On June 6, 2008, Senate Finance Committee Chairman Max Baucus introduced the “Medicare Improvements for Patients and Providers Act of 2008” (S. 3101).   Most notably, the legislation would block a scheduled cut in Medicare physician payments, extend certain expiring health care provisions, and make numerous other Medicare and Medicaid payment and coverage changes.

The following are highlights of the bill:

  • Physician Payments: In the absence of Congressional action, Medicare physician fee schedule payments will be subject to a more than 10 percent across-the-board cut effective July 1, 2008. The Baucus bill would delay the cut through December 31, 2009 and provide a 1.1% update for 2009. In addition, the bill would extend the physician quality reporting initiative (PQRI) through December 31, 2010, with an increase in the PQRI bonus to 2.0% for 2009 and 2010. The bill also would provide financial incentives for physicians to use e-prescribing, establish accreditation requirements for providers of the technical component of certain diagnostic imaging services, extend the current treatment of certain physician pathology services, and extend an increase in the geographic adjustment to payment for physician work in rural areas.
  • Renal Dialysis Provisions:  The bill would increase the composite rate for end stage renal disease (ESRD) services by 1 percentage point for both 2009 and 2010, and require the Secretary to established a fully bundled payment system for ESRD services. In addition, dialysis providers would be subject to new quality standards.
  • Other Part B Provisions:  Among other things, the bill would extend the outpatient therapy cap exceptions process; extend current payment rules covering brachytherapy and radiopharmaceuticals; extend the Medicare hold harmless provision under the hospital outpatient prospective payment system for certain small rural hospitals; repeal the clinical laboratory competitive bidding demonstration project (offset by a 0.5 percent reduction in lab payment updates for each of the next 5 years); improve payments for clinical lab tests performed by critical access hospitals; and modify payments for oxygen and power wheelchairs.
  • Hospital Provisions: The legislation would extend the Medicare Rural Hospital Flexibility Program, rebase sole community hospital payments, and make other rural hospital improvements.
  • Medicare Advantage Reforms: The proposal includes a series of changes to Medicare Advantage payment and other policies, including a phase-out of indirect medical education payments and a $1.8 billion cut in the Medicare Advantage Stabilization Fund.
  • Medicare Part D Drug Plan Provisions: Among other things, the bill would set deadlines for drug plan payment to pharmacies; establish claims submission time-frames for long-term care pharmacies; require weekly updates on pricing standards used for pharmacy reimbursement; allow coverage of barbiturates and benzodiazepines; codify coverage of certain “protected classes” of drugs; clarify the use of compendia for the drug benefit; and clarify the use of Part B data for research and other purposes.
  • Clinical Trials, Clinical Effectiveness: The bill would authorize alternative methods of payment for Medicare services provided to beneficiaries who participate in certain randomized control trials conducted by a Department of Health and Human Services (HHS) agency. It also would authorize Institute of Medicine studies on best practices in setting clinical decision-making protocols and on methodological standards for conducting systematic reviews of clinical effectiveness research.
  • Medicaid Drug Payments:  The bill would delay the establishment of Medicaid payment limits using Average Manufacturer Price for multiple source drugs through September 30, 2009.
  • Beneficiary Improvements: The bill would expand coverage of preventive services, reduce copayments for outpatient mental health services, expand access to certain low-income programs, and limit certain Medicare Advantage and Part D drug plan sales and marketing practices, among other things.

The full Senate is expected to consider the legislation later this month. If approved by the Senate, attention would then shift to reaching an agreement with the House, which passed a much different Medicare bill last summer (H.R. 3162). Prospects for enactment are uncertain, given the Administration’s strong opposition to reductions in Medicare Advantage funding. Note that Senator Chuck Grassley, Ranking Republican on the Finance Committee, also has outlined an alternative Medicare proposal that does not include managed care cuts, which could serve as the basis of a compromise agreement.