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Bush Will Accept Identical Benefits on Medicare Drugs

By ROBERT PEAR, New York Times

June 10, 2003

WASHINGTON - In a tactical retreat, the Bush administration told Congress today that it would accept equal prescription drug benefits for people in the traditional Medicare program and those who join private health plans.

Administration officials had long insisted on more generous drug benefits for enrollees in private plans, especially the preferred provider organizations that steer patients to certain doctors and hospitals. Officials said they were bowing to political reality and giving up, at least for now, on a two-tier benefit.

The move amounts to an offer to compromise with a Senate plan to give the same Medicare drug benefits to everybody.

In another pragmatic gesture to the Senate, the White House urged House Republicans today to approve a Senate bill to increase the child tax credit for 6.5 million low-income families and to end a dispute over the omission of the poor in the tax bill President Bush signed last month. "Pass it," said Ari Fleischer, the White House spokesman, when asked what President Bush would say to party members who disagreed with the bill.

The Congressional Budget Office told senators today that fewer than 10 percent of the 40 million Medicare beneficiaries would join preferred provider plans under a system where prescription drug benefits would be the same as for those people enrolled in traditional fee-for-service Medicare plans.

The Senate majority leader, Senator Bill Frist, Republican of Tennessee, said the budget office had indicated that the proportion of beneficiaries going into P.P.O.'s could be as low as 2 percent.

Administration officials said they believed the figure would be higher — perhaps 28 percent. Conservative senators want to offer superior benefits in private plans, which they view as the future of Medicare.

But administration officials said it was important to keep the legislative process moving. The sole vehicle available in the Senate is a bill that offers identical drug benefits to Medicare beneficiaries in the traditional fee-for-service program and in private health plans.

Tommy G. Thompson, the secretary of health and human services, met President Bush today and sought his guidance, administration officials said. Mr. Thompson then relayed the administration's views to Republican senators at a meeting in the Capitol.

Asked after the meeting whether he was seeking a change in the section of the Senate bill that authorizes equal benefits, Mr. Thompson said, "Not really at this point in time."

The Senate Finance Committee plans to vote on Thursday on the bill, drafted by the committee chairman, Charles E. Grassley, Republican of Iowa, and Max Baucus of Montana, the senior Democrat on the panel.

Thomas A. Scully, administrator of the federal Centers for Medicare and Medicaid Services, said the administration would not support an amendment to provide more extensive drug benefits to people who leave traditional Medicare for private plans. Supporting such an amendment would be an affront to Mr. Grassley.

"We would not do that to Senator Grassley," Mr. Scully said. "We reserve the right to push for differential benefits. But getting a bill out of the Senate is the clear goal for the president."

Mr. Bush and the Republican-controlled Congress have agreed to spend $400 billion on drug benefits and other changes in Medicare over the next 10 years. The Congressional Budget Office told senators today that the Grassley-Baucus proposal would cost $40 billion less than that.

Mr. Scully said his agency and the Congressional Budget Office had "fundamental disagreements" over the cost of preferred provider plans and the number of people who would enroll. A Senate Republican said the disagreements had produced "wildly differing estimates."

Medicare actuaries say they believe that private plans will submit bids that offer the full range of Medicare benefits for 98 or 99 percent of what the government spends on such benefits in the fee-for-service program, Mr. Scully said.

By contrast, he said, the Congressional Budget Office predicts that the preferred provider plans will cost 10 to 12 percent more than traditional Medicare. The budget office apparently thinks that few beneficiaries will be willing to pay the higher premiums that result.

"We are entering uncharted territory," Mr. Scully said. "We have 38 years of experience with the fee-for-service program, but nobody has much experience with drug benefits or P.P.O.'s in Medicare."

House Republicans said they were considering a two-pronged strategy. They would argue with the administration that large numbers of the elderly want to join private plans. At the same time, the House Republicans said, they will accept the arithmetic of the budget office, which says such plans will have a minimal cost to the government because few people will enroll.