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Jennifer Klein's Files
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MARKERS FOR THE BUDGET NEGOTIATIONS ON MEDICAID
The President's Medicaid/budget proposal assumes a saving of $54 billion during the
next seven fiscal years (predicated on the OMB baseline) while the Congressional proposals
assume a reduction of $182 billion (predicated on the CBO baseline). As significant as these
differences are, they are no more important than the structural changes envisioned by the
competing proposals.
The most crucial structural issue is the retention of the guarantee (in Beltway
parlance, the "entitlement") to specific groups of vulnerable people and families that they
will receive Medicaid coverage. Current law, and the President's proposed revision, provide
guarantees of Medicaid coverage directly to people while the Congressional proposals merely
provide guarantees of a specific amount of money to the states. The loss of this Medicaid
coverage guarantee will jeopardize coverage for millions of children, seniors and people with
disabilities; will result in growing numbers of uninsured people, especially as employer-provided
coverage continues to decline and when economic downturns occur; and, as experienced with
previous block grant programs, will inevitably erode public support for the underlying
programmatic purpose (here, the provision of health care coverage) as federal funding becomes
more attenuated from specific, discernable public benefits.
The other important structural issues, especially those that breathe life into the coverage
guarantee, include:
Scope of Coverage Guarantee: Specific vulnerable groups are explicitly included in the
coverage guarantee under existing law and need to be similarly protected in the revised
program. These groups are pregnant mothers and children (to 133 percent of poverty for
pregnant mothers and children up to age six; and to 100 percent of poverty for children
between six and 12 years of age, with the same standard phased in for children through
18 years of age), as well as specific groups of parents of dependent children, seniors and
people with disabilities. States should also have optional authority to include coverage for
other people without private insurance.
Covered Benefits: A coverage guarantee is meaningless unless it is linked with a clear
description of needed benefits included in such coverage. (As Senator Chafee observed --
after his amendment to include children in the coverage guarantee succeeded but his
amendment to specify covered benefits failed -- a state could decide that a covered
group's benefits "will be one aspirin a year.") To achieve such needed protection, either
current law must be retained with its list of mandatory and optional benefits, or a more
generic standard must be established (such as covered benefits must be commensurate
with benefits provided to that state's public employees).
Out-of-Pocket Costs: For low-income beneficiaries of the Medicaid program, anything
beyond nominal out-of-pocket costs (including premiums, deductibles and copayments)
discription tv give 10 thurge
is unaffordable and would preclude their ability to get the health care they need. As with
current law, there needs to be a prohibition against the imposition of anything beyond
states For Poverty those ubove line
nominal out-of-pocket costs as well as a prohibition against balanced billing.
Quality Standards: Since the Medicaid program's delivery system is moving rapidly
towards managed care and will undoubtedly continue to do so, national quality care
Chatee wt
standards must be implemented. Those standards should include, but not be limited to,
standards on solvency, accessibility, services, marketing, appeals, choice of plans, data
collection and ombudsman assistance.
Enforcement of Enumerated Rights: The rights to guaranteed, meaningful coverage
in m conference vt "
will be ineffective without a realistic enforcement mechanism. A private right of action,
therefore, needs to be retained.
Long-Term Care: A number of current program features need to be retained: (1) the
right to nursing home coverage after income and resources have been spent down; (2)
protection against spousal impoverishment; (3) protection against recovering the costs of
long-term care from adult children; (4) national quality care nursing home standards; (5)
mandatory coverage of home health care; and (6) state options to offer personal care and
home and community-based coverage as an alternative to nursing home care.
Medicare-Related Cost-Sharing Protections for Low-Income Seniors: Current law
protects low-income seniors from unaffordable and fast-rising cost-sharing requirements
(premiums, deductibles and copayments) of the Medicare program. (Medicaid now
covers Medicare's premiums, deductibles and copayments for seniors under the poverty
line and the premiums for seniors up to 120 percent of poverty.) Low-income seniors
would lose their ability to access the Medicare program if these protections are
eliminated, especially as Medicare premiums are scheduled to escalate in the future.
Since governors have a legitimate concern about picking up these Medicare-related costs,
it would be far preferable to transfer this guaranteed protection from the Medicaid
program to the Medicare program -- and reductions in the Medicare cutback numbers
should include this transfer of responsibility.
State Contributions: Currently, in order to draw down federal Medicaid dollars, states
must contribute 17 to 50 percent of program costs. Also, some restrictions on what
constitutes the state share apply. For example, restrictions on voluntary contributions
were enacted in response to abuses by the states. As with current law, the restrictions
should remain in place and states should match federal funds at a rate no lower than their
current match rate. Failure to establish such rules would result in far greater Medicaid
cutbacks than the dollars cut from current federal commitments.
MEMORANDUM
November 21, 1995
TO: Distribution
FR: Chris Jennings
RE: Democratic Coalition Proposal
Attached is an analysis of the Democratic Coalition's balanced budget proposal
comparing it with the Republican proposal and the House Democratic proposal. Congressman
L.F. Payne sent it over to me for our review.
SOURCES OF SAVINGS BY SECTOR/MEDICARE"
Republican w/ Fail Safe House Democrats Coalition
Group
Hospitals Total
$95.4
$57.3
$65.2
All hospitals
$86.4
$49.6
$60.6
Teaching Hospitals
$9.0
$7.7
$4.6
Skilled Nursing
$ 13.0
$6.1
$6.9
Doctors
$ 31.6
$25.2
$25.2
Home Health
$ 21.0
$7.7
$9.0
Providers, other
(Labs, durables)
$ 17.2
$2.6
$6.5
Total Provider
$178.2
$98.9
$112.8
Beneficiaries
$57.3
(COSTS $21.0³)
$26.3
Managed Care
$28.9
$-0-
$34.0
Other Savings
(Fraud, Secondary Payor $10.5
$7.9
$18.4
etc).
COSTS
$2.4
$8.3
$20.1
(preventive benefits
medical ed. trust fund etc).
TOTAL SAVINGS
after costs/interactions $270.0
$89.5
$168.0
'Due to rounding and interactions, numbers do not add up to 100%
2 Estimates, based upon CBO score of $36.6 billion failsafe in Conference agreement.
3 $15.9 billion in Formula Driven Overpayment cuts returned to beneficiaries and $5.1 billion from
premiums lower than current law. CBO did not subtract the $15.9 FDO provision from its calculations of total
savings.
McKlnnon/ DRAFT 11.19.95
MEDICARE COMPARISON
Republican
House Democrat
Coalition
BENEFICIARIES
TOTAL:$57.3 billion
TOTAL: COST of
TOTAL:$26.3 billion
$21 billion
Saves $48.8 billion at
Part B Premium
COSTS $5.1 billion
Saves $ 7.5 billion by
31.5%.
freezing premium at
$46.10 in 1996 and
keeping at 25% until
2002.
Means Testing
Saves $8.5 billion by
No provision
Saves $18.8 billion
means testing at
by means testing at
$60,000 (ind) and
50,000 (ind) and
$90,000 (couple)
75,000 (couple)
Coinsurance
No provision
COSTS $15.9
billion: Hospital
No provision
Formula Driven
Overpayment savings
are given to
beneficiaries in the
form of lowered
coinsurance rates.
Growth Rate/Per
TOTAL: $28.9
No savings
TOTAL: $34 billion
Capita/ Managed Care
billion¹
Per-capita growth:
(CBO also considers
Provider Service Network
Per-capita growth:
language as a factor in
1996- 6.0%
scoring)
1996- 8%
1997- 6.0%
1997- 3.4%
1998- 6.0%
1998- 4.6%
1999- 5.5%
1999- 4.3%
2000- 5.5%
2000- 3.8%
2001- 5.5%
2001- 5.5%
2002- 5.5%
2002- 5.6%
Original House-Senate savings were about $32 billion . CBO's score of the Conference Agreement
Includes losses due to Medical Savings Account provisions under this estimate. Thus MSAs likely cost the
Republicans about $3 billion.
1. McKinnon/ DRAFT/ 11.19.95
MEDICARE COMPARISON
Republican
House Democrats
Coalition
HOME HEATH
TOTAL: $21.0 b
TOTAL: $7.7 b
TOTAL: $9 b
Transfer coverage
no provision
Revenue neutral -
Revenue neutral -
transfers to Part B
transfers to Part B
after 120 days
after 150 days
PPS for Home Health
Saves $17.0 billion
Saves $7.7 billion
Saves $9 billion
Fail Safe
Saves $4 billion
No provision
No provision
(preliminary
estimate, pending
CBO score)
provide THE
2. McKinnon/ DRAFT/ 11.19.95
MEDICARE COMPARISON
Republican
House Democrat
Coalition
HOSPITALS
TOTAL PARTS A &
TOTAL PARTS A &
TOTAL PARTS A &
B: $86.4 b
B: $49.6 b
B: $60.6 b
Part A
Market Basket Update/
Saves $29.1 billion
Saves $14.4 billion
Saves $26.5 billion/
PPS
with updates of -2.5
with updates of MB -
one-year freeze and
in 1996 and -2.0 until
1.0 until 2002.
MB -1.5 (urban) and
2002.
MB-.5(rural).
Market Basket
Saves $2.0 billion/
Saves $500 million/
Saves $1.2 billion
Update/non-PPS
updates same as PPS
updates same as PPS
from one year freeze/
updates same as PPS
Rehab. & long-term
Saves $2.7 billion/
No provision
No provision
care hospitals
update reductions
Capital Payments-PPS
Saves $9 billion,
Saves $6.9 billion,
Saves $6.3 billion,
reduces by 15%
reduces by 10%
reduces by 10%
Capital Payments, non-
Saves $900 million,
Saves $1.5 billion,
Saves $1.4 billion,
PPS
reduces by 10%
reduces by 10%
reduces by 10%.
Rebase Capital
Saves $2.7 billion
No provision
No provision
Payments, PPS
Disproportionate Share
Saves $5.4 billion by
Saves $4.1 billion
No provision
Payments
reducing by 30%
from eliminating
over seven years.
DSH/IME outlier
payments.
Hospital Bad Debt
Saves $1.1 billion by
No provision
No provision
Payments
cutting payments
50% by 2002
Moratorium of PPS
exemption for long-term
No provision
No provision
Saves $1.4 billion
care hospitals.
Clarify transfers for
No provision
Saves $5.7 billion
Saves $5.7 billion
Long term care
3. McKinnon/ DRAFT/ 11.19.95
MEDICARE COMPARISON
Republican
House Democrat
Coalition
HOSPITALS,
PART B
Formula Driven
Saves $15.9 billion
Eliminates; $15.9
Saves $15.9 billion
Overpayment
by eliminating
billion in savings
by eliminating
returned to
beneficiaries.
Outpatient Capital
Saves $600 million
Saves $600 million
No provision
reduction/
by extending
by extending
Extend Outpatient
Saves $1.4 billion
no provision
no provision
Payment reduction
PPS for Outpatient
Services
No provision
No provision
Saves $2.2 billion
PARTS A & B
Saves about $15.6
No provision
No provision
billion (pending CBO
Fall Safe
final estimate).
4. McKinnon/ DRAFT/ 11.19.95
MEDICARE COMPARISON
Republicans
House Democrats
Coalition
Teaching Hospitals
TOTAL: $9.0 b
TOTAL: $7.7 b
TOTAL: $4.6 b
Indirect Medical
Saves $7.6 billion
Saves $1.2 billion
Saves $4.6 billion
Education
from cutting IME
from IME resident
from cutting IME to
from 6.7% in 96 to
freeze
6.8% thru 98 and
5% in 2002.
6.0% thru 2002.
Direct Graduate
Saves $1.4 billion
Saves $3.1 billion for
No provision
Medical Education
from reducing GME
50% weight for post-
payments.
initial residency.
Saves $1.4 billion for
other GME reforms.
Trust fund created by
Saves $2 billion from
All savings from
appropriation. Cost
keeping 25% of
removing from
of appropriation
amount removed
AAPCC placed in
NOT included in
from AAPCC and not
trust fund.
CBO score.
placed in trust fund.
Graduate Medical
Mandatory
Expenditures from
Expenditures
Education Trust
Expenditures of
removing from
Fund
AAPCC/75%
FY 97- $1.1 billion
FY 96: $.5 billion
FY 96: $.5 billion
FY 98- $1.3 billion
FY 97: $.6 billion
FY 97: $.8 billion
FY 99- $2 billion
FY 98: $.7 billion
FY 98: $1.4 billion
FY 00- $2.6 billion
FY 99: $.8 billion
FY 99: $1.8 billion
FY 01- $3.1 billion
FY 00: $1.0 billion
FY 00: $ 2.1 billion
FY 02- $2.4 billion
FY 01: $1.2 billion
FY 01: $2.4 billion
FY 02: $1.4 billion
FY 02: $2.9 billion
TOTAL COST:
TOTAL COST:
TOTAL COST:
$12.5 billion
$6.2 billion
$11.8 billion
COST NOT INCLUDED BY CBO IN ITS ESTIMATE.
5. McKinnon/ DRAFT/ 11.19.95
MEDICARE COMPARISON
Republican
House Democrats
Coalition
PHYSICIANS
TOTAL: $31.6 b
TOTAL: $25.2 b
TOTAL: $25.2 b
Update
Update: $35.42
Update: $34.60
Update: $36.40
MEI Floor/Celling
Floor is +31-7
Floor is +31-7.5
Floor is +3/-8.25
Adjustments
Adjustments to
Adjustments to
Update is at GDP.
updates are GDP +2
updates are GDP +2
Antitrust
Has provisions
No provisions
No provisions
Self referral
Has provisions
No provisions
No provisions
Shared Facilities
Has provisions
Has provisions
Has provisions
Fail Safe
Saves $9 billion
No provisions
No provisions
(estimate, pending
CBO score of total)
6. McKinnon/ DRAFT/ 11.19.95
MEDICARE COMPARISON
Republican
House Democrats
Coalition
PROVIDERS/
OTHER
TOTAL: $17.2 b
TOTAL: $2.6 b
TOTAL: $6.5 b
Ambulances
Saves $800 million
No provision
No provision
from 7 year freeze
Ambulatory Surgery
Saves $1.3 billion
No provision
No provision
Centers
from 7 year freeze
Durable Medical
Saves $ 4.1 billion
Saves $1 billion from
Saves $3.1 billion
Equipment
from 7 year freeze
two year freeze
from 7 year freeze
Labs
Saves $6 billion from
Saves $1.6 billion
Saves $3.4 billion
seven year freeze
from two year freeze
from 7 year freeze
Oxygen
Cuts 20%, to 30% by
Cuts 10% for 1996
2002 (savings
(savings included in
included in DME).
Durable)
Fail Safe
Saves $5 billion
(pending CBO
estimate).
SKILLED
TOTAL: $13 billion
TOTAL: $6.1 billion
TOTAL: $6.9 billion
NURSING
FACILITIES
Implement PPS
$10.0 billion
$6.1billion
$6.9 billion
Fall Safe
Saves $3.0 billion
No provision
No provision
(estimate, pending
CBO score)
7. McKinnon/ DRAFT/ 11.19.95
MEDICARE COMPARISON
Republicans
House Democrats
Coalition
OTHER SAVINGS
TOTAL: $10.5 b
TOTAL: $7.9 b
TOTAL: $18.4 b
Fraud & Abuse
Saves $3.5 billion
Saves $2.0 billion
Saves $2.4 billion
Medicare Secondary
Saves $6.5 billion
Saves $5.9 billion
Saves $6.2 billion
Payor
No provision
Extend Hospital
No provision
Saves $9.8 billion
Insurance to State/Local
workers
Hospice
Saves $500 million
No provision
No provision
by reducing payment
8. McKinnon/ DRAFT/ 11.19.95
MEDICARE COMPARISON
Republican
House Democrats
Coalition
OTHER COSTS
TOTAL
TOTAL
TOTAL
COST: $2.4 b
COST:$8.3 b
COST: $20.1 b
Preventive Benefits
Costs $100 million to
Costs $2.1 billion to
Costs $2.1 billion to
cover oral cancer
expand coverage for
expand coverage for
drugs in 1996 only.
mammography in FY
mammogram,
2001 and 2002 and,
prostate cancer, colo
colo rectal screening,
rectal cancer, pap
pap smear, diabetes
smears and diabetes.
for all 7 years.
Costs $700 million to
no provision
Costs $1.4 billion to
Rural Health
continue rural health
continue rural health
initiatives
initiatives
no provision
no provision
costs $200 million
Investigative Devices
Costs $800 million
no provision
Included in rural
Direct Payment to PAs
health savings
and Nurse Practitioners
Preferential
update/Medicare
Costs $800 million
no provision
no provision
dependent hospitals
no provision
no provision
costs $4.6 billion
Payments for military
retirees
GME Trust Fund
Appropriation- cost
costs $6.2 billion
costs $11.8 billion
not included in CBO
score
Lower Part B Premium
no provision
costs $5.1 billion
No provision
(cost included on p.1)
9. McKinnon/ DRAFT/ 11.19.95
CBO SCORE a REPUBLICAN CONFERENCE/MEDICARE
Premium Cost
Year
1996
1997
1998
1999
2000
2001
2002
7 Year
Cost over
Month/Year
Month/Year
Month/Year
Month/Year
Month/Year
Month/Year
Month/Year
Cest
Current Law
Current law $42.50/$510
$46.20/$554
$53.20/$638
$55.00/$660
$56.80/$681
$58.60/$703
$60.50/$726
$4,472
S-0-
Coalition
$46.10/$553
$46.00/$552
$49.50/$594
$53.80/$645
$60.50/$726
$66.10/$793
$73.10/$877
$4,740
$268
Republican $53.70/$644
$57.00/$684
$59.30/$711
$64.10/$769
$73.10/$877
$80.10/$961
$88.90/$1,066
$5,712
$1,240
0.0
0.0
-6.2
-10.8
-7.1
-7.0
-6.6
TOTAL: $36.6 billion
11/14/95 10:45
202 690 6562
DHHS/ASPE/HSP
J.
001
DEPARTMENT of HEALTH & HUMAN SERVICES
ASSISTANT SECRETARY for PLANNING & EVALUATION
HUMAN SERVICES USA
&
HEALTH
OF
DEVARTMENT
OFFICE of HUMAN SERVICES POLICY
Phone: 202-690-7409 FAX: 202-690-6562
From: Emil Parker
To: Jennifer Klein
Division: ASPE
Division: effice M the First Lady/ DPC
City & State:
City & State:
Office Number: 690-6808
Office Number:
Fax Number: 690-6562
Fax Number: 456-2878
Number of Pages:
4
Remarks:
11/14/95
10:45
202 690 6562
DHHS/ASPE/HSP
002
TO:
Jennifer
FROM:
Emil
RE:
Cost shifting fact sheet and other
DATE:
November 14, 1995
Thank you for your comments on the cost shifting piece. Attached is a draft that attempts to
incorporate your suggestions.
Also, thanks for the update on the logistical situation. If there's anything I can do, e.g.,
following up with people in White House administration, please let me know.
I'm out of here in a few minutes, but you can reach me at home (202-547-4918) at any time. I
hope to talk to you soon.
11/14/95
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DHHS/ASPE/HSP
003
REPUBLICAN REDUCTIONS IN MEDICARE AND MEDICAID
WILL SHIFT COSTS TO PRIVATE PATIENTS
November 14, 1995
Republican cuts in Medicare and Medicaid would force hospitals and physicians to charge
privately insured patients $90 billion more. Employees would absorb $72 billion of that
shift in higher premiums and lost wages.
A study by Lewin-VHI, a nonpartisan health care research firm, estimates that if
Medicare and Medicaid are cut by $450 billion--as called for in the Republican budget
resolution--employers, employees and the self-insured would see their health care bills
rise by $92 billion.
When Medicare and Medicaid payments are not sufficient to cover the cost of services to
beneficiaries, hospitals and other health care providers raise prices for private sector patients.
The Lewin study, cited in both The New York Times and The Washington Post, found that as a
result of Medicare and Medicaid cuts, employer spending on health insurance would rise by $75
billion over the period from 1996 through 2002, while employee contributions for employer-
provided coverage would increase by $6.4 billion and the self-insured would pay an additional
$10.2 billion. According to the study, however, employers would pass on almost all of their
increased health care costs--$66 billion of the $75 billion--to workers in the form of lower wages.
The Medicare and Medicaid reductions would consequently cost employees a total of $72
billion in lost wages and increased premiums--almost $1,000 per worker over the period.
The costs would be shifted primarily to middle-income workers.
According to the Lewin study, much of the cost shift would fall on middle-income workers, who
are more likely than low-wage workers to have employer-provided health insurance. Families
with annual incomes between $20,000 and $75,000 per year would absorb 60 percent of the cost
shift--$43 billion over seven years. Low-wage workers with insurance, however, would be the
most severely affected, because health benefits represent a greater percentage of their total
compensation. While the cost shift would slow wage growth by 2.7 percent for all workers with
insurance coverage, those earning less than $6.00 per hour would see their wage growth fall by
10.1 percent.
Over 500,000 persons would lose private insurance coverage as a result of the cost shifting.
The Lewin study predicts that the increased premiums resulting from cost shifting will force
some firms to drop health insurance coverage for their employees. According to the study, by
2002, 523,000 fewer persons will have private insurance coverage, strictly due to cost shifting.
This is in addition to the over eight million Americans who will be denied Medicaid coverage as
a direct result of program cuts.
Costs will be shifted to small businesses in particular.
Larger firms, due to their greater bargaining power, will be relatively well-equipped to avoid cost
shifts. This will leave small businesses--which already pay higher health insurance premiums--to
bear the brunt of the impact. The American Hospital Association notes that " large employers
and insurers may be able to avoid this implicit tax [the cost shift] through negotiated discounts;
11/14/95
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DHHS/ASPE/HSP
004
but many employers, particularly smaller employers, will not be able to do so." (Unsponsored
Care and Medicaid Shortfalls, 1980-1991, American Hospital Association)
Small business advocates agree that cost shifting will drive up health care bills for smaller firms.
John Galles, president of National Small Business United, warned that "we are likely to see
health care premium increases back in the double digits as a result of this legislation." (The New
York Times, November 4, 1995)
Executives from larger businesses are also expressing concern about the potential impact of the
Medicare and Medicaid cuts on employers' health care costs. Michael Rourke, senior vice
president of A & P, a grocery chain with 92,000 employees, predicted that "the costs now being
paid by the Medicare system are going to creep right back into the insurance system. Just cutting
Medicare isn't going to solve a problem that needs a far more comprehensive approach." (The
Washington Post, November 5, 1995)
There is ample evidence of cost shifting. When Medicare or Medicaid payments are cut,
hospitals raise prices for privately insured patients.
The Prospective Payment Assessment Commission (ProPAC) has documented the relationship
between Medicare/Medicaid payments to hospitals and the prices charged to private payers. In
1986, Medicare payments fully covered the cost of services; hospitals marked up prices for
private patients by 16 percent. By 1993, the most recent year for which data was available,
Medicare payments covered only 89 percent of the cost of services. and the mark-up for private
patients had risen to 29 percent. (Medicare and the American Health Care System: Report to the
Congress, Prospective Payment Assessment Commission, June 1995)
The Congressional Budget Office concurs with these findings, observing that "hospitals
offset most of the rise in unreimbursed costs during the 1980s by generating higher
revenues from private payers in the current multiple-payer health care system, actions
taken by one payer to control health spending can have a significant impact on spending
by other payers As a consequence, in the absence of other changes, further attempts to
control public-sector spending would probably produce additional cost shifting to the
private sector. (Responses to Uncompensated Care and Public-Program Controls on
Spending: Do Hospitals 'Cost Shift? Congressional Budget Office, May 1993; italics
added)
The Lewin study, based on a survey of existing research, estimates that about 40 percent of
reductions in Medicare and Medicaid payments to hospitals would be passed on to privately
insured patients in the form of higher mark-ups. The research suggests that physicians, however,
would be able to pass on only 20 percent of Medicare/Medicaid payment reductions. The study
takes into account the extent to which increased enrollment in managed care plans, and the
bargaining power of these plans. constrains the ability of providers to transfer cuts in public
programs to private payers.
11/14/95
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005
NOTE TO JENNIFER: John Sheils, first author on the Lewin study, told me that they will be
revising the numbers as soon as the reconciliation bill conference report is completed (and
available). He expects a rapid turnaround. I would suggest waiting for the revised numbers
rather than attempting to calculate them ourselves. During my conversation with him, he
indicated that he would not be comfortable with any extrapolating using the Lewin methodology;
i.e., he might undercut such an attempt in the press.
Republican Reduction in Medicare
Spending Per Beneficiary, 2002
Republican
Republican
Reduction:
Spending:
$1,700
$5,900
DRAFT
Current Law Spending: $7,600
CBO baseline Medicare spending divided by projected number of beneficiaries; fiscal year 2002.
Source: U.S. Department of Health and Human Services.
Decreases in Federal Medicare Spending
Per Beneficiary in the Republican Plan
Compared to Current Law
0
$200
-500
$400
Decrease in Spending per Beneficiary
$700
-1000
DRAFT
$1,100
$1,200
-1500
$1,500
$1,700
-2000
1996
1997
1998
1999
2000
2001
2002
CBO estimates of the Conference Agreement, 11/16/95, using CBO baseline plus CPI adjustment; Administration projections of unduplicated beneficiaries. Source: US
DHHS
Federal Medicare Spending in 2002
Current Law versus Republican Proposal
$8,000
$7,600
Federal Spending per Beneficiary
$6,000
$5,900
$4,000
$2,000
$
DRAFT
Republican
Current Law
Conference
Agreement
CBO baseline plus CPI adjustment; CBO estimates of savings under the Conference Agreement, 11/16/95; Administration projections of unduplicated beneficiaries. The
President's proposal would produce Federal spending of $6,700 in 2002. Source: US DHHS
02/003
Republican Medicare Plan V Current Law
Federal Spending per Beneficiary
2002
$8,000
700
DARET
$7,600
20%
$6,000
$5,900
$4,000
11/20/95 08:37 T202 690 6518
$2,000
$
Current
Republicans
CBO baseline plus CPI adjustment; CBO estimates of savings under the Conference Agreement, 11/16/95; Administration projections of unduplicated beneficiaries. Source:
US DHHS
Comparison of Growth in Total
Medicare Spending Per Beneficiary,
1996-2002
10%
8.2%
8%
DRAFT
7.1%
6.8%
6%
5.5%
4%
2%
0%
Current Law
Private
President's Plan
Republicans' Plan
CBO baseline plus CPI adjustment; CBO estimates of savings under the Conference Agreement, 11/16/95; Administration projections of unduplicated beneficiaries.
Administration estimates of private health spending per insured person, using CBO data. Source: US DHHS
Republican Medicare Cost-Shift:
Medicare Spending per Beneficiary 2002
$10,000
Total Spending: $8,300
Total Spending: $7,000
$8,000
Beneficiary Spending: $700
Beneficiary Spending: $1,100
$6,000
Federal Spending
$7,600
$4,000
Federal Spending
$5,900
$2,000
DRAFT
$
Current Law
Republican Proposal
CBO baseline, including CPI adjustment; CBO estimates of savings under the Conference Agreement, 11/16; Administration projections of unduplicated beneficiares. Source:
US DHHS
Confusing
Total Medicare Spending in 2002
Current Law versus Republican Proposal
$8,300
$8,000
$7,000
Total Spending Per Beneficiary
$6,000
$4,000
DRAFT
$2,000
$
Current Law
Republican
Conference
Agreement
CBO baseline plus CPI adjustment; CBO estimates of savings under the Conference Agreement, 11/16/95; Administration projections of unduplicated beneficiarles. The
President's proposal would produce total spending of $7,600 in 2002. Source: US DHHS
Republican Reduction in Medicare
Spending Per Beneficiary, 2002
Republican
11/19/95 20202 18:43 7321 401
Republican
Reduction:
Spending:
$1,700
$5,900
ASPE/HP SHH
DRAFT
Current Law Spending: $7,600
JENNINGS +++
CBO baseline Medicare spending divided by projected number of beneficiaries; fiscal year 2002.
4
Source: U.S. Department of Health and Human Services.
004/010
Decreases in Federal Medicare Spending
Per Beneficiary in the Republican Plan
Compared to Current Law
0
11/20/95 08:38 20202 6518 069
$200
-500
$400
Decrease in Spending per Beneficiary
$700
-1000
DRAFT
$1,100
$1,200
-1500
$1,500
$1,700
-2000
1996
1997
1998
1999
2000
2001
2002
CBO estimates of the Conference Agreement, 11/16/95, using CBO baseline plus CPI adjustment; Administration projections of unduplicated beneficiaries. Source: US
DHHS
03/03/03 Б
Federal Medicare Spending in 2002
11/19/95
Current Law versus Republican Proposal
$8,000
$7,600
20202 18:44 401 7321
Federal Spending per Beneficiary
$6,000
$5,900
$4,000
HHS ASPE/HP
$2,000
$
DRAFT
Republican
JENNINGS +++
Current Law
Conference
Agreement
CBO baseline plus CPI adjustment; CBO estimates of savings under the Conference Agreement, 11/16/95; Administration projections of unduplicated beneficiaries. The
President's proposal would produce Federal spending of $6,700 in 2002. Source: US DHHS
010/800
Republican Medicare Plan V Current Law
Federal Spending per Beneficiary
2002
$8,000
$1 700
DRAFT
$7,600
20%
$6,000
$5,900
$4,000
OTCO 7020 18:80
ARQ
$2,000
$
Current
Republicans
11/20/95
CBO baseline plus CPI adjustment; CBO estimates of savings under the Conference Agreement, 11/16/95; Administration projections of unduplicated beneficiaries. Source:
US DHHS
Comparison of Growth in Total
Medicare Spending Per Beneficiary,
1996-2002
10%
8.2%
8%
DRAFT
7.1%
6.8%
6%
5.5%
4%
2%
0%
Current Law
Private
President's Plan
Republicans' Plan
CBO baseline plus CPI adjustment; CBO estimates of savings under the Conference Agreement, 11/16/95; Administration projections of unduplicated beneficiaries.
Administration estimates of private health spending per insured person, using CBO data. Source: US DHHS
Republican Medicare Cost-Shift:
Medicare Spending per Beneficiary 2002
$10,000
Total Spending: $8,300
Total Spending: $7,000
11/19/95 19:44 20202 401 7321
$8,000
Beneficiary Spending: $700
Beneficiary Spending: $1,100
$6,000
Federa Spending
$7,600
ASPE/HP SHH
$4,000
Federal Spending
$5,900
$2,000
DRAFT
SONINNES +++
$
Current Law
Republican Proposal
CBO baseline, including CPI adjustment; CBO estimates of savings under the Conference Agreement, 11/16; Administration projections of unduplicated beneficiares. Source:
4
US DHHS
010/010
Total Medicare Spending in 2002
Current Law versus Republican Proposal
$8,300
11/19/95 20202 18:44 101 7321
$8,000
$7,000
Total Spending Per Beneficiary
$6,000
$4,000
DRAFT
HHS ASPE/HP
$2,000
$
JENNINGS +++
Current Law
Republican
Conference
Agreement
CBO baseline plus CPI adjustment; CBO estimates of savings under the Conference Agreement, 11/16/95; Administration projections of unduplicated beneficiaries. The
President's proposal would produce total spending of $7,600 in 2002. Source: US DHHS
010/900
MEDICAID STATE FLEXIBILITY
The Alternative Medicaid Reform Proposal dramatically increases State flexibility in Medicaid
program administration. At the same time, it achieves Federal Medicaid savings through the use
of per capita caps which provide States with substantial protections against eligible population
growth due to demographic changes, economic downtums, and other uncontrollable events.
Finally, the level of savings proposed by the alternative is substantially less than a third of what
the Republicans are seeking. Thus, States would have the flexibility to tailor their Medicaid
programs to meet their local needs without the substantial funding losses and financial risks
inherent in the Republican block grant proposals.
The State flexibility of the alternative plan is illustrated by the fact that many of the Medicaid
flexibility proposals requested by the States over the past several years are included explicitly in
the plan. The following chart reflects items requested by the NGA in its 1993 summary of State
Recommendations for Statutory Change and its Medicaid Policy adopted in January 1995.
November 20, 1995
Flexibility Proposals Contained in the Alternative Medicaid Proposal
NGA Medicaid Proposals
Alternative Proposal
1. Allow states greater flexibility to establish
Addressed. States may implement managed
managed care networks:
care programs without obtaining waivers from
HCFA.
States should be able to establish
Included.
networks (including PCCMs) through
the state plan process rather than
through the freedom of choice waiver
process.
(NGA '93, NGA '95)
Eliminate the 75/25 rule for capitated
Included.
health plans participating in the
Medicaid program (NGA '93, NGA
'95,)
Under a freedom of choice waiver,
Included.
permit states to restrict Medicaid
recipients in a rural area to a single
HMO if there is only one HMO
available. (NGA '93)
2. OBRA '87 Nursing home reform
Addressed.
modifications:
Eliminate restrictions on training sites
Eliminates prohibition on providing nurse-aide
for nurse aides. (NGA '93)
training in rural nursing homes.
Eliminate PASARR. (NGA '93, NGA
Eliminates duplicative annual resident
'95)
assessment under PASARR. Retains pre-
admission screening.
3. States should have the ability to tum home
Addressed. States may establish home and
and community based waivers into permanent
community-based services without waivers
state plan amendments once the waiver has
(subject to CBO scoring).
been proven effective. (NGA '93, NGA '95)
4. Promote cost control and efficiency -- i.e.,
Addressed. Permits States to implement
encourage states to continue innovations in
managed care programs without waivers and
provider payment methods. (NGA '95)
eliminates cost-based reimbursement for
FQHCs/RHCs.
November 20, 1995
5. Give states greater leeway in containing the
Addressed. Boren amendment is repealed for
cost of hospital and long-term care through
hospitals and nursing homes. Process options,
the Boren Amendment. (NGA '93, NGA
such as hearings and public comment -- to be
'95)
determined.
6. Provider Qualifications
Addressed.
Repeal provision establishing minimum
Included.
qualifications for physicians who serve
pregnant women and children. (NGA
'93)
Repeal the annual reporting
Included.
requirements for OB and pediatric
care. (NGA '93)
7. Allow states to pay Medicaid rates for
Addressed. States will have the option to
those services provided to recipients for
purchase group health insurance and pay
whom the state has purchased cost-effective
Medicaid rates.
group health insurance. (NGA '93)
8. Once a state has demonstrated through the
Addressed. Managed care and home and
waiver process that the program is effective
community-based care no longer require
and efficient, other states should have the
waivers.
opportunity to make that program a part of
their state plan as an optional services without
having to submit a waiver. (NGA '93)
9. Simplify eligibility by collapsing existing
Addressed. To allow for some eligibility
categories and optional groups where
simplification, continued State innovation, and
appropriate. (NGA '93)
some eligibility expansions; States would have
the option of covering individuals up to 150
percent of poverty if "budget neutral" (subject
to CBO scoring). Current coverage would be
maintained.
10. Personal care should be an optional
Affirms current law that personal care services
service that can be delivered or provided by
can be delivered by providers other than home
other providers besides home health agencies.
health agencies.
(NGA '93)
November 20, 1995
11. OBRA '87 enforcement: the determination
Affirms current law to allow the targeting of
of deficiencies require a form of scope and
state enforcement resources.
severity index to assure that limited state
resources are directed to the enforcement of
the most egregious deficiencies. (NGA '93)
12. Impose no unilateral caps for federal
Addressed. In contrast with the Republican
spending on Medicaid entitlement.
block grant proposal, the alternative per capita
proposal provides States with protections for
enrollment increases due to population
changes and economic conditions.
Disproportionate share payments (DSH)
would be reduced and restructured. The DSH
definition would be expanded to include
FQHCs/RHCs.
November 20, 1995
HE
11-20-95
politicization, but we argue this trigger is necessary to protect against groundless,
political charges (e.g., vs. U.S. military, or for "Israeli war crimes"). Tony says we
will find appropriate opportunities to reinforce your support for the Court.
(D)
Stiglitz memo on household debt. Household debt has grown rapidly this year,
which could lead to decreased spending as consumers face paying off their debt. So
far, households are managing without much strain delinquency rates on home
mortgages, consumer loans and credit card loans are up a bit, but well below peaks of
1980s and early '90s. However, the following developments warrant monitoring:
debt service as a percentage of income is up sharply; personal bankruptcy filings rose
in the first half of this year, after going down for three years, 1994 mortgages are
delinquent at 1.5 times the rate of 1993 mortgages; OCC believes banks have lowered
their standards for making consumer loans; banks appear to have lowered their
lending standards in the intensely competitive credit card business -- the credit
available to consumers on bank-issued credit cards is way up this year.
(E)
John Young (PCAST) letter on academic health centers. Young emphasizes great
importance of academic health centers (AHCs) for research, education and care of the
indigent and uninsured Very worried that proposed cuts in Medicare, Medicaid and
Disproportionate Share expenditures, plus erosion of clinical revenues resulting from
shift toward managed care could have devastating impact. A PCAST health panel has
JeNNifeR
concluded: (i) responsibility for supporting the mission of AHCs rests too much on
federal government and should be shared more broadly; (ii) AHCs' disproportionate
Klein
responsibility for indigent/uninsured will increase given current trends in medical
marketplace; (iii) current climate of heated debate is not conducive to resolving these
issues. Thus PCAST recommends: (a) appoint expert commission to make
recommendations for preserving research and educational capacity of AHCs; (b) in
interim, resist disproportionate decrease in Graduate Medical Education accounts; (c)
provide adequate resources for AHCs to care for indigent/uninsured.
John Young (PCAST) letter on 4th plenary session. Reviews PCAST activities in
its first year: reports on U.S.-Russian cooperation re protecting nuclear materials,
U.S. Fusion Energy R&D program, Statement of principles on Science and
Technology policy; op-eds and letters to editor; meetings with Hill; informal
consultations with Administration. Two key questions guide Committee for future: (i)
how can federal government protect and enhance nation's research enterprise,
especially university network; (ii) how can federal government best manage its R&D
programs in face of shrinking budgets. Young urges you to continue stressing
importance of investing in science/technology and education and to embrace PCAST's
Science and Technology principles. Young says direct contacts with you and VP have
been very helpful and hopes to meet with you again, perhaps at March 7-8 PCAST
meeting. I have sent a copy of this letter to Stephanie and Ann.
(F)
McGinty note on Superfund and dry cleaners. Response to your note on Newsweek
article by woman whose mother was hurt by costs of cleaning up toxic wastes
generated by her dry cleaning business. Katie points out that this cleanup was
required under Oregon, not federal, law. Your Superfund bill would have ensured
that small businesses either wouldn't be liable or could settle quickly. EPA has
PRESIDEN HAS SE
EXECUTIVE OFFICE OF THE PRESIDENT
11-20-95
PRESIDENT'S COMMITTEE OF ADVISORS ON SCIENCE AND TECHNOLOGY
WASHINGTON. D.C. 20500
November 8, 1995
P12: 28
President William J. Clinton
The White House
1600 Pennsylvania Avenue, N.W.
Washington, DC 20500
Dear Mr. President:
Streety busin interes been
The significant accomplishments in American biomedical research and our innovations
in medical care are widely respected throughout the country and, indeed, the world. These
achievements have occurred primarily at our Nation's academic health centers. Since World
War II, the Federal government has played a vital role in the support of academic health
centers and has done so on a bipartisan basis.
Your Administration's 1994 health care reform plan acknowledged the important
contribution to our quality of life made by academic health centers and provided a
mechanism to mitigate the loss of significant revenue that these institutions are now
experiencing. In the absence of comprehensive health care reform, academic health centers
are beginning to show signs of serious stress. Although they represent only six percent of
the Nation's non-Federal acute care hospitals, these institutions provide more than half of the
care for the indigent and uninsured populations. The prospect of sharp reductions in
Medicare, Medicaid, and Disproportionate Share (DSH) expenditures, coupled with the
erosion of clinical revenues resulting from the emergence of managed care, could have a
devastating impact on the Nation's capacity to support medical research and education and
the system that provides medical care to its most vulnerable citizens.
Academic health centers develop the biomedical knowledge and clinical techniques
needed for new and improved treatments, train the Nation's physicians and provide unique
patient care resources. In the long term, biomedical research conducted in these centers
offers our citizens the best potential to enhance their quality of life and control medical
expenditures with cost-effective methods for disease prevention and management.
Historically, the Federal government has assumed responsibility for a majority of the
support for fundamental biomedical research and graduate medical education as a public
investment that contributes broadly to the health of Americans. In 1995, the Federal
investment in academic health centers for biomedical research and education was about one
percent of total health care expenditures. Measured by any standard, this very modest rate
of investment in an area of extraordinarily rapid advancement in knowledge and technology
has had a remarkable yield. In addition, the Federal government provides, through the
Medicaid and DSH programs, significant support for low-income patient care delivered in
academic health centers.
President William J. Clinton
November 8, 1995
Page 2
Clinical revenues derived from medical practice programs conducted by the faculty of
academic health centers have been another very significant source of funds for these
programs of research, education and indigent care. Current changes in the health care
system, including Medicare and Medicaid reform, driven by Federal and State fiscal concerns
and the emergence of managed care, also threaten to eliminate this critical support for
biomedical research and medical education.
We recognize the need to slow the rate of growth in health care costs and endorse
efforts to address this need. Both public and private elements of the health care system need
to be carefully examined and restructured to enhance medical efficacy and cost-effectiveness.
However, it is also essential that in this process, the crucial public benefits that are
contributed uniquely by academic health centers be recognized, and that their continued
strength remain an important priority in the ongoing health care debate.
A panel of your Committee of Advisors on Science and Technology (PCAST)
examined these issues and reached the following conclusions:
Sharing the Responsibility - The education of competent physicians and scientists,
and the production of new biomedical knowledge and technologies, represent vital public
necessities. To date, only the Federal government has supported these functions explicitly
through the Graduate Medical Education (GME) mechanisms of the Medicare program.
With a few notable exceptions, other payers do not contribute to this support. We affirm the
principle that responsibility for supporting the missions of academic health centers and their
contributions to the well-being of society should be broadly shared by all who benefit.
Care for the Indigent and Uninsured -- Historically, academic health centers have
provided care for a disproportionate share of the indigent and uninsured populations and have
received a Medicare payment adjustment for this service. It is likely that this responsibility
can only increase in the developing private and public medical care marketplaces. With the
trend toward managed care, others are even less likely to provide this service because of its
resource-intensive nature.
Current Debate -- A satisfactory disposition of these critically important and complex
issues is unlikely to emerge from the heat of the current public debate, with its intense and
narrow focus on budgetary concerns.
President William J. Clinton
November 8, 1995
Page 3
To support and sustain the Nation's academic health centers in the immediate future
and over the longer term, PCAST therefore respectfully suggests that you consider the
following recommendations:
Expert Commission -- We recommend that an expert commission, credible to the
President, the Congress and the public, be established to develop and recommend specific
policies to address the preservation of the research and educational capacity of the Nation's
academic health centers, and the supply, composition and support of the future health care
work force. The commission should carefully consider the implementation of an equitable
mechanism to achieve these objectives. The commission should also determine the most
effective way to allocate training funds in furthering the goals of a rational workforce policy
to ensure that the numbers and competencies of health care professionals are responsive to
the Nation's needs. We believe that such an approach can best ensure the future vitality of
our biomedical research enterprise and the highest quality of our Nation's medical care.
Graduate Medical Education (GME) -- In the interim, in revising the Medicare
program, the Administration should continue to resist disproportionate decreases in the GME
accounts. Further, the funds for GME that are currently melded into the premiums paid to
all Medicare managed care providers (the Average Adjusted Per Capita Cost formula) should
be redirected to accomplish their intended objectives. This may entail developing a process
that provides these payments directly to caregivers and institutions that are involved in
graduate medical education.
Disproportionate Share -- If academic health centers are to continue their role of
disproportionately caring for the indigent and uninsured populations, then appropriate
resources must be provided. This will almost certainly remain a responsibility of the
government.
PCAST believes that the academic health centers are a national resource that, together
with our research universities, must be sustained for the good of the Nation. We hope that
you will find these recommendations helpful.
Sincerely,
Young Roung
President's Committee of Advisors
on Science and Technology
To: Jen Klein
DRAFT HHS 11/17
Fr: Chris tennings
Per your request
SUMMARY OF MAJOR PROVISIONS
"MEDICARE PRESERVATION ACT OF 1995"
Caps and Failsafe [Follows structure of House provision, with some changes in dollar totals and
growth rates.]
Failsafe sets overall annual spending limits for Medicare at: $194.2 billion in FY96, $206.3
billion in FY97, $217.8 billion in FY98, $229.2 billion in FY99, $247.2 billion in FY2000,
$266.4 billion in FY01, and $289.0 billion in FY02. For each subsequent year, spending limit
increases 5 percent (after taking into account the annual percentage increase in the average
number of beneficiaries).
Annual projected spending for MedicarePlus would be subtracted out of the overall spending
limit.
Growth Rates for MedicarePlus Plans - Payments to plans would vary by geographic area. A
national payment floor is established at $300 per beneficiary per month in 1996 and $350 in
1997. No plan would ever experience an increase smaller than 2 percent of the previous
year's rate. Overall, payments would increase as follows: 1996 - 8.0 percent; 1997 - 3.8
percent, 1998 - 4.6 percent, 1999 - 4.3 percent; 2000 - 3.8 percent; 2001 - 5.5 percent; 2002
- 5.6 percent; and subsequent years 5.0 percent. [Mixture of House & Senate. (CBO
estimates private sector cost per person will grow 7.1 percent per year on average from 1996
to 2002.)
Distinct allotments would be set for different fee-for-service sectors: inpatient hospital, home
health, extended care, hospice care, physicians' services, outpatient hospital services and
ambulatory facility services, durable medical equipment and supplies, diagnostic tests, and
other items and services. Established in statute are baseline projections of annual growth
rates in spending for each of these sectors for each fiscal year. Each sector's allotment for a
fiscal year is determined by calculating that sector's portion of total baseline spending in that
year, and then multiplying that portion (percentage) times the total fee-for-service (FFS)
budget for Medicare that year.
In order to maintain spending at the specified levels, a prospective adjustment and a look-
back mechanism are provided. Under the prospective adjustment, beginning with FY 1998
the Secretary compares projected FFS expenditures by sector for the coming year with the
allotment for that sector. If projected expenditures exceed the sector's budget allotment, the
Secretary adjusts payment rates for that sector downward so that spending is within the
allowed amount. Initial determinations and prospective adjustments must be published by
May 15, and final ones must be published by September 1.
CONFERENCE
2
MEDICARE
Look-back provision:
+
If a sector's actual expenditures two years previously exceeded its estimated allotment,
the Secretary would reduce that sector's allotment for the coming fiscal year by 133 1/3
percent of the excess. Once an allotment is reduced, the reduction can never be
recaptured.
+
If actual spending were less than the allotment for that sector, the Secretary would
increase that sector's allotment for the coming fiscal year by the amount of the shortfall.
+
Under this system, each sector's gain or loss must come from or contribute to the other
sector's allotments: the overall budget is not changed by this process. The look-back
would start in FY 1999: first look-back is to FY 1997, which will not be subject to
prospective adjustment.
MedicarePlus
Uneven rules: In general, beneficiaries have less protection under MedicarePlus than under
traditional Medicare. Also, in general, provider and plans have more opportunities to escape
budget cuts by shifting costs onto beneficiaries under MedicarePlus that under traditional
Medicare. Over time, this will lead Medicare to "wither on the vine."
Voucher/defined contribution: Medicare pays MedicarePlus plans a pre-set amount, unrelated to
the cost of health care. If the amount exceeds health care cost, a MedicarePlus plan may rebate
75 percent of the difference to the enrollee. However, if the amount is insufficient to cover the
cost of health care -- a more likely occurrence because the Agreement does not permit Medicare
spending to grow as fast as private sector health care costs -- beneficiaries can be charged more
through balance billing and other means.
Lock-in: Once beneficiaries sign up for a MedicarePlus plan, they are locked in for one year. (A
special 90-day trial period is allowed for people making their first MedicarePlus plan election, but
never again after the first election.) By contrast, under current law, beneficiaries may disenroll
from Medicare managed care plans at any time if they are dissatisfied.
High Deductible/Medical Savings Account Plans: Would be allowed under the agreement. [In
House bill.] The deductible in 1996 could not exceed $6,000. [The House provision had a
maximum of $10,000.] MSAs will attract healthier wealthier beneficiaries, leaving a sicker group
in Medicare, driving up Medicare costs, triggering further automatic budget cuts in traditional
Medicare under the failsafe.
Private fee-for-service plans: Would be allowed under the Agreement. [In both bills.)
Medigap: The Agreement includes House provisions liberalizing restrictions on the sale of
CONFERENCE
3
MEDICARE
Medigap products that duplicate Medicare, with a modification: Medigap products sold to
MedicarePlus enrollees would not have to meet any Medigap standards (including loss ratio and
standardization requirements). Enrollees leaving MedicarePlus to return to traditional Medicare
may find themselves locked out of Medigap plans. The Agreement did not conform current law
rules to permit beneficiaries to move back and forth between Medicare and MedicarePlus. As a
result, Medigap plans will only be required to offer open enrollment and community rated
premiums to beneficiaries when they first become eligible for Medicare.
Payment: Payment would be blend of local and input-price adjusted national rate (90/10 in 1996 -
-- 70/30 in 2000 and thereafter). Rates would still be county-based, but States could obtain
MSA-based rates or a single statewide rate. These provisions are designed to gradually increase
plan payments to rural areas (at the expense of urban areas where most of the current Medicare
risk enrollees are concentrated). (See other information above under Caps section.) [Mixture of
Senate and House provisions.]
Provider Sponsored Organizations: PSOs would have special process to develop standards for
fiscal solvency. Enforcement of these Federal standards could be delegated to States if the
Secretary determined that the State certification process applied standards identical to the Federal
standards. PSOs could get a temporary waiver of the requirement for State licensure if (1) the
State was not timely in completing action on the entity's application or (2) if States applied other
standards to PSOs that were not generally applicable to other similar plans. [Mixture of House
and Senate provisions.]
HCFA's Status: The MedicarePlus program would be administered by an agency separate from
HCFA [House provision]
Beneficiary Impact
Part B Premium: For 1996 through 2002, the Part B premium would bet set to cover 31.5
percent of program costs. [House provision.]
Income Related Premium: Individuals with annual adjusted gross income (AGI) over $60,000
and couples with annual adjusted gross income over $90,000 would pay an increased premium,
with the subsidy being completely phased out at $110,000 for individuals and $150,000 for
couples. HCFA would administer this premium. [Provisions in both bills; amounts are in the
middle.]
Part B Deductible: The Agreement does not include the Senate provision to raise the deductible.
Balance Billing/Premium Limits in MedicarePlus: [Same as House provision.] Beneficiaries
enrolling in MedicarePlus plans would have less protection than beneficiaries enrolling in a
Medicare managed care plan today:
CONFERENCE
4
MEDICARE
Under current law, beneficiaries enrolling in private plans can be no worse off financially than
if they stayed in fee-for-service. There is no similar guarantee under the House bill since
extra-billing is allowed (as described below) and is excluded from limits on out-of-pocket
costs for MedicarePlus enrollees.
Beneficiaries have no extra-billing protections for physician, hospital and skilled nursing
facility services in private fee-for-service plans, high deductible/medical savings account
plans, and coordinated care plans (for authorized non-network services).
Transfer to Part A
For calendar years 1996 through 2002, the savings from setting the Part B premium at 31.5
percent of program costs versus 25 percent would be transferred into the HI Trust Fund. [From
the Senate provision. House "lockbox" provision does not appear.]
GME/Academic Health Centers/ME
Cuts Medicare payments for indirect medical education (ME) by $9 - 10 billion over 7 years.
Reduces payment add-on for ME to 6.7 percent from 10/1/95 to 10/1/96, to 6.0 percent until
10/1/98, to 5.6 percent until 10/1/99, to 5.3 percent until, and to 5.0 percent thereafter.
[Basically the Senate provision, with a slower phase-in.]
Counts residents beyond their initial residency period at 0.25 for direct graduate medical
education (DGME) purposes, effective 10/1/97. [Mixture of Senate and House provisions.]
Does not include a phase-down of reimbursement for graduates of foreign medical schools.
Caps the number of residents on a hospital-specific basis for FY96 through FY02 at the
number an approved medical residency program had on August 1, 1995. [House provision.]
Establishes a Teaching Hospital and GME Trust Fund, to include the following
appropriations from the general fund of the Treasury: $1.1 billion in FY97, $1.3 billion in
FY98, $2.0 billion in FY99, $2.6 billion in FY2000, $3.1 billion in FY01, $3.4 billion in
FY02. The appropriation over 7 years totals $13.5 billion. [Same as House proposal, but
with lower appropriations.]
Home Health [Similar provisions in both bills.]
Establishes a prospective payment system for home health services. HHAs would be paid a
national average, per visit, prospective payment rate for each of the six HHA disciplines
(skilled nursing, home health aide, PT, OT, speech pathology or medical social services). The
amount of per visit rate payments would be limited by an agency-specific, case-mix adjusted
per episode cap, a dollar threshold that approximates those covered services that would be
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furnished to beneficiaries over a period of 120 days. This 120-day dollar cap would be
applied to 165 days worth of actual services, however.
Home health agencies (HHAs) that keep total payments for the year below the annual episodic
cap would be allowed to retain 50 percent of the savings; shared savings could not exceed 5
percent of the HHA's aggregate Medicare payments in a year.
Payments made for services extending beyond 165 days (outlier) would be paid on a per visit
basis, not subject to any cap. Outlier must be approved and certified as medically necessary.
The episodic cap is purportedly devised to control costs. In reality, it is nothing more than an
arbitrary budget ceiling that will provide incentives to agencies to avoid long-term heavy care
patients.
There would be no shift in coverage and financing from Part A to Part B, as in the House bill.
The conference agreement envisions 10/1/96 implementation of PPS, which would not be
possible given the lack of reliable data and systems to collect them. It would take at least two
to three years to develop a viable new payment system and a valid case-mix adjuster.
Provides that the maximum interval between recertification surveys be not greater than 36
months. Permits the Secretary to establish a frequency for surveys within this 36-month
interval commensurate with the need to ensure the delivery of quality HHA services. [House
provision; similar to proposal in President's.]
Savings generated by the OBRA 1993 freeze on cost limit adjustments, but not the freeze
itself, would be extended indefinitely in setting future HHA limits by not allowing for the
inflation that occurred during the two freeze years. [In President's February budget.]
Skilled Nursing Facilities
Effective 10/1/97, establishes a per episode prospective payment system for all cost categories
(routine, non-routine and capital) except physician services. There would be a 10 percent
reduction in payments under this system. [Senate provision.]
SNFs would be required to bill for all services that its Medicare patients receive [House and
Senate provisions were the same] EXCEPT the following services: physicians services, and
portable x-ray or EKG, which are treated as a physician's service.
Extends the savings from the OBRA93 freeze on SNF cost limits. [House and Senate
provisions were the same; President's proposal.] Reduces payment for capital-related costs
by 10 percent. (House and Senate provisions were both at 15 percent)
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The House provision to weaken Federal quality oversight of Medicare SNFs was not included.
Part B
Payments for Physicians' Services. [ Senate provision.]
(1) Creates a single physician conversion factor, instead of the current three different factors,
effective 1/1/96,
(2) Sets the 1996 conversion factor at $35.42, and
(3) Establishes a revised target/update system which sets cumulative expenditure targets, bases
them on real GDP per capita rather than historical physician volume/intensity, eliminates the
behavioral offset for update changes from the target and increases the maximum reduction in
updates due to performance from 5 to 7 percentage points and sets limits on annual bonuses at
3 percentage points.
Oxygen: 20 percent reduction in 1996, increased to a 30 percent reduction by 2002 (may preclude
reduction greater than 30 percent by Secretary). [Mixture of House and Senate.]
Fraud and Abuse Provisions
Establishes Health Care Fraud and Abuse Control Account, controlled by the Secretary of
HHS and the Attorney General. In addition to criminal fines, civil monetary penalties,
forfeitures, and penalties and damages, includes the following amounts appropriated from the
HI Trust Fund: $104 million in FY96, and that amount increased by 15 percent each year.
The OIG/HHS shall have at her disposal the following portion of the Account: between $60
and 70 million for FY96, between $80 and 90 million for FY97, between $90 and 100 million
for FY 98, between $110 and 120 million for FY 99, between $120 and 130 million for
FY2000, between $140 and 150 million for FY 2001, and between $150 and 160 million for
each successive year. [More than in House bill.]
The following amounts shall be appropriated from the general fund of the Treasury to the
Account for the use of the FBI: FY96 $47 million, FY97 $56 million, FY98 $66 million,
FY99 $76 million, FY2000 $88 million, FY01 $101 million, and $114 million for each
subsequent year.
Establishes the Medicare Integrity Program, under which the Secretary may enter into
contracts to carry out the following activities: review of activities of providers (including
medical review and fraud review), audits, payment determinations, provider and beneficiary
education, developing and periodically updating a list of items of DME which are subject to
prior authorization. Current contractors may not duplicate efforts under the Medicare
Integrity Program. The following amounts from the Trust Funds are transferred into the
program account: FY96 between $430 and 440 million, FY 97 between $490 and 500 million,
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FY 98 between $550 and 560 million, FY99 between $620 and 630 million, FY2000 between
$670 and 680 million, FY01 between $690 and 700 million, between $710 and 720 for each
successive year. [House provision.]
Creates beneficiary incentive programs, including requiring an "explanation of Medicare
benefits" (EOMB) notice be sent to beneficiaries for each service provided (at present, these
notices are sent for all services except laboratory and home health services), a program to
collect information on fraud and abuse and pay a portion of amounts collected to the
informant, and a program to collect information to improve the efficiency of Medicare and
pay a portion of program savings to the suggester. [In both bills.]
Expands sanctions for Medicare or State health programs to all Federal health care programs.
Requires HHS to issue additional safe harbors, modifications to safe harbors, and interpretive
rulings.
Adds new permissive exclusion from Medicare and Medicaid for individuals controlling a
sanctioned entity. [Senate provision.]
Creates intermediate sanctions for HMOs. [Similar provisions in both bills.]
Adds an exception to anti-kickback penalties allowing any remuneration between an
organization and persons providing services under a written agreement if the organization is a
Medicare Plus organization or the written agreement places the services providers at
substantial financial risk. [House provision]
Establishes a Health Care Fraud and Abuse Data Collection program for the reporting
information on final adverse actions, including the taxpayer identification numbers (TIN) of
those involved. [Senate provision.]
Extends civil monetary penalties (CMPs) to all Federal health care programs.
Persons excluded from Medicare or a State health care program and maintaining a direct or
indirect ownership or control interest in an entity or is an officer or managing employee of a
Medicare or State health care entity shall be subject to CMPs. [Senate provision.]
Allows CMPs to be imposed for incorrect coding or medically unnecessary services and
persons offering inducements to enrollees. [Senate provision.]
Makes CMP provisions for fraudulent claims more lenient by redefining the term "should
know" so that providers would only be liable if they act with "deliberate ignorance" or
"reckless disregard" of false claims. [House provision.]
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Creates new CMP for false certification by physicians of the need for HH services. [House
provision.]
Incorporates "Amendments to Criminal Law" from Senate bill.
Expands authority of State Fraud Control Units. [Senate provision.]
Other Provisions
XCLIA: The Agreement includes the House provision to eliminate CLIA for physician office labs.
Physician Self-Referral: Same as House provision, with the exception that a provision overriding
State laws that are more restrictive than Federal law was not included in the agreement. The
agreement would: repeal prohibitions based on compensation arrangements; exclude six currently
covered medical services from the list to which the self-referral provisions apply; expand the list
of exceptions; and delay implementation of the self-referral provisions until regulations are
published.
Malpractice Reform: [Unable to find any provision, but the House provision to reform malpractice
may be in another title.]
G\DIRECTORISUM951CONFSUMMC2
draft
11/17/95
Issues Summary
"Medicaid Transformation Act of 1995"
Conference Agreement
November 1995
OVERVIEW
Repeals Title XIX and replaces it with Title XXI, "Medigrant Program for Low-Income
Individuals and Families"
ELIGIBILITY
[Largely the same as the Senate version, although States may define disability for purposes of
mandatory coverage.]
Individual entitlement would be eliminated. Current Medicaid enrollees -- including children,
the elderly, individuals with disabilities and dually-eligible Medicare beneficiaries -- could, at a
State's option, lose eligibility for certain Medicaid-covered services.
States are required to cover pregnant women, children age 12 and under, and the
disabled (as defined by the State) with income below the poverty level. However, other
provisions in the bill undermine this guarantee. States can vary coverage across
geographic areas and can vary duration and scope of services across enrollees.
Enrollees have no guarantee of any particular service or any level of covered services.
Current spousal impoverishment protections are retained.
Individuals would not be able to sue a State in Federal court for the State's failure to comply
with Federal Medigrant requirements. Therefore, guaranteed coverage for pregnant women,
children and the disabled and spousal impoverishment protections - as well as any other
individual rights within this bill -- are effectively nullified. Only the Federal government
could attempt to enforce these statutory provisions through an administrative compliance
process.
Current restrictions on liens and estate recoveries are eliminated.
States could not deny coverage of services based on a pre-existing condition.
States cannot require an adult child whose income is below the State median income level to
contribute to the cost of nursing home care for a parent.
States may cover individuals with incomes below 275 percent of poverty. [Midpoint between
House and Senate.]
SERVICES
[Largely similar to both the House and Senate.]
Required services -- even for hospital or physician services -- would be eliminated.
Immunization services and pre-pregnancy family planning services would remain as the
only required services in this bill. However, the VFC program would be repealed,
causing immunization costs to increase. [Same as Senate.]
Comparability of services within States would be eliminated; therefore, covered services would
vary from State to State. No standard services (e.g., current mandatory services) would be
required to be covered in every State.
States would be able to vary duration and scope of services from enrollee to enrollee.
Therefore, equitable coverage for eligible beneficiaries would not be assured. States would
be able to discriminate against certain enrollees (e.g., due to age, sex, or race) by providing
different levels of coverage for the same service.
The requirement for Early, Periodic, Screening, Diagnosis and Treatment (EPSDT) of children
would be eliminated.
Abortion services would be limited to situations involving rape, incest, and protecting the life
of the mother.
PAYMENT TO STATES - ALLOCATION FORMULA
[Similar methodology to both House and Senate provisions, but with significant differences.]
Savings total approximately $164 billion over seven years.
For each fiscal year, the Secretary would calculate both a Federal obligation and an outlay
allotment for each State.
The obligation allotments would be slightly higher than the actual amount of Federal
funds States can draw down -- the outlay allotment. The rationale for this provision
may be that States often incur greater costs than they are able to draw down Federal
matching payments in a given fiscal year.
No special treatment for disproportionate share hospitals (DSH). DSH payments are
included in the base.
All States' outlay allotments would be adjusted (using a scalar factor) so that the total does
not exceed the available pool of Federal funds. The pool of Federal funds would be $96.4
billion in 1996, $103.2 billion in 1997, $107.9 billion in 1998, $112.6 billion in 1999, $117.4
billion in 2000, $122.3 billion in 2001 and $127.4 billion in 2002. The available pool of
Federal funds would increase the lower of 4.2 percent or GDP for years after 2002.
Outlay allotments for 1996 would be established in statute. [New provision.]
A State's outlay allotment for 1997 and subsequent fiscal years would be equivalent to a
calculated needs-based amount, subject to a scalar (to make State allotments sum to the total
pool) and growth limits:
Floors
Annual growth in States' outlay allotments would not fall below 3.5 percent in 1997;
this increase is reduced to 3 percent in 1998 and 2 percent for subsequent years;
All States' computed allotments would be at least 0.24 percent of the Federal pool
beginning in 1998.
Beginning in 1998, if a State's annual allotment growth exceeds the national growth
percentage, annual allotment growth would be limited to 4 percent.
Ceilings
The growth in States' outlay allotments cannot exceed 9 percent for 1997 and 5.3
percent for subsequent years;
Outlay allotments for the ten States with the lowest Federal Medigrant spending per
resident in poverty would grow at 7 percent;
The needs-based amount for each State is generated using measures of State's relative
number of residents in poverty, a case-mix index, an input cost index, and national spending
per person in poverty.
New Hampshire and Louisiana would have outlay allotments fixed through fiscal year 2000.
The two States would incrementally increase their financial participation. Both States would
be required to contribute 20 percent of the amount that would be necessary to draw down
their full outlay allotments in 1996 -- $203 million and $355 million respectively. Their
obligations would increase by 20 percent increments in order that by fiscal year 2000, they
would be meeting their full obligations. [Same as Senate.]
Louisiana and Nebraska would have pre-determined allotment increases of $37 million and
$106 million, respectively, for 1997; Nevada's allotment would be increased by $90 million
annually for 1996, 1997 and 1998. [New provision.]
A supplemental allotment for emergency services to undocumented immigrants would be
provided to the fifteen States with the highest number of undocumented immigrants. This
allotment would be allocated based on the proportion of undocumented immigrants in each
State compared to the total for all States receiving the supplemental allotment. $3.5 billion
from 1996 to 2000.
The Federal Medicaid assistance percentage (FMAP) would be either the result of the
current formula (based on States' relative per capita incomes), 60 percent, or the lower of
the new FMAP (based on total taxable resources and aggregate expenditure need) or the
current FMAP plus 10 percent. States would be able to choose between these three options.
[Combination of Senate and House provisions.]
LIMITATIONS
[Mostly similar to House provisions.]
States would not receive Federal match for payments made for non-emergency services
provided by excluded providers or provided to illegal aliens, payments eligible for third-party
coverage, or payments for medically-related costs in excess of five percent of total
expenditures. [Similar to House and Senate.]
No Federal funding would be available for administrative expenses greater than $20 million
plus 10 percent of total program spending in a given year.
No Federal funds would be available for purchase of outpatient drugs from a manufacturer
who was not participating in the drug rebate program.
SET-ASIDES
[Combination of House, Senate and new provisions.]
States would be required to devote a minimum proportion of their total program spending on
low-income families, low-income elderly, low-income disabled individuals, and services
provided by Federally-qualified health centers and rural health centers.
This minimum percentage would be based on 85 percent of the average percentage of
State spending on mandatory eligibles within these groups for mandatory services from
1992 to 1994. Spending for all elderly in nursing homes would be included in the
elderly set-aside. The Medicare cost sharing set-aside would be based on 90 percent of
the average percentage of State spending on Medicare premiums from 1993 to 1995.
[Same as House and Senate.]
The minimum percentage for FQHC and RHC services would be based on 85 percent of
the average annual Medicaid expenditures from 1992 through 1994 on services
provided by these entities. [New provision.]
States will be permitted to spend less than the minimum set-asides if they can determine that
the health needs of the population can be "reasonably met" without the required expenditure
amount. [Same as House.]
States would also be permitted to spend less than the minimum set-asides if an independent
actuary certifies that, under the State plan, the State will be spending at least 95 percent of
the minimum set-aside for any of these categories. [New provision.]
PROVIDER PAYMENTS
[Largely the same as House and Senate provisions.]
The bill removes all Federal provider payment requirements, including the Boren amendment and
payment requirements for Federally-qualified health centers and rural health centers.
States would be required to set capitation rates in accordance with actuarial principles.
DSH payments are not explicitly retained. However, States must include a description of
how these hospitals will be paid in their State plan. [Same as Senate].
COST-SHARING
States may impose cost-sharing requirements -- including coinsurance, copayments,
deductibles and other charges -- on Medicaid enrollees, except:
States would be prohibited from imposing premiums on families with incomes below the
Federal poverty level with a pregnant woman or a child (under age 19).
Copayments for primary and preventive services (as defined by the State) must be
nominal for pregnant women and children in families with income below the Federal
poverty level.
States would have broad flexibility to develop premium and cost-sharing schedules. States
could choose to develop premium and cost-sharing requirements that discourage
inappropriate use of emergency services; encourage the use of primary and preventive care,
are related to economic factors, employment status, and family size; reflect the availability of
other insurance coverage; or are tied to participation in programs that promote personal
responsibility (i.e., drug treatment or employment training).
DELIVERY SYSTEMS
[Same as House and Senate.]
Access standards for health plans and other providers would be eliminated.
Freedom of choice requirements would be eliminated. Beneficiaries would not be
guaranteed a choice of plan or delivery system.
States' ability to contract with managed care plans for services, case management, or
coordination would be unfettered.
NURSING HOME QUALITY ASSURANCE
Maintains much of the current statutory structure from the OBRA 87 nursing home reforms, but
States will be responsible for setting and enforcing quality standards.
States could turn over their standard setting and enforcement responsibilities to private
organizations (allows "deemed status"), with no Federal review;
Maintains Federal look-behind of State surveys, but changes look-behind to a three-year
cycle;
Requires States, rather than the Federal government, to establish requirements for nurse aide
training, pre-admission screening and annual resident review (PASARR) and administrator
qualifications;
Eliminates the annual review component of PASARR;
Reduces statutory specificity on the level of services and activities that must be provided to
nursing home residents;
Eliminates current protections that prohibit nursing homes from requiring potential residents
to forgo Medicaid coverage at the point of admission or in the future or from requiring
additional payments;
Modifies residents' rights with regard to transfers; and
Eliminates uniform data requirements.
MEDICAID DRUG REBATE PROGRAM
[Largely similar to House and Senate.]
Federal payment for outpatient prescription drugs would be available only if the
manufacturer has entered into a Medicaid drug rebate agreement with the Secretary.
States are not required to participate in the drug rebate program, but they cannot pay for
drugs unless they do.
Supplemental rebates (beyond those agreed to by the Secretary) are prohibited. [Same as
Senate.]
MEDICARE COST-SHARING
[Same as House and Senate.]
Low-income Medicare beneficiaries would not be assured of continuing to receive State-financed
assistance with Medicare costs. States could eliminate payments for premiums, coinsurance, and
deductibles or reduce the scope of assistance - e.g., covering only a proportion of the Medicare
premium.
NATIVE AMERICANS
[Same as House and Senate.]
One hundred percent Federal matching would be extended to services provided by tribal
providers as well as Indian Health Service facilities. However, one hundred percent Federal
matching for these services would not increase the State's base. This requirement therefore
would effectively reduce available Federal funds for other Medicaid populations.
State Medigrant plans would be required to include a description of how (or whether) Indian
Health Service facilities will be included as Medigrant providers and how eligible Indians will
receive medical assistance.
States will be required to consult with Indian tribes and tribal organizations as they develop
their Medigrant plans.
DEMONSTRATION PROGRAMS
[Same as House.]
No provisions for section 1115 demonstration programs. States with 1115 statewide
demonstrations would be treated on par with other States.
ACCOUNTABILITY
[Similar to House and Senate.]
The bill does not require States to be accountable for how they spend Federal funds.
Limitations on the use of provider taxes and donations, contained in the Medicaid Voluntary
Contribution and Provider-Specific Tax Amendments of 1991 are eliminated. [Same as
House.]
The State-share limit on inter-governmental transfers is retained. [Same as Senate].
The Secretary's authority and ability to enforce compliance would be severely constrained by
procedural requirements.
Goals, objectives and performance measures in State Medicaid plans are unenforceable.
State accountability for State Medicaid plans -- and amendments to these plans -- would be
minimal.
Current Federal disallowance authority would be compromised. The Federal government
would be prohibited from collecting pending disallowances.
MEDICARE/MEDICAID DEMONSTRATIONS
[Similar to Senate provision.]
Requires the Secretary to conduct State demonstration projects (no specific number) integrating
Medicare and Medicaid delivery systems, financed through a combination of Medicare and
Medicaid funds. These projects would focus on coordinated services for chronically ill elderly
and disabled individuals who are eligible for both programs. Beneficiaries would not be required
to participate in these programs.
Prepared by HHS, 11/17/95 (6 PM)GMEDICAID/CONGRESS.9S)RECONCONFER.ISI
TOTAL P.17