Patients and Medicare Both Forced to Pay More 

For most patients with insurance, their health plan often decides which medications they can access and how much those prescriptions cost. But for Medicare patients, that process is managed by regional entities called Medicare administrative contractors.  

Medicare Administrative Contractors’ Authority 

These contractors perform various functions on behalf of the Centers for Medicare and Medicaid Services in their assigned service area. One responsibility that gives Medicare administrative contractors influence over patients’ access to treatments is their ability to determine coverage of provider-administered medications, including complex biologic drugs.  

Whether a medication falls under Part B – requiring administration in a doctor’s office – or Part D – requiring a patient to self-administer it – directly affects both patients’ out-of-pocket expenses and overall costs to Medicare. A recent HHS Inspector General report provides one example. 

“Some Enrollees Paid Substantially More” 

The report focused on one particular biologic, ustekinumab, that is used to treat a wide range of autoimmune diseases, including plaque psoriasis. For several years, it was covered under both Part B and Part D. Then, in late 2022, certain Medicare administrative contractors made the decision to exclude it from Part B. 

This coverage determination had broader implications for patients than where they receive their medication, however. The decision also led to increases in patients’ out-of-pocket costs, particularly for those not receiving financial assistance. 

Medicare patients’ costs are often more controlled for drugs administered in the doctor’s office. And this was true for the biologic under review. “Out-of-pocket costs under Part B were minimal as long as the enrollee had supplemental insurance,” according to the report. 

In contrast, “an enrollee who self-administered Stelara at home under Part D paid an average of nearly $6,000 out of pocket.” This is because under Part D, patients are typically responsible for their copay – generally a flat amount – or coinsurance – a percentage of a medication’s list price. The latter is more common for higher-cost drugs like biologics. And it may be inflated because of opaque negotiations between pharmacy benefit managers, insurers and manufacturers. 

Costs Rise for Medicare, Too 

But patients were not the only party paying more. The Medicare administrative contractors’ decision also cost the government more.  

Differences in “payment amounts for the same drug – as well as decisions regarding coverage under Medicare Part B and Part D – can significantly affect” expenditures for the Medicare program as well, concluded the Inspector General.  

Given the authority Medicare administrative contractors wield, they would do well to consider the downstream costs to patients, and the government, before making their decisions.