Medicare privatization language softens

By ELLEN BECK, United Press International

WASHINGTON, Oct. 9 (UPI) -- The congressional conference committee working on a new Medicare bill reportedly is softening controversial language that would privatize the senior health insurance program in 2010, but the effort still might not be enough to sway angry Democrats, who oppose other aspects of the House and Senate bills.

In other words, the fate of the biggest piece of domestic legislation currently before Congress remains in doubt.


In June, both houses passed bills allocating about $400 billion over 10 years for a Medicare prescription drug benefit while increasing the program's reliance on private health insurance plans. Medicare already costs $272 billion a year to cover most of the healthcare costs of about 35-million seniors and 6-million disabled.

The House bill goes farther than the Senate version, however. It ties government spending on traditional, fee-for-service Medicare to bids made by private insurance companies, who ostensibly would participate in a program called Medicare Advantage -- an expanded Medicare+Choice, managed-care option.


According to the proposal, if FFS Medicare expenditures grow beyond private bids in competitive geographical areas, seniors would have to make up at least part of the difference out of pocket. If expenditures are lower than private bids, seniors would recoup some of those savings.

Democrats have called the mechanism a deal-breaker. They say it pushes Medicare away from being a defined-benefit, social-entitlement program and closer to being a defined-contribution program -- thereby limiting the government's responsibility.

John Rother, director of policy and strategy for AARP, the seniors advocacy group in Washington, told reporters Wednesday lawmakers are considering either a demonstration project to test Medicare Advantage in a limited way, or somehow encouraging private plans to compete within Medicare's framework -- without providing premium support.

"It may look different and I don't think it's resolved yet if it is a demonstration program," Rother said.

The demonstration idea has "always been the conventional wisdom," a Democratic staff member told United Press International. Many people are predicting the final Medicare language will include only a Medicare Advantage test run because Democrats have insisted they will not accept the government paying premiums to private insurers, the staffer said.

If the language moves away from privatization, it would be a victory for Democrats and the Senate bill, but insiders caution everything remains fluid. No final deals have been made, despite an Oct. 17 deadline set by some lawmakers earlier this month for reaching an agreement within the conference committee.


Rother said conferees have told him they are "moving in a direction to resolve" the key issues and reach a handshake agreement by Oct. 17 -- even if the details are not yet in place -- and to produce a final bill before the end of the year.

"They are upbeat about doing something this year," he added.

Perhaps, but Senate Democrats have threatened to filibuster if the final Medicare bill looks too much like the House version. Even dumping the privatization language altogether might not be enough, sources told UPI. Democrats remain concerned about gaps in prescription drug coverage, which both the House and Senate bills contain. Seniors would have to pay all drug costs within the gaps.

Controversy also surrounds how to provide the drug coverage. Both bills call for private insurers to offer drug-only plans for seniors who wish to remain in FFS Medicare, but only the Senate bill requires the government to provide a "fallback" drug plan if no insurers bid on the program.

Rother said conferees appear to be moving toward accepting some type of fallback option -- another victory for the Senate bill and the Democrats.

An issue thought settled last week apparently is back on the table: the treatment of 6.4 million "dual eligibles" -- Medicare beneficiaries who also qualify for Medicaid. President Bush reportedly called Senate Majority Leader Bill Frist, R-Tenn., and expressed the administration's displeasure over the impending deal.


Conferees had agreed in general to back the House bill language, which would give dual eligibles access to Medicare's drug benefit. The Senate version would provide these beneficiaries drug coverage through Medicaid, the federal program for the indigent, which is operated and funded by the states with matching money from Washington. Almost half of Medicaid drug expenditures go for dual eligibles.

The administration favors extending Medicare's prescription drug coverage to low-income seniors only if they do not qualify for Medicaid but are not covered by some other program. Democrats want to use Medicare as the first-payer, with Medicaid picking up what Medicare does not cover. This would ensure dual eligibles access to drug benefits. If dual eligibles are excluded, it would mark a significant change in Medicare: For the first time, all seniors would not be eligible for it regardless of income.

Because Medicaid coverage varies by state, it operates at the mercy of state budgets, many of which have been cut -- some repeatedly -- during the past couple of years due to economic downturns. Democrats fear further state budget reductions could mean Medicaid cuts, leaving seniors with either less coverage than Medicare's drug plan or, worse, no coverage at all. This could happen even if Medicare legislation offers incentives for states to continue to provide the benefit to dual eligibles.


Robert Greenstein, executive director of the Center on Budget and Policy Priorities in Washington, said he believes the administration's position on dual eligibles is based more on politics and the future of Medicaid than on providing drug coverage to near-poor seniors.

Greenstein said the administration "wants to end the current structure of Medicaid and replace it with a block grant" approach, meaning a preset amount of federal money. In order to do that, he said, states must view the existing Medicaid program as so unattractive they would prefer block grants instead. Moving dual eligibles exclusively to Medicaid -- and invoking the specter of tens of millions of baby boomers heading toward retirement in the coming two decades -- might just accomplish that goal.

Jeanne Lambrew, associate professor at The George Washington University in Washington and former associate director for health at the Office of Management and Budget, said transferring dual eligibles to Medicaid would produce no major savings, while there is only a "small cost associated with keeping these people in Medicare."

Because Medicare and Medicaid have coordinated coverage for dual eligibles for the past 30 years, states are used to wrapping their Medicaid coverage around Medicare, she added. Using Medicaid to cover dual eligibles exclusively, however, she said could "limit (states') ability to maintain their health insurance for low income people ..." On the other hand, states could save an estimated $44 billion over the 10-year life of the bill if they do not have to provide dual-eligible drug coverage.


Policy experts said a Medicare law will pass this year only if there is bipartisan support for the final agreement reached by the conference committee. Some of the votes in the House needed to pass the bill -- gained by Republican leadership arm-twisting last June -- are no longer there, experts said, so the GOP will not be able to drive the final bill down party lines.

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