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Medicare Compliance & Reimbursement

Medicare Reform:

GOP LEADERS' MEDICARE DEADLINE PASSES SANS DEAL

Published on Sun Oct 26, 2003

To no one's surprise, House and Senate negotiators failed to produce compromise legislation revamping Medicare and adding a prescription drug benefit by Oct. 17, the deadline set a month ago by Republican Capitol Hill leaders. The date also passed without any formal announcement of the sort of broad "conceptual" agreement that conference vice-chair Sen. Charles Grassley (R-IA) and others had talked about earlier in the month.

The negotiating is taking place mostly among Republicans, with Sens. Max Baucus (D-MT) and John Breaux (D-LA) the only Democrats involved. Senate Minority Leader Tom Daschle (D-SD) has complained about this and warned that it may make it harder to persuade the full Senate to approve a conference agreement.

Among this week's developments:

  • Movement Towards Income-Relating the Part B Premium. Breaux (D-LA) and others have indicated that the conference is moving towards charging higher-income beneficiaries a higher premium for Medicare Part B, which covers physician and hospital outpatient services. This approach appears in neither the Senate nor the House bill.

    The final Senate bill contains no income-relating provisions, but the upper chamber did come close to income-relating the Part B premium when it was debating S 1. An amendment by Democrat Dianne Feinstein (CA) and Republican conferee Don Nickles (OK) would have imposed higher premiums on wealthier beneficiaries, using a sliding scale starting at an income of $100,000 for individuals and $200,000 for couples. The amendment, which would have raised more than $40 billion over 10 years, garnered 59 ayes in a recorded vote, but the Senate ultimately defeated it in a subsequent voice vote after Sen. Edward Kennedy (D-MA) expressed intense opposition and threatened to hold up the legislation over the issue.

    The House bill does contain an income-relating provision, but it varies the benefit instead of the premium. Under HR 1, higher-income beneficiaries must pay more out-of-pocket for drugs before reaching the catastrophic threshold, after which Medicare pays for 100 percent of drug costs. The House, however, on Oct. 7 voted down a motion to instruct its conferees to push the principle of income relating in conference.

    Some moderates and liberals, like Kennedy, are opposed to any type of income relation in Medicare, worrying that it would undermine Medicare's political support among affluent Americans and expose it to the sorts of stigma that attach to welfare and other programs for poor Americans. However, other opponents of varying benefits by income, as the House does, are less troubled by income-related premiums.

    "I think most people who worry about support for the program would be opposed to having the benefits change by income, but they're going to split on whether or not there should be some income-relating on the premium," Marilyn Moon, director of health programs at the American Institutes for Research, said Oct. 16 on a Web briefing sponsored by the Kaiser Foundation. At the same event, the American Enterprise Institute's Joe Antos said it would be very difficult to design computer systems and other infrastructure necessary to implement the House scheme, a fear that has been voiced by many others including Health and Human Services Secretary Tommy Thompson.

    Kennedy said Wednesday that he was still opposed to income-relating premiums but wanted to see the entire package before deciding whether to support any conference report. "We can't get everything we want out of the conference," he told CQ Today.

    As workers, higher income individuals already pay more into the Medicare program in two ways. First, Medicare Part A is financed through a payroll tax. That tax is a flat-rate levy, so all taxpayers pay the same percentage of their income. However, unlike the payroll tax that finances Social Security, the Medicare tax is uncapped, so in absolute dollars the wealthy pay more.

    Second, Medicare Part B is financed partly through the income tax, under which higher-income individuals pay a greater proportion of their incomes. In addition, both the House and the Senate bills income-relate in the opposite direction by providing subsidies for low-income individuals. The current Medicare system also does this through programs under which state Medicaid programs subsidize the Part B premium and other Medicare cost-sharing for low-income individuals.

  • No Separate Agency For Private Plans. Confirming earlier reports, Breaux told the New York Times that conferees had abandoned plans to establish a separate agency to oversee the array of new private plans the House and Senate bills would introduce into Medicare. Many conservatives distrust the Centers for Medicare & Medicaid Services, the agency that oversees Medicare, and argue that it creates a conflict of interest for the same agency to oversee both traditional Medicare and the private plans. This conflict could be particularly acute under the House bill, which would pit the public and private wings of the program against each other beginning in 2010.

    Nevertheless, creating a new agency would have necessitated either an overall beefing up of Medicare's chronically starved administrative budget, or alternatively hollowing out traditional Medicare's administrative functions to pay for the new agency.

  • More Money To Keep Employers In the Game. Spooked by predictions from the Congressional Budget Office and others that roughly a third of the 35 percent of seniors with employer-based retiree coverage could lose it under either the House and Senate bill, the conferees are reportedly leaning towards beefing up incentives to employers not to drop coverage. The extra help could come in the form of increasing subsidies already in the bills, or a separate tax credit for employers that continue to provide coverage.

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