Medicare Advantage

Medicare Reimbursement Changes

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Proposed changes to Medicare Part B drug payments could provide beneficiaries with better drug options and lower costs in the future – but not everyone is happy with the changes. As prescription drug costs continue to soar from year to year, the government is looking at ways to cut expenses, particularly for Medicare enrollees. As it stands, Part B spends about $20 billion a year on prescription drugs. This figure represents nearly 5 percent of the total amount that the U.S. spends on all drugs each year.

Medicare Part B covers preventive treatments and medically necessary services, like screenings for the flu and wheelchairs. Among these covered costs are prescription drugs that are administered at the hospital or a doctor’s office. Part B is separate from Part D, which covers routine prescriptions from month to month. Because the drugs that are covered under Part B typically treat more serious conditions – like cancer or multiple sclerosis – they tend to cost more money than run-of-the-mill prescriptions.

The current payment system benefits doctors who prescribe costlier medications. Under the existing plan, medical providers get the average sales price (ASP) of the medication plus an extra 6 percent. This means that high-priced prescriptions will net a better profit for prescribers. Some doctors might make a habit of prescribing more expensive drugs to earn a better kickback.

The new plan proposed by the Centers for Medicare and Medicaid services seeks to eliminate this practice by making payments more equal across the board. Under the new plan, doctors would get a flat fee of $16.80 per prescription with an added 2.5 percent to make up the difference in ASP nationwide.

Proponents of the new payment plan say that this system would encourage doctors to prescribe medication based on efficacy rather than cost. High-priced prescriptions would be used only when medically necessary, a practice that should be standard under Part B.

Supporters of the reimbursement cut are quick to point out that opponents of the new plan have significant financial interests tied with the pharmaceutical industry. Politicians in particular have a lot to gain – or lose – by backing Big Pharma. In the current election cycle, the pharmaceutical industry has contributed more than $30 million to various campaigns already. In 2014, it was $32 million. Proponents of the new plan also contend that allowing pharmaceutical companies to go unchallenged when it comes to reimbursements will have a devastating impact on future Medicare negotiations.

Those who oppose the experiment argue that allowing the Center for Medicare and Medicare Innovation, an agency that President Obama created to pilot new Medicare programs, to make drastic changes in the current system would lead to even greater trespasses in the future. Over time, they argue, the mandatory demo approach could alter Medicare laws without going through appropriate channels – a major abuse of the system at large.

Medicare has opened the up the pilot program to comments from the public. The program has yet to be finalized. With strong supporters on both sides of the issue, the reimbursement cuts could have a substantial impact on the Medicare program as a whole.