OIG: CMS isn’t making progress on cost-saving recommendations for Parts B and D

Erin McCallister Senior Manager, Health Research Institute, PwC US August 20, 2020

CMS did not make progress on two recommendations to reduce fraud and abuse, according to a recent report on top unimplemented recommendations from HHS’ Office of Inspector General (OIG). OIG also wrote in its report that HHS has yet to establish a strategic framework for responding to international public health emergencies, a recommendation made by the OIG before the COVID-19 pandemic.

In its report of the top 25 unimplemented recommendations, OIG highlighted 14 that CMS has yet to implement. While it is making headway on several of them, the agency says CMS has made no progress on two that are related to pharmaceuticals.

The recommendations were to implement least costly alternative policies for Medicare Part B and the development of a strategy to ensure that Part D does not pay for drugs covered by the Part A hospice benefit.

Least costly alternative policies recommended in a 2012 report base the payment amount for a group of “clinically comparable products” on the lowest price product. As an example, OIG cited prostate cancer drugs where least costly alternatives could have saved Medicare $33.1 million per year. According to OIG, CMS “indicated that it would consider including a legislative proposal” in its fiscal 2021 budget, but it did not add it to the budget request.

OIG made the recommendation about Part D drugs and hospice benefit in a 2019 report based on a finding that Part D spent $160.8 million for drugs that hospice organizations should have paid for and that “sometimes” Medicare paid twice for drugs under Part D than would have been paid if they had been provided under the hospice benefit. However, OIG found that since its report, it had not received a formal management decision from CMS.

In a separate 2019 report, OIG found that HHS’ response to the 2014-15 Ebola crisis could have been more efficient through the establishment of “a strategic framework for responding to international public health emergencies,” rather than different HHS offices relying on their own domestic response plans, policies and/or procedures.

HRI impact analysis

OIG acknowledges that the recommendations predate the COVID-19 pandemic, for which the response and recovery are now a top priority for HHS. At least one of the recommendations by OIG has been on the shelf for eight years: least costly alternatives for Medicare Part B.

CMS has made attempts to change how Medicare Part B drugs are reimbursed. During the Obama Administration in 2016, CMS proposed an expansive pilot through the Center for Medicare and Medicaid Innovation that included reference pricing to set a benchmark for a group of therapeutically similar drug products as well as other value-based pricing models. However, the proposal was abandoned a year later.

More recently, the Trump administration has proposed setting Part B reimbursement rates to those paid by other developed nations. The International Pricing Index (IPI) was first proposed in 2018 with an estimate that between 2020 and 2025, it could save CMS $17.9 billion. While the proposal was put on the back burner for much of 2019, it resurfaced in a set of executive orders last month.

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Trine K. Tsouderos

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Erin McCallister

Senior Manager, Health Research Institute, PwC US

Ingrid Stiver

Senior Manager, Health Research Institute, PwC US

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