Whose Pill Is Sweetest?

By Karen Tumulty/Washington

Here's the idea: you give seniors a chance to opt out of Medicare. If they want to, you hand them a chit worth a specified amount of money and send them shopping for their own health coverage. Bureaucracy gives way to the forces of the free market. Insurance companies, in a dash to sign up tens of millions of new policyholders, come up with an array of attractive new offerings well beyond Medicare's--dental coverage, eyeglasses, hearing aids, annual physicals, prescription drugs. Everyone benefits--and at far less cost to the government.

That, in essence, is the concept behind the Medicare plan Texas Governor George W. Bush unveiled last week. But it is also the basic approach behind a bipartisan plan that has been languishing on Capitol Hill for more than a year. And it was the notion Newt Gingrich put forward in 1995 when he was House Speaker, setting up the political standoff that produced that year's infamous government shutdowns.

It may not be a new idea, but Bush's plan marks the first time a candidate has put the idea of privatizing Medicare front and center in a presidential campaign. Attention last week centered on prescription-drug coverage, one of this year's hottest political issues, which Bush would address initially by giving grants to states to help buy drugs for needy elderly. Ultimately, however, the drug coverage he envisions would be part of a much broader overhaul of Medicare that would change the program's very nature and put private insurance companies in competition with the government to provide coverage to the nation's 33 million elderly. By comparison, Vice President Al Gore's far more expensive proposal would tinker around the edges of the current system, giving uninsured people as young as 55 a chance to buy into the program and adding prescription-drug coverage on top of the other benefits provided by Medicare.

Bush deserves credit for at least addressing the fact that Medicare is approaching a day of reckoning. As 77 million baby boomers move toward retirement, the government's cost of providing for their health care will skyrocket, to the point where the entire system is projected to run out of money by 2025. Gore has proposed shoring it up with bags of cash--he would add five years to the life of the program by shifting $435 billion from the general budget. The money would pay off part of the national debt, and the future savings on interest payments would go to Medicare. But that is a temporary fix, which is why some politicians are daring to say out loud that privatizing much or all of Medicare is inevitable. "People are moving in the direction of being essentially given a voucher, a certain sum of money, with the ability to have maximum flexibility to shop for whatever it is that suits them," House Budget Committee chairman John Kasich told reporters last week in a conference call arranged by the Republican National Committee.

Even so, that term--voucher--has proved to be radioactive in politics. Former candidate Bill Bradley learned that lesson when Gore used the word to paint Bradley's health-care plan as a paltry handout. There is a long history of such scorching moments in fights over health-care reform, particularly when they involve Medicare, a program that is literally a life-and-death matter to the nation's most engaged voting bloc, the elderly. Gingrich found out the hard way as he tried to restructure the program in 1995 to squeeze hundreds of billions of dollars out of it.

But there are substantive questions too about whether market forces will work as Bush and others promise when profit-driven corporations are called upon to provide care for what Diane Rowland, a health expert for the Kaiser Commission on Medicare and the Uninsured, calls "some of our most vulnerable, frail and lowest-income people." Simply put, would the elderly be able to buy an adequate plan with the sort of subsidy Bush wants to give them? As people near the end of their lives, growing steadily sicker, is it choice they need--or reliable support?

Americans have not decided which kind of bureaucrat they dislike more: the ones who work for the Federal Government or those who work for insurance companies. In a TIME/CNN poll last week, roughly equal numbers put more trust in HMOs (41%) vs. the Medicare program (39%) to provide better health care, while 20% were not sure. But early tests of how well private insurance companies treat seniors have not been promising. Health-maintenance organizations rushed in when the government gave them a larger opening in the Medicare market three years ago. This summer scores of HMOs announced that they are dropping their Medicare policies, leaving nearly 1 million senior citizens who had signed up for them scrambling to find coverage elsewhere, either in other HMOs or by returning to the traditional fee-for-service program. No state was as hard hit as Bush's: more than 200,000 Texas seniors--fully 60% of the total who had moved to private coverage--were abandoned by their HMOs.

The insurance companies claim they cannot make a profit on the amount Medicare reimburses them for coverage, and they are stymied by tens of thousands of pages of rules for providing services under the program. Bush promises to modernize the regulations and the fee structure--he would add $150 billion more to Medicare over 10 years--but has provided little detail on how he would do so. He cites the popular health program for federal employees as a model for the structure he would set up for Medicare, but critics say the experiences of that younger, healthier government work force have little to do with those of the elderly. Many of the elderly have not been happy either with how managed care has treated them so far. They have become increasingly disillusioned by the HMOs' cutbacks in drug benefits and by their rising premiums and co-payments.

When it comes to prescription drugs for the needy elderly, the first experiment with the free market has yet to work. Nevada last March invited hundreds of insurance companies to bid on its new program providing drug coverage for low- and moderate-income people age 62 and older, but only one insurer responded--and it was disqualified because it was not licensed to do business in the state. Nevada reworked its plan, making clearer what it expected of the companies, and got five proposals in time for a second deadline, in August. The state is reviewing the proposals.

Bush boasts that his plan, while more modestly priced than Gore's, gets prescription help faster to the neediest elderly, by handing states $48 billion and telling them to deal with the problem until Bush's broader reforms solve it. But only 16 states have drug-assistance programs in operation (six others have passed laws to start them), the benefits they offer vary widely, and the Governors have said they don't want the responsibility. What's more, experience with other programs--like providing drug benefits through Medicaid--suggests the states are far less efficient than the Federal Government at enrolling those who are eligible.

At a minimum, Bush has started a national debate over the future of Medicare that many health experts say is overdue. But no one will know how workable his ideas are until he comes up with more details. And the more he spells out the fine print of his plan, the more difficult it may be for him to get Americans to accept it. Because that's how health-care politics works. Hillary Clinton could have told him that.

--With reporting by John F. Dickerson/Washington and Mitch Frank/New York

With reporting by John F. Dickerson/Washington and Mitch Frank/New York