Experts agree: the Bipartisan Budget Act changes to Medicare Part D jeopardize the program

The changes made to Part D in the Bipartisan Budget Act (BBA) that passed in February threaten the program’s successful competitive structure. While these changes closed the donut hole a year early, they went much further by lowering insurers’ payment responsibility to just five percent of costs in the donut hole for brand medications.

This undermines Part D’s market-based structure by reducing insurance plans’ stake in the program and therefore reducing their incentive to manage program costs, while also creating a significant imbalance in payment responsibility. Beginning in 2019, seniors will be paying five times more than their insurers for coverage of brand drugs in the donut hole.

Experts have come out in agreement that the BBA changes jeopardize the program.

In April of this year, CMS expressed specific concerns in their Part D call letter about the BBA changes and their potential negative impact on the program, stating “… we have significant concerns about the impact these changes will have on drug costs under Part D in 2019 and future years, particularly as plan liability in the gap significantly decreases for brand name drugs beginning in 2019.”

The former head of the Congressional Budget Office Douglas Holtz-Eakin expressed concern in his column with how these changes impacted incentives in the program: “This change damaged the program’s incentives in two ways. First, forcing the manufacturers to pay transformed the program in part to a tax-and-spend clone of the remainder of the failed entitlement state. The federal government simply took money from pharmaceutical companies … and bought drugs for seniors. The flip side of this structure is that it limited the incentives for insurers to bargain effectively to lower the cost of drugs – especially the expensive drugs that put seniors into the catastrophic part of the benefit.”

And former Governor Howard Dean of Vermont wrote in an op-ed that, “The change upended the fundamental balance in the law that requires patients, insurers and drug companies to all share in the costs of this drug benefit. … The decision to reduce insurance companies’ exposure to the benefit gives them far less incentive to keep costs under control. That could trigger other negative repercussions for seniors who depend on this program.”

Lastly, back in 2015, MedPAC made clear the importance of risk to Part D’s competitive structure, stating, “When competing [Part D] plans bear risk, they have incentives to offer benefits that are attractive to beneficiaries and yet manage spending so that premiums remain affordable. … Sponsors have been less successful at cost containment when they faced less risk for benefit spending.” 

Now Congress has the opportunity to fix the changes made by the BBA in securing the program for the future by restoring balance to payment responsibility in the donut hole and protecting seniors and the Part D coverage they rely upon.