By Deb Quillen and Andrea Slowiak
If PACE plans bid on their Part D spend each year in order to receive reimbursement for participant medications, why should the organization care about drug pricing? This is a frequent question, even among PACE staff members, and there are multiple answers.
Part of the bid process requires the PACE plan to estimate how many participants it expects to enroll during the bid year and then estimate how much will be spent to deliver care and medication to those participants. A projection of how many of these new participants will have chronic, expensive conditions is used by an actuary to help the plan account for a reasonable number of people with hepatitis C, organ transplants, multiple sclerosis, or other conditions requiring specialty drugs, so that the plan’s bid comes as close as possible to the Part D drug spend for the bid year. In the year following the bid year, CMS will do a reconciliation to determine how closely the plan’s actual spend came to their Part D bid. The further away from the bid target the plan’s spend was — either over or under — the less CMS will share in the reconciliation amount (or difference) and the more of the cost the plan will have to absorb.
Another reason to keep drug costs down is that PACE is a Medicare and Medicaid replacement plan. In PACE’s early years, it was first a Medicare Demonstration Plan to prove that 1) PACE could provide better, more coordinated care for its participants than those participants would receive if they were enrolled in regular Medicare and Medicaid; and 2) that PACE could provide that high-level, high-risk care at 90% of what it would cost Medicare and Medicaid. After PACE proved the model could provide better care at less cost, Medicare, and in certain states Medicaid, allowed PACE plans to operate as a fully qualified care option for eligible beneficiaries. Today, 137 PACE programs operate 272 PACE centers in 31 states, serving more than 54,000 participants.
Additionally, as recipients of federal and state funds, PACE plans are obligated to abide by the Fraud, Waste, and Abuse (FWA) regulations set forth by CMS and the states. Paying too much for drugs falls into the category of Waste. When a plan contracts with a pharmacy provider, it is expected that the plan sent out requests for quotations (RFQs) and/or interviewed each pharmacy vendor to determine if the vendor’s rates are reasonable. A plan’s contracted pharmacy rates may be compared with national and regional benchmarks by CMS auditors to determine if the prices are in line with other PACE plans in the same region serving a similar demographic (participants’ age, gender, race, and disease profile.) The CMS PACE Manual and the three-way contract between PACE, Medicare, and Medicaid require that PACE plans be good stewards of funds received and remain fiscally viable.
Remember, too, Medicare and Medicaid funds are tax dollars — OUR tax dollars. It is important to keep drug costs low and monitor for FWA, because no one wants to overpay for the products and services they buy!
Finally, we all know that sometimes the price of something, a house for example, can be very different from the cost once purchased. Keep in mind, low price does not always mean low cost for the program — clinical support, utilization management, and quality of services need to be considered to keep costs down and enhance patient outcomes.
Keeping costs down and quality up is the right thing to do.