MEDICARE REFORM AGAIN

With the cost of Medicare rising to unsustainable levels and the increasingly obvious need for a Medicare prescription drug benefit, President Bush is expected to propose major reforms this month to the health care program for the elderly. His plan has yet to be released, but must solve the riddle of paying private health plans enough to continue to offer coverage while ensuring that the sickest Medicare recipients can still afford care.

The Congressional Budget Office estimates Medicare costs will rise from $256 billion in 2002 to $470 billion by 2012. A drug benefit would add between $40 billion and $75 billion a year. These increases together are so much larger than contemplated tax cuts (the latest proposal by the president would cost $600 billion over 10 years) that they should occupy a prime spot on congressional calendars. With Sen. Bill Frist of Tennessee as the new majority leader, they may.

Sen. Frist, a surgeon, has long been interested in improving the health of the Medicare system. Both he and the president favor plans that would maintain government oversight but push Medicare away from its traditional fee-for-service payments and toward the competition of private health plans.

An idea from the Bush administration would offer incentives for Medicare participants to enroll in less-costly private plans. The reforms aim to extend coverage to drugs in part by bringing down costs, but the details of how this would be done – specifically, how coverage would change and for which beneficiaries, where the savings would be found or the costs shifted – will be debated extensively before an agreement.

Sen. Olympia Snowe, who has been at the center of the Medicare debate for several years, supports the money-saving reforms but does not want them to be used an excuse not to pass the drug benefit. She points out that for several years, money – $350 billion over 10 years – was put aside in the budget for the benefit so it could be largely affordable even without the overall reform. Certainly, it would help beneficiaries’ budgets.

In fact, because the debate last summer over the drug benefit turned on the questions of total cost and delivery system (public vs. private), prescription-drug legislation could provide an important test of sentiment and interest in the larger reform. The drug-benefit debate dragged on for weeks without resolution, and the White House would be correct to be concerned that it could take too much time again. Senators such as Ted Kennedy of Massachusetts and John Breaux along of Louisiana along with Sen. Snowe were close to agreement last year and could be again with the proper encouragement from party leaders, who might also pick a deadline to move the issue quickly.

Politically, Republicans, who control both houses of Congress, could not blame the failure to enact this popular idea on Democrats, while Democrats would have an incentive for the 2004 elections to see the GOP fail in its reform plans. Passing just the drug plan first would remove the political calculation while providing this important benefit.

Medicare, like all of health care coverage, is in serious need of an overhaul. The president is right to place this reform high on his agenda, and could most effectively sign it into law by passing the more popular drug benefit first and using this as a model for overall reform.