Ways to Save in Budget Busting Medicare Part B
By Stacie Dusetzina, PhD
February 22, 2022
Stacie Dusetzina is an associate professor of health policy at Vanderbilt University School of Medicine. Her research focuses on measuring and evaluating the costs of prescription drugs. Stacie is a member of the 2022 Tradeoffs Research Council.
When people talk about prescription drugs in Medicare, they often talk about Part D as in “drugs,” which covers prescription drugs for some 48 million people. But more and more, policymakers are focused on drugs paid for by Medicare Part B as in “budget busters.” Part B covers drugs administered in a doctor’s office, and spending on these drugs has grown 10% per year since 2009, rising to $39 billion in 2019. A recent study in Health Services Research looks at how we might be able to slow down the runaway Part B spending train.
Researchers Kelly Anderson, Daniel Polsky, Sydney Dy and Aditi Sen first identified four conditions for which there are multiple Part B drugs that are equally effective but vary significantly in cost. They then looked to see if there was any difference in which drugs got prescribed depending on whether the patient was in traditional Medicare or Medicare Advantage. Medicare Advantage plans are run by commercial insurers, and unlike traditional fee-for-service Medicare, they can try to control costs by requiring prior authorization before paying for an expensive drug or steering patients to particular providers. The authors found that for all four conditions, Medicare Advantage beneficiaries were 5 to 13 percentage points more likely to get prescribed the cheaper drug. They estimated that if folks in traditional Medicare were prescribed the same drugs as the Medicare Advantage patients, Medicare would’ve saved over $330 million in one year, just on these four conditions.
The researchers found Medicare Advantage beneficiaries were more likely to go to providers that prescribed more low-cost drugs overall and that within individual hospitals or clinician practices, people covered by Medicare Advantage were more likely to get the cheaper alternative. But they couldn’t determine what exactly about Medicare Advantage led to less costly prescribing. Other limitations to the study include the data being from 2016 and challenges with the quality of Medicare Advantage data.
But these findings offer hope for opportunities to cut drug spending for Medicare and its beneficiaries. For example, about 10% of Medicare beneficiaries pay 20% coinsurance for Part B drugs, which means switching to cheaper, equally effective alternatives could keep more money in their pockets. Seniors also have to pay premiums for Part B, which go up when the program has to spend more on costly drugs. Simply put, allowing traditional Medicare to require use of lower cost, equally effective drugs over more expensive alternatives could save patients and taxpayers a lot of money.