President to propose changes in Medicare, extending solvency

Most controversial issue likely to be benefit for prescription drugs

June 29, 1999|By David Folkenflik | David Folkenflik,SUN NATIONAL STAFF

WASHINGTON -- Armed with a flush federal budget surplus, President Clinton will propose significant changes in Medicare today, seeking to extend its solvency until 2025 while providing a new prescription drug benefit for the elderly and disabled.

The drug benefit, a voluntary plan that would allow all Medicare recipients to buy subsidized coverage of their medication, would be one of the most fundamental changes in the government health insurance program since its inception 34 years ago.

Currently, traditional Medicare pays only for medication prescribed during a hospital stay. The drug benefit would be phased in, with a monthly cost to recipients of about $25, a figure that would grow to $40 monthly.

That cost compares with the $90 a month that White House aides say insurers now typically charge Medicare recipients who pay extra for prescription-drug coverage. Poor recipients would receive extra financial aid to cover the monthly payments.

Many in Congress, including some Democrats, say they are skeptical about whether the government can afford to pay for drug coverage for all recipients. The White House put the cost to taxpayers at $94 billion over 15 years, or $6.26 billion a year.

The plan puts the administration at the forefront of an issue that could loom large over next year's elections, because more than a third of the nation's 39 million Medicare recipients have no insurance covering drugs, the cost of which has risen sharply. Others pay for private policies or receive coverage from past employers.

"There is nobody -- nobody -- who, if they were creating the Medicare program today, would even think about creating a Medicare program that didn't have prescription drugs in it," said Gene Sperling, the senior White House economic adviser.

Though its prospects in Congress seem uncertain, the Clinton Medicare plan to be announced today reflects a remarkable turnaround from the sense of crisis that led to the creation of a presidential commission in 1997 on how to save the program.

That panel, led by Sen. John B. Breaux, a Louisiana Democrat, and Rep. William M. Thomas, a California Republican, developed a rival plan. It would have given every Medicare recipient a set amount of money to subsidize the purchase of health insurance. That proposal would have encouraged those who need drug coverage to enroll in HMO-style plans, which do cover prescription drugs.

Poorer senior citizens -- those making under $10,600 a year but not poor enough to qualify for Medicaid -- would have received generous benefits, including medication costs, under that plan.

The administration takes a more expansive approach but seeks to find money elsewhere. It would divert 15 percent of the expected budget surplus over the next 15 years -- about $700 billion in general tax revenues -- so there would be enough money to run the Medicare program through 2025.

Clinton will also announce cost-cutting initiatives, such as giving private companies the right to negotiate discounts for Medicare by buying drugs in bulk, just as insurers do. Government agencies could direct that Medicare patients who need complicated surgeries undergo those operations at hospitals experienced at them -- in return for a reduced charge from those hospitals.

The White House plan is also expected to make the Medicare HMO plans more appealing to both insurers and recipients, which could help rein in expenses.

Some say Clinton's proposals would not do enough to strengthen the plan's finances, which will be sorely tested by the aging of the baby boomers and the continuing rise in health care costs.

"It moves the ball down the field in a positive way, but we cannot take our eyes off the target, which is fundamental reform," Breaux said.

Structural changes of any kind to the popular Medicare program are fraught with political pitfalls.

As recently as last week, White House officials considered proposing that Medicare recipients whose income exceeds $100,000 a year pay higher premiums. But that suggestion alarmed House Democrats, many of whom told Clinton's senior advisers that they would not support any change in Medicare that would make it appear to be a program for the poor rather than insurance for all.

"My main concern is that neither Social Security nor Medicare becomes a welfare program," said Rep. Jim McDermott, a Washington state Democrat. "Once they do, their days are numbered."

As a political necessity, Sperling said yesterday, the president rejected the idea of charging wealthy seniors more -- for now.

That decision left some industry officials unimpressed.

"I don't think this is a real reform," said Charles N. Kahn III, president of the Health Insurance Association of America. "At the end of the day, this will be a totally political proposal, so they can have fresh meat for the Democrats" before next year's elections.

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