MedPAC Reports on Effects of Payment Changes for Oncology Services

January 9, 2006 – MedPAC recently released its mandated report to Congress titled "Effects of Medicare Payment Changes on Oncology Services." The report found no evidence of access problems for Medicare beneficiaries. It also found that oncologists responded to payment changes by cutting costs and increasing efficiency, finding new sources of revenue, or selecting more profitable patients. The 2005 chemotherapy demonstration project payments created difficulty for MedPAC and Congress to evaluate the effect of the Medicare payment changes.

From 1999 to 2004, the report finds that Medicare beneficiaries received an increasing volume of drugs and drug administration services. Based on partial data from 2005, payments for chemotherapy drugs declined while payments for erythroid growth factors increased. Drug administration services increased, but Medicare expenditures remained constant. The report estimates that the chemotherapy demonstration provided an additional $200 million to providers. It also notes that while the 2005 chemotherapy demonstration is widely viewed as flawed, it does demonstrate that practices can collect and report quality data on claims without undue burden.

All physician practices involved in site visits reported that they had implemented changes in their practices due to the Medicare reimbursement changes. All practices visited reported changing their drug purchasing activities. Some reported changing their use of drugs, staffing, services offered, and patient mix. Additionally, all the practices visited reported committing more time and resources searching for lower prices for drugs. Physicians and office managers did not report that payment changes affected quality of care, and beneficiaries did not report seeing a decline in quality of care.

The report indicates that beneficiaries may have an increasingly difficult time paying their coinsurance as the cost of drugs continues to rise, and that inability to pay creates a financial liability for physician practices. The high cost-sharing for beneficiaries is a key concern and the Commission will investigate long-term solutions.