Robbing Peter... to Pay Peter...

In these days of deeply divided government, partisanship and extreme politics, it seems remarkable that both houses and both parties came together just before the long weekend to release a drug pricing proposal. 

A cap on out-of-pocket (OOP) costs in Part D makes a great deal of sense, especially since the supplemental insurance plans seniors rely on to defray Medicare cost sharing do not apply to Part D. I’ve long struggled with the thought that seniors need to have “skin in the game.” After all, supplemental insurance isn’t free. And seniors on fixed incomes in retirement need to manage risk. So the fact that so many have coalesced so quickly around this policy change is heartening. It is also a long-overdue recognition that the complex web of drug pricing isn’t something that patients can unravel and just “make smarter choices” the way consumers do with washing machines or other commodities. 

That said, the offset may have unintended consequences that would ultimately fall on our most vulnerable patients.

 To offset some of the cost of a Part D OOP cap, the bipartisan, bicameral proposal would invert responsibility for catastrophic coverage from 80% on the government’s shoulders to 80% on private insurers. 

The premise is that the dramatic, albeit gradual, shift in costs to insurers will force them to choose lower priced drugs and negotiate better prices with drug companies. This seems unlikely.

However, an equally important outcome —one that is far more certain and far less likely to be gradual — is that premiums will go up, and could go way up, as insurers follow their historical tendency to over-estimate additional risk and make themselves whole. Middle-class elderly (fixed income, modest savings) will end up even more squeezed than they are today, left to manage the cost of premiums without the Part D assistance available to lower-income beneficiaries. 

This could end up placing robust Part D coverage out of reach and pushing subpopulations from traditional fee-for-service (FFS) Medicare to Medicare Advantage plans that include Part D coverage. If this happens when beneficiaries are newly enrolling in Medicare, they will miss the critical time period in which their MediGap supplemental coverage could be more affordable. MA plans offer significant additional benefits that have encouraged increased enrollment recently. For many seniors, dental and vision coverage or gym memberships or transportation to doctor visits, when combined with more predictable cost-sharing, make MA plans an attractive choice.  

Unfortunately, the economics of rising premiums for stand-alone Part D coverage will make it inaccessible for patients of modest means newly enrolling in Medicare. These patients won’t choose MA plans. They will be forced into MA plans with no way to get back to the FFS-MediGap coverage combination if they need it. 

What should not be lost on any of us is how rare and especially ultra-rare disease patients, for whom treatment options have little price elasticity, will be the proverbial canary in the coal mine. They will be the first to see their equally rare expert academic centers or providers not make the MA networks. The MA perks that draw healthy enrollees focused on maintaining, and even improving their health through lifestyle modifications and care management are of little value to sicker individuals needing very specific care from very specialized clinicians. 

Requiring insurers to absorb 80% of top-end risk on the highest-cost patients is not something plans can realistically recoup with better discounts. They could, however, recoup it with less generous coverage and higher premiums. Its taking from Peter to pay Peter. 

Maybe partisan bickering and deadlocked legislators is a better option until we have something more realistic to offer to the most vulnerable among us. 

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Saira Sultan, JD is President and CEO of Connect 4 Strategies and Founder/Senior Advisor to Haystack Project, a non-profit focused on eliminating reimbursement and access barriers to treatments for rare and ultra-rare patients.