The MEDPAC committee’s recent findings could have a significant effect on both pharmacists and patients alike. What is MEDPAC and what is its purpose? MEDPAC is an advisory commission created by the Balanced Budget Act of 1997. The committee is composed of members who have diverse expertise in the financing and delivery of health care services. Their main purpose is to advise Congress on issues affecting the administration of Medicare. The advisory committee releases two reports per year on Medicare program. The most recent proposals suggest a few plans to slow Medicare drug spending. The commission recommends an interrelated set of proposals. MEDPAC estimates that these measures could save at least $10 billion over five years, partly by encouraging more use of generic drugs and also by creating incentives for insurers to negotiate better prices from drug makers.
In June 2016, MEDPAC released their second report to Congress suggesting two possible policies that address issues in Medicare Part D. Both polices have their pros and cons. Whether they are implemented simultaneously, individually, or at all depends on Congress’ action based on these findings. Often these proposals are the starting points for policy makers.
The first proposal suggests an implementation of an out-of-pocket maximum of benefits during the catastrophic period of coverage. This is also known as the “OOP Cap.” This proposal would create an annual out-of-pocket spending cap for higher-income enrollees that is similar to one already in place for low-income beneficiaries. After enrollees hit the cap, Medicare would cover 100 percent of the cost of their medications. This would assist approximately $1.1 million Medicare Part D beneficiaries because they would potentially face lower out-pocket-cost year-round. Beneficiaries with high drug costs would benefit the most. If approved, around 5% of non-Low income subsidy enrollees would experience more than a $100,000 in aggregate reductions in out of pocket costs each year. For beneficiaries who reach the catastrophic period of coverage, it would decrease their costs by an average of 27%. However, it is important to note that the OOP Cap would make it harder to reach that annual cap by not allowing a drug discount given by manufacturers to count toward the enrollee’s’ out-of-pocket maximum.
The second proposal would implement TrOOP (True Out of Pocket) a measure that would increase the out-of-pocket cost for roughly 1.1 million Medicare part D enrollees who have high enough drug spending to reach the catastrophic coverage phase. This would mean that the average beneficiary would see an increase in out-of-pocket spending of almost $1,000 per year. Out-of-pocket spending for each affected beneficiary would increase by an average of almost $1,000 per year over a five-year period. This change would take place by excluding brand manufacturer discounts from the TrOOP calculation. Essentially by getting rid of the “Donut Hole,” individuals are pushed into the catastrophic period faster, as their drugs have a higher cost associated with them.
Both of these proposals would affect only some Medicare beneficiaries who have higher medication costs or chronic medical conditions. In 2017 the out-of-pocket maximum for beneficiaries increases to $4,950. Today they are responsible for 5% of drug cost under the catastrophic period, while Medicare pays for 80% and the plan pays for only 15%. Under the MEDPAC recommendation, beneficiaries would not be responsible for that 5%. For the Medicare beneficiaries who incur the highest drug costs and associated out-of-pocket expenditures, their spending would be significantly reduced. On a per capita basis, around 200,000 beneficiaries would experience over 50 percent reductions in out-of-pocket spending—dropping from $10,600 to $5,200—in 2018. Over the five-year period, aggregate out-of-pocket expenditures for the, on average, 100,000 beneficiaries each year who would experience lower out-of-pocket spending would decrease by $4.3 billion.
While most MEDPAC recommendations are considered to be very influential, many experts don’t expect Congress to make any decisions this year. However, it is unclear what Congress intends to do with these proposals in 2017. In the meantime, pharmacists can help these patients by identifying the right plans for them with lower copays as well alternative drugs that may cost them less. One can assume that if these proposals are implemented, plans and manufacturers will impose higher costs that will be absorbed by independent pharmacies. These influences will also pressure patients to move to a big box pharmacies in order to increase their profit margins. iMedicare can stop that from happening by offering you all the information you need to save your pharmacy from these rising costs.