Congress Passes Medicare Bill (H.R. 6331)


Congress saves Medicare; quickly overrides Bush Veto

On July 15, Congress quickly voted to override President Bush’s veto of H.R. 6331, the Medicare bill that postpones a big cut in reimbursements to doctors and replaces it with a slight increase.  After an easy victory in the House of Representatives, the bill passed the Senate 70-26, with 21 Republicans joining 47 Democrats and 2 Independents.

The override brought to a conclusion a dramatic fight between the Bush Administration and Democrats in Congress over fundamental policy issues affecting Medicare.  The bill had been blocked for almost a month by a Republican filibuster. [See the July 15 article in posted before Congress had voted to override the veto.]   Returning to Washington during his treatment for brain cancer, Senator Kennedy cast the 60th vote to stop the filibuster. Only Senator McCain failed to vote on this vital bill.  

The insurance industry immediately launched a web-based letter writing campaign to ask President Bush to veto H.R. 6331 because it would reduce payments to providers of Medicare Advantage plans.  The President responded to insurance industry pressure by vetoing the bill. 

The real fight was about how to pay for the Medicare doctors’ fees and about Republican plans to privatize Medicare.  In 1997, a Republican Congress introduced Medicare + Choice (M+C) allowing Medicare-eligible seniors to enroll in private insurance plans that would compete with traditional Medicare in providing health insurance to seniors.  Six years later the M+C plans had attracted few participants.  Frustrated by the failure of M+C plans to grow as they had expected, in 2003 Republicans decided to “prime the pump” by subsidizing the privatization of Medicare.  Congress passed the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003,which expanded the role of private health plans in Medicare through prescription drug plans and, over the objections of many Democrats, a revised Medicare+Choice (M+C), renamed Medicare Advantage

Many studies have determined that the Medicare Advantage plans receive about $1000 per year per beneficiary more than traditional Medicare.  This year (2008), Democrats led by Senator Baucus (D, MT) wrote into H.R. 6331 language that will reduce these subsidies to the private insurance plans and shift the money to traditional Medicare.  Democrats wanted to fix the Medicare funding problem within the Paygo (Pay-as-you-go) rules by reducing the subsidies to the insurance companies, while the Republicans wanted to postpone the mandatory cuts in doctor’s fees by increasing the deficit (borrow more money from the Chinese).  Under the Democrats, fiscal discipline won.

H.R. 6331 does not eliminate the subsidies to the Medicare Advantage plans.  Rob Cunningham of Health Affairs Journal said on July 10: “Easily lost in all the political drama is the modesty of the compromise that won over so many Republicans in both chambers. The controversial benchmark system for setting bid targets for MA plans remains untouched, despite repeated recommendations from the Medicare Payment Advisory Commission to equalize payments for MA and traditional Medicare. The bill phases out a payment adjustment to MA plans for indirect medical education (IME) by a maximum of one-half of one percentage point a year, worth a total of $12.5 billion from 2008 to 2013. But as the Congressional Budget Office points out, the current IME adjustment represents a double payment to MA plans, because Medicare’s fee-for-service hospital rates, on which MA benchmarks are partially based, already include an IME add-on.”

The Republicans have been especially keen on Medicare Advantage Private Fee-for-Service (PFFS) plans.  Several studies have shown that both Medicare Advantage managed care plans and Medicare Advantage PFFS plans fail to provide any better care than traditional Medicare.  MA PFFS plans in particular are 17% more expensive than traditional Fee for Service Medicare.

On July 14, the American College of Physicians issued a long letter imploring President Bush to sign H.R. 6331, giving a long list of anticipated adverse consequences of not doing so. 

After the Congress voted to override the President’s veto, the ACP congratulated Congress for its quick action to prevent the cuts in the physicians’ Medicare fee schedule.

In his veto message, the President said that H.R. 6331 would reduce options for Medicare beneficiaries, “particularly those in hard-to-serve rural areas. In particular, H.R. 6331 would make fundamental changes to the MA PFFS program. The Congressional Budget Office has estimated that H.R. 6331 would decrease MA enrollment by about 2.3 million individuals in 2013 relative to its current baseline, with the largest effects resulting from these PFFS restrictions.

“While the [Medicare Modernization Act of 2003] MMA increased the availability of private plan options across the country, it is important to remember that a significant number of beneficiaries who have chosen these options earn lower incomes. The latest data show that 49 percent of beneficiaries enrolled in MA plans report income of $20,000 or less. These beneficiaries have made a decision to maximize their Medicare and supplemental benefits through the MA program, in part because of their economic situation. Cuts to MA plan payments required by this legislation would reduce benefits to millions of seniors, including lower-income seniors, who have chosen to join these plans.”

The Administration did have one valid criticism, when President Bush’s statement said “H.R. 6331 would delay important reforms like the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies competitive bidding program, under which lower payment rates went into effect on July 1, 2008.”

Nevertheless, do not be misled by the reference to low-income beneficiaries participating in Medicare Advantage plans.  The Republicans have a long-term plan to solve the projected insolvency of the Medicare system by privatizing Medicare, and they view the Medicare Advantage Plans as a stepping stone to that goal.  The Democrats acknowledge that Medicare expenses are growing at a rate that will lead to a problem in ten years.  However, Democrats view the Medicare Advantage program as a failed experiment in Medicare privatization.  Introducing insurance companies as middle men in the senior health insurance system adds cost rather increasing either efficiency or quality.  

Another way must be found to control the growing cost of health care in this country.  Democrats are not offering a separate long-term Medicare solution, but many view this problem as part of the overall problem of introducing a universal health care system for everyone in the United States.  As envisioned by Democrats, Universal Health Care will include subsidies for low income participants.  This will not be a single payer system like traditional Medicare, but some parts of the system such as a national health database and information system could be used by doctors to treat patients of all ages.

The passage of H.R. 6331 appears to be the beginning of the end for the health plan industry’s most profitable and fastest-growing private Medicare product – private fee-for-service.  PFFS is a special program because health plans are not required to create managed care networks of doctors, hospitals, and other providers. Instead, the health plan can force providers to treat its members and also force them to accept the Medicare fee schedule in payment. PFFS plans get 17% more than Medicare does for like seniors and don’t have to establish networks of providers, and they can simply pay at the already established Medicare payment schedule.  Health plans commonly pass some of these extra payments on to members in the form of extra benefits, which makes these plans very attractive – almost 10 million seniors are now in them. 

The health plan industry has lobbied hard to keep these MA PFFS subsidies.  The Democrats have said five years of subsidies is long enough.  The PFFS plans are too costly. H.R. 6331 not only starts to phase out the subsidies, it requires that any PFFS player establish networks by January 1, 2011 – converting PFFS members to mainstream Medicare Advantage. “With PFFS gone in 2011, the Congressional Budget Office (CBO) estimated that $14 billion in savings could be transferred to physician payments.”

H.R. 6331 only postpones the supposedly automatic cuts in physicians Medicare payments for 18 months.  There is no dispute that the Medicare physicians’ payments schedule needs a complete overall.  That is a subject for the next Congress, which hopefully will have more Democrats.



One Response to “Congress Passes Medicare Bill (H.R. 6331)”

  1. MA seminars or lack thereof Says:

    […] than I care to put into this, but for the benefit of all: H.R. 6331 July 15, 2008 Link to story: Congress Passes Medicare Bill (H.R. 6331) Weston Policy From the story: "H.R. 6331 not only starts to phase out the subsidies, it requires that any […]

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