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If You’re on Medicare, You Could Save Money on Drugs This Year

Federal law set caps on some spending for seniors who are enrolled in Part D prescription drug plans. Those paying for high-cost medicines will benefit.

It’s the best news that few people seem to know about: Prescription drug costs are falling this year for more than a million seniors — in many cases, by thousands of dollars.

The lower costs are the result of the Inflation Reduction Act, or I.R.A., which was signed into law by President Biden in 2022 and is known mainly for its investment of more than $370 billion into climate and energy programs. Its changes to Medicare, which will help people who are enrolled in the prescription drug coverage plans known as Part D, are significant. Yet a recent survey by the nonprofit KFF found that most Americans weren’t aware of them.

The changes began last year with a $35 monthly cap on the cost of insulin for diabetes patients, and free vaccines. This year, an annual out-of-pocket cap of $3,300 will take effect, because people covered under Part D are no longer required to pay 5 percent of the cost of brand-name drugs once they reach that level of spending. Another provision penalizes drug companies for price increases that exceed the rate of general inflation. And the I.R.A. expands eligibility for financial assistance with Part D costs for low-income seniors.

The law has also authorized Medicare to negotiate prices for expensive drugs with pharmaceutical companies for the first time. The first negotiations will be over 10 drugs, including the blood thinners Eliquis and Xarelto and the diabetes drugs Jardiance and Januvia. The effect of those talks is uncertain, and they have already provoked litigation by drug makers.

The stronger vaccine coverage eliminates cost sharing for all of the many vaccines covered under Part D. Vaccines for Covid-19, the flu and some other conditions are covered under Part B (which covers outpatient care). Some shots previously had high out-of-pocket costs. For example, patients paid an average of $77 in 2021 for the vaccine that prevents shingles, according to federal data.

In 2025, there will be two more important changes: A beneficiary’s total out-of-pocket spending will be capped at $2,000, and people will be able to spread their out-of-pocket costs throughout the year by setting up a monthly payment plan with their Part D insurance companies.

The new caps on out-of-pocket costs will save thousands of dollars for those who take high-cost drugs for conditions such as cancer and multiple sclerosis. In many cases, Medicare beneficiaries have been paying tens of thousands for their medicines. In 2020, 1.4 million people who didn’t receive a low-income subsidy had annual out-of-pocket costs of $2,000 or more, according to KFF, which focuses on health policy.

“The prescription drug reforms in this law mark the most substantial changes to the Medicare D program since the drug benefit launched in 2006,” said Tricia Neuman, senior vice president of KFF.

But even among people who are eligible for Medicare (those 65 or older), awareness of these changes is low. The KFF survey found that just 25 percent knew about the caps on annual out-of-pocket costs. And only 8 percent knew about the penalties for price increases that exceed inflation.

“Someone who takes a very expensive drug probably will be very grateful to see their costs falling this year,” Dr. Neuman said. “But truly, nobody understands why they pay what they pay for drugs, so it’s not a surprise that people don’t know that these improvements have gone into effect, or that they don’t attribute it to the Inflation Reduction Act.”

David Mitchell is among those who will benefit from the changes. In November 2010, he was diagnosed with multiple myeloma, an incurable cancer — but one that can be treated with very expensive medicines. Mr. Mitchell was 60 at the time of his diagnosis and running a Washington, D.C., communications firm that he co-founded. His firm’s health insurance plan covered the drugs he needed, although his out-of-pocket costs escalated sharply over the years.

After an initial round of treatment, Mr. Mitchell went into remission and then began a maintenance regimen for more than five years that included expensive cancer drugs. Mr. Mitchell knew the health care business well — his communications firm worked with numerous industry clients and also did public health campaigns. And, he said, he was becoming increasingly angry that most patient organizations involved in the debate over drug prices accepted funding from drug and medical-device companies, creating conflicts of interest.

As he learned more about the way drugs are priced, Mr. Mitchell became convinced of the need for an advocacy group that represented patient interests. “One morning in the summer of 2016, I woke up and had an epiphany: If no one else is going to do this, maybe you’re supposed to try,” he said. He retired from his firm that year and started Patients for Affordable Drugs, a national organization funded solely by individuals and foundations. The organization pushed for passage of the I.R.A.

Once he retired at the age of 66, Mr. Mitchell enrolled in Medicare. That’s when he began to experience the problem of high-cost drugs in the program. Along with his cancer, he is also under treatment for atrial fibrillation. Some of the drugs he uses are covered under Part B since they are administered in health care settings. Others are covered under Part D, and last year, he paid $16,916 for all his medications. Most of that amount was for just one of his current cancer drugs, Pomalyst.

This year is different because of the new out-of-pocket cap. “I filled my first prescription, and it cost $3,308, and I’m done for the year now,” he said.

Some patients may only be starting to notice the significance of the cap, said Frederic Riccardi, president of the Medicare Rights Center, an advocacy and consumer organization. “They may have experienced high costs in January, but we have clients with chronic conditions who are taking very expensive prescription drugs that are seeing significant savings,” he said. “During fall enrollment last year, we helped an individual taking a lifesaving drug who is going to save more than $15,000 this year.”

The stronger out-of-pocket protections arrive at a moment when other Medicare costs are rising. The standard Part B premium rose this year by 5.9 percent, to $174.70, and the deductible increased by $14, to $240.

Part D premiums are also rising. KFF estimated that Medicare recipients enrolled in stand-alone Part D plans who didn’t switch providers this year experienced premium increases averaging 21 percent, to $48 per month. (Medicare Advantage enrollees are unaffected since most do not pay a separate premium for drug coverage.)

The increase is due, in part, to the higher plan costs anticipated by insurers under the improved protections for patients contained in the I.R.A. But the stronger insurance protections benefit anyone enrolled in Part D, Dr. Neuman argued. “The whole point of insurance is to protect people with the highest costs, and that could be any one of us tomorrow,” she said.

Another important change expands access to federal subsidies that help low-income seniors with their Part D premiums, deductibles and cost sharing by increasing income limits. The subsidy, called Extra Help, is worth about $5,300 per year for people who enroll in it, according to the Social Security Administration, which runs the program.

This year, annual income must be below $22,590 for an individual, or $30,660 for a married couple; assets must be below $17,220 for an individual, or $34,360 for a married couple.

The program is an important feature of Part D. In 2020, 13.1 million Medicare beneficiaries received either full or partial Extra Help benefits, representing 28 percent of all enrollees that year, according to KFF.

This year, the expanded benefit was automatically granted to nearly 300,000 low-income people on Medicare, but up to three million more could benefit from the expansion, according to Medicare estimates. The program is national, and the application is available online.

Another important source of help is the Medicare Savings Programs, which help low-income people pay Part B premiums and some other costs. The programs are available nationwide and are administered by state Medicaid agencies — but they are often underutilized because few know of them and they have complex applications. Some states have been expanding eligibility.

Federal funding helps community organizations such as the State Health Insurance Assistance Program to do outreach and to enroll eligible beneficiaries. But that funding requires periodic renewal, and it was excluded from the current federal continuing resolution on spending, which expires in early March.

The under-enrollment problem stems mainly from lack of awareness, Mr. Riccardi of the Medicare Rights Center said. “We do need consistent education about these programs, especially for people who are new to Medicare.”

https://www.nytimes.com/2024/02/04/business/medicare-drugs-part-d.html?auth=login-google1tap&login=google1tap

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