Proposed Private Health Plan Subsidies in Medicare Bills Could Lead to Regional Disparities in Program
Subsidies to private health plans and rebates to seniors, as proposed in the House and Senate Medicare bills (HR 1 and S 1), could result in beneficiaries' paying "substantially different" premiums in different regions, according to an internal Bush administration assessment of the plan, the Wall Street Journal reports. Under a Republican-backed proposal to encourage more Medicare beneficiaries to join private health plans, all private plans would receive government financial support greater than that provided to the traditional Medicare fee-for-service program. Federal payments to private plans would vary, with some plans receiving only slightly more than traditional Medicare and other plans receiving as much as 15% more. The Bush administration assessment is based on an assumption that under the plan, the nation would be split into 15 Medicare "service regions," according to the Journal. Under both the House and Senate bills, private plans beginning in 2006 would be invited to bid against a selected "benchmark" related to local Medicare fee-for-service payments. The administration assessment predicts that the benchmarks would be between 8% and 9% above the fee-for-service rates on average and that federal payments could vary among regions from 1.4% to 15% above fee-for-service rates. Subsidies would be given to beneficiaries in the form of rebates to encourage them to enroll in private plans that bid below their local benchmarks. The rebates are expected to be between $300 and $700 per year for most beneficiaries and would cost as much as $20 billion from 2006 to 2010, the Journal reports. According to the assessment, the rebates unde the House Medicare bill would be large enough in some cases that private plans could eliminate premiums and even pay beneficiaries to enroll in their plans. The Bush administration assessment predicts that the government's costs for the proposal would fall to a uniform level slightly below the average cost for traditional Medicare by 2013.
The "peaks and valleys" related to the subsidy proposal that the Bush administration assessment shows "expose a fundamental political problem" for the Medicare bills, the Journal reports. Critics of the proposed subsidies say that private plans would "flock to the most profitable markets" and could compromise enrollment in traditional Medicare in that region, according to the Journal. Robert Berenson, a Medicare official under the Clinton administration, said, "In a social-insurance program, such as Medicare, extreme variations in benefits, based solely on where a beneficiary happens to live, are hard to justify." He added that while Medicare traditionally has charged the same premium for all beneficiaries regardless of location, the House and Senate Medicare bills appear to "fully ratif[y] geographic inequities." The Journal reports that lawmakers have begun to consider strategies to "smooth out" the regional disparities, including potential plans to create a "stabilization fund" that would eliminate disparities or a plan to require health plans to cover entire metropolitan areas instead of just one county (Rogers, Wall Street Journal, 9/16).
To assuage concerns that private companies offering retired employees drug coverage could rescind such benefits if Congress passes a Medicare drug benefit, lawmakers are considering offering employers tax credits, subsidies or other incentives to continue to cover retirees' drug costs, the New York Times reports. Currently, about 12 million of the 40 million Medicare beneficiaries have drug coverage through former employers, the Times reports. However, the Congressional Budget Office has estimated that as many as 33% of beneficiaries who have such benefits would lose that coverage if a Medicare drug benefit is enacted. According to the CBO report, many employers "would see enactment of a Medicare drug benefit as an opportunity to reduce the costs and risks of providing drug coverage" to retirees. According to the Times, lawmakers have been "deluged" by concerns from Medicare beneficiaries who fear losing their retiree drug benefits, and some lawmakers consider the issue "the most immediate threat" to passage of a Medicare drug benefit. Edward Kaleta, a lobbyist for Caterpillar and chair of the Employers' Coalition on Medicare, said, "Congress should not discriminate against our retirees because they have employer-provided coverage. Our retirees should be treated the same as other Medicare beneficiaries." E. Neil Trautwein, director of employment policy for the National Association of Manufacturers, said that many employers are already reducing retiree benefits because of rising costs. Despite the concerns, many employers are not pushing lawmakers to create subsidies or tax credits to encourage them to maintain retiree health benefits, the Times reports (Pear, New York Times, 9/16).
There is a "growing ... sense" among health officials that a final Medicare bill will not be passed this year, The Hill reports. Congressional aides involved in negotiations to reconcile the House and Senate Medicare bills have criticized predictions that a final Medicare will not be passed. However, The Hill reports that the "bickering that has plagued prescription drug legislation for years is seeping back into" negotiators' discussions. Senate Minority Leader Tom Daschle (D-S.D.) has said that he is "not ruling out" filibustering a final Medicare bill, particularly if it contains many of the provisions in the House bill, according to The Hill. Other lawmakers have criticized the current bills, including Senate Finance Committee Chair Charles Grassley (R-Iowa) who "lambast[ed]" the House bill for a proposal to cut hospital payments by $12 billion, The Hill reports. Further, many seniors appear to doubt that the House and Senate Medicare bills would help them with their drug costs. According to a poll conducted in July by the Pew Research Center, 51% of seniors said neither the House nor Senate bill would do enough to cover the cost of prescription drugs. Several lawmakers have said involvement by President Bush is "crucial" if a final bill is to be passed, The Hill reports. However, if seniors are dissatisfied with both bills, it "may not make sense" politically for Bush to support a final bill, a Republican aide said. "What's the political payoff?" the aide added (Cusack, The Hill, 9/16).
The Wall Street Journal today examines the "hidden gatekeepers" who "ration health care" under Medicare. Although CMS sets national policies on what Medicare will cover for certain treatments, the remaining coverage decisions are left up to about two dozen private insurers the agency contracts with to administer claims submitted by doctors and patients. CMS grants the insurers "broad authority" to make decisions in their coverage area, which can include several states or entire regions, the Journal reports. As a result, coverage decisions -- which can be significantly different from region to region -- are left to the insurers' "little-known" medical directors, according to the Journal. The insurers make regional coverage decisions, known as local medical review policies, based on whether a procedure is "reasonable and necessary," the Journal reports (McGinley, Wall Street Journal, 9/16).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.