WASHINGTON WIRE

In this issue, you'll find:

• Administration Submits Medicaid Proposals to Congress
• Costs of Prescription Drug Benefit Lower than Expected
• CMS Halts CAP Program for Part B Drugs
• Events

Top Story

Administration Submits Medicaid Proposals to Congress

Late last week, the Department of Health and Human Services (HHS) submitted two pieces of draft legislation to Congress regarding Medicaid reform in preparation for reconciliation legislation later this year.

According to the fiscal year (FY) 2006 Budget Resolution, the Senate Finance and House Energy and Commerce Committees must find $10 billion and $14.5 billion respectively in savings from programs under their jurisdiction. Most observers estimate that between $8 and $10 billion will come from the Medicaid program.

As a result of budget negotiations, HHS convened a "Medicaid Advisory Commission" that is required to submit recommendations to the agency on ways to find approximately $10 billion in savings from the program. The agency was then expected to present the recommendations to Congress two weeks before the lawmakers' deadline for submission of reconciliation language on September 16, 2005. However, with the release of this draft legislation, it appears that HHS is not waiting to receive the Commission's recommendations before approaching Congress.

The proposals contained in the HHS draft legislation mirror many of the proposals suggested in the President's FY 2006 budget released in February. Such recommendations include changes to the pharmacy reimbursement formula, reductions in the use of intergovernmental transfers, cuts to provider taxes, and changes to penalty guidelines with regard to asset transfers. Additionally, the draft language suggests reforms that have not been previously addressed. For example the legislation recommends stricter guidelines with regard to rehabilitation and case management services.

The other piece of draft legislation offered by the Administration would increase Medicaid's coverage of home and community-based services for people with disabilities. These proposals, drafted as a bill entitled the "New Freedom Initiative Medicaid Demonstrations Act of 2005," again reflect many of the proposals set forth in the Presidents FY 2006 budget. Included in this legislative language is the "Money Follows the Person Rebalancing Demonstration" which would provide 100% Federal funding for the first year of transitioning individuals in institutions to home and community-based care. The State would also be required to develop a plan for quality assurance as well as a strategy for re-developing their long term care system. The cost of this legislation would be $1.75 billion over five years.

In related news, the Medicaid Advisory Commission will have its second meeting on August 17th and 18th. The Commissioners are expected to present and review recommendations for finding $10 billion in savings from the Medicaid program during the first day of the meeting and vote on their recommendations during the second day.

Health Care News

Costs of Prescription Drug Benefit Lower than Expected

On Tuesday, August 9, 2005 the Centers for Medicare and Medicaid Services (CMS) announced that the average monthly premium for Medicare's Part D prescription drug benefit would be $32.20 - approximately $5 less per month than previously estimated by the Medicare Trustees.

CMS states that strong competition among participating companies and specifically low bids by Medicare Advantage (MA) plans helped reduce the expected monthly premiums. Regions with especially high distributions of MA plans will see even lower premiums as the benefit takes affect in January, 2006.

Additionally, Medicare's cost per beneficiary is now estimated at $92.30 per month, down from the previous estimate of $109.18 per month. While this decrease in cost will potentially save the federal government billions of dollars in the coming year, the Administration has not released new estimates on the overall cost of the program.

CMS Halts CAP Program for Part B Drugs

As a result of low participation, CMS announced last week that it would suspend the implementation of the Competitive Acquisition Program (CAP) for physician-administered drugs, or Medicare Part B drugs, until July, 2006.

The CAP program, enacted as part of the Medicare Modernization Act of 2003 (MMA), aims to provide physicians with alternatives to purchasing and billing for Part B drugs by allowing wholesalers to supply doctors with the prescription drugs as well as handle their Medicare billing. However, because prices negotiated by CAP vendors would be used in the calculation of a prescription drug's average sales price (ASP), many vendors are hesitant to participate in the program. (The ASP is currently used to set drug prices on those pharmaceuticals purchased directly by physicians.)

In a letter to House Ways and Means Committee Chairman Bill Thomas (R-CA), CMS Administrator Mark McClellan states that the delayed implementation will potentially allow for improvements in the competitive bidding process.

Upcoming Events

Events

CONGRESS IN RECESS

Wednesday, August 17/ Thursday, August 18, 2005
Medicaid Advisory Commission Meeting
J.W. Marriott Hotel - 1331 Pennsylvania Ave, NW
Washington, D.C.

For More Information

For further information on any topics discussed or publications listed, or to get copies of anything mentioned in this alert, please call (202) 466-6550 and ask for the Legislative Practice Group.

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