President Bush last week opened new rifts in Congress and the healthcare industry when he presented a vague but controversial plan to overhaul the 38-year-old Medicare program. Following weeks of speculation about how he would structure a prescription drug benefit, Bush proposed spending $400 billion to give seniors the option of enrolling in private health plans that would compete with traditional Medicare.
Throughout last week, the president and members of his administration provided scant details of how his plan would work.
The lack of specifics did not stop policymakers and advocacy groups from engaging in a heated debate over how best to reform Medicare. Most of the shots fired last week, from Capitol Hill and from a host of advocacy groups, aimed at the merits of employing the private sector to administer a Medicare drug benefit.
"Medicare has been used as a political football. It's old. It's important. But it hasn't changed," Bush said in Grand Rapids, Mich., where he spoke to 3,000 local businesspeople the day after his address to Congress and the nation. Medicare beneficiaries, the president said after a roundtable discussion at seven-hospital Spectrum Health, "ought to be able to choose their own healthcare plan."
Champions of market-based Medicare reform were quick to praise the president's call to action, even as the White House continued to hold important elements of the proposal close to the vest. Some said that proposal has not yet been fully developed despite the administration's effort to hype it last week. When Bush spoke in Michigan, a sign reading "Strengthening Medicare" served as his backdrop, but he spent less than three minutes of the 45-minute address discussing his plan.
"I was disappointed that neither the background materials nor (Bush's) address in Grand Rapids provided more detail as to how the president seeks to achieve the objectives he's laid out," said Rev. Michael Place, president and chief executive officer of the Catholic Health Association.
Bush administration sources indicated last week that they would reveal details of the president's plan later this month. Some lobbyists and other industry insiders suggested Bush is waiting for more support on Capitol Hill before he rolls out the specifics; several lawmakers, even some on the Republican side of the aisle, have voiced early concerns. "Anything short of a full drug plan I'd have a hard time supporting," one Republican member of the House Ways and Means Committee said through a spokesman.
The possible breadth of a drug benefit is just the beginning of the unanswered questions. Also still unknown: Would a private plan be the only way for beneficiaries to obtain drug coverage? Would seniors have the option of joining PPOs, HMOs or both? To what extent will health plans be willing to carry the financial risk of covering Medicare patients? How would a reformed Medicare program affect hospital reimbursement rates and policies?
As seniors and lawmakers alike wait for the answers to those questions and more, the guns are already drawn in what is likely to be a long shootout, with the president using "choice" as his ammunition and critics hurling bullets at "privatization" of a vital entitlement program.
"It is clear that President Bush intends to privatize Medicare," Rep. Pete Stark (D-Calif.) said last week in a written statement. "He's cleverly using the promise of a meager drug benefit as a bribe to push Medicare beneficiaries into second-rate, low-quality health plans ... this is a cruel hoax."
Democrats "are not too excited about privatization," added the party's House minority whip, Rep. Steny Hoyer (Md.). "It's not a policy that will help senior citizens or America."
In his State of the Union address, Bush also stated his unequivocal opposition to a single-payer system that "dictates coverage and rations care," a clear sign that he will take on anyone who renews the attempt to provide universal coverage. That wasn't enough to put the brakes on legislation that Rep. John Conyers (D-Mich.) will introduce this week to institute such a plan.
"The healthcare system is breaking down and none of the ideas on the table have a prayer of helping to fix it," said David Himmelstein, associate professor of medicine at Harvard University and co-founder of Physicians for a National Health Program, a 10,000-member grass-roots organization that worked with Conyers to develop the legislation.
"It's striking how the president says on the one hand that he's against HMOs but puts forward a plan that would force the vast majority of seniors into HMOs," Himmelstein said, echoing the sentiments of many others who fear a rehash of the 6-year-old Medicare+Choice program that has not achieved anticipated savings and is unavailable in many markets.
It is "categorically a wrong assertion" that drug benefits will go only to those who jump from Medicare to an HMO, Bush spokesman Ari Fleischer told reporters last week. The president's plan, Fleischer said, "is an expansion of the current Medicare system to include choices and options that get (seniors) prescription drug coverage."
"My impression is that some of these decisions ... might not even have been made at this point," said Chip Kahn, president of the Federation of American Hospitals, referring to the structure of a drug benefit and how private plans might use federal dollars to cover Medicare patients. "I would make no judgments at a level of detail below what Bush said in his speeches."
In Grand Rapids last week, Bush visited Spectrum Health, where he participated in a 45-minute roundtable discussion with Spectrum's president, three area physicians, a businessman and two seniors, one of them a former registered nurse.
According to one account of the event, Bush asked the group how his proposals were playing in Michigan, and said that doctors and hospitals would not absorb the costs of supplying a Medicare drug benefit because the $400 billion would not require offsetting cuts.
Bush "emphatically talked about not moving toward a nationalized (healthcare) system," Richard Breon, Spectrum's president and CEO, told Modern Healthcare. With regard to Medicare, "we were very supportive as a group that President Bush is talking about these issues and really looking to reform the program."
Providing the only other clues as to what Medicare reform could entail, Centers for Medicare and Medicaid Administrator Tom Scully told a Senate Appropriations Committee panel last week that the president's proposals will not be modeled after Medicare+Choice, and "will have a buffering effect on geographic disparities" in hospital payments. When senators on the Appropriations subcommittee pressed Scully for further information, he said, "at the risk of involuntarily returning to the private sector, I won't go into details of the plan."
Details or not, a Medicare program employing the private sector will require that health plans want to participate in the first place. Without the fine print of Bush's proposal it's difficult to know how much risk the plans would share with Medicare, which could have a lot to do with determining their level of interest.
At least 33 plans in 23 states are currently participating in a month-old HHS demonstration project to offer PPOs that share risk with Medicare. Pointing to that effort last week, American Association of Health Plans President Karen Ignagni said her membership is "highly interested" in such opportunities.
Especially for rural hospitals, risk-bearing PPOs make contract negotiations a genuinely competitive process and are preferable to market-dominant HMOs, which can limit bargaining opportunities in an area, according to Ignagni.
The broad sketch of Bush's proposed reforms show "an attempt to bring real competition to the Medicare program, not the kind of competition that Medicare+Choice tried to create but failed," said Joseph Antos, a healthcare and retirement policy scholar at the conservative American Enterprise Institute in Washington.
Antos cautioned, however, that while the CMS got a "tremendous response" to its demonstration project, "the question in my mind is how eager will these plans be over the long haul to operate in a partial-risk situation?"
In his State of the Union message, Bush proposed $400 billion in new funds to reform Medicare and add drug coverage. In doing so, the president set a marker for Congress and guaranteed lawmakers' rapt attention to the issue, several sources agreed.
The $400 billion commitment "puts Bush in the game," said the federation's Kahn.
Despite charged rhetoric last week, the obstacles to reform are substantial. Democrats have widely opposed what they view as a move toward privatizing Medicare. With a handful of Republicans expressing their own doubts, the party has not yet united behind Bush.
"There's a lot of Republican infighting going on here," one healthcare lobbyist said. "A lot of Republicans take the view that `why don't we just do a drug benefit? Let's call that reform. ... Why open ourselves up to this major thing where Democrats will be able to say we're dismantling the Medicare program?' "
Senate Majority Leader Bill Frist (R-Tenn.) was largely silent on the Medicare reform question last week, and members of his staff declined to answer policy questions posed by Modern Healthcare.
Sen. Charles Grassley (R-Iowa), chairman of the finance committee that presides over Medicare, issued a cautious response to Bush's two speeches. "I agree that we need to strengthen Medicare, first by adding prescription drug coverage that's available for all seniors, not just those that switch into managed care," Grassley said in a written statement. "We need to make other improvements to the program as well, like adding free preventive services and better protection against catastrophic illness. All of our changes should be voluntary."
Grassley continued: "I'll be working across party lines to pass out of committee a comprehensive, bipartisan prescription drug and Medicare improvement bill by early summer."
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