Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



Newsletter Article


CMS Chief Signals Confidence in Medicare Drug Pay Proposal

By Kerry Young, CQ Roll Call
March 10, 2016 -- A top federal health official cited Medicare’s recent success in imposing payment conditions on hospitals and doctors as evidence that it will succeed with a controversial proposal on reimbursement for chemotherapies and other often costly drugs.
“This is the beginning of a discussion,” Andy Slavitt, the acting administrator of the Centers for Medicare and Medicaid Services, said Wednesday at the Pharmaceutical Research and Manufacturers of America’s policy conference.
CMS plunged Monday into a significant health policy fight when it released a draft proposal that would within months change the formula in many cases that Medicare pays for medicine through its Part B program, which covers care in doctors’ offices. The plan also opens a discussion of larger changes for Part B drug payments, now a roughly $22 billion annual expense, including pegging future payments to the results for patients. CMS is accepting comments on the Part B drug model through May 9.
The proposal set off a quick firestorm, including criticism from the lawmakers overseeing Medicare: Senate Finance Chairman Orrin G. Hatch, R-Utah, House Ways and Means Chairman Kevin Brady, R-Texas, and House Energy and Commerce Chairman Fred Upton, R-Mich. The American Hospital Association, whose members’ outpatient departments are paid through Part B, joined PhRMA and other powerful trade groups in condemning the plan.
Slavitt noted that there also had been resistance as CMS began shifting some of Medicare's other expenses away from its traditional fee-for-service model to alternative forms of payment that assess the quality of the service provided. In recent years, CMS has sought to persuade hospitals and doctors to participate in programs such as accountable care organizations, which are intended to monitor how well people on Medicare fare after medical treatments. Health and Human Services Secretary Sylvia Mathews Burwell last year set a 2018 goal of moving 90 percent of Medicare’s fee-for-service payments to new quality-based payment plans. 
“In 2011, the Medicare system paid hospitals and physicians 100 percent fee for service, so there were no incentives for value,” Slavitt said at the PhRMA conference. “Last Friday, we announced that 30 percent of the payments to hospitals and physicians through Medicare fee-for-service program are now connected to” a payment system with quality measures.
Still, Slavitt acknowledged the political risk in the uproar over the Part B model.
“People are pretty good at killing things” in Washington, Slavitt said. “That’s an approach. My hope is that people engage in this” and instead work with CMS to revise the model.
The furor over the Part B drug model could put at risk a key platform of the Obama administration’s signature domestic achievement, the 2010 health overhaul, said Joel White, president of Horizon Government Affairs and a former House Ways and Means staffer. The model was put forward by the Center for Medicare and Medicaid Innovation (CMMI), a $10 billion initiative created by the law to tests ways to improve care and rein in costs by changing how doctors and other health professional are paid.
“This may result in Congress repealing CMMI,” White said.
In White’s view, CMS has not made a strong case for upending the Part B drug payments as proposed.
Designed as a test program, the CMS model would in many cases change payments for many of the nation’s doctors and hospitals. Some would remain on the current system to serve as a control group in the experiment, getting reimbursed the average sales price for Part B drugs plus a premium set at 6 percent by statute. The test group would get a payment of the average sale price plus 2.5 percent and an additional flat fee of perhaps $16.80. Several groups already have argued that this could be a financial hit on doctors in private practice.
White contrasted the CMS Part B model with the effort that resulted in the creation of the current approach for paying for these drugs in a sweeping 2003 Medicare law (PL 108-173). The Office of the Inspector General (OIG) at the Department of Health and Human Services and the Government Accountability Office (GAO) had documented many flaws in the previous payment system, based on reported average wholesale prices, White said.
“We had a stack of OIG and GAO reports about how outrageous the system was. There was clearly abuse going on,” said White, who worked on the measure as a congressional staffer. “There’s not any data in the CMS proposed rule that says physicians are actually overprescribing because of the add-on" to support the changes proposed in the new Part B model.
White said that this weakness in the Part B model will help its opponents block it. Lawmakers will be getting calls from powerful groups, likely including hospital executives in their districts. 
“You’ve got to make sure that you’ve got some pretty hard evidence and data that something bad is going on” to proceed with major changes to Part B drug pricing, White said. “Otherwise, politically, you can get your head kicked in."

Publication Details