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Medicare Drug Reimbursements: A Broken System for Patients and Taxpayers
Subcommittee on Oversight and Investigations
Mr. Thomas Connaughton
Mr. Chairman, my name is
Tom Connaughton. I am President of
the American Association for Homecare ("AAHomecare").
Our Association was formed by the merger of three national associations
on February 1, 2000. We are the only national association that represents every
line of service within the homecare community.
Our members include providers and suppliers of home health services,
durable medical equipment (DME) services and supplies, infusion and respiratory
care services, and rehabilitative and assistive technologies, as well as
manufacturers and state associations.
We thank you for the
opportunity to discuss the Medicare reimbursement system for pharmaceuticals
administered to beneficiaries by homecare providers and suppliers, in
particular, home infusion therapies and inhalation therapies administered to
respiratory patients. Homecare providers and suppliers save Medicare money by
treating patients in the most cost-effective setting - their homes.
The savings generated by treating patients at home can be dramatically
cost-effective when compared to the cost of the same therapy administered in an
institutional setting. Joining
me is JoAnn Lamphere (Dr.P.H.) of The Lewin Group.
At the request of our association, The Lewin Group conducted a survey of
providers and suppliers of inhalation and infusion therapies in order to
determine the costs associated with these therapies.
The Lewin Group has prepared a report analyzing the results of this
survey. To our knowledge, it is the
most definitive report on the subject to date.
Dr. Lamphere will summarize the findings of that report and, of course, a
complete copy is attached for your information. I
want to begin by making an important distinction between infusion and inhalation
therapies administered to patients in their homes and conventional outpatient
drugs such as pills and "patches." The
key difference is that pills and patches do not require professional services to
administer. An individual can
consume a pill or apply a patch himself after obtaining it from a retail or
"traditional" pharmacy. In
contrast, infusion and inhalation therapies cannot be administered to patients
at home without a complex array of professional services.
These medications are provided only on the prescription of a physician
and as required by regulatory, accrediting and pharmacy licensing bodies, are
prepared in high-tech, sterile settings similar to those found in a hospital.
These services ensure the safe and effective administration of infusion
and inhalation therapy in the home. As
we begin this discussion, it is also important to note that homecare providers
and suppliers are not paid separately for these important services.
Medicare does not have a separate benefit for these homecare therapies.
Infusion and respiratory medications furnished to homecare patients are
covered under the Medicare DME benefit. This
means that the only items that are explicitly covered and reimbursed are the
drugs, the equipment, and the supplies. Unlike
other health care professionals, homecare providers and suppliers do not have a
mechanism that reimburses the services necessary to administer the drugs in
addition to the reimbursement for the drugs.
By comparison, the private managed care sector has recognized the
tremendous cost-savings associated with homecare and it continues to provide
coverage for a growing list of home infusion and inhalation therapies.
Moreover, such organizations contract with providers for extended periods
of time, guarantee tremendous volume, and structure their contracts with both a
fee for the drug and a per diem to assist in covering the providers' costs of
services. Inhalation
Therapy Inhalation
therapy is administered to patients with respiratory disease, including, for
example, chronic obstructive pulmonary disease (COPD).
COPD is the fourth leading cause of death in the United States, affecting
16 million people.[1]
COPD includes a number of chronic respiratory diseases such as emphysema,
chronic bronchitis, and asthma. Individuals
with COPD have a progressive illness. The
disease can be stabilized, but it cannot be cured.
Inhalation therapy is used to manage COPD throughout the course of the
disease, but in the more advanced stages of COPD, other therapeutic
interventions may be required. Specifically,
inhalation therapy is the process through which a drug or a combination of drugs
is delivered into the airways and inhaled directly into the lungs via a device
called a nebulizer. These drugs may
include beta-adrenergic bronchodilators, anticholinergic bronchodilators, mast
cell stabilizers, anti- inflammatory
steroids, antibiotics, and sputum liquefiers.
Patients receiving inhalation therapy at home are monitored by
respiratory therapists and highly trained pharmacists.
Inhalation therapies reduce acute exacerbations of COPD, saving the
Medicare program money in emergency room visits and inpatient stays. Infusion
Drug Therapy Private
sector insurance plans and private managed care plans increasingly have embraced
home infusion drug therapy since the 1980's.
Antibiotic therapy, chemotherapy, and pain management are among the
spectrum of infusion therapies that are now commonly provided to patients in
their homes. Currently, there are
over twenty different drug therapies being offered in the home and other
outpatient settings in the private sector.
The private sector plans and payers typically recognize expressly and
separately the professional services necessary to provide infusion drug therapy
in a safe and effective manner in the home setting.
Infusion
drug therapy involves primarily the administration of the drug into the body
through a needle or a catheter. Typically,
infusion drug therapy means that a drug is administered intravenously, but it
may also apply to situations where drugs are provided through other parenteral
(non-oral) routes. Generally,
infusion drug therapies are used only when less invasive means of drug
administration are clinically unacceptable or less effective.
A team of patient service representatives, clinical pharmacists, high
tech infusion nurses, and delivery and reimbursement professionals support
patients and their caregivers throughout their treatment.
These services are inextricably linked to the therapies and are often
mandated by accrediting bodies whose standards ensure quality delivered in an
alternate site setting.
Providing infusion therapies at home has several advantages over
hospital-based therapy. Most
patients prefer to receive such therapies at home rather than in the hospital or
in a skilled nursing facility. Homecare
therapy allows many patients to lead normal lives throughout the duration of the
therapy; it enables terminally ill patients to spend valuable time with their
families and loved ones. Also, the
ability to administer these therapies in the home reduces the risk of
hospital-acquired infections that are sometimes associated with prolonged
in-patient stays. In most cases,
the cost of infusion drug therapy when properly provided in the home is far less
than the cost of such care in the hospital. Medicare
Coverage of Home Respiratory and Infusion Inhalation Therapies
It
is important to note that Medicare covers very few of the infusion drug
therapies when provided at home. Further,
as I stated above, Medicare does not have a separate inhalation therapy benefit
or a home infusion therapy benefit. Medicare coverage for these therapies in the
home is found only under the DME benefit - but only when equipment such as a
nebulizer or an infusion pump is necessary.
The fact that coverage for these therapies is limited to the DME benefit
is a very important point in understanding the homecare community's issues with
drug reimbursement, because the DME benefit explicitly covers only the drugs,
supplies, and equipment. There is
no recognition of the professional services and other functions that are widely
recognized as necessary to providing inhalation
and infusion drug therapies in the home in a safe and effective manner.
The
Medicare program's lack of recognition of these professional services is
illogical, potentially threatening to beneficiaries, and contrary both to how
clinicians define and the private sector plans cover these therapies.
The clinical value and necessity of the provision of professional
services to deliver inhalation and infusion therapies is reflected in various
accreditation standards commonly used by private sector payers, such as the
standards established by the Joint Commission on Accreditation of Healthcare
Organizations (JCAHO). Indeed, private
payers pay for these services as a specific component of the benefit.
The Lewin Group's analysis provides a good picture of the costs involved
in providing such services.
These
therapies require specialized pharmacy services.
Such services include the compounding of many of the drugs in a sterile
setting, responding to emergencies and questions regarding therapy, and
participating in the training and education of the patient (and often the
patient's family). These therapies also require the services of a nurse or
respiratory therapist to perform a variety of functions, including patient
screening and assessment, patient training regarding administration of the
pharmaceuticals, and general monitoring of the patient's health status.
In the case of infusion therapy, these services also include care for the
infusion site, and monitoring of the catheter exit site for signs of infection
or other complications. In
addition, the drug, supplies, and equipment are delivered to the patient's home
often within four hours of the prescription.
Patient satisfaction and other outcomes are measured and reported to
accrediting organizations as part of quality improvement programs.
Finally, staff, including licensed pharmacists, pharmacy technicians,
respiratory therapists, and registered nurses, are on call 24 hours a day.
It
is important to underscore that none of the specialized pharmacy services is
covered under any other Medicare benefit. In
a minority of cases, Medicare home infusion patients may meet the
''homebound" requirement and qualify for the home health benefit.
In such instances, the nursing services described above would be covered
under that benefit. For all other
Medicare Infusion Patients, the nursing services are not covered by the home
health benefit. Average
Wholesale Price and Drug Pricing Issues
Much
has been said about how Medicare pays for the few outpatient drugs that are
covered currently. The use of the
average wholesale price (AWP) as the principal basis for determining
reimbursement for drugs has received much criticism recently as being an
inaccurate reflector of the physicians' and pharmacists' costs for these drugs.
There is little question that these criticisms are correct - if the
payment "buys" drugs only. In
actual fact, the drug payment calculated on the basis of AWP has been used for
far more than that. With regard to
inhalation and infusion therapy in the home setting, the drug payment is the
only available payment mechanism for needed functions that are essential to
providing good quality care. In
other words, the spread between the providers and suppliers' acquisition cost
and the Medicare reimbursement under Medicare Part B must cover all functions
and services. The acquisition cost
of the drug is only a fraction of the overall cost of caring for these patients
at home. The
conclusions of the Lewin report, which Dr. Lamphere will explain in more detail,
reinforce the point that the cost of the drugs represents only one small portion
of the overall cost of caring for these patients in need of inhalation or
infusion therapy. Indeed, the cost
of goods represents 26% of total costs while direct patient care costs average
46% and indirect costs such as accreditation, information systems, and
Medicare/Medicaid regulatory compliance amount to another 25%. In
the case of infusion therapies delivered to Medicare beneficiaries, providers,
and suppliers, costs exceed the revenues received under Medicare.
For respiratory medications, providers and suppliers report an average
margin of 9.2% after taxes, which is considerably less than the average after
tax margin of 14.4% reported by companies on the S&P index for the same time
period in 2000. It
is important to note that homecare providers are not engaged in the selection of
a particular drug. Physicians
prescribe exactly which drugs should be used.
The services furnished by homecare providers and suppliers are triggered
by the physician's prescription. Their
jobs begin when they receive the physician's order.
Policymakers
simply cannot look at drug payment as an isolated issue, separate from the other
workings of a particular therapy. Reducing
drug payments dramatically, without corresponding changes in other aspects of
the payment methodologies, would truly strain the ability of suppliers and
providers to continue to provide these drug therapies to Medicare beneficiaries.
Indeed, homecare providers and suppliers are in a far more tenuous
position regarding drug reimbursement than are other providers because they
receive no payment whatsoever for the important functions and
services. Reimbursement for
drug therapies delivered in the home is tied solely to the drug supplies and
equipment. There is no fee
schedule for services. These
necessary professional services must be recognized, and they should be
reimbursed.
While
we have analyzed the AWP system and possible alternatives, we have not been able
to develop a recommendation for the Subcommittees for a system that accurately
determines the cost of products to providers and suppliers.
These costs vary so widely among providers and suppliers that it is
difficult to conceive of a system that accurately accounts for all of these
variables. Accordingly, we urge
Congress to proceed with caution. However,
if Congress contemplates changing the reimbursement system under Part B for
drugs administered in the home, it is critical that it recognizes the services
involved and provide a framework for reimbursing them.
It is not an option, in our opinion, to limit payment and coverage
strictly to what is covered under the
DME benefit. If Medicare beneficiaries receive only what the DME benefit
currently recognizes- the drug, supplies, and equipment (pump or nebulizer), -
then the level of care for the Medicare beneficiaries will be far less than that
commonly provided in the private sector. Indeed,
there are questions whether there will be access for Medicare beneficiaries at
all. That result would be neither
fair nor clinically appropriate. Medicare
beneficiaries often are less able to deal with the complexities of these
technical homecare therapies than are people who are decades younger. Recommendations We
believe that it is important to establish accurate definitions of home
respiratory and infusion therapy, create quality standards based on those
currently and widely used in the private sector, and establish a fee schedule
that reflects all the covered components of the therapies.
H.R. 2750, introduced earlier this year by Congressman Engel of New York,
Congressman Rush of Illinois, Congressman Towns of New York, and Congresswoman
Hart of Pennsylvania, would do exactly that for Medicare coverage of home
infusion therapy. This bill would
remove coverage of home infusion therapy from the DME benefit and establish a
new benefit that accurately reflects how these therapies are and should be
provided. If enacted, this bill
will bring the Medicare program in-line with the private sector as to how these
therapies are covered and defined. We
believe this approach is equally appropriate for inhalation therapies provided
in the home if Congress revises the reimbursement system for Medicare Part B and
drugs.
Mr.
Chairman, AAHomecare thanks you for the opportunity to present views on behalf
of our member companies. Please do
not hesitate to call upon us for additional information. [1] See National Institutes of Health, Global Initiative For Chronic Obstructive Pulmonary Disease, April 2001; Agency for Health Care Quality Research Evidence Based Practice Guidelines, Management of Acute Exacerbations of Chronic Obstructive Pulmonary Disease.
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