Adequacy of Medicare Part B Drug Reimbursement to Physician Practices for the Treatment of Cancer Patients

EXECUTIVE SUMMARY:

Section 303 of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 established a new methodology for Medicare Part B reimbursement of drugs and biologicals.  Section 303 required OIG to report to Congress on the adequacy of the reimbursement rates under the new methodology.  The objective of this review was to determine whether physician practices in the specialties of hematology, hematology/oncology, and medical oncology could purchase drugs for the treatment of cancer patients at the MMA-established reimbursement rates.   

We concluded that physician practices in the specialties of hematology, hematology/oncology, and medical oncology could generally purchase drugs for the treatment of cancer patients at less than the MMA-established reimbursement rates.  We based this conclusion on a statistical estimate of average prices paid by physician practices for 39 payment codes that constituted more than 94 percent of the $4.5 billion in total 2004 Medicare-allowed amounts for drugs associated with these 3 specialties.  We also based the conclusion on a statistical estimate of the percentage of practice/months for which physician practices were able to purchase drugs at less than the reimbursement amount.  Overall, we estimated that the average prices paid for drugs associated with 35 of the 39 payment codes were less than the reimbursement amounts.  In addition, we estimated that for at least half of the practice/months, the physician practices could purchase the drugs at less than the reimbursement amounts for 35 of the 39 codes.   

We recommended that Congress consider the results of our review in any deliberations regarding the Medicare Part B reimbursement methodology for drugs for the treatment of cancer patients.  The Centers for Medicare & Medicaid Services stated that the report provides valuable information about the payment adequacy for Part B drugs used in cancer treatment.