Social Security, Medicare premiums and a case study in drug pricing
Good news arrived last week to readers like our parents who are retired and receiving Social Security and Medicare benefits; the cost-of-living adjustment for social security will be 8.7% in 2023. This means starting in January, the average retiree will see a $146 increase in their social security check every month (the exact amount will vary, depending on how much you currently receive). This is the highest COLA in more than 40 years and reflects how much inflation has increased the cost of nearly everything we buy.
At the same time, the monthly premium for Medicare Part B, which covers outpatient services such as doctor’s appointments and chemotherapy infusions, will be reduced from $170.10 this year to $164.90 in 2023. Part B premium changes every year based on anticipated spending, but It’s only the fourth time a negative adjustment has been made in the plan’s history. It’s especially unusual given the high positive COLA, although seniors certainly welcome the net result of more money in their social security check.
To understand why the Part B premium is going down, we need to look back at this time last year when it was announced that the Part B premium would increase by 14.5% from $148.50 to $170.10. This increase came in part from rising inflation, but also because of aducanumab (Aduhelm), a drug for Alzheimer’s dementia was approved by the FDA in June 2021.
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Aduhelm was a first-of-its-kind drug targeting a potential pathogenic mechanism of dementia and generated a lot of hope of slowing down the progression of cognitive decline. It’s also a biological drug, a monoclonal antibody, that must be injected by a medical provider, thus falling under Medicare Part B. Eisai and Biogen, the pharmaceutical companies that developed the drug, initially gave it an annual price tag of $56,000. Considering that most of the 6 million Americans suffering from Alzheimer’s are 65 years and older and on Medicare, it was anticipated that Aduhelm could increase Part B annual spending by as much as $29 billion. However, some scientists and clinicians thought the data on Aduhelm’s effectiveness lacked persuasion and questioned the FDA’s decision. This led to a national coverage determination, which is an independent evaluation by the Centers for Medicare and Medicaid Services. In April 2022, the CMS decided that Medicare will only cover Aduhelm for patients enrolled in clinical trials, greatly limiting access to this medication for the general population. Aduhelm sales have been stagnant, totaling just a few million dollars since approval. The manufacturers halved the price but still failed to attract providers who are skeptical, and patients, who don’t want to pay out of pocket. With a much lower forecast for the Alzheimer’s drug going into 2023, Medicare was able to recalculate the premium. Nevertheless, the Aduhelm experience should serve as a cautionary tale on how one drug can derail Medicare spending.
There’s been a trend of Part B medications occupying larger portions of Medicare in recent years, because of the advent of biologicals that are targeted and effective, but also expensive. The increased cost is spread across all Medicare beneficiaries in the form of premiums. The CMS can curtail expenses by limiting coverage, as it did with Aduhelm, but this must be balanced with providing access to patients who would benefit from new treatments. Medicare will be able to directly negotiate for Part B drugs in 2028, but only biologicals that have been on the market for more than 13 years are eligible for negotiation so manufacturers can still charge high prices for new drugs.
Other changes in Medicare for next year include limiting the price of insulin to $35 per month and improved coverage for adult vaccinations in Part D. Both were provisions outlined in the Inflation Reduction Act. See our Health Matters article on the IRA published Aug. 29.
More:Inflation Reduction Act a first step toward prescription drug price reform
Lastly, note that the Medicare open enrollment period runs from Oct. 15 to Dec. 7. Now is the time to review your plan and switch if needed. Availability, coverage, and premium for Medicare advantage (Part C) plans can fluctuate from year to year, so compare with traditional Medicare and between plans to make sure your coverage meets your needs.
Qing Yang and Kevin Parker are a married couple living in Springfield. Dr. Yang is an anesthesiologist. She received her medical degree from Yale School of Medicine and completed residency training at Massachusetts General Hospital. Parker has helped formulate and administer public policy at various city, state, and federal government entities, including the Illinois Department of Innovation and Technology and the Illinois Emergency Management Agency. This column is not intended to substitute for professional medical advice, diagnosis or treatment. The opinions are those of the writers and do not represent the views of their employers.
This article originally appeared on State Journal-Register: Social Security, Medicare premiums and a case study in drug pricing
