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Medicare Drug Reimbursements: A Broken System for Patients and Taxpayers
Subcommittee on Oversight and Investigations
Mr. Kevin Martyn
Chairman
Bilirakis, Chairman Greenwood, Members of the Committee, good morning.
My name is Kevin Martyn. I
would like to thank you for the opportunity to testify today.
This hearing addresses a subject that has the potential to impact
directly the quality of care that our patients receive.
I would ask that the prepared testimony that I have submitted be included
in the record. I
am the President of Care For Life. Care
For Life is a pharmacy and home health care provider.
We provide blood clotting factor products and all related services and
support to persons with hemophilia who self-infuse at home.
The ability of patients to treat their condition by self-infusing at home
--instead of being treated in a hospital emergency room or treatment
center -- allows individuals suffering from this condition to lead more normal,
healthy, and productive lives. Home
infusion also saves the government money. Mr.
Chairman, as a health care provider who has served the hemophilia community for
many years, I very much appreciate this Committee's concerns over the high cost
of providing care. I am aware that
there has been considerable criticism of paying providers based on the average
wholesale price, or AWP, and I
would agree that AWP may not be the right mechanism for all parts of the
Medicare program. Having said that,
Care For Life experienced first hand last year what happened when AWP was
reduced without adequate consideration for the impact on patient care.
When AWP was suddenly lowered for blood clotting products, my company
faced the difficult task of telling some patients that we could no longer
provide care. We delayed this
decision in every case by several months by operating at a loss.
But as a business we could not do that for long.
Fortunately, in all but a handful of cases the state Medicaid directors
decided to switch back to the old AWP levels, and we were able to continue to
provide care. At least with respect
to the disease that we treat, the current payment mechanism has resulted in good
care at a fair price. I would like
to describe very briefly how we arrived at this system
-- a system that, at least for hemophilia, works quite well. Mr.
Chairman, many years ago the primary way that hemophiliacs received care when
they were having a bleeding episode was to go to a hospital emergency room.
There, a doctor would examine them and tell them what they already knew:
they were having a bleeding episode and needed an infusion of clotting factor to
stop the bleed. The patient would
be admitted, hooked up to an IV, given an infusion, then released.
Eventually, policymakers, the health care industry, and the hemophilia
community realized that it would be just as effective medically to encourage a
shift to self-infusion at home, and that doing so would in many cases be better
for patients. Home infusion is
better because patients begin to infuse sooner, which stops the bleeding faster,
thereby decreasing the likelihood of greater damage. In addition, Medicare and Medicaid pay dramatically less than
if the patient had to go to the hospital for treatment. The
idea worked, and today Medicare and Medicaid enjoy very significant cost-savings
from home infusion. For example,
according to a study published in the Journal of Care Management in June of
1998, the cost to the government of treating
a minor bleeding episode in an adult male who self-infuses at home is $1,186. Alternatively,
if that patient had to make an emergency room visit to get treatment -- for the
same minor bleeding episode -- the cost to the government would be $5,620.
That is a difference of more than $4,400 per incident, again, based on a minor
bleeding episode. Light
to moderate hemophiliacs may bleed around 12 times per year.
Those with severe hemophilia may experience a bleed 52 times per year.
The Centers for Disease Control and the national organizations
representing the hemophilia community estimate there are 17,000 to 30,000
hemophiliacs in the U.S. The
reported numbers vary because not all hemophiliacs seek treatment at treatment
centers that report to the CDC. Accordingly,
if only one third (approximately 8,000) of the hemophilia population experiences
10 minor bleeds for which they are needlessly required to visit the emergency
room for treatment, the additional cost to the government would be $44,000 per
person for minor incidents in that year. The
total additional cost to the government would be $352,000,000 annually. For
severe hemophiliacs, the additional cost of emergency room treatment would be
much higher, easily more than $100,000 annually per patient.
These additional costs do not begin to address the increased physical
injury hemophiliacs suffer from the delay involved in having to make a trip to
the emergency room to get treatment or the additional costs involved in treating
those increased injuries suffered as a result of the delay in receiving infusion
treatments. In addition to the health benefits, self-infusion at home reduces administrative costs. With respect to providing clotting factors to hemophiliacs, the federal Medicare program only makes one payment under Medicare Part B. Under the statutory formula, the actual payment from Medicare equals 76% of the AWP for the clotting factor used. We get 76% of AWP because the law directs Medicare to pay 80% of the allowable cost, which is statutorily set at 95% of AWP. The provider must collect the other 20% of the 95% allowable cost -- the co-pay -- from either the patient, private insurance, or the state Medicaid program. In the case of Care For Life, roughly 90% of the time we are successful in collecting some portion of that 20% co-payment. With the reimbursement
based on AWP, Care For Life performs all of the services associated with
providing the clotting factor. These
services include having pharmacists on staff to dispense and track drug
interactions, nurses, administrative personnel, shipping, storage, training,
supplies, and the cost of advancing the money used to purchase the clotting
factor, to name a few. Care
For Life, like many of the providers upon which the Medicare system relies, is a
for-profit enterprise. Just like
any other business, we must make a reasonable profit margin, or our investors
will put their money elsewhere. After taxes, we are making roughly 7%, which I believe is a
reasonable return. It is much less
than the margins earned by some of the country's telecommunications companies,
car companies, and entertainment companies, but enough so that it makes sense to
be in this line of business. If
the reimbursement mechanism were changed so that reimbursement was materially
decreased, providers like Care For Life would be forced to send patients back to
the hospital. That in turn would
ultimately lead to increased cost to the Medicare and Medicaid programs, and a
decrease in the quality of care received by individuals with hemophilia.
That is an outcome that I am confident that this Committee will work to
avoid. Again, I thank you for holding this hearing and for giving me an opportunity to testify. I share your concerns and I applaud your efforts to develop a reasoned approach to Medicare reimbursement. I welcome any questions that you may have.
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