MedPAC Sounds the Alarm on Stability of PDP Market

The Medicare Payment Advisory Commission (MedPAC) will be looking at ways to shore up the stand-alone prescription drug plan (PDP) portion of the Part D benefit in the coming year, after completing work on a report to Congress outlining “concerning” trends in the marketplace. MedPAC held its final discussion in April for the report on trends between the stand-alone PDP and fully integrated Medicare Advantage (MA-PD) portions of the Part D benefit. The meeting echoed prior discussions, where commissioners voiced increasing concern about the future of the PDP market with higher premiums and decreasing competition. With the descriptive work wrapping up, most MedPAC commissioners want to discuss potential solutions to recommend to Congress in future updates. Some are warning the current Part D trends could lead to the end of traditional fee-for-service (FFS) Medicare without changes. “I feel very strongly that this is probably the most important thing that we are working on, and I hope we can continue to really push forward,” said MedPAC Vice Chair Amol Navathe, of the University of Pennsylvania Perelman School of Medicine. Harmonic Health CMO Scott Sarran suggested the current trend, which he attributes to the “uneven playing field” between the MA-PD and PDP sides of the benefit, could mean the traditional FFS Medicare program may “wither away.” “We are not quite there,” Sarran said. “It is pretty easy to envision some realistic scenarios over the next two or three years, where if the gap between PDP and MA-PD becomes greater, then we will see that.” He urged MedPAC to “take the next step over the next cycle and start at least teeing up solution sets, because if we wait a year or two, it may be too late.” Some Commissioners Worry About A ‘Death Spiral’ Lawrence Casalino, of Weill Cornell Medical College, agreed the fundamental issue is the lack of a level playing field. “I’m not arguing that Medicare Advantage is bad,” he said. “I don’t mean to argue that at all. But I would argue that overpaying Medicare Advantage plans by $83 billion a year and having the MA plans use part of that $83 billion to subsidize their MA-PD plans makes a very un-level playing field with PDPs. That is a problem.” Casalino argued the MedPAC staff should raise more warnings in the upcoming report to Congress beyond the current relatively technical presentation of the issues. “I would like to see some discussion of how and why the Part D market might unwind,” Casalino said, including describing “what a death spiral is and how this could lead to a death spiral” in the stand-alone market. “If the price difference between the MA plans and the PDPs continues to increase, we’ll get only the sickest people in the PDPs,” he added. “The PDP market will unravel.” “If there is no PDP market, there is really no traditional Medicare anymore,” Casalino said. “People can have their opinions about what is good or bad about that. But I think people should clearly understand the sequence … I don’t think I’m overstating this situation.” No Need To ‘Bash’ MA To Defend PDP Market The sense of urgency is not unanimous. Some MedPAC commissioners argued “over-correcting” is possible and urged they wait for the impact of CMS’s PDP market stabilization efforts. “CMS has already implemented some initiatives to help remedy this,” Horizon Blue Cross Blue Shield Chief Actuary Kenny Kan said, citing CMS’S plan to apply separate normalization factors for risk-adjusting PDP and MA-PD plans, as well as the agency’s “premium stabilization” program adopted for 2025. Given the new policies, along with the statutory changes to Part D in the Inflation Reduction Act and the pending implementation of negotiated prices in Part D, “I believe we need to wait for the landscape to stabilize to ensure that we don’t over-correct and thereby spur greater concentration,” Kan said. Enrollment trends for 2025 appear to support the view that there is no immediate crisis. Brian Miller, of Johns Hopkins University, also argued the risk adjustment changes “might solve, not all the problems, but a lot of the imbalances.” “It actually sounds like CMS got ahead of the problem and beat us to the punch, in a good way,” he said. Miller urged the commission not to “get ahead of ourselves” in proposing bigger changes without seeing the effect of the ongoing corrections. Miller broadly agreed the PDP market likely will need to be adapted to the new realities in place under the IRA. He urged the commission to approach the issue in a “balanced” way, and not just “bash” Medicare Advantage. “There are these additional flexibilities that MA plans get, and those flexibilities…are not necessarily bad,” Navathe said. “In fact, in a lot of ways, they are very good for beneficiaries. This notion that the same organization is providing the medical and the pharmacy benefit together and shares the risk across that organization…is great, because then we can have more generous benefits on the pharmacy side, and whether that is for insulin or some other medication that actually decreases cost on the medical side, that is really beneficial for beneficiaries, and it is beneficial for society from a total cost perspective as well. To some extent, it doesn’t make sense that we want to disentangle that, because I think that is really good for beneficiaries.” MedPAC Chair Michael Chernew, of Harvard University, closed the session declaring there is no way to address the imbalance in Part D without focusing more broadly on payment for MA plans, an area the commission already is exploring. He also reinforced Miller’s point about the challenges of finding good policies to fit with the blended payment model inherent in Part D. “We do have to figure out how we can deal with the fact that we’ve set up the A/B side just structurally so differently than we set up the PDP side, and then with the payment issues that we’ve identified in other work, how that skews a bunch of choices for everybody,” he said. MedPAC’s next semiannual report to Congress will be released on June 12. By Michael McCaughan This article originally appeared in Pink Sheet, which shares a parent company with Radar on Medicare Advantage.