APRIL 14, 2005 — Widows make up almost half of the 2.4 million Medicare beneficiaries whose income qualifies them for the program's comprehensive drug benefit for low-income Americans but who are ineligible because of other financial assets, says a study sponsored by the Kaiser Family Foundation.

Based on income alone, about 15 million people qualify for the low-income benefit, about one million of whom live in nursing homes. Widows and widowers make up 43 percent of those who otherwise would qualify for the benefit but who are ineligible because of non-income assets. Widows make up 93 percent of this "widow and widower" population.

"The most likely scenario is that when a husband dies, income plummets, making the widow potentially eligible for low-income prescription drug subsidies," said the study. "However, her accumulated assets exceed those allowed under the legislation. Aggravating the situation is that asset thresholds are lower for individuals than for couples."

Drug coverage that starts in 2006 under the Medicare overhaul law (PL 108-173) provides much more comprehensive benefits to beneficiaries with incomes below 150 percent of the federal poverty line ($14,355 for an individual in 2005). But if an individual has more than $10,000 in assets or a married couple more than $20,000 they do not qualify even if they are eligible based on income. The one exception is if the beneficiary qualifies for both Medicare and Medicaid, in which case no asset test is applied.

Medicare does not count the value of a home, automobiles, and household furnishings and possessions when adding up assets. But the study said the findings nevertheless raise "serious questions about the equity of the asset test."

People with lower incomes, "by accumulating modest amounts of assets, either through bank accounts or retirement-savings vehicles ... have guaranteed that they will not qualify for the low-income Medicare drug subsidies — but a large majority use prescription drugs every day," the study said.

Asset tests "are generally intended to focus benefits on those with low incomes and exclude those with substantial assets," the study noted. But "a large proportion of the 2.37 million low-income beneficiaries who would not quality for the additional subsidies had relatively modest assets. Half of those with incomes exceeding the asset test have excess assets of $35,000 or less, and 42 percent exceed the limit by $25,000 or less."

The study's estimate of the number of people excluded by the asset test is higher than the 1.8 million announced by the Congressional Budget Office (CBO) in July 2004. Much of the difference stems from differences in methods of calculating income, the Kaiser study said. CBO's estimate, unlike Kaiser's, did not rely on the method specified in regulations implementing the Medicare law, according to the Kaiser researchers.

APRIL 15, 2005 — Proposed options to prevent a scheduled Medicare physician payment cut over the next five years range between $10 billion to $50 billion, according to estimates from the Congressional Budget Office (CBO). Medicare payments to physicians are scheduled to decline by 5 percent in 2006 unless Congress takes action to stop the cuts. Earlier this month, an American Medical Association survey found that 38 percent of physicians said they would reduce the number of Medicare patients they will accept if the cuts proceed as scheduled.

"Everyone says you're going to get the fix but there's no one saying it's a done deal," said a lobbyist representing physicians. According to the CBO analysis, which is dated March 24, freezing physician payments at the 2005 level would cost about $27 billion over five years and $48.6 billion over ten.

The Medicare Payment Advisory Commission recommended that payments be adjusted each year to reflect the changing costs of delivering physician care, known as "sustainable growth rate." Replacing the current sustainable growth rate formula for setting physician payments would cost nearly $50 billion over the next five years and $154.5 billion over the next decade.

In order to avert a scheduled pay cut to physicians in 2004 and 2005, the Medicare drug bill (PL 108-173) included a 1.5 percent payment increase for each of those years. Extending that update through 2006 would cost $9.7 billion over the next five years. Hiking payments 1.5 percent in 2006 and by another 1.5 percent in 2007 would cost $20.8 billion from 2005 through 2010.

Recognizing changes in the Medicare drug bill as "changes in law" for purposes of calculating the sustainable growth rate would cost $12.8 billion over five years and $46.1 billion over ten, according to the CBO document. Retrospectively and prospectively removing physician administered drugs from the sustainable growth rate would cost $46.5 billion from 2005 to 2010 and $114.2 billion from 2005 through 2015, according to the CBO analysis.

It is unlikely that Congress will tackle a broader overhaul of the way Medicare pays physicians this year. "It's too expensive," said the lobbyist representing physicians.

APRIL 13, 2005 — Dramatic reductions in the number of bed sores suffered by nursing home patients and improved use by doctors' offices of computer technology to treat patients are two of the many goals outlined by Medicare in a new "scope of work" to improve the quality of care in the program.

The billion-dollar program sets goals for Medicare Quality Improvement Organizations, or "QIOs," for the three years starting in August. The Centers for Medicare and Medicaid Services (CMS) invited bids April 7 from QIOs to carry out the quality improvement work outlined in what insiders call the "eighth scope of work," the eighth such plan in the history of Medicare.

The new approach builds on the foundation laid by the current plan for gathering and reporting data on specific performance measures in nursing home, hospital, and home health care. To help providers bring up their scores on those measures, which are now reported publicly, QIOs help providers retool systems of care.

Through such efforts, nursing homes reduced the practice of tying down patients to keep them from wandering by 23 percent, for example. The new plan seeks further reductions of restraint use and better efforts to prevent bed sores, a major cause of intense suffering and death in nursing homes. Better programs to prevent and treat depression in nursing homes are another focus of the new "to do" list.

Another goal is to help doctors' offices use electronic medical records and electronic prescribing to improve the delivery of care. The aim is to help doctors get ready for new systems of performance-based payment that reward quality improvements on specific measures with higher payments.

Other specific goals of the 53 contracts to be signed with QIOs are reductions in unnecessary hospital admissions, adoption by hospitals of "highly effective" systems of care, and greater use of telemedicine by home health agencies in which patients are treated from remote locations using TV and computer technology.
"The key factor that will lead to better health care over the next decade is the effective generation and use of information about the quality of health care services," said CMS Administrator Mark B. McClellan.

APRIL 15, 2005 — A new report by the Congressional Research Service on Health Savings Accounts (HSAs) should be music to the ears of the Bush administration — some of it sweet, some of it discordant. The report finds a "burgeoning market" for the accounts, which are much touted by the White House and by many congressional Republicans as the answer to fast-rising health spending in the U.S. and to widening coverage of the uninsured.

The report finds some evidence that HSAs reduce health care spending, but adds that the data is not rigorous. And health plans associated with the accounts "are not likely to make a big difference in the number of uninsured."

Funded either by employers or individuals themselves, HSAs give their owners big tax breaks for investing in the accounts and using them to pay their out-of-pocket health care expenses. The accounts are sold in tandem with high-deductible health plans, whose premiums are cheaper than those insurers charge for traditional employer health coverage.

Money from the accounts is used to pay expenses not covered by the health plans, but the owner gets to keep what is left over and can make it grow by shopping carefully for health care and by taking responsibility to maintain personal health, enthusiasts say.

Improved health and growing consumer demand for better deals on medical procedures and products will rein in growth in health care spending, they add.

Prominent insurers have entered the HSA market, some offering the plans nationwide, says the report. The accounts have drawn widespread interest on the part of large employers already offering high-deductible coverage, as well as among a number of small businesses. But "while HSA plans may reduce health care spending, it would be unreasonable for them to produce a significant reduction in the nation's health care costs," CRS says.

"It is a well-established paradigm that 5 percent of individuals account for approximately 50 percent of health care costs and 20 percent account for approximately 80 percent of costs. HSA plans with their relatively low out-of-pocket maximums will have little impact in reducing the health care spending for these groups."

Policies promoting the accounts also entail losses of revenue to the federal government. "Some might question whether it is fair that the largest tax savings per person will likely flow to healthy, higher income taxpayers. Some might also question whether the revenue loss is an appropriate use of federal health care resources, given the many people in the country who have no health insurance whatsoever."

The CRS researchers uncovered mixed data on whether HSA-related health plans reduce the number of uninsured. Overall effects are likely to be modest, the analysts said. "Many uninsured are in the 10 percent or 15 percent tax brackets and would not find the tax advantages of HSA contributions to be a compelling reason to buy the insurance."

APRIL 14, 2005 — Budget writers negotiating the fiscal 2006 budget resolution are mulling a split-the-difference solution to the gulf between the House and Senate over the level of mandatory spending cuts to be included in an upcoming budget reconciliation bill.

House and Senate GOP aides said Budget Committee Chairman Judd Gregg, R-N.H., — under pressure from the House to produce far larger cuts than passed by the Senate — has told his House counterpart that the Senate would consider cuts of no more than $43 billion over five years from mandatory spending programs, such as agriculture, Medicaid, and student loan subsidies.

Gregg and House Budget Committee Chairman Jim Nussle, R-Iowa, are conducting informal talks on the fiscal 2006 budget resolution (H Con Res 95). Adoption of a budget is a precursor to any subsequent budget reconciliation bill, a special measure in which savings from various mandatory programs would be bundled together and passed under fast-track rules.

The $43 billion figure on mandatory cuts represents the halfway mark between the House and Senate resolutions. It is far higher than the $17 billion in budget cuts the Senate voted for in adopting its budget resolution on March 17. And it is higher than Gregg's initial budget, which was approved by the committee with $32 billion in cuts.

During the Senate debate, lawmakers adopted an amendment, by Gordon H. Smith, R-Ore., to strip instructions to the Finance Committee to produce $15 billion in budget cuts, the bulk of which was to come from Medicaid.

Neither earlier Senate figure impressed the House, which has voted to instruct eight committees to produce $69 billion in mandatory savings.

But House GOP leaders may not be so quick to reject the latest Senate offer. For starters, the House would be hard-pressed to produce actual spending cuts that would hit that figure, especially after 43 GOP House members signed a letter circulated by Heather A. Wilson, R-N.M., protesting up to $20 billion in cuts to Medicaid.

And Gregg and Senate GOP aides insist that mandatory spending cuts beyond what they have offered would make it impossible to pass a budget. That message may be sinking in.

"We want to make sure we can come up with some reconciliation instructions that really do lead to a bill that we can pass," said a House GOP leadership aide.

A Senate GOP aide said Gregg also told Nussle that the absolute limit for cuts in Medicaid is $12 billion. But a health care lobbyist said "the Medicaid number is probably more solid around the $8 billion level."

In any event, the Senate Finance Committee — with jurisdiction over Medicaid, Medicare, the Supplemental Security Income programs for the poor, and unemployment insurance, among others — would figure prominently in achieving the higher figure. The House Energy and Commerce and Ways and Means committees, which share jurisdiction with Finance, are saddled with reconciliation instructions totaling $38.7 billion. Energy and Commerce has jurisdiction over Medicaid.

Other Senate committees with reconciliation instructions less than their House counterparts include: Agriculture, whose $2.8 billion instruction is $2.5 billion below that House panel; and Health, Education, Labor, and Pensions, whose $8.6 billion instruction is $12.8 billion below the House instruction to the Education and the Workforce Committee.