	Introduction

On December 24, 2009, the Senate passed a comprehensive health reform bill, the Patient Protection and Affordable Care Act, H.R. 3590 , as amended by the Senate. 3590 affecting Medicare indicate that, absent interaction effects, net reductions in Medicare direct spending would be approximately $400 billion over the FY2010-2019 period. The Senate bill includes ten titles. As noted by CBO, the provisions that would result in the largest savings include:
Permanent reductions in the annual updates to Medicare's fee-for-service payment rates (other than physicians' services) would account for an estimated budgetary savings of $186 billion over 10 years; Setting payment rates in the Medicare Advantage program on the basis of the average bids submitted by MA plans in each market would account for an estimated $118 billion in savings (before interactions) over 10 years; Reducing Medicare payments to hospitals that serve a large number of low-income patients, known as disproportionate share (DSH) hospitals, would decrease expenditures by about $25 billion; Modifying the high-income adjustment for Part B premiums would save $25 billion over 10 years; and Creating an Independent Medicare Advisory Board to make changes in Medicare payment rates is expected to save $28 billion over 10 years. Payment Rate Changes Affecting Medicare Fee-for-Service Providers

Medicare is a federal program that pays for covered health services for most persons 65 years of age and older and for most permanently disabled individuals under the age of 65. For instance, the program provides for annual updates of Medicare payments to reflect inflation and other factors. Additional funding would also be provided for outreach and assistance for low-income programs. For example, a provision included in the bill would establish a national, voluntary pilot program that would bundle payments for physician and hospital as well as post-acute care services with the goal of improving patient care and reducing spending. Another provision in the bill would also subject some hospitals to a payment penalty under Medicare for certain high-cost and common health conditions acquired in the hospital. The Secretary would be required to conduct an independent evaluation of the demonstration and submit to Congress a final report on the demonstration's best practices and the impact of the pilot program on coordination of care, expenditures under this provision, access to services, and the quality of health care services provided to applicable beneficiaries. 3401 related to a productivity adjustment . Medicare Coverage Gap Discount Program for Brand-Name Drugs. Improved Medicare Prescription Drug Plan and MA-PD Complaint System. Immediate Reduction in Coverage Gap in 2010. 4104 of this bill. Enhanced Medicare and Medicaid Program Integrity Provisions. The Senate H.R.
Medicare is a federal program that pays for covered health services for most persons 65 years and older and for most permanently disabled individuals under the age of 65 years. The rising cost of health care, the impact of the aging baby boomer generation, and declining revenues in a weakened economy continue to challenge the program's ability to provide quality and effective health services to its 45 million beneficiaries in a financially sustainable manner.
On December 24, 2009, the Senate passed its version of health insurance reform, the Patient Protection and Affordable Care Act, in H.R. 3590, as amended by the Senate. This report, one of a series of CRS products on Senate H.R. 3590, examines the Medicare related provisions in this bill. Estimates from CBO on the Senate bill indicate that net reductions in Medicare direct spending would be approximately $400 billion from FY2010 to 2019. Major savings are expected from constraining Medicare's annual payment increases for certain providers, basing payment rates in the Medicare Advantage program on average bids, reducing payments to hospitals that serve a large number of low-income patients, creating an independent Medicare Advisory Board to make changes in Medicare payment rates, and modifying the high-income threshold adjustment for Part B premiums. A new Hospital Insurance tax for high wage earners would also raise approximately $87 billion over 10 years.
Other provisions in the bill address more systemic issues such as increasing the efficiency and quality of Medicare services, and strengthening program integrity. For example, the bill would establish a national, voluntary pilot program that would bundle payments for physician, hospital and post-acute care services with the goal of improving patient care and reducing spending. Another provision would adjust payments to hospitals for readmissions related to certain potentially preventable conditions. Additionally, the bill would increase funding for anti-fraud activities, and subject providers and suppliers to enhanced screening before allowing them to participate in the Medicare program.
The Senate bill would also improve some benefits provided to Medicare beneficiaries. For instance, Medicare prescription drug program enrollees would receive a 50% discount off the price of brand name drugs during the coverage gap (the "doughnut hole") and the coverage gap would be reduced by $500 in 2010. Other provisions would expand assistance for some low-income beneficiaries enrolled in the Medicare drug program, and eliminate beneficiary copayments for certain preventive care services.