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Medicare paying more for pneumococcal, flu vaccines

From the October ACP Observer, copyright 2003 by the American College of Physicians.

By Brett Baker

Q: Has Medicare recently increased its payment rate for the pneumococcal vaccine?

A: On Oct. 1, Medicare began paying $18.62 for the pneumococcal vaccine, a figure that is significantly higher than last year's reimbursement of $13.10.

The change reflects ACP's efforts to alert the Centers for Medicare and Medicaid Services (CMS) that its methodology for determining the payment rate was inaccurate. The agency had been calculating a price for the pneumococcal vaccine based on the cost of a product that is no longer on the market and a price that was available to only a limited number of purchasers.

This calculation flaw resulted in a Medicare payment that was substantially below physicians' cost to actually purchase the vaccine.

Q: When did the CMS announce the pneumococcal vaccine payment increase?

A: The CMS announced in August that it would raise the Medicare payment for the pneumococcal vaccine. While the CMS normally announces payment changes shortly before or after they are implemented, the agency agreed with ACP and other physician organizations that it was important to give physicians early notice of the payment increase.

The College explained that physicians often order their supplies of pneumococcal vaccine when ordering the influenza vaccine, just before the start of the flu season. ACP wants to make sure that physicians have the updated payment rate information when deciding whether to purchase the pneumococcal vaccine.

ACP first published notice of the price increase in the Aug. 26 edition of the College's weekly e-mail newsletter, ACP ObserverWeekly. (The announcement is online.)

Q: Are there other recent changes that make furnishing pneumococcal and other Medicare-covered immunizations more viable?

A: The CMS increased the Medicare payment for administering the influenza, pneumococcal or hepatitis B immunization to approximately $7.72. That change took effect in March 2003.

The increase nearly doubles the administration payment from the previous rate of $3.98. Payment rates vary slightly by geographic area; a list of different regional rates is on ACP's Adult Immunization Web site.)

ACP, working with other physician organizations, was instrumental in convincing the CMS to increase the payment rate for immunization administration. The CMS revised the practice expense component of the Medicare payment rate for Current Procedural Terminology (CPT) 90471, immunization administration, to better reflect the resources physicians use to administer vaccines.

The CMS then applied the upgraded practice expense component for CPT 90471 to CMS-maintained "G" codes that are required for reporting the administration of Medicare-covered immunizations: G0008 (influenza), G0009 (pneumococcal) and G0010 (hepatitis B).

For a complete comparison of Medicare reimbursements for the influenza and pneumococcal vaccines, see "Medicare's rising rates for vaccines," above. For more information on vaccine rates, see the ACP Adult Immunization Initiative Web page.

For general immunization information, see the CMS Web page.

Q: How does the CMS determine payment rates for Medicare-covered drugs and biologicals, such as the influenza and pneumococcal vaccine products?

A: In January 2003, the CMS began using what is known as a single drug price (SDP) process to determine Medicare drug prices. While Medicare continues to pay the lower of the billed charge or 95% of the average wholesale price for Medicare-covered drugs, the CMS established the single drug price to centralize its wholesale drug prices. In the past, Medicare had each of its carriers determine the average wholesale price for each drug.

The CMS selected an industry publication known as the "Redbook" as its source to identify the average wholesale price for each drug. It then hired a contractor to use the "Redbook" to determine the Medicare drug prices and update them quarterly.

The CMS uses the following methodology to determine Medicare drug prices:

  • For a single source drug or biological agent, the average wholesale price equals the average wholesale price of the single product. Medicare then multiplies that amount by 0.95 to determine the Medicare payment allowance limit.
  • For a multi-source drug or biological agent, the average wholesale price is equal to the lesser of the median average wholesale price of all the generic forms of the drug or biological or the lowest brand-name product. (A brand-name product is defined as a product that is marketed under a labeled name that is other than the generic chemical name for the drug or biological.) Medicare then multiplies that average wholesale price by 0.95 to determine the Medicare payment allowance limit.

Brett Baker is a third-party payment specialist in the College's Washington office.

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