Feds eye overhaul of Medicare Part B payments

The Obama administration is eyeing big changes to Medicare’s prescription drug program, with plans to pilot a new payment formula as soon as this year to help rein in national healthcare spending.

The Centers for Medicare and Medicaid Services (CMS) plans to pilot a new payment structure later this year that it hopes will incentivize doctors to prescribe “higher-value” drugs rather than simply the most expensive drugs available.  

Dr. Patrick Conway, chief medical officer for the CMS, said altering the formula for Medicare reimbursements could dramatically reshape the way doctors and hospital outpatient centers think about prescribing. He said some prescribers are pressured to pick the more expensive drug to help cover their bottom line.

“We’ve heard from oncologists who feel pressure to pick higher-cost drugs,” he told reporters.

Conway, who is also a practicing pediatrician, underscored that the new formula was not an attempt to undermine doctors’ authority in the exam room.

“Nothing in this proposed payment model will prevent doctors from prescribing exactly the treatment they think their patient needs,” Conway told reporters Tuesday, adding that medicare Part B would continue to reimburse “all providers for every drug.”

The new reimbursement model, which will be announced in a set of proposed rules Tuesday afternoon, is an attempt to restrain Medicare’s spending on prescription drugs, which are becoming increasingly expensive across the healthcare sector.

Under the pilot model, the reimbursement rate in Medicare Part B would be slashed by more than half — but with a new flat rate per prescription. Currently, doctors are paid by the Medicare Part B program based on a drug’s average sales price plus 6 percent. That rate will drop to 2.5 percent under the model, with a flat payment of about $16.

Starting in 2017, CMS would expand its pilot, testing what happens when doctors are paid extra for prescribing drugs with higher success rates and when patient cost-sharing is discounted or eliminated.