MEDICARE, IN PIECES

The most important part of President Bush’s plan to reform Medicare is its apparent flexibility – the plan itself isn’t especially flexible, but the administration’s willingness to alter the proposal’s shape as doubts are raised about it may prove positively yoga-like. Given the reaction among congressional Republicans, the plan will be stretched in several directions before it is passed.

The president is right that Medicare is growing unaffordable and yet needs to be expanded by adding a prescription-drug benefit. His answer was to provide a drug benefit only to those seniors who moved from fee-for-service Medicare plans into privately run, hopefully less costly HMOs offering Medicare. It would seem like a sensible balance of care and cost, but there are good reasons that 85 percent of seniors have remained in fee-for-service rather than switching to managed care. They have stayed because the HMO Medicare plans are not offered in their states, they did not like the restrictions in the HMOs, find the switch confusing or cannot afford the risk it includes.

And in some ways it is a good thing they did: Managed-care Medicare plans were profitable to private insurers in the 1990s while they attracted healthier beneficiaries. When the beneficiary profile shifted closer to average, however, costs rose rapidly. To still save the public system money, the private insurers, which consume 15 to 30 percent of their budgets on administration and profits, would have to spend less than the public nonprofit, which spends one-fifth as much on administration. Care providers already are being squeezed so there are limited savings there, and even the $400 billion the president announced for the reform barely covers just the cost of a prescription-drug benefit.

Sen. Olympia Snowe was among the first Republicans to say the outline by the president was not acceptable. She was followed by Sen. Charles Grassley of Iowa and House chairmen Bill Thomas and Billy Tauzin among others. The best defense that Rep. Tom DeLay of Texas could muster for the president was confusion: “We’re not even close to understanding what the president is going to propose,” he said. And that may be key to the administration’s proposal. When President Bush himself spoke at a rally specifically for Medicare reform the day after the State of the Union, it was reported, he spoke for only a few minutes on the subject before switching to the issue of terrorism. If he is saying that he is willing to keep his ideas general on the reform and ensure that he not alienate members of his own party, crucial for passing legislation, he stands a chance of reform this year.

President Bush took several important steps on Medicare last week. He made its necessary reform part of his agenda, he accurately reiterated the need of a prescription drug benefit and he recognized that these changes would cost a significant amount of money, more, in fact, than what the administration proposed for a drug benefit last year. And even his push for privatization may well turn out to provide the best choice over time. But before 85 percent of Medicare beneficiaries are coerced through financial penalties into switching to managed care, the theory needs to prove itself more thoroughly. The risks that it will add a layer of corporate bureaucracy and allow the government to define its contributions instead of Medicare’s benefits are too great.

Sen. Snowe has sensibly urged the administration to begin with the drug coverage, using the many compromises developed in the senate last year as its foundation. It would be a meaningful start and establish a pattern that could guide the system’s comprehensive reform.