Reimbursement Roundup

Medicare may cut payments for some drugs

Medicare wants to cut reimbursement for about 50 drugs typically administered in physicians’ offices to control drug-related costs.

Under current policy, Medicare pays physicians 95% of the average wholesale price of drugs administered to patients incident to other professional services.

However, because many physicians can purchase drugs at below wholesale prices used by Medicare carriers to calculate payments, some are reaping profits anywhere from 11% to 900% over official reimbursement levels, says the Office of the Inspector General. In turn, Medicare is asking carriers to use newer, more accurate average wholesale prices for these 50 popular drugs starting Oct. 1.

As part of the policy review, the House Commerce Committee is investigating allegations that drug companies have artificially inflated the average wholesale prices for certain prescriptions to give physicians a financial incentive to use particular drugs.

Got a gripe about Medicare? MGMA wants to know

Got a pet peeve about a regulation or administrative requirement? How about a suggestion for reducing the hassle when dealing with Medicare? If so, the Medical Group Management Association (MGMA) wants to hear from you.

MGMA is asking providers to help identify Medicare compliance and reimbursement problems they feel present the greatest barriers for medical group practices. That information, along with recommended solutions, will be presented to Congress, the Medicare Payment Advisory Committee, and the Health Care Financing Administration.

If you have a suggestion, contact the Medical Group Management Association by e-mail at or call (202) 293-3450.

Medicare+Choice providers must have physician ID

Beginning Oct. 1, 2000, Medicare will start collecting physician encounter data from Medicare+Choice organizations as part of its programs to devise more accurate risk adjustment payments. To identify participating providers, the agency plans to use the Unique Physician Identification Number (UPIN). In turn, Medicare+Choice contracted physicians and nonphysician practitioners — physician assistants, nurse practitioners, physical therapists, etc. — who don’t already have an ID number need to get UPINed ASAP.

Pharmacy capitation offers edge downward

The hottest thing going with marketing capitation to seniors has been the addition of prescription drug coverage — in some cases, fully covered drugs. Add the rich drug benefit and the much-lowered basic price of an office visit — as opposed to the fee-for-service approach — and you see major cost shifting. The hottest feature in marketing becomes the coldest disaster of physicians straining under drug-included capitation arrangements.

But the "freebie" drug benefit that had been so characteristic of Medicare+Choice (M+C), which is Medicare’s capitated system, is declining. The question is whether this decline will continue, or if it’s a blip on the radar screen, according to a recent report by the Medicare Payment Advisory Committee (MedPAC). MedPAC is Congress’ chief research and advisory group for Medicare and Medicaid policy decisions. In 1999, 65% of Medicare beneficiaries had access to a plan with drug coverage. In 2000, that percentage dropped to 64%. In 1999, about 54% had access to a zero-premium drug plan with drug coverage, and in 2000, the proportion dropped to 45%.

Drug benefits dropping?

Medicare beneficiaries have access to a M+C plan with rather extensive drug benefits. For example, the typical Medicare capitation plan offered an annual cap of $500, generic copayments of no more than $15, and brand copayments of no more than $20.

Managed care plans may be cutting back their generosity in drug coverage to seniors, given the intense rise in expenditures in that area. But at the same time, public pressure is building for lawmakers to broaden Medicare’s coverage of drugs. The demand is huge. In 1968, seniors spent an average of $64 annually on drugs, compared to $848 in 1998. At the same time, out-of-pocket expenditures have reversed. In 1968, seniors paid about 87% of their drug costs themselves, compared with 28% in 1998.

"This decline in patient liability for prescription drug costs has been one of several factors that have contributed to a 200% increase in total real drug spending per person in the same year," MedPAC stated.

According to MedPAC’s analysis, Congress has a long way to go before deciding on the vast array of options for beefing up Medicare’s pharmacy benefits. Here are a few options they care considering:

• voluntary vs. mandatory pharmacy benefits;

• subsidies;

• changing deductibles, out-of-pocket maximums, and benefit limits;

• adding an extensive benefits management component to Medicare’s administration;

• tax credits, vouchers, and deductions.

Congress will address those mammoth tasks again this summer.

Pap coverage may be expanded

Medicare would cover annual pelvic exams and Pap smears for all women under legislation being promoted by Reps. Clay Shaw and Karen Thurman, both Republicans from Florida.

Currently, Medicare will pay for annual cervical cancer screening for women who meet high-risk criteria or are of childbearing age and have had an abnormal Pap test during the past three years.