Senate OKs Medicare Drug Benefit

President Bush speaks on Medicare at the Spring Valley Hospital Medical Center Tuesday, Nov. 25, 2003 in Las Vegas, Nev. He told the public gathering that seniors will start seeing ``real savings in health care costs'' six months after he signs the new Medicare bill.(
The Senate on Tuesday approved the most sweeping changes to Medicare since its creation 38 years ago, adding a long-sought prescription drug benefit and a contentious experiment with private competition.

Passage of the $395 billion bill was secured by a 54-44 vote.

President Bush hailed the Senate action as a major victory in the effort to improve health care in America, reports CBS News White House Correspondent Mark Knoller.

In a speech at a new hospital in Las Vegas, the president said the bill will strengthen and modernize an aging and ailing Medicare program

"We inherited a good Medicare system. It has worked, but it is becoming old and needed help," said Mr. Bush.

And although nine Republicans voted against the measure because of the costs, Mr. Bush called it an historic action and a bipartisan achievement. "Because of the actions of members of both parties, the Medicare system will be modern and it will be strong," he said.

Both sides acknowledged the final vote was not in doubt after lawmakers on Monday cleared away the last efforts by Democratic opponents to stop the legislation. The House had passed the bill near dawn on Saturday on a 220-215 vote.

Senate Majority Leader Bill Frist, R-Tenn., called it a "historic" and "momentous" day as lawmakers broke years of deadlock over revamping Medicare.

But Sen. Edward Kennedy, one of the legislation's staunchest foes, said the bill ultimately would cause "the unraveling of the Medicare system." He predicted Republicans would go on to attack Social Security after next year's election.

Mr. Bush was eager to sign the bill into law. When he does, the president will be able to claim stewardship of a program that has traditionally been a major part of Democrats' appeal to voters.

Medicare, which now serves 40 million Americans, was launched by Democrat Lyndon Johnson in 1965. In the 1996 election, fears over the future of Medicare helped President Clinton soundly defeat Republican Sen. Bob Dole.

At its heart, the Medicare legislation was designed as a compromise, with the new drug coverage for all Medicare beneficiaries long sought by Democrats combined with a Republican-backed plan to give private insurance companies a vast new role in health care for the program's beneficiaries.

Under the legislation, seniors will be eligible beginning next year to purchase a Medicare-backed discount drug card at a cost estimated at $30 a year. The administration estimated the card would mean savings of between 15 percent and 25 percent off retail prices; critics argued those numbers were wildly inflated.

Beginning in 2006, the legislation allows seniors to purchase coverage for their prescription drugs. GOP officials estimated the drug insurance premium would be $35 a month, with a $250 deductible. The coverage will pay 75 percent of costs after that until a recipient's drug costs reached $2,250. After that, there will be no drug coverage until a recipient's out-of-pocket expenses reached $3,600, or roughly $5,100 in overall prescription expenses. Above that level, insurance will pick up roughly 95 percent of costs.

The measure included subsidies for low-income seniors.

The scope of the bill goes far beyond prescription drugs, though, including an additional $25 billion for rural hospitals and health care providers, a requirement for higher-income seniors to pay more for Medicare Part B coverage and billions of dollars to discourage corporations from eliminating existing coverage for their retirees once the new government program began.

The bill satisfies other goals of conservatives, including creation of tax-preferred health savings accounts, open to individuals who purchase high-deductible health insurance policies. Those accounts are unique in that they would permit taxpayers to shelter some income from all taxes. The money in other tax-advantaged accounts is taxed either when saved or when spent.

Most contentious of all, the legislation would create a limited program of direct competition between traditional Medicare and private plans, beginning in 2010.

Conservatives argued that would help bring down the cost of Medicare over the long run, while critics said it would privatize the program and lead to "cherry picking" of relatively healthy seniors by insurance companies and higher premiums for those seniors who remained under the government-designed benefit.

Over and over, supporters of the bill stressed that after years of gridlock, the opportunity to act was at hand. "If we don't do this at this time, it may be years" before another opportunity comes along, said Sen. Charles Grassley, R-Iowa, an architect of the bill.

Critics were unmoved. Senate Democratic Leader Tom Daschle called the bill a "bailout for the HMOs and insurance companies."

The bill's path to passage was cleared in the Senate on a pair of procedural votes, including a cliffhanger that was only decided when Sen. Trent Lott of Mississippi, the former Senate Republican leader, sided with the current GOP leadership despite his opposition to the legislation. Fiscal conservatives have said the bill's $400 billion price tag was too much for a government facing record deficits.

Even as the White House cheered the progress on the Medicare bill, Congress dropped efforts to pass major energy legislation this year — another White House priority — after repeated attempts failed to find two additional votes needed to push the bill through the Senate.