Reconciling Health Reform Bills

January 7, 2010

The Honorable Harry Reid, Majority Leader
United States Senate
Washington, DC 20510

Dear Majority Leader Reid:

As President of the National Committee to Preserve Social Security and Medicare, I am writing to highlight the health care reform issues of greatest importance to our millions of members and supporters and to ask that you consider our views as you work with House leaders to reconcile the Senate-passed Patient Protection and Affordable Care Act with the House's Affordable Health Care for America Act .

America 's seniors have a major stake in the health care reform debate as the skyrocketing costs of health care are especially challenging for those on fixed incomes. The Medicare savings included in both the Patient Protection and Affordable Care Act and the Affordable Health Care for America Act will positively impact millions of Medicare beneficiaries by slowing the rate of increase in premiums and improving benefits, and they will extend the solvency of the Medicare Trust Fund by five or more years. Doing this without taking a single penny out of the pockets of beneficiaries in the traditional Medicare program is, to us, is a win-win for seniors and the Medicare program.

However, we believe favorable action on the following provisions is needed to produce a health care reform bill that seniors will readily support.

Independent Payment Advisory Board

The National Committee to Preserve Social Security and Medicare is opposed to the establishment of the Independent Payment Advisory Board (IPAB) included in the Senate-passed Patient Protection and Affordable Care Act . Existing c ost containment policies have already reduced the rate of increase in Medicare spending to three percent a year less than the increase in private health insurance costs for the past 10 years according to the Centers for Medicare and Medicare Services (CMS) Office of the Actuary. Over many years, this has reduced Medicare payments to 80 percent of private health insurance payments to physicians and to 70 percent of private health insurance payments to hospitals according to the Congressional Budget Office (CBO).

Despite Medicare's long record of cost efficiency, the IPAB would single out the program for permanent, annual spending reductions. We believe the process established through the IPAB, when coupled with the $400 billion savings in provider payments included in health care reform legislation, would widen the current gap between what Medicare and private insurers pay hospitals, doctors and other providers to unsustainable levels. This will inevitably result in access problems for Medicare beneficiaries.

The National Committee agrees that the rate of growth in health care spending must be reduced, but we strongly oppose legislative remedies that single out Medicare for cuts. To protect seniors and the Medicare program, any Medicare savings should be made in the context of system-wide reforms. The Independent Payment Advisory Board should be eliminated from any final legislation.

Medicare Part D Doughnut Hole and Lowering Prescription Drug Costs

It is crucial to eliminate the Medicare Part D coverage gap - or "doughnut hole" - as part of comprehensive health care reform. The National Committee strongly supports provisions in the House bill that remove the coverage gap, and we are pleased that Senate Majority Leader Harry Reid has pledged to secure these provisions in a final bill.

Currently, 3.4 million beneficiaries fall into the doughnut hole each year and must bear the full cost of their drugs while continuing to pay Part D premiums. Research has shown that exposure to the full costs reduces prescription drug use considerably, a fact that is not surprising since about one-half of all beneficiaries live below 200 percent of the federal poverty level. Budget politics dictated the inclusion of the doughnut hole in the Part D program, but it results in a benefit that exposes Medicare beneficiaries to far greater cost-sharing burden than is required under most plans that cover prescription drugs.

Complete closure of the coverage gap is needed to remove this glaring flaw in the Part D benefit. Both the House and Senate bills provide a 50 percent discount on brand-name drugs in the doughnut hole. While this would provide some important interim relief for many beneficiaries, it remains essential to close the hole since many beneficiaries will not be able to afford these drugs, even at half-price.

The National Committee also strongly supports provisions in both bills that require pharmaceutical makers to provide rebates and other price concessions for the Medicare and Medicaid programs. The prices for brand-name drugs continue to increase significantly each year, and analyses have shown that government agencies have been able to save billions of dollars by requiring price reductions. The House bill would recoup windfall payments made to pharmaceutical makers by requiring that these companies apply Medicaid rebates to beneficiaries who are dually eligible for Medicaid and Medicare - restoring a policy that was in force prior to the establishments of the Part D program. It is important to restore this policy and to allow the Secretary of the Department of Health and Human Services to negotiate for drug price concessions for all beneficiaries. In addition, the final bill should mandate a higher level of rebates for drugs under the Medicaid program, allowing the government to use the full leverage of bulk purchasing to achieve savings for taxpayers.

Medicare Advantage

Since enactment of the Medicare Modernization Act, a top-priority for the National Committee has been elimination of the subsidies that are paid to Medicare Advantage plans. Therefore, we support provisions in health care reform legislation to eliminate the billions of dollars in wasteful subsidies - $11 billion in 2009 alone - that are being paid to Medicare Advantage plans. Reducing these overpayments to private insurance plans, so they are not paid more than it costs to treat beneficiaries in traditional Medicare, will strengthen the solvency of the Medicare program and reduce the rate of increase in Part B premiums for all Medicare beneficiaries.

The National Committee supports the approach in the House-passed legislation to reduce Medicare Advantage payments to traditional Medicare levels on a county-by-county basis. We are concerned about the competitive bidding approach in the Senate bill in light of the lack of competition that has resulted from plan enrollment which is concentrated in very few plans.

Expanded Support for Long-Term Supports and Services: CLASS Act and Medicaid

Inclusion of the CLASS Act program in the final health reform bill would represent a crucial expansion of support for long-term supports and services. This voluntary national insurance program for purchasing community living assistance will help many people remain in the community and avoid institutional care, which will improve their quality of life and result in significant savings for the Medicaid program, according to CBO.

Currently, approximately 73 percent of Medicaid long-term care spending goes to institutional care, and it is important to shift this care to community settings. The Senate bill has provisions to allow Medicaid to expand support for home- and community-based services (HCBS), and we strongly support inclusion of this language in the final bill. This language facilitates state adoption of HCBS by allowing states to file a state plan amendment rather than request a waiver to expand these services under Medicaid, and it incentivizes these expansions by increasing the federal matching rate for funding. In addition, the Senate bill includes the Community First Choice Option, which would provide a six percentage point boost to the federal match for attendant supports and services, and the bill also provides important asset protections for spouses who are endangered with impoverishment when the other spouse needs long-term services in the community.

Together with the CLASS Act, these Medicaid improvements would represent an important policy shift, one that is popular with the public – as can be seen in a recent poll that found 85 percent of Americans in support of having long-term supports and services included in health reform legislation.

Low-Income Assistance

Both the Senate and House health care reform bills offer valuable improvements to Medicare benefits for low-income beneficiaries. The National Committee believes it is particularly important to raise the asset test for the Medicare Savings Programs and the Part D Low-Income Subsidy. Enrollment barriers should also be removed. These new policies would help reduce the number of beneficiaries eligible for these programs but not participating - a number which is now in the millions. The House bill contains provisions for these policies, and they should be included in a final bill.

Age Rating

The National Committee is concerned that age rating makes health insurance unaffordable for many older people, particularly single older women, who are not yet eligible for Medicare. Therefore, we urge Congress to accept the House-passed provision that prohibits plans from charging older adults more than twice as much as younger adults. This provision is preferable to the 3 to l cost sharing allowed in the Senate bill.

We greatly appreciate the Senate's work on health care reform legislation and the important impact it will have in extending the solvency of the Medicare Trust Fund and slowing the growth of beneficiary premiums. We look forward to continued work with you to preserve seniors' access to affordable, high-quality health care.

Cordially,

Barbara B. Kennelly
President & CEO

CC: Members of the U.S. Senate