Medicare Compliance & Reimbursement

Senate Majority Leader Bill Frist (R-TN) and House Speaker Dennis Hastert (R-IL) shook up the stalled Medicare talks Nov. 12 with a compromise proposal on premium support, the direct competition between traditional Medicare and private plans included in the House's bill but not the Senate's.

Premium support has been foremost among many thorny issues that have bedeviled efforts by negotiators to agree on a proposal to overhaul Medicare and add a drug benefit. The leadership competition proposal has garnered support from important quarters such as Democratic conferees John Breaux (LA) and Max Baucus (MT).

And in a Nov. 13 statement, AARP head William Novelli said, "The idea of a premium support demonstration (or a test of comparative costs) which is limited in duration and location, with strict standards for accountability and low-income beneficiary protections, could strike a balance on the most intensely debated issue in the conference." Indeed, Novelli's receptivity to Frist and Hastert led Senate Democratic leader Tom Daschle (SD) to charge that AARP was "caving in" to Republicans.

But the Frist-Hastert plan has also engendered criticism from those who think it goes too far, including key Senate Democrats like Edward Kennedy (MA) and several Senate Republicans. Criticism has come, too, from conservative House Republicans, including conference chair Rep. Bill Thomas (CA), who think it does not go far enough.

The House bill would phase in premium support as a permanent feature beginning in 2010. Frist and Hastert have proposed instead a three-year premium-support demonstration program, to run from 2008 to 2010, in four large metropolitan statistical areas, each with at least 30-percent managed care penetration among Medicare beneficiaries, and in one region with at least 20-percent penetration. If areas could not be found to meet these criteria, the plan allows for alternative geographic mixes.

After 2010, the Department of Health and Human Services could extend the demo for up to three more years. After that, new legislation would be needed to extend the demo or to make it permanent. The so-called "core group" of conferees - all Republicans plus Baucus and Breaux - met on Nov. 13 without reaching agreement. Thomas and conference vice-chair Sen. Chuck Grassley (IA) are reportedly planning to recommend changes to the plan, which Frist and Hastert will consider before proposing a final package. The GOP leaders aim for a formal conference agreement early next week, with floor action in the House and Senate before the adjournment target date of Nov. 21.

Tough Going Expected In Both Chambers 

The task of coming up with a viable compromise will be extremely difficult. On the one hand, many conservatives, nervous about the unfunded entitlement expansion represented by a broad new benefit, believe that premium support is necessary to make Medicare more efficient and hold down costs. Conservatives such as Patrick Toomey (R-PA) and Jay Hensarling (R-TX), who voted "aye" this summer when the House bill passed by only one vote, have expressed disappointment with the limited nature of the Frist-Hastert competition provision.

On the other hand, many Democrats believe that premium support would increase premiums for older, sicker and rural beneficiaries, who would remain in traditional Medicare as private plans cherry-picked younger and healthier beneficiaries. Frist and Hastert attempt to deal with these concerns by exempting low-income beneficiaries and limiting premium increases for everyone else to 10 percent a year. They also direct the HHS Secretary, in determining whether to extend the demonstration, to look at how well risk-adjustment is preventing cherry-picking, as well as whether the demo is protecting quality and saving money.

Making conservatives happy by strengthening the premium support provisions risks losing Baucus, which would likely end any hope of picking up significant Democratic support in the Senate. As it is, the leaders' plan may already go too far to pass the Senate, let alone get the 60 votes needed to defeat a filibuster.

Thirty-seven senators, including seven GOP senators, sent a Nov. 13 letter to Frist arguing that the plan was not really a premium support demonstration but rather "a veiled attempt to institute this policy into law. According to CMS data, this proposal could capture up to 10 million seniors, 25 percent of Medicare beneficiaries," says the letter, which is signed by Kennedy and 28 other Democrats, independent James Jeffords (VT) and Republicans Olympia Snowe and Susan Collins of Maine, Wayne Allard and Ben Campbell of Colorado, and John Chafee (RI), John McCain (AZ), and Arlen Specter (PA).

The Republican signatory list suggests that Frist and Hastert will have to contend with opposition that goes beyond the ideological. For example, the presence of Colorado's two senators may be partially explained by the fact that Denver is one of the areas with enough managed care penetration to qualify for the proposed demonstration. In the late '90s, Campbell helped lead the successful opposition to efforts by the Centers for Medicare & Medicaid Services to include Denver in a demonstration of competitive bidding among Medicare private plans, although one of the main objections health plans raised to that demo was the exclusion of traditional Medicare, which would be included in the new demonstration.

The search for compromise is complicated further by other major components of the package that could cause various members of Congress to vote no. Examples include a dramatic expansion of tax-advantaged medical savings accounts, authorization to import less expensive drugs from Canada only if the HHS Secretary certifies that it is safe - a certification that Secretaries under both President Clinton and President Bush have refused to give - and a prohibition against state Medicaid programs "wrapping around" Medicare to pay Medicare cost-sharing or provide drugs unavailable through Medicare for low-income seniors.