Senate Finance Committee Chairman Max Baucus, D-Mont, says he intends to begin negotiating with the House on Medicare legislation despite veto threats from the Bush Administration.

“Finance Committee negotiations on a Medicare bill have been very productive, and there’s now a good basis for negotiation with the House,” Baucus says. “It’s important to move as quickly as possible toward a final Medicare bill before the end of this year.”

Earlier in the week, the administration warned Congress the President would veto any legislation sent to him that contains cuts in the Medicare Advantage program or imposes any added state oversight to the program.

In response, Baucus cautioned that the Medicare provisions may have to be placed in an omnibus spending bill if the members of the committee can’t draft a compromise bill promptly. Additionally, his office said a formal request for the committee to hold a markup of the bill where amendments could be introduced and the bill would be voted on, had been withdrawn.

He had signaled that possibility earlier in the week. “I would still like to have a markup next week, but I’m not going to guarantee there will be one,” Baucus said. “With every passing day, it’s a little less likely.”

He disclosed that his proposal to cut Medicare Advantage plans to help pay for a delay in cutting physician payments to Medicare effective Jan. 1 would focus almost entirely on private fee-for-service plans, which make up about one-fifth of all MA plans.

Heavier cuts have been proposed in legislation that passed the House that would end the 12% disparity between the cost of MA to Medicare and the cost of regular, fee-for-service programs.

And Democrats fired back at the administration, charging that the veto threat confirms that the president “desperately wants to privatize Medicare,” as stated by Rep. Pete Stark of California, chairman of the Health Subcommittee of the House Ways and Means Committee.

Responding to the back-and-forth, an official of America’s Health Insurance Plans, whose members underwrite Medicare Advantage plans, defended the programs.

“We have been very clear in all our outreach to members of Congress that Medicare Advantage payment reductions mean one thing: They will take away benefits from MA beneficiaries, many of whom make less than $20,000 a year in order to pay for a physician fix without any view toward quality improvement in Medicare,” said Mohit Ghose, an AHIP spokesman.

Regarding the state oversight issue, Ghose said AHIP’s board on May 15 established new marketing principles it expected its members to adhere to that involve cooperating with state regulators.

Ghose noted that a key component of the new principles calls for MA plans to “strengthen mechanisms to promptly and effectively address non-compliance, including working with the National Association of Insurance Commissioners, the Centers for Medicare and Medicaid Services, beneficiary groups and broker organizations to urge that new uniform processes and criteria be adopted to report serious broker, agent or plan employee misconduct ….”

The legislation being drafted is designed to pay for a congressional initiative that would head off a 10% cut in Medicare payments to physicians effective Jan. 1.

The administration veto threat came in a letter to Baucus, and Sen. Charles Grassley, R-Iowa, ranking minority member of the Finance Committee.

They have been trying to jointly develop a legislative proposal that would raise the funds necessary to stave off a cut in physician fees under Medicare for 2 years.

The letter voicing the administration’s concerns was written by Michael Leavitt, secretary of the Department of Health and Human Services, parent agency of the Centers for Medicare and Medicaid Services.

The letter said administration advisers would recommend a veto if any legislation sent to the president “results in the loss of access to healthcare services, benefits, or choices in the Medicare Advantage program.”

Cuts in the MA program have been proposed because the Congressional Budget Office has issued studies indicating that the MA program costs an average 12% more than the cost to the Medicare program from traditional fee-for-service providers.

Legislators representing rural districts, especially senators from western states, are very concerned that cuts in MA would leave beneficiaries in rural areas without adequate coverage.

In the letter, Leavitt also said the bill should pay for the physicians’ pay fix by “responsibly adjusting payments to other providers” who are reimbursed under traditional Medicare.

The letter also listed other changes that would provoke a veto threat, including provisions that “disturb, undermine, oroverturn the many successes of the new Medicare prescription drug benefit” or “undermine efforts to promote fiscal solvency in the Medicare and Medicaid programs.”

This is shorthand for proposals in both the House and the Senate that would assign a greater role to the states in overseeing the marketing of MA programs.

In his response to the Leavitt letter, Stark said, “President Bush’s veto threat confirms that he desperately wants to privatize Medicare.”

Stark also said the Leavitt letter “also demonstrates that he is more interested in promoting his radical ideology than he is speaking the truth.

“Bush continues to suggest that limiting or eliminating overpayments to private plans will reduce benefits, even though he knows they are legally obligated to provide no less than Medicare’s benefits,” Stark said. “He continues to support a funding warning that his administration’s own actuary has admitted is arbitrary, even though he knows that Medicare is solvent and sustainable for the future.”

Moreover, Stark said, Bush “suddenly promotes linking physician payments to the adoption of health information technology, even as he opposes the interoperability standards and privacy protections that are prerequisites for a well-functioning and national health information technology system.”