A major spending package that passed the Senate on Sunday brings a new redesign to Medicare Part D benefits, increasing the liability for insurers, experts say.
However, the package’s landmark policy to give Medicare drug price negotiating powers could help lower costs depending on what drugs the federal government chooses for negotiation.
All told, several experts said the overall impact financially for health insurers will reside in implementation of healthcare provisions in the Inflation Reduction Act, which passed the Senate Sunday and will be voted on in the House this Friday.
“At the end of the day, it cuts both ways for Medicare plans,” said Ryan Urgo, managing director of the policy practice division for consulting firm Avalere Health, in an interview with Fierce Healthcare.
Urgo said a downside for plans lies in the “substantial shifting” in liability away from the federal government and onto Part D plans.
The legislation would install a $2,000 out-of-pocket cost cap for Part D beneficiaries. It also spreads out the cost of that cap in monthly installments to seniors over the course of the plan year.
It would also limit costs for seniors in the catastrophic phase of Part D coverage.
Once drug spending reaches a certain threshold, then Medicare pays for the bulk of the drug costs and the beneficiary is responsible for 5%. However, the bill would change that beneficiary responsibility to zero in 2024, according to an explainer from the Kaiser Family Foundation.
The bill would in turn increase liability for manufacturers and Part D plans in the catastrophic phase, Urgo said.
Current liability for Part D costs is 80% for Medicare in the catastrophic phase and plans 15%, with the beneficiary taking up the remaining 5%. The legislation would increase the plan liability for those catastrophic costs to 60%, Urgo said.
“[Part D plans] will have more skin in the game to more tightly manage costs in the catastrophic portion of the benefit,” Urgo added. “There is a premium stabilization policy in the bill as well that will mitigate some of that impact on plans. Premiums can only rise by a certain percentage at both the previous year’s bids and then the federal government will provide financial support to prevent them from going up any further.”
Choosing drugs to negotiate
While plans have more liability for Part D catastrophic costs, the bill’s landmark policy that gives Medicare narrow drug price negotiating powers could be a boon to payers, experts said.
But how much of a benefit could depend on what drugs are selected for negotiation.
The bill empowers Health and Human Services to choose 10 drugs starting in 2026 to negotiate for lower prices for only Medicare. There could be a lot of jockeying on what those drugs are, said Darshak Sanghavi, M.D., chief medical officer for the digital health provider Babylon, in an interview with Fierce Healthcare.
“Let’s say the secretary chooses to negotiate prices like Ozempic or others and drives down the price quite a bit,” said Sanghavi, referring to the pricey diabetes drug. “Payers could say that is fantastic we are going to prescribe that much more widely and much more effective at weight loss and lower total cost of care for diabetes. That could be a positive thing for payers’ bottom lines.”
While the negotiated drug price does not apply to commercial plans, it could help inform negotiations between commercial plans and manufacturers, Urgo said.
“I wouldn’t be surprised if you didn’t see commercial payers if they emulate the changes Medicare is making,” he said.