Feds to test new Medicare Part B payment models

Citing a new report that found prescription drug spending reached $457 billion in 2015, the federal government announced it will test new Medicare Part B payment models to try to tackle those spiraling costs.

The Centers for Medicare & Medicaid Services (CMS) says its proposals will create incentives for patients and physicians to select lower-cost, high-performing drugs that are administered at medical facilities, as well as test new ways to reward positive outcomes.

Under one of its proposals, CMS said it will pay providers the average sales price of a drug plus a 2.5 percent add-on and a flat payment of $16.80 per day per drug. Currently, Medicare Part B pays providers the average sale price plus an add-on fee of 6 percent, which CMS says can incentivize them to prescribe higher-cost medications.

CMS also will test other proposals, including those that would:

  • Discount or eliminate patient cost-sharing to improve their access to the most effective drugs
  • Create evidence-based clinical support tools that could provide information about how a clinician's prescribing patters align with regional or national trends, and/or best practices for prescribing
  • Vary payments for drugs according to clinical effectiveness for different indications to "pay for what works for patients"
  • Set a standard payment rate for a group of therapeutically similar drugs
  • Allow CMS and pharmaceutical manufacturers to enter into agreements that link drug prices with patient outcomes

CMS says its evaluation of the new model to run for five years, and it will require all providers and suppliers furnishing and billing for Part B drugs to participate--though what test each participates in will vary in order for the agency to measure what works best.

"These models would test how to improve Medicare beneficiaries' care by aligning incentives to reward value and the most successful patient outcomes," Patrick Conway, CMS chief medical officer and deputy administrator for innovation and quality, said in the announcement. "The choice of medications for beneficiaries should be driven by the best available evidence, the unique needs of the patient and what best promotes high-quality care."

The debut of the new models dovetails with the release of a report from the Department of Health and Human Services that estimates prescription drug spending accounted for 16.7 percent of overall personal healthcare services in 2015, and will continue to rise faster than overall health spending. In addition, the report says, spending on specialty drugs is rising more rapidly than it is on other types of drugs.

Already, however, CMS' new proposals have received some pushback. The trade group Pharmaceutical Research and Manufacturers of America said in a statement that making such "sweeping changes" without stakeholder input "is not the right approach and puts Medicare patients who rely on these medicines at risk."

Some providers also disapprove. "It is an understatement to say that this latest CMS initiative is misguided and a perilous cancer care policy," Ted Okon, executive director of the Community Oncology Alliance, said in a statement. "It will only serve to accelerate the consolidation of cancer care into the more expensive hospital setting and undermine the physician-patient collaboration on the treatment of cancer."

To learn more:
- here's the CMS announcement
- check out the CMS fact sheet
- read the HHS report on drug prices
- here's the PhRMA statement
- read the COA's statement

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