Doctors Recouped Cuts in Medicare Pay (NY Times 16/6/10)
When Congress aims to reduce Medicare spending, lawmakers often rely on cutting the prices they pay doctors and hospitals.
But a new study shows how that approach may have limited success, if doctors respond by simply treating more patients to make up for the lost income.
That is what happened, according to the study, after Congress tried to reduce Medicare spending on cancer chemotherapy drugs that doctors administer to patients in their offices. Many doctors ended up prescribing chemotherapy for more of their patients, to make up for the lower prices.
The study, being published Thursday on the Web site of the academic journal Health Affairs, suggests that any significant changes in medical payment rates must be done carefully, said Joseph P. Newhouse, a health policy professor at Harvard who is one of the study’s authors.
“Hospitals and doctors will respond to changes in how they are paid,” Professor Newhouse said.
The study, which will be published in the July issue of Health Affairs, examined changes in payments for certain cancer drugs as part of Congress’s 2003 overhaul of Medicare.
The issue was the large sums that cancer specialists made from the difference between what they paid for the chemotherapy drugs they gave to patients and how much Medicare reimbursed them for those drugs. In some cases, a doctor could buy the drugs for about 20 percent below the price Medicare set for the drugs, which are given intravenously in a doctor’s office.
Critics at the time were concerned that doctors had a financial incentive to provide chemotherapy to patients when there was little likelihood that they would benefit from the treatment. But when the cuts went into effect, there was a new concern — that many cancer specialists would stop treating patients, sending them instead to hospital clinics for their chemotherapy.
“At the time, I think we were legitimately concerned about that,” said Dr. Craig C. Earle, a cancer specialist who is now the director of health services research at Cancer Care Ontario and the Ontario Institute for Cancer Research in Toronto, which oversees cancer care for Canadians in the province of Ontario.
But doctors ended up treating more patients, not fewer, according to the study, which analyzed Medicare claims for 222,478 patients who were found to have lung cancer from 2003 to 2005.
On average, within a month of the diagnosis, chemotherapy treatment increased to 18.9 percent of patients, compared with 16.5 percent before the law went into effect in 2005.
“In sum, far from limiting access,” the changes under the law “actually increased the likelihood that lung cancer patients received chemotherapy,” the study concluded.
Doctors responded by treating more patients because they had been making so much money under the old system, Professor Newhouse said. “These markups were a substantial portion of their income,” he said.
The study could not determine whether some doctors had cut back or stopped their use of chemotherapy drugs.
Because the study was limited to lung cancer patients, the findings may also not be true of the price cuts that affected other patients undergoing chemotherapy, the authors said. Nor did the study address the question of whether the increased use of chemotherapy was benefiting patients.
The reason the authors limited the study to lung cancer was to be able to better test the idea of whether doctors might also change types of chemotherapy, based on their relative profitability. Doctors tend to view the different chemotherapy options for lung cancer as offering essentially the same benefits to patients, unlike treatments for some other cancers, Dr. Earle said.
Under the government’s reimbursement formula, which is based on percentages of the drug’s price, doctors using the most expensive chemotherapy drugs still make more money than those who choose a less expensive drug.
The study found that doctors frequently switched to more expensive options, like increasing their reliance on drugs like docetaxel, where doctors were paid roughly $2,500 for giving a standard monthly amount. “The financial incentive seemed to have an effect where there’s not strong evidence or more than one equally good treatment option,” Dr. Earle said.
But at the same time, Dr. Earle said, he thinks some cancer doctors left private practice for positions in hospitals because of the lower reimbursement rates, which made them no longer able to afford being independent.
“When you squeeze the system in a little place, there is a lot of change,” he said, “but not always the way one would expect.”