The Magazine


May 31, 1999, Vol. 4, No. 35 • By ROBERT M. GOLDBERG
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WHY ARE THE WHITE HOUSE and congressional Democrats afraid of reforming Medicare? Three months ago, when the co-chairmen of the National Bipartisan Commission on the Future of Medicare produced a plan for saving Medicare, the White House instructed Clinton appointees to the commission to vote against it. Their votes denied the Breaux-Thomas plan (named for senator John Breaux and congressman Bill Thomas) the supermajority of commission members required to forward the proposal to Congress for an immediate vote.

More recently, the White House has fought to keep Congress from considering Breaux-Thomas at all. At the end of March, Senate Finance chairman William Roth asked for a "sense of the Senate" vote to gauge the Senate's interest in debating the measure. The White House mobilized the entire cabinet to call every Senate Democrat and instruct them to vote "nay." Breaux and John Kerry were the only Democrats to break ranks.

The administration is afraid of Breaux-Thomas because it could neutralize the issue Al Gore and key congressional Democrats believe their party can ride to victory in the next elections: prescription-drug benefits. Breaux-Thomas is a bold plan for reforming Medicare that would give seniors a choice of health plans, including some with drug coverage. It would operate through "premium supports," a euphemism for vouchers.

Democrats have countered with at least five proposals to give seniors a drug benefit, and Clinton is expected to weigh in soon with his own scheme. Currently, House Democrats are rallying around a bill called the prescription Drug Fairness for Seniors Act. In district after district, House Democrats have used their sponsorship of the bill to generate publicity and organize events at which seniors, bused in by labor unions, demand action on the legislation.

Internal GOP polls show that by a 3-1 margin, voters support a hypothetical Democrat who favors a drug benefit over Republican candidates who oppose one. But Republicans could easily turn the tables -- first, by showing that the Prescription Drug Fairness Act isn't what it's cracked up to be, and then by touting their own superior proposal.

Rather than protect seniors directly, by providing them health-insurance coverage for prescription drugs, the Drug Fairness legislation would operate through price controls and what amount to phantom discounts. It would force drug and biotech companies to sell at a price set by the government any product purchased by seniors. It is thus the drug companies' customers -- the pharmacies, not individual consumers -- that would receive the price break, which they might or might not pass along to private consumers. Experience with such arrangements is not encouraging. Similar caps on the prices of drugs sold through Medicaid were imposed in 1990, requiring pharmaceutical firms to give the government the same discounts they gave private customers. The result was that private discounts were cut to make up for revenue lost in sales to the government, and drug spending in the private sector rose. The same thing can be expected to happen under the prescription Drug Fairness Act: The 70 percent of seniors who now supplement their Medicare coverage with private-sector drug benefits will see their costs increase.

The Prescription Drug Fairness for Seniors Act, then, does not actually provide drug coverage, even for poor seniors. The contrast with Breaux-Thomas -- under which many seniors would choose health plans that include drug benefits -- offers Republicans a tremendous opportunity to blunt the Democratic charge. Naturally, the Democrats are nervous. The White House wants to avoid a Finance Committee vote on the proposal at all costs because it knows the reform would pass. Then Bill Thomas, who has been building his own bipartisan majority on the Ways and Means Committee, could secure the bill's passage in the House. And if both houses passed Breaux-Thomas in some form, Clinton would be forced to veto legislation protecting the Medicare entitlement and providing a prescription-drug benefit for the first time.

So the question is, Why are Republicans doing nothing to force a vote on Breaux-Thomas? The answer -- all too familiar -- is that House speaker Dennis Hastert and Senate majority leader Trent Lott themselves fear a vote on Medicare reform. They know the Democrats will seize on the fact that Breaux-Thomas would gradually raise the age of eligibility for Medicare from 65 to 67 (just as present law already provides for Social Security) to mendaciously portray it as ending the Medicare entitlement. The Republicans are as frightened about being beaten up by Democrats as the Democrats are of having their favorite issue stolen.

Internal White House documents reveal how weak the Democrats' position on Medicare really is. One memo claims that because of the rising age of eligibility, millions of seniors would go without coverage. In reality, Breaux-Thomas would allow people under 67 to buy into Medicare, and other Republican proposals now before Congress would provide them a variety of health-care tax credits and deductions. What's more, Breaux-Thomas would actually reduce the amount of money most seniors spend on health insurance because it would relieve them of having to buy supplemental coverage, as many now do, for such items as prescription drugs.

True, there are other Democratic bills that would create a drug benefit for seniors. But they would authorize the government to decide what drugs seniors could receive, put price controls on new biotech products, create an open-ended entitlement funded by taxes, and impose higher out-of-pocket expenses on seniors. Another advantage of Breaux-Thomas, noted by Medicare commission member Deborah Steelman: It would provide a drug benefit without tapping the 15 percent of the Social Security surplus that the president, in his State of the Union message, said he intended to dedicate to that end.

The White House is expected to unveil its own Medicare reform plan sometime in June, and the word is it will contain drug benefits in the form of price controls. At bottom, though, neither Clinton and Gore nor congressional Democrats are interested in passing a drug benefit, much less overall Medicare reform, before the 2000 election. That is why Republicans should play offense. Pushing prescription-drug coverage as part of a sound Medicare reform would rob the Democrats of control over an issue that is crucial to their political fortunes. The sooner the GOP rallies around Breaux-Thomas, the sooner the Democratic effort to seduce seniors with phantom discounts will be defeated.

Robert M. Goldberg is senior research fellow at the Ethics and Public Policy Center in Washington, D.C.