Medicare panel at critical juncture; Group meets today on reforms allowing private competition; White House noncommittal


WASHINGTON -- With its fate possibly on the line, the commission that was entrusted to save Medicare from insolvency will meet today under mounting pressure to accept reforms that would subject the program to competition from private health care plans.

Though the woes of the Social Security system have grabbed more headlines, Medicare is in more imminent danger, and the solutions to its financial crisis are almost certainly more difficult. The commission is supposed to complete its recommendations by Monday, and today's meeting to hash out the details of a reform proposal could be pivotal.

But opposition from liberals who oppose any reform they fear could dismantle the cherished Medicare program may doom any action this year -- unless President Clinton lends his support.

"There is a bipartisan majority of that commission that wants to report genuine reforms in Medicare, and so I think we need to be supportive of that effort," Senate Republican leader Trent Lott of Mississippi said yesterday after a White House meeting with the president. "That will be critical in whether or not we will be able to get congressional action this year on Medicare reform."

No one denies the urgent need for change. For nearly 40 million Americans, mostly seniors, the $207 billion program is a lifeline. But as the elderly population increases and medical costs rise, disaster looms. Medicare's hospital insurance trust fund is expected to go broke in just 10 years. With no changes to the system, the vast population of retiring baby boomers could push the annual cost of Medicare as high as $2.9 trillion by 2030, or nearly 40 percent of the federal budget.

Last month, the co-chairmen of the Medicare commission -- Sen. John B. Breaux, a Louisiana Democrat, and Rep. Bill Thomas, a California Republican -- unveiled their solution: Allow senior citizens to choose between the traditional federal plan and a bevy of private insurance plans, all of which would compete for customers and drive down costs.

To gain the commission's official imprimatur, Breaux and Thomas need the votes of 11 of the commission's 17 members. They believe they have 10.

Breaux and Lott have begun leaning on Clinton to persuade at least one of his four commission appointees to come on board, complaining that the appointees seem to be voting as a united bloc against any dramatic reforms.

"He's got to get some of his people to participate," Lott said of the president. "This week is critical."

The White House remains noncommittal. Chris Jennings, the president's top health care adviser, said yesterday that Clinton would demand that any Medicare fix include his proposal to allocate 15 percent of the federal budget surplus to the program -- up to $700 billion over the next 15 years.

Jennings said the plan would also have to include prescription drug coverage, a set of guaranteed benefits for all Medicare patients, and protection for low-income seniors.

"If the commission moves to address all those things, I think that they'll see much more openness by our members," Jennings said.

Republican leaders and even moderate Democrats are growing frustrated. The commission was created by the 1997 balanced budget deal as a way to defuse the bitter partisanship that had stymied long-term solutions to Medicare's problems. Republicans still remember their painful experience in the campaign of 1996, when Democrats convinced many voters that Republicans were intent on eviscerating Medicare.

Republicans fear that once again, Clinton and the Democrats will turn on them and exploit the Medicare issue in 2000 to win the White House and regain control of Congress.

As now constructed, Breaux's plan would create a standardized core package of benefits that any insurer would have to adopt if it wanted to bid for Medicare customers. Those benefits would have to be at least as generous as the services offered by the government's fee-for-service plan. Insurers could offer more comprehensive coverage or other incentives to entice seniors to sign on.

The government program would also be given new powers to bid out services, negotiate prices, establish networks of doctors and cut costs. Wealthier beneficiaries would pay higher out-of-pocket expenses for any of the plans to help subsidize the poor.

Last week, the nonpartisan Congressional Budget Office estimated that the reforms would save the government just 1 percent a year. Over time, those savings would add up. By 2030, the CBO said, savings would reach between $475 billion and $850 billion a year. Medicare would still grow from 12 percent of the federal budget to as much as 29 percent, but that is still far cheaper than doing nothing would be.

The federal Health Care Financing Administration produced its own analysis of the Breaux plan yesterday, concluding that it would save $347 billion through 2009.

Another commission Democrat, Sen. Bob Kerrey of Nebraska, has signed on with Breaux and with their Republican colleagues to support the plan.

Most congressional Democrats are resisting it. Two Democratic commission members, Sen. John D. Rockefeller IV of West Virginia and Rep. Jim McDermott of Washington state, have become outspoken critics. This month, Rockefeller, McDermott, Rep. John D. Dingell, a Michigan Democrat, and all four Clinton appointees drafted a letter to Breaux, saying his plan "does not seem to reflect Democratic principles."

A senior Democratic leadership aide said the White House is leaning against the plan as well.

"You have to be a believer in the tooth fairy to not worry about seniors under this plan," McDermott said yesterday.

Democratic opponents have several concerns. McDermott said senior citizens would be pushed into managed care plans just as health maintenance organizations are cutting back coverage for the elderly. A half-million people lost their coverage last year when several HMOs pulled out of the Medicare program, McDermott said, raising the possibility that senior citizens would face similar jeopardy under Breaux's plan.

Rockefeller is concerned that affluent urban seniors would have numerous choices under Breaux's plan, but that the rural poor would suffer because private insurers would not see any profit in thinly populated areas. That could mean that the existing federal program would be left with the poorest and sickest patients, thereby pushing up federal costs and co-payments.

Besides, McDermott said, managed care companies have already squeezed out most of the inefficiencies in private health care markets. Premiums are again rising. What is to say the same thing would not quickly happen with Medicare?

McDermott said the existing Medicare program could find sizable savings if administrators have flexibility to seek competitive suppliers, negotiate contracts and take other steps already available to private insurers. White House aides seem to agree.

The president "feels quite strongly that with his foundation of dedicating the surplus and some of the reforms that he would like to see -- modernizing the program, making it more competitive, making it more oriented to using the same purchasing tools in the fee-for-service program that the private sector has -- we can significantly strengthen and improve the Medicare program," Jennings said, with no mention of private competition.

Pub Date: 2/24/99

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