Shifting Medicare Part B to Part D Could Increase Out-of-Pocket Spending for Patients, Study Finds

In May 2018, as part of the Trump administration’s blueprint to reduce drug costs for American patients, HHS proposed shifting coverage of some Medicare Part B drugs to Medicare Part D. However, a new study, published today in JAMA Internal Medicine, finds that shifting reimbursement of these drugs could increase out-of-pocket spending for some Medicare beneficiaries.

The study¹ relied on data from CMS for the 75 brand-name drugs associated with the highest Part B expenditures among fee-for-service Medicare beneficiaries for the year 2016. The median annual spending per drug was $98.4 million, and together the drugs accounted for $19.8 billion in spending, or 77.0% of 2016 fee-for-service Part B spending. The products with the highest associated expenditures were aflibercept, rituximab, and pegfilgrastim.

Under 2018 prices, the proposed shift of Part B drugs to Part D could create a 6.9% to 18.3% decrease in total spending after rebates and discounts are applied, with Part D spending estimated to range from $17.6 billion to $20.1 billion. If HHS were to shift only specialty drugs (defined as those with costs more than $670 per month), total spending could drop by 10.6% to 21.8%.

However, patients could see their out-of-pocket costs grow even as Medicare’s spending drops. The median estimated patient cost-sharing for Part B for the 75 drugs studied was $4683 under 2018 pricing. Shifting Part B drugs to the 2018 Part D benefit could raise out-of-pocket costs by at least 10% for 22 to 29 of the 75 products (or, if the shift were limited to specialty drugs, for 2-9 products).

The favorable impact of a shift in coverage would be the greatest for beneficiaries who quality for Part D low-income subsidies, the authors noted, as the program can eliminate the coinsurance liability based on income and resources. Conversely, patients with Medigap insurance would see their out-of-pocket costs exceed the annual premium costs for supplemental insurance for 62.7% to 74.7% of products (47-56 drugs). For patients with Medigap but without Part D coverage, out-of-pocket costs would increase.

According to the authors, to achieve long-term cost savings, additional policies may need to be implemented through rulemaking or legislation. These reforms could include value-based pricing, flexible formularies that allow for greater negotiation on price in protected drug classes, and a reduction in the government’s reinsurance subsidy in Part D. HHS could also consider capping out-of-pocket costs for beneficiaries, or sharing saving from increased rebates with beneficiaries.

In an invited commentary² on the paper, Francis J. Crosson, MD, and Jon B. Christianson, PhD, who both serve on the Medicare Payment Advisory Commission, or MedPAC, agree that “proposals for changes in Part B and Part D coverage must be carefully coordinated, and all consequences fully understood, something often overlooked in policy proposals.”

Crosson and Christianson argue that a 2017 MedPAC proposal to create a Drug Value Program—involving using vendors to negotiate prices for Part B products, allowing clinicians or institutions to purchase products in the marketplace at the price negotiated by those vendors that will be reimbursed by Medicare, allowing utilization management tools, and disallowing Medicare payments of more than 100% of the average sales price for a drug—would lower cost-sharing for beneficiaries.

They also proposed using arbitration techniques to help mitigate the impact of high drug prices at launch, and suggest a package of changes to Part D under which plans would assume much of the insurance risk for high-cost beneficiaries, moving the burden away from Medicare.

Crosson and Christianson acknowledge that, if MedPAC’s recommendations are enacted, some beneficiaries could remain in the coverage gap for longer, but other beneficiaries—those with high spending—could pay less in out-of-pocket costs.

References

1. Hwang TJ, Jain N, Lauffenburger JC, Vokinger KN, Kesselheim AS. Analysis of proposed Medicare Part B to Part D shift with associated changes in total spending and patient cost-sharing for prescription drugs [published online January 14, 2019]. JAMA Intern Med. doi: :10.1001/jamainternmed.2018.6417.

2. Crosson FJ, Christianson JB. Managing the cost of Medicare Part B drugs: implications for the program and beneficiaries [published online January 14, 2019]. JAMA Intern Med. doi: 10.1001/jamainternmed.2018.6146.