Advocates for Evidence-Based Health Policy Speakers
We Can Protect Seniors for $1 per Month
While Medicare Part D has made prescription drugs more accessible since its creation in 2006, seniors are increasingly facing astronomically high co-insurance payments. Innovative prescription drugs for diseases such as cancer present significant benefits to patients but come with high price tags. Unlike Medicare Parts A and B, supplemental insurance cannot be purchased by Medicare Part D members to cap out-of-pocket spending. Some Part D beneficiaries who reach a “catastrophic threshold” of about $5,000 out-of-pocket drug expense may find reprieve via the federal government’s Low-Income Subsidy (LIS), but those who do not qualify continue to pay 5% co-insurance for all drug costs.
In this article, the authors highlight the need for financial protection for non-LIS Part D beneficiaries. The average annual spending by a non-LIS member who reaches the catastrophic threshold has increased from $10,300 in 2007 to $27,095 in 2015 (a 163% increase). Further, when analyzing the 4 most commonly used drug classes by non-LIS beneficiaries, the weighted annual price increased 16% in the same period, whereas the same measure increased only 5% for LIS beneficiaries. Single claims comprised an astounding 16% of non-LIS who reached catastrophic coverage, demonstrating that all patients may benefit from financial protection against the potential need for a single, costly drug. According to the authors, the increased cost to the federal reinsurance program created by extending an out-of-pocket spending cap to all Part D members, regardless of LIS qualifications, could be covered by an estimated premium increase of just $0.40-$1.31 per member per month. At face value, such risk protection by spreading the costs amongst all members seems perfectly in line with the core purpose of insurance.
This proposal could greatly benefit many seniors but may also lead to harmful consequences if not accompanied by additional changes. The study’s estimated compensatory premium increase could be underestimated if the recent trend of increasing non-LIS catastrophic phase spending continues to grow. Accordingly, proper cost control measures would strengthen this policy. With only a 15% liability in the catastrophic phase due to the federal reinsurance program, plans may lack sufficient financial incentives to reduce spending and negotiate drug pricing. To address drug pricing, a variety of measures should be explored such as allowing Medicare Part D to negotiate prices. It is imperative to accompany increased protection for non-LIS seniors with structures that control costs and premiums from increasing excessively for all.
This Policy Prescriptions® review is written by Elliot Baerman as part of our collaboration with the Health Policy Journal Club at Baylor College of Medicine where he is a medical student.
Abstract
Medicare Part D has no cap on beneficiaries’ out-of-pocket spending for outpatient prescription drugs, and, unlike Medicare Parts A and B, beneficiaries are prohibited from purchasing supplemental insurance that could provide such a cap. Historically, most beneficiaries whose annual Part D spending reached the catastrophic level were protected from unlimited personal liability by the Low-Income Subsidy (LIS). However, we found that the proportion of beneficiaries whose spending reached that level but did not qualify for the subsidy—and therefore remained liable for coinsurance—increased rapidly, from 18 percent in 2007 to 28 percent in 2015. Moreover, average total per person per year spending grew much more rapidly for those who did not qualify for the LIS than for those who did, primarily because of differences in price and utilization trends for the drugs that represented disproportionately large shares of their spending. We estimated that a cap for all Part D enrollees in 2015 would have raised monthly premiums by only $0.40–$1.31 per member.
PMID: 29985706
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