The New Medicare Drug Bill Is Big, But Seniors Won’t See Many Of Its Benefits For Years

Prescription drugs are photographed September 11, 2000. (Photo by Chris Hondros/Getty Images)

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The big tax, climate, and health bill that Congress could pass as soon as Friday could substantially lower drug costs for millions of Medicare enrollees. But older adults may not feel much of its impact for years.

The bill, passed by the Senate and due to be considered by the House on Friday, would make a number of significant changes in the way Medicare itself and Medicare enrollees pay for drugs. However, many provisions would gradually phase in over seven years. And even then, the highest profile change—the ability of Medicare to negotiate prices—would apply only to a limited number of drugs.

A lot can happen before this bill, part of the Inflation Reduction Act, becomes fully effective. For example, if Republicans take control of government in 2025, they could revise or even repeal some provisions before they ever take effect. The GOP unanimously opposed all the prescription drug changes included in the Senate version of the big health care, climate, and tax bill it approved Sunday.

A first step

The measure would not even begin to allow Medicare to negotiate drug prices until 2026. And even then, the agency could negotiate over 10 drugs that it spends the most on, that have been on the market for at least nine years, and that do not have generic equivalents. By 2028, the number of eligible drugs would increase, but only to 20. The current bill never would allow negotiations over the vast majority of the thousands of drugs used by older adults.

Democrats who supported the bill undoubtedly see it as only a first step to a much broader change in the way Medicare buys drugs. But, for now, the scope of the reforms would be relatively modest. The Congressional Budget Office estimates drug price negotiations would save Medicare about $100 billion over 10 years. But 85% of the savings would come in fiscal year 2028 and beyond.

The bill makes many other changes beyond price negotiations and for many older adults it would significantly lower their out-of-pocket health care costs. These reforms would apply to the Part D drugs you buy at the pharmacy and the Part B drugs administered in doctor’s offices. Here is a rundown of the many changes included in the bill and a timeline of when they’d occur:

2023: Next year, the bill would take two big steps. The biggest: Drug companies would be required to rebate any price increases that exceed overall inflation. That provision, which would apply only to those who buy their drugs through Medicare, effectively would cap drug price increases to the rate of inflation. The risk: Drug makers could use inflation as a floor as well as a ceiling for price increases.

The second change would end cost-sharing for Part D vaccines. The means Medicare participants could get common vaccines for shingles, pneumonia, and the like at no cost. That provision alone would benefit about 4 million people.

2024: The bill would eliminate 5% out-of-pocket payments for those Medicare enrollees with very high drug costs. This is complicated but, for example, this year, a Medicare enrollee would need to spend about $7,000 out-of-pocket (including the value of manufacturer discounts) before qualifying for catastrophic Part D drug coverage (this is the infamous donut hole). And once they reach that limit they still must pay 5% coinsurance for these meds. The bill would end that 5% out-of-pocket payment.

The bill also would expand eligibility for low-income subsidies for Part D drugs to those whose incomes reach 150% of poverty. This year, that would be about $21,000 for a person living alone or about $27,000 for a two-person household.

2025: Total out-of-pocket costs for Part D drugs would be capped at $2,000. Currently about 1 million Medicare enrollees pay more than $2,000 annually for their Part D drugs, many for chronic conditions such as cancer or multiple sclerosis. However, this hard cap has limits. Medicare-only participants enrolled in Program for the All-Inclusive Care of the Elderly (PACE) programs, a highly regarded comprehensive care model for frail older adults living at home, would not benefit.

2026. This is the first year Medicare would be able to negotiate prices directly with drug makers. But it would apply only to 10 high-cost Part D drugs.

2027: Medicare could negotiate for an additional 15 Part D drugs. The bill would also repeal a Trump-era drug rebate rule in 2027.

2028: Medicare could negotiate prices for another 15 Part D and Part B drugs

2029: The number of Part D and B drugs subject to price negotiation will increase to 20.

The bill would make the most important changes in the way Medicare recipients receive prescription drugs since Congress created a Medicare drug benefit in 2003. Especially for those with very high drug expenses, this bill will be a very big deal. But Medicare recipients will have to wait awhile to enjoy its full benefits.

Life Sciences, Forbes – Healthcare

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