FY 2020 Annual Performance Plan and Report - Goal 1 Objective 1

Topics on this page: Goal 1. Objective 1 | Objective 1.1 Table of Related Performance Measures

Goal 1. Objective 1: Promote affordable health care, while balancing spending on premiums, deductibles, and out-of-pocket costs

Affordability is a key component of accessible health care. For individuals and families, high costs of care create economic strain. Americans often have to choose between spending a higher proportion of wages on health care and paying for other household essentials. Without timely access to health care services, Americans risk worsening health care outcomes and higher costs. Yet for many, costs make health care out of reach.

HHS is committed to lowering health care costs for Americans to affordable levels and minimizing the burden of government health care spending. By increasing consumer information, offering lower-cost options and innovation in payment and service delivery models, and promoting preventive care and market competition, HHS is working with its partners to reduce the burden of higher health care costs.

The Office of the Secretary leads this objective. The following divisions are responsible for implementing programs under this strategic objective: AHRQ, CMS, and FDA.

Objective 1.1 Table of Related Performance Measures

The Medicare Prescription Drug Improvement and Modernization Act of 2003 amends Title XVIII of the Social Security Act by adding a Voluntary Prescription Drug Benefit Program (Medicare Part D). Since its inception, Medicare Part D has significantly increased the number of beneficiaries with comprehensive drug coverage and enhanced access to medicines.

While Medicare Part D offers substantial insurance coverage for prescription drugs, it does not offer complete coverage.  Prior to 2010, a beneficiary was responsible for paying 100 percent of the prescription costs between the initial coverage limit and the out-of-pocket threshold (or catastrophic limit).  Only once the beneficiary reached the catastrophic limit did Medicare coverage recommence. This is known as the coverage gap (or “donut hole”). For 2019, this gap in coverage is above $3,820 in total drug costs, and up until a beneficiary spends $100 out-of-pocket.

Public Law No. 115-123, also known as the Bipartisan Budget Act of 2018 enacted on February 9, 2018, increased the manufacturer discount for beneficiaries in the gap from 50 to 70 percent and reduced beneficiary cost sharing to 25 percent in 2019 for applicable drugs. The discount is applied at the point of sale, and both the beneficiary cost sharing and the manufacturer discounts count toward the annual out-of-pocket threshold (known as True Out-of-Pocket Costs). This performance measure reflects CMS's effort to reduce the average out-of-pocket costs paid by non-Low Income Subsidy Medicare beneficiaries while in the coverage gap and to ensure that the coverage gap is closed completely by 2020 as required by law. For 2020 and beyond, the beneficiary, on average, will only be responsible for 25 percent of the costs of both generic and brand name drugs while in the coverage gap, which makes this coverage equivalent to coverage prior to reaching the gap.

CMS identifies, tests, evaluates, and expands, as appropriate, innovative payment and service delivery models that can reduce Medicare, Medicaid, and the Children's Health Insurance Program expenditures and improve or preserve beneficiary health and quality of care. CMS is testing a variety of alternative payment models (APMs) that create new incentives for clinicians to deliver better care at a lower cost. In addition, CMS is implementing payment reforms that increasingly reward quality and efficiency of care.

To encourage alignment, Medicare is leading the way by publicly tracking and reporting payments tied to alternative payment models. Moving payments to more APMs in an aligned fashion and on an aligned timeframe increases the overall likelihood that new payment models will succeed. CMS uses a framework to describe and measure health care payments through the stages of transition from pure FFS to more advanced alternative payment models.

Despite falling short of its 2017 target, CMS continued to make good progress and increased the percentage of FFS Medicare payments tied to APMs to 38 percent. CMS will discontinue this goal in 2018 and replace it with a new measure tying FFS Medicare payments to the downside risk of APMs.