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Medicare Part B Drug Plan Could Raise Out-of-Pocket Patient Costs

Research confirms that a proposal to shift Medicare Part B drugs to Part D would increase out-of-pocket patient costs.

out-of-pocket patient costs

Source: Thinkstock

By Sara Heath

- An HHS proposal to shift some Medicare Part B drugs to Medicare Part D may decrease overall drug spending, but it could increase out-of-pocket patient costs, data suggests.

The HHS proposal would shift Part B drugs to Part D prescription drug plans. The proposal, announced in May 2018 as a part of the Trump Administration’s drug pricing blueprint, would create drug price negotiation flexibilities for healthcare payers, ideally lowering the overall cost of medications. In turn, cost savings should be passed onto patients, HHS reasoned.

But that may not end up being the case, this latest study published in Health Affairs, demonstrated. Because of the differences in how Part B and Part D drugs are paid for, as well as different mitigating factors such as Medigap insurance and low-income subsidies, the Part B to Part D shift may do more harm than good for patients’ pocketbooks.

“In Part B, Medicare payments are based on the average sales price, which is the price paid (net of discounts and rebates) by most private purchasers, plus a statutory add-on amount,” the authors explained. “In Part D, private insurers administer prescription drug plans for Medicare beneficiaries; individual Part D plans (and their pharmacy benefit managers) negotiate with manufacturers to determine the amounts they pay for drugs.”

The researchers mimicked the impacts the Trump proposal would have on overall drug spending by looking at the 75 Part B drugs with the highest expenditures.

READ MORE: Part D Drug Price Proposal Could Limit Patient Access to Care

By 2018 regulations, costs for those 75 Part B drugs would be $21.6 billion. Under Part D, the cost of those drugs would be between $17.6 billion and $20.1 billion after rebates, demonstrating a considerable cost reduction, the researchers acknowledged.

But of the 75 drugs studied, 44 percent were filed as protected Part D classes, meaning all plans must cover all of those drugs, considerably constraining payers’ abilities to negotiate lower costs.

Protected class drugs, which include immunosuppressants for prophylaxis of organ transplant rejection, antidepressants, antipsychotics, anticonvulsants, antiretrovirals, and antineoplastics, accounted for $9.5 billion, the researchers said.

Additionally, overall drug cost savings come at the expense of the patients, the researchers found. Patients with certain supplemental insurance plans, such as Medigap, would be harmed, not helped, by this policy.

For those with Medigap, Part D out-of-pocket costs exceeded the cost of Medigap by $1460 for those with Part D coverage and by $1952 for those without Part D coverage.

READ MORE: How Out-of-Pocket Drug Costs Impact Patient Treatment Access

According to the Kaiser Family Foundation, 20 percent of Medicare beneficiaries have Medigap insurance.

Out-of-pocket spending would go down for patients receiving low-income subsidies or without Medigap insurance.

“Our analysis also indicates that the proposed policy reform could have a material impact on patients’ out-of-pocket costs, with effects varying by drug and patients’ insurance in addition to Medicare,” the researchers explained. “We estimated that moving drug coverage from Part B to Part D could decrease out-of-pocket costs among patients without supplemental insurance for the majority of drugs, while increasing cost-sharing for 29.3 percent to 38.9 percent of products.”

This proposal does hold some promise, the researchers acknowledged. It does lower the overall drug spend, and could reduce out-of-pocket costs for certain patient populations. However, it must be implemented with careful attention to patient cost-sharing to ensure it does not cripple patient access to critical medications.

“Policy implementation (eg, through a demonstration project) should be accompanied by rigorous monitoring of patient health outcomes, access, and quality of care,” the researchers concluded. “In the interim, while the potentially offsetting effect of reforms on premiums would need to be assessed, HHS could consider capping out-of-pocket costs, or sharing some of the savings from increased rebates with beneficiaries. As it implements this proposal, HHS should ensure that the proposed reforms benefit both patients and payers.”

READ MORE: Top Strategies for Collecting Patient Financial Responsibility

These findings echo those of other healthcare researchers. An analysis from Avalere published soon after the Administration’s proposal concluded that shifting Part B drugs to Part D could increase out-of-pocket costs for cancer patients.

The differences in Part B and Part D coverage formularies create disparities in patient financial responsibility under either plan, according to Avalere senior director Richard Kane.

“Medicare beneficiaries typically have lower out-of-pocket costs in Part B – especially since so many seniors carry supplemental coverage,” Kane said in a statement. “Any proposal for shifting drugs to Part D needs to account for these differences.”

Considering the transition of some prescription drugs from Part B to Part D will call for careful consideration of numerous different factors, according to Avalere executive vice president Matt Brow.

“Beneficiary out-of-pocket costs under Part B and Part D are based on a combination of many factors,” Brow said. “The financial impact of a transition of certain Part B drugs into Part D would not be uniform across patients, but rather will differ for particular groups of beneficiaries.”

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