Medicare Proposes Lower Drug Reimbursements to Hospitals and Doctors

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Earlier this month, Medicare announced a plan to change how they reimburse doctors and hospitals for certain medications under Medicare Part B in order to encourage them to choose less expensive drug treatments for patients. Specifically, the drugs to be targeted under this new proposal include intravenous medications, injectable drugs and some eye treatments. 

As of right now, the Medicare Part B program reimburses doctors and hospitals for the “average price” of the medication used plus an additional 6% fee. Thus, doctors and hospitals bring in more of a profit when they decide to use drug treatments that are on the expensive side. However, under a new reimbursement program, Medicare is proposing to lower the reimbursement for Medicare Part B drugs to “average price” plus 2.5% along with a flat fee of $16.80 per drug per day. As a result of the new method of reimbursement, the Centers for Medicare and Medicaid Services (CMS) hopes that doctors and hospitals would be more inclined to choose less costly treatments, especially since they often choose high-priced drugs even though lower cost, same efficacious therapies are available.

Value-Based Pricing

In addition to changing the way doctors and hospitals are reimbursed for certain services, CMS is also hoping to test what they call “value-based pricing” programs, something similar to what some pharmacy benefit managers and commercial health plans are already testing. One example is the indication-based pricing idea, which would cause reimbursement amounts to vary depending on how effective a drug is in treating a type of cancer. Essentially, if one particular type of cancer therapy is used to treat different conditions and has more success in one over the other, the plan is to pay for what works best for optimal health care outcomes at the lowest cost.

Medicare Proposal Critiques

Although some may welcome this proposal, many have expressed their concern - particularly some drug manufacturers and cancer doctors. In their eyes, this new plan is too heavily focused on saving money rather than the patient’s best interest. Furthermore, they suggest that following through with these changes to Medicare Part B could “limit access to care for some of the sickest Medicare beneficiaries,” according to The New York Times. Although the Obama administration has expressed that these changes are not intended to disrupt or interfere with a doctor’s true medical judgement or their ability to order Medicare Part B drugs when appropriate, doctors and hospitals continue to remain skeptical of the proposal.

As a pharmacy benefit consulting firm that works with a diverse group of clients including hospitals, we are always on the lookout for information about how they may be affected by industry changes. If you have questions about the Medicare Part B proposal or are curious to learn more about how it could affect revenue for certain companies and organizations, please do not hesitate to call PBIRx at (888) 797-2479.