Say it isn’t so!

Federal Government reforms Trump Tennessee’s Private Insurers news@theheraldnewspapers.com When designing the Medicare Modernization Act of 2003, Congress and its adjunct medical experts and healthcare economists took care to address the entire spate of the system’s pharmaceutical pricing schemes in its quest for broad-based, market centered reforms for all of Medicare. For years, the system that Medicare was using to reimburse for “in-office” doctor-administered drugs was flawed and grossly out of balance. When doctors administered chemotherapy drugs, their reimbursement was based not on the actual price of the medicine, but on a theoretical pricing fiction called “Average Wholesale Price” (AWP). If it really existed, AWP would be the average “sticker” price of a drug set by U.S. wholesalers, but the Government Accounting Office, Health and Human Services and numerous legislators have referred to AWP as a “fraud”, a “waste,” and a “rip-off” with no connection to actual prices paid for the drugs by doctors and hospitals. This pricing scheme also ignored staff cost or outlays borne by the physician in administering the drug to the patient. Worse yet, not all drugs had the same “spread” between actual cost and the amount the doctor was reimbursed. When faced with a decision of what to prescribe, the doctor faced a perverse financial incentive to choose one drug over another simply because of a higher payment rate, not which drug may be best for a patient. Simply put, AWP had the potential to taint clinical judgment by providing physicians with a monetary reason to prescribe one product over another. Despite outcries from oncologists, urologists, hematologists and other physicians who often administer drugs therapies in their offices (and who may have grown accustomed to the “spread” to offset financial drains such as outrageous trial bar induced medical malpractice fees) Congress and Medicare did the darndest thing. Improbable as it may seem, the government led the charge for prudent reform. Congress and Medicare took bold action to fix the system and as of January 1, 2006, the government now reimburses drug therapies based on the Average Sales Price (ASP), a far more accurate reflection of the actual cost of the drug. Medicare has also increased fees paid to oncologists for administration of therapies, and will adjust patient co-payments for drugs to accurately reflect the true market price. The plan includes a transitional payment year for doctors to adjust their own bookkeeping before new drug reimbursement formulas go into affect. Such changes have cured the overpayment for drugs and the underpayment for services. History has shown that taxpayer funded systems such as Medicare and Medicaid are usually the last to institute sensible reforms. But in the case of AWP, the bureaucratic government healthcare program acted quickly and made common-sense reforms ahead of the private sector.   With the government horse now pulling the private sector cart, many private insurers recognized the value of this reform and were quick to follow the government’s lead. But in some areas of the country, it has been difficult for insurers to make the much needed reform, ironically, because of the doctors themselves. Regrettably, some hematologists and oncologists are freaking out at the mere mention of change and the need to revamp their bookkeeping. Tennessee is, unfortunately for patients, one of the few states where delays have occurred. Physicians are still being reimbursed based on the antiquated AWP system, a system that threatens the efficiency and integrity of clinical decisions and, more importantly, undermines patient’s health. All patients, whether insured by the public or private sector, should have the best healthcare possible. It makes sense that both public and private health care insurers, like Medicare, Medicaid and private HMOs, should reimburse doctors for the true cost of the drug and the administration of that drug. Reimbursement for some drugs at more than the actual cost presents an inherent and opportunistic moral hazard. The time has come for the entire health care system to accurately reimburse doctors for in-office drugs and their administration. Doctors should be paid for their time related to administering the drug and the real cost of the medication- no more, no less. America’s patients and doctors both deserve a clear path to unencumbered treatment options that are not unfairly burdened by financial incentives. Let’s hope that the insurance companies in all states follow the government’s lead for inserting fairness and sense into a failed pricing scheme and rid the healthcare world of AWP.   A public policy analyst working at the state and federal level, Kerri Houston is Vice President of Policy for Frontiers of Freedom and executive director of its Project for the American Healthcare Century.