Senate Democrats Lay Out Conditions for Passage of Medicare Legislation

In a letter to President Bush yesterday, 37 Senate Democrats laid out several conditions for their support for any Medicare reform legislation that emerges from the conference committee tasked with reconciling the separate bills (HR 1 and S 1) approved last month by the House and Senate, the New York Times reports. Several Senate Democrats said the letter is an attempt to "lay down political markers" for the upcoming House-Senate conference committee, the New York Times reports (Pear, New York Times, 7/9). In the letter, initiated by Senate Minority Leader Tom Daschle (D-S.D.) and Sen. Edward Kennedy (D-Mass.), the Democratic senators said they would reject any bill that includes what they called "premium support," the Washington Post reports (Eilperin, Washington Post, 7/9). That provision, included in the House bill, would have the federal government contribute a set amount of money toward health coverage for beneficiaries who choose to join a private health plan. Beneficiaries would be responsible for making up the difference between the government contribution and the actual price of premiums or could keep any savings (Kemper, Los Angeles Times, 7/9). The House provision also would establish direct price competition between traditional Medicare and private health plans beginning in 2010 (California Healthline, 7/8).

In the letter, the Senate Democrats said the proposal would allow the "wealthiest and healthiest" beneficiaries to join private plans, leaving the "sickest and costliest" beneficiaries in traditional fee-for-service Medicare, the Post reports. "The bill cannot give seniors false choices that coerce them into leaving conventional Medicare to enroll in HMOs and private plans. It is wrong to provide greater resources to enrich private plans while starving Medicare in the bargain. It is wrong to legislate a vast social experiment that would raise premiums for Medicare and victimize the oldest and sickest senior citizens," the letter says. House Republicans are "just as adamant" about keeping the provision in the final bill, the Post reports. In a letter sent to House Speaker Dennis Hastert (R-Ill.) before the House passed its reform bill last month, a group of more than 40 Republicans stated that they would not accept a final measure without the premium support legislation. Rep. Paul Ryan (R-Wis.) said, "That's the test of whether we have reform or not. [Without that provision] we're just exploding an entitlement program. That's antithetical to our values" (Washington Post, 7/9).

The Senate Democrats' letter also mentioned several other issues that they called "non-negotiable," the Los Angeles Times reports. According to the letter, the Democrats:

• Support measures to control drug prices;
  
• Support subsidies for low-income seniors;
  
• Support measures to encourage companies currently offering drug benefits to their retired workers to maintain that coverage (Los Angeles Times, 7/9);
  
• Oppose any plan that would allocate funds to help people establish tax-free Medical Savings Accounts, saying that any "extra money" should be used to provide more comprehensive drug benefits (New York Times, 7/9);
  
• Insist that the final bill call for the federal government administer drug coverage in areas in which private plans choose not to offer drug benefits; and
  
• Urge that the final bill include a House provision that would allow people who are dually eligible for Medicare and Medicaid to have their drug expenses covered under Medicare (Rovner/Wegner, CongressDaily/AM, 7/9).
  

Besides the 37 Democrats who signed the letter and voted against the Senate Medicare bill, there are six other Senate Democrats who voted against the bill, potentially giving Democrats more than the 40 votes needed to block a final bill on the floor, the Washington Times reports (Fagan, Washington Times, 7/9). House Majority Leader Tom DeLay (R-Texas) warned the Democrats who signed the letter not to draw "lines in the sand" before the conference committee begins (Washington Post, 7/9). Senate Finance Committee Chair Charles Grassley (R-Iowa) said he hopes the conference committee will have a final compromise by mid-September to avoid the "politics of the presidential campaign," according to the New York Times (New York Times, 7/9). Hastert declined to say when the House would formally appoint its conferees. House Republican Conference Chair Deborah Pryce (R-Ohio) said House leaders are in no hurry to move to conference committee while informal discussions continue. "The more preconferencing you can do, the more you can do without the procedural stuff getting in the way," Pryce said (CongressDaily/AM, 7/9). The Senate named conference committee members Monday (California Healthline, 7/8). The outcome of the conference committee negotiations depends largely on Bush, who has often said that he wants to sign a Medicare bill but has not said with whom he sides on many of the "most divisive issues," the New York Times reports (New York Times, 7/9).

Under the Medicare bills passed by the House and Senate, seniors would have access to a stand-alone drug benefit regardless if they are enrolled in traditional Medicare or in a private plan. The Senate bill calls for the federal government to provide a drug benefit through a contractor only in areas in which private drug-only health plans decide not to participate. Under the House bill, beneficiaries would pay an estimated average $35 monthly premium and a $250 annual deductible for drug coverage. 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. The amount that a beneficiary would pay before qualifying for catastrophic coverage would be determined on a sliding scale based on income. For most beneficiaries, coverage would resume once they have purchased $4,900 worth of drugs in a year, which would result in beneficiaries spending $3,500 out of pocket. Individual beneficiaries with annual incomes of $60,000 or more would have to pay more before catastrophic coverage began. Under the Senate bill, beneficiaries would pay a $275 annual deductible and an estimated $35 average monthly premium for the drug coverage. They would pay half of their annual drug costs from $276 to $4,500 and all drug costs between $4,501 and approximately $5,800. After about $5,800, beneficiaries would be required to cover 10% of their drug costs, with Medicare paying the remainder. Both bills would provide greater subsidies to low-income beneficiaries, although the approaches differ. Both bills would also create a drug discount card beginning in 2004 that could provide discounts of between 15% and 25%. The House bill would raise the deductible beneficiaries pay for physician services and would include new preventive care coverage options, such as a free physical for each beneficiary. The Senate bill would create a new coverage option called "Medicare Advantage," under which private plans would offer coverage for catastrophic health expenses and preventive care services in addition to the required Medicare benefits, giving beneficiaries an incentive to move out of traditional Medicare and into a private plan. The Senate bill also calls for spending $12 billion over 10 years for two five-year demonstration projects. One would implement a new competitive bidding payment system for private plans in certain regions, and the other would pay for preventive and chronic care services under traditional fee-for-service Medicare (California Healthline, 7/8).

The House yesterday approved by voice vote a bill (HR 2631) that would guarantee that drug benefits for retired civilian federal workers be at least as generous as the value of drug coverage offered to active federal workers under the Federal Employees Health Benefit Program and could not be reduced to the level proposed under pending Medicare bills, the Washington Post reports (Hsu, Washington Post, 7/9). Through FEHBP, federal employees have access to a variety of health plans, with varying coverage levels and out-of-pocket costs. The most popular health plan under FEHBP, a Blue Cross Blue Shield policy, currently covers about 80% of federal employees' total prescription drug costs, according to Kenneth Thorpe, chair of the health policy department at Emory University's Rollins School of Public Health. In comparison, the Senate Medicare bill would cover about 49% of beneficiaries' total medication costs, and the House bill would cover 55% of beneficiaries' costs, Thorpe said. Rep. Tom Davis (R-Va.), the bill's sponsor, said that the federal government should "set an example" for private employers to discourage them from ending retiree drug benefits should Congress pass a Medicare drug benefit. The Congressional Budget Office has estimated that more than one-third of all retirees who have drug coverage through their former employers would lose that coverage if Medicare drug coverage is implemented (California Healthline, 7/8). Rep. Jo Ann Davis (R-Va.), one of the bill's co-sponsors, said, "This is an issue of the federal government leading by example. If the federal government cuts benefits for its retirees, how can we expect private employers to do anything but follow our lead?" But Rep. Henry Waxman (D-Calif.) said the bill is evidence of "breathtaking" hypocrisy by House Republicans and that the bill would not be necessary if the House Medicare reform proposal were more generous. Rep. Pete Stark (D-Calif.) said, "This bill says, 'We take care of our own, and to hell with the average American.' It shows Republicans know full well that employers will dump their employee retirement benefits as soon as they can" (Hsu, Washington Post, 7/9). A similar bill (S 1369), by Sen. Daniel Akaka (D-Hawaii), is pending in the Senate (California Healthline, 7/8).

With lawmakers attempting to craft legislation that would entice private health plans to increase their participation in Medicare, the private health insurance industry has "tremendous leverage" in the final stage of the lawmakers' negotiating process, according to the Los Angeles Times. Actuaries for and executives of private insurance companies have begun meeting "behind the scenes" to begin discussing new ways to provide coverage in anticipation of a final Medicare bill, the Los Angeles Times reports. One of the "bigger questions" lawmakers face in negotiations is how to deliver drug benefits to beneficiaries who choose to remain in traditional Medicare, according to the Times. Although lawmakers have proposed using private plans to offer a stand-alone drug benefit, as of last week, lawmakers said they had not heard interest from any private insurers in offering a drug-only plan to beneficiaries. The Los Angeles Times reports at least one insurance company -- PacifiCare Health Systems -- has expressed interest in offering a stand-alone drug benefit. "We're very interested in participating in the stand-alone drug plan. Our business model is very well-suited to this kind of program," Howard Phanstiel, president and CEO of PacifiCare, said. According to the Times, many private insurers appear to be "holding out" for changes in the final reform bill before committing to offering the stand-alone drug coverage. Several private insurance company executives, health care advocates and analysts last week said they are confident that Congress would produce a bill that meets the private sector's approval. However, Bruce Vladeck, a CMS administrator in the Clinton administration, cautioned against letting private insurers dictate the final House-Senate negotiations. "We've had private plans coming into Medicare since the 1970s. When you overpay them, they come in. When you underpay them, they leave" (Los Angeles Times, 7/9).

Two recent reports explore a proposed provision in the House Medicare bill and the Medicare+Choice program:

• Center on Budget and Policy Priorities: A provision in the House Medicare reform bill that would create tax-preferred Health Savings Security Accounts could cost states between $20 billion and $30 billion over the next 10 years and the federal government $174 billion over the same time period, according to a CBPP analysis, CongressDaily reports (Rovner/Wegner, CongressDaily, 7/8). Under the proposed HSSAs, families would be permitted to save as much as $4,000 per year for medical expenses, including premiums. The study, by CBPP Deputy Director Iris Lav, notes that if the legislation is enacted, many business would alter their health insurance plans to cover only catastrophic costs, encouraging employees to use HSSAs (Wolfe, Minneapolis Star Tribune, 7/9). The complete report is available online.
  
  
• Journal of the American Medical Association: Medicare beneficiaries covered by Medicare+Choice plans that have monetary caps on drug benefits have a potential 200% to 300% increase in out-of-pocket costs after exceeding such caps, according to a study in today's JAMA. The study, led by Dr. Chien-Wen Tseng, of the Department of Family Health and Community Health at the University of Hawaii and a member of the Robert Wood Johnson Clinical Scholars Program, found that patients with capped M+C coverage had median out-of-pocket drug costs of between $79 and $100 per month before reaching the cap and between $179 and $305 per month after reaching the cap. According to the study, 94% of Medicare+Choice plans in 2002 had annual dollar caps. On average, patients who exceeded their caps did so three months before the end of the year, the study says (American Academy of Family Physicians release, 7/8). An abstract of the study is available online.
  

The following programs reported on the Medicare legislation:

• CNN's "Inside Politics": The program reports on the upcoming House-Senate Medicare negotiations. The segment includes comments from Daschle, Bush and Rothenburg Political Report editor and publisher Stuart Rothenburg (Karl, "Inside Politics," CNN, 7/8). Transcripts of this segment are available online. The segment is available online in RealPlayer.
  
  
• PBS' "NewsHour with Jim Lehrer": The segment reports on the differences between Republicans and Democrats on the Medicare bills (Dentzer, "NewsHour with Jim Lehrer," PBS, 7/8). Audio of the complete segment is available online in RealPlayer.