New Drug Pricing Bill Could Affect Millions of Medicare Beneficiaries

More than 1.4 million Medicare beneficiaries could see their medication costs plunge if the Senate passes a budget reconciliation bill that contains drug pricing reforms, Kaiser Family Foundation estimated. [Editorial update: The House passed the legislation on Aug. 12, and President Joe Biden signed it into law on Aug. 16.]

The bill — put forward by Senate Majority Leader Chuck Schumer (D-N.Y.) and Sen. Joe Manchin III (D-W.Va.) — will allow Medicare to negotiate some prescription drug prices starting in 2026 and require drug companies to pay rebates if drug prices rise faster than inflation starting in 2023. Between 2019 and 2020, half of drugs covered by Medicare Part D and 48% of drugs covered by Medicare Part B saw price increases greater than the rate of inflation (1.0%), according to a previous Kaiser Family Foundation analysis.

The bill also includes provisions that would reduce out-of-pocket spending for Medicare beneficiaries by eliminating the 5% coinsurance requirement above the Part D catastrophic coverage phase in 2024. About 1.3 million Part D enrollees without low-income subsidies (LIS) had out-of-pocket drug spending above the catastrophic threshold in 2020.

Starting in 2025, Part D beneficiaries would be protected by a $2,000 out-of-pocket spending cap. In 2020, 1.4 million Medicare Part D enrollees without LIS had annual out-of-pocket drug spending of $2,000 or more. The Congressional Budget Office estimated the Part D benefit design changes could add $25.1 billion to federal spending over 10 years.

The bill plans to expand eligibility for full Part D LIS to beneficiaries with annual incomes up to 150% of the federal poverty level and repeal the partial LIS benefit for enrollees with incomes between 135% and 150% of FPL in 2024. Nationwide, about 0.4 million Medicare enrollees received partial LIS benefits in 2020, and they could see their out-of-pocket costs drop due to the expansion.

Meanwhile, the bill aims to eliminate cost sharing for adult vaccines covered under Part D in 2023, and require vaccine coverage for all Medicaid adult enrollees. The latest data from 2020 shows that more than 4.1 million Medicare beneficiaries had a vaccine covered by Part D.

SOURCES: “How Would the Prescription Drug Provisions in the Senate Reconciliation Proposal Affect Medicare Beneficiaries?” Kaiser Family Foundation. “Prices Increased Faster Than Inflation for Half of all Drugs Covered by Medicare in 2020,” Kaiser Family Foundation.

This infographic was reprinted from AIS Health’s biweekly publication RADAR on Drug Benefits.

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