Lower Medicare cancer pay linked to higher utilization

A reduction in Medicare physician payments for outpatient cancer drugs starting in 2005 does not appear to have had the negative impact on patient access to treatment that some physicians warned it would. In fact, the reductions actually led to a higher percentage of cancer patients receiving chemotherapy, says a new study sponsored by the Robert Wood Johnson Foundation.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 substantially reduced payments for outpatient chemotherapy drugs, and researchers from the RAND Corp. and others attempted to gauge the impact these reductions had on patient access to care.

The study's authors examined Medicare claims data information from 2003 and 2005 -- the year the cuts first took effect -- for more than 222,000 lung cancer patients. They discovered that on average, the percentage of patients who received chemotherapy within a month of diagnosis increased to nearly 19% of patients, compared with 16.5% before the law went into effect. For treatment that occurred just in doctors' offices, the figure increased from 13% to 15%.

Medicare used to pay for such drugs at 95% of what was known as the average wholesale price. Under this system, physicians were able to buy drugs on the open market and administer them to patients at a much higher price to Medicare, according to the report, which appeared online June 17 and will appear in the July edition of Health Affairs. After the change in law, Medicare switched to a new payment system based on the average sales price, which set payment at 1.06 times the average cost to physicians of buying the drugs, down from a payment-to-cost ratio of 1.22.

Researchers studied five specific drugs -- carboplatin, docetaxel, etoposide, Gemcitabine HCI and paclitaxel. Within a month of implementation of the new payment system, the portion of patients receiving chemotherapy treatment increased 2.4 percentage points, and physicians showed a tendency to prescribe docetaxel, a relatively costly drug, to a higher percentage of lung cancer patients.

For other drugs that underwent marked decreases in payment rates, physicians prescribed them for a smaller share of chemotherapy recipients "because there was far less financial inducement to use them," the study concluded. The researchers indicated that physicians were well aware of the impending payment switch and acted accordingly.

"The timing of the sustained decline in the use of these agents preceded the introduction of the average sales price payment system by a few months," the authors wrote. "Presumably, physicians knew that the reduction in payment rates for these drugs would be large and were reducing their reliance on them in advance. Failure to do so could have meant a considerable loss of income."

Joseph P. Newhouse is a study author and an economist and health policy professor at Harvard University in Massachusetts. He said there was some surprise among the research team at the results, as they had anticipated seeing more patients being turned over by physicians to clinics once the payment rates dropped. "It looks like the oncologists substituted toward the agents whose prices had fallen the least."

Mireille Jacobson, a study author and senior health economist at RAND in Santa Monica, Calif., said lawmakers should consider such behavioral responses to payment cuts before they consider implementing more of them. "Changing prices alone is just one piece of the puzzle."

Oncologists question results

The study concluded that the increase in utilization of chemotherapy and the decline in the use of certain drugs for lung cancer patients may have important implications for the well-being of Medicare beneficiaries.

"Unfortunately, we cannot infer the appropriateness of treatment or health outcomes from these data," the researchers wrote. "Among patients receiving chemotherapy treatment, some work suggests that the switch away from paclitaxel to docetaxel should have limited effects on outcomes, although at a considerable increase in cost."

Jacobson acknowledged that there are factors to consider other than financial inducements for physicians. "We're not suggesting that physicians only take into account payments when they make clinical decisions."

Allen S. Lichter, MD, CEO of the American Society of Clinical Oncology, said physicians must consider several factors when administering cancer drugs, such as toxicity and potential side effects, and how often a patient may have to schedule treatments. "It's naïve to think the actual cost of the drug is the only factor."

He also questioned some of the study's conclusions and implications in light of what he described as a slight jump in overall chemotherapy use, adding, "It's hard to believe that you can make such sweeping conclusions that physicians did this out of greed by treating 2% more patients."

Dr. Lichter said physician offices ran into problems with the average sales price-based payment system that Medicare switched to under the 2003 legislation. More doctors lost money when the program paid them less for drugs than they could buy them for on the open market.

He also said clinical research has shown that older patients can tolerate these chemotherapy drugs at acceptable toxicity levels, another possible factor in the utilization increase.