Vice President Kamala Harris’s campaign plan to cap the costs of prescription drugs has some healthcare analysts warning that it would cause an increase in health insurance premiums, with the only debate being how much.
Last week, Harris released a series of economic proposals aimed at lowering prices for food, housing, and healthcare in an attempt to distance herself from the economic legacy of President Joe Biden.
Among those proposals is a plan to set caps on the amount paid for households for drugs. The policy would expand provisions of the Inflation Reduction Act, which Democrats passed in 2022, meant to lower prescription drug costs for beneficiaries of Medicare, the government healthcare program for people who are over 65 or who have certain disabilities.
One provision of the Inflation Reduction Act caps spending on insulin to $35 per month cap for Medicare beneficiaries. Harris is now calling for that cap to be imposed on all healthcare plans. Biden has alluded to the proposition of expanding the insulin price cap for several weeks and announced it publicly as a goal of his last few months in office.
Another part of the Inflation Reduction Act, slated to take effect in 2025, caps total annual spending on prescription drugs for Medicare beneficiaries at $2,000, meaning that the Centers for Medicare and Medicaid Services would cover any prescription costs exceeding $2,000.
Harris is now pledging to extend that provision to all private healthcare plans as well, meaning that private insurance providers would be required to foot the bill for prescription drug spending over $2,000.
Healthcare experts predict that health insurance premiums will likely increase if these two policies are implemented into law. But it is difficult to assess how much insurance prices could rise.
“What they’re doing already, it’s increasing premiums,” healthcare policy adviser at the Heritage Foundation Ed Haislmaier told the Washington Examiner. “That’s not an expectation. That’s a fact. It has increased premiums already, and it’s expected to increase premiums more, even substantially more, as early as this fall.”
Last year, health insurance premiums for family coverage reached nearly $24,000, increasing by 7%. Premiums for single coverage rose to nearly $8,500, growing by 2%.
Premiums for Medicare Part D, which covers prescription drugs administered at home, decreased in 2023. But Haislmaier says that early data on next year’s premiums shows a marked increase in premiums, according to his own research.
Haislmaier said that premiums for Medicare Part D supplemental insurance plans have increased 46% since the passage of the Inflation Reduction Act in 2022, with the national average premium costing $6,098.
He also said the number of Medicare Part D supplemental plans has also decreased by 31% since 2021, according to his calculations with the raw early data.
According to healthcare think tank KFF, stand-alone Part D prescription plans decreased by 11% from 2023 to 2024 to a total of 709 different plans. This is the lowest number of plans available since Part D began, and Haislmaier projects it will drop further.
This means that seniors have fewer options for choosing coverage despite rising prices.
“The plan premiums go up and there are fewer plans offered. And in fact, as people have been expecting, this is going to get worse,” said Haislmaier.
If the insulin price cap, along with the $2,000 maximum, were extended to the general population as Harris proposed last week, Haislmaier said, premiums would continue to rise steadily.
Matthew Rae, the associate director of the healthcare marketplace program at KFF, told the Washington Examiner that premiums may increase with Harris’s proposals, but it’s difficult to estimate by how much.
“For both of these proposals, not that many people have huge out-of-pocket costs,” said Rae, referencing the more than 60% of Americans with employer-sponsored health insurance.
According to a KFF analysis with 2018 data, nearly 13% of people with employer-provided health insurance coverage pay somewhere between $200 and $1,000 annually. That year, fewer than 1% of patients had out-of-pocket costs more than $2,000.
When calculating total drug spending, not just the patient’s cost-sharing requirements, only 4% of patients with employer-provided insurance have prescription costs over $5,000 annually, per 2018 numbers.
In other words, only 3% of enrollees account for about 40% of both the total drug spending and that for out-of-pocket prescriptions.
Rae did say, however, that capping the out-of-pocket expense for prescriptions could raise premiums, with the assumption that reducing patient cost-sharing will encourage patients to take more medications than they actually need–a theory that is hotly debated in healthcare economics.
When it comes to the insulin cap, Rae said, the policy would have such a small impact that the effect on premiums would likely be rather small.
“Not all those people are paying way, way more,” Rae added. “So for that population, it would bring down their costs a little bit depending on the specific proposal.”
According to KFF’s numbers, about 1-in-5 patients in 2018 would have saved money if the $35 cap on insulin applied to non-Medicare plans.
Support for bringing down the price for 100 units of insulin increased on both sides of the aisle when the list price on insulin increased by 40% between 2014 and 2018.
But Haislmaier said that this rise has little to do with manufacturers but rather pharmacy benefits managers, or PBMs, the middlemen that negotiate prices for prescriptions between insurance providers and drug companies.
“It’s not about the drug companies. It’s about the middlemen,” said Haislmaier. “In fact, the problem the drug companies have is they have to give bigger discounts, basically payoffs, to the PBMs. So to do that, they have to raise the list price.”
An insulin price cap for private insurance plans was included in the 2022 Build Back Better bill, which was doomed by a lack of support from Sen. Joe Manchin (I-WV).
Under that proposal, private insurers would have only been required to cover at least one of each type of the five types of insulin, categorized by how quickly they work. They would also would have had to cover both pen and vial administration methods if the bill passed.
Haislmaier says any policy proposal in an election year is “all about what it sounds like.”
Rising healthcare costs remains a top issue for voters, ranking the third most important issue in a May Pew Research Center Poll. About 48% of Republicans and 65% of Democrats said the affordability of healthcare was a “very big problem.”
Overall, 89% of respondents said the rise in the cost of healthcare is either a “very big” or “moderately big” problem heading into the 2024 election.
But when the category of healthcare costs is broken down into its component parts, it becomes clear that more people are worried about insurance premiums than prescription drug costs.
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As of March, nearly half of insured adults were worried about affording their monthly health insurance premium. Both those with employer-sponsored insurance and those on Obamacare plans said their premiums and out-of-pocket costs to see a doctor were too high.
Comparatively, about 1-in-5 adults said they had not filled a prescription due to cost. One in 10 said they cut pills in half or skipped doses of medicine last year because of cost.