Medicare Negotiators Reach Agreement on Structure of Proposed Prescription Drug Benefit
Negotiators working to reconcile the House and Senate Medicare bills (HR 1 and S 1) on Wednesday said they have reached an agreement on the structure of a Medicare prescription drug benefit, the New York Times reports. Under the tentative plan, the federal government would pay 75% of beneficiaries' drug costs up to $2,200 per year. Beneficiaries would pay a $275 deductible and average monthly premiums of $35. Beneficiaries whose drug costs exceed the $2,200 annual cap would pay out of pocket from that point until their drug costs reached about $3,600, when catastrophic coverage would begin. After that point, the beneficiaries would have to pay 5% of the cost of each prescription or a copayment of $5 to $10 for each prescription. Beneficiaries with incomes below 135% of the federal poverty level would not have to pay the premiums or deductible but would make a $2 copay for each generic drug and $5 for each brand-name drug until their overall drug costs reached $5,000; Medicare would fully cover drug costs after that point. Beneficiaries with incomes between 135% and 150% of the poverty level would pay a $50 deductible, reduced premiums based on a sliding scale related to income and 15% of the cost of each prescription until their out-of-pocket costs reached $3,600. Beneficiaries with assets of more than $10,000 would not be eligible for subsidies, regardless of their income level. According to the Times, the plan would provide drug benefits to 10 million beneficiaries who currently lack such coverage and would ease prescription costs for many others. However, the proposed drug benefit would provide less coverage than what privately-insured workers under age 65 typically receive, according to documents prepared by conferees.
The agreement on the structure of the drug benefit "signal[s] new momentum for the Medicare bill," the Times reports (Pear, New York Times, 10/23). In addition to the drug benefit, conferees have reached "tentative agreements" on a number of other key issues, including requiring the federal government to administer Medicare drug coverage in areas where fewer than two private plans decide to participate; requiring Medicare to cover drug costs of people eligible for both Medicare and Medicaid; boosting payments to health care providers, particularly those in rural areas; relating premiums under Medicare Part B, which covers outpatient services, to beneficiaries' incomes, although exact income levels have yet to be determined; creating a payment system that would entice private managed care networks to enter the market by rewarding them as their market share increased; giving subsidies to employers to encourage them to retain retiree drug benefits; and expanding use of health savings accounts for individuals (Kenen, Reuters/Boston Globe, 10/22).
Negotiators on Wednesday also debated proposed cuts in Medicare payments to hospitals and a plan that would provide $6 billion to $20 billion in subsidies to private insurers to encourage them to participate in Medicare in certain regions (Espo, AP/Las Vegas Sun, 10/22). Negotiators are still debating how to ensure that the cost of the drug benefit does not exceed $400 billion over 10 years, whether to offer new tax breaks to encourage people to establish savings accounts for medical expenses and how to deter employers from eliminating their retiree health coverage if a Medicare drug benefit is passed (New York Times, 10/23). Conferees also "have yet to make significant progress" on the issue of allowing U.S. residents to purchase prescription drugs from Canada and other countries, but lawmakers said that provision would be addressed soon, CongressDaily reports (Wegner/Heil, CongressDaily, 10/22).
According to CongressDaily/AM, conferees are now following a framework for an agreement drafted by Rep. Bill Thomas (R-Calif.), chair of the conference committee (Rovner/Heil, CongressDaily/AM, 10/23). That proposal, presented to a small group of negotiators on Tuesday, reportedly is more similar to the House bill than the Senate version and includes a provision that would require fee-for-service Medicare to compete directly with private health plans beginning in 2010; a provision calling for Congress to intervene in Medicare spending increases; a provision that would allow health savings accounts; and a provision that would reduce by several billion dollars planned federal payments to hospitals. The framework also reportedly includes the provision regarding relating Medicare Part B premiums to beneficiaries' incomes (California Healthline, 10/22). The draft also "spell[s] out a relatively small number of important issues on which negotiators have reached loose consensus," including the requirement that the government administer drug coverage in certain cases, the Washington Post reports (Goldstein, Washington Post, 10/23). Reaching "agreement on Thomas' plan may prove difficult" because of disagreement among negotiators concerning the House-passed competition provision, CongressDaily reports (CongressDaily, 10/22).
The competition provision is one of the key "sticking points" that could "derail the bill or provoke a Democratic filibuster in the Senate," according to the Times (New York Times, 10/23). 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. 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 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, 10/22). Sen. Bill Nelson (D-Fla.) said that the competition provision is a "deal breaker" (New York Times, 10/23). Sen. John Breaux (D-La.) warned Republicans that some parts of the provision could collapse the Medicare bill like "too many bricks in a boat" (Rogers et al., Wall Street Journal, 10/23). Lawmakers seeking a compromise hope to convince conservatives that a pilot project and a modified private plan payment system would constitute "adequate reform," Reuters/Globe reports (Reuters/Boston Globe, 10/22). Lawmakers are considering one option that would require a greater market presence of private plans before instituting competition with traditional Medicare (Wall Street Journal, 10/23).
Howard Phanstiel, the CEO of PacifiCare, which operates Secure Horizons, one of the nation's largest Medicare managed care plans, on Wednesday told participants at an American Association of Health Plans conference that he has "serious doubts about the viability" of proposals to encourage more private health plans to participate in Medicare, CongressDaily reports. Phanstiel said his firm and other companies will "have no choice but to get more involved in the Medicare market," as the baby boom generation becomes eligible for Medicare, CongressDaily reports. But he added that "it's going to be difficult," both fiscally and managerially. He added that PacifiCare already offers a stand-alone drug benefit, which is the proposed method for providing the drug benefit, but "constraints" Congress might enact could prevent PacifiCare from participating in the drug benefit, CongressDaily reports (Rovner, CongressDaily, 10/22).
Republicans on Wednesday set a new deadline for conferees to reach agreement on a compromise bill, the St. Petersburg Times reports. "We set a 'glide slope' so we can have decisions by" Friday, House Speaker Dennis Hastert (R-Ill.) said. CMS Administrator Tom Scully also expressed optimism that an agreement would be reached soon while speaking at an AAHP meeting. Conferees have settled about 80% of the differences between the Senate- and House-passed bills, he said, adding that "[t]here's a 95% chance a bill is going to happen" (Fritz, St. Petersburg Times, 10/23). Sen. Charles Grassley (R-Iowa) said, "We now have on paper things that we've been talking about for weeks." Aides to Hastert and Senate Majority Leader Bill Frist (R-Tenn.) said that although they do not expect all the bill's details to be decided by Friday, they hope to have a compromise "in firm enough shape" to begin briefing other lawmakers and begin a final budget analysis (Reuters/Boston Globe, 10/22). Any bill cannot be finalized by the conferees until it is reviewed by the Congressional Budget Office (St. Petersburg Times, 10/23). Lawmakers' goal is to gain final approval of the bill by both the House and Senate in early to mid-November (Reuters/Boston Globe, 10/22). Senate Democrats have scheduled a closed-door meeting Thursday to review the negotiations thus far, and Senate Minority Leader Tom Daschle (D-S.D.) in a news conference Thursday is expected to release a letter to President Bush outlining conditions for a final bill to receive bipartisan support. The letter reportedly calls for a "rejection of 'caps or other arbitrary limits' on Medicare spending," according to one official, the AP/Sun reports. Other officials said that if negotiators fail to reach a compromise on major issues soon, Hastert and Frist "would step in more forcefully," according to the AP/Sun (AP/Las Vegas Sun, 10/22). Thus far, it is "unclear whether the final product will attract bipartisan support," the Times reports. In interviews with the Times on Wednesday, Sens. Jeff Bingaman (D-N.M), Kent Conrad (D-N.D.), Ben Nelson (D-Neb.) and Bill Nelson -- who voted for the Senate Medicare bill in June -- "voiced reservations about the work of the conference committee," particularly the House-passed competition provision, according to the Times (New York Times, 10/23).
The federal government is spending $600,000 this year to fly a blimp over sporting events to promote Medicare, the AP/St. Petersburg Times reports. The blimp, which already has flown over football games, state fairs and other events, features a likeness of the American flag and lettering advertising the 1-800-Medicare telephone number that the public can call to learn about benefits. It is part of a $30 million advertising campaign to increase awareness of Medicare among beneficiaries (AP/St. Petersburg Times, 10/23).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.