Medicare Part B Reimbursement Cuts Are Backdoor Rationing

June 8, 2016 Updated: June 8, 2016

Imagine being denied treatment for cancer because Washington bureaucrats decided that a cutting-edge new therapy that could cure you just wasn’t “cost effective.”

That’s already happening in Britain under its government-run health care system, the National Health Service (NHS). And Medicare officials are poised to bring similar policies here.

The NHS’s “Cancer Drugs Fund” restricts physicians’ ability to prescribe half of all oncology medicines. If a medicine doesn’t extend the average cancer patient’s lifespan by a set length of time, which varies according to the medicine’s price, doctors can’t prescribe it for general use—even if it would be the most effective treatment option.

In February, the NHS announced it would review existing general-use drugs to tighten prescribing restrictions. After the review, the number of off-limits drugs will rise. Patient groups predict the move will deny treatment to 22,000 cancer sufferers and “set cancer treatment back by a generation.”

A new proposal from the Center for Medicare & Medicaid Innovation (CMMI) could similarly tie American doctors’ hands. CMMI plans to slash physician reimbursements for medications administered in a doctor’s office under Medicare Part B. Doctors buy these medications up-front and receive reimbursement from Medicare.

The proposed scheme will prevent many doctors from breaking even on the most advanced, most expensive treatments. Essentially, CMMI will cut Medicare spending by forcing doctors to resort to cheaper drugs and second-tier treatments—or run the risk of having to close their practices.

Currently, Medicare reimburses physicians for chemotherapy and certain other medications at the drug’s average sales price (ASP) plus 6 percent. That add-on accounts for the fact that some doctors pay more than the average price. It also covers expenses associated with handling, storing, and administering the drugs.

Often, that 6 percent makes the difference between a viable medical practice and one drowning in red ink.

A scientist examining cells in a 96-well plate. These plates allow scientists to look at lots of cells at the same time and directly compare cells that have or have not been treated with a drug, at the Cancer Research U.K. Cambridge Institute, in Cambridge, England, on Dec. 9, 2014. Cancer Research U.K. is the world's leading cancer charity dedicated to saving lives through research. Its vision is to bring forward the day when all cancers are cured. They have saved millions of lives by discovering new ways to prevent, diagnose, and treat cancer, and as such the survival rate in the U.K. has doubled in the last 40 years. Cancer Research U.K. funds over 4,000 scientists, doctors, and nurses across the U.K., more than 33,000 patients who join clinical trials each year, and a further 40,000 volunteers that give their time to support the work. (Dan Kitwood/Getty Images/Cancer Research U.K.)
A scientist examining cells in a 96-well plate. (Dan Kitwood/Getty Images/Cancer Research U.K.)

Under CMMI’s proposal, Medicare would reduce reimbursements to ASP plus 2.5 percent, along with a flat fee of $16.80 per day. The formula makes generic drugs more economical to administer compared to pricier, cutting-edge treatments.

Most doctors already don’t receive ASP plus 6 percent. In 2013, “sequestration” budget cuts effectively lowered reimbursements to ASP plus 4.3 percent.

Those cuts crippled many doctors’ ability to care for Medicare patients. Eighty percent of oncologists at community cancer clinics reported that their practices were affected by the cuts. Fifty percent had to send Medicare patients elsewhere—often to distant hospitals—for chemotherapy.

Now, analysts predict CMMI’s proposal will bring the effective reimbursement rate down to ASP plus 0.86 percent and a daily flat fee of $16.53.

If sequestration cuts forced doctors to turn away cancer patients, the new CMMI cuts could outright bankrupt many clinics. At minimum, many doctors will feel pressure to stock and prescribe cheaper treatments, even if they’re less-effective.

Keeping Medicare spending under control is important. But reforms should incentivize providers to do so while improving care—which sometimes means paying more for higher quality treatments. CMMI’s proposal relies on the mindless bureaucratic logic that Britain’s NHS and other socialized medical systems use: good care is expensive—let’s ban it.

Medicare might be ailing. But CMMI’s reimbursement scheme isn’t what the doctor ordered. It will tie the hands of physicians and make them choose between running a profitable practice and providing the best care for their patients.

Sally C. Pipes is president, CEO, and Thomas W. Smith fellow in health care policy at the Pacific Research Institute. Among her books are “The Cure for Obamacare” and “The Way Out of Obamacare.”

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All," (Encounter 2020). Follow her on Twitter @sallypipes