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Senate Democrats' Medicare Bill Would Make Cuts to Private Plans, Raise Physician Pay

The chairman of the Senate Finance Committee has outlined the final, contentious details of a $20 billion Medicare bill he plans to introduce Friday, including offsets that guarantee a presidential veto.

Finance Chairman Max Baucus, D-Mont., discussed the bill's provisions late Thursday after a meeting with medical lobbying groups. He said the legislation would give physicians a 1.1 percent increase in their Medicare payment rates for the next 18 months, instead of the 10.6 percent cut they are scheduled to receive starting July 1. The pay hike would be paid for primarily through cuts to private Medicare plans - cuts that President Bush vigorously opposes.

Finance Committee staffers were still writing the final draft of the bill late Thursday evening. Primarily a Democratic product, it has attracted some Republican support but not yet enough to obtain the 60 votes needed to invoke cloture and end debate on the legislation.

The bill would cost about $20 billion over five years, Baucus said, and the offsets will come almost entirely from the Medicare Advantage program, in which private insurers provide benefits in place of government-run Medicare. His proposal would cut funding to Medicare Advantage programs that get extra funds because they are in areas with teaching hospitals. It would also limit payments to so-called private fee-for-service plans. And it would limit the private plans' ability to use a process called "deeming," through which health care providers not explicitly enrolled in the plans could be forced to participate whenever a patient covered by the plans visited them.

Many Democrats have pushed hard for such cuts, calling the private plans overpaid and damaging to traditional Medicare. Medicare Advantage plans are paid, on average, 117 percent of what traditional Medicare would pay for services. But some beneficiaries like the plans, and Republicans believe that private-sector competition will eventually reduce costs.

In a May 22 letter to lawmakers, Health and Human Services Secretary Michael O. Leavitt said President Bush would veto any Medicare bill that would cut payments to Medicare Advantage plans.

The Finance Committee's ranking Republican, Charles E. Grassley of Iowa, criticized Baucus' decision to use offsets from Medicare Advantage.

"It's going to guarantee a presidential veto," Grassley said. "Without saying whether the president's right or wrong, I can say this - we've got to get things done by June 30, and that's going to make it impossible."

Republican Sens. Gordon H. Smith of Oregon and Olympia J. Snowe of Maine have said publicly they would support the bill, and Baucus indicated he was looking for more Republicans to sign on. "You'll know more next week," Baucus said.

Grassley plans to introduce an alternative measure that would also stop the cuts to physician pay and provide a 0.5 percent pay increase through 2008 and a 1.1 percent increase in 2009.

"We will have a document out, soon after Chairman Baucus puts his document out, that can be signed by the president," Grassley said.

Baucus said his bill will contain a number of other Democratic priorities, which may have contributed to the bill's $20 billion cost.

Much of that total comes from the pay increase for physicians, but Democrats will also include funds for low-income participants in the Medicare drug benefit, Baucus said.

Earlier in the week, Baucus outlined other bill provisions, such as a proposal to reimburse at a higher rate physicians who use electronic prescribing and a proposal to make sure that pharmacies are paid promptly by Medicare for drugs they dispense under the program.

From CQ

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