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Medicare Part D Prescription Drug Model to Change in 2020

Medicare Part D Prescription Drug Model to Change in 2020

There are big changes on the horizon for the Medicare Part D prescription drug model, and they’re going to affect medical coders.
The current reimbursement system and payment model for Part D creates incentives for plans to push patients to the “catastrophic phase.” Once the patient reaches this “donut hole,” Medicare is responsible for 80 percent coverage, with the Part D plan paying 15 percent and the patient paying 5 percent. Before the donut hole or catastrophic phase, the Part D plans are responsible for 75 percent of the drug costs after patients satisfy their deductible.
This structure creates a negative incentive for Part D plans, rewarding insurance companies for pushing patients toward the catastrophic phase of the benefit, where they will have significantly less financial responsibility (15 percent versus 75 percent). Part D insurance plans have very little reason to manage the costs of the patients who spend the most, according to Department of Health and Human Services Secretary Seema Verma.
As a result of these negative incentives, federal spending in the Part D catastrophic phase grew from $9.4 billion in 2008 to $37.4 billion in 2017. Also, in 2016, 3.2 million beneficiaries who spent enough on prescription drugs to reach the catastrophic phase, and who didn’t qualify for low-income subsidies, spent an average of $3,000 per year out of pocket on their prescriptions.
The new Medicare Part D Model includes incentives to lower costs and negotiate down list prices for the first time since Part D was implemented January 1, 2006. This will result in reduction in out-of-pocket costs for patients.
A five-year voluntary model that begins in 2020 will enable plans to take on risk for spending in the coverage gap. Part D plans will be given a target level of spending for the catastrophic phase, and will share the savings with the insurer if they fall below the target. But they will have to take the losses if they spend above the target. The model will also provide a program of incentives and rewards for Part D plans that help reduce drug costs and encourage beneficiaries to choose drugs with lower list prices.

Certified Inpatient Coder CIC

Barbara Cobuzzi

About Has 99 Posts

Barbara J. Cobuzzi, MBA, CPC, CENTC, COC, CPC-P, CPC-I, CPCO, AAPC Fellow, is an independent consultant, CRN Healthcare Solution, Tinton Falls, N.J. She is consulting editor for Otolaryngology Coding Alert and has spoken, taught, and consulted widely on coding, reimbursement, compliance, and healthcare-related topics nationally. Barbara also provides litigation support as an expert witness for providers and payers. Cobuzzi is a member of the Monmouth, N.J., AAPC local chapter.

One Response to “Medicare Part D Prescription Drug Model to Change in 2020”

  1. Charlotte says:

    As of July 2019 I’m hearing rumors of changes in medication guidelines on the way with coverage guidelines becoming tighter. It could be a coordinated effort or just reactionary because of the opioid focus. Other scheduled drugs (stimulants and benzodiazepines) are receiving more scrutiny. In certain “vulnerable” populations guidelines are predicted to change limiting dosage and quantity. That would compensate for some of the lost revenue by insurance and drug companies. That would also explain why my prescriber warned me that some of my long term medications could be restricted in the future.