August 10, 2001

Finance Committee Members Spar Over Proposals for Medicare Reform

A tri-partisan group of Senate Finance Committee members Aug. 1 released six principles "necessary for a Medicare bill." Offered by Ranking Member Charles Grassley (R-Iowa), Sens. Olympia Snowe (R-Maine), Jim Jeffords (I-Vt.), John Breaux (D-La.), and Orrin Hatch (R-Utah.), the principles are reportedly a variation of market-based Medicare reform legislation (S. 358) introduced by Sens. Breaux and Bill Frist (R-Tenn.). However, the new principles also include a new modernized fee-for-service (FFS) plan.

In a prepared press statement, Sen. Snowe said, "We are here today to outline principles that can serve as a sound framework for a new prescription drug benefit and improvements to Medicare." Sen. Snowe said "the framework for a prescription drug benefit that we have built together would provide for voluntary, affordable coverage for all seniors enrolled in Medicare."

While few details beyond the principles are available, seniors under the plan could choose to stay in traditional FFS Medicare, opt for their coverage through Medicare+Choice plans, or pick the new modernized FFS. Under the new modernized FFS plan, seniors would be offered an optional set of benefits under traditional Medicare that provides better health care coverage. The new benefits would include more affordable hospital coverage and better preventive health benefits.

In addition to Medicare improvements, the other five principles include: access to affordable prescription drugs for all seniors; a stronger Medicare+Choice program; a sustainable Medicare program; a strengthened rural health care infrastructure; and a simplified and higher quality Medicare program that streamlines regulations, reduces paperwork and provides better education to providers.

While the announcement was designed to "spark" negotiations and "build momentum" toward committee consensus, the press conference fueled an unfavorable reaction by Chair, Max Baucus (D-Mont.). "Today, a proposal was unveiled that, in my view, does not represent a broad majority of the Senate, and it is one that I cannot support and will actively oppose," said Sen. Baucus.

Finance Committee member Sen. Bob Graham (D-Fla.) continues to put forward his proposal that adds a drug benefit directly to Medicare. His proposal does include other reform proposals, but is not as market-reform oriented. His proposal is said to cost $318 billion over 10 years.

The FY 2002 Budget Resolution reserves $300 billion for reforming Medicare and prescription drugs.

Information: Lynne L. Davis, AAMC Office of Governmental Relations, 202-828-0526.