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Medicare keeps lawmakers waiting

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WASHINGTON, Sep 15, 2004 (United Press International via COMTEX) -- It has been nine months since Congress conceived the Medicare Prescription Drug, Improvement and Modernization Act of 2003 and now some legislators are growing anxious to see the new baby.

Democrats are particularly curious because if this baby turns out to be an ugly duckling, it becomes a presidential campaign issue.

Unfortunately, the gestation period of the new Medicare family addition extends to January 2006 and an attempt at an early congressional ultrasound by the Senate Finance Committee has left some expectant Hill parents with a disappointing view.

Even though the Centers for Medicare and Medicaid Services already has written 900 pages of proposed regulations on how to run the new program, lawmakers Tuesday said the plan was too vague.

"There is not, in my judgment, a lot of guidance in a number of areas," said Sen. Max Baucus, D-Mont. "There needs to be much more guidance to be fair to everyone involved."

President Bush is bragging during campaign stops that the new Medicare plan will bring prescription drugs to the program. Democrats have are complaining about the cost to beneficiaries and looking for any signs this will not work as the presidential campaign heads into its final seven weeks.

Democrats have pretty much used up their criticism of the Medicare drug discount card program -- it is slowly gaining ground despite their claims it does not benefit seniors.

The Medicare Advantage health plans that the new law envisions will offer beneficiaries more choice in the managed-care arena and prescription drugs, as well as prescription-drug-only plans designed for seniors in the traditional fee-for-service Medicare.

The question hanging both last December, when the legislation became law, and today is how many health plans are going to show up for the birth in 2006? The new law dangles some $16 billion in incentives in front of health plans to entice them to submit competitive bids -- much to the chagrin of Democrats, who strongly opposed this dole-out. Yet serious questions remain about plan participation, generated mostly by past history with Medicare+Choice.

Considered the black sheep of the Medicare family -- Medicare+Choice HMO plans have been adopted into the new Medicare Advantage, which will focus, however, on preferred provider organizations.

Medicare+Choice HMOs started as favored children in 1997 but found they couldn't make it financially with the level of government payments and, over the years, pulled out of areas, decreased enrollment, raised costs and reduced benefits -- mainly prescription drug coverage. A program that was expected to attract one-third of Medicare seniors barely has enrolled 6 percent in 2004.

The HMOs were nowhere to be found in rural areas -- where they could not establish the provider networks they needed -- and only after Congress increased their payment rates -- to very close to or above the fee-for-service level -- were they able to hang on in select markets. So much for saving money from FFS -- many HMO plans actually are more expensive but -- on the flip side -- they also tend to offer more services and benefits for the money than does traditional Medicare.

Sen. Bob Graham, D-Fla., told CMS Administrator Scott McClellan that Medicare Advantage plans are getting up to 12 percent more than FFS.

"How can you justify this?" he asked.

"What I want to do is to give all beneficiaries access to affordable healthcare -- even if there are some differences in the payment," McClellan responded.

McClellan said if beneficiaries pay less out-of-pocket overall, then that will help reduce healthcare costs and "right now MA plans are way ahead in delivering much more efficient healthcare overall."

To which Graham added that if they are getting 12 percent more than FFS, "they ought to be providing better services."

PPOs, on the other hand, often are called "FFS lite," because they do not have the tightly managed care restrictions of HMOs and do not require such extensive, healthcare-provider networks. They also, however, can be up to a third more costly than their HMO siblings. The Medicare baby could well become just like every other kid -- expensive.

There has been a PPO demonstration project going on among some of the Medicare managed-care insurers to test the viability of PPOs in Medicare. Baucus hinted that a new report due out on this pilot could show CMS overstepped its authority in implementing it.

Drug-only plans are really a new concept in the industry, so no one knows exactly what to expect and Congress has included a fall-back plan where the government simply will find a drug plan if no plans bid for the business. The best guess is some insurer will at least give it a try.

The regulations proposed by CMS so far, however, do not spell out some key fundamentals of Medicare Advantage that would guide how these drug plans and PPOs will work -- and until that is settled no one knows what participation will be.

For example, how large will the service regions be? Some health plans would like state regions -- they often function that way now and their risk is geared toward that. Some large insurers, though, are willing to give multi-state regions a go because of their nationwide product lines.

Karen Ignagni, president of American's Health Insurance Plans, the industry group for the insurers, danced around repeated questioning about how many health plans she expects to participate Medicare Advantage. She managed to pin it down to "significant interest," but added that insurers still were trying to sort out the regulations and figure out if the program is a fit.

On an encouraging note, she said health-plan participation in the old Medicare+Choice HMO end is picking up thanks to the Medicare Modernization Act's funding provisions.

Gerald Shea, assistant to the president for government affairs at the AFL-CIO in Washington, said, "We're very nervous -- and afraid frankly -- that if the rule comes out without sufficient guidance, companies are going to be very lost trying to implement this."

Another major missing part that is particularly essential for drug-only plans is the formulary -- the list of drugs to be covered by the benefit. The regulations also lack specific instructions to employers who offer retiree drug coverage on requirements for getting some of the billions of dollars in subsidy money set aside for them if they continue to offer retiree coverage.

Sen. John Breaux, D-La., told McClellan the agency had "succeeded in making everyone mad" -- including pharmacy benefit managers, who use restrictive formularies to control costs -- because a drug formulary proposal by U.S. Pharmacopeia includes 146 classes of drugs, and because of back-door efforts to have 300 or more classes included, which would be a "blank check for drug manufacturers."

McClellan stressed the Pharmacopeia formulary guidelines were only a part of the decision-making process on establishing a formulary -- meaning CMS still has a long way to go.

"We know that a number of our members are looking very seriously at participating in 2006," Ignagni said and indicated industry has until Oct. 4 to submit comments to CMS on what will work and what won't work for health plans.

She added there were "hundreds of operational issues" to be addressed.

Mark Merritt, president of the PBM industry giant, the Pharmaceutical Care Management Association, said he likely would not know, until the final rule is published in January or February, what the participation rate of PBMs will be. He said it is a competitive issue and chief executives simply are not talking about it yet.

McClellan, a physician and an economist, has the background for delivering this Medicare baby, but lawmakers, unlike most parents, are not going to be getting a lot of prenatal information to use on the campaign trail. Just as with real infants, this Medicare baby is on its own schedule -- one steeped in regulatory procedures that will keep everyone guessing for months to come.


Ellen Beck is UPI's Health Policy Editor. E-mail

Copyright 2004 by United Press International.


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