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WASHINGTON U.S. Senator Bob Graham (D-Fla.) and a bipartisan coalition of senators, today offered an innovative package of reforms that includes a prescription drug benefit in Medicare and make other changes to modernize the program. The majority of Democrats on the Senate Finance Committee support the Medicare Reform Act of 2001. Click here for bill summary or complete bill text.
"Like many of us, the Medicare program is not functioning as well as it used to, when it was younger," Graham said. Now is the time to bring Medicare into this new century. Adding a real prescription drug benefit - one with no caps, no gaps and no gimmicks - is a key part of this modernization process. We also need to look at the program as a whole, both how it does business and how it serves our seniors."
The Medicare Reform Act of 2001 creates a prescription drug benefit that would be available to all seniors, regardless of income. Benefits would not be capped and there would be no gaps in coverage. The benefit would be in the Medicare system - which seniors already know and trust. The benefit would be administered by private-sector pharmacy benefit managers or PBMs. This allows seniors to make a choice and brings competition into the program to keep down costs. These private companies would actually bear some of the risk of the benefit. If they manage to keep prices low for beneficiaries, they could share in the cost-savings.
The legislation also:
Adds preventive benefits to Medicare
Creates an independent panel of medical experts to make coverage decisions
Allows Medicare to use cost-saving competitive and management practices
Sets up a demonstration program to improve Medicare + Choice
Ensures
sustainability of Part B by creating a sliding-scale premium.
Groups representing every affected party have supported this bill including: AdvancePCS, Genentech, Generic Pharmaceutical Association, and National Council on the Aging.
This bipartisan bill is co-sponsored by Sens. Lincoln Chafee (R-R.I.), Jeff Bingaman, (D-N.M.), Tom Carper (D-Del.),Kent Conrad (D-N.D.), John Kerry (D-Mass.), Blanche Lincoln, (D-Ark.), Zell Miller (D-Georgia) and John D. Rockefeller (D-W.V).
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In recent years the need to reform the Medicare program has been brought to the forefront of Congressional attention. As a result, it is now widely recognized that:
the Center for Medicare and Medicaid Services (CMS, formerly the Health Care Financing Administration) is not able to meet the vast demands placed on it by enactment in recent years of several major pieces of legislation (HIPAA, BBA, BBRA, BIPA), as well as by increasing program enrollment and greater use of medical services;
the Fee-For-Service program lacks the ability to use tools commonly used in the private sector and therefore is prohibited from being an efficient, competitive purchaser;
the Medicare+Choice program is unstable and based on a system of administered prices;
by failing to provide prescription drugs and many preventive services typically covered by private insurance plans, Medicare's benefit package is inadequate and outdated; and
while the long-term solvency outlook is better than it has been in decades, the pending retirement of the baby-boom generation will require action to improve the sustainability of the program.
Summary
The Medicare Reform Act of 2001 takes the commonsense steps necessary to begin to strengthen and modernize the program for the coming decades. While additional measures may be required to sustain the program through the peak enrollment years, bipartisan agreement exists around several reforms that would improve the program for beneficiaries, providers and taxpayers alike.
Where accord has not yet been reached in how or whether to restructure the Medicare+Choice program Congress should take steps to learn what would work, and what would not work. However, for the 84% of beneficiaries enrolled in the fee-for-service program, the time to act is now. The bipartisan consensus provisions included in the "Medicare Reform Act" should be enacted without delay in order to:
- keep our promise to America's seniors by ensuring that Medicare will
continue to provide affordable, adequate health care coverage;
- respond to
provider concerns;
- spend taxpayer dollars efficiently; and
- proceed
with major structural reforms to the program in a responsible and well-informed
manner.
Improving Medicare Management and Administration
The responsibilities placed on CMS (formerly HCFA) have grown tremendously, due to enactment in recent years of numerous pieces of legislation affecting the Medicare program in profound ways, growth in program enrollment, and greater use of medical services. At the same time, the agency is severely underfunded leading to problems with customer service to beneficiaries and providers, outdated technology systems, and slow responses to Congress.
Additionally, CMS lacks the administrative flexibility to function in a market-oriented manner, preventing the agency from behaving effectively, competitively and efficiently. It has also been criticized for making arbitrary coverage decisions.
The "Medicare Reform Act" would provide CMS with the resources and tools necessary to improve the Medicare program for beneficiaries and the providers who serve them. The following provisions could be implemented quickly and would thus make an immediate, positive difference in how Medicare works:
New Scientific Commission For National Coverage Decisions
Medicare coverage decisions are frequently the source of criticism of CMS providers, beneficiaries and manufacturers complain that national decisions often are confusing and seem arbitrary. Independent expertise in making coverage decisions is warranted given the rapid development of new technologies and the dilemma faced by CMS in pursuing the dual goals of providing the best care to Medicare beneficiaries and spending taxpayer dollars wisely.
The "Medicare Reform Act" would establish a Medicare Coverage Commission as a new agency within the Executive Branch, with members with clinical, medical, technical and scientific expertise appointed by the President. The Commission would establish national coverage policies at the request of beneficiaries or their representatives, manufacturers and suppliers, providers, or government agencies, including CMS.
The Commission would have a budget and staff, and the ability to convene advisory committees and commission studies as needed to evaluate new procedures, technologies and services.
CMS Leadership - Improving Responsiveness
The Administrator of CMS is responsible for a $375 billion budget and for the health care received by more than 70 million beneficiaries, yet the Administrator is only an Executive Schedule Level IV employee. To recognize the importance of the Administrator's role and responsibilities, the position would be elevated to an Executive Schedule Level III.
To provide increased accountability and better responsiveness to Congress, providers, and the public without creating added levels of bureaucracy, additional political appointee positions would be created within CMS.
Hiring Flexibility For Highly Trained CMS Personnel
To implement and evaluate the Medicare program with excellence, CMS needs staff with clinical, biomedical, scientific and technical expertise. However, CMS has been losing highly-qualified staff to other agencies, such as the National Institutes of Health and the National Center for Health Statistics because these agencies are better able to compensate specially qualified personnel at market rates. The Medicare Reform Act of 2001 would recognize the importance of retaining and attracting staff with special skills by providing CMS with hiring flexibility.
Increased Funding for Improved Customer Service
Many of the problems facing CMS are the result of a severely underfunded administrative budget. Medicare cannot be operated in a customer-friendly, highly responsive manner with an administrative budget that is less than 2% of program costs. (Large self-insured employers typically dedicate 10-15% of program costs to administrative operations.)
In a 1999 open letter to Congress and the Executive fourteen experts spanning the political spectrum stated their belief that "many of the difficulties that threaten to cripple CMS stem from an unwillingness...to provide the agency the resources and administrative flexibility necessary to carry out its mammoth assignment." The signatories recommended additional administrative resources as critical to reform of the program.
The "Medicare Reform Act" would increase funds for program operations in order to improve services to beneficiaries and providers, and would build the analytical and institutional infrastructure needed for a competitive system. The administrative budget would be increased by 15% for fiscal year 2002 and, in subsequent years, would increase by the growth in benefit costs, not to exceed 5% of program costs. The additional resources would be used for:
funding Medicare representatives at Social Security offices (for assistance
in claims submission, learning how to respond to a denial of coverage, etc.);
dedicated customer service staff for providers at CMS regional offices;
increasing funding for the State Health Insurance Assistance Programs
(currently located only in some large cities, these programs assist
beneficiaries in making plan choices);
updating information technology
systems;
expanded provider relations and training functions at the
contractor level; and
hiring highly-skilled staff (or the ability to
contract the work) to develop better mechanisms for risk adjustment, measures of
plan quality, systems for consumer education, and methods for dividing
geographic cost differences between those that are related to the quality of
care and those that are not. These mechanisms are critical to the successful
development and implementation of a competitive Medicare program.
Private Sector Purchasing and Quality Improvement Measures
urrent law does not permit CMS to adopt many tools developed in the private sector to control health care costs, leading to overpayments for many services and supplies. The National Academy of Social Insurance has recommended greater flexibility for CMS to use best practices from the private sector to improve quality and spend wisely in the Medicare program.
The "Medicare Reform Act" would allow CMS to use purchasing, contracting and quality improvement techniques which have been successfully demonstrated or which are used in the private sector. These measures, with safeguards for beneficiaries and providers, would increase the competitiveness of the traditional program, saving money for the taxpayers and offering more choices and greater quality to beneficiaries. The "Medicare Reform Act" would:
establish a coordinated care program;
allow contracts for disease
management services;
authorize CMS to use competitive pricing for Part B
items and some services;
allow provider and physician collaborations;
create preferred provider options in appropriate areas;
establish a
competitive process for global payments to facilities; and
simplify and
modernize contracting authorities.
Creating an Effective and Equitable Competitive System The Medicare+Choice program is based on a system of administered pricing payments are set through a complex statutory formula that has nothing to do with plan prices. Changing the way Medicare+Choice plans are paid, possibly through a competitive pricing system, could result in more appropriate payments to plans, reduced possibility of risk selection, and could equalize the benefits available to beneficiaries. This would replace the currently flawed Medicare+Choice system with one that is based on fair competition.
Proposals to inject competition into Medicare managed care payments through bidding systems have differed on the basis of the competition (price and quality, and/or benefits), the way in which payments to plans are determined, and the impact on beneficiaries.
The Balanced Budget Act of 1997 created the Medicare Competitive Pricing Demonstration Project to test a new method of paying plans based on a competitive market approach. The demonstration was to begin on January 1, 1999, but has never been implemented.
The "Medicare Reform Act" would reaffirm Congressional commitment to improving the efficiency of the Medicare+Choice program and to laying the groundwork for a competitive system by moving forward with the Competitive Pricing Demonstration Project. The demonstration, with rebate authority, would be established in the state of Florida. Lessons learned from this project would help to design and implement an effective and equitable competitive system. It is not sound to undertake a wholesale restructuring of the Medicare+Choice system without knowing what would, and would not, work. < p >A New Orientation -- Medicare Wellness The Medicare Wellness provisions would shift the focus of Medicare from simply treating illness to promoting wellness and emphasizing prevention:
New Preventive Services Based upon the recommendations of the United States Preventive Services Task Force, several new services proven to be effective in preventing disease would be added to the Medicare benefits package: hypertension screening, cholesterol screening, tobacco cessation counseling, counseling on treatment options for post-menopausal women, expanded osteoporosis screening, expanded medical-nutrition therapy services and screening for visual acuity and hearing impairment.
"Fast-Track" Process for Additional New Benefits To move Congress out of the business of micro-managing the Medicare benefits package, the Institute of Medicine would conduct a study every 3 years to assess the scientific validity and cost-effectiveness of the Medicare preventive benefits package. Based on that study, IOM would recommend preventive benefits to be added to or removed from Medicare. Congress would consider the recommendations using a "fast-track" process. This process would allow Congress to keep the Medicare program up to date with rapid advances in medical science and would ensure that Medicare's preventive benefit package stays up-to-date with that available in the private insurance market.
Research and Education An aggressive research effort would investigate ways to improve utilization of current and new preventive benefits, new methods of improving the health of Medicare beneficiaries, and the efficacy of both current and potential preventive screenings. Beneficiaries would be educated on risk factors which contribute to the onset of disease.
Reducing Medication Errors A grant program would be established to prevent medication errors, and subsequent deaths and injuries, by improving the systems of delivering inpatient and skilled nursing care. Grants would be provided to hospitals and skilled nursing facilities to offset the high costs of developing and implementing new and emerging patient safety and information technologies. < p >Medicare Outpatient Prescription Drug Benefit The addition of a prescription drug benefit is necessary to maintain the commitment that Medicare will provide affordable, adequate, health care coverage. Additionally, a standard prescription drug benefit is essential to laying the groundwork for an effective and equitable competitive system.
The "Medicare Reform Act" includes a prescription drug benefit based on the following principles:
Voluntary, Accessible, Integrated Coverage For All Beneficiaries While the majority of Medicare beneficiaries do not have reliable coverage, there are exceptions, e.g. employer retiree plans. While all beneficiaries would be eligible for the new Medicare benefit, it would be voluntary. Beneficiaries choosing coverage through Medicare would be encouraged to enroll when first eligible to keep premiums affordable.
> The benefit would be integrated into the Medicare program to ensure its availability to all beneficiaries, and because it makes the most clinical sense. If the Medicare program were being designed today, prescription drugs surely would be included. It is no more logical to exclude prescription drugs from the basic benefits package than it would be to exclude anaesthesia services or laboratory tests.
Access to prescription drug coverage would be guaranteed through the use of private benefit managers which currently operate in every zip code in the country.
Comprehensive Standard Benefit With Cap On Out-Of-Pocket Expenses "The Medicare Reform Act" would provide comprehensive coverage of all medically necessary prescription drugs. After the deductible is met, there would be no limits or caps on the benefit, and no gaps in coverage. Additionally, beneficiary protections would increase steadily as prescription drug needs increase.
> Employers offer their employees a standard drug benefit -- this decreases administrative complexity, and the likelihood of risk segmentation. "The Medicare Reform Act" mirrors the practice of employers and would provide a standard, defined benefit:
-Medicare would contribute 50% of the cost of premiums for most beneficiaries.
-Beneficiaries would pay a $250 deductible. Inclusion of a deductible encourages appropriate utilization, and holds down program costs and beneficiary premiums.
-Coinsurance would be graduated, or "ramped-up" to provide the most assistance to the beneficiaries with the greatest need. The Medicare program's contribution would increase as beneficiary out-of-pocket costs increase:
The program would pay 50% of the cost of each prescription above the deductible and up to $3,500 in out-of-pocket spending (and the beneficiary would pay 50%).
The program would pay 75% of the cost of each prescription above $3,500 and up to $4,000 in out-of-pocket spending (beneficiary would pay 25%).
-A cap on out-of-pocket expenses is necessary to provide assistance to beneficiaries with the greatest medical need, and to insure them against the most devastating costs: after $4,000 in out-of-pocket expenditures, the Medicare program would pick up any remaining expenses and the beneficiary would pay no coinsurance.
Affordable For All Beneficiaries As more than half of Medicare beneficiaries without drug coverage have incomes greater than 150% of the poverty line ($12,885 for an individual; $17,415 for a couple), Medicare must provide an affordable drug benefit for all beneficiaries. Most beneficiaries would receive a 50% premium subsidy; exceptions are detailed below:
> Beneficiaries with incomes below 135% of poverty would receive full assistance for their drug premiums and cost-sharing (the Medicaid program would pick up the costs for those below 120% of poverty using the current Medicaid matching rate; the Federal match rate would be 100% for those between 120-135% of poverty ).
Beneficiaries with incomes between 135-150% of poverty would receive a government premium contribution on a sliding-scale basis of between 100-50% (the Federal matching rate would also be 100% for this group).
Individuals with annual incomes between $75,000-$100,000 and couples with annual incomes between $150,000-$200,000 would receive a government premium contribution on a sliding-scale basis of between 50-25%.
Beneficiaries with very high incomes (individuals with annual incomes above $100,000, and couples with annual incomes above $200,000) would receive a government contribution of 25% towards the cost of their premium.
Use of the Private Sector to Promote Choice and Competition Multiple private sector entities (such as pharmacy benefit managers or health insurers) in each geographic region would administer, manage and deliver the prescription drug benefit. Used currently in the private sector, pharmacy benefit managers (PBMs) negotiate drug prices with manufacturers, process pharmacy claims and ensure appropriate drug use.
> PBMs would be allowed to use all of the methods they use currently in the private sector to provide benefits economically, including the use of formularies, preferred pharmacy networks, and generic drug substitution. Additionally, PBMs would be allowed to use mechanisms to encourage beneficiaries to select cost-effective drugs, including the use of disease management and therapeutic interchange programs.
Beneficiaries in every part of the country would have access to coverage provided by PBMs that would not assume full insurance risk for drug costs. In this way, adverse selection and inappropriate incentives would be avoided.
However, to ensure that PBMs pursue and are held accountable for high quality beneficiary services, improved health outcomes, and managing costs, PBMs would be required to put a substantial portion of their management fees at risk for their performance. Performance goals would include price discounts and generic substitution rates, timely action with regard to appeals, sustained pharmacy network access and notifications to avoid adverse drug reactions.
Although all PBMs would be required to offer the standard benefit at a minimum, payments received on the basis of their performance could be used to reduce beneficiary cost-sharing or to waive the deductible for generic drugs.
Requiring PBMs to share risk provides a middle ground between proposals that have included no risk being assumed by the private sector, and proposals that have required the assumption of insurance and selection risk for the cost of drugs.
This arrangement would bring us the benefits of private sector competition without the instabilities that would be associated with a full risk-bearing model. It would take advantage of the fact that the private sector has provided an efficient, workable, stable system for the delivery of prescription drugs, and the management of drug costs, and would allow beneficiaries to choose between multiple vendors.
Comparative information would be provided to beneficiaries to assist in making choices of PBMs or HMOs. The Secretary of HHS would be allowed to contract with private, nonprofit consumer information coalitions to provide comparative information to beneficiaries.
Continuation and Expansion of Current Coverage Although employer-provided coverage is declining, efforts should be made to encourage employers to continue providing coverage. Therefore, incentives to retain employer-provided coverage would be included in the Medicare Reform Act. Medicare HMOs would be required to provide, at a minimum, the drug benefit established by this proposal; the HMOs would be reimbursed for the standard benefit. Medigap plans would be modified to compliment, rather than duplicate the Medicare prescription drug benefit.
Medicare Sustainability
The Medicare Hospital Insurance (HI) Trust Fund currently enjoys the best solvency status in over a quarter century -- the most recent Trustees' report projects solvency until 2029. At the same time, the retirement of the baby-boomers will add significant pressure to the program. The "Medicare Reform Act" would begin to address this pressure by taking two modest steps:
Indexing the Part B Deductible
The Part B deductible is $100 a year. It has been increased only three times since Medicare began, when it was set at $50. Rather than implementing periodic, large increases in the deductible, this policy would index the deductible to inflation beginning in 2003. Small, annual adjustments would allow predictability for beneficiaries, and would guard against the program assuming a growing amount of Part B costs.
Sliding Scale Part B Premium
While the lowest-income beneficiaries do not face a Part B premium (Medicaid picks up the premium for these beneficiaries) all other Medicare beneficiaries pay the same premium, regardless of income. The "Medicare Reform Act" would provide all beneficiaries with some level of subsidy for Part B benefits, but that level would depend on income:
Individuals with annual incomes below $75,000 and couples with annual incomes below $150,000 would receive the government contribution of 75 percent provided in current law.
Individuals with annual incomes between $75,000-$100,000 and couples with annual incomes between $150,000-$200,000 would receive a government premium contribution on a sliding-scale basis of between 75-25 percent.
Beneficiaries with very high incomes (individuals with annual incomes above $100,000 and couples with annual incomes above $200,000) would receive a government contribution of 25 percent towards the cost of their premium.