Medicare Compliance & Reimbursement

In the early morning hours of June 27, both the House and the Senate passed bills that would add a prescription drug benefit for seniors and increase the role of private preferred provider organizations in the program.

The Senate passed its version, S 1, in a bipartisan 76-21 vote. The House followed suit a couple of hours later, passing HR 1 216-215, with most Democrats and some conservative Republicans in opposition.

As the time for the House vote expired, the nays outnumbered the yeas. The positive outcome was only assured when several Republican representatives reportedly changed their votes.

Given the closeness of the House vote, any move in the coming House-Senate conference to make the House bill less market-oriented - such as removing the provision that would set up direct competition between fee-for-service Medicare and private plans starting in 2010 - risks alienating more conservative Republicans and tipping the vote the other way.

However, support for the Senate legislation is more fragile than the margin would suggest: Many Democrats voted for the bill only reluctantly. Any attempt to move toward the House bill in conference could spell trouble in the upper chamber, perhaps leaving Senate GOP leaders with a bare 51-vote partisan majority that S.1 coauthor and Senate Finance Chair Charles Grassley (R-IA) has so vigorously said he did not want.

One example of the balancing act that Grassley and S 1 co-sponsor Sen. Max Baucus (D-MT) have managed came Thursday, when the pair offered an amendment that was adopted by a 71-26 tally. The amendment splits $12 billion - made available when the Congressional Budget Office scored S 1 below the $400 billion over ten years reserved for Medicare reform in the fiscal year 2004 congressional budget resolution - between two demonstration projects.

Under the Senate bill, PPOs would bid to serve Medicare beneficiaries in particular geographic regions, but their maximum reimbursement would be capped by a "benchmark" linked to FFS costs in the area. Some Republican senators said this amounted to the very price controls the competitive bidding system was designed to avoid, and they argued for a benchmark set by the middle bid of the three lowest-bidding PPOs for each area.

The Grassley-Baucus amendment sets aside $6 billion for a demonstration program to test this reimbursement mechanism. To satisfy Democrats who view the middle-PPO method as a subsidy to less efficient private plans, Grassley and Baucus use the other $6 billion to fund a second demonstration, this time of adding improvements like disease management and care coordination to FFS Medicare.

Senate Majority Leader Bill Frist (R-TN) wants to lower expectations for how fast the bill can emerge from conference, CQ Daily Monitor Update reported June 27. The White House would like a summer signing ceremony, but Frist will only say that conference report will emerge this year.