Medicare payment options for recombinant erythropoietin therapy.

We analyzed alternative payment approaches that Medicare could use to pay for recombinant human erythropoietin (rHuEPO) therapy. How Medicare pays for rHuEPO therapy will affect whether providers make prudent purchases of the biologic and prescribe it appropriately and whether companies offer the program low prices. Medicare's policies may also guide policies of other third parties. Selecting payment options for Medicare payment requires balancing desirable and undesirable implications, especially trade-offs between improving access to and quality of care for beneficiaries versus constraining costs to Medicare and its beneficiaries. The options for paying providers that contain financial incentives to constrain expenditures also contain incentives for providers to skimp on use, perhaps to the detriment of patients' quality of care. On the other hand, options that may reward additional use may lead to higher expenditures and threaten the quality of care from the direction of overuse. Medicare currently varies the level and method of payment for rHuEPO therapy according to the setting in which it is provided. Equity among beneficiaries and providers and incentives for efficient use of medical services would argue for paying the same amount for the same service, regardless of where it was provided. Whatever payment options are adopted, the Health Care Financing Administration (HCFA) will have to be able to exercise flexibility in monitoring and responding to changing market conditions. In this dynamic market, the number of manufacturers, medical indications for use approved by the Food and Drug Administration, and, eventually, Medicare's predominance are likely to evolve over time. The appropriate level and perhaps even the method of payment may well change with market conditions.(ABSTRACT TRUNCATED AT 250 WORDS)