United Press International - November 13, 2003
Ellen Beck, United Press International

Not by a long shot -- if history serves as teacher -- are Republicans ready to give up their ideal of reining in Medicare spending, now at $280 billion a year and expected to skyrocket as the baby boomers retire. They will continue to push the standard GOP ingredients: private sector competition and requiring seniors already in the program to accept more responsibility for payments.

The so-called prescription drug legislation now in final congressional conference committee negotiations hangs on the privatization issue -- rightly or wrongly. Working out the details of the drug coverage was difficult, but it turned out to be a no-brainer compared to privatization, which cuts to basic philosophical differences.

The initial House bill language called for the government's fee-for-service Medicare payments in 2010 to be tied to bids placed by private insurance plans competing for Medicare business. If the FFS costs turn out to be higher than the plans, seniors would pay more in premiums. If so, it would be the first time the government would limit in some way what it spends on Medicare. Critics say such a change could destroy the FFS program and force seniors into the managed care arm.

Meanwhile, Democrats have not blinked even once. They have denounced -- vociferously, adamantly and even angrily -- privatization from the day the House bill passed in June. For the Democrats, this is a deal breaker and potentially dooms any bill coming out of the conference committee, especially in the Senate, which did not include privatization language in its bill.

It is basic party politics: Democrats want to keep Medicare an open-ended entitlement for all seniors, while Republicans want to limit government spending. It has been an issue since 1965 when the Medicare bill passed and it has perpetuated a battle every year since.

Eight years ago this day, the United States stood at the brink of government shutdown -- and in fact did shut down on Nov. 14, 1995. Republican demands to reduce the government's Medicare costs led the charge. At issue in the appropriations bills, needed to keep the government running, were increases in beneficiary premiums. Democrats, led by President Bill Clinton, adopted the same hardline stance they are displaying today.

This week, however, the GOP, seeing Democrat intransigence, decided to offer an olive branch option. A measure proposed by Senate Majority Leader Bill Frist, R-Tenn., reportedly would slim down the premium support proposal -- starting it two years earlier but limiting it to six years, as well as keeping it only in several large metro areas where Medicare+Choice managed care plans already are successful.

The GOP also wants to include medical savings accounts for seniors and billions of dollars in incentives to entice private health plans to buy into the new Medicare drug coverage.

The scaled-back premium-support idea -- especially if limited to successful Medicare+Choice regions -- could provide some comfort for Democrats. That is because in those areas health plans basically are paid at least the FFS Medicare rate -- and in many instances much more -- so seniors might not be at huge risk.

Also in those areas are the preferred provider organization demonstration projects -- which in early analyses look like they might succeed over time. The PPOs -- which in the demo projects can be paid 99 percent of FFS -- are the hallmark of the new Medicare bill -- providing not only drug coverage but the full health/drug combo for seniors.

Medical savings accounts, however, sound good but, in reality, fall short. They allow people to save money for healthcare expenses with pre-tax income. The savings then would be coupled with a type of catastrophic or high-deductible, low-cost health plan. The idea is seniors would use the savings to purchase routine or small-ticket healthcare services.

The problem is when an individual purchases healthcare services out of pocket -- without insurance -- they pay the physician's or the clinic's or the laboratory's "street" price. They do not get the benefit of paying the negotiated, vastly reduced price these same providers charge insurance companies. So, in the end, the individual has markedly less buying power with his or her saved dollars.

As of Thursday -- and the Medicare negotiations are a moving target on Capitol Hill -- the GOP was heartened by cautious but positive comments from the senior group AARP on the compromise proposal. President Bush again urged the conferees to work quickly to an agreement.

Democratic Minority Leader Tom Daschle, D-S.D., an outspoken critic and one of the diehards defending the party line, told reporters he had not seen the proposal -- a daily jab at the conference committee's exclusion of all but two Democrats in the serious negotiations.

"But based on what we've been told, we're deeply concerned that 10-million people will be forced into an HMO for the first time," he said. "And all senior citizens, the other three-fourths of senior citizens, are going to be forced to pay much higher premiums."

Sen. Edward Kennedy, D-Mass., who supported the Senate bill and garnered support for it during the June vote, said Thursday the "proposals that have been recommended by the leadership in the House and the Republican leadership here would effectively undermine the Medicare system which our seniors depend on. And that is unacceptable. That is unacceptable."

The Democrats said AARP was the only senior group to give any support to the compromise plan and they would call other senior groups to the Capitol later Thursday to oppose it.

A Nov. 21 deadline looms to pass a bill out of the conference committee. The ball has bounced back to the Democrat's court, however, and potentially the GOP is setting up to play the blame game should the entire deal fall through.

Some Democratic staffers had expected the fallback position to be a demonstration project for privatization and the GOP plan appears to head in that direction.

The question remains whether it is far enough toward that goal for Democrats to accept and still feel they have defended and protected the traditional Medicare entitlement without standing in the way of getting a much needed prescription drug benefit for the 35-million seniors in the program.

Ellen Beck covers healthcare policy for UPI Science News. E-mail sciencemail@upi.com

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