Privatization at Heart of Stalemate in Debate Over Medicare

Just weeks before Congress adjourns for the year, the drive to add a prescription drug benefit to Medicare has bogged down in disagreement between Republicans and Democrats over efforts to privatize the program.

Other issues also divide the congressional negotiators trying to forge compromise legislation to overhaul Medicare and cover some of the prescription drug costs of 40 million senior and disabled Americans.

But it is the stalemate over the administration-supported proposal to have the invisible hand of the market -- rather than the bureaucratic hand of government -- determine prices and premiums that poses the greatest threat to a years-long effort to expand Medicare benefits.

“That is virtually a showstopper,” Senate Minority Leader Tom Daschle (D-S.D.) said Thursday of the privatization plan. Under that approach, health maintenance and preferred provider organizations would compete directly for patients with traditional fee-for-service Medicare.

Almost three months after the House and Senate passed competing $400-billion Medicare bills, expectations for a successful compromise remain high. Indeed, the conference committee of congressional negotiators could produce a list of tentative agreements as soon as this afternoon.

But that won’t necessarily point the way toward a final deal, some negotiators cautioned.

“Even what we think might be final may not be final,” said Sen. Charles E. Grassley (R-Iowa), vice chairman of the congressional conference committee. The divisive privatization issue did not even come up in almost four hours of discussion Thursday afternoon, he added.

The conference committee’s chairman, Rep. Bill Thomas (R-Bakersfield), meanwhile, has continued to push a framework that closely resembles the bill that passed the House by just one vote.

That action prompted 41 senators -- enough to sustain a filibuster -- to declare Thursday that such a bill would meet certain defeat.

“We’re further away from [agreement] today than at any time since the conference started,” warned Sen. Edward M. Kennedy (D-Mass.).

In a letter to President Bush, the 41 senators -- 39 Democrats, one Republican and one independent -- outlined their concerns and called on him “to provide the leadership necessary to achieve a bipartisan bill that can become law.”

Democrats are upset not only over the substance of the legislation but also over the negotiating process. Thomas has excluded five of the conference committee’s seven Democratic members from negotiating sessions, saying he is interested in working only with members willing to compromise.

At a largely ceremonial White House session last month, Rep. Charles B. Rangel (D-N.Y.) thanked Bush for inviting all 17 negotiators to the meeting, telling the president it was his only chance to learn what had been happening in the conference committee.

“He just smiled,” Rangel said of the president’s reaction.

The two Democratic negotiators -- Sens. Max Baucus of Montana and John B. Breaux of Louisiana -- met with other Senate Democrats on Thursday. “This is all very difficult,” Baucus said afterward.

Other Democrats were more defiant.

“I think the Republicans have to have a bill,” said Sen. Kent Conrad (D-N.D.). “And that gives us a lot of leverage. There’s no reason we have to accept anything that undermines Medicare.”

Disagreement persists on most of the thorniest issues, but on some there are signs of convergence:

* Democrats, concerned that most insurance companies would not offer drug-only policies, have insisted on making a government-administered benefit available to seniors. Republican negotiators appear to be willing to guarantee seniors a choice between a drug-only plan and an HMO or PPO that offers drug coverage, although none would be government-run. Senate Democrats say this is not good enough.

* The negotiators seem to have agreed on a formula by which the government would pay almost all drug costs for single seniors earning up to $12,123 a year. But some senators want the subsidy extended to seniors earning as much as $14,368 annually.

* Senate Democrats want the bill to force down the cost of prescription drugs. The original Senate bill would have made it easier for generic drugs to get to market, but House Republicans have long opposed such measures. And while the House has passed separate legislation to allow the importation of U.S.-made drugs from Canada, the Senate has not.

* Some Democrats continue to oppose a House measure requiring higher-income seniors (the threshold ranges from $60,000 to $100,000 a year) to pay a larger share of their drug costs. And many Democrats strongly oppose an added element that would require higher-income seniors to pay more for Part B Medicare services, which include doctors’ visits and other outpatient services.

* House and Senate negotiators from both parties are working to address the concern that employers would withdraw health coverage from as many as one-third of retirees if Congress provides a drug benefit.

The structure of the drug benefit itself appears to be relatively noncontroversial. Negotiators have tentatively agreed to require most seniors to pay a monthly premium of about $35 and an annual deductible of about $275. Most seniors would pay 25% of their drug costs up to about $2,200. After that, they would be responsible for all of their drug costs until their out-of-pocket expenditures reached $3,600 or so. Medicare would pay for 95% of a senior’s drug costs above that amount.

The Republicans’ plan to privatize Medicare is the one factor most likely to provoke Senate Democrats to filibuster or vote against a final bill. The division extends beyond Medicare to the deep philosophical differences that define Republicans and Democrats.

Republicans believe private-sector competition is essential to controlling Medicare costs and keeping the insurance program financially solvent. Private health plans compete for Medicare beneficiaries’ business, driving down the cost of premiums and discouraging seniors from getting unnecessary medical care, they say.

Democrats counter that lower-priced private plans would attract seniors who are healthy and have lower medical bills. Traditional Medicare would be left with sicker patients, and their premiums would become more expensive. Ultimately, most seniors would be forced to join private health plans and traditional Medicare would be destroyed, they say.

“We are fighting to preserve Medicare as we know it,” said Sen. Debbie Stabenow (D-Mich.).