[Congressional Record Volume 140, Number 41 (Friday, April 15, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: April 15, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
          THE MEDICARE BENEFICIARY COINSURANCE PROTECTION ACT

                                 ______


                         HON. WILLIAM J. COYNE

                            of pennsylvania

                    in the house of representatives

                        Thursday, April 14, 1994

  Mr. COYNE. Mr. Speaker, I rise today to introduce the Medicare 
Beneficiary Coinsurance Protection Act. This legislation amends 
Medicare part B with regard to the amount seniors pay for outpatient 
hospital services.
  Currently, Medicare part B covers physician and outpatient hospital 
services. However, the financial burden placed on Medicare 
beneficiaries is different in these two settings. Physician services 
are reimbursed at 80 percent of the Medicare fee schedule and 
beneficiaries are responsible for the remaining 20 percent. The 
beneficiary's obligation is referred to as a coinsurance payment. There 
is no comparable fee schedule for outpatient services. When care is 
rendered in an outpatient setting, the beneficiary's coinsurance 
payment is 20 percent of whatever the hospital charges. Because 
hospital charges are higher than the Medicare reimbursement rates, 
beneficiaries bear more than 20 percent of the burden for paying for 
these procedures. In fact, HCFA estimated that in 1992, beneficiaries 
paid 40 percent of the hospital's total reimbursement for these 
services. The legislation that I am introducing today ensures that 
beneficiaries pay closer to 20 percent for outpatient hospital surgery.
  In 1983, Medicare changed the way it reimburses most hospitals for 
inpatient services to a prospective payment system [PPS]. Under PPS, 
Medicare inpatient hospital payments are made at predetermined, 
specific rates which represent the average cost, nationwide, of 
treating a patient according to his or her medical condition. These 
rates are commonly referred to as DRG's or diagnostic related groups. 
Under this system a hospital that can treat a patient for less than the 
payment amount may keep the savings. If the treatment costs more, the 
hospital must absorb the loss.
  Hospital outpatient procedures were not included under PPS at that 
time due to a lack of data concerning the costs of these services. In 
1986 the Omnibus Budget Reconciliation Act [OBRA] required HHS to 
develop a PPS system for hospital outpatient surgery by January 1, 
1991. As of now, a PPS system for outpatient hospital services has not 
been developed and until it has, Medicare will continue to reimburse 
for these procedures based on the lesser of the hospital's customary 
charge, reasonable costs, or a blend of costs. In other words, Medicare 
does not base its reimbursement on hospital charges. However, 
beneficiary liability is based on that amount.
  Evidence suggests that since the implementation of PPS, Medicare 
recipients have increasingly been treated in the outpatient setting. 
Consequently, Medicare recipients' out-of-pocket payments have 
increased. In a 1990 report, the General Accounting Office [GAO] wrote:

       * * * with the current hospital payment system, 
     beneficiary's share of the hospital payment--or coinsurance--
     is based on hospital charges rather than on Medicare-
     allowable costs. This means that the beneficiary's share 
     of the hospital payment for outpatient hospital surgery is 
     almost always greater than the 20 percent coinsurance for 
     certain other Medicare-covered services, such as physician 
     costs.

  The Prospective Payment Commission [ProPAC], the group which advises 
Congress and the HHS Secretary on hospital payment issues, noted in 
their March 1993 annual report to Congress that,

       * * * beneficiary liability is now set at 20 percent of 
     charges rather than 20 percent of payments as it is in other 
     settings. Since hospital charges are generally higher than 
     the costs or payments for outpatient services, Medicare 
     beneficiaries are responsible for substantially more than 20 
     percent of costs or payments.

  They went on to observe that,

       * * * beneficiaries who receive services in hospital 
     outpatient departments pay a disproportionate share of the 
     total payments.

  Recently, I heard from a gentleman in my district who had cataract 
surgery performed in an outpatient hospital setting. He paid his 
coinsurance based on hospital charges. However, had his financial 
liability been based on the amount Medicare reimbursed the 
institution--like other services under the Medicare Program--he would 
have saved over $300 in out-of-pocket expenses. This man's situation is 
a good illustration as to why the present system needs to be changed.
  The bill I am introducing today will solve this problem by limiting 
beneficiary coinsurance for outpatient hospital services to 20 percent 
of the reasonable cost of the service. This straightforward solution 
has been recommended by ProPAC and GAO. Further, this approach and this 
bill has the support of the American Association of Retired Persons 
[AARP]. If enacted, this legislation will ensure that Medicare 
recipients are paying closer to 20 percent coinsurance for all medical 
services--not the 40 and 50 percent estimated by HCFA. Under my 
legislation, the gentleman in my district would have saved $300, not 
paid it out in medical bills. The Medicare Beneficiary Coinsurance 
Protection Act guarantees that seniors pay an equitable amount for 
their health care and that their coinsurance for these services be more 
consistent with other parts of the program.
  This legislation also revises the formula used to calculate payments 
to hospitals for ambulatory surgery center-approved procedures, 
radiology services, and diagnostic services. Presently, Medicare 
reimburses facilities the lesser of costs, charges or a blended amount 
for these procedures. As I noted earlier, regardless of the 
reimbursement amount that the facility receives from Medicare, 
beneficiary coinsurance is always based on 20 percent of charges. For 
institutions reimbursed the blended amount, program payments are not 
reduced by the full amount of the beneficiary copayment. Thus, ProPAC 
notes ``total payments to hospitals for outpatient services are higher 
than Congress intended.'' To fix this, the Medicare Beneficiary 
Coinsurance Protection Act subtracts the beneficiary out-of-pocket 
payment after the total payment has been calculated. This 
formula revision has been suggested by GAO, ProPAC and President 
Clinton.

  Mr. Speaker, the President has made a commitment to reform the 
present health care system and has developed a proposal to achieve that 
objective. He has stated that he wants to ``fix what's broken'' with 
the current system. The fact that beneficiaries are paying much more 
than 20 percent coinsurance for certain Medicare services is a good 
example of what's not working in the current system and what needs to 
be fixed. Until HHS establishes a PPS system for outpatient services, 
recipients will continue to pay more out-of-pocket for coinsurance than 
necessary. In the interim, seniors need the Medicare Beneficiary 
Coinsurance Protection Act to ensure that they are paying what they 
should for outpatient services under the program. I urge my colleagues 
to join with me in this effort. Mr. Speaker, I have requested that the 
Congressional Budget Office prepare a revenue estimate for this 
proposal.
  Mr. Speaker, I ask that a letter from AARP be included in the Record.
                                                             AARP.
     Hon. William Coyne,
     U.S. House of Representatives,
     Washington, DC.
       Dear Representative Coyne: The American Association of 
     Retired Persons commends you for introducing the Medicare 
     Beneficiary Coinsurance Protection Act. This legislation 
     would strengthen the Medicare program by correcting an 
     inequity in beneficiary coinsurance for hospital outpatient 
     services that has existed for several years.
       As you are well aware, beneficiaries now pay a 
     disproportionate share of the cost of hospital outpatient 
     services. This happens because beneficiary coinsurance is 
     based on hospital charges rather than on Medicare's payment 
     amount. As a result of this anomaly, the Prospective Payment 
     Assessment Commission estimates that beneficiaries are now 
     paying anywhere from 37 to 54 percent of the cost of their 
     outpatient care. This is a significant out-of-pocket cost for 
     beneficiaries and will only increase as more and more 
     services are provided on an outpatient basis.
       AARP believes that, ultimately, an outpatient prospective 
     payment system is the best approach for both restoring 
     coinsurance to the standard 20 percent and for controlling 
     Medicare spending for outpatient care. Unfortunately, the 
     implementation of an outpatient DRG system is several years 
     away and the inequity in beneficiary coinsurance continues to 
     worsen. Your legislation offers a reasonable interim solution 
     to the beneficiary coinsurance problem that will help to 
     restore a fair system of payment for outpatient services. You 
     are also to be commended for including a financing mechanism 
     in the bill and we are hopeful that the CBO estimates will 
     prove the feasibility of implementing this long-overdue 
     improvement in the Medicare program.
       AARP supports your efforts and we look forward to working 
     with you and your colleagues on passage of this legislation.
           Sincerely,

                                                  John Rother,

                                 Director, Division of Legislation
     and Public Policy.

                          ____________________