Incremental medical repair

The battle over Medicare reform is about whether we should have choices and competition in the federal health care system.

It’s also about incrementalism — reforming Medicare in small doses to stretch out the popular program’s costs, and to test whether most Medicare beneficiaries will accept the added fees for prescription drug coverage.

Liberals want to keep the system as it is, while adding prescription drug costs to further expand one of the government’s largest and costliest entitlements.

Conservatives, on the other hand, want to turn Medicare into the same kind of health care system government workers and lawmakers have, where they are offered annual choices from a wide variety of private health insurance plans. Under this approach, each plan competes for customers, which, in theory, holds down costs and provides a wider selection of benefits and a wider range of prices.

The bill that Republicans unveiled this week is somewhere between these two sides. It would provide subsidies for the elderly and disabled to help pay for prescription drugs under a separate federal insurance plan or through private policies.

Supporters say this would cost beneficiaries about $35 a month more, plus a $275 a year deductible, though it’s still too early to determine the cost of premiums.

The bill also contains a longer-term program to steer the elderly into private medical care plans that would include preferred-provider groups or health maintenance organizations (HMOs). To achieve this, it calls for a pilot program in six large urban areas where Medicare would be forced to directly compete in the marketplace with private health care plans.

Conservative lawmakers who were balking over the bill said it did not go far enough in the direction of true privatization reform to yield the kind of savings that would make it more affordable. Liberals, such as Sen. Ted Kennedy of Massachusetts and several Democratic presidential hopefuls, think it goes too far, sticking the nose of privatization under Medicare’s tent that they warned would eventually destroy the fee-for-service nature of this virtual government monopoly.

In a stunning political split among the Democrats this week, the powerful 35 million-member AARP (which lobbies for America’s retirees) embraced the GOP’s compromise. AARP policy director John Rother said he was won over by the added subsidies the bill would give low-income Medicare patients, plus incentives aimed at keeping employers from abandoning existing drug coverage for their retired workers.

AARP’s decision was a major victory for Republicans and for the White House, which backs the bill. Key Democrats are on board, too, including Sens. John Breaux of Louisiana and Max Baucus of Montana who helped work out the agreement.

At this point, as I mentioned earlier, no one knows exactly how much this will add to the government’s bills, though Congress has set aside $400 billion for the coming decade.

We do know this will be the largest expansion of Medicare’s entitlements since its inception in the 1960s, and will likely cost a great deal more than current forecasts; the Baby Boom generation will soon retire, placing huge new burdens on the Medicare system.

Clearly, this compromise bill avoids the deeper marketplace reforms needed to unleash the kind of serious competition that would hold down future costs. Trials in six cities are not real reform, though they are a start.

But Republican congressional leaders and the White House aren’t thinking about that now. They’re going for incremental reform, believing that, in the words of AARP’s John Rother, “We can always build on it in the future.”

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