Changes in Out-of-Pocket Drug Expenditures Among Medicare Beneficiaries With Dementia Under the Inflation Reduction Act: A Simulation Study

Objectives

We investigated how the Inflation Reduction Act (IRA) Medicare Part D benefit redesign may reduce out-of-pocket (OOP) drug expenditures for Medicare beneficiaries with dementia.

Methods

Using data from the Health and Retirement Study (HRS) linked with Medicare claims, we simulated post-redesign OOP drug spending by applying the 2025 prescription drug cost-sharing rules to each beneficiary’s pre-redesign Part D medication utilization for 2016, adjusting for inflation. Our study population comprised HRS respondents aged 65 and older in 2016, enrolled in Medicare fee for service, with at least one Part D drug claim in 2016, and diagnosed with dementia between 2000 and 2016 (n = 1677). We compared pre-redesign and post-redesign annual OOP drug expenditures stratified by: (1) low-income subsidy (LIS) eligibility status; (2) household income among non-LIS beneficiaries; (3) comorbidity count, and 4) cognitive impairment severity.

Results

After the redesign, we project average annual OOP drug expenditures among LIS beneficiaries with dementia to decrease from $56 to $25—representing a $31, or 55%, reduction. In contrast, among non-LIS beneficiaries, average OOP drug expenditures is projected to decrease from $772 to $576, a $196, or 25% reduction. We project the reduction in OOP drug expenditures to be greater among beneficiaries with 6 to 8 comorbidities (45%) than among beneficiaries with fewer comorbidities (21%-26%).

Conclusions

The Inflation Reduction Act Medicare Part D benefit redesign will reduce OOP drug spending for beneficiaries with dementia, resulting in potentially marked savings not only for low-income beneficiaries and beneficiaries with a high comorbidity burden but also for higher-income beneficiaries.