Medicare Conferees Near Agreement on Prescription Drug Benefit, Means-Testing Proposal

Negotiators attempting to reconcile the House and Senate Medicare bills (HR 1 and S 1) are focusing their discussions on the proposed prescription drug benefit and are considering an option that would have the federal government pay 75% of beneficiaries' drug costs up to $2,200 per year, the Wall Street Journal reports. Beneficiaries whose drug costs exceed the $2,200 annual cap would pay out-of-pocket for their drug costs until about $3,700, when catastrophic coverage would begin. Although lawmakers have yet to make a final decision on the drug benefit structure, the general design seems likely to "lean heavily toward" the coverage proposed in the House bill, the Journal reports (Lueck/Rogers, Wall Street Journal, 10/17). Under the House bill, beneficiaries would have access to a stand-alone drug benefit for which they would pay an estimated average $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 at $4,900 a year -- or $3,500 out-of-pocket -- for most beneficiaries (California Healthline, 6/27). The Senate bill calls for the government to pay 50% of beneficiaries' drug costs up to $4,500 and calls for beneficiaries with annual incomes below 160% of the federal poverty level to receive subsidies for the drug coverage. The House bill also includes subsidies, but they would be much smaller than the ones proposed in the Senate bill. The Journal reports that if lawmakers decide to adopt the current proposal, "it would raise the stakes for senators to protect these subsides" (Wall Street Journal, 10/17).

Conferees reported progress on a number of major issues this week. On Thursday conferees discussed whether to include a $174 billion House-passed provision that would create tax-preferred health savings accounts and whether the federal government should administer Medicare drug coverage in areas where not enough private plans participate (Rovner/Heil, CongressDaily/AM, 10/17). They also this week reached "some agreements" on how to boost participation of private health plans in Medicare and how they would be paid, the Washington Times reports. However, lawmakers have yet to decide some issues, including whether private health plans will begin to compete with traditional Medicare in 2010. Lawmakers also continue to discuss relating premiums for Medicare Part B, which covers outpatient services, to beneficiaries' income. There is "general support" on the idea of charging wealthier beneficiaries higher premiums for Part B, although no details on the proposed plan have been finalized, according to the Times. A House Republican leadership aide said that conferees' anticipated plan regarding means testing will be praised by House Republican leaders as "a good sign that the final measure is moving in their direction," the Times reports. Sen. Edward Kennedy (D-Mass.), who opposes the idea of means testing and had threatened to filibuster the final Medicare bill if it includes such a plan, said he "is reserving all judgments" until he sees a final package (Fagan, Washington Times, 10/17). House Minority Leader Nancy Pelosi (D-Calif.) said in a statement, "We should hold down costs by letting the government negotiate lower drug prices -- not by charging seniors more for the benefits they need and deserve" (Rovner, CongressDaily, 10/16). Supporters of income relating say the change would be fair, as long as Medicare benefits remain universal, according to the Christian Science Monitor (Francis, Christian Science Monitor, 10/17).

Despite the fact that negotiators are not likely to meet the self-imposed deadline for a final agreement of Oct. 17, many said that they have "made steady progress on the bill" and that the deadline was "effective in moving things along," the Times reports (Washington Times, 10/17). Lawmakers are "more optimistic than ever that they can reach a compromise," and negotiations so far have "produced a rough map" that will help resolve differences between the two bills, Gannett/Detroit News reports. Senate Finance Committee Chair Charles Grassley (R-Iowa) added that he is not worried that conferees missed Friday's deadline because progress thus far has been "demonstrable," Gannett/News reports (Frandsen, Gannett/Detroit News, 10/17). Sen. Max Baucus (D-Mont.) said that negotiators are "moving closer to agreement," but no final decisions have been made. Sen. Orrin Hatch (R-Utah) added that conferees hope to have a broad outline sketched by Friday, but he said that they "still have a long way to go" (CongressDaily/AM, 10/17). Karen Ignagni, president of the American Association of Health Plans, said that there are "some very difficult issues [lawmakers] have yet to figure out," but she added that the some of the traditional ideological barriers among lawmakers have been overshadowed by the repercussions of failing to pass a final bill (Gannett/Detroit News, 10/17). Many lawmakers and observers say that the best estimate for a final agreement is late next week, the Journal reports (Wall Street Journal, 10/17). It is unclear whether negotiators will make a formal announcement on Friday regarding progress, CongressDaily/AM reports (CongressDaily/AM, 10/17).

Some conservative lawmakers have begun expressing concern that the cost of the proposed drug benefit will go beyond the $400 billion over 10 years called for in the fiscal year 2004 budget, the Times reports (Washington Times, 10/17). The Congressional Budget Office estimates that the Senate version would actually cost $432 billion over 10 years and that the House version would end up costing $425 billion over 10 years (Christian Science Monitor, 10/17). Grassley said this week that he is "willing" to consider including a cost-containment provision in the Medicare bill because the current legislation "looks too open-ended for some people to vote for it" (Washington Times, 10/17). For instance, some House Republicans are advocating a provision that would implement a system to more closely monitor Medicare spending and include "alarms or legislative triggers that would force congressional action if Medicare begins to draw above a fixed threshold of general revenue," the Journal reports (Wall Street Journal, 10/17). Sen. John Breaux (D-La.) said that conferees have addressed such measures only in "general terms" and that discussions on the issue "had barely begun" (Espo, AP/Dallas Morning News, 10/16). Another proposed plan to control costs is to create a copayment for home health care, currently one of the few services for which Medicare beneficiaries do not have to pay. Under a proposal negotiators are considering, Medicare beneficiaries would have to pay a $40 to $45 copay for each 60-day period in which they receive home health care services (Christian Science Monitor, 10/17).

Analysts speaking Thursday at a briefing by the Congressional Black Caucus Foundation said that all lower-income Medicare beneficiaries, and particularly black beneficiaries, "could suffer severely" from some aspects of both the House and Senate Medicare bills, CongressDaily reports. A study by the Center for Studying Health System Change found that blacks are more than twice as likely as whites to be eligible for both Medicare and Medicaid and thus would be particularly affected by proposals to exclude these so-called "dual eligibles" from the proposed drug benefit. Conferees have "tentatively" agreed to gradually transfer drug costs of dual eligibles from Medicaid to Medicare, CongressDaily reports. Jeanne Lambrew, a former Clinton administration health official and a professor at George Washington University, said that provisions in the Senate bill that would require copayments for outpatient laboratory services and a proposal that would relate Part B premiums to beneficiaries' income "could have serious implications" for blacks, who are less likely than whites to have supplemental insurance to offset that cost increase (CongressDaily, 10/17).

• CNN's "Inside Politics" on Thursday reported on lawmakers' consideration of relating Medicare premiums to beneficiaries' income. The segment includes comments from Democratic presidential candidates former Vermont Gov. Howard Dean, Rep. Dick Gephardt (Mo.) and Sen. John Kerry (Mass.) and House Minority Leader Nancy Pelosi (D-Calif.) (Schneider, "Inside Politics," CNN, 10/16). The full transcript of the program is available online.
  
  
• NBC's "Nightly News" on Thursday also reported on the proposal. The segment includes comments from Sens. John Breaux (D-La.) and Edward Kennedy (D-Mass.) and Robert Greenstein, executive director of the Center on Budget and Policy Priorities (Reid, "Nightly News," NBC, 10/16). The full segment is available online in RealPlayer.