Daniel Joyce: Hi. My name is Dan Joyce. I'm a urologic oncologist at Vanderbilt University. And I am very pleased and honored to be joined by a friend and colleague, Stacie Dusetzina, who is a professor in the Department of Health Policy here at Vanderbilt, as well as an Ingram Professor of Cancer Research at the Medical School. She's also nationally known for her work in drug pricing and policy, has served on the Medicare Payment Advisory Commission, a huge thought leader in this area, and is here to talk to us about a recent publication in Health Affairs concerning Medicare Part D plans and the Inflation Reduction Act and how that's affected those plans and the costs for our patients. So, Stacie, thanks so much for being here.

Stacie Dusetzina: Yeah, thanks for having me. I'm really thrilled to be able to share this work.

Daniel Joyce: So I know you have some slides prepared. So I'm happy to let you present those, and then we will chat after.

Stacie Dusetzina: Sounds great. So thanks a lot, again, for the opportunity to share this work. This paper focuses on Medicare Part D redesign that has fully gone into effect this year, and looks at some differences in who may be saving money on the Medicare Part D redesign as part of the Inflation Reduction Act, and who might be spending a little bit more money. So to be able to describe what we found, or to give you an outline of what I plan to cover, I'm going to talk first about what the Medicare Part D benefit looked like before and after the Inflation Reduction Act so you understand how the changes are occurring. And then I'm going to talk about some comparisons of spending on branded drugs before and after the benefit design changed, and then unintended and intended consequences of the law.

So to understand the Medicare Part D benefit. So Part D is the retail outpatient prescription drug benefit for Medicare beneficiaries. It covers over 55 million people. So it's a lot of people affected by Medicare Part D changes. And this gives you a snapshot of the benefit in 2023, a couple of years ago. So one of the things that you'll probably notice right away is that this is really complicated, and it's got all these different phases, and what you pay as a patient depends on where you are in your total spending. I've also left off a deductible phase that some people will pay a deductible. Usually, people who pay lower premiums will pay a deductible, and people who pay higher monthly premiums will not. But in general, people would pay approximately 25% of their drug's price in the initial coverage phase, 25% in the coverage gap, and 5% indefinitely in the catastrophic phase before the Part D redesign.

So after the IRA Part D redesign is fully implemented in 2025, we actually have a much simpler benefit. We have only a couple of phases. You could still pay a deductible, but I'm not showing that here. But the biggest change that people should be aware of is that you stop paying once you've hit the catastrophic limit. So patients pay about 25% of the drug's cost while they're in the initial coverage phase. Once they've spent $2,000 out-of-pocket, they no longer have to spend any money through the rest of the calendar year. So that's a big shift for people who are high spenders in the Medicare Part D benefit.

So what does this mean for people who are using specific medications? So for people using very high-priced cancer drugs, this is an enormous amount of savings. So these bars represent your out-of-pocket spending for one year of treatment with each of these example drugs. And you can see that in 2023, when there was no limit on out-of-pocket spending, you could spend $10,000 or $15,000 or more out-of-pocket on a single drug. So when we shift to 2024, this is where the Inflation Reduction Act is starting to be phased in. In that year, they basically just cut off the 5% coinsurance once you hit the catastrophic phase, but had not placed that hard $2,000 cap. So in effect, people paid about $3,500 total out-of-pocket in 2024, and then you drop down to $2,000 in 2025.

So you can see from this that if you are taking a very expensive drug, your situation has completely transformed from being totally unaffordable for most people to actually pretty accessible. Now, $2,000 is still a lot of money. So the IRA also includes a provision to allow you to smooth out the cost over the year; you have to enroll into the smoothing or the Medicare prescription payment plan. But that is an option for people who have very high drug prices.

Now, the complicating factor is that not everybody is going to save money under this new benefit design. So this is an example of some commonly used preferred brand-name drugs. And what we find is that savings are a little bit less consistent. And in some cases, depending on your plan, you might actually spend more money over the course of a year when you're taking a lower-priced drug. So the situation is not savings for everybody. It's a lot of savings for high spenders and maybe less so for people who are taking a smaller number of drugs or lower-priced drugs.

And the reason for this lack of savings seems to be driven by plans shifting how they cover preferred brands. So, again, thinking about things like blood thinners or diabetes medications, a lot of plans have shifted away from flat copayments and into coinsurance. So people paying a percentage of the drug's price. And you can see that this is the percent of plans using copayments for preferred brands. It actually decreases pretty substantially for Medicare Advantage plans. But you can see that standalone plans available for traditional Medicare beneficiaries have really decreased their use of copayments over time. And this can result in people having pretty high bills when they go into the pharmacy.

So I think the key takeaways for this paper are that people with very high drug spending are likely to save a lot of money under the Inflation Reduction Act. So when we think about people with cancer, this is an incredible benefit redesign that really helps to provide them with financial security for the first time. Those with lower spending might not be able to save as much, and it makes it very important for people to shop Part D plans during open enrollment, which happens in October of every year. So if you know a Medicare beneficiary who is concerned about their drug costs, they're using a preferred brand-name drug, help them to shop their Part D plan this year. It could save them a bunch of money.

And again, I think we need to continue to work on education, again, around the plan shopping issues. We know a lot of people don't shop for new plans. Once they've picked a plan, they stay in it no matter how poorly it covers their drugs. And we also know that a lot of people still can't afford that $2,000 upfront. So having more education about things like the Medicare smoothing, the prescription payment plan would be important for making sure that people are in the benefits that they are entitled to and actually have affordable access to drugs. So with that, I'm going to stop sharing and look forward to chatting.

Daniel Joyce: Thanks so much, Stacie. Really informative work. I went through the process of helping my parents go through the Medicare beneficiary enrollment last year and was blown away by how complex and challenging it was for two highly educated people in my own life. So this is really informative. One thing I found particularly interesting was the way the copayments and coinsurance affect that out-of-pocket maximum. So you could pay—

Stacie Dusetzina: Yeah.

Daniel Joyce: If you have a copayment that's less than the 25%, that counts towards that out-of-pocket maximum, you actually reach that out-of-pocket maximum quicker with less money. And so that seems to be a big factor that we're going to have to think about when enrolling in a Part D plan.

Can you talk a little bit about if you are age 65, you're going to enroll in a Part D plan, what particular components of where you're coming from from an interaction with the healthcare system, but also, in the plan itself that patients should look for?

Stacie Dusetzina: Yeah, sure. The most important is to make a decision about whether Medicare Advantage, the private version of Medicare, versus traditional Medicare is the right option for you. A lot of people don't understand the tradeoffs that they're making when they're making that decision between Medicare Advantage and traditional Medicare. But it makes a big difference in the long run. So for traditional Medicare, the huge benefit is that you can go to see any doctor, any hospital. You're not limited on where you can go to get specialized care. It's all covered. And there's pretty limited use of things like prior authorization and utilization management in general.

So when you think about traditional Medicare, there's a lot of access. So you can see anybody you want. The problem with traditional Medicare is it's more expensive. So if you enroll in it, you have to buy a supplemental plan or you should probably buy a supplemental plan that covers your out-of-pocket spending. And you'll find that if you're shopping using the Part D Plan Finder and searching for drugs, those standalone Part D plans that go with traditional Medicare are more expensive. So their premiums are higher and their cost-sharing might look less generous. But you're making an explicit tradeoff there.

Now, if you go with Medicare Advantage, you usually can find maybe even a $0 premium plan. So it looks really inexpensive. You can get extra benefits like gym memberships and hearing and dental and vision services. So there are lots of bonuses associated with going with Medicare Advantage. The big drawback there is if you need specialized care at some point in the future, you might not have access to that care. So you might be signing up for a network of doctors and hospitals that don't have the professionals that you want to see should your health become more complicated or worse as you age. Most people have no idea about the significance of that decision and how hard it is to undo that decision once you've made it. So I think it's important for people to think about which of those different strategies works best for them.

And then I think the key question is, what's the total spending you're going to be dealing with? So when you're going on the Part D Plan Finder, if you have a set of drugs you know you need to have covered, you can search for those. And the Plan Finder lets you search by your pharmacy, and also, sorting by total annual spending. So again, you think about the tradeoffs. Are you going to be really annoyed if you have a high deductible? If you have really expensive drugs, do you want to sign up for the payment plan that lets you basically pay a smaller amount upfront or nothing when you fill the drug at the pharmacy and then bills you later? So there are lots of choices to make, and as you said, very complicated.

Daniel Joyce: Can you talk a little bit about how formularies fit into this? I find accessing the formulary of a plan to be a little bit convoluted and complex, and I'm doing research in this space.

Stacie Dusetzina: Yeah.

Daniel Joyce: Is it something patients should consider when they're looking at plans? And how can that factor into their decision-making?

Stacie Dusetzina: Sure. So when you are going to search for a plan and you are already using medications, have those with you so you can search for your specific medications that you're using because some plans will exclude drugs and they will include other drugs that could be used to treat your same conditions. So there are a lot of rules associated with plan design. So Medicare plans have to follow a whole lot of rules that make sure that people have drugs available to treat all of the conditions that they could have, but they don't have to cover all drugs. So a lot of times, people might find that maybe they have type 2 diabetes and their diabetes medication starts to become more expensive for them at some point. They might then need to go in and shop to see if they can find a plan that covers that drug better.

I've had conversations throughout the year with friends who have said, "My parent can't afford their diabetes medication anymore and they're on Part D, and they used to have good coverage." Well, your plan doesn't have to keep the same coverage. And I think this is something people don't really understand is that you originally signed up for Medicare Part D using your drug list. And it covered your drug really well. You had a low copay. And now suddenly, you're paying a lot of money. Well, that doesn't mean you can't find another plan that covers that drug well, it just means your plan no longer does, which is really frustrating for people, right? You've gone and done all this work to pick the right plan for you, and your plan can change all the rules in the next year. And that's why it's important to check every year to make sure you're still getting a good deal. It's one of those frustrating things where you shouldn't have to do that, but unfortunately, that's the reality.

Daniel Joyce: Yeah. And that's something that really stuck out to me too is that this is an annual process—

Stacie Dusetzina: Yeah.

Daniel Joyce: —and it's just as onerous each time you do it. I mean, it's not like it's getting easier each year. You have to recheck, "What's my plan doing?" And then, "Is there something better out there?" And I just have a hard time believing most patients are going to be able to do that.

Stacie Dusetzina: Absolutely, yeah. And I think that on top of that, if you're in traditional Medicare and you want to shop your Part D plan, traditional Medicare, you're buying all these separate components of coverage. So changing your Part D plan is pretty easy, right? You can go in and change that. If you're in Medicare Advantage, changing your Medicare Advantage Part D plan has implications for the whole rest of your coverage. So it's even more complicated if you thought, "Well, I'm really not that happy with my coverage on my Medicare Advantage plan. I want to switch." Well, then you have to be careful that you're not switching to something that has better drug benefits, but worse medical coverage, like maybe your doctor is no longer in-network for this new plan you've picked.

And my understanding is that when you're shopping for those plans, you have to leave the Plan Finder website to even go and figure out what doctors are in-network in the Medicare Advantage plan. So it adds on layers and layers of complication that makes it just feel impossible, like you said, even for people like us who this is what we study voluntarily for a living.

Daniel Joyce: Yeah.

Stacie Dusetzina: This is what we want to be doing with our time.

Daniel Joyce: Yeah, it's a really good point. Is there anybody doing work to try to simplify this for patients to create some sort of interface or assistance program that can guide them through this process?

Stacie Dusetzina: Yeah. This is one of the frustrating points is that you're not sure about the quality of some of the input data. So first, I'm not sure that there's anywhere that you could do a one-stop shop. I think the Medicare Plan Finder is CMS's attempt to help you shop for your Medicare benefits. But there's a lot left to be desired, like, "Well, wouldn't it be better if you were interested in shopping for Medicare Advantage if you could first indicate where are the doctors and hospitals where you'd like to go if you needed that care and start from that perspective rather than starting with your drug fills?" And then that is not available for people right now.

I think there's a lot of interest. For example, there's some work that MedPAC has been doing, the Medicare Payment Advisory Commission, working on how to think about streamlining benefit design, because another thing that is overly complicated is that on the Plan Finder, a Medicare Advantage plan can say, "We offer dental, hearing, vision, and all these other services," but it's not clear what that means either. So if you offer one hearing-related service, you can say you offer hearing services versus if you offer like seven different options. So the extent of that benefit is not clear for people. So even if you really were a savvy consumer and you're going through all of the work of trying to figure out what's the best plan for you, that is maybe going to be incomplete information.

And something that will probably just blow your mind, it does mine every time I hear this, is the networks of doctors that are being sold to you on Medicare Advantage are often not up-to-date. So you could be sold a plan and you've gone through the effort to say, "Well, I want to go to Vanderbilt. This is where I've always gone for my care in case I need cancer care." And you could pick a plan that says, "This is in-network," and it might not actually be by the time your plan starts the next year. So even if you did your very best or you built the best tool available, sometimes the input information is actually inaccurate.

Daniel Joyce: I want to talk about a couple other specific things that you mentioned in your work. The first is this sort of exodus of enhanced prescription drug programs from 2024 to 2025. Can you talk about first what is an enhanced prescription drug program and then why was there this drop-off?

Stacie Dusetzina: Yeah. So enhanced plans are basically plans that offer a more generous benefit than the standard benefit design. So you could think about that like they offer no deductible or they offer low copay instead of a 25% coinsurance. So these have been really popular types of plan designs, and it's a good way for plans to attract people into their network. So if I said, "Instead of you paying 25% of your blood thinner, you pay a $50 copay," well, that could make my plan look better relative to other plans, and more people will enroll into it. So plans have usually liked to offer enhanced benefits to make what they're offering more attractive.

Now, I think one of the things that has happened with the redesign is that plans now have a financial disincentive for offering that really generous benefit. So as you pointed out earlier, one of the ways that the benefit works is that if I'm offered a $0 deductible and I'm filling my medication, the plan still has to credit me with what it would've paid under the standard benefit. So when I fill my first drug, let's say I fill a $700 list-price drug and I had a $0 deductible, well, the plan has to contribute the amount that the deductible would have been under the standard benefit, which is like $550. So they lose out on that, and that money counts towards me hitting the out-of-pocket maximum of $2,000.

So as you pointed out earlier, I, as a consumer, depending on which plan I pick, could spend much less than $2,000 and hit the out-of-pocket cap because of those rules about how the spending has to accumulate. So I think what that's doing is putting pressure on plans to actually push more of the standard benefit design and more of those costs on the patients. So what you see is a lot more use of deductibles. Even in Medicare Advantage, there's more deductible use now than there was a couple years ago, and a higher percentage paying the 25% coinsurance instead of a flat copay.

Daniel Joyce: Yeah, it's really complex and a little convoluted to me. I love the slides you shared that broke down who's paying for what in the initial coverage and the catastrophic. And we've gotten rid of the donut hole now, which is great. I can't really get a sense of who is... If the payment allocations have changed significantly, that seems fair to say that patients are paying less. But as far as the plan, Medicare, manufacturers, do you have an idea of how things have changed for those entities? Because it's interesting to think, "Well, how then are manufacturers going to change if they're now paying more? Or is it the plan that's paying more? And are we seeing those changes there because they're bearing more of the brunt of the costs now?"

Stacie Dusetzina: Yeah. So plans have had a huge shift in how they get paid. So Medicare pays plans an up-front payment for covering beneficiaries. So plans will say, "Here's our bid. Here's how much we think it'll cost to cover beneficiaries." And they get paid in an up-front payment and then in reinsurance. So before the redesign, what had been happening was that plans would bid really low. So they'd say, "Our cost of covering everybody is going to be super low," and they'd get a low up-front payment. And then they would charge Medicare much more once people had high spending, so in reinsurance payments.

And I think what was happening is that there were some financial incentives for plans to have more of that payment come in the form of reinsurance because they would actually be penalized less in that case. So they could make a little bit more money arranging their payments in that way. And they could also make their premiums look really generous because they had low up-front bids.

With the redesign, Medicare's paying plans much more up-front and there's less of a financial incentive to get paid in reinsurance. So they're trying to put pressure on plans to manage spending better than they would have under the old benefit. So I think the one thing stepping back is Medicare still pays plans for delivering the benefit. It's just that how they pay plans may make it a little bit less profitable for plans or makes it more important for them to manage spending and keep it as low as they can.

Now, for drug manufacturers, the new benefit design charges them 10% of the drug's price in the initial phase and 20% in catastrophic. So the idea there is if you have a higher-priced drug that has more spending in the catastrophic phase, you have to pay a bigger penalty. So it's like taxing the manufacturers of brand-name drugs. I think that that's more money coming out for manufacturers now than in the old benefit design. So in the 2023 benefit, drug manufacturers had to pay 70% of the drug's price, but only in the coverage gap or donut hole. So there was a fixed amount of spending. And once you got through that spending, then manufacturers had no additional financial responsibility. So if you are a maker of an expensive drug where most people filling it are going to hit the out-of-pocket cap, you're going to have to pay that 20% on many of your sales. So I think that actually increases the amount of money coming from the pharmaceutical companies overall, especially for expensive drugs.

Daniel Joyce: Fascinating stuff. Every time I talk to you, I'm just blown away by your depth of knowledge on all aspects of this. It's very helpful to hear and gain a little bit better understanding both from a policy side of things, but also, just from a patient-centered side of things. And I think, ultimately, encouraging that the Inflation Reduction Act has done a lot of good for our patients. But still a lot of things to sort out in order to make sure we're getting patients the information and the support they need to get the lowest-cost care and the highest-value care for themselves. So a lot of work to be done. But, Stacie, I can't thank you enough for taking the time to discuss this very informative and helpful work.

Stacie Dusetzina: Well, it's absolutely a pleasure to talk with you as always. And I'm always happy to talk about Medicare Part D any time of day.

Daniel Joyce: Sounds good. I'll take you up on that.