The infamous Medicare Part D ‘donut hole,’ which leaves seniors with a coverage gap for prescription drugs, has vexed Washington for years. Despite Part D’s success and high satisfaction among seniors on the plan, the quirk in the law has drawn many proposals over the years for a remedy.
CASE wrote about it over at Morning Consult this week; but to summarize: after $405 is spent out-of-pocket on prescription drugs, seniors on the plan would have 75% of costs covered until they hit the threshold of $3,750, at which point they’d have to pay 35% of the cost of brand name drugs, and 44% of generic drugs. At the $5,000 mark, when catastrophic coverage kicks in, they pay only 5%.
Now Kenneth Thorpe — professor of health policy at Emory University and chairman of the Partnership to Fight Chronic Disease – writes over at National Review this week, that Congress is making things even worse by trying to ‘fix’ this glitch. Thorpe explains that the recent budget bill includes a ‘fix’ that would not only undermine the incentive for insurers to keep costs low, but would encourage them to favor increasing healthcare costs.
Why? Because the budget bill takes insurers off the hook for the donut hole costs, leaving them responsible for a mere 5% of seniors’ drug expenses. The biggest chunk, 70%, would be paid by drug manufacturers. Now, instead of working to keep costs low and keep seniors out of the donut hole, insurers now have a financial incentive to push seniors through to catastrophic care, where their obligation is minimal.
At a time when America is looking for solutions to lower medical costs, this plan will do just the opposite. Further, it shifts costs to drug manufacturers, who already bear the costs of research, testing and bringing new drugs to market. Forcing costs onto the innovators and inventors who are working on the cures of the future only means those costs will be passed on to consumers.
If only Congress would listen to Steve Forbes, who argued at last week’s Healthcare Costs Innovation Summit that market-based reforms like nationwide shopping for health insurance, incentivizing hospitals and clinics to post prices, making pharmacy benefit managers more transparent, and removing the gap between consumer and provider—not more government—will reduce waste, increase competition, and lower healthcare costs for all Americans.
Fixing the donut hole has long been a bi-partisan goal and one that unites seniors and younger generations seeking more affordable healthcare. But the so-called ‘fix’ in this budget proposal is the wrong answer, provides the wrong market incentives, and threatens higher costs for drug users across the board.
