Medicare Reform: What Happened? What’s Next?

Wednesday, December 31, 2003

Well, it happened. President Bush has signed into law what may be the most damaging piece of legislation ever concocted by Congress. The damage done to the HME services industry is best illustrated by one fact: The combined market value of publicly traded providers dropped 30% within days of its passage.

How did this happen? Let’s keep in mind two things. First, the industry has more powerful enemies than friends. One House member, Dave Hobson, R-Ohio, stood his ground and said he would not vote for a bill that contained competitive bidding in any form. But in the end, he fell victim to pressure and misinformation.

Second, as important as issues like AWP and competitive bidding are to the industry, they were and remain side issues to be reconciled by staff - staff that gets its marching orders from Bill Thomas, R - Calif, chairman o f the House Ways and Means Committee. CMS provided Thomas with enough ammunition to attack the industry, and he directed staff to use every piece of it.

Combine the dearth of industry advocates with congressional indifference and a middle-of-the-night, arm-twisting vote and you have a recipe for disaster. That is what the Medicare Reform and Prescription Drug Act of 2003 is to the industry: a full scale disaster.

Optimism reigned before the final battles because the industry had a plan: Work together with a unified message behind the leadership of AAHomecare. Providers made “Hill visits,” consumers wrote thousands of letters and high-priced lobbyists were hired. But when it became clear that victory was out of reach, the coalition shattered and it was every man for himself. When it was most crucial to be speaking with one voice, a cacophony of different messages engulfed Capitol Hill. The industry was disorganized and thus, a factor to be ignored.

As a result, HME providers got nothing they wanted and everything they feared. Competitive bidding, reduced respiratory drug reimbursement, IR (based on the results of competitive bidding in the five largest MSAs) and across-the-board cuts based on FEHBP rates in 2005. The 678-page legislation also has mandates intended to reduce utilization of power chair codes. Worst of all, many of the wounds received by the industry were self-inflicted.

What’s next? Now that Congress has acted, the focus moves to CMS which must interpret ambiguous legislative language and committee reports to develop administrative rules for a large and diverse array of initiatives. The challenge to the bureaucracy is mind-boggling.

In a bizarre way, this is good news. CMS will not be able to meet the implementation deadlines for most, if any, of the legislation’s 100+ new initiatives. This provides time to develop more allies and get Congress to revisit some of the bill’s more onerous provisions. But as good and loyal as he is, Dave Hobson can’t do it alone. The industry has to get serious about how it recruits, develops and supports friends in Congress. It is also important to remember that guys like Mike Ross, D-Ark., are important and say all the right things but as long as they are in the minority they are unable to deliver results.

If there is cause for optimism it is this. In 1988, Congress rushed through a piece of legislation designed to give Democrats an edge in the fall elections - the Medicare Catastrophic Coverage Act. A year later, when it became clear what was in the legislation and how much it would cost, the legislation was rescinded. Without a major turn-around in the economy and the ability to stop spending billions on multiple wars, deficit spending will continue. After the 2004 elections, conservative Republicans will push to reconsider social programs like the prescription drug benefit that was at the core of this year’s Medicare legislation.

If the industry can recover fast enough, develop more strong relationships in Congress and build an unshakable coalition that will stay on message, there may be an opportunity to reverse some of the more egregious provisions of the legislation. But given what happened over the past few months, this is a big “if.”

Dave Williams is an independent consultant in legislative and political strategy. Reach him at