A major Medicare expansion

It looks as if Medicare is about to get a long-needed overhaul.

In a sign of the continuing clout of America's elderly when there's an election on the horizon, the Senate Monday is poised to take up the largest expansion of social services in three generations: prescription-drug coverage for Medicare. The House will follow suit with a similar measure. And the president has indicated he'll support a compromise.

If it passes, as expected, America's seniors will get partial relief from the steep cost of prescription drugs. Those with catastrophically high bills will get the most help.

The legislation breaks a five-year logjam over how to help elderly citizens pay for pharmaceutical drugs. They're already the only group in the United States to enjoy universal healthcare coverage.

The issue has gained political salience over the past decade as the use of pharmaceutical drugs, and their cost, have skyrocketed. Drug prices, in fact, have increased even faster than the double-digit rises in overall healthcare.

For the past five years, incumbents from both parties have promised to help elderly citizens pay for the pharmaceuticals they've become increasingly reliant upon. But deep partisan differences over how to provide the coverage, and its extent, had always tripped up legislation.

Conservatives, including President Bush, had insisted on a limited benefit that increased in generosity only if seniors agreed to leave traditional Medicare for a private plan. Liberals wanted a more generous benefit for everyone, whether or not they chose to stay in the traditional fee-for-service system that allows them to go to the doctor of their choice.

In the end, moderates forged a compromise that satisfies neither the conservatives nor the liberals, but does provide a legislative accomplishment for incumbents to take back to their constituents.

"If you're an incumbent, you don't want to say you stood in front of seniors getting any benefit at all for the promise that maybe somewhere down the line the Democrats would have a better bill," says Robert Blendon of Harvard's Kennedy School of Government in Cambridge, Mass.

The compromise would give seniors partial drug coverage in exchange for a monthly premium of $35. The House and Senate versions differ on the amount of the yearly deductible and when different levels of coverage would kick in. The House also proposes that people with higher incomes pay more out of pocket before they get full catastrophic coverage.

Some analysts are skeptical that the legislative houses can work out their differences. But others are more optimistic. "This is one of those benefits that will be universally used, so it has very broad appeal, even though the coverage is mediocre," says Mark Schlesinger of the Yale School of Public Health in New Haven, Conn.

Some conservatives strongly oppose the compromise, contending it doesn't do enough to privatize the overall Medicare system. But conservative supporters note that the new drug benefit will be administered by private plans, which is a step in the direction of full privatization.

Some liberals oppose the compromise on the grounds that it doesn't provide nearly enough benefits. The bill is expected to cover only about a quarter of the $1.8 trillion that Medicare beneficiaries are expected to spend on pharmaceuticals over the next 10 years, according to the Congressional Budget Office. But liberal supporters counter that the basic benefit can be expanded in the future.

"Each side may want to help the elderly, but they also may want to use it as a steppingstone for a broader agenda - the Democrats for broader access and the Republicans for further privatization," says Professor Schlesinger.

The Medicare expansion is made more notable coming in an era when conservatives are dominating politics. But it can also be viewed as being in line with Medicare's history. When the program was created in 1964, it was designed to provide the elderly with the same benefits as the average 45-year-old working man. That has been the both the program's strength and its major weakness.

It fails because the needs of the elderly are very different from the average working person - so that huge gaps remain in Medicare coverage, such as catastrophic care and prescription drugs.

But the intent to model it on the average working person's insurance has also been the foundation for changes. One rationalization for the expected passage of the new compromise is that most working Americans already have drug coverage and now that costs are so high, seniors deserve the same.

In another bow to the clout of the elderly, both the Senate and Mr. Bush are working to make it easier to get access to less-expensive generic drugs. Currently, major pharmaceutical companies take advantage of loopholes in the law to keep generic versions of their most popular drugs off the market once a patent expires.

Last week, the president announced regulatory changes that would make it more difficult for drug companies to do that. The Senate is expected to pass a more comprehensive bill that makes the changes law.

Bush predicts the regulatory changes could save consumers $3.5 billion a year in drug costs. The more extensive Senate bill could save as much as $60 billion.

The proposal, which was approved in the Senate last year, is expected to meet more opposition in the House, where it stalled last year. But with the expected passage of the Medicare drug benefit, some analysts believe the generic bill will make it past hurdles in the House as well.

"If you're going to do this massive expansion of Medicare, whatever you think about it, it makes sense economically to eliminate these barriers to lower-cost medicines," says Brad Cameron of Business for Affordable Medicine, a business lobby group. "It would be the fiscally responsible thing to do."