$2,000 Annual Cap on Medicare Part D is BS

[intercst]

I see a lot of articles trumpeting the “$2,000 annual out-of-pocket drug cap for seniors” in the Inflation Reduction Act. Let’s review how the 4 parts of Medicare Part D works.

https://boomerbenefits.com/medicare-part-d-plans/what-is-par…

1) Annual Deductible

For 2022, the annual deductible is $480 out-of-pocket before any drug coverage licks in. For $480, Mark Cuban will likely sell you 3 or 4 times the amount of drugs than your price-gouging Medicare Part D insurer.

2) Initial Coverage

The insurance company tracks the spending by both you and the insurance company (on drugs the insurance company has price gouged) until you have together spent a total of $4,430 in 2022.

3) The Coverage Gap

After you’ve reached the initial coverage limit for the year, you enter the coverage gap. During the gap, you will pay only 25% of the retail cost of your medications (with unlimited price gouging setting the retail price.) Your gap spending will continue until your total out-of-pocket drug costs have reached $7,050 in 2022.

4) Catastrophic Coverage

After you’ve spent the $7,050 out-of-pocket for the year, you enter Catastrophic Coverage, where you are responsible for 5% of the drug’s cost.

For a $100,000/yr drug, that’s $5,000 in addition to the $7,050 you’ve already spent. For a $500,000 drug, you need to come up with an extra $25,000 in addition to the $7,050 you’ve already spent.

Less then 2% of Medicare beneficiaries tumble into the despair of Catastrophic Coverage each year where there is no limit to what you’ll be charged. The $2,000 annual limit in the just passed Senate bill applies only to the Catastrophic Coverage portion of Medicare Part D.

So the total annual out-of pocket limit on your Part D drug coverage is $9,050/year under the new law. (i.e., the $7,050 limit on the coverage gap plus the $2,000 limit on Catastrophic Coverage under the new law), not $2,000/year.

intercst

[WendyBG]

Thank you for your explanation.

Speaking as a cancer survivor, the $2,000 annual limit in the just passed Senate bill which applies only to the Catastrophic Coverage portion of Medicare Part D is highly significant.

Some of the most expensive drugs are chemotherapy drugs.

**Medicare Part B covers most chemotherapy drugs. These are cancer-treating medications that are given as a shot, through an IV tube, or by mouth.**

**There’s one important distinction to take note of. Medicare Part B covers cancer drugs that you take intravenously or by mouth. If your drug is only made to be taken by mouth, your Medicare Part D plan should cover it.**

https://www.ncoa.org/article/what-does-medicare-cover-for-ca…

Oral chemotherapy is prescribed in many cases and it has some advantages over traditionally administered chemo(I.V.). For example, it is often more convenient to manage the oral meds from the comfort of home rather than traveling back and forth to an infusion center for IV chemotherapy. A big issue that affects patients’ access to oral chemo can be affordability. Most oral treatments are paid under the Medicare Part D, which is Medicare’s drug supplement plan. Unfortunately, most Medicare Part D plans do little if anything to reduce the cost of the pills. They are super-expensive.

The $2,000 annual limit in the just passed Senate bill which applies only to the Catastrophic Coverage portion of Medicare Part D is highly significant because it will shelter cancer patients (and others with very high cost medications) from the cost of drugs that would otherwise cost in the tens of thousands, even hundreds of thousands, of dollars.

https://www.thompsoncancer.com/oral-chemo-benefits-costs/

This is extremely important and highly appreciated!

Wendy

[OrmontUS]

Great explanations from both:

intercst: In reality, this caps Medicare drug expenses at about $9,000 - but from a political standpoint $2,000 sounds so much better than saying $9,000

Wendy: There is a sub-group of Medicare clients whose drug costs can skyrocket way past that number and this cap can save them from bankruptcy.

I predict that the drug companies will respond to this as well as the stipulation that price increases will be limited by the rate of inflation by introducing new drugs into the US market at even more astronomical prices. It’s easier to sell them at a discount than to increase the cost of a lower priced drug.

I heard a news report that the slow introduction of drug negotiations was designed to give Medicare time to learn how to negotiate. I would point out that the federal General Services Administration has been negotiating prices for generations. One of their primary tools for commodity prices has been their “commerciality clauses” which go something like this:

1. Based on the submission of evidence, the manufacturer/distributor shows that they have substantial sales of that item under the name/part number submitted (to prevent “special” part numbers being created to sell at inflated prices

2. They give the GSA “most favored nation” treatment and agree to sell the products at the lowest prices offered to ANY entity under similar terms and conditions of sale. (Meaning that donations to charity, etc. doesn’t impact the current prices). All sales promotions and incentives offered to others have to be reflected in equivalent price reductions to the government.

There ya go - entire “negotiation” fits on the back of an index card. Add a clause that any refusal of a drug company to participate would give the government license to contract to create generics “for the benefit of the American people” might spur some who would threaten not to sell to the US at the prices they were happy with elsewhere.

The argument that they would no longer do research at thee prices paid is bogus as plenty of research is being done in Europe, India, Israel, Japan, Korea and elsewhere while the prices are lower there.

Jeff

[intercst]

Ormont writes,

2) They give the GSA “most favored nation” treatment and agree to sell the products at the lowest prices offered to ANY entity under similar terms and conditions of sale. (Meaning that donations to charity, etc. doesn’t impact the current prices). All sales promotions and incentives offered to others have to be reflected in equivalent price reductions to the government.

There ya go - entire “negotiation” fits on the back of an index card. Add a clause that any refusal of a drug company to participate would give the government license to contract to create generics “for the benefit of the American people” might spur some who would threaten not to sell to the US at the prices they were happy with elsewhere.

The argument that they would no longer do research at thee prices paid is bogus as plenty of research is being done in Europe, India, Israel, Japan, Korea and elsewhere while the prices are lower there.

One thing that would immediately help on drug pricing is a rule that “if you find a lower price than what the Part D insurer is offering at their approved, in-network pharmacy, you can buy the drug from the low-price vendor and still have the purchase count towards your annual deductible and annual out-of-pocket cost.”

Right now, anything you buy from GoodRx or Mark Cuban doesn’t count towards your Part D deductible or annual out-of-pocket cost.

I’m not even sure such a provision would cost the health insurance companies that much money. About 35% of Medicare beneficiaries sign up for Medicare Advantage, even though it gives a for-profit health insurer the opportunity to skim 15% off the top. A lot of people are too addled or innumerate to help. The health insurance industry will always be able to take advantage of this market segment.

intercst