Senate Finance Committee Holds Hearing on Privatization in the Medicare Program

In what could be a preview of the upcoming debate over Medicare reform, Democrats and Republicans disagreed over the effects of including more private plans in Medicare during a Senate Finance Committee hearing yesterday, CongressDaily reports. The hearing aimed to examine the private managed care plans operated by the Office of Management and Budget, the Defense Department and General Motors (Rovner, CongressDaily, 4/3). President Bush's proposed Medicare reform framework includes several coverage options, including traditional fee-for-service coverage and a new private system that the administration has compared to the Federal Employees Health Benefits Program, under which federal employees can choose among a variety of private plans with varying benefits and costs. In that plan, seniors could join a new private system called "Enhanced Medicare," which would begin in 2006 and would allow private health plans to offer different drug benefits, with different premiums, copayments and deductibles, so long as the plans meet a baseline federal standard, which is not yet set. A third option, called "Medicare Advantage," would be similar to Medicare+Choice, which offers beneficiaries a choice of private plans with and without drug coverage but no guaranteed drug benefit (California Healthline, 3/18).

During yesterday's hearing, Sen. Max Baucus (D-Mont.) said, "My sense is that with higher administrative costs, profits and risk load, combined with an inability to contract with preferred providers in remote areas, preferred provider organizations would actually be more expensive than traditional fee-for-service Medicare." Sen. John Breaux (D-La.), who supports Bush's "Enhanced Medicare" proposal, said that while Medicare managed care plans have not always been readily available in rural areas, PPOs offered under FEHBP are available nationwide. "All (federal) workers, including the postmaster in my hometown of New Hartford, Iowa, have a choice of health plans," committee Chair Charles Grassley (R-Iowa) said. He added that "competition in Medicare, if done right, has the potential to change the lives of patients by lowering costs, improving benefits and increasing quality." But Sen. Blanche Lincoln (D-Ark.) said that FEHBP PPOs operating in rural areas do not necessarily serve members as well as PPOs in urban areas. Sen. John Rockefeller (D-W.Va.) added that his constituents want "a prescription drug benefit, and we can give it to them if we don't fritter away the money on privatization" (CongressDaily, 4/3).

At a hearing before the House Appropriations Subcommittee on Labor, HHS and Education yesterday, CMS Administrator Tom Scully said the agency needs an additional $129 million for fiscal year 2004 to fund new responsibilities for hearing disputes over Medicare coverage, CongressDaily reports. As of Oct. 1, CMS will be responsible for adjudicating beneficiaries' disputes over denial of benefits, a task currently handled by administrative law judges in the Social Security Administration. Scully said disputes might be handled differently under CMS, including settling cases without the use of administrative law judges. He said the additional funds are needed to hire more independent contractors to review benefit denial cases and to hire more staff. "If there's one issue that's going to cause us problems this year, this is it," Scully added (CongressDaily, 4/3).