How To Protect Seniors’ Access To The Medications They Need

posted by AHIP

on June 3, 2019

New research informs how to ensure seniors can get the prescription drugs they need at a cost they can afford: Give Big Pharma some skin in the game

WASHINGTON, D.C. – Out-of-control drug prices mean that seniors face a heavier burden than ever to pay for their prescription drugs. Seniors should be able to get the medications they need at a cost they can afford. That’s why health insurance providers support establishing a Maximum Out of Pocket (MOOP) limit for Medicare Part D. This would put a hard cap on the total amount that Part D enrollees would pay in a year for their medications – saving thousands of dollars a year for those facing the highest drug costs.

Limiting what seniors pay for their prescription drugs will cost money. New research from leading consulting firm Oliver Wyman sheds some light into what a MOOP would cost under current proposals – about $20 billion in higher premiums for seniors, and about $84.7 billion in extra taxpayer costs. So how to fund it? America’s Health Insurance Plans (AHIP) offers a solution that goes beyond cost shifting, to cover the costs of a MOOP in a way that protects seniors and taxpayers, while ensuring the sustainability of the Medicare program: Extend the Medicare Coverage Gap Discount Program, so drug makers pay some of the costs once seniors reach the catastrophic phase.

“We strongly support capping what Part D enrollees pay. We are committed to protecting the health and financial security of seniors and people with disabilities,” said Matt Eyles, president and CEO of AHIP. “The Medicare Coverage Gap Discount Program is proven to lower costs for seniors – so let’s extend it into the catastrophic phase to save them even more. Today, drug makers have perverse incentives to set their prices high, and raise them higher year after year, to move as many seniors into the catastrophic phase as quickly as possible—sometimes by filling only a single prescription. Let’s give Big Pharma some accountability and skin in the game when it comes to protecting America’s seniors who are most at risk with the highest drug costs.”

What is a MOOP?

A MOOP would apply to the “catastrophic phase” of Medicare Part D. The “catastrophic” phase of Part D was designed to protect enrollees not eligible for low-income subsidies. Once they have reached a certain spending threshold ($6,350 in 2020), they only pay 5% of their prescription drug costs for the rest of the year. Fewer than 10% of seniors with Part D coverage enter the catastrophic phase each year. But as drug prices continue to rise and may exceed tens of thousands or hundreds of thousands of dollars, even that 5% has put a huge financial strain on Americans.

A MOOP would replace this approach with a new solution that would limit seniors’ out of pocket costs each year to a specified amount. This is very similar to how prescription drug coverage works in other markets, including employer provided coverage.

What Did the Study Analyze?

To successfully protect access and financial stability, a MOOP must be structured in a stable, sustainable way. Some have proposed that this cost could be offset by changing the structure of federal subsidies for Part D spending. In its new study, Oliver Wyman evaluated the 10-year impact (2021 – 2030) of 1) creating a Part D MOOP and 2) reducing federal reinsurance payments. It found that creating a MOOP would:

  • decrease member cost sharing in the catastrophic phase by $59.3 billion BUT
  • increase Part D premiums for everyone by $20 billion, and raise taxpayer costs by $84.7 billion.

Reducing federal re-insurance payments and shifting liability to insurance providers would:

  • increase Part D premiums for everyone by nearly $6 billion more AND
  • increase taxpayer costs by nearly $7 billion more by shifting federal funds into higher premium subsidies.

The Better Solution

“Current proposals for creating this cap on patient costs in Part D would simply shift costs,” Eyles observed. “Once seniors enter the ‘catastrophic’ phase, drug makers have no accountability and reap all the profits, while seniors and taxpayers face the biggest financial burdens. And now we’re seeing drugs with price tags of $1 million or more being brought to market.

“Let’s build on what’s already working. Let’s cover the costs of a MOOP in a way that protects seniors and taxpayers, while ensuring the sustainability of the Medicare program: Extend the Medicare Coverage Gap Discount Program.”

The full study from Oliver Wyman can be found here.

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