Prescription Drugs in Medicare

On this page: Medicare

Background

Until the 2006 introduction of Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… Part D (Drug Coverage), Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… covered very few prescriptions outside of hospital settings. Medicare Part B This program primarily covers physician and outpatient services and some home health care and ambulatory care. People who are covered or eligible for coverage by Medicare Part A may voluntarily enroll in Part B by paying a monthly premium. However, a person also may be enrolled only in… continues to cover a limited number of prescription drugs administered in a physician’s office or hospital outpatient department or associated with the use of durable medical equipment.  Medicare Part B This program primarily covers physician and outpatient services and some home health care and ambulatory care. People who are covered or eligible for coverage by Medicare Part A may voluntarily enroll in Part B by paying a monthly premium. However, a person also may be enrolled only in… covers 80 percent of the cost. The beneficiary is responsible for the remaining 20 percent, some or all of which may be covered by some form of supplemental coverage. Beneficiaries who lack such coverage or use extremely costly drugs may face substantial cost-sharing for these medications. A recent Government Accountability Office report found that some particularly expensive Part B drugs have cost-sharing that exceeds $100,000 per year.

Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… Part D is voluntary, outpatient prescription drug coverage. Approximately 70 percent of Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… beneficiaries are enrolled in Part D either through stand-alone Part D plans (PDPs) or through Medicare Advantage Medicare beneficiaries can get their Medicare benefits through Original Medicare or a Medicare Advantage Plan. If beneficiaries have Original Medicare, the government pays for Medicare benefits when they get them. Medicare Advantage Plans, sometimes called “Part C” or “MA Plans,” are… plans that include prescription coverage ( MA Medicare beneficiaries can get their Medicare benefits through Original Medicare or a Medicare Advantage Plan. If beneficiaries have Original Medicare, the government pays for Medicare benefits when they get them. Medicare Advantage Plans, sometimes called “Part C” or “MA Plans,” are… -PDs). Some beneficiaries with low incomes and assets are eligible for extra help with their Part D costs through the Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… Low-Income Subsidy program.

More than 43 million Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… beneficiaries were enrolled in Part D plans in 2018: 20.6 million in stand-alone plans (PDPs) and 16 million in Medicare Advantage Medicare beneficiaries can get their Medicare benefits through Original Medicare or a Medicare Advantage Plan. If beneficiaries have Original Medicare, the government pays for Medicare benefits when they get them. Medicare Advantage Plans, sometimes called “Part C” or “MA Plans,” are… plans with prescription drug coverage ( MA Medicare beneficiaries can get their Medicare benefits through Original Medicare or a Medicare Advantage Plan. If beneficiaries have Original Medicare, the government pays for Medicare benefits when they get them. Medicare Advantage Plans, sometimes called “Part C” or “MA Plans,” are… -PDs). An additional 6.8 million had drug coverage through employer-sponsored plans that received Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… ’s retiree drug subsidy for being the primary provider.

In 2018, enrollees could choose from an average of 23 PDPs and 17 MA Medicare beneficiaries can get their Medicare benefits through Original Medicare or a Medicare Advantage Plan. If beneficiaries have Original Medicare, the government pays for Medicare benefits when they get them. Medicare Advantage Plans, sometimes called “Part C” or “MA Plans,” are… -PDs, however, in 2018 more than half of Part D enrollees were in plans sponsored by the top three insurers.

The benefit is currently undergoing several changes because of the Affordable Care Act ( ACA Comprehensive health care reform legislation passed by Congress and signed into law on March 23, 2010. ). For example, Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… Part D beneficiaries who do not receive payment help through the Low-Income Subsidy (LIS) program were traditionally responsible for all of their prescription drug costs while they were in the Part D coverage gap, or “doughnut hole.” In 2011, the hole began to close due to a series of escalating discounts provided by Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… and brand-name drug companies.

Once the coverage gap closes in 2020, non-LIS Part D beneficiaries will be responsible for just 25 percent of their prescription drug costs from the time they meet their deductible to the time they enter catastrophic coverage. This timeline remains unchanged for generic prescription drugs. However, the Bipartisan Budget Act of 2019 closes the coverage gap in 2019 for brand-name prescription drugs.

In addition, the growth rate for the catastrophic spending threshold under Part D, which is the amount a beneficiary must spend out of pocket before a much lower coinsurance A form of health care cost sharing in which a percentage of covered expenses must be paid by the insured person.  Different from a copayment (copay) which is usually a flat dollar amount.  rate applies, is being artificially slowed from 2014 through 2019. In 2020, the growth rate will again rise along with enrollees’ per capita drug spending. This change is expected to increase the out-of-pocket spending threshold from $5,100 in 2019 to $6,350 in 2020.

Another ACA Comprehensive health care reform legislation passed by Congress and signed into law on March 23, 2010. provision that requires beneficiaries with higher incomes to pay higher Part D premiums was implemented in 2011, with the same income thresholds used for Part B premiums. The law also imposed a freeze on the income thresholds from 2011 through 2019, rather than allowing them to rise with inflation. This will increase the number and share of Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… beneficiaries subject to income-related Part B and Part D premiums.

While CMS data suggest that Part D premiums are growing slowly, the average enrollment-weighted monthly premium for PDPs has increased by roughly 60 percent since the benefit was first offered in 2006. It is now more than $40 per month.

Standard Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… Part D coverage consists of a deductible, then initial coverage, followed by a coverage gap, and finally catastrophic coverage. The benefit parameters change annually based on Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… Part D per capita drug spending (Figure 7-1). In 2019, beneficiaries fall into the coverage gap after their total drug spending reaches $3,820 and enter catastrophic coverage after their total out-of-pocket spending reaches $5,100.

Even when enrollees enter catastrophic coverage (i.e., after spending more than $5,100 out-of-pocket in 2019), they are still responsible for 5 percent of their prescription drug spending. This benefit design can lead to out-of-pocket costs that exceed $10,000 for enrollees taking expensive prescription medications.

Cost-sharing under Part D is also growing. Most Part D plans are shifting from flat rate copayments to coinsurance A form of health care cost sharing in which a percentage of covered expenses must be paid by the insured person.  Different from a copayment (copay) which is usually a flat dollar amount.  (where beneficiaries pay a percentage of the drug’s price.) When combined with rapidly escalating prescription drug prices, this trend will have beneficiaries paying considerably more at the pharmacy counter. Since 2006, median copayments for non-preferred brand name prescription drugs have increased by 45 percent. In addition, the proportion of PDPs using coinsurance A form of health care cost sharing in which a percentage of covered expenses must be paid by the insured person.  Different from a copayment (copay) which is usually a flat dollar amount.  instead of copayments has increased over recent years. In 2018, virtually all PDP enrollees were in plans that used coinsurance A form of health care cost sharing in which a percentage of covered expenses must be paid by the insured person.  Different from a copayment (copay) which is usually a flat dollar amount.  on two or more of their formulary tiers.

 

                                                                                                   Figure 7-1

                                                                           The Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… Part D “Doughnut Hole”

doughnut holeSource: U.S. Department of Health and Human Services, Centers for Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… & Medicaid Services, Announcement of Calendar Year (CY) 2019 Medicare Advantage Medicare beneficiaries can get their Medicare benefits through Original Medicare or a Medicare Advantage Plan. If beneficiaries have Original Medicare, the government pays for Medicare benefits when they get them. Medicare Advantage Plans, sometimes called “Part C” or “MA Plans,” are… Capitation Capitated payment systems are a type of managed care. They can be used to fund health care, long-term care or both. In a capitated system a managed care organization (MCO) is paid a fixed amount for each person served (often a specific amount per consumer per month) and in turn is… Rates and Medicare Advantage Medicare beneficiaries can get their Medicare benefits through Original Medicare or a Medicare Advantage Plan. If beneficiaries have Original Medicare, the government pays for Medicare benefits when they get them. Medicare Advantage Plans, sometimes called “Part C” or “MA Plans,” are… and Part D Payment Policies, April 2, 2018 

Another trend is the use of preferred pharmacy networks. In this case, Part D plans offer lower cost-sharing for prescriptions filled at preferred pharmacies. In 2015, nearly 90 percent of stand-alone Part D plans had a preferred pharmacy network.

Plans may also attempt to control costs and enhance quality by establishing drug formularies and preferred drug lists. A growing number of covered prescription drugs are subject to utilization management such as prior authorization, step therapy, or quantity limits. In 2018, PDPs and MA Medicare beneficiaries can get their Medicare benefits through Original Medicare or a Medicare Advantage Plan. If beneficiaries have Original Medicare, the government pays for Medicare benefits when they get them. Medicare Advantage Plans, sometimes called “Part C” or “MA Plans,” are… -PDs applied some form of utilization management to more than 45 percent of the prescription drugs on their plan formulary. These requirements can present administrative burdens on clinicians and barriers to coverage for beneficiaries.

One component of Part D designed to help people use their prescription drugs safely and to minimize risk is medication therapy management (MTM). MTM services must be offered by all Part D plans to those whose annual drug costs exceed a statutory amount, updated annually. It was $3,967 in 2018. Plans are generally free to set eligibility criteria related to the number of drugs being used and to the number and type of chronic conditions as long as they meet certain guidelines from CMS. Those who accept their drug plan’s invitation for free MTM services can receive a comprehensive review of all their medications, a detailed medication list, and recommended steps to resolve any drug-related problems.

While MTM services are reserved for eligible beneficiaries, all Part D participants can use CMS quality measures to determine how their respective drug plans ensure safe medication use. Plans are rated on about two dozen quality measures, grouped into four areas: drug plan customer service; member complaints, problems getting services, and choice to leave the plan; member experience with drug plan; and drug pricing and patient safety.

PRESCRIPTION DRUGS IN MEDICARE: Policy

Medicare negotiating authority

In this policy: Federal

Congress should grant Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… the statutory authority to use its purchasing power to obtain drug price discounts directly from pharmaceutical manufacturers in addition to private Part D plans that currently negotiate with pharmacy benefit managers Companies that administer prescription drug benefits on behalf of health plans and insurers. and pharmaceutical manufacturers.

Quality and safety

In this policy: Federal

Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… Part D quality measures that focus on clinical improvements should be emphasized in beneficiary communications including the Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… Plan Finder.

Part D medication therapy management programs, especially pharmacist-led interventions, should be better incentivized across Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… to minimize preventable medication-related problems and to encourage appropriate prescribing, monitoring, and safe use of medications.

 

Access to the Low Income Subsidy (LIS)

In this policy: Federal

Congress should eliminate the asset test for the low-income subsidy for Part D coverage and ensure coordination of benefits for those who are dually eligible for Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… and Medicaid.

Adequate pharmacy benefits

In this policy: Federal

With respect to their formularies and preferred drug lists, plans should:

  • publicly disclose the nature of formulary and preferred drug list A list of pharmaceutical products that will be covered under a public or private insurance plan without being subject to a prior authorization requirement. Under prior authorization a provider must obtain approval for certain services or procedures before delivering them if they are to… restrictions and utilization management policies; and
  • allow the use of nonformulary drugs or those not on the preferred drug list A list of pharmaceutical products that will be covered under a public or private insurance plan without being subject to a prior authorization requirement. Under prior authorization a provider must obtain approval for certain services or procedures before delivering them if they are to… when they are medically necessary and ensure that plan members are aware of how such alternatives can be obtained.

Plans should also:

  • ensure participation of plan physicians and clinical pharmacists in the development of formularies and preferred drug lists;
  • provide any prescription drugs that are exceptions to the health plan formulary and preferred drug list A list of pharmaceutical products that will be covered under a public or private insurance plan without being subject to a prior authorization requirement. Under prior authorization a provider must obtain approval for certain services or procedures before delivering them if they are to… to enrollees who require such drugs, under the same terms and conditions (including cost-sharing requirements) as drugs in the formulary; and
  • subject disagreements between an enrollee and a plan about prescription drug coverage to the plan’s internal complaint process and external appeals process.

Prescription drugs

In this policy: Federal

Pharmacies, prescription drug plans, and Medicare Advantage Medicare beneficiaries can get their Medicare benefits through Original Medicare or a Medicare Advantage Plan. If beneficiaries have Original Medicare, the government pays for Medicare benefits when they get them. Medicare Advantage Plans, sometimes called “Part C” or “MA Plans,” are… plans should be allowed to forego copayments in cases where they would hinder the ability of a beneficiary with low income to obtain medically necessary prescription drugs.