May 28, 1999
Senate Finance Committee Hears Testimony on Premium Support
Urging Congress to move forward with a bipartisan Medicare bill this year, Sen. John Breaux (D-La.) and Rep. Bill Thomas (R-Calif) testified before the Senate Finance Committee May 26, recommending their premium support-based Medicare reform proposal. The Breaux/Thomas proposal was put together in March when the two co-chaired the now disbanded National Bipartisan Commission on the Future of Medicare. The committee also heard from a panel of health care policy experts who responded to the Breaux-Thomas proposal and suggested ways to modernize Medicare's current fee-for-service (FFS) and Medicare + Choice plans to make Medicare more efficient, attractive, and competitive in today's health care marketplace.
The Breaux-Thomas proposal includes modeling Medicare after the Federal Employees Health Benefits program (FEHBP); modernizing Medicare FFS; reforming Medigap; reforming graduate medical education (GME) (see below); expanding the benefits package to include a modest outpatient prescription drug package; and extending beyond FY 2002 provider payment reductions mandated by the Balanced Budget Act of 1997 (BBA). Under an FEHBP-like model (also known as premium support),private plans would submit their plan and premiums for approval to a Medicare Board in order to compete against one another and FFS. The plan modernizes FFS by combining Medicare's Part A and Part B trust funds and creating a single annual deductible for all beneficiaries. Medigap plans would be required to cover prescription drugs, allowing for varying degrees of coinsurance and deductibles.
Emphasizing that the Breaux/Thomas plan is about "change in approach to change itself," Rep. Thomas also pointed to a Congressional Budget Office (CBO) analysis of the proposal that states that the plan would provide "greater choice for beneficiaries," and reduced costs as a result of increased plan competition.
Bruce Vladeck, Ph.D., senior vice president for policy at Mount Sinai School of Medicine and former HCFA administrator, countered that beneficiaries, especially those in rural areas, could find themselves paying a higher premium than they do today for a plan that offers less in benefits. Moreover, he questioned the urgency of reform given the "overwhelming proportion of beneficiaries (who are) highly satisfied" with the current program.
If the need to control costs is the impetus for Medicare reform, Dr. Vladeck stated that Congress was "able to achieve enormous savings through the BBA" and those savings were "produced almost entirely through the use of traditional measures, the kind that have been used in the Medicare program for 25 years." He continued that there exist "some proven approaches that have been working for years and appear to have more significant impacts now than they've had in the past."
Dr. Vladeck said that Medicare reform is possible without the kind of sweeping overhaul required under Breaux/Thomas and suggested technical changes to the BBA to rein in its "far-reaching" reforms. In his written statement, Dr. Vladeck suggested that technical changes to the BBA should include the incorporation of a "teaching adjustment in the prospective payment system for hospital outpatient services, and insuring that the Disproportionate Share hospitals receive the full adjustment" that they receive under the current payment formula.
Dan Crippen, Ph.D., director, Congressional Budget Office; William Scanlon, Ph.D., director of Health Financing and Systems Issues for the General Accounting Office (GAO); and Ken Thorpe, Ph.D., professor of health policy at Tulane University, focused on a variety of Medicare reform measures, including changes to Medicare FFS and Medicare + Choice. Many of the witnesses' recommendations were included in the Breaux/Thomas plan, such as incorporating a prescription drug benefit and reforming beneficiary cost-sharing.
Alternative FFS modernization recommendations by Dr. Crippen included expanding prospective payment such as bundling together acute and post-acute hospital services; "combining payments for physician and facility services during a hospital stay;" and including severity adjustments in PPS to account for risk and difficult cases. Mr. Thorpe suggested that Medicare+ Choice plan competitively bid "premiums at the plan service area instead of county by county." Mr. Thorpe said that the plan service area better represents the network of physicians and hospitals in the managed care plan. Moreover, he said that the broader market area will prevent plans from selecting which counties in their plan service areas to offer or not offer their services.
While the majority of the second panel did not wholeheartedly embrace the Breaux/Thomas proposal, David Kendall, senior analyst for Health Policy at the Progressive Policy Institute, and Deborah Steelman, president of Steelman Health Strategies, were supportive. Ms. Steelman told the committee that the Breaux-Thomas plan, which she voted for as a member of the Bipartisan Commission on the Future of Medicine, represents the brightest future for Medicare. In her prepared statement Ms. Steelman said that the proposal "combines the best of the marketplace and government--innovative and efficient health care and guaranteed benefits for seniors, and equitable financing obligations for beneficiaries and younger taxpayers, which ensures quality care at a reasonable price."
Information: Paul Bonta or Lynne L. Davis, AAMC Office of Governmental Relations, 202-828-0526.
