With a proposal to cut Medicare payments for doctor-administered drugs, the CMS is likely to face intense lobbying from doctors concerned that the new rates could drive down their revenue and cause them to stop seeing some patients.
The CMS last week released a flurry of regulations and proposed rules setting fiscal and calendar year 2005 payment rates for inpatient rehabilitation care and nursing homes. The most controversial proposal, however, deals with the way doctors are reimbursed for drugs they administer in their offices.
Along with an expected across-the-board 1.5% increase in Medicare payments for physician services, the CMS is proposing cuts in payments for doctor-administered drugs, in some cases by as much as 89%. According to preliminary CMS data, payments for 24 of 32 of the most common doctor-administered drugs will be slashed while the CMS will increase payments for six drugs. Rates for two drugs will see no change. The drugs cover a broad spectrum of therapies from cancer drugs to immunosuppressants to asthma drugs. Physicians have used higher payments for these drugs to offset declining reimbursements for professional fees under Medicare Part B in the past several years.
The proposed changes are the result of the Medicare Modernization Act, which in addition to creating prescription drug benefits for seniors addresses a number of long-standing healthcare financing mechanisms and concerns including how much Medicare has paid for such drugs, known as Part B drugs. Traditionally, Medicare has reimbursed based on a drug's average wholesale price, set by drugmakers. But because doctors typically buy the drugs for much less, Medicare has come under attack for paying too much.
The modernization act directed Medicare to survey the actual costs doctors pay for drugs and reset its payment formula to better reflect those prices. Some of the results of the change: an 89% cut for ipratropium bromide, used for asthma and other lung ailments, as well as an 89% cut for proventil, albuterol sulfate and ventolin, drugs also used to treat breathing ailments. The CMS will pay 106% of what doctors pay for the drugs.
Cuts in the prices paid for the drugs will be offset by an increase in physician fees for administering them. The administrative payment increase is highest for oncologists. Last year, the CMS raised payments to them for administering Part B drugs by 110%. This year, they will get an additional 3% increase mandated by Congress to help them transition to the new payment formula.
The cuts to the payments for the drugs, though long anticipated, still took the provider community by surprise because of their depth. During the next few months, provider groups said, they will be asking both Congress and the CMS to reconsider.
"Our position is Congress should hold (all funding) constant for the next two years until studies are done" to quantify the impact of the proposal on providers, said Deborah Kamin, senior director of cancer policy and clinical affairs at the American Society of Clinical Oncology, an Alexandria, Va.-based organization representing oncologists.
James Rohack, a cardiologist and chairman of the board for the American Medical Association, said the AMA is coordinating studies with the societies of those specialties most affected by the proposal to present to Congress.
"What we're looking at specifically is, `What's the impact on patient care and patient access?' " he said.
In a news release, the American Association for Homecare, a trade association for the inhalation therapy industry, said that "given the numerous patient-management, pharmacy, compounding, delivery and administrative costs, these drug therapies cannot be provided to Medicare patients at (the new prices) without a substantial service or dispensing fee."
Members of the provider community said the cuts could force doctors to stop seeing some Medicare patients. According to the oncology society, the CMS proposal will lead to a cut of at least $500 million in reimbursements for cancer care.
"A number of doctors are saying they will have to close satellite clinics at a minimum," Kamin said.
Rohack said specialists in rural areas in particular may be forced to stop treating Medicare patients. In some cases, Part B drugs have to be purchased in bulk, but because rural doctors often don't have enough patients who need the treatments, they end up having to throw away the drugs after they've expired. The new proposed prices make that financially impossible for doctors to do, Rohack said.
In a news release, Sen. Chuck Grassley (R-Iowa), chairman of the Senate Finance Committee and a chief architect of the modernization act, called the change a cost-saver for both Medicare and consumers.
"In the current system, beneficiaries paid more in copayments than the physician or supplier paid to acquire the drug," he wrote.
The proposal does contain some good news for providers. The 1.5% increase in Medicare payments reverses a 3.7% cut that had been projected by previous law. The proposal also gives doctors in areas where there are low doctor-to-beneficiary ratios an additional 5% increase in payments as an incentive to attract and retain more doctors in those areas. Those payments will go to the 20 areas with the lowest ratios, to be determined.
The proposed rule also includes new benefits to Medicare patients including an initial preventive examination for new Medicare beneficiaries. Screenings for cardiovascular disease, colorectal and prostate cancers, diabetes and mammograms, along with other preventive measures, will be covered by Medicare.
In other regulations, the CMS is increasing payments to skilled-nursing facilities by 2.8% starting Oct. 1. It is raising rates paid to inpatient rehabilitation facilities by 3.1%. The rule released last week did not change the controversial so-called "75% rehab rule." That rule, which took effect July 1, implemented 13 clinical conditions that a certain percentage of patients in a facility must have for the facility to be deemed an inpatient rehabilitation facility. Providers have said the rule too narrowly defines the clinical conditions and will force many facilities to stop seeing some patients in order to qualify as such a facility and receive higher Medicare payments.
The CMS also announced proposed regulations to establish the Medicare drug benefit, passed by Congress and approved by President Bush. Beneficiaries would pay a $250 deductible for prescription medications, after which the government would pay 75% of costs up to $2,250. After the beneficiary has spent $3,600 out of pocket, the government would pick up 95% of all subsequent costs. The drug benefit is set to take effect Jan. 1, 2006.