Medicare Program Changes in Senate-Passed H.R. 3590

Patricia A. Davis, Coordinator
Specialist in Health Care Financing

Jim Hahn
Analyst in Health Care Financing

Paulette C. Morgan
Specialist in Health Care Financing

Holly Stockdale
Analyst in Health Care Financing

Julie Stone
Specialist in Health Care Financing

Sibyl Tilson
Specialist in Health Care Financing

Medicare is a federal program that pays for covered health services for most persons 65 years and older and for most permanently disabled individuals under the age of 65 years. The rising cost of health care, the impact of the aging baby boomer generation, and declining revenues in a weakened economy continue to challenge the program's ability to provide quality and effective health services to its 45 million beneficiaries in a financially sustainable manner. 

On December 24, 2009, the Senate passed its version of health insurance reform, the Patient Protection and Affordable Care Act, in H.R. 3590, as amended by the Senate. This report, one of a series of CRS products on this Senate bill, examines the Medicare related provisions in this bill. Estimates from CBO on the Senate bill indicate that net reductions in Medicare direct spending may approach $410 billion from FY2010 to 2019. Major savings are expected from constraining Medicare's annual payment increases for certain providers, basing payment rates in the Medicare Advantage program on average bids, reducing payments to hospitals that serve a large number of low-income patients, creating an independent Medicare Advisory Board to make changes in Medicare payment rates, and modifying the high-income threshold adjustment for Part B premiums. A new Hospital Insurance tax for high wage earners would also raise approximately $87 billion over 10 years. 

Other provisions in the bill address more systemic issues such as increasing the efficiency and quality of Medicare services, and strengthening program integrity. For example, the bill would establish a national, voluntary pilot program that would bundle payments for physician, hospital and post-acute care services with the goal of improving patient care and reducing spending. Another provision would adjust payments to hospitals for readmissions related to certain potentially preventable conditions. Additionally, the bill would increase funding for anti-fraud activities, and subject providers and suppliers to enhanced screening before allowing them to participate in the Medicare program. 

The Senate bill would also improve some benefits provided to Medicare beneficiaries. For instance, Medicare prescription drug program enrollees would receive a 50% discount off the price of brand name drugs during the coverage gap (the "doughnut hole") and the coverage gap would be reduced by $500 in 2010. Other provisions would expand assistance for some lowincome beneficiaries enrolled in the Medicare drug program, and eliminate beneficiary copayments for certain preventive care services. 

Date of Report: January 28, 2010
Number of Pages: 80
Order Number: R40970
Price: $29.95

Document available electronically as a pdf file or in paper form.
To order, e-mail congress@pennyhill.com or call us at 301-253-0881.