While much of the Inflation Reduction Act analysis has been focused on the newly established mandate for the federal government to set drug prices in Medicare, bringing down the price of medicines, the law also makes other changes to Medicare. It reduces federal subsidies to low-income and high-need people, putting more financial risk onto the health insurance companies and pharmacy benefit managers that offer drug plans and puts a limit on out-of-pocket spending for beneficiaries.
With any change in law, there are some desired and expected outcomes and likely unexpected downsides. In this case, the shifting financial incentives in the Inflation Reduction Act are expected to erode the attributes that make the Medicare drug benefit or “Part D” well-liked. Academics, actuaries, and business leaders anticipate the upcoming changes will result in more restrictive drug formularies and fewer part D plans. Moreover, the Inflation Reduction Act will not reduce drug costs meaningfully for most Medicare beneficiaries and will increase out-of-pocket costs for many.
When surveyed, Medicare Part D enrollees report high satisfaction with the plan, particularly their ability to get their medicines affordably in a plan they find convenient to use. However, when surveyed, many healthcare plan administrators indicated that they plan to make formularies more restrictive and use more utilization controls due to the Inflation Reduction Act; they also expect premiums to increase. They may steer Medicare beneficiaries to use drugs that have to be administered by a doctor rather than pills that can be picked up at a pharmacy because those drugs fall outside of the pharmacy benefit where risk is changing.
Several aspects of the design change likely create incentives that encourage more restrictive formularies. Of the 50 million people enrolled in the drug benefit, roughly two million have health needs resulting in high out-of-pocket costs. With the Inflation Reduction Act those beneficiaries will no longer have to pay for covered drugs after they have spent $2,000 out-of-pocket, meaning the plan picks up the cost afterward. This provides greater financial certainty to beneficiaries and it also creates a greater incentive for plans to avoid this cost and risk. This may include formulary restrictions or exclusions.
With the Inflation Reduction Act, plans will have significantly more financial responsibility for beneficiaries who incur higher medicine costs and who have low income, which will include people with conditions such as Multiple Sclerosis, HIV, certain cancers, and autoimmune diseases. While the federal government does provide extra money, the risk adjustment does not adequately cover the costs for these beneficiaries. Plans may respond by narrowing formulary coverage for certain conditions so as not to attract beneficiaries needing these drugs or to avoid the potential uncompensated costs of these medicines in their enrolled beneficiaries. This benefit change can potentially encourage plans to use practices that can deter the higher-cost, unprofitable beneficiaries from enrolling with their formulary designs, as was seen following the enactment of the Affordable Care Act.
In 2024, Medicare beneficiaries find themselves with fewer stand-alone prescription drug plans to choose from relative to the program's inception. As plans assume more financial risk under the Inflation Reduction Act , the profitability of stand-alone drug plans is likely to be challenged, leading to potential market exits. Mutual of Omaha Rx has already announced its departure from the Medicare Prescription Drug Plan market at the end of 2024, citing the Inflation Reduction Act as the reason. Such exits will further limit beneficiaries’ already shrinking choice of pharmacies, potentially forcing them to pay higher cost sharing at their local independent pharmacy if it is out of network.
Recent analysis suggests that most beneficiaries are unlikely to see a substantial reduction in their out-of-pocket costs from the federal price setting, and for many, costs will actually increase. Seven of the first ten selected drugs are predominantly on formulary tiers that require a fixed copayment, meaning beneficiaries’ out-of-pocket costs will typically remain the same regardless of the underlying price of the drug. For the remaining three drugs, the cap on out-of-pocket costs would make the total costs the same for drugs with and without a price control in most instances. Moreover, while the law requires plans to cover the drugs with price controls, they can still impose utilization management hurdles. The Inflation Reduction Act introduces another change to the benefit structure that, when interacting with the government price setting, will cause roughly 3.5 million beneficiaries to pay more if they are taking a drug with a government-set price, many of them low-income and in employer group plans.
The Medicare Part D program relies primarily on competition, with federal oversight, to provide beneficiaries with options for drug coverage through private insurance plans. CMS reviews the Part D formularies and may only approve a plan design, including a formulary if it is unlikely to “substantially discourage enrolment” by people eligible for the benefit. Under this oversight, drug formulary restrictions have increased over the past decade, even for medicines treating serious health conditions such as cancer or schizophrenia, that were given extra protection from being excluded. So, as Medicare is further modified due to the Inflation Reduction Act, CMS and Congress need to anticipate emerging problems. This includes considering if the current Part D formulary standards and review procedures are sufficient to protect patient access as directed by the law and monitoring the impact of IRA on access to medicine and Part D Plans in implementation, considering modifications to preserve benefits and not expand the policy until the net effect on health and beneficiary satisfaction is better determined.
Kirsten Axelsen is a visiting scholar with the American Enterprise Institute and a biopharmaceutical company consultant.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.