Lawmakers working on Medicare bill consider billions in favors

WASHINGTON -- Fearing a political backlash, lawmakers at work on a Medicare drug bill are ready to spend billions of dollars to discourage companies from dropping or reducing coverage for retirees when a new federal benefit begins.

Options under consideration include subsidies or tax breaks for companies, beyond money contained in legislation that passed the House and Senate earlier this year, congressional aides said.

Lawmakers also probably will loosen federal regulations envisioned under the proposed new Medicare prescription drug program for companies that maintain existing coverage, according to the aides, who spoke on condition of anonymity.

"No one knows with any certainty" how many retirees would lose company-provided drug coverage should Medicare legislation become law, the nonpartisan Employee Benefit Research Institute concluded in a July study requested by Senate Majority Leader Bill Frist, R-Tenn.

Lawmakers have made it clear they aren't eager to find out -- particularly considering that Congress' own experts put the estimate at 4.4 million, and corporations, labor unions and the politically potent AARP are clamoring for help on the issue.

The AARP, whose membership includes more than 35 million Americans age 50 and older, and the Business Roundtable, which represents large corporations, intend to begin a joint round of advertising that will touch on the issue in coming days.

Elusive compromise

The issue is one of numerous interlocking and expensive items confronting lawmakers as they seek an elusive compromise. The bill would provide a new drug benefit. It also would overhaul Medicare by creating a large new role for private insurance, an effort to modernize health care for seniors and slow future cost increases for the government.

Lawmakers have yet to decide whether to require wealthier seniors to pay more than other beneficiaries for coverage. Also to be settled is whether to raise or reduce planned government payments to doctors, hospitals and other health care providers.

Perhaps of most direct concern to the 40 million Americans on Medicare, lawmakers have not agreed on the level of premiums, deductibles, co-payments and other expenses that low-income and other older people would pay for drug benefits.

With a nominal deadline of Oct. 17 looming, Thomas, chairman of the House-Senate negotiations, issued a schedule Friday for the week ahead that amounts to a forced march through a thicket of controversy.

In an additional sign of urgency, a second memo stressed the importance of secrecy. Only one aide may accompany each lawmaker to bargaining sessions, it said, and anyone else will be asked to leave.

The issue of employer-based drug benefits has vexed lawmakers for months.

An estimated 12 million Medicare clients receive drug coverage through former employers, and lawmakers expressed shock last spring when the Congressional Budget Office estimated that as many as 4.4 million might lose that coverage.

Sen. Charles Grassley, R-Iowa, called the estimate a bombshell, and some lawmakers were confronted this summer by angry constituents, some prodded to take action by the AARP.

Yet CBO's estimates drew poor reviews from other groups. The Employee Benefit Research Institute, respected by lawmakers of both parties, estimated the figure would be less than 10 percent, or something more than 1 million.

At the same time, EBRI noted that even without legislation, companies have been cutting back on retirement benefits. "If you don't have retiree health coverage chiseled in granite, you'll never get it. And if you do have retiree health coverage chiseled in granite, you'd better keep an eye on it," says Gerry Shea, senior health policy official for the AFL-CIO.

The reasons include costs rising "in the double digit range of anywhere from 15 to 20 percent annually," according to Paul Dennett of the American Benefits Council, which represents primarily Fortune 500 companies.

Dennett and others also say a change several years ago in a little-known industrywide accounting standard prompted companies to cap future health care costs.

The House and Senate bills provide different sorts of payments to companies to encourage them to retain their coverage. Rather than try to merge the two, congressional aides say companies may be allowed to select the one that helps them more.

The AFL-CIO is advocating a tax credit that would allow companies to offset at least part of the cost of a more generous benefit than Medicare would provide.

Other proposals would loosen federal regulations. One would give employers the flexibility to retain an existing program rather than conform to Medicare's standards, yet still receive subsidies. That provision was included in the House-passed bill, which includes an estimated $68 billion in subsidies to existing employer and union plans.

It's also likely that lawmakers will make clearer that existing employer coverage would become secondary to Medicare, as is the case with Medicare's current health benefits.

Additionally, while apparently Congress can do nothing to change the accounting standard, aides said tax law changes may be possible to allow companies to allocate more for retirement expenses without damaging their appeal to investors.