CMS Proposes Changes to Medicare Payments

The Centers for Medicare and Medicaid Services is exploring the possibility of changing the way doctors are paid for Part B drugs, and it is almost time for a decision—comments to the CMS will close on May 9th, reports US News.

Under the current system, Medicare adds 6 percent to the average drug cost when it pays hospitals and doctors. That percentage, according to critics, only adds to the problem of rising drug costs. In other words, if a doctor prescribes a $100 drug to a patient, they are reimbursed from Medicare with $106.

Under the proposed changes from the Centers for Medicare and Medicaid Services, doctors would receive only 2.5 percent above the average price (down from 6), plus a $16.80 flat rate for each drug.

This suggestion on the part of the CMS comes amid reports that doctors are more willing to prescribe unnecessarily expensive drugs—when cheaper alternatives are available—because their payments from Medicare grow with the cost of a given drug. The process is often thought of as a vicious cycle:

  1. Doctors receive 106 percent of a drug cost (reimbursement plus 6 percent).
  2. Doctors are therefore inclined to prescribe more costly drugs.
  3. Pharma companies then sell more drugs by increasing the cost, since doctors will more readily prescribe them.

“If you have a marketplace where you can sell more of your cancer drugs by charging more for them – because the person prescribing the drugs will make more money – that’s a reason to raise your prices,” Director of the Center for Health Policy at Memorial Sloan Kettering Cancer Center Dr. Peter Bach said to US News.

Are the doctors at fault? Should we blame them for a tendency to supplement their income? Absolutely not. The law is the law, and doctors are by no means recommending fraudulent products to consumers. In some cases, more expensive products are actually better than cheaper generics. By taking money out the picture, though, doctors will no longer have to deal with the pressure of choosing between a patient’s best interests and his own.

The decision is still up in the air—after May 9th, when stakeholders have had sufficient time to provide feedback, the CMS will announce a decision.


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