How Will SCHIP Be Extended and What Will Happen to Medicare Advantage and the Upcoming Medicare Physician Fee Cuts

Health Market Survey publisher Bill Boyles joins us again today. After getting his perspective on the State Children's Health Insurance Program (SCHIP) debate yesterday, I prevailed upon him to put a post together for our readers.

Bill has some very important news on just how this debate, which involves three greatly important health care issues--the SCHIP extension, proposed Medicare Advantage cuts, and the scheduled Medicare physician fee cuts, is coming together:

Dems Seeking SCHIP-Only Deal,
But Not Without A Good Road Map
by Bill Boyles

Key Democratic Chairmen in the House and Senate have instructed their staff to work out a possible road map for how to split off Medicare Advantage (MA) reform from the SCHIP bill, I found out earlier this week. They’ve been working with MA lobbyists to avoid a train wreck when the House-Senate conference meets in two weeks.

The thinking is that the House bill is simply too massive a change to ever work out a deal among Democrats, let alone a bi-partisan agreement within a House-Senate conference committee. That leaves only one option: limiting the conference to the Senate bill and considering the MA stuff separately.

That’s bad news for Medicare Advantage backers. Their main hope has been that neither party will be able to work out all the kinks of a road map compromise, and the whole thing will stall out and fail until 2009.

There’s no way the House Dems will ever agree to just dropping MA, not after sweating blood to get it out of the House (including a final vote margin of one vote that caused Republicans to walk out). But there is a way the House leadership could think about dropping the proposed Medicare Advantage cuts: if there is a pre-nuptial agreement. And the dowry has to include a real list of specifics with what , when, where and how a House-Senate deal takes shape. This is what is being negotiated at the staff level while members of Congress work on their tans. If they succeed it’s lights out for MA plans before the SCHIP vote even happens.

In retrospect, there was a sly hidden logic to House Dems pushing through their MA reforms attached to the House SCHIP bill, something that was criticized by pundits as a hopeless exercise at the time. Now neither party wants the popular SCHIP bill to go down in flames, and the only way of saving it now is to reach some kind of a deal on all those “hopeless” provisions. Otherwise, it’s going to be stalemate city.

For months there have been two hidden priorities for September. First, getting the SCHIP bill to the White House so it can be vetoed and over-ridden in a vote that includes lots of Republicans. And second making sure that the [pending 10%] physician fee cuts are restored this year instead of being extended like they were last fall due to the election. Nobody wants the AMA attacking Congress just weeks before the first Democratic primaries in February. This year it has to be done by mid-December at the latest.

The road map for dropping the House MA provisions in SCHIP has to deal with this now, not after the SCHIP compromise is voted on and sent to Bush. The only financing method that can raise enough to satisfy the docs is MA reform. Basically, the passage of the House bill gave House Democrats the leverage they needed to insist on a private behind-the-scenes deal before SCHIP can pass.

What’s going to be in the deal? That depends on how much the Senate Finance Committee thinks it has to give the House Dems to make them jump. Almost all of the non-SCHIP stuff in the House came from the House Commerce Committee, not Ways & Means and not necessarily the majority. With the huge attraction of child health removed, the Senate can probably pick and choose what it wants from the House bill, just enough to reach the magic number of bi-partisan votes in the Senate. First to cut will be MA private fee-for-service, but there are dozens of smaller changes that affect various provider groups, not just insurers.

What’s in this for the GOP? Nothing good. If they try to block SCHIP, Republicans get hammered by voters just before an election in which they are already expected to lose seats and perhaps lost their majority for decades. The best idea may be to let Bush fight his own veto battle on SCHIP without even involving Republicans. That means letting the House MA reforms go through, and a large faction of the GOP will say it’s better to protect MA than pass SCHIP.

Medicare Advantage lobbyists this week said with bravado they think they can win the battle with the AMA over whether to use MA reform to pay for restoring Medicare physician fee cuts. I doubt it. First, most of the private insurers in the U.S. are not even that interested in Medicare Advantage – it’s heavily concentrated in United, a couple Blues plans, and the large regional HMOs like Kaiser. Intense lobbying at the state level by medical societies could really hit home this year and easily trump anything AHIP can muster in an underfunded campaign that is not winning much public credibility – or votes. The health insurance industry is also split. Carriers are really much less worried about MA reform than Michael Moore’s popularity with mainstream voters, and finding ways to work with Democrats.