WASHINGTON -- Medicare, which offers health-care coverage for America's elderly, faces trillions of dollars of unfunded liabilities. Unfortunately, legislators are constantly tempted to increase benefits and thus spending. They should resist their inner darkness as the Bush administration attempts to create a more rational reimbursement system for cancer drugs.
Although Medicare has never covered pharmaceuticals -- the benefit package passed last year won't kick in until 2006 -- it made an exception for cancer drugs administered by oncologists. The cost was $10.5 billion in 2003.
Yet rather than pay physicians a fair fee, Congress set drug reimbursements based on the industry's official average wholesale price, or AWP, rather like the sticker price of new automobiles. Observes Grace-Marie Turner of the Galen Institute, doctors used the resulting "spread" between cost and reimbursement "to cover Medicare's underpayments for their practice expenses."