Medicare Update: Medicare Part B’s BIG Changes

The “B” in the Medicare Part B program may come to be known as “BIG,” as in big changes; both the physician reimbursement component of Medicare Part B, as well as the coverage of outpatient medications, are undergoing major changes. Medicare Part B, also known as medical insurance, covers physician services. Physician and other providers, such as nurse practitioners, are paid for by Medicare under a fee schedule dictated by Medicare. In addition to physician services, Medicare Part B also covers supplies such as durable medical services and medications provided within a physician office. Because of the increase on demand imposed by aging baby boomers during a time of limited resources and extraordinary innovation, cost-controlling measures are being introduced that directly impact geriatric providers.

MEDICARE PRICING NOW

The system for determining the fee that physicians are reimbursed from Medicare is unlike other markets where the producer sets prices based on the market conditions for its services. Instead, in senior care, Medicare dictates the prices based on a predetermined formula. The current Medicare physician fee schedule bases annual adjustments on the Sustainable Growth Rate (SGR) Formula. This formula ties physician payment updates to a number of factors:

• Growth in input costs
• Growth in fee-for-service enrollment
• Growth in the volume of physician services relative to growth in the national economy

The result of this formula is that the more services utilized for reasons of demand, the less the reimbursement to physicians in subsequent years, in hopes that this will decrease utilization and expenditures. As has been the case for the last several years, Congress has put aside the formula adjustment, instead choosing to follow the Medicare Payment Advisory Commission’s (MedPAC’s) recommendation. MedPAC is tasked with analyzing access to care, quality of care, and other issues affecting Medicare. MedPAC advises Congress on healthcare reimbursement based on careful analysis of two questions: (1) Are current payments adequate? and (2) What cost changes are expected in the coming year?

In the area of practice expense, MedPAC examines changes in economy-wide productivity and input prices such as practice overhead. With regard to adequacy of current payments, MedPAC focuses on access and quality. Access for beneficiaries would ensure that payment levels are such that there are an adequate number of providers for beneficiaries. Access also means access to capital to ensure that practices can be innovative to assure appropriate quality standards through the introduction of electronic health records or ePrescribing, to cite just two examples.

For 2008, providers are already lobbying hard to increase their reimbursement from the current recommendations that MedPAC has made. Those recommendations include a 1.7% increase on physician reimbursement, a 3.1% increase on hospital reimbursement, and a freeze on nursing home reimbursements.

THE FUTURE OF MEDICARE PHYSICIAN REIMBURSEMENT

For 2007, instead of the 5.4% decrease as set forth under the SGR Formula, Congress passed a freeze on Medicare’s annual adjustments. But even more significant with regard to the annual adjustment to the Medicare fee schedule is the introduction of a pay-for-performance (P4P) payment.

A section of the Tax Relief and Health Care Act of 2006, Sec 101 Physician Payment and Quality Improvement, introduced the beginning of P4P initiatives within Medicare. Beginning July 1, 2007, and ending December 31, 2007, providers will receive an additional 1.5% from Medicare for reporting measures identified as 2007 physician quality measures under the Physician Quality Reporting Initiative (PQRI).

The additional 1.5% from Medicare for reporting measures identified as 2007 physician quality measures under the Physician Voluntary Reporting Program is available to eligible professions, which include (in addition to physicians) nurse practitioners, physical and occupational therapists, and qualified speech-language pathologists. In those fields of medicine, where four or more quality measures apply, providers are required to report on at least three quality measures in at least 80% of the cases in which the respective measures is reportable. As a result, physicians would be well advised to focus on just three measures during this first period of time.

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In skilled nursing facilities (SNFs), Medicare Part B drug coverage often does not apply. Here is an example of such a case.

Dr. Jones writes for Ms. Smith to receive low-molecular-weight heparin (LMWH) and albuterol through a metered dose inhaler (MDI). During the subacute stay, there is no issue, as the nursing facility is responsible financially for all medications under their capitation payment—Medicare Part D as well as Part B medications do not apply. After the subacute stay ends and Ms. Smith moves to her long-term care (LTC) stay, the Medicare Part D plan covers her medications because the Medicaid drug benefit for the dually eligible, like Ms. Smith, transferred to Medicare Part D on January 1, 2006.

It’s important to remember that just because Ms. Smith may be privately paying for her room and board instead of Medicaid, she will almost certainly have Medicare A, B, and D since over 90% of seniors are covered under these programs. As a result, this case covers the vast majority of LTC residents.

The procedure for processing med orders for residents like Ms. Smith during their LTC stay would go as follows: The SNF staff faxes the order sheet to the LTC pharmacy, who in turn sends it to Ms. Smith’s prescription drug plan (PDP). The PDP automatically denies the claim, stating that both albuterol MDI and LMWH are Medicare Part B drugs since the albuterol requires durable medical equipment (DME)/inhaler for use and the LMWH could be given in a physician’s office and billed “incident to” the physician visit. While this is true if Ms. Smith lived outside a SNF, her site of care within a SNF makes these Medicare Part D–covered medications. This problem can be proactively addressed by noting in these orders that Ms. Jones is a resident of a SNF.
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And while the return from participating in this exercise may be low, $2250 per a Medicare-only provider, it is clear that not only will the Centers for Medicare & Medicaid Services (CMS) be expanding this program, but other payors will follow this lead. Physicians should be familiar with these measures so that they can optimize their Medicare reimbursement, and more importantly, be prepared for the expansion of P4P.

OFFICE-BASED MEDICATIONS

Currently, medications that are administered in the physician’s office are reimbursed directly from CMS to the physician. This had been done based on a reimbursement rate of average wholesale price (AWP) multiplied by 95%. Recently this was changed to a rate based not on AWP, but rather average sales price (ASP), which was meant to more accurately reflect the cost to physicians for acquiring these medications. The current reimbursement is now set at ASP multiplied by 106%. Under the Medicare Modernization Act (MMA), this system changes once again under the Competitive Acquisition Program (CAP).

CAP is outlined in Section 303(d) of the MMA; this requires the implementation of a CAP for Medicare Part B drugs and biologicals not paid on a cost or prospective payment system basis. Beginning with drugs administered on or after January 1, 2006, physicians will be given a choice between buying and billing these drugs under the ASP system, or obtaining these drugs from vendors selected in a competitive bidding process.

Medications are considered paid under Medicare Part B if they are administered in a physician’s office by a licensed physician. The same medication can, however, be covered under Medicare Part D when dispensed through a pharmacy through a prescription and self-administered. Currently, medications that are used to treat or prevent deep venous thrombosis, multiple sclerosis, or rheumatoid arthritis are the ones most likely to be cross-covered depending on site of administration—a patient’s home versus a physician’s office.

This is a voluntary program in which physicians may participate. Physicians can continue getting reimbursed under ASP or choose to participate in the CAP program. Physicians may choose to participate if they consider the relief of the administrative burden of acquiring these medications and billing CMS directly to be greater than the reduction in potential profits from providing these medications in their offices. Physicians give up any chance to capture federal payments for Medicare Part B drugs that exceed the actual purchase costs of the medications. In addition, by participating, a physician practice will not be able to leave the program or pick another vendor until the next year. And it is important to note that physicians are relieved of all administrative responsibility; in fact, physicians can be barred from the program if they fail to submit necessary drug administration claims on a timely basis. Physicians must weigh for themselves the costs and benefits of participating in the CAP program before making a decision.

If they choose to participate, the CAP process involves the following steps:

• A physician who decides to participate in the upcoming year chooses one of five drug vendors who bid the lowest in a federal competition.
• The physician orders an entire course of therapy directly from the vendor. The doctor submits patient information and expected date of administration.
• The vendor sends the drugs in one or more shipments without charging the physician.
• After dispensing the therapy, the physician bills Medicare for the cost of administering the drugs.
• The vendor charges Medicare for the cost of the drugs and collects any appropriate coinsurance or deductibles from the patient.

CAP was implemented on July 1, 2006, with BioScrip as the sole designated vendor. In the initial enrollment period, 307 physician practices enrolled in and began using CAP. Despite the failure to engage many physicians in the initial enrollment into CAP, CMS is looking at other methods of covering Medicare Part B medications in the future, possibly by moving coverage from Medicare Part B to the Medicare Part D benefit.

MEDICARE PART B VS MEDICARE PART D COVERAGE

Now with the introduction of Medicare Part D, outpatient prescription drug coverage is available beyond the Part B program. Drug coverage under Medicare Part B is covered for those medications administered by physicians in their offices as part of a sustained clinical treatment, such as chemotherapy or for other specified drugs that cannot be self-administered. In addition, certain vaccines, such as influenza, pneumococcal, and hepatitis B, are covered under Medicare Part B, while all new vaccines are covered under the Part D program.

Unfortunately, with just a few exceptions, one cannot determine medications covered under Medicare Part B versus Medicare Part D by simply knowing the medication; instead, knowledge of the place of dispensing and the reason for the therapy is needed to determine coverage.

Some of the drug classes where uncertainty lies include the following:

• Drugs requiring the use of DME
• Drugs furnished “incident to” a physician service
• Immunosuppressant drugs
• Oral anti-cancer drugs
• Oral antiemetic drugs
• Erythropoietin
• Prophylactic vaccines
• Parenteral nutrition

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CMS Guidance on Medicare Part B vs Medicare Part D Drug Coverage

Part B vs Part D Guidance
www.cms.hhs.gov/PrescriptionDrugCov-GenIn/Downloads/PartBandPartDdoc_ 07.27.05.pdf

Part B vs Part D Coverage Table
www.cms.hhs.gov/NationalMedicareTrain-Prog/Downloads/RxCoveragePartABD.pdf
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MedPAC recently made two recommendations with regard to Medicare Part B drug coverage:

1. Congress should direct CMS to identify and always cover certain overlap drugs under Medicare Part D.
2. Congress should allow plans to cover a transitional supply of overlap drugs under Medicare Part D with certain limitations until a coverage determination can be made.

These recommendations by MedPAC, and the desire of CMS to control Part B medications costs, are pushing these medications to be increasingly covered under the Medicare Part D program. This move will impact those practices that deliver Medicare Part B medications, as well as the practices that need to assist their patients in accessing these medications.

LTC PART B MEDICATIONS

In LTC facilities, Medicare Part B medications are covered under the Medicare Part D program, with the exception of the influenza, pneumococcal, and hepatitis B vaccines. For other Part B medications that require billing through “incident to” billing, these medications are covered under the Medicare Part D program. Therefore, DME supply–related drugs and drugs furnished “incident to” a physician service, while covered under Medicare Part B outside a LTC facility, are Medicare Part D–covered medications inside such facilities.

The two main points that LTC providers need to remember with regard to Medicare Part B medications is that except for vaccines, almost all Part B medications are covered under Medicare Part D for LTC residents when given in the facility. The second point is that given the financial pressures that LTC facilities face today, facilities need to make sure that those medications that can be covered under the Medicare Part B program instead of by the facility through Medicare Part A are covered in this way. These include treatments such as erythropoietin for the treatment of anemia in residents undergoing dialysis, as well as injectibles that are more appropriately given in the physician’s office and billed “incident to” the physician visit under Medicare Part B, thereby alleviating the facility from added financial pressure.

Carefully managing the Medicare Part B medication program in LTC is needed to ensure that residents have access to these medications in the most efficient and effective manner possible.

THE FUTURE OF MEDICARE PART B

Physicians need to prepare their practices for the changes in Medicare Part B. This includes submitting the first round of the PQRI while preparing one’s practice for increasing reporting and performance requirements.

On the Medicare Part B medication side, practices that are currently providing a great deal of Part B medications need to plan for the decrease in practice revenue from the loss of this activity as it moves increasingly to the CAP and Medicare Part D programs. Those practices not involved in Medicare Part B medications need to be aware of the changes so they can direct their patients through this system to ensure access to these necessary medications.

Just as the introduction of Medicare Part D meant big changes for geriatrics providers and for their patients, the changes occurring to the Medicare Part B program will affect not only access to necessary medications, but how physician practices are paid. Clearly knowing about these changes to the Medicare Part B program will enable practices to best prepare to care for the growing number of seniors utilizing these benefits.

Please send any questions or experiences about Medicare Part B you would like to share with readers to: Spivackb@pol.net