Medicare Compliance & Reimbursement

Most Democrats supporting Grassley-Baucus would not support the direct competition between FFS Medicare and private plans envisioned in the House approach. Therefore, whether a Medicare bill is finally enacted is likely to depend on whether the White House will lean on House Republicans to accept something like the Senate bill.

For the White House, the calculation would seem to be politics versus principle, with the betting being that politics will win out. Republicans do not relish having to explain to voters why they could not enact a prescription drug benefit with control of the White House, the Senate, and the House.

Centers for Medicare & Medicaid Services Chief Tom Scully told reporters June 17 that the administration purposefully omitted from its Medicare reform proposal two elements that prevented consensus in the National Bipartisan Commission on the Future of Medicare: a higher eligibility age, and the FFS-private plan competition model of the House bill. The House competitive model was left out, even though in theory it is probably preferable, because it would be a lightning rod that could gridlock things from the start, he explained.

The bills in both chambers have already bent the White House's principles considerably. Under the original administration Medicare proposal, seniors would have had to join a private plan to get a full drug benefit, with only a discount card and catastrophic coverage available to seniors who chose to stay in FFS Medicare. Yet both the House and Senate bills offer equal drug benefits to all beneficiaries, with the FFS benefit delivered by the drug-only plans which the administration has consistently opposed.

The administration has avoided explicitly taking sides between the House and Senate. In a June 19 Statement of Administration Policy, the White House offered qualified support for the Senate bill, calling it "an important first step toward implementing many of the President's principles for strengthening and improving Medicare."

The White House praised the bill's introduction of PPOs: "The administration believes that a prescription drug benefit works best when it is incorporated into a comprehensive package of medical benefits." However, the administration voiced concern about the legislation's fallback structure for delivering the drug benefit to FFS beneficiaries in areas where at least two private entities willing to share risk with the government did not materialize. In those areas, the government would contract with a pharmacy benefit manager or other private entity to deliver the benefit.

"It is essential that private entities bear insurance risk for this stand-alone coverage," the SAP declares. "The fallback provisions are a government-run delivery system for prescription drugs which could lead to government pricing of individual drugs and government regulation of the availability of certain prescription drugs. We will work with Congress to improve this bill so it does not discourage private entities from bearing insurance risk for prescription drug coverage."