Transcript Overview of Financial Flows in the Medical System

Medicare Prescription
Drug Payment
Presented by Margaret Nowak
September 24, 2008
Avalere Health LLC | The intersection of business strategy and public policy
Why Focus on Medicare?
 CMS* is a leader in defining evidence necessary for coverage and
reimbursement
» CMS’ process sets the standard for many payers
» Payment systems, rates, and quality measures frequently are benchmarks
for private payers and Medicaid
 Medicare prescription drug benefit increases Medicare’s role and influence in the
healthcare market
 Unlike private payers, CMS must adopt publicly accountable and transparent
processes
* CMS = Centers for Medicare & Medicaid Services
© Avalere Health LLC
Page 2
As of 2006, Medicare Covers Outpatient Prescription Drugs
 Congress established a new outpatient prescription drug benefit (Part D) for
Medicare beneficiaries
 Private-sector health insurance plans (e.g., Aetna, Humana) contract with
Medicare to deliver prescription drug benefits
 Medicare Part D covers prescription drugs in much the same way as private
insurance plans
» Includes most drugs sold through retail pharmacies (e.g., Walgreen's)
» The law requires that Part D plans also covers supplies associated with the
administration of insulin, including syringes and needles
» Needles and syringes for other self-injected drugs are not explicitly covered
under Part D, however individual plans may choose to do so
» Many self-injected drugs are packaged and sold in pre-filled syringes, in
which case Medicare covers the “sharps” as part of the drug
© Avalere Health LLC
Page 3
Payment for Drugs Is Shared Across Stakeholders
Drug Manufacturer
$
Rx
$
Pharmacy
Insurance Plan
Rx
$
$
Patient
$
Medicare
© Avalere Health LLC
Page 4
Needle Disposal Costs Are Not Included in Medicare Drug
Reimbursement
 What Medicare can and cannot pay for under the Part D prescription drug
benefit is defined in statute
 Disposal costs do not meet any statutory definition of a Part D drug
» CMS has specified that needle disposal is not directly related to injection of
insulin, and therefore cannot be reimbursed by Part D*
» For the Federal government to reimburse plans for disposal costs, Congress
would have to pass legislation
» Alternatively, plans could pay for disposal and pass cost on to enrollee
* Source: CMS Final Regulations for Medicare Improvement and Modernization Act of 2003, January 28, 2005.
© Avalere Health LLC
Page 5