Beyond Medicare reform

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Medicare reform is now a fact of life. Conservatives who regard it as a defeat should rememberwhat Ronald Reagan, when he was criticized for compromising, would often tell people: "When I began entering into the give and take of legislative bargaining in Sacramento, a lot of the most radical conservatives who had supported me during the election didn't like it. (Compromise) was a dirty word to them, and they wouldn't face the fact that we couldn't get all of what we wanted today. They wanted all or nothing and they wanted it all at once. If you don't get it all, some said, don't take anything."

Welfare reform is a great example of how conservatives can compromise and win. As governor (and when President Nixon was pushing for a guaranteed income for welfare recipients) wanted a strong work requirement in welfare. To win legislative approval, Mr. Reagan worked out a compromise that included increased payments to the poorest recipients, a cost of living allowance for welfare benefits and an "experimental" work requirement. Sound familiar?

Decades later, the little experiment had given conservatives enough political support and policy experience to enact welfare block grants to the states along with work requirement and benefit termination after five years. To get welfare reform through Congress in 1996, more money than conservatives were happy about was spent on social services. This year, extension of welfare reforms held the line on spending. And conservatives now advocate using the cost savings from reduced caseloads to make the Earned Income Tax Credit (EITC) more generous.

If Mr. Reagan and conservatives had cut and run each time their vision of welfare reform was sullied by increased spending and a small experiment, would America be better off today?

Conservatives now have a similar choice to make on Medicare and health care: sulk or get down to the hard work of governing. The technological reality of medical progress made a prescription drug benefit as much a necessity as the imperative of improvementsinmilitary weaponry made investment in new equipment essential to our national defense. Now, the challenge is to ensure that more and more of future medical spending is largely a product of personal choices and resources, not government controls.

What does this mean going forward? Passing a Medicare bill will only accelerate Democrat and activist demands for price controls on new medicines. That means pressure to extend the Veteran Affairs approach to drug budgets to Medicare. Conservatives must point out that the VA approach -- which extracts a price 24 percent below the manufacturer's wholesale price-only applies to 1 percent of total drug consumption in America. The VA also uses rationing, forced drug switching and 14-month waiting periods for people who want to join the department's plan to control spending.

Second, conservatives must suggest regulations that will implement Medicare reform to shore up its weaker elements. That includes integrating the stand-alone drug benefit, keeping seniors in private drug plans and coordinating the distribution of the private drug cards with programs that drug and biotech firms have that allow seniors to buy all of their drugs for about $50 a month. In the long term, whatever resources drug spending frees up in other medical costs should go back to consumers and health plans.

Conservatives should create a Medicare competition task force to educate and build support for the experiment that allows seniors to choose their own health plans. Experiments fail because politicians seek to abandon, not build on them. And as the financial pressure on Medicare builds, they will turn to competition instead of tax increases to sustain the program. Conservatives must provide the intellectual scaffolding to support and expand the experiment.

Third, conservatives have to propose ways to provide affordable health care coverage for all Americans. They can use many of the elements and the coalition that emerged from the Medicare bill: expanded health savings accounts; shifting the tax benefits enjoyed by corporations to individuals; tax credits to provide coverage; and encouraging greater choice of health care plans. All while Congress should be moving people and dollars away from Medicaid, which is the public housing equivalent of medicine in America. As with Medicare, conservatives will have to respond to the political demand for better access to insurance that go beyond their previous prescriptions.

Mr. Reagan compromised because he was determined and had faith that time and the American people would be on the side of greater freedom. Conservatives need to see Medicare reform for what it is: a small step forward in a long effort to give Americans more freedom and better health care. Less defeatism and more dedication is the order of the day.Timeandmedical progress is on our side.

Robert Goldberg is director of the Manhattan Institute's Center for Medical Progress.