Medicare Plan Faces Fight From GOP Conservatives

Conservative Republicans warned congressional leaders Friday that they will fight to defeat the GOP Medicare reform plan unless it allows Americans to establish medical savings accounts--a feature stricken from the Senate version of the legislation.

Without the accounts, which could be spent by recipients for the services of any doctor they choose, the Medicare legislation reform measure amounts to little more than a “rationing plan” that pushes people into health maintenance organizations with a strictly limited list of physicians, Peter Ferrara, speaking for Americans for Tax Reform, a GOP activist group, said at a press conference called by conservative groups.

“We believe the consumer must be sovereign,” said Mike Tanner, a health analyst at the Cato Institute, a libertarian Washington think tank. The savings accounts are “an absolutely crucial issue” and any reform bill lacking them will be unacceptable,” he said.

Some conservatives are highly suspicious of HMOs, which offer care for a fixed monthly payment for each beneficiary. They fear that HMOs have strong financial incentives to withhold care. But the savings accounts, they believe, would permit beneficiaries to seek additional care.

Republican leaders promised late Friday to restore the accounts when House and Senate negotiators meet in conference committee to resolve differences between each chamber’s version of Medicare reform. The flap reflects the tough infighting that Republican leaders face as they try to craft a final bill that they can send to a White House that opposes many of the GOP reforms.

The savings accounts would constitute a radical departure from the current Medicare system. They combine high-deductible insurance with a tax-sheltered savings account.

For example, the current Medicare program spends about $5,000 a year to cover the costs of a typical beneficiary. Under the House plan, the beneficiary could open a medical savings account, purchasing an insurance plan with an annual $2,500 premium and $3,000 deductible. The patient would have to pay the first $3,000 of costs before receiving insurance payments.

Under the plan, the federal government would pay the $2,500 premium to the insurance company and place the other $2,500 in the tax-free, interest-bearing medical savings account. The beneficiary could decide each time he or she wants medical care whether to dip into the account and use some of the $2,500 to pay bills or to let it roll over into the following year for use on future medical expenses.

Conservatives strongly favor the savings accounts because they allow each person to decide when to spend money on medical care and enables that person to select any physician. But the Congressional Budget Office has said that the House version would lose $4 billion a year for Medicare and the original Senate version $2 billion.

The problem, according to the budget office, is that many healthy people whose yearly bills under Medicare have been only $1,000 to $2,000 would sign up for the accounts. The government, however, would be obligated to set aside $5,000--the average cost for all beneficiaries.

Advocates said that the accounts would make Medicare enrollees pay close attention to costs and encourage them to shop for services.

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Opponents said the accounts would be used primarily by affluent and healthier beneficiaries, draining funds from the Medicare system that otherwise would help pay for the sick elderly who have large bills.

The savings account plan was one of 46 items stricken from the Senate reconciliation bill on a technicality raised by Democrats on Oct. 27 as the Senate was rushing to complete its bill. The technicality involved the so-called Byrd rule, which bans the inclusion in budget bills of provisions that increase the deficit unless 60 senators vote to waive the requirement.

After Democrats raised the issue, Republicans were unable to muster the 60 votes to waive the rule.

Sentiment for the accounts is stronger in the House, where Republicans this week began gathering signatures for a letter threatening to withhold support for overall Medicare reform.

GOP activists decided to make their displeasure public at a news conference Friday.

Ferrara called the savings accounts “essential and critical” to the Medicare plan. “This is the centerpiece of health care reform,” he said.

The Republicans want to reduce the growth of Medicare spending by $270 billion over the next seven years to help balance the federal budget and to rescue the Medicare hospital trust fund, which is projected to run out of money in 2002.

Also Friday, Sen. Judd Gregg (R-N.H.), an influential senator on health care issues, told Senate Finance Committee Chairman William V. Roth Jr. (R-Del.) in a letter that “everything possible must be done” to restore the savings accounts.

Despite the Congressional Budget Office estimates that the accounts would take funds from Medicare, they are “the epitome of the type of market forces we are trying to insert into Medicare,” Gregg said.

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GOP leaders handling the Medicare bill promised to revive the savings account. Roth and Rep. Bill Archer(R-Tex.), chairman of the House Ways and Means Committee, issued a joint statement pledging that the accounts “will be part of the final conference report” dealing with Medicare.

The savings accounts are “a fundamental part of the Medicare and health care reforms being worked on by Republicans in Congress. . . . The Democrats will not prevent MSAs from being in the final conference report,” they said in a statement.