Alan Arnfield wasn’t looking for fame, but he ended up receiving ample press attention after being part of a White House announcement recently on big changes to Medicare insulin pricing caps.

The upstate New Yorker with type 2 diabetes (T2D) says he simply responded to an email seeking comment about Medicare beneficiaries struggling to afford insulin. That led to a short video that played during a May 26, 2020, briefing by President Donald Trump in the Rose Garden, as part of the announcement of a new $35 insulin copay cap for certain Medicare plans starting in 2021.

There’s been a lot of excitement about this move marking an end to skyrocketing insulin prices, which have led to a crisis for many patients, and even some deaths. But of course this initial price cap is limited to a specific group of seniors.

“For me on Medicare’s Part D prescription plan, this will result in savings,” says 68-year-old Arnfield. But he’s still concerned about his two adult sons living with type 1 diabetes (T1D), who of course aren’t eligible for the updated Medicare Part D Senior Savings Model.

“We’re doing OK and not going without eating, but it is expensive and difficult to pay for my diabetes medications like insulin. But I do have questions and worry about everyone else who isn’t 65.”

It is true that any new policies adopted by Medicare tend to influence private insurance plans to follow suit, but it’s not yet clear whether, or when, that may happen in this case.

The complex Medicare coverage system can be a bit confusing to the uninitiated. It’s all under the umbrella of the Centers for Medicare and Medicaid Services (CMS), and there are multiple parts. The one impacted by this recent Medicare insulin cost development is the prescription-focused Part D. That’s where insulin typically fits in — though insulin can also be covered under Medicare Part B, which includes diabetes devices, but that’s only if the insulin is being covered in conjunction with use of an insulin pump.

What patients pay under Medicare Part D varies based on their particular plan, and many have supplemental, secondary insurance plans that impact the total cost they’re responsible for. But essentially, there are four main stages within Part D:

  • Pre-deductible: Before meeting the annual deductible, a Medicare beneficiary pays 100 percent.
  • Initial coverage: After meeting the deductible, a patient typically makes a simple copay per medication or service.
  • The so-called Donut Hole (aka coverage gap): When a patient reaches a certain threshold for total drug costs ($4,020 in 2020), they then become responsible for 25 percent of the medication’s price until reaching the next stage. For example, if a bottle of insulin costs $300 and you pay your plan’s $20 copay during the initial coverage period, you’ll be responsible for paying $75 during the donut hole period.
  • Catastrophic: Eventually, when a higher limit is reached, a patient exits the donut hole into what’s known as “catastrophic coverage,” in which prescription medications are covered at 100 percent. Most patients reach this point later in the year, generally speaking.

Importantly, this new Medicare $35 cap impacts all of these coverage stages, meaning patients will not be required to pay the large deductible first, or the often higher costs experienced during the “donut hole” stage.

This chart from CMS breaks it down nicely:

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Per CMS estimates, Medicare beneficiaries who use insulin and join one of the participating plans could see an average out-of-pocket savings of $446 per year, or 66 percent.

A new study recently published in the New England Journal of Medicine on the average out-of-pocket insulin costs per year shows that Medicare beneficiaries have the potential to save even more.

This new data analysis shows that a “typical” Part D prescription plan during 2019 had Medicare beneficiaries paying $1,140 for the year. By comparison, under the new model starting in 2021, Medicare beneficiaries are expected to pay no more than $420 in annual out-of-pocket costs for insulin — a savings of over $700 per year on just insulin alone.

This is the important part: Getting these savings is not automatic, it’s optional. So patients need to pay attention and actively opt in.

People will need to choose one of the new “enhanced” plans to get the savings, whether it’s a standalone prescription drug plan or a Medicare Advantage plan with optional prescription drug coverage. The insulin cost savings is not included in Medicare “basic” plans, which typically don’t include the best coverage or savings offers for prescriptions, but have a lower premium.

At the time of the announcement on May 26, a total of 88 insurers had agreed to participate with a total of 1,750 different drug coverage plan options.

CMS plans to release more detail on premiums and costs for these specific Medicare plans beginning in September 2020, with final information on the savings model.

Beneficiaries will be able to enroll during the Medicare open enrollment period from Oct. 15, 2020, through Dec. 7, 2020. The Part D coverage in these plans would begin Jan. 1, 2021.

Who’s picking up the slack to cover these reduced prices? We’ve made an effort to break it down:

Currently, Part D plan sponsors (the organizations providing Medicare coverage plans) can offer prescription drugs at lower cost-sharing during the donut hole coverage gap. But the sponsors have to pick up the costs that would normally be paid by Pharma companies. Often, those costs are passed on to Medicare beneficiaries (the patients) in the form of higher premiums.

This new policy makes two significant changes:

  1. Pharma companies — specifically, Eli Lilly, Novo Nordisk, and Sanofi as the participating insulin makers — can continue paying their full coverage gap discount for products, even if a Part D plan offers lower cost-sharing.
  2. Part D plans are required to cap insulin costs at $35 for a month’s supply, by applying the manufacturer rebates.

With the cost burden shifted to manufacturers, they will be paying an estimated $250 million additionally during the 5 years of this voluntary model, according to CMS. After that 5-year period starting in 2021, it’s unclear what happens next, but CMS will likely reassess whether to continue this policy, or make changes.

American Diabetes Association CEO Tracey Brown attended the presidential announcement in late May, praising this effort and noting that it’s an important first step, but more needs to be done.

“This is an important beginning,” she said. “During this time of national emergency due to COVID-19, we call on policymakers at the state and federal levels to suspend all cost-sharing for insulin and other drugs. No one who requires medication should be forced to go without during this unprecedented public health and economic crisis.”

Medicare covers roughly 46 million people or 15 percent of the U.S. population. CMS points out that 1 in 3 of those people have diabetes and more than 3.3 million Medicare beneficiaries use at least one type of insulin.

But as noted, this new model is only for a small number of those total beneficiaries. Indeed, while this new offer of $35 insulin is great for some folks, there are a number of limitations to consider.

First, beneficiaries could be facing higher Medicare premiums. CMS says enhanced plan premiums could rise as a result of this, but that’s up to each plan sponsor. Enhanced standalone plans already have premiums nearly double the basic plans — $57 monthly compared to $31 monthly. If that continues or increases, it could offset some of the insulin cost savings here.

On top of that, this Kaiser Family Foundation analysis points out that the new insulin payment model is not available to Medicare beneficiaries already receiving Low Income Subsidies, which is a majority of those on their enhanced plans.

It’s also important to point out that this new model doesn’t address the issue of “non-medical switching,” in which plans essentially force their members to use specific medication brands for business reasons. Initial info about this $35 pay cap model indicates participating plans are not required to offer Medicare beneficiaries a choice in insulins. This means patients could be forced to change insulins in order to receive the price cap, or face higher costs if they remain on a different insulin.

Also, this new policy is focused on people ages 65 and older. Medicare accounts for a small chunk of the big picture. There are a lot more people who aren’t on Medicare who are struggling to afford insulin.

Note that this is a pilot program, in a sense. CMS says it will look at how this works starting in 2021 and determine whether any changes are needed as time goes on.

CMS Administrator Seema Verma also said during the announcement: “If it goes well, we’ll extend this to other drugs. We’re starting with insulin, but depending on the progress, we will consider offering this flexibility to manufacturers and plans with other drugs, depending on the results. We think this creates a foundation and a platform to fix things, some of the problems that we have in the Part D plans.”

The good news is that if Medicare does decide to continue with this low-cost insulin, private insurers may well follow suit.

Arnfield, who has lived with type 2 diabetes for a decade now, is optimistic that the new Senior Savings Model will lead to cost savings for him.

Alan Arnfield

He generally checks his glucose levels a few times a day with a fingerstick test, rather than a continuous glucose monitor (CGM), and describes himself as very insulin resistant. He takes three different diabetes drugs: the mealtime insulin Humalog, long-acting insulin Toujeo, as well as the T2D oral medication Ozempic. That latter is the priciest at $195 per month, while the insulins can total nearly $100 a month under his current plan.

All of that is on top of his $435 standard deductible, as well as the $89 monthly premium he pays for his Medicare plan.

Cutting that monthly $400 medication cost in half would be a significant help for his family, not to mention being able to sidestep the standard deductible usually attached to insulin, Arnfield says.

“It’s tough,” he says, especially when dealing with the donut hole coverage gap that brings higher costs.

He’s also no stranger to diabetes beyond his own T2D, as his two sons both live with type 1 diabetes: his oldest, now 44, and his youngest, now 19, were both diagnosed as kids. The latter, currently in his freshman year of college, is on Medicaid and Arnfield worries about him as he moves through higher education and enters the post-college workforce where he’ll be forced to pay exorbitant costs for insulin.

Now 68, Arnfield spent three decades working for IBM before retiring in 2015 and starting a new career in real estate brokerage with his wife, in upstate New York. While they try to make their income as steady as possible, the real estate market is unpredictable.

“We work hard, but it’s uncertain. With my expensive prescriptions, I do wonder how long I can keep up with my real estate. I work 8 hours a day now and can’t slow down, even though I’d like to at some point. I worry about how long I can keep up at this pace and still be able to afford everything.”

As to the White House announcement, Arnfield said he received an email from the Association of Mature American Citizens (AMAC) seeking members’ stories about diabetes costs and insulin pricing. He responded, and recruited his T1D-techie son to help him record a 30-second video.

He sent that along and didn’t think much more about it — until hearing back that the White House liked his video and wanted to feature it in the upcoming announcement. Arnfield enjoyed watching his “30 seconds of fame” live, and laughs about how afterward, he received messages and calls from people in corporate America that he hadn’t talked to in his years.

Since the announcement, Arnfield said he hasn’t heard any more from the White House or CMS about what to expect going forward. All of this will certainly make him study his Medicare plan options even more closely than usual, once open enrollment begins in later 2020.

Even with this new policy for cheaper insulin, he remains concerned about the unanswered questions: How will premiums be affected? And will non-Medicare folk see higher insulin prices as a result?

“Sure, this equates to savings for me but it’s specific to Part D… there are a whole lot of people who are not 65, but are in desperate straits,” he said. “I do worry about everyone, including my son who’s type 1 in college. What about them? We can’t lose sight of that.”

Those on front lines selling Medicare insurance plans to beneficiaries say that the new $35 copay cap will help, even with its limitations.

The non-profit SCAN Health Plan, which focuses on seniors and is one of the largest Medicare Advantage plans in the country, says this new model is an important step in the right direction for lower prescription drug prices and out-of-pocket costs for those 65 and older. Nearly 10 percent of the org’s members have diabetes and take insulin, according to SCAN’s Chief Pharmacy Officer Sharon Jhawar. As CMS outlines more details on enhanced plans, SCAN plans to market those accordingly and share details for those who might be interested.

At national specialty pharmacy benefit manager (PBM) AscellaHealth — which offers commercial, Medicare, and Medicaid services — President and CEO Dea Belazi says this will provide a valuable new choice for some individuals to save money.

“There is a potential that this additional cost for the plans may be reflected in higher premiums, but due to the nature of the benefit, the initial premiums for these 2021 plans are likely to be market competitive,” Belazi said. “The potential lies with enhanced diabetes management and improved affordability and access to insulin to lower the overall cost of the beneficiary’s healthcare and subsequent premiums.”

This news announcement didn’t escape eye rolls and criticism, however, given the times we live in.

For starters, some view this as a political maneuver by President Trump, aimed at wooing the senior vote before the upcoming 2020 presidential election.

And then there’s the misinformation Trump propagated with his bizarre comment: “I don’t use insulin. Should I be? Huh? I never thought about it.” There’s no evidence he is touched by diabetes or would ever need to consider taking insulin, which can be lethal to those who don’t need it.

Basically, he belittled the importance of this life-sustaining medication, making it sound like yet another lifestyle choice for the health-minded, like choosing to take a vitamin. This potentially adds to the stigma and confusion that exists about diabetes across the world.

Those sidelines are unfortunate, because at the base level this is a milestone for people with diabetes: This Medicare policy change on insulin pricing is a huge step in the right direction.