Sorry, but the World is Not coming to an End

[axeman462]

Glad to see you writing here. What we know is that the beneficiary will be meeting the 2000 max much sooner than prior years because behind the scenes, the insurance companies will be calculating much differently and giving you credit for a high priced drug even though you may have only paid a copay for the drug. The higher of the two is what they use to calculate your 2000.00 max. Let’s say you paid 47.00 copay for eliquis on the plan you chose but the basic Medicare drug plan has a 590.00 deductible. Behind the scenes, the insurance company takes the greater of the two and will apply that price to your max out of pocket. That means they would apply 590.00 to your out of pocket and not 47.00 or the next month they apply 25% of the price while you only paid 47.00 because the base plan will have a 590.00 deductible and 25% coinsurance after. So one will be hitting that 2000 max even quicker than expected on some drug plans That’s the best part about the new 2025 plans. However, the plans come at a price. The companies can’t lose money on these plans. Once the calculated 2000 has been done behind the scenes, they now will be paying 60% and the manufacture will be covering the additional 40%. In the past it was the government/manufacturer that was covering the majority of the expense and not the insurance company. This along with the beneficiary meeting the 2000 max much quicker on some plans will cause the monthly rates to be higher. You are right to expect your out of pocket cost for the drug to be lower but also expect your monthly cost of the plan to be higher. The calculations the insurance company will be doing behind the scenes are complex to the point that even an insurance broker will have a hard time knowing when a senior will be hitting their 2k max for the year. Even the zero copay drugs will be calculated into the 2k max. Maybe the drug is 20.00 and you paid zero, they will be taking the higher of the two and apply to your 2k. We will have to see how this affects the price moving forward but we are anticipating premium increases across the board. Of course this is not in writing and not official. Everything can change. This was presented to me by UHC about a month ago. I can’t even confirm the accuracy being nothing is in writing. It is a calculation that every plan will be following. For the reason why this is part of the Inflation Reduction Act. The new plans will be helping control the Medicare trust fund from running out of money. More financial responsibility to the insurance companies and seniors.

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[n3417511]

Inflationary pressures on hospitals are a key element in cost increases for the commercial space, for example, according to the report. Because the federal government is trimming payments in public plans, providers are turning to increased payouts from the commercial sector to cover rising operating costs.

In addition, new and innovative prescription drug products are also playing a key role in driving up costs, according to the report. The analysts call out GLP-1s in particular as a driver to watch. Costs per member on GLP-1s have risen steadily over the past several years, reaching $23.16 in the first half of 2023 compared to $8.99 in 2021.

Drugs that treat central nervous system conditions like Alzheimer's disease or Parkinson's disease are also set to be significant cost drivers in the coming years, according to the reports.

 

[just-a-client]

Glad to see you writing here. What we know is that the beneficiary will be meeting the 2000 max much sooner than prior years because behind the scenes, the insurance companies will be calculating much differently and giving you credit for a high priced drug even though you may have only paid a copay for the drug. The higher of the two is what they use to calculate your 2000.00 max. Let’s say you paid 47.00 copay for eliquis on the plan you chose but the basic Medicare drug plan has a 590.00 deductible. Behind the scenes, the insurance company takes the greater of the two and will apply that price to your max out of pocket. That means they would apply 590.00 to your out of pocket and not 47.00 or the next month they apply 25% of the price while you only paid 47.00 because the base plan will have a 590.00 deductible and 25% coinsurance after. So one will be hitting that 2000 max even quicker than expected on some drug plans That’s the best part about the new 2025 plans. However, the plans come at a price. The companies can’t lose money on these plans. Once the calculated 2000 has been done behind the scenes, they now will be paying 60% and the manufacture will be covering the additional 40%. In the past it was the government/manufacturer that was covering the majority of the expense and not the insurance company. This along with the beneficiary meeting the 2000 max much quicker on some plans will cause the monthly rates to be higher. You are right to expect your out of pocket cost for the drug to be lower but also expect your monthly cost of the plan to be higher. The calculations the insurance company will be doing behind the scenes are complex to the point that even an insurance broker will have a hard time knowing when a senior will be hitting their 2k max for the year. Even the zero copay drugs will be calculated into the 2k max. Maybe the drug is 20.00 and you paid zero, they will be taking the higher of the two and apply to your 2k. We will have to see how this affects the price moving forward but we are anticipating premium increases across the board. Of course this is not in writing and not official. Everything can change. This was presented to me by UHC about a month ago. I can’t even confirm the accuracy being nothing is in writing. It is a calculation that every plan will be following. For the reason why this is part of the Inflation Reduction Act. The new plans will be helping control the Medicare trust fund from running out of money. More financial responsibility to the insurance companies and seniors.

With insurance, plans don't technically pay for anything. Premiums pay for everything. Under-65, beneficiary premiums foot the bill. With Medicare, the premium is split - beneficiaries pay around 25.5% of the premium, and Medicare pays 74.5% of it. (Beneficiaries pay a higher percentage if they are subject to IRMAA. Let's leave IRMAA and LIS out of this, to keep it simple.)

The way I understand it, plans submit a bid for each plan year (based on their costs from the prior year). The bid is the total cost the insurer will bear: 75% of the cost of drugs (the other 25% of drug costs being paid for by beneficiary cost-sharing), plus administration costs, plus profit. The bid includes all expected costs, including drug costs in the catastrophic phase - including payments Medicare will make through reinsurance. All of it is projected.

(To simplify, I left out manufacturer rebates and pharmacy concessions. I believe those have also been accounted for in the total costs, but if they are now going to be passed along to reduce beneficiary cost-sharing - well that change alone, if it is going to be implemented, is by definition going to increase premiums.)

Medicare comes up with an average bid, makes some risk adjustments, and calculates the beneficiary premiums for each plan. If a plan had bid more than the average bid, the beneficiaries who sign up for that plan have to pay higher premiums to cover the difference.

Medicare then pays plans monthly - a lump sum, per patient per month.

After the end of the plan year, there's a reconciliation - what the plan actually cost, vs. the bid. There are savings or losses, and they are shared between Medicare and the plan. So - plans are at risk for losses if their bids were off.

The problem has been Medicare reinsurance payments in the catastrophic phase, which, though included in the plan bids, have not been included in the reconciliation. Instead, Medicare simply pays for those costs. It's been a free ride for plans - the more insurers push people up into the catastrophic phase, the more Medicare was on the hook, and the less the plans were at risk of losses. The result has been that Medicare has been paying more like 77% of the Part D program costs, more than they are legally supposed to pay. (A report by the actuary Milliman gives an example - reinsurance costs were underestimated in 2017 by approximately 17%, leading to a federal contribution rate of 77%, resulting in federal spending of $6.8 billion more than intended by statute.)

So, with the redesign of the catastrophic funding, Medicare is cutting down on the free ride by cutting back on reinsurance. That means that more of the spending in the catastrophic phase - still paid for like all other costs by Medicare as part of the per patient per month payments - are now also subject to reconciliation the following year. Plans are thus "liable" for those costs in the sense that they are more accountable for them, just as they have always been accountable for drug spending in the Initial Phase and so on.

Arguably, if Medicare's share drops from 77% to 74.5%, beneficiary premiums would have to rise to make up for that. I don't know what the dollar impact would be. But plans can take steps to try to prevent big premium increases. They have other levers - utilization via step therapy and prior authorization, higher cost-sharing, or simply becoming more efficient and productive. Or resizing their formularies. It depends on how much the insurer was previously gaming the system. Most likely they'll employ some mix of premium increases plus the other steps, to leave the plans as competitive as possible.

When you wrote "Once the calculated 2000 has been done behind the scenes, they now will be paying 60% and the manufacture will be covering the additional 40%. In the past it was the government/manufacturer that was covering the majority of the expense and not the insurance company", maybe we are saying the same thing. See, the way I look at it, the insurance company doesn't "pay"for anything, and the payments for > $2,000 will come out of the same per patient per month money from Medicare to the plan. It's not that the plans have to dig into their own pockets to come up with cash to pay for this. Medicare has to pay the statutory 74.5%! The problem has been that they have been gamed into paying 77%, so they are trying to get that down.

I do notice the expensive Wellcare plan, Medicare Rx Value Plus, was their $0 deductible plan, but for 2025 will only waive the deductible for Tiers 1, 2 and 3. So for 2025, Wellcare will have no $0 deductible plan.

While we don't know the premiums yet, this is a case where Wellcare is worsening the cost-sharing probably at the expense of raising the premium. But over in Value Script, they lowered Tier 4 from 50% to 35%. That might mean they are raising the premium - since it was $0, $.40 or $.50, they have plenty of room to raise it painlessly.

 

[straightnochaser]

Wellcare is not paying commissions on PDP next year, I expect the others to follow suit.

 

[n3417511]

That’s exactly correct. You sound like an expert for sure. And here I thought I was talking to my senior.

 

[axeman462]

Wellcare is not paying commissions on PDP next year, I expect the others to follow suit.

where are you hearing this?
no commish for new biz, or does that include renewals?

 

[vic120]

Wellcare is not paying commissions on PDP next year, I expect the others to follow suit.

Really?

 

[straightnochaser]

Really?

Yup

 

[hockeyday]

Wellcare is not paying commissions on PDP next year, I expect the others to follow suit.

So you work for wellcare? Glad they are putting it out there early, I will not service drug plans for free,

 

[straightnochaser]

where are you hearing this?
no commish for new biz, or does that include renewals?

Not sure about renewals