What President Barack Obama calls a “self-inflicted wound,” the sequester was built into the 2011 debt-limit law (PL 112-25) as a penalty meant to compel a divided Congress to compromise on a major fiscal overhaul and come up with a plan to save $1.2 trillion over a decade.
But budget battles would persist for cancer specialists, even if the sequester were somehow repealed.
Obama has proposed a cut that would slice a bit deeper into Medicare than even the sequester. Medicare reimburses doctors for drugs administered in their offices by giving them a premium of 6 percent on top of what’s deemed the average sale price of the medicines. The sequester reduced these payments to about 104 percent of the average sale price of the drug, down from 106 percent. In his fiscal 2014 budget proposal, Obama proposed paying 103 percent.
Such a proposal eventually might be part of the new round of debates about how to rein in Medicare costs. There’s strong support in both parties for at least the vague concept of what both sides call entitlement reform, but health care advocates say many lawmakers might not fully understand the consequences of this work.
Paul Ginsburg, president of the nonprofit Center for Studying Health System Change, said altering Medicare payments, as has happened with the reimbursement for cancer drugs, can trigger changes in health practices and can affect the profits of companies and even industries. About a third of the members of Congress were sworn in after the passage of the 2010 health overhaul (PL 110-148, PL 110-152), which marked the last time lawmakers made major changes to Medicare.
“They’re not focused on how much work they’ll have to do when they inevitably decide that they have to reform Medicare,” said Ginsburg, a former deputy assistant director at the Congressional Budget Office and adviser to Congress on Medicare.
Ginsburg is adamantly opposed to the sequester’s cuts, but notes there were sound reasons for overhauling the Medicare payments for drugs administered in doctors’ offices through the 2003 law.
“What was happening before the Medicare Modernization Act was just outrageous,” he said.
Congress warned repeatedly in the late 1990s and early 2000s that Medicare was paying too much for medicines administered in doctors’ offices, known as Part B drugs, as pharmaceutical companies could manipulate the standard then used to set reimbursement. Companies would report the average wholesale price to be used as the benchmark, but doctors often could obtain the drug for less and then bill Medicare for the higher rate.
In 2001, TAP Pharmaceutical Products Inc. agreed to pay $875 million to resolve federal criminal charges and civil liabilities in connection with its fraudulent drug pricing and marketing of prostate cancer drugs.
Congress changed the system in 2003 when it expanded Medicare to pay for prescription drugs that people can take on their own, a program known as Part D.
Insurance companies negotiate discounts for Part D, which accounted for about $62 billion in 2010 sales. There were about $20 billion in Part B sales. Doctors don’t stand to directly benefit from prescriptions for Part D drugs, but they can from the choices that they make with Part B.