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Who pays for proposed Medicare reform

Senate Finance Committee Chairman Chuck Grassley said last week that he is interested in restructuring Medicare's prescription drug benefit, including putting drug manufacturers on the hook for some of the costs accrued in the "catastrophic phase" of coverage.

By the numbers: A new analysis by the American Action Forum shows the winners and losers. Cheaper drugs would win, and more expensive drugs would end up paying more than they do now.

  • That's kind of the point of the proposal. As drug prices continue to go up, the cost of even one prescription can send a senior straight into the catastrophic phase, where the government picks up 80% of the tab.
  • Experts say that creates bad incentives, and that putting both drugmakers and insurers on the hook for more of these costs will help contain prices.

Details: The maximum rebate for any given drug in 2020 is about $3,700.

  • Reforming these rebates to be a percentage of the drug's cost in the catastrophic phase would mean that there's no limit on how much a drug company would pay.
  • The higher the percentage, the more pharma would have to pay — and the more losers there would be compared to current policy.

My thought bubble: Pharma is going to hate this, especially if it puts the industry as a whole on the hook for greater discounts.

Go deeper: How your health care would change under "Medicare for All"