Government

Medicare proposes removing Part B drugs from SGR formula

If finalized, the plan would reduce the number of years in which physicians would face pay cuts.

By David Glendinning — Posted July 1, 2009

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The Centers for Medicare & Medicaid Services on July 1 proposed removing physician-administered drugs from the calculation of the Medicare doctor payment formula, a major policy change that the American Medical Association and other physician organizations have been pushing for most of the last decade.

The administrative proposal, outlined in the 2010 proposed physician fee schedule rule, would not reduce next year's planned 21.5% across-the-board cut. But CMS expects that it would decrease the number of future years in which physicians face reductions under the sustainable growth rate formula. It also could make it easier for Congress to reverse those cuts, because the cost to lawmakers of doing so would become significantly less.

The AMA praised the development and said it was a victory for physicians and patients. The Association has argued since 2002 that the cost of Part B drugs, typically medications that doctors inject into patients in the office setting, artificially drove up spending and made required rate reductions larger than they should have been.

The Bush administration refused to make the administrative change, saying CMS did not have the statutory authority to change the policy on its own. But the Obama White House disagreed, saying it has the power not only to take the drug costs out of the equation going forward but also retroactively removing the impact of Part B drugs back to 1996. It noted that increases in the cost of outpatient drugs in recent years have outpaced cost growth for all other physician services, disproportionately driving spending levels above the yearly targets set by the payment formula.

CMS expects to issue a final fee schedule rule by Nov. 1. The agency said it may modify the proposal in the event of congressional action on Medicare pay.

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