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Medicare seeks new way to buy Part B drugs, support physicians

Physician surchases computer for drug informationRule to address access, affordability, and innovation in prescription drugs

March 9, 2016 – Medicare Part B paid $20 billion on outpatient drugs last year. Maybe there is a better way to pay for prescription drugs? The Centers for Medicare & Medicaid Services (CMS) has proposed a rule to test new models that will also offer more support to physicians and other clinicians in delivering high quality care.

In 2015, Medicare Part B spent $20 billion on outpatient drugs administered by physicians and hospital outpatient departments. Total prescription drug spending in the U.S. was about $457 billion in 2015, or 16.7 percent of overall health spending, according to a report released yesterday.

CMS wants public input and comments as part of the rulemaking process, and says, in a news release, it looks forward to continuing to work with stakeholders through the rulemaking process to maximize the value and learning from the proposed tests.

Medicare Part B covers prescription drugs that are administered in a physician’s office or hospital outpatient department, such as cancer medications, injectables like antibiotics, or eye care treatments.

The proposed Medicare Part B Model would test new ways to support physicians and other clinicians as they choose the drug that is right for their patients.

The proposed rule is designed to test different physician and patient incentives to do two things:

drive the prescribing of the most effective drugs, and

test new payment approaches to reward positive patient outcomes.

Among the approaches to be tested are the elimination of certain incentives that work against the selection of high performing drugs, as well as the creation of positive incentives for the selection high performing drugs, including reducing or eliminating patient cost sharing to improve patients’ access and appropriate use of effective drugs.

“First and foremost, our job is to get beneficiaries the medications they need. These proposals would allow us to test different ways to help Medicare beneficiaries get the right medications and right care while supporting physicians in the process,” said Andy Slavitt, Acting Administrator for CMS.

“This is consistent with our focus on testing value-based care models like we have been doing with physicians and hospitals in ACOs. Models like this one can help doctors and other clinicians do what they do best: choose the medicine and treatment that keeps their patients healthy.”

Today’s proposal is part of the Administration’s broader strategy to encourage better care, smarter spending, and healthier people by paying for what works, unlocking health care data, and finding new ways to coordinate and integrate care to improve quality.

“These models would test how to improve Medicare beneficiaries’ care by aligning incentives to reward value and the most successful patient outcomes,” said Dr. Patrick Conway, CMS Deputy Administrator for Innovation and Quality & CMS Chief Medical Officer.

“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 proposed rule seeks comments on testing six different alternative approaches for Part B drugs to improve outcomes and align incentives to improve quality of care and spend dollars wisely; these include:

Improving incentives for best clinical care. Physicians often can choose among several drugs to treat a patient, and the current Medicare Part B drug payment methodology can penalize doctors for selecting lower-cost drugs, even when these drugs are as good or better for patients based on the evidence. Today, Medicare Part B generally pays physicians and hospital outpatient departments the average sales price of a drug, plus a 6 percent add-on. The proposed model would test whether changing the add-on payment to 2.5 percent plus a flat fee payment of $16.80 per drug per day changes prescribing incentives and leads to improved quality and value. The proposed change to the add-on payment is budget neutral.

Discounting or eliminating patient cost-sharing. Patients are often required to pay for a portion of their care through cost-sharing. This proposed test would decrease or eliminate cost sharing to improve beneficiaries’ access and appropriate use of effective drugs.

Feedback on prescribing patterns and online decision support tools. This proposed test would create evidence-based clinical decision support tools as a resource for providers and suppliers focused on safe and appropriate use for selected drugs and indications. Examples could include best practices in prescribing or information on a clinician’s prescribing patterns relative to geographic and national trends.

Indications-based pricing. This proposed test would vary the payment for a drug based on its clinical effectiveness for different indications. For example, a medication might be used to treat one condition with high levels of success but an unrelated condition with less effectiveness, or for a longer duration of time. The goal is to pay for what works for patients. 

Reference pricing. This proposed model would test the practice of setting a standard payment rate—a benchmark—for a group of therapeutically similar drug products.

Risk-sharing agreements based on outcomes. This proposed test would allow CMS to enter into voluntary agreements with drug manufacturers to link patient outcomes with price adjustments.

Today’s announcement is a continuation of the Department of Health and Human Services’ (HHS) work from last fall when HHS convened a forum that brought together consumers, physicians, clinicians, employers, manufacturers, health insurance companies, representatives from state and federal government, and other stakeholders to discuss ideas on how the health care system can meet the dual imperatives of encouraging drug development and innovation, while ensuring access and affordability for patients.

>> A fact sheet with more information about the proposed rule is available. 

>> A fact sheet with more information about what Medicare beneficiaries need to know about the proposed model. is available.

>> The proposed rule will be open to a 60-day comment period. CMS is accepting comment on the proposed rule through May 9, 2016. The proposed rule is available for viewing.

>> Additional information on the proposed rule.

>> To learn more about Medicare Part B Drugs: Pricing and Incentives visit:

>> To read an issue brief on Observation Trends in Prescription Drug Spending

 

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