Most Drugs in Medicare Part D Plans Now Require Coinsurance

Average percentage of covered drugs with coinsurance jumped from 35% in 2014 to 58% in 2016, leading to higher out-of-pocket costs.

An analysis conducted by Avalere Health found that most of the prescription drugs covered by Medicare Part D plans (PDPs) were subjected to coinsurance in 2016 instead of copayments.

Coinsurance is when a beneficiary pays a percentage of the drug versus a copayment or fixed dollar amount. This often leads to patients paying more out-of-pocket costs than copayments.

In 2014, the average percentage of covered drugs with coinsurance was 35%. In 2016, this figure increased significantly from 35% to 58%.

Normally in PDPs, coinsurance is applied to drugs with high costs on the specialty tier. However, the plans have now extended to drugs on the lower tiers, including drugs that are covered on preferred and non-preferred brand tiers.

Avalere believes that the increase in coinsurance over recent years could have an effect on beneficiaries who enroll in PDPs in 2016.

“As coinsurance becomes more common in Part D plans, consumers will find their drug costs are less predictable and will need to rely more on tools like the Medicare Plan Finder to help estimate out-of-pocket costs,” said Senior Manager at Avalere Colin Shannon.

In order to encourage the use of drugs with lower costs and to negotiate rebates from drug manufacturers in exchange for lower tier placement, healthcare plans use formulary tiers. By using these tiers, it helps keep premiums low for beneficiaries.

Unfortunately, there has been an increase in beneficiaries enrolled in PDPs that have more than one tier requiring coinsurance. In fact, the percentage of beneficiaries enrolled in PDPs with more than one tier requiring coinsurance jumped from 39% in 2014 to 96% in 2016.

“These very high rates of coinsurance have shifted our understanding of Part D formulary coverage,” said Senior Vice President of Avalere Caroline Pearson. “It will be important to monitor what drugs are being placed on various coinsurance tiers and how plans are using these tiers to manage cost and utilization in the program.”

When analysists studied Medicare Advantage prescription drug (MA-PD) plans, they found that coinsurance was used far less frequently than PDPs. In 2016, MA-PDs charged coinsurance for only 26% of covered drugs, with the majority being specialty drugs.

Since MA-PD plans are responsible for the medical costs of their enrollees, they have more of an incentive to cover drugs at lower beneficiary costs. Furthermore, since these plans are able to buy down drug premiums using medical cost savings, they have less of an incentive to closely manage drug costs.