Background Paper

No. 70

Coverage and Payment for Prescription Drugs Under Medicare Part B: A Complex Patchwork
August 31, 2009


Amanda Cassidy, Consultant


As part of the diverse discussions around health care reform, many have looked to refining Medicare payment systems as a way to give health care practitioners and providers greater incentives to deliver care more efficiently, and thus slow health care spending growth. Understanding how Medicare currently pays for Part B services, including drugs covered under Part B, is essential to understanding the potential impact of these types of reforms. Most items and services covered under Part B, including most Part B drugs, are paid individually, which means practitioners and providers generally receive more payments for providing more services. Some reform proposals would expand the use of bundled payments under Medicare to pay for items and services as a group, rather than separately, to curb incentives to provide unnecessary care. If such reforms were to include Part B drugs, it would be a significant change from current payment policies. A close look at coverage and payment for Part B drugs reveals complex policies and interactions with Part D drug coverage.

Related Materials

For more on public financing of prescription drugs, see "The World of Prescription Drugs: Approvals, Pricing, and Purchasing" (Fundamentals Briefing, January 30, 2009) and "The Medicaid Drug Rebate Program" (The Basics, April 13, 2009).

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