Bush signature won't end Medicare debate

President faces pressure from two sides: Some say the drug plan is too costly, others that it isn't generous enough.

The big Medicare bill signed by President Bush Monday is surely historic - but that doesn't mean wrangling over the subject will end with the stroke of his pen. Medicare is likely to remain a difficult and contentious issue in Washington for years to come.

Politics is one reason. Democrats have already served notice that they will try to expand the bill's prescription-drug benefit. Many Republicans, for their part, want a bigger role for private health plans in the mammoth government-run program.

Medicare's fiscal future is another problem still unresolved. Many experts judge that the bill does not really address the long-term cost of the system, which is expected to explode when baby boomers begin retiring in bulk.

Medicare's own trustees predict that the program's cost will double as a share of the nation's economy over the next 30 years. The longer Congress delays facing up to this reality, the harder it may be to fix.

"One way or another you have to have constraints on these healthcare costs," says Richard Jackson, director of the Global Aging Initiative at the Center for Strategic and International Studies.

Like most major pieces of enacted American legislation, the Medicare bill is a compromise, a hodgepodge of provisions sought by a variety of political factions. This is one of the most complex in years.

The signature change, the new drug benefit, includes a large "doughnut hole" or uncovered cost gap between front-end insurance coverage and a catastrophic-cost backstop. No one knows how seniors will react to this gap. Neither can anyone predict whether private insurance firms will be eager to participate in the new Medicare, as the bill's structure assumes.

Many costly questions

What drugs will the benefit cover? Will Medicare's full-scale entry into the drug business cause prices to go up or down? Will companies now drop drug coverage for retirees? These new competition pilot programs - in which Medicare will compete directly with private insurers on price - where will they be?

One thing true believers on both sides of the political aisle already know is that the bill leaves them unsatisfied. Some have served noticed that they will continue to push the issue, and try to get provisions they don't like repealed, or modified.

Senate minority leader Tom Daschle (D) of South Dakota has already introduced legislation that would repeal aspects of the just-passed Medicare bill, such as its ban on the federal government using its buying power to negotiate drug discounts. Daschle also wants to legalize the importation of cheaper drugs from Canada and Western Europe.

Democrats will also almost certainly press to make the drug benefit more generous. They point out that while the bill sets aside $400 billion for drugs over the next 10 years, Medicare beneficiaries will actually incur $1.8 trillion in drug costs during that time. "This debate is not over, it's just beginning," Daschle said last week.

Republicans, for their part, will almost certainly try to increase the role market forces play in curtailing Medicare costs.

The bill signed into law Tuesday establishes a limited market-force demonstration project. Beginning in 2010, traditional Medicare will have to compete directly with private plans in six metro areas.

But some Republicans - notably Rep. Bill Thomas of California - wanted this "premium support" concept to simply start up throughout the country in 2010. And many wavering GOP members finally voted for the drug benefit on the theory that the pilot programs are a wedge which will be inevitably widened, bringing private enterprise deeper into Medicare.

Private competition an answer?

In an American Enterprise Institute analysis written prior to the final congressional vote on Medicare, former House Speaker Newt Gingrich said that shifting away from "the failed bureaucratic third-party-payer model" back to a "market-mediated binary-payer model" would be "the single most significant reform that can be made in saving the country from skyrocketing health costs."

"Skyrocketing" is indeed the right word. Rising general health costs, plus the rising burden of paying for baby-boom beneficiaries, was already predicted to drive Medicare to the brink of bankruptcy in a few decades. Now a drug benefit has been piled on top of this fiscal mess - adding 20 percent to Medicare's long-term costs, the Congressional Budget Office says.

It's not impossible that the incentives for competition embedded in the just-passed bill might help reverse this trend, say some experts. But they would have to work exactly as designed - a big "if." And the pilot premium-support program would probably have to be expanded.

"The bill does nothing to reduce the long-term cost of the existing Medicare program," concludes a report of the Concord Coalition, a Washington budget watchdog group.

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