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Senate to Take Up Baucus Medicare Bill; Grassley Prepares Alternative

By Drew Armstrong, CQ Staff

June 6, 2008 – 8:25 p.m.-- Democrats will likely bring their long-awaited Medicare bill to the Senate floor this week, but observers of previous dramas involving physician payment legislation are predicting a familiar dance of veto threats and eventual compromise with Republicans and the White House.

Finance Chairman Max Baucus, D-Mont., introduced the bill (S3101) June 6. It would replace a 10.6 percent cut to Medicare's physician payment rates scheduled to begin July 1 with an 18-month "patch" that would give doctors a 1.1 percent pay raise instead. The patch would be paid for mostly with cuts to privately run Medicare plans—cuts that President Bush has adamantly opposed.

The bill is likely to come to the Senate floor in the middle of the week. Majority Leader Harry Reid, D-Nev., and Baucus have agreed to bypass committee action.

"I intend to work on the Senate floor with anyone who wants to strengthen Medicare's service to seniors, keep its costs in line, and get a good bill passed into law," Baucus said in a statement June 6.

The Finance panel's ranking Republican, Charles E. Grassley of Iowa, plans to release his own bill on Monday, said a spokeswoman. While many of its provisions are said to be almost identical to those in the Baucus legislation, Grassley says his bill will contain offsets—focused on a narrow part of those private-sector plans—that will win the approval of the White House.

For those who have watched a similar process unfold year after year since Medicare's cost containment formulas (PL 105-33) first demanded cuts in 2002, the sparring between Baucus and Grassley has the look of a drama in which the audience already knows the ending.

"Baucus has to try to get cloture and fail before his leadership and members allow him to go negotiate a narrower, more stripped-down bill with Grassley and the White House," predicts a House GOP aide. "I predict the endgame will be a narrow, stripped-down package that includes an 18-month doc fix."

Jennifer Bell, a lobbyist with Alston & Bird and formerly a Grassley aide, agreed.

"Baucus needs Grassley and Grassley needs Baucus," said Bell, who is lobbying on the bill. "They've done what they need to do with their caucuses, and now they'll come back together and wrangle with the White House, mostly over offsets."

That process will likely create a narrower package, Grassley predicted after hearing about Baucus' bill.

That also means that the administration will likely get its way in shrinking the Baucus offsets to private-sector Medicare plans.

"The administration has concluded it can take up the gauntlet and win on everything they really care about. And it looks like they're going to," Bell said.

Likely Cuts
The Democratic bill would cost about $20 billion over five years, Baucus said, and the offsets will come almost entirely from the Medicare Advantage program, in which private insurers provide benefits in place of government-run Medicare. His proposal would cut funding to Medicare Advantage programs that get extra funds because they are in areas with teaching hospitals—so-called Indirect Medical Education payments. It would also limit the private plans' ability to use a process called "deeming," through which health care providers not explicitly enrolled in the plans could be forced to participate whenever a patient covered by the plans visited them.

Another cut comes from Medicare's oxygen benefit, which pays for seniors to have oxygen tanks that help them breathe. Many Democrats believe oxygen providers are overpaid.

Also included are changes to make sure pharmacies are paid promptly by Medicare and restrictions on how private Medicare plans market themselves to seniors.

Many Democrats have pushed hard for Medicare Advantage cuts, arguing that the private plans are overpaid and damaging to traditional Medicare. Many Republicans, however, believe that private-sector competition will eventually reduce costs.

In a May 22 letter to lawmakers, Health and Human Services Secretary Michael O. Leavitt said Bush would veto any Medicare bill that cuts payments to Medicare Advantage plans.

Despite that threat, many outside observers believe some Medicare Advantage cuts are inevitable in a final package, most likely starting with trims to those Indirect Medical Education funds. The cuts in Grassley's bill are widely expected to come from those payments, which were included as an offset in Bush's fiscal 2009 budget.

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