Mediscare, Act II

The Medicare caldron is boiling once again, and the White House appears ready to use it to scald Republicans at the ballot box again next year. This time, however, a few key Democrats may spoil the soup.

Hopes collapsed last week that the high-powered National Bipartisan Commission on the Future of Medicare would endorse a visionary plan to reform and modernize the antiquated program. The stakes are high: Medicare is going bankrupt faster than Social Security is, beneficiaries already are facing restrictions on access to medical care, and a huge influx of Baby Boom retirees looms on the horizon.

The chairmen of the Medicare commission, Democratic Senator John Breaux of Louisiana and Republican Congressman Bill Thomas of California, lived up to the name of the “bipartisan” commission in crafting a joint plan, one designed to leverage the powerful forces of market competition and consumer choice to save the program.

But politics trumped policy. Despite heroic efforts by both chairmen, the final tally in Tuesday’s vote was one short of the 11-vote super-majority that the 17-member commission had set as its threshold to issue a recommendation. None of President Clinton’s appointees voted for the reform plan. The commission therefore has disbanded, unable to agree on any advice for Congress and the White House.

Breaux feels particularly betrayed by Clinton, who last year assured him he would support the kind of reform plan that he and Thomas ultimately designed. Breaux had gone out on a limb to provide Clinton with a legacy he could use to help salvage his damaged presidency, and Clinton promptly sawed it off. This, despite Breaux’s loyalty to Clinton during the Senate impeachment votes.

In a news conference the day before the Commission took its final vote, Chairman Breaux roundly criticized his fellow New Democrat. “Do I wish the president had come out and endorsed this proposition? The answer is yes,” Breaux said. “Am I disappointed he hasn’t? The answer is also yes.”

Had Clinton lived up to his word to Breaux to publicly endorse the plan he had privately supported last year, it would have freed the White House appointees on the commission to vote for reforms that several of them privately supported as well. Breaux even crafted a prescription drug benefit to woo votes of Democratic appointees, but it didn’t work.

Mediscarewas such a successful political weapon in 1996 that Democrats apparently couldn’t resist using it again. There have been suggestions that House Minority Leader Richard Gephardt (D-MO) may have been in on the deal as well.

Gephardt is salivating at the prospect of becoming speaker of the House if Democrats can pick up just six more seats in the 2000 elections. His endorsement of Vice President Al Gore’s presidential candidacy last week and the failure of the Medicare Commission to endorse a solvency plan took place within hours. Some political insiders say the price of Gephardt’s endorsement of Gore was the White House promise to keep Medicare alive as a political issue in the next election. Failure of the Medicare commission to endorse the Breaux-Thomas plan virtually assures that will happen. Democrats hope they can leverage enough votes by demagoging Republicans to take over the House, making Gephardt speaker.

But there’s trouble ahead. Democrat Bob Kerrey (D-NE) also served on the Medicare Commission and supported the Breaux plan. The very public position of these two respected Democratic leaders cracks party unity and will make the next Mediscare battle harder for Gephardt, Gore & Co. to win.

Congress and the White House established the Medicare Commission last year to provide recommendations on how to save the troubled program. In 1998, Medicare spent $214 billion to provide health services for 39 million beneficiaries, mostly Americans over age 65. The commission was created because virtually all who seriously study the program admit that Medicare’s entitlement to covered services is unsustainable. The coming influx of baby-boom beneficiaries will bankrupt the system in less than a decade unless it is modernized.

Under the Breaux-Thomas proposal, beneficiaries would have the choice of staying in traditional Medicare or receiving financial assistance that they could use to purchase their own health coverage in the private marketplace. The “premium support” model they offered would move Medicare away from the current crushing system of price controls, regulatory bottlenecks, and restrictions on coverage to give seniors money they could use to choose their own health care arrangements in a competitive system. Their plan was modeled after the successful program through which members of Congress receive their own health coverage, the Federal Employee Health Benefits Plan.

The Breaux-Thomas plan would have done two things: give seniors much more choice and freedom in obtaining health care and save taxpayers $500-$700 billion a year by 2030. It is likely to still be in play when Breaux introduces it for Senate consideration later this Spring.

Nonetheless, Medicare will continue to be used as a political weapon. That is bad for today’s senior citizens, for tomorrow’s retirees, and for young families who face the prospect of dramatically higher taxes into the next century for a program with an insatiable appetite for taxpayer dollars.

An hour before the Commission held its final meeting, Clinton held a news conference saying he would work with Congress on passing his own, yet unspecified, reform plan. Clinton announced in his State of the Union address earlier this year that he wants to set aside 15 percent of the federal budget surplus to extend the life of Medicare. But Republicans and Democrats alike have roundly criticized the idea: it would mean a large-scale shift of general fund taxes into Medicare, which is now largely financed by earmarked payroll taxes. And, according to the head of the General Accounting Office, David Walker, the Clinton alternative “does not include any meaningful program reform that would slow spending growth.”

If Republicans were to get their act together, they would see that Medicare presents not only a danger but also an opportunity. Visionary presidential candidates could put Medicare modernization in play as a positive issue, just as Steve Forbes put Social Security privatization into play during the 1996 presidential campaign.

Doctors and even beneficiaries are running into walls of restrictions in Medicare. Dr. Robert Waller, former chairman of the Mayo Foundation which operates the Mayo Clinics, asked his staff to count the number of pages of government rules and regulations his facilities must follow. He counted 132,000 pages governing every detail of what doctors can and cannot do in treating patients, including Medicare beneficiaries. One of Medicare’s worst features is a provision enacted in the Balanced Budget Agreement that has the effect of keeping seniors from privately contracting with their doctors to receive the medical services they want.

Candidates could argue that the solution is to restructure the program to put beneficiaries, not bureaucrats, in charge of getting the best quality and services at the best price through the competitive marketplace. That means redefining Medicare in terms of a fixed dollar amount for each individual instead of an entitlement to a list of government-determined products and services.

Under a modernized Medicare, instead of appeasing regulators and health police, patients would be free to make their own choices of doctors and care arrangements. The market will provide more attractive options for a variety of products and services. Seniors looking out for their own interests and pocketbooks will spend much more wisely the $6,000 Medicare spends on the average beneficiary each year.

Competition will facilitate continued innovation in products and service delivery. The result: taxpayers will be protected, consumers will get better value, and Medicare could become solvent for decades to come. It’s a goal. The coming election debate will determine whether this visionary reform plan has a chance of becoming a reality.

Grace-Marie Arnett is president of the Galen Institute, a public policy research organization based in Alexandria, Virginia. She is the editor of Empowering Health Care Consumers through Tax Reform, published in 1999 by the University of Michigan Press.

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