Out-Of-Pocket Costs

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.”

Source

Despite Restraints, Democrats’ Drug Pricing Plan Could Still Aid Consumers

The Medicare prescription drug pricing plan Democrats unveiled this week is not nearly as ambitious as many lawmakers sought, but they and drug policy experts say the provisions crack open the door to reforms that could have dramatic effects. 

Tamping down drug expenses has been a longtime rallying cry for consumers beset by rapidly rising prices. Although people in private plans had some protections, those on Medicare often did not. They had no out-of-pocket caps and frequently complained that federal law kept them from using drugmakers’ coupons or other cost-cutting strategies.

A plan offered earlier this year by House Democrats — which included robust negotiation over drug prices in Medicare — was blocked by a handful of moderates who argued that the price curbs would stifle innovation. The legislation also was on a course to hit roadblocks among senators.

The moderates favored more limited negotiation over drugs only in Medicare Part B — those administered in doctors’ offices and hospitals. Most people in Medicare get their drugs through Part D, which covers medicine dispensed at a pharmacy.

When it appeared that the bill to fund President Joe Biden’s social agenda would move forward without a drug pricing proposal, the pressure built, intense negotiations were held, and a hybrid proposal was unveiled. It includes identifying 100 of the most expensive drugs and targeting 10 of them for negotiations to bring those costs down beginning in 2025. It will also place inflation caps on prescription drug prices for all insurance plans, restrict copays for insulin to no more than $35, and limit Medicare beneficiaries’ annual out-of-pocket drug costs to $2,000.

“There was a sense that the government had its hands tied behind its back. Now a precedent is being set,” said Senate Finance Committee Chairman Ron Wyden (D-Ore.), who led the talks for the senators. “There’s going to be negotiation on the most expensive drugs: cancer drugs, arthritis drugs or the anticoagulants. And that’s a precedent, and once you set a precedent that you can actually negotiate, you are really turning an important corner.”

Drugmakers say the changes could stymie consumers’ options. “Under the guise of ‘negotiation,’ it gives the government the power to dictate how much a medicine is worth,” Stephen Ubl, CEO of the trade group PhRMA, said in a statement, “and leaves many patients facing a future with less access to medicines and fewer new treatments.”

But how, exactly, will the changes be felt by most Americans, and who will be helped?

The answers vary, and many details would still have to be worked out by government agencies if the legislation passes. House members warned some minor changes were still being made Thursday night, and it all has to pass both chambers.

Controlling Insulin Costs

One of the most obvious benefits will go to those who need insulin, the lifesaving drug for people with Type 1 diabetes and some with Type 2 diabetes. Although the drug has been around for decades, prices have risen rapidly in recent years. Lawmakers have been galvanized by nightmarish accounts of people dying because they couldn’t afford insulin or driving to Canada or Mexico to get it cheaper.

Under the bill, starting in 2023, the maximum out-of-pocket cost for a 30-day supply of insulin would be $35. The benefit would not be limited to Medicare beneficiaries.

That cap is the same as one that was set in a five-year model program in Medicare. In it, the Centers for Medicare & Medicaid Services estimated that the average patient would save about $466 a year.

Detailed analyses of the proposals were not yet available, so it is unclear what the fiscal impact or savings would be for patients outside of Medicare.

Limiting Out-of-Pocket Spending

Another obvious benefit for Medicare beneficiaries is the $2,000 cap on out-of-pocket costs for prescription drugs. Currently, drug costs for people in the Part D prescription drug plans are calculated with a complicated formula that features the infamous “doughnut hole,” but there is no limit to how much they might spend.

That has led to consumers with serious diseases such as cancer or multiple sclerosis paying thousands of dollars to cover their medication, a recent KFF analysis found. Under current law, when an individual beneficiary and her plan spend $4,130 this year on drugs, the beneficiary enters the doughnut hole coverage gap and pays up to 25% of the price of the drug. Once she has spent $6,500 on drugs, she is responsible for 5% of the cost through the end of the year.

Limiting that expense is an especially big deal for people who get little low-income assistance and have expensive illnesses, said Dr. Jing Luo, an assistant professor of medicine at the University of Pittsburgh’s Center for Research on Health Care. “The patient pays 5% of all drug costs, and 5% of $160,000 is still a lot of money,” he said.

The legislation would alleviate that fear for consumers. “Rather than having a bill at the end of the year, like over $10,000, maybe their bill at the end of that year for that very expensive multiple myeloma treatment is $2,000,” he said.

Negotiating Drug Prices

Medicare price negotiation is probably the highest-profile provision in the legislation — and the most controversial. According to the bill, the Department of Health and Human Services would be responsible for identifying the 100 high-cost drugs and choosing the 10 for price negotiations. That effort wouldn’t start until 2023, but the new prices would go into effect in 2025. Another 10 drugs could be added by 2028. No drugs have been identified yet.

To meet the concerns of some lawmakers, the legislation lays out specific provisions for how HHS would select the drugs to be included. Only drugs identified as one of a kind or the only remedy for a specific health problem would be included.

The list would also be limited to drugs that have been on the market beyond the period of exclusivity the government grants them to be free from competition and recoup costs. For most regular drugs, the exclusivity can last nine years. For the more complicated biologic drugs, the period would be 13 years. Using the exclusivity timing allowed lawmakers to skirt the issue of whether the drugs were still under patent protection.

The measure allows for prices to be negotiated to a lower level for older drugs chosen for the program. So, for example, the negotiated price for a non-biologic drug that has been available for less than 12 years would be 75% of the average manufacturer price. That would fall to 65% for drugs that are 12 to 16 years past their initial exclusivity, and 40% for drugs more than 16 years past the initial exclusivity.

Drugs from smaller companies with sales under $200 million are excluded because lawmakers were afraid tamping down their prices would harm innovation.

Some experts questioned whether the negotiated prices would be directly felt by consumers.

“It helps Medicare, without question, to reduce their expenditures,” said William Comanor, a professor of health policy and management at the UCLA Fielding School of Public Health. “But how does that affect consumers? I bet Medicare doesn’t change the copay.”

Yet, he added, the copayment is less of an issue if a consumer’s prescription expenses are capped at $2,000.

Linking Prices to Inflation

Under the bill, manufacturers would have to report their prices to the HHS secretary, and if the prices increase faster than inflation, the drugmakers would have to pay a rebate to the government. Manufacturers that don’t pay the rebate would face a civil penalty of 125% of the value of the rebate.

The provisions would apply to drugs purchased through Medicare and non-Medicare plans.

Over the long term, the idea is to slow the overall inflation of drug prices, which has exceeded general inflation for decades.

Drug prices would be pegged to what they were in March, and the system would go into effect in 2023, so there would be little immediate impact. (Some lawmakers had hoped to peg the program to prices from several years ago — which might produce a bigger effect — but that was changed in the negotiations over the weekend.) The long-term impact is also hard to judge, because under the current complicated system, many people who pay for drugs get assistance from the drug companies, and most generics in the U.S. are relatively inexpensive, Comanor said.

Over the long haul, though, savings are expected to be substantial for the government, as well as for consumers who don’t qualify for other programs to help pay drug expenses and need high-end medication.

At the very least, the legislation would move the U.S. in the direction of the rest of the world.

“The longer the drug is on the market, the lower the price,” said Gerard Anderson, a professor of health policy at Johns Hopkins’ medical school. “In every other country, the price goes down over time, while in the United States, it is common for prices to increase.”

Update: This story was updated at 3:15 p.m. ET on Nov. 5, 2021, to reflect new language added to the measure that would changed the exclusivity period for negotiating the price of biologic drugs from 12 to 13 years.

Source

Caring for an Aging Nation

Health care for the nation’s seniors looms large as the baby-boom generation ages into retirement. President Joe Biden tacitly acknowledged those needs in March with his proposal to spend $400 billion over the next eight years to improve access to in-home and community-based care.

The swelling population of seniors will far outpace growth in other age groups. That acceleration — and the slower growth in other age groups — could leave many older Americans with less family to rely on for help in their later years. Meanwhile, federal officials estimate that more than half of people turning 65 will need long-term care services at some point. That care is expensive and can be hard to find.

Spending for paid long-term care already runs about $409 billion a year. Yet that staggering number doesn’t begin to reflect the real cost. Experts estimate that 1 in 6 Americans provide billions of dollars’ worth of unpaid care to a relative or friend age 50 or older in their home.

As the country weighs Biden’s plan, here’s a quick look at how long-term care works currently and what might lie ahead.

A Variety of Services

More than 65,000 paid, regulated service providers cared for 8 million Americans in 2016, according to the most recent federal report. In addition, AARP estimates more than 50 million people provide unpaid care, generally to family members.

Home Health Care

Care that occurs in the home, usually done by an unpaid caregiver or by a health aide, who may be employed by an agency (does not include hospice services).

12,200 home health care agencies

Community Support Services

Supplemental care including services such as adult day care centers and transportation.

4,600 adult day care centers

286,300 adults enrolled in adult day care service centers

Assisted Living/Retirement Communities

Residential facilities that can offer a variety of care levels, including assisted living centers and memory care.

28,900 assisted living and other residential care communities

811,500 residents

Nursing Homes

Full-time residential facilities that offer 24-hour supervision and nursing care.

15,600 nursing homes

1.35 million residents

Note: Data from 2016

Source: National Center for Health Statistics

Note: Data from 2016
Source: National Center for Health Statistics

Booming Number of Seniors

As baby boomers age, 10,000 people a day pass their 65th birthday. The Census Bureau estimates that more than 94.6 million people will be 65 or older in 2060.

From January to June 2018, the percentage of older adults age 85 and over needing help with personal care was more than twice the percentage for adults ages 75-84 and five times the percentage for adults ages 65-74.

8% of 75-84

21% of 85+

The Cost of Long-Term Care Services

From 2004 to 2020, the cost for facility and in-home care services has risen, on average, between 1.88% and 3.8% each year.

The median income for a household in which the head of the household is 65 or older was $47,357 in 2019.

Sources: GenworthU.S. Census Bureau

The Physical – And Financial – Burden

Source: HHS Office of the Assistant Secretary for Planning and Evaluation
Source: HHS Office of the Assistant Secretary for Planning and Evaluation
Source: University of Massachusetts-Boston Center for Social and Demographic Research on Aging Gerontology Institute
Source: U.S. Government Accountability Office

The $61 Billion Price Tag

Medicaid pays for the majority of long-term care services, but Americans also pay $61 billion out-of-pocket.

Note: Data from 2018
Source: Congressional Research Service

Medicaid

The federal-state health care insurance program for low-income and disabled Americans is the single-largest payer of long-term and community-based care and some in-home services. To qualify, many families must “spend down,” or reduce the older adult’s income and assets. And waiting lists for in-home care services in many states are long.

Medicare

The federal health insurance program for seniors and certain people with disabilities usually pays for acute care and post-acute, skilled nursing care and home health care services.

Other Public Programs

Other public spending comes from different sources, including states, localities, the Veterans Health Administration and the Children’s Health Insurance Program. Over half of this spending covered long-term care services given at residential care facilities for people with various mental health conditions and developmental disabilities.

Out-of-Pocket

These costs, paid for by individuals, include deductibles and copays for services as well as the direct payments made toward covering long-term care.

Private Insurance

Private health care plans usually cover payments for some limited home health and skilled nursing related to rehabilitation. Long-term care insurance may also help with these costs.

Other Private Funding

These funds generally come from nonprofit philanthropic groups, private individuals or corporations.

This story was produced by KHN, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.

Source