Medicare Data Raises Questions About Drug Costs

The recently released Medicare data on payments to individual doctors doesn’t provide specifics on prescription drug outlays, but opens the door to scrutiny of Medicare reimbursement for medicines delivered in physician offices, writes Jill Wechsler.

The Centers for Medicare and Medicaid Services (CMS) has released data on payments to some 880,000 healthcare providers who collectively received $77 billion in Medical Part B fee-for-service payments in 2012. It’s part of the government’s “transparency” campaign to better inform the public and healthcare entities about spending and costs in the delivery system. The American Medical Association blasted this “data dump” as likely to confuse the public and “destroy careers,” which may be valid complaints as journalists, analysts, and plaintiffs’ attorneys begin to troll the data set.

For example, the information indicates that oncologists and ophthalmologists received some of the highest reimbursement. And CMS notes that these specialty groups are heavy users of Part B-covered prescription drugs, which Medicare pays for as part of its fee to the doctor. The payment formula is set by law at 106% of the average sales price (ASP) for Part B drugs, the 6% intended to cover the cost of delivery, explained CMS principal deputy administrator Jonathan Blum in a press briefing. He acknowledged that the high payments to these providers reflect the high cost of many of the drugs they purchase and administer to patients. A logical question is whether this payment structure encourages doctors to prescribe more costly drugs.

For example, about 3300 ophthalmologists received a total of $3.3 billion for treating age-related macular degeneration, according to analysis by the New York Times. One explanation is that many of these heavy billers make extensive use of Genentech’s Lucentis for treating this condition, as opposed to off label use of Avastin, which is a fraction of the cost.

CMS hopes that disclosure of this payment information will help uncover fraud and waste, as might be the case with doctors ordering excessive numbers of tests or using pricey brand medications when less costly generics or alternatives are available. While it’s not fraudulent for doctors to prescribe expensive therapies for approved indications, this might fall under the heading of “waste.” CMS aims to “raise those issues” that drive Medicare costs, said Blum, and patient co-pays, which amount to 20% of the cost of Part B drugs.