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 August 6, 2003 HOUSE AND
SENATE MEDICARE PRESCRIPTION DRUG BILLS INCLUDE OTHER RETIREE HEALTH PROPOSALS
Since both Houses of Congress passed their versions of the Medicare Prescription
Drug and Modernization Act of 2003 (H.R.1 and S.1)* in July, the provisions that
have attracted the most attention are the proposals for a new Medicare prescription
drug benefit. The bills include numerous other proposals that would affect retiree
health coverage. Those proposals are the focus of this Capital Checkup. Click on one
of the following headings to go directly to the relevant text: Separate issues of Capital Checkup discuss the House and Senate bills'
proposals
for prescription drug coverage under Medicare and the bills'
proposals
for improving access to more affordable prescription drugs for health plan
participants of all ages, as well as the House's proposals for new personal health savings
accounts. Renaming and Restructuring the Medicare Part C Program The bills would rename the Medicare Part C program (which is currently referred to as
Medicare+Choice) as "Medicare Advantage," and restructure it, in somewhat different ways
under each bill. Both bills would also make structural changes at the Department of Health
and Human Services. They would create a new office that would be responsible for overseeing
the prescription drug plans and Medicare managed care contracting. The House bill would also
create a Medicare Enhanced Fee-for-Service (EFFS) program that would encourage the provision
of expanded Medicare benefits through private sector fee-for-service plans or preferred provider
organizations (PPOs). The House bill provides for competitive bidding among Medicare Advantage
plans and EFFS plans, as well as for a variety of other Medicare services. Both the Senate and
House bills would extend reasonable cost contracts, but for different time periods. One of the most controversial parts of the House bill is a provision that would permit
competitive bidding between the core Medicare program and private-sector Medicare Advantage
and EFFS plans, starting in 2010. Beneficiaries selecting a plan that exceeds a competitive
"benchmark" would pay additional premiums. Viewing this as a major step toward privatization
of Medicare, critics of the approach warn that this would result in adverse selection, with
beneficiaries who are in traditional Medicare paying a higher premium than beneficiaries would
in a managed care plan. New Part A and B Coverage Both bills would also change Medicare Parts A and B. For example, under the House bill Part B
would cover an initial preventive physical examination and cholesterol and blood lipid screening
tests. The Senate bill would cover cardiovascular screening tests, vision rehabilitation services,
certain marriage and family therapy and mental health counseling, and kidney disease education services.
It would also expand coverage of routine costs associated with certain clinical trials, and create
new coordinated health care programs to assist seniors with disease management. Medicare Secondary Payer Modifications The bills would amend the Medicare Secondary Payer statute to clarify that actions to recover
Medicare overpayments may be brought against any responsible party, including insurers, workers'
compensation and liability carriers, third party administrators, employers or group health plans.
Double damages would also be available. Erie County Corrections The Senate bill would legislatively reverse the Third Circuit U.S. Court of Appeals' controversial
2000 decision in Erie Country Retirees Ass'n. v. County of Erie, Pa. (220 F. 3d 193 (3d Cir. 2000)).
There the court had held that it was a violation of the Age Discrimination in Employment Act (ADEA)
for the employer to provide richer health coverage for early retirees than for those over age 65. The
Senate bill would amend the ADEA to make it clear that it is not illegal to provide differential retiree
health coverage for early retirees and those enrolled in Medicare, or even to provide no health coverage
for the over-65 group. On July 11, 2003, the Equal Employment Opportunity Commission (EEOC) released a proposed regulation
that would allow sponsors of group health plans to provide different or less health coverage to
Medicare-eligible retirees than the coverage provided to younger retirees, without violating the Age
Discrimination in Employment Act (ADEA). (This proposed regulation is discussed in the
July 14, 2003
issue of Capital Checkup.) Implications of the Proposals for Sponsors of Group Health Plans that Cover Retirees If the proposals discussed in this Capital Checkup become law, they will have a significant impact on
employer-paid health plans that cover retirees. However, since both the fact and the shape of a final bill
are still uncertain, it is premature to consider detailed changes in the design of retiree health plans in
anticipation of the legislation. When and if a Medicare prescription drug program is enacted, plan sponsors
will want to review the details carefully to determine how it will affect their retirees and their benefit
programs. Outlook A House-Senate Conference Committee is now working on harmonizing the two measures, an effort that is
expected to take several months. The outlook for enactment of prescription drug legislation is less
certain than it originally appeared. Among the controversial issues that must be decided are two of the
proposals discussed in this Capital Checkup: If Congress passes the bill that eventually emerges from the Conference Committee,
President Bush has announced his intention to sign it into law. The Segal Company
will report on significant developments regarding this legislation. |
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