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April 30, 2007

Washington Health Policy Week in Review Archive 7a05b20f-ea51-4136-831f-0a4ffa3d8ce6

Newsletter Article


Grapevine: People on the Move

By CQ Staff

James R. Tallon Jr., has been named chairman of The Commonwealth Fund. Tallon served as a director of the Fund since 1996 and is a member of its Executive and Finance Committee.

Tallon will take office on Nov. 14, 2007, succeeding Samuel O. Thier, M.D., who chaired The Commonwealth Fund since 2002.

"Mr. Tallon has a deep commitment to helping drive the nation toward a high performance health system," said Karen Davis, president of The Commonwealth Fund, in a statement. "Throughout his career he has worked especially hard on behalf of those who are most vulnerable—the uninsured, low-income Americans, racial and ethnic minorities, children, and frail elders. His leadership will be a great asset to the Fund."

Tallon joined the Fund from The United Hospital Fund of New York, where he served as president. Nationally recognized for his leadership in health care policy, Tallon served for eight years as chairman of the Health Committee during his 19-year tenure in the New York State Assembly.

Tallon also headed Gov. Eliot Spitzer's, D-N.Y., Health Care Policy Advisory Committee during the gubernatorial transition period in 2006.

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Kennedy, Dingell Offer Universal Coverage Bill

By CQ Staff

April 25, 2007 -- Sen. Edward M. Kennedy, D-Mass., and Rep. John D. Dingell, D-Mich., announced Wednesday the introduction of a bill that would cover all Americans by opening up the Medicare program to Americans under age 65.

Under the "Medicare for All" plan, Americans could either keep their current coverage, enroll in Medicare, or join any of the plans offered through the Federal Employees Health Benefits Program, the lawmakers said at a midday press briefing. The costs of private coverage would be shifted from businesses and individuals to the federal government, adding $600 billion a year to federal spending. According to Kennedy and Dingell, that cost would be fully covered by payroll taxes and general revenues and would not add to the federal deficit.

Employers and employees would pay sharply higher payroll taxes to fund the plan. "A preliminary estimate of the payroll tax financing necessary will be a payment of 7 percent of payroll by businesses and 1.7 percent by workers," said a summary of the proposal released by Kennedy's office.

The lawmakers estimated that the administrative efficiencies achieved through their plan would save $308 billion a year. "The best plan for the nation is to build on a program that all Americans know and respect by creating Medicare for all," Kennedy said.

"Not only will covering all Americans improve millions of lives, it will actually save money by reducing emergency room costs and increasing access to preventive services and earlier treatments," Dingell added.

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Latest Projections Show a Brief Reprieve for Social Security, Medicare

By Martha Angle, CQ Staff

April 23, 2007 – Trustees for Social Security and Medicare issued their annual report this afternoon, providing the latest assessment of the looming financial crunch for the two giant entitlement programs.

The new report shows both trust funds in slightly better shape than last year's projections, but the long-term picture remains gloomy. The White House and congressional Republicans jumped on the report to demand that the Democratic majority in Congress begin addressing the strain on the entitlement programs. Democrats remained mum in the immediate aftermath of the report.

Medicare's trust fund for hospital coverage now is likely to be exhausted by 2019, one year later than the estimate a year ago.

The trustees projected that Social Security's trust funds—from which retirement and disability benefits are distributed—will be exhausted in 2041, also a year later than projected in 2006.

For a second year in a row, the trustees said that Medicare is projected to draw more than 45 percent of its funding from the government's general revenues within a seven-year period covering 2007–13. (The rest of the program's funding comes from payroll taxes and monthly premiums paid by beneficiaries.)

Under a provision of the 2003 Medicare prescription drug law (PL 108-173), that warning from the trustees will trigger a cascade of legislation and debate. But it does not force Congress to act.

Within 15 days of the time President Bush submits his fiscal 2009 budget to Congress next February, he will be required to propose legislation to cut Medicare spending. Congressional leaders would have to introduce bills reflecting Bush's proposal, and to consider them on an expedited basis.
But Democratic leaders are unlikely to advance any measures that would drastically reduce Medicare's benefits, or its payments to health care providers.

Pressure for Action
In a message accompanying their new assessment, the six trustees, led by Treasury Secretary Henry M. Paulson Jr., said, "We are increasingly concerned about inaction on the financial challenges facing the Social Security and Medicare programs. The longer we wait to address these challenges, the more limited will be the options available, the greater will be the required adjustments, and the more severe the potential detrimental economic impact on our nation."

Rob Portman, director of the Office of Management and Budget, echoed that warning in a statement Monday afternoon.

"We know that sensible reforms now that slow the rate of growth even slightly will generate substantial future savings that can save these important programs," he said. "It is disappointing that the new congressional majority chose to completely ignore entitlements in their recently passed 2008 budget proposals."

Senate Minority Leader Mitch McConnell, R-Ky., also said the latest report pointed to the need for action to shore up the troubled retirement programs, though he struck a slightly less partisan tone.

"As I said on the first day of this Congress, divided government provides a unique opportunity to address big issues facing the nation," McConnell said. "The report released by the trustees on Social Security and Medicare only underscores the critical need for Congress to set aside poll-tested politicking and address big problems like the massive entitlement crisis that will fall on tomorrow's seniors, today's children, and all taxpayers."

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Medicare Drug Costs May be Heading for Faster Growth

By John Reichard, CQ HealthBeat Editor

April 24, 2007 – Brightening the gloomy details of this week's Medicare Trustees' report was a bit of good news: Medicare prescription drug spending is well below projections and in-patient hospitalizations dipped sharply in 2006. But leading Medicare analysts at a Tuesday post-mortem on the report forecasted those trends may not endure.

Medicare Actuary Richard Foster told the forum, sponsored by the American Enterprise Institute (AEI), that drug spending appears to be returning to double-digit growth rates. And the reason for the drop in hospitalizations is unclear, Foster said in an interview following the event.

Overall, analysts at the forum voiced little confidence that the warning delivered by the report—that general revenues as a proportion of the overall funding of the program will climb to 45 percent in 2013—swill shock lawmakers into making changes next year to address Medicare's fiscal woes.

Growth rates for prescription drug spending used to project Medicare prescription drug spending dove down into the single digits in 2004–2006, said Foster. He also noted that the value of bids by plans to offer the Medicare drug benefit fell 10 percent between 2006 and 2007, "which is pretty phenomenal," he said.

But Foster predicted that the growth rate for prescription drug spending used to calculate projections of the cost of the Medicare drug benefit will rise to 12.6 percent per year over the next decade. And the downward trend in premiums charged by Medicare drug plans may not endure, he suggested.

Average premiums charged in 2007 fell because many of the drug plans charging monthly premiums above $32 realized they had to charge less to compete with the plans attracting the lion's share of enrollees, Foster said. Plans that charged lower premiums were able to do so through heavy reliance on low-cost generic drugs, but plans may not be able to squeeze even more savings from generics in the future, he added.

Health and Human Services Secretary Michael O. Leavitt suggested in remarks this week that the 5 percent decline in 2006 of in-patient hospital admissions may have resulted from the start of the Medicare prescription drug benefit—that the wider use of drugs kept medical conditions under better control and thereby lessened the need for hospital care.

Foster said Tuesday the decline—680,000 fewer hospital admissions in 2006 compared with 2005—was unusually large. But he expressed skepticism that prescription drug use grew enough in the Medicare population to account for the drop, saying many Medicare beneficiaries already had drug coverage.

Foster also noted that monthly Part B premiums for doctor and other forms of non-inpatient care are going up, projecting an increase from $93.50 this year to $100.50 next year if Congress keeps payments flat in 2008 compared with 2007.

Former Congressional Budget Office Director Robert Reischauer expressed hope Tuesday that Democrats and Republicans would forgo the usual election year partisanship in 2008 with respect to Medicare and agree on changes ranging from spending cuts to tax increases to beginning to tackle the growing fiscal imbalance in the program.

"What we need is an environment in which both parties hold hands and share responsibility," he said. But other speakers, including AEI analyst Joseph Antos, voiced little confidence that Congress would either act on the package of financing revisions the White House must propose early next year under provisions of the Medicare overhaul law (PL 108-173) or that lawmakers would develop a package of their own.

Under that law, the White House must propose a plan and Congress must consider it the second time the Trustees forecast that general revenues will reach the 45 percent threshold within a seven-year forecasting window. That second forecast occurred in the report released Monday.

Former Clinton health policy aide Jeanne Lambrew said she differed with Reischauer, calling it unlikely in an election that a White House controlled by a Republican would agree with a Congress controlled by Democrats on legislation addressing Medicare financing.

Reicschauer offered a wry protest, saying, "No one outdoes me for pessimism, but I was trying to offer some hope here."

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Rockefeller, Snowe Unveil SCHIP Measure

By Mary Agnes Carey and Alex Wayne, CQ Staff

April 26, 2007 -- A bipartisan group of senators Thursday introduced legislation to reauthorize and expand the State Children's Health Insurance Program (SCHIP) to cover an additional six million children over the next decade.

The bill (S 1224), would allow states to provide coverage to children with family incomes at or below 300 percent of the federal poverty level—up from the current 200 percent—as well as to pregnant women and legal immigrant children.

At a news conference Thursday, Sen. John D. Rockefeller IV, D-W.Va., said the bill would add up to $50 billion to the program over the next five years. He said he and cosponsor Sen. Olympia J. Snowe, R-Maine, had met with Finance Committee Chairman Max Baucus, D-Mont., to discuss the measure, which Rockefeller said would "in essence" be the Finance SCHIP bill.

"On our side, it's considered the first priority bill to pass," Rockefeller said, adding that a markup could be scheduled as early as May.

A Baucus aide said Thursday that "the committee will consider a Chairman's mark—including input from Sen. Rockefeller's legislation and from others—in late spring."

The program, created in 1997 and up for reauthorization this year, has been hailed for its success, but analysts say more must be done—through expansions and efforts to build greater public awareness—to cover the more than 9 million children who are currently uninsured. Financing such an expansion could prove difficult since Democrats have pledged to follow pay-as-you-go, or PAYGO rules, which require that spending be offset by spending cuts or tax increases.

Rockefeller and Snowe said that an increase in the federal cigarette tax or a reduction in Medicare Advantage payments could help pay for the bill. "Give me a chance to get my hands on some of that Medicare Advantage money, and I'll be there in a shot," Rockefeller said. "I think there are a lot of places we can go for money. This is a priority." Other Democrats as well have expressed an interest in reducing Medicare Advantage payments to fund other health care priorities.

Under the Rockefeller-Snowe measure, SCHIP funding formulas would be revised to account for factors such as rising health care costs, population growth, and an individual state's uninsured population, with the hope of avoiding annual shortfalls that many states experience. States would have two years to use their annual allotments or the money would be reinvested in the program.

To help speed SCHIP and Medicaid enrollment, states could use financial information from other means-tested programs, such as the federal food stamp program or school lunch programs to see if children are financially eligible.

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Stark Plans July Bill to Cut Medicare Advantage Payments

By Alex Wayne, CQ Staff

April 25, 2007 -- The chairman of a powerful House subcommittee said Wednesday that he plans to introduce legislation by July to cut spending on Medicare to free money to avert a large reduction in the program's reimbursements to doctors and increase benefits for seniors.

Democrat Pete Stark of California, the chairman of the Ways and Means Subcommittee on Health, clarified that he plans to find some of the savings he needs in Medicare Advantage (MA), a program that pays private insurance plans to provide health insurance coverage to seniors instead of traditional Medicare.

In recent weeks, at least three independent, nonpartisan agencies—the Medicare Payment Advisory Commission, the Congressional Budget Office (CBO), and Medicare's own actuaries—have reported that the government pays private plans an average of 12 percent more, per beneficiary, than it costs to cover people in traditional Medicare.

Medicare's chief actuary, Richard S. Foster, told Stark's subcommittee Wednesday that if payments to the private plans equaled costs in traditional Medicare, the system's financial condition would be improved and beneficiaries would pay less. Medicare's hospital insurance trust fund, he said, would remain solvent for an additional two years, and beneficiaries would pay about $2 less per month for premiums.

Medicare's trustees reported Monday that the trust fund is projected to be exhausted by about 2019. The base premium this year for Medicare's supplemental insurance, or Part B—which most seniors obtain—is $93.50 per month.

"I think it would be irresponsible for me not to at least take a look" at cutting spending on Medicare Advantage, Stark said after Foster's testimony. According to the CBO, making payments to Medicare Advantage plans even with the costs of traditional Medicare would yield about $54 billion over five years.

Stark said he would use any savings he can find to reduce or avert a scheduled 10 percent cut in 2008 in the rate Medicare reimburses doctors, and to enhance benefits for seniors. He said he'd like to provide them more preventive care and give low-income seniors more help with deductibles and premiums. If any money remained, that could be used for a planned $50 billion, five-year expansion of the government's Children's Health Insurance Program.

House Speaker Nancy Pelosi, D-Calif., indicated Monday that she favors reducing payments to Medicare Advantage plans. Stark said he does not support eliminating Medicare Advantage altogether; some of the plans, he noted, are paid less per beneficiary than it costs Medicare to cover people.

Insurers and President Bush are sure to oppose any cuts to Medicare Advantage, which they say is increasingly popular with seniors. And Senate Finance Chairman Max Baucus, D-Mont., who would control any Medicare bill in his chamber, has not indicated similar zeal to cut the program.

The Blue Cross and Blue Shield Association released a study Wednesday that found that reducing government payments to Medicare Advantage plans could cause more than three million people—roughly one-third of all beneficiaries enrolled in the plans—to lose their private coverage and be forced back into traditional Medicare.

According to the study, beneficiaries in Ohio and Pennsylvania would be hardest hit, with approximately 196,000 people in each state losing coverage. Michigan and Texas also would face large reductions, with 180,000 and 173,000 beneficiaries, respectively, losing their private coverage. "Congress should not take any action that would jeopardize care for the millions of people who are overwhelmingly satisfied with their Medicare Advantage coverage," said Scott P. Serota, president and chief executive officer of Blue Cross and Blue Shield.

Mary Agnes Carey contributed to this story.

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