Medicare Infusion Drug Payments Waste Over $500 Million, Risks Patient Health

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Ethan Barton Editor in Chief
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Congress’ inability to update Medicare coverage of an important kind of drug has cost taxpayers more than half a billion dollars and has caused sick people to face unnecessary health risks.

Infusion drugs – medications administered intravenously and often essential for a patient’s life – were excluded from a 2003 reform of Medicare’s payment system.

Consequently, the government has spent an extra $585 million over an eight-year period, according to the Department of Health and Human Services inspector general

Also, Medicare typically won’t pay for infusion drug patients to be treated at home, so they have to go to long-term care facilities like nursing homes and hospitals, according to the National Home Infusion Association, a trade organization that represents infusion drug suppliers.

Such a requirement adds an unnecessary hospital visit bill to Medicare and forces extremely sick patients to move, sometimes against doctors’ orders, according to the association. In some instances, patients being treated for illnesses such as cancer will have to visit hospitals at least daily, for medication.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 separated most other outpatient drugs into Medicare Part D and established a more rigorous reimbursement formula for medications. But the law’s language explicitly excluded infusion drugs without explanation.

“The problem with Medicare pricing is that it’s not set under anything scientific,” said Heritage Foundation Senior Fellow Robert Moffit. “There are very powerful political forces.”

The exclusion could also be an example of Medicare’s inability to adapt with healthcare advances.

“It’s kind of an artifact as a design of Medicare as it was,” said Edmund Haislmaier, another Heritage Foundation senior fellow. Infusion drugs became prominent “ before there was any outpatient prescription drug benefit.”

Haislmaier said it wouldn’t be the first time Congress failed to update the law as healthcare changes have occurred.

He noted that outpatient drugs weren’t originally part of Medicare because they weren’t a significant portion of medical expenses at the time. The 2003 reform added reimbursements for outpatient drugs decades after they were first commonly prescribed, Haislmaier said.

“The system wasn’t able to adapt to the fact that there were all these new drugs,” Haislmaier said. “Inherently, it will be behind the curve because the technology and the market will change faster than the laws and regulations. It literally takes an act of Congress.”

The inspector general recommended the law be changed so infusion drugs would follow the more accurate payment formula used for most other pharmaceuticals.

The watchdog reported in April that the antiquated payment system cost taxpayers an extra $251 million from April 2013 to October 2014. A 2013 report also showed that the formula wasted $334 million from 2005 to 2011.

That means the cost per quarter more than tripled between the two reports.

Consequently, doctors typically receive a bigger reimbursement for infusion drugs than they likely would under the reformed formula. For example, Medicare paid physicians 13 to 21 times the cost of milrone lactate, a heart medication, according to the inspector general.

However, those higher payments may be necessary to pay doctors for services Medicare does not reimburse when administered at home, according to the National Home Infusion Association.

The association disagreed with the inspector general, calling the 2013 report “seriously flawed” in a letter to then-Health and Human Services Secretary Kathleen Sebelius.

The home infusion association used milrinone lactate as an example.

“A drastic reduction in the payments for the drug likely will result in most of these milrinone patients being forced to remain in the hospital or a long-term care setting to receive these complex infusions,” the letter said. “The report does not address the significant costs that will be incurred as a result of lengthy periods of institutional care these patients would require.”

While that may be true, the inspector general noted that such a system is dangerous for beneficiaries. Doctors may be incentivized to prescribe medications with higher reimbursements and dissuaded from prescribing those that result in a cut, the April report said.

Instead, the home infusion association recommended that Medicare be expanded to cover all expenses of home treatment, and to bill the drugs and the physician or nurse services separately.

The association noted in a 2014 report that private insurers have reimbursed home infusion for over 30 years.

“Importantly, patients treated at home instead of in a facility are at reduced risk of acquiring health care-acquired infections, which is a crucial safety consideration since many of these patients are at high risk of infection due to their age, compromised immune systems and, depending on their treatment, an opening in their body that is needed for the therapy,” the report said.

Allowing drug infusion patients to stay at home for their treatment would save Medicare nearly $80 billion from hospital visits, according to a report conducted by Alavere and commissioned by the association.

However, expanding coverage would also eliminate the need for kickbacks that fund physician services.

The National Home Infusion Association declined to comment.

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