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104th Congress Rept. 104-79
HOUSE OF REPRESENTATIVES
1st Session Part 1
A BILL TO AMEND SECTION 4358 OF THE OMNIBUS BUDGET RECONCILIATION ACT
OF 1990 TO PERMIT MEDICARE SELECT POLICIES TO BE OFFERED IN ALL STATES
ON A PERMANENT BASIS
March 15, 1995.--Ordered to be printed
Mr. Archer, from the Committee on Ways and Means, submitted the
R E P O R T
[To accompany H.R. 483]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 483) to amend title XVIII of the Social Security Act
to permit Medicare select policies to be offered in all States,
and for other purposes, having considered the same, report
favorably thereon with amendments and recommend that the bill
as amended do pass.
A. Purpose and Summary................................... 2
B. Background and Need for Legislation................... 2
C. Legislative History................................... 2
II. Explanation of the Bill...........................................3
A. Expansion of Medicare SELECT (sec. 1)................. 4
Votes of the Committee............................................4
IV. Budgets Effects of the Bill.......................................5
A. Committee Estimate of Budgetary Effects............... 5
B. Statement Regarding New Budget Authority and Tax 6
C. Cost Estimate Prepared by the Congressional Budget 6
V. Other Matters to be Discussed under the Rules of the House........7
A. Committee Oversight Findings and Recommendations...... 7
B. Summary of Findings and Recommendations of the 7
Government Operations Committee.
C. Inflationary Impact Statement......................... 7
VI. Changes in existing Law Made by the Bill, as Reported.............7
The amendments are as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. PERMITTING MEDICARE SELECT POLICIES TO BE OFFERED IN ALL
STATES ON A PERMANENT BASIS.
Section 4358(c) of the Omnibus Budget Reconciliation Act of 1990,
as amended by section 172(a) of the Social Security Act Amendments of
1994, is amended--
(1) by inserting ``and such other States as elect such
amendments to apply to them'' after ``Services)'', and
(2) by striking ``and only during the 3\1/2\-year period
beginning with 1992''.
Amend the title so as to read:
A bill to amend section 4358 of the Omnibus Budget Reconciliation
Act of 1990 to permit Medicare select policies to the offered in all
States on a permanent basis.
a. purposes and summary
H.R. 483 would extend the Medicare SELECT program to all States on
a voluntary and permanent basis.
b. background and need for legislation
Under current law, Medicare beneficiaries can purchase private
health insurance to supplement their Medicare coverage. These
individually purchased policies are known as Medigap policies. Medigap
insurance is regulated by federal and state law. The Omnibus Budget
Reconciliation Act of 1990 (OBRA 1990) established a demonstration
project under which insurers could market a Medigap product known as
Medicare SELECT. SELECT policies are the same as other Medigap policies
except that they may only pay in full for supplemental benefits if
covered services are provided through designated health professionals
and facilities known as preferred providers. OBRA 1990 limited the
SELECT demonstration project to 3 years (1992-1994) and to 15 States.
The Social Security Amendments of 1994 (P.L. 103-432) extended the
project for 6 months, through June 30, 1995.
The demonstration project is currently set to expire on June 30,
1995. If the program is not extended before this date, HCFA would be
required to notify the participating States to prepare for closing the
program. Medicare SELECT carriers would then have to close the program
to new Medicare enrollees on June 30, 1995. While current enrollees
could remain in the program, health plans would be required to notify
the participants that the program has ended.
If the program is allowed to expire, no additional individuals
would be allowed to enroll in SELECT plans. This will likely result in
significant increases in premiums for current enrollees as no new lives
would be allowed into the pool, many enrollees will likely leave the
plan if the program is ended, and those remaining in the pool age and
Current enrollees in Medicare SELECT are receiving significantly
reduced premiums as related to traditional fee-for-service Medigap
policies. The bill would expand the program to all fifty states and
make the program permanent so all seniors could enjoy the savings
associated with Medicare SELECT products and the peace of mind that the
program is permanent.
c. legislative history
H.R. 483 was introduced on January 11, 1995, by Mrs.
Johnson of Connecticut, et al., and referred to the Committee
on Ways and Means and Committee on Commerce, and on January 17,
1995, was referred to the Subcommittee on Health. The bill as
introduced contained four provisions: (1) expanding the
Medicare SELECT program to all fifty states and make it
permanent; (2) allowing for the development of an eleventh plan
option under Medigap; (3) clarifying renewability requirements
for SELECT plans; (4) imposing civil money penalties for
misrepresentation or the provision of false information.
The Subcommittee on Health of the Committee on Ways and
Means marked up the bill on February 23, 1995, and approved by
voice vote one amendment by Chairman Thomas that limited the
bill to an extension of the program to all fifth states and
made the program permanent. The Subcommittee ordered favorably
reported H.R. 483, as amended, by a recorded vote of 10-3.
The Committee on Ways and Means marked up the bill on March
8, 1995, and ordered the bill to be favorably reported without
amendment by a roll call vote of 31 yeas and 2 nays.
The Subcommittee on Health of the Committee on Ways and
Means held a public hearing on February 10, 1995, on Medicare
Reform and Innovation, which focused on Medicare SELECT, as
well as other programs.
II. EXPLANATION OF THE BILL
a. expansion of medicare select (sec. 1 of the bill and sec. 4358(c) of
Under present law, 15 states are eligible for participation
in the Medicare SELECT program: Alabama; Arizona; California;
Florida; Illinois; Indiana; Kentucky; Massachusetts; Minnesota;
Missouri; North Dakota; Ohio; Texas; Washington; and Wisconsin.
The program is set to expire on June 30, 1995.
Explanation of provision
The provision would extend the SELECT program to all States
on a permanent basis. States would be given the opportunity to
participate in the Medicare SELECT program.
Reasons for change
The program is rapidly approaching the current expiration
date of June 30, 1995. If the program is not extended before
this date, the Health Care Financing Administration (HCFA)
would be required to notify the participating States to prepare
for closing the program. Medicare SELECT carriers would then
have to close the program to new Medicare enrollees on June 30,
1995. While current enrollees could remain in the program,
health plans would be required to notify the participants that
the program has ended. This would result in significant
increases in premiums for current enrollees as no new lives
would be allowed into the pool, many enrollees will likely
leave the plan if the program is ended, and those remaining in
the pool age and increase costs.
The State and time limited nature of the program has
limited insurer participation because of significant
development and start-up costs of new policies and the
uncertain nature of the program. This uncertainty has also led
to difficulties in network development as providers are also
concerned with the limited duration of the program.
Medicare SELECT premiums appear to be ten to 37 percent
lower than traditional Medigap premiums, when rated on the same
basis. Consumers Union, in the August 1994, Consumers Reports,
ranked Medigap plans nationally and ranked eight Medicare
SELECT plans in the to fifteen Medigap products country wide.
In addition, the National Association of Insurance
Commissioners has reported that very few complaints have been
associated with Medicare SELECT products.
When the demonstration was first announced, 29 States
indicated their desire to participate in the program and there
continues to be a strong interest in SELECT among those states
not currently allowed to participate in the program. The
National Governors Association, the National Conference of
State Legislators, and the National Association of Insurance
Commissioners have all supported expanding this program to all
fifth states and making it permanent.
The provision is effective upon enactment.
III. VOTES OF THE COMMITTEE
In compliance with clause 2(l)(2)(B) of rule XI of the
Rules of the House of Representatives, the following statements
are made concerning the votes of the Committee in its
consideration of the bill, H.R. 483.
motion to report the bill
The bill H.R. 483, was ordered favorably reported by a roll
call vote of 31 yeas and 2 nays on March 8, 1995, with a quorum
present. The roll call vote was as follows:
Mr. Archer Mr. Stark
Mr. Crane Mr. McDermott
votes on amendment
The Committee defeated an amendment (8 years and 25 nays)
offered by Mr. Stark for a temporary extension (18 months) of
Medicare SELECT for States currently participating in the
program. The roll call vote was as follows:
Mr. Stark Mr. Archer
Mr. Ford Mr. Crane
Mr. Matsui Mr. Thomas
Mr. Coyne Mr. Shaw
Mr. Levin Mrs. Johnson
Mr. Cardin Mr. Bunning
Mr. McDermott Mr. Houghton
Mr. Lewis Mr. Herger
IV. BUDGET EFFECTS
a. committee estimate of budgetary effects
In compliance with clause 7(a) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of this bill, H.R. 482, as
The Committee agrees with the estimate prepared by CBO,
which is included below.
b. statement regarding new budget authority and tax expenditures
In compliance with subdivision (B) of clause 2(l)(3) of
rule XI of the Rules of the House of Representatives, the
Committee states that the provisions of H.R. 483 do not involve
any new budget authority, or any increase or decrease in
revenues or tax expenditures.
c. cost estimate prepared by the congressional budget office
In compliance with subdivision (C) of clause 2(l)(3) of
rule XI of the Rules of the House of Representatives, requiring
a cost estimate prepared by the Congressional Budget Office,
the following report prepared by CBO is provided.
Congressional Budget Office,
Washington, DC, March 10, 1995.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
reviewed H.R. 483, a bill to permit Medicare Select policies to
be offered in all states, as ordered reported by the House
Committee on Ways and Means on March 8, 1995. CBO estimates
that enactment of H.R. 483 would not significantly affect the
federal budget or the budgets of state and local governments.
Pay-as-you-go procedures would apply because the bill could
affect direct spending. The estimated change in direct
spending, however, is not significant.
Medicare Select policies are Medicare supplemental health
insurance policies allowed under a demonstration program that
Congress initiated in section 4358 of the Omnibus Budget
Reconciliation Act of 1990. The program was limited to 15
states and was to run for three years beginning on January 1,
1992. The demonstration was extended for six months in section
172 of the Social Security Act Amendments of 1994. This bill
would extend the program to the entire country and make it
Except for Medicare Select policies, issuers of Medicare
supplemental policies are not allowed to offer benefits that
differ depending on the provider selected by the beneficiary.
Under Medicare Select policies, insurers can, in effect, set up
Medicare Preferred Provider Organizations (PPOs). If PPOs are
successful in managing care, they can reduce Medicare costs,
because Medicare pays for most of the cost of the services
covered under the supplemental policies. The preliminary
evaluation of the demonstration conducted under contract to the
Health Care Financing Administration (HCFA), however, has found
very little management of care by the insurers and no cost
savings to Medicare. On the other hand, Medicare costs could
rise if enactment of this bill caused additional Medicare
beneficiaries to purchase coverage that reduced their co-
payments and thus diminished their economic incentives to seek
cost-efficient care. The preliminary evaluation of the
demonstration found that few additional beneficiaries purchase
Medicare supplemental policies. Because this bill could result
in either costs or savings, and there is little evidence of
either, CBO estimates that this bill would have no significant
effect on the federal budget.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Scott
June E. O'Neill, Director.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
a. committee oversight findings and recommendations
With respect to subdivision (A) of clause 2(l)(3) of rule
XI of the Rules of the House of Representatives (relating to
oversight findings), the Committee advises that it was as a
result of the Committee's oversight activities concerning the
extension of the Medicare SELECT program to all fifty states
and making the program permanent that the Committee concluded
that it is appropriate to enact the provisions contained in the
b. summary of findings and recommendations of the committee on
government reform and oversight
With respect to subdivision (D) of clause 21(l)(3) of rule
XI of the Rules of the House of Representatives (relating to
oversight findings), the Committee advises that no oversight
findings or recommendations have been submitted to this
Committee by the Committee on Government Reform and Oversight
with respect to the provisions contained in this bill.
c. inflationary impact statement
In compliance with clause 2(l)(4) of rule XI of the Rules
of the House of Representatives, the Committee states that the
provisions of the bill are not expected to have an overall
inflationary impact on prices and costs in the operation of the
national economy. As is indicated above (in Part IV of this
report), the bill is projected to be deficit neutral over
fiscal years 1995-2000.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL AS REPORTED
In compliance with clause 3 of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, existing law in which no change
is proposed is shown in roman):
SECTION 4358 OF THE OMNIBUS BUDGET RECONCILIATION ACT OF 1990
SEC. 4358. MEDICARE SELECT POLICIES
(a) * * *
* * * * * * *
(c) Effective Date.--The amendments made by this section
shall only apply in 15 States (as determined by the Secretary
of Health and Human Services) and such other States as elect
such amendments to apply to them [and only during the 3\1/2\-
year period beginning with 1992].
* * * * * * *