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It Pays to Shop: Variation in Out-of-Pocket Costs for Medicare Part D Enrollees in 2016

Findings
  1. The statutory limit on out-of-pocket spending for 2016 is $4,850. This amount is substantially higher than the out-of-pocket spending shown before the catastrophic threshold (generally about $3,000) in Figure 1. Under the provision in the Affordable Care Act that phases out the coverage gap, manufacturers are required to discount the cost of certain drugs (mostly brand drugs) by 50 percent. The amount of this discount counts toward achieving the $4,850 catastrophic threshold.

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  2. In general, specialty tier rates are limited to 25 percent by CMS guidance. But plans that reduce or eliminate the deductible can raise the specialty tier coinsurance rate as high as 33 percent.

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  3. Jack Hoadley, Juliette Cubanski, and Tricia Neuman, Medicare Part D at Ten Years: The 2015 Marketplace and Key Trends, 2006-2015, Kaiser Family Foundation, October 2015, available at http://kff.org/medicare/report/medicare-part-d-at-ten-years-the-2015-marketplace-and-key-trends-2006-2015/.

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  4. Centers for Medicare & Medicaid Services, Medicare Part D Specialty Tier, April 7, 2015, available at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/CY-2016-Specialty-Tier-Methodology.pdf.

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  5. Gretchen Jacobson, Christina Swoope, Tricia Neuman, and Karen Smith, Income and Assets of Medicare Beneficiaries, 2014-2030. Kaiser Family Foundation, September 2015, available at http://kff.org/medicare/issue-brief/income-and-assets-of-medicare-beneficiaries-2014-2030/.

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  6. Jack Hoadley, Elizabeth Hargrave, Laura Summer, Juliette Cubanski, and Tricia Neuman, To Switch or Not to Switch: Are Medicare Beneficiaries Switching Drug Plans To Save Money? Kaiser Family Foundation, October 2013, available at http://kff.org/medicare/issue-brief/to-switch-or-not-to-switch-are-medicare-beneficiaries-switching-drug-plans-to-save-money/.

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  7. Gretchen Jacobson, Christina Swoope, Michael Perry, and Mary C. Slosar, How are Seniors Choosing and Changing Health Insurance Plans? Kaiser Family Foundation, May 2014, available at http://kff.org/medicare/report/how-are-seniors-choosing-and-changing-health-insurance-plans/.

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Appendix
  1. One of the brands on our list, Synthroid, has generic alternatives (levothyroxine), available long before 2013. But this drug is commonly prescribed as a brand because many clinicians believe that patients whose dosage has been established on the brand version are not readily switched to the generic version without further titration of the dosage.

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