Bush administration retreats from Medicare drug plan

WASHINGTON -- The Bush administration signaled retreat on Monday in its effort to provide a heftier prescription drug benefit for seniors willing to leave traditional Medicare for a new managed care option.

Emerging bipartisan legislation in the Senate calls for an equal benefit, regardless of how a Medicare recipient receives health coverage, and HHS Secretary Tommy Thompson said he was "not really at this point in time," seeking a change in the provision.

After a meeting in the Capitol with key GOP senators, Thompson said the HHS is working with Sen. Charles Grassley and the leadership to get a bill.

The administration said as recently as Friday that it preferred offering a better benefit as an incentive for seniors to enroll in Preferred Provider Organizations.

Grassley, the Iowa Republican who chairs the Senate Finance Committee, intends to unveil formal legislation today, with a vote scheduled in his committee on Thursday.

Senate Majority Leader Bill Frist has set aside the last two weeks of June for debate in the full Senate on the legislation, and he told reporters, "We are on course to deliver to the American people a bill that will improve health care security for seniors."

Sen. Max Baucus, D-Mont., the senior Democrat on the committee, supports the measure, and Sen. Edward M. Kennedy, D-Mass., a prominent voice on health care issues, has praised it as a good beginning in need of several improvements. Other Democrats, including the party's leader, Sen. Tom Daschle of South Dakota, have sharply criticized the proposal, and a politically charged fight is expected on the Senate floor.

The legislative effort received a mixed verdict during the day from congressional analysts.

Several sources, who spoke on condition of anonymity, said official congressional budget estimates put the cost of the bill at $359 billion, and $8 billion lower once unidentified cost-saving measures were taken into account.

That means the architects of the legislation have additional funds to improve the drug benefit, in part by reducing gaps in coverage. Grassley said unspecified changes would be made overnight. "We're going to have a $400 billion drug plan when it's all said and done," he said.

But these same estimates forecast that fewer than 10 percent of Medicare recipients would choose to receive their coverage from the proposed new Preferred Provider Organizations that Bush wants set up, according to officials who spoke on condition of anonymity. One source put the estimate at 2 percent.

If correct, the forecast would undermine some of the key goals the administration has set out for the legislation -- shoring up Medicare's finances while transforming it into a more modern system that reflects changes made in health care over the past 38 years.

For his part, Thompson told reporters the administration's own estimates were far higher. "High 30s, low 40s," he said, speaking in percentages.

Thompson's comment about equal drug benefits amounted to an acceptance of the political reality in Congress. In addition to the Senate legislation, the bill likely to reach the House floor later this year is also expected to contain equal benefits for seniors, regardless of whether they choose traditional Medicare or a PPO.

Drug benefits aside, PPO plans would offer preventive health coverage as well as protection against catastrophic health care expenses, neither of which is currently available under Medicare. Under PPOs, beneficiaries may see any physician for their care, but would pay higher costs -- sometimes much higher -- if the doctor were outside the insurance plan's network.

The Bush administration began the year by floating a proposal under which seniors remaining in traditional Medicare would receive a discount card, while those in PPOs would qualify for a drug benefit.

That drew strong objections from congressional Republicans as well as Democrats, and the administration then proposed a better benefit for seniors willing to go into managed care.

In addition to Thompson's remarks on the subject, Grassley said he, too, believed the administration would no longer resist the equal benefits, meaning that the value of the government's subsidy would be the same in either case.

Frist told reporters, "They recognize that the bill as being presented is different than the president's bill, but underscored that it meets all of the president's principles that have been laid out to date."

Pending overnight changes, aides have said that beneficiaries enrolled in traditional Medicare could purchase stand-alone drug coverage for a premium of roughly $35 a month. The plan would carry a deductible of $275, after which the individual would be required to pay 50 percent of the bill until total costs reached $3,450. From that point until costs reached $5,300, the individual would pay 100 percent of the bill. Beyond that level, insurance would pay 90 percent, and the individual 10 percent.

The government would subsidize expenses for low-income beneficiaries.