The Evolution and Future of the Medicare Chemotherapy Concession

Abstract

Cancer is a life threatening disease that affects thousands of Americans each year. Chemotherapy is one of the most effective treatments for the disease, but its prohibitive cost makes it all but unavailable to those without health insurance. The Medicare program provides coverage for chemotherapy treatment to 40 million Americans 65 and older, those in the highest risk group for developing cancer. Last year the Medicare program spent over five billion dollars on chemotherapy treatment, with 75 percent of this money being paid to oncologists to reimburse them for the prescription drugs they administer to Medicare beneficiaries during chemotherapy treatment. Through a practice known as the “chemotherapy concession,†oncologists purchase prescription chemotherapy drugs from their manufacturers and wholesalers, administer the drugs to patients, and then bill Medicare for reimbursement. This payment from Medicare often far exceeds the actual cost of the drugs to the physicians who purchased them. Government audits have found that profit margins for doctors of 80 to 90 percent are not uncommon in these transactions. Critics contend that this practice encourages doctors to over-prescribe chemotherapy and jeopardizes the continued coverage of chemotherapy treatment by the Medicare program. Oncologists have maintained, however, that these generous drug reimbursements are necessary to offset Medicare’s inadequate payments to them for the chemotherapy administration services they provide to Medicare beneficiaries in their offices. Medicare currently does not compensate oncologists for a wide range of essential services they offer their patients, such as psychological therapy, nutrition counseling, family support services, and pain management classes. For this reason, oncologists claimed that they would only support a reduction in Medicare’s prescription drug reimbursements if it was accompanied by a corresponding increase in Medicare’s payments to them for chemotherapy administration services. A number of proposals for Medicare reform have been advanced over the course of the last decade. Many of these proposals called for Medicare to reimburse oncologists at market prices for the prescription drugs they purchased and administered to Medicare beneficiaries. Several proposals called for the Medicare program to adopt payment systems similar to those that have been successfully implemented by other public health insurance programs, such as Medicaid and the Veterans Health Administration. The Medicare Prescription Drug Improvement and Modernization Act of 2003 signed into law on December 8, 2003, radically reforms the way that Medicare pays for prescription chemotherapy drugs. The bill increases payments to oncologists for their services in administering chemotherapy to program beneficiaries, while at the same time reducing Medicare’s spending on prescription drugs. The Act has been widely criticized, however, for preserving a system wherein oncologists have an incentive to over-prescribe chemotherapy treatment to their patients because they make a profit on the chemotherapy drugs administer.