November
19, 2021 Christopher Holt
With
the focus on the Build Back Better Act (BBBA), you may have missed
the recent news that Medicare Part B premiums are
increasing 14.5 percent for most beneficiaries next year. There’s
a lot to unpack, but what stands out is that much
of this premium increase is for a “contingency reserve” to cover the
costs of Biogen’s new Alzheimer’s drug Aduhelm—if Medicare
ultimately decides to cover it.
Medicare
Part B primarily covers physician services and out-patient
hospital services, along with some home health and durable medical
equipment expenses, among other things. Medicare beneficiaries pay a
monthly premium (the standard premium is $148.59 per month in 2021) and have
an annual deductible ($203 in 2021). In August, the Medicare Trustees projected
that premiums would rise to $158.50 for 2022,a 6.7 percent increase. Instead, the
Centers for Medicare and Medicaid Services (CMS) announced last week the
standard monthly Part B premium in 2022 will be $170.10,
an increase of $21.60 a month. This is the largest dollar increase in Part B premiums in
history. The annual deductible will also be increasing $30 to $233 in
2022.
CMS has cited three primary drivers of this historic premium
increase. First, back in
2020, Congress artificially constrained the Part B premium increase for
2021 to $3 amid the pandemic and ensuing economic slowdown. CMS was
directed to recapture lost premium dollars over the following years.
CMS says that the need to recapture constrained pandemic
premiums, paired with general program cost increases, accounts for half
of the 2022 premium increase. The agency attributes the rest of the increase to Aduhelm,
the new and controversial Alzheimer’s treatment approved by the Food and Drug
Administration (FDA) earlier this year. I explored that issue in
a previous Weekly Checkup, but given questions about its effectiveness,
controversy around the FDA’s approval process for the drug, and the cost
($56,000 per year, per patient) Medicare has not yet made a coverage
determination. CMS is arguing that half of the 2022 premium increase is
necessary to fund a “contingency reserve” in case Medicare
decides to cover Aduhelm. In other words, Medicare will take seniors’ money up front,
and make a decision about coverage later.
In fairness to CMS, the majority of U.S. Alzheimer’s
patients are enrolled in Medicare, and estimates indicate that the impact of Aduhelm on
Medicare spending could easily surpass $100 billion annually. For
context, total Medicare Part B spending in 2019 was $37 billion. That said, Medicare is unlikely to approve
expansive coverage of the therapy. Medicare can, and probably should, limit
coverage to a subset of patients most likely to benefit, if it decides to cover
the drug at all. But if Medicare ultimately decides not to cover Aduhelm,
or to substantially curtail its use, what becomes of the contingency reserve?
The Aduhelm situation
shines a spotlight on the long-term challenge of how to handle new, high-cost therapies
without breaking Medicare’s dwindling piggy bank or reducing incentives
for innovation. There is also a short-term political problem for Democrats.
While they push forward with BBBA, which they can try to argue
addresses some of the long-term challenges of high-cost drugs, few if any
of the provisions will take effect before next year’s midterms, meanwhile
seniors will absorb the highest ever Part B premium increase first.
CMS has to adjust premiums to account for
anticipated costs, but raising premiums more than double what
was expected because of a possible coverage decision that hasn’t been made is
hard to swallow (even with a historic
cost of living bump padding seniors’ Social Security checks).
Policymakers should keep an eye on where those increased premium revenues
ultimately end up.
Christopher Holt
is the Director of Health Care Policy at the American Action Forum.
https://www.americanactionforum.org/weekly-checkup/medicare-part-bs-historic-premium-increase/#ixzz7D42rOEC1
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