What is Part D redesign?
Some policymakers have proposed redesigning Part D — Medicare’s voluntary prescription drug benefit — to protect beneficiaries from high out-of-pocket costs, realign financial incentives for the organizations that sponsor Part D plans, and reduce overall program spending.
Several changes have been proposed to the standard Part D benefit, including:
- Creating a maximum out-of-pocket cap for beneficiaries when they reach the catastrophic spending phase of the program, something that currently doesn’t exist.
- Ensuring that Part D plans are incentivized to promote drugs that offer the most value at the lowest cost — for example, by reducing government subsidies for reinsurance and shifting responsibility for large claims to plans themselves.
- Requiring drug manufacturers to provide cost discounts.
In 2020, three bills were introduced in Congress that featured changes to the Part D benefit: H.R. 3, S. 2543, and H.R. 19 (see table). The two House bills were reintroduced in 2021.
Why do some policymakers argue for Part D redesign?
Since its start in 2006, Part D has undergone little change, even as Medicare spending on the prescription drug benefit has grown substantially, from $44.3 billion in 2006 to $102.3 billion in 2019. Most of this growth has been in the catastrophic phase of coverage — which begins when beneficiaries have spent $6,550 out of pocket. Medicare spending on Part D catastrophic coverage more than doubled between 2013 and 2017 to more than $59 billion, driven largely by the high prices of specialty drugs. Meanwhile, beneficiaries contend with a cost-sharing requirement in the catastrophic phase — 5 percent coinsurance — that can sometimes severely limit their access to these expensive medications.
Concerns about the sustainability of spending at this level spurred recommendations in 2016 for realigning Part D plans’ financial incentives. Currently, plans place high-cost drugs on preferred formulary tiers so that beneficiaries enter the catastrophic coverage phase as early in the year as possible — knowing that Medicare will subsidize claims at 80 percent for those beneficiaries.
By shifting financial responsibility for these claims from Medicare to the plans themselves, some analysts believe that Part D plan sponsors — the organizations that contract with Medicare to offer plans — would be likely to negotiate more aggressively with drug manufacturers for better prices and formulary placement. Others argue that redesign isn’t necessary, pointing to the popularity of the Part D program and the fact that premiums have been stable for years. Opponents of the proposed changes also say they could lead to significant increases in the size of discounts manufacturers owe for certain classes of drugs.
Read the full article here.
Source: https://www.commonwealthfund.org/publications/explainer/2021/may/medicare-part-d-redesign