On the Web National Bipartisan Commission on Medicare Outline of Draft Proposal

By Amy Goldstein
Washington Post Staff Writer
Saturday, January 23, 1999; Page A04

The government should sharply curtail its role in medical care for the nation's elderly by asking private health plans to compete to provide their treatment, according to the chairman of a high-level federal commission working to reform the Medicare system.

Issuing the blueprint less than six weeks before the commission must give its advice to Congress and the White House, Sen. John Breaux (D-La.) contended that Medicare needs "fundamental reform" rather than simply a massive infusion of money, as President Clinton proposed this week.

Under the central reform Breaux proposed, drawing on months of work by the commission, the government no longer would pay directly the medical bills of the nation's 39 million Medicare patients. Instead, it would help patients buy coverage from HMOs and other kinds of insurance plans that would be approved by a powerful new federal Medicare board.

For the first time, the government would require elderly people with higher incomes to pay more for their care. And Americans would have to wait longer to join; the eligibility age would gradually increase from 65 to 67.

In releasing the blueprint, Breaux acknowledged that the commission has not yet analyzed how well these changes would accomplish the group's basic mission: finding a way to keep the nation's second-largest entitlement program from going broke in about a decade.

But the plan drew relatively favorable reactions from Republicans and the insurance industry, while it was criticized by the commission's most liberal members. Members on both ends of the ideological spectrum said the plan fails to include crucial details that ultimately will determine whether they support it, such as how much the government would pay health plans, how much rich and poor patients would have to pay, and what medical services would be included.

Even in its broad strokes, however, Breaux's proposal points the direction the commission is almost certain to go if its members prove able to find common ground. The direction is far more radical than the revisions Clinton broached this week for the other pillar of the government's assistance to the elderly -- Social Security. As part of his State of the Union address Tuesday, the president said the government should devote most of the federal surpluses to Social Security for the next 15 years and that part of that money be invested in the stock market for the first time.

Both of those enormous entitlement programs are forecast to go bankrupt relatively soon because Americans are tending to live longer and the large baby boom generation will begin reaching retirement age in about a decade.

At a time when the White House and Republican leaders in Congress have identified Social Security reform as a main priority this year, Breaux's proposal was, in part, an attempt to create momentum for serious discussion this year of Medicare, too.

"I think this is much more important than Social Security because the due date is sooner," the senator said yesterday. The trust fund that pays Medicare hospital bills is projected to run out of money in 2008, while the Social Security trust fund is expected to remain solvent until 2032.

To stretch the Medicare trust fund until 2020, Clinton has recommended pouring into the program 15 percent of the federal budget's surpluses over the next 15 years -- as much as $700 billion.

Yesterday, Breaux said that while such a huge infusion would relieve financial pressure on the program, "It is like putting more gas in an old car."

The six-page document he circulated yesterday among the commission's 16 other members is entirely his own work, but he said he believed it reflected broad areas in which the group can reach consensus.

In addition to altering the government's role in paying bills, the proposal would make several other substantial changes:

The original version of Medicare, in which patients choose their own doctors and visit them whenever they want, would become one choice in the revamped program. But in a major reform, it would merge separate pieces of the program that have covered hospital stays and office visits, creating a single deductible for both parts.

The Medicare program no longer would subsidize the direct costs of training doctors at the nation's teaching hospitals. That change is bitterly opposed by the Association of American Medical Colleges, which fears that the $2.2 billion in yearly subsidies would become more vulnerable if it were shifted into the main federal budget.

The role of the Health Care Financing Administration, the federal agency that runs Medicare, would be drastically reduced. It would continue to run the traditional version of Medicare, with new freedoms designed to help it become more efficient. It no longer would set rates, and the proposed Medicare Board would take over its job overseeing outside health plans that treat Medicare patients.

Breaux's plan left unresolved an important question about whether prescription drugs should become a basic part of Medicare coverage. He said he personally would favor including them, but said it remained uncertain whether the program could afford that popular but expensive addition.

His proposal says the government's subsidy of patients' insurance should be determined each year, based on the average price of all the health plans that want to participate. But Breaux did not specify what percentage of that price the government should pay, or how the subsidy should be updated over time as medical costs rise.

While Breaux and some of the commission's conservative members said that method would promote competition and lower the cost of care, liberals contended it could strand patients with bigger medical bills. "This is the end of the Medicare entitlement," said commission member Bruce Vladeck, HCFA's former chief administrator.

Staff writer Judith Havemann contributed to this report.