How a major Medicare change could help seniors with high drug costs
Multiple sclerosis was a one-two punch to Therese Humphrey Ball’s life. She had to deal with the disease – and the cost to treat it.
Symptoms like loss of vision and weakness in her legs forced the 68-year-old former nurse from Indiana to retire early, and high drug costs forced her to move out of her nice apartment.
“The worst was for the first two months, no heat,” Humphrey Ball said. “It was like something you never thought you'd live in.”
But she felt she had no other options. Humphrey Ball had successfully treated her MS for eight years with the medication Copaxone. But the drug cost $6,000 a month, more than her monthly income.
Teva Pharmaceuticals, the maker of Copaxone, hiked the price27 times in 25 years. The drug now costs around $7,000 per-month, 10 times what it did when it was first launched in 1997.
Humphrey Ball had to ration and eventually go off Copaxone for several months.
“You can't imagine how mad I was,” she said, “... to think that in the United States of America, people have to do this. It is not right.”
Humphrey Ball channeled that anger by testifying on Zoom in front of Congress in May 2021.
“I can’t control my disease or change that I have MS, but telling you my story and advocating for lower prices is something I can control,” she told lawmakers.
Policymakers listened: Part of the Inflation Reduction Act passed in August caps out-of-pocket costs for seniors who have the Medicare prescription drug benefit known as Part D.
Increasing senior access and costs savings
The federal Medicare health insurance program for older Americans is taking a historic step: Starting in 2025, the 48 million seniors in the program will not have to spend more than $2,000 of their own money on prescription drugs each year. Currently, there are no spending limits, forcing some seniors relying on expensive drugs to clear out savings and retirement accounts to pay for medications.
The new limit targets an estimated 1.4 million older Americans who spend more than that annually.
The IRA’s ambitious goal is to cut costs for seniors and the Medicare program overall, while increasing the share of costs to insurance companies and drug manufacturers.
New benefit shifts responsibility to drugmakers and insurers
The overhaul of Medicare's prescription drug benefit is an attempt to decrease patients’ and Medicare’s cost burden while increasing how much insurers and drugmakers are on the hook for Part D drugs. Although Medicare is a federal program, seniors get coverage through private insurers.
“It really boils down to a basic problem with the original design of the Part D benefit,” said Juliette Cubanski, deputy director of medicare policy for the Kaiser Family Foundation. “For both patients and for the Medicare program, the risk is completely open ended.”
Much of the risk rebalancing starting in 2025 will happen after patients reach that $2,000 spending threshold. The new benefit decreases costs to the Medicare program to 20 percent, down from 80 percent. Meanwhile, drugmakers will now be required to give a 20 percent discount on the sticker price of drugs. Insurance companies will be responsible for 60 percent of drug costs, four times their current responsibility.
That’s intended to create incentives for insurers to negotiate harder with drug manufacturers for lower prices.
As insurer risk increases, companies will likely look to other levers to control costs. The new IRA rules limit annual premium increases to 6 percent per year.
But Cubanski warns that insurers could potentially slim down benefits. Insurers also could limit the list of drugs they cover or more tightly control, as well as which medications patients take. That could make it harder for seniors to get the drugs they need.
“Medicare beneficiaries overall, they're getting a much better benefit in terms of their out-of-pocket cost exposure,” Cubanski said of Part D’s shift to more financial responsibility for insurers.
But she cautions seniors could also be giving up easy access to more types of drugs with zero deductibles and low premiums.
Future challenges for seniors
While the new spending limit is likely to raise insurance company costs, it could be a boon to drugmakers.
“Drug manufacturers love the cap,” Cubanski said. “Making drugs more affordable for patients means they'll be less likely to skip doses.”
While demand for prescription drugs is expected to increase, the new Part D law includes other provisions aimed at reining in drug prices that could limit revenue for manufacturers. Those include giving Medicare the power to negotiate drug prices and penalizing drugmakers for hiking prices faster than inflation.
One potential consequence Cubanksi and others are watching for is higher launch prices for new drugs.
While seniors will be shielded from those high prices with the new cap, they could face other challenges, including higher premiums and skimpier benefits as insurance companies look to limit their expenses.
Humphrey Ball is counting down the days until 2025, when the new cap starts and she can return to taking Copaxone.
“So that's what I'm happy about. That's what I'm looking forward to – that I know the medicines I need will be there for me and I don't have to hoard anymore,” she said.
She’s looking forward to a sense of predictability, something she’s sought since her diagnosis in 2003.
This story comes from the health policy podcast Tradeoffs, a partner of Side Effects Public Media. Dan Gorenstein is Tradeoffs’ executive editor, and Alex Olgin is a reporter/producer for the show, which ran this story on Oct 27, 2022.
Tradeoff's coverage of issues facing older Americans is supported in part by the SCAN Foundation – advancing a coordinated and easily navigated system of high-quality services for older adults that preserve dignity and independence.