The US House of Representatives and the Senate have passed competing versions of Medicare reform and prescription drug coverage bills. The passage of reform legislation by the House and Senate sets the stage for a contentious July 2003 conference committee to be called to reconcile the differences between the two bills, producing what could be the largest restructuring of the Medicare program since its 1965 inception.

In addition to providing a prescription drug benefit for Medicare beneficiaries, the legislation is also likely to include a large number of financial concessions to certain subsets of health care providers, especially small and rural hospitals.

These provisions would adjust a number of Medicare Part A and Part B reimbursement rates (including the physician fee schedule), impose new structures for the reimbursement of costs for drugs and durable medical equipment, change state payment methods for the care of individuals who are enrolled in both the Medicare and Medicaid programs, and create new Medicare demonstration projects

Under the Senate drug bill's provisions, Medicare beneficiaries wishing to remain in fee-for-service Medicare would pay a $275 deductible and a $35 monthly premium to obtain a privately administered prescription drug (only) benefit. Participating plans could set higher or lower premiums so long as the actuarial value of the drug coverage offered remained the same. Beneficiaries would be required to pay half of annual drug costs, after the $275 deductible, up to $3,700. At that point, beneficiaries would pay 100% of costs up to an out-of-pocket cap of $4,500 ($5,813 worth of drugs). Thereafter, beneficiaries would be responsible for 10% of all further drug costs.

The House drug legislation incorporates, among many other differences from the Senate measure, a privately administered drug benefit having a variable $35 monthly premium and a $250 annual deductible. The plan would cover 80% of drug costs from $251 to $2,000. Thereafter, a gap in coverage, based on a sliding income scale, would be in effect until a catastrophic cap was reached. For individuals with annual incomes of less than $60,000, catastrophic coverage would take effect when costs reached an annual $3,500 out-of-pocket limit.

Highly relevant

Of the provider payment provisions in the bills, a number may affect diagnostic imaging centers. The House bill, but not the Senate measure, would also replace the 4.2% cut in the physician fee scale expected for 2004 with increases of at least 1.5% for 2004 and 2005.  If these provisions of the House bill do not survive conference, diagnostic imaging center technical and professional component services would be reduced by about 4.2% next year and additional reductions are expected in CY 2005. In addition, both the House and the Senate bill would reform the methodology used to pay medical oncologists for chemotherapy administration, which could have an impact on all other technical component payments. However, as the result of active advocacy by the diagnostic imaging community and others, both bills contain language that would hold technical component services harmless against these possible reductions.

Finally, the Senate bill, but not the House bill, includes language that would extend the physician self-referral proscriptions to specialty hospitals.  In a related development, the Centers for Medicare & Medicaid services has proposed extending the physician self-referral provisions to nuclear medicine services (including PET). 

Diane S. Millman, JD, of Powers, Pyles, Sutter & Verville, PC, Washington, DC, is counsel to the National Coalition for Quality Diagnostic Imaging Services (NCQDIS). This article has been based, in part, on the Medicare update that she presented to NCQDIS on July 1, 2003.