NHC Letter in Support of a Cap on Out-of-Pocket Costs for Medicare Part D
July 10, 2019
Dear Chairman Grassley and Ranking Member Wyden:
As the Senate Finance Committee is crafting legislation related to prescription drug and other health care costs, the National Health Council (NHC) writes this letter in support of a cap on out-of-pocket (OOP) costs for Medicare Part D beneficiaries as one way to reduce costs for our nation’s seniors.
Founded in 1920, the NHC is the only organization that brings together all segments of the health community to provide a united voice for the more than 160 million people with chronic diseases and disabilities and their family caregivers. Made up of more than 125 diverse national health-related organizations and businesses, the NHC’s core membership includes the nation’s leading patient advocacy organizations, which control its governance and policy-making process. Other members include health-related associations and nonprofit organizations including the provider, research and family caregiver communities, and businesses representing biopharmaceutical, device, diagnostic, generic, and payer organizations.
The NHC is committed to ensuring patients have access to affordable, high-value medications. We share your concern that many Medicare beneficiaries currently struggle to afford their medications due to high OOP costs, even when they are enrolled in a Part D plan. Some enrollees in Part D plans face many thousands of dollars in OOP costs for medications every year in addition to the costs they may have for other health care services. Under existing law, Medicare Part D does not cap OOP costs for beneficiaries who are not eligible for the low-income subsidy (LIS) program.1 When non-subsidized Part D enrollees reach the catastrophic threshold, they continue to incur OOP expenses, in the form of five percent coinsurance, for the rest of the benefit year. For this reason, the NHC has long supported a cap on OOP costs in Medicare Part D.2 We are pleased that this issue has attracted increased attention in recent years, and we recently supported draft legislation by the House Committees on Energy and Commerce and Ways and Means to realign incentives related to spending in the catastrophic phase with some suggested modifications which are also outlined in this letter.
Since the launch of Part D plans in 2006, many factors have shifted in the policy and drug landscapes. The Part D program benefit design included an actual gap in coverage where patients were required to pay the full cost of their medications to reach the catastrophic phase of the benefit. Today, that gap is nearly closed. Additionally, the range of medications available in 2006 was far less broad and deep than today. Today, there are therapies available that better manage, and sometimes even cure, the health conditions beneficiaries face. These changes are indeed improvements for patients in Medicare. But, the policy of Part D has not kept pace with the advancing science of medications, and many Medicare beneficiaries are paying the price for the lack of policy advancement.
The closure of the coverage gap has succeeded in helping more people with Medicare access their needed medications. At the same time, the coverage gap closure and changes introduced by the Bipartisan Budget Act of 2018 have resulted in more beneficiaries reaching the catastrophic threshold. In 2016, one million non-LIS Medicare beneficiaries reached the catastrophic phase, a number that has grown significantly in recent years.4 Further, other factors such as increasing manufacturer discounts and rising average-negotiated prices in Part D have also accelerated the progression of patients through the Part D benefit design into catastrophic coverage. These increased average-negotiated prices also mean that the total amount of spending that occurs in the catastrophic phase of the benefit is growing. According to MedPAC, “Aggregate spending for high-cost enrollees (i.e., including catastrophic and non-catastrophic spending) grew from about 40 percent of Part D spending before 2011, to 44 percent in 2011, to 58 percent in 2016,” which “reflects an annual 10 percent increase in per capita spending for high-cost enrollees.”5 And, since the federal government is responsible for 80 percent of spending in the catastrophic phase, these trends impact the Medicare program as well as the OOP costs of Medicare patients. Thus, the NHC also is supportive of proposals to shift the share of costs in the catastrophic phase to realign incentives in the program.
A hard cap on OOP costs and realigned incentives represent a good first step toward lowering Medicare Part D enrollees’ OOP expenses. However, we encourage the Committee to consider additional protections for beneficiaries into the final versions by:
- Distributing beneficiary cost-sharing throughout the year;
- Protecting beneficiaries from unintended consequences through oversight and transparency; and
- Considering additional solutions to make OOP costs more affordable for non-subsidized beneficiaries.