The Centers for Medicare and Medicaid Services (CMS) released a proposed rule to mediate its 2018 decision to decrease Medicare Part B payments for 340B drugs. While the remedy is appreciated, the implementation is controversial as it implements a lengthy multi-year claw-back to achieve budget neutrality.

Why is the remedy needed?

  • In CY 2018, CMS decreased Medicare Part B payments for drugs purchased through the 340B program. The decision to decrease payments resulted in an almost 30%-point reduction in payment. As required by the Social Security Act, the payment reduction was implemented in a budget neutral manner — CMS reduced payments for 340B drugs and increased payments on other items and services paid to all hospitals (not just 340B entities) under OPPS.
  • A Supreme Court ruled that the 2018 payment cuts were not consistent with CMS’ authority and asked the agency to address its mistake.

How will the remedy work?

  • CMS proposes to make a one-time lump sum payment to 340B hospitals for the amounts they would have received had the payments reductions not occurred. CMS estimates these repayments will total $9 billion and will be made to 1,649 340B hospitals.
  • CMS aims to make these payments by the end of CY 2023 or the beginning of CY 2024.

What’s the catch?

  • The statute requires that any payment adjustments to the OPPS must be done in a budget neutral manner — meaning that any decreases in payment must have corresponding increases in payment.
  • Beginning in CY 2025, CMS proposes to reduce all payments for non-drug items and services to most providers of outpatient services, including non-340B entities, by 0.5% each year until neutrality is met. CMS estimates it will take approximately 16 years to reach neutrality.
  • CMS is proposing that providers that did not enroll in Medicare until after January 1, 2018, and thus did not fully benefit from the increased payment for non-drug items and services from CY 2018 through CY 2022, would be excluded from the prospective rate reduction.