Medicare Drug Bill Eludes Lawmakers

With hundreds of billions of dollars to spend and tens of millions of constituents to please,  lawmakers have plotted a slow course to providing a Medicare drug benefit (search), despite earlier promises to seniors that negotiators would have a compromise ready last week.

House and Senate negotiators insist that they have made a lot of progress on their differing versions of the $400 billion drug benefit program now under consideration. But conflicting demands have made it difficult to reach a final agreement.

Lawmakers have drawn so “many lines in the sand that Capitol Hill looks more like graph paper," said Robert Reischauer, former director of the Congressional Budget Office (search), who added that philosophical differences remain at the root of the conflicts.

Negotiators have come to a number of conclusions about a Medicare prescription drug benefit, among them, the inclusion of some means-testing, in which beneficiaries would pay different premiums based on their income levels, and measures to encourage employers to provide health care benefits to retirees.

A final bill is also expected to include “rural equity” provisions, politically popular across Congress and particularly among rural-area representatives such as Senate Finance Committee chairman Charles Grassley, R-Iowa, and ranking member Max Baucus, D-Mont. Analysts are split over whether health care recipients in rural areas really need extra funding, expected to cost $25 billion to $28 billion over the next 10 years.

Several points of contention remain in other areas of the bill, including the issues of drug reimportation (search), the continuously rising prices of prescription drugs and the role of private insurers in providing benefits.

“The issue at the grassroots around the country is almost universally defined as drug prices.  People want to hear that Congress is taking on the drug price issue,” said John Rother, director of policy and strategy for AARP (search).

The House bill would allow consumers, pharmacists and wholesalers to import Food and Drug Administration-approved pharmaceuticals from 25 industrialized countries. Drug reimportation from Canada and elsewhere would result in lower prices, say proponents, but skeptics say safety of the drugs can't be insured and price controls in foreign nations that end up being passed on to Americans could have a damaging impact on the future of pharmaceutical research.

Republican lawmakers also want to include private plans in any reforms to Medicare because they say private insurers play a key role in keeping costs down, but quality of services up.  

Private plans under Medicare Plus Choice (search) have had mixed success, and proponents of private insurance insist that any program introducing competition must avoid overregulation if it is going to have a chance to succeed.

But some advocacy groups say they don't believe private insurers can provide the best programs at an affordable price, and fear private providers will eventually replace government guarantees.

“There’s a high threshold of skepticism that private plans can actually deliver,” Rother said. “As far as the public is concerned, they are only willing to see that experiment go forward if there are iron-clad assurances” that the public plan will not be affected.

Adding a drug benefit to Medicare has been actively debated for four years, and some political observers say its time has finally come.

“People are working on this like it’s going to be the law of the land,” said Howard Cohen, a veteran Hill staffer and current principal of HC Associates (search). “Politically, there are many reasons why this bill should be done this year."

Analysts say that if a bill is not completed before next year's election, Republicans, who control the Senate, House and the presidency, will have a hard time explaining to their constituents why they couldn't get the work done. Similarly, if Democrats hold up the bill, they will be blocking provisions that are very important to their voters.

Fear and the desire for political survival are the two biggest propellants toward passage of a prescription drug package, Reischauer said.

“Neither the Republicans nor the Democrats want to be blamed for a failure,” he added.

While the October deadline for a House-Senate compromise has come and gone, lawmakers do have some time before the holiday recess to work out their differences, Reischauer said. Congressional members will likely focus on finishing up the yearly appropriations measures and then race to get the drug benefit wrapped up before the current session adjourns.

The phone-book size bill is not expected to be perfect, and experts say that because it is such a massive piece of legislation with uncertain implications, it will certainly have to be revisited and amended once its impact and success are measured.

Additionally, while the fiscal year 2004 appropriations measure allocates $400 billion over 10 years for the drug benefit, the need to get a bill passed has already made it a challenge for lawmakers to stay within their spending constraint.

“When Congress compromises, it spends,” Reischauer said. “The easiest way to resolve differences is to throw money at the problem. It is probably going to be a number that stretches that $400 billion limit."