Healthcare lobbies limber up for Senate Medicare fight

Physicians look to be the biggest winners and HMOs the biggest losers in the Senate Democratic Medicare package headed to the floor this week, but the legislation contains enough to keep healthcare lobbyists of all stripes plenty busy.

Early Friday evening, Finance Committee Chairman Max Baucus (D-Mont.) issued a summary of his $20 billion, five-year Medicare bill; draft language soon leaked to K Street and around town. Committee ranking member Chuck Grassley’s (R-Iowa) alternative, poised for introduction as soon as Monday, is expected to carry about the same price tag.

{mosads}The centerpiece of the bills is an 18-month fix to a looming 10.6 percent cut in Medicare fees to physicians, the result of a perennial problem with the statutory formula that sets the pay rates; the reduction is set to automatically kick in on July 1. In place of this cut, both bills would keep payments at their current level through the end of the year and give doctors a 1.1 percent raise in 2009.

Healthcare lobbyists found little new to praise or condemn in the legislation, as most of its provisions have been seen in other recent Medicare bills. Yet they continue to watch closely and, in some cases, nervously.

The American Medical Association (AMA), for one, is content. “The AMA commends Chairman Baucus for his leadership in working to enact legislation that will stop looming Medicare physician payment cuts. … We look forward to reviewing the details of Sen. Grassley’s legislation,” Edward Langston, chairman of the AMA’s board of trustees, said in a statement.

Baucus and Grassley, along with other committee members, spent months attempting to work together on a consensus package. Baucus abandoned those efforts in late May after the sides failed to reach an accord, owing largely to disagreements about payments to private Medicare Advantage plans.

The realities of a sharply divided Senate dictate that the camps will look to renew their negotiations in the coming weeks — unless Baucus and the Democratic leadership can pull off the unlikely coup of winning over enough Republicans to get the 60 votes needed to advance contentious legislation.

Finance Committee Republican Sens. Gordon Smith (Ore.) and Olympia Snowe (Maine) already have publicly endorsed Baucus’s efforts.

The biggest challenge has been offsetting the cost of the physician fee hike. Baucus takes dead aim at Medicare Advantage, proposing to cut $12 billion in spending from the program. In doing so, he sets the stage for a clash with the White House. Health and Human Services Secretary Mike Leavitt made clear last month that Medicare Advantage cuts would prompt a veto.

“This package is virtually exclusively funded through Medicare Advantage cuts,” complained Karen Ignagni, the president and CEO of America’s Health Insurance Plans . “We’re looking at a very significant cut that will impact the choices that seniors have.”

The legislation would gradually eliminate so-called indirect medical education (IME) payments made to Medicare Advantage plans. The money is intended to offset the increased costs of treating patients at teaching hospitals, which take on more complicated patients, but Democrats maintain the Medicare Advantage IME funding is redundant because money for teaching hospitals is already built into traditional Medicare.

The bill also targets private fee-for-service plans, the most expensive and fastest-growing type of Medicare Advantage plan, especially in rural areas. Seeking to reduce the financial incentive for insurers to offer these plans, Baucus would require most of them to develop provider networks akin to those used by HMOs.

Medicare Advantage would also lose $1.8 billion from a stabilization fund intended to promote plan participation in the program.

Though the legislation is commonly referred to as a physician payment bill, it would have significant effects on a plethora of healthcare industries, including pharmacies, pharmacy benefit managers (PBMs), kidney dialysis providers, oxygen suppliers, power wheelchair vendors and hospitals.

The measure has numerous provisions affecting hospitals, but Chip Kahn, president of the Federation of American Hospitals , said the physician fee fix itself is as important to his members. “Hospitals have to work with physicians every day. … We need them to be paid better,” he said.

Pharmacies would get a reprieve from changes in how Medicaid calculates the price of prescription drugs. Drugstores won another key provision in the Baucus bill, to the chagrin of the PBMs. Pharmacies have lobbied since the launch of the Medicare Part D prescription drug benefit in 2006 for a requirement that PBMs pay them within two weeks of dispensing medication to Part D beneficiaries. The PBMs say not only is that unnecessary, it would drive up costs.

The PBMs, for their part, have something to smile about as their trade group, the Pharmaceutical Care Management Association , can be credited in part with the inclusion of electronic-prescriptions language in the bill.

Kidney dialysis providers were pleased to see language that would create annual payment updates for their services. “We are supporting the [end-stage renal disease] provisions in the Baucus bill,” said Rob Forman, president of the Kidney Care Council, an industry group.

Oxygen and power wheelchair suppliers would face reductions and significant changes to the way they are paid; Medicare would save $1 billion on the oxygen changes alone. Absent from the bill, however, is a postponement of a competitive bidding program affecting suppliers of durable medical equipment, such as oxygen and wheelchairs, the industry is seeking. A trade group representing these industries, the American Association for Homecare , was still reviewing the bill and could not comment.

Baucus and Grassley each would extend certain funding for rural hospitals and other rural programs designed to preserve access to medical care for people in those areas. These provisions have been key to winning Senate support for previous Medicare bills.

The measure also includes several initiatives designed to improve the quality of medical care. Baucus and Grassley each support providing bonus payments to doctors who use e-prescriptions from 2009 to 2013 and reduced payments for those who do not from 2011 to 2013. The bills would extend a program to gives bonuses to physicians who report information on quality and would provide funding for another program designed to develop measures of quality in hospital care.

Baucus also seeks to expand beneficiary access to subsidies for Medicare and for the Part D prescription drug benefit through several provisions in the bill.