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Executive Summary

The House-Senate conference committee considering pending catastrophic care legislation is scheduled to take up the substantive issues related to the proposed drug benefit and its financing on April 19. Senate and House staff are working to prepare a proposed compromise, or "offer," on key issues for the House conferees to present on April 19. House conferees on April 14 sent an "offer" to the Senate on "minor and technical" differences between the two bills regarding the drug benefit and financing mechanism. A previous House offer was accepted by the Senate conferees before Easter. If the current offer is similarly agreed to, as expected, it will complete the conference committee's consideration of so-called "underbrush" issues and clear the way to more substantive questions remaining. The April 14 offer broadens the definition of covered outpatient products: prescription drugs approved as safe and effective by FDA, including pre-1938 and DESI products not yet subject to a hearing notice; licensed biologicals; and insulin. The compromise definition constitutes the House formulation with the addition of pre-1938 and DESI products. The Senate bill defines covered products as prescription drugs recognized in the U.S. Pharmacopoeia. The Senate bill excluded insulin. House managers offered to accept modified Senate provisions regarding pharmacists' administrative allowance (dispensing fee). Under the offer, participating pharmacies would receive a $ 4.50 allowance in 1991 and nonparticipating pharmacies could receive a $ 2.50 allowance; annual adjustments to the allowance would be indexed by a gross national product deflator. The House-passed bill would have set the allowance in 1989 and provided updates biannually. The Senate-passed bill would provide a $ 3.50 allowance for nonparticipating pharmacies. The House recommended a modification of its own criteria for participating pharmacies. The House proposed that HHS be prohibited from requiring routine submission of claims for all drugs purchased by Medicare beneficiaries, unless the department implements a point-of-sale electronic claims processing system. The proposal allows HHS to require submission of claims and other documentation needed for beneficiaries to demonstrate that they have exceeded the deductible and may claim benefits. The House-passed bill would have included in its criteria for participating pharmacies the requirement to assist beneficiaries in determining whether they have met the drug deductible and, upon request, to submit appropriate documentation to the carrier to facilitate carrier determination concerning the deductible. The Senate-adopted version would require pharmacies to certify when the deductible has been met but would prohibit HHS from requiring documentation regarding the deductible, except for audit purposes. A Senate provision for civil monetary penalties for pharmacies that charge more for Medicare-covered services than for the general public was accepted by the House. A one-time study on drug payment limits, focusing on basic payment methodology and including any potential recommendations for change, would be requested of the Office of Technology Assessment, under another House proposal. The House-passed bill would have required HHS to report by April 1, 1989; a similar Senate provision would have required studies by OTA annually and an HHS-contracted study by the Institute of Medicine. An HHS report on indexing for the drug benefit's annual deductible, which would have been required under the House-passed bill but not the Senate, would be dropped in the House offer. House conferees propose that the Senate back off a provision for limiting payments to health maintenance organizations. The House provision would require that payments for HMOs reimbursed on a reasonable cost basis be adjusted to reflect the drug benefit. The Senate provision would permit such HMOs to elect to be paid 80% of reasonable cost for covered outpatient drugs. A new prescription amount limit of 30 days, except for specific drug categories for which HHS authorizes a longer supply, was proposed in the House offer. Provisions adopted by both the House and Senate would have limited amounts to 60-day supplies, except that the Senate bill would have permitted 90-day supplies in the case of chronic maintenance drug therapy. Financing provisions proposed on April 14 include basing the supplemental, or income-related, premium on beneficiaries' tax liability, calculated through a dollar amount per $ 150 of tax assessments. The House proposed that actual supplemental premium amounts be determined from a table constructed by the Treasury Department. The House bill would have assessed the supplemental premium on all Medicare Part A beneficiaries with at least $ 6,000 of adjusted gross income. The Senate measure would target Part B enrolles with not less than $ 150 of tax liability. The dollar amount per $ 150 of tax liability is still an open issue; the House bill would set it at $ 10 per $ 143 in excess of $ 6,000, capped at $ 580; the Senate version proposed a $ 1.09 payment per month per $ 150, capped at $ 800.

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