Old Tricks

by Jonathan Cohn | March 17, 2003

Given the White House's reputation for political savvy and tight spin control, its very public stumbling over Medicare has been fascinating to watch. It began back on January 10, when the administration circulated a memo on Capitol Hill outlining President Bush's Medicare reform plan, including the requirement that seniors leave the traditional fee-for-service program and enroll in HMOs if they wanted to obtain prescription-drug coverage. This didn't sit well with congressional leaders, in part because they felt they hadn't been sufficiently consulted beforehand (Ways and Means Chairman Bill Thomas was said to be particularly piqued) and in part because the HMO requirement was sure to offend seniors. So, a few days later, those briefings found their way into the hands of Robert Pear of The New York Times and Amy Goldstein of The Washington Post, prompting even Republican allies to trash the plan publicly: "Prescription-drug coverage should be available to all seniors, not just those who switch into managed care," said Charles Grassley, whose Senate Finance Committee has jurisdiction over the bill. A spokesperson for Senator Olympia Snowe, who also sits on the Finance Committee, said the senator "clearly would have concerns about an approach that required entry into managed care in order to receive prescription drugs." Soon the White House was in full retreat. For weeks, administration officials had been promising an aggressive push on Medicare reform, beginning with a major policy speech in Grand Rapids, Michigan, on the morning following the State of the Union address. But, with so many would-be allies in a tizzy, the White House scrapped the plan at the last minute. In Grand Rapids, standing before a backdrop emblazoned with the words "strengthening medicare," Bush rushed through a few throwaway lines about protecting seniors and then moved quickly onto Iraq. Early February produced two new spectacles: Secretary of Health and Human Services Tommy Thompson stammered through an appearance before the House Ways and Means Committee, deflecting questions from angry representatives with repeated variations of "the proposal is still being worked on." Then came a story in the Chicago Tribune, quoting House Speaker Dennis Hastert about a testy meeting he'd had with Bush at the White House. "I don't think you can pass a piece of legislation that takes an 80-year-old grandmother and says you have to give up your fee-for-service as you know it in order to get a drug piece in it," Hastert recalled telling the president. Eventually, administration officials began admitting to reporters that the aborted attempt at reform had been a fiasco but promising they would unveil a new and improved plan soon. This week, they did just that. Or, at least, they tried. In a speech before the American Medical Association on Tuesday, Bush vowed to accommodate his critics. "All seniors should have help in buying prescription drugs," Bush said. "Seniors who are happy with the current Medicare system should be able to stay in the system and receive help for prescription drugs." It was precisely what the naysayers had wanted to hear until Bush explained the details, and it became apparent that the new plan looked an awful lot like the old one. The "help" for prescription drugs that Bush is offering seniors who stay in traditional Medicare consists, first, of a drug discount card--which Bush promised would reduce costs by 10 to 25 percent but has been shown by a General Accounting Office study to offer average discounts of less than 10 percent. Bush is also offering to limit seniors' out-of-pocket expenses for prescriptions with a so-called catastrophic insurance plan that would pay all drug costs beyond a certain amount per year. While it's a perfectly good idea in theory, Bush pointedly avoided specifying at what level the coverage would kick in--apparently because the figure his aides had talked about days before (between $4,500 and $7,000 in annual expenses) would be financially crippling to many seniors. Finally, Bush promised low-income seniors a $600 subsidy in the form of a debit card--another nice thought but, again, not much help for a fixed-income senior who would still be responsible for all drug costs over $600 until the catastrophic insurance kicked in. Clearly, this is nothing like a real drug benefit--the kind most Americans with private insurance have and the kind that seniors would get under Bush's plan if they were to leave traditional Medicare and enroll in an HMO. In other words, the new Bush reform scheme would have largely the same effect as the old: forcing seniors to choose between staying in traditional Medicare and forgoing significant help on drugs, or getting the help by enrolling in a managed care plan. Not surprisingly, the next day brought forth more unenthusiastic responses from Republicans, such as Louisiana Representative Billy Tauzin: "The bottom line is that, for those who don't want to even think about a choice here, who want to stay in fee-for-service, you have to give them an adequate drug coverage." Why is Medicare giving Bush such fits? For one thing, he has forgotten who his supporters are--or, more precisely, where his supporters are. Besides being Republicans, Grassley, Hastert, Snowe, and Tauzin have another thing in common: They all represent areas with significant rural populations, and that's where managed care has been most problematic. As part of the 1997 balanced budget agreement, the federal government created Medicare+Choice, bringing more managed care options into Medicare--in effect, providing an early test of whether a proposal like Bush's could really work. The plans rushed in to enlist new members, then rushed right back out again within a few years. Overall, more than half of the plans have dropped out, leaving 2.5 million seniors scrambling for coverage. The problem has been most acute in rural areas, where sparse populations and the scarcity of doctors and hospitals make it harder for HMOs to squeeze out profits. Today, 80 percent of rural Americans have no Medicare HMO, including the residents of Grassley's Iowa and Snowe's Maine. In other areas, such as Tauzin's district in Louisiana and Hastert's in Illinois, tens of thousands lost HMO coverage when insurers left. Given this situation, it's no wonder these Republicans are nervous about a plan that reserves full prescription coverage only for those beneficiaries enrolled in managed care. As Pennsylvania Republican John E. Peterson, chairman of the Congressional Rural Caucus, told The New York Times, relying on private plans "doesn't work; it isn't an option." The other major reason Bush is running into such trouble is that he himself has literally made a career of trashing HMOs. During the 2000 campaign, he attacked Al Gore (falsely) for having a plan that would push seniors into managed care: "[I]t works like an HMO," he proclaimed in October 2000. "It acts like an HMO. It quacks like an HMO." As recently as the State of the Union--i.e. , the day before he planned to announce his Medicare plan--he was still taking swipes at managed care, declaring, "Instead of bureaucrats and trial lawyers and HMOs, we must put doctors and nurses and patients back in charge of American medicine." The problem, of course, is that the managed care plans he keeps denigrating are the very ones he'd have seniors leave Medicare to join. The irony is that the philosophy of Bush's Medicare plan is actually defensible. Those who advocate significantly expanding the role of privately run managed care plans include not just conservatives but also some well- respected liberals, such as Brookings Institute economist Henry Aaron and syndicated columnist Matt Miller (who defended the concept in these very pages several years ago). But those advocates make the case for their plans honestly, arguing that managed care will discourage seniors from consuming so much health care, thereby reducing costs. Bush, by contrast, has tried to sell his Medicare plan by pretending to be Ted Kennedy, promising to add more and more benefits to the government program seniors love and cherish. It's the way Bush has handled most of his domestic agenda: talking like a liberal while acting like a conservative. Only this time, it seems, he's not getting away with it.

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