House Energy and Commerce Committee Approves Medicare Reform Bill

The House Energy and Commerce Committee yesterday voted 29-20 to approve a Medicare reform bill, the Washington Post reports. The vote follows a three-day markup session during which the committee rejected several Democratic amendments that would have increased drug coverage and the role of traditional Medicare in offering a drug benefit (Goldstein/Dewar, Washington Post, 6/20). The House plan calls for beneficiaries beginning in 2006 to have access to a stand-alone drug benefit for which they would pay a $35 monthly premium and a $250 annual deductible. The plan would cover 80% of beneficiaries' drug costs from $251 to $2,000 per year, after which there would be a gap in coverage before catastrophic coverage would take effect. The amount that a beneficiary would pay before qualifying for catastrophic coverage would be determined on a sliding scale based on income. Individual beneficiaries with annual incomes of $60,000 or more would have to pay more before catastrophic coverage began. Most beneficiaries would qualify for catastrophic coverage after spending $3,500 out of pocket per year. The bill would raise the deductible beneficiaries pay for physician services and would include new preventive care coverage options, such as a free physical for each beneficiary. The bill also would establish direct price competition between traditional Medicare and private health plans beginning in 2010 (California Healthline, 6/19). The Energy and Commerce Medicare bill is virtually similar to the one passed by the House Ways and Means Committee. However, the Energy and Commerce plan would not require a new copayment for Medicare beneficiaries who use home health services, the Post reports (Washington Post, 6/20). The Energy and Commerce Committee also adopted an amendment by Rep. Richard Burr (R-N.C.) that would create a drug discount card in 2004. The card would give larger subsidies to low-income beneficiaries, as well as tax deductions for employers, relatives or friends who provide funds for the card. The cards would remain in effect until the federal drug benefit began in 2006 but could continue to be available in areas where no private health plan offered a drug benefit (California Healthline, 6/19). House Majority Leader Tom DeLay (R-Texas) yesterday said he expects the Medicare reform bill to reach the House floor sometime next week, CongressDaily/AM reports (Rovner, CongressDaily/AM, 6/20).

Continuing to address amendments to the Senate's Medicare reform bill (S 1), senators yesterday voted 56-39 to defeat a Democrat-backed amendment that would have limited the amount drug coverage premiums could increase in a given year, the New York Times reports (Pear/Toner, New York Times, 6/20). The bill, which the Finance Committee approved last week, would increase the participation of private plans and give all beneficiaries an equal drug benefit beginning in 2006. Beneficiaries would pay a $275 annual deductible and an estimated $35 average monthly premium for the drug coverage, which they could obtain by remaining in traditional Medicare and enrolling in a stand-alone private drug plan or by choosing a new coverage option called "Medicare Advantage." Either way, beneficiaries would pay half of their annual drug costs from $276 to $4,500 and all drug costs between $4,501 and approximately $5,800. After about $5,800, beneficiaries would be required to cover 10% of their drug costs, with Medicare paying the remainder. Under the new coverage option, private plans would offer coverage for catastrophic health expenses and preventive care services in addition to the required Medicare benefits, giving beneficiaries an incentive to move out of traditional Medicare and into a private plan. The government itself would provide a drug benefit through a contractor only in areas in which drug-only health plans decide not to participate (California Healthline, 6/19). The defeated amendment, proposed by Majority Leader Tom Daschle (D-S.D.), would have allowed the private drug coverage premiums to increase no more than 10% of their average cost nationwide in any given year, the Post reports. Under the amendment, monthly drug premiums would have began at $35 (Washington Post, 6/20). Daschle said that he was concerned about "the unpredictability and volatility of premiums." However, Sen. Craig Thomas (R-Wyo.) said that beneficiaries would "shun health plans that charged excessive premiums," the Times reports (New York Times, 6/20).

The Senate also voted 95-0 to approve an amendment that would allow local pharmacies -- as well as mail-order companies -- to handle long-term prescriptions under the new drug benefit, the Post reports (Washington Post, 6/20). Under the amendment, proposed by Sens. Michael Enzi (R-Wyo.) and Jack Reed (D-R.I.), pharmacy benefit managers would not be allowed to require beneficiaries to obtain long-term prescriptions only from mail-order companies. The amendment would also require PBMs to disclose to the government any discounts they negotiate with drug companies and pass those discounts to consumers (CongressDaily/AM, 6/20). Beneficiaries would have to make up any of the cost difference between local pharmacies and mail-order companies on long-term prescriptions, the Post reports. The Senate also approved on a 94-1 vote an amendment that would ease market entry of generic drugs (Washington Post, 6/20). See related story for more on the generic drug amendment.

Twenty-seven Republican senators, including Sens. Judd Gregg (N.H.), Rick Santorum (Pa.), Trent Lott (Miss.) and Don Nickles (Okla.), yesterday sent a letter to President Bush saying that Medicare reform should encourage more competition among health plans, the Times reports. They said, "We must move away from a Medicare-style price control structure that stifles quality and innovation, not impose these old ideas on an expanded and reformed system" (New York Times, 6/20). The letter says that it is "vital" that the Medicare legislation "improve the fiscal sustainability of the program for both present and future generations" (CongressDaily/AM, 6/20). The letter also said that the Medicare legislation must "preserve, and not undermine, current employer-sponsored retiree health plans." In addition, the letter urged the administration to use its influence in future reconciliation negotiations between the House and Senate to increase Medicare's dependence on the private marketplace, according to the Times.

In an Office of Management and Budget Statement of Administration Policy yesterday, the Bush administration said that while it supports the passage of the Senate Medicare bill, it opposes several provisions. The statement says that the administration is against an amendment that would reverse portions of the 1996 welfare reform law that prohibits many documented immigrants from receiving Medicaid coverage for five years following their immigration, CongressDaily reports. The amendment, by Sen. Bob Graham (D-Fla.), would lift the five-year restriction for fiscal years 2005 though 2007 for legal immigrant children and pregnant women (Koffler, CongressDaily, 6/19). Daschle said, "Everyone who is legally residing in this country ought to have the same opportunity for benefits" (Fagan, Washington Times, 6/20). However, the OMB statement says, "These provisions contradict current welfare reform policy and should not be undone in Medicare reform legislation" (Davies, Miami Herald, 6/20). The statement continues, "The administration has proposed substantial new state flexibility as part of Medicaid and SCHIP reform, and coverage for legal immigrants should be examined in that context" (CongressDaily, 6/19). The OMB statement also criticizes a provision in the Senate bill that would require the federal government to provide a drug benefit in areas where private insurers do not offer such coverage, the Times reports. According to the statement, "The 'fallback' provisions are a government-run delivery system for prescription drugs which could lead to government pricing of individual drugs and government regulation of the availability of certain prescription drugs" (New York Times, 6/20). The statement also says that the administration is opposed to provisions that would increase payments for "clinical psychologists, demonstrations related to chiropractic care [and] Medicaid disproportionate share hospitals, among others." The release says that "drug coverage will work best if it is integrated into a comprehensive package of medical benefits, which more closely resembles products found in the private market today. To assure that this new option is both stable and viable, the government contribution to Medicare Advantage plans should be based on market principles. The administration will work with the Senate to this end" (CongressDaily, 6/19).

Before the Senate and House Medicare reform bills reach conference committee, Sen. Judd Gregg (R-N.H.) said that he expects several Republican-backed amendments will be introduced to the Senate bill, including one that would address Medicare beneficiaries with "very low incomes and very high drugs costs" and one that would increase premiums for beneficiaries with high incomes, CongressDaily/AM reports (CongressDaily/AM, 6/20). Once the House and Senate bills reach conference committee, Senate Finance Committee Chair Charles Grassley (R-Iowa) predicted "strong Senate resistance" to the House Medicare provision that calls for direct competition between traditional Medicare and private plans beginning in 2010, CongressDaily reports. Grassley added that because the House and Senate bills contain several differences, the conference committee is "going to take a period of time" to reach a consensus. He added that while it would be "nice" if the conference committee agreed on a compromise bill by the end of July, it is more important to have a "good product" than to meet "some artificial date." According to CongressDaily, the Bush administration would likely side with the Senate in a conference committee over the House Medicare bill competition provision (Koffler/Rovner, CongressDaily, 6/19).

The following broadcast programs reported on the proposed Medicare reforms:

• C-SPAN's "Washington Journal": The program interviews Sen. Edward Kennedy (D-Mass.) about the reforms ("Washington Journal," C-SPAN, 6/20). The full segment will be available in RealPlayer after the broadcast online.
  
  
• NPR's "All Things Considered": NPR's Julie Rovner discusses progress on the Senate and House Medicare reform bills (Rovner, "All Things Considered," NPR, 6/19). The full segment is available in RealPlayer online.
  
  
• NPR's "Talk of the Nation": Guests on the program included Joe Antos, a scholar in health care and retirement policy at the American Enterprise Institute; Urban Institute senior fellow Marilyn Moon; CMS Administrator Tom Scully; and NPR health policy correspondent Joanne Silberner (Conan, "Talk of the Nation," NPR, 6/19). The full segment is available in RealPlayer online. Expanded NPR coverage of the debate over adding a prescription drug benefit to Medicare is available online.

• PBS' "Frontline": A documentary on the cost of prescription drugs titled, "The Other Drug War," addresses efforts in Maine and Oregon to control drug costs and examine why prescription drugs are "so expensive to begin with" and whether costs can be controlled without compromising drug research and development. The program's Web site includes extended interviews with health care economists and pharmaceutical industry executives, including the CEOs of Eli Lilly and Merck; answers to frequently asked questions about the cost of prescription drugs; and a background report on the experiences of Maine and Oregon (PBS release, 6/17). Complete video of the entire program in both RealPlayer and Windows Media will be available online on Saturday at http://www.pbs.org/wgbh/pages/frontline/shows/other/. In addition, program producer Jon Palfreman participated in a live online discussion on Washingtonpost.com at http://discuss.washingtonpost.com/zforum/03/r_tv_frontline062003.htm on June 20.