Dueling Diagnoses For Medicare

President Bush Tuesday proposed sweeping changes to Medicare, calling for prescription drug coverage and private sector involvement — but providing few details on how much of either he wants.

"We can and we must improve Medicare and protect our seniors from runaway health care costs," the president said as he outlined his proposal in a speech Tuesday before the American Medical Association. "A modern Medicare system must offer more choices and better benefits to every senior. All seniors should have help in buying prescription drugs."

As CBS News Correspondent Joie Chen reports, like many older Americans, Viola Quirion faces tough choices over what she needs to survive.

"First I buy my prescriptions to make sure I have enough money for that. Then if I have any left, that's what I have to do with the food," says Quirion.

The price of her prescriptions for ovarian cancer and a variety of other ills keeps going up. She says she and other Medicare recipients are in desperate need of prescription drug coverage.

According to Chen, even moderate republicans warn the president's plan is not comprehensive enough and say it is just a first step.

"I applaud the president for moving in this direction, understanding that this is a major down payment, obviously it will cost more into the future. But we can get this done now," says Sen. Olympia Snowe.

House Democrats were offering their own plan Tuesday — one that would cost hundreds of billions of dollars more over a decade.

The White House promised "comprehensive" benefits for those who moved into HMOs and private plans. But officials refused to say whether or how the drug subsidies would be more generous than those in traditional Medicare, insisting that Congress would iron out the details.

Top House Republican leaders gave the proposal a lukewarm reception Tuesday.

"Certainly we'll coordinate and make sure we wind up in the same place," House Ways and Means Chairman Bill Thomas, R-Calif., told reporters after speaking to the doctors' group. But Thomas said, "The starting point will be slightly different."

Rep. Billy Tauzin, R-La., the chairman of the House Energy and Commerce Committee, was more blunt.

"My committee almost certainly will want a strong and adequate prescription drug benefit within fee-for-service (traditional Medicare)," Tauzin said, adding that the expectation is that a drug benefit in traditional Medicare will be "as strong if not the same as private market plans."

Democrats criticized the president's proposal as forcing seniors to choose between Medicare and decent prescription drug coverage.

"The White House should not be forcing seniors to choose between the doctor they know and trust and the drugs they need," said Jay Carson, a spokesman for Senate Minority Leader Tom Daschle, D-S.D.

Mr. Bush pledged in his January State of the Union address to spend $400 billion over a decade to change Medicare, mostly to deliver on his promise to add drug benefits.

On Monday night, the White House laid out a "framework" for how the president intends to do that, though many of the difficult details were left to lawmakers. Mr. Bush also renewed his call for establishing discount drug cards for seniors.

The president is pinning his hopes on what the White House calls "Enhanced Medicare," an arrangement in which seniors would join a private health plan and get unspecified prescription drug benefits in return for paying a monthly premium and an annual deductible. Underscoring the emphasis the administration places on the plan, Mr. Bush proposed creating a new government agency, the Medicare Center for Beneficiary Choices, to oversee the program.

Low-income seniors would receive the drug coverage without paying the annual premium, and those not eligible for Medicaid — the government health program for the poor — would receive unspecified financial assistance for out-of-pocket drug costs.

The government would pay for most of Enhanced Medicare, which would also provide full coverage of preventive benefits and protection against high out-of-pocket drug costs. It would eliminate the lifetime limit for inpatient hospital care.

Seniors who chose to stay in traditional Medicare would get protection against high drug costs also. The framework did not specify what would constitute high drug costs, or where the government help would kick in, and White House officials declined to say what they envisioned.

The administration offered a third option, "Medicare Advantage," that would enroll seniors in "low-cost and high-coverage managed care plans" currently available under Medicare. Plans in competitive markets would bid to provide participants with Medicare's enhanced basic benefit package.

Mr. Bush plans to ask Congress to immediately provide all seniors with a drug discount card that the White House estimated would save 10 percent to 25 percent on prescription drugs.

The General Accounting Office, the investigative arm of Congress, estimated the savings at slightly less than that.

Mr. Bush will also request a $600 annual subsidy for low-income seniors, to continue under his vision of a revamped Medicare.

The administration tried to implement the drug card program administratively, but community pharmacists and chain drug stores challenged the proposal, and a federal judge ruled in January that the government had no legal right to impose such a program. Several GOP lawmakers have said they support passing a law to implement the drug card program.

Under the proposal by House Democrats, seniors would pay premiums of $25 a month and have a $100 yearly deductible, Democratic aides said. Medicare would pay 80 percent of drug costs, and there would be a $2,000 limit each year on out-of-pocket costs for beneficiaries. The poorest seniors would have their costs subsidized by the government.

The Democrats' plan would cost $700 billion to $900 billion over 10 years.

Medicare is one of the largest expenditures of the federal government, requiring an outlay of $273 billion in 2001.

Controlling Medicare costs is a pressing policy concern, because — like Social Security — the program provides benefits to retirees out of cash generated by taxes on current workers. As the baby boom generation retires, a shrinking workforce will have to support a growing number of retirees.

According to the program trustees' most recent report, Medicare will eventually cost more than Social Security, will face a larger deficit and will become insolvent 11 years earlier.

As currently structured, Medicare spending will grow from representing 2.5 percent of the economy to 8.6 percent in 2076.