Here’s how Biden is averting a spike in Medicare drug plan premiums

President Joe Biden and Vice President Kamala Harris have repeatedly touted on the campaign trail their efforts to lower drug prices, including a $2,000 limit on Medicare enrollees’ out-of-pocket prescription costs that starts in January. But what they haven’t talked about is that the cap has prompted insurers to propose hiking the drug plan premiums of millions of Medicare beneficiaries.

President Joe Biden and Vice President Kamala Harris have repeatedly touted on the campaign trail their efforts to lower drug prices, including a $2,000 limit on Medicare enrollees’ out-of-pocket prescription costs that starts in January. But what they haven’t talked about is that the cap has prompted insurers to propose hiking the drug plan premiums of millions of Medicare beneficiaries. The final Part D plan premiums are scheduled to be released this month. To avoid a massive spike just weeks before the presidential election, the Biden administration is offering insurers hefty new subsidies that could total about $5 billion next year. The move, which did not need congressional approval, has sparked criticism from several Republican lawmakers. Medicare beneficiaries will be able to start selecting plans in mid-October, when the annual open enrollment period kicks off. About 13.3 million people are enrolled in Part D plans and pay $43 a month, on average, for coverage in 2024, according to KFF. The increase in premiums was not unexpected. It stems from changes to the Medicare drug benefit contained in the Democrats’ 2022 Inflation Reduction Act. In addition to the $2,000 limit, the law requires insurers to be on the hook for more of the costs once enrollees hit the catastrophic coverage phase above the cap. Starting in January, insurers will cover 60% of drug costs, with Medicare and drug manufacturers splitting the remaining 40% for brand name drugs and Medicare picking up the full 40% for generic medications. But prior to the IRA’s changes, plans were responsible for only 15% of the costs, with beneficiaries shelling out 5% and Medicare covering 80%. “The plans will, just because of the design, have so much more liability and responsibility,” said Angela Lamari, an analyst at Capstone, a Washington-based firm that consults with investors and corporations on public policy. “So the bids this year were significantly higher than any year before.”