Current Issues in Oncology Reimbursement

Current Issues in Oncology Reimbursement

ABSTRACT: The reimbursement policies of Medicare, Medicaid, and private insurers can have a major impact on the ability of oncologists to deliver care to their patients. This article explores current issues of particular interest to oncologists, including coverage of off-label drug uses, reimbursement for drugs used in clinical trials and for costs of care for patients in trials, the effect of DRGs on the introduction of new technologies, attempts by Medicare to develop a fixed-price payment system for hospital outpatient department services, new methodologies for determining fee schedules for physician services, bundling versus separate payments for chemotherapy administration, and whether payments for drugs administered by physicians should be based on the average wholesale price (AWP) or some other methodology. [ONCOLOGY 9(Suppl):185-189, 1995]


This article provides an overview of current issues in oncology
reimbursement, with a special emphasis on Medicare/Medicaid policies.
Topics included are coverage of off-label drug uses, possible
changes to Medicare payment methods affecting hospitals and physicians,
and the effect of reimbursement on the dissemination of new technologies.

Coverage Issues

A number of coverage issues recur in oncology. These coverage
limitations can be the source of much difficulty for patients
seeking treatment and for the physicians who provide it.

Off-label Uses of Drugs

The Food and Drug Administration (FDA) approves drugs based on
the proposed labeling submitted by the manufacturer, and the indications
for use included in the FDA-approved labeling are those that the
manufacturer has demonstrated are safe and effective to the FDA's
satisfaction. Once a drug has been approved by the FDA, however,
physicians are legally permitted to prescribe the drug for any
purpose without limitation to the indications set forth in the
approved labeling.

Consistently available reimbursement for "off-label"
uses of cancer drugs has been a major problem in the past. Legislation
and changing insurer practices have, however, significantly improved
the situation.

Medicare-For a number of years, Medicare's policy has been
to allow its carriers to reimburse for off-label uses of approved
drugs "taking into consideration the generally accepted medical
practice in the community." [1] Under this long-standing
policy, Medicare covered many cancer chemotherapy drugs, but coverage
lacked uniformity across the country because it depended on local
assessments of generally accepted medical practice.

To remedy this lack of uniformity, Congress enacted legislation
effective in 1994 for drugs "used in an anticancer chemotherapeutic
regimen." [2] Under this law, Medicare is required to cover
any off-label use that is listed in any one of the three major
drug-use compendia (the United States Pharmacopoeia-Drug Information,
the American Hospital Formulary Service, or the American
Medical Association's Drug Evaluations) or that is supported
by articles in certain peer-reviewed journals. The list of approved
journals includes the major cancer-related journals, as well as
the important general medicine publications [3].

The Health Care Financing Administration (HCFA), which administers
the Medicare program, has interpreted this law as applying only
to drugs used as part of the chemotherapy regimen itself, and
not to drugs used to treat the toxicities or side effects of the
chemotherapy [3]. There is no official list of which drugs are
contained in each category.

There is a potential difference in Medicare coverage of an off-label
use that is listed in a compendium and one that is merely supported
by the literature. In the case of a compendium listing, Medicare
is automatically required to cover the listed use. In the case
of a literature-supported use, each carrier remains free to evaluate
the literature and determine whether the published articles in
fact support the use. Since there is a lag between the time that
articles are published and the time that the compendia are revised
to take them into account, it is likely that there will continue
to be some lack of uniform coverage during that period.

Medicaid-Medicaid's policy on coverage of off-label uses
is more complicated. Generally, state Medicaid programs are required
by federal law to cover all off-label uses that are listed in
one of the three drug-use compendia identified above. A state
may, however, establish a formulary and exclude from the formulary
any drug that does not have a "significant, clinically meaningful
therapeutic advantage in terms of safety, effectiveness, or clinical
outcome," compared with other drugs that are included in
the formulary [4]. Any excluded drug must nevertheless be available
to patients on a case-by-case basis if authorized by the state
prior to use.

Currently, Congress is considering major reforms to the Medicaid
system, such as converting the program to block grants, under
which the states will have great flexibility to design their own
rules. This could result in greater diversity of state policies
on coverage of off-label uses.

Private Insurance-In general, private insurers look to
the major drug-use compendia and the peer-reviewed literature,
and will pay for uses that are supported by those sources. In
addition, a number of states have recently enacted legislation
requiring insurance coverage of recognized off-label uses.

Medicare Drug Coverage

Many of the new injectable biologic drugs, such as the hematopoietic
growth factors, can be self-administered subcutaneously but are
also administered by health care professionals. This results in
a potential issue of coverage under Medicare, which excludes coverage
of drugs that "cannot" be self-administered. Medicare
policy, however, is to cover drugs that are not "usually"
self-administered [5]. Under this policy, Medicare is paying for
growth factors except in those cases where the drugs are, in fact,

Although Medicare does not have a drug benefit as such, there
are three circumstances in which the program covers drugs. First,
drugs, including oral drugs, are covered as part of the benefit
for inpatient hospital or nursing facility services; therefore,
drugs provided to inpatients are covered. (As discussed below,
however, when there is a fixed payment for all services furnished
to a hospital inpatient, there is no extra payment to cover drugs.)

Second, drugs that cannot be self-administered are covered by
Medicare when they are furnished incident to a physician's professional
service and included in the physician's bill. Chemotherapy and
other injectable drugs furnished in the office are covered under
this provision. For this coverage to apply, Medicare requires
that the physician be present in the office suite and immediately
available to provide assistance and direction, although a nurse
or other assistant may actually administer the drug. In addition,
if a nonphysician administers the drug, that person must be employed
by the physician, rather than by the hospital or other entity

Third, drugs are covered as part of the durable medical equipment
benefit when they are administered through pumps that are reimbursed
as durable medical equipment [7]. This coverage applies to both
ambulatory infusion pumps and stationary equipment used in the
patient's home, but it does not extend to disposable pumps, which
are not considered to be durable medical equipment.

In addition to these injectable drugs, Medicare covers a small
number of oral drugs, including (beginning in 1994) several anticancer
chemotherapy agents. Coverage of oral chemotherapy agents is limited
to those drugs that have an injectable counterpart used for the
same indication. Currently, four drugs qualify under this provision-cyclophosphamide,
etoposide (VePesid), melphalan (Alkeran), and methotrexate.

New Technologies

A persistent issue, under both public and private health plans,
relates to the coverage of new procedures and technologies. Since
all health plans exclude coverage of items and services that are
considered "experimental" or "investigational,"
any innovation faces an obstacle until it is regarded as standard
practice. These provisions have proved troublesome to oncology
because so many patients undergo nonstandard treatment.

Coverage in such situations can vary considerably among insurers.
Some insurers will deny coverage of the patient care costs for
any service designated as investigational, and may take the use
of an informed consent form as evidence that the service was investigational.

Obstacles to coverage may be especially formidable in the case
of expensive technologies. Even though cost is generally not explicitly
a factor in determining whether a procedure is covered, a high-cost
procedure will generally be carefully scrutinized with respect
to its investigational status, whereas a new low-cost procedure
may draw little attention.

A number of formal programs have been established to evaluate
new technologies to determine whether they should be covered by
insurance. Among private insurers, the most active may be the
Blue Cross/Blue Shield Association's Technical Evaluation Program.
This program, which provides nonbinding advisory opinions to local
Blue Cross/Blue Shield plans, does not rely on community practice
standards or consensus, but only on scientific evidence [8].

In the case of all insurers, the best route to obtaining a determination
that a procedure is no longer experimental is usually the publication
of articles in peer-reviewed journals supporting its safety and
effectiveness. Physicians who are developing new procedures should
be mindful of the importance of literature to insurance coverage,
and should seek to publish studies involving new procedures as
quickly as possible.

Clinical Trials

The most disadvantageous situation for insurance coverage is a
clinical trial, since the very existence of the trial is often
viewed as conclusive evidence that the procedure being furnished
is experimental. While it may be justifiable under the limiting
language of insurance plans to deny coverage of the aspects of
the trial that are truly experimental, when coverage is denied,
it often extends to all aspects of the patient's care, including
patient care costs that would have been incurred even if the patient
had undergone standard therapy. Effective coverage of clinical
trials will probably be available only when there is state or
federal legislation requiring it.


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