Vaccine Costs, Compensation, and Access: Problems-and Solutions

Consultant for Pediatricians, Consultant for Pediatricians Vol 7 No 9, Volume 7, Issue 9

Vaccines are perhaps the single most important contribution the 20th century made to civilization. They have been responsible for saving untold numbers of lives and for vastly improving the quality of many more. Although vaccines have had some bad press of late, they are still strongly recommended by the medical community. However, financial issues, difficulties with managed care organizations (MCOs) and other parts of our health care system, and problems with the manufacture and delivery of vaccines prevent optimal use of this crucial preventive service. Here I discuss the problems associated with vaccine delivery and administration and suggest several practical solutions.


I began practicing on July 1, 1978. I felt privileged to be a pediatrician in the golden age of vaccines. I felt confident that there were several infectious diseases that I would probably never have to treat because of the fine array of vaccines in the physician’s arsenal. I had seen occasional cases of measles, mumps, rubella, tetanus, and pertussis during my training- but far fewer than were seen by pediatricians who had begun to practice in 1958 or even in 1968. I had studied diphtheria, polio, and smallpox but had seen not a single case of any of these diseases throughout my medical school and residency years.

Despite the wonders of lifesaving vaccines, patients were still dying of diseases caused by Streptococcus pneumoniae and Haemophilus influenzae. Like all other pediatricians of the time, I lived in fear of the middle-of-the-night phone call from parents concerned about their child’s unusual cough. Was it croup caused by a virus or could it be epiglottitis caused by H influenzae? My son suffered with croup and I spent many a night under our “army tent” (sheets placed over a bridge table with two vaporizers working), fearful that I might miss the diagnosis of epiglottitis.

Newborn nursery and pediatric unit beds were still occupied by patients with bacterial meningitis. I remember as if it were yesterday informing the parents of children with meningitis that even after survival there were potential complications that could occur-complications such as brain abscess, loss of vision or hearing, learning disabilities, motor impairments, and more.

Today, in 2008, we have cut the number of cases of H influenzae infection significantly, and annual cases of S pneumoniae pneumonia in the United States are down to about 40,000.1 Meningococcal disease has also been radically reduced to fewer than 1000 cases a year.2 The annual incidence of hepatitis A is down to about 20,000 cases3 and varicella to about 32,000 cases4; the numbers of cases of rotavirus infection and polio have fallen even more dramatically. Today we have influenza virus vaccines that have diminished the risk of vaccine-induced Guillain-Barr syndrome. Soon we will have the pleasure of seeing a significant drop in the incidence of cervical and anogenital cancers as a result of the recent introduction of a vaccine to protect against human papillomavirus (HPV) infection, currently the most prevalent sexually transmitted disease in the United States.


However, despite the availability of these vaccines, they are not reaching enough people. There are still 15 million to 60 million cases of influenza reported annually in the United States alone.5 Vaccines save approximately 3 million lives a year. This is a wonderful statistic, but it is not good enough. Close to 2 million lives a year are still lost to vaccine-preventable diseases.6

Suboptimal use of vaccines is the result of a variety of problems with vaccine delivery. These include problems related to the cost of vaccines, inadequate physician compensation by MCOs, the manufacture of vaccines, effects of new types of health insurance, changing patterns of use of the health care system, and the fractured nature of health care delivery to poor children. Each of these problems is discussed in greater detail below, and possible solutions are outlined.


In times past, it was primarily underprivileged persons who had difficulty establishing roots in a medical home. The local hospital’s emergency department was often their primary source of medical care. Today, however, many families have 2 working parents who must seek medical care after normal business hours. These families turn to urgent care centers, emergency departments, and retail-based clinics. Some of these facilities are open 24 hours a day, 7 days a week, and are being used for this convenience.

Many retail-based clinics make it possible to pick up a gallon of milk or a box of tissues while obtaining medical care from a nurse practitioner or physician’s assistant. Retailbased clinics also offer short waiting times, plenty of parking, and the convenience of proximity to patients’ homes. However, there is likely to be no physician on the premises of these clinics, and the supervising physician might be hundreds of miles away, leaving the nurse practitioner or medical assistant essentially unsupervised.

As of this writing, retail-based clinics have not yet offered vaccines, but the idea is under consideration.

Physicians can counter the movement to non–office-based care by extending office hours, by scheduling carefully in order to minimize waiting times for patients and, perhaps most important, by reminding patients of the benefits of the medical home. The benefits of a medical home include being examined and treated by a physician or by a nurse practitioner who is working under the close supervision of a physician; being able to speak directly to one’s physician after hours in the event of an emergency; and being able to rely on the physician to keep track of such things as drug allergies, significant aspects of medical or family history, and vaccinations received or needed.


Another recent phenomenon, high-deductible health plans, also impedes the optimal administration of vaccines. These plans require the patient to pay for the first $1100 to $3000 of health care each year. Now families must decide how to spend their health care dollars. Patients arrive in doctors’ offices sicker than they did previously because they want to save money by waiting to be seen.

Although some high-deductible health plans cover preventive care received before the deductible has been met, about two-thirds do not do so.7 Some patients are electing to skip the yearly health maintenance exam in an effort to save money. As a consequence, conditions such as developmental problems, diabetes, and heart issues may be missed. There is also a real fear that vaccinations will be skipped because of patients’ efforts to keep out-of-pocket costs to a minimum.


There are also problems associated with the administration of vaccines to patients who are uninsured and underinsured. There are wonderful programs, such as Vaccines for Children and the Children’s Health Insurance Program (CHIP)/State Children’s Health Insurance Program (SCHIP), which supplement Medicaid programs. However, access problems arise because patients’ eligibility status can change from month to month. It can also be challenging to convince these patients to keep appointments. Record keeping can be problematic because for many of these children, trips to the doctor’s office are interspersed with trips to the emergency department and the local clinic. All of these issues can lead to lower vaccination rates.

Some states have begun to address the problems involved in providing vaccines to low-income children by implementing vaccine registries.


Recently, plant shutdowns have given rise to problems with maintaining adequate supplies of vaccines. Inadequate supplies have also resulted from unexpected demand. In addition, the delivery of vaccines given to prevent a seasonal disease has at times been too late to permit optimal vaccination of the population. If a vaccine is given to prevent a seasonal disease, it is important that it be released long enough before the season begins to both educate physicians and patients and to distribute the vaccine to the appropriate sources.


There are significant problems involved in the cost of supplying vaccines. Manufacturers incur costs associated with research and development that can reach hundreds of millions of dollars. The manufacture of vaccines is a business and manufacturers need to recoup expenses and earn a profit. The costs of vaccine development are passed on to the physicians who purchase vaccines. This problem is compounded by the fact that some of the vaccines that have recently been released are quite expensive. Some cost between $85 and $120 per dose.

It is not uncommon for a pediatric practice to have more than $100,000 worth of vaccines stored in its refrigerator for future use. The money invested in the purchase of the vaccines is not making money. Would it save a practice money to carry a smaller inventory of vaccines? It would certainly require less of an investment in inventory, but it also would increase the chance of running out of a vaccine and not being able to immunize a patient when needed. Covering that eventuality would require a recall system to notify patients when an out-of-stock vaccine once again became available. Yet, when a patient returned for the vaccine, would you collect another co-pay? The patient might feel that it was unfair to incur the cost of this second co-pay. On the other hand, if you didn’t collect the co-pay, you would lose between $10 and $25 because the MCO would subtract it from the amount due you for the encounter, assuming that it had been paid by the patient. Worse still, patients might not return to the office and you might not be able to maintain their vaccine schedules.

One solution to the problem of the up-front cost of purchasing vaccines is to use a universal supplier- either the state or federal government. However, some states have already tried this approach and it has not been 100% effective. Massachusetts, for example, is experiencing fiscal problems trying to provide complete vaccine coverage for all the children in that state. Furthermore, although a universal supply system would ensure that physicians did not lose money on vaccines, neither would they make money with such a system, since they would lose the profits currently derived from vaccinating patients.


While preventing disease and saving lives are the primary goals of every pediatrician, vaccinating patients also provides an important source of income. Certainly, no physician should lose money vaccinating a patient. Vaccines are a product purchased by physicians and, as in any business, there is profit involved when the product is sold. In the case of vaccines, profit is realized when payment is received after administration. The amount of payment will vary depending on the payer. If a vaccine is administered to a patient who is insured by an MCO, the amount of money received is determined by the contract that the physician has negotiated with the MCO. Some physicians can receive more than 35% above cost, while others with poorer contracts might receive as little as 1% to 2% above cost.8 Unfortunately, some physicians are even paid below cost.

Moreover, the time between the purchase of a vaccine and its use- and the additional delay involved inwaiting several weeks after the administration of a vaccine to be paid- means that during all this time the money invested in the purchase of the vaccine has not been making money.

For physicians who treat patients who are insured by MCOs, still other problems arise. MCOs do not incorporate new vaccines or price increases for existing vaccines until the manufacturer’s cost has been published. Some MCOs have been known to take as long as 90 days to adjust their computer systems to recognize and pay for new vaccines or new price increases. During this period, the physician has no idea what his or her payment will be or if he will be paid at all. Once the decision has been made to pay for a new vaccine, some MCOs retroactively pay physicians, but this is rare. A physician has the right to wait to offer a vaccine until the amount of the payment is known. However, if such a strategy were adopted, both patients and physician might suffer. Patients could be exposed to and contract the disease in question; in addition, the physician who did not provide the vaccine might then be open to a lawsuit.

Estimating accurately what you must receive for vaccines. In an effort to help pediatricians, the American Academy of Pediatrics has devised a vaccine business plan; this plan advises that in order to break even on a vaccine purchase a physician must receive 17% to 24% above the cost of that vaccine. This figure takes into account several factors: the cost of the vaccine, the cost of storage (including refrigeration and electricity), wastage, whether or not the product is returnable, and the cost of money.

Negotiating for better contracts with MCOs. Income also derives from the service performed at the time of the patient’s visit. This is the vaccine administration fee, which is dependent on the physician’s managed care contract. Physicians can and must advocate for higher payments. We must remind MCOs that vaccinating people saves money. It costs far less to vaccinate than it does to treat disease. When dealing with capitated plans, request that vaccines be carved out instead of included as part of the capitated rate.

When negotiating, remember that there is strength in numbers. Physicians must speak up for what they want. The more physicians who speak up for what they want and need, the greater will be their success. In addition, remember that pediatricians are important to families as they shop for insurance coverage. It is the rosters of pediatricians and obstetrician-gynecologists that are most often checked by young families. This fact can give pediatricians leverage with MCOs-although it can only do so if it is brought to the MCO’s attention.

Using proper CPT codes to maximize reimbursement for vaccinations. To generate profit, one must use the appropriate CPT codes. These codes clearly identify the specific product used; correctly identifying the product should guarantee proper payment. For example, there are multiple CPT codes for hepatitis B vaccines. Use code 90743 when giving hepatitis B vaccine to an adolescent if you are using the 2-dose series. If you are giving the 3-dose series to an adolescent, the appropriate CPT code is 90744.

The correct use of CPT codes is also helpful with Healthcare Effectiveness Data and Information Set (HEDIS) reporting. With the explosion of pay-for-performance programs among MCOs, rate of vaccination is one of the few measures that an MCO can use to assess performance in pediatrics.

Pediatricians must also remember to advocate for appropriate payment for the administration of vaccines. Some MCOs contend that if they pay fairly for the vaccine they should not have to pay fairly for its administration. This is utter nonsense. There must be proper payment for both product (the vaccine) and service (the administration of that vaccine). The various vaccine administration codes, along with an explanation of their proper use, are provided in the Table.

In addition to CPT codes for vaccine administration, there are also evaluation and management CPT codes for the visits themselves. For a well-child visit for an established patient use the 99391-99395 series codes, which are age-dependent. If a patient is new to your practice, use the 99381-99385 series codes. If a patient comes into the office for a sick visit and you notice that the child is behind in his or her vaccine schedule, use this opportunity to play catch-up; the appropriate CPT codes for such encounters are 99212-99215 for established patients or 99201- 99205 for new patients (in addition to the codes for the vaccines given). If a patient comes to the office for a vaccine only, use the CPT code for that vaccine but do not code for an office visit. However, an exception to the foregoing rule may be made if the time spent in counseling far exceeds what you would normally spend.

The public’s fear of autism caused by vaccines continues, and physicians are spending significantly more time explaining the value of vaccines and trying to dispel parents’ fears. In such a situation, use the CPT code 99211 and remember to document in your notes the extra work involved. If after you have spoken with the parents, they still refuse the vaccine, use the code 99211 and the ICD-9 diagnosis code v64.06.

Keeping a watchful eye on charges made and monies received. Even if you have employed the correct CPT codes, you must still determine whether you have been paid correctly. Regularly review your explanation of benefits to determine its accuracy. Did the MCO pay your contracted amount? Or did they pay too much, too little, or not at all? Have you stayed current regarding the amount you are charged by the vaccine manufacturers?

One effective method for tracking charges is to employ a grid for every vaccine given, listing the CPT code, the purchase price, and the amount of money received from all the major MCOs. Review this information quarterly.


REFERENCES:1. Centers for Disease Control and Prevention. Active Bacterial Core Surveillance (ABCs) Report, Emerging Infections Program Network: Streptococcus pneumoniae, 2005. Accessed August 18, 2008.
2. Centers for Disease Control and Prevention. Active Bacterial Core Surveillance (ABCs) Report, Emerging Infections Program Network: Neisseria meningitidis, 2006. Accessed August 18, 2008.
3. Center for Food Safety and Applied Nutrition. Hepatitis A virus. In: Foodborne Pathogenic Microorganisms and Natural Toxins Handbook. Accessed August 18, 2008.
4. McNabb SJN, Jajosky RA, Hall-Baker PA, et al. Summary of notifiable diseases-United States, 2005. MMWR. 2007;54:2-92.
5. Geier DA, King PG, Geier MR. Influenza vaccine: review of effectiveness of the US immunization program and policy considerations. J Am Phys Surg. 2006;11:69-74.
6. Ehreth J. The global value of vaccination. Vaccine. 2003;21:596-600.
7. Committee on Child Health Financing. Highdeductible health plans and the new risks of consumer- driven health insurance products. Pediatrics. 2007;119:622-626.
8. Brunell PA, moderator. Roundtable: Pediatric practitioners feeling the squeeze. Inf Dis Children. Jan 2007. http://www/; Brunell PA, moderator. Roundtable: Experts propose solutions to the vaccine reimbursement issue. Inf Dis Children. Feb 2007. http://www/ Accessed August 19, 2008.