Background

As discussed in prior Avalere Heath analysis, the Medicare Part D redesign component of the Inflation Reduction Act (IRA) will substantially shift the experiences of enrollees, plans, and manufacturers in the Part D program. In 2025, beneficiaries’ out-of-pocket (OOP) costs will be capped at $2,000 annually and beneficiaries will be allowed to spread these costs over the plan year using the Medicare Prescription Payment Plan (MPPP) (previously known as “OOP smoothing”). Both provisions are expected to increase the utilization of prescription medications. In turn, plans may modify their formulary and benefit designs in response to that expected higher benefit liability. Plans are also expected to vary those strategies for each therapeutic area (TA). Manufacturer contracting approaches with Part D plans will further influence the Part D market, including both plan management responses and patient access dynamics.

Analysis Details

To assess the potential implications of Part D redesign across Medicare beneficiaries with heart failure, Avalere Health analyzed 100% Medicare FFS data for more than 1.3 million beneficiaries newly diagnosed with heart failure between 2017 and 2019. The analysis examined annual Medicare expenditures, including medical and pharmacy spending, and evaluated differences by low-income subsidy (LIS) status.

Average annual Medicare spending was nearly $40,000 per beneficiary. Spending was higher among LIS beneficiaries (~$50,000) than among non-LIS beneficiaries (~$30,000). On average, Part D spending accounted for more than $20,000 per year, across the study population.

The analysis also estimated how acute events – and reduction of those events – may vary between LIS and non-LIS beneficiaries. Avalere Health identified greater savings opportunity among LIS beneficiaries, who had higher average costs, than non-LIS beneficiaries.

Stakeholder Considerations

Claims-based analyses can provide a baseline for evaluating how Part D redesign may affect utilization, spending, and access across patient populations and therapeutic areas. Manufacturers and plans can use these data to identify populations with high pharmacy or medical costs, assess the relationship between treatment and acute-event use, and monitor changes in utilization and formulary management following implementation. These insights can support Part D contracting, access, and evidence-planning decisions as stakeholder strategies continue to evolve.

Methodology

This analysis utilized the 100% Medicare fee-for-service (FFS) claims, accessed by Avalere via a research collaboration with Inovalon, Inc. and governed by a research-focused CMS Data Use Agreement Avalere Health analyzed Medicare FFS claims for more than 1.3 million beneficiaries newly diagnosed with heart failure between 2017 and 2019. The analysis assessed annual medical and pharmacy spending, utilization, and acute-event costs overall and by low-income subsidy status. It also modeled potential cost offsets associated with reductions in acute events.

To learn more about our capabilities, connect with us.