Federal officials have ignored a government watchdog’s repeated recommendation that could have reduced Medicare costs by $251 million in only a year-and-a-half and significantly improved the quality of healthcare provided to patients.
Medicare reimbursements for infusion drugs — medicines administered through IV pumps — are based on the wholesale prices manufacturers reported in 2003, according to the Department of Health and Human Services inspector general. However, the pharmaceuticals are typically sold for significantly less.
“Under this methodology, providers are being reimbursed for many drugs at double their costs, while recouping only half of their costs for other drugs,” the inspector general said. Most other drug reimbursements are based on the actual sale price and are updated every quarter.
The inspector general has often recommended that the Centers for Medicare and Medicaid ask Congress to change infusion drug reimbursements to match the process used for other drugs, including most recently in February 2013.
“If this legislative change had been enacted subsequent to [the inspector general’s] recommendation, Medicare expenditures for … infusion drugs could have been reduced by $251 million over 18 months,” the watchdog said.
In addition to saving money, patients may have also seen better treatment. Physicians may prescribe certain drugs more than others, since Medicare reimbursement for some medicines is greater than the actual cost, while others may carry a net loss.
“These payment-related issues could also affect drug utilization,” the inspector general said. “For example, payments that substantially exceed costs could present incentives for providers to over-utilize a particular product, while payments that are below cost could contribute to providers’ inability or unwillingness to provide a particular drug.”
In other words, Medicare could inadvertently pay providers to prescribe some medications.
Although the Centers for Medicare and Medicaid acknowledged the benefits of changing the reimbursement calculation, it still has not sought a legislative change.
The inspector general also recommended that the centers solicit contractors to supply infusion drugs to drive down costs through competition in the meantime. Medicare and Medicaid officials agreed, but said they couldn’t make the change until at least 2017.
The inspector general has repeatedly reported that Medicare pays hundreds of millions of dollars more than necessary by basing their infusion drug reimbursements on outdated bulk prices, rather than quarters’ average sales prices.
Medicare could have reduced its $712 million payments by 35 percent from April 2013 to October 2014. Reimbursements for two drugs in particular — milrinone lactate, a heart medication, and Hizentra, used to boost weakened immune systems – would have saved Medicare $267 million under the inspector general’s suggested formula.
Also, Medicare paid at least double the estimated amount for nearly half of the infusion drugs during those 18 months.
For example, Medicare’s $52 reimbursements to providers for milrinone lactate is based on manufacturers’ 2003 reported bulk sale price.
“However, during the period under review, the estimated acquisition cost of milrinone lactate ranged from $2.44 to $3.99, meaning that Medicare paid providers 13 to 21 times their estimated cost for the drug,” the report said.
As a result, the drug’s providers each spent around $31,000 over the 18 months, but were reimbursed nearly $500,000.
Conversely, Medicare may have reimbursed providers as much as 88 percent less than what they paid for another quarter of the infusion drugs.
“In other words, Medicare reimbursement may not have been sufficient to cover the average cost of these drugs for providers, possibly because payment amounts have remained unchanged since 2003,” the watchdog said.
For example, 50 units of insulin cost providers between around $5 and $6. However, Medicare only reimbursed $2.80. In total, providers may have been reimbursed $20 million less than what they paid during those 18 months.
