SUSAN DENTZER: During his State of the Union speech Tuesday night, President Bush repeated his call for dramatic changes in Medicare - the federal health insurance program for the aged and disabled.
PRESIDENT BUSH: Health care reform must begin with Medicare; Medicare is the binding commitment of a caring society. We must renew that commitment by giving seniors access to the preventive medicine and new drugs that are transforming health care in America.
SUSAN DENTZER: In a speech yesterday in Michigan, the president elaborated just a bit more.
PRES. GEORGE W. BUSH: I believe that seniors, if they're happy with the current Medicare system, should stay on the current Medicare system. That makes sense. If you like the way things are, you shouldn't change. However, Medicare must be more flexible. Medicare must include prescription drugs. Medicare must be available to seniors in a variety of forms. I like to remind people medicine has changed and Medicare hasn't - stuck in the past.
SUSAN DENTZER: Along with a number of analysts, and some like-minded members of Congress, President Bush believes that the current Medicare program is deficient in many respects. They say those deficiencies mean that Medicare beneficiaries don't always get the best care -- even as the program lacks incentives to control costs.
In what's widely regarded as Medicare's biggest shortcoming, the current program does not pay for most prescription drugs consumed outside the hospital.
As a result, although many Medicare beneficiaries can get coverage for drugs in other ways, such as through private health plans, it's estimated that roughly 11 million seniors have no such drug coverage whatsoever.
Eighty-two year-old Alvin Shapiro is one of those 11 million. We spoke with him last year.
ALVIN SHAPIRO: What good is it to give a man -- pay for his surgery $50,000, pay for this, pay for that, pay a small fortune for his bypass and then you don't give him money to take his heart pills? Now, that's foolish, that's foolish.
SUSAN DENTZER: But the program has also failed to keep pace with the times in other ways. One example is that Medicare does not pay health-care providers to offer a broad range of preventive care that could help beneficiaries help ward off devastating diseases like diabetes or keep them under control.
Louisiana Democratic Sen. John Breaux, who has backed reforms similar to the president's, says adding drug coverage without making other changes would be disastrous.
SEN. JOHN BREAUX: I think it would be a serious mistake to just add more benefits to the current Medicare program without reforming the system; it would just hasten its demise, and we do not want that to happen.
SUSAN DENTZER: So that's why the president, many Republicans and a handful of Democrats want a new approach. They would allow Medicare beneficiaries who are happy with the current program to stay in it. But if beneficiaries wanted prescription drug coverage, they would probably have to enroll in one of a range of plans offered by private health insurers; those could range from HMOs to so-called "fee-for-service" plans closer to traditional Medicare.
The president proposes to spend $400 billion carrying out these reforms over the next decade. But beyond that, many details of the plan are still being developed. And concerns are being voiced by members of both parties.
Republican Sen. Charles Grassley of Iowa said in a statement yesterday that "Prescription drug coverage should be available to all seniors, not just those who switch into managed care." Democrats have been even blunter.
SEN. TOM DASCHLE: Rather than simply adding prescription drug coverage to a Medicare program that works, the president's plan would coerce seniors to drop out of traditional Medicare and join an HMO in order to get even limited drug coverage.
SUSAN DENTZER The president's full plan may not be available for days.
RAY SUAREZ: So what is next for Medicare? Joining me now to discuss the possibilities are Gail Wilensky, a senior fellow at Project Hope, a foundation for international health education. She was an adviser to George W. Bush on health care issues during the 2000 campaign. And Gail Shearer, the director of health policy analysis for Consumers Union, a consumer advocacy group.
Well, the president gets a bipartisan hand when he says that he's going to fix Medicare. Is there a consensus on what about it needs fixing, the place from where you start, Gail Wilensky?
GAIL WILENSKY: Well, there's some agreement. There's certainly agreement that there is no prescription drug coverage and that's a problem. There's agreement that there's not catastrophic coverage, there's no limit that a senior might have to pay if they get very sick in terms of the physician care. There's a share of physician care.
There's a lot of dispute about whether Medicare is more or less okay, except for the benefits it doesn't have, or whether it needs to be brought into the 21st century.
The president mentioned that Medicare still has a lot of attributes of its original 1960s heritage, medicine, how it's delivered and finance has changed a lot. There's dispute about how important that is and whether or not this is a program that's ready for the 78 million baby boomers that are going to start retiring at the end of this decade and really fit for the 21st century.
RAY SUAREZ: Gail Shearer?
GAIL SHEARER: Well, I think it's important not to lose sight of what Medicare is doing right, and I think that's sometimes lost in this debate. When people turn 65, they get Medicare coverage and they know they're going to have it for the rest of their lives, and that's wonderful because when you look at the people under 65, some 41 million have no health insurance at all, and if they lose their job, they lose their health insurance.
So while there are problems with Medicare, and we really need to build in a prescription drug benefit for all Medicare beneficiaries, I think it's important not to lose sight of the fact that it's serving a really important function and doing a pretty good job of it.
RAY SUAREZ: And are the recipients generally satisfied? Do we know that?
GAIL SHEARER: In general, they are. They are not happy when it comes to the gaps that are there. For example, the cost of prescription drugs, the cost of long-term care.
They tend to be very satisfied when they're in traditional coverage because, let's not forget, when your in traditional Medicare coverage, you're free to go to any doctor, which means when you get sick, you know you can go to the best doctor. You know that year after year, you're going to have continuity of care, you're not being forced into the private marketplace where you may have to change doctors on a regular basis and you may have to change plans every year.
GAIL WILENSKY: Well, any doctor that will take you, that is, and one of the issues that is on the table now is a real concern because traditional Medicare has reduced payments to doctors two years in a row.
Traditional Medicare is a government-administered pricing system. And while the seniors tend to like the program, as Gail has indicated, except for the areas that it doesn't cover, many of the doctors and the hospitals and home care and nursing home groups find it very difficult because of the pricing structure and the rules and regulations and the complexities and sometimes the frustration of not being able to do things that are done normally in a private insurance, like disease management, trying to coordinate the care for somebody with diabetes or congestive heart failure, or getting a new technology covered.
Medicare was very late in bringing on liver transplants, years after the private sector had covered them. It was very expensive and there was a lot of nervousness about whether Medicare should actually go in that area. So the provider community, physicians, hospitals, et cetera tend to be a bit more frustrated than the seniors.
RAY SUAREZ: When the president talks about some Medicare recipients being freed to move to a different kind of plan, very few details have been given but what would that look like? What shape does that take? What are you hearing about what the administration has in mind?
GAIL SHEARER: Well, the details are very sketchy, but we're getting the sense that he's suggesting if you want to stay in traditional Medicare, fine, no prescription drug benefits for you. If you want prescription drug benefits, you can either enroll in an HMO, Health Maintenance Organization, where you have restrictive choice of doctor or perhaps you can enroll in a PPO, Preferred Provider Organization, which means there will be a network.
If you go outside the network, you will have to pay more. You'll have unlimited cost sharing. It's really opening the door to the private marketplace and lots of uncertainty for seniors and the disabled and no guarantees that you'll have prescription drug benefits that meet the level that others have.
RAY SUAREZ: What are some of the up sides and down sides of doing just what she described?
GAIL WILENSKY: What she was describing exists for federal employees, the federal employees health care plan that has been mentioned frequently in the last few days allows workers who live all over the country, not just in Washington, to have a choice of health care plans every year in November they can stay where they are or choose another one.
They get information about what they would have to pay if they had certain kind of illnesses. The federal government's contribution toward the premium doesn't vary with the plan they choose, and that makes them more aware of the benefits that they would get and if there are some tradeoffs involved and what it would cost them.
The up side is that the flexible types of networks that have worked well for most of in us this country, that allow doctors that may choose not to participate in Medicare in the future-- it really hasn't been a problem much in the past-- or that have other benefits that are part of the package that is not part of the Medicare package could be offered to seniors.
I think it's very important to have seniors be able to choose the plans that meet their needs. They won't be the same plans and it won't be the same benefits, and it probably won't be the same price.
RAY SUAREZ: But we heard the president say that seniors who like the program they're under, if they're happy, they should stay, he said. If you set up two parallel structures like that, don't you lose some of the efficiencies that you achieved by having one, lower management costs and...
GAIL WILENSKY: Well, you don't really need to have 35 million or 39 million people in a plan in order to have efficiencies. And you don't actually need to do what the administration sounds like it's suggesting, if you follow the federal employees' model; that is, you could have all plans offer a basic and a comprehensive version, both traditional Medicare having a basic and a comprehensive and all the other plans and have them all be treated on the same basis.
This was a different way to try to change some of the incentives but if you look at this model that exists and has worked successfully for federal employees to not cause the kind of managed care backlash that we saw in the rest of the country, the important idea is that they're treated the same, traditional Medicare and other plans, because some people will find constraints of HMO not to their liking.
They want fee for service, they may feel comfortable in the traditional Medicare plan with the very heavy government involvement, and they should be able to stay there. I don't think it's going to be possible to say, "you can stay there but not get prescription drugs." I think politically that's not going to be a viable strategy, although we'll wait and see. This is very early in the process, so maybe I shouldn't say it's not politically viable. It's certainly causing a lot of comment.
RAY SUAREZ: Political viability?
GAIL SHEARER: Well, I don't think you can say some people get coverage and some people don't.
But I think it's important to go back to this federal employee model and remember that it works well for federal employees, but we're talking about a very different population here, a population of older people, a population of people who may have difficulty reading that fine print every year and having to go through and pick a new health plan and they'll be totally confused.
So I'm not convinced that that's the right model, and I'm pretty convinced, though, that a program that says you have to sacrifice your freedom of choice of doctor to get what we know you really want, I don't think that will fly politically.
RAY SUAREZ: We already heard some senators expressing doubts about being able to get prescription drugs by leaving traditional Medicare. That doesn't... sounds like it's losing steam.
GAIL WILENSKY: I think the question will be: Some benefit, but not as much benefit, or maybe the government's spending on behalf of the senior the same whether it's the traditional program or a different program, other ways to approach this strategy.
There's concern that if we don't begin to modernize Medicare for the 21st century, we're going to have a lot of trouble, a lot of pressure relying only on pushing the providers to restrain spending when 78 million baby-boomers start to retire.
RAY SUAREZ: Why has it been so hard to fix this so far?
GAIL SHEARER: Well, there really is a philosophical divide in Congress and in the country. There are those who believe that the marketplace, the private marketplace can fix this problem. There are those who believe that it has to be a governmental solution. That's one problem.
The second big problem is dollars. What is our national priority here? What are our priorities? Do we want to spend what it takes to build in a Medicare benefit, like doctor coverage, into Medicare, or do we want to give tax breaks to people?
I mean we really have to think hard about how much we want to spend. The president's proposal, it's important to keep this in context. If all of that money went to pay for prescription drugs, it would cover about one fifth of what Medicare beneficiaries are expected to pay for drugs.
RAY SUAREZ: The $400 billion.
GAIL SHEARER: The $400 billion. That's right. It's a relatively small share of what people are paying and it's important to keep that in context.
GAIL WILENSKY: Of course our history is wherever we start, we will end up spending much more. When Medicare started, the premium that seniors pay for part of Medicare was 50-50 in terms of what the government paid and what the seniors paid. Seniors now pay no more than 25 percent of that premium. We've underestimated the benefits every time. We'll underestimate the cost of this one, too.
RAY SUAREZ: Gail Wilensky, Gail Shearer, thank you both.