Medicare Predicts Slightly Lower Drug Premiums in 2018

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By Mindy Yochelson

Base monthly premiums for Medicare prescription drug coverage will drop slightly in 2018, according to the annual announcement of average bid amounts and premiums released July 31.

The Part D base premium will be $35.02, down from the $35.63 for 2017 announced a year ago.

The continued use of generics as drugs go off patent and the use of utilization management tools, such as prior authorization and step therapy, have kept premiums stable despite rising drug costs, observers said.

The Part D program offers “an abundance of competing choices in each region and using cutting edge, cost-saving tools like pharmacy networks and home delivery,” Mark Merritt, president and chief executive officer of the Pharmaceutical Care Management Association, told Bloomberg BNA in an Aug. 1 email. PCMA represents pharmacy benefit managers.

The Centers for Medicare & Medicaid Services’ drug premium projections are based on bids submitted in June by plans for basic drug coverage. The Part D national average monthly bid amount for 2018 is $57.93, the CMS said.

Insurers that offer the Part D benefit include Humana, Cigna, Aetna, and WellCare.

First Drop in Five Years

The projected drop in premiums is the first in five years, Avalere Health, a consulting company, said in an Aug. 1 statement.

Behind the decrease are lower-than-expected costs for beneficiaries who don’t reach the catastrophic coverage level, along with slightly lower costs for those who will have high spending in 2018 above the catastrophic threshold, Avalere said.

The Part D benefit has an initial coverage limit followed by a coverage gap. Enrollees remain in the gap—or doughnut hole—until their out-of-pocket spending reaches the catastrophic coverage limit. After that, Medicare subsidizes 80 percent of their drug spending through reinsurance.

Better Management

Medicare plans are doing a better job of managing drug costs, Kelly Brantley, an Avalere vice president, told Bloomberg BNA Aug. 1.

The overall stability of the premium despite rising pharmaceutical costs is likely due at least in part to the use of managed networks and utilization management techniques, she said.

But even for those with high drug costs who will reach the catastrophic phase, predictions are for stable spending, she said.

Plans’ reinsurance estimates in the past few years have gone up by double digit percentages, she said. However, for 2018 predictions, the change from 2017 “is essentially neglible,” she said.

Brantley said she wasn’t sure what’s behind the stability for next year’s reinsurance costs. “There’s nothing we know of in the drug market” or through beneficiary utilization that would explain the lack of an increase, she said.

Flat Premiums

Jack Hoadley, a research professor at Georgetown University, told Bloomberg BNA that in general he wasn’t surprised by the numbers. For at least a half-dozen years, there has been a pattern of flat premiums, he said. This was at least partly driven by the continued shift to generics for common drugs, like antidepressants, he said.

The recent “blip” due to the high cost of some drugs to treat hepatitis C, for example, has somewhat subsided, he said. These medicines aren’t for chronic conditions, so their use tapers off after treatment. “There’s not a huge rash of new infections,” he said. Overall, “the sense is that use has been dropping off.” Further, the government paid for much of these high-cost drugs for beneficiaries who reach the catastrophic phase through the Part D reinsurance program, he said.

Individual Beneficiary Impact

Hoadley cautioned that the $35.02 premium isn’t what any one beneficiary would pay.

Individual plan information will be announced later this year. The information will be on the CMS’s Medicare Plan Finder on Medicare.gov, allowing beneficiaries to shop for the best plan, he said.

Similarly, Casey Schwarz, senior counsel for education and federal policy at the Medicare Rights Center, said that the weighted average isn’t particularly meaningful for individual beneficiaries. It describes nationwide prices, she said. Part D premiums will continue to vary widely across plans. Some plans will increase their premiums in 2018, while others will lower them, she told Bloomberg BNA.

Beneficiaries should be on the lookout in early fall for premium information from their own plan for 2018, Schwarz said. Her group is a beneficiary advocacy group.

To contact the reporter on this story: Mindy Yochelson at MYochelson@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

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