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Medicare Part B to D shift may decrease total spending, increase out-of-pocket costs

Although a proposal by the HHS to shift certain prescription drugs from Medicare Part B to Part D may reduce total drug spending by 6.9% to 18.3%, it could also increase out-of-pocket costs for some Medicare beneficiaries, according to a study published in JAMA Internal Medicine.

“The HHS policy blueprint was published on May 11, 2018,” Thomas J. Hwang, AB, of the Program on Regulation, Therapeutics, and Law, division of pharmacoepidemiology and pharmacoeconomics, in the department of medicine at Brigham and Women’s Hospital, Harvard Medical School, and colleagues wrote. “The proposed Medicare Part B reform is an important part of the Trump administration’s strategy to lower drug prices and reduce out-of-pocket costs for Medicare beneficiaries. We modeled the effects of the proposed reform on total drug spending and patients’ out-of-pocket costs for prescription drugs.”

Researchers conducted a retrospective drug cohort study of the 75 brand-name drugs that had the highest Part B expenditures in 2016. The median annual spending per drug was $98.4 million, with the 75 drugs comprising 77% of the $25.7 billion fee-for-service Part B drug spending.

When using 2018 drug prices, researchers concluded that the 75 drugs considered totaled an estimated Part B spending of $21.6 billion annually and that, under the proposed policy, total Part D drug spending for these same drugs ranged from an estimated $17.6 billion to $20.1 billion after rebates, which equaled a 6.9% to 18.3% decrease in drug spending.

Researchers also found that 33 of the drugs, which accounted for $9.5 billion in Part B spending, were in protected Part D classes where plans are required to cover all drugs.

In addition, the drug prices in other high-income countries were a median of 45.8% to 59.7% lower than those in Part B.

When looking at patient costs, researchers determined that median patient cost-sharing for all 75 drugs was $4,683 per year in Part B and that shifting Part B drugs to the 2018 standard Part D benefit would decrease out-of-pocket costs by a median of $860 for Medicare beneficiaries without Medicaid or Part B supplemental insurance.

In addition, although cost-sharing would be lower for all drugs in Part D than in Part B for beneficiaries who would qualify for Part D’s low-income subsidy program, Part D out-of-pocket costs were estimated to increase for beneficiaries with Medicare supplemental insurance.

“To achieve long-term cost-savings, additional reforms may need to be implemented simultaneously, through HHS rulemaking or legislation,” the researchers wrote. “Policy implementation should be accompanied by rigorous monitoring of patient health outcomes, access, and quality of care. In the interim, while the potentially offsetting effect of reforms on premiums would need to be assessed, HHS could consider capping out-of-pocket costs, or sharing some of the savings from increased rebates with beneficiaries. As it implements this proposal, HHS should ensure that the proposed reforms benefit both patients and payers.” – by Melissa J. Webb

Disclosures: Hwang reports having been previously employed by Blackstone and Bain Capital. Please see the study for all other authors’ relevant financial disclosures.