Inflation: What New Consumer Data, Drug-Price Bill Analysis Actually Mean for Affordability

Examining key eHealth stats, Washington Post legislation analysis, and whether near-term inflation relief is a reality.

Medicare beneficiaries aren't just worried about the impact of inflation on their medical costs. They fear that even a small increase would make their premiums and prescriptions unaffordable.

These are the latest results from a survey of 2,500 Medicare beneficiaries who purchase coverage via eHealth, one of the nation's first and largest health insurance exchanges.

And while the July 2022 eHealth report puts a compassionate fine point on the effect of financial fears—which impact people's everyday lives as well as that fever chart we call the stock market—what impact do certain medical costs actually have on inflation? A Washington Post analysis tackled these questions, citing a wealth of sources—some of whom are trading intellectual fisticuffs.

Healthcare inflation fears mount

eHealth's survey highlights include the following:

Inflation's effects are both a future concern and a current reality.

1. 95% of survey respondents are worried about rising healthcare costs.
    
2. 45% indicate they've seen inflation's impacts already.
    

Two concerns weigh on consumers' minds more than any.

3. 65% of respondents were equally concerned about Medicare Part B premiums and prescription drug costs.
    
4. 60% were worried about rising copays and deductibles.
    

Unaffordability is dangerously close.

5. 49% of Medicare beneficiaries would not be able to afford a Medicare premium that increased by 10% or less.
    
6. 52% answered the same about prescription drug hikes.
    

Seniors are looking for immediate relief, but legislation will not bring it.

7. 88% would welcome sooner-rather-than-later drug cost reductions to ease inflation fears.
    
8. 86% want the government to play a role, specifically for Medicare to be able to engage in direct negotiations with drug companies.
    

But what would be the effect? And to what degree and how quickly can drug price bill legislation—if passed—impact either inflation or medication costs?

Drug cost impacts on inflation: Yes or no?

The aforementioned Post analysis states: "On the face of it, the latest U.S. government report would suggest prescription-drug costs are not a big part of the inflation problem." For proof, the article cites the following:

• Drug price inflation pales in comparison to the overall. The Bureau of Labor Statistics reports that prescription drug prices grew at a far lower rate (2.5% since June 2021) than overall prices during the same period (9.1%).
   
• A small number of drugs account for the most spending. The Congressional Budget Office reports that while 90% of prescribed drugs are generic, brand-name drugs generate significant spending.
   
• This is also true for Medicare. Two Kaiser Family Foundation studies show the same discrepancy in Medicare Part D (7% of covered drugs equal 60% of net spending) and Part B (8.5% of covered drugs total 80% of spending).

Where things get dicey—and sources contentious—is the subject of brand-name drugs, also covered in the WaPo article:

• "Brand-name prices are high and rising." This according to a recent JAMA study.
   
• No, they're not. The Pharmaceutical Research and Manufacturers of America (PhRMA) cites data from multiple sources that "the trend on drug prices is not skyrocketing." PhRMA takes issue with the JAMA study, claiming that it "completely ignores savings that are generated within the system as a branded medicine overtime becomes generic or biosimilar products that lead to lower costs for patients and society."
   
• Yes, they really are. JAMA study co-author Benjamin Rose rebuts the rebuttal, noting that "generic savings only occur after drugs have a period of market exclusivity."

They said, they said—but what do Congress and the Biden administration say?

Enter the drug price bill

A pending Senate bill would allow Medicare to negotiate select drug prices and require manufacturers to pay Medicare a rebate if the price of their drug outpaced inflation. The Biden administration backs the bill, claiming it "will not only lower the cost of prescription drugs and health care for families, it will reduce the deficit and help fight inflation."

The Post analysis pokes holes in this claim, noting that Medicare's new negotiating power would apply to only 10 drugs (20 initially), with the first impacts not felt until 2026. As to the rebates, if inflation continues to remain above drug price increases, few would be offered and not until 2023 at earliest.

A Post source at the Committee for a Responsible Federal Budget concludes that "not much of the effects of this particular bill take effect in the near-term. So over the next couple of years, it's probably doing more to help prevent inflation from bleeding into drug prices (and then bleeding back into inflation) than from cutting inflation outright."

The Post's fact checker feature ends in a draw, acknowledging potential savings on the highest-cost drugs but leaving the debate open as to how much brands are to blame—and leaving consumers with their same inflation concerns.