House and Senate Pass Measures for Broad Overhaul of Medicare

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House and Senate Pass Measures

For Broad Overhaul of Medicare

By ROBIN TONER and ROBERT PEAR

New York Times, June 27, 2003

WASHINGTON - After a severe test of President Bush's influence on Capitol Hill, the Senate and the House today approved the biggest expansion of Medicare since its creation nearly four decades ago, passing legislation to provide prescription drug benefits to the elderly and give private health plans a much larger role in the program.

The House vote was 216 to 215 in a dramatic roll-call that lasted more than 40 minutes, with the "nays" outnumbering the "yeas," until several Republicans switched their votes. Conservative Republicans joined most House Democrats in voting against the bill in a setback for the Republican leadership and for President Bush, who had lobbied intensely for the measure for months. The vote came around 2:30 a.m., shortly after the Senate cleared its version of the bill by an overwhelmingly bipartisan vote of 76 to 21.

Senate Republican leaders hailed the legislation as long overdue relief for the 40 million elderly and disabled Americans on Medicare. "The bill we have just passed is nothing less than historic," said Senator Bill Frist of Tennessee, the Republican leader.

But many Democrats who voted for the bill said they did so grudgingly. "It's not the kind of bill I would write," said Senator Tom Daschle of South Dakota, the Democratic leader.

He added, "We can simply no longer allow the perfect to be the enemy of the good."

The Congressional action breaks six years of political gridlock, caused by fundamental disagreement over the proper role of government in Medicare, which was created in 1965 as a pillar of President Lyndon Johnson's Great Society.

But the House and Senate bills differ in important ways, suggesting that it will not be easy to produce a consensus measure. The House bill, assembled almost entirely by Republicans, is more conservative than the bipartisan Senate bill.

In an effort to secure conservative support for the Medicare bill, House Republican leaders combined it, at the last minute, with a separate bill encouraging people of all ages to set up two types of tax-exempt personal savings accounts to help pay medical expenses. By a vote of 237 to 191, the House on Thursday approved the new savings accounts, estimated to cost the Treasury $174 billion in lost revenue over the next decade. The Senate bill has no such provision.

Both the House and Senate bills are intended to create a vibrant marketplace of private health plans to give the elderly new alternatives to the traditional, government-run Medicare program. Both versions are officially estimated to cost $400 billion over the next 10 years, though conservatives predicted that costs would soar beyond that amount.

A pivotal vote in the Senate came on Thursday on an amendment that evenly split $12 billion between improvements in traditional Medicare and more incentives to spur competition among private health plans. Republicans wanted to help the private health plans. Democrats sought to strengthen traditional Medicare with more benefits like preventive services and chronic care.

The coalition behind the Senate bill held on that final test vote against challenges from both the left and the right. The amendment was adopted by a vote of 71 to 26.

The breakthrough on Medicare was, in part, a triumph for President Bush, who clearly wants to sign the long-promised prescription drug legislation before his re-election campaign. He pushed his party hard in recent weeks, overcoming the reservations of many conservatives who oppose the creation of a costly new entitlement.

The House debate on the Medicare bill was brief, partisan and bitter. Representative Bill Thomas, Republican of California, said, "The out-of-date Medicare program fails to provide access to affordable prescription drugs." Instead of providing such benefits, he said, "Democrats would rather scare seniors and ignore their true needs."

Representative Jim McGovern, Democrat of Massachusetts, countered, "This bill ends Medicare as we know it and turns it into a convoluted, complicated voucher program." And Representative Sander M. Levin, Democrat of Michigan, denounced the bill as "a radical effort to dismantle Medicare."

Republicans presented the new health savings accounts as a way to encourage "personal responsibility and savings," in the words of Representative J. D. Hayworth, Republican of Arizona. Individuals could take tax deductions for their own contributions and would not have to pay taxes on employer contributions to such accounts.

But Representative Pete Stark, Democrat of California, said the new accounts would be "tax shelters for the wealthy and the healthy." Representative Louise M. Slaughter, Democrat of New York, said the accounts "would threaten traditional employer-based health care by encouraging companies to reduce their employees' health coverage." Many Democrats backed the Senate bill with reservations, as a first step to help the elderly with their prescription drug costs.

Senator Max Baucus of Montana, the chief Democratic sponsor of the bill, described it on Thursday as "a down payment and a beginning" that would be improved in years to come.

Many Republicans described the House and Senate bills as a first step toward "modernizing" an antiquated program whose every detail is controlled by federal regulations.

Both bills carry political risks. Critics assert that the drug benefits will fall short of expectations. Moreover, they note, both bills include substantial gaps in coverage, and both would require higher copayments than workers are generally charged.

For example, in the Senate bill, beneficiaries typically pay a 50 percent copayment until their drug costs hit $4,500 in a year; at that point, coverage stops. Beneficiaries are then responsible for all drug costs until spending reaches about $5,800. At that point, Medicare picks up 90 percent of the costs.

Democrats have criticized that gap and a similar one in the House bill, seeking to close them. But the bills' sponsors argued the drug benefits were the best they could provide with the money available.

Lawmakers in both parties are also worried about the complexity of the new drug program and how the elderly will navigate it.

The House and Senate bills rely on a new, largely untested product: private stand-alone insurance policies that provide only drug coverage, to be used by people in traditional Medicare, which still serves 88 percent of Medicare's beneficiaries. Others would get drug benefits through preferred provider organizations and health maintenance organizations.

Negotiations between the House and the Senate will probably be contentious. The House bill would eventually require direct competition between traditional Medicare and private health plans, a goal many conservatives favor. That idea is anathema to Democrats, who argue that private plans would draw the healthiest and wealthiest elderly, and undermine the traditional program.

There are other differences. Under the Senate bill, the government would provide drug benefits in any region where fewer than two private drug plans are available. The House bill includes no backup mechanism.

Many Democrats asserted that neither bill did enough to control the cost of prescription drugs. But House Republicans said that a little-noticed feature would indeed give elderly people access to lower drug prices. In both the House and Senate bills, Medicare beneficiaries would receive drug coverage through health plans and insurance companies subsidized by the government. These insurers would pool the purchasing power of their subscribers. As a result, said Representative J. Randy Forbes, Republican of Virginia, Medicare beneficiaries would get "an upfront discount of 25 percent" on many prescription drugs.