President Bush is set to push his plan to expand Medicare to cover prescription drugs, but Democrats say the administration's mammoth tax cut is threatening the solvency of the 36-year-old health insurance program.
Amid building public pressure and widespread support for the creation of a prescription-drug benefit, Medicare reform is shaping up as the next major legislative battle for the White House and its foes and allies on Capitol Hill.
White House: 'There Is No Surplus in Medicare'
With the president expected to unveil his principles for reform next week, Senate Democrats plan to call White House Budget director Mitch Daniels on the carpet at a public hearing next week to ask him why his boss plans to dip into the Medicare trust fund in order to pay for his tax cut — something the Bush administration vehemently denies.
"We're on the brink of raiding the Medicare trust fund this year … We're in a position of raiding the Medicare trust fund for every dime that's in it next year," Sen. Kent Conrad, D-N.D., the chairman of the Senate Budget Committee, said at a news conference this week. "This is fiscal mismanagement on a grand scale."
"The truth, in fact, is that … Medicare dollars will be used only for Medicare," Bush's chief economic adviser, Larry Lindsey, said in a statement.
In addition to raiding the trust fund, Democrats accuse the White House of planning to invade the so-called Medicare surplus — "excess" revenue from a payroll tax on workers and employers that Democrats have argued should be put in a legislative "lockbox."
Not so say the president's aides, who contend there will be no "raid" on the Medicare surplus because there simply isn't a surplus to be raided.
"There is no surplus in Medicare," White House press secretary Ari Fleischer told reporters. "There is a shell game."
Who you believe depends on what precisely you classify as "Medicare dollars" and which set of Medicare accounting procedures you think is really a "shell game": the government's current procedures, or the ones suggested by the president. But in a town where the definition of the word "is" has been the subject of great debate, there is unlikely to be bipartisan agreement anytime soon.
At any rate, the federal Health Care Financing Association projects the program will go bankrupt in 2029 unless changes are made.
There is bipartisan agreement that those changes must include expanding the program to cover the skyrocketing pharmaceutical costs. There is no consensus on how, precisely, that task should be accomplished.
An Added Benefit
Medicare has provided health insurance to elderly and some disabled citizens since 1965. Roughly one-third of the 39 million people currently on Medicare do not have prescription drug coverage of any kind. A recent ABCNEWS/Washington Post poll showed 80 percent of Americans think the issue of prescription drugs should be a high priority for Bush and Congress.
"[A] glaring shortfall exists from the 20th century Medicare we have inherited in the new century: It lacks a prescription-drug benefit," Sen. Chuck Grassley, R-Iowa., the ranking Republican on the Finance Committee, said in a statement this week.
In the 10-year budget outline proposed by the White House and approved by Congress this year, $300 million was allocated for the purpose of creating a Medicare prescription-drug benefit.
Bush is expected to present a plan based largely on a proposal he made during last year's presidential campaign, which called for $198 billion in new spending over a 10-year period.
Under that proposal, Medicare would cover prescription drug-costs on a sliding scale, with full coverage for people earning at or below 135 percent of the poverty level and 25 percent of the costs covered for those making more than 175 percent of the poverty rate. All drug and catastrophic medical costs over $6,000 would be fully covered. The president also wants Medicare to offer recipients a choice of competing, private health insurance plans.
Bush will likely lay out a broad outline for reform and leave it to Congress to hash out the specifics. His original proposal was patterned after a bill by Sens. John Breaux, D-La., and Bill Frist, R-Tenn. — the dynamic, bipartisan health-care duo that proposed a patients' bill of rights that was backed by Bush, but rejected by the now-Democratically controlled Senate. The Congressional Budget Office pegs the 10-year cost of that plan at $176 billion.
Most Democrats oppose the Breaux-Frist legislation and Bush's plan, arguing they would leave Medicare recipients at the mercy of health maintenance organizations — a notion that is as much anathema to many liberals as private school vouchers.
Senate Democrats, led by Sen. Bob Graham, D-Fla., are trying to rally support for a proposal to create a more comprehensive, voluntary prescription-drug benefit within Medicare itself, at an estimated cost of $318 billion.
Their plan, like the rival Breaux-Frist measure, would use a sliding scale to determine a beneficiary's level of prescription drug coverage. But Democrats would cap annual out-of-pocket drug expenses at $4,000 — $2,000 less than under the Breaux-Frist and the Bush plan. Under the proposal, most Medicare beneficiaries would end up paying only half of the overall costs for their prescription drugs.
The key difference is that while the Democratic proposal calls for private pharmacy benefit managers to administer the new drug benefits, Republican-backed measures would require beneficiaries to enroll in private health insurance plans to take full advantage of the federal subsides.
In many ways the political dynamics surrounding the debate over Medicare resemble the partisan scrap over Social Security — another popular, decades-old government program facing bankruptcy. In both cases, Republicans want to tap free-market forces — in the case of Social Security, it's the stock market — in an effort to extend its solvency, while Democrats argue the GOP's plans would shortchange the elderly and that Bush's tax cut places the program in jeopardy.
Lindsey said last week he expected this year's federal budget surplus to fall short of the administration's earlier projection by $56 billion.
With that projected surplus growing smaller and smaller, the president and congressional leaders on both sides of the aisle may find themselves under increasing pressure to come up with spending cuts or tax increases to fund domestic priorities, such as a prescription-drug benefit for Medicare.