Dr. Jeffery C. Ward, a cancer specialist, has not yet faced the painful task many of his colleagues have this year: closing the door to patients because of federal budget cuts. But that’s only because Ward already made the hard choice of switching from running a private practice to serving on staff at a large hospital.
“We have escaped having to turn patients away,” said Ward, who now works for Swedish Medical Center in Seattle.
Recent news reports have blamed the sequester’s automatic spending cuts as the reason cancer patients have been forced to switch to new cancer centers in the middle of their treatments. But the sequester’s 2 percent slice in Medicare payments has really only exacerbated the recent rapid consolidation of cancer centers, a trend triggered by budget decisions made a decade ago.
With the Medicare Modernization Act of 2003 (PL 108-173), Congress changed a payment system for drugs administered in doctors’ offices that had been seen as ripe for abuse in the form of excess payments.
This made it distinctly less profitable to run smaller practices. Of 1,254 practices counted in a survey by the nonprofit Community Oncology Alliance, more than 500 had been consolidated through mergers or acquisitions, often with hospitals, between 2008 and 2012. Another 241 closed, and another 47 reported turning away patients, according to the survey results.
The sequester began taking effect on March 1 and is adding pressure to a network of smaller cancer practices already under financial pressure. As a result, more people will have to switch centers. That can create burdens such as longer commutes or potentially more cumbersome check-in procedures for patients already fatigued from fighting cancer, said Ward, who is the chairman of the American Society of Clinical Oncology’s clinical practice committee.
“It can have a dramatic and severe impact on patients for whom just getting out of bed can be quite a feat,” he said.
There are only anecdotal reports that patients have been turned away from cancer clinics this year, and there doesn’t yet appear to be a solid estimate of how many people could be affected this way by the sequester. North Shore Hematology Oncology Associates in New York says as many as 3,700 of the 25,000 patients the site sees in a year may have to switch to new treatment centers.
Democratic Sen. Barbara Boxer of California said on the Senate floor last month that she had heard about people who were turned away from cancer clinics.
“I understand we are truly suffering in this country,” said Boxer, who has called for a repeal of the sequester.
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.
Health researchers have suggested many changes for Medicare’s drug purchasing, including having Medicare negotiate directly with companies and creating a system in which doctors would be reimbursed without a direct link to what kinds of drugs are prescribed for patients. The current practice can create an incentive for doctors to, at times, favor newer and more expensive drugs over older ones.
Whatever Congress does, the margin paid to cancer doctors on drug sales appears likely to continue to drop, despite strong lobbying by industry groups.
“There is a sense that this will get reversed and fixed,” Ward said. “I don’t know that I believe that.”
Vice President Joe Biden waits to conduct a mock swearing-in ceremony with Sen. Brian Schatz, D-Hawaii, in the Capitol's Old Senate Chamber, December 2, 2014. Schatz was sworn in to serve the remainder of his term since he was appointed to the seat after Sen. Daniel Inouye, D-Hawaii, passed away.