Republican Leaders Reach Deal on Medicare
For First Time, Plan Would Cover Drug Costs
By Amy Goldstein
Washington Post Staff Writer
Sunday, November 16, 2003; Page A14
Leaders of Congress last night announced a hard-fought agreement in principle on the largest expansion of Medicare since the program's birth, promising older Americans the first federal help in paying for prescription drugs while tilting the health insurance system heavily toward the private sector.
Senate Majority Leader Bill Frist (R-Tenn.), House Speaker J. Dennis Hastert (R-Ill.) and key lawmakers who have been bargaining over Medicare legislation for months said they had reached consensus on all the outstanding disagreements over a $400 billion plan to redesign the program. But they released no details, said they still were waiting for final budget estimates on whether the plan was affordable and acknowledged that they were uncertain the long, intricate bill could pass both chambers of Congress.
They sounded euphoric, if vague. "I'm confident this is the best deal that could be made," Ways and Means Committee Chairman Bill Thomas (R-Calif.), who has led the negotiations, said in the near-empty Capitol.
Congressional sources said the lawmakers had resolved major disagreements over a new kind of competition for patients from private health plans in Medicare, retiree benefits provided by private companies and extra subsidies for people on Medicare who are especially poor. They said they would describe their decisions publicly today.
The lawmakers announced what Frist called "an agreement on principles" only after a final round of bargaining that lasted well past midnight Friday and through most of yesterday. As the negotiations continued, Frist and Hastert labored to create an aura of an inevitable breakthrough, though it is uncertain whether they can push the legislation through the Senate and the House by the end of this week, as both leaders said they are determined to do.
The bill would create a federal subsidy for prescription drugs for people 65 and older who are willing to buy a new type of insurance policy or join a private health plan. The plan, which would take effect in three years, also would give extra assistance to low-income Medicare patients.
The sources said that several minor issues remain unresolved. And the sources said that lawmakers have not obtained final budget analyses showing whether the changes to Medicare would be likely to fit within the $400 billion price tag for the next decade, to which the White House and Congress have agreed.
Most critically, it remained unclear whether the fragile agreement can win support of the majority of House members and senators. The House passed its Medicare bill by just one vote in June, partly because it contained several provisions that are popular with GOP conservatives but now have been altered in the agreement. The Senate's vote was more bipartisan, but Democrats have been denouncing the shape the agreement has assumed in recent days, and 44 senators -- including seven Republicans -- have signed a new letter of protest.
Last night, Sen. Edward M. Kennedy (Mass.), the Senate's most influential Democrat on health matters, said, "I remain deeply troubled that this plan will undermine the reliability and affordability of Medicare for our nation's seniors."
But the White House released a statement from President Bush, who is eager to use a new Medicare law in his presidential campaign and who called last night's agreement "the most significant improvement in senior health coverage in nearly 40 years."
The agreement came as sources said negotiators had found solutions to two aspects of the massive legislation -- containing more than 1,000 pages -- that had proved particularly contentious.
One involved a central ideological disagreement over how far the government should go try to motivate Medicare patients to leave the traditional, fee-for-service version of the program, to which nearly 90 percent belong, and join private health plans. The House voted to try to foster that migration by placing the traditional program into a direct price competition for patients with preferred provider organizations, known as PPOs, and other kinds of private health plans through a strategy that Democrats have warned would end up making it more expensive to remain in the original program.
In the end, the agreement pares, but does not eliminate, the House's idea. The price competition would be allowed to start in 2010 in as many as six metropolitan areas and last for as long as six years. Thomas, who had argued earlier in the week for a broad experiment in such competition, said last night that he supported all aspects of the accord.
The other final issue involved financial incentives to try to deter the nation's employers from abandoning the drug benefits they provide retirees once federal coverage becomes available. Lawmakers last night would not confirm how much extra money they had decided to allot.
Created in 1965 as a major piece of Lyndon Johnson's "Great Society" expansion of federal social programs, Medicare provides health care to about 40 million elderly and disabled people -- and has assumed vast economic and political significance.
For years, Congress has wrestled with how to satisfy a widespread public demand that Medicare be updated to include coverage for pharmaceuticals, which have gained far more importance in the practice of medicine than when the program began. Until now, Medicare has paid for medicines that are administered directly in a hospital or in an outpatient setting, but not for prescriptions that patients take at home.
In June, Congress reached a watershed, when both chambers approved Medicare measures that shared the basic goals of drug coverage and greater reliance on private health plans. But the bills also contained many differences, and a team of House and Senate negotiators, all but two of them Republican, has spent the past four months in a search for common ground.
Specifically, the drug benefit would be available to anyone on Medicare who is willing to pay a premium of about $35 a month and a $275 yearly deductible. After that, the government would pick up three-fourths of drug costs, up to $2,200. Coverage then would stop except for a small number of people who have extremely high expenditures, above $3,600 a year. Before the drug benefit began, the government would try a more modest method to lower older people's expenses, organizing a network of drug discount cards sold by companies that manage pharmacy benefits. The White House has predicted those cards could shave as much as one-fourth off the price of medicine, but other estimates have been less optimistic.
Medicare patients could obtain those benefits in two ways: through new insurance policies that covered only drugs; or by joining a PPO, HMO or other private plan that also furnished the rest of their care.
The agreement includes a compromise on whether the government should, as the Senate wants, guarantee that coverage is available everywhere, even if private insurance companies decide not to take part -- a particular concern in rural places that private plans have largely avoided because the markets are less profitable. Under the Senate plan, the government would have stepped in anywhere that Medicare patients did not have a choice of at least two private drug policies. The compromise would consider patients to have adequate choice if there is one such free-standing insurance policy for drugs and one private health plan in their area.
Overall, the agreement incorporates many conservative ideas about the future of health care for older people -- and for the rest of country -- although it would not move Medicare quite as far in some of those directions as House Republicans have sought.
For instance, the deal calls for an unprecedented attempt to limit overall federal spending on the program, which historically has been an entitlement that can draw on as much money as required to provide specific benefits to everyone it covers. The agreement, however, stops short of the ceiling that many in the GOP sought. Instead, it would require the White House to recommend ways to bring down spending if it rose more quickly than expected but would not compel Congress to act on those recommendations.
Similarly, the agreement includes a longtime darling of conservative health policy: a new system of tax-preferred savings accounts for people who can afford to set aside money for medical expenses. House Republicans wanted two such programs, estimated to cost $174 billion for the next decade, but only the smaller one, costing about $6 billion, is in the deal. Conservatives say that such tax breaks would motivate consumers to avoid unnecessary medical care, but many Democrats say the health savings accounts would drain the nation's health insurance system of wealthy patients in good health.
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