June 16, 2003             

"House and Senate Medicare Proposals"

The Alliance to Improve Medicare (AIM) and the Progressive Policy Institute (PPI ) hosted a briefing on pending House and Senate Medicare improvement and prescription drug benefit proposals. Speakers included Elizabeth Fowler, Chief Minority Health Counsel, Senate Finance Committee; Joel White, Professional Staff Member, House Ways & Means Health Subcommittee; Patrick Morrisey, Deputy Majority Staff Director, House Energy & Commerce Committee; and Lori Denham, Legislative Director, Office of Representative Cal Dooley (D-CA).

Ms. Fowler spoke on behalf of both the Finance Majority and Minority staff regarding

S. 1, "The Medicare Prescription Drug and Improvement Act of 2003."  Ms. Fowler reported that Majority Leader Bill Frist (R-TN) had scheduled two weeks of debate on the bill with a vote on final passage scheduled to occur shortly before the Senate adjourned for the July 4th recess period.  She noted that over 100 amendments would likely be considered during Senate debate.  She briefly outlined expected amendments from the Democratic side including amendments to address issues concerning employer-provided health coverage, prescription drug coverage gap, premium stabilization, and the prescription drug plan fall-back option.  Expected Republican amendments, according to Ms. Fowler, would likely address PPO plan payment rates. Other expected amendments would likely address drug reimportation, drug advertising restrictions, and generic drug approval and access.

In response to a question from the audience, Ms. Fowler stated that one solution to the employer "crowd-out" issue under consideration included increasing subsidies to employers offering retiree health care coverage. She noted that, while the bill as currently drafted includes subsidies up to 65% of premium costs, any increase in these subsidies would depend on scoring costs from the Congressional Budget Office (CBO).

Mr. White outlined key issues addressed in H.R. 2473, "The Medicare Prescription Drug and Modernization Act of 2003."  According to Mr. White, the bill would establish private, open-network plans in a new 10-region enhanced fee-for-service (EFFS) program.  The new EFFS, or Part E, would be required to offer prescription drug coverage, disease management programs, unified premiums and deductibles, and out-of-pocket expense limits.  Mr. White also stated that the House bill further encouraged competition by creating a new Medicare Advantage program in the place of Medicare+Choice.  The new program would link plan payments to FFS costs and growth.  Mr. White noted that, under the bill, all Medicare Advantage and EFFS plans would begin bidding by region in 2006 and would enter FEHBP-style competitive bidding with traditional fee-for-service Medicare in 2010. Mr. White also noted that CMS estimated a total of 48% of all seniors would enroll in either the new EFFS or Medicare Advantage programs.

Mr. White outlined the bill's benefit structure and noted that seniors would have four avenues for obtaining prescription drug coverage: 1) a stand-alone plan available to those seniors in traditional FFS Medicare; 2) new, regional EFFS plans; 3) Medicare Advantage plans; or 4) retiree coverage provided through former employers.  Mr. White also outlined additional subsidies for seniors under 150% of the Federal Poverty Level and income-related catastrophic thresholds for seniors with annual incomes above $60,000.

Mr. White then described provisions in H.R. 2473 to reform traditional FFS Medicare benefits. He noted that the bill would provide a free physical for each senior entering Medicare, new cholesterol screenings, and improved mammography access.  He also noted that the bill would implement a new 1.5% home health co-payment and, for the first time, would index the Part B deductible.

Mr. Morrisey noted that H.R. 2473 is the "best Medicare bill in a generation to provide better benefits for seniors."  He described aspects of the bill including creation of a competitively bid, private health care option and other program reforms. Specifically, Mr. Morrisey stated that Medicare's financial viability was "in doubt" unless Congress begins to move toward a more modern program such as the new Part E or Medicare Advantage programs. He stated that the creation of these programs would incentivize seniors to move, over time, into private plans that will offer more choices of coverage and integrated benefit packages.

Mr. Morrisey also outlined other reforms that he stated would "fix abuses in the current system." These additional reforms include a new payment system for physician-administered drugs, indexing the Part B deductible to better ensure that payments grow more closely with costs, and regulatory and contracting reform to better help providers "navigate the morass" of government. In closing, Mr. Morrisey noted that the proposed bill would offer "better choices, better efficiencies, and set in place a dynamic system to use the best aspects of the marketplace."

Ms. Denham described the work of House centrists, led by Representative Dooley, to develop H.R. 1568, "The Medicare Rx Now Act of 2003." Ms. Denham stated that Rep. Dooley and other supporters believed that seniors should have a universal prescription drug benefit included in Part B and at no additional cost. She noted that H.R. 1568 would specifically target low-income seniors and seniors with large drug expenses.  Additionally, she stressed that the Dooley proposal would count all third party contributions toward spending limits in an effort to encourage employers and state programs to continue existing coverage. Ms. Denham stated that the sponsors of H.R. 1568 considered the proposal "a first step toward incremental improvements" for Medicare. 

Outlining House centrist concerns with H.R. 2473, Ms. Denham stated that the benefit choices seemed complicated and uncertain.  She noted that seniors would have to carefully estimate future drug costs before determining whether the proposed stand-alone drug coverage would provide financial savings.  Additionally, she stated that the bill does not ensure continuous plan participation and that seniors could be forced to change plans annually. In closing, Ms. Denham noted that Rep. Dooley plans to offer his proposal as an alternative during floor debate on H.R. 2473.

In response to a question from the audience, Mr. Morrisey noted that H.R. 2473 does not contain a government-run fallback option for the stand-alone prescription drug plan.  He stated that the bill assumes that each of the 10 regions will be served and that the bill gives HHS the authority to increase subsidies to lure plans and to guarantee coverage in each region.  Mr. White noted that the Senate bill provides for a government-run fallback plan but only through sharing of insurance risk, not performance risk for the plan.

Another audience member asked the panelists to explain the provision in H.R. 2473 which would establish FEHBP-like bidding for all Medicare plans in 2010.  Mr. White responded that, effective in 2010, traditional Medicare FFS will compete "head-to-head" with private plans on pricing and benefits. He noted that traditional FFS premiums could increase or decrease depending upon how efficient that program is as compared with other, private plan options.  Mr. Morrisey noted that the authors of H.R. 2473, Ways & Means Committee Chairman Bill Thomas and Energy & Commerce Committee Chairman Billy Tauzin, are committed to ensuring competition in the Medicare program. He noted that competition will provide incentives to beneficiaries to choose the most efficient plans and will provide incentives to plans to maximize efficiencies to submit lower premium bids for coverage.