Unintended Consequences of the Inflation Reduction Act’s Out-of-Pocket Cap for Insulin

• In Event: From Coverage to Care: Networks, Cost-Sharing, and Access

Abstract

Introduction: Out-of-pocket caps are frequently proposed as a method to reduce health care costs. However, short-run improvements in affordability after a cap would be undermined if insurance plans respond by raising premiums or exiting the market.

Purpose: The goal of this paper was to test the association between an out-of-pocket cost cap for insulin and responses by Medicare Part D plans. In a landmark policy change, the Inflation Reduction Act capped out-of-pocket costs for insulin at $35 per 30-day supply for Medicare beneficiaries in 2023. The effect of the policy on affordability is ex ante unclear. On the one hand, data from insulin fills suggest this policy reduced out-of-pocket costs per 30-day insulin supply for many patients. On the other hand, previously high out-of-pocket insulin costs were a source of profit for Medicare Part D plans. If Part D plans respond to this lost source of revenue by raising premiums or exiting the market, these unintended consequences would reduce the policy’s beneficial impact on medication affordability.

Methods: Our dataset included the 882 stand-alone Medicare Part D plans available in the market in 2022, the year the policy was announced (hereafter, “baseline”). Outcomes of interest tracked for each plan included exiting the market after the policy (anytime in 2023 or 2024) and, for plans remaining in the market, the premiums each year from 2021-2024. Plans with higher baseline average out-of-pocket costs per 30-day supply of insulin were considered to be more exposed to the policy. In regression analyses that adjusted for plan and region characteristics, we assessed whether exposure to the policy predicted changes in premiums or likelihood of exiting the market after the out-of-pocket cap policy.

Results: After the Inflation Reduction Act out-of-pocket cap, the Part D plan exit rate increased from 5% to 11%, and the premiums of remaining plans rose by $9.12 (a 20% increase). In regression analyses, plans with higher exposure to the policy were more likely to exit the market after the policy or, if remaining in the market, had higher increases in premiums after the policy than less-exposed plans.

Conclusions: When implementing an out-of-pocket cap, policymakers should consider the possibility that insurance plans might shift the costs of improving affordability for some beneficiaries onto other beneficiaries in the form of higher premiums or exit the market, reducing plan choice. These indirect effects should be weighed against the direct cost-reduction effects of the out-of-pocket cap when designing policies to maximize access to medications.

Author

• Rebecca Myerson, Emory University
  Presenting Author