Healthcare Reform and the Future of Oncology

Oncology Fellows, July 2011, Volume 3, Issue 2

The healthcare system in the United States has become increasingly unsustainable.

The healthcare system in the United States has become increasingly unsustainable. We hear frequent reports in the media and within our hospitals about the inability to improve health outcomes despite spiraling healthcare costs. The financial burden of cancer care is monumental. In 2008, overall costs were estimated at $228 billion, which included $93 billion in direct medical expenditures, $18.8 billion in lost productivity, and $116.1 billion in indirect costs.1

One example of this economic burden is seen in an analysis of patients with metastatic breast cancer. In this analysis, direct costs averaged $35,164 per year. New targeted-therapy drugs costs range from $20,000 to $50,000 per year per patient, and these costs continue to increase. Another example is seen in colorectal cancer therapy, which increased an incredible 340-fold between 1994 and 2004.2 The drugs we prescribe as oncologists account for 40% of all Medicare prescription costs. This is in contrast to only 4% of federal dollars that are directed toward cancer prevention.3 This article will discuss the impact that the Patient Protection and Affordable Care Act (PPACA) will have on our patients with cancer, on our hospital systems, and on us, the physicians.

Historically, Americans have low rates of adherence to recommended screenings for breast, cervical, and colorectal cancers. ”

Impact of Health Reform on a Patient With Cancer

When you combine the costs of tests, imaging, physician services, chemotherapy, surgery, and radiation therapy, the price tag on cancer treatment may range anywhere from $40,000 to more than $100,000 per patient. There are provisions within the PPACA that may offer modest advantages for our patients, including greater scrutiny when raising insurance premiums. Because of the increased requirements for employers to provide insurance coverage, individual states will form health insurance exchanges or cooperatives that offer low-cost options for workers as well as create competition in the marketplace. It is unclear how this will be federally regulated; many of these exchanges may operate differently because they will be created at the state level. Federally, the government will provide subsidies to low-income individuals so they can obtain insurance. With these changes, it has been estimated that 32 million additional individuals may be covered by 2019.4

One of the biggest concerns of patients is whether PPACA will cover preexisting conditions. Under the current plan, children with preexisting conditions such as cancer are protected from being excluded from insurance and will also be covered until the age of 26 under a parent’s insurance plan. For those patients who fall into the category of non—Medicare-eligible retirees older than age 55, there will be access to subsidized high-risk pools and insurers will not be allowed to set annual or lifetime limits on coverage. These changes will likely have a significant impact on patients with cancer who may fall into the age range that is not yet eligible for Medicare benefits.

A major challenge for our patients is finding coverage for their skyrocketing prescription drug costs. This will become especially important in cancer treatment as we increasingly develop targeted agents, many of which are in oral form. Currently, there is a large gap in Medicare Part D coverage. Many patients find themselves in the “donut hole,” causing them to struggle financially because their coverage is lacking. As the PPACA reforms take effect, there will be a $250 subsidy for those affected by the donut hole. By 2020, however, it is projected that 75% of oral medications will be covered by Medicare—a significant improvement over today’s Medicare coverage.

Historically, Americans have low rates of adherence to recommended screenings for breast, cervical, and colorectal cancers. Recent Centers for Disease Control data reveal that 38% of Americans older than age 50 have not had their recommended colonoscopy and sigmoidoscopy screening, and 24% of women aged 40 to 50 years and 21% of women over age 50 have not had recommended mammogram screening in the last 2 years.5 Preventive, quality-focused, cost-effective care will be the major PPACA initiatives, with preventive services coverage being federally mandated. Medicare will cover 100% of actual charges and fees for preventive care, such as cancer-screening exams. Incentives to Medicare beneficiaries may increase compliance with screening recommendations; this might ultimately save thousands of lives while cutting healthcare costs.

The expanded healthcare access will affect those covered under Medicare, private insurance, and PPACA. Unfortunately, of the 32 million people with newfound coverage, up to 50% will be covered under Medicaid and may not benefit from the expanded coverage. It is unclear if those with Medicaid will face the same challenges they currently do. In addition, it is possible that hospitals and private practice will continue to suffer financially by caring for Medicaid patients.

Impact of Health Reform on Private Practice and Hospital Systems

PPACA will have both positive and negative impacts on hospital finances. Under the expanded care, up to 95% of the US population will be insured. On the positive side, this will dramatically decrease the number of completely uninsured people, reducing hospitals’ bad debt. Currently, approximately 15.3% of the population is uninsured and 35% is underinsured. For the most part, hospitals are burdened with uncompensated medical care costs that one 2001 report estimated to be $35 billion.6

These financial benefits, however, will be offset by a $14 billion reduction in Medicaid’s disproportionate share hospital (DSH) payments, which will begin in 2014.4 DSH payments provide financial assistance to hospitals that serve a large number of low-income patients, such as the uninsured and those with Medicaid. Medicaid DSH payments are the largest source of federal funding for uncompensated hospital care. For the hospitals that depend on DSH, this will add additional burden to an already stressed system; this may ultimately result in hospital consolidations, additional hospital services bring cut, and hospital closures. Medicare will provide expanded coverage by making cuts using the following strategies: not paying for hospital-acquired conditions, which will save $1.4 billion over 10 years; not paying for excessive readmissions, saving $7.1 billion over 10 years; and additional Medicare/Medicaid efforts to reduce fraud, saving $2.9 billion over 10 years.

In order to raise the quality of care delivered and provide incentives to hospital systems that are able to cut costs, accountable care organizations (ACOs) are an integral aspect of provisions set to go into effect next year. According to the Centers for Medicare & Medicaid Services (CMS), an ACO is defined as “an organization of healthcare providers that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it [sic].”7 The pillars of ACO are care coordination, care effectiveness, population health management, safety, and efficiency.8 In this system, if an ACO is able to meet performance standards and achieve a specified level of savings for an “episode of care,” then the ACO would share in some of the cost savings. The expected effect of ACO implementation on cancer care remains unknown at this time.

Impact of Health Reform on Physicians

Medical oncologists have felt significant financial pressures even prior to the passing of PPACA. The American Society of Clinical Oncology estimates that 80% of patients in this country receive their care in a community setting. Under this model, patients typically visit their physician in a private-practice office where they receive their infusional chemotherapy. Under this system, the private practice has purchased the drug and will bill the payer for both drug and administration. PPACA is expected to drastically alter this model by changing reimbursement for chemotherapy, supportive drugs, and professional services, and by attempting to move all practices toward ACOs.

Prior to 2005, the CMS reimbursed practices at 95% of average wholesale price for chemotherapy and associated drugs, and this rate was quite profitable for oncologists. With the Medicare Modernization Act of 2005, the oncologists’ profits plummeted after drug reimbursement became based on average sales price (ASP) rather than average wholesale price (AWP). (Editor’s note: Before we went to press, the Senate introduced S. 733, a bill designed to correct this reimbursement issue.) ASP provides approximately 49% less in value than AWP. These changes have already increased the number of referrals to hospital infusion centers and have created partnerships between hospitals and private groups in order to shift financial risk to larger hospital systems. In addition to decreased margins in delivering pharmaceuticals, reimbursements for professional services will also decrease. The combination of these financial threats poses a major risk to small private practice groups because they will likely struggle to meet ACO regulations.

Preparing for Change

In the future, the stresses on the healthcare system will magnify. By 2030, the US population will expand to 365 million people, with 72 million adults over the age of 65. As the baby boomer population ages, the incidence of cancer is predicted to increase more than 45% from 2010 to 2030. There were 1.6 million patients with cancer in 2010; this number will swell to 2.3 million in 2030.9 This increase will occur as the oncologist workforce continues to shrink. In preparation, it is essential that our disjointed system of care be restructured to be more efficient, nonduplicative, cost-effective, evidence-based, and safe. As these cancer care delivery models evolve, it will be essential that physicians take an active role in policy changes in order to protect their livelihood as well as continue to provide high-quality patient care.

This edition of Oncology Fellows is supported by Genentech, a member of the Roche Group.

Sheetal Kircher, MD, is a second-year fellow at Northwestern University Feinberg School of Medicine in Chicago, Illinois.


  1. American Cancer Society. Economic Impact of Cancer Web site. Accessed on March 13, 2011.
  2. Schrag D. The price tag on progress—chemotherapy for colorectal cancer. N Engl J Med. 2004;351:317-319.
  3. Meropol NJ, Schulman KA. Cost of cancer care: issues and implications. J Clin Oncol. 2007;25:180-186.
  4. American Hospital Association. Special Bulletin. Summary of major provisions in final house reform package. March 22, 2010. Accessed March 20, 2011.
  5. Behavior risk factor surveillance system survey data. Atlanta, GA: US Department of Health and Human Services, Centers for Disease Control and Prevention; 2007.
  6. Whitman G. Hazards of the individual health care mandate. Cato Policy Rept. 2007;29:9-12.
  7. Medicare “Accountable Care Organizations” Shared Saving Program—New section 1899 of Title XVIII. Accessed March 20, 2011.
  8. McClellan M, McKethan AN, Lewis JL, et al. A national strategy to put accountable care into practice. Health Aff (Millwood). 2010;29:982-990.
  9. Smith BD, Smith GL, Hurria A, et al. Future of cancer incidence in the United States: burdens upon an aging, changing nation. J Clin Oncol. 2009;27:2758-2765.