It's the RxMOOPs!

The IRA of 2022 made some big changes to Medicare. The most meaningful of those changes is the amusingly named "$2000 RxMOOP." I muse on what those changes mean to my practice.

Over the last 5 years, I’ve been somewhat obsessed with making sure that my Third Party records inside of my pharmacy dispensing instance are exactly how I like them. I maintain separate records for Affordable Care Act plans vs. group insurance (“Commercial”) plans vs. Fee for Service Medicaid vs. Medicaid Managed Care, and I maintain separate records for each Medicare Prescription Drug Plan (PDP) and each Medicare Advantage Plan with Part D Coverage (MAPD). Over the years, I’ve developed a purposeful system, especially for Medicare, to be able to tell, in detail, which Medicare Part D plan a patient is on, whether it is a PDP or an MAPD, which drug benefit type it has, which formulary it uses, and what the premium, deductible, deductible exemptions, and copayments will be for each plan.

For example, I have a record named:

AARP Medicare Advantage Essentials from UHC UT-4 (HMO-POS) EA H4604-011-0.

This indicates its marketing name, its drug benefit type (EA = Enhanced Alternative), and its “plan code” - a combination of the Medicare Contract ID (H4604), the Plan Benefit Package (011) and the segment ID (0, though I’m still not sure what the point of this one is).

In the notes for this plan, I put a note that reads:

2025 Plan Design: Premium: $0.00 ; Deductible: $340.00 Tier 1, 2 exempt from deductible

30 day copay at Preferred/Standard Pharmacies/90 day mail (if better):

Preferred Generic: $0/$0

Generic: $10/$10/$0

Preferred Brand: $47/$47/$131

Non Preferred Drug:$100/$100

Specialty: 29%/29%

Formulary ID: 25002

This tells me (on each patient with this particular plan), that this plan charges a $0 premium, it has a deductible of $340, “generics” skip the deductible, the plan gives a discount for mail order to the tune of $30/90 days for tier 2 generics, and a discount of $10/90 days for tier 3 “preferred brands,” and that this plan uses the primary United Healthcare Medicare Advantage Formulary, formulary 25002. It also means that other than mail order, there’s no differential copayments for going to a competitor pharmacy. (For what it’s worth, I can and do assist pharmacies in creating similar records relevant to their geography in their own software instances).

I create records like this for all of the MAPDs and PDPs in my county, and I scrupulously match my patients to the correct record based on an eligibility check using the Medicare Transaction Facilitator, which returns the appropriate Contract ID and PBP code in each response.

In so doing, I’ve come up with some descriptive statistics of the Medicare beneficiaries that I care for, which I think are relevant to looking at the elements of the Inflation Reduction Act which took effect a few days ago.

To start with, for those interested in the public policy implications of Medicare Advantage vs. Traditional Medicare - for 2025, 75% of my patient population has elected to enroll in MAPDs vs. 25% into PDPs. Surprisingly to me, my pharmacy serves a lower % of Low Income Subsidy (LIS) patients (15.8%) than the average for Utah (16.7% of Part D beneficiaries). The typical independent pharmacy has more LIS beneficiaries than the average LIS uptake as I understand it. Additionally, 9% of my patients are enrolled in Retiree Drug Subsidy or Employer Group Waiver Programs.

The Inflation Reduction Act created a “level payment” program called the “Medicare Prescription Payment Plan.” The Medicare Prescription Payment Plan (MPPP) rules mean that Part D Plans trigger a “Likely to Benefit” (LTB) notice for patients with a copayment on a SINGLE claim of $600 or more. When this happens, via an “approved message code” of 056 in a claim, the pharmacy is required to give a notice to the patient that they MIGHT want to enroll into the MPPP.

Notably, most of my patients are enrolled into “Enhanced Alternative” (EA) plans (87%), with markedly reduced deductibles, and generally with fixed copayments after the deductible. In my work, the most likely prescriptions to trigger such an LTB notice are brand name drugs, usually tier 3 or above items. For a fixed copayment plan with the most typical copayment for tier 3 ($47), even a 90 day supply of the most expensive tier 3 item will not trigger a LTB notice for the vast majority of my patients. The overwhelming majority (79%) of my Medicare patients have a deductible that is less than $459, so a 90 day supply of a tier 3 item will NOT trigger a LTB notice, because a deductible of $458 or less + 3 copayments of $47 = $599 or less. I had a patient taking 3 months of Repatha, and I thought, “surely this patient should receive a LTB notice!” but no, being enrolled in the plan above, they had a $340 deductible + 3 * $47 copays resulted the high, but not high enough to trigger a LTB notice total amount due of $481. I still told them they should think about the MPPP.

The Inflation Reduction Act changed the Medicare Part D benefit to have a new $2000 Out of Pocket Maximum or “RxMOOP.” An underappreciated nuance of Medicare rulemaking for 2025 is that for beneficiaries enrolled into EA plans, the “$2000 RxMOOP” can actually be substantially LESS than $2000. In particular, for the purposes of calculating the RxMOOP for EA plans, CMS rulemaking says that you count the GREATER of two numbers:

1. the ACTUAL copay the beneficiary incurs

2. What the copay WOULD have been had the beneficiary been enrolled in a Defined Standard plan.

Defined Standard (DS) plans in 2025 have a $590 deductible and then 25% coinsurance until the beneficiary reaches $2000 out of pocket. What this means, practically, is that beneficiaries on high cost medications who elect to enroll into EA plans can reach their RxMOOP very quickly. It also means that EA-enrolled beneficiaries reach the RxMOOP faster in time and spend less money the more expensive their medications are. For example, take a patient on a GLP-1, and let’s say that that GLP-1 has a $1000/month total cost.

On a DS plan, the beneficiary would pay their $590 deductible + 25% coinsurance for the remainder = $102.50 for a total outlay of $692.50 in January. In February, they’ll pay 25% coinsurance of $250.

On an EA plan with a $0 deductible and $47/month fixed copayments, the beneficiary will pay $47 every month, but will get to count the value of the amounts that the DS beneficiary actually paid. This results in the following chart, with the overall effect that the DS beneficiary pays $2000 while the EA beneficiary pays $329 in total for their drug benefit for 2025.

I’m sorry, but the correct answer was “the MOOPs”

If the beneficiary takes a more expensive medication, say one that costs $2000/month instead of $1000/month, but still has the same $47/month copayment, then the differential becomes even more stark and the EA beneficiary reaches the “$2000 RxMOOP” in April instead of July, after paying a whole $188 in actual out of pocket costs (and having incurred $2000 in “True Out of Pocket” (TrOOP) costs - kinda weird that this is called “TRUE out of pocket”). The MPPP doesn’t really make much sense for a patient in such a situation - there are very few people who’d significantly benefit from spreading out four $47 copayments from 4 months to 12 months. Those who would benefit are likely already enrolled in the Low Income Subsidy and will likely spend less than $100 for the year on their drug benefits. I want to point out again that something like this example will affect literally 87% of my patient base who enrolled in EA plans - the full $2000 RxMOOP will only be borne by the 6% of my patients who did not enroll into EA plans and who don’t qualify for the Low Income Subsidy. In other words, congratulations are in order to Wendell Potter and the Lower Out of Pocket Costs NOW! coalition - 94% of my Medicare patients will face out of pocket costs that are LESS than $2000/year no matter how many drugs they get, and the other 6% will spend at most $2000/year on their medications.

This year is the first year that I added the Formulary ID to my Third Party Notes in my dispensing software. Inputting that information has been an enlightening experience - it has revealed that despite my patients being enrolled in over 40 unique PDPs/MAPDs, there are only 21 formularies for those 40+ plans, and the top 5 of those 21 formularies are used by the plans chosen by 70% of my patients. The most popular formulary among my patients is the aforementioned formulary 25002, which is used by most all of the United Healthcare Medicare Advantage plans (except the Chronic Special Needs Plans which use 25003). This concentration of patients into 5 formularies means that it is actually feasible to learn relevant details about the most popular formularies (like their PA criteria, or their tiering for common medications - 25002 has Mounjaro at tier 3 with a PA that basically requires lab evidence of diabetes) and have that information actually be applicable across the bulk of my Medicare patient population. Considering that across the US, there are >500 formularies used by Part D contractors, the fact that 5 of those formularies account for 70% of my patients makes the situation feel much more understandable and controllable.

So what did I learn this year from my OCD about Medicare?

1. I’m unlikely to have a large number of patients having required “Likely to Benefit” notices for the MPPP due to the high proportion of my patients enrolled in Enhanced Alternative Plans with low deductibles and fixed copayments.

2. Most (87%) of my Medicare patients will reach their RxMOOP at an actual outlay smaller than $2000 due to the interaction of EA plans with the RxMOOP.

3. While there are ~500 Medicare formularies nationally, 5 of those formularies account for ~2/3 of my patients. I suspect that most pharmacies have a similar concentration of patients in a very small and manageable number of formularies, if they take the time to look.