Congress Approves Medicare Overhaul

Congress early today approved landmark legislation that would overhaul Medicare and expand its benefits to include prescription drug coverage, a major breakthrough on an issue stalled for years by partisan impasse.

The Senate passed its bill, 76 to 21. The House approved its version by the narrowest of margins, 216 to 215. House Republican leaders extended the allotted voting time to round up the final support needed to pass it.

The two bills differ in some key areas, but their passage represents a major step toward enactment of the most far-reaching changes in the health-care program for the elderly since it was established in 1965.

Both the House and Senate bills also move toward an important goal sought by President Bush: giving private health plans a larger role in Medicare in an effort to increase market competition and control cost. That would be a major change for a program that has always been heavily regulated by the government.

“This is an historic opportunity to combine the best of what government can do with the best of what the private sector can do,” said Sen. John B. Breaux of Louisiana, a centrist Democrat who supported the Senate Medicare bill.

In the House, Speaker J. Dennis Hastert of Illinois reminded fellow Republicans of the high political stakes surrounding the bill. “Senior citizens ... will never forget if you voted against” the measure, he said.

The House bill goes further than the Senate version in trying to shift the elderly into private-sector alternatives to Medicare’s traditional coverage. That and other differences could make for lengthy and difficult negotiations this summer, when lawmakers from the House and Senate meet to draft a final compromise bill.

But the legislation’s progress so far is a watershed development for an issue that for years has been treated more as fodder for political campaigns than as an achievable legislative goal.

“This issue has momentum,” said Senate Finance Committee Chairman Charles E. Grassley (R-Iowa). “After five years of talk about prescription drugs, this Congress is within reach of helping senior citizens with life-enhancing medicines and to strengthen Medicare both for consumers and for taxpayers.”

The Senate vote on the legislation was solidly bipartisan: 35 Democrats, 40 Republicans and one independent voted for it. Voting against the bill were 10 Republicans and 10 Democrats. Both of California’s Democratic senators, Dianne Feinstein and Barbara Boxer, voted for the bill.

The bill was nearly derailed, in a moment of political drama, after senators approved an amendment by Feinstein that, for the first time, would have required well-off Medicare beneficiaries to pay higher premiums than lower-income people. The amendment was opposed by most of her fellow Democrats -- most vocally by Sen. Edward M. Kennedy (D-Mass.). Kennedy refused to allow the entire bill to come to a final vote unless the Senate dropped the Feinstein amendment. It did, by voice vote.

The final House vote was much more partisan than the vote in the Senate. Supporting the measure were 209 Republicans and nine Democrats; opposing it were 195 Democrats, 19 Republicans and one independent. House Democrats had argued the bill’s effort to expand the role of private medical plans was a threat to the basic principle of Medicare -- that benefits should be guaranteed by the government, not be subject to the vagaries of the private market.

“I did not come to Congress to privatize Medicare,” said Rep. Rosa DeLauro (D-Conn.).

But Republicans said their bill would “modernize” the 38-year-old program by adding a drug benefit and helping control its costs by encouraging competition.

“Democrats are living in 1965,” said Rep. Jim Nussle (R-Iowa). “But it’s not 1965. Medicare is going bankrupt. Doing nothing ... is not an option.”

For Bush, the legislation would fulfill a campaign promise dear to the hearts of the nation’s elderly: Medicare coverage for prescription drugs.

Many lawmakers from both parties also have pledged in recent campaigns to work for filling the drug coverage gap in Medicare. They have noted that when the program was established, outpatient drugs were not as central to medical care as they are today.

If Bush and the GOP-controlled Congress deliver on that the drug coverage promise, many analysts say they may neutralize a political issue that has bedeviled their party. For years, Democrats have accused Republican candidates of trying to dismantle Medicare. That argument will be harder to make if Congress enacts a huge expansion of the program this year.

But there is a wild card in the political outlook: Some analysts warn of a potential backlash from the elderly because the legislation’s drug coverage may fall far short of what they are expecting. The final measure also may call for more out-of-pocket costs than the elderly want to bear.

The House and Senate bills are similar in many respects. Both would provide $400 billion over 10 years to add a prescription drug benefit to Medicare and expand the role of private medical networks -- such as preferred-provider organizations -- in providing government-subsidized care to the elderly.

Under the House bill, beginning in 2006 beneficiaries would be given the option of getting drug coverage if they pay a premium averaging $35 a month (premiums would be subsidized or waived for low-income people).

For those who participate, after they pay a $250 deductible, the government would pay 80% of beneficiaries’ drug costs up to $2,000 a year, and 100% after drug costs exceeded $4,000 -- a threshold that would be set higher for people earning more than $60,000 annually. That introduces a controversial income differential to a program that for the most part has treated beneficiaries equally, regardless of income.

Beneficiaries could get drug coverage by joining a PPO or other managed-care plans participating in Medicare. Alternatively, they could remain in Medicare’s traditional fee-for-service program, and obtain drug coverage from a stand-alone policy from a private insurer.

Critics of the House bill are worried that in some regions, no such policies will be available because insurance companies have been reluctant to write such policies.

Before the full drug benefit takes effect in 2006, the bill provides interim assistance. Every Medicare beneficiary would get a drug discount card that could save them between 15% and 25% on drug purchases.

The Senate bill provides similar benefits, but has a higher deductible -- $275 a year -- and a different benefit structure. Under it, the government would pay half of beneficiaries’ drug costs up to $4,500 a year, and 90% once drug costs exceed about $5,813.

The most controversial differences between the two bills center on provisions affecting the respective roles of the government and private-sector plans.

Perhaps the most crucial disparity is a Senate provision -- opposed by Bush and House Republicans -- that allows the government to offer drug coverage as a fallback if at least two private policies are not offered in a particular area.

During debate on the House bill, Democrats criticized the gaps that would exist in drug coverage, and said the proposed benefits were a pale shadow of the help elderly people need. They offered a more generous and expensive alternative.

“The Republicans shortchange our seniors but always find more money for tax cuts for the wealthy and special interests,” said Rep. Charles B. Rangel (D-N.Y.).

The proposal was rejected, 255 to 175.

Some GOP conservatives, meanwhile, complained that the bill’s market-oriented reforms did not go far enough. That is why Bush in recent days mounted a lobbying campaign to persuade them that the reforms will accomplish their goals -- and that the alternative would be a prescription drug bill they like even less. Vice President Dick Cheney came to Capitol Hill on Thursday to press that case.

To encourage conservatives to support the bill, despite their reservations, GOP House leaders first scheduled a vote on another health bill on conservatives’ wish list: one that would allow people to establish tax-free accounts to save for future medical expenses.

Democrats said the proposal would weaken the incentives businesses now have to provide health insurance to their employees.

But Republicans said the accounts would encourage consumers to be more thrifty in their health-care spending.

The bill passed, 237 to 191. But whether it can win Senate approval remains in doubt.

In another bid to broaden support for the Medicare bill, the GOP leaders added provisions -- similar to those included in the Senate measure -- to make it easier for lower-cost generic drugs to reach the market and to allow pharmacists to import less expensive drugs from Canada.

In the Senate, Feinstein erected the final roadblock to approval when she teamed with several Republicans to offer her amendment, which would require more affluent Medicare beneficiaries -- those earning $100,000 or more -- to pay more in premiums than lower-income seniors for the part of Medicare that pays doctors’ bills.

Most Democrats voted against the amendment, fearing that anything linking benefits to income will undermine broad political support for the program. But Feinstein argued that it was a way to economize in the program at a time of burgeoning costs.

“The federal government should not be subsidizing the ... premiums of those beneficiaries who can afford to pay for the cost of the premiums themselves,” Feinstein said. Opponents initially tried to kill the amendment, but failed, 59 to 38. But after a furious Kennedy gave his ultimatum to a huddle of lawmakers that included Feinstein, GOP leaders agreed to drop the amendment.

Afterward, Feinstein said she hoped her proposal would be restored in negotiations with the House. But she acknowledged, “There are powerful voices that don’t want to income-relate these premiums.”

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Times staff writer Vicki Kemper contributed to this report.