Deal Would Alter Medicare’s Core

Times Staff Writer

As Congress prepares to vote on a final $400-billion Medicare prescription drug bill, there is one thing on which most lawmakers agree: The legislation would, over time, change the essence of the 38-year-old health insurance program for the elderly and disabled.

Now, the government sets the prices for thousands of medical services and pays the bills. But under the Medicare reform legislation, some details of which were released Sunday, the government would pay private insurance companies and managed-care plans billions of dollars in incentives to compete with traditional Medicare for the prescription drug business and general health-care needs of more than 40 million Americans.

Medicare would begin to become “an insurance program backed by the American taxpayer, supervised by the government,” Sen. John B. Breaux (D-La.), a key supporter of the compromise legislation, said Sunday.

It is that fundamental difference -- Medicare as a government program versus Medicare as a huge government-subsidized health insurance market -- that underlies the deep divisions between Democratic opponents of the bill and its Republican supporters.


With Republicans in control of both Congress and the House-Senate committee that shaped the compromise legislation, it is not surprising that the GOP goal of containing Medicare costs by turning much of the program over to the private sector prevailed over Democrats’ desire to maintain Medicare as a social insurance program.

Lawmakers’ assessments of how the legislation satisfied one or both of those goals will influence their votes for the bill and determine whether the nation’s seniors and disabled get government assistance in paying for their prescription drugs.

Although Sen. Edward M. Kennedy (D-Mass.) continued to oppose the bill, saying it would leave millions of seniors with “high premiums and higher drug costs,” Sen. Max Baucus (D-Mont.) said he believed that the bill could pass the Senate without the support of the senior senator, who is highly respected on health issues.

Conceding that the bill is not perfect, Baucus said that “on balance, this is better to pass than not to pass.” He and Breaux were the only two Democrats on the negotiating committee.

As congressional leaders and staff members laid out the details of the massive Medicare reform legislation Sunday, those differences -- and the political arguments that will be used to frame them in the coming days -- grew only sharper.

“We’re making a generational decision here to spend $400 billion to keep each other’s mama and daddy alive,” said Rep. W.J. “Billy” Tauzin (R-La.), another key negotiator.

“The health-care security of 40 million seniors is at stake,” said Senate Majority Leader Bill Frist (R-Tenn.), the heart surgeon credited by negotiators with closing the Medicare deal.

For Rep. Bill Thomas (R-Bakersfield), chairman of the House-Senate negotiating committee, the legislation is all about reducing the government’s financial burden for seniors’ health care while making Medicare sustainable over the long term and adding a major benefit.

“Over the next decade, [the bill] will also change the relationship between taxpayers and an ever more expensive program,” he said.

Interest groups and consumer and senior advocates also weighed in. The legislation garnered endorsements from the managed-care, pharmaceutical and insurance industries, as well as from business groups and the American Medical Assn.

AARP, the 35-million-member group for older Americans, did not make a formal endorsement but sent positive signals.

“We think progress is being made,” said Mike Naylor, the group’s director of advocacy. “But there are a couple of issues still outstanding,” he added, declining to elaborate.

But Ron Pollack, executive director of the health-advocacy group Families USA, said the agreement “does too much to destroy Medicare and too little to help the seniors who can least afford their medicines. It can still, and should be, changed.”

Negotiators were awaiting final cost estimates and counting votes before finalizing language in the massive bill. As of Sunday, however, these were the major elements of the legislation:

* In April, a temporary Medicare-endorsed drug discount card would be available to all beneficiaries for an annual fee of about $30. Low-income seniors would get $600 in Medicare credit on their card next year and in 2005.

* Beginning in 2006, seniors could get Medicare drug coverage for an average monthly premium of $35 and an annual deductible of $275. The drug benefit would be administered by a managed-care plan, a stand-alone drug benefit plan or, in areas where seniors didn’t have at least two plans to choose from, by Medicare itself. The government would assume some of the private companies’ financial risk.

Most seniors would pay 25% of their drug costs up to $2,200, with Medicare picking up the other 75%. They would be responsible for all of their drug expenses from $2,201 to $3,600, after which Medicare would pay for 95% of their drug costs.

Low-income seniors would receive additional help with their drug costs. The poorest seniors would pay $1 for each generic prescription and $3 for brand-name drugs. Co-payments for seniors with slightly greater income would be $2 and $5.

* To qualify for low-income coverage, seniors would have to submit documentation on the value of their assets. Because of the assets test and the lower income-eligibility requirements, roughly a third of the 9 million low-income seniors would not qualify for higher prescription drug subsidies.

* About 2 million wealthier seniors -- individuals with incomes of more than $80,000 and couples earning more than $160,000 -- would pay higher premiums for doctors’ visits and other outpatient services.

* The re-importation of U.S.-made drugs from Canada would remain illegal unless the secretary of Health and Human Services certified the safety of such sales. The bill would make it somewhat easier for generic drugs to get to market, which could lower prices somewhat.

* The government would create a $12-billion fund to encourage private health-maintenance and preferred-provider organizations to cover Medicare beneficiaries.

* Beginning in 2010, private health plans in six areas would compete with traditional Medicare in a six-year pilot program. To encourage low prices and high participation, seniors and insurance companies would split the savings -- 75% and 25%, respectively -- if their premiums were lower than Medicare’s. Premiums for seniors remaining in traditional Medicare would increase no more than 5% a year.

* Employers would receive $70 billion to $80 billion in tax-free subsidies to maintain drug coverage for their retirees.

* If more than 45% of Medicare funding were projected to come from general revenue, Congress would have to act to control Medicare spending.

* At a cost of roughly $7 billion over 10 years, all Americans could set up tax-deferred health savings accounts.

* Several tens of billions of dollars would go toward higher payments for doctors, rural health-care providers and hospitals. Reimbursements for office-administered cancer drugs would be cut, but other payments to oncologists would increase.

* Payments to home health-care providers would be cut, but there would be no co-payment for beneficiaries.

* New benefits would include a “welcome to Medicare” physical for new beneficiaries, screening tests for diabetes and heart conditions, and disease management programs.