Medicare considers dispensing fee

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Tuesday, August 31, 2004

WASHINGTON - Medicare in July issued a Notice of Proposed Rulemaking that revealed an 89% cut for albuterol and ipratropium. That’s the bad news. The good news is that CMS also floated the idea that it might soften the cut by paying HMEs a fee for dispensing the drugs.
“This is the first time that I have actually seen that [CMS is] considering raising or adjusting the dispensing fee to try and make up some of the shortfall providers are expecting,” said Lisa Smith, an attorney with Brown & Fortunato in Amarillo, Texas. “I know this was something the industry wanted, but until the notice came out, I hadn’t heard that it was something that was under serious consideration at CMS.”

CMS will collect comments on the service component and other changes in the NPRM until Sept. 24. Even if a service component is implemented, there is no guarantee it will help recoup the costs associated with providing respiratory medications, including shipping, handling, compounding and billing, say industry watchers.

The current dispensing fee is $5 per drug, which will not be sufficient to cover the requirements of caring for Medicare patients, said Smith. The government spent $35.5 million for 7.1 million dispensing fees in 2003. Industry watchers are expecting to see a dramatic increase in this amount when the final rule is announced this fall.

“The question will be can you do all your service for whatever the dispensing fee is? It’s going to become a game of volume,” said one industry source.

The big volume companies like Lincare, Apria, playing on Medicare’s fears that access will be disrupted after the cuts, responded to the NPRM saying they will exit the business if a “reasonable dispensing fee” is not established. (See story page 1).

The 89% cut takes shape as the much talked about ASP plus 6% reimbursement model first unveiled in the December 2003 Medicare Modernization Act.

Under this new model, albuterol’s payment is expected to drop from 39 cents to 4 cents per milligram when the final numbers are calculated. Ipratropium bromide payments will fall from $2.82 to 30 cents per milligram, according to the proposed fee schedule.

The 6% add-on is estimated to be about $1 for a typical month’s supply of 450 milligams of albuterol and about $1.60 for a month’s supply of 93 milligrams of ipratropium, according to the notice.

The Notice of Proposed Rulemaking said the cuts were necessary to reduce what the government considers a gross overpayment for respiratory medications based on current acquisitions costs. Medicare estimates in 2003 it overpaid on albuterol and ipratropium bromide by nearly $900 million, or about 64% of the $1.4 billion Medicare paid for the two drugs, according to acquisition prices determined by OIG and GAO studies.

The cuts are expected to save $4.2 billion over 10 years on respiratory medications alone.

The NPRM also outlined changes that could save HMEs money.

The regulations proposed a change in how the drugs would be delivered, shifting from a 30-day supply to a 90-day supply for each prescription. Such a change could greatly reduce costs involved in shipping and even labor, say some sources.

There is also a move to eliminate the need for suppliers to have a signed Assignment of Benefits (AOB) form before Medicare can make a payment. This proposal is highly regarded by industry members as a cost-cutting measure for providers.

“[CMS is trying to minimize the financial impact on providers,” said Smith. “The elimination of the AOB requirement will relieve the suppliers of having to jump through more paperwork and more hoops that make absolutely no sense.”

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