New Study: Proposed Medicare Part D Rule Would Increase Medicare Costs $24 Billion, Hike Senior Premiums

  

WASHINGTON, March 11, 2014 /PRNewswire-USNewswire/ -- A new actuarial study released by The Pharmaceutical Care Management Association (PCMA) examining the impact proposed changes to the Medicare prescription drug program finds that eliminating preferred pharmacy networks in Part D would increase premiums by approximately $63 annually for over 75 percent of Part D enrollees and raise overall program costs by an estimated $24 billion over the next ten years.

"CMS' proposal to eliminate preferred pharmacy networks will make it harder and more expensive for seniors to access prescription drugs," said PCMA President and CEO Mark Merritt.

The study examines the sections of CMS' proposed rule on preferred pharmacy networks. Currently, more than 75 percent of Part D beneficiaries are enrolled in plans that feature preferred pharmacy networks.

Key findings from the study, which was sponsored by PCMA and prepared by Oliver Wyman, include:

• As of February 2014, more than 75% of prescription drug plans (PDP) enrollees are in plans with preferred pharmacy networks and these enrollees could be adversely affected by the elimination of plans utilizing preferred pharmacy networks.

• The preferred pharmacy networks provision would increase premiums for the affected population by an average of approximately $63 per year for the 2015 plan year.

• The rule could increase cost sharing among PDP enrollees by an average of $80 to $100 per year.

• Since the rule would inflate the national average benchmark for Part D plans, CMS would pay an estimated additional $64 in direct subsidies per beneficiary per year in 2015, for a total increased payment of nearly $1.5 billion in 2015 across all PDP enrollees, based on Part D enrollment of approximately 23 million beneficiaries.

• Over a 10-year period, the increased cost of eliminating preferred pharmacy networks is estimated to be approximately $990 per affected enrollee, and the cost would be approximately $24 billion to CMS in the form of higher direct subsidy payments.

Oliver Wyman's findings are generally consistent with a separate Milliman analysis that found the entirety of the proposed rule will increase Part D costs by up to $1.6 billion in 2015.

In addition, a recent poll found that seniors in plans with preferred pharmacy networks are overwhelmingly satisfied, citing lower costs, convenient access to pharmacies and other benefits, according to a survey from Hart Research Associates. The survey found that 85 percent of seniors surveyed are satisfied with their preferred network plan. In addition, the survey found that four in five seniors would be disappointed if their preferred network plan is eliminated.

The Medicare Payment Advisory Committee has warned CMS that the proposed changes to preferred pharmacy networks could lead to disruptions in beneficiaries' access to medicines.

PCMA represents the nation's pharmacy benefit managers (PBMs), which improve affordability and quality of care through the use of electronic prescribing (e-prescribing), generic alternatives, mail-service pharmacies, and other innovative tools for 216 million Americans.

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A call for a common sense approach to personal importation of prescription medicines and access to safety, savings, and improved health

The publisher of a leading informational website on aging issues says that personal importation by Americans of safe, affordable brand-name prescription medicines from Tier One countries remains a primary option to reduce the cost of medicines in the U.S.

Tier One countries are those defined as having standards of safety, efficacy and quality, of prescription medicines and pharmacies and oversight that meets or exceeds those of the U.S.

“The U.S. Food and Drug Administration ( FDA) has recently launched a series of initiatives that call for greater cooperation with regulatory agencies in other countries regarding importation of ingredients into the U.S. for pharmaceutical manufacture,” says Daniel Hines, Publisher of www.TodaysSeniorsNetwork.com and a series of related websites on aging and health issues.

“This indicates the FDA is both willing , and has the power to act to enact such agreements."

He also points to the role of personal importation in reducing the crushing burden of prescription medicine costs in the U.S.

“In a recent interview with Kaiser Health Report, former Senator John Danforth (R-MO) cited the cost of health care as the major problem facing the newly formed ‘Super Committee’ of Representatives and Senators as they must consider recommendations to address the country’s fiscal crisis,” he says.

“The pricing practices of Pharma have been major drivers of the governmental and personal fiscal crises facing the country by spurring the cost of healthcare by raising prescription medicine prices at a rate exceeding inflation and have likely led to bogus internet sources springing up as Americans seek relief from excessive prices ,” Hines says.

“That’s why personal importation of safe, affordable brand-name prescription medicines has passed the U.S. Congress under two administrations over the past 10 years, but the bills which would have established additional safety procedures were made inoperable by the extensive lobbying of Pharma that imposed ‘poison pill’ amendments.

“Deterring the activities of bogus sourcing of prescription medicines and to protect the safety of Americans is commendable and is reflected in the operating credo of those services that have created and adhere to standards of safety, efficacy and quality.

“Americans should not confuse the ability for safe implementation of personal importation that might exist in light of the recent Google settlement regarding internet pharmacy advertising.

”We call on the FDA to extend its new approach towards possible reciprocity and cooperative agreements with agencies, especially those in Tier One Countries, as a means to lower prescription medicine prices in the U.S., thereby contributing to the already proven record of safety, efficacy and quality from medicines being personally imported into the U.S.”

Nation’s Health Care Bill To Nearly Double By 2020

By Phil Galewitz

KHN Staff Writer

The federal health law, which will expand coverage to 30 million currently uninsured Americans, will have little effect on the nation's rising health spending in the next decade, a government report said today.

The report by the Medicare Office of the Actuary estimated that health spending will grow by an average of 5.8 percent a year through 2020, compared to 5.7 percent without the health overhaul. With that growth, the nation is expected to spend $4.6 trillion on health care in 2020, nearly double the $2.6 trillion spent last year.

Health law critics said the report confirmed their concerns. "Most of us understood the health reform law was about expanding coverage not cutting costs," said Joseph Antos, a health policy expert at the conservative-leaning American Enterprise Institute.

But White House Deputy Chief of Staff Nancy-Ann DeParle said the report showed Americans were getting a good deal. "The bottom line from the report is clear: more Americans will get coverage and save money and health expenditure growth will remain virtually the same," she said on the White House blog.

DeParle, who helped lead the White House efforts on the overhaul, said several delivery system reforms being tested under the health law will work to lower spending. "We know these new provisions will save money for the health care system, even if today’s report doesn’t credit these strategies with reducing costs," she said. She pointed to new programs that administration officials have said they hope to implement changing the way Medicare and Medicaid pay doctors and hospitals.

National health spending in 2010 grew at its slowest rate ever recorded – 3.9 percent – as a result of more Americans forgoing treatment because they had lost their jobs and their health coverage, said the report, which is being published online today by the journalHealth Affairs. In 2009, health spending grew by 4 percent.

The report estimates that spending on health will accelerate this year because the economy is expected to improve and people would have more disposable income to spend on medical care.

In 2014, when the major coverage expansions of the health law begin to take effect, national health spending is expected to grow 8.3 percent, according to the new analysis. But spending growth should return to its 6 percent historical average from 2015 to 2020 as some employers drop coverage and the so called "Cadillac tax" on high-cost insurance plans takes effect in 2018. "The effect is likely to be a slowdown in the growth of health services, health insurance premiums and health spending overall," the study said.

Meredith Rosenthal, a health economist at Harvard School of Public Health, said it is difficult to predict what impact the health law will have on slowing national health spending. "Many of the components of the law that are intended to control costs are still in draft form," she said citing experiments such as accountable care organizations and bundled payments that change how Medicare pays providers.

The number of Americans with employer-sponsored insurance will grow from 163 million last year to 170 million in 2014, the report estimated. But by 2020 that number is expected to drop to 168 million as a result of two factors: Baby Boomers joining Medicare and employers dropping health coverage for workers. Most of those workers would turn to new state insurance exchanges – or marketplaces –or Medicaid, the federal-state health program for low-income and disabled people.

The issue over how many employers would stop offering coverage has been a political flash point since the health law was approved in March 2010. Democrats maintain most employers would continue to provide coverage, but Republicans and other critics predict many companies would drop it because their workers will be able to go to new health exchanges. Starting in 2014, the health law requires all employers with 50 or more workers to provide coverage or pay a fine.

The Congressional Budget Office — the neutral scorekeeper — estimates that, by the end of the decade, 3 million fewer people will get health insurance from their employer. That’s slightly more than the Office of Actuary prediction.

The study authors stressed their projections could vary depending on many factors, including the overall state of the economy and how quickly people sign up for new coverage.

"These projections are definitely uncertain and that increases as we move along in the projection period," said Sean Keehan, a study author and an economist in the Office of the Actuary.

The Medicare actuaries acknowledged that they were off on one of their estimates last year. At that time, they predicted that national spending in 2009 would grow by 5.8 percent, instead of the 4 percent growth that the report said actually occurred. Keehan said one of the factors helping push that prediction off the mark was that fewer people than expected joined COBRA plans after losing their jobs and that resulted in fewer people with health coverage and less spending.

The office also predicted last year about 375,000 people would sign up for new Pre-existing Condition Insurance Plans by 2013. But since the plans began a year ago under the health law, only about 20,000 people have signed up.

CMS Chief Actuary Rick Foster attributed the lack of public awareness of the new insurance pools for the less-than-anticipated participation. He said his office took into account the low participation rates in making estimates for enrollment in Medicaid and insurance exchanges starting in 2014.

The report estimated about 13.9 million people would enroll in new state-based insurance exchanges in 2014 and the number of uninsured would drop by nearly 20 million in that year. Given how many millions of eligible people don’t sign up today for Medicaid, that prediction is highly speculative, said Steven Findlay, an analyst at Consumers Union.