Medicare Conferees Reject Health Savings Security Accounts
Negotiators attempting to reconcile the House and Senate Medicare bills (HR 1 and S 1) have decided not to include a House-passed provision that would have given tax breaks to U.S. residents who set up Health Savings Security Accounts, the Washington Post reports (Goldstein, Washington Post, 10/28). The provision would have allowed the creation of two types of savings accounts that people enrolled in private health plans could use to accrue money tax-free to pay for some medical expenses, including medical treatment, medications and long-term care services or coverage. Under the provision, individuals with health insurance deductibles of at least $1,000 and families with deductibles of at least $2,000 could use Health Savings Accounts, and individuals with $500 deductibles and families with $1,000 deductibles could use Health Savings Security Accounts. The proposal reportedly would have cost an estimated $174 billion (California Healthline, 8/8). Conferees "in recent days abandoned" the more expensive of the two accounts, the HSSAs, which would have cost an estimated $163 million, the Post reports. They have not eliminated the possibility of allowing the less-expensive health savings accounts (Washington Post, 10/28).
The House has included similar provisions each time it has passed a Medicare reform bill, but the accounts called for in this year's Medicare bill would be "more generous" and would include more people, according to the Post. Congress in 1997 approved a plan to try the accounts during a four-year period. However, the accounts "attracted fewer people than predicted," and most of them already had health insurance, the Post reports. Proponents of such plans say they would give people "greater control over their health care and incentives to seek only medical services they need," according to the Post. Critics counter that the proposed accounts primarily would benefit wealthier people who have enough money to create the accounts and would remove them from the traditional health insurance coverage. Health plans then would be left with mostly lower-income and sicker individuals, ultimately driving up costs, according to the Post (Washington Post, 10/28). Many Senate Democrats say that the $174 billion cost of the program would be better used to make the proposed Medicare drug benefit more comprehensive (California Healthline, 8/8). Some House conservatives have said they would consider voting against the final bill if a health savings account provision is not included (California Healthline, 8/14). However, some of those lawmakers on Monday did not say whether negotiators' action to reject HSSAs "would cost their support" for a final Medicare bill, the Post reports (Washington Post, 10/28).
Lawmakers have agreed on a basic structure for a Medicare drug benefit and some other issues, but they have been "unable to agree on sweeping changes in the overall structure of Medicare," the New York Times reports (Pear, New York Times, 10/28). The "most polarizing" issue yet to be resolved by negotiators is the House-passed competition provision, according to the Post (Washington Post, 10/28). The provision calls for premiums under traditional Medicare to be determined by competition with private plans, rather than by a fixed formula. According to some Democrats, such a proposal would cause fee-for-service Medicare premiums to rise and would prompt healthier beneficiaries to join private plans, leaving beneficiaries who are sicker in traditional Medicare (California Healthline, 10/23). However, some Republicans say that the provision would save money and "give beneficiaries more choices," the Times reports (New York Times, 10/28). A recent analysis by the HHS Medicare actuary found that the proposal could result in beneficiaries in different parts of the United States paying sharply different premiums. Beneficiaries now pay the same premiums. According to the Medicare actuary, beneficiaries in North Carolina and Oregon would pay as little as $58 per month in 2013 under traditional, fee-for-service Medicare, while beneficiaries in states like New York and Florida could pay as much as $175 per month. According to the actuary, premiums also could vary within each state. The projected national average premium under traditional Medicare in 2013 is $107 per month (California Healthline, 10/23). Sen. Max Baucus (D-Mont.), a conference committee member, said the variations in premiums between different parts of the United States and within regions is "a huge problem." Sen. Charles Grassley (R-Iowa), also a conference committee member, said the apparent variation in premiums resulting from the competition provision is "one of the impediments to getting something done" on that provision (New York Times, 10/28).
Rep. Billy Tauzin (R-La.) said negotiators are considering "a number of different models" for keeping the cost of the Medicare legislation under $400 billion over 10 years, the limit adopted by lawmakers in the fiscal year 2004 budget. Grassley said that Congress should adopt strong cost-control measures if the Medicare spending growth rate rises above a certain point, perhaps by raising premiums, changing the proposed drug benefit or raising payroll taxes (Heil, CongressDaily/AM, 10/28). He added that some type of cost controls would be necessary to get a bill passed in the House. However, because the Senate likely would not accept strict cost-control measures, Grassley said he fears that conferees will include only a "fig leaf, so people can say we are doing something to control costs." Conferees simply might end up agreeing that Congress should "decide how to respond" if and when Medicare spending exceeds a certain amount in the future, the Times reports (New York Times, 10/28).
Conferees on Monday also discussed implementing a "graduated premium structure" under which higher-income beneficiaries would have to pay higher premiums under Medicare Part B, which covers outpatient services, the Wall Street Journal reports. Currently, all beneficiaries pay the same rate each month to cover 25% of costs for Part B. Under the structure of graduated increases, beneficiaries with annual incomes between $80,000 and $100,000 would pay 35% of the costs; beneficiaries with incomes between $100,000 and $150,000 would pay 50% of the costs; beneficiaries with incomes between $150,000 and $200,000 would pay 65% of the government's costs; and beneficiaries with incomes exceeding $200,000 would pay 80% of the costs. The graduated structure, which would affect about 2.3 million beneficiaries if enacted, would likely not take effect until 2007, because the new drug benefit would not take effect until 2006. Even then, it might be phased in over several years, according to the Journal. The Journal reports that the "biggest stumbling block" to implementing the proposed premium structure is deciding how to administer it and which federal agency should do so. Both the Social Security Administration and the Internal Revenue Service could administer the new structure. But some Republicans fear that that the higher premiums could be viewed as tax increases if the structure is administered by the IRS (Rogers, Wall Street Journal, 10/28).
As conferees continue to debate the major issues, the Bush administration is beginning to raise its profile in the negotiations, CongressDaily/AM reports. On Monday, White House Budget Director Josh Bolten attended the conference committee negotiations to discuss cost containment, according to Grassley (CongressDaily/AM, 10/28). In addition, President Bush is expected to ask Congress to "move forward on [the] priority" of creating a prescription drug benefit during remarks on Wednesday in the Rose Garden (Kemper/Chen, Los Angeles Times, 10/28). The Post reports that Bush also hopes to "inject momentum" into discussions over cost-containment strategies (Washington Post, 10/28). Senate Majority Leader Bill Frist (R-Tenn.) said that conferees are "on track" to complete work on the legislation by midweek, but he indicated that "there are no hard and fast deadlines for a conference report," CongressDaily reports. HHS Secretary Tommy Thompson said, "We have a ways to go" (CongressDaily, 10/27).
The AP/Fort Worth Star-Telegram on Monday looked at pollsters' opinions on the effect that passage of the Medicare legislation could have on the Republican party. Some Republican pollsters have said that Congress' approval of a Medicare prescription drug benefit could result in a "political windfall" for Bush and other Republicans in the 2004 elections, according to the AP/Star-Telegram. Republican pollster Linda DiVall, president of American Viewpoint, said, "When you're looking at the fact that the Republicans control the government, the Medicare issue becomes a governance issue." She added that passage of the legislation would give the Republican party the chance to "provide a benefit that people would be pleasantly surprised came from Republicans." But Celinda Lake, a Democratic pollster who called the current legislation "bad," said, "If they pass something that's bad, then, they're going to pay a very high price" (Espo, AP/Fort Worth Star-Telegram, 10/27).
CNN's "Lou Dobbs Tonight" on Monday interviewed Sen. Olympia Snowe (R-Maine) about a letter to Medicare conferees she and Sens. Ron Wyden (D-Ore.) and Arlen Specter (R-Pa.) signed. Snowe said that she supports keeping the cost of a Medicare prescription drug benefit at $400 billion over 10 years. She added that the "untested, unproven" House-passed competition provision would "ill serve senior citizens." Snowe said, "The right policy is an imperative here so that we're not experimenting with new proposals that basically are ideological ventures that will affect the quality of health care that is given to seniors in future years. So we have to get it right on the prescription drug side but also in the Medicare side," adding that the purpose of the letter is not to threaten to filibuster the legislation (Dobbs, "Lou Dobbs Tonight," CNN, 10/27). The full transcript of the program is available online.This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.