GOP Leaders Declare Agreement on Medicare

House and Senate Republican leaders, joined by two Democratic senators, said Saturday night they had reached “an agreement on principles” to add a $400-billion prescription drug benefit to Medicare while overhauling the health-care program that now covers 40 million senior and disabled Americans.

“We feel very good, very optimistic that we’re going to be able to send a bipartisan bill to the president ... in a few days,” said Senate Majority Leader Bill Frist (R-Tenn.).

If approved by Congress, the reforms would represent the most significant changes to the U.S. health-care system since Medicare and Medicaid were created in 1965.

The first change seniors would see, possibly as soon as next spring, would be a Medicare-endorsed drug discount card that for an annual fee of about $30 could save them from 15% to 25% of the cost of each prescription. The card would be phased out in 2006, when the Medicare prescription drug benefit, which seniors could have for a monthly premium of about $35, would take effect.

The reforms would also bring private insurance companies and market-based competition into the $277-billion Medicare program like never before. Beginning in five to seven years, some seniors would be encouraged -- some say pushed -- to leave traditional Medicare, in which they choose their own doctors and hospitals, to join HMOs or preferred-provider organizations.

President Bush, who promised a Medicare drug benefit in his 2000 campaign, praised congressional leaders “from both sides of the aisle” for the agreement and urged Congress to pass the legislation so he could sign it into law.

“Seniors have waited a long time for help in paying for prescription drugs, and I am pleased that we are now on the verge of providing them with the help they need and the health-care choices they deserve,” he said in a statement.

But it remained unclear late Saturday whether the details of the legislation, which should be made available today, would satisfy the demands of House conservatives and Senate Democrats.

Last week, 44 senators -- including seven Republicans -- signed a letter calling on Frist to take the private competition provisions out of the bill. At the same time, conservative Republicans in the House insisted on a nationwide, permanent competition program that, by raising prices for seniors in traditional Medicare, would encourage them to join less expensive managed-care plans.

Instead, late Saturday, congressional negotiators agreed on a pilot competition project that would operate in perhaps six cities or counties where roughly a third of seniors already were participating in Medicare HMOs or PPOs. Currently, almost 89% of beneficiaries participate in traditional, fee-for-service Medicare.

“I remain deeply troubled that this plan will undermine the reliability and affordability of Medicare for our nation’s seniors,” Sen. Edward M. Kennedy (D-Mass.) said in a statement. “It is time to put aside partisan efforts to privatize Medicare and get on with the business of enacting a workable prescription drug benefit.”

The two Democratic negotiators were more optimistic.

“When the details are announced ... we’ll get more votes in the House and Senate than people think,” said Sen. Max Baucus of Montana.

“No one got everything they wanted,” said Sen. John B. Breaux of Louisiana, adding that “the only thing that could prevent [the bill] from being passed is unnecessary political partisanship.”

Lawmakers have long realized that the lack of prescription drug coverage was a fundamental flaw in the $277-billion Medicare program.

That weakness had become more glaring in recent years with significant pharmaceutical advances. At the same time, the cost of prescriptions grew increasingly burdensome for the elderly and disabled, particularly the one-quarter of Medicare beneficiaries who had no drug coverage whatsoever.

Previous Medicare prescription drug bills succumbed to partisan and philosophical differences. This year’s passage of different bills by the House and Senate appeared to signal new political will for the enactment of final legislation. But before long House and Senate negotiators had bogged down over significant differences.

Months of heated, on-again, off-again negotiations picked up last week as Congress’s planned adjournment date of Nov. 21 approached. A tentative agreement announced by congressional leaders Wednesday fell apart within hours.

But Frist and House Speaker J. Dennis Hastert (R.-Ill.) patched up their relationships with Rep. Bill Thomas (R-Bakersfield), the chairman of the negotiating committee, and had hoped to announce an agreement Saturday afternoon. Leaders and the top negotiators -- House Majority Leader Tom DeLay (R-Texas), Baucus and Breaux and Rep. W.J. “Billy” Tauzin (R-La.) -- reached a new compromise on what had been the bill’s single most divisive provision, a House Republican proposal to force traditional Medicare to compete with private managed-care plans. But old differences resurfaced and new ones arose.

Repeated rounds of proposals and counterproposals forced the leaders and negotiators to spend hours waiting for new cost estimates from the Congressional Budget Office. But by the end of the day, thanks to what Thomas called a pleasantly surprising bit of accounting that indicated lawmakers had more money to play with than they thought, negotiators made two key adjustments.

The first would give employers $70 billion to $80 billion in tax credits and subsidies to encourage them to maintain drug benefits for their retirees. The seniors group AARP, the organization that used to be known as American Assn. of Retired Persons, and others were concerned that employers would drop such coverage for retirees if they could get it through Medicare.

The second adjustment -- slightly better benefits for the poorest seniors and disabled persons, those who now receive drug coverage through the state-federal Medicaid program, was important to many Democrats and state governors.

The leading group representing private health plans hailed the compromise.

“America’s seniors are a giant step closer to having more health-care choices and prescription drug coverage under Medicare,” said Karen Ignani, head of AAHP-HIAA, a trade association representing managed-care providers and insurance companies.

The Medicare prescription drug benefit would not, however, operate the kind of drug coverage many working Americans now have through their employers. Under that coverage, workers generally make a co-payment for each prescription.

Under the Medicare plan, the government would cover 75% of seniors’ first $2,200 in drug costs, after the senior has paid a $275 annual deductible. Seniors would then have 100% of their next $1,400 in drug costs. After seniors have spent about $3,600 on drugs in a single year, the government would step in and cover roughly 95% of their remaining costs.

Times staff writer Nick Anderson contributed to this report.