At the New England Journal of Medicine, Drs. Stacie Dusetzina, Nancy, Keating and Haiden Huskamp review several of the possible redesigns for Medicare Part D. Right now Medicare Part D is not truly insurance. It is a payment assistance program that has insurance like features for broad segments of the population but there is ongoing catastrophic exposure. This catastrophic, open ended exposure is becoming more and more important as ultra-high price drugs are becoming more common and more broadly prescribed.
Right now, Medicare Part D has a deductible, then a region of spending where there is a 25% coinsurance paid by the patient, and after that first co-insurance level, a smaller, but never capped 5% coinsurance paid by the patient. For most people, this is not too relevant as they are not taking $100,000 or more year drugs. But for the folks who are on $100,000 to $500,000 year drugs and more importantly are on them for the rest of their lives, it is a significant failure of insurance as it is not protection against a tail risk, but protection against a mid point of the distribution.
There are three proposals to provide some catastrophic protection. These proposals all have trade-offs. If we are holding actuarial value constant and providing a catastrophic limit to the few people with very expensive claims, then the money has to come from somewhere. And that somewhere is from people who have lower levels of claims or the entire covered population.
Holding lower claim spending benefits constant means higher premiums or a new infusion of federal money.
Medicare as it is currently constructed is a weird set of choices that have their roots in either the 1964 Blue Cross and Blue Shield business model or jello wrestling between Capital Hill and the Congressional Budget Office to get a good enough score. Without supplements, Medicare is not true protection against catastrophic claims. It is usually good enough for most enough, but not good enough for the most unusual. Medicare Part D just shows this even more bluntly than it is evident in the hospital component of Medicare.