New Grassley Proposal Would Limit Medicaid Cuts With Medicare Reductions

A proposal by Senate Finance Committee Chair Chuck Grassley (R-Iowa) would reduce Medicare payments to private insurance plans and home health agencies, while making "only small cuts to Medicaid," CQ Today reports. Grassley's proposal would reduce mandatory spending by $12 billion over five years -- $2 billion more in cuts than the committee was required to make as part of the fiscal year 2006 budget resolution. According to sources familiar with the negotiations, Grassley is considering proposals that would:

Reduce payments to hospitals for outpatient care, for savings of $400 million;

Reduce from 100% to 75% the amount of bad debt that skilled nursing facilities can write off, for savings of $500 million;

Freeze the home health care market basket, for $2.1 billion in savings over five years;

Eliminate an incentive fund for insurers to participate in the new Medicare prescription drug benefit for savings of $6.8 billion over five years;

Create pay for performance guidelines for Medicare providers;

Boost payments to rural hospitals and home health agencies;

Adopt the Bush administration's "risk adjustment proposal" that would give higher payments to insurers covering sicker patients and lower payments to insurers that enroll healthier patients to save $5.4 billion over five years;

Extend a cap on coverage for therapy services; and

Freeze Medicare physician payments for one year, averting a scheduled 4.3% payment reduction in 2006, for a cost of $6.6 billion over five years.

Medicaid Changes

Concerning Medicaid, Grassley's spending package would:

Base Medicaid payments for prescription drugs on the "average manufacturer's price," which equals the average of actual sale prices including most manufacturer discounts, for a projected savings of to save $5 billion over five years;

Tighten asset transfers by some people to qualify for Medicaid nursing home care coverage, for a projected savings of $1.5 billion to $2 billion;

Require pharmaceutical companies to provide about $1.5 billion in additional drug rebates over the next five years; and

Tax managed care plans to generate $1 billion.

Grassley also has said he intends to include in the budget reconciliation the bill (S 1716) he is co-sponsoring that would extend Medicaid benefits to hurricane survivors and another measure (S 183) that would allow families of disabled children with annual incomes up to 300% of the federal poverty level to buy into Medicaid, CQ Today reports. Those programs would cost an estimated $6.1 billion and $3 billion over five years, respectively. If the proposals become part of the reconciliation bill, they would be guaranteed a floor vote. However, Grassley "may have a difficult time gaining a committee consensus" on the Medicare and Medicaid proposals, though sources familiar with the bill have characterized it as "fluid with staff negotiations continuing," according to CQ Today.

Energy and Commerce Changes to Medicaid

According to CQ Today, the House Energy and Commerce Committee also is considering an adjustment to Medicaid prescription drug payments that is similar to what the Finance Committee has proposed. The committee also is considering allowing states to:

Increase Medicaid beneficiaries' cost-sharing, for a savings of $2 billion;

Alter Medicaid benefits packages; and

Establish health savings accounts for Medicaid beneficiaries.

The committee reportedly also would require states to verify applicants' eligibility for Medicaid or risk a reduction in federal funding (Carey, CQ Today, 10/13). 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.