WASHINGTON - The nation's top Medicare official said yesterday that the Bush administration had "significant disagreements" with a bipartisan Senate proposal to add prescription drug benefits to Medicare, and he reaffirmed President Bush's desire to encourage elderly people to join private health plans by offering them extra drug benefits.
The official, Thomas A. Scully, welcomed progress in Congress toward passage of Medicare drug legislation. But he expressed major concerns about some features of the bill being drafted by the chairman of the Senate Finance Committee, Charles E. Grassley, an Iowa Republican; and the senior Democrat on the panel, Max Baucus of Montana.
First, Scully said, Medicare beneficiaries will not have a strong incentive to enroll in private plans if they can get coverage for outpatient drug costs through the traditional fee-for-service Medicare program, which now serves 88 percent of the 40 million beneficiaries.
Second, Scully said, he has doubts about whether private insurance companies will want to offer the type of drug coverage envisioned in the Senate bill.
The fee-for-service Medicare program already covers doctors' services and hospital care. Under the Grassley-Baucus proposal, beneficiaries could obtain drug coverage, as a separate item, from government-subsidized "prescription drug plans," which cover pharmaceutical costs and nothing else.
Stand-alone drug coverage "does not exist in nature" and would probably not work in practice, Scully has said.
Scully, the administrator of the federal Centers for Medicare and Medicaid Services, testified yesterday at a hearing of the Finance Committee, which plans to vote on the Medicare proposal next week.
The Senate majority leader, Bill Frist, a Tennessee Republican, said he was determined to push the legislation through the Senate this month.
"It's ambitious," Frist said. "But it is a goal we will meet."
Grassley and Baucus would provide the same drug benefits to people in the traditional Medicare program and to those who join private health plans.
But Scully said, "We have significant disagreements" with that approach.
"We strongly prefer to have differential drug benefits," he told Republican Sen. Craig Thomas of Wyoming, who shares that view.
The House has twice passed Medicare drug legislation, in 2000 and 2002, and is expected to do so again this month. House Republican leaders have said that drug benefits should be equal, or nearly equal, in private plans and in the traditional government-run Medicare program.
Bush administration officials say they believe that private plans provide better, more coordinated care, and can manage costs better, than the traditional Medicare program. But economists say the savings are highly uncertain, because private plans have higher administrative costs and tend to pay doctors and hospitals more than Medicare pays.
The Grassley-Baucus bill has strong bipartisan support, but as senators examined the details yesterday, they raised many questions and some objections.
The bill would provide comprehensive drug coverage with minimal premiums and co-payments to 14 million beneficiaries with low incomes.
Sen. Don Nickles, an Oklahoma Republican, said the assistance for low-income people was so extensive that it might encourage them to use more medications than they needed.
"These are enormous subsidies, new subsidies, brand-new subsidies," said Nickles, the chairman of the Budget Committee. "Utilization will skyrocket."
Congress has set aside $400 billion for drug benefits and other new initiatives in Medicare over the next 10 years. Several Democrats have said that sum is not adequate to provide the type of drug coverage that insurers typically provide to people under the age of 65.
Under the Grassley-Baucus bill, drug coverage would be available to all Medicare beneficiaries, regardless of where they live. The government would provide such coverage, through a contractor, in areas where fewer than two private plans offered drug benefits.
Fear of confusion
Sen. Blanche Lincoln, a Democrat from Arkansas, expressed concern that private plans would come and go, with a variety of different drug benefits.
"You will have seniors making decisions from year to year in total confusion," Lincoln said.
Alissa Fox, policy director for the Blue Cross and Blue Shield Association, said its member companies were eager to serve Medicare beneficiaries through networks of doctors and hospitals known as preferred provider organizations. But she said they needed to see the details of the legislation to know whether they would actually sign contracts with the government.
"Before offering a product to Medicare beneficiaries, we want to be sure that the program is stable," Fox said. "You don't want to pull the rug out from [under] people, to be in one day and out the next."
Baucus said he was "not terribly sanguine" that private plans would serve the vast rural areas of his state. Even if they establish networks of doctors and hospitals in Montana, he said, "you might have to travel 200 miles to find a medical specialist in the network."