Rising Costs, Fewer Choices: What’s Up with Medicare Drug Plans?

Dan Gorenstein (DG): More than 50 million people rely on Medicare for prescription drug coverage.

Coverage that’s meant to keep their medicines affordable for cancer, diabetes, high blood pressure. But this market for prescription drug plans, known as Part D, is on some shaky ground.

Insurance companies are fleeing. Costs rising. And a whole lot of people are feeling pretty frustrated.

Stacie Dusetzina:  This is why, it’s like, it’s madness. // Mark Newsom: It’s incredibly complicated. // Consumer: It shouldn’t be so difficult.

DG: Today, where this market’s going wrong and what its troubles mean for consumers and the future of Medicare Part D.

From the studio at the Leonard Davis Institute at the University of Pennsylvania, I’m Dan Gorenstein. This is Tradeoffs.

*****

DG: We’re telling today’s story with help from Tradeoffs senior producer Leslie Walker. Hey Leslie.

Leslie Walker (LW): Hello! This is part two of an open enrollment doubleheader right? Obamacare last week? Medicare this week?

DG: Tis’ the season to be enrolled.

And to be clear, Leslie, we’re talking today about Medicare Part D. That’s the insurance for prescription drugs that most older Americans get.

LW: That’s right. Today’s episode, brought to you by the letter D. I’ve got two small kids, I can’t resist. I got to say Andrew, our sound designer, if you wanted to sneak in a little Elmo here, I would not be mad about it.

Elmo: What’s the letter? What’s the letter? The letter of the day is D! Clap, clap. It’s the letter of the day.

LW: So good. Sesame Street aside, Dan, what’s happening in Medicare Part D right now is big.

Anyone who’s got a spouse, a sister, a dad, a neighbor, someone over 65 they love who is covered by Medicare likely needs this coverage. 

About half of older adults take five medicines or more.

DG: Yeah, I don’t even know how many drugs my mom, Linda, is on right now. But I can see the bottles lined up on her counter. 

LW: Exactly. Lots of people’s drugs are cheap generics, but some are really expensive.

Even for those older Americans who are prescription drug free right now, they could be one stroke, one fall, one tumor away from needing some really pricey stuff.

DG: Okay clearly, Leslie, it’s important that this insurance works well. 

LW: Yes, and in some ways, for some people, it is working well. But at the same time, like we said at the top, this market’s got some problems.

Take 73-year-old Steven Hadfield for example.

Steven Hadfield (SH): I live in Matthews, North Carolina, which is a suburb of Charlotte.

LW: Back in 2014, Steven was diagnosed with this uncommon cancer.

SH: Waldenström’s Macroglobulinemia, which is a very rare blood disease 

LW: Now Waldenström’s is treatable with an incredibly expensive drug that runs about $16,000 dollars a month.

And that’s on top of a small mountain of other drugs that Steven needs. Here’s just a couple of them.

SH: I’m on Dupixent because of what the chemo does to my skin. For my diabetes, I’m on Januvia and then I’m also on metformin extended release.

LW: Several years after Steven’s diagnosis, seniors like him who are struggling with high drug costs caught the eye of Democrats in Congress, as you’ll recall Dan.

In 2022, lawmakers decided to pass these sweeping reforms to the Medicare Part D program.

DG: Right we covered this — lawmakers capped major costs that Steven and millions of others face at the drug store.

News clip: Diabetics across the country will see a break in their out of pocket costs for insulin.

DG: So that no one owes more than 35 bucks a month for insulin or $2,000 dollars a year for all their drugs combined.

News clip: The cap is one of the 2022’s IRA’s provisions to lower prescription drug prices for Medicare enrollees. 

LW: The law was a big relief for Steven. His insulin costs plummeted from $400 a month to just $35.

And as the Biden administration began to tout these new policies, Steven ended up becoming kind of like this spokesperson for the law.

He kicked off a huge White House event.

SH: No one in America should have to live this way. That’s why I am so grateful to President Biden for passing the Inflation Reduction Act. 

LW: He even had a special visit with the President.

President Joe Biden: Steven, how are you? How are you, pal? SH: I’m fine. Appreciate it. Biden: We appreciate you.

LW: Now, fast forward to this fall. 

SH: The letter came in the mail about three or four weeks ago.

LW: Steven got a notice from the insurance company that runs his Part D plan. A hike to his monthly premium for 2026.

SH: Starting in January, it goes to $100 a month. It doubles.

LW: Doubles. And for Steven, that’s a lot of money.

SH: I stress out every day. The rent’s due in two more days. Car payments are due. Duke Power is wanting money. 

LW: Some days, Steven told me, his nerve pain is so bad he can barely walk, but he’s got to keep stringing jobs together, in part, to cover his medical expenses. 

He’s got a seasonal gig at an amusement park, he picks up catering shifts, and works as a kind of waiter at a stadium in downtown Charlotte.

SH:  We’re trying to get ready for a sold-out game with Duke University tomorrow. Like I wasn’t really supposed to be working today, but, any hours helps out on your paycheck when your paycheck comes.

LW: Steven is clear. He’s glad for those Part D reforms that have helped him save money and stick to his meds. But here’s the thing, Dan. 

Those very same reforms are one big reason Steven’s seeing his premium go up — and why he’s got to keep hustling at those basketball games.

DG: So what you’re saying, Leslie, is that Steven is both a beneficiary of this beefed up benefit, but also kind of, like, an unintended victim.

LW: Exactly. And the pinch Steven’s experiencing — this kind of mixed blessing — is really this age-old tension at the heart of health insurance.

Here’s Mark Newsom.

Mark Newsom (MN): We’ve always had this struggle to balance access with cost. 

LW: Mark’s worked in both the insurance industry and the federal government and is now a managing director at the consulting shop Avalere.

And Mark’s point is that if you want to improve people’s access to drugs, whether by covering more medications or making them cheaper — like with this $2,000 cap — that better access comes with a higher cost.

DG: Right, like all those expenses above and beyond $2,000 don’t just vanish into thin air. Someone’s still go to pay the bills.

LW: Yes, and the way that 2022 law was written, it stuck insurance companies with a lot more of that bill. They’re now trying to cope with those new costs and one way they’re doing that is by passing some along to the consumer.

DG: So people like Steven are getting squeezed, seeing that higher premium — that doubling of his premium.

LW: Yes, premiums are going up for some — about 40% — of folks with traditional Medicare. Out-of-pocket costs, like deductibles, are climbing too.

And on paper these jumps can look kind of small — a $30 increase here, a $15 bump there — but you’ve got to remember, a lot of seniors have limited or even fixed incomes.

Now all that said, Dan, there is one clearly cheaper alternative out there: Buy a Medicare Advantage drug plan. 

DG: Medicare Advantage, sometimes known as MA, just a refresher for folks at home — is the version of Medicare that gives private insurance companies a lot more control over your medical care, limits the doctors and hospitals you can use. 

LW: That’s right and on average, Dan, these MA drug plans are six times cheaper. In fact, three-quarters of people on them pay no premium at all.

DG: That’s pretty good.  

LW: Right? Hard to beat. But remember, Dan, costs don’t just vanish.

In this case, they’re being picked up by the federal government — taxpayers — who basically subsidize Medicare Advantage by paying those insurers a much higher rate — roughly $80 billion dollars higher, according to one estimate.

DG: A story for another podcast episode. Let’s not go down that rabbit hole.

LW: It is a deep rabbit hole indeed. But for this story, the point is that plans can take that extra money and then turn around and use it to tamp down premiums — insulate their customers from those rising costs.

DG: Okay, so that sounds expensive for us as taxpayers, but kind of good for us as consumers?

LW: In theory, yes, but Medicare Advantage just isn’t a great fit for some people. Steven is a perfect example. He needs to see certain specialists out of state that rare cancer he has. But none of the MA plans he could find covered those docs.

SH: I got on the computer on one of my mornings off and and I looked at other plans. I made phone calls to other companies and explained my situation.

LW: So as much as those higher premiums sting, Steven’s kind of stuck.

Vanderbilt professor Stacie Dusetzina, worries about costs continuing to rise for folks. But she says we’ve got to be honest with ourselves. If we want the peace of mind that a policy like this $2,000 cap offers, that’s going to cost us.

Stacie Dusetzina (SD): I appreciate nobody likes to pay for health insurance, right? Like, if I could get free health insurance, great. I would also be happy about that. But you have to figure out where along that spectrum is the right price that allows everybody to afford the coverage and have the type of coverage they want when they need to fill the drugs.

DG: When we come back, one senior’s drug plan vanishes and she enlists her economist-daughter in a search for a new one.

BREAK

DG: Welcome back. We’re looking today at Medicare’s market for prescription drug coverage — why it’s in flux and how that’s affecting consumers, insurers and taxpayers. 

We’re doing that with help from senior producer Leslie Walker.

So Leslie, before the break we heard both some good news about how Part D is getting better for people like Steven Hadfield and some bad news about how the cost of this coverage is going up.

LW: That’s right. And rising costs are just one way consumers are getting batted around. There are two other big ways and I learned about them both from talking to Cindy Trish. 

Cindy Trish (CT): I’m a 73 year old woman. I live on Martha’s Vineyard, which is an island in Massachusetts.

LW: Not sure if you caught that there, Dan, but Cindy Trish is 73 just like Steven Hadfield. So I guess, you could say, this episode is not only sponsored by the letter D, but the number 73 too!

DG: Oh my god.

LW: Andrew, hit that Elmo music!

Elmo: When we learn something new, we do the happy dance, dance!

DG: This is brutal. 

LW: Sorry but not sorry. Okay, so quickly Dan, one other thing to know about Cindy Trish: She’s lucky enough to have a daughter who studies Medicare Part D for a living.

Erin Trish (ET): My name is Erin Trish. I’m the co-director of the Schaeffer Center for Health Policy and Economics at the University of Southern California

LW: Erin’s the brave one who suggested that the three of us — Erin, Cindy and I — all hop on the phone together and talk about what’s going on with Cindy’s Part D coverage. 

ET: My sister was like, are you sure this is a good idea? I was like, it’ll be fine. // CT: Now, because you have the joy of interviewing a mother and daughter, Erin just pointed out that I was wrong. // ET: I’ve spent my whole life correcting my mother.

LW: A mother-daughter Medicare counseling session of sorts.

ET:  I’m not picking up the phone in January when you’re pissed at me about that.  // CT: Erin will continue to correct me, I’m sure [laughs]  

LW: Here’s the first big thing I learned. Remember those rising costs we talked about before the break that insurance companies are facing?

DG: Right.

LW: Yes, well it turns out that while some companies are trying to make this new math work by raising premiums or deductibles, others are just heading for the hills.

Mark Newsom (MN): We had a small fire already. Now we’re pouring gas on the fire.

LW: Mark Newsom, that former Medicare official and insurance executive, told me a lot of companies had already been struggling to turn a profit in this market.

DG: That market you mean, Leslie, for drug plans in traditional Medicare, not Medicare Advantage.

LW: Right. What experts told me is that those 2022 reforms passed by Democrats pushed some players in that traditional market over the edge.

We’ve seen big names, like Cigna and Elevance, announce they’re getting out of the game. Overall, Dan, the number of Part D plans available in traditional Medicare has fallen by — and I was shocked by this — 50% in just the last 2 years.

DG: Holy smokes.

LW: Yeah. Cindy Trish just got a letter a few weeks back that her plan was going away.

Medicare Advantage was out of the question to cover her seven medicines. She travels a lot and needs a broad network of doctors and hospitals. 

Sfx: Keyboard typing

ET: I’m looking up coverage for 2026, and I entered my mom’s zip code where she lives…

LW: So Cindy asked her daughter Erin to help her find a traditional Medicare drug plan. 

ET: And then it asks as a next step, do you want to see your drug costs when you compare plans?

LW: And here’s the second big thing I learned, Dan. Shopping for a new plan is really damn hard — even when your daughter is an economist.

ET: A plan that’s using 25% co-insurance for Tier 3 preferred brand drugs // CT: I still don’t retain the difference between copay or co-insurance. // ET: That’s very high relative to the net price of the drug //CT: I’ll tell you, this is unduly complicated, OK?

LW: Now you, Dan, long-time health reporter that you are might be like what’s new here? This stuff has been hard forever.

The thing that’s newer here, I guess, ties back again to those rising costs that insurance companies are facing. In an effort to control costs as best they can, the insurers are pulling out all the stops. 

DG: You mean copays, coinsurance, deductibles, formularies, the whole thing.

LW: You got it. And as insurers pull all those levers, it’s getting harder for consumers like Cindy to do some comparison shopping and understand what’s going to cost what.

During our call, I mean, Cindy got frustrated. And Erin kindly reassured her mom: It’s not your fault.

ET: You shouldn’t like, feel badly, like most people I talk to have no clue what’s going on, including many, you know, policymakers and staffers and experts in this program. 

LW: Erin tells her mom she’s got to watch out. The costs she could face could be really different depending on the plan she picks. 

Premiums…

ET: The monthly premiums range from about $8 a month to about $238 a month…

LW: Deductibles…

ET: One of them has a $601 deductible, and then two of them have zero deductible…

LW: And there are other costs. More plans are ditching the typical flat copay, — let’s say $50 for every fill — in favor of what’s called coinsurance, [where you] basically owe 15 or 25% of a drug’s sticker price.

DG: Who can figure this all out, Leslie? I mean this isn’t 3-dimensional chess. It sounds like 30-dimensional chess!

LW: Yes. I talked about this with Mark Newsom, who actually worked in the federal government back when Part D was first created.

MN: You can imagine some of the family conversations I have around the holidays, and they’re like, “You worked on this. Fix it!”

LW: And Mark shared what I thought was a pretty honest reflection on what’s gone wrong here.

MN: The thing I’ve learned that I didn’t understand when I started, you know, [is] when you start in it, you get sucked into the grandeur of it. You’re meeting the president of the United States or a senator. You’re like, “Wow, I’m doing big stuff. And this is important.” And all that’s true. But when you get sucked into that, you take your eye off the ball that we’ve built this incredibly complicated program that often doesn’t serve the taxpayer, the beneficiary, or providers, and I think Part D is extremely guilty of that.

DG: To quote our current President, “Nobody knew health care could be so complicated.”

LW: Indeed.

DG: Alright but don’t leave us hanging here, Leslie: What did Erin and Cindy end up figuring out?

LW: So, when we hung up, Erin was recommending a plan with a lower premium and higher cost sharing — something like $16 a month instead of the $112 Cindy had been paying on her old plan. 

She could be on the hook for higher costs when she goes to pick up her prescriptions, but in the end, Erin thinks Cindy’s going to end up spending around the same amount she did this year.

DG: Got it, and I guess it does seem like despite all of this confusion and truly terrifying complexity, there is still this silver lining here, which is, thanks to that $2,000 cap, the worst case scenario for Cindy or anyone else is if you make a bad choice on a the plan that you pick is you’re only going to get dinged, at most, $2,000 bucks.

LW: As long as you pick a plan that covers all your drugs. That’s critical because otherwise you could be looking at a lot more than $2,000.

What’s clear here is if you’ve got really high drug costs, those 2022 reforms are likely going to save you money no matter which plan you pick.

What’s less clear is what’s going to happen to everyone with lower drug costs. It’s possible a lot of them end up spending more than they used to — — people like Cindy Trish. That’s who researchers like her daughter Erin will be watching closely to see whether they ultimately end up better or worse off.

DG: And most of those folks probably don’t have an economist for a daughter. 

LW: That is true.

DG: To wrap up here, Leslie, at least for this year, here’s what we know: Many people are facing higher costs and fewer choices in the traditional Part D market. And that’s happening in part because of these new protections that people like Steven and Cindy are getting.

There are also a lot of unknowns. I guess I’m wondering: Where do the experts you spoke to see all of this heading? Because it seems like there’s some real smoke here to indicate there’s a fire. 

LW: Yes, there are basically two forks in the road that experts told me they’re looking ahead for.

One is that when Democrats passed those Part D changes, they actually expected some of this turmoil in the market, so they put this lid on how quickly people’s premiums could rise. And they also threw a bunch of cash at those insurance companies to help cover their rising costs.

But these policies designed to stabilize this market are, in theory, going to end soon so the big question is: What happens then?

DG: That makes it sound like we’re headed for some kind of cliff: Does the government keep throwing taxpayer money at this affordability problem or let Part D costs climb?

LW: That is the multi-billion dollar question.

Then there’s this more existential question of what happens if even more of these traditional Part D plans disappear? Like I said, we’ve lost about 50% of them in just the last two years.

So if that keeps up, you can imagine a day where some folks might not have any options — or at least any options that the average person could afford. 

DG: So just to be clear here, Leslie, you’re painting a picture of a world where some people like Steven or Cindy have no choice but to move to Medicare Advantage — give up more control of their care at a much higher cost to the federal government.

LW: Look, nobody thinks this market is on death’s doorstep yet. But I found it pretty telling that nearly every expert I talked to brought up this obscure fact about the history of the Part D program.

There is this option for the government to basically step in and take over the traditional Part D drug market. Congress included that provision back in 2003 when they first created this program.

DG: Some kind of like public option, like ‘Medicare drug coverage for all.’

LW: Yes. Now it’s extremely unclear how that would actually work, but it’s a possibility that a lot of wonks raised, so they clearly think this is somewhere we could end up.

At least Vanderbilt professor Stacie Dusetzina is kind of excited about this idea. What could a government, with a whole bunch of purchasing power and no corporate shareholders to answer to deliver?

SD:  Well, seems like now is an opportune time to give it a shot. Could you spend more efficiently if you had a public option? Could you do better?

DG: Leslie Walker, thanks for your work on this story.

LW: You’re welcome, Dan.

Elmo: When we learn something new, we do the happy dance dance!

DG: Guys, seriously? This is ridiculous.

Sfx: Elmo loves you!

DG: The cost pressures facing Part D plans could be going up another notch. The Trump administration recently announced that insurers might now have to cover weight-loss drugs for a whole bunch more folks on Medicare.

It’s unclear how exactly those costs might be passed along to consumers, but whatever happens, seniors like Steven Hadfield will be waiting on a knife’s edge.

This year, Steven was lucky to get a grant from a nonprofit that covers some of his insurance costs. He’s unsure if he’ll get that assistance again next year.

SH: My thing is take it one day at a time and just try to make it.

DG: I’m Dan Gorenstein. This is Tradeoffs.