The Trump administration just sold out seniors to appease the health insurance lobby.
Earlier this year, the administration proposed a major healthcare reform that garnered applause across the political spectrum, even from lifelong Democrats like me. The overhaul would have forced insurance companies and pharmacy benefit managers to reduce Medicare beneficiaries' out-of-pocket pharmacy bills by tens of billions of dollars.
But in July, officials scrapped that proposal due to intense opposition from insurance lobbyists. Patients won't forget this betrayal -- nor should they.
The proposed rule would have helped Americans who rely on Medicare's "Part D" prescription drug benefit. Part D differs considerably from traditional Medicare. The government doesn't provide coverage directly. Instead, private insurers sponsor and sell plans to seniors and folks with disabilities. The government regulates and subsidizes those plans to ensure they're affordable.
Most insurance companies use PBMs to administer their drug plans. PBMs ultimately decide which drugs are available under each plan -- and negotiate with pharmaceutical companies for steep discounts. Last year, drug firms offered about $166 billion in total rebates and discounts.
But patients don't necessarily share in these savings. That's because PBMs keep the discounts, which can reduce a drug's "list" price by up to 70 percent, secret.
As a result, at the pharmacy counter, patients fork over their co-pays and co-insurance -- a set percentage of a drug's cost -- based on the full list price. For example, a medication could feature a list price of $100, but a PBM might negotiate a rebate that brings the true cost down to $50.
Since that massive discount is secret, a Part D plan with a 25 percent coinsurance requirement would force beneficiaries to pay $25 out-of-pocket. If beneficiaries could instead pay co-insurance based on the actual, post-rebate cost of the drug, they'd only spend $12.50.
The proposed rule would have forced insurers and PBMs to pass discounts to patients. If insurers had refused, the government would have classified the rebates as illegal kickbacks.
Medicare beneficiaries would have saved a boatload of money under the proposed rule. If 90 percent of discounts were passed on, they would have saved $53 billion over the next decade, according to one government analysis.
The rebate rule would have made it much easier for enrollees to fill their prescriptions and remain healthy. By improving medication adherence, the rule could have reduced total healthcare spending on diabetes patients alone by $20 billion over the next decade.
As a dyed-in-the-wool Democrat, I rarely agree with the Trump administration. But this reform could have genuinely helped millions of Americans afford their prescriptions. It's a shame the administration buckled under the insurers and PMBs’ lobbying blitz.
Ron Klink is a former Democratic congressman from Pennsylvania and is currently senior policy adviser at Nelson Mullins Riley & Scarborough LLP.
