February 25,2000

Committee to Hold Hearing on Competition in the Medicare Program

WASHINGTON -- Senate Finance Committee Chairman William V. Roth, Jr. (R-DE) today announced the Committee will meet on Tuesday, February 29, 2000 at 10:00 a.m. in 215 Dirksen Senate Office Building to hear testimony on competition in the Medicare program.

The following witnesses are expected to appear before the Committee:

I. A panel consisting of:

Madeleine Smith, Ph.D., Specialist in Social Legislation, Congressional Research Service; Washington, D.C.

Mark McClellan, M.D., Ph.D., Assistant Professor of Economics, Stanford University; Stanford, CA

Jeff Lemieux, Ph.D., Senior Economist, Progressive Policy Institute;
Washington, D.C.

II. A panel consisting of:

Len M. Nichols, Ph.D., Principal Research Associate, Urban Institute;
Washington, D.C.

Keith Mueller, Ph.D., Director, Nebraska Center for Rural Health Research; Omaha, NE

Karen Ignagni, Chief Executive Officer, American Association of HealthPlans; Washington, D.C.

BACKGROUND

On February 29 at 10:00 a.m. the Finance Committee will hold its second Medicare reform hearing of the year. The first hearing focused on the larger concepts incorporated in both the Breaux-Frist proposal and the Administration's proposal for fundamental Medicare reform.

This hearing will focus on how competition between public and private health plans would be structured under the two proposals. Both the Breaux-Frist premium support proposal and the Administration's competitive defined benefit proposal significantly enhance the competitive aspects of the Medicare program. Key to the success of either proposal is the ability to generate a more efficient market through a better educated and price-sensitive Medicare beneficiary population. It is this prudent consumer behavior that allows for slower growth in both beneficiary premiums and the government contribution. This slower growth reduces beneficiary out-of-pocket spending and improves the financial viability of the Medicare program.

The two proposals use somewhat different strategies to achieve a more competitive Medicare program. The Breaux-Frist proposal links the government contribution to the average premium charged by health plans. Plans with above average premiums are at a severe competitive disadvantage. The Administration's proposal links the government contribution to the premium charged by the traditional HCFA-run fee-for-service plan. Plans with premiums higher than the traditional plan are at a severe competitive disadvantage. These two approaches reflect a policy balance between encouraging plan competition and protecting the premiums beneficiaries pay to remain in the traditional HCFA-run plan.