WASHINGTON, June 5 (UPI) -- The Republican chairman and leading Democrat on the Senate Finance Committee agreed Thursday on language for a prescription drug bill for Medicare that includes an option for seniors to choose private insurance plans -- the same plans that have taken a financial beating in the Medicare + Choice program.
The legislation, to be taken up at a hearing by the full Senate Finance Committee on Friday, is to include a key provision called risk corridors that could be just what skittish insurers need to agree to give partnering with the government another try.
A risk corridor protects against the unintended consequences of a new law –- things that go wrong or change that cannot be predicted when writing the legislation. One Senate staffer said the legislation would require insurers to take a "little risk rather than a lot of risk."
Larry Akey, spokesman for the 300-member Health Insurance Association of America, said his group would consider the whole proposal to see what benefit plan can be offered to Medicare beneficiaries that "doesn't cause us to break the bank."
Akey and Karen Ignagni, of the American Association of Health Plans, said they provided as much information and data as possible to the Finance Committee on how insurance works and the various types of insurance coverage.
Both insurance industry groups strongly support a prescription drug plan for Medicare, but they were not asked to help write the legislation, nor did they give the committee a "must include" or "must not include" list of requirements for their support.
President Bush had proposed a $400 billion program to move toward more reliance on private health care plans in Medicare over the traditional fee-for-service Medicare, where the government acts as payer. The administration thinks private plans, if run efficiently, can operate for less money and provide more benefits than the traditional entitlement. A report from the Congressional Budget Office released this week disagreed.
The administration's goal was to use prescription drug coverage as a catalyst to get seniors to join private health plans and move away from traditional Medicare, which is predicted to go broke around 2026. Beginning in 2006, people enrolling in a network of preferred provider organizations could face a more limited choice of physicians; however, they would receive more extensive drug coverage than if they chose to remain in the traditional Medicare program, which would offer only a drug discount card. PPOs also would offer other benefits, such as coverage for catastrophic health expenses and preventive medicine.
Republicans on the Finance Committee have been working with those elements to craft the new legislation. Chairman Charles Grassley, R-Iowa, and the ranking minority member, Sen. Max Baucus, D-Mont., agreed Thursday to present a plan also pegged at $400 billion over the next decade. Details are not finalized yet but it mostly would follow the Bush plan except in the extent of its prescription drug benefit.
The committee's legislation calls for the drug benefit to be the same for beneficiaries regardless of whether they chose a PPO or remained in traditional Medicare. The benefit would begin in 2006 but a discount card would be available by next year. That had been a key issue of contention between Republicans and Democrats.
Ignagni said the plan needs more study but appears to be one that can work. She added the agreement shows for certain how the "debate has moved forward considerably."
A statement from the White House said the president is "encouraged" by the agreement.
The insurance groups hoped several years of lobbying and educating lawmakers about the problems with the Medicare + Choice program will pay off in this new plan.
Medicare + Choice started in 1997 as an expanded option for seniors, giving them the chance to select a HMO that offered at least what traditional Medicare did and often much more -– including coverage for drugs and preventive services. The problem was the program's funding mechanism was severely flawed, resulting in government payments to many plans far lower than what was needed to provide benefits and meet their financial needs and risk calculations. As a consequence, hundreds of plans pulled out and millions of Medicare beneficiaries, especially in rural areas, were left stranded without an HMO plan and some were forced to go back to traditional Medicare. Many lawmakers have called the program a failure.
The government –- the Medicare program is under the auspices of the Department of Health and Human Services –- also proved to be a bad business partner. Government regulators kept tinkering with the program. They refused to fix the funding mechanism so the Medicare + Choice payment could keep up with increases in payments under traditional Medicare. The plans also had to commit to the upcoming year's financial package in the spring, well before their own beneficiary usage data was complete.
It is no surprise health plans are eager to serve Medicare's 40 million seniors –- a population that will grow to 70 million as the baby boomers retire.
Insurers could get comfort in the risk corridors established to protect them and Medicare beneficiaries from the instability that arose in Medicare + Choice because of government vagaries.
For example, if a health plan's expenses were 5 percent more than a set expenditure level for the year, the government would chip in, paying the plan perhaps 25 percent of the difference. The higher the overage, the more the government would contribute to make up the difference.
If the plan spends less than expected over the course of a year, the risk sharing could work in reverse, requiring the insurer to return to the government some of the additional money.
"This (risk corridor) is an important contribution," Ignagni told United Press International Thursday, "that provides a safety net for consumers and beneficiaries."
Ignagni, who said she had not seen the risk corridor language, said such protections ensure plans are not forced to pull out of the program for financial reasons, leaving beneficiaries stranded.
Not all Finance Committee Democrats were ready to sign on to an agreement. Earlier Thursday, Sen. Jay Rockefeller, D-W.Va., said he and other Democrats were "all in high states of frustration" over the process because the Republican committee members had not included them in the discussions.
"It's quite extraordinary, this process," Rockefeller said but added the Republicans on the committee could very well have the votes they need to push the legislation through.
