Tuesday, March 9, 2010

Murray Amendment (#3356) and Medicare Beneficiary Assignment

Before the vote on the Murray amendment regarding TANF and summer employment, I wanted to forward around this summary.  You will note that the amendment uses a Medicare pay-for – “intelligent assignment” of low-income beneficiaries in Part D plans – that MedPAC commissioners have previously criticized as potentially unworkable, and may result in greater “churning” of beneficiaries if subsidy-eligible seniors get re-assigned to a new plan every year.

Despite the pay-for referred to above, CBO has scored this amendment as increasing the deficit by $1.6 billion over six years (2010-2015).  A PAYGO point of order therefore lies against the bill, and is expected to be voted on.

 

Senator Murray has revised her amendment to the Baucus Amendment (#3336), to extend the TANF Emergency Fund through 2011 and provide funding for summer employment for youth.  Please note that the only change to the summer youth employment provisions is a change to the cost, from $1.5 billion to $1.3 billion.

The Senate will vote on this amendment as part of a series of four votes at 11:30am tomorrow.

Background on new provisions

TANF Emergency Fund

The amendment provides an additional $1.3 billion for the Temporary Assistance for Needy Families (TANF) Emergency Contingency Fund and extends it until March 2011, with payments allowable through 2012.  It also includes “employment services” as a use of funds.  These services are broadly defined as “services designed to help an individual begin, remain, or advance in employment.”

The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) created a $5 billion Emergency Contingency Fund within the TANF block grant. The fund helps states pay for additional costs of providing economic aid to families during the current economic downturn for FY2009 and FY2010.

Republicans opposed including the Emergency Contingency Fund in ARRA because it undermined key principles of welfare reform by rewarding states that increased their caseload and exempting new beneficiaries from having to engage in meaningful work related activities.

Intelligent Assignment

The amendment includes language requiring the Centers for Medicare and Medicaid Services (CMS) to provide “intelligent assignment” of low-income subsidy (LIS) beneficiaries’ Part D prescription drug plans.  Under current law, CMS is required to randomly auto-assign LIS beneficiaries to plans, and those beneficiaries can switch from their auto-assigned plan if they prefer another option.  The amendment would require CMS to assign LIS beneficiaries to plans that are in the lowest quartile of costs and “reasonably meets the needs of such Part D eligible individuals as a group.”  This amendment would save approximately $1.6 billion as a result of the requirement that CMS choose low-cost plans for beneficiaries.

Two potential concerns have been raised by this amendment.  First, it would almost by definition appear difficult to provide “intelligent assignment” to Part D beneficiaries “as a group.”  At a 2008 Medicare Payment Advisory Committee (MedPAC) meeting, commissioners noted that “the idea that you could do this in some kind of systematic way for beneficiaries in an open season kind of framework is kind of mind-boggling,” given each beneficiary’s unique medical conditions.

Second, while the amendment is designed to place LIS beneficiaries in low-cost plans, low-income subsidy beneficiaries tend to have higher health and prescription drug costs than the Medicare population as a whole.  As a result, any “low-cost plan” with high LIS enrollment could experience a quick spike in costs in future years, thus losing its “low-cost” designation.  This scenario could create a large amount of “churn,” whereby beneficiaries are switched from plan to plan every year in order to meet the “low-cost” threshold, creating beneficiary confusion and potentially harming access in the process.

Pay-for

We are still waiting for a score on this amendment and will update you as soon as we have it.   The amendment is paid for by eliminating the of the advance refundability of the Earned Income Tax Credit (EITC), found in section 3507 of the Internal Revenue Code.  This proposal was put forward by the Administration in their FY11 budget.  Under current law, recipients of the earned income credit have the option of receiving “advanced payments” of the EITC, delivered through lower employer withholdings in their paychecks, instead of receiving a single payment from the government once a year.  The Administration believes this has been an ineffective program, with at most 3 percent of eligible individuals participating.  In addition, the Administration cites recent research that shows “evidence of significant non-compliance by employers and workers,” meaning fraud.  The Administration’s proposal was scored by Treasury as raising $760 billion, all on the outlay side.