Bush compromises on health care reform

By Steve Schifferes BBC News Online in Washington

US President George W Bush will criss-cross the country this week to promote his plan to give prescription drug benefits to senior citizens.

Bush wants to inject competition into the Medicare system

For years the powerful lobby of older Americans, the AARP, has tried to get a prescription drug benefit through Congress.

Some 40 million elderly Americans have most of their hospital bills and doctors' fees paid by the government through Medicare, but the plan does not include drug coverage.

Now, for the first time, both Houses of Congress seem in preliminary agreement on the need for a senior citizen drug benefit, which the Bush administration has budgeted at $400bn over 10 years.

But neither the House nor the Senate proposal includes making the full drug benefit available only to senior citizens joining a managed care network of physicians known as PPOs (preferred provider organisations).

This was considered a key element of Mr Bush's proposal, because it was hoped that such an approach could help to contain the growing costs of the Medicare programme as more Americans of the "baby-boomer" generation reach retirement age.

US HEALTH CARE PLANS

Fee-for-service: patient can choose any doctor, cost paid by Medicare on a fixed scale

PPO (preferred provider network): patient chooses doctor from a list of participants in health insurance scheme who agree to be directly reimbursed

HMO (health maintenance organisation): patient can only get care from specific doctors after authorisation from HMO insurance provider

Now the administration has indicated that it may be prepared to accept the Senate's plan for a universal prescription drug benefit "in order to keep the legislative process moving".

Health Secretary Tommy Thompson said after a cabinet meeting on Monday that he was "not really" seeking to change a bipartisan Senate plan, which is to be put before the Senate Finance Committee on Tuesday.

Politics of reform

Passing a health care reform plan this year, which could be implemented ahead of the 2004 election, could be of enormous political benefit for President Bush.

Polls consistently show that Democrats are more trusted than Republicans on this issue, and that perception has helped the Democratic ratings, particularly among older Americans.

Medicare reform is a battle Mr Bush is determined to win

However, the Democrats are split on how to respond to the Republican plans.

Some Democrats, including Senate minority leader Tom Daschle and Representative Dick Gephardt, who is running for president, want to target the millions of working Americans who lack any health care coverage at all.

Mr Gephardt has proposed a plan to subsidise small companies to provide such coverage, at the cost of the repealing President Bush's entire tax cut package.

Other Democrat hopefuls for the presidency, including John Edwards and Howard Dean, have more modest health care plans which mainly target drug costs.

And a group of moderate Democrats, led by Louisiana's Senator John Breaux, have backed the Republican proposal.

Doctors v lawyers

Other parts of the US health care system are also under strain.

Doctors are warning that the cost of medical malpractice insurance has soared out of control, driving them away from practising medicine in some specialities like obstetrics.

Mr Bush has backed their concerns, and proposed capping the damages in medical malpractice law suits at $250,000 for pain and suffering.

The plan pits two of America's most powerful lobbies - doctors and lawyers - against each other, and is expected to have difficulty passing the Senate.

Managed care

The Bush administration and the non-partisan Congressional Budget Office (CBO) are in "fundamental disagreement" about the costs and benefits of the managed care element in the president's Medicare reform plan.

There is also disagreement on the costs of the new plans

The head of the Medicare programme, Thomas Scully, said that it had "wildly differing estimates" of how many seniors would be prepared to take up a new, broader Medicare benefits that would be available to those in PPOs.

According to the CBO, less than 10% of senior citizens would join a managed care plan if it did not have additional drug benefits, as opposed to the administration's estimate of 25%-40%.

Currently 88% of Medicare recipients have chosen to stay in traditional fee-for-service arrangements.

And there is also disagreement on the costs of the new plans, with Mr Scully's experts saying they would be cheaper than existing fee-for-service Medicare, while the CBO says it would cost 10% to 12% more to provide the additional, mainly preventative care benefits.

Independent experts like Marilyn Moon of the Urban Institute tend to agree with the CBO over the modest nature of any cost savings that PPOs will produce.

But in the long run, the battle over Medicare reform could just prove the beginning of a bigger battle over reining in the cost of the all the major entitlement programmes, including Social Security, the state pension system.

It is a battle that Mr Bush, who is already looking towards a partial privatisation of Social Security if he wins the next election, is determined to win.

Under the Senate proposal, senior citizens would get a prescription drug benefit for a monthly premium of $35 and a yearly deductible of $250. The government would pay 80% of the cost of medicines up to $2,000. There would be additional benefits for "catastrophic" additional drug costs.