WASHINGTON Congress this year could enact the biggest overhaul of Medicares prescription drug benefit since it was first established in 2003. If successful, seniors and taxpayers would be more insulated against the cost of the most expensive drugs.
One proposed change is meant to help Medicare control the costs it absorbs so that the programs premiums can remain stable despite increasing drug prices. Supporters of the drug program tout its low premiums, with the Trump administration and the private insurers who run Part D recently highlighting that average consumer premiums will fall in 2020.
But the programs overall costs are rising, and is subsidized mostly by taxpayers, who pick up the highest drug costs. One little-discussed trend is that this federal support is the fastest-growing part of the $80 billion drug program.
The amount the government paid to subsidize the highest-cost individuals represented 25% of Part D spending in 2007, but 54% in 2017, according to the Senate Finance Committee, which is leading the charge to overhaul the program.
House and Senate draft bills would cut Medicare spending by changing the financing for the highest-cost seniors. To save the government money, the private plans that Medicare pays to administer the program would take on more financial risk, and drugmakers would have to provide discounts.
Its possible that the proposed changes could end up having consequences of their own, such as insurers restricting drug access to control costs, and drug companies investing less in research.
The proposed changes reflect the fact that drugs are more expensive than when the Medicare drug benefit was first enacted. Under the current system, Medicare pays 80% of annual costs over $8,140. Rising drug prices have led to more seniors reaching that level.
The original design would probably still be adequate if drugs cost what they cost 10 or 15 years ago, and thats obviously not the case, said Juliette Cubanski, associate director of the Kaiser Family Foundations program on Medicare policy. Congress, I think, is now trying to catch up to the present-day reality that were all facing, in terms of the high cost of some medications, and benefit design thats not totally in step with that reality.
Reasons for the rise in high-cost patients Medicare Part D, signed into law when Republicans controlled the White House and both chambers of Congress, was designed to be run by private companies, unlike the original Medicare fee-for-service program that covers hospital stays and doctor visits.
Part Ds private insurers take on some financial risk. But most of the costs are paid for by Medicare.
Congress is considering changing who pays what as drug spending hits certain thresholds. The Finance bill would streamline the current complicated structure of the drug benefit, which splits costs between patients, insurers, drugmakers and taxpayers. The division of costs shifts when certain spending levels are reached.
Rising drug prices in recent years mean it is more likely for seniors to reach the catastrophic phase where Medicare covers 80% of costs. For instance, the Hepatitis C treatment Harvoni, which cost Medicare $2.5 billion in 2017, is $78,000 per patient during a one- or two-month course which essentially puts someone into catastrophic coverage immediately.
The number of people who reached this threshold with a single prescription was 33,000 in 2010. That increased to 360,000 by 2016, according to the Medicare Payment Advisory Commission.
Other factors may have made the problem more acute. Two changes occurred as part of the 2010 healthcare law.
When the program was originally designed, for budget reasons, Congress created a coverage gap or doughnut hole. When individuals reached a certain amount of spending, they were on the hook for the full costs of their drugs until they reached the level where the catastrophic coverage kicks in.
The health law closed the doughnut hole. Part of the change required brand-name drugmakers to offer discounts for seniors in the gap, which changed over time and grew to 70% this year. But the law also required the discounts to count along with the patients out-of-pocket expenses. In other words, a senior would reach the catastrophic spending amount while technically paying less than that.
