RAO Davao City

United States Military Retiree Activities Office Davao City, Philippines

MEDICARE REIMBURSEMENT RATES 2008 UPDATE 1 August 2008

Posted by Service Officer on July 31st, 2008

President Bush sought to block a bill 15 JUL aimed at forestalling an 11% cut in payments to doctors taking care of Medicare patients, but Congress quickly overrode his veto. The House voted 383 to 41 to override the veto, while the Senate voted 70 to 26, in both cases far more than the two-thirds necessary to block the president’s action. With organized medicine, other lobbies, and the military community promoting the popular measure in an election year, Republicans broke heavily from the white house. A total of 153 House Republicans voted to defy the White House, 24 more than in a 24 JUN vote that started the momentum toward passage of the Medicare doctors’ bill.

Twenty-one Senate Republicans voted for the bill this time, including four senators who had voted “nay” in the two previous Medicare votes. The Medicare bill is the third, along with the recent farm bill and a water resources bill, to become law despite Bush’s veto. Overall, Bush has vetoed 12 pieces of legislation during his presidency, including a “pocket veto” of last year’s defense authorization bill.

At issue in this bill was how the government should respond to a planned reduction in Medicare doctors’ fees, mandated by a formula that requires the cuts if certain spending targets are not reached. Under the formula, a 10.6% cut in fees for doctors was supposed to go into effect 1 JUL, but Congress overwhelmingly voted instead to reduce the reimbursement to insurance companies that serve Medicare beneficiaries under its managed-care program. Those reductions would allow the postponement of the pay cut to doctors for 18 months, but would cost the insurers $14 billion over five years. Bush said the cuts to insurers would harm the managed-care program, which his administration sees as giving seniors more choices and eventually leading to lower health costs for the federal government. “I support the primary objective of this legislation, to forestall reductions in physician payments,” Bush said in his veto message. “Yet taking choices away from seniors to pay physicians is wrong.” He called the bill “fiscally irresponsible” and charged that it “would undermine the Medicare prescription drug program.” But Democrats said their legislation would prevent doctors from fleeing the traditional treatment practices that are used by more than 8% of the mostly elderly Medicare patients. They said private insurers were receiving too much funding in the Medicare Advantage program. “I guess the president is voting with them and not with America’s seniors and those with disabilities when he vetoed this bill,” said House Speaker Nancy Pelosi (D-CA).

The House and Senate votes followed a large political push by the American Medical Association — which ran ads in home states and districts of key Republicans — and AARP, which held a lobbying campaign in which 1.2 million of its activists contacted members of Congress urging the veto override.

Health-care experts said Congress is simply moving the problem down the road, since lawmakers will be confronted within the year with the need to take additional steps or allow a major cut in physician fees. “This is stopgap Medicare legislation,” said Charles N. “Chip” Kahn III, president of the Federation of American Hospitals. “It is not confronting any of the major spending or organizational issues concerning Medicare.” Yesterday’s congressional votes were not as dramatic as the maneuvering that occurred last month over the original legislation. On 26 JUN, Senate Democrats fell one vote short of the 60 needed to pass the measure. But on the day of the veto vote, Sen. Edward M. Kennedy (D-MA) — recuperating from brain surgery to remove a cancerous tumor — left Boston after a morning treatment of chemotherapy and radiation at Massachusetts General Hospital to return to the Senate for another Medicare vote. Once his vote assured Democrats of the 60 needed for passage, another nine Republicans switched sides, pushing the margin to a veto-proof 69 votes. The bill affects the 9.2 million active and retired military personnel and their family members who use the military’s Tricare system, because it uses payment rates set by Medicare. [Source: Washington Post Michael Abramowitz & Paul Kane article 16Jul 08 ++]

Much of the controversy over the Medicare bill enacted 15 JUL concerned how much to pay the insurance companies that offer private Medicare Advantage health plans. The bill made modest adjustments to the formula that determines the subsidies these companies receive, which will save taxpayers $45 billion over the next 10 years. The insurance lobby tried unsuccessfully to convince Congress that these subsidy reductions would result in benefit cuts and higher costs for enrollees in their plans. The lobbyists did not mention that, for every dollar they receive, insurance companies on average pay 87 cents for medical care, with some plans paying even less. The rest goes to administrative and marketing expenses and, of course, to profit. Original Medicare spends about 3 cents on the dollar on administrative costs. No money is diverted towards marketing or profit. The lobbyists also did not mention that most of the excess subsidies that insurance companies receive remain untouched by this bill. These subsidies will cost taxpayers $150 billion over the next ten years, compared to the cost of providing coverage through Original Medicare.

Insurance companies are not the only middlemen who are taking an excessive cut of the dollars they receive from taxpayers and people with Medicare. Since the Part D drug benefit began in 2006, some pharmacy benefit managers have been overcharging consumers for drugs, particularly for some widely used generics: often the price for the consumer is double or triple the price that pharmacy benefit managers pay to pharmacies. This overcharging, sometimes called lock-in pricing, pushes consumers into the doughnut hole, where they are forced to pay inflated prices. It also raises costs to Medicare for covering low-income people with Medicare under the Extra Help program. The political influence of the pharmacy benefit managers has allowed this scam to continue, although the Centers for Medicare & Medicaid Services has recently proposed regulations to put an end to the practice. The Medicare Rights Center and other consumer groups support these new regulations. The cut taken by the middlemen in our health care system has impacts far beyond Medicare. According to a recent report comparing health care in the U.S. with care in other industrialized countries, the U.S. tops the chart on the percentage of health care spending that goes to administrative costs, marketing and profits. We also have the highest rates of death from preventable or treatable diseases. And we have the highest percentage (over one third) of adults who go without care or medicine because of the cost. [Source: Weekly Medicare Consumer Advocacy Update 17 Jul 08 ++]

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