Early in the COVID-19 pandemic, residents and staff at nursing homes and other long-term care facilities accounted for a huge share of COVID deaths, but a new KFF analysis finds that they were relatively rare events across the country in June.

The analysis finds that 13 states and the District of Columbia in June reported either no COVID-19 deaths, or virtually no deaths compared to the state’s population, at long-term care facilities. Most other states reported average weekly deaths in long-term care facilities at or near their lowest levels since the pandemic began.

The analysis is based on data as of the week of June 27 from 42 states and the District of Columbia that report on cases and deaths in long-term care consistently enough to allow analysis of trends. It covers a period prior to the recent rise in cases and deaths nationally linked to the spread of the Delta variant.

Nationwide, states in June reported an average of 0.1 deaths among long-term care residents and staff per week per 100,000 population, down 96 percent from 1.6 deaths per week per 100,000 in December as the nation’s vaccination campaign began. That’s a somewhat sharper decrease in deaths than among the population outside long-term care settings.

Cases in long-term care facilities nationally averaged 0.5 per week per 100,000 population in June, down 97 percent from their peak in December. The analysis notes how quickly deaths and cases fell as the federal Pharmacy Partnership delivered nearly 8 million COVID-19 vaccine doses to long-term care residents and staff between December and April.

As COVID-19 cases increase along with spread of the more transmissible Delta variant, the effectiveness of COVID-19 vaccines continues to be an important topic. A new KFF analysis looks at COVID-19 vaccine “breakthrough cases,” when fully vaccinated individuals become infected, as well as hospitalizations and deaths, to see which states are providing data on breakthrough events, how regularly, and what those data reveal.

After a review of the websites of all states and D.C. and other official sources, the new analysis found that half of states (25) report some data on COVID-19 breakthrough events. Within that, 15 states report these data on a weekly basis and one state reports on a daily basis, while the other nine report more infrequently. Overall, the data found that breakthrough events are extremely rare among those who are fully vaccinated, and that the vast majority of reported COVID-19 cases, hospitalizations, and deaths in U.S. are among those who are unvaccinated or not fully vaccinated. Some key highlights include:

• The rate of breakthrough cases reported among those fully vaccinated is well below 1% in all reporting states, with Connecticut the lowest (0.01%) and Alaska the highest (0.29%). Hospitalization rates among those fully vaccinated ranged from effectively zero (0.00%) in California, Delaware, D.C., Indiana, New Jersey, New Mexico, Vermont, and Virginia to 0.06% in Arkansas. Death rates were even lower at 0.00% for all but two states, Arkansas and Michigan, where they were 0.01%.
• More than 9 in 10 COVID-19 cases, hospitalizations, and deaths occurred among people who are unvaccinated or not yet fully vaccinated. The share of COVID-19 cases among those not fully vaccinated ranged from 94.1% in Arizona to 99.85% in Connecticut.

This analysis highlights how rare breakthrough events are but also how data remain limited, and only available for a subset of states.

While COVID-19 vaccines are highly effective at preventing severe disease, hospitalization, and death from COVID-19 and also reduce the likelihood of mild or asymptomatic infection, a small share of fully vaccinated individuals do become infected, and some become hospitalized or have died. These rare occurrences are known as “breakthrough cases” which are to be expected, and historically known to occur with other vaccines as none is 100% effective.

The Centers for Disease Control and Prevention (CDC) currently monitors hospitalizations and deaths, from any cause, among fully vaccinated individuals with COVID-19, but not breakthrough infections, which it stopped monitoring as of May 1. CDC presents this data in aggregate at the national level but not by state, and there is no single, public repository for data by state or data on breakthrough infections, since the CDC stopped monitoring them.

We therefore reviewed the websites and other official state sources for all 50 states and D.C. to see which are providing data on COVID-19 breakthrough cases, hospitalizations and deaths, how regularly, and what those data may tell us. We only used data from official state sources (we did not include data available only in news media reports, for example). Where a state did not provide comparable data on overall COVID-19 cases, hospitalizations, or deaths reported over the period in which it captured breakthrough events, we obtained data on cases and deaths from the Johns Hopkins University COVID-19 Dashboard and on hospitalizations from the U.S. Department of Health & Human Services for the appropriate period (see methods for more detail).

Importantly, not all hospitalizations and deaths of those fully vaccinated and diagnosed with COVID-19 are due to COVID-19 or have a known cause at the time of reporting. The CDC reports that as of July 19, of 5,601 hospitalized breakthrough cases, 27% were asymptomatic or not related to COVID-19 and of 1,141 fatal cases, 26% were asymptomatic or not related to COVID-19. States differ in whether they provide this detail. DC, for example, reports that as of July 11, 50% of hospitalized breakthrough cases were due to COVID-19, 19% were not, and 31% were of unknown reason. However, few states made these distinctions. Where they did, we only included breakthrough hospitalizations and deaths due to COVID-19. In other cases, some of these breakthrough events may be due to causes other than COVID-19.

Overall, we find that:

• Half of states (25) report some data on COVID-19 breakthrough events (see Table 1). Twenty-four provide data on breakthrough cases, 19 on hospitalizations and on deaths.
• Fifteen of these states regularly update these data, often on a weekly basis. The rest use a different frequency, have one-time reports, have stopped updating, or have an unclear reporting frequency.
• The data reported from these states indicate that breakthrough cases, hospitalizations, and deaths are extremely rare events among those who are fully vaccinated against COVID-19 (see Figure 1). The rate of breakthrough cases reported among those fully vaccinated is below 1% in all reporting states, ranging from 0.01% in Connecticut to 0.54% in Arkansas.
  • The hospitalization rate among fully vaccinated people with COVID-19 ranged from effectively zero (0.00%) in California, Delaware, D.C., Indiana, New Jersey, New Mexico, Vermont, and Virginia to 0.06% in Arkansas. (Note: Hospitalization may or may not have been due to COVID-19.)
  • The rates of death among fully vaccinated people with COVID-19 were even lower, effectively zero (0.00%) in all but two reporting states, Arkansas and Michigan where they were 0.01%. (Note: Deaths may or may not have been due to COVID-19.)

• Almost all (more than 9 in 10) COVID-19 cases, hospitalizations, and deaths have occurred among people who are unvaccinated or not yet fully vaccinated, in those states reporting breakthrough data (see Figure 2).
  • The reported share of COVID-19 cases among those not fully vaccinated ranged from 94.1% in Arizona to 99.85% Connecticut.
  • The share of hospitalizations among those with COVID-19 who are not fully vaccinated ranged from in 95.02% in Alaska to 99.93% in New Jersey. (Note: Hospitalization may or may not have been due to COVID-19.)
  • The share of deaths among people with COVID-19 who are not fully vaccinated ranged from to 96.91% in Montana to 99.91% in New Jersey. (Note: Deaths may or may not have been due to COVID-19.)

Note that as more people get vaccinated, the share of cases, hospitalizations, and deaths accounted for by unvaccinated people will tend to fall, since there will be fewer unvaccinated people in the population. That will be true even if infection, hospitalization, and death from COVID-19 is still very rare among vaccinated people.

Implications

While information on breakthrough events is still limited and incomplete, this analysis of available state-level data indicates that COVID-19 breakthrough cases, and especially hospitalizations and deaths, among those who are fully vaccinated are rare occurrences in the United States. Moreover, this data indicate the vast majority of reported COVID-19 cases, hospitalizations, and deaths in U.S. are among those who are unvaccinated or not fully vaccinated. These findings echo the abundance of data demonstrating the effectiveness of currently authorized COVID-19 vaccines. Moving forward, particularly as the more transmissible Delta variant is now the dominant strain of COVID-19 circulating in the U.S., more robust state-level data will help to monitor ongoing vaccine effectiveness and inform discussions about booster vaccinations.

There are approximately 48 million children under the age of 12 in the United States. This group is not yet eligible for COVID-19 vaccination, though it is widely expected that a vaccine will be authorized for at least some children by the end of the year (clinical trials are currently underway among children between the ages of 6 months and 11 years old). Although children have not borne the most severe brunt of COVID-19 relative to adults, some do become hospitalized, suffer long-term consequences, and even death from the disease. In addition, children can transmit to others, contributing to ongoing community transmission in the U.S., as the country continues to struggle to contain the virus in the midst of the much more transmissible Delta variant. Achieving a high rate of vaccine coverage among those under age 12, once eligible, is therefore important to protecting children and controlling continued spread of COVID-19, particularly as it is expected that many children will return to in-person schooling in the fall.

But reaching younger children may pose new challenges, including concerns about vaccination among parents. In almost all states, parental consent for vaccination is required for those under age 12. Yet, our KFF COVID-19 Vaccine Monitor surveys find that parents of younger children remain cautious about vaccinating their children against COVID-19, with almost three quarters (73%) saying they will either wait and see, will only do so if required by school, or won’t do so at all, although these views may change once a vaccine is authorized for kids. In addition, parents who may be willing to get their children vaccinated against COVID-19 could face barriers to accessing the vaccine.

Better understanding the characteristics of children under 12 in the U.S. may help inform vaccination efforts when they become eligible. We analyzed data from the U.S. Census and the 2019 American Community Survey to provide an overview of the population by age, region and state, race/ethnicity, poverty, and insurance status (see Methods for more information).

• There are 48 million children under the age of 12 in the United States, almost three times the number of adolescents, aged 12-15, the most recent age group to become eligible for COVID-19 vaccination. Over half are between the ages of 5 and 11 (59.2%), the subset for whom authorization of a vaccine may come next. A quarter (24.9%) are between the ages of 2-4 and the remainder (15.9%) are under the age of 2. (A COVID-19 vaccine is not being tested for those under the age of 6 months, but data were not available to disaggregate further by age).
• Children under the age of 12 represent 14.6% of the U.S. population, ranging from 11.6% in Maine to 19.5% in Utah. The largest share of children under age 12 live in the South (39.1%), followed by the West (24.3%), Midwest (21.0%), and Northeast (15.6%).
• About half (50.5%) of children under the age of 12 are children of color, including more than a quarter (25.8%) who are Hispanic. An additional 13.3% are Black, 4.7% are Asian, and the remaining 6.7% are American Indian or Alaska Native, Native Hawaiian or Other Pacific Islander, or multiracial (Figure 1). Some states have even larger shares of children of color. For example, in 5 states (Hawaii, New Mexico, the District of Columbia, California, and Texas), more than two-thirds of children under age 12 are children of color (Table 1). Over 4 in 10 children under age 12 are Hispanic in five states, including 60.4% in New Mexico and 52.0% in California. In 4 states, more than a third of children under age 12 are Black including 48.5% of children in DC and 42.8% of children in Mississippi. Over 1 in 10 children under age 12 are Asian in California (11.1%) and this share rises to nearly a quarter (22.6%) in Hawaii. Overall, children under age 12 include a larger share of people of color compared to the rest of the population (50.5% vs. 38.1%).

• Almost four in ten (39.4%) children under the age of 12 live in households with incomes below 200% of the Federal Poverty Level (FPL). This includes 17.5% living below poverty and 21.9% between 100-200% FPL. The remainder are split between households with incomes between 200-400% FPL (30.2%) and at or above 400% FPL (30.4%) (Figure 2). Some states have much higher shares of children living in low-income households, including 3 states with more than half of children under 12 living in households with incomes less than 200% FPL – Mississippi (53.3%), Arkansas (53.1%), and New Mexico (50.6%). In 13 states, more than one-fifth of children live below poverty (Table 2). Children under age 12 are more likely to be living in poverty compared to the rest of the population (17.5% v. 11.5%).

• Finally, while the majority of children under the age of 12 have health coverage, including 4 in 10 (39.8%) who are covered by Medicaid, 5.0% are uninsured (Figure 3). Because of broader Medicaid coverage, the uninsured rate for children under age 12 is nearly half that of those 12 and older (9.9%). Similar shares of children under age 12 and the rest of the population have private coverage.

Implications

Overall, these data show that children under age 12 account for a sizeable share of the population, suggesting that achieving a high vaccination rate among this group will not only be important for protecting them against infection and illness but can also help boost the country’s overall vaccination rate, facilitating efforts to contain the spread of the virus.

The data further show that children in this age group are more racially diverse than those older than age 12 and include a particularly high share of Hispanic children. They also are more likely than their older counterparts to be living in low-income or poor households. As such, success vaccinating this group may help to reduce racial disparities in overall vaccination rates for Black and Hispanic people. However, these data also highlight the importance of prioritizing equity when vaccinations begin for children under age 12 and focusing on reducing barriers to vaccination that disproportionately affect people of color and low-income people, such as concerns about missing work, transportation challenges, and/or other logistical barriers or information gaps.

Finally, an added challenge to vaccinating children in this age group is that a large share live in the South and in other states where vaccination rates are lowest. Direct outreach to parents in these states to address their questions and concerns about the vaccine will be important, as will working with pediatricians and family physicians to provide trusted information to parents and to administer vaccines. Schools will also likely play an important role in providing information and outreach to parents, and in some cases offering or requiring vaccination, particularly for those parents who say they want to wait and see or will only vaccinate their child if schools require it.

Many people enrolled in Medicare go without dental care, especially beneficiaries of color, according to a new KFF analysis of dental coverage and costs for people with Medicare.

Almost half of all Medicare beneficiaries (47%) did not have a dental visit within the past year as of 2018, the analysis finds, with rates higher among those who are Black (68%) or Hispanic (61%) compared to White beneficiaries (42%). Rates were also higher among those who have low incomes (73%), or who are in fair or poor health (63%). The data pre-date the onset of the coronavirus pandemic and do not reflect the slump in health care utilization during the public health emergency.

One reason Medicare beneficiaries do not seek care is a lack of insurance. Nearly half of all people with Medicare (47%) did not have dental coverage, as of 2019. The others got it through Medicare Advantage (29%), private insurance (16%) and Medicaid (8%).

The analysis also finds that beneficiaries can face significant out-of-pocket costs when they do seek care. Average out-of-pocket spending among Medicare beneficiaries who used any dental services was $874 in 2018, the analysis finds. One in five beneficiaries spent more than $1,000, including one in ten who spent more than $2,000.

The findings come at a time when Senate Democrats are seeking to add a standard dental, vision and hearing benefit to Medicare, as part of a sweeping $3.5 trillion budget reconciliation package. If it makes it through Congress, it would be the largest expansion of Medicare benefits since the inception of Part D prescription drug coverage in 2006.

The new analysis also provides an in-depth look at the scope of dental benefits available to people enrolled in Medicare Advantage plans, which have become the leading source of dental coverage among Medicare beneficiaries.

In 2021, 94 percent of Medicare Advantage enrollees in individual plans are in a plan that offers access to some dental coverage. The scope of coverage varies widely across these plans. Most Medicare Advantage enrollees with access to dental coverage have preventive benefits, such as cleanings, and access to more extensive dental benefits for services such as extractions and root canals that typically require 50 percent coinsurance for in-network care, and are subject to an annual dollar cap, the analysis finds. The average annual cap on dental benefits is about $1,300 in 2021.

Among the factors policymakers likely will consider in determining whether to add a dental benefit to Medicare are the scope of covered benefits, the amount of beneficiary cost sharing for specific services, and the impact on overall Medicare spending and premiums.

For more data and analyses about Medicare and dental coverage, visit kff.org

Nearly 3 million Medicare Part D enrollees had out-of-pocket drug spending above the catastrophic threshold in a recent five-year period, finds a new KFF analysis that takes a comprehensive look at how many people on Medicare have drug expenses high enough to push them above that limit.

While the Part D drug benefit has helped make drugs more affordable for people with Medicare, the lack of a hard cap on annual out-of-pocket spending under Part D exposes enrollees to significant costs, unless they qualify for low-income subsidies.

While a relatively small number of enrollees exceeds the threshold in any given year, the new analysis shows that, over time, the number of beneficiaries with expenses above the cap grows — including beneficiaries who have persistently high drug costs over multiple years and people who have high costs in one year but not others.

In 2019, for instance, nearly 1.5 million Medicare Part D enrollees had out-of-pocket spending above the catastrophic coverage threshold, the new analysis finds. Looked at more broadly over a five-year period (2015-2019), the number with spending above the threshold in at least one year increases to 2.7 million Part D enrollees. And over 10 years (2010-2019) the number of enrollees with out-of-pocket drug spending above the threshold in at least one year during the period increases to 3.6 million.

The study findings come amidst ongoing public concern about the high cost of prescription drugs, and as policymakers on both sides of the aisle support proposals in the House and Senate to modify the design of the Part D benefit and establish a hard cap on out-of-pocket drug spending by Part D enrollees.

The standard Part D benefit includes a catastrophic coverage threshold above which enrollees must pay five percent of their total drug costs out-of-pocket, with the rest covered mainly by Medicare. In 2021, the catastrophic threshold is set at $6,550 in out-of-pocket drug costs, an amount that includes what beneficiaries themselves pay plus the value of the manufacturer discount on the price of brand-name drugs in the coverage gap (aka, “donut hole”), which counts towards this amount.

That five percent coinsurance, however, can really add up. Medicare beneficiaries who take high-cost drugs for conditions such as cancer, multiple sclerosis, rheumatoid arthritis, or hepatitis C can pay thousands of dollars out-of-pocket for their medications after exceeding the Medicare Part D catastrophic threshold. Proposals to cap what beneficiaries pay could add costs to the program, unless combined with other policies to lower Medicare drug spending.

All told, Part D enrollees with drug spending above the catastrophic threshold at some point between 2010 and 2019 collectively incurred $9.9 billion in out-of-pocket costs for prescriptions filled in the catastrophic phase – representing more than one-third of their total out-of-pocket drug costs over the period ($26.1 billion).

Under H.R. 3, the Elijah E. Cummings Lower Drug Costs Now Act, out-of-pocket drug spending under Part D would be capped at $2,000, while under H.R. 19, the Lower Costs, More Cures Act, the House GOP prescription drug bill, and bipartisan legislation that passed out of the Senate Finance Committee in the 116th Congress (S. 2543, Prescription Drug Pricing Reduction Act of 2019, and the Senate Finance bill), the cap would be set at $3,100. Both amounts exclude the value of the manufacturer discount.

Also available is the newly updated brief, What’s the Latest on Medicare Drug Price Negotiations?, which describes the status of proposals to give the federal government the authority to negotiate drug prices in Medicare, including how the negotiation process would work under H.R. 3 and the expected effects on spending for Medicare, beneficiaries and people with private insurance.

For more data and analyses about Medicare and prescription drug costs, visit kff.org.

For details on the Inflation Reduction Act’s Medicare Drug Price Negotiation Program, see “FAQs About the Inflation Reduction Act’s Medicare Drug Price Negotiation Program”

Prescription drug costs are a major concern for consumers and a fiscal challenge for public and private payers, representing 10% of national health spending and nearly 20% of health benefit costs for large employers and Medicare. In response, lawmakers are considering a broad range of policy options, including one that would allow the federal government to negotiate prescription drug prices on behalf of Medicare beneficiaries and people enrolled in private plans, a proposal that has strong bipartisan public support. This brief describes the current status of drug price negotiation proposals, looks back at the history of proposals to give the federal government the authority to negotiate drug prices in Medicare, describes the negotiation provisions in key legislation (H.R. 3), and discusses the potential spending effects for the federal government and individuals.

What’s the status of Medicare drug price negotiation proposals?

President Biden supports a change in law that would allow Medicare to negotiate drug prices, according to a July 2021 executive order and the FY2022 budget proposal, although the Administration has not outlined a specific process for drug price negotiation and estimated savings from this proposal were not reflected in the budget. The executive order, which also endorsed other proposals to lower drug prices, such as inflation caps, called for HHS to develop more specific proposals to lower drug prices within 45 days of the order’s issue date.

In Congress, proposals to authorize the federal government to negotiate drug prices for Medicare and other payers appear to have some momentum in the both the House and Senate. In the House, this proposal is a key feature of H.R. 3, the Elijah E. Cummings Lower Drug Costs Now Act, which was reintroduced in the 117^th Congress in April 2021 after passing the House in the previous session. H.R. 3 would require the Secretary of the Department of Health and Human Services (HHS) to negotiate the price of at least 50 brand-name drugs without generic competitors starting in 2025 and would make the negotiated price available to both Medicare and private payers. Other legislation has been introduced in the House that would also allow government negotiation of drug prices.

In the Senate, Democrats are reportedly planning to include a provision to allow Medicare drug price negotiation provision in a budget reconciliation package, although specific details have not yet been released. The chairman of the Senate Finance Committee, Senator Ron Wyden (D-OR), released a set of principles for drug pricing reform in June 2021 that endorsed Medicare drug price negotiation, among other approaches, but has not yet released drug price legislation in the 117^th Congress. According to Senator Wyden’s principles document, allowing Medicare to negotiate drug prices could address circumstances of market failure around drug prices, such as when there is inadequate or no competition or when drugs launch at high prices that may not be justified based on their clinical value. The principles call for a policy that establishes clear criteria for which drugs to include in price negotiation, gives the HHS Secretary the requisite tools to negotiate a “fair” price, and creates incentives for manufacturers to participate in the negotiation process.

What’s the history of Medicare drug price negotiations?

Under the Medicare Part D program, which covers retail prescription drugs, Medicare contracts with private plan sponsors to provide a prescription drug benefit and gives plan sponsors authority to negotiate drug prices with pharmaceutical companies. The law that established the Medicare Part D benefit, which covers retail prescription drugs, includes a provision known as the “noninterference” clause, which stipulates that the HHS Secretary “may not interfere with the negotiations between drug manufacturers and pharmacies and PDP [prescription drug plan] sponsors, and may not require a particular formulary or institute a price structure for the reimbursement of covered part D drugs.” In effect, this provision means that the government can have no direct role in negotiating or setting the price of drugs in Medicare Part D. This approach contrasts with how drug prices are determined in some other federal programs, such as mandatory drug price rebates in Medicaid, and the use of ceiling prices and minimum discounts, in conjunction with a national formulary, in the Department of Veterans Affairs (VA).

For drugs administered by physicians that are covered under Medicare Part B, Medicare reimburses providers 106% of the Average Sales Price (ASP), which is the average price to all non-federal purchasers in the U.S, inclusive of rebates.  When no ASP is available, Medicare pays 103% of the wholesale acquisition cost (WAC) until ASP data are available. The WAC is equivalent to a list price and typically higher than ASP. In other words, Medicare does not set its own rates for drugs covered under Part B, in contrast to how traditional Medicare sets payment rates for hospitals, physicians, and other providers.

The Part D non-interference clause has been a longstanding target for some policymakers since even before the Part D drug benefit took effect in 2006. And with the rise in the number of high-priced drugs coming to market, including the recently-approved Alzheimer’s drug, and with drug prices rising faster than the rate of inflation, there is renewed interest in proposals to lower drug spending, including allowing the federal government to negotiate drug prices for Medicare beneficiaries and people with private insurance. Proponents of this approach believe that giving the HHS Secretary the authority to negotiate drug prices would provide the leverage needed to lower drug costs, particularly for high-priced drugs for which there are no competitors, where private plans may be less able to negotiate lower prices. Opponents counter that the current system of private plan negotiation is working well, and that government involvement in price negotiations could dampen incentives for pharmaceutical companies to invest in research and development.

How would Medicare negotiate drug prices under H.R. 3?

H.R. 3 amends the non-interference clause under current law by adding an exception that allows for the price negotiation process established by the legislation. The negotiation process applies to at least 25 (in 2024) and 50 (in 2025 and subsequent years) single-source brand-name drugs lacking generic or biosimilar competitors, selected from among the 125 drugs with the highest net Medicare Part D spending and the 125 drugs with the highest net spending in the U.S., which could include physician-administered drugs covered under Medicare Part B, along with all insulin products. Drugs that are new to market could also be subject to negotiation if their list price is greater than median household income and their projected spending would place them among the list of drugs with the highest spending under Medicare or the U.S. overall.

From these lists, the Secretary selects specific drugs for negotiation based on projections of the greatest savings to the federal government or to individuals eligible for the negotiated price. The Secretary would then negotiate with pharmaceutical manufacturers to determine a “maximum fair price” for each of the selected drugs. H.R. 3 defines a target price for a selected drug equal to the lowest average price in one of six countries (Australia, Canada, France, Germany, Japan, and the United Kingdom), or 80% of the average manufacturer price in cases where there is no international price, as might be the case for relatively new drugs. The bill also establishes an upper limit for the negotiated price equal to 120% of the Average International Market (AIM) price paid by at least one of the six applicable countries. For selected drugs where there is no AIM price available, the proposal establishes a maximum price equal to 85% of the average manufacturer price (AMP). The AMP is defined as the average price charged by drug companies to wholesalers and pharmacists, net of discounts.

In determining the maximum fair price, H.R. 3 requires the Secretary to consider research and development costs, market data, production and distribution costs, and existing therapeutic alternatives, including comparative effectiveness data. If a manufacturer offers a price that is no more than the target price, the proposal requires the Secretary to accept this as the maximum fair price for the drug. The agreed-upon negotiated price would be made available to private plan sponsors in Medicare Part D and commercial payers in group and individual markets, and to providers that administer physician-administered drugs.

H.R. 3 imposes financial penalties on drug companies that do not comply with the negotiating process as well as if negotiations fail. Manufacturers that fail to negotiate successfully with the Secretary would face an escalating excise tax on the previous year’s gross sales of the drug in question, starting at 65% and increasing by 10% every quarter to a maximum of 95%. In addition, manufacturers that refuse to offer an agreed-upon negotiated price to any payer would pay a civil monetary penalty equal to 10 times the difference between the price charged and the maximum fair price (based on AIM, as explained above).

The timeline for the negotiation process spans a roughly two-year period. To make negotiated prices available in 2024, the list of selected drugs for negotiation would be published on April 15, 2022. The period of negotiation between the Secretary and manufacturers would occur between June 15, 2022 and March 31, 2023, and the negotiated “maximum fair prices” would be published no later than April 1, 2023.

What has CBO said about the potential for savings from Medicare drug price negotiation under H.R. 3?

CBO estimated over $450 billion in 10-year (2020-2029) savings from the Medicare drug price negotiation provision in the version of H.R. 3 in the 116^th Congress, including $448 billion in savings to Medicare and $12 billion in savings for subsidized plans in the ACA marketplace and the Federal Employees Health Benefits Program. CBO also estimated an increase in revenues of about $45 billion over 10 years resulting from lower drug prices available to employers, which would reduce premiums for employer-sponsored insurance, leading to higher compensation in the form of taxable wages.

A separate CBO estimate of the same Medicare drug price negotiation provision included in another House bill in the 116^th Congress (H.R. 1425, the Patient Protection and Affordable Care Enhancement Act) estimated higher 10-year (2021-2030) savings of nearly $530 billion, mainly because the Secretary would negotiate prices for a somewhat larger set of drugs in year 2 of the negotiation program under H.R. 1425 than under the version of H.R. 3 that CBO scored (50 vs. 25 drugs; this change is incorporated in the current version of H.R. 3).

In prior analyses of drug price negotiation, CBO said that providing the Secretary with broad authority to negotiate drug prices without also exerting some form of pressure on drug manufacturers to lower their prices would likely produce negligible savings. However, in its analysis of H.R 3, CBO indicates that the excise tax provision provides the Secretary with needed leverage to achieve lower drug prices and federal savings by creating a strong incentive for drug companies to engage in the negotiation process.

While CBO expects that the lower drug prices resulting from allowing the federal government to negotiate drug prices would lead to lower Medicare beneficiary premiums and cost sharing under Part D, CBO also expects that this policy would lower revenues for drug manufacturers, lead to higher drug prices in other countries and a lag in the introduction of new drugs in the six reference countries, and lead to a modest reduction in the number of drugs coming to market in the future, due to the loss in revenue for drug manufacturers. CBO estimates eight fewer drugs coming to market over the next 10 years, of the approximately 300 drugs expected to be approved during this period, and 30 fewer drugs in the subsequent decade.

How would drug price negotiations affect out-of-pocket drug spending and premiums?

Allowing the federal government to negotiate drug prices on behalf of Medicare beneficiaries and private plan enrollees would reduce out-of-pocket drug spending and premiums, according to an analysis by Medicare’s actuaries of the version of H.R. 3 that passed the House of Representatives in the 116^th Congress. (CBO has not conducted a similar analysis for H.R. 3.) The actuaries estimated that the negotiation provisions of H.R. 3 would reduce spending by Medicare Part D enrollees by $117 billion between 2020 and 2029, including a reduction of nearly $103 billion in cost sharing for people who use drugs covered under Part D that are subject to negotiation, and another $14 billion reduction in Part D premiums. In addition, the actuaries estimated that the negotiation authority in H.R. 3 would reduce beneficiary spending under Part B by an additional $18 billion during this time period by reducing cost sharing for Part B drugs by more than $6 billion and by reducing Part B premiums by nearly $12 billion. These estimates do not reflect the interactive effects of other provisions in H.R. 3, such as the Part B and Part D inflation caps or Part D benefit redesign, which would also affect beneficiary premiums and cost sharing.

Because the lower negotiated prices would also apply to private health insurers under H.R. 3, people with private insurance would also face lower cost sharing for prescription drugs and premiums, according to the actuaries. Overall, people with private health insurance would save an estimated $54 billion between 2020 and 2029, including $25 billion in lower cost sharing for enrollees who use drugs subject to negotiation and $29 billion in savings due to lower premiums.

These estimates may understate savings for Medicare beneficiaries and private plan enrollees that could be achieved under the current version of H.R. 3, which requires the Secretary to negotiate prices for a larger number of drugs in year 2 than the version of H.R. 3 that the actuaries analyzed.

What are the prospects for Medicare drug price negotiation?

With President Biden in the White House and Democrats now controlling both chambers of Congress, the prospects for a change in law that would allow the federal government to negotiate drug prices appear to be more favorable than under the previous Administration, although the path forward for this proposal remains uncertain. Congressional Democrats are generally supportive of government negotiations on drug prices, as is the public, based on concerns about high and rising drug prices, particularly for new drugs with little or no competition. Many supporters would also like to apply budgetary savings from this proposal to pay for other health care priorities. But even among Democrats, support for this proposal is not universal, and it is not clear that current legislative proposals have sufficient votes to pass the House this Congressional session, given a narrower majority, and concerns about preserving incentives for innovation raised by some centrist Democratic lawmakers.

Congressional Republicans have generally been opposed to allowing the Secretary to negotiate drug prices under Medicare and did not include this proposal in their drug price legislation, H.R. 19. The pharmaceutical industry continues to express strong opposition to government involvement in drug price negotiations based on concerns that it could lower revenue for drug companies, have a dampening effect on research and development, and limit access to new drugs. H.R. 3 includes $7.5 billion in additional funding over 10 years (2022-2031) for the National Institutes of Health (NIH) to support innovative biomedical research through the NIH Innovation Projects, which would supplement the $5 billion in funding allocated for such research in the 21^st Century Cures Act.

While the immediate prospects for legislation to allow the federal government to negotiate drug prices for Medicare and private payers are unclear, the proposal may have greater momentum in the current session of Congress given support among the leadership in the House and Senate, the strength of public support among both Democrats and Republicans, and the potential to achieve meaningful savings for patients, employers, and Medicare.

Medicare Part D, the outpatient prescription drug benefit for Medicare beneficiaries, provides catastrophic coverage for high out-of-pocket drug costs, but there is no limit on the total amount that beneficiaries have to pay out of pocket each year. Medicare Part D enrollees with drug costs high enough to exceed the catastrophic coverage threshold are required to pay 5% of their total drug costs unless they qualify for Part D Low-Income Subsidies (LIS). In 2021, the catastrophic threshold is set at $6,550 in out-of-pocket drug costs, which includes what beneficiaries themselves pay and the value of the manufacturer discount on the price of brand-name drugs in the coverage gap (sometimes called the “donut hole”), which counts towards this amount. With no hard cap on out-of-pocket drug spending, Medicare beneficiaries without LIS who take high-cost drugs for conditions such as cancer, multiple sclerosis, rheumatoid arthritis, or hepatitis C may pay thousands of dollars in out-of-pocket costs for their medications after exceeding the catastrophic threshold.

Policymakers on both sides of the aisle support proposals to modify the design of the Part D benefit and establish a hard cap on out-of-pocket prescription drug spending by Part D enrollees. This proposal is included in H.R. 3, the Elijah E. Cummings Lower Drug Costs Now Act, which passed the U.S. House of Representatives in December 2019 and was recently reintroduced in the 117^th Congress; H.R. 19, the Lower Costs, More Cures Act, the House GOP prescription drug bill; bipartisan legislation that passed out of the Senate Finance Committee in the 116^th Congress (S. 2543, Prescription Drug Pricing Reduction Act of 2019); and other legislation. Under H.R. 3, out-of-pocket drug spending under Part D would be capped at $2,000, while under H.R. 19 and the Senate Finance bill, the cap would be set at $3,100 (both amounts exclude the value of the manufacturer price discount).

By design, catastrophic coverage is intended to protect Part D enrollees with high drug costs, which may affect only a small share of enrollees in any given year but a larger share over time, including those who have persistently high drug costs over multiple years and others who have high costs in one year but not over time. To inform discussions about proposals to add a hard cap on out-of-pocket spending under Part D, we analyzed the number of Part D enrollees without low-income subsidies who have exceeded the catastrophic coverage threshold annually, and over multiple years, based on 2007-2019 Part D claims data for Part D enrollees without low-income subsidies from the Centers for Medicare & Medicaid Services Chronic Conditions Data Warehouse (see Methods for details).

Takeaways

• In 2019, nearly 1.5 million Medicare Part D enrollees had out-of-pocket spending above the catastrophic coverage threshold. Looking over a five-year period (2015-2019), the number of Part D enrollees with out-of-pocket spending above the catastrophic threshold in at least one year increases to 2.7 million, and over a 10-year period (2010-2019), the number of enrollees increases to 3.6 million (Figure 1).

• More than 1.4 million Part D enrollees had out-of-pocket spending above the catastrophic threshold in two or more years during the five-year period between 2015 and 2019, and nearly 2 million enrollees had spending above the catastrophic threshold in two or more years over a 10-year period (2010-2019).
• The number of Part D enrollees with out-of-pocket drug spending above the catastrophic threshold in a given year has more than tripled from nearly 400,000 in 2010 to 1.5 million in 2019 and has been at or above 1 million each year since 2015 (Figure 2). Similarly, the percent of all Part D enrollees not receiving low-income subsidies with out-of-pocket spending above the catastrophic coverage threshold has more than doubled, from 2.1% in 2010 to 4.4% in 2019.

• The increase in the number of Part D enrollees with out-of-pocket drug spending above the catastrophic coverage threshold since 2010 is partly due to the availability of new higher-priced drugs, drug price increases, and changes made by the Affordable Care Act (ACA) to the coverage gap phase of the Part D benefit and the calculation of out-of-pocket spending before enrollees qualify for catastrophic coverage, which have reduced the out-of-pocket cost burden on enrollees.
  • The ACA phased out the coverage gap (sometimes called the “donut hole”) by lowering the share of total costs paid in the gap by Part D enrollees from 100% to 25% over a 10-year period, and requiring drug manufacturers to provide a discount on the price of brand-name drugs in the gap. This price discount counts as beneficiary out-of-pocket spending that qualifies an enrollee for catastrophic coverage, which enables enrollees to move through the coverage gap more quickly.
  • Between 2018 and 2019 alone, the number of non-LIS enrollees who reached the catastrophic coverage phase increased from 1.1 million to 1.5 million, coinciding with an increase in the manufacturer discount on brand-name drugs in the coverage gap, from 50% in 2018 to 70% in 2019.
• The 3.6 million Part D enrollees with out-of-pocket drug spending above the catastrophic threshold between 2010 and 2019 spent a cumulative $9.9 billion out of pocket for prescriptions filled in the catastrophic phase over these years (Figure 3). This represents more than one-third of their aggregate total out-of-pocket drug costs over this time period ($26.1 billion).
  • In 2019 alone, the 1.5 million Part D enrollees with out-of-pocket spending above the catastrophic threshold spent $1.8 billion out of pocket in the catastrophic coverage phase, which was nearly half of their total out-of-pocket drug spending for the year ($3.8 billion).

Conclusion

As new, high-priced drugs come to market and are covered under Medicare Part D, the current requirement for beneficiaries to pay a coinsurance of 5% in the catastrophic coverage phase can lead to thousands of dollars in out-of-pocket costs. Our analysis demonstrates that while most Part D enrollees have not had out-of-pocket costs high enough to exceed the catastrophic coverage threshold in a single year, the likelihood of a Medicare beneficiary incurring drug costs above the catastrophic threshold increases when looking over a longer time span.

Adding a hard out-of-pocket cap to Part D, as has been proposed by policymakers on both sides of the aisle, would help the growing number of Medicare beneficiaries who take just one very high-priced drug for medical conditions such as cancer or multiple sclerosis, or who take a handful of relatively costly brand or specialty medications to manage chronic illness. Capping out-of-pocket costs under Part D would protect Medicare beneficiaries against very high levels of out-of-pocket drug costs, including those with one-time catastrophic costs as well as those with high drug expenses year after year. While adding a cap on out-of-pocket drug spending under Part D would generate cost savings to enrollees, it could also add costs to the program, unless combined with other policies to lower Medicare drug spending, which are the subject of ongoing discussion in Congress.