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Community Oncology 2005

Community Oncology 2005. Medicare cancer care cuts deeper than expected; cancer care facing two cliffs in 2005 . Problems with 2005 Medicare Reimbursement Changes. Medicare changes a step in the right direction but have missed the mark

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Community Oncology 2005

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  1. Community Oncology 2005 Medicare cancer care cuts deeper than expected; cancer care facing two cliffs in 2005

  2. Problems with 2005 Medicare Reimbursement Changes • Medicare changes a step in the right direction but have missed the mark • New Medicare drug reimbursement system for 2005 has produced sharp cuts • Cancer drug underpayment • Essential cancer services not adequately paid • Addition of $300 million CMS demonstration project at the end of 2004 averted a cancer care crisis

  3. Medicare Changes Producing Severe Cuts In Drug Payments • Graph examines projected Medicare payments for top 16 cancer drugs analyzed by the GAO (12/1/04) based on different payment systems • ASP system has produced substantial drug payment cuts over AWP system (95% AWP in 2003; 85% AWP in 2004) • Graph shows extreme shortfall in GAO estimate of ASP impact

  4. GAO Analysis Flawed • GAO used estimated reimbursement rates • Update of GAO analysis with real reimbursement rates reveals cancer drug underpayment • $85 million for top 16 cancer drugs • $113 million for all cancer drugs

  5. GAO Analysis Flawed • GAO analysis updated with actual 2nd quarter Medicare reimbursement rates shows that 6 out of the top 16 drugs are reimbursed less than cost (dollars in millions; projected total 2005 Medicare reimbursement by drug)

  6. Actual Changes Exceeding Congressional Intent • Actual cancer care cuts through 2013 ($9.7 billion) far exceed MMA congressional intent ($2.5 billion) according to study by PricewaterhouseCoopers

  7. Actual Changes Exceeding Congressional Intent • MMA Congressional Intent is actual score of the cancer care provisions of the Medicare Modernization Act based on estimated Medicare reimbursement rates (dollars in millions) • Actual Medicare Cuts is revised score calculated by PricewaterhouseCoopers based on actual Medicare reimbursement rates (dollars in millions) • Actual Medicare changes exceed congressional intent by factor of approximately 4X

  8. Problems With Drug Payments • Basic problems exist with new ASP-based drug reimbursement system • Patient bad debt further increases impact of cuts • 13 out of 16 GAO drugs with cost greater than reimbursement • Clinics subsidizing Medicare for at least 6 months for drug price increases

  9. Cancer Clinics Subsidizing Medicare for Price Increases • Herceptin increased in price by 4.4% in February • Price increase will not be fully paid for by Medicare until 4th quarter reimbursement rates • At least 6-month lag in updating drug reimbursement rates • Community cancer clinics subsidize Medicare for the price increase for 7 months

  10. Components of Cancer Care Not Paid By Medicare • Drug overpayment under old Medicare system implicitly paid for important aspects of cancer care • Important components of cancer care not paid under new system; examples: • Direct drug costs • Include storage, inventory, pharmacy, waste disposal • MedPAC estimates 27% of total direct drug costs, with 73% for drug acquisition costs • Cancer treatment planning • Medicare pays for treatment planning by radiation oncologists

  11. Two Cliffs Facing Cancer Care • Private insurers announcing severe cuts • Many cases, reduction in drug reimbursement without increase in services payments • As early as July 2005 • Over $400 million decrease in Medicare payments for medical services effective January 2006 • $300 million demonstration project ends 2005 • Chemo administration and MD fees cut • Consequences, already happening: • Patients treated in the hospital • Use of higher priced treatment alternatives

  12. CAP Not The Answer • Competitive acquisition program (CAP) not the answer to drug payment problem • Pharma has no incentive to bid drugs • Time-tested GAO system in place has produced best cancer drug prices for Medicare • CAP will actually increase costs to Medicare • New middleman costs of shipping, administration, management, and waste • Additional administrative burden and liability for cancer clinics

  13. Solutions • Fix ASP drug reimbursement system • Pay for pharmacy facilities and treatment planning • Extend the current CMS demonstration project throughout 2006 • Quality, pay-for-performance initiative on important cancer-related symptoms • OIG, CMS & MedPAC studies not available till 2006

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