Senate Finance Committee Formally Releases Medicare Reform Proposal
The Senate Finance Committee yesterday formally released its Medicare reform plan, with some changes from an earlier version, and committee members discussed possible alterations to their drug coverage proposal in response to a Congressional Budget Office estimate that the committee's original proposal would cost approximately $50 billion less than the $400 billion over 10 years that Congress has allotted for Medicare reform, the Washington Post reports. The committee's Medicare reform proposal would increase participation of private plans in Medicare and would offer all beneficiaries a drug benefit, regardless of whether they join a private plan (Goldstein/Dewar, Washington Post, 6/11). The committee's plan calls for all Medicare beneficiaries to have access to a drug benefit beginning in 2006, for which they would pay a $275 annual deductible and a $35 monthly premium (California Healthline, 6/10). Beneficiaries choosing to remain in traditional Medicare could sign up for a stand-alone drug benefit. They also could choose to enroll in a private health plan that offers a drug benefit under a new coverage option called "Medicare Advantage" (Washington Post, 6/11). Under the new coverage option, 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 government itself would provide a drug benefit through a contractor in areas in which drug-only health plans decide not to participate (California Healthline, 6/10).
Congressional aides yesterday began working to determine if they could adjust the so-called gap in drug coverage contained in the Finance Committee's proposal, the Post reports (Washington Post, 6/11). Under the committee's initial plan, beneficiaries would pay half of their annual drug costs from $276 to $3,450 and all drug costs between $3,451 and $5,300. After $5,300, beneficiaries would be required to cover 10% of drug costs, with Medicare paying the remainder (California Healthline, 6/10). Finance Committee member Sen. John Breaux (D-La.) yesterday said he thought that the amount after which beneficiaries would be required to pay all drug costs could be raised to $4,000 (Rovner/Fulton, CongressDaily, 6/10). According to the Washington Times, Senate Finance Committee Chair Charles Grassley (R-Iowa) and the committee's ranking Democrat, Sen. Max Baucus (D-Mont.) told the CBO yesterday to apply the difference between the amount of the committee's plan and the budgeted amount to "bee[f] up the drug benefit." However, it is unclear what effect that will have on beneficiaries' covered costs (Fagan, Washington Times, 6/11). Finance Committee aides said closing the entire gap could cost as much as an additional $200 billion. Breaux yesterday said a gap in drug coverage likely would still exist under the Finance Committee's proposal even if the proposal cost $400 billion over 10 years (CongressDaily, 6/10).
Under the revised Finance Committee proposal, the annual deductible for Medicare Part B, which covers outpatient care, would increase from $100 to $125 per year, beginning in 2006. The Part B deductible has been $100 per year since 1991, the Journal reports. The Finance Committee proposal also would increase the deductible annually based on inflation after 2006 (Rogers, Wall Street Journal, 6/11). The AP/Philadelphia Inquirer reports that it is unclear whether committee members are calling for the deductible to be increased as a way to offset costs of the drug benefit or as a way to encourage seniors to join private plans (Espo, AP/Philadelphia Inquirer, 6/11). The new coverage option under the Finance Committee's proposal would have a $400 deductible for hospital and outpatient care, compared with the current deductibles of $840 for hospital care and $100 for outpatient care (California Healthline, 6/10). Sen. Olympia Snowe (R-Maine), one of the proposal's co-sponsors, seemed surprised by the Part B deductible increase, the AP/Inquirer reports. "I don't want to index the Part B deductible," she said.
The Finance Committee's proposal also includes the following measures:
- Beneficiaries with incomes at or below 160% of federal poverty level, about $14,764 per year for an individual or $19,766 for a couple, would receive government subsidies to purchase prescription drugs (AP/Philadelphia Inquirer, 6/11);
- Private insurance companies that agree to offer the new coverage option would sign a two-year contract with the federal government instead of the usual one-year contract, in an attempt to "give the program more stability," the Wall Street Journal reports (Wall Street Journal, 6/11);
- Medicare would cut payments for laboratory tests under its fee-for-service program by 20%. Medicare currently covers the complete cost of such tests. The proposal would allow individual labs to make up "most of the difference" by charging copayments of beneficiaries;
- Private health plans would be permitted to attempt to control drug costs by establishing preferred drug lists, by charging copayments for drugs not on such lists and by encouraging the use of generic drugs and mail-order pharmacies; and
- Medicare would increase payments to rural providers. To partially offset the cost of increasing such payments, Medicare would freeze payments for home medical equipment for seven years (Pear, New York Times, 6/11).
President Bush has not yet decided whether he would sign legislation that includes an equal drug benefit for all Medicare beneficiaries, a Bush administration official said yesterday, the Post reports (Washington Post, 6/11). After meeting with several Republican senators on Monday, HHS Secretary Tommy Thompson said the administration is not currently seeking a change in the provision in the Finance Committee proposal that offers equal drug benefits. Bush's own Medicare reform framework calls for beneficiaries to receive a choice of three coverage options beginning in 2006, with varying drug coverage. First, beneficiaries could remain in traditional fee-for-service Medicare, with access to prescription drug discount cards and catastrophic protection. Second, they could enroll in "Enhanced Medicare," which would offer a choice of private plans that include prescription drug coverage. The third option, "Medicare Advantage," would be similar to the current Medicare+Choice program, which offers a selection of private health plans with and without prescription drug coverage. Low-income beneficiaries would receive additional premium and cost-sharing assistance. In the interim, all beneficiaries would get immediate access to drug discount cards and protection against high out-of-pocket costs (California Healthline, 6/10). White House Press Secretary Ari Fleischer yesterday "sidestepped" a question about whether the Bush administration has "abandoned" its goal of using drug benefits as an enticement for seniors to join private plans under Medicare, the Post reports. However, Fleischer indicated that Bush aides would not attempt to dissuade lawmakers' current proposal. Fleischer added that "a lot of these moving parts will get settled" if both the Senate and House pass Medicare reform bills and a conference committee needs to reconcile the bills. The Post reports, however, that lawmakers are unlikely to reverse parts of bills on which both houses agree (Washington Post, 6/11). According to CongressDaily, positive statements regarding the Finance Committee's proposal by the Bush administration "appear less a signal of support than a tactic designed to get the bill into conference" (Koffler, CongressDaily, 6/10). Bush is scheduled to meet with the Illinois State Medical Society today to discuss Medicare reform with doctors and Medicare beneficiaries, in an attempt to "push Congress to put something on his desk to sign," the Chicago Sun-Times reports (Sweet, Chicago Sun-Times, 6/11).
In related news, the New York Times today examines private health insurance and pharmaceutical company officials' reactions to Medicare reform proposals. Officials are "particularly wary" of lawmakers' reform plans, in part because they are "perturbed by Medicare's long history of reducing its payments ... or at least keeping those payments well below the pace of cost increases," the Times reports. Howard Phanstiel, president and CEO of PacifiCare Health Systems, said, "We are going to approach this very carefully," noting that the Medicare+Choice program has been "underfunded for five years." Aetna officials said they are "eager to join with federal officials" on Medicare reform but added that they are concerned about payments, the Times reports. "Anything [Congress] do[es] must be adequately funded," Susan Rawlings, head of Aetna's unit for retiree markets, said. Paul Heldman, an analyst for the Schwab Washington Research Group, said, "Historically, Medicare starts out paying providers enough so that it is attractive for them to do business," adding that eventually payments begin to decrease. He added, "There's no reason for it to be any different with any drug benefit." According to Richard Evans, an analyst for Sanford C. Bernstein, a drug benefit for all Medicare beneficiaries could mean a reduction in drug companies' worldwide sales by 2%. Evans said that as the industry's largest consumer, Medicare would be a "price maker, not a price taker" and be able to set costs. In addition, drug companies are concerned that employers that currently offer drug benefits to retirees would discontinue such coverage if the government creates a Medicare drug benefit. Still, the Times reports that some drug companies could benefit from current Medicare reform proposals. Dr. Kris Jenner, a physician and health care portfolio manager for T. Rowe Price, said drug companies that "depen[d] heavily" on volume, such as generic drug makers, pharmacy benefit managers and wholesalers, are most likely to benefit from reform proposals (Abelson, New York Times, 6/11).
Meanwhile, in the House, members of the Rural Health Care Caucus yesterday said they would only vote for a Medicare reform proposal that includes increases in Medicare payments for rural providers, CongressDaily reports (Rovner, CongressDaily, 6/10). Under the proposal being developed by House Republican leaders, which is similar to proposals approved by the House in the last two legislative sessions, beneficiaries could choose a stand-alone benefit for which they would pay a $35 monthly premium and a $250 annual deductible. 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. Under a new provision not previously adopted by the House, the amount that a beneficiary would pay before qualifying for catastrophic coverage would determined on a sliding scale based on income. Most beneficiaries would qualify for catastrophic coverage after spending $3,700 per year, but that figure would be higher for beneficiaries whose annual incomes are about $50,000 or higher. The plan would cover 100% of costs once a beneficiary qualified for catastrophic coverage (California Healthline, 6/10). House Ways and Means Committee Chair Bill Thomas (R-Calif.) said yesterday he plans to include rural provisions in the House Medicare reform bill, The Hill reports (Cusack, The Hill, 6/11).
The following broadcast programs reported on the Finance Committee's proposal:
- CNN's "Inside Politics": CNN's John Karl reports on how new deficit projections are influencing the debate (Karl, "Inside Politics," CNN, 6/10). The full transcript of the program is available online.
- CBS' "Evening News": CBS's Joie Chen reports on the plan details (Chen, "Evening News," CBS, 6/10). The full segment is available in RealPlayer online.
- NBC's "Nightly News": The segment includes comments from Frist (Brown, "Nightly News," NBC, 6/10). The full segment is available in Windows Media online.
- Thompson will answer questions about the President's goals for Medicare in the online interactive forum "Ask the White House" today at 1:30 p.m. ET. A transcript of the chat will be available online. A White House video on Medicare is available in RealPlayer online.