Prescription Drugs - Comparisons Of Senate And House Medicare Bills

COMPARISONS OF SENATE AND HOUSE MEDICARE BILLS:
MORE, AND LESS, THAN PRESCRIPTION DRUG COVERAGE

S. 1 and H.R. 1, the prescription drug legislation that passed the Senate and the House of Representatives, respectively, on June 27, 2003, do more than add a prescription drug benefit to Medicare. Both bills make substantial changes to the Medicare program, including imposing additional costs on beneficiaries for current Medicare services. Both bills increase reliance on private insurance to provide Medicare services. These changes are so dramatic in scope that, given the inadequacy of the prescription drug benefits proposed, they raise questions about the overall merits of both bills.

The following memo outlines problem areas that need to be addressed by the conferees in order to make the legislation more responsive to the needs of beneficiaries.

Threats to the Overall Structure of the Medicare Program:

Privatization of Medicare: H.R.1, Section 241 would require the traditional Medicare program to participate in a competitive bidding process, starting in 2010, in regions of the country in which there are at least two private plans. Competitive bidding destroys Medicare by creating different premiums and different programs in different parts of the country, and by penalizing the oldest and most frail beneficiaries, who are likely to remain in the traditional program. CMS' chief actuary estimates that premiums for traditional Medicare could increase by as much as 25% in the first five years if forced to compete against private plans that serve the youngest and healthiest beneficiaries.
Means Testing/Income Relating: H.R. 1, Section 106 destroys the universal nature of Medicare by tying eligibility for the catastrophic drug benefit to income. Similarly, S. 1, Section 104 excludes from Medicare drug coverage those older people and people with disabilities who are also eligible for Medicaid (dual eligibles.) Medicare has succeeded as a social insurance program because it provides equal benefits and protections to all individuals, regardless of their income. Neither benefits nor coverage should be based upon differences in income.
Affordability: As the cost of health care has risen, the percentage of income Medicare beneficiaries pay towards their health care has also grown. Rather than address the expanding burden on beneficiaries, both H.R. 1 and S.1 increase the amount Medicare beneficiaries will have to pay by tying increases in the Part B deductible to health care inflation. As a result, the cost of obtaining doctors' services under Part B will increase at a more rapid pace than it did previously, making more people eligible for state-related low-income assistance, and forcing more people into private plans. The bills also pass other costs on to beneficiaries. H.R. 1 Section 702 adds a co-payment for home health services, generally used by the oldest and most frail beneficiaries. S.1 Section 431 adds co-payments for lab services, and section 430 limits reimbursement for certain durable medical equipment, again resulting in beneficiaries with greater health care needs paying more for those services.
Increased Bureaucracy and Complexity: Both bills expand the federal bureaucracy, and hence increase the complexity of the Medicare program by establishing a new federal agency, either the Center for Medicare Choices (S. 1 Section 310), or the Medicare Benefits Administration (H.R. 1, Section 801). Under this scheme, one agency will have authority to make decisions concerning services to be covered, while the other will have authority to determine payment. The possibilities for duplication and confusion are endless. In addition, under both bills, employees of the new agency would be exempt from Civil Service requirements, meaning the possibility of higher salaries and less job security than their counterparts doing similar jobs at CMS. The irony here is that both bills also contain provisions allegedly designed to reduce regulatory burden.

Problems with the Prescription Drug Benefit:

Inadequate benefit design: Neither H.R. 1 nor S. 1 includes a prescription drug package that meets the needs or expectations of older people and people with disabilities. The House package provides better coverage for people with lower drug expenses (only have to incur about $775 out of pocket to receive a benefit as opposed to approximately $1155 under the Senate bill.) The Senate package has a smaller doughnut and provides better coverage for those with greater expenses. Neither bill provides for a stable benefit or a guaranteed premium. Neither bill includes safeguards concerning formulary design and the ability of a beneficiary to have access to medically necessary non-formulary prescriptions. Both provisions "lock in" beneficiaries for one year, so that a beneficiary whose drug needs change cannot switch to a different plan with a different formulary.
No guarantee of availability of a drug benefit: S.1 Section 101, establishing Section 1860D-6, provides for a government "fallback" plan if two private drug plans are not offered in a community. No similar provision is included in H.1, which would simply increase payments to insurance companies to encourage them to participate. Without a fallback plan, beneficiaries in many areas of the country are unlikely to have any drug coverage. We know from experience with the Medicare+Choice program that increasing reimbursement does not guarantee participation by private insurance companies in rural and less desirable communities. The Senate's fall back provision needs to be included and strengthened by allowing the fall back plan to remain in a community for 2 years, even if 2 private insurance companies subsequently decide to enter the market.
Low-income protections: H.R. 1 provides, for those dually-eligible for Medicare and Medicaid, that Medicare is the primary payer for both the regular drug-benefit and the low-income subsidy. Under this provision, Medicaid will provide "wrap-around" coverage, filling in gaps not covered by Medicare, although Medicaid may require such individuals to pay the Medicare-prescribed co-payments even when they exceed Medicaid's standard of "nominal". This provision with respect to dually-eligible persons is superior to the low-income protections included in S. 1., which excludes dually-eligibles (defined as those who are enrolled for full benefits, including prescription drugs, in their state Medicaid program) from participating at all in the Medicare drug benefit.

With respect to other low-income protections, however, S. 1 is on the whole preferable to H.R. 1. Among the better protections for beneficiaries in the provisions of S. 1 are the use of the Qualified Medicare Beneficiary ("QMB") and Specified Low Income Medicare Beneficiary ("SLMB"), as well as establishment of a category of "Subsidy-eligible individuals" (those with incomes between 135% and 160% of the federal poverty levels) as vehicles to provide Medicare prescription drug benefits. In addition, S. 1 has a lower asset test in determining eligibility for the Medicare prescription drug for all categories of low income beneficiaries, and lower co-payments amounts for such beneficiaries, than does H.R. 1.
Inadequate cost containment: As the Families USA report issued on July 10^th indicates, the cost of prescription drugs is increasing exponentially, and faster than the rate of inflation. Instead of addressing the cost problem, both bills perpetuate it. Both prevent the Secretary of Health and Human Services from interfering with the ability of private plans to enter into contracts. In other words, the Secretary cannot negotiate prices with drug manufacturers, or require the private plans to enter into such negotiations. Instead of using the buying power of 40 million Medicare beneficiaries to reduce drug prices, the bills dilute this power by dividing the country into regions. Both bills attempt to limit costs by encouraging the use of generic drugs. The Senate provisions on expanded access to generic drugs, set forth in Title IX of the bill, provide better protection than the House provisions in Title XI.
Increased premium for delayed enrollment: Both H.R. 1 Section 101 and S. 1 Section 101 provide for an increased premium for delayed enrollment in Part D that will make the drug benefit unaffordable for most people. The bills allow private insurance companies to adjust their applicable premium "in a manner that reflects additional actuarial risk involved." Most people who delay enrollment will do so because their pharmaceutical expenses are less than the cost of the Medicare benefit. If they enroll when their drug costs increase, the additional cost of the premium may still render the benefit meaningless. People won't get the coverage they require, while private insurance companies can avoid insuring costly individuals. The penalty for late enrollment in Part D far exceeds the penalty for delayed enrollment in Part B, which sets a 10% increase per year enrollment was delayed.
Additional tax credit instead of richer drug benefit: H.R. 1 provides for a tax credit for the establishment of health savings accounts (HSAs) over $500, at a projected cost of $174 billion in additional revenues over 10 years. HSAs have nothing to do with Medicare, but provide a tax credit for middle to upper income individuals with health insurance for establishing separate savings accounts for health care costs. Thus, at a time when Congress wants Medicare beneficiaries on fixed incomes to pay more out-of-pocket for their health care, Congress is also expanding the deficit to allow wealthier working people to save on their out-of-pocket health care costs. Worse, the extra $174 billion could be used to improve the drug benefit by closing the "doughnut hole" (approximately $64 billion) and changing the definition of out-of-pocket costs for purposes of reaching the catastrophic limit (approximately $65 billion).

Problems with the Provisions Concerning Private Plans:

Unnecessary confusion: H.R. 1, Section 201, creates a new Medicare Part E to establish the enhanced fee-for-service (EFFS) program. S. 1 Section 211 establishes EFFS as part of the existing Medicare Part C. The Senate provision creates less confusion and duplication. Though not a significant issue, the change of the name of Medicare+Choice to Medicare Advantage is an unnecessary diversionary measure that will not do anything to promote enrollment in these programs.
Erosion of the unified benefit structure: Under existing law, Medicare+Choice plans must provide the same benefits as available under traditional Medicare. If they receive payments in excess of their actual costs, they may offer additional benefits of their own choosing or return the excess funds to a Medicare stabilization fund. 42 U.S.C. � 1395w-24. S. 1, Sections 200 and 212, and H.R. 1 , Section 200 both require MA and EFFS plans to offer benefits that are not available to the majority of beneficiaries who will remain in traditional Medicare. Thus, they erode the universality of Medicare by differentiating, for the first time, between required benefit packages in the traditional and private insurance programs.
Limiting information to beneficiaries: Under existing law, CMS must mail to beneficiaries a detailed list of information about the private plans available in their community to help them choose between and among plans. 42 U.S.C. � 1395w-21(d)(2)(A)(ii). H.R. 1 Section 231 limits the government's obligation by adding to the above section, "to the extent such information is available at the time of preparation of materials for the mailing." This limitation will impede the ability of beneficiaries to make the most informed and knowledgeable choice and will result in beneficiaries enrolling in plans that do not provide the best care for them.
Lock-in: Under current law, Medicare beneficiaries retain the right to enroll in or disenroll from a Medicare+Choice plan up through December 1, 2005. After that time, they will be "locked-in" to an M+C plan until the next annual coordinated enrollment period, with some limited exceptions. H.R. Title II would "lock-in" beneficiaries to their choice of MA or EFFS plan, starting in January 2006 when the programs first go in to effect. S. 1., Section 201 provides for continuous enrollment and disenrollment during the first 6 months of 2006 and the first 3 months of 2007. We believe that implementation of these lock-in provisions should be delayed completely, especially if beneficiaries are going to be provided with more limited information about plans, until beneficiaries have the chance to understand the new options that may be available.
Inequitable treatment of fee-for-service: The GAO has stated that Medicare+Choice plans are paid, on average, 104% of the amount it would cost traditional Medicare to provide services to their enrollees. Both S. 1 and H.R. 1 include increases in the reimbursement mechanisms for private plans so that these plans will receive even more funding than traditional Medicare. Even CMS projects that the majority of beneficiaries will remain in traditional Medicare; these beneficiaries need assurance that the program of their choice will be adequately funded.

Issues Pertaining to the Appeals Process:

Introduction of evidence: H.R. 1 Section 938 contains a provision limiting the introduction of evidence by a provider or supplier. However, it is not clear whether this limitation also applies to beneficiaries' introduction of evidence that must be obtained from a provider or supplier, such as a beneficiary's medical record, which is in the possession and control of the provider or supplier. This provision must be at minimum clarified, or eliminated, so as not to limit a beneficiary's ability to submit evidence in support of his or her Medicare appeal. S. 1 Section 514(a) takes the approach of establishing a deadline to complete the record in an ALJ hearing or for DAB review of 90 days after the date of request for hearing or review, with an extension for good cause. Again, beneficiaries may have difficulties getting medical records from providers or may not be aware of an issue until the hearing. The bill or the legislative history should clarify that a beneficiary may have more time to submit records outside of her control, or to respond to issues raised for the first time upon review.
Notice: H.R. 1 Section 933 and S. 1 Section 514(a) set forth the information that must be sent to Medicare beneficiaries by Medicare decision makers at various levels of appeal. However, they fail to require that, when a beneficiary has a legal representative, such information be sent to that representative. This is so even though the Courts have held that legal representatives must be provided with such information. The sections must be amended to include such a provision. These sections also do not require the notice to include the statutory and regulatory basis for a denial of care, even though Courts have required that this information be provided, as well.
Expedited access to judicial review: H.R. 1 Section 932(a) and S. 1 Section 512 provide for expedited access to judicial review for claims determinations and for health care provider enforcement cases when designated reviewers determine there are no questions of fact. The Senate bill establishes review panels made up of reviewers from existing appeals levels other than the redetermination level, while the House bill refers to administrative law judges, members of the Departmental Appeals Board, and qualified independent contractors or other independent entities. However, qualified independent contractors and redeterminations have no application to provider enforcement cases, which go through a separate process. Further, if this provision is to be effective in determining whether an issue of fact remains that warrants completion of the full administrative review process, then the review panel should consist of only those reviewers with expertise to make such a determination. Therefore, the provisions should be clarified to require that the review panels consist only of ALJs or members of the DAB.
Transfer of Administration Law Judge Function: H.R. 1 Section 931 and S. 1 Section 511 transfer Medicare administrative law judge appeals from the Social Security Administration to the U.S. Department of Health and Human Services ("DHHS"), and require that DHHS assure the independence of the administrative law judges by having them be separate from the Centers for Medicare and Medicaid Services ("CMS"). This is laudable; however, a further provision should be added which states that Medicare administrative law judge's are bound only by Medicare statute and regulations, and not by CMS policy or other CMS directives. Such a provision would assure full independence of the administrative law judges. The Senate provision contains an addition of performance standards for ALJs which may be in conflict with the Administrative Procedures Act. Otherwise, the Senate provision contains a more measured and thoughtful approach to the transfer.

Other Erosions of Beneficiary Protections:

Passing costs on to beneficiaries: As indicated above, each bill has a provision that would add co-payments in traditional Medicare to services utilized by persons with greater health care needs.
Quality concerns: H.R. 1 Section 953 would temporarily suspend collection of OASIS data from home health agencies for non-Medicare or Medicaid patients. OASIS data is used for quality assessment and to develop norms of care; therefore it is imperative that all information be fully available. In addition, agencies that do not have to collect data for private-pay patients may prefer to serve those patients, and choose not to serve Medicare and Medicaid patients, for whom the data must be collected.
Skilled Nursing Facility Concerns: The bills contain provisions concerning health care provider enforcement cases that may adversely affect the ability of the government to assure high quality care. H.R. 1, Section 932(d), S. 1, Section 513, both authorize the Secretary of Health and Human Services to develop a process to expedite appeals for providers when the remedies of termination, denial of payment, civil money penalty, or temporary management have been imposed on an immediate basis due to the serious nature of violations. Because the bills expedite all hearings whenever a remedy is imposed, they do not distinguish between the most serious cases and less serious cases, and may create insurmountable burden on the DAB. Further, the bills need to incorporate language from earlier bills that expedited review does not affect the application of any remedy imposed against a provider. Such language is needed to protect the health and safety of beneficiaries.
Regulatory Reform: S. 1 and H.R. 1 incorporate many provisions from previous bills designed to eliminate the regulatory burden on providers. Many of these provisions are problematic from a beneficiary perspective, since the regulations were designed to protect against provider abuses and problems with beneficiary access to care. Others are inconsistent with provisions establishing Medicare Parts D and E and the revised Medicare Advantage program. All of these sections require the Secretary to issue new regulations within a specified time period. The most ironic provision is S. 1 Section 504, which requires the Secretary -"to reduce the number of words comprising all regulations by at least two-thirds by October 1, 2004."

Beneficiary Protections (List Is Not Exhaustive; Representative of the Variety of Provisions):

Preventive benefits: H.R. 1 Sections 601, 611-614, 626, 628-631 provide for/extend coverage for important services.
Additional information and assistance for beneficiaries. S. 1 section 606 provides important additional and permanent funding for State Health Insurance and Assistance Programs (SHIPs). S. 1 Sections 551 and 552 and H. 1 Sections 925 and 926 provide additional important information to hospital patients and skilled nursing facility residents. S. 1 Section 605 provides for assistance to legal immigrants for coverage under Medicaid and SCHIP.
Therapy caps: H.R. 1 Section 624 extends for one year the moratorium on caps for out-patient therapy services. It also requires the prompt submission of overdue reports on payment and utilization.
Prior determination process: H.R. 1 Section 938 establishes a new process for beneficiaries to get a prior determination, in certain circumstances, from Medicare as to whether Medicare will cover a particular service. The utility of this important provision may be limited by the requirement that beneficiaries submit supporting documentation at the time of the predetermination request, when often that information is unavailable. The provision should be strengthened by requiring Medicare to obtain medical document directly from providers.
Chronic care: S. 1 Sections 442 and 443 create clinical care management payment demonstrations and fee-for-service care coordination demonstrations.
Establishment of program to prevent abuse of nursing facility residents: S. 1, Section 636 incorporates long-pending legislation to perform criminal background checks on workers.
Waiver of Part B Late Enrollment Penalty for Certain Military Retirees; Special Enrollment Period. Both bills waive the penalty for late enrollment in Part B for certain military retirees and create a special enrollment period.