Medicare Reformers Fear Deadlock as Deadline Nears

WASHINGTON —  The highly charged politics of the government’s influential Medicare reform commission were laid bare Tuesday as commissioners grappled with a controversial proposal to limit the federal role in financing and running the health care system for the elderly and the disabled.

While agreeing with the need to cap government’s contribution to the $214-billion-a-year program, the 17-member commission found itself at odds on two contentious questions: the scope of the benefits that the elderly would get under a new system and whether coverage of prescription drugs would be offered by all health plans--including the traditional Medicare program.

“This could end in an impasse,” said Laura D’Andrea Tyson, a commission member and dean of the Haas School of Business at UC Berkeley. “It could deadlock because of the drug coverage questions--that is the pivotal issue.”

With just five weeks left before the commission must report to Congress, Rep. Bill Thomas (R-Bakersfield) had the same assessment.

“Today was a basic advance from where we were before. But if we have to have drugs in the traditional Medicare program, then it’s going to be difficult to come to an agreement,” Thomas said.

A Sweeping Change in Medicare Program

If the commission endorses the new framework, it would be a sweeping change in the 34-year-old Medicare program, the nation’s largest health insurance program serving 38 million elderly and disabled people.

Depending on the direction the commission takes over the next four weeks, the proposal could fundamentally alter the nature of the entitlement that the elderly would be guaranteed. And, over time, it could result in a growing number of the elderly receiving their health care through health maintenance organizations and other managed-care plans.

Under a proposal outlined by Sen. John B. Breaux (D-La.), who chairs the commission, the government would pay 88% of the national average cost of a health care plan and recipients would pick up the remaining 12%, as well as co-payments and deductibles.

One commission member, Rep. Jim McDermott (D-Wash.), estimated that the proposal would result in a 30% increase in the premium cost to beneficiaries without any guarantee of new benefits. However, he said, if drugs were covered--as has been proposed--the increase in costs might be justified.

Many commissioners, however, said that they would make no judgment about the impact on beneficiaries’ pocketbooks until government actuaries complete a detailed estimate.

Breaux also proposed that more affluent retirees pay more than others. Under his plan, elderly couples with an income of $50,000 a year and individuals with incomes of $40,000 a year would pay 25% of their premiums--more than twice as much as less affluent beneficiaries. In contrast, the poor would pay nothing.

Those covered by Medicare would choose between the traditional fee-for-service program, which allows them to choose any doctor or hospital, and a selection of HMOs and other managed care plans. Because a recipient’s costs would be higher in more expensive plans, it is expected that many people would enroll in cheaper plans.

While all the plans offered would cover the same categories of benefits as the traditional fee-for-service Medicare plan, the specifics, such as guidelines on how long a patient’s hospital care is covered, would be determined by the individual plan subject to the approval of a new review board.

“At the moment, you are entitled by law to a very detailed set of benefits. This is a proposal that takes that away--you have disentitled a set of American workers,” said Bruce Vladeck, a commission member and former administrator of the Health Care Financing Administration.

“What is now a statutory guarantee to services becomes an artifact of the way the market drives the system. That’s a pretty profound thing.” Vladeck said.

Government’s Share Could Change

Left unclear is whether the government’s 88% share would be set in stone or whether some future Congress might reduce it, shifting more of the cost of health care to the elderly.

“Is the government’s contribution going to be adequate to keep pace with the growing cost of that benefit over time? Is the beneficiary’s health care program going to remain affordable?” asked Trisha Smith, a senior health lobbyist for the American Assn. of Retired Persons.

Also up in the air is whether both the traditional Medicare plan and managed care plans would cover the cost of prescription drugs. Republicans would like prescription drugs to be covered only by plans offered through the private insurance market because they believe that will persuade the elderly to join those plans. They circulated a memo among Republican commissioners arguing that a drug benefit in the traditional Medicare program is “bad medicine” and that such a benefit should be reserved for the private insurance plans.

“The drug benefit is the carrot that will get people to join the private plans,” said Deborah Steelman, a commission member who is a well-known lobbyist representing major pharmaceutical companies and insurers.

If the government’s traditional plan offers drug coverage, then why would anyone join a managed care plan? Steelman said.

But Democrats said that the traditional Medicare program must offer a drug benefit as well so that the elderly and disabled could compare plans based on cost and quality rather than choosing a plan based on the benefits it offers.