Monday, July 07, 2003

Capitol Hill Watch

House-Senate Conference Committee Faces Several Hurdles in Reconciling Medicare Bills

      With the House and Senate preparing to launch a conference committee to reconcile the Medicare reform bills (HR 1 and S 1) passed by each chamber, several "hurdles" could make negotiations difficult, the Washington Times reports. John Feehery, a spokesperson for House Speaker Dennis Hastert (R-Ill.), said, "This is going to be a very tough negotiation. Both sides will be making decisions on what they can pass and what they can't pass" (Fagan, Washington Times, 7/7). The House and Senate passed separate Medicare bills in June that both would increase the participation of private plans in the program and give all beneficiaries an equal benefit. Under both bills, 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 government itself 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, though 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 House measure also would establish direct price competition between traditional Medicare and private health plans beginning in 2010. 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 (Kaiser Daily Health Policy Report, 7/2).

Key Issues
The following are some of the key issues that lawmakers are likely to debate in conference:

• Means testing: House and Senate Republicans are expected to encourage conference committee members to include means testing for drug coverage as a way to reduce government expenditures. Senate Majority Leader Bill Frist (R-Tenn.), who is expected to be a member of the conference committee, said that "some form" of means testing likely will be in the final bill, the Washington Times reports. However, Sen. Edward Kennedy (D-Mass.), who will not be a member of the conference committee, threatened to filibuster the entire Senate bill on the day of its passage after a bipartisan group of senators attempted to add a means-testing provision. Kennedy said, "I will continue to strongly oppose the inclusion of a means-testing provision in any Medicare prescription-drug bill." Rep. Mike Pence (R-Ind.) said, "If Sen. Kennedy really wants to filibuster over entitlements for rich people, let's have that fight. I really believe seniors are prepared to support a drug benefit for seniors who need it most."
  
• Private competition: Conference committee members will be considering whether the final bill will include a provision requiring traditional Medicare to compete with private plans beginning in 2010. Supporters of the provision, included in the House bill, say that it would force traditional Medicare to "modernize" and become more cost-effective. However, opponents say the plan would move "healthier, wealthier seniors" into private plans and place an undue burden on Medicare, "essentially killing" the traditional fee-for-service program. House Republican leaders have vowed to fellow Republicans that they will fight for the provision. "For many of us, we're not interested in this bill if it doesn't have any of these reforms," Rep. Patrick Toomey (R-Pa.) said (Washington Times, 7/7).
  
• Home health care: A "debate is brewing" over the creation of a $40 copayment for Medicare beneficiaries who require home health care, the Philadelphia Inquirer reports. A provision in the House bill, proposed by House Ways and Means Chair Bill Thomas (R-Calif.), would require beneficiaries to pay between $40 and $50 for 60 days of home health care, with an exemption for low-income beneficiaries. Rep. James Greenwood (R-Pa.) said he expects the provision to be included in the final bill, adding, "The House conferees will say to the Senate conferees: 'If you intend to hold out for the costly part of your plan, then you have to pay for it.'" The possibility of a new copayment has "mobilized" home health providers, who say the cost of collecting the copay will be greater than the money collected and the cost could preclude some beneficiaries from receiving care (Stark, Philadelphia Inquirer, 7/7).
  
• Private participation: Raising reimbursement rates for private health plans currently participating in Medicare+Choice is considered key to ensuring private plans' participation in the new Medicare coverage option, and insurers want rates to begin rising in 2004 and 2005 because they will be the benchmark for 2006 rates, AP/Arkansas Democrat Gazette reports. The House bill contains a provision that would increase reimbursement rates in 2004, but the Senate bill does not. "If [lawmakers] don't stabilize Medicare+Choice, we will think seriously about further pulling back from the program," Howard Phanstiel, president and CEO of Pacificare Health Systems, the largest private plan participant in Medicare+Choice, said. Meanwhile, some private plans are concerned about the new coverage option proposed by lawmakers that would allow beneficiaries to join preferred provider plans. Providers would sign two-year contracts with the federal government for such coverage. However, some insurance executives say the plan is "seriously flawed" because hospital and doctor prices vary widely from state to state, but the plan would require a single price within each designated region. In addition, insurance executives say it would be difficult to make a profit in rural areas, where there is less competition and hospitals and doctors rarely grant discounts to private health plans (Agovino, AP/Arkansas Democrat Gazette, 7/7).
  
• Dually eligible beneficiaries: New York Gov. George Pataki (R) and 36 other governors plan to lobby Congress to include in the final Medicare bill a provision requiring the federal government to cover the cost of prescription drugs for people who are eligible for both Medicare and Medicaid, the Albany Times Union reports. Currently, states are responsible for the drug costs of dually eligible individuals. However, Pataki, in a letter to New York's congressional delegation, wrote, "We have always believed that these costs should be borne by the federal government." The Times Union reports that most of New York's 31 representatives, as well as Sens. Charles Schumer (D) and Hillary Rodham Clinton (D), favor the federal government paying the drug costs of dual eligibles. However, Senate Finance Committee Chair Charles Grassley (R-Iowa) has said that doing so would be too expensive (Freedman, Albany Times Union, 7/5).
  
• Rural providers: Provisions included in the House and Senate versions that would increase rural provider payments by more than $25 billion might have helped lawmakers garner "crucial votes" from rural legislators. But the provision could foster a debate with legislators who say the provisions come at the expense of urban providers, the Los Angeles Times reports. Rep. Xavier Becerra (D-Calif.) said, "It's a zero-sum game. It's not that you want to deprive rural communities, but you don't want to do it at the expense of poor older folks in urban areas." The Senate bill would provide $25.3 billion over 10 years, beginning in 2005, to increase rural provider reimbursements. The House version would provide $27.2 billion over 10 years beginning in 2004. According to the Times, "finding a balance" between rural and urban interests in the final bill may "prove ... crucial" to whether a final bill is approved (Hook, Los Angeles Times, 7/6).
  

NYT Examines Private Plans' History
The New York Times on July 5 examined the history of private health plans' participation in Medicare. Proponents of increased private health plan participation say that such measures would allow Medicare to provide better care for less money. But others say that such efforts historically have not fulfilled expectations of saving money, the Times reports. The Times cites Medicare+Choice as an example, noting that after the 1997 Balanced Budget Act, the federal government reduced payments to private plans, which could then no longer afford to offer the benefits that had lured people to enroll in them in the first place. Half of all plans participating in Medicare+Choice have left the market since the program began in 1997, and many other plans have cut benefits "drastically," according to the Times. More than four million Medicare beneficiaries are enrolled in Medicare+Choice plans, down about 25% from enrollment figures in 1997. Further, a recent study by the Urban Institute found that since 1970, private plans' per beneficiary spending has grown 11.1%, compared to 9.6% per beneficiary spending growth under traditional Medicare, suggesting Medicare has more effectively controlled costs than private plans, according to the Times. Stuart Altman, a Brandeis University health care policy professor, said that Medicare generally operates with lower administrative costs than private plans and that Medicare is better able to negotiate discounted rates with hospitals and doctors than private plans. Nancy-Ann DeParle, a former CMS administrator, said, "It turns out that administered pricing has been an effective way to control costs." In an analysis for the Journal of Health Politics, Policy and Law, DeParle said that the government's goal of saving money under Medicare+Choice conflicts with its desire to encourage health plan development. Further, some analysts say that the new coverage option -- PPOs -- called for in both the House and Senate bills might be even less successful than Medicare+Choice, according to the Times. PPOs allow people to go to out-of-network providers and "have grown in popularity as a way for businesses to shift more of the costs of care onto the consumer," the Times reports. Officials from private health plans say they are effective in controlling costs, but say that they cannot negotiate low enough prices to keep costs down, the Times reports. Dr. John Rowe, chair and CEO of Aetna, said, "We believe we are delivering a package of benefits that is value added to the traditional program" (Abelson, New York Times, 7/5).

Beneficiaries' Drug Coverage Not Equal to FEHBP
The drug benefit under the Medicare bills passed by the House and Senate does "not come close" to providing the same level of drug coverage offered to federal employees under the Federal Employees Health Benefits Program, under which federal employees have access to a variety of private health plans providing various levels of coverage, the Washington Post reports. President Bush and some lawmakers have said they proposed Medicare reforms with the intent of offering beneficiaries "the same medical benefits" members of Congress and other federal employees receive, according to the Post. In a recent address to a Connecticut Hospital, Bush said, "Every federal employee, including every member of Congress, gets to choose the health coverage that best fits their needs. If it's good enough for the employees and members of Congress to have choice, it's good enough for our seniors to have choice when it comes to health care plans as well." While both proposed Medicare bills would allow beneficiaries to enroll in a stand-alone drug benefit, all 188 health plans under FEHBP include drug coverage, the Post reports. Kenneth Thorpe, chair of the health policy department at Emory University's Rollins School of Public Health, said that 90% of the people insured under FEHBP are enrolled in health plans that cover at least two-thirds of their total drug expenses. The most popular plan under FEHBP, a Blue Cross Blue Shield policy, covers about 80% of total prescription drug costs, according to Thorpe. In comparison, Medicare beneficiaries would be reimbursed for about 49% of total medication costs under the Senate bill and 55% under the House version, Thorpe said. He added that giving Medicare beneficiaries a drug coverage package equal to what federal employees receive would cost about $700 billion over 10 years, which includes the $400 billion Congress has set aside for Medicare reform. Thorpe said, "It's much more expensive, but the drug benefits are much better in FEHBP" (Connolly, Washington Post, 7/6). Tricia Neuman, a Kaiser Family Foundation vice president and director of the foundation's Medicare Project, said the House and Senate drug plans are "clearly less generous in terms of drug benefits than the benefits typically offered under the FEHBP." A provision proposed by Sen. Mark Dayton (D-Minn.) and approved by the Senate would make prescription drug coverage for members of Congress equal to whatever level lawmakers approve for Medicare beneficiaries. The Washington Times reports that the amendment has "proven embarrassing" to some lawmakers. Frist has said he has "made no commitments to drop [the provision] or keep it in" the final Medicare bill (Washington Times, 7/4). Roll Call earlier reported that the amendment was a "symbolic vote that would be overturned in negotiations with the House" (Connolly, Washington Post, 7/6).

Drug Companies Benefit
The Medicare reform bills represent a tentative "victory" for drug makers and their lobbyists, USA Today reports. According to USA Today, drug makers have "averted what they feared most" -- a group of 40 million customers with the ability to negotiate lower drug prices and influence pharmaceutical companies' profits. Both the House and Senate reform bills prohibit the federal government from being involved in drug price negotiations, according to USA Today. Instead, the bills would divide the nation into 10 regions in which private companies would compete to offer prescription drug coverage. Scott Kay, an analyst for Banc of America Securities, said, "It's manageable for [drug makers]. It's not government-run, and that's a home run for them." The two bills also would help the drug industry by infusing the health care market with $400 billion over 10 years and by easing the political pressure for price controls, USA Today reports (Drinkard, USA Today, 7/7).

NPR Coverage
NPR's "Morning Edition" on July 7 reported on the House and Senate efforts to reconcile the two versions of the Medicare bill. The segment includes comment from Rep. Thomas Reynolds (R-N.Y.), Rep. Robert Matsui (D-Calif) and Kaiser Family Foundation President and CEO Drew Altman (Liasson, "Morning Edition," NPR, 7/7/03). The segment is available online in RealPlayer.

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