Column-New Alzheimer’s drug clouds outlook for Medicare premiums next
year
Send a link to a friend
[July 12, 2021] By
Mark Miller
CHICAGO (Reuters) - The decision by U.S.
drug regulators last month to approve a controversial treatment for
Alzheimer’s disease could fuel an unusually large increase in Medicare
premiums next year, but the outlook is clouded by a number of factors
that will play out later this year.
Biogen Inc's drug Aduhelm could create hope for millions of older
Americans afflicted with Alzheimer’s - if it is effective in combating
the disease. But the U.S. Food and Drug Administration (FDA) approved
the drug despite objections from its own scientific advisory panel,
which voted nearly unanimously that clinical trials did not demonstrate
its effectiveness.
Medicare typically covers FDA-approved drugs - but this one comes with
an eye-popping price tag set by its maker - $56,000 per patient
annually. That figure does not include other associated care that could
add tens of thousands of dollars of additional costs.
Aduhelm will be administered by healthcare providers, and thus will be
covered under Part B, rather than the Part D prescription drug program.
And the impact on Part B finances could be huge. The premium paid by
enrollees - which covers 25% of program costs - could rise sharply. So
could the remainder of Part B costs, which are covered by all taxpayers.
Predicting actual costs is speculative at this point due to uncertainty
about the number of patients Medicare decides should have access to
Aduhelm. But even a conservative estimate of $29 billion annually, from
the Kaiser Family Foundation https://bit.ly/3jUrSpM, would nearly double
Part B spending on drugs, which totaled $37 billion in 2019. (https://bit.ly/3jUrSpM)
Medicare’s trustees will need to take into account the program’s likely
spending on Aduhelm in 2022 as it sets the Part B premium, which
typically is announced in November. And the new drug likely will have
other impacts on the costs experienced by Medicare beneficiaries.
Many enrollees in traditional Medicare also have supplemental Medigap
policies that cover their coinsurance costs. Premiums for those policies
could rise as insurers anticipate higher outlays associated with Aduhelm.
And 10% of traditional Medicare enrollees do not have supplemental
coverage, so they would be subject to the program’s 20% cost-sharing
requirement for Aduhelm - roughly $11,500 per year.
Out-of-pocket costs also would be an issue for enrollees in Medicare
Advantage, the privately offered managed care alternative to the
traditional program. Most Advantage enrollees are in plans that charge
20% coinsurance for Part B drugs provided in-network, mirroring the
traditional program, according to Kaiser - the co-insurance rates can be
much higher out of network.
Medicare typically covers FDA-approved drugs, but it can conduct its own
reviews in order to decide which types of patients should be covered. In
the case of Aduhelm, Medicare could limit use to patients in the early
stages of Alzheimer's. Just last week, the FDA narrowed its own
recommendation for prescription of the drug, saying it should be used
only with patients who have mild cognitive impairment or early dementia.
[to top of second column] |
A sign marks a Biogen facility in Cambridge, Massachusetts, U.S.
January 26, 2017. REUTERS/Brian Snyder/File Photo
Congress also could step in with legislation that mitigates any impact
on Medicare enrollees. More broadly, the unusual FDA approval process
and high cost for this drug could add fuel to the debate among
legislators about broader drug-pricing reform.
“This gives credence to the argument that the pharmaceutical industry
cannot be relied on to deliver value to patients,” said Rachel Sachs, a
professor of law at Washington University in St. Louis who wrote about
the Aduhelm controversy https://bit.ly/3hrAzX7 recently for the journal
Health Affairs. (https://bit.ly/3hrAzX7)
OTHER PRESSURES
Two other factors could also put upward pressure on the Part B premium
next year.
Medicare increased the Part B premium this year by just $3.90, to
$148.50 per month. But the increase actually was on track to be larger -
Congress stepped in to cap it at 25% of whatever it would have been if
Medicare had followed the usual formula, as part of a COVID-19 relief
bill. That could set the stage for a larger “catch-up” increase this
year.
Healthcare utilization is another wild card. Despite the big surge in
healthcare utilization last year associated with COVID-19, overall
consumption of healthcare services fell dramatically during the lockdown
last year. A key question is how this will impact utilization of
services by Medicare enrollees next year. Utilization could be higher
than normal as the pandemic recedes, putting further pressure on the
Part B premium.
THE COLA FACTOR
The Aduhelm drama will play out against the backdrop of another
pocketbook issue for seniors next year - the Social Security
cost-of-living adjustment (COLA).
The recent surge in inflation has some forecasters predicting a very
hefty COLA next year. The widely watched Consumer Price Index for All
Urban Consumers (CPI-U) jumped 5% in May from a year earlier - the
biggest gain since August 2008, when it rose 5.3%. The final COLA number
will be decided by monthly data during the third quarter for the
Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W).
But for seniors who are enrolled in both Social Security and Medicare,
the key figure is the net COLA after the Medicare Part B premium is
deducted. Typically, some portion of the COLA is gobbled up by higher
Part B premium costs. (The dollar amount of the Part B increase is
deducted from the dollar amount of the COLA.)
Put it all together, and it could be a roller coaster ride this fall for
seniors monitoring these pocketbook issues.
(Writing by Mark Miller; Editing by Matthew Lewis)
[© 2021 Thomson Reuters. All rights
reserved.] Copyright 2021 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content. |