Medicare drug plans are slashing drug coverage — and it’s going to impact everyone

 If current trends continue, by the time you turn 65 there’s a good chance you’ll have to pay for most of your medication yourself.

Yes, even if you’re on Medicare.

During the same time there’s also been a rise of more than 20% in the number of other drugs that Medicare plans will only cover with onerous restrictions.

Medicare only affects two small groups of people in America: Everybody over 65, who already depends on it for their health or survival, and everybody under 65, who is going to eventually depend on it for their health or survival. Actually, it also affects a third: those under 65 with disabilities.

Researchers at the University of Southern California found that the private health insurance companies that administer Medicare drug plans drastically increased the number of exclusions and restrictions during the period from 2011 to 2020.

During that time, the percentage of available drugs that the insurance companies refused to cover jumped from 20.4% to 30.4%. And the percentage that they would cover but subject to restrictions, such as prior authorization or step therapy, rose by more than a fifth to 14.4%.

(Step therapy is when your doctor has to first prescribe the pharmaceutical that the insurance company prefers for your condition. Only if that fails can your doctor prescribe the treatment that he or she thinks is best.)

“Exclusions are increasingly being applied to drugs for complex conditions such as cancers and autoimmune disorders that are often characterized by heterogeneous treatment effects across products and patients,” writes Geoffrey Joyce, professor of pharmaceutical and health economics at the University of Southern California, and his co-authors Barbara Blaylock, Jiafan Chen, and Karen Van Nuys.

“Further, because different pharmacy-benefit managers exclude different medicines and often change their formularies from year to year, Medicare beneficiaries must navigate an ever-changing benefit landscape. This is particularly challenging if a beneficiary switches plans or their plan changes pharmacy-benefit managers.”

The restrictions are especially severe for drugs that are still under patent, and where only the brand-name version exists, the researchers found. Astonishingly, more than two-thirds of such drugs are subject to ban or restriction by Medicare drug plans, researchers found.

Some “68.4 percent of brand-name-only compounds faced some sort of utilization restriction in 2020,” they found. That included nearly 45% that faced an outright ban.

Drugs still under patent are newer and typically much more expensive than those that are also available as cheap generics. There is no mystery to this. Drug companies spend billions developing new life-saving or life-transforming drugs, and they are hardly going to do so unless they are allowed to earn a return on their investment.

The study looked at all the available drugs over which Medicare drug plans had some control. This didn’t include drugs in six areas — anticonvulsants, antidepressants, antineoplastics, antipsychotics, antiretrovirals, and immunosuppressants—for which coverage is mandated and where the plan administrators have very little discretion. For the study, all forms of a particular drug—such as brand name and generic versions of the same thing—counted as one drug.

Meanwhile, in a twist that you would struggle to make up, these exclusions and restrictions affect those who have stuck with “traditional” government Medicare more severely than those who have embraced privatized “Medicare Advantage.”

That’s because those on traditional, government-run Medicare are nonetheless dependent on private health insurance companies for their drug plans. And if you’re on traditional Medicare, those insurers don’t even have an incentive to keep you out of the hospital, because the costs for that (if that happens) fall on the taxpayer.

At least when you sign up for Medicare Advantage the private insurer takes on the full cost of your healthcare. If they shortchange you on medications, and you end up in hospital, well, they have to foot the bill.

Drug exclusions and restrictions aren’t necessarily bad, Joyce, the study’s lead author, tells me. For example, he says, where there are several competing drugs that have the same effect, insurers can realize big, common sense savings by negotiating an exclusive deal with one drug company in exchange for a discount.

“If they do this well and intelligently, it’s not harmful,” he says. The problems can come when, for example, competing drugs don’t do the same thing, or where they don’t work as well for different people. In many cases, where people are shunted onto a drug that doesn’t work for them, they end up going without.

“The Medicare Part D program has been a tremendous success in improving healthcare and pharmaceutical affordability, access, and value,” America’s Health Insurance Plans, the trade association and lobbying group for the private health insurance companies, said in a statement.

The government’s Center for Medicare & Medicaid Services, which oversees the program, “reviews and approves formularies, including the specific drugs, tiering and utilization management strategies employed in each formulary,” they said. “There must be coverage for at least 2 drugs in each class or category for non-protected class drugs, with CMS potentially requiring more than two drugs for particular categories or classes if CMS determines that additional drugs provide important therapeutic advantage.”

They added that “there is also an exceptions process for enrollees who have a clinical need.”

As ever, the question of who is going to pay for something is more complicated than the question of whether we want it. Either way, it’s yet more evidence that retirement may prove to be a lot more expensive than many of us realize. Keep saving.

https://finance.yahoo.com/news/medicare-drug-plans-slashing-drug-143700231.html