Medicare implementation is the main event for HHS

March 1, 2005

IN HIS FIRST few days as Secretary of the Department of Health and Human Services (HHS), Mike Leavitt made waves by announcing plans to revise Medicaid and ensure drug safety.

IN HIS FIRST few days as Secretary of the Department of Health and Human Services (HHS), Mike Leavitt made waves by announcing plans to revise Medicaid and ensure drug safety. But the "main event" of the year, he emphasized, will be implementing new Medicare programs. The White House has a great deal at stake in getting insurers and MCOs to expand Medicare Advantage (MA) plans and Medicare PPOs across the country. Even more challenging is the task of convincing plans and PBMs (pharmacy benefit managers) to establish a whole new network of Medicare pharmacy benefit plans (PDPs).

TIGHT SCHEDULE The MA application and bidding process begins this month in order for plans to be ready to start marketing and enrolling seniors by October 1. Plans have to submit applications by March 23. The Centers for Medicare and Medicaid Services (CMS) are scheduled to announce capitation rates, local benchmarks and bidding procedures in April. Final bids are due in June, and CMS is slated to approve plan packages in September.

CMS got off to a good start by issuing final regs for MA plans and for the new prescription drug benefit on January 21. The rules clarify policies and reduce unnecessary procedures in order to encourage more MCOs to participate as regional PPOs or local MA plans. A few new provisions are expected to make it easier for regional PPOs to form networks in rural areas.

MOUNTING COSTS All these issues will affect the Medicare program's overall cost, which continues to generate outrage on all sides. Fiscal conservatives and Democrats are up in arms over soaring administration cost projections for the Medicare drug benefit: now a whopping $724 billion for the 10 years running from 2006 to 2015, when more seniors are expected to be enrolled in the program. Conservatives want to cap program spending at $400 billion, while Democrats insist they can save money by bringing in cheap drug imports and establishing a centralized Medicare drug purchasing program, unhampered by the much-debated non-interference clause.

The overall Medicare bill won't be so high, though, if seniors decide not to participate. Current estimates assume that 80% of eligible Medicare beneficiaries will join the drug program, but most observers doubt that participation will be anywhere near that level. One hurdle in convincing seniors to sign up is considerable uncertainly about future copays and deductibles; CMS expects monthly premiums to average $35, but that's just a guess.

The Medicare price tag might drop a little if enrollment in MA plans falls short. CMS still predicts that one-third of seniors will join HMOs or PPOs, but now expects this to occur at a slower rate. This will save Medicare money, as will implementing a risk adjustment system that pays plans less for treating healthier patients. Policymakers realize that large numbers of seniors have to join PDPs and MA plans for the new programs to succeed, but if lots of beneficiaries sign up, program expenditures will rise, and critics on all sides will call for spending caps and benefit curbs.

Jill Wechsler, a veteran reporter, has been covering Capitol Hill since 1994.