Health & Spirit

Senate bill aims to protect taxpayers from costly drugs

Andrew Siddons, CQ-Roll Call on

Published in Health & Fitness

WASHINGTON -- Congress this year could enact the biggest overhaul of Medicare's prescription drug benefit since it was first established in 2003. If successful, seniors -- and taxpayers -- would be more insulated against the cost of the most expensive drugs.

One proposed change is meant to help Medicare control the costs it absorbs so that the program's premiums can remain stable despite increasing drug prices. Supporters of the drug program tout its low premiums, with the Trump administration and the private insurers who run Part D recently highlighting that average consumer premiums will fall in 2020.

But the program's overall costs are rising, and is subsidized mostly by taxpayers, who pick up the highest drug costs. One little-discussed trend is that this federal support is the fastest-growing part of the $80 billion drug program.

The amount the government paid to subsidize the highest-cost individuals represented 25% of Part D spending in 2007, but 54% in 2017, according to the Senate Finance Committee, which is leading the charge to overhaul the program.

House and Senate draft bills would cut Medicare spending by changing the financing for the highest-cost seniors. To save the government money, the private plans that Medicare pays to administer the program would take on more financial risk, and drugmakers would have to provide discounts.

It's possible that the proposed changes could end up having consequences of their own, such as insurers restricting drug access to control costs, and drug companies investing less in research.


The proposed changes reflect the fact that drugs are more expensive than when the Medicare drug benefit was first enacted. Under the current system, Medicare pays 80% of annual costs over $8,140. Rising drug prices have led to more seniors reaching that level.

"The original design would probably still be adequate if drugs cost what they cost 10 or 15 years ago, and that's obviously not the case," said Juliette Cubanski, associate director of the Kaiser Family Foundation's program on Medicare policy. "Congress, I think, is now trying to catch up to the present-day reality that we're all facing, in terms of the high cost of some medications, and benefit design that's not totally in step with that reality."

Reasons for the rise in high-cost patients Medicare Part D, signed into law when Republicans controlled the White House and both chambers of Congress, was designed to be run by private companies, unlike the original Medicare fee-for-service program that covers hospital stays and doctor visits.

Part D's private insurers take on some financial risk. But most of the costs are paid for by Medicare.


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