WASHINGTON -- Calling the salvation of Medicare "a solemn responsibility," President Clinton proposed yesterday the most sweeping overhaul of the program in its 34-year history, a plan that mixes new benefits with additional out-of-pocket expenses for recipients.
"It's the right thing to do for our parents and our grandparents," Clinton said. "It's the right thing to do for the children of this country. It is the right thing to do so that when we need it, the burden of our health care cost does not fall on the children and hurt their ability to raise our grandchildren."
Many lawmakers, eager not to appear obstructionist, promised to take Clinton's proposal seriously, even as some members from both parties objected to several provisions.
Democrats embraced the president's centerpiece proposal -- an optional prescription drug coverage for all 39 million elderly and disabled Americans on Medicare. But they urged the president not to maintain stringent cost-cutting measures adopted in the 1997 balanced-budget plan.
Republicans welcomed Clinton's efforts to inject more private-sector competition into Medicare as a way to curb costs and improve services. But they said he did not go far enough, and they complained that any Medicare prescription drug benefit should not apply to the wealthy or to those who already have drug coverage elsewhere.
Still, virtually no one in Washington was willing to dismiss the plan out of hand. Rep. Bill Thomas of California, the House Republicans' leader on Medicare reform, attended Clinton's White House announcement. Afterward, Thomas, who co-chaired a bipartisan Medicare reform commission that collapsed this year, said: "This should not be politics as usual. Republicans believe this is overdue, and we want to be part of the solution."
Under the Clinton plan, Medicare beneficiaries would receive aid in paying for prescription drugs, at a cost to the government of $110 billion over 10 years.
Beginning in 2002, if a beneficiary paid a monthly $24 fee, the government would cover half of the first $2,000 in prescription drug costs a year. That monthly premium would rise gradually to $44 by the time the benefit is fully phased in by 2008. At that point, the government would cover half of the first $5,000 in annual drug expenses.
Single beneficiaries with incomes below $11,000 a year, or couples with incomes below $17,000, would pay no premiums or deductibles. Other poor patients would also receive financial help.
Under the Clinton plan, the elderly no longer would have to pay premiums or co-payments for preventive health care, such as mammograms, cancer screening and osteoporosis testing. This would represent a major change for a health care system that for three decades has stressed treatment over prevention.
To pay for those new benefits, and extend the solvency of the financially strapped Medicare system to 2027, the president would make fundamental changes in the structure of the program.
Managed care plans that want to compete for Medicare patients would have to offer a core of benefits similar to Medicare's existing fee-for-service plan. They could offer other enticements, too, like a dental plan or eye care. They would also be encouraged to compete on price. Any beneficiary who chooses a cheaper, managed care plan could pocket 75 percent of the resulting savings; the government would keep the final quarter.
Despite its stress on marketplace competition, the White House made an exception for Medicare's traditional fee-for-service plan. The out-of-pocket premiums in this plan would be locked in and could not drift upward. Increases in the traditional system's premiums would have driven seniors into managed care, Clinton administration officials said. And that was a prospect that Democrats would not accept.
"It should be a choice, not financial coercion," said Gene Sperling, the president's senior economic adviser.
Administration aides say that even with that insulation from full competition, the managed-care provisions, once they began in 2003, would save taxpayers $8 billion over 10 years.
The Health Care Financing Administration, which runs Medicare, would have authority to whittle down the price of medical supplies, to negotiate contracts with lower-cost doctors, and to coordinate the care of the chronically ill. That would save an estimated $25 billion over 10 years.
The White House would also extend some of the balanced-budget agreement's cost-cutting measures past the deal's 2002 expiration date. Many of those cost-cutting measures have already squeezed health care providers, especially hospitals and home health care programs, by limiting the money the government would pay for certain services, such as ambulance transport.
Some of those cuts would be allowed to lapse under the Clinton proposal. And his plan would set aside $7.5 billion to help hospitals and other providers cope with the cuts. The extension of those cuts would yield a net savings of about $31.5 billion over 10 years.
The White House plan also imposes a 20 percent co-payment for medical lab work to save money and cut down on unnecessary or fraudulent medical tests. It would also allow the current $100 annual deductible for outpatient care to rise with inflation.
An infusion of cash from the federal budget surplus -- up to $794 billion over the next 15 years -- would cushion the costs of the new benefits.
Clinton appealed yesterday to lawmakers and taxpayers to accept that sacrifice, for the good of senior citizens today and the future retirement of the huge baby boom generation that will strain the Medicare system.
"At a time of soaring surpluses, no senior should wind up in the hospital for skimping on their medication to save money," the president said. "At a moment of such tremendous promise for America, no middle-aged couple should have to worry that Medicare will not be there when they retire, that a lifetime's worth of investment and savings could be swallowed up by medical bills."
On balance, most health care analysts say, the new benefits that the Clinton plan offers would more than offset the new costs it imposes. The soaring price of prescription drugs -- and their rising role in modern medical treatments -- makes a new drug benefit even more valuable in the future, said Richard Sorian, a senior researcher at Georgetown University's Institute for Healthcare Research and Policy.
"This is a net gain for beneficiaries," said Sorian, a former adviser to Donna E. Shalala, the secretary of health and human services. "It's an especially huge gain if you already have health problems."
But the plan must clear enormous hurdles in Congress, where some Republicans and Democrats fear that compromise in an election season will hurt their party's chances.
Republicans, and some Democrats, said that by insulating the traditional fee-for-service plan from market forces, Clinton's plan does not go far enough to inject competition into Medicare.
Many Republicans also complained that the prescription drug coverage would unnecessarily apply to wealthy recipients, and to the two-thirds of Medicare recipients whose prescription drugs are already covered through supplemental insurance, employer plans or HMOs.
Behind closed doors yesterday, Senate Democrats confronted Shalala and John Podesta, the White House chief of staff, with concerns about the proposed cost-cutting measures and the reliance on managed-care providers. These providers, the Democrats complained, have already lured seniors away from traditional Medicare, only to abandon them or to drop promised benefits.
"Those are two major yellow flashing lights," said Sen. Barbara A. Mikulski, a Maryland Democrat.
Still, there was more than a glimmer of hope that Clinton's proposal -- along with White House hints on accepting some kind of Republican-styled broad tax cut -- would jump-start prospects for a grand bargain at the end of the legislative year.
Sen. Pete V. Domenici of New Mexico, the Republican chairman of the Budget Committee, sounded an optimistic note.
"I don't think there's any doubt that we are going to do something on Medicare this year," he said.
Medicare proposals
Drug benefit
* Medicare pays 50 percent of first $2,000 spent on outpatient prescription drugs
* No deductible; benefit begins with first dollar spent
* Above $2,000 per year, patient pays 100 percent.
* Cap rises to $5,000 in 2008
* Monthly premium rises from $24 in 2002 to $44 in 2008 for most beneficiaries
Preventive care
* No copayments, deductibles for mammograms, prostate screening, etc.
* New 20% copayment for lab tests
* Deductible for doctor's office visits increases about $2 a year from current $100
Managed health plans
* Medicare clients using private managed health plans will pay lower premium if plan is efficient, more if it is not
--- KNIGHT RIDDER/TRIBUNE