November 17, 2003

Medicare Conference Committee Reaches Agreement, Sends Bill To Congress For Consideration, Final Vote

On November 16, the congressional Conference Committee working on H.R. 1, the "Medicare prescription drug and modernization" bill, approved a final agreement.

Reportedly, only two of the seven Democrats on the Conference Committee--Sens. Max Baucus (Mont.) and John Breaux (La.)-were involved in the agreement.

The bill will be filed and scheduled for floor consideration and final vote this week in both chambers of Congress, according to a spokesperson for Sen. Bill Frist (Tenn.). However, the ultimate fate of H.R. 1 is in question as most Democrats and some conservative Republicans disagree with major provisions, especially the one that provides for Medicare competing with private health plans providing Medicare coverage.

Among the final agreement's provisions are the following:

·         A prescription drug benefit beginning in 2006, including a $275 deductible, then 75% coverage of expenses up to $2,200 with $3,600 in out-of-pocket catastrophic coverage. After they reach the catastrophic limit, low-income beneficiaries with incomes below 135% of poverty levels would not be subject to copayments, while beneficiaries with incomes between 135% and 150% of the poverty level would pay $2 for generic or $5 for brand name drugs. There are more provisions for low-income beneficiaries, including asset maximums, indexed for inflation, of $6,000/$9,000 for single/couple for those below 135% of the poverty level and $10,000/$20,000 for those with incomes between 135% and 150% of the poverty level. The average premium for this benefit would be $35. Drug plans would be at risk for a certain percent of costs. The government would guarantee that beneficiaries in each region have access to at least one prescription drug plan (PDP) and one "integrated" plan, or two PDPs. From April 2004 until 2006, a Medicare-endorsed prescription drug discount card would be established as an interim benefit.

·         Retiree plans offering actuarially equivalent prescription drug coverage would receive 28% payment, tax-free, for drug costs between $250 and $5,000. Employers also could provide premium subsidies and cost-sharing assistance for retirees enrolling in Medicare PDPs and integrated plans, and could negotiate preferential premiums from integrated plans.

·         Beginning in 2004, Medicare could pay participating private plans 100% of the cost of fee-for-service Medicare, and in following years could raise all rates for private plans by the growth in fee-for-service Medicare. In 2010, Medicare would begin a six-year demonstration program for "comparative cost adjustment" in up to six metropolitan statistical areas where the traditional Medicare fee-for-service program would "price" compete with Medicare private health plans.

·         Hospitals that do not provide the Centers for Medicare and Medicaid Services (CMS) quality of care information would have their Medicare payments reduced. The agreement would establish for new specialty hospitals an 18-month moratorium on provider "self-referral."

·         Physicians would receive a 1.5% update in 2004 and 2005, instead of a payment reduction.

·         Beneficiaries could obtain coverage for new preventive benefits, including screenings for diabetes and heart disease and improved payments for mammography screening, disease management for chronic illnesses, and an initial physical when first Medicare-covered. In addition, the Part B (physician and medical services other than hospital) deductible would increase to $110 in 2005 and would be indexed to Part B cost growth.

·         The Part B Premium Subsidy would be income adjusted beginning a five-year phase-in in 2007 with the following income thresholds (income levels are doubled for couples):

·         The average wholesale price method of payment for prescription drugs would be replaced beginning in 2005 with the average sales price (ASP), plus an additional percentage. Manufacturers would be required to report ASP data, and the Inspector General of the Department of Health and Human Services would regularly audit the ASP data and compare it with market prices and Medicaid average manufacturer prices. Medicare also would increase physician allowance for drug administration.

·         Employers would not have to provide 1099 Forms to service providers if services are paid for with a debit, credit, or stored-value card.

·         Tax-free health savings accounts would be available for qualified medical expenses.

·         Drug reimportation would be allowed only from Canada and only with approval from the Food and Drug Administration.

"Our agreement improves seniors' Medicare benefits by adding prescription drugs and preventive and wellness provisions while modernizing the delivery of health care," stated Rep. Bill Thomas (Cal.), chairman of the House Ways and Means Committee and of the Medicare Conference Committee. "It will provide more fairness in sharing Medicare's costs between seniors and American taxpayers who want to ensure Medicare is available for their families when they retire. The passage of this agreement will improve the lives of seniors and strengthen Medicare."

Sen. Thomas' colleague Sen. Olympia Snowe (Maine) reflected another opinion: "I remain deeply concerned about the specific impact this 'agreement in principle' will have in the real world for millions of Americans who count on Medicare for their health coverage, in particular the untested premium support plan. But the devil is in the details-principles do not establish specifically how this policy will be implemented, or how it will protect those seniors who rely on the traditional Medicare system for their insurance coverage."