Simple solutions that won’t be approved

Paul Waldman proposes a simple, straightforward change to Medicare payment rules that would save significant money by removing at least one fucked up incentive to prescribe overly expensive medication:

Avastin costs $50 a dose, while Lucentis costs $2,000 a dose. And Medicare pays doctors a six percent fee on top of the cost of whatever drug they’re prescribing. So if you’re an ophthalmologist who has a patient with macular degeneration and you prescribe Avastin for them, you get $3. If you prescribe Lucentis, you get $120. Dr. Melgen billed Medicare for $11.8 million in Lucentis alone….

get rid of that six percent fee and just give doctors a flat fee for writing prescriptions. Make it $5, or $10, or any number that makes sense. There’s no reason in the world that the fee should be tied to the price of the drug; all that does is give doctors an incentive to prescribe the most expensive medication they can.

This would be straightforward and remove the incentive for providers to overprescribe because they get a cut. Most private insurers that pay for drugs that are administered during the course of an appointment already pay fee schedule instead of percentage fees. 

It is a simple, straightforward incentive correction that will save money and lead to more appropriate course of action for patients.  And it won’t pass as it takes money out of the pockets of the one of the most trusted professions and organized lobbies in the country. 

However, PPACA’s Indepedent Payment Advisory Board could have a role in reducing this practice.  IPAB, for those who need a refresher, is a board appointed by the President and confirmed by the Senate that has the responsibility for cost control in Medicare if Medicare spending per beneficiary exceeds either the average of CPI-U and CPI-U medical components between 2015 and 2019 or the general rate of growth in the economy after 2019. 

IPAB can’t ration, and it can not change Medicare beneficiary benefit designs.  It can only make changes to provider payment structures.  Low hanging fruit like the percentage based on-site prescription fees would probably be the first round of easy cuts.  IPAB can get away with it because it is politically isolated from Congress.  However, IPAB probably won’t have a chance to go to work as right now Medicare per capita spending growth is at or under target (in and of itself, a good thing, but a problem to eliminating really stupid waste).

44 replies
  1. 1
    Wag says:

    If we wanted to save the entire system money we pay dos more for using cheap drugs and less for the newest, more expensive alternatives.

  2. 2
    Schlemizel says:

    That schedule makes no sense at all, it takes no more time or skill to prescribe one drug over the other. I would dearly love to know how that came to be.

  3. 3
    Richard Mayhew says:

    @Schlemizel: the specialists are probably the best trusted group in America, so they get what they want, and they spend plenty of money to make sure Cognress knows what they want.

  4. 4
    Bobby Thomson says:

    This is why I’m skeptical of any bending of the cost curve. High medical costs = car and tuition payments for doctors.

    Witness the administration’s recent cave on Medicare Advantage to take away an election year cudgel. So long as there is an organized medical industry lobby to defend high medical costs, people may be able to tinker at the margins here and there, but I don’t see the potential for anything that would significantly reduce costs in the long run, because that means significantly reducing revenues.

  5. 5
    Eric U. says:

    We noticed the docs had prescribed my mother some name brand pills when a generic was available, and wondered why. Now I know

  6. 6
    MomSense says:

    A friend of mine served on an advisory committee that Sec. Sebelius set up back in 2009 and 2010. Their work was all about Medicare reimbursements and setting up a mechanism to change the fee for service model to one based on fees per condition based on best practices and the experience of some of the better providers like Mayo Clinic. It was my understanding that this problem of prescriptions was included in their work.

    Also, I have some news to report on dealing with life changes and exchange policies. I recently reported a major increase in salary (yay me!) which meant a change in the subsidy amount. The coverage will be seamless, I will just pay a lot more per month. It is manageable and still about $1,000 less than I was paying per month before I had to drop my coverage in the aftermath of the fustercluck brought to us by Wall Street and the Republicans.

    Speaking with a person, she said that the volume has been intense the past couple of weeks. When I called, the wait time was so long that I left my contact information and they called me back the next day.

  7. 7
    japa21 says:

    @Eric U.: This isn’t related to prescription drugs. This is related to drugs administered by the physcian in the office.
    Two things on this post. The first is that insurance companies do pay on a fee schedule, and what they basically use is Medicare’s. In effect, insurance companies are paying just as much as Medicare is.
    Secondly, the rationale isn’t that it takes more time to administer a costly drug than a less expensive drug, it is that the physician has already paid for those drugs and needs a profit margin.
    Think of it this way. You produce a product for $100 and sell it for $106. You have a six percent profit margin and feel okay with that. Now you produce a product that costs $2,000. Would you sell that for $2,006?
    Granted, I think this proposal would definitely reduce the use of the more expensive drugs and that would be a benefit. But getting it through would be extremely difficult.

  8. 8
    Richard Mayhew says:

    @Eric U.: Did your mother swallow the pill in the doctor’s office? If she did, then the incentive was to overprescribe. If she got the pill at CVS/Rite-Aid, the doc was not seeing any extra cash for name brand/generic, or at least not any extra cash from Medicare. Probably getting extra cash through honoriums, trips and fellowships from at least one if not more drug manufacturers.

  9. 9
    Richard Mayhew says:

    @japa21: Some insurance companies pay the administration fee of 6% like Medicare others pay $14.22 for administration.

  10. 10
    Wag says:

    @Eric U.:

    We physicians do not get kickbacks based on our outpatient prescribing habits. The overuse of the newest brand name medications is more directly tied to pharacutical reps and the gifts that they shower on docs (free lunches, boxes of “free” samples of the latest and greatest drugs, pens, etc.).

  11. 11
    jake the snake says:

    I find it interesting that while destroying the NEA seems to be one
    foundations of education “reform”,
    no one has suggesting destroying theAMA for healthcare reform.

  12. 12
    jake the snake says:

    I find it interesting that while destroying the NEA seems to be one
    foundations of education “reform”,
    no one has suggesting destroying the AMA for healthcare reform.

  13. 13
    kc says:

    Medicare pays doctors a six percent fee on top of the cost of whatever drug they’re prescribing.

    How did that get to be a rule at all? I see no benefit to the patient or the payor.

  14. 14
    Stan Gable says:

    I wonder to what extent the Avastin/Lucentis thing is a corner case, it gets referenced all of the time but it’s probably a pretty unique case. AMD is exclusively an elderly thing and to my knowledge, Avastin/Lucentis have not shown any use in vision related stuff outside of AMD, meaning it’s only relevant to a population that is perfectly price-insensitive and to the extent they are capable of doing their own research, very sensitive to benefits that are very small.

    If you took away the doctor incentives, you may not see much of a change in behavior patterns. The patient + pharma incentives are probably a bigger deal.

  15. 15
    Mnemosyne says:

    @Eric U.:

    Also, generics are not always the solution. Some people are allergic or sensitive to the “inactive” ingredients and can’t use the generic. One of my co-workers is super-sensitive to lactose and has to scrutinize the label of everything she takes, because it’s a common filler.

    There’s also the problem that sometimes the manufacturer says something is identical to the prescription version and it isn’t. This has been a persistent problem with the generic formulations of buproprion (brand name Wellbutrin) and it’s not uncommon. So generics can be a good solution for some people, but not everyone.

  16. 16

    And, let us never forget, constant wrangling to figure out what meds the patient’s insurance company covers, which is seemingly random.

  17. 17
    kindness says:

    Medicare billing is such a suckers game. Republicans know the problems but refuse to allow them to be fixed because 1) lobby money and more importantly 2) they can blame Medicare for being bad and hope to toss the whole system next winning election.

  18. 18
    Roger Moore says:

    The difference between drugs is important. The FDA actually distinguishes between an active pharmaceutical ingredient (API, the part we think of as the drug) and a pharmaceutical (the final, compounded formula you get out of a bottle). The details of the final version are really important, especially for things like time-release drugs where the “inactive” ingredients control how fast the drug makes it into your blood stream. To take an example from illicit drug use, this is why smoked or injected amphetamines are much more addictive than pill form; the faster the stuff gets into your blood and the bigger the spike when it happens, the more addictive it is. This is also why there are compounding pharm places; people may need a special formulation to meet their needs.

  19. 19
    JCJ says:

    @Richard Mayhew:

    Good afternoon, Richard. I am sure you have already seen the New York Times article yesterday regarding how much CMS pays physicians for Medicare, but did you note the tool to explore how much an individual physician was paid?

    These are Medicare rates so obviously private insurance would almost certainly pay more, but I had never looked at how much I get paid by Medicare. @MomSense mentioned at #6 what his/her friend had worked on regarding fee for condition rather than fee for service. As you may recall I asked earlier about this regarding my specialty (radiation oncology.) If Medicare pays a radiation oncologist $136 per week during a patient’s course of treatment then I could get paid $408 more per patient when treating breast cancer after lumpectomy. Before my new partner arrived I was probably treating around 100 patients per year. This is a gross distortion as a course of radiation given in 6½ weeks is no better than a course given over 4 weeks. A recent study showed the same results for prostate cancer treated in 5½ weeks vs. 8 weeks. Actually there is a difference in results regarding payment but not patient outcome. There are some instances where the longer course of treatment is still indicated (radiation of lymph node regions,) but these are not the majority.

  20. 20
    Stan Gable says:


    Neat stuff – my ophthalmologist was #1 in the county. Which I would have guessed, as 80-90% of his patients are elderly with AMD.

  21. 21
    fleeting expletive says:

    My dental hygienist asked me this afternoon if there isn’t some portion of ACA covering dental for some people. I thought I remembered you mentioning dental coverage somewhere but I couldn’t recall it. Is there some population covered for at least some dental care? Thank you…

  22. 22
    Quaker in a Basement says:

    IPAB, for those who need a refresher, is a board appointed by the President and confirmed by the Senate that has the responsibility for cost control in Medicare

    Death panels! SKREE! SKREE! SKREE!

  23. 23
    MattR says:

    @Richard Mayhew: The source article has been changed so that the last word of the first sentence you excerpted is now “dispensing” instead of “prescribing”. You may want to change this post as well to reflect that. Otherwise, I think a number of people are going to reach the same mistaken conclusion that Eric U did (I know I made the same assumption he did)

  24. 24
    mainsailset says:

    I don’t mean to be picky but Lucentis is FDA approved, Avastin is not. Though the two drugs seem to perform closely, Avastin does have a higher rate of SAE. Also the two drugs, as I read it are administered ‘as needed’ for Avastin and monthly for Lucentis. The ‘as needed’ translates into 10 fewer doctor office visits over two years.

  25. 25
    jl says:

    As I said in AL’s post on medical obsolescence last night, the word ‘cost’ is misleading. These issues have less to to with real economic costs of development and production than patents, licensing, and decisions on how to package the product. I think that last is critical in the case of these two drugs.

  26. 26
    Mnemosyne says:


    Also, I’m pretty sure that Avastin is administered via IV, so it’s not really something that you pick up at the pharmacy to take at home. Now I’m wondering if Lucentis is the same kind of thing, in which case it really is something that’s given to you at the doctor’s office or hospital (or other infusion center), not a “prescription” the way most people think of it. That may be causing part of the confusion as well.

  27. 27
    Mnemosyne says:

    Argh! Can I please be released from moderation for mentioning the type of store you get drugs from? KTHXBAI.

  28. 28
    Villago Delenda Est says:

    @Mnemosyne: Look, when you call it the V1agra Superstore, you gets what you pay for.

  29. 29

    My math is pretty lousy but to bill 11 million a year for this drug the doctor is basically administering the drug to 21 patients a day. That to me does not add up because when you take out holidays and stuff, it actually adds up to more than that. Anyone with superior math skills than me please feel free to correct me.

  30. 30
    JPL says:

    OT.. Sebelius resigned. I still admire her and her task was huge and I’m sorry to see her go.

  31. 31
    nellcote says:

    @fleeting expletive:

    Is there some population covered for at least some dental care?

    CA medicaid (MediCal) covers a limited amount of dental care. The problem is finding a dentist that takes it. Many of the community health clinics have dental care but obviously it takes months to get an appointment.

  32. 32
    Origuy says:

    Slightly OT, but Obamacare related: A free medical clinic in rural Arkansas is closing down because it’s no longer needed.

    “We’ve gone from seeing around 300 people a month on a regular basis, but as people were enrolling in Obamacare, the numbers we were seeing have dropped. We were down to 80 people that came through the medical clinic in February, all the way down to three people at the medical clinic in March. Our services won’t be needed anymore, and this will conclude our mission.”

  33. 33
    Mnemosyne says:

    @fleeting expletive:

    IIRC, you can purchase dental insurance alongside medical insurance on the exchanges. Not sure about people who are steered to Medicaid, though — that may vary by state.

  34. 34
    J.Ty says:

    @Mnemosyne: $*&%$ generic buproprion filler is the bane of my existence. I dunno what’s in the purple ones they give you in Colorado, but I’m never getting that prescription filled there again… At least I’m not my mom though. She has Celiac’s and basically can’t take generic medicine at all.

    ETA: I’m also really mad about the Medicare Advantage thing! Politics, sure, but… bleh. Program that is expensive and doesn’t work should get cut! DID get cut. For a minute.

  35. 35
    Schlemizel says:

    @Litlebritdiftrnt: I assume the price given is per month so that would mean scripting 22 MONTHS a day. If the script was written for a year that would be under twice a day, if it were 90 days (I have no idea what is common for that drug) it would be 8 times a day, still not impossible.

  36. 36
    Mnemosyne says:


    IF the doctor is running a fairly large infusion center, it’s plausible. It’s basically a big room filled with recliners with a bunch of people all getting their IV or injectable medication at the same time.

  37. 37
    Mnemosyne says:


    I think these are infusion/IV drugs, not drugs you take by mouth at home.

  38. 38
    mainsailset says:

    The article I read indicated these meds were given by direct injection into the eye which is why the doctor office visits once a month or ‘as needed’ add up in a hurry. Pretty lucrative for a doc office.

  39. 39
    Richard Mayhew says:

    @JCJ: I’m stealing this comment

  40. 40
    Richard Mayhew says:

    @Litlebritdiftrnt: Real easy, the doc oversees a couple of physician assistants or Certified Registered Nurse Practicioners who do most of the actual work but bill under the doc’s name/NPI/Medicare ID— that is how quite a lot of the high volume work gets done.

  41. 41
    Jasmine Bleach says:


    The article I read indicated these meds were given by direct injection into the eye

    Yes, that’s correct–it’s injected directly into the eye. Well, Lucentis is, at any rate.

    It also treats diabetic macular edema and retinal vein occlusion (not just wet AMD).

  42. 42
    Jasmine Bleach says:


    Also, I’m pretty sure that Avastin is administered via IV, so it’s not really something that you pick up at the pharmacy to take at home. Now I’m wondering if Lucentis is the same kind of thing, in which case it really is something that’s given to you at the doctor’s office or hospital (or other infusion center), not a “prescription” the way most people think of it.

    Avastin is administered via IV for its usual cancer indications. If used for AMD, it is injected into the eye like Lucentis is. This would have to be done at a hospital or medical facility.

    Avastin keeps tumors from growing new blood vessels to feed themselves (aggressive tumors like to do that). Lucentis reduces bulging blood vessels in the eye. They both have similar mechanisms of action, but one is designed to treat tumors and one for eye delivery.

    Not a huge expert on it, though.

  43. 43
    Harish2 says:

    @Eric U.: Yeah, it can’t possibly be because newer drugs are usually better because more R&D has gone into reducing the side effects that the older generations of drugs have. No siree, if a drug was good for my great-gramps fifty years ago, it’s got to be good for me today.

    To all the commenters here who think the big problem is that docs get paid TOO MUCH, how much do you think is enough money for someone who works 60-80 hour weeks, saves lives all the time, has gone through 7+ years of post-college schooling, and has $200K of med school debt? I’m a 40-year-old internist, and every single person I graduated college with, every single one in my engineering program, has a higher net worth than I do, even though I spend my days (and nights, and weekends) saving lives and they spend theirs at a 9-5 desk job. How is that fair? You want to cut our pay further, expect Third World levels of health care.

    Also, Richard, there’s a reason why specialists are trusted, and insurance industry employees are viewed as the scum of the earth. I can count on one hand how many I’ve made a significant impact on just this week alone. Nothing your industry does can compare.

  44. 44
    Harish2 says:

    @Richard Mayhew: By the way, an NP and PA is more than qualified to give those injections, but that’s not the “actual work” of medicine, the actual work is diagnosis and deciding treatment plan and seeing if the patient improves, which are things that only the ophthalmologist can do in your scenario. To say the NPs and PAs are doing the actual work is like saying that janitors do all the actual work in schools because they’re doing the physical labor.

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