Smoothing Medicare Beneficiaries’ Out-of-Pocket Drug Costs

In 2003, the Medicare Modernization Act was signed into law to add the Part D prescription drug benefit to Medicare for our nation’s older adults and people with disabilities. While the program has been a huge success in its 15-year existence, much has changed over that time. 

New types of therapies have come to market and the time is right for Congress to update Medicare Part D. We applaud those in Congress who are working tirelessly to reach bipartisan agreement for important changes, most notably adding a cap on out-of-pocket expenses. 

While the current Medicare Part D benefit is wildly popular and works well for most people, it is the only type of health insurance in America that does not have a limit on out-of-pocket expenses such as deductibles and copays, keeping access out of reach for many of those most in need of treatment. Leaders in both chambers of Congress have proposed changing this by redesigning the benefit to include a cap. The Senate has proposed an annual cap of $3,100, while the proposal in the House of Representatives includes a cap of $2,000.

While these proposals will help many Medicare beneficiaries, we are concerned that some patients with complex, chronic conditions living on fixed incomes will have drug costs that will cause them to hit the cap very early in the plan year, for some in their first or second visit to the pharmacy counter. Not only does this put financial strain on patients and their families, but far too often, patients with these high upfront costs choose to skip their prescribed medication entirely because they are unable to shell out thousands of dollars at one time.

Recently, as part of changes made to H.R. 3, Rep. Anna Eshoo (D-Calif.), chair of the House Energy and Commerce Health Subcommittee, sought to address those upfront, high costs by including a “smoothing” mechanism to help Medicare Part D beneficiaries smooth out high upfront costs over time. As Eshoo noted in a hearing, with the average income of a Medicare beneficiary being about $26,000, a $2,000 pharmacy bill can create a significant burden.

Her proposal will improve the affordability of prescription medications over the course of a year for a significant subset of Part D enrollees, resulting in more affordable access. By allowing enrollees with high out-of-pocket costs to pay in installments rather than all at once, patients will be better able to budget and pay for the medications they need.

Similarly, Sens. Bill Cassidy (R-La.) and Bob Menendez (D-N.J.) are working on a bipartisan proposal that would accomplish the same aim. Their goal is to include it in a Senate bill that would also create the important out-of-pocket cap.

A recent Morning Consult survey commissioned by the Alliance for Aging Research found that 75 percent of adults support a cap or limit to what beneficiaries pay out-of-pocket in the Medicare Part D program. And when asked to choose between a monthly and an annual cap, 46 percent of older adults support a monthly cap versus 24 percent who support an annual cap.

Most people budget on a monthly basis; therefore, a way to spread costs evenly across the year will make that process easier. We are grateful that Congress and the administration are prioritizing an out-of-pocket cap to improve access for our nation’s older adults. The cap, combined with a way to smooth costs over time, will go even further by helping them manage the cost of their care.


Marc Boutin, JD, serves as CEO of the National Health Council in Washington, D.C.

Sue Peschin, MHS, serves as president and CEO of the Alliance for Aging Research in Washington, D.C.

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