President Clinton yesterday laid out a long-awaited proposal to reform Medicare that seeks to fortify the program's precarious finances, start giving older Americans federal help in buying prescription drugs, and change the way private health plans compete for elderly patients.
Under a key part of the initiative, the government would try to foster new price competition among HMOs, with Medicare patients for the first time given the ability to pocket savings if they chose plans that can offer services for less money.
However, Clinton at the same time recommended charging Medicare patients slightly more money for some of their health care. Patients would have to start paying 20 percent of the cost of medical laboratory tests. And the amount of money people must pay each year before the program begins covering their doctor bills -- which has long remained at $100 -- would begin increasing annually to keep pace with inflation.
The administration has labored for months over the plan in hopes of invigorating sluggish efforts on Capitol Hill to shore up the country's second-largest social program. Clinton said yesterday his approach would "secure the health of Medicare while improving the health of our seniors."
While certain details had been seeping out for days, the first look at the entire Clinton plan shows that the White House does not envision a revolution in Medicare. But if approved by Congress, the new proposals would add up to a major redesign of the lifeline to medical care for 39 million elderly and disabled Americans.
Taken together, several health policy experts said yesterday, the elements of the plan reflect two balancing acts for Clinton. For one thing, the president is trying to make room for a popular but expensive new prescription drug benefit -- estimated to cost $118 billion in its first decade and to escalate sharply after that -- in a program that currently is destined to run out of money early in the next century.
In addition, the administration is trying both to enhance the role of the HMOs -- which enroll a small but growing share of Medicare patients -- and to bolster the traditional "fee-for-service" version of the program, in which patients choose their own doctors and visit them whenever they want. Under the plan, for instance, patients in traditional Medicare no longer would have to pay part of the cost of preventive services, such as tests for cancer or side-effects from diabetes.
At a time when managed care suffers from a bad reputation and is not available to elderly patients in certain parts of the country, the version of Medicare a patient selects "should be a choice and not financial coercion," said Gene Sperling, the White House chief economic adviser.
As they began yesterday to sift through the plan's details, Republican leaders on Capitol Hill reacted guardedly to Clinton's ideas, sounding wary of dismissing efforts to improve a highly popular program but unwilling to embrace the White House's approach. By last evening, administration officials said they were heartened by the political reaction yesterday and believed that it might still be possible to push through reforms this year -- even though it is relatively late in the congressional season, other issues are competing for attention, and Medicare is a complex and touchy topic.
In a joint statement, Senate Majority Leader Trent Lott (R-Miss.) and House Speaker J. Dennis Hastert (R-Ill.) said: "We want to see an America in which every senior has the best possible health care, including access to affordable prescription drugs."
But in what is emerging as a major GOP theme on the subject, Lott and Hastert objected to Clinton's desire to offer drug coverage to all elderly patients, including those who already have it through employers' retiree health benefits or from private policies that some patients buy to supplement Medicare. "We should be careful not to force those who already have prescription drug coverage to accept a government-run plan," the GOP leaders said.
While some Democrats have indicated recently they would rather defer decisions on Medicare in order to use the issue in next year's election campaigns, party leaders yesterday threw their support behind Clinton. House Minority Leader Richard A. Gephardt (D-Mo.) called the president's proposal "fiscally responsible" and said the drug benefit he proposed would be "the single greatest improvement to the Medicare program since its inception."
The proposal drew a more tepid response, however, from another key Democrat, Sen. John Breaux (La.), who chaired a Medicare reform commission that ended in a deadlock in March. Breaux yesterday praised Clinton for "moving the ball down the field." But he said the White House's effort to use market forces to help save the program money is "like the second cousin to real competition," because it seeks to foster rivalry among health plans but would not put those plans into direct competition against the traditional version of the program. Under the administration's approach, patients who wanted the drug benefit would pay $24 a month when the program began in 2002, eventually increasing to $44 by 2008. In exchange, the government would pay half the cost of their drugs up to a limit, which would begin at $1,000 and eventually rise to $2,500.
In response to GOP concerns that the new federal help would prompt employers to drop drug coverage for retirees, the White House is proposing to begin giving those employers an as-yet unspecified subsidy if they preserve that benefit. The government also would begin subsidizing HMOs for their drug benefits.
Similarly, in response to loud complaints lately from health plans, hospitals and nursing homes, which argue that a 1997 budget agreement unfairly limited their Medicare payments, Clinton is calling for $7.5 billion worth of relief over the next 10 years. Lobbyists for several health care trade groups said, however, that they need far more money.
Administration officials estimate that their plan would reduce Medicare spending by $72 billion over the coming decade, enough to pay for about three-fifths of what the prescription drug benefit would cost during that time.
The proposal calls for the remaining $45.5 billion to come from future budget surpluses. All told, under the Clinton plan, Medicare would get a major infusion of cash from those expected surpluses -- a total of $794 billion over the next 15 years.
Staff writer Eric Pianin contributed to this report.
Medicare Proposal Highlights
Savings from choosing lower-cost plans would be passed on to beneficiaries at a rate of 75 cents for every dollar. Savings: $8 billion over 10 years, starting in 2003.
Prescription drug benefit
* Costs $24 per month in 2002; $44 per month by 2008.
* Matches prescription drug payments up to $1,000 in 2002; $2,500 by 2008.
* Offers financial incentives for employers to provide a drug benefit to retirees that is at least equivalent to the new Medicare benefit.
* Excludes premiums and copayments for individuals earning less than $11,000 or couples earning less than $17,000.
Cost: $118 billion over 10 years, starting in 2002.
Deductibles and copayments
* Clinical laboratory services would require a 20 percent copayment.
* Deductibles for doctor visits and other outpatient services, now $100, would be indexed for inflation.
Savings: $11 billion over 10 years.
Preventive services offered by Medicare, such as pelvic exams and prostate cancer screenings, would no longer have copayments or deductibles.
Cost: $3 billion over 10 years (with health education campaign).
Buy-in plan would allow those age 62-65 to purchase Medicare benefits for $300 per month.
Cost: $1.4 billion.
Dedicating $794 billion in budget surpluses over 15 years would extend the life of the trust fund until at least 2027.