Medicare experiment could put more pressure on insurers to save money on prescription drugs

WASHINGTON — The federal government is giving health insurance companies that run Medicare prescription drug plans new tools it hopes will save money for patients.

The Centers for Medicare and Medicaid Services announced a voluntary program Friday that will allow Medicare Part D plans, which share the cost of prescription drug insurance with the federal government, to keep more of the savings they negotiate — with the caveat that if they don’t save enough money, they have to pay the government back for it.

In a call with reporters, CMS Administrator Seema Verma said that this should result in lower costs for patients who typically spend a lot of money on prescription drugs.

Insurance companies have until March 1 to decide if they want to participate in this program, which will begin on Jan. 1, 2020. It’s being run through the Centers for Medicare and Medicaid Innovation, a division established by the Affordable Care Act that has broad authority to run experiments to test new ways of the government paying for health care.

Companies that participate in this experiment would see a change to the “catastrophic” portion of Medicare prescription drug coverage, which applies once a patient has already spent $5,100 in out-of-pocket costs. Once they’ve spent that much on prescription drugs, patients are responsible for only 5 percent of new costs — their insurance picks up the other 95 percent.

That 95 percent is split between the federal government and the private insurance company that runs the patient’s Medicare prescription drug plan. The government pays 80 percentage points and the plan pays the additional 15 percentage points.

That means the insurance company has an incentive to cut good deals with pharmaceutical companies for lower prices on drugs — but only to a certain extent, because they get to keep only 15 percent of the savings.

Under the new program, if plans do a good enough job, they could keep more of the savings, shifting the 15/80 split in favor of the insurance companies. The current description of the program doesn’t say by how much. But the plans would also be responsible for paying the government back if they end up spending more money on drugs, which would shift the 15/80 split in favor of the government.

“The devil will be in the details,” said a health care lobbyist. The lobbyist added that plans’ enthusiasm about the program will depend on exactly how much money they could save and how much they might stand to lose.

Verma told reporters that while patients will still pay the same 5 percent under this new program, the fact the insurance companies will have the ability to save more money will encourage them to drive a harder bargain with drug companies. Patients will benefit from that, she said, because they’re paying 5 percent of the price that the insurance companies negotiate.

“Even though the individual is still responsible for 5 percent, hopefully they’re paying a lower amount because the plan has a greater incentive to manage that piece of the benefit,” Verma said.

Verma said she didn’t know if the department had an estimate of how many plans would participate in the program.

Source: https://www.statnews.com/2019/01/18/medicare-experiment-insurers-drug-prices/

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