November 2005

Legislative Watch

By George G. Olsen, JD

Three Issues to Watch

Hurricane relief, drug benefits, and Medicare premiums are at the top of Congress' to-do list

Scores of health care issues swirl about the White House and the halls of Congress, but there are three that demand particular attention at this time: efforts by the Bush Administration and Congress to address the medical needs of those dislocated by Hurricane Katrina, the new Medicare drug benefit, which will become effective on January 1, 2006, and the recent announcement by the Centers for Medicare and Medicaid Services (CMS) that Medicare Part A and Part B premiums will be significantly higher in calendar year 2006.

HURRICANE RELIEF
The "extraordinary times" occasioned by Hurricane Katrina have precipitated "extraordinary measures" by both the White House and Congress as they have attempted to address the health care needs of the tens of thousands of people forced to flee their homes in the Gulf States. The complexity and sheer magnitude of the problems have conspired to make solutions difficult to develop. Nevertheless, lawmakers have risen to the challenge.

On September 19, 2005, Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and the ranking member of the Finance Committee, Max Baucus (D-Mont), introduced S 1716, the Emergency Health Care Relief Act of 2005. The bill was placed on the Senate calendar so it could be taken up quickly once there was agreement to proceed. As of this writing, the Senate had not passed the bill and there is no companion measure in the House of Representatives.

S 1716 extends emergency Medicaid benefits to displaced victims of the hurricane. It provides Louisiana, Mississippi, and counties in Alabama that are under a disaster declaration with a 100% federal match on Medicaid funding until the end of 2006. It also furnishes targeted, temporary Disaster Relief Medicaid (DRM) coverage to those people in or evacuees from the hardest hit counties in Louisiana, Mississippi, and Alabama. Coverage would apply to all persons up to 100% of the federal poverty level or up to 200% for pregnant women, children, and the disabled. States that provide medical care through DRM would be reimbursed at a 100% federal share level.

The bill helps individuals who qualify for DRM, but who have private health insurance, to pay their insurance premiums so they can maintain their existing coverage rather than receive Medicaid benefits. In addition, S 1716 provides assistance to qualified employers to help them maintain private health insurance coverage for their employees. A qualified employer is one that operated in the disaster area and that is inoperable as a result of damage sustained by Hurricane Katrina or is not paying salary or benefits to employees as a result of damage caused by the storm. This aid is limited to the days on which the business is inoperable or that salaries or benefits were not paid.

In light of the impending enrollment period for the new Medicare prescription drug benefit, the bill directs the Secretary of Health and Human Services to develop a plan that will ensure the smooth transition of individuals dually eligible for both Medicare and Medicaid to the Part D drug benefit. The Part B late enrollment penalty for Medicare beneficiaries would also be waived by the bill.

The Grassley-Baucus proposal proffers relief to health care providers including:

• Certain hospitals will receive full reimbursement for their Medicare bad debt, and hospitals located in disaster areas will not be penalized for the failure to submit any required quality data.
• A disaster relief fund would be established to provide payments to those Medicaid providers who experienced a significant increase or decrease in patient volume as a result of Hurricane Katrina. Direct payments are also available to providers to offset the costs incurred as a consequence of the hurricane.
• Eligible providers include those that are entitled to Medicaid payment and have experienced a significant increase in the percentage of patients eligible for medical assistance or provided uncompensated care, or have had a significant decline in their patient caseloads.

The White House does not support S 1716 because it believes that the better course of action is to permit the Centers for Medicare and Medicaid Services to grant waivers to states that are caring for Medicaid and non-Medicaid eligible individuals displaced by the disaster. The first waiver approved by CMS was for Texas. Pursuant to the waiver, a separate eligibility category would be created for evacuees from areas that have been declared national disaster areas. Texas will furnish up to 5 months of Medicaid coverage for persons eligible to participate in the waiver program. They include disabled individuals and low-income persons who require long-term care, children up to age 19 if the family's income is at or below 200% of the federal poverty level, parents of the children if family income is at or below 100% of the federal poverty level, and pregnant women up to 185% of the federal poverty level. The program will also provide up to 5 months of Medicaid benefits for persons who are not eligible for Medicaid but who have no private health insurance or coverage under the Children's Health Insurance Program (CHIP). The waiver gives qualifying individuals access to the same health care benefits available under Texas' fee-for-service program. CMS is currently considering waivers for several other affected states.

At this writing, Senators Grassley and Baucus have not reached an agreement with the White House as to what should be included in Katrina-relief legislation. For its part, the House is working to determine what legislation is necessary and what relief can be afforded through regulatory or executive action. It may be mid October or later before Congress takes action.

MEDICARE DRUG BENEFIT
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 established a new Medicare prescription drug benefit (Medicare Part D), which will become available on January 1, 2006. Individuals enrolling in Part D will pay a monthly premium that will vary with the plan selected and will be responsible for a $250 yearly deductible. After the deductible is satisfied, the beneficiary will pay 25% of his or her yearly drug costs from $250 to $2,250 and the drug plan will cover the remaining 75%. Thereafter, the beneficiary will pay 100% of drug costs from $2,251 until out-of-pocket drug costs reach $3,600. This is known as the coverage gap or "donut hole." Once the out-of-pocket limit is reached, the benefit's catastrophic coverage becomes effective—ie, the plan pays 95% of the beneficiary's drug costs for the remainder of the year and the beneficiary is responsible for only 5%.

On September 23, 2005, after months of evaluating bids, CMS announced that 10 National Prescription Drug Plan Organizations had been approved. They include: Aetna Life Insurance Company, Connecticut General Life Insurance Company, Coventry Health and Life Insurance/First Health Life and Health Insurance/Cambridge Life Insurance, Medco Containment Life Insurance Company, Memberhealth Inc, Pacificare Life and Health Insurance Company, Wellpoint, United Care Insurance Company, and Wellcare Health Plans. In addition to the national plans, scores of regional Medicare Advantage (MA) and Prescription Drug Benefit (PDP) plans will be offering the Medicare drug benefit.

As of October 1, 2005, these plans, including both MA and PDP, may start marketing their programs to Medicare beneficiaries. Enrollment for the drug benefit begins on November 15, 2005, and runs through May 15, 2006. Coverage begins on January 1 of next year if the beneficiary has enrolled by that time. Thereafter, drug benefit coverage will commence on the first of the month after the beneficiary enrolls.

CMS is clearly pleased by the extensive participation of private entities in the drug benefit program because it ensures a vast array of benefit options for enrollees. According to a September 30, 2005, HHS press release, "Everyone in Medicare, no matter what their income or how they get their health care, can choose coverage that reflects what they want, including lower cost, more complete coverage and convenient access. For example, for people who want to get their coverage in traditional Medicare, the lower cost choice could be a stand-alone plan with a low premium and low prices for a beneficiary's drugs. The more complete coverage choice could be a drug plan that offers coverage for generic drugs and in some cases even brand-name drugs through the coverage gap in the standard Medicare benefit, a plan with no deductible, and a plan that covers almost all of the commonly used drugs. And for convenient access, a beneficiary can choose a plan that provides coverage through their own preferred pharmacies."

Information recently released by CMS reveals that Medicare beneficiaries in every state will have plan options that include coverage in the drug benefit in the coverage gap as well as deductibles below the standard $250. Every state except Alaska will have plan options with monthly premiums less than $20, and in some states the plans with premiums appreciably lower than that will be offered. The drug benefit will be available through Medicare Advantage plans (eg, plans that provide health benefits through HMOs and PPOs) in all but nine states: Connecticut, Idaho, Iowa, Maine, Nebraska, New Hampshire, North Dakota, North Carolina, and South Dakota.

CMS has a wealth of information to help Medicare beneficiaries make an informed decision about whether to enroll in the Part D drug benefit and, if so, how to select a plan that meets the beneficiary's specific needs. These materials are available at the Web site www.medicare.gov and via telephone at (800) MEDICARE. The new Medicare and You handbook contains valuable information about drug coverage available in local areas.

MEDICARE PAYMENT INCREASES
CMS recently announced that Medicare Part B premiums and deductibles would be substantially higher in calendar year 2006. Next year, the monthly Part B premium will be $88.50, an increase of $10.30 from the 2005 premium of $78.20. This increase follows a 17.4% jump in the premium from 2004 to 2005. The Part B deductible will be $124 in 2006 as compared to $110 in the current year.

CMS is required to update annually the premiums and deductibles paid by Medicare beneficiaries. Medicare law mandates that the monthly premium for Part B must be sufficient to cover 25% of the program's costs as well as a reserve against an unanticipated escalation in spending. The federal government is responsible for 75% of such expenditures.

CMS identified several reasons for the increase for 2006:

• The single most important factor, according to CMS, is the "rapid growth in the volume and intensity of Part B services" especially in physician offices and hospital outpatient departments.
• Price increases of approximately 3% will pertain for outpatient hospital services, physician-administered drugs, and certain other Part B-covered services.
• Payments to Medicare Advantage plans will be higher as a result of the statutory formula under current law.
• Adjustments to the Part B reserves are necessary to increase the amount of federal assets in the Part B trust fund.

In 2006, Medicare beneficiaries will face the following premium and deductible structure:

• Part A Premium: $393 (not paid by 99% of beneficiaries)
• Part A Deductible: $952.
• Part B Premium: $88.50.
• Part B Deductible: $124.
• Part D Premium: $5 to $30 plus depending on the plan selected.
• Part D Deductible: $250 or less depending on the plan selected.

George G. Olsen, JD, is an attorney with the law firm of Williams & Jensen, PLLC, Washington, DC.

LOOKING FOR EXPERT ADVICE? Experts here are available to answer all your questions! Please contact us for more information about this feature, or to become an expert.

MEDIA CENTER Interactive Media  Archives  · December 2008  · November 2008  · October 2008  · August/September 2008  · Fall 2008 Product Directory  · July 2008  · June 2008  · May 2008  · April 2008  · March 2008  · All Archives  Newsletter  · Rehab Today Resources Classifieds Calendar Consumer Resources Media Kit Advertiser Index EAB Reprints Submit an Article