SENATE MEDICARE REFORM PROPOSAL
DOES AWAY WITH MEDICARE AS WE KNOW IT
Senator Breaux (D. La.) and Senator Frist (R. Tn.) are misinforming their colleagues and Medicare beneficiaries about the real effects of their bill, S. 1895, "The Medicare Preservation and Improvement Act of 1999." The bill neither improves nor preserves Medicare. Instead, it creates a private system of insurance, governed by a new bureaucracy unaccountable to the public, that will reduce benefits to older people and people with disabilities and require Medicare beneficiaries to pay more for less service.
The Breaux-Frist Bill Does Not Protect Traditional, Fee-for-Service Medicare.
Traditional Medicare creates an entitlement to insurance to pay for needed medical care and guarantees beneficiaries the right to choose their own doctors.
The Breaux-Frist bill creates "Medicare plans,"offered by private insurance companies and by HCFA, which must include the benefits offered under Parts A and B of Medicare. However, the bill does not require that any of these private plans be a traditional fee-for-service insurance plan. Nor does it guarantee beneficiaries the right to choose their own doctors.
HCFA retains functions relating to health care benefits made available under traditional Medicare. However, the bill does not specifically require HCFA to offer a traditional fee-for-service insurance plan, and the bill's funding and administrative mechanisms will make it difficult for HCFA to do so.
The Breaux-Frist Bill Does Not Provide a Meaningful Prescription Drug Benefit for All
Medicare Beneficiaries.
The drug benefit is only available in the more costly high-option plans.
The drug benefit is limited to an actuarial equivalent of only $800.
The bill's "discount" or reduction of the premium for prescription drug coverage is not a real discount.
The discount amounts are minimal. People with incomes between 135% and 150% of poverty would be required to pay between 50% and 75% of the drug premium, based on a sliding scale. Those with incomes over 150% would pay 75% of the drug premium.
The discount amount would be included as gross income for tax purposes. The Medicare Board would send each beneficiary a statement each year of the amount to be reported in tax returns.
The Breaux-Frist Bill Would Increase Expenses for Beneficiaries.
Currently, all Medicare beneficiaries pay the same, flat dollar amount for Part B premiums regardless of where they live. Under the Breaux-Frist bill, premiums would vary depending on the plan chosen and other factors.
Beneficiaries would only have premium - free insurance if they chose the most limited, bare-bones plans. They would pay a higher percentage of the premium cost for plans that provide more coverage.
Because the Breaux-Frist bill determines the premium amount based on a percentage, premium costs would increase more dramatically as health insurance costs increase.
When the amount of general revenues that may be used to fund Medicare has been exceeded, extra costs will have to be passed on to beneficiaries and providers.
The Breaux-Frist Bill Provides Limited Protection for Low-income Beneficiaries.
Only beneficiaries with incomes below 135% of poverty are protected. All other beneficiaries must pay the full premium amount.
The prescription drug premium will only be paid for low-income beneficiaries if they enroll in the lowest-cost high option plan in their area, thus narrowing their choice of plans.
Low-income beneficiaries who choose to enroll in a more costly high option plan will have to pay a portion of the premium, and may in fact end up paying the full premium amount.
The Breaux-Frist Bill Increases the Risk of Insolvency.
If general revenues exceed 40% of Medicare spending, payments to both private plans and HCFA plans could be cut.
Funding for HCFA plans would be limited to premiums received from the Medicare Board. If the premiums do not cover costs, the program could become insolvent.
The bill requires HCFA to assume the financial risk for the Medicare plans it offers in the same manner that Medicare+Choice organizations are financially responsible for the Medicare+Choice plans they offer. Unlike private insurers, HCFA will not have the option to withdraw from a market that does not support its plan.
The Breaux-Frist Bill Increases Bureaucratic Administration of Medicare While Decreasing Public Oversight of Program Administration.
The bill creates a new seven member independent agency, the Medicare Board, that is appointed by the President. The staff of the Board are not subject to civil service rules.
In addition to determining Medicare eligibility and administering the private Medicare plans, the non-civil service Medicare Board oversees HCFA's administration of traditional Medicare, including the budget for traditional Medicare. Since the primary job of the Medicare Board is to promote the private plans with which traditional Medicare will compete, Board members will have a conflict in interest when they review traditional Medicare.
The Medicare Board may make assessments against all Medicare plans, including HCFA plans, to pay its expenses and the salaries of its members and employees.
The bill does not require that any periodic accounting or audit of the Medicare Board and its expenses be conducted or reported to Congress.
Conclusion
S. 1895, the Breaux-Frist bill, represents a radical departure from the Medicare program
that is known and liked by the American public, without really addressing any of the
public's concerns about the future of Medicare. The public needs to be aware that, rather
than improving Medicare, S.1895 significantly weakens this effective program.
Last year, the League of Women Voters reported that Americans of all ages value the Medicare program highly. Participants in the League=s study appreciated that any one can qualify for Medicare and rejected reform options that would limit access to care. They expressed concern that increasing Medicare enrollment in managed care would result in beneficiaries not being able to see "their trusted doctor@ or another doctor of their own choosing.
About 85 percent of all Medicare beneficiaries are in traditional fee-for-service Medicare. Proponents of Medicare reform proposals assert that, under the proposals, Medicare beneficiaries will still be able to get their health care through traditional Medicare. A careful reading of the bill sponsored by Senators Beaux and Frist, Senate Bill S. 1895, "The Medicare Preservation and Improvement Act of 1999,@ reveals, however, that those assertions are not correct.
TRADITIONAL MEDICARE PROVIDES UNIFORM SERVICES AND BENEFITS. BENEFICIARY COST-SHARING AND
PROVIDER PAYMENTS ARE SET BY LAW.
Traditional Medicare provides an entitlement to health insurance.
Traditional Medicare is an entitlement program. Individuals become entitled to Part A, which covers hospital, nursing home and some home health care, by meeting eligibility criteria, including paying payroll taxes. They are then entitled to elect to enroll in Medicare Part B, which pays for doctors= visits, durable medical equipment, and some home health services.
Traditional Medicare is an insurance program. Medicare beneficiaries are entitled to have payments made on their behalf for the services they receive.
Traditional Medicare guarantees uniformity and security in benefits, services, and cost-sharing.
Traditional Medicare covers medically necessary services. It provides a uniform health delivery system to all Medicare beneficiaries across the United States.
Beneficiaries may obtain health care from the doctor or other provider of their choice, anywhere in the country.
Every Medicare beneficiary in the country who voluntarily elects Part B coverage pays the same uniform, set premium for that benefit. The Part B premium of $45.50 is the same in 2000 as it was in 1999.
Co-payments and deductibles for services under Medicare Parts A and B are set by law and are uniform for all beneficiaries. Medicare also places limits on the amount doctors may charge beneficiaries.
Traditional Medicare reimburses providers for the services they provide.
The fee-for-service Medicare program reimburses doctors and providers directly, based on set fee schedules or prospective payment mechanisms. The Health Care Financing Administration (HCFA), which administers Medicare, does not interfere in medical decisions.
S. 1895, THE BREAUX-FRIST BILL,
DOES NOT PROVIDE FOR
A TRADITIONAL MEDICARE PROGRAM
The bill does not specify that there be a traditional Medicare program.
The Breaux-Frist proposal does not establish an insurance program like traditional Medicare, but establishes a program of "Medicare plans,@ health plans offered either by private insurers or by a revamped HCFA. No where does it state that at least one Medicare plan must be a fee-for-service plan.
Under the bill, HCFA is only required to offer one standard Medicare plan throughout the United States. The bill does not say that this one standard plan must be traditional Medicare or a fee-for-service plan.
All other Medicare plans, including higher option plans offered by HCFA, can be offered in limited service areas.
Enrollment in Part B Medicare is no longer voluntary. Individuals must enroll in Part B in order to receive Medicare benefits.
The bill does not guarantee uniformity and security in benefits, services, and cost-sharing.
The bill says that all Medicare plans would have to provide items and services for which benefits are available under Medicare Parts A and B. However, all Medicare plans have to be approved by the Medicare Board which will review benefit packages. HCFA can seek legislation to modify Medicare in accordance with its business plan in order to maintain the solvency and functioning of the program.
The bill, unlike traditional Medicare, does not guarantee the right of the beneficiary to choose a doctor or other provider.
Premiums are not uniform as under traditional Medicare, but vary by plan. They depend upon a number of factors, including the scope of benefits offered.
A beneficiary who lives in an area in which no private plans are offered may pay lower premiums for the nation-wide plan sponsored by HCFA than a beneficiary who lives in an area with a greater choice of health plans and who chooses the same HCFA plan.
Instead of uniform cost sharing, the bill authorizes the Medicare Board to approve reasonable variations in cost-sharing if the actuarial equivalence of total cost-sharing for benefits is maintained. This means, for example, that a plan can impose a co-payment for home health benefits, not currently allowed under Medicare, and reduce slightly the co-payment for doctors visits. A plan may choose to change cost-sharing arrangements to discourage use of certain services.
Payment mechanisms discourage fee-for-service plans.
Payments are not made directly to doctors or other providers, as under traditional Medicare and other fee-for-service plans. They are made to the entities that offer Medicare plans. In fact, the bill specifically precludes direct provider payments.
The entities offering Medicare plans determine reimbursement rates for doctors and other providers. Doctors and other providers may choose not to participate in a health plan, including the nation-wide plan offered by HCFA, if its reimbursement rates are too low.
Payments to entities offering Medicare plans must be made according to schedules set by a new Medicare Board, and cannot be made according to reimbursement schedules under traditional Medicare or the current Medicare managed care program, Medicare+Choice. The factors and adjustments for determining rates are similar to those considered in setting payment for Medicare managed care plans, and are not the prospective payment systems or fee schedules used under traditional Medicare.
Current experience with the Medicare +Choice program shows the difficulty of offering a fee-for-service plan under a capitated payment system such as the one proposed in S. 1895. Although the Medicare+Choice program has been in effect since 1998, no private fee-for-service plans, as authorized under Medicare+Choice, have yet been offered to beneficiaries. Applications for private fee-for-service plans, currently under consideration by HCFA, have a limited service area. They will not be a national plan as is traditional Medicare.
The Medicare reform proposal currently under consideration by Congress would do away with Medicare as known and valued by the American public. The basic principles of traditional Medicare - a nation-wide, uniform system of insurance that allows beneficiaries to choose their own doctors anywhere in the country while paying set out-of-pocket costs - are all missing for S. 1895. Proponents of reform should stop deceiving the American public.
© Center for Medicare Advocacy, Inc. 01/08/2010