KHN Morning Briefing

Summaries of health policy coverage from major news organizations

Specialty Drugs Cause High Medicare Out-Of-Pocket

Lawmakers focus on Medicare payment and cost issues, especially in light of a new government report on high out-of-pocket costs.

The Wall Street Journal: "Specialty prescription drugs are taking a big bite out of seniors' wallets, according to the Government Accountability Office. A GAO report "states that high-cost drugs--classified as drugs with a monthly cost of at least $500--in recent years have imposed far higher out-of-pocket costs for seniors on Medicare who used them than for those who didn't." Specifically, the drugs tend to fall into a category known as "specialty-tier" drugs and "are designated by private prescription-drug plans that participate in the Medicare Part D program. Because of a 'doughnut hole' in Part D coverage, which forces seniors to pay the entire cost for prescription drugs within a certain cost range, the price of the specialty-tier drugs can weigh heavily on Part D enrollees."

This coverage gap "takes effect between the cost range of $2,700 and $6,154 per year. Above $6,154 in drug costs, Medicare pays the majority of the cost of purchasing drugs, which is considered catastrophic coverage." The GAO concluded that "seniors using specialty-tier drugs reached the catastrophic-coverage threshold 55% of the time, while those who did not reached the threshold only 8% of the time" (Yoest, 3/1). 

Meanwhile, MedPAC issued a new set of recommendations regarding specific Medicare payment issues.

Reuters: The Medicare Payment Advisory Commission (MedPAC) on Monday issued nonbinding recommendations that Medicare "cut U.S. government payments to private insurers and home healthcare providers." The panel, which is an independent body set up to advise Congress on Medicare, "repeated its earlier call for the federal government to pay private insurers that offer coverage known as Medicare Advantage the same as it pays when Medicare reimburses providers directly." According to a statement from the panel, the "commission 'remains concerned that Medicare's payments to (Medicare Advantage) plans will again exceed' Medicare's fee-for-service program." Reuters reports that the panel reiterated "'its recommendation for financial neutrality' between both types of payments. ... Congress is considering cuts to Medicare Advantage and other sectors as part of the stalled healthcare reform legislation" (Richwine, 3/1).

CQHealth Beat: MedPAC's "report was released as President Obama and congressional Democrats mount a fierce onslaught on payments for the private health plans as they seek funding for their proposed health care overhaul. The plans, known as Medicare Advantage plans, continue to enroll members, are widely available, and offer enhanced benefits, MedPAC said. 'However, taxpayers and beneficiaries in traditional fee-for-service Medicare subsidize these benefits, often at a high cost,' said the report. Meanwhile, Medicare Advantage continues to swell, with 24 percent of all Medicare beneficiaries enrolled in the program as of November, for a total of 10.9 million people." Commissioners also "reminded Congress that fundamental problems remain within the traditional system" and their recommendations "for changing the base rates paid by Medicare to providers won't solve those problems" (Norman, 3/1).

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