Congress approves Medicare pay-patch

August 1, 2008

Washington, D.C. - Enough Republicans sided with Democrats last month to approve legislation canceling a scheduled 10.6% cut in Medicare fees for physicians.

WASHINGTON, D.C. - Enough Republicans sided with Democrats last month to approve legislation canceling a scheduled 10.6% cut in Medicare fees for physicians. The dramatic fight over the bill reflected a sharp philosophical divide on Capitol Hill between advocates of private plans offering more coverage choices to seniors and those who view such efforts as "privatizing" the traditional Medicare program.

President George Bush vetoed the bill largely to signal continued support for private plans. But pressure from the American Medical Assn., AARP and retail pharmacists guaranteed that Congress would override the veto by a large margin.

A number of provisions are expected to reduce insurer participation in Medicare (see Politics & Policy, page 10). There are changes in Medigap policies and curbs on "abusive marketing practices" by private plans. The measure specifically bans cold calls, cross-selling, aggressive marketing tactics and misleading promotional activities, and it stiffens training and licensing requirements for agents and brokers.

The fight over Medicare Advantage will get worse when Congress looks to offset the larger physician rate cut next year, predicted Sen. Orrin Hatch (R-Utah) at the Atlantic Information Services July conference. Sen. Jay Rockefeller (D-W.Va.) countered that the "irrational protection of inefficient programs like Medicare Advantage" will block healthcare reform in the coming year.

One provision in the bill offers token support for a value-based payment system through bonuses to physician who expand reporting on quality care. The legislation also takes an initial step toward more efficient electronic health information systems by requiring doctors to adopt electronic prescribing methods by 2011, replacing a voluntary program.

SOMETHING FOR EVERYONE

There are dozens of provisions in the legislation designed to please beneficiaries and providers alike. The bill covers more preventive services, cuts some copayments, removes certain coverage caps, increases assistance for low-income seniors and offers added support to hospitals and providers in rural areas. There are goodies for speech pathologists, ambulance services, clinical labs, community health centers, and others.

In the area of reform, clinics providing dialysis services for patients with kidney failure face a new bundled payment system.

But the bill also blocks a new competitive bidding program designed to address high Medicare outlays for durable medical equipment. The Centers for Medicare and Medicaid Services (CMS) recently launched a pilot program to establish an alternative system for supplying and paying for wheelchairs and other items, but providers and equipment makers argued successfully that the contemplated system is unfair and inappropriate.

Insurers sponsoring Medicare drug plans also face new challenges. A provision codifies and sets the stage for expansion of certain "protected classes" of prescription drugs that have to be included on all Part D plan formularies. A "prompt pay" provision also requires Part D plans to reimburse pharmacies within 14 days and to update drug pricing standards every week-another requirement that plans say will be costly and hard to meet.