Issues & Insights

Here’s Why Congress Should Cap Medicare Out-of-Pocket Drug Costs

A bipartisan group of House lawmakers just unveiled a bill that would cap Medicare beneficiaries’ out-of-pocket drug costs.

That’s a terrific idea. High out-of-pocket costs prevent many Medicare patients from accessing vital medicines. Limiting those costs would keep folks healthy. And in the long run, the reform could generate savings for our nation’s health system.

Medicare’s “Part D” drug benefit is different from other entitlement programs. Rather than administer benefits directly, the government subsidizes Part D plans sold by private insurers. Insurers are largely free to design Part D plans as they see fit, as long as the plans meet certain requirements. Insurers compete for beneficiaries’ business by offering a variety of plans with different premiums and cost-sharing structures.

Part D’s unique, market-based structure has successfully contained costs for both the program and its beneficiaries. In its first decade, Part D cost about $350 billion less than originally projected.  Part D premiums have also remained stable, and are about half of initial estimates.

Thanks to Part D, more than 40 million elderly patients now have access to reasonably priced medications.  One study found that Part D has saved more than 22,000 lives annually since it was first enacted.

The program isn’t perfect, of course. It leaves a small minority of patients on the hook for huge pharmacy bills, since there is no cap on out-of-pocket spending. About 2 percent of all Part D enrollees have to spend more than $5,000 — sometimes significantly more — out-of-pocket each year.

Excessive out-of-pocket costs are more than a financial burden. When patients can’t afford their prescriptions, they start skipping doses or stop taking their medicines altogether. This “prescription non-adherence” can lead to serious illness and avoidable death.

The new bill, released by members of the House Ways and Means and Energy and Commerce Committees, would fix this problem.   It’d eliminate all copays and coinsurance after beneficiaries spend $5,100 out-of-pocket.

By helping patients afford their drugs, this bill would increase medication adherence and save our health system money in the long run. When patients stick to their drug regimens, they’re less likely to require expensive hospitalizations down the line.

Indeed, a study in the journal Health Affairs found that adhering to a prescribed drug regimen reduced total medical spending for patients with several chronic conditions.  Patients with congestive heart failure who kept up with their prescriptions required around $8,000 less in health expenses a year compared to non-adherent patients.  Adherent patients with diabetes spent close to $4,000 less than their non-adherent peers.

Capping out-of-pocket costs in Medicare Part D is a simple way to improve Medicare beneficiaries’ health and save taxpayers’ money. Congress and the president should leap at the chance to bring some much-needed relief to America’s most vulnerable patients.

Sandip Shah is founder and president of Market Access Solutions which develops strategies to optimize patient access to life-changing therapies.

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