On Tuesday, the Biden administration announced what appeared to be sensational news: For the first time in over ten years, Medicare would become cheaper for millions of retirees.
On the surface, the announcement about one of America's largest social safety programs was remarkable. The monthly premium for Medicare Part B, which covers doctor visits and other outpatient care, will
"For years, that fee has gone up," Biden
But upon closer inspection, the news is both less significant and more complicated than meets the eye. First of all, the savings only amount to a few dollars per month. The premium is scheduled to decrease from $170.10 to $164.90 next year, a difference of $5.20.
"The dollar amount is maybe no big deal," said Mary Johnson, a Social Security and Medicare policy analyst at the
Medicare is enormously complex, in large because it consists of a patchwork of different programs authorized over many years. The clutter of options and choices is confusing for millions of Americans and presents a special challenge for many financial advisors. In 2021, the program covered 65 million Americans, spending a total of
Certainly, a premium decrease is better news for retirees than an increase, which is what happens most years. But it's also worth noting why the price had so much room to come down. In 2022, the premium for Medicare Part B suddenly shot up by $21.60 — the
The Aduhelm saga
The reasons for this are where the story gets complicated. About half of the 2022 price jump was caused by a single drug: Aduhelm, an expensive new medicine for Alzheimer's Disease. Originally, Aduhelm was expected to cost $56,000 per year. When Medicare set its premiums for 2022, it still hadn't decided whether or not to cover the drug. But to err on the side of caution, it charged enough so that Aduhelm could be paid for. This sent premiums soaring.
"It was a thorn in everyone's side," Johnson said. "Aduhelm became a poster child for drug overcharging."
Political pressure mounted on the Biden administration to intervene. Meanwhile, Aduhelm faced a
"The notion that one pharmaceutical company can raise the price of one drug so much that it could negatively impact 57 million senior citizens and the future of Medicare is beyond absurd," Sanders wrote. "With Democrats in control of the White House, the House and the Senate we cannot let that happen."
Then, late last December, Biogen made a shocking announcement: It was cutting the drug's price in half — down to about $28,200. But for Medicare beneficiaries, it was too late. The new premiums took effect in January 2022, charging 14.5% more for Medicare Part B. Retirees were furious.
"Our Part B premium was based on the cost of the drug at $56,000," Johnson said. "So already I'm being overcharged!"
Senior citizen groups and their allies in Congress continued to demand action — and later that year, they got it. In April, Medicare decided to
On September 27, that decision was made final. In announcing the new premiums, Medicare
"That is unprecedented," Johnson said. "We've never had a reassessment. We've never had a finding that 'Yes, the amount that was charged was excessive' … and they were going to use the excessive amount to reduce premiums."
For senior citizens and their advocates, the announcement marked a hard-won victory. But for the Biden administration, the news — while certainly positive — had little to do with any broader policy. For example, the Inflation Reduction Act, which gives Medicare the power to negotiate drug prices, would not have applied to Aduhelm even if the law had been in effect at the time, because it only affects drugs that have been on the market for several years.
But is it worth celebrating? Some experts think so. In a time of raging inflation, the fact that any expense is going down rather than up — however marginally — is welcome news for many retirees.
"Inflation is one of the biggest threats to this demographic's retirement today," said Rhian Horgan, the CEO of retirement education platform
For her part, Johnson is pleased that the Part B premium will decrease next year, but doubts that something like this will happen again. The unique set of political circumstances — Democrats controlling both Congress and the White House, the president pushing a bill to control drug prices — is unlikely to repeat itself, she said. Nevertheless, the story could have one long-lasting legacy.
"I think what it may do [is] it may make drug makers more constrained," she said. "There's going to be changes to how drugs are going to be priced."
