A couple of weeks ago, the Hill reported that there is interest in the Senate to change the Medicare Part D drug benefit so that is actually functions as catastrophic insurance.
Senate Finance Committee Chairman Chuck Grassley (R-Iowa) is working on a bipartisan plan to cap seniors’ expenses for prescription drugs in Medicare as part of a broader effort to lower drug prices.
Grassley told The Hill on Wednesday that one idea he is working on with Sen. Ron Wyden (Ore.), the top Democrat on the panel, is “some sort of maximum amount that one person would have to pay” for drugs…
Capping Medicare Part D enrollees’ out-of-pocket costs has long been a priority for Wyden, who previously proposed legislation to limit seniors’ costs to around $2,650 a year. More than 1 million seniors in 2015 paid more than $3,000 for their Medicare drugs, according to Wyden’s office.
Medicare Part D has a complex benefit design. There is an initial deductible, then an area where the beneficiary pays 25% coinsurance, then depending on whether or not the drug is brand or generic, another layer of coinsurance. Finally, once drug costs are over a threshold ($8,140 in 2019), the individual beneficiary has a 5% co-insurance. There is currently no out of pocket limit to a patient’s total cash costs.
This is a problem. Dr. Stacie Dusetzina is one of America’s leading drug pricing experts and she made this comment about helping her dad choose a Medicare plan that stuck with me:
I told him those are the drugs I study
His reply was no way could he afford that. He would just have to die.— Stacie Dusetzina (@DusetzinaS) October 23, 2017
5% is much better than 90% or 100% but for drugs that routinely cost $100,000 or more per year, it is still a massive fiscal barrier to care.
Medicare Part D’s design has never provided true catastrophic protection. It did not provide that protection in 2006 when the number of six figure drugs was far lower, and it does not provide that protection now as an increasing number of six and (potentially) seven figure drugs for a lifetime are on the market and in the pipeline.
Policy makers have a number of choices that they can make. They can institute an out of pocket cap which increases the actuarial value of Medicare Part D without any other changes. They can hold actuarial value constant by increasing the deductible while also instituting an out of pocket cap. They can change how rebates flow. They can encourage more competition to hopefully hold prices lower than they otherwise would be.
The basic choice of whether or not to hold the actuarial value of Medicare Part D constant and then rejigger the benefit design is one that will test the ability of Congress to make non-Pareto improvements. Someone will benefit and a lot more people will be mildly hurt. The other choice is to turn on another firehose of federal money. That is the easier choice to make politically.
On the Road and In Your Backyard
daveNYC
Cap, no?
dnfree
Having Medicare Part D be separate from regular Medicare can cause strange problems. I had the new shingles shot, which is a series of two, at my doctor’s office, which is where I have had all my immunizations before and after retirement. My doctor thought nothing of it either–I had the new pneumonia shot and the first new shingles shot the same day, one in each arm. The EOBs didn’t come in for a couple of months–until after I’d had the second shingles shot. Guess what? Medicare doesn’t cover the shingles shot, just the pneumonia shot. The shingles shot is supposed to be under Part D so you are supposed to get it at, for instance, a drugstore. Because Medicare didn’t cover it, my supplement plan didn’t cover it either, and the cost of each shot was over $500. So a $1000 medical bill for just going the wrong place to have the shots. After lengthy review, the health network decided to “forgive” the cost because my doctor hadn’t realized this either. It might work differently for Advantage plans–I’m not sure–but it’s another pitfall of a fragmented system.
David Anderson
@daveNYC: updated!
Barbara
The fact that Medicare Part D is a siloed benefit causes all kinds of problems in all kinds of ways.
smintheus
Or they could just set maximum prices for drugs instead of requiring the government to subsidize the cost of padding the drug makers’ profits.
Ruckus
@smintheus:
Now you are just talking silly! Why would anyone want to limit profits? Aren’t those companies supposed to make as much money as they can squeeze out of each patient, regardless of the cost to the individual and the country?
//
Chris Johnson
Technically, he will indeed just have to die… someday.
But that’s not what we’re talking about. Still… just sayin’
john carter
A friend who can’t afford $10,000 a pop for his drugs tells me he has no choice but to die and has accepted that fact.
He also told me he seriously thinks about taking some of the people who created this mess with him (while he can), but not the lower level guys.
I’m sure that’s just the frustration talking, no?
Michael J Allen
Before messing with the Part D program they should remove the prohibition against Medicare negotiating drug prices, or make all prices the same as the average of Canada, France, and the UK, or whatever way they want in order to make drug prices the same here as everywhere else. Anything else is like rearranging those famous deck chairs.
If you have Medicare Advantage – well I do and don’t understand it really, but my insurance has tiers like the Aetna related insurance I had before plus the donut hole where you pay most of the costs for a few thousand dollars after a certain level which is (don’t make me look it up) somewhere over $2000 a year. There is a mail order pharmacy where you get 3 months worth of whatever for the cost of two, just like with Aetna. And some basic generics are now free.
The good thing is that there is no additional premium for the drug part or the hospital part.
Ruckus
@Michael J Allen:
Medicare is better than nothing. Which is what seniors had before it was started because the medical costs skyrocket as one get old and insurance was prohibitive. (Yes I know that some things for kids are horribly expensive, but all olds have higher costs, it’s what happens as one gets closer to paying the funeral home for a tiny house.) And it’s been made worse by the things that have been done to it to keep the insurance industry with their hands in your pockets. Part D for example. Medicare Advantage for another. It’s far, far better than nothing. But it’s a bad way to take care of people who often no longer can work to pay for their care, and mostly have worked for decades to pay for it.