June 17, 2008

TO:  Nada L. Stotland, M.D., President 
        Ron Burd, M.D., Speaker 
        Board of Trustees 
        Assembly Executive Committee 
        Council on Advocacy and Public Policy 
        Committee on Government Relations

FR:   Nick Meyers, Director of Government Relations 
        Jason Pray, Deputy Director for Political Affairs and Grassroots

RE:   Latest Information about Senate Medicare Debate

As you know, last week the Senate failed to invoke cloture and cut off debate on S. 3101, legislation sponsored by Senator Max Baucus (D-MT) to stop the 10.4% Medicare payment update cut now scheduled to go into effect on July 1. The Baucus bill also would make major improvements in Medicare coverage of treatment for mental illness, most notably by gradually reducing the 50% discriminatory coinsurance for outpatient mental health services to the same 20% required for all other part B services.

Yesterday, we attended a physician-only luncheon meeting with Senator Chuck Grassley (R-IA), the ranking (senior) Republican on the Senate Finance Committee. Senator Grassley indicated that he expects the Democratic leadership to call for another cloture vote on S. 3101 (Baucus) between today and Thursday, which he said would fail again. At that point, he expects to get together with Senator Baucus and work out a package deal on Medicare. He emphasized what we know and have reported to the Board and the membership: that President Bush objects to the level of cuts to Medicare Advantage plans now in the Baucus legislation, and as a result will veto a Medicare bill with similar cuts. Senator Grassley thought that President Bush would not allow any "expanded entitlements" which meant that the Senate would have to agree to a very stripped down Medicare bill.

We took advantage of the opportunity to press him about as hard as we could about the 50% coinsurance requirement. We suggested that he had an opportunity to take a truly historic action to end blatant Medicare discrimination that has been a feature of the program since it was started. We also noted that this should not be seen as an expanded entitlement, since it was simply an action to treat outpatient mental health services like every other Part B service. Finally, we noted that including the phase-out of the 50% coinsurance requirement in the Medicare package sent to the President would stop forcing the elderly and disabled to pay fully half the cost of their own care out of pocket, and that the free-standing APA-developed legislation to achieve this objective, as incorporated into the Baucus Medicare package was introduced by his Republican colleague, Senator Olympia Snowe (R-ME).

Senator Grassley responded by saying that "before the package got bogged down in partisanship" he was prepared to make a counteroffer to Senator Baucus and accept the 50% coinsurance provision with a 10-year phase-out. This is entirely consistent with our earlier intelligence as reported to the leadership. This is encouraging information, and we will continue to lobby for an end to the 50% coinsurance. While we have always sought the shortest possible phase-out (and members may recall that the House-passed CHAMP Act included an immediate reduction in the coinsurance to 20%), the barrier has always been the Congressional Budget Office (CBO) cost estimate. Even if budgetary and political reality dictates a 10-year phase out, once we have real world cost data instead of CBO's estimate we can always ask the next Congress to shorten the timeframe.

We will provide you with another update as the legislation situation plays out. While we will endeavor to do so with as much lead time as possible, the situation is extremely fluid and subject to abrupt change without warning.