Dampening the prospects for passage of prescription drug legislation this year, government officials told the Senate Finance Committee last week that such a plan would raise Medicare's annual costs from 7.2% to 10%, or from $17.5 billion to $24 billion in 1999.
The report was just one of many developments last week on key healthcare issues before Congress.
The same committee passed a bill calling for a three-year demonstration project that would allow Medicare to reimburse the Department of Veterans Affairs for treating Medicare-eligible veterans not entitled to VA care.
That program would be financed by trimming Medicare's reimbursement to hospitals for beneficiaries' unpaid co-insurance, which would cost hospitals $170 million over three years.
Hospital lobbyists were trying to eliminate the bad-debt cuts before the measure moves to the full Senate.
"We're talking about putting money back into Medicare, and what's the first thing they do out of the box but cut Medicare?" said Thomas Scully, president and chief executive officer at the Federation of American Health Systems, which represents for-profit hospitals.
On the prescription drug benefit, witnesses from the General Accounting Office and the National Academy of Social Insurance warned the Finance Committee that Congress needs to consider likely cost increases if it designs a new Medicare benefit package that includes outpatient prescription drugs.
They said those costs could be controlled by using such measures as pharmacy benefit managers or "best price" drug discounts, as drugmakers are now required to give to state Medicaid programs.
But Sen. Orrin Hatch (R-Utah) warned that cost-control mechanisms could deny pharmaceutical companies the revenues they need to research new drugs. He called such mechanisms "price controls."
Other committee members warned that adding prescription drug benefits could be prohibitively expensive.
Sen. John Breaux (D-La.), who as chairman of the National Bipartisan Commission on the Future of Medicare wrote a reform proposal that included coverage of prescription drugs for Medicare beneficiaries, urged the committee not to pass a prescription drug benefit without other reforms that can control costs.
Those warnings came as the White House appeared to be putting the finishing touches on President Clinton's Medicare reform plan, of which a prescription drug benefit will be the centerpiece. White House officials briefed Capitol Hill aides late last week.
Clinton last week called on Congress to move on Medicare reform and other healthcare measures, such as patient-protection legislation, that he called for in his State of the Union address (See story, this page).
House Speaker J. Dennis Hastert (R-Ill.) said he is open to the White House proposal but criticized Clinton for not supporting Breaux's plan.
In other healthcare developments last week:
* Senate Democrats, by threatening a filibuster, blocked action on a bill that would allocate exclusively for Medicare and Social Security reform any surpluses from Social Security tax collections. The Senate came five votes short of the 60 necessary to stop debate on the "lockbox" measure, which passed the House 416-12 in May.
* And a draft GAO report said Medicare overpaid HMOs $1.3 billion in 1998 because of a forecasting error. The GAO report said the overpayments will escalate as enrollment in Medicare HMOs increases. The overpayment results from HCFA's overestimation of 1997 fee-for-service costs, which were used as the baseline for 1998 payment rates, the GAO said.