Medicare Drug Plan Wins Panel Approval

Shortly after President Bush promoted Medicare (search) changes for the second time in two days on Thursday, the Senate Finance Committee passed legislation to provide a prescription drug benefit to Medicare recipients.

"The conventional wisdom was that a Senate split almost right down the middle couldn't be expected to produce anything," said Senate Finance Committee Chairman Chuck Grassley, R-Iowa, who helped craft the 10-year, $400 billion measure with ranking member Max Baucus, D-Mont.

Not so, Grassley said: "We're here to deliver."

The panel passed the legislation 16-5. The Senate could vote on a bill as soon as next week. The president has asked for a bill on his desk by July 4. The House is working on an alternative to the Senate plan that would include a provision to save $18 billion over five years by holding down increases that hospitals receive to offset inflation.

Hospitals have already lobbied some lawmakers to resist the changes.

Bush has said that the 38-year-old government Medicare program has not changed over the years even though medicine has. Bush argues that by not providing prescription drug coverage (search) and preventative care, the health care system is becoming more expensive and less effective. He said that be giving seniors proper medication early on, major health problems and the associated care needed to treat them can be avoided.

"We're really good at health care, but we've got problems that we've got to deal with," Bush said Thursday in a speech to seniors that followed a roundtable discussion in New Britain, Conn.

"The challenge for America is that life-saving drugs are both affordable and available to life-saving seniors," he said, adding that he has signed off on regulations instructing the Food and Drug Administration (search) to speed the entry of generic drugs to the market.

The swift agreement has caught many lawmakers by surprise. For years, prescription drug coverage has been the source of rancorous debate. The latest moves are "a sea change" from years past, said Sen. John Breaux, D-La.

The crux of the reforms enables Medicare beneficiaries to receive drug coverage either through Medicare or through private managed care options. Beginning in 2006, seniors in preferred provider organizations would have a portion of their drug costs paid for by the government as part of their insurance coverage. Seniors choosing Medicare could buy separate coverage for drugs.

The bill's sponsors said that for the first year, the premium is expected to be about $35 a month for both the private and public programs. Seniors would be obliged to pay the first $275 in costs. Insurance would pay half the cost for expenses between $276 and $3,450. There would be no coverage between $3,450 and $5,300, and insurance would pay 90 percent of everything above that amount.

Low-income seniors would receive government subsidies, which would gradually phase out before disappearing at 160 percent of the federal poverty level. Those levels are $14,764 for an individual and $19,766 for couples.

At the same time, the bill would pave the way for annual increases in the deductible for Part B Medicare -- which covers doctor and out-of-hospital services -- beginning in 2007. The current $100 level, unchanged since 1991, would go to $125 in 2006.

"If [seniors] like what they have now, without a doubt they can keep it. If they'd like a new option, they can have that. If they don't like the new option, they can switch back to what they had before. We're talking about giving seniors the right to choose," Grassley said during the committee hearing.

Traditional arguments to the plan remain. Some Republicans say the bill represents a mammoth increase to a government program and want private insurers to take over for those who want drug coverage. Alternatively, some Democrats say it doesn't go far enough to help seniors.

Despite plans to offer several amendments, Democrats could support the measure when it comes to a vote by the end of the month.

"I think it will pass," said Senate Democratic leader Tom Daschle of South Dakota. "Many of us go into this debate with the hope we can vote for it."

At the same time, he said, "if final passage does come we don't see it as the final word in any regard."

Republican lawmakers say they would like more than just the drug coverage addition to Medicare, but an overhaul of the whole system that would make it easier for seniors to move into private managed care. Health and Human Services (search) Secretary Tommy Thompson and other administration officials have said that the drug plan will encourage a large percentage of current beneficiaries to give up Medicare for PPOs.

Congressional experts say they doubt seniors would make a major shift from government to private care.

In the House, legislation expected to go to committee next week shares several provisions but also differs on numerous details.

Besides the hospital payout savings, the House plan would require seniors to spend $250 before any drug coverage begins. It would then cover 80 percent of the cost for $251 to $2,000 in drug expenses. Like the Senate bill, there would be a gap after that, until someone's out-of-pocket spending reached $3,700. At that point, Medicare would pay 100 percent of the costs.

The premium would be $35 per month for those who want to participate, except for poor seniors, who would pay no or a reduced premium -- a feature not included in the Senate bill.

That would introduce the concept of relating benefits to income, with those with incomes up to 135 percent of the poverty level paying nothing and those from 135 to 150 percent of poverty paying less. Also, seniors with higher incomes -- $60,000 a year for individuals to $100,000 for couples -- would have to spend more on drugs before the catastrophic provision would kick in.

Fox News Mike Emanuel and the Associated Press contributed to this report.