#SOTU, Inflation Reduction, and Med Pricing
#SOTU, Inflation Reduction, and Med Pricing
State of The Union speech often reminds me of a report card - the President's in this case. Let's briefly review some key terms used in the State of The Union:
Read time 5 mins
Every year the US President presents his report on progress and strategic priorities for the year ahead. This year, President Biden especially emphasized the need and progress made in healthcare access. Let’s review some quick terms he used in the State of the Union. (if you are interested, KHN and Politifact combined forces to review the strength of evidence behind his claims!)
Inflation Reduction Act
Passed in 2022 (August) revamped many things, and major healthcare changes included
In 2023
Enhanced premium subsidies for people purchasing insurance on the Affordable Care Act marketplaces - an estimated 13 million people will have more affordable care (pun intended!)
Capping insulin cost sharing to $35 a month for Medicare
No cost-sharing on vaccines for Medicare, Medicaid, and CHIP
10 medications chosen for “negotiated prices”
Barring pharmaceutical companies from raising prices faster than inflation, or they will owe rebates
In 2024
Capping Medicare Part D Out-of-pocket drug costs beyond the “catastrophic” threshold of $7,050
In 2025
Capping Part D out of pocket at $2000 for Medicare beneficiaries with Part D plans
Enhanced premium subsidies for Affordable Care Act marketplaces ends
In 2026
Negotiated prices under Medicare for 10 medications take effect - see next section!
Medicare Price Negotiation
Why is this important?
KFF reported that in Medicare Part D, the 250 most popular medications accounted for 60% of cost spending even though they make up only 7% of all medications covered under Part D. This is an upside pyramid where the apex is costing Medicare Part D the most. Remember, Part D has the “donut hole” (or coverage gap) where until a patient reaches the catastrophic limit, they are responsible for payment, and beyond the limit, they cost-share 5% of the total cost of medication.
A simplified case example: (yearly premium costs excluded from example for simplicity)
Mr. Johnson is a 70-year-old male, has Part D where the donut hole or coverage gap kicks in at the limit of $4,660. This means up to the total annual cost of $4660, his Plan D will share the cost of medications. Beyond this annual amount, he is responsible for 25% of all medication costs until he reaches the other side of the donut hole when his total prescription costs are >$7,400 out of pocket. (note: the 25% he pays towards medications counts, as does the remaining 75% though he is not responsible for paying it).
So, his plan dictates he shares 15% of the cost of medication. His monthly medication costs are $2000 - this means:
January - Februrary he pays $300 per month = $600
15% of $2000 = $300 per month
March - April he pays $500 per month because = $1000
In March, his total year spending reaches >$4660 which means he has reached the donut hole.
In the donut hole, he is responsible for 25% of all costs, until he reaches $7400. So, 25% of $2000 = $500 per month
May - December he pays $100 per month = $800
In May, his total year spending reaches >$7400 and now he is responsible for 5% of the cost of medications. So, 5% of $2000 = $100 per month
Total spend out-of-pocket in 2023 is $2400 on medications only.
What is the new plan?
Capping Medicare Part D Out-of-pocket drug costs beyond the “catastrophic” threshold of $7,050 in 2024. This will get rid of the 5% that Mr. Johnson paid per month once he reached the other side of the donut hole.
This will yield $1,150 in savings in 2024 for Mr. Johnson.
$7400 - $7050 = $350
plus no $800 out-of-pocket cost when outside of the donut hole
$350+$800 = $1150 in saving annually for him
In 2025, there will be a further cap of Part D out of pocket at $2000 for Medicare beneficiaries. Saving Mr. Johnson at least $400 per year moving forward.
Perspective: this is a big deal! Per KFF, in 2020,
69% of Part D enrollees spent between $2,000 and $3,000 out-of-pocket
19% spent $3,000 up to $5,000 out-of-pocket
11% spent more than $5,000 out-of-pocket
Medicaid expansion
Per the White House, expansion of Medicaid in Missouri and Oklahoma has taken place - thus including individuals below 138 percent of the Federal poverty level. This is anticipated to provide health insurance coverage for 500,000 persons. Furthermore, pregnant females can retain Medicaid eligibility up to 1 year postpartum.
Affordable Care Act (ACA) Enrollment
Politifact reported that “last year, a record 14.5 million Americans selected an ACA plan. This year's open enrollment closed Jan. 15 in most places and, based on preliminary numbers, enrollment in 2023 will continue the upward trend.”
In addition, per the White House:
The annual open enrollment period was extended by 1 month to bring in more policyholders
Low-income Americans are able to enroll at any time in the ACA
Paperwork burdens Medicaid and ACA enrollment have been reduced
Navigation services or consumer assistance programs for enrollment into ACA received more funding support
Final Thoughts
A lot was accomplished for healthcare insurance but there is much more to accomplish. With ongoing litigation against the ACA in various ways, 2023 is likely to lead to newsworthy life. More importantly, in the climate of individual rights vs state laws, access to care (beyond insurance) may hold a more central focus. And much of this conversation was missing in the state of the union. I would give our executive branch a grade B minus: improvement noted, but more improvement needed.
Why? Simple aspects of access to care are under threat, like no-cost-sharing insurance coverage of cancer screening based on evidence-based nationally accepted standards is on the chopping block per Braidwood Management v. Becerra. There are many more examples of access to care, including reproductive & fertility rights, gender identity, long-term care, or COVID testing and treatment cost/coverage.
The importance of preserving access to care is paramount.
The preservation of access to care (dare I say improving access to care) may seem like an aspirational goal - it is not.
It is simply a matter of believing in science.
No fundamental social change occurs merely because government acts.
It's because civil society, the conscience of a country,
begins to rise up and demand - demand change.
- President Joe Biden
More reading:
KHN & Politifact Review SOTU, KFF on Inflation Reduction Act, Biden Promise Tracker from Politifact