Fixing Medicare Benefit Cliff Shouldn’t Give Cover for Drug Company Giveaway

Beneficiaries in Medicare’s prescription drug program (Medicare Part D) with high drug spending will have to pay much more out of pocket starting in 2020 under a scheduled sharp increase in the spending threshold at which catastrophic coverage kicks in. Policymakers may soon eliminate that looming benefit “cliff.” But they shouldn’t also reduce the discount that drug companies must pay when beneficiaries are in the program’s coverage gap — a separate issue (as explained below) that drug companies are trying to link to eliminating the cliff.

The coming cliff in the Medicare drug benefit stems from the expiration of a temporary provision in the Affordable Care Act (ACA). Under the standard drug benefit, after paying an annual deductible, beneficiaries pay 25 percent of drug costs until their costs reach $3,750; they then enter a coverage gap in which they are responsible for a larger share of costs, until they reach the threshold for catastrophic coverage, in which they pay no more than 5 percent of costs. An ACA provision slowing the growth of the catastrophic coverage threshold expires after 2019, and the threshold reverts to its pre-ACA scheduled level. As a result, the threshold will jump from $5,100 in 2019 to $6,350 in 2020. Reps. Frank Pallone and Richard Neal, ranking Democratic members of the House Energy and Commerce and Ways and Means committees, respectively, have introduced a bill that would eliminate the cliff by making the slower growth rate permanent.

– Center on Budget and Policy Priorities

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