Last month, the Trump administration announced a groundbreaking agreement with drug manufacturers to cut insulin costs by as much as 66% for Medicare beneficiaries. That’s a big deal for the approximately 3.3 million seniors who depend on insulin to manage their diabetes.
But what, exactly, does the new agreement mean for you? If you’re an insulin-dependent diabetic—or you care for someone who is—here’s what you need to know about the new Medicare savings program for insulin.
Does Medicare cover insulin?
In most cases, there is no coverage for insulin under Original Medicare (Part A and Part B). There’s an exception for individuals who use an insulin pump, however.
If your doctor prescribes an external insulin pump, it may be covered under Part B’s durable medical equipment benefit. If Medicare approves your insulin pump, it also pays for the insulin used with the pump. You pay 20% of the allowable charges after you meet your Part B deductible. When it comes to injectable and inhaled insulin, there’s generally no coverage under Part A and Part B.
Medicare Part D prescription drug plans, however, are required to cover injectable and inhaled insulin. The new Medicare savings program is designed to work with Part D plans and changes the way plan sponsors and drug manufacturers pay insulin costs for Medicare beneficiaries. Instead of tiered copayments and percentage-based coinsurance, the new savings model caps out-of-pocket insulin costs at just $35 per prescription.
Understanding insulin costs
If you’re a diabetic, you know insulin costs have skyrocketed in the past decade. Between 2002 and 2013, the cost of insulin therapy tripled; it increased another 55% since 2014.
The cost increases haven’t been uniform, however. Traditional short- and intermediate-acting insulins such as Humulin and Novolin have actually gone down considerably and now cost less than half as much as insulin analogs such as lispro and aspart.
The method of administration also affects the cost. Insulin pens were first introduced in 1985 by Novo Nordisk and cost about 30% more per dose than insulin vials. Some fast-acting insulins cost more than twice as much in pen form versus vials.
The latest innovation, the inhalable insulin Afrezza, costs roughly six times as much as other rapid-acting insulins.
Just as with other types of prescription medications, insulin is available in both generic and brand-name form. Once the patent on a particular insulin formulation expires, other manufacturers can make follow-on generic versions which typically cost a fraction of their brand-name equivalents.
What it all means is that insulin prices vary widely—and that makes it hard for diabetics to plan for their insulin costs. According to data released by GoodRx, 10-milliliter vials of insulin retail for as little as $75 to as much as $400 each. Pens cost significantly more per dose with costs for 3-milliliter devices ranging between $80 and $240. Afrezza, the inhalable insulin powder, can cost as much as $1.11 per unit or about 10 times the price per unit of traditional forms of insulin.
Drug manufacturers aren’t oblivious to the high cost of insulin therapy. Major insulin makers Sanofi-Aventis, Eli Lilly, and Novo Nordisk all offer copay cards and financial assistance programs to help lower out-of-pocket costs. Some even partner with national drug store chains to make insulin available at heavily discounted prices.
Those efforts are helpful, but they don’t change the fact that insulin copays and coinsurance amounts are a tremendous financial burden for Part D enrollees.
Medicare Part D and insulin
Medicare Part D covers insulin, but the benefits are different in each phase of coverage:
- During the deductible phase, plan members pay 100% of their insulin costs. That means spending as much as $435 out-of-pocket before the plan pays its first dollar.
- During the initial coverage phase, members pay a copayment for their insulin prescriptions. Depending on the plan’s formulary and the type of insulin, the copay for a 10 mL vial of brand-name synthetic analog could be $75 or more.
- In the coverage gap, members pay 25% of the actual cost of their medications. The plan and the drug manufacturer pay the other 75%. That translates to $100 on a $400 vial of insulin.
- If you reach catastrophic coverage, you’ll pay the greater of 5% of actual costs or $8.95 for insulin.
According to the Centers for Medicare and Medicaid Services (CMS), the average Part D plan enrollee spends nearly $700 a year out-of-pocket on insulin costs. Data from the Kaiser Family Foundation shows that 25% of enrollees spend nearly $1,500 a year, and 5% spend $2,000 or more a year.
The worst part for most insulin-dependent Medicare beneficiaries isn’t necessarily the total amount of out-of-pocket spending, but the erratic way it’s incurred. Part D plan members pay the full cost of their insulin during the deductible phase, a predictable copayment during initial coverage, and potentially hundreds of dollars each month in cost-sharing during the coverage gap.
This multi-phase system makes budgeting impossible—and it’s a major reason people go without necessary medication when the predictable copayment goes away and percentage-based cost-sharing kicks in.
The new Medicare Part D Senior Savings Model
Earlier this year, CMS began tweaking the rules for the drug manufacturer discount program used during the coverage gap. The idea was to encourage Part D plans to adopt a set copayment for insulin instead of the current 25% coinsurance amount. The Trump administration challenged plans to cap insulin copays at $35.
The problem for Part D plan sponsors was that the discount guidelines strongly disincentivized the switch to a flat copayment. Drug manufacturers are required to pay 70% of the patient’s medication costs during the coverage gap. The plan member pays 25% and the plan pays the remaining 5%.
The manufacturer’s 70% discount is based on the amount actually billed to the patient. For example, if the pharmacy charges the plan member $500 for a vial of insulin, the drug manufacturer pays 70% of that amount or $350. The patient pays 25% or $125, and the plan pays $25.
But if the plan capped the amount the patient could be charged at $35 as the administration proposed, the manufacturer would only have to pay 70% of the $35 copayment charged to the patient, not the full cost of the insulin. In the example above, for a $500 vial of insulin, the manufacturer would be responsible for just $24.50 and the plan would have to pay $439.50 to make up the difference.
Few plans could afford to adopt the insulin copayment model under the previous rules without dramatically raising premium costs.
The Senior Savings Model removes that financial disincentive by applying the 70% manufacturer contribution to the full amount of the insulin instead of the amount billed to the plan member. The plan’s costs are still higher under the new model, but not unmanageably so. It now only has to cover the $90 difference between the member’s $125 coinsurance under the old model and the $35 copayment under the Senior Savings Model.
Cost Comparison with the Senior Savings Model for $500 Insulin Prescription
|Current Guidelines||Senior Savings Model|
|Member cost-sharing||25% or $125||$35 (savings of $90)|
|Manufacturer||70% or $350||70% or $350|
|Part D plan||5% or $25||$115 (increase of $90)|
The Senior Savings Model takes the savings a step farther and applies the new $35 insulin copayment to every phase of Part D coverage except the catastrophic coverage phase. Under the new model, insulin-dependent diabetics pay a maximum of $35 for their insulin prescriptions even if they haven’t met their deductible. With the Senior Savings Model, insulin costs will be exactly the same no matter the coverage phase, making it easier for members to budget for their health care expenses.
CMS estimates that the average Part D plan member will save about $450 a year on insulin, a savings of 66%.
Finding a Part D Plan with the Senior Savings Model
The Senior Savings Model is a voluntary opt-in program, but CMS announced that as of May 26, over 1,750 standalone Part D plans and Medicare Advantage prescription drug plans had applied to offer low-cost insulin under the new model. Insulin makers Eli Lilly, Novo Nordisk, and Sanofi-Aventis also signed up to participate.
That’s great news because it means most Medicare beneficiaries will be able to find a plan with the Senior Savings Model in their service area. There are a few things to keep in mind, however, before you shop for plans:
- The new plans will first become available during the 2020 fall Annual Election Period and become effective on 1/1/2021.
- The Senior Savings Model is only available with enhanced Part D plans. Basic benefits plans aren’t allowed to offer the new insulin copayment.
- Medicare Advantage Special Needs Plans, PACE plans, and certain other Medicare plans are not eligible for the Senior Savings Model.
- Insurers aren’t required to include every type of insulin in their Senior Savings Model plan formularies; they could choose to cover an insulin pen from one manufacturer but not from another, for example. However, they must cover at least one pen-dosage form and one vial-dosage form for each type of insulin (short-acting, intermediate-acting, long-acting, and rapid-acting) in their formulary.
- Plans are allowed to set their insulin copayment below $35, but if they do, they must apply the same lower copayment to all three phases of coverage.
CMS is adjusting its plan finder tool to include a filter for Senior Savings Model plans to make it easy to find and compare participating plans.
The bottom line on diabetes, insulin, and Medicare
Getting the health care you need to monitor and treat diabetes is expensive. Even with great insurance like Medicare, costs can be unpredictable and overwhelming. The new Senior Savings Model is an innovative private-public partnership that helps stabilize insulin costs; we hope to see even more innovative programs for seniors in the future.
In the meantime, the most important thing you can do to protect your health is to find a Medicare plan that works for your needs. We’re here to help you sort through your options, compare costs, and make the right choice. Get in touch if you have questions about the new Senior Savings Model and how to save money on diabetic management and insulin treatment.