News and Commentary

Chemo Treatment Rates Increased Under Medicare Modernization Act

Back when the Medicare Modernization Act was passed in 2003, it substantially reduced payment rates for chemotherapy drugs administered on an outpatient basis starting in January 2005. Big savings for payers, you might think. But what if physicians responded by prescribing more chemotherapy to make up for income that they lost because of the lower payments?

Some of those savings might not have materialized, says Mireille Jacobson, PhD, a senior economist at the Rand Corp.

Researchers at Rand looked into how these reductions affected the likelihood of receiving chemotherapy, how they affected the setting of chemotherapy for Medicare beneficiaries with newly diagnosed lung cancer, and how they affected the types of agents the patients received. Before January 2005, payment was determined using the average wholesale price; afterwards, the average sales price was used.

“The goal of the study,” says Jacobson, “was to follow any changes in the way cancer drugs are paid and to determine what implications the lower payment might have on treatment.” Society has the notion that physicians follow a higher standard than other people, but they can be just as influenced by payment and reward as anyone, she says.

The researchers followed a cohort of beneficiaries who had at least one claim with a lung cancer diagnosis in Medicare’s Outpatient or Carrier Files between 2003 and 2005. “There’s no screening for lung cancer,” says Jacobson. “Most people present fairly late in the game and usually the survival rate isn’t too high. There isn’t a clear treatment protocol for people at that stage.”

What was the likelihood that a new patient would be treated with chemotherapy in December 2004 (the old system) versus January 2005?

They found that before January 2005, 16.5 percent of patients received chemotherapy within one month of diagnosis. After implementation of the new payment system, chemotherapy treatment within one month increased 2.4 percentage points to 18.9 percent. This increase came almost entirely from treatment in physicians’ offices. Although 13 percent received treatment in a physician’s office within one month of diagnosis before January 2005, 15.3 percent did so afterward.

Jacobson explains that if the physician has a lot of treatment alternatives to choose from, other than chemotherapy, “maybe chemotherapy is less attractive and the physician is less likely to prescribe it.” On the other hand, if chemotherapy plays a significant treatment role, as in lung cancer, does the physician make up for the lost income by treating more patients? “That’s what we found happening with lung cancer patients,” she says.


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