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   Jim Carr  A message from PEF Retiree President Jim Carr

What size pill $$ will you have to swallow in 2020?

Some changes are in store for Medicare Part D (prescription drugs) in 2020 and policymakers are contemplating even more. While Medicare directly affects seniors’ health insurance coverage, fundamental price changes under Medicare can sometimes indirectly affect the costs for younger Americans as well.

The Kaiser Family Foundation (KFF), a nonpartisan nonprofit focused on national health issues, recently outlined what the program will look like next year under current law, and under recent legislative and administrative proposals.

In 2020, a provision of the Affordable Care Act (ACA) that slowed the growth rate of the catastrophic coverage threshold will expire, and the threshold will revert to its pre-ACA scheduled level. As a result, the threshold will increase more significantly in 2020 than it has in recent years.

While Part D out-of-pocket expenses are not capped, once beneficiaries pay a certain amount, their obligations are reduced. This reduction comes when they hit what is called the “catastrophic threshold.” In 2019, once a beneficiary pays more than $5,100 toward their prescriptions, they enter catastrophic coverage and are on the hook for only 5 percent of the expenses going forward.

In 2020, this threshold will jump by $1,250, to $6,350. This change could affect individuals who reach this level of spending, unless Congress acts to continue the slower growth rate or otherwise restructure Part D as part of larger drug-pricing-reform efforts.

In the longer term, several proposed bills would change the structure of the Part D program by creating a cap on out-of-pocket expenses and reallocating responsibility for coverage expenses among insurance plans, pharmaceutical manufacturers, the Medicare program, and beneficiaries.

For example, the Senate Finance Committee’s drug pricing bill would cap beneficiary expenses at $3,100 annually, with manufacturers and Medicare each paying 20 percent of the costs once a beneficiary hits that limit and the insurance plan paying 60 percent. For comparison, the House drug pricing bill would set the annual out-of-pocket cap at $2,000, with plans paying 50 percent, manufacturers 30 percent, and Medicare 20 percent after that point. Both bills would eliminate beneficiary liability in the catastrophic phase.

By contrast, the Trump administration’s Part D proposal did not specify the level of the cap, but would require plans to cover 80 percent of the costs once that threshold was reached, with the Medicare program paying 20 percent.

I have included the Alliance for Retired Americans Fact Sheet on the House Drug pricing bill below for your review.

House ‘Drug Price Negotiation Bill’

On September 19, U. S. House of Representatives Speaker Nancy Pelosi and House Democrats released the Lower Drug Costs Now Act (H.R. 3). The bill would allow the government to negotiate lower drug prices for people covered by Medicare and private insurance.

H.R. 3 repeals the so-called “noninterference” clause, which currently prohibits the government from negotiating lower drug prices and requires the secretary of Health and Human Services to negotiate on up to 250 of the most expensive drugs, including insulin. The negotiated amount would be available to all payers, thus allowing workers covered by employer-sponsored plans to also benefit from the price reductions. Additional features of H.R. 3 include:

• Limiting Prices to International Drug Index — Americans pay the highest prices in the world for prescription drugs. H.R. 3 would bring drug prices in the U.S. more in line with those in other industrialized nations. Prices would be limited to 120 percent of the average costs of the drug in six other countries (Canada, United Kingdom, France, Germany, Australia and Japan).

• Excise tax on drug corporation profits — Drug corporations that refuse to negotiate or those that don’t comply with the agreement would be subject to a 65 percent to 95 percent excise tax on their gross sales.

• Limit increase in drug prices under Medicare Parts B and D — The proposal will also limit the increase in drug prices under Medicare Part B and D to the cost of inflation. The base year is set at 2016; thus, drug companies that have increased their prices since then would have to lower them or pay a rebate to the government.

Cap on out-of-pocket drug spending under Medicare — The bill caps out-of-pocket spending for Medicare beneficiaries at $2,000 a year. Currently, there is no cap on out-of-pocket spending. Out-of-pocket spending continues to escalate each year, particularly for specialty drugs — high-cost prescription medications used to treat complex, chronic conditions such as rheumatoid arthritis, multiple sclerosis, and cancer. According to the Kaiser Family Foundation, the average out-of- pocket spending for 28 of 30 specialty drugs is $8,109 per year.

Additional Medicare benefits — Savings from the negotiations will be reinvested into Medicare and could be used to expand benefits, such as providing hearing, dental and vision coverage.

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