President Joe Biden and Vice President Kamala Harris have been promoting their efforts to lower drug prices, including a $2,000 limit on Medicare enrollees’ out-of-pocket prescription costs starting in January. However, this cap has led insurers to propose raising drug plan premiums for millions of Medicare beneficiaries.
The final Part D plan premiums are expected to be released this month. To prevent a significant spike just before the presidential election, the Biden administration is offering insurers substantial new subsidies, totaling around $5 billion next year. This move, not requiring congressional approval, has drawn criticism from several Republican lawmakers.
Medicare beneficiaries will begin selecting plans in mid-October during the annual open enrollment period. Approximately 13.3 million people are enrolled in Part D plans, paying an average of $43 a month for coverage in 2024.
The increase in premiums was anticipated due to changes in the Medicare drug benefit under the Democrats’ 2022 Inflation Reduction Act. Along with the $2,000 limit, the law mandates insurers to bear more costs once enrollees surpass the catastrophic coverage phase above the cap.
Starting in January, insurers will cover 60% of drug costs, with Medicare and drug manufacturers splitting the remaining 40% for brand name drugs, and Medicare covering the full 40% for generic medications. Previously, plans were responsible for only 15% of costs, with beneficiaries paying 5% and Medicare covering 80%.
The subsidy program, part of a Medicare demonstration project, will provide participating insurers with an extra $15 per member per month, limiting monthly premium increases to $35 from the previous year. Medicare will also reduce insurers' exposure to beneficiaries with high drug expenses.
The Centers for Medicare and Medicaid Services highlighted that the Inflation Reduction Act made significant changes to the drug program, aiming to enhance premium stability and plan predictability for enrollees. The agency emphasized that the Part D Premium Stabilization Demonstration aligns with past efforts to address transitional issues in the Medicare program.
Republican lawmakers have criticized the Biden administration's actions, citing concerns about the impact of the Inflation Reduction Act on seniors' access to medications and federal costs. They have raised questions about the rushed demonstration program and its potential implications.
Efforts to prevent a premium spike in Part D drug plans may also be driven by a desire to discourage senior citizens from shifting to Medicare Advantage policies, which currently enroll about half of Medicare beneficiaries and often offer drug coverage at lower or no premiums. The administration has been focusing on controlling rising Medicare Advantage costs.
