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I taught a US Health Policy and Politics, 1987-Present class for three years at the Duke Sanford School of Public Policy. The first real material I had the students dive into was on Medicare Catastrophic. Medicare Catastrophic passed with “I love ice cream” majorities in 1988. It instituted out of pocket limits on Medicare hospital cost-sharing, expanded access to some benefits and instituted a limited prescription drug benefit. The main source of financing for these new benefits were the then current Medicare beneficiaries. Everyone thought that this was going to be well received.

OOPS!

A year later, most of the Medicare portions of the bill were repealed by similar “Puppies are adorable” majorities.

I teach the class with assumption that Congress learns from what it thinks went well or failed miserably the last time that they touched health insurance. Medicare Catastrophic was a formative experience for everyone involved in ClintonCare which was then a formative experience for both Medicare Part D and the ACA (with different lessons learned by different actors.) The big lesson was that most people most of the time are not at catastrophic risk so expensive benefits that mainly are intended for 5% to 10% of the beneficiary population are hard to sell. This is especially true when those benefits are financed by people who already have private coverage and therefore realize no insurance value from the existence of the new benefit.

The Inflation Reduction Act (IRA) made massive changes to the Medicare Part D benefit. The two big changes are the institution of an out of pocket limit of $2000 instead of an unlimited 5% coinsurance for catastrophic expenses, and a lot of replumbing behind the scenes on how super-high cost claims are paid. The replumbing behind the scenes means far more of the total costs are showing up in premiums rather than federal reinsurance. Premium subsidies are higher but most people will seek a premium spike. And that premium spike will be applied to folks who will benefit from a $2000 out of pocket cap and those who believe that they will never touch that cap in a year.

As I’m working on tightening up some specific aims that relate to Medicare Part D, I am really starting to get a vibe that the political-economic distribution of costs and benefits in the IRA for Part D makes these changes very vulnerable to repeal much like Medicare Catastrophic was vulnerable to repeal. The benefits are concentrated among a disjointed population while the costs are visible and broadly spread.

The Politics of the Inflation Reduction Acts Part D changesPost + Comments (14)