While yet another attempt at passing a bill that would avert Medicare physicians' 21 percent pay cut failed in the Senate yesterday, a new study published in today's Health Affairs reveals that doctors who have their Medicare reimbursement slashed may find other ways to recoup the money.

According to Harvard researchers led by economist Joseph Newhouse, when Congress tried in 2003 to reduce Medicare spending on cancer chemotherapy drugs that doctors administer to patients in their offices, many doctors compensated for the lower prices by prescribing higher-priced chemotherapy drugs for more of their patients.

At the time, doctors could buy the drugs, which they administered intravenously in their offices, wholesale for about 20 percent below the Medicare price and pocket the difference. But despite concern that reducing rates would cause many cancer specialists to send patients instead to hospital clinics for their chemotherapy, office physicians ended up treating more patients, according to the analysis of 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 a 2005 law capped payments to doctors at 106 percent of the national average sales price. Almost all of the increase in treatments came at doctors' offices, not in hospitals.

The kinds of drugs prescribed also changed, depending on payment rates, the authors say. For example, the percentage of patients receiving paclitaxel, whose reimbursement for a monthly dose fell from $2,270 to $225, declined from 30 percent to 26 percent. Use of docetaxel (Taxotere), whose payments remained flat at $2,500 for a monthly dose, rose from 9 percent to 10 percent.

Although critics of the study say that it looks at physicians' treatment choices too simplistically, ignoring factors such as newer drug regimens, Newhouse describes the effect as rather cut and dried.

"Drugs that seemed to have the bigger markups before...seemed to be used less frequently and the drugs that were the least affected seemed to be used more frequently," Newhouse told the Boston Globe. "It's hard to imagine what else is going on besides the price change. I don't think there are any [other explanations] that are very plausible."

In conclusion, any significant changes in medical payment rates must be done carefully, Newhouse said. "Hospitals and doctors will respond to changes in how they are paid."

To learn more:
- see the article in the New York Times
- check out this piece in the Boston Globe
- access the study in Health Affairs
- here's the Wall Street Journal's update on the extenders bill

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