AMNews: July 1, 2002. Medicare drug benefit fight delays physician pay relief ... American Medical News

Medicare drug benefit fight delays physician pay relief

Senate Democrats answer GOP Medicare prescription drug proposal with a plan of their own.

By Markian Hawryluk, AMNews staff. July 1, 2002. Additional information

Washington -- Physicians seeking relief from the deep cuts projected in Medicare payment over the next four years must anxiously await resolution of what likely will be a bitter battle over an outpatient prescription drug benefit.

The two issues are entwined in the overall Medicare reform debate. And judging from the initial blows in the prescription drug fight, doctors could be in for a long wait.

Senate Democrats in June introduced a more generous -- but more expensive -- prescription drug benefit than the one House Republicans outlined in May. Democrats charged that the GOP plan would be of little help to seniors, while Republicans blasted a provision in the Senate plan that would require its reauthorization after seven years.

The Democratic plan was introduced by Sen. Bob Graham (D, Fla.) and has the backing of 21 Senate Democrats, including Majority Leader Tom Daschle of South Dakota.

"This will be the largest expansion of the Medicare program since its inception in 1965, and it represents significant reform by shifting the emphasis from treating sickness to promoting wellness," Graham said.

The voluntary prescription drug benefit would rely on private-sector pharmacy benefit managers to negotiate discounts on behalf of enrolled beneficiaries. The measure would set the monthly premium at $25 in the first year, with a $100 deductible and out-of-pocket costs capped at $4,000. The cost-sharing provisions would increase in future years.

The bill would encourage beneficiaries to choose generic drugs by charging tiered co-payments, with generics costing the least, followed by brand-name drugs on the PBM's preferred list and finally non-preferred brand-name medications. Low-income beneficiaries would receive subsidies, and sometimes complete waivers, of cost-sharing provisions.

The bill would create an appeals process for seniors for whom a medication approved by the PBM was not medically appropriate. Each PBM would be required to offer at least one preferred drug in each therapeutic category. Those categories would be developed by the Health and Human Services secretary, along with a committee of medical experts.

If passed, the benefit would take effect in 2004 but would require Congress to reauthorize the program in 2010. Graham said the sunset provision would ensure that Congress would take another look at the benefit after seven years and address any problems with the system.

Fire from across the aisle

But Republicans charge that the Democrats' measure threatens to give beneficiaries a temporary benefit that would be pulled away if Congress couldn't agree on reauthorization.

"This legislation includes a very precarious piece. It creates, then sunsets, their prescription drug benefit," said Rep. Bill Thomas (R, Calif.). "The Senate has essentially offered a demonstration project when the need to provide prescription drug coverage for seniors has already been clearly and repeatedly established."

Instead, Republicans promoted their drug plan. At press time, House committees were debating and poised to vote on the GOP measure.

Republicans propose a 6% Medicare physician pay increase over 5 years.

Introduced by Thomas and Rep. Billy Tauzin (R, La.), it would allow beneficiaries to purchase drug coverage from private insurance companies. Those insurers could offer different premiums and benefit packages, but the overall value of each plan would have to be equal to a standard package described in the bill.

Committee staff members estimated that the average beneficiary would pay a $35 monthly premium and a $250 annual deductible. The plan would cover 80% of beneficiaries' drug costs up to $1,000 and 50% of drug costs up to $2,000. Out-of-pocket costs would be capped at $3,800, but there would be no coverage for annual drug costs between $2,000 and $3,800.

Many consumer groups have expressed concern over cost-sharing provisions in the GOP measure. They also question whether insurers would develop drug plans and whether they would be viable, given their attraction to sick, high-cost beneficiaries.

The AMA has expressed support for the GOP Medicare package. In a letter to Thomas and Tauzin, the AMA said it backed the drug plan's subsidies for low-income seniors, caps on out-of-pocket costs and use of physicians to establish formularies. It also supports the Medicare physician payment fix included in the package.

"This bill will strengthen the Medicare program for America's seniors by helping them get the prescription drugs they need, fixing the Medicare payment problem and providing regulatory relief so physicians can spend more time with patients and less time on paperwork," said then-AMA Chair Timothy T. Flaherty, MD.

The GOP package would include $11 billion to reverse cuts in Medicare physician payments, as well as $10 billion for hospitals, $4 billion for Medicare+Choice plans and $2 billion for nursing homes. The bill would shift physician payment from a 15% drop to a 6% increase over five years.

"This would result in a 2005 payment rate that is 20% higher than if Congress failed to act," Dr. Flaherty said. But the bill would require lawmakers to address the physician payment formula again before 2006 to avoid a new round of cuts.

The Democratic plan does not yet include Medicare payment provisions, such as the physician reimbursement fix. But Graham indicated that his drug bill likely would be linked to such provisions before reaching the Senate floor.

It is unclear how senators intend to pay for the drug plan. The House has passed a budget blueprint that sets aside $350 billion for Medicare payments and a prescription drug benefit. The Senate has not yet allocated the $450 billion that would be needed for Graham's drug proposal.

Despite some crossover between the two prescription drug proposals, the House and Senate seem widely divided on many provisions. Pundits have remained skeptical that the two sides will be able to agree on the drug benefit this year.

As a result, several key lawmakers have floated the idea of dealing with the remaining Medicare provisions separately. Such a move could even occur in a lame-duck session after the November elections.

Graham said he thought the public clamor for a prescription drug benefit would drive the two sides to reach a compromise. "None of us buy the so-called conventional wisdom that nothing significant can be enacted in this election year," he said.

ADDITIONAL INFORMATION:

Dueling drug plans

House Republicans and Senate Democrats have offered competing Medicare drug plans.

SENATE DEMOCRATS

Monthly premium: $25
Annual deductible: $100
Co-payments: $10 for generics; $40 for preferred brand names; $60 for non-preferred brand names
Out-of-pocket cost cap: $4,000
Total proposal cost: $450 billion over seven years
Expires: Dec. 31, 2010

HOUSE REPUBLICANS

Monthly premium: $35 (estimated)
Annual deductible: $250
Co-payments: 20% for first $1,000 of drug costs; 50% for drug costs from $1,000 to $2,000; 100% for drug costs between $2,000 and $3,800
Out-of-pocket cost cap: $3,800
Total proposal cost: $350 billion over 10 years*
Expires: No expiration date

*Includes all Medicare payment provisions.

Sources: Office of Sen. Bob Graham; House Ways and Means and House Energy and Commerce committees

GOVERNMENT & MEDICINE