A Fix for Medicare Drug Spending
The whole system is going to be tough to reform. But this proposal shouldn’t be difficult
It’s hard to say which is crazier: Washington’s failed system for controlling drug costs or the resistance to a modest reform.
In addition to paying doctors for treating Medicare patients, the federal government also pays them 6 percent of the cost of any drug administered in their office. This gives doctors an incentive to prescribe the most expensive drugs available. The Centers for Medicare and Medicaid Services has proposed reforms in two stages. First, in August, the 6 percent fee would be reduced to 2.5 percent, plus a flat fee. Later, CMS wants to try what it calls value-based pricing strategies, such as paying doctors more for choosing drugs shown to be more effective.
Who would object to that? Just about everyone. Drugmakers say the current system “works to control costs.” (In reality, spending on this part of Medicare grew 17 percent faster than the program as a whole from 2005 to 2014.) Doctors groups argue the change will limit patients’ access to drugs and that Medicare should instead pressure drugmakers to lower their prices. In Congress, more than 300 Republicans and Democrats oppose the change, based on the theory that it will constrain patients’ and doctors’ choices.
These arguments are little more than fear-mongering. A more sensible system is easy to envision: Drugmakers can encourage doctors to choose products based on clinical effectiveness, not financial gain. If Medicare’s reimbursement rates are found to be too low, they should be adjusted directly, not through incentive payments that favor one drug over another. No doctor should refuse to administer a medically necessary drug simply because it’s not expensive enough.
Reforming Medicare as a whole goes beyond reducing the $20 billion it spent last year on drugs administered in doctors’ offices or hospital outpatient departments. Those broader fixes will require hard choices. This should be the easy stuff. <BW>