House Committees and Senate Consider Legislation to Reform Medicare

House Ways and Means Committee Action

After an eight-hour mark-up ending late Tuesday night, the House Ways and Means Committee approved, 25-15, a bill (H.R. 2473) that would add prescription drug coverage to Medicare. Rep. Earl Pomeroy (D-SD) was the only Democrat to vote for the bill.

As in the bill (S. 1) approved by the Senate Finance Committee on June 12 (see The Source, 6/13/03), the Medicare Prescription Drug and Modernization Act of 2003 would provide Medicare beneficiaries with the option of purchasing private coverage of prescription drugs, either through stand-alone “drug only” insurance plans, through existing health maintenance organizations (HMOs) or through preferred provider organizations. Certain aspects of the bill differ slightly from the Senate bill. Beneficiaries would pay a monthly premium averaging $35, a $250 annual deductible, and 20 percent of the first $2,000 a year in drug costs. After exceeding $2000, beneficiaries would be responsible for 100 percent of costs up to an out-of-pocket cap of an additional $3,500. Those with “catastrophic costs” exceeding the $3,500 cap would have 100 percent of their drug costs covered for the rest of the year.

There are three major differences between the House and Senate proposals: 1) the House bill contains a means test for catastrophic coverage; 2) the House bill would require direct competition between private plans and the traditional Medicare program beginning in 2010; and 3) the House bill does not contain a “fallback” plan for the government to step in to help seniors in geographic areas where at least two private plans do not offer coverage.

Democrats were especially concerned about the lack of coverage for an individual whose drugs costs had reached $2,000, but had not yet exceeded $3,500, and termed this gap the “doughnut hole.” Rep. Pete Stark (D-CA) offered a substitute amendment that would have set beneficiaries’ premiums at $25; eliminated the doughnut hole; limited the annual deductible to $100 a year; and lowered the catastrophic costs level to $2,000. The amendment was defeated, 14-26.

During consideration of the bill, the committee adopted a number of amendments, including:

an amendment by Reps. Jim Nussle (R-IA) and Pomeroy that would increase the Medicare reimbursements for physicians who work in underserved regions and for hospital labor costs. The amendment was adopted, 39-0;
an amendment by Rep. Nancy Johnson (R-CT) that would direct the Secretary of Health and Human Services to expedite payments to community-based specialty physician practices. The amendment was adopted, 32-5; and
an amendment by Rep. Mac Collins (R-GA) that would provide that certain features concerning the negotiation of drug prices and copayments to pharmacies should not be imposed on the new drug plan. The amendment was adopted, 24-12.

The Committee defeated the following amendments:

an amendment by Rep. Jim McDermott (D-WA) that would have removed the competitive bidding provision, under which traditional Medicare and private plans would compete for customers in a bidding process. The amendment was rejected, 14-23;
an amendment by Rep. Ben Cardin (D-MD) that would have ensured that the Medicare program would be able to offer a guaranteed prescription drug plan for a premium of no more than $35 nationwide. The amendment was rejected, 15-23; and
an amendment by Rep. Lloyd Doggett (D-TX) that would have encouraged the manufacturers of prescription drugs to offer prices in the United States similar to those they charge in Canada. The amendment was rejected, 12-23.

Before final approval, the committee adopted, 25-15, a substitute amendment by Chair Bill Thomas (R-CA) that would lower the catastrophic threshold from $3,700 to $3,500; allow state pharmaceutical assistance plan spending to count toward an individual’s out-of-pocket spending in calculating his or her catastrophic benefit; create Medicare ombudsmen to provide assistance to enrollees in presenting more recent income information; require plans to notify beneficiaries when a change has been made in the preferred status of a drug or a change has been made in beneficiary coinsurance; and index the low-income prescription drug subsidy asset test, starting at two times the Social Security Income asset test.

House Commerce Committee Action

After three days of debate, the House Energy and Commerce Committee approved, 29-20, its version of H.R. 2473 on June 19. The bill is nearly identical to the bill passed by the House Ways and Means Committee, although an amendment offered by Chair Billy Tauzin (R-LA), and adopted, 41-5, would remove a provision that requires beneficiaries to pay a copayment of $2 for generic drugs and $5 for brand name drugs. This provision remains in the Ways and Means Committee bill.

Rep. John Dingell (D-MI) offered a substitute amendment that would have set beneficiaries’ premiums at $25; limited the annual deductible to $100 a year; limited out-of-pocket spending by seniors to $2,000; and directed the Secretary of Health and Human Services to negotiate contracts for lower drug prices with drug manufacturers. The amendment was defeated on a party-line vote of 25-27.

During consideration of the bill, Democrats offered many amendments to the legislation, but all were defeated. Rep. Anna Eshoo (D-CA) offered an amendment to substitute many of the major components of the Senate bill for H.R. 2473. The amendment was defeated, 42-9.

The Committee approved the following amendments by voice vote:

an amendment by Rep. Mike Ferguson (R-NJ) that would count seniors’ out-of-pocket spending and state spending towards the catastrophic coverage threshold; and
an amendment by Rep. Edward Whitfield (R-KY) that would provide an additional $230 million for reimbursements to hospitals that treat large numbers of low-income patients.

Senate Action

The Senate began its debate of S. 1 on June 16 and plans to continue through next week. As of Friday morning, the following amendments had been adopted:

an amendment by Sen. Judd Gregg (R-NH) and Sen. Charles Schumer (D-NY) that would bring generic drugs to the market more quickly by making it more difficult for pharmaceutical companies to extend their patents for brand name drugs. The amendment was approved, 94-1;
an amendment by Sen. Michael Enzi (R-WY) that would make it easier for seniors to order their prescription drugs from local pharmacies. The amendment was approved, 95-0; and
an amendment by Sen. Thad Cochran (R-MS) that would allow for the reimportation of drugs into the United States and would require the Secretary of Health and Human Services to certify to Congress that reimporting drugs from Canada would not pose a health risk. The amendment was approved by voice vote.

Final passage of both the House and Senate bills is expected next week, after which a conference will be held to work out the differences between the two bills. On June 20, the Bush Administration released an Office of Management and Budget (OMB) Statement of Administration Policy supporting passage of the Senate bill.