FOR IMMEDIATE RELEASE, Contact: (202) 225-3625
June 21, 2002
No. FC 24-A
Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways and Means, today announced that on Wednesday, June 19, 2002, the Committee ordered favorably reported, H.R. 4954, the “Medicare Modernization and Prescription Drug Act of 2002,” as amended, by a recorded vote of 22-16. The Committee also favorably reported H.R. 4946, the “Improving Access to Long-Term Care Act of 2002,” as amended, by a recorded vote of 29 to 6.
DESCRIPTION OF H.R. 4954 AS APPROVED:
Medicare Prescription Drug Benefit: The bill would establish a new voluntary prescription drug benefit in Medicare that is available to all Medicare beneficiaries entitled to Part A or enrolled in Part B. The program would be administered by a new agency within the U.S. Department of Health and Human Services (HHS) called the Medicare Benefits Administration (MBA).
The coverage would be provided under a prescription drug plan (PDP), such as an insurance carrier or a pharmaceutical benefits manager, or a Medicare+Choice (M+C) plan. Coverage is defined as either “standard coverage” or actuarially equivalent coverage, if approved by Medicare. For 2005, “standard coverage” would be defined as having a $250 deductible, 20-percent cost sharing up to $1,000, 50-percent cost sharing for costs between $1,001 and $2,000, and catastrophic protection at $3,800 in out-of-pocket spending. Once the beneficiary reached the catastrophic limit, full coverage would be provided. Plans would not be permitted to offer an actuarially equivalent benefit if it is substantially different than the standard benefit. Plans could offer more generous benefits, and would have to offer access to negotiated price discounts, even when no benefits were payable because of the application of cost sharing.
Plans would be required to provide seniors with convenient access to “bricks and mortar” pharmacies as defined by Medicare. In addition, drug plans could not solely offer mail order plans. Finally, the plan would be required to establish an optional point-of-service plan under which beneficiaries would have access to any or all pharmacies that are not participating pharmacies in its network.
If a plan establishes a formulary, it would have to establish a pharmaceutical and therapeutics committee, a majority of which would be physicians or pharmacists. The formulary would have to include drugs within each therapeutic category and class of covered outpatient drugs, although not necessarily all drugs within such categories or classes.
Each PDP sponsor would be required to have meaningful procedures for the hearing and resolving of any grievances. A beneficiary in a plan that provided for tiered cost-sharing could request coverage of a non-preferred drug on the same conditions applicable to preferred drugs if the prescribing physician determined that the preferred drug was not as effective for the enrollee or had adverse effects for the enrollee. Similarly, a beneficiary could appeal to obtain coverage for a drug not on the formulary if the prescribing physician determined that the formulary drug for treatment of the same condition was not as effective for the individual or had adverse effects for the individual. In general, PDP sponsors would be required to meet the requirements for independent review of coverage denials and appeals in the same manner that such requirements apply to M+C plans.
To ensure medication compliance and avert interactions, the PDP sponsor would be required to have an effective cost and drug utilization management program, quality assurance measures including a medication therapy management program operated by pharmacists.
Plans would be required to assume financial insurance risk on a prospective basis for covered benefits except as covered by subsides or as covered by Federal incentive payments to encourage plans to expand service areas for existing plans or establish new plans. The Medicare Benefits Administrator would be required to assure that all Medicare beneficiaries would have a choice of enrollment in at least two qualifying plan options in their area of residence. The requirement would not be satisfied if only one PDP sponsor or M+C organization offered all the qualifying plans in the area. If necessary to ensure such access, the Administrator would be authorized to provide financial incentives, including the partial underwriting of risk, for a PDP sponsor to expand its service area under an existing prescription drug plan to adjoining or additional areas, or to establish such a plan, including offering such plan on a regional or nationwide basis.
Individuals with incomes below 150 percent of poverty would receive an additional subsidy equal to 100 percent of the value of standard drug coverage provided under the plan. For individuals between 150 percent and 175 percent of poverty, there would be a sliding scale premium and full cost-sharing subsidies. However, for both groups, beneficiary cost sharing would be reduced to an amount not to exceed $2 for a multiple source or generic drug and $5 for a non-preferred drug.
Total subsidies for non-low income beneficiaries would total 65 percent. Direct subsidies would comprise 35 percent and reinsurance (which subsidizes plans for beneficiaries with high costs) would constitute 30 percent. The beneficiary would be required to pay a premium for the 35 percent not covered by premium subsidies, except if the beneficiary was low income as outlined above.
Medicare+Choice Revitalization: The M+C plans would receive a fourth payment option: 100 percent of fee-for-service (FFS), as recommended by Medicare Payment Advisory Commission (MedPAC). In addition, costs for Medicare beneficiaries entitled to benefits from facilities of the U.S. Department of Veterans Affairs (VA) and the U.S. Department of Defense (DOD) will be included.
The bill will also fund the blend by repealing the budget neutrality provision for 2003 and 2004, but it is terminated in 2005. In addition, the national average used in the calculation of the blend would be revised, to reflect only M+C enrollees, rather than all beneficiaries. For 2003 and 2004, the minimum percentage would be 3 percent above the previous year’s amount rather than 2 percent.
The bill would make permanent the change in M+C reporting deadlines and annual, coordinated election period. This provision would permanently extend the deadline changes that were temporarily changed by the Bioterrrorism bill.
This bill would clarify that Federal standards would supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency), with respect to M+C plans offered by M+C organizations, effective on the date of enactment.
The bill would establish a new M+C option – specialized M+C plans for special needs beneficiaries (such as the EverCare demonstration).
The bill would make Medicare Medical Savings Accounts (MSAs) permanent and removes the enrollment cap. This provision would eliminate the requirement that Medicare MSA plans track encounter data since these are bank accounts.
H.R. 4954 would allow a reasonable cost contract to be extended or renewed beyond December 31, 2004, if there were no coordinated care M+C plans in its service area. Social HMOs would be extended through December 31, 2004, and could become M+C plans thereafter.
Medicare+Choice Competition Program: Beginning in 2005 when the drug benefit is implemented, a new M+C payment system would be established based on competitive bidding.
The bid amount would indicate the proportion of the bid attributable to the provision of: (1) statutory non-drug benefits, (2) statutory prescription drug benefits, and (3) non-statutory benefits. Plans would be required to submit this information and the actuarial basis for determining these amounts. The bid amount could not vary by enrollees within a plan.
The Administrator would have authority to negotiate monthly bid amounts (including portions of the bid), and may reject a bid amount, or a portion of it, that is not supported by the actuarial bases provided by the plan.
The FFS area-specific non-drug benchmark would be set at the largest of the minimum update, the floor, or a percentage of FFS costs (100 percent of FFS in 2005-2007 and 95 percent FFS thereafter). The percentage of FFS costs would be set at the adjusted average per capital cost that year.
If plans bid below the risk-adjusted benchmark, beneficiaries would save 75 percent of the difference and taxpayers would save 25 percent. The 75 percent can be rebated to the beneficiary, or reduce their prescription drug or supplementary premiums. If instead, the monthly bid exceeded the risk-adjusted benchmark, then enrollees would pay the difference.
Demonstration Program: A demonstration program for “competitive-demonstration areas” defined as a Metropolitan Statistical Area designated by the Secretary of HHS with at least two M+C plans by different organizations and at least 50 percent of beneficiaries enrolled in M+C plans would be established. The demonstration program would be limited to a maximum of four sites and for a period of 2 years per site.
For each competitive-demonstration area, the Administrator shall annually determine the choice non-drug benchmark amount defined as the sum of the weighted FFS and M+C components. The weighted FFS component would be defined as the nationwide proportion of FFS enrollees, thereby giving FFS a disproportionate influence in establishing the benchmark for that area. The M+C component would equal the national market share of M+C plans, thereby decreasing M+C influence in establishing the weighted average bid. But unlike the M+C competition program, M+C plans’ bids can affect the benchmark.
Beneficiaries who choose plans that bid below the benchmark would save 75 percent of the savings, and taxpayers would retain 25 percent of the savings. If the bid is above the benchmark, the beneficiary would pay the excess amount.
Municipal Health Service Amendment: The Municipal Health Service demonstration projects would be extended 5 years from 2004 to 2009 with respect to individuals who reside in the city in which the project is operated.
Rural Healthcare Improvements: H.R. 4954 would provide:
The bill would direct the Secretary to revise the MBI cost weights to reflect the most currently available data and to establish a schedule for revising the cost weights more often than once every 5 years.
The bill would reinstate periodic interim payment (PIP), condition for application of special physician payment adjustment, flexibility in-bed limitation for hospitals with strong seasonal census fluctuations, and 5-year extension of the authorization for appropriations for grant program.
H.R. 4954 would also provide:
Finally, the bill would provide a temporary 5-percent bonus for 3 years to rural hospitals in States where the average rural inpatient margin is negative and urban hospitals in States that have fewer than a 3-percent inpatient margin. There are 14 States with low Medicare reimbursement rates that qualify all or in part under this provision.
Providing Safe Harbor under Federally Qualified Health Centers: Remuneration in the form of a contract, lease, grant, loan, or other agreement between a public or non-profit private health center and an individual, or entity providing goods, or services to the health center would not be a violation of the anti-kickback statute if such an agreement would contribute to the ability of the health center to maintain or increase the availability or quality of services provided to a medically underserved population.
Inpatient Hospital Services: For fiscal year 2003, all hospitals would receive an update of MBI minus 0.25. This reflects a 3.05 percent update for Medicare payments over last year.
A 2-year increase in the level of adjustment for indirect costs of medical education would be included to provide for a better phase-in so that payments would be 6 percent higher in 2003 and 5.9 percent in 2004.
Recognition of New Medical Technologies Under Inpatient Hospital Prospective Payment System (PPS): These provisions would help integrate new technology into Medicare’s inpatient area sooner.
Phase-in of Federal Rate for Hospitals in Puerto Rico: Under H.R. 4954, Puerto Rico hospitals would have their rates increased to a 75/25 Federal/Puerto Rico rate over 5 years, beginning in 2004.
Skilled Nursing Facility Services: This provision would increase payments to skilled nursing facilities and skilled nursing facilities serving AIDS patients.
Hospice: This provision would provide coverage for hospice consultation services and a 10-percent increase in payment for hospice care furnished in frontier areas. In addition, there would be a rural hospice demonstration project and a demonstration project for use of recovery audit contractors.
Outpatient Department Services: Beneficiary hospital outpatient coinsurance would be reduced from around 40 percent to 20 percent, saving beneficiaries about $10 billion over the next 10 years.
Provisions Reforming Physician Payment Formula: Physicians received a 5.4-percent cut this year and are projected to receive significant payment cuts through 2006 under current law. This bill would provide physicians with a 3-year solution, which results in about 2 percent updates for 2003-2005.
The Sustainable Growth Rate (SGR) formula would be suspended for 3 years and the following polices would be put in place:
Acquisition of Certain Items and Services: The Secretary would competitively bid acquisition for durable medical equipment and off-the-shelf orthotics. The Secretary would be permitted to exempt areas that were not competitive due to low population density. The Secretary would also be able to exempt items and services for which the application of competitive acquisition was not likely to result in significant savings.
The Secretary may not award a winner-take-all contract, and multiple providers would have to be maintained. Competition would have to be on the basis of both price and quality. The provision would require the Secretary to conduct a demonstration project on the application of competitive acquisition to clinical diagnostic laboratory tests.
Payment for Ambulance Services: The provision would increase the rates paid under the phase-in of the ambulance fee schedule and add an extra year for high-cost regions. The provision would increase mileage payments by 25 percent for ground ambulance trips more than 50 miles.
Two-Year Extension of Moratorium on Therapy Caps: The provision suspends application of the $1,500 therapy caps for two additional years through 2004.
Coverage of An Initial Preventive Physical Examination: Medicare covers a number of preventive services. However, it does not cover routine physical examinations. The provision would authorize coverage of a free initial preventive physical examination upon eligibility for Medicare.
Renal Dialysis Services: The provision would increase the composite rate 1.2 percent for renal dialysis facility services furnished in 2004. The prohibition on exceptions to the composite rate would not apply to pediatric facilities, as of October 1, 2002, that did not have an exception rate as of that date.
TRICARE Amendment: This provision would eliminate the Medicare Part B late enrollment penalty for enrollees who sign up between January 1, 2001 and December 31, 2003, and would create a continuous enrollment period through 2003 (so retirees can sign up immediately).
Cholesterol Screening Amendment: The bill would provide coverage of cholesterol and blood lipid screenings under the Medicare program. The Secretary would establish standards regarding frequency and type of cholesterol and blood lipid screening tests.
Home Health Services: The provision would eliminate the 15-percent reduction in payment rates under the PPS and establish a co-payment for a home health service for a 60-day episode of care for certain beneficiaries. The provision would establish, beginning with 2003, a beneficiary co-payment of 1.5 percent (or no more than $40) for each 60-day episode of care. This would not be a per visit co-pay as has been considered in the past. Low-income beneficiaries and those receiving four or fewer home health visits in an episode of care would be excluded from the co-payment.
Update in Home Health Services: Updates would be set at 2 percent in 2003, 1.1 percentage point for 2004, and by 2.7 percent for 2005. The provision would limit the total amount of outlier payments or payment adjustments for home health care in a fiscal year to no more than 3 percent of total projected payments, beginning in 2003.
Outcomes Assessment Information System (OASIS): The bill would also:
Direct Graduate Medical Education: Extension of Update Limitation on High-Cost Programs; Hospitals with per resident amounts above 140 percent of the geographically adjusted national average amount in 2002 would be frozen at that amount for 10 years.
Redistribution of Unused Resident Positions: Currently there are caps on residency of the paid slots for each teaching hospital. This provision would enable the Secretary to reassign 75 percent slots that had remained unused for at least 3 years to other teaching hospitals. A preference would be given to rural and other underserved areas in an effort to encourage more physicians to practice in those areas.
Modifications to Medicare Payment Advisory Commission: MedPAC would be required to examine the budget consequences of its recommendations prior to issuing such recommendations, and would consider the efficiency of services as well as collect more current data on hospitals.
Demonstration Project for Disease Management for Certain Medicare Beneficiaries with Diabetes: The Secretary would be required to conduct a demonstration project, for up to 3 years, to examine the impact on costs and health outcomes of applying disease management to Hispanic Medicare beneficiaries who are diagnosed with diabetes.
Demonstration Project for Medical Adult Day Care: The Secretary would be required to establish a demonstration project under which a home health agency, directly or under arrangement with a medical adult day care facility, would provide medical adult day care services as a substitute for a portion of home health services otherwise provided in a beneficiary’s home.
Medicare Benefits Administrator: This provision would create MBA as an agency established within HHS with the task of managing Part C (M+C) and Part D (prescription drug) of Medicare. benefit.
An Administrator appointed by the President with the advice and consent of the Senate for a 5-year term would head the agency. The MBA would be able to hire qualified private sector employees or public sector employees and negotiate contracts and establish a Medicare Policy Advisory Board to discuss Part C and D recommendations.
Regulatory Reduction and Contracting Reform: This title consists of the entire Johnson-Stark bill, H.R. 3391, “Medicare Regulatory and Contracting Reform Act of 2001,” unanimously passed by this Committee and by the House last December. The provisions of this title do not change the bill that passed in any substantive way except it would modify implementation dates (since it is being considered 6 months later) and recognize legislation which has become law regarding M+C lock-in and adjusted community rate filing dates.
DESCRIPTION OF H.R. 4946 AS APPROVED:
Above-the-Line Deduction for Long-Term Care: Under current law, individuals may claim an itemized deduction for the cost of eligible long-term care insurance premiums, but only to the extent that such eligible long-term care premiums, combined with the taxpayer’s additional medical expenses, exceeds 7.5 percent of adjusted gross income (AGI). This bill would provide an above-the-line deduction for a percentage of eligible long-term care premiums for which the taxpayer pays at least 50 percent of the cost of coverage.
Additional Personal Exemption for Each Qualified Family Member with Long-Term Care Needs: Under current law, individuals are entitled to a personal exemption deduction ($3,000 in 2002) for the taxpayer, the taxpayer’s spouse, and each dependent. The personal exemption amount is phased-out for taxpayer’s with AGI above certain thresholds. This bill would provide the taxpayer with an additional personal exemption for each qualified family member with long-term care needs. The exemption would be phased-in as follows: $500 in 2003 and 2004, $1,000 for 2005 and 2006, $1,500 for 2007 and 2008, $2,000 for 2009 and 2010, $2,500 for 2011, and a full personal exemption ($3,000 adjusted for inflation) would be allowed in 2012 and thereafter.
Hepatitis A Vaccine Added to List of Taxable Vaccines: A manufacturer’s excise tax is currently imposed at a rate of 75 cents per dose on certain vaccines that are routinely recommended for administration to children. This bill would add any vaccine administered to prevent Hepatitis A to the list of taxable vaccines.
Expansion of Orphan Drug Tax Credit: Taxpayers can currently claim a 50-percent credit for expenses relating to human clinical testing of certain drugs for rare diseases or conditions, which are referred to as “orphan drugs.” The qualifying tax credit is available for expenses paid or incurred by the taxpayer after the drug has been declared to be an “orphan drug” by the Food and Drug Administration (FDA). This bill would expand the definition of qualifying expenses to include those expenses paid or incurred after the date the taxpayer files an application with the FDA (but only if the drug is ultimately certified as an “orphan drug” by the FDA). The expansion of the credit would encourage drug manufacturers to begin the process of human clinical testing of orphan drugs prior to FDA approval and expedite the manufacturing and availability of drugs designated as potential treatment for rare diseases or conditions.
Conforming Amendment to Combined Fund: Under current law, certain employers are required to make contributions to the Combined Fund, which is administered for the benefit of retired coal industry workers, to defray the cost of providing retiree benefits. This bill would provide that payments made by contributors to the Combined Fund will be reduced by the amount the Combined Fund will receive as a subsidy payment as provided in H.R. 4954, the “Medicare Modernization and Prescription Drug Act of 2002.”
Allow Employer Contributions to Archer MSA’s on behalf of M+C MSA Account Holders: Currently, there are two types of MSAs, Archer MSAs and M+C MSAs. This bill would allow employers or former employers to make contributions to an Archer MSA on behalf of a Medicare eligible individual. This bill would treat policies selected as part of the M+C MSA as a high deductible plan for purposes of Archer MSAs and would allow those individual who have a M+C MSA to also have an Archer MSA.