Congress Nears Medicare Drug Deal

Republican congressional leaders stepped to the brink of agreement Wednesday on major Medicare legislation to create a prescription drug benefit for older Americans and carve out a vast new role for private insurance companies in the government-run health care program.

"I think it's a middle-of-the-road deal," said Sen. John Breaux of Louisiana, the first Democrat to swing behind the proposal after Republicans scaled back their demand for competition between traditional Medicare and the private plans.

GOP congressional officials said the Bush administration was ready to embrace the agreement, which Senate Majority Leader Bill Frist proposed to Breaux and Sen. Max Baucus, D-Mont., late Tuesday night. Baucus said he, too, was inclined to give his support, pending a look at the fine print.

There were critics aplenty, however, and some Democrats began an immediate effort to limit defections and defeat the measure on the Senate floor.

Senate Democratic leader Tom Daschle of South Dakota attacked it. Sen. Edward M. Kennedy, D-Mass., referring to the remaining requirement for direct competition, said, "We can't accept a proposal that's going to threaten the whole Medicare system."

Additionally, officials said Rep. Bill Thomas, R-Calif., the lead House negotiator in months of arduous bargaining, objected to the terms that Frist, Speaker Dennis Hastert, R-Ill., and House Majority Leader Tom DeLay, R-Texas, had blessed and offered Democrats.

Still, after years of political gridlock and months of private negotiations, GOP congressional officials announced plans to have the deal formally ratified by congressional negotiators early next week, and brought to the House and Senate for votes in the following days.

These officials also said that the GOP leadership had worked closely with the AARP in drawing up their offer, and expressed optimism the measure would win the formal support of the politically influential organization with 35 million members age 50 and over. A spokesman for the group said its board of directors would make a decision once the compromise was ratified by House and Senate negotiators.

Many details of the emerging agreement were sketchy, and subject to change as Republicans work to firm up support. But passage of the emerging bill would mark the most dramatic overhaul of Medicare since the program was created at the height of the Great Society in 1965.

Beginning next year, older Americans would be eligible to purchase a discount card that the administration estimates would yield savings of 15 percent or higher off the cost of drugs.

The broader drug benefit would become effective in 2006, with people offered the chance to purchase coverage at a monthly cost of $35 a month. Those with low incomes would receive subsidies for the premium, deductibles and co-payments involved, and the poorest would be required to pay as little as $2 per prescription.

At the same time the legislation would create a new drug benefit, it also would usher in a new era of private insurance under Medicare.

Private companies would be encouraged to offer coverage under preferred provider organizations, a form of managed care in which patients pay more for care from doctors outside their network. Supporters argue that private coverage would help modernize the system by offering benefits not available in traditional Medicare — preventive care, for example, or perhaps prescription glasses.

At the same time, they say these changes would help reduce the rising cost of Medicare.

Patients who choose to remain in traditional Medicare would find dramatic changes, as well.

For the first time, beneficiaries with high annual incomes — beginning at $80,000 a year — would be required to pay more for nonhospital care under Medicare Part B.

The Republican call for direct competition emerged weeks ago as the principal hurdle to an agreement.

"A lot of people are trying to kill the bill or pass the bill on that one" item alone, said Sen. Don Nickles, R-Okla.

Under the House-passed measure, the government's per-person subsidy for Medicare would be calculated in part based on the cost of coverage offered by private companies. The current subsidy is set according to the cost of providing the fixed benefit that older Americans are guaranteed.

Democrats argued the result of the GOP-sought change would be to raise premiums for those who remain in traditional Medicare. Estimates by Medicare's experts point in that direction, with premium prices varying widely from region to region.

Republicans insisted the provision was needed to help curtail future Medicare costs.

Under the compromise proposal, the legislation would create a temporary, three-year program of competition in four large metropolitan areas, plus one region of the country. The Health and Human Services Department would have authority to extend the program for an additional three years, after which it would end unless Congress intervened.

Breaux told reporters that to protect beneficiaries in traditional Medicare, premium increases would be capped at 10 percent, although it was not clear whether that was an annual limitation or would cover a longer period.

In a further gesture to conservatives, the legislation would create a health-related tax account for individuals purchasing private high-deductible health insurance.

It also would establish an unusual requirement for the president and Congress to review Medicare's finances if the cost of the program exceeded a predetermined limit.

The bill would affect Medicare payment rates for providers, from doctors and hospitals to home health care givers and companies that sell or rent medical equipment such as wheelchairs.