With the ACA, the payment structure of the doughnut hole changed in 3 key ways, beginning in 2011. First, for generic medications, patients’ out-of-pocket costs are gradually offset by the Part D plan sponsor, ultimately reducing to patients paying 25% and plans 75% of the drug price in 2020 (Fig. 4A).5,6 Second, for branded drugs, patient cost sharing is reduced and offset by the plan and a 50% manufacturer discount (Fig. 4B). Finally, for branded drugs, the manufacturer discount is credited toward patients’ out-of-pocket spending, allowing patients to move through the doughnut hole more quickly.30
Impact on Patient Out-of-Pocket Spending
Closing the doughnut hole means patients will pay less out-of-pocket for the same quantity of medication, because of lower cost sharing in the doughnut hole. As of 2014, this policy has collectively saved patients more than $11.5 billion.31 However, savings from cost-sharing reductions in the doughnut hole may be limited relative to the total out-of-pocket cost for users of many orally administered anticancer therapies. This was demonstrated in an analysis performed by Dusetzina and Keating,6 which found that although patients will save approximately $2550 annually in out-of-pocket costs for orally administered anticancer medications under the 2020 doughnut hole structure, they will still pay between $3889 and $9623 in cost sharing for the duration of therapy. Notably, a large proportion of spending for Medicare Part D beneficiaries using specialty drugs is under the catastrophic phase (where the beneficiary pays 5% of the drug price). Although this is a relatively small percentage, the high price of most oral anticancer drugs can result in significant spending by beneficiaries each calendar year.32 Furthermore, patients trying to mitigate their out-of-pocket burden through plan selection may have few options, as coverage for orally administered anticancer therapies varied little across Part D plans.6
Remaining Challenges for Medicare Beneficiaries
While closing the doughnut hole has provided relief for many seniors, a few key challenges remain. Emerging research has shown that the high price of anticancer medications and the Part D benefit design have resulted in patients being exposed to very high out-of-pocket spending over time.6,7,33,34 Importantly, there is currently no limit on out-of-pocket spending on outpatient prescription drugs on Medicare Part D plans (including Medicare Advantage plans). Trish and colleagues34 explored this by investigating Medicare Part D expenditures for patients taking specialty medications before (2008–2010) and after (2011–2012) initiation of doughnut hole closure. They found that, while mean out-of-pocket spending below the catastrophic threshold decreased by 26% after 2011 compared with before, these savings were almost entirely offset by out-of-pocket spending in the catastrophic phase, which increased by 92% in the post-ACA period. Limiting spending by seniors across all part of their health care spending should be a goal of future policy-reform efforts.
Next, additional costs incurred by Part D plan sponsors and Medicare may result in increases in premiums over time for all enrollees. This stems not only from the increasing proportion of costs covered by plans in the doughnut hole (up to 75% for generic medications and 25% for branded medications), but also from the higher proportion of beneficiaries who will likely reach the catastrophic coverage phase (where the plan is responsible for 15% of drug costs; Fig. 2).
The impact of closing the doughnut hole on premiums after 2020 will depend on the number of beneficiaries who make it to the doughnut hole and catastrophic phases, as well as other factors in the pharmaceutical market. Surprisingly, between 2011 and 2015, average Part D premiums were relatively flat or decreasing,35 possibly stemming from overestimation of costs by plans in the prior year and subsequent equalization via risk corridors.36 However, 2016 saw a 6% increase in premiums—the highest since 2009—as well as the highest increase in deductibles in Part D’s history.35
Commercial Insurance: Annual Out-of-Pocket Spending Limits
The ACA included many provisions aimed at the commercial insurance market, including individual and employer-sponsored commercial plans. Perhaps the most critical provision for patients undergoing cancer treatment is the requirement that all plans be subject to annual out-of-pocket spending limits. Starting on January 1, 2014, the ACA required all nongrandfathered group health plans to comply with annual limits on out-of-pocket spending.37,38 Spending that contributes to the out-of-pocket limit includes coinsurance, copayments, and deductibles paid for in-network medical or pharmacy services.39 The out-of-pocket limit is the total amount an enrollee will have to pay during a policy period before his/her health insurance plan begins to cover 100% of his/her essential benefits.18
For 2017, the out-of-pocket limit is $7150/individual and $14,300/family.37 Although this limit shields patients from extremely high annual out-of-pocket spending, affordability is also dependent on the structure of cost sharing within the health plans. For example, high deductible plans that have front-loaded out-of-pocket spending can create a substantial financial burden for patients with cancer during their initial months of treatment.
Employer-Sponsored Health Plans
In 2016, 98% of employer-sponsored plans had out-of-pocket spending limits, but there was considerable variation in the dollar amounts for the limits.40 Among single enrollees, 14% had out-of-pocket limits of less than $2000, 18% had limits greater than $6000, and the remaining 68% fell somewhere between.40 Enrollees in employer-sponsored plans have also experienced a shift in how they pay for their prescription drugs with increased use of deductibles and coinsurance over the past decade. An analysis of large employer plan enrollees found that in 2014 24% of out-of-pocket prescription drug expenses were paid through deductibles compared with only 4% in 2004.41 In addition, 20% of out-of-pocket drug expenses in 2014 were paid through coinsurance, compared with 3% in 2004.41
Marketplace Exchange Plans
Insurers selling plans within the ACA marketplace are required to reduce cost sharing for low- and moderate-income subsidy-eligible enrollees in Silver plans.37 For example, 2015 enrollees with an income between 100% and 200% FPL had out-of-pocket limits of $2250/individual and $4500/family, whereas enrollees between 200% and 250% FPL had limits of $5200/individual and $10,400/family.37 As with large employer-sponsored insurance, the enrollee’s out-of-pocket limit protects them from high annual spending, but the degree of protection also depends on the plan’s makeup of deductibles, copayments, and coinsurance.42 Like group plans, there is considerable variation in coverage within exchange plans. The median 2016 maximum out-of-pocket limit for Silver plan enrollees without subsidies is $6500, with a range of $4000 to $6850.42
For exchange plans with lower actuarial values, such as the Bronze plan, enrollees typically have higher cost sharing because of deductibles and coinsurance, which enables these plans to set lower premiums.43 Therefore, many enrollees initially select Bronze or Silver plans with low premiums.44 However, patients with cancer may financially benefit from paying a higher premium for a plan with lower deductibles and less coinsurance because many orally administered anticancer drugs are placed on the highest cost-sharing specialty tier,44,45 and this practice is increasing over time.43
Remaining Challenges for Commercially Insured Patients
Overall, the out-of-pocket maximum provision has been a positive development for patients with cancer. However, the shift toward the use of high deductibles and coinsurance may limit patient access to treatments. This is of particular concern for patients who need ongoing expensive treatments year after year.
In addition, a large proportion of commercially insured enrollees do not have enough liquid assets to meet the maximum out-of-pocket limit.46 A 2015 report analyzed how household resources match up against the potential out-of-pocket limits introduced by the ACA.46 Two hypothetical out-of-pocket limits were used to represent the middle to high range of out-of-pocket cost sharing seen in commercial insurance plans: $3000 single/$6000 family (middle limit) and $6000 single/$12,000 family (high limit), respectively. They found that 39% of commercially insured households lacked the liquid financial assets needed to cover the middle limit, and 51% were unable to cover the high limit.46 Moreover, 71% of those in the 100% to 250% FPL reported lacking liquid assets to cover for the middle limit, and 82% the higher limit.46
The 3 ACA provisions outlined in this review have reduced the out-of-pocket burden or increased access to health insurance for many patients, but some important gaps in coverage and access remain. Medicaid expansion has increased insurance access to millions of previously uninsured Americans. Early studies of the impact of Medicaid expansion suggest that it has increased access to treatments and reduced costs for patients with cancer.19,20 In addition, the coverage of preventive cancer screenings has increased the use of such services within the low-income population, potentially leading to increased early detection and treatment.19–22 Nevertheless, approximately 3 million people remain in the coverage gap in states that refused Medicaid expansion, putting health insurance coverage out of reach for most of these individuals. This is a critical area for improvement as health care reform is explored in early 2017.
For Medicare beneficiaries, closing the doughnut hole lowers out-of-pocket costs for patients taking orally administered anticancer therapies and other outpatient prescription drugs. However, these measures may not be sufficient to control out-of-pocket costs because of remaining policy gaps, such as the lack of out-of-pocket spending limits on Medicare Part D and the growing reliance on coinsurance rather than copayments for calculating beneficiary cost sharing. This is critically important as inflation in drug prices continues to increase at a remarkable pace, placing seniors at financial risk. These underlying pricing dynamics must be addressed to ensure patients have access to the growing number of treatments offered through Part D plans.
For commercially insured patients, the out-of-pocket maximum provision may provide significant financial relief for patients facing a new cancer diagnosis and high spending. However, many patients now face high deductibles that may limit their access to treatments. Our review of the literature also suggests that the current out-of-pocket spending limits may be unaffordable in relation to the amount of liquid assets available to many families.46 However, in the context of the potential out-of-pocket cost of cancer treatment without a maximum, it should be viewed as indisputable progress in limiting financial toxicity associated with cancer.
As of the writing of this article, the fate of the ACA and future health care reform efforts are unknown. We remain hopeful that efforts to repeal and replace the ACA will not reverse the progress that has been made for improving access to care for many patients. At the same time, we have highlighted some important gaps left by the ACA that could be targeted by replacement plans. Addressing these issues may help to increase access to care and affordability for patients with cancer and without.
The authors thank Dr. Joel F. Farley for helpful feedback on an earlier draft of this article.
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Keywords:Copyright © 2017 Wolters Kluwer Health, Inc. All rights reserved.
Cancer; Medicaid; cost sharing; drug prescriptions; insurance coverage; medically uninsured; Medicare Part D; Patient Protection and Affordable Care Act