Medicare Compliance & Reimbursement

Medicare beneficiaries would receive 100 percent coverage of drug expenses after spending $3,500 out-of-pocket under bills approved by two House committees last week. That's down from $3,700 in the proposal unveiled June 12 by Ways and Means chair Bill Thomas (R-CA) and Energy and Commerce chair Billy Tauzin (R-LA).

Ways and Means voted 25-15 on June 17 to add a prescription drug to Medicare and increase the role of competition and private plans in the program. Democrat Earl Pomeroy (ND), who voted aye, was the only panel member to cross party lines.

Commerce approved its version of the legislation two days later in a 29-20 vote. Again, the only break in party discipline was one Democrat, Ralph Hall of Texas, voting to approve the plan.

Republicans modified one of the most contentions portions of their bill, the introduction of direct competition between fee-for-service Medicare and private plans in 2010. As passed by the two committees, the legislation phases in this competition and its potential effect on FFS premiums over a 5-year period. FFS premiums would remain unaffected in "noncompetitive areas," such as areas without two private so-called enhanced FFS or Medicare Advantage Plans or areas where the private plan penetration was below the lower of 20 percent or the national average.

These modifications, however, did not mollify Democrats, who called the bill a first step in the total privatization of Medicare. Both committees turned back identical Democratic substitutes that would have delivered a drug benefit using pharmacy benefit managers bearing only contractual risk, not insurance risk.

After a $100 deductible, the Democratic plan would have paid 80 percent of all drug costs up to $2,000, and 100 percent of all costs above $2,000. Democrats acknowledged that their alternative would have more than doubled the cost, but they said it could be easily paid for by scaling back administration-backed tax cuts for the wealthy.

The House is expected to debate the plan next week. Given the Republican majority's iron control, Democratic objections are not expected to pose a serious threat to passage. Perhaps more of a threat - although again probably not enough of one to derail the bill - could come from within the Republican party. In the Commerce mark-up, Tauzin secured support from a group of panel members dubbed the "rump group," but that support could evaporate on the floor.

The rump group consists of several Republicans including Rep. Richard Burr (NC), Charlie Norwood (GA), and Joe Barton (TX), who favor offering Medicare beneficiaries a defined number of dollars to buy coverage, rather than a defined benefit. Suspicious that the House Medicare plan would balloon beyond its official $400 billion pricetag, the group originally wanted to offer the benefit through a drug discount card on which the government would place subsidies for low-income beneficiaries. Under the plan, friends and relatives would be able to add money to the cards, and those contributions would be tax deductible.

The group lacked the clout to make its plan the primary drug delivery model. But in return for supporting Tauzin in the mark-up, they won the chairman's acceptance of a Burr amendment essentially incorporating the group's model as a transition that would begin immediately and phase out when drug-only plans got off the ground, likely in 2006. Moreover, some rump group members are doubtful that drug-only plans will enter in all markets, and under the Burr amendment the drug cards would stay in place as a fallback in areas where drug-only plans did not enter.

Because of Commerce's jurisdictional limits, Burr could not include the tax deductibility feature in his amendment. The group wants to get that in when the Rules Committee melds the Commerce and Ways and Means bills. However, the committee could also take out the Burr amendment entirely. Asked if that would be enough for some group members to vote against the whole package, a staffer unhesitantly answered, "Yes."