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2004 hhsdocs

2004 hhsdocs

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Number of Pages:15

Date Created:May 6, 2004

Date Uploaded to the Library:July 29, 2013

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Case No. 2004-663mb 
April 19, 2004 

Mr. Christopher Farrell JUDICIAL WATCH, INC. 501 School Street, S.W., Suite 500 Washington, D.C. 20024 
Dear l1:r. Farrell: 
This response your March 22, 2004, Freedom Information Act (FOIA) request, addressed Lee Jackson, FOIA Officer, Centers for Medicare and Medicaid Services (CMS) and seeking certain documents pertaining cost estimates for proposed Medicare legislation. have completed the search the files within the Office the Secretary (OS) and the Centers for Medicare and Medicaid (CMS) and have identified one hundred sixty-two (162) pages responsive your request. releasing the full texts thirteen (13) pages records. have determined withhold one hundred forty-nine (149) pages their entirety under exemption (b)(5) the FOIA. 
Exemption )(5) permits the withholding inter-agency intra-agency memorandums letters, which would not available law party other than agency litigation with the agency." The withheld material draft, preliminary, pre-decisional and contains staff advice, opinions, and recommendations. Withholding necessary preserve free and candid dialogue leading decision-making. 
You asked for specific identifying information about the records being withheld. Such descriptions are called Vaughn indices. HHS only provides Vaughn indices litigation, when are required the court. 
There fee this instance because charges not exceed our billing threshold $25.00. you have reason believe that any denied records should not exempt from disclosure, you may appeal. ask that you mail your appeal within days from the date our final response you, the Deputy Assistant Secretary for Public Affairs (Media), U.S. Department Health and Human Services, 200 Independence Avenue, S.W., Room 645-F, Hubert Humphrey Building, Washington, D.C. 20201. Clearly mark both the envelope and your letter "Freedom Information Act Appeal." 
Sincerely yours, 

Rosario Cirrincione Director FOi/Privacy Acts Division Office Public Affairs 
Enclosures 

February 004 
NOTE TO: Dennis Smith 

SUBJECT: Summary Differences Between OACT and CBO Cost Estimates for 08-1 73, the "Medicare Prescription Drug, Improvement, and Modernization Act 2003"-Updated you know, the Office the Actuary has estimated that the Medicare modernization act would
increase net Federal costs total $534 billion through fiscal year 2013.The corresponding estimate the Congressional Budget Office $395 billion. OACT and CBO have independently estimated the cost the modernization act using the best data, assumptions, and methods that each organization could develop. The following points summarize the nature the differences the estimates. 
 	
The estimates differ principally because the future uncertain, and this uncertainty reflected somewhat different assumptions regarding the numerous cost and behavioral factors that will affect actual future costs. this regard, the difference estimates useful reminder the inherent uncertainty and rough indication the sensitivity future costs the underlying cost factors. 

 the total difference $139 billion between the estimates, approximately billion relates Title the act, the Medicare prescription drug program: 

-OACT estimates that about percent all Medicare beneficiaries would enroll (or otherwise benefit from) the Medicare drug benefit, compared percent for CBO, and also estimate slightly higher average, per-beneficiary value for the standard drug benefit. These factors account for $32 billion the total difference. 

-While OACT and CBO estimate similar numbers beneficiaries who are eligible for the low-income drug subsidy, OACT estimates significantly higher enrollment rate these individuals. addition, our estimated average cost for the low-income subsidy per beneficiary slightly greater than CBO's. the total difference estimated drug costs, the low-income subsidy accounts for $47 billion. 
-The cost Medicare providing the drug benefit would partially offset net Federal savings for Medicaid. (Federal Medicaid drug expenditures would eliminated, but other Federal Medicaid costs would increase somewhat; beneficiaries enroll for the Medicare low-income drug subsidy, some will found qualify for Medicaid coverage). CBO estimates greater degree net Federal Medicaid savings, because their prior baseline projections included rapidly growing cost for 4'pharmacy plus" Medicaid waivers. total, the CBO savings estimate $18 billion greater than OACT's. 
This estimate excludes Federal administrative costs, other than the $1.5 billion authorized section 015 the 
act, and the impact social insurance payroll taxes and general income taxes. additional Medicare expenditure $16 billion through 2013 would made for employer drug subsidy payments Federal employers. Beneficiaries employer-sponsored retiree health benefit programs are included this percentage. 

 
$32 billion the remaining difference the overall cost estimates associated with Title II, the Medicare Advantage program. OACT's estimated costs for this title are $46 billion, versus CBO' estimate $14 billion: 
-CBO's estimate based $IObillion cost for the regional PPO stabilization fund, and billion for the "immediate improvements" 
2004 and later payment rates. They estimate that these changes will slow the decline private plan enrollment, with about percent beneficiaries ultimately enrolled. Regional are estimated have costs somewhat excess the prevailing "payment benchmarks," with the result that few such plans could participate and beneficiary enrollment would minimal. 
-OACT's estimate includes $12 billion for the stabilization fund and another $34 billion due the higher payment rates stardng 2004 and the restructured payment formula 2006 and later. estimate that HMO enrollment would increase from its current level about percent percent and that PPO enrollment would also reach percent 2009 and later. The latter projection based estimated PPO costs that are generally below the payment benchmarks, with the result that beneficiaries could qualify for significant premium rebates and/or additional benefits. Because these estimated PPO costs typically exceed fee-for-service levels, however, Medicare costs for such enrollees would higher than under prior law. 
 	Other differences exist between the OACT and CBO estimates for Titles III through IX. These differences tend smaller and are also largely offsetting (with CBO sometimes higher and sometimes lower than our estimates). you know, not uncommon for these two organizations differ somewhat their estimates. For example, CBO's estimated Medicare savings for the Balanced Budget Act 1997 totaled about $116 billion the first fiscal years. The corresponding OACT estimates were $152 billion. Similarly, the BBA savings estimates over the first years were $394 billion for CBO versus $517 billion for OACT. believe that CBO has prepared competent, good-faith estimates for the Medicare modernization act. prefer the assumptions and methods employed the Office the Actuary, and stand behind our own estimates, while recognizing that uncertain future could prove all wrong. 
Please let know you have any questions about this information. 
Rick Foster 

DEPARTMENT HEALTH HUMAN SERVICES Centers for Medicare Medicaid Services 7500 Security Boulevard, Mail Stop N3-01-21 Baltimore, Maryland 21244-1850 
DATE:  June 21, 2003  
FROM:  Richard Faster Chief Actu'iry  
TO:  Representative William Thomas Chairman Vays and Means Committee  

SUBJECT: 	Estimated Proportion Medicare Beneficiaries Who Would Purchase Drug Insurance Coverage under Ways and Means Medicare Reform Package 
The Medicare reform legislative package reported earlier this week the House Ways and Means Committee would provide for voluntary program prescription drug coverage for Medicare beneficiaries. Coverage would offered through insurance companies and health plans, with partial Federal reinsurance for beneficiaries incurring high drug costs and with Federal premium subsidy. Together, the reinsurance and premium subsidy would cover percent the average value the drug benefit, for beneficiaries with annual incomes below $60,000. Beneficiaries could enroll this program any time but would face potential higher premium rates preexisting condition exclusions they delayed enrollment past their first opportunity. estimate that virtually all Medicare beneficiaries (i.e., least percent) would opt for such drug coverage. general, would expect very high participation rate for any drug benefit with substantial premium subsidy and potential penalties for late enrollment. 
Please let know you have any questions about this information can additional assistance. 
n,s.  
Richard Foster, F.S.A. Chief Actuary 

cc: Thomas Scully 
 

DEPARTMENT HEALTH HUMAN SERVICES Centers for Medicare Medicaid Services 7500 Security Boulevard, Mail Stop N3-01-21 Baltimore, Maryland 21244-1850 
DATE: June 26, 2003 
FROM: 	Richard Foster 
Office the Actuary 

TO: 	Representative Charles Rangel 
Ranking Member 
House Committee Ways and Means 

SUBJECT: 	Estimated Impact H.R. Premiums for Fee-for-Service Beneficiaries and Later 
Under H.R. the "Medicare Prescription Drug and Modernization Act 2003," premiums paid beneficiaries traditional fee-for-service Medicare would not affected the operations private health plans prior Beginning the determination such premiums for beneficiaries residing "competitive" areas would affected the level fee-for-service costs the area compared private plan costs. (In other areas-that is, those not meeting the criteria defining competitive areas-there would change fee-for-service premiums.) transition rule would limit year-to-year changes fee-for-service premiums. This memorandum presents estimates the changes fee-for-service premiums under H.R. 2010 and later, for beneficiaries residing "'competitive Medicare Advantage areas" and "'competitive Enhanced Fee-for-Service regions. important understand that the impact H.R. premiums for fee-for-service beneficiaries would vary substantially depending such factors as: 

 
The cost private EFFS and health plans relative fee-for-service cost levels; The percentage Medicare beneficiaries enrolled traditional fee-for-service, EFFS plans, and plans, both for regions and for the nation overall; and 

The number consecutive years that area was "competitive," defined the bill. described below, generally estimate that premiums for fee-for-service beneficiaries 
competitive areas EFFS regions would exceed those under current law. There are 
plausible situations, however, which such premiums some areas could instead slightly 
lower than current-law levels. The beneficiary premium provisions H.R. for and later are complex, and summary these provisions exceeds the scope this memorandum. Reference should made section 241 the legislation for the specific definitions, rules, and formulas. 

EFFS plan costs the region and tlle proportion beneficiaries fee-for-service 
The transition provision would phase any adjustments fee-for-service premiums, based 
the consecutive number years that the area had been competitive. One-fifth the full 
adjustment would applied the first such year, two-fifths the second consecutive year, 
three-fifths the third year, etc.4 Consequently, the estimated ultimate premium impacts 
described above would proportionally smaller during the initial transition (which would 
2010 through 2014 for many areas) any later period involving fewer than consecutive years competitive area. addition, there possibility that, some competitive areas 
during the transition, fee-for-service premiums would adjusted downward rather than upward 
 This situation could occur the average cost HMOs that area were greater than the fee-forservice cost level. the final year the transition, however, after the higher payment benchmarks for private plan premium determinations had phased out, would expect any such areas revert non-competitive status. this case, fee-for-service premiums would not affected. noted above, these estimates apply only Medicare beneficiaries residing competitive EFFS areas. Under H.R. not all areas would meet the competitive criteria, which case premiums for fee-for-service beneficiaries would not affected. have not yet estimated the proportions beneficiaries who would enroll fee-for-service Medicare versus EFFS private health plans 2010 and later. Prior estimate that roughly percent With relatively high private plan enrollment, estimate, fee-for-service premium increases would the upper end our estimated 5-25 percent range. With relatively low private enrollment, estimated the Congressional Budget Office, the fee-for-service premium increase would tend the lower end this range. estimate that, 2014, the average cost the three winning PPO plans most EFFS regions would slightly less than the region's fee-for-service cost. PPO costs were instead significantly greater, estimated CBO, then fee-for-service premiums competitive EFFS regions would tend slightly less than current law, depending the proportion beneficiaries the region enrolled private plans. region area that had been competitive subsequently became non-competitive, then fee-for-service premiums would revert their normal, unadjusted level. later years the area again became competitive, then the transition would start over and fee-for-service premiums would again follow the pattern described above.

beneficiaries would remain the fee-for-service program, with total roughly percent suggested the foregoing discussion, the impact the post2010 competition provisions fee-for-service premiums complex. addition, the estimates shown this memorandum reflect considerable uncertainty due (i) lack robust data private plan costs, (ii) possible changes beneficiary enrollments reaction the premium changes after 2010, (iii) ambiguity certain the draft legislative provisions, and (iv) the limited time available for preparation these estimates, which necessitated simplified estimation methods. Consequently, while believe that these estimates provide reasonable indication future fee-for-service premium levels under the draft legislation, they should considered preliminary and used only with full awareness their limitations. 

Richard Foster, F.S.A. Chief Actuary For previous versions the Medicare reform legislation, developed the Ways and Means Committee, had 
estimated private plan enrollment percent prior The lower estimate for H.R. results from change the calculation Medicare Advantage payment rates under section 212 


estimates increase net Medicare and other Federal costs under sefocted draft Senate Finance proposals (Based June 10, 2003 "Chairman's Mark;" amounts billions) 
Fiscal year 	Total
Proposal 2004 2005 2006 2007 2008 2009 2010 201l 2012 2013 2004-2oos 2004-2013 Medicare Advantage l.8 l.8 $2.0 $2.1 $2.2 $2.3 $5.0 $16.0 
pp()s............................................... ...... 	$2.3 $3.8 $4. $4.2 $4.3 $4.4 $4.5 $4.6 $10.2 $32.0 

Total for Medicare Advantage .............. 

$6.6 $6.8 $7.0 $15. $48.0$3.7 $5.5 $6.2 
Prescription drug benefit: 
Increase Medicare costs .................... $3.6 

$147.5 $496.9$36.5 $48.7 $62.7 $68.0 $75.8 $85.2 
$7.2
Net increase Fed. Medicaid costs ...... 
$8.2 $8.8 $16.0 $54.6$4.0 $6.2 
Total for benefit. ......................... $3.6 

$84.0 $94.0 $163.4 $551.5$5.5 $40.5 $59.3 $64.5 $69.9 $75.7 
Notes: 
Medicare Advantage estimates are very rough and provide only general indication the financial effect this provision. particular, under the draft legislalion, there could significant shifts enrollment between HMOs and PPOs, which are not reflected these estimates. 	
The Jrnh SFC Medicare reform package has other provisions beyond those shown here. Estimates are not yet available for these olher provisions. 	
Sec our June 2003 note alternative benchmarks for description why costs would increase under the Medicare Advantage PPO option. See cover e-mail regarding nature HMO cost increase. 	
The "increase net Medicare costs" refers increase benefit expenditures and/or reduction premium revenues. Estimates not include Federal administrative costs. 

Office the Actuary Centers for Medicare Medicaid Services June 11, 2003 

Scualc June 2()().) crsion card and Initial Catastrophic Catastrophic Average General Low transitional coverage Coinsurance out-of-pocket coinsurance monthly Premium Rein-mcome low-income Total Federal Deductible limit rate threshold rate Subsidy surance subsidy Medicare Medicaid Total 

$0.0$3.6 
2005 
$5.5 $0.0 
2006 
$4.0 $40.5
$275 
$3,450 50% $3,700 10% $31.80 $17.0 $8.0 $9.2 $2.3 
2007 $303 $3,802 50% $4,077 10% $34.59 $24.4 l.2 $1.3 $0.0 $48.7 $5.8 $54.5 
$4,174 50% $4,477 10% $37.48 $27.0 $11.8 $14.4 $0.0 $53. 
$6.2 
$4,571 50% $4,902 10% $40.48 $29.8 $12.4 $0.0 $57.9 $64.52009 $364 $398 $4,992 50% $5,353 10% $43.55 $32.7 $12.9 $0.0 $62.7 $7.2 $69.9 
$5,451 50% $5,846 10% $46.82 $35.9 $13.5 $18.5 $0.0 $68.0 $7.7 $75.7 
$20.6 $75.8 $8.2 $84.0$5,952 $0.050% $6,384 10% $5L21 $40.3 $85.2 $8.8 $94.0$518 $6,500 $0.050% $6,971 10% $55.91 $16.8 $23.0 

$252.5 $101.5 $13 l.5 $11.4 $496.9 $54.6 $551.5 
Notes: Dual-eligible Medicaid beneficiaries will retain their current Medicaid coverage. Medicare will waive the state requirement pay the Part premium for 
beneficiaries between 74% and 00% the Federal poverty level. Medicaid dual beneficiaries would not enroll Medicare drug plans. 
Low-income persons (non dual-eligible Medicaid) will have the following benefit provisions and premium suibsidies 2006. 
Deductible  QMB  Sl.MB QI-I   for Medicare and Medicaid Services (CMS). understand that has claimed media accounts that his cost estimates showing higher cost figures than were announced the Bush Administration were intentionally suppressed during last years Medicare debate, and that was threatened with termination rnvealed the higher cost figures Congress. 
While not surprised that the estimated cost the new bill far exceeds official CBO figures, very concerned about these allegations and the possible threats against Mr. Foster. 

Concerns about the cost the bill were rais1ed repeatedly during the Medicare debate. your agency possessed higher cost estimates, those estimates should have been disclosed for full discussion and debate. Etimates the CMS Chief Actuary are not binding Congress, but the figures would have been helpful during the debate and should have been released. 

4009 6TH AVENUE: 294 FEDERAL BUILDING 11301 CAVSNPORT STREET 115 RAILWAY STREET Sum:9 100 CENTENNIAL MALL NORTH Sum:2 
SUITE0102 KEARNEY, 68845 

LINCOLN, 68508 	OMAHA, 68154 SCOTTSBLUFF, 69361 
(308) 236-7602 	(402) 476-1400 (402) 7E8-8981 (308) 632-6032 ohuel



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