Viewed as an issue important to his presidential legacy, Clinton has made Medicare reform a top priority for the administration and has vowed to veto any tax-cut plan that would threaten his proposal to dedicate $794 billion of the federal surplus to the Medicare trust fund. Although Republicans have forced the Clinton administration to defend its plan, they have not yet put forth their own legislative proposal. In March, the National Bipartisan Commission on the Future of Medicare failed to garner the necessary votes needed to officially submit a Medicare reform proposal to Congress. Despite the lack of an official recommendation, the commission co-chairs, Sen. John Breaux, D-La., and Rep. Bill Thomas, R-Calif., vowed to introduce in Congress this year their proposal to transform the Medicare program into a premium-support system. Senate Finance Committee Chair William Roth, R-Del., is reportedly committed to holding hearings on Medicare reform after the August congressional recess.

The American College of Cardiology (ACC) will closely monitor the debate as it proceeds through Congress. Unusually early in the legislative session, sharp dividing lines have emerged between Republicans and Democrats creating little possibility for compromise on Medicare reform or on other big issues, such as tax cuts and a patients' bill of rights. However, action on pieces of Medicare reform are possible, such as a prescription-drug benefit and relief for nursing homes and academic medical centers affected by payment cuts instituted under the Balanced Budget Act of 1997.

As the debate advances, it will be important to understand the differences among the ideas being presented. The ACC will continue to provide updates in Cardiology and on the Web site. The following is a summary of proposals put forth by the president:

Expanding and Improving Benefits
The president has proposed the establishment of a prescription-drug benefit for all Medicare beneficiaries. Currently, Medicare does not provide coverage for outpatient prescription drugs, leaving approximately 12.8 million (or 35 percent of) Medicare beneficiaries without any form of supplemental outpatient prescription-drug coverage.

Beginning in 2002, beneficiaries would have the option of enrolling in a prescription-drug benefit program. Beneficiaries would pay a separate premium for the benefit—an estimated $24 per month in 2002 and $44 per month in 2008—but would not be responsible for a deductible. In exchange, Medicare would pay for half of a beneficiary's drug costs up to a limit. Initially, Medicare would cover up to $1,000 of drug costs, rising to $2,500 in 2008. For beneficiaries who cannot afford the monthly premiums, the president's plan would provide additional protections. Seniors who fall between 135 and 150 percent of poverty would pay no monthly premiums. For seniors with incomes below 135 percent of poverty, both monthly premiums and cost-sharing requirements would be waived.

According to the president's proposal, the Health Care Financing Administration (HCFA) would not directly administer the benefit but would instead contract out with private-sector entities, such as pharmacy benefit managers, which would competitively bid to manage the benefit for a given geographic area. In an attempt to counter claims by pharmaceutical companies of price fixing, the president's proposal specifically states that Medicare would not set prices for drugs; rather, prices would be determined through negotiations between private benefit administrators and drug manufacturers. Even as such, pharmaceutical manufacturers have launched a multi-million dollar campaign against the president's proposal.

The president estimates that providing a prescription-drug benefit to all seniors would cost $118 billion over the next 10 years—although there is some question about whether this estimate is too low. In contrast, Republicans are likely to present a prescription-drug plan that would apply only to low-income beneficiaries.

The president is also proposing steps to improve preventive benefits. Specifically, the proposal would waive the Part B deductible and 20 percent coinsurance for Medicare-covered preventive services. The proposal also calls for an information campaign on prevention, a study to identify preventive interventions that are most valuable to older Americans, and a demonstration project to evaluate the "most successful and cost-effective means" for providing smoking-cessation services to Medicare beneficiaries.

The president's plan also includes a Medicare buy-in for beneficiaries ages 55–65 who have involuntarily lost their jobs and their health care coverage and those who do not have access to employer-sponsored insurance.

Making Medicare Competitive
The president's proposal would, for the first time in the program's history, inject into Medicare price competition among managed care plans. All Medicare managed care plans would be required to offer a defined set of Medicare benefits, including the new prescription-drug benefit. Because beneficiaries would be able to compare plans on the basis of cost and quality and not the lure of extra fringe benefits—such as health club memberships—beneficiaries who choose lower-cost plans would have lower premiums. Beneficiaries who choose to remain in the traditional fee-for-service program would not experience higher premiums. GOP critics argue that the president's defined benefit proposal falls short by not requiring traditional Medicare or HCFA to be in direct competition with other health plans.

Along with a guarantee of a defined package of benefits, Medicare beneficiaries will be asked to pay a 20 percent coinsurance for clinical laboratory services. Furthermore, the current $100 Part B deductible would begin to increase, beginning in 2002, indexed to inflation. The deductible has been increased only three times since Medicare began in 1966. The president did, however, reject imposing means-testing requirements on premiums.

Making Medicare Efficient
The president is proposing, as he did in his FY 00 budget, the permanent establishment of the Medicare "Centers of Excellence" program. Started in 1991 as a demonstration project, certain facilities, deemed "centers of excellence," were paid a single fee to provide all of the facility, diagnostic, and physician services associated with coronary artery bypass graft (CABG) surgery. Beginning in 2001, "centers of excellence" would be established nationwide for CABG surgery and other heart procedures as well as for hip and knee replacement surgeries. According to the president's proposal, Medicare achieved about a 12 percent savings for CABG procedures performed through the demonstration while most facilities experienced increased market share. Facilities would retain their "center of excellence" designation for three years as long as they continued to meet quality standards.

As part of the president's plan to adopt "best practices" from the private sector to improve quality and control costs, he is proposing the creation of a new Medicare preferred-provider option (PPO). Beneficiaries would have an incentive, through lower cost-sharing requirements, to use preferred providers within a PPO's network.

Medicare, as specified in the proposal, would also adopt the tools of primary care case management (PCCM) and disease management. Specifically, PCCMs would be developed in areas where evidence shows a lack of coordination of care for beneficiaries or a pattern of inappropriate utilization. Physicians who enter into contracts with Medicare to provide PCCM services would receive case-management fees in addition to their usual fee-for-service payments. Beneficiaries who meet the criteria for a PCCM would volunteer to remain with a PCCM for a period of time and would receive extra benefits or lower cost sharing in return.

Targeting high-cost health conditions, such as congestive heart failure, the president's plan would introduce disease management, or care coordination, into the Medicare program by allowing Medicare to competitively pay qualified entities that provide services, including patient screening and assessment, review of medications, physician interaction, and patient education. In an effort to minimize fragmentation of care, these entities would be required to provide disease management for related conditions, such as congestive heart failure, hypertension, coronary artery disease, and diabetes.

The president's plan also authorizes "innovative" purchasing techniques for Medicare, including single payment per case to combinations of practitioners, providers, and suppliers for all care delivered at a specific facility or site of care. For example, all payments for a surgeon, anesthesiologist, attending physician, and physician consultant(s) for each case could be combined with the applicable diagnosis-related group and paid to one entity. This type of single-payment arrangement, however, would be established only if overall program savings are expected. Also, under the president's plan, qualifying group practices could qualify for bonus payments if they reduce "excessive use" and "demonstrate positive medical outcomes for their patients." Qualifying practices would be given an annual target based on the practice's historic experience. A bonus could be paid if expenditures are lower than the target.

Securing the Trust Fund
The president's plan would dedicate 15 percent of the federal surplus (or $794 billion over 15 years) to shore up the financial health of the Medicare trust fund until 2027, thus lessening the need for "excessive cuts and radical restructuring." Approximately $45.5 billion of the surplus would be used to help finance the prescription-drug benefit.

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