The Trump Administration is heavily promoting what it calls its “Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs.” But will the plan reduce out-of-pocket costs for Medicare beneficiaries?
The answer is: Not by much, at least not very soon. And, in some cases, it could even make drugs more costly.
The first problem is that the paper really isn’t a plan at all, at least not one with specific proposals. Rather, it is a diagnosis of multiple challenges paired with scores of ideas that could—possibly– address them. The 44-page document includes only about three pages of actual recommendations, and many of them are couched in the conditional: The Department of Health and Human Services (HHS) “may support improved competition…” or it “may support better negotiation…” Indeed, the Concord Coalition counted 136 question marks. Not exactly Trump-like in its sense of certainty.
Back-breaking drug costs
In addition, many of the problems it identifies affect the commercial market for pharmaceuticals but not Medicare. The vast majority of Medicare beneficiaries pay very little for their meds, especially if they use generics. The problem is the relatively small number of older adults who face back-breaking costs for brand-name and specialty drugs.
Here is the background, nicely summarized in this report by the Kaiser Family Foundation: About two-thirds of the 60 million Americans enrolled in Medicare have Part D drug coverage. Of the 43 million with drug insurance, nearly 60 percent have stand-alone coverage and about 40 percent are in Medicare Advantage (MA) plans that combine pharmaceutical insurance with other benefits.
The average monthly premium for all Part D plans is about $32, an amount that has been holding steady for the past decade. For MA plans, the drug benefit is rolled into a single monthly premium. Stand-alone plan premiums average about $41.
$300 or less
The standard annual deductible for Medicare drugs in 2018 is $405, but nearly half of enrollees are in zero deductible plans. Cost-sharing averages about $10 for generic drugs and about $40 for preferred brands. More than 12 million low-income Part D enrollees receive premium and cost-sharing assistance through a special subsidy program. By some estimates, more than 90 percent of Medicare enrollees spend $300 or less annually on drugs.
But there are two problems: If you must take a brand-name drug that is not on your insurance company’s preferred list, your costs can skyrocket. Cost sharing for many of these drugs can approach 50 percent. And the consulting firm Avalere Health estimates that in 2016, about 800,000 Medicare beneficiaries faced more than $5,000 in what’s known as True Out-Of-Pocket Costs. That includes actual out-of-pocket expenses (about 60 percent of total costs), drug manufacturer payments for a mandated discount program, and some charitable assistance. Most troubling, the number of beneficiaries who triggered catastrophic coverage grew by more than 50 percent from 2013 to 2016.
Part D and Part B
The other problem is that not all drugs are covered by Part D. Medications administered through infusion, such as many cancer drugs, often are covered by Medicare Part B instead. And these drugs can be enormously expensive. It is not unusual for a cocktail of chemotherapy that includes some newer drugs to cost $30,000—through older drugs may be less costly.
Here is where the Trump plan gets complicated. Throughout his presidential campaign, Trump said he’d give Medicare authority to negotiate prices directly with drug makers. His blueprint fails to do this, however. Instead, it suggests shifting coverage for these infusion therapies from Part B to Part D. The idea: Since Part D is managed by private insurance companies, those carriers could negotiate lower prices.
Some would pay more
But here is the problem: In a separate study, Avalere found that average out-of-pocket costs for new cancer therapies were about one-third higher when covered by Part D ($3,200) than under Part B ($2,400). In other words, for some Medicare beneficiaries, shifting infusion therapies to Part D could raise their out-of-pocket costs, not lower them.
It will depend, Avalere says, on a complicated set of circumstances: including the drug price, the mix of medications used by a patient, her income level, and whether she has Part D coverage or Parts A and B plus additional insurance such as a Medicare Supplemental (Medigap).
Avelere also suggests the shift could increase Part D premiums by more than it would reduce Part B premiums. Thus, net premium costs from someone with Part B and Part D coverage could go up.
As the infusion example shows, drug pricing for Medicare is a complicated story. And it will take a lot more than a report that is more sizzle than steak to change the narrative.
As with the rest of this column, you really need to understand what the following words mean in order to write about Medicare. It does not appear that you do.
“And the consulting firm Avalere Health estimates that in 2016, about 800,000 Medicare beneficiaries faced more than $5,000 in what’s known as True Out-Of-Pocket Costs. That includes actual out-of-pocket expenses (about 60 percent of total costs), drug manufacturer payments for a mandated discount program, and some charitable assistance. Most troubling, the number of beneficiaries who triggered catastrophic coverage grew by more than 50 percent from 2013 to 2016.”
— The mandated drug manufacturer discount program you seem to dismiss as an afterthought actually covers half or more on average of the TROOP amount you mention. And none of these statistics from the past mean anything anymore because the templated “donut hole” co-pay (what this really relates to) falls to 25% — same as the IEP phase templated co-pay — next year.
— I am not sure what “charitable assistance” you refer to but the Social Security/Extra Help LIS program and State Pharmaceutical Assistance Programs (not available in all states) covers almost all of these costs for over half the people on Medicare (so presumably for half of this large subset). This half is lower middle class and middle class (the poor on Medicare also get Medicaid–free drugs no matter how many they need). As a result, very few people as a percent of the people on Medicare are actually financially affected by these statistics and those that are are high upper middle class and outright wealthy. That’s small solace if you are so chronically or otherwise ill that you need this many drugs but it is some solace.
The numbers change all the time but the last time I ran them, the net result is that for this very small minority of ill but rich people who need so many expensive drugs, they get the drugs they need for less than a dime on the dollar if they use Part D. Increasingly they do not but play other games that only rich people can play to avoid Medicare — and its surtaxes on the rich — altogether.
(I have no idea what the statement that out of pocket costs amount to 60% of total costs even means. Do you? Think about it: Who would buy such terrible insurance?)
[…] The report is an annual exercise designed to review the health of the nation’s biggest health insurance program. It looks in detail at each of Medicare’s pieces, including Part A inpatient hospital insurance; Part B coverage for outpatient hospital care, physician services, and the like; Part C Medicare Advantage plans; and Part D drug insurance. […]
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