Bringing the Oncology Community Together

Medicare Reimbursement Cuts Caused by Sequestration Begin to Take Effect

Ben Leach
Published Online: Thursday, April 4, 2013
Capitol HillAs a result of sequestration-related federal budget cuts, Medicare reimbursement has been reduced by 2% across the board, with the reduction affecting a number of services offered to cancer patients.

This latest round of cuts took effect on April 1, 2013.

Any Medicare physician claims made on or after that date are subject to the cut. Additionally, drugs that are administered on the physician claim, such as chemotherapy or other cancer drugs that must be given at the physician’s office, are also subject to the cut.

Before sequestration took effect, when both Medicare and a beneficiary covered drugs, physicians were reimbursed for a total of 100% of the average sales price (ASP) of the drug plus 6% to cover overhead and storage costs. Medicare would cover 80% of the cost, with the remaining 20% coming from the beneficiary.

The 2% reduction in reimbursement is taken off of the 80% reimbursement that Medicare normally pays. For example, if the ASP of a drug was $1000, under the old system, Medicare would pay $848 and the beneficiary would pay for $212 for a total of $1060. Under these sequestration-related cuts, Medicare would pay 98% of what they would have paid before. In this example, Medicare would pay $831 of the $848. The beneficiary would still cover 20%, or $212 in this example, meaning that the percentage above the ASP used to cover overhead and storage costs would be reduced from 6% to 4.3%.

The cuts also affect physician reimbursement if the drugs are given in an office. While medications are typically covered under Medicare Part D, which includes private insurance, services provided by a physician are covered under Medicare Part B, and those services are subject to the cuts.

Sandra M. Swain

Sandra M. Swain, MD

This reduced Medicare reimbursement comes after cuts were made at both the National Institutes of Health and the FDA. Cuts of more than 5% were made at both agencies, reducing the budget for research into cancer as well as potentially slowing down the approval process for cancer drugs.

Sandra M. Swain, MD, president of the American Society of Clinical Oncology (ASCO), made a statement concerning the sequestration-related cuts, saying that sequestration will have “a shattering impact on the entire cancer enterprise in the United States.”

“ASCO is deeply disappointed in the failure of lawmakers to avert this fiscal crisis, and will closely monitor the impact of sequestration on the oncology community,” she said. “In the meantime, ASCO will immediately urge Congress to enact measures that retroactively reinstate critical funding to ensure patients have continued access to high quality cancer care.”

Related Articles
Oncologist Compensation Highest in Southwest, With 23% in ACOs Already
Among physicians, oncologists fall slightly above the middle in terms of compensation, with average earnings reported at $290,000.
As CMS Contemplates ICD-10 Delay, Take Advantage of the Slow Rollout
Even as the Centers for Medicare & Medicaid Services (CMS) examines the implications of the ICD-10 delay there are some steps oncology and hematology practice managers can take now before the rollout gets into full swing.
Delayed Launch of Sunshine Act Website May Affect Physician Review
A delay in the launch of the Centers for Medicare & Medicaid Services (CMS) web site that tracks the financial relationship between physician and industry may prevent physicians from fully reviewing the data.
Most Popular Right Now
More Reading
External Resources

American Journal of Managed Care
Pharmacy Times
Physicians' Education Resource
Physician's Money Digest
Specialty Pharmacy Times
OncLive Resources

OncLive TV
Oncology Nurses
Web Exclusives

About Us
Advisory Board
Contact Us
Forgot Password
Privacy Policy
Terms & Conditions
Intellisphere, LLC
666 Plainsboro Road
Building 300
Plainsboro, NJ 08536
P: 609-716-7777
F: 609-716-4747

Copyright OncLive 2006-2014
Intellisphere, LLC. All Rights Reserved.