MP900407553Every year Medicare pays approximately $20 billion to doctors to administer prescription medications. New rules seek to lower that amount.

Currently, when a doctor administers a prescription medication to a patient in a doctor's office or a hospital outpatient facility, Medicare Part B reimburses the doctor for the cost of the drug plus an extra 6%. That means the more expensive the medication the more the doctor is paid to administer it.

Doctors have an obvious incentive to use expensive medications even when a cheaper alternative is just as effective. This hurts patients who are required to make co-payments.

To change this incentive and lower costs Bankrate reports that Medicare is proposing new rules in "Medicare prods docs to prescribe cheaper drugs."

The proposed changes include:

  • Lowering the amount doctors are reimbursed from the current 6% to 2.5% to give less incentive to use expensive medications.
  • Eliminate or reduce patient cost-sharing so patients are not financially hurt when doctors prescribe more expensive medications.
  • Introduce a new payment structure that depends on the effectiveness of a medication. The more effective a medication the more doctors would be reimbursed for using it. In turn, this would give them a financial incentive to administer cheaper, better medications.

It is important to note that these proposed rule changes are not yet in effect. They also do not effect Medicare Part D prescriptions that are not administered by doctors.

Public comments on the proposal are being accepted through May 9, 2016.

Reference: Bankrate (March 15, 2016) "Medicare prods docs to prescribe cheaper drugs."