Facts About Medicare, Part B & Deficit Reduction

Medicare is a promise to Americans. It is a promise that Americans who are over 65 and Americans under 65 with certain disabilities will have health insurance. [Medicare.gov]

Medicare is divided into different parts. These parts include Part A (Hospital and Facility-based Services), Part B (Physician and Outpatient Services), Part C ( Medicare-Approved Private Insurance) and Part D (Medicare Prescription Drug Coverage). [Medicare.gov]

Medicare Part B is designed to “cover medically-necessary services.” Examples of specific items and services covered under Part B include X-Rays, lab tests, blood transfusions, kidney dialysis and chemotherapy. [University of Iowa, Hospitals & Clinics]

Beneficiaries pay a standard monthly premium in order to receive Part B coverage. [Medicare.gov]

Unlike medicines that are obtained at a pharmacy and covered under Medicare Part D, the drugs covered under Part B are those that are administered in a physician office setting, such as those given through an IV. Drugs covered through Part B cannot be picked up at a pharmacy. [Medicare.gov]

Since Part B medicines cannot be purchased by beneficiaries at local pharmacies, medicines covered under Part B are purchased directly by physicians from manufacturers or wholesalers. Physicians are then reimbursed by Medicare for their costs. [CMS.gov]

When Congress passed the Medicare Modernization Act in 2003, it altered the reimbursement rates Medicare would pay for drugs and services delivered under Part B. Congress set reimbursement rates for these drugs based on “Average Sales Price” plus 6 percent (ASP). [Baylor University Medical Center]

The result of the change was significant and produced dramatic savings for the government. The Medicare Payment Advisory Commission believes the new rates have resulted in “substantial savings for Medicare on nearly all drugs.” The Congressional budget office believes the new rate would save the government $16 billion over 10 years. [MedPac.gov/HHS.gov]

However the reduction in reimbursements has not been without consequences. The Journal of Clinical Oncology found in one study that the new reimbursement rates created “economic strains” on medical practices who for a variety of reasons pay more than ASP+6 for the drugs and services they administer. The Journal wrote that this economic tension faced by providers “limits patient access to care when practices are forced to turn away patients or go out of business.” [Journal of Clinical Oncology]

Community cancer clinics that administered chemotherapy have been particularly hard hit by Medicare reimbursement rates that do not match their costs. In the last three-and-a-half years, 199 clinics have closed, while another 369 have reported that they are struggling financially. Forty-eight practices report that they are now sending patients elsewhere for services. [CommunityOncology.org]

The findings are not surprising. The ASP reimbursement rate is - by definition - “an average.” Because it is an average, some practices will pay more than the reimbursement rate, while others will pay less to acquire these medicines. Compounding the problem is the fact that the federal government includes discounts provided to distributors that are not passed along to physicians when calculating the average. [CommunityOncology.org]

Medicare Part B must not be brought into the deficit reduction fight. In many parts of the country, Medicare payments for medicines are already too low. Further cuts will accelerate the problem, meaning fewer practices will offer services and more beneficiaries will struggle to access the care they need. [Letter to Congress from Association of Community Cancer Centers and Others]