APPROPRIATE PAYMENTS, HIGH-QUALITY CARE FOR BENEFICIARIES USING INHALATION DRUGS
Medicare currently pays under Part B for inhalation drugs administered via a nebulizer. Medicare pays separately for the cost of the drug itself and for dispensing the drug to a beneficiary. Beginning in 2006, Medicare will pay a 30-day dispensing fee of $57 for the first time an individual uses inhalation drugs as a Medicare beneficiary, and a $33 fee for other months. Medicare will pay a dispensing fee of $66 for a 90-day supply. In addition, CMS is developing a demonstration program in 2006 to promote improvements in care and outcomes for beneficiaries who use respiratory medications. This demonstration program will test whether care management and care coordination by inhalation service providers working with physicians and other partners can lead to improvements in health outcomes.
Medicare payment for inhalation drugs administered via nebulizers has changed significantly in the last few years. Prior to 2004, Medicare paid for inhalation drugs based on 95 percent of the average wholesale price, which the OIG and GAO found vastly exceeded suppliers’ drug acquisition costs. As a result, both the Medicare program and Medicare beneficiaries were paying more than they should for these drugs. As part of Congress’s effort to get accurate and appropriate payments in the Medicare program, the MMA changed Medicare reimbursement for inhalation drugs. Beginning in 2005, Medicare reimburses inhalation drugs at 106 percent of the average sales price (ASP).
In addition to paying for the cost of the drug itself, Medicare has paid a dispensing fee for inhalation drugs. Prior to 2005, Medicare paid a dispensing fee of $5 per month. In light of the substantial changes with the new ASP system, CMS viewed 2005 as a transitional year and established an interim dispensing fee of $57 for a 30-day supply of inhalation drugs and $80 for a 90-day supply based on industry data. In establishing the 2005 dispensing fee, CMS indicated that although the industry cost data included services that may be of potential benefit to some beneficiaries, CMS was concerned that these services may be outside the scope of a dispensing fee and that such services might not be consistently provided. CMS indicated that it would consider the issue further to establish an appropriate dispensing fee for 2006.
2006 Dispensing Fee:
In the proposed rule, CMS indicated that it intended to establish a dispensing fee for 2006 that is adequate to cover the costs of those services that appropriately fall within the scope of a dispensing fee. The agency indicated that this fee amount would likely be lower than the 2005 fee of $57 per 30-day supply. The proposed rule sought comment on a number of issues such as what services appropriately fall within the scope of a dispensing fee and the cost of those services, as well as what services inhalation drug suppliers are currently providing to beneficiaries.
The final rule considered the issue of what services appropriately fall within the scope of a dispensing fee. The 2004 industry data, on which the 2005 fee is based, included a wide range of services beyond basic dispensing. For example, the industry cost study reported that suppliers may typically expend 50 minutes per established patient per month on patient education, caregiver training, care coordination, and in-home visits. CMS believes that such extensive provision of these services, if provided, reflect care management activities that do not fall within the scope of a dispensing fee. However, Medicare is conducting several demonstration programs to support care management services that have an evidence-based impact on health outcomes and avoiding preventable complications and preventable medical expenses.
Furthermore, a September 2005 OIG report, which focused on the extent to which beneficiaries receive various care management services from inhalation drug suppliers, found that such services may be infrequently provided to beneficiaries in actual practice. The OIG report concluded that most beneficiaries receive few services from drug suppliers beyond calls to ask if a refill was needed. For example, the OIG found that only 16 percent of beneficiaries received an educational service, 8 percent made a non-billing inquiry to their supplier, 8 percent received an in-home visit, 5 percent had a care plan revision, and 3 percent received a respiratory assessment at least once during 2003. The OIG report focused on those services that some had suggested were a valuable part of dispensing inhalation drugs to beneficiaries, but where little was known about the extent to which the services were actually provided. In fact, the services examined by OIG accounted for 60 percent of costs included in the industry data used to establish the 2005 fee.
Thus, while we believe effective care management services in conjunction with inhalation drug therapy may be of potential benefit to some beneficiaries, at this time there is a lack of clear evidence that such services are widely provided to beneficiaries in a way that actually leads to better beneficiary outcomes and lower overall costs. For consistency with the statute and achieving improvements in beneficiary health, we do not believe that including care management services in Medicare’s payment for the dispensing fee is appropriate. Consequently, we have established a dispensing fee for 2006 based on industry cost data, excluding industry reported costs for care management services (patient education, caregiver training, care coordination, and in-home visits) as well as non-Medicare reimbursable costs (sales, marketing, bad debt, and profit), and we are developing a demonstration program that includes performance-based payments. Beginning in 2006, Medicare will pay a 30-day dispensing fee of $57 for the first time an individual uses inhalation drugs as a Medicare beneficiary, and a $33 fee for other months. We have established a higher initial 30-day fee because we recognize that there may be greater levels of effort involved in dispensing when beneficiaries first begin using nebulizer drugs. In addition, Medicare will pay a 90-day dispensing fee of $66 beginning in 2006.
We believe that effective care management services can have an important impact on the quality of care for beneficiaries with chronic respiratory conditions who depend on inhalation drugs. We intend to develop a demonstration program on care management and care coordination for patients with relatively severe or complex respiratory conditions and needs who use respiratory drugs, including nebulizer drugs as well as meter dose inhalers (MDIs). With Medicare’s coverage of inhalation drugs expanding in 2006 to include MDIs under Medicare Part D, the demonstration program may be able to assist certain beneficiaries in using inhalers effectively, possibly in conjunction with nebulizer therapies.
Since care coordination and management is ultimately the physician’s responsibility and clearly works best when it supports the physician’s plan of care, demonstration payments would involve physicians who would make ultimate judgments about how best to provide patient support, as well as partnerships with other entities in the health care system to provide care management services. The demonstration program would test whether care management and care coordination services can improve health outcomes and reduce overall Medicare costs, for example by preventing clinical complications, avoiding hospital and physician visits that could potentially be addressed in the less costly and more convenient home setting, or by reducing the use of duplicative services or relatively costly therapies when they are not clinically appropriate. Furthermore, we believe the demonstration represents an important step in Medicare efforts to understand how to best promote needed steps to improve patient care and pay for better patient outcomes. The demonstration program, which could be a large-scale demonstration in 2006, could transition to more systematic involvement of respiratory care in the Medicare Health Support program (currently in its pilot phase) as well as performance-based payments in Medicare Part B.
Additional Administrative Changes:
In last year’s regulations, CMS revised several policies to help suppliers reduce costs, particularly those for shipping. CMS allowed 90-day supplies to reduce unit shipping costs and also more flexible refill shipments to reduce the need for overnight delivery. CMS currently allow refills to be sent up to approximately 5 days before the end of the current usage period. To further facilitate the use of ground delivery, we are currently in the process of working to expand this timeframe to allow refills to be sent up to 7 days before the end of the current usage period.