Restructuring both Medicaid and Medicare will Cut Healthcare

The pressure is increasing to restructure both Medicare and Medicaid,
to lower services and cost to seniors, disabled people, the poor,
children, and people in nursing homes.  This Kaiser Family Foundation
Daily Health Policy reports covers both Medicare and Medicaid.


1. House Rejects Motion That Would Have Instructed Medicare
Negotiators To Include Means Testing for Drug Benefit

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The House on Tuesday voted 234-161 to reject a motion that would have
asked negotiators charged with reconciling the House and Senate
Medicare bills (HR 1 and S 1) to include means testing in the proposed
prescription drug benefit, the Washington Times reports. The
"symbolic" measure, proposed by Rep. Jeff Flake (R-Ariz.), would have
asked negotiators to include in the final bill a provision that would
require all beneficiaries with higher incomes to pay more
out-of-pocket for access to a drug benefit, not just catastrophic
coverage, the Times reports.

The House-passed Medicare bill already includes a provision that would
require beneficiaries with higher incomes to pay more out-of-pocket
before catastrophic drug coverage took effect. Flake said the only way
to control costs under the proposed drug benefit is to exclude
beneficiaries with the highest incomes. "There is no reason in the
world why we ought to be paying the prescription drug benefits for the
wealthiest in society, the Bill Gates, the Barbra Streisands, the Ted
Turners, the Warren Buffetts," he said.

Reaction

A House Republican leadership aide said the House vote "sends a signal
to conservatives that they have more work to do to convince the
majority members in the House that this is a position worth fighting
for." However, Jim Manley, a spokesperson for Sen. Edward Kennedy
(D-Mass.), who has threatened to filibuster any final bill that
includes means testing, said that 51 House Republicans voting against
the measure indicates that there is a lack of support for some of the
central reforms conservatives have asked for in a final bill,
including means testing and a provision that would require
fee-for-service Medicare to compete directly with private plans
beginning in 2010. Manley said the vote "demonstrates that there is a
will in the House for a bipartisan approach" to a final Medicare bill.
House Republican leadership aides have said the failure of Flake's
measure does not weaken the party's ability to push for means testing
and that House Republicans will "continue fighting" for means testing
provisions, the Times reports (Fagan, Washington Times, 10/9).

Progress

Although few outside observers believe that Medicare conferees can
finish work on a final bill before an Oct. 17 deadline set by
Republican leaders, negotiators have not yet abandoned their attempts
to do so, CongressDaily/AM reports. After a meeting with Senate
Majority Leader Bill Frist (R-Tenn.), House Speaker Dennis Hastert
(R-Ill.), Rep. Billy Tauzin (R-La.) and Sen. Charles Grassley
(R-Iowa), conference Chair Bill Thomas (R-Calif.) said, "It's not my
deadline, but I'll work under it."

Tauzin said that the meeting centered on process and that conferees
would meet again today via telephone. Thomas said negotiators on
Thursday would "loop back through" some issues that have already been
addressed in an attempt to finalize some decisions "so staff can draft
over the weekend." Congressional staffers said that although several
key issues have not been resolved, they are making progress on the
drug benefit, how to structure and pay private plans and how to
structure some payments to providers.

Maintaining the $400 billion cost of the legislation is still a "key
challenge," according to conferees, CongressDaily/AM reports. "We have
$400 billion and everyone has $600 billion worth of wishes," Thomas
said (Rovner, CongressDaily/AM, 10/9).

Disagreeing With Bush Administration

Negotiators have reached tentative agreements on several provisions in
a final Medicare bill that seemingly "rejec[t] major recommendations"
made by the Bush administration, the AP/South Florida Sun-Sentinel
reports. Under negotiators' agreements, private insurance companies
that offer preferred provider plans under Medicare would be reimbursed
based on a formula that considers both competitive bidding and the
cost of traditional, fee-for-service Medicare. Bush administration
officials proposed setting payments based only on competitive bidding.
In addition, negotiators have agreed to allow any private company that
wishes to provide coverage under Medicare to do so. The Bush
administration had proposed allowing only three such plans to operate
in each region. According to the AP/Sun-Sentinel, there has been no
indication that administration officials have strongly objected to the
negotiators' stances (Espo, AP/South Florida Sun-Sentinel, 10/8).

N.Y. Hospitals Hit Hardest?

The New York Times on Thursday examined a debate over whether Congress
should cut billions of dollars in Medicare payments to hospitals,
particularly teaching hospitals, which are the "most heavily
concentrated in New York State." Medicare traditionally has paid
teaching hospitals higher reimbursements than other hospitals for
treating the same patients with the same conditions.

The Balanced Budget Act of 1996 called for the payment differential to
be reduced in a series of steps over several years, the Times reports.
On Oct. 1, 2002, the differential between payments to teaching
hospitals and payments to other hospitals dropped from 6.5% to 6%,
according to the Times. By law, the payment rate would have dropped to
5.5% this Oct. 1, but the decline was postponed, pending passage of
the Medicare bill, the Times reports. The House-passed Medicare bill
calls for the differential to be reduced to 5.5%.

According to the Healthcare Association of New York State, a hospital
lobbying group, a reduction from 6% to 5.5% would equal a loss of $9.5
billion in payments nationwide over 10 years. The Senate bill would
reduce the differential from 6.5% to 5.53%; some senators say they
actually intend to argue for a much smaller reduction, according to
the Times. The House bill also would reduce the annual increase in
Medicare payments to hospitals to offset rising costs from 3.5% pear
year to 3.1% per year for the next three years; HANYS estimates that
action would reduce payments by $10.4 billion over 10 years.

The Senate bill would not change those increases. Both the House and
Senate Medicare bills include a provision that would increase payments
to rural hospitals by $14 billion over 10 years; the net reduction in
payments overall would be $5.4 billion for hospitals nationwide over
the next decade. New York state hospitals would lose $2.1 billion in
Medicare payments over 10 years compared with 2002 payments because it
has few rural hospitals and 110 teaching hospitals. New Jersey
hospitals would lose $711 million in payments, Connecticut hospitals
would lose $399 million in payments and hospitals in 22 states, mostly
in the Midwest and South, would receive more payments over the next
decade (Perez-Pena, New York Times, 10/9).

Seniors Want Specifics

The Boston Globe on Thursday examined Medicare beneficiaries' desire
to obtain specifics on Democratic presidential candidates' plans for
Medicare. According to the Globe, many of the Democratic candidates
have been "speaking in abstractions" about their plans to "save"
Medicare and create a prescription drug benefit under the program.
However, the Globe notes that such arguments may be "less persuasive,
or relevant, than the day-to-day, dollars-and-cents anxieties" that
worry many seniors (Healy, Boston Globe, 10/9).




2. Medicaid Reform Could Be More Difficult Than Medicare Reform,
Hearing Indicates

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Medicaid "is arguably more in need of reform" than Medicare, CMS
Administrator Thomas Scully told participants at a House Energy and
Commerce Committee hearing on Wednesday, CongressDaily reports.

However, the hearing indicates that fixing Medicaid "will be no
easier, and potentially even more difficult, than reforming" Medicare,
according to CongressDaily.

Scully defended a proposal announced by the Bush administration
earlier this year that would give states greater flexibility in their
Medicaid programs (Rovner, CongressDaily, 10/8). Under the plan,
states would receive a fixed amount of funding, rather than matching
funds, for beneficiaries covered at their discretion.

States no longer would have to apply for federal waivers to deviate
from federal eligibility and benefits standards. In addition, states
would only be required to maintain comprehensive Medicaid coverage for
beneficiaries whose income levels are low enough that the federal
government mandates that they be covered (Kaiser Daily Health Policy
Report, 9/8).

Democrats at the hearing defended the existing Medicaid program and
"derided" the Bush proposal as an "effort to pass back to the states
the responsibility for caring for the nation's sickest and most
vulnerable individuals," CongressDaily reports. Rep. Lois Capps
(D-Calif.) said, "The biggest challenge facing Medicaid is the Bush
administration's effort to dismantle it." Rep. Henry Waxman (D-Calif.)
added that Medicaid "has been uniquely successful ... serving patients
who are hardest to reach, the cases that are the most difficult."

Financing Loophole

Scully also told committee members that many states have taken
advantage of the "upper payment limit," a phrase used to describe a
Medicaid financing loophole (CongressDaily, 10/8). Under the loophole,
states pay city- or county-owned care facilities more than the actual
costs of health services for Medicaid beneficiaries, receive
additional matching funds from CMS and then require the facilities to
return the extra state funds. The states sometimes pay the facilities
a small fee for participating and use the extra federal funds for both
health and nonhealth programs.

CMS is gradually phasing out states' use of the loophole (Kaiser Daily
Health Policy Report, 8/23/02). Scully said that of Medicaid's
estimated $304 billion cost in fiscal year 2004, up to $25 billion
will be from use of the loophole (CongressDaily, 10/8).

You can listen to this hearing by clicking on
http://www.kaisernetwork.org/healthcast/energy&commerce/08oct2003