KFF offers facts about Medicare spending

As the new Administration and Congress consider changes to federal health care programs, including Medicare, a Kaiser Family Foundation (KFF) issue brief offers spending facts about the program, which currently accounts for roughly $1 of every $7 in federal spending. The brief indicated that repealing the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) would increase spending and worsen the program’s long-term financial outlook, but noted that Medicare faces challenges apart from ACA repeal, including higher health costs and an aging population.

Although the program faces financial challenges, KFF noted that Medicare “isn’t going broke.” The Hospital Insurance Trust Fund, which pays for Part A benefits, primarily through payroll taxes, is expected to pay for full insurance benefits until 2028, at which point it will be able to pay for 87 percent of hospital benefits. Part B physician services and Part D drug benefits, however, are paid for through a combination of general revenues and beneficiary premiums and are set only a year in advance. As a result, they are not subject to a funding shortfall, but higher projected spending would increase the amount of general revenue funding and beneficiary premiums required to cover costs. Spending on Part benefits is expected to rise faster than spending on benefits paid for under Parts A and B, with per-capita spending expected to rise 5.8 percent for Part D between 2015 and 2025, compared to 3.2 percent for Part A and 4.6 percent for Part B.

The aging U.S. population is resulting in higher Medicare spending. For example, the number of people over age 65 is expected to double from 2010 to 2050 from 40 million to 84 million, while the number of people over 80—who account for a disproportionate share of Medicare spending—is expected to nearly triple, from 11 million to 31 million. Medicare spending accounted for 15 percent of the federal budget in 2016, and is expected to increase to 18 percent of the federal budget, accounting for $1 in every $6 spent, by 2027. Average annual growth in spending is expected to increase more quickly between 2015 and 2025—at a rate of 7.1 percent—than it did immediately after the ACA was enacted between 2010 and 2015, when it increased at a rate of only 4.4 percent.

ACA provisions reducing payments to providers and Medicare Advantage (Part C) plans reduced overall spending growth from 9 percent between 2000 and 2010 to 4.4 percent between 2010 and 2015. KFF cited a Congressional Budget Office (CBO) report and stated that ACA repeal would add $802 billion to Medicare spending through 2025; KFF opined that repeal would lead to higher deductibles, premiums, and cost sharing for beneficiaries and would hasten the insolvency of the Hospital Insurance Trust Fund (see Repealing the Affordable Care Act—an unaffordable idea?, Health Law Daily, June 24, 2015). With the ACA in place, KFF reports that net Medicare spending is projected to grow from 3.2 percent of the gross domestic product (GDP) in 2016 to 5.7 percent of the GDP in 2046; prior to the ACA, net Medicare spending was projected to account for 8.5 percent of the GDP in 2046.

CMS updates its Medicare and Medicaid drug spending dashboards

As part of its effort to provide additional information on, and increase transparency in the cost of prescription drugs, CMS has updated both its Medicare and Medicaid drug spending dashboards to include information from 2015. According to a CMS press release, the medications presented as part of the 2015 Medicare Drug Spending Dashboard represents a very large proportion of Medicare spending, including 34 percent of all Part D spending and 69 percent of Part B drug spending, which was similar to the 2014 drug dashboard. A second, contemporaneous CMS press release notes that the medications presented as part of the 2015 Medicaid Drug Spending Dashboard represent approximately 41 percent of Medicaid covered outpatient drug spending in 2017.

Total program spending

For total program spending, the Medicare dashboard shows five drugs with the highest Part D and Part B drug spending, respectively, in 2015 compared to their spending in 2014. For example, the dashboard shows that Lantus (insulin) was a top-five drug in terms of costs in Medicare Part D between 2014 and 2015, as was Havroni, a new drug to treat Hepatitis C.

The Medicaid dashboard also shows the trend in total drug spending for the five drugs with the highest aggregate drug spending in 2015. Of the top five, Harvoni and Abilify (aripiprazole, a brand name anti-psychotic drug) had total drug spending greater than $2 billion in 2015, with annual total program spending for Abilify greater than $1.7 billion for each of the past five years. Also, spending for Lantus/Lantus Solostar (insulin glargine, a brand name diabetes drug) was $1.4 billion and spending for Vyvanse (lisdexamfetamine dimesylate, a brand name attention deficit hyperactivity disorder drug) and Humira/Humira pen (adalimumab, a brand name drug used for rheumatoid arthritis) was approximately $800 million each.

Highest total spending (Part D)

The Medicare dashboard shows that the five Part D drugs with highest total spending in 2015 were:

  • Spiriva (tiotropium bromide, a brand name chronic obstructive pulmonary disease treatment);
  • Advair Diskus (fluticasone/salmeterol, a brand name asthma and chronic obstructive pulmonary disease treatment);
  • Crestor (rosuvastatin calcium, a brand name cholesterol drug)
  • Lantus/Lantus Solostar (insulin glargine, a brand name diabetes drug); and
  • Harvoni (ledipasvir/sofosbuvir; a brand name Hepatitis C virus treatment).

Advair Diskus and Crestor were also among the top five drugs with the highest Part D spending in 2014, but Spiriva, Lantus, and Harvoni were not. Harvoni was introduced in October 2014 and in 2015 had just over $7 billion in spending. Sovaldi (sofosbuvir), another drug for treating Hepatitis C, had the highest spending in 2014, but was not among the top five drugs in 2015, with $1.3 billion in spending.

Highest total spending (Part B)

The Medicare dashboard shows the top five Part B drugs with highest total spending were:

  • Lucentis (ranibizumab, a brand name drug for wet age-related macular degeneration);
  • Remicade (infliximab, a brand name rheumatoid arthritis drug);
  • Neulasta (pegfilgrastim, a brand name white blood cell stimulator for use with cancer treatments);
  • Rituxan (rituximab, a brand name cancer treatment); and
  • Eylea (aflibercept, a brand name drug for wet age-related macular degeneration).

These were the same five drugs with the highest Part B spending in 2014. Each of these drugs contributed more than $1 billion in spending for the Medicare Part B program.

Unit cost

The Medicare dashboard lists the top five drugs with the largest increases in average cost per unit from 2014 to 2015 in the Part B and D programs. Glumetza (metformin HCl, a diabetes treatment) had the largest increase in cost per unit at over 380 percent and had total spending increases from $34.3 million to $153 million. All five of these Part D drugs had increases in cost per unit of more than 100 percent. Among Part B drugs, mitomycin (a generic chemotherapy agent), had the largest increase in average Part B cost per unit at 163 percent and had total spending increases from $5.9 million to $15.8 million. The other four Part B drugs had smaller, but still significant increases, approximately 25 to 40 percent.

The Medicaid dashboard shows the top five drugs with the largest increases in average cost per unit from 2014 to 2015. Ativan (lorazepam, a brand name drug used for anxiety) had the largest increase in cost per unit at 1,264 percent and a spending increase from $1.7 million to $5.3 million. All five of the drugs had increases in cost per unit of more than 400 percent.

High cost per prescription fill

The Medicaid dashboard shows the top five drugs selected for high costs per prescription fill (i.e., greater than or equal to $1,000) in 2015. Advate (antihemophilic factor [recombinant], a brand name hemophilia treatment) had an average cost per fill of $20,828 and was associated with total program spending of $354 million. In comparison, Prezista (darunavir ethanolate, a brand name HIV antiviral) had an average cost per fill of $1,259 and total program spending of $335 million. NovoSeven RT (coagulation factor VIIa [recombinant], a brand name hemophilia treatment) had the highest average cost per fill at $67,098 and $298 million in program spending.

Voters say Rx drug costs and better provider networks are top priorities

Health care is not playing a major role in the 2016 election campaign, finishing last or near the bottom of the list of voter issues, according to the October 2016 Kaiser Health Tracking Poll. Instead, the most important issues to the public are the presidential candidates, the economy and jobs, foreign policy, immigration, and social issues.

Non-health issues lead the way

According to the Tracking Poll, the most important issues among Democrats, Independents, and Republicans can be broken down as follows:

  • Among Democratic voters, the presidential candidates are the most important issue (36 percent), followed by the economy and jobs (30 percent), foreign policy (14 percent), social issues (12 percent), health care (9 percent), and immigration (9 percent).
  • Among Independent voters, the economy and jobs are the most important issue (29 percent), followed by the presidential candidates (27 percent), foreign policy (22 percent), immigration (8 percent), social issues (7 percent), and health care (6 percent).
  • Among Republican voters, the economy and jobs (34 percent) and foreign policy (34 percent) tied for the most important issues, followed by the presidential candidates (23 percent), immigration (20 percent), social issues (8 percent), and health care (5 percent).

Top health care issues

When asked to prioritize their health care concerns, the public said that making sure that high-cost drugs for chronic conditions are affordable (74 percent), government action to lower prescription drug prices (63 percent), and making sure health plans have sufficient provider networks of doctors and hospitals (57 percent) were the most important.

Additional health care concerns were by the public as follows:

  • Protecting people from high prices when they visit an in-network hospital but are seen by an out-of-network doctor (54 percent).
  • Making information comparing quality of care by doctors and hospitals more available (53 percent).
  • Making information about the price of visits, tests, and procedures more available (50 percent).
  • Making information about what doctors and hospitals are covered under different health plans more available (49 percent).
  • Helping people with moderate incomes pay high out-of-pocket costs (44 percent).
  • Repealing the requirement that nearly all Americans have insurance or pay a fine (38 percent).
  • Repealing the entire Patient Protection and Affordable Care Act (ACA) (37 percent).

Public health care option

The poll also examined the public’s view on a public health care option to compete with private plans in the ACA marketplaces. When asked if they favored a public health insurance option to compete with private insurance plans in the ACA marketplaces, 70 percent favored the public option (34 percent strongly favoring and 36 percent somewhat favoring) and 23 percent were opposed (15 percent strongly opposed and 8 percent somewhat opposed).

However, when asked if they favored a “government administered” public health insurance option the results were less favorable, with 54 percent in favor (25 percent strongly in favor and 29 percent somewhat in favor) and 41 percent opposed (27 percent strongly opposed and 14 percent somewhat opposed).

In addition, 21 percent of those in favor shifted their opinion to opposing the public option after hearing the argument that doctors and hospitals would be paid less. Likewise, 27 percent of those in favor shifted to opposing the public option after hearing that the government plan would have an unfair advantage over private insurers.

The ACA’s future

The poll continued to show that Americans’ view of the ACA is divided down political party lines. The majority of Democrats (76 percent) had a favorable view of the ACA, while most Republicans (83 percent) expressed an unfavorable view. Independents also leaned negative, with 52 percent expressing an unfavorable view.

DOJ sues Mississippi, says mentally ill are unnecessarily institutionalized

The federal government emphasized its stance on the importance of using home- and community-based services (HCBS) by filing a lawsuit against the state of Mississippi over its mental health program. The Department of Justice (DOJ) alleged that the state ran afoul of the integration mandate of the Americans with Disabilities Act (ADA) (P.L. 101-336) and forced thousands of people to be institutionalized when the services could be provided in a community setting.

Integration mandate and lawsuit

In Olmstead v. L.C., 527 U.S. 581 (1999), the Supreme Court found that the ADA requires public entities to provide services to the disabled in home- and community-based settings as much as possible. The ‘integration mandate’ states, “A public entity shall administer services, programs, and activities in the most integrated setting appropriate to the needs of qualified individuals with disabilities” (28 C.F.R. section 35.130(d)). According to the Olmstead Court, unnecessary institutionalization diminishes patients’ abilities to interact socially,  pursue education and employment, and find cultural enrichment.

The suit against Mississippi alleges that state-run hospitals are segregating mentally ill patients who could be successful in community treatment. The Justice Department believes that patients are regularly cycling through the state’s four mental health facilities because they are not able to thrive in their communities due to a lack of services. The cuts to the DOMH have limited its ability to offer HCBS services and activities, and State Attorney General Jim Hood expressed his displeasure toward the state legislature following the filing of the suit, blaming them for offering corporate tax cuts instead of serving the population. The state attempted to settle with the federal government, but negotiations failed. The DOJ wants a consent decree, but Hood objects due to expense and perpetual oversight. The state is now in the expensive position of defending itself against the DOJ.

Mississippi budget cuts

The state of Mississippi’s budget woes have turned into what some are calling a crisis, resulting in significant budget cuts. The state government admitted in June that at the close of the state fiscal year, there would be unpaid bills and a $50-60 million shortfall. Although some representatives disagreed on the impact of the amount, overcoming the shortfall would have required collections in the $725-750 million range in the month of June.

Significant budget cuts and dipping into funds failed to ward off the shortfall. Governor Phil Bryant (R) already cut $60 million from the budget and spent $50 million out of state accounts, making use of the Rainy Day Fund. The cuts impacted  state departments, such as the Department of Revenue, which was forced to dismiss temporary workers during tax season. In July, this blog covered some of these budget issues, including an editorial written by the director of the Mississippi Public Health Association that highlighted the Department of Corrections’ generous allocations, nearly nine times more than what the Health Department will be able to use (see Highlight on Mississippi: Budget crisis has health pundits grumbling, July 1, 2016).

Health impacts

Health agencies were not immune to the budget cuts, although there are arguments that they only lost a small chunk of money and, in one case, ended up on top. According to watchdog.org, in the latest round of cuts, the Department of Health (DOH) lost $5.8 million and the Department of Mental Health (DOMH) lost $7.3 million, which amounted to 1.53 percent and 1.17 percent of their budgets, respectively.

Departments heads note that these cuts are only the latest in a line of issues. The Dr. Mary Currier, head of the DOH, said the agency closed six clinics, failed to fill 89 positions, and has cut 64 employees. Diana Mikula, who directs the DOMH, said their reserves are tapped after absorbing a total of $8.39 million in cuts. The agency cut some of its workforce or transferred employees to other positions, but was still forced to eliminate a significant amount of facility space that psychiatrists used to determine if criminals were able to stand trial. Other closures include the Acute Medical Psychiatric Service unit at a state hospital,  Male Chemical Dependency Units, early intervention services, and psychiatric beds.