Analysis: Proposed Medicare Part D changes incite cheers, jeers

Washington Watch

When do you fix a government program that’s not broken?

That’s the question many in Washington are asking, after Medicare recently proposed a series of changes to its Part D prescription drug program – a program that, by most everyone’s view, is working very well.

The Centers for Medicare and Medicaid Services (CMS) proposed new rules recently that would fundamentally change the program's private insurance coverage for certain drugs, alter the pharmacy networks that some plans cover and limit the number of policies available to beneficiaries in any given region.

The proposed rules change is stirring a hornet’s nest of opposition from an unlikely coalition of opponents, concerned about the potential for turmoil that critics fear could leave some Medicare beneficiaries without coverage for the drugs they need and with fewer choices overall.

Medicare Part D started out controversial in 2003, when the House passed the measure after then President George Bush made late night, last minute phone calls during an all night session of the House of Representatives, leading to an unusually long three hour vote when a 218 216 defeat was miraculously flipped to a 220 215 victory at 6 a.m.

But since it was implemented in 2006, it has been considered a tremendous success story by Republicans and Democrats alike, helping all 52 million elderly and disabled beneficiaries get access to the Medicare drug benefit through private plans approved by the federal government.

Over 10 years, its costs of $346 billion have been 45 percent lower than initially projected and 95 percent of Part D beneficiaries say they are satisfied with the program – an astonishing number when looked at in the context of the controversy over the Affordable Care Act. Government officials note that Part D has saved $8.9 billion on prescription drug costs for Medicare recipients.

The proposed rule changes

Now Medicare wants to make changes it says will streamline the program and help it long term. Congressional lawmakers of both parties and health care advocates suggest they are trying to fix a system that’s not broken. The Center for Medicare & Medicaid Services (CMS) says the new regulations would save $1.3 billion over five years.

The changes range from new limits on the number of plans insurers could offer consumers to new rules about what drugs those plans must cover. The plan also would prohibit exclusion of pharmacies from a plan’s “preferred pharmacy network” as long as they agree to the plan’s terms and conditions.

Here are the key proposals:

Reductions in required drug coverage. This would remove special protections for some classes of drugs, which require insurers to provide access to the vast majority of drugs in that class.

Currently, Medicare has six protected drug categories but wants to eliminate two of those, starting in 2015, with antidepressant drugs and those that help suppress the immune system.

Antipsychotic medicines would be eliminated starting in 2016. They include many well known drugs, such as Wellbutrin, Paxil and Prozac to treat depression, and Abilify and Seroquel to treat schizophrenia.

Three other categories – cancer, HIV and anti seizure drugs – would retain their status as protected classes and insurance companies would be required to continue covering nearly all drugs in those treatment areas. Medicare has traditionally required the broad coverage because patients with these conditions must often try several drugs before finding one that works.

The Obama administration says they needed the original drug coverage as a temporary measure to help ease patients’ transition to the new Medicare Part D program, and that since then, insurers had lost their leverage in negotiating with drug companies because the drug companies knew the insurers were required to cover their drug costs and were therefore less willing to offer lower prices.

In recent testimony on Capitol Hill, Jonathan Blum, principal deputy administrator for CMS, assured lawmakers that beneficiaries would still have access to the drugs they need and that there would be adequate notification for patients before a drug could be removed from a plan's coverage. He suggested the change would lead to greater competition and lower prices. The administration cited a 2008 study that showed that the six protected classes accounted for almost a third of total outpatient drug spending under Part D and that the costs were about 10 percent higher because of the requirement to cover substantially all drugs in these classes.

But patient advocates worry that a drug plan could have a list of preferred drugs with just two medications to treat schizophrenia. They argue that is inadequate because anti psychotic drugs work in different ways in the body and doctors need more options to figure out what works best for each patient. Other patient groups fear that the change will mean seniors won’t get drugs they need.

Limits in number of plans offered. This would allow insurers to offer no more than two prescription drug plans – one basic plan and one enhanced – in the same service area. The health law’s ongoing closing of the Part D “doughnut hole” – the gap in coverage where seniors pay the full cost of coverage before the plan’s catastrophic cap kicks in – “has reduced the need for plans offering enhanced benefits,” according to CMS. The agency says that each region of the country now has nearly three dozen plans and reducing that would help give beneficiaries more clarity about the differences among plans.

But critics counter that having more plans on the market boosts competition, increases plan innovation and keeps prices low. An analysis from Avalere Health found that the proposal would require that 39 percent of all enhanced plans be eliminated by 2016.

But not everyone dislikes this specific proposal. Joe Baker, president of the Medicare Rights Center, suggests it might help ease confusion among seniors. “Most people with Medicare fail to re evaluate their coverage options on an annual basis, largely because there are too many options and too many variables to compare, even when they can save money or increase their coverage by switching plans.”

Separately, a Kaiser Family Foundation study found that from 2006 through 2010, only 13 percent of beneficiaries switched drug plans during each annual enrollment period despite changes in premiums, cost sharing and coverage.

Expansion of preferred pharmacy networks. The government is proposing to give all pharmacies the ability to be in a health plan’s “preferred pharmacy network” if they agree to offer beneficiaries the same price that is available through pharmacies that have negotiated preferred cost sharing with the insurer.

Critics of the plan say the change will lead to higher prices because Part D plans won’t be able to get the same price concessions from drug makers and pharmacies. They say that Medicare has no power under the drug law to demand such a change. But community pharmacists around the country expressed strong support for the provision. In a letter to CMS Administrator Marilyn Tavenner, they argued that the proposed changes would make it easier for Medicare beneficiaries in small towns and rural areas to obtain drugs under Part D through community pharmacists. Lawmakers in both parties representing rural districts also praised this proposal saying it offers seniors more convenience.

The politics

All together, the administration’s proposal “touches every single stakeholder in the Part D world,” a former CMS official told Kaiser Health News recently. As Medicare sees it, the rules are needed to help beneficiaries make good choices and save taxpayers money.

But not surprisingly, patient advocate groups, pharmaceutical manufacturers and lawmakers are pushing back against many parts of the proposals. Opponents have unusual company among their brethren. Even insurers and drug benefit managers, who have previously supported added limits on drug coverage, oppose the proposed rules. They object to provisions including changes to so called preferred pharmacy networks, where consumers are steered toward a limited network of pharmacies, and to reducing the number of plans that insurers can offer in any one region.

John Castellani, chief executive of the Pharmaceutical Research and Manufacturers of America, the drug industry trade group, said Medicare Part D is the rare government program that not only gets high marks from consumers but also has cost taxpayers billions of dollars less than originally expected.

The opposition to the proposal has been so strong, that in a letter to CMS, more than 275 companies and groups called for the rule’s withdrawal “in the strongest terms,” arguing that the changes were unnecessary for a program that has proved effective. If it becomes law, they wrote, “millions of seniors and beneficiaries with disabilities would lose their current choice of plan or face changes in coverage.”

AARP, the powerful seniors’ lobby, takes issue with the proposal to increase cost sharing for some Medicare beneficiaries. Understanding that prescription drugs drive escalating health care costs, Nancy LeaMond, AARP’s executive vice president argued that “instead of shifting additional costs onto Medicare beneficiaries, we must look for savings throughout the entire health care system, as the rising cost of health care threatens people of all ages.”

Bipartisan opposition is growing on Capitol Hill as well. A majority of the members of the Senate Finance Committee – including newly installed Chairman Ron Wyden, D Ore. – and all but four of the Democrats on the committee recently wrote a letter to CMS Administrator Marilyn Tavenner, criticizing the entire rules proposal.

"We are perplexed as to why [you] would propose to fundamentally restructure Part D by requiring immediate, large scale changes to the program," the lawmakers wrote. "Many of the proposed changes are untested and unstudied and could result in significant loss of beneficiary choice, access and consumer protections."

The Administration’s defense

According to the Congressional Budget Office, the Medicare Part D program cost the federal government 45 percent less than forecast from 2004 through 2013. But CMS expects costs to climb. Government subsidies for insurers in high risk markets and low income cost sharing subsidies continue to increase, CMS’ Blum told the House Energy and Commerce Subcommittee on Health recently. New, expensive biologic therapies will also likely add to the total bill.

Blum suggests that there are several cost reducing elements of the rules proposal. Lifting some restrictions on drugs that must be covered will give Part D plans more power to negotiate discounts, which will save taxpayers money, he suggests. In addition, the agency says, changing the rules about how Part D “preferred pharmacy networks” operate will produce savings for the government. The proposed regulation would also give the agency new ways to fight waste and fraud.

The agency estimates the proposed changes would save $1.3 billion between 2015 and 2019.

“We also have to recognize that in some circumstances, due to current regulations, market driven competition among Part D sponsors is not bringing down costs as efficiently as it could,” Blum said.

Also contributing to this report were Kaiser Health News, the New York Times, Modern Healthcare and Reuters.

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