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Delay in Doctor Payment Cuts Likely to Be Centerpiece of Medicare Measure

By Drew Armstrong, CQ Staff

January 16, 2008 -- House and Senate aides are optimistic that they can craft a far-reaching package of Medicare changes this spring, after leaving many wants and needs on the cutting room floor in December.

The legislation's centerpiece, they said, will probably be an 18-month-long halt to a 10.6 percent cut to Medicare's physician payment rates now scheduled for July 1, according to a Democratic Senate Finance Committee aide.

The legislative action is expected to be driven by the Senate, which also passed a six-month patch to the scheduled physician payment cuts in December. The cuts are mandated by Medicare cost-containment formulas, and Congress has delayed them several times since 2002, when they were first called for. Lawmakers believe that continuing to delay the cuts in physician payments is vital because doctors may stop seeing Medicare patients if the cuts go through.

"We're really hopeful and optimistic that they can get something done," said a House Democratic aide, referring to the Senate. "If they can't—which we'll know by late spring—then we have to figure out what the backup plan is."

According to the Senate Finance aide, such a package would cost between $12 billion and $15 billion over five years.

The proposed Medicare changes were discussed Wednesday morning at a forum on 2008 health care legislation at the Four Seasons Hotel in Georgetown, hosted by the Stanford Group Company, a financial services firm.

With a longer-term patch over the cuts, "we can start getting prepared for much bigger things in 2009," the Finance aide said, referring to Democrats' desires to enact broader health reforms if they win the presidential election.

The Bush administration appears to be on board, at least with the general concept of a longer-term patch. "You cannot go on patching this on a six-month-by-six-month basis," said Health and Human Services Secretary Michael O. Leavitt on Wednesday. "We have to solve this. . . . I expect that will occupy a substantial part of my spring," he said.

But Democrats contend that the White House is part of the reason why there was no longer-term package last December.

Finance Chairman Max Baucus, D-Mont., and Rep. Pete Stark, D-Calif., had lofty goals for a two-year package of Medicare changes, including a delay in the doctor payment cuts, but the White House threatened to veto most of the proposals. The six-month Medicare package that emerged in December was designed to give Democrats another bite at the apple this spring.

The Finance Committee is expected to move quickly in the opening weeks of the new session to hold hearings and a markup.

Election-year politics could intrude, but the Finance aide appeared undaunted. "We're running an anti-conventional-wisdom campaign this year," said the aide. "Certainly the conventional wisdom would be that you don't get much done in an election year."

There is also the question of where lawmakers will find the billions of dollars for the package. "You need a fair amount of offsets to pay for it," said the Finance aide. "Definitely the intention would be to abide by PAYGO," the aide added, referring to the need to offset new spending.

Republicans and the White House would probably oppose one option for those offsets: cuts to private Medicare plans, known as Medicare Advantage. Democrats have longed to reduce payments to the plans, which they see as receiving overly generous subsidies. So far they have been stymied by the White House and a strong lobbying effort by private health insurers.

A Republican aide to Senate Finance reiterated that position. "We can't do wholesale cuts in [Medicare Advantage]. We want something that can be signed into law and we know the President will veto anything that makes wholesale cuts," the GOP aide said in an e-mail message.

But more targeted cuts to the private plans could be possible, the aide said. Reductions in bonus payments to hospitals with teaching programs might be one possibility for cuts, said the GOP aide, as could be so-called private fee-for-service plans, which are more expensive than other types of plans in the program.

Democrats might also push for new restrictions on how the private plans are marketed to seniors. There have been complaints that private insurers and agents have pushed too aggressively for seniors to sign up for the plans.

Baucus "wants to address those issues legislatively," said the Democratic Finance Committee aide, of the marketing issues. Such a proposal would likely generate some savings. The Democratic aide also suggested that Medicare payments to providers of oxygen services—such as breathing assistance and oxygen tanks for use at home by patients—might be cut.

Mary Agnes Carey contributed to this story.

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