Medicare Compliance & Reimbursement

Senate Finance Committee Chair Chuck Grassley (R-IA) and ranking Democrat Max Baucus (DMT) unveiled a Medicare drug package June 5, and hope to gain panel approval of the legislation June 12.

Under the plan, all beneficiaries who voluntarily signed up would get an equal drug benefit. In traditional Medicare, private plans would compete to provide drug-only coverage. In any area where two private drug-only plans did not materialize, the federal government would provide guaranteed federal fallback coverage through a contractor.

A new program, MedicareAdvantage, would incorporate and strengthen the current Medicare+Choice program and add new options - preferred provider organizations and what a Finance summary calls "other coordinated care plans to offer integrated benefits more typical of the health benefits" available today in employer sponsored plans. MedicareAdvantage plans of all kinds would offer the same drug benefit at the same premium as the drug-only plans in fee-for-service Medicare.

Private plans would bid to provide comprehensive medical coverage in MedicareAdvantage on a regional or national basis. Only three plans per region would be chosen. All plans would charge the same national premium for drug coverage as the drug-only plans, but medical coverage premiums could differ. If a plan was able to underbid FFS costs, beneficiaries would share in the savings by paying lower medical-coverage premiums.

The government would always share risk with drug-only plans and share prescription-drug risk with comprehensive plans. The government also would share substantial risk with PPOs and other comprehensive plans for medical risk in the early years of MedicareAdvantage, but plans gradually would assume more insurance risk themselves for their non-drug medical coverage.

A new Health and Human Services division separate from the Centers for Medicare & Medicaid Services would administer all private insurers in Medicare, including providers of drug-only coverage.

Numbers are in flux, pending completion of a Congressional Budget Office analysis, expected early in the week of June 9. However, tentative basics of the drug coverage are as follows: Beneficiaries would pay a premium of around $35 a month and a $275 annual deductible, then have 50-50 cost-sharing up to around $3,450 in total spending.

Above that amount would be one of the coverage "doughnut holes" that became famous during last year's Medicare drug debate - a gap in coverage in which beneficiaries would pay for drugs on their own, assisted only by negotiated discounts available with their insurers' discount card. Beneficiaries would pay for drugs out of pocket until total spending reached about $5,300. Above that amount, catastrophic coverage would provide 90 percent of prescription costs.

Family contributions, Medicaid contributions, and contributions from state government senior pharmacy programs would count along with the beneficiary's own spending toward the out-of-pocket maximum spending that triggers catastrophic coverage. Employer contributions would not count, mainly because the aim of the legislation is to target the limited funds available on the beneficiaries who get the least assistance with their drug purchases today, said a Republican Finance staffer at a June 5 briefing.

Low-income beneficiaries get additional federal help, phased out on a sliding scale at higher income levels, and the federal government also would offer modest additional assistance to states for low-income Medicare beneficiaries.

Beginning in 2004, all beneficiaries would get a drug discount card to tide them over until the coverage program begins in 2006.

The bill also contains reimbursement assistance for rural health-care facilities that would be offset by other Medicare payment changes, leaving the full budgeted $400 billion for a drug benefit, according to Grassley.