Report: Proposed Medicare Changes Mean Higher Premiums

The administration wants to change Medicare’s drug benefit, but a conservative economist predicts higher premiums

Lipitor(atorvastain calcium) tablets made by Pfizer and distributed by Parke-Davis are seen November 30, 2011 in Washington, DC. Pfizer's patent on the best-selling drug of all-time, the cholesterol-lowering medication Lipitor, expired on November 30, 2011, opening the path to generic competitors for America's most popular medication. Lipitor came on the market in 1997, and has raked in some $100 billion for Pfizer even in a crowded market that includes various other cholesterol-lowering statins, many of which have already gone generic. In the United States, anti-cholesterol drugs account for 255 million prescriptions a year, and about nine million people are taking Lipitor. 
National Journal
Sam Baker
Feb. 6, 2014, midnight

Pro­posed changes to Medi­care’s pre­scrip­tion drug cov­er­age could cause seni­ors to lose their plans or face high­er premi­ums, a con­ser­vat­ive think tank says in a new re­port.

The Amer­ic­an Ac­tion For­um, led by former Con­gres­sion­al Budget Of­fice Dir­ect­or Douglas Holtz-Eakin, cri­ti­cized changes the Medi­care agency wants to make to the ne­go­ti­ations among phar­ma­cies and in­sur­ance com­pan­ies.

“If [the changes are] im­ple­men­ted, the tax­pay­er will face high­er budget costs, mil­lions of seni­ors will lose their pre­ferred plans, be­ne­fits will di­min­ish, and premi­ums will rise,” AAF said in a re­port on the Part D pro­gram.

The fed­er­al Medi­care agency, CMS, pro­posed new rules earli­er this year that would change the way plans es­tab­lish net­works of pre­ferred phar­ma­cies. Plans and phar­ma­cies could no longer reach ex­clus­ive ar­range­ments; any phar­macy would be able to de­cide wheth­er it wants to be part of a plan’s pre­ferred net­work.

AAF says that will mean few­er pre­ferred net­works, dis­rupt­ing cov­er­age and rais­ing prices for seni­ors who rely on nar­row­er phar­macy net­works.

“This is the en­ti­tle­ment that works, why are they break­ing it?” Holtz-Eakin said in an in­ter­view.

A CMS of­fi­cial dis­puted the re­port’s con­clu­sion. There’s lim­ited evid­ence that ex­clus­ive con­tracts ac­tu­ally save money — either for seni­ors or the gov­ern­ment, the of­fi­cial said, and the new pro­pos­al would give seni­ors more ac­cess to any dis­counts by mak­ing them avail­able from more phar­ma­cies.

The of­fi­cial ac­know­ledged that nar­row net­works have the po­ten­tial to save money, but said the pro­posed reg­u­la­tions will re­quire plans and phar­ma­cies to prove that they provide real value.

“The pro­posed policies “¦ will en­sure that Medi­care be­ne­fi­ciar­ies have ac­cess to af­ford­able health and pre­scrip­tion drug plans while mak­ing cer­tain that plans provide value to Medi­care and tax­pay­ers,” a CMS spokes­man said.

A “non-in­ter­fer­ence” clause has kept Medi­care out of the ne­go­ti­ations among phar­ma­cies, drug com­pan­ies and Part D plans, but CMS is now re­in­ter­pret­ing the clause in a way that would al­low the gov­ern­ment to get in­volved in ne­go­ti­ations between plans and phar­ma­cies.

Holtz-Eakin said the change in non-in­ter­fer­ence rep­res­ents a fun­da­ment­al change in the way Part D works.

“It’s a pretty in­vas­ive and mi­cro­man­aging ap­proach,” he said.

Part D is gen­er­ally con­sidered a suc­cess — its premi­ums have stayed nearly flat for years, and its cost to the fed­er­al gov­ern­ment has been lower than ex­pec­ted.

Con­ser­vat­ives see the pro­gram as a mod­el for the over­all health care sys­tem, ar­guing that com­pet­i­tion among private Part D plans is what keeps the pro­gram’s costs in check. Holtz-Eakin said changes to Part D’s net­works could have elec­tion-year con­sequences.

“I find it stun­ning that the ad­min­is­tra­tion would pick an­oth­er health care fight, par­tic­u­larly with seni­ors, in this way in an elec­tion year. This sup­posed to be a polit­ic­ally savvy group, but this is nuts,” Holtz-Eakin said.

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