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Challenges to industry led to creative thinking on IOL payments
Experts give insight into some of industry’s thinking that figured into the decision on alternative payment arrangements for presbyopia-correcting IOLs.
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The ophthalmic community recently found itself at a crossroads in regard to reimbursement for presbyopia-correcting IOLs. The target population for these IOLs crossed into the Medicare population, but the proposed pricing for several new presbyopia-correcting IOLs was well above the Medicare reimbursement rate for standard IOLs. Therefore, many patients who could benefit from the lenses, and who were willing to pay for the technology out of pocket, were unable to do so because they were covered by Medicare, which prohibits billing patients beyond what Medicare allows for a covered service.
| Laurent Attias |
At the same time, the industry was faced with the quandary of whether to continue supporting the development of new technologies like these that might be strangled by the reimbursement restrictions of the Centers for Medicare and Medicaid Services.
It is helpful to look at some of the economic factors affecting the policy-making at CMS in order to understand the recent rule change that now allows patient share billing for presbyopia-correcting IOLs.
Industry professionals, who are intimately involved with bringing these products to market and helping the medical community navigate through the reimbursement waters, are faced with challenges in developing products that will often be paid for by Medicare. These challenges include identifying the driving forces that are leading to escalating Medicare costs under the current system, foreseeing the government’s future solutions to these escalating costs, and developing products that will fit within the government’s solutions.
The recently appointed administrator of the CMS, Mark McClellan, MD, PhD, has proposed some ideas to help find a solution to the reimbursement restrictions that have been put in place in response to continual escalation of Medicare expenditures. If these results are achieved, the pendulum may swing in the other direction as industry professionals come to understand the future restrictions and aim to design products that will meet those guidelines.
Rising Medicare costs
The escalating costs of the Medicare program have been a topic of discussion for some time now. Many factors contribute to these cost increases. Here some of the driving forces behind the cost increases in the Medicare program and some possible solutions.
One of the causes of Medicare cost increases is high malpractice premiums, which are at least in part brought on by the practice of “defensive medicine” — for instance, ordering diagnostic tests that may not be medically necessary but may be prudent to protect the physician from litigation. As a solution, President Bush has proposed tort reform. There is a clear desire on the part of Dr. McClellan and others to achieve tort reform because it will heavily affect the cost of Medicare.
Another driver for increased health spending is the cost of care for the uninsured, which is borne by insured individuals. The government has proposed creating health savings accounts and setting up association health plans to help address this crisis.
Overpayment for some physician-administered drugs is another problem. Under the provisions of the Medicare Modernization Act of 2003, the government intends to implement a drug reimbursement policy based on the average sale price (ASP) of medication rather than the average wholesale price. This plan involves the government’s assessment of the ASP and a payment rate of approximately 6% above ASP rather than a payment based on the average wholesale price.
Another source of increasing costs is lucrative reimbursement for procedures to treat potentially avoidable complications and re-treatments. A solution might be to offer higher payments for procedures that are deemed to have better, safer outcomes and pay less for the treatment of avoidable complications. This would hopefully align economic incentives with providers’ goal of providing the best care.
New, costly technologies are another driver for increased Medicare costs. A solution could be providing reimbursement incentives for the use of new technologies that have been proven to offer better outcomes than earlier technologies. Dr. McClellan has indicated that newer technology is worth its extra cost if the outcomes are correspondingly superior. He has hinted that, once a new and better technology is covered and paid at a higher rate, reimbursement disincentives for the use of older technologies may follow.
With this push toward paying providers more for the use of better technologies, the differences that separate one product from another will need to be better defined by manufacturers and clinical investigators.
Focusing on short term
A downward spiral begins when fixed payment formulas lead to cost reduction efforts by facilities and physicians, which in turn lead to future reductions in payment for services. As the cost for the procedure decreases, the CMS reimbursement rate is also ratcheted down.
New technologies that are shown to provide substantial clinical benefits, as demonstrated by robust study data, can break this spiral by meriting additional payment.
When higher-cost products are utilized, the reimbursement for that procedure eventually increases. The CMS annually updates its hospital payment levels based on median costs, which are determined based on a retrospective look. For example, the rates set in calendar year 2006 will be based on cost data in 2004 and part of 2005. CMS will soon mirror this process in setting ASC rates. So eventually, cost changes result in reimbursement changes.
The two-aspect model
The government fosters egalitarian principles in Medicare, which is why there are policies like the prohibition on balance billing. But some of the newer technologies that are being developed, such as IOLs that correct presbyopia, have been developed to offer a much higher value than the $150 that Medicare pays ASCs for conventional IOLs. For instance, prices for the Alcon AcrySof ReStor apodized diffractive IOL and the Advanced Medical Optics ReZoom multifocal IOL have been set at levels approaching $900.
As noted above, before the recent ruling by CMS, this put the Medicare patient who wanted these technologies in a bind. CMS would not pay $900 for an IOL, and the patient was unable by law to pay for it out of pocket, even if he or she was willing to do so.
One solution that was proposed to this problem — the solution that eventually was adopted by CMS after much debate — was to acknowledge that these IOLs have two aspects. The aspect that treats cataract is covered, and the aspect that treats presbyopia is noncovered.
Medicare patients have always been allowed to pay for noncovered services, so patients can now pay the facility for the incremental cost of the noncovered, presbyopia-correcting aspect of the IOL, and the can pay the physician for related noncovered services that are not part of cataract diagnosis or treatment. An analogy has been made between this new policy and the insurance policies that allow a patient to pay for an upgrade to a deluxe eyeglass frame in a plan that pays only for a basic frame; essentially, the added fashionability is the noncovered aspect of the frames.
Now and in the future
The ophthalmic industry is challenged to continue to develop innovative products that are substantially differentiated in terms of patient benefits that are supported by comparative clinical studies.
Additionally, we must explore how best to respond to the new two-aspect model for benefits that are not covered by insurers. Positive change can be achieved if we can prove that we are providing products that have enough differentiation to justify and maximize the opportunities of the new programs.
As the government embraces change to improve the Medicare system, industry professionals must continue to be on the forefront of research and development. Our efforts must be devoted to developing technologies that will satisfy future guidelines and demands of third-party payers.
For Your Information:
- Laurent Attias is Global Director, Refractive Marketing and Sales, for Alcon Laboratories. He can be reached at 6201 South Freeway, Fort Worth, TX 76134; 817-568-6540; e-mail: laurent.attias@alconlabs.com.
- Brette McClellan is Director, Health Policy Government Relations, for Alcon Laboratories, and can be reached at 6201 South Freeway, Fort Worth, TX 76134; 817-568-6349; e-mail: brette.mcclellan@alconlabs.com.