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Republicans Reach Tentative Deal to Pass Medicare Drug Plan

In a rare Sunday news conference, Republican leaders released a six-page summary of a bill that would enact the most significant changes to Medicare since its creation in 1965. Beginning in 2006, the legislation would add a drug benefit to Medicare, which provides health care coverage to some 40 million elderly and disabled Americans.

Medicare beneficiaries would be offered a chance to purchase the drug coverage primarily from regional private companies at a monthly premium of $35. After a $275 annual deductible, insurance would pay 75 percent of drug costs up to $2,200, but then provides no coverage until out-of-pocket spending reaches $3,600. Insurance would pick up 95 percent of the cost of drugs after beneficiaries had spent $3,600 in one year.

One of the major sticking points during the House-Senate negotiations was a proposal known as “premium support” that would require traditional Medicare to compete directly against private health plans. House Republicans had wanted premium support to be nationwide and permanent, but Democrats argued it would undermine traditional Medicare and raise health care costs for the sickest and most vulnerable seniors.

In the end, the two Democrats at the negotiations, Sens. John Breaux of Louisiana and Max Baucus of Montana, agreed to a six-year pilot project that would have head-to-head price competition in six metropolitan areas. Residents of those areas who chose to remain in traditional Medicare would have their premium increases capped at 5 percent a year and waived for low-income seniors.

Another provision that concerns many Democrats is the bill’s requirement that Congress and the White House would have to review Medicare’s finances when general revenues constituted 45 percent of Medicare spending.

The bill would also provide $12 billion in subsidies to private insurers that choose to offer basic health insurance to those eligible for Medicare. Preferred provider organizations, which encourage use of certain doctors but allow patients to go elsewhere if they pay extra, could participate in this program.

The plan does not allow for legal access to lower-cost prescription drugs from Canada.

In response to concerns from seniors who want to keep drug coverage provided by their former employers, the bill would provide tax-free subsidies to employers who maintain drug coverage for retirees once Medicare drug benefit begins.

In a departure from the current system that has all beneficiaries paying the same amount for coverage, under the new plan individuals with incomes greater than $80,000 would pay a larger premium for Medicare Part B, which covers doctor visits.

To help seniors before the new drug coverage kicks in, older Americans would be allowed to purchase a discount card in 2004 and 2005 that the Bush administration estimates would yield savings of 15 percent or higher off the cost of drugs. Low-income seniors would receive an additional $600 annual subsidy.

The bill’s chances received a major boost Monday when the AARP threw the weight of its 35 million members behind the plan.

“We’re going to work to get it passed,” AARP chief executive William Novelli told the Associated Press.

Novelli said the AARP, which represents Americans age 50 and older, will “pull out all the stops” to get the bill passed, including a three-day television campaign this week.

The bill also has the support of doctors and hospital groups, but is lacking support from many key Democrats.

Sen. Edward Kennedy, a Massachusetts Democrat who helped shepherd a Medicare bill through the Senate last June, said the plan that came out of the conference committee reflected the Republicans’ determination to dismantle Medicare and on Sunday told CBS, “I don’t think that bill will pass the United States Senate.”

Senate Majority Leader Bill Frist (R-Tenn.) argued that the bill is a chance to overcome years of partisan friction that has stalled changes to Medicare.

“After nearly six years of empty promises, stalled negotiations, and partisan gridlock, we have finally broken through and reached agreement on a bipartisan $400 billion Medicare prescription drug bill,” Frist said Saturday.

President Bush said that he would be working for the bill’s passage.

“I know I will be actively pushing the bill, because it conforms to the principles I laid out of prescription drugs for our seniors: choice for seniors, accountability for the Medicare plan,” President Bush told reporters at the White House.

Other than Breaux and Baucus, no congressional Democrat voiced support for the legislation last weekend.

“Many will reach the decision that this is better to pass than not to pass,” Baucus predicted.

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