Senate Passes Medicare Bill
Revisions Are Broadest to Program Since Its Creation in 1965

By Amy Goldstein and Helen Dewar
Washington Post Staff Writers
Tuesday, November 25, 2003; 10:20 AM

Congress this morning passed historic legislation that promises 40 million Americans on Medicare the first federal help in paying for prescription drugs and opens the program to powerful new market forces. The Senate's final vote culminated a six-year quest on Capitol Hill to redefine the 1960s social program and embraced changes in health care for all Americans that conservatives have long sought.

The drug benefits, to start in three years, are the most popular and expensive element of the plan, which is predicted to cost $400 billion over its first decade. The bill also would fundamentally change the way Medicare works and lead to smaller but still-controversial revisions in the health care system for people of all ages. It would create new competition for Medicare patients from private health plans, increase federal payments to doctors and hospitals and end the tradition of charging everyone in the program the same fees for the same services.

Other parts of the measure would create new tax breaks for Americans who open special savings accounts for medical expenses. The legislation also takes steps to make low-cost generic medicine more readily available. The final version, however, omitted the popular idea of making it easy for American consumers to reimport U.S.-manufactured drugs from Canada and other western countries where they sell at lower prices.

The Senate adopted the plan on a 54 to 44 vote after a debate as acrid and partisan as deliberations in the House four days earlier. The House passed the measure, 220-215, just before dawn on Saturday after the longest roll call in its history, while GOP leaders leaned on rebellious colleagues for three hours to secure the razor-thin victory. The Senate's vote was less theatrical, coming after Democrats failed on Monday at two parliamentary maneuvers intended to block the legislation.

In approving the changes to Medicare, the Senate essentially ensured that they will become law. President Bush had made clear that he is eager to sign the bill and carry it as a trophy -- a GOP-driven accomplishment on an issue long associated with Democrats -- into next year's battle for the White House and control of Congress. Taken together, the provisions of the 678-page measure constitute the most far-reaching changes to Medicare since its birth.

Most Republicans voted for the bill, while most Democrats opposed it. Voting for the measure were 42 Republicans, 11 Democrats and one Independent. Thirty-five Democrats and nine Republicans voted against it. Virginia's senators supported the bill; Maryland's opposed it.

The final vote came as senators rushed to finish their work for the year as early as today.

Republicans, who hold the majority in both chambers of Congress, praised the legislation, saying it would provide long-awaited assistance for the group of Americans who use medicine the most, while offering those people new alternatives in how they obtain care.

"Today is a fateful day, a red-letter day for seniors," said Senate Majority Leader Bill Frist (R-Tenn.) moments before the vote. "It's been a long time coming, but it's finally here: the prescription drug coverage they need, and the Medicare choices they deserve."

But Democratic senators, like their House counterparts, assailed the incentives for private competition as a threat to Medicare's future and a handout to private health plans, insurance companies and pharmaceutical manufacturers.

Sen. Edward M. Kennedy (D-Mass.), who led the fight in the Senate against the measure, recalled that Medicare began because private insurance had been inaccessible to too many elderly people. Kennedy said the legislation would "force senior citizens into the cold arms of HMOs." He said it reflects what he called an assault on both Medicare and Social Security "from a heartless right-wing ideology that ignores the lessons of the past. . . . It sees Medicare as another profit center for HMOs and insurance companies, not a solemn commitment between government and its citizens."

Created in 1965 as a major piece of President Lyndon Johnson's "Great Society" expansion of federal social programs, Medicare provides health care to about 40 million elderly and disabled people -- and has assumed vast economic and political significance. It also is on precarious financial footing, forecast to run out of money within about two decades, because Americans are living longer and the large baby-boom generation is to start retiring soon

The question of how to change the program is intricate and has been mired for years in ideological conflicts that, at root, reflect the Democratic preference for government programs to help vulnerable residents and the GOP eagerness to rely more on the private sector to deliver social services.

After years of dispute, the issue gained momentum in late June, when both chambers passed separate versions of Medicare legislation. They shared the basic goals of drug benefits and a greater reliance on private health plans, but they also contained substantial differences. And it was unclear until slightly more than a week ago whether a small team of House and Senate negotiators, most of them Republican, would be able to bridge those differences.

The core of the bill would, for the first time, offer subsidies for prescription drugs to anyone in Medicare who wanted them. Until now, the program has covered medicine that patients are given in the hospital but not ones they use at home. Starting in 2006, patients could get that coverage by buying a separate private insurance policy for drugs or by joining a preferred provider organization (PPO), HMO or other type of private health plan that also provided the rest of their care.

In either case, the coverage would require patients to pay a monthly premium averaging $35 the first year, and a $250 annual deductible. After that, the government would pay three-fourths of their drug expenditures up to $2,250. At that point, the coverage would stop, except for a relatively small number of people with "catastrophic" drug expenses who have paid at least $3,600 a year from their own pockets.

Medicare patients with low incomes would get extra help. The bill would reach fewer patients than Democrats wanted, in part because the GOP insisted on taking people's assets into account in determining who qualified for the special assistance. Recipients with incomes of less than 150 percent of the federal poverty line -- about $13,000 a year for an individual or nearly $18,000 for a couple -- would not be charged the premiums or deductible, but would pay a few dollars in copayment for each prescription.

Before the drug benefit began, federal health officials would, starting next spring, temporarily coordinate a network of drug discount cards that Medicare patients could buy from companies that manage pharmaceutical benefits. Proponents predict the cards could save people perhaps 15 percent off the retail price of medicine.

The legislation would give $86 billion in payments and tax advantages over 10 years to the nation's employers if they provide drug coverage to retired workers. The new subsidy is intended to discourage companies from dropping such coverage once federal prescription benefits began.

Other aspects of the legislation have nothing to do with drugs. In a major departure from its tradition of treating all beneficiaries alike, Medicare would for the first time charge higher premiums for visits to doctors and other outpatient care to patients with higher incomes -- $80,000 a year or above.

Under an especially contentious provision, the government would conduct an experiment designed to foster greater market competition in the program. The experiment, to take place for six years in a half-dozen metropolitan areas starting in 2010, would require Medicare's original, fee-for-service version to compete directly against private health plans for patients based on price. Most Democrats have said the experiment could undermine the traditional program, predicting that patients would have to pay more to stay in that version and thus would be coerced into the private plans. But some conservatives wanted such a system to be permanent and nationwide.

Even as they lost the votes in the House and the Senate, Democrats vowed to continue their fight to shape Medicare in the ways they prefer.

Senate Minority Leader Thomas A. Daschle (D-S.D.) said, "I predict that we will be back within the next 12 months." He and other Democrats said they would press for create greater leverage for federal health officials directly to negotiate discounts on drug prices that Medicare patients are charged, create a form of the drug benefit that would be run directly by the government and enact federal protections for Medicare patients and younger people who get care through private health plans.

"We may spend the rest of our careers," Daschle said, "repairing the flaws in this bill."