The curious timing of Medicare reform

Political and fiscal forces coalesce to drive a $400-billion plan that satisfies few lawmakers.

The Medicare reform now on a fast track through the Congress - and, if passed, all but sure to be signed into law - would satisfy no one.

Republicans had hoped it would leverage millions of seniors out of traditional Medicare into private, more competitive health plans. It probably won't. Democrats had hoped it would guarantee seniors that most their prescription drug costs would be covered by Medicare. It won't do that, either.

Nonetheless, this year's Medicare drug bill has more political momentum behind it than any bill in the 108th Congress, in part because it's been so long in coming. With budget deficits on the rise, it' might also be the last opportunity either party will have to enact such a significant new entitlement.

"It's important for Republicans to deliver something, after two years of full control and four years of promising," says Tom Miller, director of health policy studies at the Cato Institute, a libertarian think tank. And Democrats, who first proposed adding a prescription drug benefit to Medicare in 1978, took a big hit in the 2002 elections, after blocking a GOP prescription drug plan that they said did not go far enough. "Democrats have decided they can finally take 'yes' for an answer, and then come back and do more," adds Mr. Miller.

A 'Down Payment'

The $400 billion plan now before the Senate and just under way in the House is budgeted to cover less than a quarter of the $1.8 trillion that Medicare recipients are expected to spend on prescription drugs over the next 10 years. In an opening statement in this week's Senate debate, Sen. Edward Kennedy (D) of Massachusetts called this a "down payment" until the next election. His goal was to get the new entitlement on the books, then work to expand it.

"There will be further attempts in years to come for Democrats to offer additional funding for these proposals," says Kennedy spokesman Jim Manley. "Democrats will make the case to the public that they are fighting to improve the Medicare package, while Republicans are focusing on giving tax breaks to the wealthy." Both Kennedy and Democratic leader Tom Daschle signaled that they would support such a strategy, despite opposition to GOP plans, which they deemed too modest in the past.

For Republicans in Congress, the path to medicare reform was more challenging. The GOP took back the House in 1994 after promising to cut deficits and restore budget discipline. To add a significant new entitlement to a program already projected to go bankrupt by 2026 ran against the grain of that commitment.

"There's a fear that such a new entitlement will squeeze out all of discretionary spending down the line," says Patrick Morrisey, counsel for the House Energy and Commerce Committee, the last of three congressional committees to present its version of a Medicare reform bill.

Already, Republicans on Capitol Hill have stepped back from the line President Bush set out last March, which would have given a significantly larger prescription- drug benefit to seniors who opted out of the traditional fee-for-service Medicare program.

This was a non starter for many GOP moderates, especially those in rural areas who worried that private health plans would not be available to provide prescription-drug options for their constituents. Proposals in both the House and Senate shift more of the responsibility to the federal government to ensure that coverage is available.

But for seniors watching the progress of this legislation, the $400 billion price tag is still not adequate.

"We've said from Day 1 that that was not going to be enough to fund a sufficient benefit," says David Certner, director of federal affairs for the AARP, which represents 35 million seniors.

"If you don't make the prescription-drug benefit attractive enough, the only people who will enroll are people with high drug costs," he adds. "And that's not going to help this program to survive," he adds.

Longtime supporters of adding a drug benefit to Medicare also worry that the plans currently in play on Capitol Hill could encourage employers who are now providing drug coverage for employees to drop it. Since 1999, the number of companies offering health coverage to retirees has already fallen by 40 percent.

Opportunity knocks

But the view from Capitol Hill is of a window of opportunity that could close quickly. Despite looming deficits, this year's budget resolution set aside $400 billion for a prescription-drug plan for the next 10 years. "If we don't use it now, there's no guarantee it's going to be there in subsequent years," says Sen. Max Baucus of Montana, the ranking Democrat on the Senate Finance Committee.

"I can't see the AARP opposing this when the results could be zero," says Sen. John Breaux (D) of Louisiana, who co chaired a previous commission to reform Medicare - which came to naught.

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