Federal Court Rejects Bush Administration Medicare Payment Policy

Last month, U.S. District Court Judge Henry Kennedy blocked a Bush administration Medicare payment policy, ruling that CMS does not have the authority to redefine the reimbursement rates set by Congress, the New York Times reports.

The ruling came as part of a test case on a Bush administration directive that limits Medicare payments to the least costly medications for specific conditions.

According to the Times, CMS officials are reviewing the Oct. 16 ruling of the case, which involved Medicare payment for DuoNeb, an inhalant treatment for chronic obstructive pulmonary disease and bronchitis manufactured by Mylan-subsidiary Dey.

Ruling

In his ruling, Kennedy said that CMS and some of its contractors violated federal law by limiting payments to "the least costly alternative," adding that the administration's position would give the HHS secretary "enormous discretion" to decide the amount that is paid for services and items covered under Medicare without consideration for the detailed formulas set by Congress.

Kennedy said, "This flies in the face of the detailed statutory provisions."

Under the 1965 Medicare law, payments for services and products that are "not reasonable and necessary for the diagnosis or treatment of illness or injury, or to improve the functioning of a malformed body member" generally are prohibited. If an item is covered, the payment rate is specified in other parts of the law, the Times reports.

The Bush administration argued that Medicare officials should have the authority to determine whether the cost associated with a specific item was "reasonable and necessary."

However, Kennedy said that argument "does not make sense" because of congressional efforts to establish the payment rates.

On Monday, CMS spokesperson Peter Ashkenaz said, "We are disappointed with the ruling and continue to believe that our policy is supported by the statute," adding, "We are still considering our options and next steps."

Some federal health officials also said the ruling would pose problems to efforts to reduce Medicare costs.

According to the Times, similar legal disputes with the government over payments for other medications have been raised, such as the COPD and asthma treatment Xopenex manufactured by Sepracor (Pear, New York Times, 11/4).