The Sequester and Lessons About Health Spending Cuts

A post by Sarah Kliff on the Washington Post’s Wonkblog site is getting a lot of attention this morning.  She reported that cancer clinics across the country are turning away patients because sequester cuts.

Here’s the essence of this issue:  Most pharmaceuticals are covered by the Medicare Part D program.  That’s not the case with injectable drugs administered by a physician, such as those used for chemotherapy patients, which are covered under Medicare Part B.

Physicians are reimbursed for these drugs at the average sales price plus six percent – the six percent add-on is there to cover the costs of acquisition, storage and administering the medicines.  For many physicians, particularly those in rural areas without the heavy patient volume to negotiate significant discounts, this reimbursement barely covers their costs, if it does at all.

So, when the sequester makes cuts in that Part B payment level, a story like Ms. Kliff’s results – that cancer centers aren’t seeing Medicare patients because the financial losses they would take on these drugs would force them out of business.

But, here’s the rub.  During congressional deliberations over budget reductions, cuts in Medicare Part B drug payments were proposed….well before the sequester went into effect.   Congress was, in fact, considering reducing the average sales price-plus-six percent payment level to ASP-plus-3%.

So, while the sequester cuts are hurting some patients, they are also providing an object lesson to policymakers.  We can’t make Medicare or our nation’s health system better by constantly chipping away at payments for healthcare goods and services.  Such cuts may help meet short-term budget targets, but the reduced access to critically-needed care is both unconscionable and counterproductive because of the increased acute care and hospitalizations that will eventually be required by sick patients.

It has been difficult for the White House and Congress to start serious negotiations on structural Medicare reform.  Wouldn’t it be far better, though, to focus on health-affirming ways to make Medicare more financially sustainable and cost-effective than to continue with the kind of reimbursement nibbling that results in severely ill patients being turned away by caregivers?