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Congress takes step to revamp Medicare

Lawmakers look at a pair of reform bills. Critics say the budget can't afford them.

In the firmament of national politics, it seems the stars are suddenly aligned to yield a major overhaul of Medicare, including the creation of a prescription drug benefit for seniors.

"The timing for Medicare reform on a comprehensive basis has arrived," declares Sen. John Breaux, D-La. "I think we have a unique opportunity at a very unique and special time to introduce comprehensive Medicare reform which has a realistic chance of getting adopted in this Congress."

Breaux's optimism is based on the arrival of a new cast of characters in key positions who seem eager to retrofit the 35-year-old program for the 21st century. These include President Bush; Senate Finance Committee Chairman Charles Grassley, R-Iowa; Max Baucus of Montana, the ranking Democrat on the Senate Finance Committee; and House Ways and Committee Chairman Bill Thomas, R-Calif.

By mutual agreement, these men will begin their deliberations by focusing on a pair of bills drafted by Breaux and Sen. Bill Frist, R-Tenn., that rely heavily on the competitive instincts of the private sector to manage services in an efficient, low-cost manner. Their first proposal, known as Breaux-Frist I, is far more comprehensive than Breaux-Frist II, which was unveiled recently.

Of course, neither of the bills is expected to satisfy those Democrats who continue to support a more defined benefit plan put forward by Al Gore during the presidential campaign. Democrats admit the need to trim costs does not bode well for their preferred solution.

And even though Breaux-Frist would be less costly than anything the Democrats have proposed, many Democrats warn that the Bush administration has not set aside enough money in its proposed budget to finance even a modest attempt to overhaul Medicare and create a prescription drug benefit.

Sen. Kent Conrad, D-N.D., argues that because the Bush budget sets aside $1.6-trillion for tax cuts over the next 10 years, it can't possibly fund the Medicare program that the Republicans envision. "I am concerned that this lack of funding suggests a lack of commitment to this proposal," Conrad says.

The plight of seniors with high prescription drug bills and no insurance has been a familiar theme in congressional hearings for many years. But the task of creating a prescription benefit under Medicare has, until now, seemed too daunting for Congress.

"My prescription drugs cost almost $2,300 a year, which is over 10 percent of my annual income," Sylvia Kessler of Tamarac told a House committee recently. "Without two part-time jobs and some financial help from my children _ thank God _ I would have to choose between food and my medications."

While those in need of a Medicare prescription drug benefit have the sympathies of Republicans and Democrats alike, the pressure for change has been muted somewhat because two-thirds of all Medicare beneficiaries have drug coverage through private insurance known as Medigap.

During the last presidential election, however, there was agreement between Bush and Gore that the need for a Medicare drug benefit is growing as prices skyrocket and more medicines are developed to sooth the ailments of the elderly.

As Frist, who is a heart surgeon, notes: "The challenge we have . . . is that prescription drugs are the new technology that wasn't around 20 years ago (and) where there's going to be explosive growth _ explosive growth."

The Congressional Budget Office estimates each Medicare recipient will spend an average of $4,818 annually for prescription drugs by 2011 _ up from an estimated $1,756 this year.

The original Breaux-Frist proposal was based on the findings of a 1999 bipartisan commission. It would provide a menu of competing private insurance plans, including the current fee-for-service plan, from which Medicare-eligible seniors could choose. It calls on the government to provide a fixed subsidy for each beneficiary, whose premiums and co-payments would increase according to income.

Breaux-Frist II, which was designed to answer Democrats' complaints that the original bill created nothing more than a voucher program, would offer a prescription drug benefit through the traditional Medicare program. Grassley said Breaux-Frist II would be the starting point for his committee's discussions.

"I want to emphasize that both versions of our Medicare reform legislation guarantee seniors can keep their current Medicare benefits and all seniors will have access to prescription drug coverage," Breaux says. "Our plans combine the best of what government does, finance and oversight of the program, with the best the private sector does, create competition and keep pace with medical advances."

Robert D. Reischauer, president of the Urban Institute, estimates that the seniors with $3,000 in drug costs will be required to spend $2,435 a year for premiums, deductibles and co-insurance by 2003 under the Breaux-Frist plan. And, he said, they would pay more than 50 percent of their drug costs until the total annual expenditure hit $12,900.

"Few working Americans would be satisfied with such coverage for themselves or their parents," Reischauer concluded.

Of course, there are many other proposals being offered to establish a Medicare prescription drug benefit. Among them is one drafted by Sen. Bob Graham, D-Fla., that would create a drug benefit without drastically altering Medicare.

And while seniors might be disappointed with the coverage under Breaux-Frist, Democrats say the estimated cost of $163-billion over 10 years would throw the government into deficit under the proposed Bush budget. According to Conrad, the North Dakota Democrat, the government could not afford Breaux-Frist even if all of Bush's proposed $1-trillion so-called "contingency fund" were devoted to Medicare, which is unlikely to happen.

"The administration proposes about half of the amount that most experts believe will be necessary for a reasonable and affordable benefit," Conrad says, referring to Bush's request for $150-billion. "I am concerned that this lack of funding suggests a lack of commitment to this proposal."

Bush, meanwhile, insists he is open to negotiations with members of Congress on the shape of a final bill.

"Medicare must be modernized," Bush said in his recent speech to a joint session of Congress. ". . . It is time to act."

During his campaign, Bush had proposed that Congress delay Medicare reform and instead enact a modest $48-billion program designed to help low-income seniors with prescription drug costs. Although he has sent that proposal, known as "Immediate Helping Hand," to Congress, he is no longer pressing for it to be enacted.

Rep. Mike Bilirakis, R-Tarpon Springs, chairman of the health subcommittee of the House Energy and Commerce Committee, says he still favors enactment of a temporary fix.

"There's a fear that if you put some temporary fix in place to help the needy and the sickest now, that that means prescription drugs as part of Medicare is just something that's not going to be addressed by this Congress because the immediate solution, so to speak, would be considered the final solution. I don't believe that," Bilirakis said.

Yet even if congressional leaders could resolve the funding, it may be hard to find consensus between Democrats and Republicans on the role of private insurers in providing prescription drug coverage. Critics contend that the poor record of private HMOs in providing what's known as Medicare+Choice in recent years does not bode well for relying on private insurers to handle drug coverage.

In Florida and elsewhere, HMOs have been withdrawing from the Medicare program, saying the government does not pay them enough to make a profit. Thus many Medicare beneficiaries who joined HMOs to get drug coverage are left in the lurch.

Rep. James Greenwood, R-Pa., said recently that 934,000 Medicare patients are expected to lose their choice of an HMO by next year.

Lawmakers from rural areas argue that because there are few, if any, HMOs in their districts, a Medicare prescription drug plan that relies on HMOs would be of no use to their constituents. This is why Congress is struggling to preserve the current fee-for-service option.

On the other hand, the pharmaceutical industry strongly opposes a prescription drug benefit administered directly by the government on grounds that it would be a back-door way of imposing price controls. The insurance industry argues that the legislation should not disrupt coverage for seniors who currently are reimbursed through private Medigap plans. And economists warn that unless the drug benefit is affordable, the program would attract only the sickest people and that would drive up costs.

Given these and many other obstacles to overhauling Medicare, it's actually surprising that congressional leaders are optimistic that they can produce such an important piece of legislation during the current Congress. Oldtimers on Capitol Hill say the new president and the new committee chairman may find it harder than they think to accomplish their goal.

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