Higher Medicare payments for hospitals and doctors will take a step toward becoming reality if the Republicans' Medicare prescription-drug bill passes the U.S. House as expected this week.
Even though the GOP drug plan is anticipated to be dead on arrival in the Senate, providers are confident that their giveback provisions in the bill will be approved by the Senate this fall and made into law.The drug benefit and Medicare modernization legislation that passed the House Ways and Means, and Energy and Commerce committees last week, by largely party line votes, includes provisions that would increase hospital Medicare payments by about $14 billion and physician payments by $11 billion over the next 10 years.
The projected gain to hospitals was revised by the Congressional Budget Office, which earlier estimated it to be around $9 billion.
The most controversial piece is a $310 billion drug benefit for Medicare beneficiaries. For premiums of about $35 per month, the benefit would pay 80% of the first $1,000 spent annually on prescriptions after a $250 deductible, and 50% of the second $1,000. However, assistance stops after a beneficiary spends $2,000, unless the total surpasses $3,800, when full catastrophic coverage kicks in.
House Democrats criticized the Republican plan because of this coverage gap, or "doughnut hole," and because it relies on commercial insurance companies to offer drug plans to beneficiaries. "I guess we ought to start calling it the private doughnut bill," said Rep. Pete Stark (D-Calif.).
House Republican leaders will reconcile minor differences between the bills passed in each committee and plan to bring a version to the House floor this week.
Senate Majority Leader Thomas Daschle (D-S.D.) said last week that he would bring a drug bill to the floor of the Senate in July.
However, the House bill "has no chance" of passing the Senate and it is unlikely that any drug legislation will be approved by the tightly divided Senate this year, said Frederick Graefe, a healthcare lobbyist with Hunton & Williams in Washington.
But passage of the House bill is important for provider groups because they expect that the Senate will pass provider Medicare payment legislation in the fall, and the House bill will set the standard.
"(The House bill) provides a set of railroad tracks regarding Medicare payment issues upon which a legislative package could travel to enactment this fall," said Chip Kahn, president of the Federation of American Hospitals.
Graefe predicted that the House bill will be "the high water mark" for hospitals and doctors, with the exception of rural providers who might get more generous treatment from the Senate.
Hospitals enjoyed a reversal of fortune in the House thanks largely to aggressive lobbying last month. Early drafts of the Republicans' bill called for hospital payments to be cut by about $18 billion, according to CBO estimates.
But the American Hospital Association struck a deal with Rep. William Thomas (R-Calif.), chair of the Ways and Means Committee, that will result in a $14 billion windfall for hospitals.
After saying in early May that "all indications are that hospitals are doing fairly well," Thomas told reporters last week that payment inequities for small urban hospitals need to be corrected and rural hospitals should get more support.
"When you are trying to build a real bill you engage in negotiations and compromises, that is what occurred with the hospital associations," Thomas said.
In addition to giving hospitals a higher inflation factor in 2003 than current law would have provided, the bill reduces a scheduled cut in indirect medical education payments over the next two years and removes differences in payments to hospitals based on size and whether they are urban or rural.
Hospital associations oppose a provision intended to streamline the adoption of new inpatient technology, which would let device manufacturers set prices for some items.
Hospital groups argue new technology is adopted adequately under the current prospective payment system, and letting manufacturers set prices would violate the Medicare payment system that is intended to reward hospitals for managing their per-case costs.