July 18, 2003

"Medicare Conference Committee Outlook"

The Alliance to Improve Medicare (AIM) and the Progressive Policy Institute (PPI) hosted a briefing on the ongoing conference committee issues regarding H.R. 1, the "Medicare Prescription Drug and Modernization Act of 2003" and S. 1, the "Prescription Drug and Medicare Improvement Act of 2003." Speakers included Ms. Elizabeth Scanlon, Health Policy Advisor, Office of Senate Majority Leader Bill Frist (R-TN), Ms. Kate Leone, Legislative Assistant, Office of Senate Minority Leader Tom Daschle (D-SD), and Mr. Patrick Morrisey, Deputy Staff Director, Committee on Energy & Commerce, U.S. House of Representatives.  Ms. Monica Tencate, President, Health Policy Source, Inc., served as moderator for the panel.

Ms. Scanlon cited a significant commitment by Senate and House leadership to produce a conference report.  She highlighted key issues for the conferees to work through, including: competitive bidding provisions; low-income subsidies; dual eligible treatment; benefit design features; income-relating provisions; fall-back mechanisms; and health savings accounts.  Ms. Scanlon noted that these issues require major discussions by conferees given the significant differences between the House and Senate bills.  She reported that conference staff meet regularly to develop options for conferees with the goal of developing the best and most workable program for Medicare beneficiaries.

Ms. Leone noted that Senate Democrats are very excited about the prospects of adding prescription drug coverage to Medicare.  She stated, however, that Democratic caucus members are concerned about the substance of the proposals and cited a letter signed by 37 Senate Democrats outlining priorities for Medicare prescription drug legislation. Foremost, she noted that Senate Democrats are united behind the principle that beneficiaries not be coerced into HMO plans to obtain drug coverage.  Other priorities cited by Ms. Leone included the availability of a government offered "fall-back" plan to ensure beneficiaries have drug coverage in areas that lack private plans, continuation and protection of employer-provided retiree benefits, and Medicare coverage for Medicaid-eligible beneficiaries. Further, Ms. Leone stated objections to inclusion of health savings account legislation in the House-passed bill. She noted that the $127 billion cost of the HSA provisions should be used to close the coverage gap in drug benefits.  Finally, Ms. Leone noted that Democrats are "hopeful for a better end product than what emerged from either the House or Senate."

Mr. Morrisey stated that the conferees hope to have a bill on the President's desk by early fall.  He noted that House conferees are encouraged by numerous similarities in the House and Senate bills and by the significant opportunity to make structural changes to improve Medicare.  Morrisey noted that while all issues are subject to discussion, H.R. 1's slim majority on the House floor puts that body in a more tenuous position than the Senate. 

Mr. Morrisey cited the "dynamic new structure to inject competition" into the Medicare program as one of the most important provisions in the House bill. He stated that this provision has been misinterpreted and misunderstood.  The provision, according to Mr. Morrisey, would result in "modest programmatic reforms necessary to keep the program viable."  In short, beginning in 2010, private plan regions having a pre-set amount of competition would submit bids for payment rates. HHS would then compare traditional fee-for-service costs in that region with private plan bids.  Mr. Morrisey cited key provisions included in the competitive structure to ensure a level playing field for all plans, both traditional fee-for-service and private, including risk adjustments for population region, age and health status of beneficiaries.  He noted that all plans would be rewarded for efficiencies and that more efficient plans could offer beneficiaries lower premiums.  Mr. Morrisey noted that these provisions are necessary because, without them, Medicare faces bankruptcy.

Finally, Mr. Morrisey noted that the House would work closely with Senate conferees and staff.  He also stated that staff had already begun to meet and had made "good progress" in discussions on regulatory relief provisions of the bill.  He stated that negotiations would be complex but that House conferees and staff are hopeful that a final product will emerge.

In response to a question about employer-provided retiree health coverage, Ms. Scanlon stated that conferees take very seriously reports that companies may drop or change coverage.  She reported that numerous discussions had occurred with employee benefit managers and had heard "something different than some reports."  She stated that staff were encouraged by these discussions and by indications that the majority of employers will retain retiree coverage.

In response to a question about the House-passed competitive bidding provisions and potential budgetary savings, Mr. Morrisey noted that the provisions may not save money over the bills' 10-year budget period but that the provisions would set in place a structure to realize savings in the future.  Ms. Leone stated that these provisions are highly controversial and noted that the Senate, based on bipartisan discussions, chose not to include such competition requirements in S. 1.  She noted that these provisions would transform Medicare into a defined-contribution program that would undermine the program's entire premise and the "essential guarantees" made to beneficiaries.  She further noted that Senator Daschle opposes these provisions and sees them as a fundamental issue for the conferees. Mr. Morrisey noted that the competition concept "puts plans and fee-for-service on a level playing field" and asked why seniors shouldn't be able to choose the most efficient plan in their area.  Ms. Scanlon noted the complexity of the issue and the need to ensure that "what we put in place helps seniors."

An audience member asked if a competitive-bidding demonstration project might be one option for conferees to consider in lieu of full-blown competition in all regions.  Mr. Morrisey stated that conferees want to review all options.  Ms. Leone stated that the suggestion raised the idea that the House provisions after 2010 are essentially an experiment.  She then noted that the suggestion raised an interesting middle point.

An audience member asked how the House and Senate bills would affect state pharmaceutical plans and dual eligible individuals.  Ms. Scanlon noted that there had been some valid concern with the Senate provisions.  Senate staff, she reported, were looking at how state programs should work with the new drug benefit without discouraging states from continuing to offer drug coverage to Medicaid beneficiaries.