Senate Finance Committee Republicans Agree To $10B in Cuts to Medicaid, Medicare
Senate Finance Committee Republicans on Thursday reached an agreement on a fiscal year 2006 budget reconciliation plan that would save a net $10 billion in Medicaid and Medicare costs over five years, CQ HealthBeat reports (CQ HealthBeat, 10/20). The committee must vote on the plan on Monday. The plan would include $25.1 billion in proposed spending reductions and about $15 billion in spending increases for Medicaid and Medicare (Rogers, Wall Street Journal, 10/21). The plan would provide a net savings of $4.26 billion in Medicaid costs and a new savings of $5.76 billion in Medicare costs (CQ HealthBeat, 10/20). The plan would increase Medicaid rebates paid by pharmaceutical companies from 15.1% to 17% for a savings of $1.1 billion. In addition, the plan would revise the prescription drug reimbursement formula for Medicaid to limit the profit margins of pharmacists for a savings of $4.57 billion (Wall Street Journal, 10/21). The plan also would place new restrictions on Medicaid asset-transfer rules for an estimated savings of $305 million (Wayne, CQ Today, 10/20). The plan would provide $1.8 billion in additional Medicaid funds for survivors of Hurricane Katrina and $834 million to fund legislation (S 183) sponsored by Senate Finance Committee Chair Chuck Grassley (R-Iowa) that would allow families with annual incomes at or less than 300% of the poverty level to purchase Medicaid coverage for disabled children (CQ HealthBeat, 10/20).
Medicare Revisions
The plan would eliminate a stabilization fund established under the 2003 Medicare law to encourage managed care plans to participate in Medicare Advantage for savings of $5.44 billion. In addition, the plan would encourage a link between performance and Medicare reimbursements to hospitals and physicians for an estimated savings of $4.5 billion (Wall Street Journal, 10/21). The plan would provide higher Medicare reimbursements to health insurers that cover sicker patients and lower payments to those that cover healthier patients for a savings of $6.5 billion (CQ HealthBeat, 10/20). The plan also would reduce Medicare reimbursement rates for durable medical equipment for a savings of $910 million. The plan would provide $10.8 billion to increase Medicare physician reimbursements by 1% in 2006, $710 million to extend for one year a six-year moratorium on a cap on the amount the program can spend for outpatient physical and speech therapy, and $520 million to increase by 1.6% the reimbursement rate for health care providers that treat end-stage renal disease (CQ Today, 10/20).
Other Revisions
The plans also would:
- Reduce the Medicare reimbursement rate for skilled nursing facility bad debt from unpaid beneficiary copayments and deductibles from 100% to 70% of allowable costs;
- Mandate that new physician-owned specialty hospitals cannot have ownership or investment interests from physicians who refer Medicare or Medicaid beneficiaries to the facilities and confirm that the "whole hospital" exception would not apply to new specialty hospitals as of June 8, 2005;
- Provide increased funds to states with deficits in their SCHIP programs to expand outreach and enrollment efforts;
- Enact a series of measures to encourage the purchase of long-term care insurance;
- Encourage states to eliminate Medicaid waste, fraud and abuse; and
Veto Threat, Democratic Opposition
Parts of the plan "might draw a veto threat from the White House," according to sources familiar with the issue, CongressDaily reports. The Bush administration has opposed revisions to provisions of the 2003 Medicare law, "particularly those that encourage private-sector participation in the program," according to CongressDaily. As a result, a provision to eliminate the stabilization fund for managed care plans could prompt opposition from President Bush. Mark Hayes, health policy director for the Senate Finance Committee, said that the Bush administration "is much less overly enthusiastic than we are" about the elimination of the fund (Heil, CongressDaily, 10/21). Meanwhile, Democrats on the Senate Finance Committee do not support the plan, in part because "conservative Republicans have delayed a separate bill to provide more generous Medicaid benefits to Katrina victims," the AP/Seattle Post-Intelligencer reports (Taylor, AP/Seattle Post-Intelligencer, 10/21).
Other Reaction
Health insurers are "angered" over two parts in the plan: the provision to eliminate the stabilization fund for managed care plans and the provision to adjust Medicare reimbursements to health insurers based on the health of beneficiaries, CQ Today reports. Karen Ignagni, president of America's Health Insurance Plans, said, "Just two years after enactment, and three weeks before beneficiaries start making choices (on drug plans), members of Congress are proposing to change the rules." She added, "It sends a serious message that members of Congress weren't serious about private-public partnerships" (Schuler, CQ Today, 10/20). Craig Fuller, president of the National Association of Chain Drug Stores, also criticized the plan. He said, "They managed to achieve savings for budget purposes, but they have really come up with half a loaf in terms of meaningful Medicaid reform" (Wall Street Journal, 10/21). However, American Medical Association President J. Edward Hill praised the provision in the plan to increase Medicare reimbursements for physicians. He said, "We look forward to working with the House to build upon the Senate's progress on this issue of critical importance to our nation's seniors and the physicians who care for them" (CQ HealthBeat, 10/20).
