2003-11-04 --  Government Plans the Demise of Medicare


Bush Administration Backs Congressional Intervention
If Medicare Costs Grow Faster Than Anticipated


"Because many private plans tend to "cherry pick" the healthiest
patients, it is impossible to predict whether direct competition
between traditional Medicare and private health plans "will not
produce a death spiral" for traditional Medicare in some parts of the
country, Schlesinger said, the Los Angeles Times reports (Los Angeles
Times, 11/4)."

"Both plans would "fundamentally change the financing of Medicare" and
would make it more difficult for lawmakers to increase the amount of
the proposed drug benefit, raise payments to doctors or provide
coverage for more outpatient services, the Times reports."


"The panel is made up of health care experts and academics (Sherman,
AP/Milwaukee Journal-Sentinel, 11/3). Mark Schlesinger, a professor at
Yale and Rutgers universities and chair of the panel that wrote the
report, said, "There is no evidence -- repeat, no evidence -- that
private plans would reduce long-term (spending) growth rates" (Kemper,
Los Angeles Times, 11/4)."




Kaiser Foundation Daily Health Policy Report, November 4, 2003

Bush Administration Backs Congressional Intervention
If Medicare Costs Grow Faster Than Anticipated

The Bush administration has said it supports a House Republican-backed
Medicare cost-containment proposal that would require congressional
action on ways to reduce Medicare spending if the program's costs
increase more quickly than anticipated, the New York Times reports.

Negotiators attempting to reconcile the House and Senate Medicare
bills (HR 1 and S 1) are also considering a similar proposal from
senators on the conference committee.

The plans come in response to federal officials who say that even
without implementing the proposed Medicare prescription drug benefit,
the federal government's general revenue spending on Medicare in 2012
will total $170 billion, compared with $78 billion in 2002.

The General Account Office has said that Medicare's "growing reliance
on general revenue impose[s] a mortgage on future generations," the
Times reports. Under the latest proposal from House Republicans,
Medicare could be declared "programmatically insolvent," if the
program's trustees said that general tax revenue would account for
more than 45% of total Medicare spending at any point in the next
seven years, according to the Times.

If trustees make such predictions two years in a row, the president
would be required to propose ways to reduce Medicare's dependence on
general revenue, which could include cutting benefits, increasing
premiums or raising payroll taxes. The plan also calls for expedited
procedures to allow Congress to consider the cost-containment
legislation within six months, overriding normal Senate and House
rules and limiting debate in the Senate.

The Senate proposal also calls on the president and Congress to take
action to control costs if general tax revenue exceeds 45% of
projected Medicare spending, and it would prohibit the Senate from
considering any law that increased use of general revenue beyond that
percentage unless 60 senators supported doing so. The Times reports
that the Senate's move to offer its own cost-containment proposal,
despite objections from many Democrats and advocates for the elderly,
signals that any final agreement on the Medicare legislation will
likely include a cost-containment measure.

Reaction

Both plans would "fundamentally change the financing of Medicare" and
would make it more difficult for lawmakers to increase the amount of
the proposed drug benefit, raise payments to doctors or provide
coverage for more outpatient services, the Times reports.

Rep. Jeb Hensarling (R-Texas) said that the two proposals would not go
far enough, adding that there appears to be "little cause for
optimism" on the issue. Rep. John Spratt Jr. (D-S.C.) said the
proposals would "undermine Medicare's protection for the elderly."

The Times reports that Sen. John Breaux (D-La.), one of the two
Democrats on the conference committee, has said he favors a
cost-control mechanism. But Sen. Max Baucus (D-Mont.), the other
Democratic conferee who has been participating in the negotiations,
has said that any cost-control measure should "not single out
Medicare"; he said he prefers offsetting Medicare cost-control
measures with similar requirements for tax cuts.

The Leadership Council of Aging Organizations said in a letter to
conferees, "Requiring congressional action if and when Medicare
spending exceeds an estimated target would bring fear and uncertainty
to millions of Americans at a time in their lives when they need
security." The letter added that an unforseen emergency, such as an
outbreak of severe acute respiratory syndrome, or SARS, could make
spending estimates irrelevant (Pear, New York Times, 11/4).


Study Assesses Competition Provision

Requiring traditional, fee-for-service Medicare to compete with
private health plans could make coverage unaffordable for lower-income
seniors in some regions of the United States, according to a new study
by a 12-member panel convened by the National Academy of Social
Insurance, the AP/Milwaukee Journal-Sentinel reports.

The panel is made up of health care experts and academics (Sherman,
AP/Milwaukee Journal-Sentinel, 11/3). Mark Schlesinger, a professor at
Yale and Rutgers universities and chair of the panel that wrote the
report, said, "There is no evidence -- repeat, no evidence -- that
private plans would reduce long-term (spending) growth rates" (Kemper,
Los Angeles Times, 11/4).

The report notes that private health plans have "done little to hold
down long-term growth in private health care spending," CongressDaily
reports (Heil, CongressDaily, 11/3). Because many private plans tend
to "cherry pick" the healthiest patients, it is impossible to predict
whether direct competition between traditional Medicare and private
health plans "will not produce a death spiral" for traditional
Medicare in some parts of the country, Schlesinger said, the Los
Angeles Times reports (Los Angeles Times, 11/4).

The panel said, however, that private plans could improve coverage for
Medicare beneficiaries who are able to navigate the "complex
proposals," according to Cox/Richmond Times-Dispatch (Cox/Richmond
Times-Dispatch, 11/4). Further, some members of the panel said that
protecting traditional Medicare from competition with private plans
"is logically and practically inconsistent with the desire to make
choices available to beneficiaries."

The report recommends instituting a pilot program to test competition
among private insurers but not between traditional Medicare and
private plans. The report also says that "the future of health care
for seniors should include a mix of original Medicare and private
insurance plans," according to the AP/Journal-Sentinel (AP/Milwaukee
Journal-Sentinel, 11/3). "We believe providing security and stability
for people who need security and stability is paramount over
competition," Schlesinger said.

The report is available online. Note: You will need Adobe Acrobat
Reader to view the report.

Reaction to Report  CMS Administrator Tom Scully called the study
"precooked" and said that the private competition proposal Medicare
negotiators are considering represents a "modest, modest, modest
change" from the current system, under which 12% of Medicare
beneficiaries are enrolled in private plans. "Nobody's talking about
getting rid of Medicare," he added. Karen Ignagni, president and CEO
of the merged American Association of Health Plans/Health Insurance
Association of America, said that many of the panel's criticisms of
Medicare HMOs -- including the frequency with which private plans drop
Medicare+Choice coverage -- are the result of insufficient funding
from the government to such plans (Los Angeles Times, 11/4). Scully
said that the competition provision being considered by the conference
committee is a "watered down version" of a competition measure
recommended in 1999 by a congressional Medicare commission,
CongressDaily reports (CongressDaily, 11/3). The current framework
negotiators are using to discuss the competition provision -- which
was developed by Rep. Bill Thomas (R-Calif.), the conference
committee's chair -- does not include a number of specifics that could
be determined later, including when such a program would begin. The
proposal includes new language designed to make the provision "more
palatable" to Senate Democrats, according to Sen. Don Nickles
(R-Okla.).

Progress  On Monday, Medicare conferees continued to discuss key
issues with the legislation, including cost containment, the
competition provision and allowing U.S. residents to purchase
medications from foreign nations. Negotiators "planned to break
without reaching accord on any issues ... in contrast to expectations
last week for a swifter pace," CongressDaily/AM reports (Heil,
CongressDaily/AM, 11/4). Scully said that conferees have reached
agreements on 95% of the issues, adding that although some
"controversial" provisions remain, there is "nothing that would be a
bill terminator," according to CongressDaily (CongressDaily, 11/3).