Medicare Compliance & Reimbursement

Revamp features Rx benefit, increased managed care presence and much, much more funding.

Congress Nov. 25 completed passage of the most dramatic overhaul of the Medicare program since its inception. Under the terms of the legislation, which President George Bush is expected to sign, in 2004 seniors would get a discount drug card, which the Bush administration predicts will provide savings of 15 to 25 percent. A full-scale drug benefit would kick in on Jan. 1, 2006, as would a framework for preferred provider organizations to provide coverage in 10 to 50 regions across the country. In addition to prescription drugs, the bill also revamps Medicare to give health plans a more significant role and includes a host of measures relating to provider reimbursement. The Congressional Budget Office estimates that spending under the legislation, HR 1, would be nearly $410 billion over its first 10 years; with the effect of money-saving provisions included, the proposal would cost $15 billion less, bringing it in within the $400 billion provided for in the fiscal year 2003 budget resolution. The most notable savings - $13.3 billion - would come from charging seniors with higher incomes bigger premiums for Medicare Part B, which pays for physician and hospital outpatient services.

Compromise on Premium Support  The conference agreement was made possible by a compromise on the issue of premium support, the House bill's head-to-head competition between private plans and traditional Medicare. When talks appeared to bog down, Senate Majority Leader Bill Frist (R-TN) and House Speaker Dennis Hastert (R-IL) stepped in and negotiated a compromise premium support demonstration program with Democratic Sens. Max Baucus (MT) and John Breaux (LA), the only two Democratic conferees conference chair Rep. Bill Thomas (R-CA) allowed to participate in conference deliberations. The premium demonstration would run for six years, beginning in 2010, in up to six metropolitan statistical areas with at least 25 percent Medicare private plan penetration. Medicare would subsidize each beneficiary based on a benchmark composed of a combination of fee-for-service costs and plan bids, so that if plans bid lower than traditional Medicare, premiums could go up for beneficiaries who chose to remain with their FFS coverage. Among other objections, Sen. Tom Daschle (D-SD), Ted Kennedy (D-MA), and many other Democrats see even a demonstration of premium support as the beginning of the end of Medicare's universal entitlement, arguing that such competition would entice younger and healthier seniors to join private plans, raising costs all the more for the older and sicker beneficiaries left in traditional Medicare. Proponents of premium support respond that payments would be risk-adjusted. However, in a recent conference call sponsored by the liberal-leaning Center on Budget and Policy Priorities, Henry Aaron of the Brookings Institution [...]