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House Dems Say SCHIP Plan Would Cover Five Million More Uninsured Children

By Mary Agnes Carey and John Reichard

July 24 -- House Democrats Tuesday evening unveiled a $90 billion legislative package they plan to mark up later this week that would expand a children's health program by cutting Medicare payments to private insurers and raising tobacco taxes, including a 45-cent-a-pack increase in the federal tax on cigarettes.

The proposal also heads off scheduled Medicare payment cuts to doctors totaling 10 percent in 2008 and 5 percent in 2009, replacing them with 0.5 percent increases in each of the two years, and shaves payments compared to current law to home health agencies, skilled nursing facilities, inpatient rehabilitation facilities, and long-term acute care hospitals, in a package of Medicare reductions that includes almost $50 billion in cuts to private plans.

The House Energy and Commerce committee will begin its consideration of the package Wednesday afternoon, with the Ways and Means Committee following at 1 p.m. on Thursday. Republicans said the measure was too large and would not become law. Rep. Joe L. Barton of Texas, the ranking Republican on the Energy and Commerce, was preparing an alternative to the Democrats' bill.

Among its provisions, the House Democrats' measure would increase Medicare benefits for preventive care and mental health care, raise the value of assets low-income seniors can have and still qualify for the relatively generous Medicare drug benefit for poor seniors, and cover more out-of-pocket Medicare costs for poorer elderly Americans. House Ways and Means Health Subcommittee Chairman Pete Stark, D-Calif., described the package as almost complete in an early evening telephone press briefing, issuing the caveat that the sponsors hadn't yet heard final numbers from the Congressional Budget Office confirming his assumption the tax would raise about $27 billion. Stark asserted that the estimate was unlikely to change much when CBO finally weighed in.

To soften the blow of the Medicare reductions, Democrats resorted to phrasing employed by Republicans when they were in control of Congress, instructing reporters not to use the term "cuts," and emphasizing that savings under the package from payments to home health, skilled nursing and rehabilitation providers were consistent with the recommendations of the Medicare Payment Advisory Commission (MedPAC), which advises Congress and the Medicare program on payment levels. Energy and Commerce Committee Chairman John D. Dingell, D-Mich., declared that "these are not cuts to HMOs. These are quite frankly reductions in completely unjustified overpayments" to HMOs. Earlier in the day, Republicans likewise dropped their old phrasing, accusing Democrats of planning to fund the package using "massive cuts" in Medicare.

Among its provisions, the measure aims to equalize payments between Medicare Advantage plans and Medicare's traditional fee-for-service program by 2011, reducing federal reimbursements to those plans by nearly $50 billion over the next five years. While there is no change planned for 2008, beginning in 2009, payment benchmarks will be a blend of two-thirds of the current private plan payment system and one-third of rates paid in traditional Medicare. In 2010, the blend moves to one-third current system payments and two-thirds traditional rates, with payments equalized in 2011. Plans that failed to bid below the phased down benchmarks would not be allowed to enroll new members in that year.

The House package also would repeal a stabilization fund created by the 2003 Medicare overhaul law (PL 108-173) to entice preferred provider organizations, or PPOs, to offer coverage in underserved regions.

Democrats estimated the cost of heading off payment cuts to doctors in 2008 and 2009 at around $20 billion. They also said the provisions were written in a way that would not drive up the monthly premiums seniors pay Medicare for treatment outside the hospital, which typically are deducted from Social Security checks. The proposal replaces the current system that sets a single spending target for all Medicare outlays for physician care with one that carves up outlays into six separate pools with spending targets for each.

The change is meant to increase incentives for doctors not to overprescribe tests, visits, and procedures, in that outlays surpassing the applicable spending target must be recovered in subsequent years in the form of payment reductions. The pools include outlays for primary and preventive care, which are allowed to grow faster than other types of spending to increase that type of treatment; other evaluation and management services; anesthesia; imaging; major procedures; and minor procedures.

The provisions governing physician payment also create a mechanism to give doctors feedback on how the level of treatment resources they prescribe compares to that of their peers for the same type of patient. And they provide for a pilot program in which doctors get paid to provide a "medical home" to coordinate the often complex care received by the elderly.

Provisions reauthorizing the State Children's Health Insurance Program would cover some $2 million more uninsured children than would the $35 billion SCHIP expansion package approved last week by the Senate Finance Committee, Dingell said. The bill maintains current law regarding eligibility for SCHIP, with the exception that states would have the option of covering pregnant women meeting income eligibility criteria, according to a summary of the proposal.

States would have two years to spend the allotment they receive each year. If they ran out of money enrolling eligible children, they would receive payment adjustments. States would receive higher payments if they adopted certain practices meant to increase enrollment, such as 12-month coverage, presumptive eligibility, elimination of in-person interviews, and a single application form covering both SCHIP and Medicaid. The five million gaining coverage would be children enrolling either in SCHIP or Medicaid. The proposal also would allow for coverage of the children of legal immigrants and of qualifying pregnant women who are legal immigrants.

The proposal also would require dental coverage, and coverage of mental health care benefits on a par with benefits for physical health.

In 2008, the bill also would make a one-time series of changes to scheduled payment updates to fee-for-service providers. Skilled nursing facilities, home health agencies, and long-term care hospitals would see a freeze in their payments, while inpatient rehabilitation facilities (IRF) would see a 1 percent update. To quality as an IRF, 60 percent of a facility's patients would have to meet special criteria for the hospital to quality for the more generous reimbursements given to inpatient rehabilitation facilities.

The provider payment changes, a House aide noted, follow payment recommendations from MedPAC and the panel's recommendations also have influenced the package's provisions aimed at controlling the rising use of imaging services. Stark said the measure also would include a "bundled payment" for dialysis facilities to prevent improper dosing of biotech anemic drugs to dialysis patients.

Concerning specialty hospitals, the legislation would repeal the "whole hospital exception" that allows physicians to refer patients to hospitals in which they have ownership. The package would limit to 13 months the period of time in which beneficiaries pay to rent oxygen equipment, after which time they would assume ownership.

The House Democrats' bill also would eliminate a "trigger" provision in the Medicare drug law (PL 108-173) that requires the president to propose legislation on reducing Medicare spending if the program's trustees find for two years in a row that Medicare is projected to draw more than 45 percent of its funding from general government revenues. For the first time in April, Medicare trustees for the first time triggered the funding warning.

The package also would give Medicare the authority to use recommendations of the U.S. Preventative Health Services Task Force to add new preventative benefits without congressional approval. The bill also would eliminate co-insurance and waive the deductible for current preventative benefits covered by Medicare. Over a six year period, co-payments for mental health services would be reduced from the current 50 percent co-payment to the standard 20 percent co-payment for other medical services.

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