2003-10-24 -- More on the Showdown on Medicare Restructuring


George J. Kourpias, President of the Alliance  for Retired Americans,
says, "The structure of the proposed bill, as reported by the  news
media, confirms our worst fears."

Kourpias sites the following objections to the proposed bill:

*  privatizes Medicare by calling for traditional fee-for-service
Medicare to compete  directly with private health plans beginning in
2010. (Medicare actuaries estimate this will increase original
Medicare's premiums up to 25%, driving all but the sickest out of
original Medicare, leaving it with high costs and minimal funds, and
eventually killing it.)

*  adds a means-test to the Part B premium, forcing higher income
seniors to pay  more for coverage. This provision was not in either
H.R. 1 or S.1 but has been  added by the negotiators. (This also will
drive middle-class people into private care, leaving original Medicare
as a poverty program which will be drastically cut.)

*  endangers employer-provided health benefits by not providing
sufficient employer  incentives such as tax credits or subsidies.

*  includes a coverage gap that would force beneficiaries whose drug
costs exceed  $2,200 a year to pay out-of-pocket for their drug costs
between $2,201 and  approximately $5,000.

*  increases costs to states for "dual eligibles" - people who are
eligible for both  Medicare and Medicaid.

"Once a final agreement is announced by negotiators, seniors will
still have time to let  their elected representatives know they
disapprove of the bill," says Kourpias, "but we  will have to act
quickly to make sure that every Member of Congress gets our message
before any final bill comes to the floor for a vote.

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Kaiser Family Foundation Daily Health Policy Update: As showdown on
Medicare prescription-privatization bill approaches, Democrats are
objecting but seem willing to block (filibuster) only the very worst
aspects of the overall plan.

Kaiser Foundation Daily Health Policy Briefing, October 24, 2003

Medicare: Group of Senators Raises Objections to Competition, Other
Proposals in Medicare Negotiations

As a conference committee continues to work on reconciling the House
and Senate Medicare bills (HR 1 and S 1), a group of senators, mostly
made up of Democrats, on Thursday warned that they would block passage
of a final Medicare bill if the version coming out of the committee
does not meet certain conditions, the Wall Street Journal reports.



In a letter released at a news conference yesterday, 41 lawmakers --
including 39 Senate Democrats, Sen. Olympia Snow (R-Maine) and Sen.
James Jeffords (I-Vt.) -- said that a final bill should not include a
House-passed provision calling for health savings accounts for all
individuals or any limits on Medicare spending.

A final bill should include provisions that would encourage employers
to maintain retiree drug coverage if a Medicare drug benefit is
implemented; help speed market entry of generic medications; and
provide subsidies to low-income Medicare beneficiaries, according to
the letter.

The senators signing the letter called on President Bush to intervene
in negotiations to help bridge the differences between the Republican
and Democratic parties and craft a bipartisan piece bill. "The
president can solve this problem," Sen. Tom Daschle (D-S.D.) said
(Lueck, Wall Street Journal, 10/24). (See below.) The Senators' letter
can be read by clicking on
http://www.ourfuture.org/docUploads/medicare10-23.pdf

Many Democrats also have said they were largely left out of the
negotiating process, noting that Rep. Bill Thomas (R-Calif.), the
conference committee's chair, has "excluded five of the conference
committee's seven Democratic members from negotiating sessions,"
according to the Los Angeles Times. Thomas has said he "is interested
in working only with members willing to compromise," the Times reports
(Kemper, Los Angeles Times, 10/24).
http://www.latimes.com/news/nationworld/nation/la-na-medicare24oct2423
5422,1,1570641.story?coll=la-headlines-nation



"A partisan conference report that jeopardizes Medicare and does not
provide meaningful assistance to the elderly and disabled should not
and will not pass," the letter says (Pear, New York Times, 10/24).
http://www.nytimes.com/2003/10/24/politics/24MEDI.html

A core group of negotiators, made up of House and Senate Republicans
and two Senate Democrats, stayed Thomas' Capitol office on Thursday
night, "reviewing options to resolve long-standing differences,"
AP/Long Island Newsday reports. In a "signal perhaps of increasing
intensity," lawmakers asked their aides and administration officials
to leave the room, according to AP/Newsday (Sherman, AP/Long Island
Newsday, 10/23).
http://www.newsday.com/news/politics/wire/sns-ap-medicare,0,4334846.story

Competition Provision

One of the major concerns most Democrats have is the House-passed
competition provision, under which traditional, fee-for-service
Medicare would begin to compete directly with private health plans in
2010 (Fagan, Washington Times, 10/24). The provision also calls for
premiums under traditional Medicare to be determined by competition
with private plans, rather than by a fixed formula.
http://www.washingtontimes.com/national/20031023-114656-3112r.htm

According to some Democrats, such a proposal would cause
fee-for-service Medicare premiums to rise and would prompt healthier
beneficiaries to join private plans, leaving beneficiaries who are
sicker in traditional Medicare (Kaiser Daily Health Policy Report,
10/23). Requiring traditional Medicare to compete with private plans
would mean "the demise of Medicare as we've known it," Daschle said,
calling the provision "virtually a show-stopper" (Freedman, Albany
Times-Union, 10/24).
http://www.timesunion.com/AspStories/story.asp?storyID=182854&category
=NATIONAL&newsdate=10/24/2003




Negotiators are considering modifying the competition provision to
decrease its potential impact on premiums and shield beneficiaries who
would remain in traditional Medicare from changes, perhaps by
protecting low-income beneficiaries' premiums, the Journal reports.
However, "it isn't clear" if such proposals would satisfy Democrats,
according to the Journal (Wall Street Journal, 10/24). Sen. Charles
Grassley (R-Iowa) said that a reconciled bill would not pass the House
without some sort of competition provision, but he acknowledged that
if it is "too far-reaching, it would prevent the bill from passing the
Senate."

Rep. Billy Tauzin (R-La.) said that if House Republicans do compromise
on the competition provision, they will "expect some concession from
Democrats" on a provision that would address ways to control the
Medicare spending growth rate (New York Times, 10/24). He said that
conferees are considering four or five cost-containment proposals,
including some that would allow Congress to intervene if Medicare
costs rise beyond estimates from the Congressional Budget Office
(Rovner/Heil, CongressDaily/AM, 10/24). In the letter, the senators
said that the tentative agreement on the Medicare prescription drug
benefit structure that was reached by conferees this week could be in
jeopardy if House Republicans insist on including the competition
provision in the final bill. Sen. Edward Kennedy (D-Mass.) said the
drug benefit is "at grave risk at this time."

Drug Benefit Structure

The letter does not object to the basic structure of the drug benefit
agreed upon by negotiators (Pear, New York Times, 10/24).

Under the tentative agreement on the drug benefit, the federal
government would pay 75% of beneficiaries' drug costs up to $2,200 per
person per year. Beneficiaries would pay a $275 deductible and average
monthly premiums of $35. Beneficiaries whose drug costs exceed the
$2,200 annual cap would pay out of pocket for their drug costs from
that point until about $3,600, when catastrophic coverage would begin.
After that point, the beneficiaries would have to pay 5% of the cost o
f each prescription or a copayment of $5 to $10 for each prescription.

Beneficiaries with incomes below 135% of the poverty level would not
have to pay the premiums or deductible but would contribute a $2 copay
for each generic drug and $5 for each brand-name drug until their
overall drug costs reached $5,000; Medicare would fully cover drug
costs after that point. Beneficiaries with incomes between 135% and
150% of the federal poverty level would pay a $50 deductible, reduced
premiums based on a sliding scale related to income and 15% of the
cost of each prescription until their out-of-pocket costs reach
$3,600. Beneficiaries with assets of more than $10,000 would not be
eligible for subsidies, regardless of their income level (Kaiser Daily
Health Policy Report, 10/23).

Ideological Divide

Democrats said the letter is "designed largely to slow any rush toward
agreement that may be developing," AP/Newsday reports (Sherman,
AP/Long Island Newsday, 10/23). The New York Times reports that the
some lawmakers' criticism regarding the negotiations to date
illustrates the ideological differences between conservative House
Republicans and Senate Democrats. "Members of Congress can agree on a
Medicare drug benefit. But we cannot agree on larger questions about
the future of Medicare. That's the fault line between the two
parties," Rep. Rahm Emanuel (D-Ill.) said.

The letter also "highlight[s] the challenge facing Republicans: to get
a final bill through the House without destroying the bipartisan
coalition that wrote the Senate bill," according to the Times.
Democrats would need 41 senators to filibuster a final bill, but
Daschle on Thursday said, "It's not my intention today to say we're
going to filibuster anything" (New York Times, 10/24). He did,
however, say a filibuster was an option (Washington Times, 10/24).
Kennedy said, "We're further away from (agreement) today than at any
time since the conference started" (Los Angeles Times, 10/24).

But Grassley said that some lawmakers' concerns "might be premature,"
saying that they are based on tentative and not final decisions,
CongressDaily reports (Rovner/Heil, CongressDaily, 10/23). Sen. Bill
Frist (R-Tenn.) has said he hopes to have final legislation before the
Senate in the first or second week of November (Cohen, Newark
Star-Ledger, 10/24).

Other Progress

Conferees are "nearing agreement" on changing the way Medicare pays
for medications it currently covers. Currently, Medicare reimburses
doctors who administer medications to beneficiaries in their offices
for 95% of the average wholesale price of the drug in most cases.
Negotiators are considering requiring Medicare to reimburse providers
85% of AWP for one year, and then a new market-oriented price system
would be researched and determined by Medicare officials.

The new system would allow some discretion for individual drugs to be
paid based on AWP if necessary (Wall Street Journal, 10/24). Lawmakers
on Thursday also discussed ways to lessen the impact of a proposed
copayment for home health visits on home health services (Long Island
Newsday, 10/23).

They also discussed raising payments to physicians, particularly those
in rural areas (Goldstein, Washington Post, 10/24, see below).
Conferees also are reportedly considering adding a Medicare preventive
care benefit if there is enough money available after key provisions
in the Medicare discussions are resolved.

A recent General Accounting Office report found that a number of
treatments or checkups recommended by the U.S. Preventive Services
Task Force, including tetanus-diphtheria and chicken pox booster shots,
vision and hearing impairment services and cholesterol screening, are
not covered by Medicare. Negotiators are considering coverage for
routine physical exams and cardiovascular screening tests; improved
coverage for some mammograms and outpatient vision services; a
weight-loss demonstration project; and waiving deductibles for
colorectal cancer screening tests (Rich, CongressDaily, 10/23).

Friday Deadline Still in Reach, Lawmakers Say

"We still are on schedule [to reach an agreement] by Friday
afternoon," Grassley said. Conferees are working from an outline
prepared by Thomas that leaves most of the controversial items until
the end of negotiations, and as a result, it "remains unclear ...
whether the group can agree on issues they have not yet considered,"
the Post reports (Washington Post, 10/24).

Broadcast Coverage  The following broadcast programs covered the
Medicare prescription drug bill negotiations:

PBS' "The NewsHour with Jim Lehrer": NewsHour correspondent Terence
Smith speaks with health correspondent Susan Dentzer about what
changes Medicare patients should expect from a new prescription drug
bill (Smith, "The NewsHour with Jim Lehrer," PBS, 10/23). The segment
is available online in RealPlayer.

CBS' "Evening News": The segment outlines the coverage of the proposed
plan and the objections of the Democratic legislators. It includes
comments from Daschle, Kennedy and Tauzin (Andrews, "CBS Evening
News," CBS, 10/23). The segment is available online in RealPlayer.

NBC's "Nightly News": The program reports on senators' letter to Bush
and includes comments by Tauzin, Kennedy and Grassley (Reid, "Nightly
News," NBC, 10/23). The segment is available online in WindowsMedia.

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Democrats Assail Medicare Proposals

By Amy Goldstein Washington Post Staff Writer Friday, October 24,
2003; Page A04

The race to find a compromise on Medicare prescription drug
legislation hit a substantial snag yesterday as Senate Democrats
warned they would not tolerate several changes, sought by the leader
of the House-Senate negotiations, that would benefit private health
plans and for the first time restrict government subsidies to the
program.

Forty-one senators, including one Republican, sent a letter yesterday
to President Bush, imploring him to intervene so that the negotiators,
working to combine House and Senate Medicare bills, do not produce a
deal that Democrats say the Senate would reject.

The most vehement protests centered on an aspect of the House bill
that eventually would require the traditional version of the program
to compete with private health plans based on price. Proponents of
that competitive arrangement, known as premium support, say that it
would encourage people to join private health plans and drive down
costs; critics predict it would end up costing more for patients who
remain in the traditional fee-for-service program, which now includes
nearly 90 percent of the 40 million elderly and disabled Americans in
Medicare.

Such Democratic objections are not new. But congressional leaders are
pressuring the Medicare conference committee to complete its work
within days, and yesterday's complaints provided evidence that two
months of negotiations have not produced an avenue for the program
that is certain to satisfy both chambers of Congress.

Democrats stopped short of saying they would filibuster a plan they
dislike, but they used barbed language in urging negotiators to avoid
premium support and several other contentious provisions that the
House GOP wants. "Virtually a show-stopper," is the way Senate
Minority Leader Thomas A. Daschle (D-S.D.) characterized the
possibility of the system of price competition.

In one sign of the cross-pressures bearing on the negotiations, the
Democrats' letter to Bush is essentially a mirror image of a letter
that a group of 13 House conservatives wrote last month to House
Speaker J. Dennis Hastert (R-Ill.). In it, they vowed to oppose any
final Medicare plan unless it contains many of the same provisions
that the Democrats pledged to reject.

Negotiations are taking place in secrecy, but a few lawmakers who are
participating said they hope to reach a rough consensus on as many
aspects of the legislation as possible by the end of today. They
acknowledged that, even if that proves possible, they would lack
critical details, including budget estimates, that will determine
whether such agreements solidify in the next week or two.

"We still are on schedule by Friday afternoon," said Senate Finance
Committee Chairman Charles E. Grassley (R-Iowa), the chamber's lead
negotiator.

Sources familiar with the conference committee's work said that
yesterday's negotiations skirted the most polarizing issues. They said
the negotiations were devoted mainly to discussions of whether
physicians deserve larger Medicare payments, especially in rural
areas, and how much Medicare should pay for the medicine it already
covers when patients are in the hospital.

Negotiators are working from an outline, prepared by the conference
committee's chairman, House Ways and Means Chairman Bill Thomas
(R-Calif.), which embodies most of the preferences of House
conservatives and is being resisted even by some GOP senators in the
meetings.

Sources said the outline is organized with all of the most
controversial items at the end, so it remains unclear even after
bargaining sessions that went into the night whether the group can
agree on issues they have not yet considered. But they said that
Thomas has said the negotiators should whittle the five-page document
down to two or three pages of agreed-upon items.

In addition to the competition between old and new forms of Medicare,
outstanding issues include requiring Congress to place unprecedented
caps on Medicare spending so that it does not rise above $400 billion
during the next decade; tax breaks for younger people to set up saving
accounts for their medical bills; and a break with the program's
tradition by which wealthier Medicare patients would be charged more
for care.

The only two Democrats allowed by Thomas to participate in the
negotiations briefed Senate Democrats yesterday on their progress, and
urged the lawmakers to be patient and support their efforts to reach
an acceptable agreement. Some participants in that meeting emerged
with criticism. Sen. Kent Conrad (D-N.D.), who signed the letter to
Bush, said afterward that forcing traditional Medicare into price
competition with new health plans would be "the death spiral" of the
program. Sen. Bill Nelson (D-Fla.) said older constituents in his
state "would rise up in arms" if Medicare switches to the system of
premium support.



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Wall Street Journal, Oct 24, 2003

Senate Democrats Warn Bush On Direction of Medicare Talks

By SARAH LUECK  Staff Reporter of THE WALL STREET JOURNAL

WASHINGTON -- Senate Democrats, concerned that Republican-led
negotiations on Medicare prescription-drug legislation are drifting
too far to the right, warned President Bush that the final bill must
meet their conditions or risk defeat.

In a letter to the president, 41 lawmakers -- enough to block passage
of the bill -- said that "only a genuinely bipartisan effort can
achieve the goal of strengthening Medicare." The signers, including a
Republican and an independent, put pressure on Mr. Bush to step in and
bridge their differences with the conservative majority in his party.

"The president can solve this problem," said Senate Democratic leader
Tom Daschle of South Dakota.

The letter came as House-Senate negotiators pressed toward a
compromise on adding a prescription-drug benefit to Medicare, which
some involved said could come soon. It highlights the difficulties
ahead even if they manage to find middle ground. The federal Medicare
program provides health-care coverage to about 40 million elderly and
disabled Americans.

Thursday night, Montana Sen. Max Baucus, one of the two Democrats
participating in the Medicare talks, asked that congressional aides
and Bush administration officials leave the room "so we could start
talking brass tacks," on issues including a House provision that would
require traditional Medicare to compete with private insurance plans.
At a tense meeting earlier in the evening, Democrats conveyed to him
that the policy would be a deal breaker because it could raise
premiums in traditional Medicare.

In the past week, lawmakers debating the legislation in closed-door
sessions reached tentative agreements on several issues, including the
structure of a drug benefit, subsidies for low-income beneficiaries
and some changes in payments to Medicare providers.

Conservative Republicans have demanded changes aimed at holding down
the costs of Medicare, including increasing the number of
beneficiaries enrolled in private health plans, as a condition of
their support for a new drug benefit. But Democrats, some of whose
backing would be needed if the bill is to pass the Senate, say some
proposals would threaten traditional Medicare.

Negotiators are considering modifications to the provision, including
ways to temper the impact on premiums and shield more beneficiaries in
the traditional program from any changes. One idea would be to protect
low-income beneficiaries' premiums. But it isn't clear if any of those
ideas would satisfy Democrats.

The letter, which also was signed by Sens. Olympia Snowe, a Maine
Republican, and James Jeffords, an independent from Vermont, said the
final package shouldn't include a House-backed provision creating new
tax-preferred health-savings accounts or any limits on Medicare
spending, an idea that has been discussed in the negotiations. The
lawmakers said the bill should encourage employers to continue paying
for retirees' drug benefits, help speed cheaper generic medications to
market and include generous help for low-income beneficiaries.

Aides to the negotiators are nearing agreement on changing the way
Medicare pays for currently covered outpatient medications. In a
melding of House and Senate provisions, Medicare for one year would
reimburse providers 85% of average wholesale price, or AWP, reported
by the industry. The current payment is 95% of AWP in most cases.
After the first year, payment would shift to a new market-oriented
price to be researched by Medicare officials, with some discretion for
individual drugs to be paid based on AWP if necessary. It isn't
decided what payment increases might be included for oncologists, who
have argued that the AWP system has helped them to cover the costs of
administering cancer drugs.