New law means big relief for small budgets of Medicare patients

Arlene Hines carefully counts her pills each month, determined to “make them last” by skipping the doses she can’t afford. Hines, 68, has a lot of help paying for those drugs through her Medicare plan. Just not enough.

“With food and paying the (doctor visit) co-pays along with getting the medicine, it’s just $39 is a whole lot of money for me,” she said, discussing the price of just one of her eight prescriptions for nerve damage, high blood pressure and other conditions. “With an income of $1,200 a month ... That’s a lot.”

On Tuesday, President Joe Biden signed a new law that could help thousands of Georgia Medicare beneficiaries like Hines. Known as the Inflation Reduction Act, it’s a sprawling collection of new policies covering issues including climate change, taxes and health care. It features new drug spending rules for Medicare, the federal health insurance program for those 65 and older and some younger people with disabilities. Medicare insures 1.8 million in Georgia, including 1.4 million on a plan specifically for drugs.

Doctors and experts interviewed by The Atlanta Journal-Constitution called the provisions everything from insufficient to unprecedented. All agreed they will change some lives.

The Medicare changes will roll out starting next year and over the next several years through 2030. Those on Medicare who pay for the prescription drug benefit known as Part D will pay less in a variety of ways: Out-of-pocket drug costs will be capped at $2,000 annually, and a 5% co-pay that used to apply to drug prices in perpetuity will go away. The first change to take effect, in 2023, will be a new cap of $35 monthly on the cost of an insulin prescription — the only drug named in the legislation that will receive its own price cap.

Over the long term, Medicare can negotiate the prices drugmakers charge on a few costly drugs, which is expected to save billions of dollars for both Medicare patients and the federal government.

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Erin Fuse Brown, a professor and director of the Center for Law, Health and Society at Georgia State University, called the reforms “significant.”

“I think that one of the common misunderstandings about the Medicare prescription drug benefit is that it is a full, ‘everything-is-covered,’ or that there’s very little cost sharing,” Fuse Brown said. “Whereas the truth is, that even if you have a Part D prescription drug plan ... before the (new law), there was an unlimited amount of out-of-pocket spending that you could incur if you have very high-cost prescription drugs. These are sometimes drugs that they need to be on for years, if not for the rest of their lives.”

Dr. Melissa Dillmon, an oncologist who works at the Harbin Clinic in Rome, treats many older cancer patients and was glad to see movement.

“We have patients that are: ‘Do I pay my grocery bills? ... How do I feed myself and pay for my medications?’” said Dillmon. She said some of her patients are facing $10,000 to $20,000 a month in co-pay costs for their chemo drugs.

A ‘grim outlook’ brightens

On her tight budget, Hines has stretched her drugs by taking her blood pressure medicine and antibiotics less often than prescribed — a practice that is not recommended by doctors and can help diseases become resistant to antibiotics. She takes less than the three daily pills for nerve damage she’s prescribed, hoping she can take two, sleep, and then make it to the next night’s pills without much pain.

Dillmon says some patients go into bankruptcy or spend their entire retirement fund to cover drug costs. Her clinic works hard to prevent that from happening. The three-doctor office also employs two workers devoted to finding charity assistance for their patients, including those on Medicare Part D who can’t afford their prescription co-pays. When the $2,000 annual drug price cap goes into effect in 2025, Dillon says, that will be a very big deal.

Valerie Taylor, a former nurse from Stone Mountain, was a full-time caretaker for her mother with dementia when she first had warning signs of blood cancer in 2018. Uninsured, Taylor also didn’t qualify for medical coverage under Georgia’s Medicaid rules. She bargained with her longtime doctors to treat her, but reached her credit card limit before her diagnosis was even completed.

She had to rely on a charity to pay for treatment, including an operation. She’s now in remission.

Credit: Miguel Martinez

Credit: Miguel Martinez

But Taylor’s short life expectancy due to cancer quickly qualified her for Medicare based on disability, and she now has Part D drug coverage — that means if she has a relapse, she won’t be able to turn to charity again. One pill she took daily for her cancer treatment was partially covered by her insurance, but cost nearly $1,000 a day just for the co-pay. For her, the $2,000 annual cap on drug costs that takes effect in 2025 is a huge improvement.

“It was a pretty grim outlook for me without this law being enacted,” Taylor said.

On Medicare, “I would not have been able to pick the drugs up at the pharmacy,” because the pharmacist would have needed her to pay the deductible before handing over the first month’s prescription, Taylor said. “So if I can’t pay that, I don’t get the drug.”

Some research says that that is exactly what happens to a large portion of patients on Medicare needing high-cost cancer drugs. Lobbyists with the Washington, D.C.-based Leukemia and Lymphoma Society cite research suggesting that 40% of such patients show up at a pharmacy counter, learn the price of the drug, leave without the drug and abandon cancer treatment.

What the Act does

The Inflation Reduction Act signed by President Biden on Aug. 16 does a lot for health care, such as keeping Affordable Care Act insurance plans more affordable for three more years for working families in middle-income and upper-income households. But some of the new law’s longest-lasting impacts are for Medicare beneficiaries, especially those who’ve purchased a Part D plan to cover prescription drugs. Here’s how it breaks down:

  • As people with Medicare Part D plans start their drug spending each year, they must pay a percentage of their drug prices out of pocket — the amount required changes as their cumulative spending mounts. Until now, even if they spent so much that they passed the “catastrophic threshold” of $7,050 in a single year, they would continue to owe 5% of their drugs’ prices out of pocket. But with the new law, that final 5% copay is eliminated, starting in 2024.
  • The catastrophic threshold capping out-of-pocket spending under Medicare Part D is to be lowered from $7,050 in 2022 to $2,000 by 2025. That will help about 46,000 Georgians annually, whose Medicare Part D out of pocket costs exceed $2,000. This includes Medicare advantage plans.
  • That $2,000 maximum that people pay each year will not just be capped, but spread over time. Anyone hit with an immediate $2,000 charge will get the year to pay it in monthly installments.
  • The price of insulin will be capped at $35 per month for all Medicare Part D enrollees and for Medicare Part B enrollees who use an insulin pump. About 106,000 Georgians on Medicare Part D use insulin.
  • Vaccines will be free on Medicare Part D. That will affect about 112,000 Georgians annually.
  • Medicare will be allowed to negotiate drug prices on a small number of high-priced drugs. We don’t know which drugs will be chosen yet, but their prices will fall for whoever takes them on Medicare starting in 2026.

Sources: Kaiser Family Foundation and the White House

Brian Connell, director of federal affairs at the Society, said he’s been working to get the cap on annual drug costs passed for a decade. He watched the news roll in on Twitter Aug. 12, when Congress passed the Inflation Reduction Act.

“We are celebrating,” he said.

“Nearly 60,000 Georgians each year are diagnosed with cancer, and because of how cancer works, many of those are on Medicare,” Connell said. “And each and every one of those patients are people who are potentially going to benefit from this one day.”

Some drawbacks

The bill has its critics. First and foremost the pharmaceutical industry, which spent more than $180 million on lobbying this year alone. Groups have published misleading ads about the bill and its provisions across the country and in Georgia.

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Some of those ads told viewers the bill was cutting Medicare by nearly $300 billion, when in reality it’s expected to reduce the prices Medicare has to pay to drugmakers by nearly $300 billion by allowing Medicare to finally negotiate some prices. Targeting a Georgia lawmaker who supported the bill, one such ad said, “Senator Raphael Warnock, STOP THE RAID ON MEDICARE.”

Some critics’ arguments, however, are grounded in reality. No matter how high pharma companies’ profits are, if less money flows to them, it could result in less spending on new drug research.

The monthly cost for a Medicare prescription drug program can vary wildly depending on how soon the person signed up after they were eligible and other factors. The Kaiser Family Foundation estimated that the average monthly premium in 2022 was $43 for a standalone Part D drug plan. People who decide to join Part D several years after joining Medicare will find themselves paying a steep penalty.

In addition, for Medicare patients who don’t choose to buy the prescription plan Part D, there may be no coverage for pills at all.

Credit: Miguel Martinez

Credit: Miguel Martinez

Matthew Shocke of Acworth took a temporary break from Medicare to use his wife’s health plan, and is about to go back to Medicare. He thinks the name of the new law overstates what it will accomplish on national inflation and that it doesn’t do enough on drug costs. “It’s kind of a Band-Aid, to get votes,” he said.

Shocke is bedbound, and takes drugs for gout, a benign pituitary tumor and other conditions.

“With drugs, you don’t have any choice but to pay if you get sick,” Shocke said. “It’s not like most goods. You don’t have to get a new car; you’d have options. I’m on a couple of prescriptions that, if I stopped taking them, I go into a hospital or die.”

His drugs had previously cost him about $4,000 per year with his Medicare Advantage plan, he said. The new law with its $2,000 annual out-of-pocket cap will save him thousands of dollars, he concedes.

“I think It does personally benefit me,” he said. “I’m cautiously optimistic.”

EDITOR’S NOTE: This article has been changed to correct the number of Georgians on a Medicare plan specifically for drugs. The number of Medicare recipients on a Medicare plan for drugs is 1.4 million.