Bush's big gambit on Medicare

His plan may win the Senate vote Monday, but it also creates a major new social program that makes conservatives squirm.

By winning a new prescription-drug benefit for seniors, George W. Bush could recast not only the Medicare program but also his presidency - in a direction that many in his party don't like.

The question is whether the gambit will be the decisive victory Mr. Bush hopes for, one that shows Republicans are capable of dealing with America's mounting healthcare concerns without breaking the federal bank.

It's the GOP equivalent of President Clinton's move to reform welfare. And it is prompting many similar cries of alarm from the party base. While Mr. Clinton ended a 61-year federal entitlement guarantee that his party created, Bush is adding to a federal entitlement his party once opposed.

Clinton's move shrank the welfare rolls and positioned Democrats, albeit reluctantly, more in the political center.

In a similar way, Bush's effort to provide drug coverage while also shifting many seniors into private insurance plans would be a historic change. Republicans could say they were able to deliver, after years of promises by both parties, the biggest expansion of Medicare since 1965.

But the move also carries the risk of a backlash, either from seniors disappointed that the new law doesn't go far enough to reimburse their pharmacy bills - or by Republican faithful angry that it does too much.

"This could be a real triumph of Republican politics, but it would also be a triumph of Democratic health policy," says Robert Moffit, top health-policy analyst at the Heritage Foundation, a conservative think tank.

The $400 billion set aside for a new prescription drug benefit in Medicare over the next 10 years is just a down payment, he adds. The big costs will kick in when 76 million baby boomers begin to retire in 2012.

The prospect of high and rising costs made the House's vote Saturday a cliffhanger, with 25 Republicans breaking with the White House. A win in the Senate is expected Monday, despite strong opposition from some Democrats who oppose Republican efforts to introduce an element of choice and competition with Medicare.

Top domestic initiative

The plan would deliver on what has become the president's top domestic priority, just as the 2004 campaign season is taking hold. And it positions GOP congressional candidates to claim credit on an issue typically owned by Democrats.

But how the issue will play out with American retirees and taxpayers remains uncertain.

Even before new Medicare costs take hold, the Bush administration has presided over a dramatic increase in discretionary spending unrelated to the war on terrorism. These include big increases in government spending on education and agriculture. A nearly $100 billion energy bill, including subsidies for energy producers across the board, has passed the House and is expected to be taken up again in the Senate, where it failed by two votes on Friday.

With the federal deficit expected to reach half a trillion dollars this year, approval of a big new entitlement in Medicare could also be seen as a betrayal of GOP roots as the party of limited government.

"We can never out-Democrat the Democrats. If voters want bigger government, they'll return to the genuine article," says Rep. Jeff Flake (R) of Arizona, one of 25 Republicans to buck the president and vote against adding a prescription drug entitlement to Medicare.

However, Republicans could also face a backlash from seniors, once the impact of the reform on their pharmacy bills takes hold. One of the biggest concerns is the prospect that large numbers of employers who currently provide prescription-drug benefits for retirees will drop coverage, once a federal option is available.

The House-Senate compromise bill includes some $70 billion in incentives for employers to continue their coverage, but it may not be enough to offset the benefit of dumping employees into a new federal plan, analysts say.

"Employers will get federal subsidies, but they will be much better off it they dropped it completely," says Kenneth Thorpe, a health-policy expert at Emory University, who estimates that some 25 percent of employers will drop coverage even with the new subsidy. That means that some 2.1 million private-sector retirees would probably lose their retirement benefits if the GOP bill becomes law, he adds.

"There are things in this bill that can come back to haunt Republicans, especially whether that $70 billion indemnifies companies who were thinking of dumping their health plans," says Ross Baker, a political scientist at Rutgers University in New Brunswick, N.J.

"This is the group that can be most easily ignited, if there is any sense that companies are beginning to shut down plans for retirees," he adds. "Hell hath no fury like seniors inflamed."

Anticipating this possibility, Democrats began last week to circulate video footage of former Rep. Dan Rostenkowski (D) of Illinois being chased down a Chicago street by angry seniors protesting a 1988 catastrophic coverage bill. The bill had to be repealed in 1989. Democrats say if the GOP bill passes, it will probably meet the same fate.

In response, Senate Republicans counter that, unlike the 1988 plan, the new Medicare reform is voluntary. The first change Americans will see in their lives is a new a drug discount card to help offset pharmacy costs. The prescription-drug benefit does not begin until 2006, and a more controversial plan to compare costs of Medicare and private plans - and increase premiums for seniors, if traditional fee-for-service Medicare plans come up short - takes effect in a limited number of cities still later.

In negotiations with the House, Senate Republicans rolled back the price competition element to a limited demonstration project in six metropolitan areas - a key demand of GOP moderates. They also added $25 billion to improve service and federal payments to rural doctors and hospitals - a key to winning support for the bill from many rural Democrats.

Rural benefits

"That gap [between urban and rural payments] is not eliminated, but it is meaningfully reduced," says Sen. Kent Conrad (D) of North Dakota. While most on the liberal wing of the Democratic caucus are opposing this bill as a threat to Medicare, Mr. Conrad and other rural Democrats say they will vote for it. "There are things in this bill I am very opposed to, but I have to remember I am a US senator from North Dakota. This will be a very significant help for my people."

But many conservatives remain deeply concerned about the fiscal impact. "The Medicare bill fits into a broader theme, which is that Republicans have lost their fiscal conscience," says Stephen Moore of the Club for Growth, an antitax group. "We've had now the biggest education bill, the biggest farm bill, the biggest foreing aid bill, and now the biggest healthcare bill in two decades."

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