Medicare Compliance & Reimbursement

Medicare beneficiaries and the government could save up to $45.2 billion over ten years if the health care program for seniors and the disabled cut back on overpayments to physicians for outpatient prescription drugs.

So says the Centers for Medicare & Medicaid Services. In the Aug. 20 Federal Register, the agency seeks comment on four alternative payment schemes, including options paralleling payment changes contained in the House and Senate Medicare bills.

Medicare Part B only covers about 450 drugs, primarily drugs provided incident to a physician's services or through covered durable medical equipment. But in 2002 the government paid an estimated $8.4 billion for those drugs. In 1998, the tab was only $3.3 billion, meaning costs have grown at almost 30 percent per year.

Currently, Medicare reimburses physicians for drugs at 95 percent of "average wholesale price." AWP is widely viewed as an artificial figure that typically significantly exceeds what physicians actually pay, but not everyone is happy with the fixes being offered.

For instance, Deborah Kamin, senior director for cancer policy and clinical research at the American Society of Clinical Oncologists, said congressional bills and the proposed rule could all deprive cancer care of up to $500 million next year and up to $16 billion over ten years. She pointed to survey results showing that most community oncologists would reduce the number of Medicare patients they take or stop taking Medicare patients entirely, with the most severe effects occurring in rural areas.

Anti-cancer drugs represent the biggest slice of outpatient drugs covered by Medicare. Oncologists received $3.3 billion from Medicare in 2002 as reimbursement for such drugs, more than triple the $1.2 billion they received in 1998.

ASCO agrees that Medicare pays too much for anti-cancer drugs themselves, but the organization has long argued that the program under-reimburses oncologists for the costs of administering drugs. CMS says its rule, which would provide $1.6 billion over 10 years in additional "practice expense" reimbursements for oncology and other specialties, uses practice expense data provided by ASCO itself, as do the congressional bills, even though the ASCO numbers are "inconsistent with other available data" in some respects. ASCO applauds CMS for using its data, but says legislative and regulatory revisions on the table still crank that data through a flawed formula that doesn't properly account for nonphysician expenses incurred in administering oncology drugs.

For 2002, the proposed rule's changes would have elevated practice expense reimbursement by $190 million, according to CMS, with $150 million going to oncology. A separate provision that allows physicians to bill separately for each medication when multiple chemotherapy drugs are injected at the same time would have meant another $25 million for oncologists.