Congress on Verge of Remaking Medicare

WASHINGTON -- Congress appears to be on the verge of making the most significant changes to the nation’s health-care system since it created the Medicare program almost 40 years ago.

New details that emerged Tuesday in the Senate and the House confirmed that not only are both chambers serious about overhauling Medicare this year, but also that Congress intends to do much more than simply add prescription-drug coverage to the $277-billion program.

Shaped in large part by the Bush administration’s desire to move seniors into private health plans, the leading Medicare reform proposals will likely transform health-care delivery for the 40 million seniors and disabled people now enrolled in Medicare. “Seniors like the Medicare program. But some are missing the miracles of modern medicine,” Health and Human Services Secretary Tommy G. Thompson said Tuesday in a speech promoting the administration’s Medicare “modernization” plan.

That general framework, which President Bush will defend at events today in Chicago and Thursday in Connecticut, emphasizes preventive care, disease management, negotiated drug prices and networks of doctors working for fees set by insurance companies.

The administration’s framework and leading congressional proposals, which lawmakers will debate for the rest of the month beginning Thursday, also rely on competition among private health plans to lower health-care costs.

The reform may also deliver some bad news to seniors. The Senate proposal would, for the first time since 1991, increase the amount seniors would have to pay each year for doctors’ visits.

In 2006, the payment would rise from $100 to $125, and then it would be adjusted annually for inflation.

Both the House framework and the bipartisan Senate bill would require seniors to pay a monthly premium of $35 to get drug coverage, either through a preferred provider organization or, for seniors choosing to remain in the traditional program, a stand-alone drug-benefit plan.

The Senate plan would subsidize premiums for low-income seniors.

The House GOP framework would phase out drug coverage for seniors with annual incomes of about $60,000 or more.

Medicare drug coverage would become available in 2006.

With the number of American seniors expected to more than double over the next 50 years and the Medicare trust fund projected to run dry long before then, Bush and congressional leaders have said it would be irresponsible to add a prescription-drug benefit to Medicare without also finding a way to lower spending on other program benefits.

Republicans believe bringing more managed care and private competition into Medicare will do that; Democrats and the Congressional Budget Office disagree. Those groups also disagree on how many current Medicare beneficiaries would join the private plans.

The nonpartisan Congressional Budget Office said only 2% of seniors would join preferred provider organizations -- loose networks of doctors who agree to charge standard amounts for their services.

Republicans predicted the total would be closer to 30% or 40%.

For now, however, Republicans and Democrats appear to have agreed to put those disputes aside in the interest of passing a Medicare prescription-drug bill by fall.

All leading reform proposals would allow Medicare recipients to stay in traditional fee-for-service programs and, if they chose, to buy into a stand-alone drug-benefit plan.

Or they could choose from several PPOs, which would offer a standard level of benefits, including prescription-drug coverage.

Equal prescription-drug benefits would be offered to all seniors, regardless of whether they joined a PPO.

Yet even as the Senate Finance Committee prepared to vote Thursday on its bipartisan Medicare legislation, key details of the prescription-drug benefit remained unsettled.

In essence, Senate aides were still trying to figure out how much prescription-drug coverage and Medicare reform they could buy with $400 billion over 10 years, the amount set aside in Congress’ annual budget.

“The plan is to spend up to the $400 billion,” said a Republican committee aide speaking on condition of anonymity.

The Congressional Budget Office estimated that a preliminary version of the Senate Finance Committee’s Medicare proposal would cost $351 billion to $370 billion over 10 years.

So, committee members have directed their staffs to use the “leftover” money to increase the government’s share of seniors’ drug costs.

Any improvements made to the drug benefit are likely to increase the chances that the Senate could pass a Medicare reform bill by June 27, when lawmakers hope to leave Washington for their Fourth of July recess.

Many Democratic senators, as well as seniors’ groups, have criticized the Senate proposal and a working outline supported by House Republicans for leaving Medicare beneficiaries with a sizable gap in prescription-drug coverage.

The Senate proposal would require seniors to pay $3,712.50 of their first $5,300 in drug expenses annually before Medicare would begin picking up 90% of any additional costs.

The limited coverage is “a very serious barrier to people actually signing up for the program,” said John Rother, director of policy and strategy for AARP, the 35-million-member seniors’ lobby.

However, Rother said, “we are done with waiting. We want to see a bill enacted this year.”

So AARP, along with many congressional Democrats, will work this year to narrow the size of the coverage gap. Doing away with it will have to wait.

Senate Finance Committee aides said they would narrow their bill’s gap as soon as today. “To fill the hole completely would cost about $200 billion more than we currently have to spend,” said a Democratic aide.

Other new and unique elements of the Senate proposal include plans for the government to share the financial risk of PPOs and private insurance companies participating in the new program.

Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) and Sen. Max Baucus of Montana, the committee’s ranking Democrat, said last week that such provisions -- which could cost the government $20 billion to $25 billion over 10 years -- were needed to encourage private companies to insure Medicare beneficiaries, who are generally older and sicker and cost more to cover.

Committee aides said Tuesday that the proposal offers two kinds of risk-sharing, one that would pay all costs of health services to individual seniors once they exceeded a set, agreed-upon amount.

In addition, the government would absorb a proportion of any money lost by the health-care plans each year, and share in any profits.

“We have spent countless hours” negotiating with private health plans to come up with “an attractive business model,” said a Republican committee aide.