New Medicare Prescription Drug Payment Model Promotes Value and Quality Care
As drug prices continue to rise at an unsustainable rate, we must ensure that our health care system and its financial incentives enhance the quality and value of care. We believe the Medicare Part B prescription drug model proposed by the Centers for Medicare & Medicaid Services (CMS) creates value for the patient and the program by encouraging treatment choices that have been shown to improve care and health outcomes.
This week we submitted comments to CMS in support of the proposal to test new ways of paying for prescription drugs in Medicare Part B. With appropriate monitoring and oversight, we believe that Medicare patients will retain, and potentially gain, access to needed medications through the pilot project.
Current Medicare payment model puts pressure on doctors to prescribe pricier drugs
Currently, Medicare reimburses for most Part B drugs (those administered in doctors’ offices and hospital outpatient settings) by paying the average sales price, plus 6 percent. This means that Medicare pays providers more for prescribing more expensive drugs, even if an equally effective and less expensive drug is available. This can lead to much higher cost-sharing for patients. With rapidly increasing drug prices, this higher cost-sharing threatens to put needed medications out of reach for many.
We know that providers weigh a number of important factors in making treatment decisions, but we can’t ignore that financial incentives, as research has demonstrated, can play a role in this decision-making process.
CMS will test new payment model while protecting patients’ access to services
In the first phase of this model, CMS will test changing the reimbursement to average sales price, plus 2.5 percent, plus a flat fee of $16.80. Shifting the reimbursement to a smaller add-on percentage and a flat fee reduces the incentive to use higher-priced drugs that are no more effective than alternatives. The model also levels the playing field for providers who prescribe equally effective but less expensive drugs.
In the second phase, CMS will test various value-based pricing strategies that have shown promise in the private market. These include:
- Increasing access to high-value drugs by reducing or eliminating patient cost-sharing for those services
- Supporting providers with tools to help them to make clinical decisions based on evidence and encourage appropriate use of health care services
Recognizing the unique characteristics and needs of Medicare patients, we believe that the proposed CMS model will ensure that these strategies are tested in a way that safeguards patient access to the services they need. In our comments, we encouraged CMS to implement these strategies by seeking high levels of input from patients and other stakeholders and with as much transparency as possible.
The CMS proposal also includes monitoring and appeals processes to ensure the continuity of patients’ access to needed medications. In our comments, we encouraged CMS to make these protections even stronger by actively engaging with patients and their advocates throughout the entire process.
We also recommended that CMS provide the public with additional detail on how patients will be supported in navigating the proposed “Pre-Appeals Payment Exception Review” process. This process provides an additional layer of protection by allowing providers and patients to apply for an exception to the pricing model under phase II if it is needed.
We believe that this proposal will benefit Medicare patients and is consistent with larger health system transformation efforts to shift payment away from volume-based reimbursement to one that incentivizes quality and value.