Study: Medicare cuts led docs to increase drug utilization

Medicare pay cuts for chemotherapy drugs led doctors to prescribe the drugs more frequently, according to an independent study released Thursday.

The findings run counter to fears among healthcare advocates that the cuts — included as part of the 2003 Medicare Modernization Act (MMA) — would discourage treatments at the expense of patient health.

“This sort of dynamic runs contrary to what most people would expect," said Harvard University's Joseph Newhouse, the lead researcher behind the findings.

Under the MMA, Medicare stopped paying out whatever physicians billed for outpatient chemotherapy drugs, which doctors buy directly from drug companies. Instead, the agency capped reimbursements at the average cost to oncologists, plus six percent. The move was designed to prevent doctors from marking the drugs up at the expense of taxpayers. Patient advocates, though, feared that the lower reimbursements would lead to fewer treatments.  

Instead, Newhouse and other researchers found that doctors increased treatments for outpatient chemotherapy drugs by 2.4 percent after the MMA was enacted. Additionally, doctors simultaneously shifted to more costly drugs, shying away from cheaper options. 

“Physicians don’t always respond to incentives the way most people expect, but in this case they do respond in a way that makes sense to economists," said Mireille Jacobson, senior economist of the RAND Corporation and an author of the study. "It seems logical on the one hand that when you pay less you get less. However, in this case, since a high proportion of an oncologist’s income depends on prescribing, paying less per drug results in more drugs.” 

The findings, which appeared Thursday in the journal Health Affairs, were based on an examination of Medicare claims for more than 222,000 patients diagnosed with lung cancer between 2003 and 2005.