NCPA - National Center for Policy Analysis

Cancer Payment Reform: Medicare is Missing the Elephant in the Room

July 27, 2016

Senior Fellow John R. Graham writes in NCPA's Health blog:

Last May I wrote about the uproar over Medicare's proposed changes to how it will pay doctors who inject drugs in their offices. This largely concerns chemotherapy. Currently, physicians buy the drugs and Medicare reimburses them the Average Sales Price (ASP) plus 6 percent. The proposed reform would cut the mark-up to 2.5 percent and add a flat fee of $16.80 per injection.

I did not think the reform would have a positive impact, but I also thought criticism was overblown. Well, Medicare has managed to irritate all the affected interest groups to such a degree that it is likely to toss the proposal and go back to the drawing board.

A new analysis published by Memorial Sloan Kettering Cancer Center explains where Medicare went wrong, politically. It irritated both drug makers and physicians because the reform would have cost both groups money. If Medicare had raised the flat fee to $24.66, 55 of 100 most prescribed chemotherapy drugs would have been more profitable for doctors and 45 would have been less profitable. The higher the flat fee, the more likely oncologists would embrace the reform.

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