NCPA - National Center for Policy Analysis

Study Shows Drop in Unnecessary Treatment after Medicare Cuts

November 8, 2010

Changes to Medicare reimbursement policy led to a sharp decline in unnecessary care, according to a new study in the New England Journal of Medicine.

Researchers at the University of Michigan found a drop in doctors prescribing hormone treatment to prostate cancer patients who were not benefiting from the treatment after the Medicare Modernization Act made reimbursement cuts.  According to the authors, this suggests financial reform can reduce unnecessary care.

Clinical studies found men with high-risk tumors benefited more from androgen deprivation therapy, as opposed to those with low-risk tumors.

  • In the 1990sapproximately 500,000 men were receiving the injected therapy.
  • Many doctors made a large profit off of the therapy, with the average practice receiving the drugs at 82 percent of the wholesale price and being reimbursed 95 percent of the wholesale price.
  • The change in reimbursement of injected medication in 2003 resulted in reduced profits as Medicare began to reimburse based on the actual sales transactions reported by the pharmaceutical company and not wholesale prices.

The study's authors looked at Medicare database information of 54,925 men who received a prostate cancer diagnosis between 2003 and 2005.  The men were divided into three categories -- appropriate use, potentially inappropriate and discretionary.

Following the change, treatment regimens remained the same for patients in the appropriate use group.  But usage in the potentially inappropriate use group dropped 17 percentage points between 2003 and 2005.  The discretionary group declined as well, though not as sharply, says the National Journal.

In that time, reimbursements for the treatment dropped from $356 to $176 per dose.

Source: Althea Fung, "Study Shows Drop in Unnecessary Treatment after Medicare Cuts," November 4, 2010.

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