June 6, 2019
The Honorable Richard Neal
House Committee on Ways and Means
The Honorable Frank Pallone
House Committee on Energy and Commerce
The Honorable Kevin Brady
House Committee Ways and Means
The Honorable Greg Walden
House Committee on Energy and Commerce
Re: Call for Feedback on Draft Medicare Part D Legislation
Dear Chairmen Neal and Pallone and Ranking Members Brady and Walden:
On behalf of our millions of members and supporters, the National Committee to Preserve Social Security and Medicare provides the following comments on bipartisan draft legislation making structural changes to the Medicare Part D program.
The National Committee is a membership organization committed to improving the income and health security for current and future retirees. We thank the committee for providing us with this opportunity to comment on the proposed draft and look forward to working with you and your staffs on reducing drug costs for seniors.
While the National Committee supports adding an out-of-pocket cap to the Part D program, this proposal must be accompanied by significant measures to address drug costs. Insulating consumers in the absence of such measures will only increase incentives for manufacturers to keep drug prices high, harming Medicare’s finances and diverting resources that could be used for benefit improvements that seniors need.
We urge Congress to couple an out-of-pocket cap with allowing Medicare to directly negotiate the costs of drugs and providing the program with a meaningful mechanism to compel manufacturers to offer reasonable prices.
While making changes to Part D, Congress should also address the catastrophic cliff. Without action, the threshold for individuals to enter the catastrophic phase of the prescription drug benefit — where beneficiary costs decline from 25 percent to just 5 percent — will jump from $5,100 to $6,350 in 2020 unless a provision in the Affordable Care Act, which lowers the threshold and expires after 2019, is extended. Legislation is needed to avoid this large jump in the threshold.
Further, Congress should consider making changes to the Extra Help program to increase access and affordability for low income seniors. For example, Congress should eliminate the program’s asset test and the partial benefit (so that beneficiaries with incomes under 200 percent of poverty are exempted from premium and deductible costs and protected by fixed copays). To this end, the National Committee supports the Medicare Extra Rx HELP Act (S. 691) introduced by Senator Bob Casey. The We also urge Congress to eliminate cost-sharing on generics for Low Income Subsidy beneficiaries.
Rationalizing the Structure of the Part D program
The National Committee supports rationalizing Part D’s structure to make plans more accountable for encouraging the use of cost-effective therapies when they are available per recommendations by the Medicare Payment Advisory Commission (MedPAC).
According to MedPAC’s 2016 report, “Medicare and the Health Care Delivery System,” generic substitution rates drop substantially for some classes of drugs under catastrophic coverage (where government reinsurance picks up 80 percent of costs). This suggests that plans don’t encourage the use of lower cost generics when they don’t have much financial incentive to do so. Manufacturers often offer rebates that can offset the 15 percent required plan contribution toward drug costs in the catastrophic phase. If plans do not pay anything for a high-cost drug but must pay 15 percent of the costs for a lower cost generic, they have a strong incentive to offer the higher cost brand name drug. This in turn raises out-of-pocket costs for seniors and for the Medicare program. Increasing health plan liability to 80 percent in the catastrophic phase would help reduce this perverse incentive for plans.
MedPAC has also recommended excluding manufacturer discounts from the calculation of out-of-pocket costs for purposes of calculating the amount of spending required to enter the catastrophic phase of the Part D benefit. The National Committee opposes this as it would raise the amount of out-of-pocket spending that beneficiaries would need to incur before making it into the catastrophic phase of the program. We are concerned that this approach would affect individuals with the highest drug costs the most.
We look forward to working with you to improve the Part D program for beneficiaries.
President and CEO