During a time of high inflation, when do you hear of medical costs, much less anything, coming down? The cost of gasoline, energy, food and daily living items are going up and it doesn’t seem like there is any end in sight. But one area, Medicare Part B, may just be coming down. Well, it is no guarantee, but maybe in 2023 we will see a decrease in Medicare Part B prices. Medicare Part B covers physician services, outpatient hospital services, certain home health services, durable medical equipment, and certain other medical and health services not covered by Medicare Part A, which covers inpatient hospital care, skilled nursing facility, hospice, lab tests, surgery, home health care. In addition, the Part B premium is set at 25% of projected program costs and must ensure that the program’s Trust Fund has sufficient reserves to cover costs during the year.
Some history first. In November of last year, 2021, the Centers for Medicare and Medicaid Services (CMS) announced that the Medicare part B premium would increase by 14.5%. That means the premium that was $148.50 in 2021 would be going to $170.10 in 2022. Roughly half of this increase was attributable to the need to create a contingency reserve to cover significantly higher expenditures associated with Aduhelm, Biogen Inc.’s controversial new drug aimed at slowing the loss in cognition from Alzheimer’s disease. Aduhelm is a monoclonal antibody directed against amyloid beta plaque found in the brain. The accumulation of amyloid beta plaques is a defining pathophysiological feature of Alzheimer’s disease. The original estimated cost for one year’s treatment was $56,000. The rest of the increase was driven in part by the statutory requirement to prepare for potential expenses, such as spending trends driven by COVID-19 and uncertain pricing and utilization of other drugs.
After the Part B premium increase was determined, two things happened. First, in December 2021 Biogen announced that it would cut the price of Aduhelm nearly in half to $28,200 annually. Second, in January 2022 CMS issued a preliminary decision to limit Medicare’s coverage of the new drug to those enrolled in clinical trials, greatly restricting its use. This decision was finalized in April of 2022. In January 2022, Health and Human Services (HHS) asked CMS to reassess its recommendation for the Part B premium. On Jan. 10, HHS Secretary Xavier Becerra said in a press release that “Today I’m instructing the Centers for Medicare and Medicaid Services (CMS) to reassess the recommendation for the 2022 Medicare Part B premium, given the dramatic price change of the Alzheimer’s drug, Aduhelm. With the 50% price drop of Aduhelm on January 1, there is a compelling basis for CMS to reexamine the previous recommendation.”
The Centers for Medicare and Medicaid Services considered three options: 1) making a midyear change in the premium; 2) sending out refund checks; and 3) incorporating the savings into the 2023 premium. Each approach was considered, but there were serious drawbacks:
- Apparently, the Part B premium has never been re-determined. No provision has ever been made for mid-year changes and the statute says that the determination should be made for the entire year. In May 2022, CMS concluded that recalculating the premium would be very complicated, involve significant resources, and require a number of entities that are involved in the payment of the premium for different groups of beneficiaries to make major operational changes.
- The idea of sending out refund checks was even less appealing. CMS concluded that the agency only had the authority to send premium refund checks in instances of overpayment relative to the established premium.
Thus, the decision has been made to go with Option 3) which was to incorporate the savings into the 2023 premium. The Medicare Part B premium for 2023 will be determined in the fall.
Now, here is where the “Maybe” comes in. How would that work? The 2022 Part B premium is $170.10. If all spending assumptions remained unchanged but the actual price of Aduhelm was reduced to $28,200 and the decision to limit coverage to clinical trials was incorporated, the premium would have been $160.40 for 2022. Assuming there are no other changes, they can either lower the premium to the new number of $160 or they can keep it at the previously calculated $170 for 2023. Several reasons for keeping it at $170 is it has already been projected in the federal budget for next year. A year with no Part B premium increase will be a welcome respite and allow retirees to use their entire Social Security cost-of-living adjustment to cover rising prices for other goods and services. Also, the higher premium should allow the excess assets in the Medicare Part B trust fund to further dampen premium growth after 2023.
So what will the federal government do? Will they lower the Medicare Part B premiums, or will they just have less increases in the future? Looking at past actions of the federal government, what do you think they will do? Can we count on a decrease in Medicare Part B premiums? That is the big “Maybe” but we will continue to monitor the situation and let our clients know as soon as we do!