Medicare Compliance & Reimbursement

According to the Centers for Medicare & Medicaid Services, increasing practice expense reimbursements is irrevocably linked to decreasing drug payments, since the agency only has authority to do the former by using funds gained from the doing the latter. Under the first alternative offered in the rule, drug reimbursements by Medicare contractors would be limited to the amounts the contractors pay private policyholders in "comparable" circumstances. CMS says implementing this option would save the government $4.1 billion, and beneficiaries $2.6 billion, over 10 years. CMS' second option, similar to the Senate approach, would set payment for each covered drug at a discount off the AWP for that drug as of April 1, 2003. The discount would be 10 to 20 percent, reflecting what research from the General Accounting Office and the HHS Office of Inspector General suggests physicians generally pay. In subsequent years, rates would be adjusted by the medical inflation rate. Under this option, for new drugs and drugs coming off patent, the first year's reimbursement would be determined by information from the manufacturer on the "expected widely available market price," with potential referral to the OIG as a disincentive for manufacturers to report inflated prices. In the second year, CMS could adjust the reimbursement to reflect actual price data; absent such an adjustment, and in all subsequent years, payment would be indexed to medical inflation. The Senate bill would set reimbursement for single-source drugs at 85 percent of the April 1, 2003, AWP. New drugs would be paid at 100 percent of AWP in the first year, and payments would be adjusted for medical inflation. For multi-source drugs, payment would be set at the lesser of 85 percent of AWP and the price at which the drug is widely available in the market. The Congressional Budget Office estimates that the Senate provision would reduce Medicare spending by $14 billion over ten years. CMS said its corresponding option would save the government $5.1 billion over ten years at a discount of AWP minus 10 percent, and $14.3 billion at a discount of AWP minus 20 percent. Beneficiaries would save $3.2 billion over ten years at the smaller discount, and $9.1 billion at the larger discount. Under the rule's third option, CMS would define AWP to be "the widely available market price" and establish that price through market monitoring via data from GAO, OIG, and other sources. Reimbursement cuts would be limited to 15 percent a year. Drugs for which market information was lacking would be reimbursed by a discount from the April 1, 2003, AWP, as in option 2, and the savings to the government and beneficiaries would depend on the level of discount. According to CMS, a 10 [...]