Health Industry

Medicare Surprise: Drug Plan Prices Touted During Open Enrollment Can Rise Within a Month

Something strange happened between the time Linda Griffith signed up for a new Medicare prescription drug plan during last fall’s enrollment period and when she tried to fill her first prescription in January.

She picked a Humana drug plan for its low prices, with help from her longtime insurance agent and Medicare’s Plan Finder, an online pricing tool for comparing a dizzying array of options. But instead of the $70.09 she expected to pay for her dextroamphetamine, used to treat attention-deficit/hyperactivity disorder, her pharmacist told her she owed $275.90.

“I didn’t pick it up because I thought something was wrong,” said Griffith, 73, a retired construction company accountant who lives in the Northern California town of Weaverville.

“To me, when you purchase a plan, you have an implied contract,” she said. “I say I will pay the premium on time for this plan. And they’re going to make sure I get the drug for a certain amount.”

But it often doesn’t work that way. As early as three weeks after Medicare’s drug plan enrollment period ends on Dec. 7, insurance plans can change what they charge members for drugs — and they can do it repeatedly. Griffith’s prescription out-of-pocket cost has varied each month, and through March, she has already paid $433 more than she expected to.

A recent analysis by AARP, which is lobbying Congress to pass legislation to control drug prices, compared drugmakers’ list prices between the end of December 2021 — shortly after the Dec. 7 sign-up deadline — and the end of January 2022, just a month after new Medicare drug plans began. Researchers found that the list prices for the 75 brand-name drugs most frequently prescribed to Medicare beneficiaries had risen as much as 8%.

Medicare officials acknowledge that manufacturers’ prices and the out-of-pocket costs charged by an insurer can fluctuate. “Your plan may raise the copayment or coinsurance you pay for a particular drug when the manufacturer raises their price, or when a plan starts to offer a generic form of a drug,” the Medicare website warns.

But no matter how high the prices go, most plan members can’t switch to cheaper plans after Jan. 1, said Fred Riccardi, president of the Medicare Rights Center, which helps seniors access Medicare benefits.

Drug manufacturers usually change the list price for drugs in January and occasionally again in July, “but they can increase prices more often,” said Stacie Dusetzina, an associate professor of health policy at Vanderbilt University and a member of the Medicare Payment Advisory Commission. That’s true for any health insurance policy, not just Medicare drug plans.

Like a car’s sticker price, a drug’s list price is the starting point for negotiating discounts — in this case, between insurers or their pharmacy benefit managers and drug manufacturers. If the list price goes up, the amount the plan member pays may go up, too, she said.

The discounts that insurers or their pharmacy benefit managers receive “don’t typically translate into lower prices at the pharmacy counter,” she said. “Instead, these savings are used to reduce premiums or slow premium growth for all beneficiaries.”

Medicare’s prescription drug benefit, which began in 2006, was supposed to take the surprise out of filling a prescription. But even when seniors have insurance coverage for drugs, advocates said, many still can’t afford them.

“We hear consistently from people who just have absolute sticker shock when they see not only the full cost of the drug, but their cost sharing,” said Riccardi.

The potential for surprises is growing. More insurers have eliminated copayments — a set dollar amount for a prescription — and instead charge members a percentage of the drug price, or coinsurance, Chiquita Brooks-LaSure, the top official at the Centers for Medicare & Medicaid Services, said in a recent interview with KHN. The drug benefit is designed to give insurers the “flexibility” to make such changes. “And that is one of the reasons why we’re asking Congress to give us authority to negotiate drug prices,” she said.

CMS also is looking at ways to make drugs more affordable without waiting for Congress to act. “We are always trying to consider where it makes sense to be able to allow people to change plans,” said Dr. Meena Seshamani, CMS deputy administrator and director of the Center for Medicare, who joined Brooks-LaSure during the interview.

On April 22, CMS unveiled a proposal to streamline access to the Medicare Savings Program, which helps 10 million low-income enrollees pay Medicare premiums and reduce cost sharing. Enrollees also receive drug coverage with reduced premiums and out-of-pocket costs.

The subsidies make a difference. Low-income beneficiaries who have separate drug coverage plans and receive subsidies are nearly twice as likely to take their medications as those without financial assistance, according to a study Dusetzina co-authored for Health Affairs in April.

When CMS approves plans to be sold to beneficiaries, the only part of drug pricing it approves is the cost-sharing amount — or tier — applied to each drug. Some plans have as many as six drug tiers.

In addition to the drug tier, what patients pay can also depend on the pharmacy, their deductible, their copayment or coinsurance — and whether they opt to abandon their insurance and pay cash.

After Linda Griffith left the pharmacy without her medication, she spent a week making phone calls to her drug plan, pharmacy, Social Security, and Medicare but still couldn’t find out why the cost was so high. “I finally just had to give in and pay it because I need the meds — I can’t function without them,” she said.

But she didn’t give up. She appealed to her insurance company for a tier reduction, which was denied. The plan denied two more requests for price adjustments, despite assistance from Pam Smith, program manager for five California counties served by the Health Insurance Counseling and Advocacy Program. They are now appealing directly to CMS.

“It’s important to us to work with our members who have questions about any out-of-pocket costs that are higher than the member would expect,” said Lisa Dimond, a Humana spokesperson. She could not comment about Griffith’s situation because of privacy rules.

However, Griffith said she received a call from a Humana executive who said the company had received an inquiry from the media. After they discussed the problem, Griffith said, the woman told her, “The [Medicare] Plan Finder is an outside source and therefore not reliable information,” but assured Griffith that she would find out where the Plan Finder information had come from.

She won’t have to look far: CMS requires insurers to update their prices every two weeks.

“I want my money back, and I want to be charged the amount I agreed to pay for the drug,” said Griffith. “I think this needs to be fixed because other people are going to be cheated.”

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Few Acute Care Hospitals Escaped Readmissions Penalties

Preventable rehospitalization of the nation’s older adults has proved a persistent health and financial challenge for the U.S., costing Medicare hundreds of millions of dollars each year.

Various analyses have found many readmissions within a month of discharge might have been avoided through better care and more attention paid to the patients after they left the hospital. The federal government’s campaign to reduce the frequency of so-called boomerang patients by applying financial disincentives has entered its 10th year with Medicare’s decision to lower payments to 2,499 hospitals throughout the current fiscal year, which began last month and runs through September 2022.

The Hospital Readmissions Reductions Program (HRRP), created as part of the Affordable Care Act, punishes general acute-care hospitals when more Medicare patients return for a new admission within 30 days of discharge than the government decides is appropriate. The average penalty this fiscal year is 0.64%, with 39 hospitals losing the maximum of 3% of reimbursements.

Over the lifetime of the program, 2,920 hospitals have been penalized at least once. That’s 93% of the 3,139 general acute hospitals subject to HRRP evaluation, and 55% of all hospitals. Moreover, 1,288 have been punished in all 10 years. Only 219 eligible hospitals have avoided any payment reductions since the program’s start in 2013, though more than 2,000 hospitals are automatically exempt from penalties because they have specialized functions: those that focus on children, psychiatric patients, veterans, rehabilitation and long-term care or those that serve as the only hospital in an area.

Hospital readmissions have become less frequent since before the ACA was enacted, and most experts attribute that partly to the financial threat of the penalties, though other factors likely contributed to the improvements. Less debatable is that the penalties have saved the government billions of dollars since their inception. The Centers for Medicare & Medicaid Services estimates that because of the HRRP, Medicare will keep an extra $521 million this fiscal year. You can look up individual hospital penalties using KHN’s interactive tool.

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The Public Backs Medicare Rx Price Negotiation Even After Hearing Both Sides’ Views

As Congress debates cutting prescription drug costs, a poll released Tuesday found the vast majority of adults — regardless of their political party or age — support letting the federal government negotiate drug prices for Medicare beneficiaries and those in private health insurance plans.

The argument that pharmaceutical companies need to charge high prices to invest in research and develop new drugs does little to change that sentiment, according to the new KFF poll. Most respondents agreed the negotiation strategy is needed because Americans pay more than people in other countries and because companies’ profits are too high.

Various polls, in addition to KFF’s, have found the plan to allow Medicare to negotiate prescription drug prices to be very popular. (KHN is an editorially independent program of KFF.) The policy has polled favorably for at least the past six years, according to Ashley Kirzinger, associate director of public opinion and survey research at KFF.

Still, congressional lawmakers have yet to reach a consensus on whether to include such a provision in the major reconciliation bill aimed at funding President Joe Biden’s domestic policy agenda and enhancing social programs. Republican lawmakers generally oppose efforts to impose price restraints on prescription drugs. Democrats in the House are pushing a bill that would allow changes in Medicare drug policies, including negotiations of prices for some medications. The bill passed the House last year but has run into opposition this fall. A few moderate Democrats have introduced a narrower approach.

The KFF poll found 83% of the public — including 91% of Democrats, 85% of Independents, 76% of Republicans and 84% of seniors — initially favored the federal government negotiating lower drug prices for both Medicare and private insurance. These opinions were relatively unchanged by the arguments in favor or against the policy, the poll found. Even Republican support remained relatively steady, at 71%, after hearing concerns about how negotiations could upend the pharmaceutical industry. However, the share of Republicans who “strongly” favored the plan dipped from 44% to 28%.

For example, large majorities regardless of party identification and age found the following argument convincing: “Those in favor say negotiation is needed because Americans pay higher prices than people in other countries, many can’t afford their prescriptions, and drug company profits are too high.”

A third, including a slight majority of Republicans 65 or older, found the following argument convincing: “Those opposed say it would have the government too involved and will lead to fewer new drugs being available in the future.”

In addition, 93% — including 90% of Republicans — said that even if prescription prices were lower “drug companies would still make enough money to invest in the research needed to develop new drugs,” while just 6% said “drug companies need to charge high prices in order to fund the innovative research necessary for developing new drugs.”

These findings represent a change from a June KFF poll, which found attitudes changed after hearing assertions that allowing the federal government to negotiate Medicare prescription drug prices could lead to less research and development or limited access to newer prescriptions.

“This [latest] poll did a better job of representing what’s happening in the debate,” said Kirzinger. “The public is hearing both sides of the argument.”

Pharmaceutical companies have spent a lot of money on messaging. PhRMA, the industry’s trade group, launched a seven-figure ad campaign against legislation to lower drug prices through negotiation. Pharmaceutical companies have spent the most of any single industry on federal lobbying this year and donated sizable sums to House Democrats opposed to the plan, according to Open Secrets.

But the Medicare drug-pricing negotiation plan outlined in H.R. 3 (or the “Elijah E. Cummings Lower Drug Costs Now Act”) is estimated to save roughly $500 billion in federal spending for Medicare drugs over 10 years, according to a Congressional Budget Office estimate. Many Democrats hope to use the savings to expand coverage in Medicare and Medicaid as they piece together their larger spending plan.

The KFF poll also found most people have little or no confidence that Biden or Congress will “recommend the right thing” for the country on prescription drug prices. The vast majority expressed the same about drug companies. A slight majority reported confidence in what AARP recommends — and the advocacy group backs the negotiated Medicare prices.

The KFF Health Tracking Poll was conducted from Sept. 23 to Oct. 4 among a nationally representative sample of 1,146 adults, including an oversample of adults 65 and older. The margin of sampling error is plus or minus 4 percentage points for the full sample.

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