In late January, the Kaiser Family Foundation (KFF) issued a policy brief on the 10 Essential Facts About Medicare and Prescription Drug Spending. We encourage you to look at the complete brief at this link https://www.kff.org/infographic/10-essential-facts-about-medicare-and-prescription-drug-spending/, but wanted to summarize the key facts. As always, Kaiser Family Foundation and Kaiser Health News are two tremendous resources for healthcare news consumers.
KFF #1 – Medicare’s share of the nation’s retail prescription drug spending has increased from 18% in 2006 to 30% in 2017.
Our thoughts: Prior to 2006, there was no formal Medicare drug program. At the same time, the increase is phenomenal, driven by our aging demographics and costs.
KFF #2 – Prescription drugs covered under both Part B and Part D accounted for 19% of all Medicare spending in 2016.
Our thoughts: This again is driven by aging and costs. Back in the day, plan drug costs were sub 10%, but high-costs drugs in both programs have driven the near doubling.
KFF #3 – Ten drugs accounted for 17% of all Part D spending in 2016 (including both Medicare and out-of-pocket spending).
Our thoughts: Most of the ten drugs are brand name drugs used by seniors and disabled with diabetes, CHF and other heart conditions, high cholesterol, or asthma/COPD. But others are some very high-priced meds hitting a small number of consumers, including Hepatitis C and cancer drugs
KFF #4 – After a period of relatively slow growth, Medicare Part D spending per enrollee is projected to increase at a faster rate in the coming decade.
Our thoughts: KFF says the last 7 years or so saw modest drug inflation, but this will more than double over the next decade. In our view, this news will drive the drug-cost reform efforts we are seeing.
KFF #5 – Spending for catastrophic coverage (“reinsurance”) has increased as a share of total Medicare Part D spending, from 14% in 2006 to 40% in 2017.
Our thoughts: The catastrophic phase is after a member spends over $5,100 in out-of-pocket costs (including some Coverage Gap costs borne by drug-makers via discounts at the drug counter). This is largely government spending and shows the financial crisis facing the program without reform.
KFF #6 – Prescription drugs accounted for $1 in every $5 that Medicare beneficiaries spent out-of-pocket on health care services in 2016, not including premiums.
Our thoughts: Combined with numbers 2, 4 and 5 above, could mean congressional action on a bipartisan plan to attack costs.
KFF #7 – Medicare Part D enrollees who did not receive low-income subsidies spent about $500 out of pocket on their prescriptions in 2016, on average, but 1 million enrollees with spending above the catastrophic threshold spent nearly $3,200 out of pocket.
KFF #8 – Average Part D enrollees’ out-of-pocket spending in the catastrophic phase dropped in 2011 due to the Affordable Care Act provision to phase out the coverage gap—but costs for this group are on the rise as total drug spending grows.
Our thoughts on 7 and 8: This fact adds fuel to the fire for Trump’s attempt to force drug rebates to reduce costs at the point of sale. As we have noted in an earlier blog, while this may be hugely popular, it also could mean consequences for premiums and other benefits, given how benefits are designed and financed in Medicare Advantage and Part D.
KFF #9 – Medicare Part D enrollees can pay thousands of dollars out of pocket for specialty tier drugs, with the majority of costs for many specialty drugs occurring in the catastrophic phase of the benefit.
Our thoughts: While Medicare Part D is a godsend for most seniors and the disabled, one sore spot are the high costs for drugs on a specialty tier. CMS has tinkered with its policy to ensure that those needing such drugs get access and are not discriminated against. But the fact remains that these drugs are expensive and further reforms will simply mean higher costs for other drugs on lower tiers. The catastrophic phase limits the damage. Trump’s price control and other changes are in part aimed at these drugs. The KFF site has some other good analyses of the impact of specialty drugs on seniors and the disabled in Medicare.
KFF #10 – Many proposals to reduce prescription drug costs enjoy broad support among Democrats and Republicans.
Our thoughts: Broad support exists for transparency, government negotiation and price limits, price controls on high-costs drugs, patent and FDA reform, banning advertising, and importation. We think it is only a matter of time before the parties get together. We urge them to think it through for unintended consequences.