Medicare Compliance & Reimbursement

White House pressuring Congress on PPO inducement measures.

President Bush has vowed to veto the Senate version of a deficit-reducing budget package that includes elimination of the Medicare Advantage Regional Plan Stabilization Fund, intended as an inducement for Preferred Provider Organizations to enter and remain in regional markets.

"If the final bill is presented to the President that limits the choices of seniors, takes away their prescription drug coverage or cuts the Stabilization Fund to increase Medicare spending, the president's senior advisors will recommend that he veto the bill," the White House announced in a Statement of Administration Policy Nov. 1.

The Senate passed its budget reconciliation bill on Nov. 3 with the cut intact. The fund elimination is part of legislation that is the first attempt in nearly a decade to tackle the growth of entitlement spending, the part of the federal budget that rises automatically based on set formulas and population changes.

At issue is the $10 billion set aside for health insurance companies participating in Medicare. Lawmakers included the provision as part of the 2003 Medicare Prescription Drug, Improvement and Modernization Act, which developed a new type of private managed care plan the regional PPOs--that is available to provide care to Medicare beneficiaries starting in 2006. The stabilization fund would provide additional funds to PPOs from 2007 through 2013, with the additional funds being above and beyond the regular Medicare managed care payments these PPOs would receive.
 
These additional payments from the stabilization fund would not be available to Medicare Health Maintenance Organizations. Several critics have called the $10 billion a "slush fund," but the White House said the money would induce managed care plans to enter rural areas, thus expanding choices for some Medicare benes.

House, Senate Differ On Way To Cut Deficit

The House budget reconciliation bill passed the Budget Committee on the same day as the Senate version but the House legislation retains the stabilization fund. The bill would cut Medicaid's growth by $12 billion over five years and by nearly $48 billion over the next decade, according to the nonpartisan Congressional Budget Office.

The Senate's approach trims spending on Medicaid and the related Children's Health Insurance Program by $4.3 billion through 2010, and $14 billion through 2015. The Senate measure mitigates cuts to health care programs for the poor by shifting the bulk of cost savings to Medicare, which would suffer $5.7 billion in cuts over five years. That savings would then increase to $40.6 billion through 2015.

The budget bill is the most ambitious effort to rein in federal spending since 1997, Sen. Judd Gregg (R-NH), Senate Budget Committee chairman, said in a statement. "We produced a budget this year, for the first time in eight years, to control the rate of growth of entitlement spending," he noted.

But Sen. Kent Conrad (D-ND), senior Democrat on the Budget Committee, said it was a sham to portray the legislation as a deficit reduction measure.

"The first chapter of this book cuts spending by $39 billion over the next five years," Conrad said. "But that is only part of the package. The next chapter will have tax cuts of $70 billion. Chapter three is to increase the debt limit. This budget package will increase the debt of the United States."

Note: Medicare Legislation & Regulation will not publish an issue on Thursday, November 24. Look for the next issue of MLR on December 1.