CMS’s Scully goes after AWP

Tuesday, September 30, 2003

WASHINGTON - CMS Administrator Tom Scully seems bound and determined to reduce Medicare reimbursement for albuterol and other prescription drugs one way or another.

Despite similar legislation being considered in the U.S. House of Representatives and Senate, CMS on August 15 issued its own four proposals on how to handle the issue, which has dogged the industry for years.

“This has been a long-standing issue that has come up year after year,” a CMS official said. “This time it’s not going to get dropped. It’s going forward in the administration, and it’s going forward in Congress.”

Medicare currently pays 95% of the AWP for covered drugs, but CMS officials claim they have ample evidence showing that the reimbursement is significantly above what HMEs and other providers pay. HMEs maintain, however, that the difference, or spread, goes toward the cost of administering the drugs and caring for the patient.

One CMS proposal for cutting drug reimbursement mirrors legislation in the House Medicare reform bill and supports competitive bidding for covered drugs. A second proposal is similar to a Senate proposal and calls for a reduction in the percentage of the AWP reimbursed.

If Congress fails to change how Medicare reimburses for drugs, CMS will take action with its rule-making authority, Scully said.

“The idea is to try to come to a better sense of what the payment really should be for the drugs and then increase the payment to physicians for the administration of the drugs,” CMS said.

Yet, while CMS wants to create a separate payment mechanism for physician services, DME services are ignored by the proposal. The reason, according to CMS: It doesn’t want to pay for services that are considered uncovered.

This decision has left many in the HME industry shaking their heads.

“Again CMS does not value [DME] services,” said an industry insider. “They are specifically excluded [in the proposal]. So, the government will pay a doctor for the office and a nurse for taking the time to do things, but they won’t pay the pharmacy or the DME dealer for their respiratory care or any kind of patient service.”

A report commissioned by AAHomecare in 2000 pointed out that the cost of a homecare company of acquiring respiratory and infusion drugs is small compared to the total cost of providing services. It also warned that reductions to AWP payments would negatively impact HME profits and patient access.

“If they cut drug reimbursement substantially and there’s no similar adjustment made in the service side to where profit margins aren’t there to provide the service, then I think a lot of people will get out of that line of business,” said Lisa Smith, an attorney for Brown & Fortunato in Amarillo, Texas.

AAHomecare reacted cautiously to the CMS proposal, again pointing to sacrifices in patient access that would have to be made.

“The lack of a service component - coupled with CMS’s proposed payment cuts - will, without question, seriously impact patients’ access to care,” said Kay Cox, AAHomecare’s president, in a press release.

CMS hopes the proposals will help to eliminate a problem it has recognized for nearly a decade and comes at a time when drug payments are skyrocketing.

Drugs payments have nearly tripled versus the growth of people in the Medicare program by an average of 1.5%. In 1998, the government spent $3 billion on drugs. In 2002, that payment jumped to almost $8.5 million.

“It’s a huge increase, so obviously there is a concern about money being spent on drugs. It’s becoming really significant,” said an industry insider.

The pubic comment period on CMS’s four proposals ends Oct. 14. AAHomecare said it is formulating its response and encouraging others who might be effected to send in their comments.

“I would guess they are going to try and enact something sooner rather than later having finally gotten to this point,” said Smith.