HHS Secretary’s Last-Minute Push to Cut Medicare Premium
Health and Human Services Secretary Xavier Becerra wants to reduce Medicare’s 2022 premium because of the recent price drop of controversial Alzheimer's drug Aduhelm. If the premium is cut, it will be too little, too late—and bad policy to boot.
Biogen, the manufacturer of Aduhelm, initially priced the drug at $56,000 for a year’s treatment. The prospect that millions of seniors might be prescribed Aduhelm led the Centers for Medicare & Medicaid Services (CMS) to increase Medicare’s standard Part B premium to help finance an unprecedented increase in program spending. The monthly premium paid by most seniors rose from $148.50 in 2021 to $170.10 in 2022. The expected cost of pharmaceutical treatment for Alzheimer’s disease was responsible for $11.60 of that increase.
CMS announced the premium increase on November 12. Faced with a tepid response from physicians and insurers, the company announced on December 20 that it would reduce the wholesale acquisition cost of the drug by about 50% starting in January. Secretary Becerra’s order to the Centers for Medicare & Medicaid Services (CMS) to “reassess the recommendation for the 2022 Medicare Part B premium” was issued on January 10—two months after the CMS premium announcement and three weeks after the price drop.
One might not expect the federal government to respond quickly to even major changes in the health care market. In this case, however, the price cut was widely publicized and unambiguously meant that Medicare spending for Aduhelm would be substantially lower than previously estimated. If there was the possibility of lowering Medicare’s premium, surely any reassessment could have begun in December.
But that is not the only problem with this timeline. Contrary to the Secretary’s statement, the November 12 premium announcement was not a “recommendation.” It was a policy decision prescribed by the Social Security Act that would have been cleared at the highest levels, presumably including the Secretary’s office. Because Medicare premiums are deducted from Social Security benefits, the premium amount must be set far enough in advance of the new year to ensure that the proper amount is deducted from monthly checks.
Making a change in the premium now would create serious administrative problems. Social Security benefits are paid on the second, third, or fourth Wednesdays of the month, depending on the recipient’s birth date. Payments net of Part B premiums will be deposited in beneficiary bank accounts starting on January 12. If premiums are reduced by the Secretary for the full year, nearly 60 million people will be due refunds for January and later months, depending on when the Social Security Administration can implement the change in payments.
The amount of savings for the average senior is modest. Roughly speaking, cutting the price of Aduhelm in half would reduce the monthly premium by $5.80, half of the premium amount associated with the new treatment. That’s less than $70 a year.
Higher-income seniors would see substantially more than that because they pay an additional income-related premium. Beneficiaries making more than $114,000 a year would save about $97 a year. Those making more than $500,000 a year would save $236. These are not large sums, but any premium reduction is regressive—not what one might expect from the current administration.
The large increase in Part B premiums that was added solely because of the introduction of a costly new treatment was unprecedented. Cutting back that increase after the start of the year would also be unprecedented—if the Secretary has the authority to do so without congressional approval. Standard practice is to factor any extra premium revenue into premium calculations for 2023. That would not generate headlines, but it would reinforce the political stability of the Medicare program.
Joseph Antos is the Wilson H. Taylor Scholar in Health Care and Retirement Policy at the American Enterprise Institute.
