New Alzheimer’s Drug Could Significantly Increase Medicare Spending in Massachusetts

New Alzheimer’s Drug Could Significantly Increase Medicare Spending in Massachusetts

Last updated on: November 10, 2022

New Alzheimer’s Drug Could Significantly Increase Medicare Spending in Massachusetts

A new, expensive Alzheimer’s drug might hit the market soon, and the cost implications are significant, especially for people with Medicare. After almost 20 years with no new medications for Alzheimer’s, a new drug has been approved by the Food And Drug Administration (FDA). It’s called Aduhlem (aducanumab). While this might sound like great news, the price tag appears to be quite a problem. Currently, it looks like it will cost approximately $56,000 per year per person in Massachusetts.

Alzheimer’s affects approximately 6 million people in America, most being over the age of 65 years old. This means many people who have Alzheimer’s Disease in Massachusetts are on Medicare. 

The new medication is an IV medication that would be administered by physicians. Therefore, it is not covered under Medicare Part D. Instead, it is covered under Medicare Part B, which usually pays for physician-administered medications. In order to be covered under Part B, a medication has to be reasonable and necessary for the patient. 

A Few Things To Note

  • In Massachusetts, Medicare has not yet officially agreed to cover this drug. However, The Centers For Medicare and Medicaid Services (CMS) usually don’t take cost into account when making coverage determinations. Regarding this new drug, it has been reported that CMS might set limits on the coverage because of its cost. It’s unclear still what those limits would look like.
  • Medicare does not set its own prices for drugs that are covered under Medicare Part B. Rather, Medicare reimburses providers 106 percent of the average sales price (ASP), which is equal to the average cost to all non-federal purchasers in the U.S, inclusive of rebates. Many new drugs obviously won’t have an ASP, so instead, the price is based on the wholesale acquisition cost (WAC) until an average sales price is determined.

What Will It Cost Medicare?

It’s unclear right now how many Medicare beneficiaries would be interested in taking this drug. Still, for reference, in 2017, more than 2 million Medicare beneficiaries used one or more of the Alzheimer’s drugs covered under Part D. If just 25 percent of these people (500,000) decided to try the new drug, it would amount to nearly 29 billion dollars for one year of treatment ($56,000 list price multiplied by 103% multiplied by 500,000 people). To put this amount of money in context, Medicare spent a total of 37 billion dollars in 2019 for all Part B drugs.

Many people suspect that spending on the drug for Medicare patients could end up being higher than the budgets for the Environmental Protection Agency or NASA.

What Does This Mean For Medicare Beneficiaries?

This could mean extremely high out-of-pocket costs for people with Medicare. Medicare Part B generally covers eighty percent of costs. This means if you don’t have a Medicare Supplement, you’re responsible for the remaining eighty percent. For one year, this could cost a person $11,500. And that’s just for the Alzheimer’s medication. This doesn’t include any other medical costs that a person might incur for the year. Keep in mind, this isn’t a cure. This means people may have to take this for many years and will have to continue paying these out-of-pocket costs for as long as they take the medication. 

Does A Medigap Plan Solve The Problem?

In many ways, yes. Since the Alzheimer’s drug will be covered under Medicare Part B, the Supplement Plan should cover the twenty percent coinsurance. While it would likely pay for some or all of the twenty percent that Part B doesn’t cover, it is likely that premiums would rise because of the extra costs incurred. The savings from a Medicare Supplement Plan could still be quite significant, despite an increase in monthly premiums.

Why You Should Sign Up For A Medigap Plan As Soon As You Become Eligible in the state of MA

You might initially think that you won’t need a Medigap plan, so you decide not to enroll when you first become eligible. Imagine a few years later, you now need this Alzheimer’s drug. Because you missed your initial enrollment window, you likely have to go through medical underwriting if you decide you want a Medigap plan. This means insurance companies can either outright deny you a Medigap plan, or they can agree to cover you, but the premiums will be significantly higher. Sometimes they increase the premium to the point where you literally might not be able to afford it.

You may not have realized that some medications are covered under Medicare Part B and not Part D. If you signed up for Medicare Part D in Massachusetts, this unfortunately wouldn’t help you with this new Alzheimer’s drug. It’s always a good idea to enroll in a Supplement Plan as soon as you become eligible!

Unfortunate Consequences 

There are many drugs that cost more than this one, the main difference is that people will need to take this drug for many years. It is not believed that the drug slows the progression of Alzheimer’s, so once a person starts taking it, they may need or want to take it forever. Because of this, costs for Medicare will likely increase. In addition to the out-of-pocket payments a person may have to incur if they decide to take this drug, Part B premiums would likely go up for every person enrolled to try to make up some of the costs Medicare incurs. 

Enroll Medicare Can Help

If you’re ever confused about your coverage or what kind of plan you need to be enrolled in, don’t hesitate to reach out to us. We have experts on call who can help you decide which plans are best for you. We will find you the best plans at the best prices. We’re all still waiting to see precisely how Medicare handles the coverage for this new drug, but as soon as we have answers, we will make sure you have them as well!

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