Senate Finance Committee
Passes Medicare Prescription Drug Legislation; Includes Relief
for Rural Providers
June 13. 2003 - After a marathon 11-hour mark up,
the Senate Finance Committee June 12 passed 16-5 prescription
drug benefit legislation entitled, "The Prescription
Drug and Medicare Improvement Act of 2003." The bipartisan
legislation, sponsored by Senate Finance Committee Chair Charles
Grassley (R-Iowa) and Ranking Minority Member Max Baucus (D-Mont.)
creates a voluntary drug benefit, offers an enhanced Medicare
option that would offer more comprehensive medical benefits,
and includes reforms to the fee-for-service program, such
as increased payments to rural hospitals and physicians.
According to the summary of the agreement announced on June
4, the prescription drug benefit would be available to those
in Medicare fee for service (FFS) as well as those in private
plans. Such a benefit would be "integrated with other
medical benefits for those who enroll in a private managed
care or preferred provider plan. For beneficiaries who stay
in fee-for-service, the benefit would be provided through
stand-alone drug only plans. The value of, and subsidy toward,
the drug benefit for beneficiaries in private plans and FFS
would be equal."
The plan also "restyles" Medicare+Choice as a new
Medicare Advantage program. Private plans, including preferred
provider organizations (PPOs) would compete on a regional
basis. Benefits would be encouraged to offer richer benefit
packages than fee for service.
The bill also includes fee-for-service modernizations, such
as a chronic care demonstration program and increased payments
for providers. The provider payment provisions are targeted
primarily to rural hospitals and physicians. Some of the rural
hospital and physician provisions include: increasing the
standardized amount for other urban and rural hospitals; decreasing
the labor share for those hospitals that would benefit from
such a provision; increasing payments for low volume hospitals;
equalizing Medicare disproportionate share hospital payments
for rural hospitals; temporarily increasing the work, practice
expense and malpractice geographic indices of the physician
payment formula for services delivered in localities below
1.0.
Under the legislation, state Medicaid Disproportionate Share
Hospital (DSH) allotments will be temporarily increased for
the last two quarters of FY 2004 and the first two quarters
of FY 2005. The AAMC is working to add a second year of temporary
DSH relief. States with extremely low Medicaid DSH spending
will have their allotments temporarily (FYs 2004 and 2005)
increased to 3 percent of overall Medicaid spending. Neither
relief from Medicare Indirect Medical Education cuts nor relief
from the cuts to physician payment updates are included in
the base bill. The AAMC has been working to include such relief
in the legislation (see related article).
Much of the mark up focused on potential variation in premiums
associated with the drug benefit; the "donut" or
gap in coverage that requires seniors to spend a certain amount
of out of pocket costs before catastrophic coverage kicks
in; the impact such a drug benefit would have on retiree health
plans currently offered by employers; whether or not savings
would be created by competition and bidding among health plans;
and the government's "fall-back" plan if plans fail
to bid to serve beneficiaries in a market area.
Although 138 amendments had been filed with the committee
June 11, 32 were incorporated into a modification of Chairman
Grassley's mark. Approximately eight amendments were voted
upon, while others were offered and then withdrawn. Many of
the amendments had not yet been scored by the Congressional
Budget Office (CBO) and the $400 billion over 10 year budget
was placing restrictions on what could be added to the legislation.
Sen. John Breaux (D-La.) offered an amendment agreed to by
voice vote that would close a loophole under the Stark law
that currently allows physician interest or ownership in a
"whole hospital." The General Accounting Office
(GAO) has reported an increasing trend in physician owned
niche hospitals that offer specialty services, such as orthopedics
and cardiac care [see Washington
Highlights, May 30].
Amendments incorporated into the Chairman's modified mark
include:
- Graduate medical education technical language relating
to the costs of resident training in non-hospital sites.
The AAMC and dental, osteopathic and family practice organizations
had written a letter
in support of the legislation;
- A requirement that the Secretary would deem FDA-approved
clinical trials as automatically qualified for coverage
of routine costs associated with clinical trails of breakthrough
medical technologies; and
- Allowing States the option to provide Medicaid and
State Child Health Insurance Program coverage to lawfully
present legal immigrant children and pregnant women for
FYs 2005-2007.
Sen. Jeff Bingaman (D-N.M.) offered an amendment to carve
Medicare Disproportionate Share Hospital payments from Medicare
Advantage plan payments so that they could be paid directly
to hospitals. Sen. Grassley agreed to work with Sen. Bingaman
on the issue before the legislation goes to the floor for
debate the week of June 16.
Sen. Jon Kyl (R-Ariz.) offered and then withdrew an amendment
that would base updates to Medicare physician payments on
the Medicare Economic Index for two years before returning
the update to the Sustainable Growth methodology.
Information:
Lynne Davis Boyle, Assistant Vice President
AAMC Office of Governmental Relations
ldavisboyle@aamc.org
(202) 828-0526
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