The Lower Costs, More Transparency Act (H.R. 5378) currently before Congress aims to increase price transparency in health care and address the high cost of prescription drugs. One of the provisions of the bill would change the way Medicare pays for physician administered drugs. Currently, Medicare pays a higher price for drugs that are administered in a hospital outpatient setting than drugs that are administered in physician's office. The Lower Costs, More Transparency Act would create a site-neutral payment system that would eliminate the discrepancy in payments based on where drugs are administered.
HCCI has published and presented several research projects on administered drugs, specifically chemotherapy, that look at the effect of the current payment system on overall health care spending. We have created a one-pager that highlights the main findings of our research and illustrates the effect that the Lower Costs, More Transparency Act could have on administered drug spending. Below are key findings, click the PDF to read more:
- Administered drug spending represents over 30% of total outpatient spending in Medicare and 10% of total outpatient spending in the employer-sponsored insurance population (ESI). The lower share of outpatient spending in ESI is driven by a younger demographic composition (<65 years old) relative to Medicare.
- A larger share of administered drugs, like chemotherapy, are given in a hospital outpatient setting than in physician offices, and this share has increased over time.
- Most of spending on administered drugs (95%) is for the drugs themselves, while ancillary services that occur during drug infusions make up a small but growing share of administered drug spending (5%). As written, the Lower Costs, More Transparency Act would address the largest component of administered drug spending but would not change the way ancillary services are reimbursed.