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Pass Catastrophic Medicare Plan Drug Costs to PBMs: Azar

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The head of the federal department that oversees Medicare says one thing he’d like to do is improve the catastrophic coverage piece of the Medicare Part D prescription drug plan program.

Alex Azar II, secretary of the U.S. Department of Health and Human Services (HHS), talked about the Medicare Part D program Wednesday, at a 2020 budget proposal hearing organized by a House Appropriations Subcommittee.

(Related: Medicare’s Drug Coverage Gap Shrinks)

“It’s a great program,” Azar said at the hearing, which was streamed live on the web.

But Azar said he sees ways to make the program more efficient.

The Fiscal Year 2020 HHS Budget Proposal

The federal government fiscal year 2020 budget proposal would affect HHS spending during the 12-month period that starts Oct. 1.

The administration of President Donald Trump has proposed allocating $87 billion for discretionary programs at HHS for fiscal year 2020. That budget proposal, which would not have a direct effect on Medicare or Medicaid benefits levels, would cut HHS discretionary spending 12% below the budget allocation for fiscal year 2019.

The administration has proposed replacing the Affordable Care Act exchange plan subsidy program with a state grant program. That shift would start to take effect in 2021.

Catastrophic Coverage Cost-Sharing

Azar discussed the Trump administration’s ACA program funding proposal briefly in his written testimony, but, during the hearing, he and lawmakers focused mainly on topics such as Medicare, and on efforts to fight opioid abuse.

In the Medicare Part D program, Medicare shares the cost of providing drug coverage for enrollees with private companies.

In comments on the Medicare Part D program, Azar said the program’s pharmacy benefits managers (PBMs) already negotiate prices close to what European health care programs get, when federal law frees the PBMs to negotiate.

But Medicare Part D program rules for formularies, or the lists of drugs that drug plans cover, limit the PBMs’ ability to hold down the cost of many types of drugs, and some other program rules also hurt, Azar said.

More on this topic

The Medicare Part D program sets a ceiling on coverage for ordinary drugs. Once participants reach the minimum level for catastrophic drug spending, then Medicare Part D plan catastrophic coverage kicks in.

For 2019, the cap on ordinary coverage is $3,820. The catastrophic spending level is $5,100 in out-of-pocket drug spending.

While enrollees are in the donut hole, they get a 75% discount on brand-name drugs and a 63% discount on generic drugs.

Enrollees using catastrophic coverage are supposed to pay 5% of the cost of the drugs covered by catastrophic coverage. For an enrollee using catastrophic coverage to pay for an expensive, brand-name treatment that costs $100,000, the 5% contribution requirement could lead to $5,000 in medical billings.

Azar — a former top pharmaceutical company executive — said at the hearing that he would like to see Medicare Part D plans cut patients’ spending on drugs purchased with catastrophic coverage to zero.

Today, at the Medicare program, “we bear 80% of the cost of catastrophic coverage,” Azar said.

The PBMs and the patients absorb the rest of the costs, he said.

Azar said Medicare program managers ought to make the PBMs absorb 80% of the catastrophic coverage costs.

“We could bear 20%, and our seniors could pay 0%,” Azar said.


Links to information about the hearing, according to a written version of Azar’s testimony and a video recording of the hearing, are available here.

— Read Dems: “Complete” Drug Plans Should Fill Donut Hole, on ThinkAdvisor.

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