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Voucher debate holds up Medicare overhaul

By SUZANNE SATALINE
© St. Petersburg Times
published July 23, 2003

WASHINGTON - Congress is at an impasse over the Medicare bill in part because of deep divisions concerning whether to require Medicare to compete directly with private insurance plans starting in 2010.

The so-called premium support provision, which survived a challenge by House Democrats last week, would allow the U.S. government to grant a fixed amount of money to private plans for each senior enrolled rather than allocate the money just to Medicare.

Democrats fear that such a system would puff up an already powerful private insurance industry, allowing health maintainance organizations and preferred provider organizations, among others, to decide if they would provide coverage.

In essence, the government would be creating a voucher plan for insurance companies, said Rep. Jim Davis, D-Tampa.

"In this bill, Medicare as we know it ends," he said from the floor July 15. "Medicare is converted to a voucher program. Under the voucher plan if you are not entirely healthy, you can safely assume these private insurance companies will not want to insure you. You will not be a good risk. You will not be sufficiently profitable."

Republicans say that without such a provision, the bill would ultimately undermine private prescription drug plans by luring seniors away from companies with the promise of complete coverage. This would increase the cost of the government program by trillions of dollars, they say. Nearly two dozen Republicans have refused to vote for the bill.

Davis and other House Democrats last week asked members to kill premium support and adopt a provision that would echo that of the Senate. Under the Senate bill, unless two private insurers provided policies in a region, traditional Medicare would cover drug benefits.

Davis said private plans have not worked in many parts of the country and that in the past five years, more than 2-million seniors have been dropped by private HMOs. Democrats say that insurance providers do not enjoy huge profits in rural areas and might be more willing to drop coverage there.

One example of this is Medicare Choice, established in 1997 to give seniors the option of choosing private insurance coverage. Subscribers receive more benefits in exchange for agreeing to visit only certain doctors.

Only 13 percent of rural seniors have the option of joining, said Jason Ormsby, policy director with the Alliance for Health Reform, a nonpartisan research organization run by Sens. Bill Frist, R-Tenn., and John D. Rockefeller IV, D-W.Va. Medicare Choice benefits - such as drug plans and physical therapy - have been reduced over the years.

The controversial House provision would make Medicare more closely resemble the Medicare Choice plan and could induce insurers to exclude seniors who incur the highest costs.

"You're not going to prevent cherry-picking within the insurance industry," Ormsby noted.

Republicans balked at Davis' motion. Congress had previously rejected a version of the plan that would have diminished competition in drug pricing, said Rep. Billy Tauzin, R-La. The Democrats were raising a dead issue, he said.

"In effect what this motion does is to strike the competitive features of the vision of Medicare reform adopted on the House floor and to rely instead upon government-backed, government-fallback medicine for Americans," he said from the floor.

The Republicans quickly defeated the Democrats' motion.

Some interest groups say Congress' prescription drug benefit as proposed would cost much more than lawmakers are prepared to admit.

The cost has been pegged as high as $7.5-trillion, adjusted for inflation, from now to perpetuity by the National Center for Policy Analysis, a self-described free-market think tank in Dallas. That amount would translate into a 12 percent increase beyond current Medicare spending projections.

The center sees two problems with the current House version, said Matt Moore, policy analyst. One is that as the government starts providing benefits, it will lure seniors away from private companies, decreasing competition.

The other factor: "We're going to be adding a new entitlement to the current Medicare system," he said. "The money could be used on other programs" such as Social Security.

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