Proposals for Medicare Reform Advance In House, Senate

JUNE 23, 1997 VOLUME 4, NUMBER 51

As Congress approaches its summer recess next month, Medicare reform remains a difficult and divisive issue. Three separate proposals are under active consideration. All three Republican proposals share common themes, including requiring beneficiaries to contribute more to the cost of care, controlling payments to providers and increasing the use of managed care organizations. The three proposals also have substantial differences.

One of the three current Medicare proposals comes from the Senate Finance Committee, which completed its work last week. The other two proposals both come from the House of Representatives, with one championed by the Ways and Means Committee and the other by the Commerce Committee. All three proposals are part of larger budget packages, including transportation, education, welfare and agriculture programs. A few of the Medicare issues under consideration:

Payments by Beneficiaries

The Senate proposal goes the furthest to increase the cost of medical care for seniors. Currently, nearly all Americans are covered by Medicare at age 65; the Senate proposal would increase the coverage age to 67 (similar to Social Security changes already adopted).

The Senate would also require wealthier seniors to pay substantially more of the cost of doctors’ care (Part B deductibles would be indexed to beneficiaries’ wealth). Home health care, currently provided free of copayments and deductibles, would require payment of a $5 fee for each home visit.

Neither of the House proposals make such large changes to the copayments or deductibles. This issue is expected to be one of the major areas of controversy, since President Clinton last year vetoed another Medicare reform proposal which he said asked too much of seniors.

Provider Payments

All three proposals would limit payments to hospitals. Under both House plans, current reimbursement rates would be frozen for one year. Under the Senate plan, hospitals would receive an increase this year, but of less than 1%. Future reimbursement increases would be controlled tightly, with limited inflation protection, under all three plans.

Each of the plans calls for changes to reimbursement schedules which currently provide for different treatment of specialists and generalists. In addition, the House Ways and Means Committee has handed physicians their most important victory by including a provision limiting pain and suffering damages in medical malpractice lawsuits to $250,000.

Managed Care

Under all three proposals, the emphasis on managed care can be expected to increase. The current drive to enroll seniors in Health Maintenance Organizations would be expanded by all the plans to include Preferred Provider Organizations and point-of-service plans. In addition, all three would allow hospitals and physicians to establish their own health care plans. Most observers agree that the approach favored by all three proposals would radically alter the medical landscape in the coming years.

Another issue addressed by all three plans: the current disparities among managed care plans based on geography. Under present rules, higher-cost urban health care results in significant differences in HMO reimbursement rates. The result is that fewer HMOs seek to serve rural areas, and less competition means fewer choices and lower benefits for rural seniors.

All three proposals seek to redress these differences, with the Senate version going the furthest. Even the House Commerce proposal would increase payments to rural plans, with the House Ways and Means proposal falling between the other two plans.

Congress is expected to make final decisions soon. Summer recess is scheduled to begin in August, and Congress will not want to go home without resolving these issues.

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