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Obama Administration Withdraws Medicare Part B Demonstration Project

Posted: December 16, 2016

The Obama Administration announced it will withdraw its planned nationwide experiment in which Medicare would have reduced payments for many drugs given to patients in doctors’ offices and hospital clinics. President Obama has claimed that Medicare’s payment formula rewards doctors for prescribing more expensive drugs, and pushed for a five-year test to persuade doctors to prescribe less expensive treatments under Part B of Medicare.

The intent was to test how alternative drug payment structures might improve the quality of patient care and the value of Medicare spending. This would require mandatory participation for doctors and hospitals that provide Part B drugs to Medicare patients in three-fourths of the nation’s 7,000 primary care service areas.

The experiment drew criticism from pharmaceutical companies, doctors, patients and members of both parties in Congress, as the complexity of the issues and limited time available led to the proposal not reaching finalization. Advocacy groups joined doctors and drug companies in saying that the plan could jeopardize access to very significant medications in its search for cost savings. Every member of the Senate Finance Committee, consisting of 14 Republicans and 12 Democrats, and more than 300 House members expressed concern over the proposal.