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Impact of Medicare Part B Reform on
Private Insurance Reimbursement
Howard M. Tag February 27, 2004
In light of DIMA, how will private In light of DIMA, how will private insurers change reimbursement insurers change reimbursement for office administered for office administered drugs?drugs?
Survey-based analysis
AgendaAgenda
• Housekeeping
• Demographics
• Survey results– 2003 baseline– 2004-2005 outlook
• Conclusions
• Reimbursement planning and solutions
• Pharmaceuticals, biologicals, devices, genomic-based diagnostics and therapeutics
• Since 1998
Special ThanksSpecial Thanks
• Survey design and analysis Elan B. Rubinstein, PharmD, MPH
• Recruitment and survey administrationNFO J Street
DemographicsDemographics
Qualitative SurveyQualitative Survey
• January 2004
• 15 MCO Medical Directors
• 60 million covered lives
Markets and ProductsMarkets and Products
• All regions; East coast weighted
• 11/15 offer Medicare+Choice
• 5/15 also Carriers, FIs, DMERCs
MCO Products Reflect MCO Products Reflect National MarketNational Market
Other8%
POS15%
PPO38%
HMO39%
Results: 2003 BaselineResults: 2003 Baseline
FFS With Some Direct SupplyFFS With Some Direct Supply
• Chemo*: 11/15 AWP-based– 3 require direct supply – 1 capitated
• Non-Chemo: 8/15 AWP-based– 4 require direct supply – 2 give choice of direct supply or reimbursement at the
direct supply contract price– 1 capitated
________________________________________________* All references to chemotherapy include supportive care treatments
Average = 90% - 94% AWPAverage = 90% - 94% AWP
• Lower than Medicare’s 95% AWP
• Chemo and non-chemo usually same
• Range was 80% AWP to 110% AWP
Specialty Distributors Paid Specialty Distributors Paid Slightly LessSlightly Less
• Chemo: 3 plans that require direct supply, pay 90% AWP
• Non-Chemo: 4 pay 90% AWP; 2 pay 80% - 85% AWP
How MCO Infusion/Injection Payments How MCO Infusion/Injection Payments Compared to Medicare Fee Compared to Medicare Fee (2003)(2003)
1 2
5 5
1
0
5
10
15
Lower Same Higher
By 11-20% By 1-10%
2004 – 2005 Outlook2004 – 2005 Outlook
Medicare Rate Is Important in Medicare Rate Is Important in Commercial Reimbursement DecisionCommercial Reimbursement Decision
9
11
8
9
0 3 6 9 12 15
Non-Chemo
Chemo
2004 2003
2004: Few Changes Planned 2004: Few Changes Planned
• Only 3/15 will lower AWP-based reimbursement
– 2: additional 10% reduction
– 1: additional 5% reduction
Direct Supply Will IncreaseDirect Supply Will Increase
• Chemo (‘03 baseline = 3)– 5/15 will require for infusables– 6/15 for injectables
• Non-Chemo (’03 baseline = 6)– 8/15
Infusion/Injection Fee Infusion/Injection Fee Increases in 2004Increases in 2004
Up 21-50%
(2)
Up >50%
(2)
Up 20% or Less
(5)
No Increase
(6)
Some Movement from Medical Some Movement from Medical to Rx Benefitto Rx Benefit
• Infusables – 4/15
• Injectables – 5/15
MCOs likely to re-categorize from medical to prescription benefit:
Tiered FormulariesTiered Formularies
• 5/15 will have tiered formulary for office-based infusables/injectables
For 2005, ASP+6% Will Be Important In For 2005, ASP+6% Will Be Important In Private Ins Reimbursement DecisionPrivate Ins Reimbursement Decision
9
11
0 3 6 9 12 15
Non-Chemo
Chemo
ConclusionsConclusions
Modest Changes in 2004Modest Changes in 2004
• Few surveyed MCOs are likely to lower payments for office-based drugs and biologicals
• More than one-half will increase payments for infusion and injection procedures
Bigger Changes in 2005Bigger Changes in 2005
• 11/15 surveyed plans say Medicare conversion to ASP will be important factor in setting reimbursement for private insurance business
Direct Supply Will IncreaseDirect Supply Will Increase
• More plans will require physicians to use direct supply for office-based drugs
– Some will require for non-chemo drugs but not oncology
Other Changes in Small DosesOther Changes in Small Doses
• About one-third of surveyed plans will– Re-categorize drugs from medical to
prescription benefit or – Establish tiered formularies for office-
based products
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Washington, DC 20006 USA
202.785.3800
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