Staff Document

Major Options to Modernize and Secure the Medicare Program for the 21st Century

Purpose: To provide background information to Members of the Senate Committee on Finance on major legislative options for modernizing the Medicare program.

Contents:

Section 1: Overview (P. 1)

Section 2: Medicare+Choice and Health Plan Competition (P.3)

Section 3: Fee-for-Service Plan Management Modernization (P. 11)

Section 4: Benefit Design Improvements Within the Current Law Standard

Package (P. 15)

Section 5: Access to Outpatient Prescription Drug Coverage (P. 20)

Section 6: Medicare Governance (P. 28)

Section 7: Medicare Solvency Standards (P. 31)

Section 1. Overview

Background Discussion (p.1)

Section 2. Medicare+Choice and Health Plan Competition

Establishment of Medicare+Choice Premiums (P. 3)

Option 1 - Continue with Medicare+Choice government-determined premium approach (P. 5)

Option 2 - Adopt a plan premium bidding approach (P. 5)

Determination of the Government Contribution (P.6)

Option 1 - National model #1: Link the government contribution to the average premium of both public and private plans weighted by plan enrollment. (P. 6)

Option 2 - National model #2: Link the government contribution to the cost of the traditional FFS plan. (P. 7)

Standard vs. Flexible Benefit Offerings By Plans (P. 10)

Option 1 - Require the Medicare benefit package to be offered as the minimum, without variation (Medicare+Choice current law) (P. 10)

Option 2 - Allow moderate benefit variation around the core set of benefits (FEHBP model) (P. 10)

Section 3. Fee-for-Service Program Management Modernization (P. 11)

Option 1 - Contractor Reform (P. 11)

Option 2 - Primary Care Case Management (P. 11)

Option 3 - Disease Management Services (P. 12)

Option 4 - Competitive Bidding of Certain Products (P. 12)

Option 5 - Provider and Physician Collaborations (P. 13)

Option 6 - Preferred Providers (P. 13)

Option 7- Centers of Excellence (P. 13)

Option 8 - Demonstration of Bonus Payments for Health Care Groups (P. 13)

Option 9 - Purchasing and Quality Improvement Programs (P. 14)

Option 10 - Funding for Overpayment Recoveries (P. 14)

Section 4. Benefit Design Improvements Within the Current Law Standard Package (P. 15)

Option 1 - Enact a new, model standard benefit package for Medicare - illustration follows. (P. 17)

Option 2 - Seek expert evaluation of and recommendations on Medicare standard benefit package design prior to legislative action. (P. 17)

Option 3 - Incremental changes (several options appear in the paper) (P. 17)

Section 5. Access to Outpatient Prescription Drug Coverage (P. 20)

Medicare Program Options: (P. 23)

Option 1 - The Breaux-Frist 2000 Proposal (P. 23)

Option 2 - The President's Proposal (P. 24)

Option 3 - Universal High Deductible Benefit (P. 24)

Option 4 - Universal Step-Up Benefit (P. 25)

Option 5 - Combined Deductible (P. 25)

Option 6 - Part B Expansion (P. 26)

Free-Standing Drug Assistance Program:

Option 7 - Targeted, Low-Income Benefit (P. 27)

Section 6. Governance of Medicare (P. 28)

Option 1 - Assignment of New Functions and Resources to HCFA (P. 29)

Option 2 - Oversight Board (P. 29)

Option 3 - Operational Board (P. 29)

Option 4 - HCFA Re-engineering (P. 29)

Option 5 - Redefining Congressional Oversight (P.29)

Section 7. Solvency Provisions (P. 31)

Option 1 - The Bipartisan Commission Chairmen's Proposal (P. 32)

Option 2 - The President's Proposal (P. 32)

Option 3 - Establish more effective measures of financial viability (P.33)

Section 8. Appendix