Get the latest market trends in your inbox

Stay on top of the latest market trends and economic insights with the Axios Markets newsletter. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Denver news in your inbox

Catch up on the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Des Moines news in your inbox

Catch up on the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Minneapolis-St. Paul news in your inbox

Catch up on the most important stories affecting your hometown with Axios Minneapolis-St. Paul

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tampa-St. Petersburg news in your inbox

Catch up on the most important stories affecting your hometown with Axios Tampa-St. Petersburg

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!
Expand chart
Data: CMS; Chart: Harry Stevens/Axios

Taxpayers are picking up more and more of the tab for Medicare's prescription drug coverage, because more seniors are racking up bills big enough to enter the program's "catastrophic phase," where government subsides are the highest.

Between the lines: Some experts say the program's basic structure encourages this spending growth, and needs to be reformed.

How it works: Medicare Part D has a ridiculously complicated financing structure, with different parties responsible for varying portions of each patient's bill throughout the year.

  • Insurers pay a large portion of seniors' initial drug costs.
  • But once patients spend a certain amount, they enter the catastrophic phase. Then the government pays 80% of the costs, through a reinsurance program. The insurer pays 15% and the enrollee pays 5%.
  • Higher reinsurance spending is driven by the number of enrollees who reach the catastrophic phase, and the costs they each incur.

Why it matters: As drug prices rise, patients and taxpayers are both paying more.

What they're saying: "The insurer is basically off the hook" once patients reach the catastrophic phase, said Doug Holtz-Eakin of the American Action Forum.

  • “The insurance guys don’t have strong incentives to negotiate too hard and pharma has every incentive to have high prices," Holtz-Eakin added.
  • "For products with exceptionally high prices, ...[insurers] are largely shielded from the costs of most price increases — effectively limiting the ability of the market to lower these drug prices," Northwestern's Craig Garthwaite said in a recent congressional testimony.

Yes, but: There's no government-funded safety net in private insurance, but even in that market, insurers aren't always able to negotiate lower prices.

  • Even in a restructured Part D program, insurers still might struggle to get lower prices for drugs that have no competition, or that Medicare requires them to cover.
  • "We should increase their incentive to negotiate, but we also need to be realistic about how much they can negotiate for those products," Vanderbilt's Stacie Dusetzina said.

Go deeper

Dave Lawler, author of World
2 hours ago - World

Venezuela's predictable elections herald an uncertain future

The watchful eyes of Hugo Chávez on an election poster in Caracas. Photo: Cristian Hernandez/AFP via Getty

Venezuelans will go to the polls on Sunday, Nicolás Maduro will complete his takeover of the last opposition-held body, and much of the world will refuse to recognize the results.

The big picture: The U.S. and dozens of other countries have backed an opposition boycott of the National Assembly elections on the grounds that — given Maduro's tactics (like tying jobs and welfare benefits to voting), track record, and control of the National Electoral Council — they will be neither free nor fair.

Biden plans to ask public to wear masks for first 100 days in office

Joe Biden. Photo: Mark Makela/Gettu Images

President-elect Joe Biden told CNN on Thursday that he plans to ask the American public to wear face masks for the first 100 days of his presidency.

The big picture: Biden also stated he has asked NIAID director Anthony Fauci to stay on in his current role, serve as a chief medical adviser and be part of his COVID-19 response team when he takes office early next year.