Medicare sets deadline to fix doctor outpatient drug pay

The Bush administration says it can boost practice cost reimbursements for physicians relying on such funds.

By Markian Hawryluk, amednews staff. May 26, 2003.

Washington -- After two years of trying to convince lawmakers to change the way Medicare pays for physician-administered prescription drugs, the Bush administration has taken matters into its own hands. Unless Congress acts, the Centers for Medicare & Medicaid Services will overhaul the payment system by Jan. 1, 2004.

But that means Congress could lose the potential savings that could help fund an outpatient prescription drug benefit and Medicare pay increases. It also has doctor groups concerned whether the cost of administering the drugs will be adequately covered.

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Medicare pays for certain outpatient drugs when administered with physician services. The vast majority of these drugs are for chemotherapy. The program pays according to the manufacturer-reported average wholesale price. Recent government investigations have shown that some manufacturers inflated prices they report to Medicare, while lowering prices for physicians. This spread, lawmakers say, is costing the program millions each year.

But physicians administering the drugs say those spreads help offset the shortfall in Medicare payments for their services. Lawmakers and regulators have agreed that lowering drug prices cannot be done without also increasing practice expense payments to the affected doctors.

"Clearly we're overpaying for AWP, and clearly we're underpaying for some physician practices. It may not be a one-for-one match, but we ought to be paying the right amount for both," CMS Administrator Tom Scully said. "No Blue Cross plan would consciously do this. It's nuts."

Medicare Part B drug spending increased 35% in 2002, to $8.5 billion.

CMS has supported revisions to the AWP pricing system but previously maintained it could not increase practice cost payments for physicians who rely on the cross-subsidy without lowering payments to other physicians. Speaking to reporters on Capitol Hill, Scully said the agency now thinks it could adjust only payments to physicians impacted by an AWP fix. "I doubt anybody would sue us for increasing practice expense [payments]," he said.

To change the price of the drugs and the payment for administering them, CMS would have to include those provisions in the 2004 physician fee schedule final rule, which must be issued by Nov. 1. That means the agency must issue a draft rule for comment sometime this summer.

Scully listed oncologists, gastroenterologists, hematologists and possibly nephrologists among physicians who would see reimbursement boosts for practice costs. CMS has been working with the American Society of Clinical Oncologists to determine how those payments should be increased.

"Our estimate of what the right amount for practice expense should be has gone up in the last couple of years," Scully said. He attributed the change primarily to new cost data from the oncologists' group.

Pressure on Congress

The Bush administration would still prefer that Congress fix the problem itself. Scully said that even with increases in practice expenses, an AWP fix would save Medicare money.

Under self-imposed budgetary rules, Congress must offset new spending with other savings. But if CMS addresses AWP through the regulatory process, Congress would lose that source of savings, which could be used for such initiatives as adding an outpatient drug benefit to Medicare.

Drugs that came on the market after 1995 have largely fueled Medicare drug spending increases.

"I have clear, unequivocal instructions from the administration, from the highest levels, to fix this administratively if Congress doesn't," Scully said. "But clearly we need to wait as long as we can for Congress to fix it."

A spokesperson for the House Ways and Means Committee indicated that the panel was drafting Medicare legislation for consideration in late May. While that measure will focus primarily on an outpatient prescription drug benefit, it also may include an AWP fix. The House Energy and Commerce Committee and Senate Finance Committee are also working on AWP proposals.

While oncologists would welcome any solution that would protect their ability to provide oncology services to Medicare beneficiaries, ASCO officials said they preferred a legislative fix that would carry the weight of law.

"Congressionally mandated Medicare reform that properly reimburses both cancer drugs and cancer care services is ultimately the best solution to fixing the current system," said ASCO President Paul A. Bunn Jr., MD.

The group has urged passage of the Quality Cancer Care Preservation Act, introduced in the House by Reps. Charlie Norwood, DDS (R, Ga.), and Lois Capps (D, Calif.).

The bill would set Medicare pay rates for the covered drugs at 120% of the manufacturer's average sale price and raise practice expenses to cover the cost of administering chemotherapy, factoring in the cost of oncology nurse time, specialized equipment and other supplies.

"If the system isn't reformed carefully, patient access to quality cancer care will be severely disrupted," Dr. Bunn said. "This bill would ensure that we are able to continue to provide the care our patients need." The Medicare Payment Advisory Commission has been studying the AWP issue and will include the results of two studies in its June report to Congress. One of those studies will look at drugs in development or awaiting regulatory approval that might impact Part B spending.

"It sounds like there are going to be proportionally more biologicals, more single-source [drugs], which will, all other things being equal, tend to accelerate the rate of growth," MedPAC Chair Glenn Hackbarth said.

That may increase pressure on Congress and CMS to address the AWP issue this year. According to preliminary estimates, 2002 Part B drug spending increased 35%, to $8.5 billion, fueled largely by drugs that came on the market after 1995.

ADDITIONAL INFORMATION:

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Thomas, the federal legislative information service for bill summary, status and full text of the Quality Cancer Care Preservation Act (HR 1622) (thomas.loc.gov)