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[Medicare/Medicaid] [5]
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Records of the First Lady's Office (Clinton Administration)
Jennifer Klein's Files
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MEDICARE BUDGET RECONCILIATION CONFERENCE AGREEMENT
Savings
No CBO scoring table is yet available. However, the agreement appears to
closely track the House bill in its savings provisions with one exception: health plans
contracting with Medicare in 1996 would receive an 8% increase in payments over 1995
levels, rather than the 5.3% increase in 1996 called for in the House bill. Presumably
this higher payment is paid for through higher savings under the so-called "fail-safe"
rate-of-growth limit on payments to fee-for-service providers.
Under the House bill savings would have broken down as follows:
Approximate Savings
(7-year total, in billions)
Reductions in payments to health plans
$34
Fraud and abuse
3
Part A payment reductions (mainly hospitals)
68
Part B payment reductions (doctors, labs, etc.)
55
Part B premium increases
47
Income-relate Part B premium
7
Parts A and B payment reductions
(mainly home health)
23
"Fail-safe" rate-of-growth limit
33
TOTAL
$270
Medicare "Plus"
The provisions providing for payments to additional types of health plans are
similar to those included in the House-passed bill. The Secretary would contract with
health insurance plans, with Provider Service Organizations (PSOs), with Taft-Hartley
plans, and with Association plans. Health insurance plans could include indemnity fee-
for-service plans as well as managed care plans such as HMOs. Plans would be
required to be licensed under State laws, except that PSOs could apply to the
Secretary for a waiver of this requirement if the State attempted to impose
unreasonable standards or failed to act on a licensure application from a PSO in a
timely manner.
As under the House bill, all state-licensed insurers, HMOs, and other health
plans would be "considered to meet" the Federal standards during the initial year of
operation. Association and Taft-Hartley plans are not required to be organized and
licensed under State law
The bill appears to preclude health plans from charging Medicare beneficiaries
any additional premium for the basic Medicare benefit package. However, staff have
indicated that the bill is supposed to allow health plans to charge an additional premium
for the basic package if the price of the benefits exceeds Medicare's contribution.
Payments to health plans would be based initially upon 100% of the current
AAPCC rates inflated by specific annual percentages set forth in the bill which, other
than an 8% growth rate for 1996, are derived from the percentage growth allowed
Medicare under the budget resolution. Payments in each county would be further
modified by blending the county-specific rate with an input-price adjusted national rate
on a phased in basis which would start in 1996 at 10% national, 90% county-specific
and reach 30% national, 70% county-specific in 2000. A floor would be set for
payments of $300 per month in 1996 and $350 in 1997, inflated by the national growth
rate in subsequent years. A minimum growth rate of 2% would also be established.
Balance billing.--As under the House-passed bill beneficiaries who received
services under a Medicare plus plan from providers who did not have a contract with
the plan would not be protected by Medicare's balance billing limits. This would occur
with all services in a fee-for-service plan or with out-of-network services in a point-of-
service plan.
Anti-trust--The bill provides partial anti-trust protection to providers establishing
PSOs.
Medical Savings Accounts.--Medical savings accounts are included in the
conference agreement. Individuals would be allowed to disenroll from MSA high-
deductible plans every 12 months, thus exacerbating the risk selection dangers of
MSAs
ProPAC and PhysPRC.--As under the House-passed bill, ProPAC and
PhysPRC are abolished and replaced with a single Medicare Payment Review
Commission.
Part B Premium and Other Beneficiary Payment Changes
As under the House-passed bill, the Part B premium would be established at
31.5% of Part B expenditures. All receipts from the higher Part B premium would be
deposited into the Part A Trust Fund. In addition, higher-income beneficiaries would
begin paying higher premiums at $50,000 per individual/$90,000 per couple and would
pay 100% of the Part B premium at $100,000 individual/$150,000 per couple.
Fraud and Abuse Provisions
The conference agreement would apply Medicare and Medicaid's anti-fraud and
abuse provisions virtually to all payers and would establish new Federal criminal
sanctions against health fraud and abuse. The Conference agreement goes another
step beyond the House provisions for mandatory spending for the Inspector General
and for Medicare "Integrity" by providing for mandatory spending for the FBI. The
conference agreement makes transfer of assets in order to qualify for Medicaid a
Federal offense.
Standard of proof for civil money penalties.-As in the House-passed bill, the
conference agreement raises the standard of proof for the government to impose a civil
money penalty.
Physician self-referral.-The conference agreement includes the House-passed
provision which removes all prohibitions against physicians referring patients to entities
with which they have a compensation arrangement. Radiation therapy services,
durable medical equipment, prosthetics and orthotics, home health services, outpatient
prescription drugs, and inpatient and outpatient hospital services are removed from the
list of services to which the self-referral ban applies. Ambulatory surgical services,
renal dialysis facilities, hospices, and comprehensive outpatient rehabilitation facilities
are exempted from the self-referral ban, Changes enacted in 1993 could not be
implemented until regulations are promulgated.
Part A Payments
Hospital payments.-Hospital updates have been reduced by two percentage
points in each of the next seven years
"High Medicare" hospitals.-Payments are increased by 0.5 percentage points
in 1996 and by 0.3 percentage points in 1997 from what they would otherwise be
for hospitals with a high proportion of Medicare patients
Indirect Medical education.--The IME adjustment is reduced to 5.0 percentage
points between 1996 and 2001.
Disproportionate share adjustment--The DSH adjustment is reduced 30
percent between 1996 and 1999
Part B Payments
Physician payments.-A single conversion factor is established which has the
effect of reducing surgeon payments substantially while assuring that other
physicians will not receive a negative update
Other Part B services.-- Payments for clinical laboratory services, ambulatory
surgery, durable medical equipment and ambulance services are frozen for
seven years
Graduate Medical Education
As in the House-passed bill, a Graduate Medical Education Trust Fund financed
by general revenue would be established. Receipts to the fund would equal $13.5
billion over the next seven years. Provisions ending funding for non-U.S. citizen
residents have been deleted.
"Fail-safe" Rate of Growth Limit
As under the House-passed bill, a "fail-safe" rate-of-growth limit would be
imposed on fee-for-service payments. Because of higher payments to health plans in
1996 and other changes, this provision will produce more savings than under the
House-passed bill.
SUMMARY OF MAJOR MEDICARE PROVISIONS
18:18 10/30/95
ISSUE
HOUSE
SENATE
Savings Target
$270 billion over 7 years
$270 billion over 7 years
Outlay Targets
FY 97, $208.0 B; FY 98, $217.1; FY 99, $228.4; FY
FY 96, $193.3 B; FY 97, $206.5 B; FY 98, $219.7;
2000, $246.4; FY 2001, $265.5; FY 2002, $288.0
FY 99, $233.5; FY 2000, $249.6; FY 2001,
$266.9; FY 2002, $285.6
Expenditure Limits
Failsafe:
BELT:
Mechanism
Reduces payment rates automatically If target
Reduces payment rates automatically If target
allotments are projected to be exceeded.
allotments are projected to be exceeded.
Operales on a sector-by-sector basis.
Operates through aggregate cap.
Lookback mechanism further adjusts payments
No lookback mechanism.
rates If sectoral expenditures two years
previously deviated from sectoral largets.
Applies only to Medicare fee-for-service
Applies only to Medicare fee-for-service
Health Plan Options
Medicare fee-for-service or "MedicarePlus"
Medicare fee-for-service or "Medicare Choice"
MediSave: High deductible plan In conjunction
High-deductible plan In conjunction with
with medical savings account (MSA) (maximum
Medicare Choice Accounts (minimum
deductible $10,000, Indexed)
deductible $3,000 per year; maximum cost
sharing $6000).
Coordinated care plans (HMO,POS,PPO)
Similar
Union, Association, or Taft-Hartley plans
Union, association, or Taft-Hartley plans
Private fee-for-service plan
Similar
Provider service network (PSN)
Similar
DRAFT 10/27/95 HCFA/OLIGA
1
002
ISSUE
HOUSE
SENATE
10/30/95
PROGRAM REQUIREMENTS MEDICARE PL US and MEDICARE CHOICE
Eligibility
All beneficiaries entitled to Part A and enrolled in
All beneficiaries entitled to Part A and enrolled
18:19
Part B are eligible to enroll in a MedicarePlus
in Part B are eligible to enroll In a Choice plan,
plan, Including ESAD beneficiaries.
except those with ESRD.
0)
Envollment
Enrollment process established by Secretary and
Same, except Secretary conducts enrollment
conducted by plans. Annual open enrollment
process.
period.
Auto-assignment
Traditional Medicare If beneficiary does not elect
Same
an option
Same plan from year to year unless beneficiary
Same
elects to change
Disenrollment
During annual open enrollment period or "for
Same, except Secretary conducts disenrollment
cause"
process by notifying Medicare Choice plan.
90-day free-look period; must stay in MSA for 12
90-day free-look period for all Med. Choice
months
options; must give 12 month notice before
disensalling from MSA.
Administration
Office in HHS separate from HCFA
No provision
Contracts
MedicarePius plans (except MSAs) must have a
All Medicare Chaice plans must have contract
contract with the Secretary. Contracts would be
with the Secretary.
for one year and automatically renewable.
The Secretary may audit and inspect, and may
Invoke Intermediate sanctions or termination for
Same
failure to meel terms.
Information
Secretary through contracts) to disseminate
Similar, except Medicare Choice plane can
Information on coverage oplions to beneficiaries
distribute their own marketing materials If they
meet certain requirements.
DRAFT 10/27/95 HCFA/OLIGA
2
003
ISSUE
HOUSE
SENATE
Benefits
Current Medicare benefit package, except MSA
Same, except plans may offer additional
services (unless these additions will
10/30/95 18:20
substantially discourage enrollment).
Premiums and Rebates
If Medicare payment exceeds the adjusted
If Medicare payment exceeds plan premium,
community rate, plans must provide additional
beneficiary can receive 75% of difference in
0)
benefits, cash rebates (up to the amount of the
cash (25% goes to HI Trust Fund); 100% in
Part B premium) or a combination, in value equal
supplemental benefits; or 100% deposited in a
10 the difference.
MSA (even If the beneficiary is not in a high-
deductible plan).
If Medicare payment is less than plan premium,
If Medicare payment is less than plan premium,
the plan could charge enrollees the difference.
the beneficiary is responsible.
Plans could also charge a premium for benefits In
excess of those provided under the adjusted
community rate.
Plan Standards
NAIC would develop standards for MedicarePlus
States license all plans (except union, Taft-
plans (except those noted below); the Secretary
Hartley, association plans), but the Secretary
would Issue regulations based on NAIC's
shall establish a temporary certification
standards (If consistent with the statute). States
process, which sunsets and can be used only
could certify and enforce if their processes
under limited conditions. The Secretary shall
approved by Secretary.
establish standards for solvency and quality
assurance.
Secs. of HHS and Labor would establish
standards, certify, and enforce for union and Taft-
Hardley plans.
The Secretary would establish standards (by
9/1/96), certify, and enforce for PSNs.
Preempts State laws governing MedicarePlus
plans.
DRAFT 10/27/95 HCFA/OLIGA
3
004
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND budget
ROUTE SLIP
TO: Jennifer Klein
Take necessary action
Approval or signature
Comment
Prepare reply
Discuss with me
For your information
See remarks below
FROM: Kountorpes
DATE: 11/7/95
REMARKS:
Thanks for breakfast!
Enclosed plse find:
Thishas
not been
Ocoalition "principles"
(developed w/sen staff
circulated widely
2
coalition summary
pleasehold
close
W
Wse/Sen Reconciliation
SAPs FYI
plse call ifyou need
anythingelse 54790 Sign
OMB FORM 4
Rev Aug 70
Coalition Principles for Reconciliation Bill
1. The deficit reduction glide path should be enforced by a mechanism that forces
Congress and the President to take action if the deficit is higher than projections. A
strong enforcement component is critical if changes are made in economic assumptions
or if tax cuts are included in the package.
2. The deficit should decline each year on a reasonable glide path toward balance in
2002. The deficit should not increase in any year.
3. Any tax cuts enacted up front should be fully offset by the elimination of corporate
subsidies in the tax code. Any additional tax cuts should be contingent on the budget
achieving lower deficit levels as a result of the economy performing better than projected
by CBO.
4. The reconciliation bill should include a correction in the Consumer Price Index in
order to spread the burden of deficit reduction in a fair manner.
5. The welfare reform provisions should provide sufficient funding to meet the work
requirements to move individuals off of welfare and into work without placing an
unfunded mandate or undue restrictions on the states and should guarantee child care
assistance to individuals who need child care to move off of welfare and into work.
6. The basic guarantees of coverage under Medicaid should be preserved with a
reasonable rate of growth. The Qualified Medicare Beneficiary Program should be
maintained. Basic standards for Medicaid coverage and the floor on payments to
hospitals should be preserved.
7. The discretionary spending levels should provide room for sufficient funding for
investments in health care, education programs and economic development.
8. The reconciliation bill should provide a sustainable rate of growth in Medicare
spending that is comparable to private sector growth. Payments to hospitals should not
be cut by more than $60(?) billion.
9. The budget should not require reductions in student loan programs
10. Agricultural programs should not be asked to make unreasonable reductions that
undermine agricultural policy and harm the international competitiveness of U.S.
agriculture.
Issues about Reconciliation Alternative
Medicare
1. Does the administration have a general position on the proposal by the Coalition or the Republicans
to expand choice in Medicare?
2. Does the administration have any specific concerns about the provisions expanding choice in the
Coalition alternative.
3. Which specific provisions in the Coalition alternative reducing the rate of growth in Medicare does
the administration have the greatest concern with? Which areas are cut too much?
Medicaid
1. Is the overall approach in the Coalition alternative on reconciliation consistent with the President's
position (exclusive of the savings level)?
2. Does the administration have concerns with any of the specific Medicaid provisions in the Coalition
alternative?
3. Are there additional Medicaid reforms that were assumed in the President's budget that were not in
the Coalition alternative?
Discretionary
1. What are the administration's priorities within discretionary spending. Is there a list of proposed
discretionary spending by function or appropriations subcommittee based on the President's June
budget?
Welfare
1. Does the administration object to the total welfare savings in the Coalition alternative?
2. Are there any additional welfare reform savings not in the Coalition substitute that the administration
supports?
The President's June budget proposed $21 billion in food stamp savings, $3.5 billion higher than
in the Coalition alternative. What (if any) specific savings were assumed in the President's plan
to achieve the higher level of savings that were not in the Coalition plan.
What policies (if any) are assumed in the $13.5 billion in savings over seven years from "cash
assistance" in the President's June budget. How much of the savings is from SSI and how much
from AFDC.
3. Would the administration accept the food stamp savings in the Senate bill in a final welfare reform
bill?
4. Does the administration object to any of the specific welfare reform provisions in the Coalition
welfare reform bill?
Inclusion of welfare benefits in taxable income
Reapplication requirement for SSI
S. Would the administration object to the proposal that was in the original Coalition reconciliation
alternative requiring the Secretary of HHS to narrow the standards for SSI eligibility based on mental
Impairments to place less emphasis on factors such as ability to concentrate, persistence and pace of
work performance and ability to tolerate increased mental demand from high pressure work?
6. What does the administration support regarding benefits to non-citizens?
Is the language from the Deal substitute on immigration (which was incorporated in the
Coalition reconciliation alternative) still the official administration position on immigration?
Would the administration support the Senate language on immigration if it was modified to
address the concerns mentioned in Director Rivlin (allow immigrants to receive benefits upon
receiving citizenship, eliminate provisions requiring sponsors to have income of greater than 200
percent of poverty, exempt immigrants who become disabled after entering the country from the
denial of SSI, eliminate provisions applicable to discretionary programs, student loans, Social
Services Block Grants, and elementary and secondary education, adopt exemptions from the
House bill or Deal substitute and modify provisions relating to Medicaid)?
Enforcement / Budget process reform
1. Does the administration support the concept of providing enforcement which forces Congress and the
President to take action if the deficit exceeds specified targets?
2. Does the administration have any views on the specific deficit enforcement provisions in the Coalition
budget?
3. Does the administration have a position on the other budget process reforms in the Coalition
alternative?
Extending PAYGO window to ten years
Eliminating inflation adjustment for discretionary caps (included in Republican bill)
Providing the President with line item veto authority for fiscal year 1996.