Senate Finance Committee Members Begin To Draft New Medicare Reform Proposal

Several members of the Senate Finance Committee have begun drafting a Medicare reform proposal that would increase use of private health plans and would give an equal drug benefit to all beneficiaries, regardless of whether they join a private plan, the Washington Post reports. According to Senate aides, Finance Committee Chair Charles Grassley (R-Iowa) and Sens. Olympia Snowe (R-Maine), Orrin Hatch (R-Utah), John Breaux (D-La.) and James Jeffords (I-Vt.) have developed a proposal that would create a new form of Medicare, called "Medicare Advantage," that would rely on preferred provider organizations and other managed care plans (Goldstein/Dewar, Washington Post, 6/4). The proposal, which Breaux discussed yesterday, includes a prescription drug benefit for which beneficiaries would pay a $275 deductible and a $35 monthly premium (Dalrymple, AP/Las Vegas Sun, 6/3). Beneficiaries also would be required to pay half of annual drug costs up to $3,450 and all drug costs between $3,451 and $5,300 (Fagan, Washington Times, 6/4). According to Breaux, fewer than 8% of beneficiaries have drug expenses between $3,451 and $5,300 (AP/Las Vegas Sun, 6/4). After $5,300, beneficiaries would be required to cover 10% of drug costs, with Medicare paying the remainder. Breaux said that under the proposal, the private plans would offer coverage for catastrophic health expenses and preventive care services, giving beneficiaries an incentive to move out of traditional Medicare and into a private plan. Further, beneficiaries opting for private coverage would pay a $400 deductible for hospital and doctor visits, compared with $840 for hospital stays and $100 for doctor visits for beneficiaries remaining in traditional Medicare (Washington Times, 6/4). The Post reports that the plan, including its cost, "remains a work in progress" (Washington Post, 6/4). Senate leadership aides yesterday said they expect Finance Committee members to formally announce their proposal June 10 and vote on it June 12.

The Wall Street Journal reports that Bush administration officials are "concerned" about some facets of the proposal but said that the plan might be the "best means" to gain bipartisan support for Medicare reform. According to the Journal, if Grassley can reach an agreement with Sen. Max Baucus (D-Mont.), the ranking Democrat on the Finance Committee, the White House "is prepared to bite its tongue, at least for the time being" (Lueck/Rogers, Wall Street Journal, 6/4). The Bush administration's reform framework differs from the Senate proposal in that it would give beneficiaries a choice of three coverage options beginning in 2006. First, beneficiaries could remain in traditional fee-for-service Medicare, with access to prescription drug discount cards and catastrophic protection. Second, beneficiaries 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 seniors would get immediate access to drug discount cards and protection against high out-of-pocket costs (California Healthline, 6/3). Senate Minority Leader Tom Daschle (D-S.D.) yesterday detailed Democrats' requirements for supporting a Medicare reform plan (Rovner/Heil, CongressDaily/AM, 6/4). He said that any reform proposal Democrats would support could not force beneficiaries to move from traditional Medicare to private plans or "dismantle or weaken" the current program and must provide equal benefits and access to care to rural and urban beneficiaries (Washington Post, 6/5).

Meanwhile, House Ways and Means Chair Bill Thomas (R-Calif.) said yesterday he expects his committee will begin to debate Medicare reform in the week of June 23, following the release of the Finance Committee's proposal, the Wall Street Journal reports (Wall Street Journal, 6/4). The Hill reports there is a "widening split" among House Republicans over competing Medicare drug benefit proposals by Thomas and Rep. Charles Norwood (R-Ga.). According to The Hill, a majority of Republican members on the Energy and Commerce Committee sent a letter in support of Norwood's plan to committee Chair Billy Tauzin (R-La.) (Cusack, The Hill, 6/4). That proposal is based on a drug "debit" card Medicare beneficiaries could use to purchase drugs. Under the plan, all beneficiaries would receive a card with a balance, likely about $1,000, to which they could add tax-deductible contributions of their own or from former employers. States also could contribute funds to low-income seniors. Funds would carry over from year to year, and beneficiaries' annual drug spending likely would be capped at about $5,000 (California Healthline, 5/8). Thomas, meanwhile, reportedly has begun drafting legislation that is expected to be a "modified version" of a proposal the House passed last year (The Hill, 6/4). Under that legislation, Medicare beneficiaries would be allowed to purchase drug coverage directly from private insurance companies for a $250 annual deductible and a $33 monthly premium. Low-income seniors would be exempt from the premiums and deductible. The federal government would cover 80% of seniors' annual prescription drug costs up to $1,000, 50% up to $2,000 and no costs between $2,000 and $3,700, after which a catastrophic benefit would have begun (California Healthline, 6/28/02). According to The Hill, House Speaker Dennis Hastert (R-Ill.), who has been pressuring House members to move forward with such legislation, can either attempt to "forge a compromise" or let the two committees move forward with their proposals and "hope to iron out differences in conference" (The Hill, 6/4).

The following are summaries of two opinion pieces on recent Medicare reform proposals.

• John Harwood, Wall Street Journal: Senate Majority Leader Bill Frist (R-Tenn.) is facing a "showdown" over Medicare reform legislation that could help put a "sympathetic face on the future of Republican conservatism," but he is facing resistance from conservative Republicans, Harwood writes in his "Capital Journal" column. According to Harwood, Frist has moved away from advocating for the Bush administration's reform framework, which calls for increased reliance on private health plans and an unequal drug benefit. Rather, Frist has begun to support disease management programs to help reduce expenditures for the "sickest 20% of beneficiaries," who make up "80% of the program's costs," Harwood writes. Frist's advisers are preparing for "flak from the right," he adds, concluding, "Resistance from [Frist's] own party may prove as significant as that from the other side" (Harwood, Wall Street Journal, 6/4).
  
  
• Robert Samuelson, Washington Post: Adding a prescription drug benefit to Medicare is a "bad idea" because it would "simply worsen the country's central budget problem: the huge retirement costs of the baby-boom generation," Samuelson writes in an opinion column for the Washington Post. He concludes, "We can only hope that bickering among politicians and interest groups ... creates a deadlock" and no benefit is passed (Samuelson, Washington Post, 6/4).