Medicare Drug Plan Changes Risk Complicating Treatment Access

Patient organizations and charitable groups are urging the Biden administration to take additional steps to contain a potential uptick in utilization management tactics by Medicare prescription drug plans next year.

Consumer-friendly provisions of the Inflation Reduction Act that take effect in 2025 will cut out-of-pocket drug spending for Medicare beneficiaries, but increase costs and coverage liability for Part D drug plans. To help with the transition, the Department of Health and Human Services will provide more upfront funding to the plans and launch a demonstration program designed to stabilize premiums and help stand-alone drug plans weather possible losses.

But it’s unclear if those moves will provide enough financial protection for the plans. And because the IRA holds annual premium increases to 6% through 2029, some policy watchers expect drug plans will try to manage their rising costs by narrowing formularies, increasing step therapy and prior authorization requirements, and switching patients to comparable but less costly medications.

Applying these and other cost-cutting utilization management (UM) tactics more widely, however, could delay treatments for beneficiaries or cause some to lose coverage altogether, patient groups fear.

With Medicare’s 2025 open enrollment beginning Oct. 15, groups like the Alliance for Aging Research and the PAN Foundation want the Biden administration to increase oversight of the Part D marketplace and to require greater plan transparency about their utilization management policies.

These and other organizations are alerting Medicare beneficiaries about the upcoming coverage changes, the need to carefully scrutinize drug plan choices for next year, and the potential for more stringent cost control activity.

“There’s only so many levers that a plan can pull,” said Adina Lasser, public policy manager at the alliance. “They can only increase premiums so much. And they’re going to have this very strong incentive to control their costs. So we’re expecting to see quite a bit of increase in the use of utilization management among these plans.”

“It’s a fair concern. I just don’t know to what extent,” said Tom Kornfield, founder and CEO of MAST Health Policy Solutions, a consulting firm that specializes in Medicare Advantage and Part D policy.

‘A Robust Process’

In a statement, the Centers for Medicare & Medicaid Services said it has a “robust process for reviewing and approving” plan formularies to ensure enrollee access to drugs are “found in widely accepted treatment guidelines and indicative of general clinical best practice.”

The agency reviews plans’ utilization management criteria to make sure they’re “not overly restrictive and are consistent with the Food & Drug Administration (FDA)-approved label, relevant treatment guidelines, and industry standards.” Information on the agency’s Plan Finder “is based upon the formularies meeting those standards,” the agency said.

An alliance-backed report urges the CMS to act before potential problems arise.

Some of its recommendations call for the CMS to create a “watchlist” for adverse formulary decisions that the agency won’t approve, to enhance plan formulary reviews to identify potentially harmful drug access issues, and to identify more situations when plans must cover more than two classes or categories of drugs.

The agency should also make it easier to appeal a plan’s coverage decision, and improve plan transparency so enrollees can see when drugs have utilization management restrictions, the report said.

The CMS said it “continues to approach implementation of the Inflation Reduction Act with the goal of promoting transparency and robust engagement with interested parties.”

“Through the Medicare Drug Price Negotiation Program, CMS will make sure people with Medicare get a fair price on some of Medicare’s costliest prescription drugs” it said. “The agency will also promote competition in the market and ensure Medicare is strong for beneficiaries today and into the future.”

Medicare beneficiaries will save an estimated $7.4 billion in out-of-pocket prescription drug costs in 2025 due to Part D benefit changes in the Inflation Reduction Act, an HHS report estimates.

New IRA provisions for 2025 include a $2,000 cap on out-of-pocket spending, greater cost-sharing by drug plans and drug manufacturers when beneficiary costs exceed $2,000, and an option for enrollees to extend payments over an entire year.

Final Part D premiums for next year will be announced in the lead-up to Medicare’s 2025 open enrollment period that runs from Oct. 15 to Dec. 7. Although they’ll vary, Medicare Advantage plan premiums, on average, are expected to be less than stand-alone drug plan premiums, according to the nonpartisan KFF.

The KFF will monitor plans’ response to the IRA provisions that begin in 2025.

The law is driving the biggest changes in the Medicare drug benefit in 20 years, said Tricia Neuman, executive director of KFF’s Program on Medicare Policy.

“But it’s too soon to know whether plans are going to be imposing more restrictions that make it harder for people to get their medication,” Neuman said. “We will know soon enough, but we don’t know yet.”

Voluntary Demonstration

Not everyone agrees a spike in utilization management is inevitable next year.

Trevis Parson, chief actuary with Via Benefits, which sells insurance and advises plan participants on coverage options, said he doesn’t think stand-alone plans “will need to hit these type of tactics to the same degree they otherwise would’ve given CMS’ recent response” with the demonstration program.

The voluntary demonstration for stand-alone Part D plans will lower the base beneficiary premiums by $15 next year, and hold total Part D premium increases to $35 between 2024 and 2025, according to the agency fact sheet. The demo also increases government risk sharing for potential plan losses.

It’s designed for one year, with at least two subsequent years “with parameters to be adjusted to reflect market conditions and variation in those years,” the CMS fact sheet said.

In an email, Lasser said plans that participate in the demonstration “may give beneficiaries a false sense” that they “won’t rely on UM as much as they otherwise would, thus delaying the potential issues for beneficiaries but not preventing them in the long run.”

And because the demonstration was announced after plans had submitted their bids to the CMS, their pricing and benefit structures won’t reflect the demonstration’s added support, said Kornfield, whose firm specializes in Medicare Advantage and Part D policy.

While the demonstration will cover more of plans’ potential losses and lessen their financial risks, “I don’t know if it completely makes them whole,” Kornfield said.

“I think that’s a plan-by-plan question. There’s a lot of uncertainty associated with the new benefit and the demonstration doesn’t fix all that,” he said.