By Amy Goldstein
Washington Post Staff Writer
Thursday, February 25, 1999; Page A12

With its March 1 deadline bearing down, a federal commission working to reform Medicare appeared increasingly likely yesterday to end in a deadlock, as members continued to bicker over whether a plan to revamp the nation's insurance system for the elderly would help patients and save the government money.

After nearly a year of work, the group began for the first time yesterday to debate in detail the financial implications of the dramatic change it has been contemplating in the beleaguered Medicare program. Under that overhaul, the government would stop setting prices and paying the medical bills of elderly patients, beginning instead to give those patients the money to buy coverage from private health plans competing to provide their care.

Conservatives on the group praised the proposal -- which was released last month by Sen. John Breaux (D-La.), the commission's chairman -- predicting that it would lower medical costs while ushering in better health care for Americans who need it most. "It's going to save money, but I'm for it even if it doesn't save a dime," said Sen. Phil Gramm (R-Tex.).

However, liberal members charged yesterday that the projected savings are illusory, subtly shifting expenses from the government to patients who are old and sick. Democrats also continued to insist that the commission call for coverage of prescription drugs to be made available to all Medicare patients -- an idea that is popular with the public but has been rejected as unaffordable by Republicans on the panel.

"If [pharmaceutical benefits are] not an issue that can be discussed, then we have reached as far as we can go," said Laura D'Andrea Tyson, formerly a top economic adviser to President Clinton and now dean of the business school at the University of California at Berkeley.

In light of such sparring, Breaux indicated yesterday that he is willing to allow the 17-member group to continue haggling for a few more weeks, but only after he polls members to gauge whether there is any chance for a consensus.

For now, Breaux's proposal has attracted 10 votes, but -- with virtually every one of his Democratic colleagues on the panel balking -- it remains one vote short of the number required to send a recommendation to Congress and the White House.

Created as part of a 1997 federal budget agreement, the commission is striving to find a way to avert the collapse of the 1960s-era insurance system, which is predicted to go bankrupt in about a decade -- even before the large baby boom generation begins to reach retirement age. The problems facing Medicare are more imminent and more intricate than those confronting the nation's Social Security system, even though the retirement program has, at the moment, attracted more attention in the White House and on Capitol Hill.

Yesterday's contentious session was the first time the Medicare panel has convened since members received, in recent days, three separate financial analyses of the proposal Breaux has advanced. The analyses were done by the Congressional Budget Office, the federal agency that runs Medicare and the commission's own staff.

While the analyses differ in several respects, they all conclude that making Medicare rely more heavily on the private marketplace, through an approach known as "premium support," would save the beleaguered program some money. But they also suggest that exactly how much money could be saved depends on several factors that remain unclear. Those factors include how much medical care health plans would be required to provide -- an issue the commission has not fully addressed -- and whether elderly patients would gravitate to health plans that are less expensive.

Several of the commission's Democrats noted yesterday that the analyses show that the conversion to the "premium support" approach would account for only a fraction of the cost savings anticipated under the reform proposal. According to the Medicare agency, more than two-thirds of those savings would come from controversial and unrelated changes that the commission is considering, including the possibility of charging more affluent patients higher medical fees and requiring patients to wait until they turn 67 before they can join the program -- two years beyond the current eligibility age.

And despite the vigorous debate over the merits of including prescription drugs, none of the financial analyses addresses the question of how much that benefit might cost.