As lawmakers prepared to throw overboard a Medicare reimbursement loophole that inflates outpatient prescription drug payments, provider groups, smelling blood, began circling to feast on the carcass.
A group of Republican lawmakers led by House Energy and Commerce Committee Chairman W.J. "Billy" Tauzin (R-La.) last week proposed replacing the system for reimbursing physicians and other providers for the select outpatient prescription drugs that Medicare covers.
The payments are for prescription drugs administered on an outpatient basis related to the use of durable medical equipment, infusion therapy, dialysis, chemotherapy, organ transplants and pain management. Medicare reimburses providers for the cost of those drugs using an industry calculation called the "average wholesale price," which is much higher than the prices providers actually pay.
As a result, HHS' inspector general's office earlier this year estimated that Medicare overpaid by $1.6 billion in 1999 on 24 of the Medicare-covered drugs, compared with the prices the Department of Veterans Affairs paid for the same drugs. Medicare and beneficiaries paid a total of $3.9 billion on all Medicare-covered outpatient prescription drugs in 1999.
In a letter to Thomas Scully, administrator of the Centers for Medicare and Medicaid Services, Tauzin, along with Reps. Michael Bilirakis (R-Fla.) and James Greenwood (R-Pa.), said they would draft a legislative proposal soon basing reimbursement for outpatient prescription drugs on a manufacturer-reported "average sale price." That calculation would include rebates and discounts.
With the potential to pass legislation that could save up to $1.6 billion a year from Medicare payments, provider groups are eager to get their hands on that money to offset what they view as unfair payment policies.
Groups representing hospitals, doctors and insurers all have found ways to tell Congress to spend roughly $1.6 billion on their members. Hospitals said a change that takes effect next year in the Medicare prospective payment formula for outpatient departments will cost hospitals $1.5 billion in 2002.
Meanwhile, physicians are backing legislation introduced last week by Sens. James Jeffords (I-Vt.) and John Breaux (D-La.) that would reduce a scheduled cut to Medicare physician payment rates to 0.9% from 5.4%. A Jeffords aide said the bill would increase physician payments by $1.7 billion in 2002.