New Accumulator Adjustment Programs Threaten Chronically Ill Patients

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For too many Americans with chronic illnesses, such as HIV, arthritis, and hemophilia, insurance companies and their pharmacy benefit managers (PBMs) are erecting access barriers to innovative and life-saving prescription medicines. A new and growing trend—called accumulator adjustment programs—threatens to exacerbate the problem by significantly increasing out-of-pocket spending for patients. On top of it, patients are not even aware of this sudden and very costly change.

Patients with chronic illnesses already jump through hoops to receive their drugs. First, they have to ensure that their medicines are covered by their plan. Then they often have to work through a series of utilization management steps, such as prior authorization and step-therapy.

On top of those hurdles, more and more patients are facing high deductibles for prescription drugs or are being asked to pay a percentage of the cost of a drug, which is called coinsurance, instead of a nominal copayment. Coinsurance and deductibles often require patients to pay cost sharing based on the list price, which does not reflect the rebates that the PBMs receive from the drug companies.

When patients are still satisfying their deductible or are paying high coinsurance, they can face out-of-pocket spending of thousands of dollars to fill one prescription. If they cannot afford these costs, they will leave the pharmacy counter empty-handed and risk becoming sick or getting sicker. Drug manufacturers offer coupons to prevent this and make cost sharing for these drugs affordable. Historically, commercial insurance plans have applied the value of these coupons to a patient’s annual deductible and out-of-pocket maximum; reaching these limits translates into lower out-of-pocket spending for the rest of the year.

Now, however, accumulator adjustment programs are currently being pushed by PBMs, such as Express Scripts and CVS Caremark, to insurers including United HealthcareMolina, and BlueCross BlueShield of Texas and Illinois, and to large employers such as WalmartHome Depot, and Allstate. These programs change the calculus for patients by no longer applying the copay coupons to patient deductibles and out-of-pocket maximums. Patients must spend more out of pocket to reach their deductible; sometimes thousands of dollars more. For too many patients, this makes the drugs they depend on unaffordable.

While there has been an ongoing debate between the insurance industry and the drug companies regarding who is responsible for the high cost of some medications, this new practice has nothing to do with the actual cost of the drug. The only thing that has changed is how much the insurance company, employer, or PBM is requiring patients to pay for their drug. And these entities are beginning to implement accumulator adjustment programs without adequately informing beneficiaries, who will be shocked to learn that the cost-sharing assistance they have been relying on no longer applies toward their deductible or out-of-pocket costs.

People living with HIV and hepatitis have long relied on these copay coupons to afford the cost of their medications. The impact on a countless number of peoples’ lives has been profound. But this new practice will increase patient out-of-pocket spending, leaving patients at risk of hitting a “cost cliff” mid-year. This cliff could cause disruptions to patients’ care as medication becomes prohibitively expensive. For people living with HIV, hepatitis, and so many other health conditions, the resulting decision can literally mean life or death.

While some may claim that coupons are being used to incentivize brand-name drugs over generics, the fact is 87 percent of the coupons are for drugs that have no generic equivalent. The 13 percent of branded drugs programs in which generic equivalent products are available accounted for only 0.05 percent of all prescriptions filled.

There is a relatively new drug regimen, known as pre-exposure prophylaxis (or PrEP), that when taken regularly, prevents HIV. Because there is no generic alternative, most patients can’t afford the high coinsurance and rely on manufacturer copay assistance to reach their deductible and lighten the burden. This new practice of no longer applying the copay coupons to patient deductibles and out-of-pocket maximums by the insurance companies and PBMs are making access to this remarkable treatment more difficult and will have a significant impact on our efforts to prevent HIV in the United States.

But it does not have to be like this. The growing practice of not counting copay coupons toward a beneficiary’s deductible most likely stems from PBMs, insurers, and human resources professionals, who sign off on these plans, failing to fully comprehend the impact these programs will have on vulnerable patient populations and the overall health care system.

Patient groups and employees across the country should reach out to their health insurance providers and workplace plan managers to check whether their plan is implementing this new troubling practice. And if they are, people need to speak up and push back. These new insurance practices are not acceptable and bad for the health of our country.




No Limit: Medicare Part D Enrollees Exposed to High Out-of-Pocket Drug Costs Without a Hard Cap on Spending

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Prescription drugs play an important role in medical care for 59 million seniors and people with disabilities.  Medicare beneficiaries have access to outpatient prescription drug coverage through the Part D prescription drug benefit, which is administered by private stand-alone prescription drug plans (PDPs) and Medicare Advantage drug plans (MA-PDs). Since the start of the Medicare Part D program in 2006, the drug benefit has helped to lower out-of-pocket drug spending for all enrollees. Beneficiaries in Part D plans with low incomes and modest assets are eligible for additional assistance with plan premiums and cost sharing through the Low-Income Subsidy (LIS) program, reducing out-of-pocket costs even further for this population.

The Centers for Medicare & Medicaid Services (CMS) establishes guidelines that all Part D plans must follow for the design of the drug benefit and the value of coverage that must be offered. Plans are allowed to vary, however, along dimensions that affect beneficiaries’ access to and costs for medications, including which drugs are covered and cost-sharing requirements. The standard Part D benefit in 2017 includes a deductible ($400), followed by 25 percent coinsurance for prescriptions up to an initial coverage limit ($3,700 in total costs), and then a coverage gap where enrollees without low-income subsidies pay a larger share of their drug costs until their out-of-pocket drug spending exceeds a catastrophic coverage threshold ($4,950). The Affordable Care Act (ACA) included a provision to phase out the Part D coverage gap by requiring plans to cover a growing share of total drug costs and providing a manufacturer price discount of 50 percent for brand-name drugs filled in the gap, with the amount of the manufacturer discount counting towards the out-of-pocket threshold that triggers catastrophic coverage. Once enrollees’ drug spending reaches the catastrophic threshold, those without the LIS pay up to 5 percent of their total drug costs; those who qualify for the full low-income subsidy pay nothing for their drugs in this phase of the benefit. Plans typically place drugs that cost over $670 per month on a specialty drug tier, with coinsurance that ranges from 25 percent to 33 percent.

Concern has been rising in recent years about the growing cost burden on Medicare and beneficiaries posed by new, unique, and expensive specialty drugs used to treat a range of diseases. The Medicare Boards of Trusteesand the Medicare Payment Advisory Commission have documented this rising cost burden on the Medicare program, which is reflected in higher Part D program spending overall, as well as higher spending for reinsurance of high-cost Part D enrollees who reach the catastrophic coverage phase of the benefit, where Medicare pays for 80 percent of drug costs. Although Part D provides coverage of catastrophic drug expenses, enrollees who do not receive the LIS are still responsible for up to 5 percent of their drug costs in this phase of the benefit. For very high-priced medications, this relatively small coinsurance rate can translate to a significant amount of out-of-pocket costs for beneficiaries who do not receive low-income subsidies.

This analysis examines the out-of-pocket prescription drug cost burden for Medicare beneficiaries in Part D plans who do not receive low-income subsidies, focusing on those enrollees who have drug costs that exceed the catastrophic coverage threshold. We refer to this group as Part D enrollees with high out-of-pocket drug costs. Although these enrollees do not comprise the entire group of enrollees who have high total drug spending that exceeds the catastrophic coverage threshold, they are exposed to a potentially large cost burden because they do not receive the financial protection of the low-income subsidies. We analyze Medicare prescription drug event claims data for 2015, the most recent year of publicly available Medicare claims data, and trends since 2007, the first full year of the Part D drug benefit. For detail on the data and methods, see the Methodology.


In recent years, the high and rising cost of prescription drugs has emerged as a pressing issue for consumers, public programs, and private insurers. As our analysis shows, Medicare beneficiaries who do not receive the additional financial protection provided by low-income subsidies are not insulated from this cost burden and can incur substantial out-of-pocket costs for their medications. We find that one million Medicare beneficiaries in Part D plans who were not receiving low-income subsidies had high out-of-pocket costs in 2015—that is, drug spending above the catastrophic coverage threshold—and their annual out-of-pocket spending averaged over $3,000 in 2015.

Our analysis indicates that out-of-pocket costs above the catastrophic threshold represent a growing concern for people with Medicare, and both MedPAC and Medicare’s actuaries have shown that rising spending for catastrophic coverage has placed greater fiscal pressure on Medicare. Our analysis also shows that the number of Part D enrollees who did not receive low-income subsidies and had out-of-pocket spending above the catastrophic threshold has increased over time. Looking to the future, we would expect to see continued increases in the number of enrollees reaching the catastrophic coverage threshold in 2016 and later years, due in part to the ACA changes to the coverage gap as well as the greater availability and use of high-priced drugs. These trends have cost implications both for beneficiaries and, as the Medicare actuaries have projected, for Medicare.

Part D enrollees with high out-of-pocket costs in 2015 spent an average of $1,215 out of pocket on their prescriptions filled above the catastrophic threshold, or $1.2 billion in the aggregate. In other words, Part D enrollees would have collectively saved $1.2 billion if Part D had a hard cap on out-of-pocket spending, rather than requiring enrollees to pay up to 5 percent coinsurance in the catastrophic coverage phase. Placing a hard cap on out-of-pocket spending under Part D would save money for enrollees, but would increase costs to Medicare and would not address underlying concerns related to high-priced drugs.

While Part D has helped make drugs more affordable for people with Medicare, and the ACA has provided additional relief to enrollees with high drug costs by gradually closing the coverage gap, the absence of an annual out-of-pocket spending limit under Part D exposes enrollees to significant costs—unless their incomes and assets are low enough to qualify for low-income subsidies. Various proposals to reduce drug costs—including allowing the federal government to negotiate prices for Medicare beneficiaries, and allowing Americans to import drugs from Canada and other countries—enjoy broad, bipartisan public support. With a growing number of people on Medicare facing high out-of-pocket drug costs, alleviating this burden remains an issue for federal policymakers to address.

OIG: Acute care hospitals owe Medicare $51.6M, CMS agrees to provider clawbacks


A new government report finds that Medicare improperly paid acute care hospitals for outpatient services they provided to patients who were inpatients at other facilities. And now Medicare wants the money back

The Centers for Medicare and Medicaid Services has agreed to claw back the $51.6 million and require hospitals to refund patient copays and deductibles.

The Department of Health and Human Services Office of Inspector General audited (PDF) Medicare payments made between Jan. 1, 2013, and Aug. 31, 2016, and found that in that window CMS made $51.6 million in improper payments to hospitals for outpatient services provided to patients who were inpatients at long-term care facilities, critical access hospitals, inpatient rehabilitation facilities and inpatient psychiatric facilities.

Medicare typically would not pay an acute care hospital for outpatient treatments for a patient who is an inpatient at a different facility, according to the OIG, and instead the services should be rendered through an agreement between the two facilities, with payments going to the inpatient provider.

In addition, Medicare beneficiaries were responsible for $14.4 million in coinsurance and unnecessary deductibles paid to the acute care hospitals, the OIG found.

“Medicare overpaid the acute care hospitals because the system edits that should have prevented or detected the overpayments were not working properly,” the OIG concluded.

“If the system edits had been working properly since 2006, Medicare could have saved almost $100 million, and beneficiaries could have saved $28.9 million in deductibles and coinsurance that may have been incorrectly collected from them or someone on their behalf.”

OIG made three recommendations to CMS to resolve this issue:

  1. Recover the $51.6 million in inappropriate payments.
  2. Have the acute care hospitals refund the patients’ $14.4 million in coinsurance and deductibles.
  3. Identify improper payments outside of the audit window, and recover those as well.

CMS has agreed to these recommendations, OIG said.

OIG conducted the audit as previous investigations showed Medicare made inappropriate payments for outpatient services for people who were inpatients at acute care hospitals, and the organization wanted to see whether the trend extended to other types of facilities.

Healthcare Triage: Donald Trump and Healthcare Cost Sharing

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One of the few things that both Donald trump and Hilary Clinton seemed to agree on is that high out-of-pocket spending, specifically as it relates to the Affordable Care Act, is a problem. One of Clinton’s most popular health care proposals during her campaign was to reduce out of pocket spending to more “manageable” levels for many Americans. President-elect Trump sought to fix this problem by repealing the ACA and replacing it with something better.

Reducing out-of-pocket spending, however, will require some tradeoffs. No easy solution exists, but there are examples out there worthy of consideration. That’s the topic of this week’s Healthcare Triage.

Payments for cost sharing increasing rapidly over time

Payments for cost sharing increasing rapidly over time

Money Roll

Rising cost-sharing for people with health insurance has drawn a good deal of public attention in recent years.  For example, the average deductible for people with employer-provided health coverage rose from $303 to $1,077 between 2006 and 2015.

While we can get a sense of employees’ potential exposure to out-of-pocket costs by looking at trends in deductibles, many employees will never reach their deductibles and other employees may have costs that far exceed their deductibles.  In addition to deductible payments, some employees also have copayments (set dollar amounts for a given service) or coinsurance payments (a percentage of the allowed amount for the service).  To look at what workers and their families actually spend out-of-pocket for services covered by their employer-sponsored plan, we analyzed a sample of health benefit claims from the Truven MarketScan Commercial Claims and Encounters Database to calculate the average amounts paid toward deductibles, copayments and coinsurance.

We find that, between 2004 and 2014, average payments for deductibles and coinsurance rose considerably faster than the overall cost for covered benefits, while the average payments for copayments fell.

Coinsurance Trend Means Seniors Likely To Face Higher Out-Of-Pocket Drug Costs, Report Says

Coinsurance Trend Means Seniors Likely To Face Higher Out-Of-Pocket Drug Costs, Report Says