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Bush's Medicare Reform: A Big Pill to Swallow

George W. Bush's State of the Union address on Jan. 28 won't just be about Iraq and terrorism. The President will also use his high-profile appearance to argue for a top domestic priority: broad reform of Medicare, the health-care program for seniors. And as he did with his economic stimulus package, Bush will be thinking big. "You'll see a very aggressive President," promises Thomas A. Scully, administrator of the Centers for Medicare & Medicaid Services, the Health & Human Services unit that runs the program.

Bush will go beyond calling for new federal subsidies to help seniors buy drugs. He'll argue that adding the benefit without reining in skyrocketing costs is a prescription for failure. And he will urge Congress to restructure the program to move from fee-for-service care to a system based on private insurance.

Under the White House scheme, insurance companies would sell Medicare coverage, including a drug benefit. They would compete with each other, and with the traditional plan. Some might offer lower prices, others more benefits. To encourage seniors to participate, the government would subsidize a fixed portion of premium costs.

Such a change would shift more of the burden of future cost hikes to seniors and away from other taxpayers. "We'd be grossly irresponsible if we just added new bells and whistles," says one White House ally, Senate Budget Committee Chairman Don Nickles (R-Okla.). "We don't want to saddle our kids with an overpromised, underfunded system."

But Democrats--and even some Republicans--are sure to balk. They worry that the plan won't save much money, since the sickest--and highest-cost--patients would stay in the traditional system. And they say that past experiments with Medicare health-maintenance organizations have flopped. "I do not support a reformed system based on managed care and private plans," says top Senate Finance Committee Democrat Max Baucus of Montana.

White House allies argue that a drug benefit alone is too costly and needs to be part of a more efficient system. And pharmaceutical costs are soaring by 10% or more a year. The price tag on Bush's initial drug plan would have been about $180 billion over 10 years. Today, most Hill experts figure a 20% drug subsidy would cost in excess of $400 billion.

Will Congress find a compromise in 2003 after failing in the past? One crucial player will be Senator John B. Breaux (D-La.), a moderate who has tried to broker a Medicare deal for years. Unlike Baucus, Breaux is tilting toward broad-based reform rather than just a drug benefit. Another powerful force is the AARP, the seniors lobby. Policy director John Rother says the group may back some reforms, but he adds: "The key is not disadvantaging people who want to stay in fee-for-service Medicare."

Another critical voice will be that of Senate Majority Leader Bill Frist (R-Tenn.), well placed to move reform--his top legislative priority--through the Senate. But Frist may find himself bogged down in other legislative battles.

Veteran Hill aides put odds of passage at 50-50 this year. If Bush pushes hard, he may be able to get some reform--and to claim credit in 2004 for helping the elderly lower their pharmaceutical bills. That achievement might neutralize a powerful Democratic issue in senior-heavy swing states such as Florida and Pennsylvania. And he'll force Democrats to choose between swallowing a bill with more structural change than they would like or killing a benefit they've been demanding for years. The $400 billion question: In a year when the President will be distracted by Iraq, the war on terror, and a nasty battle over taxes, can he make the big push? A Bush Administration panel will suggest changes to Title IX, the 1972 law that gave women's teams equal footing with men's in high school and college sports. On Jan. 31, the Commission on Opportunities in Athletics is expected to recommend that the law be changed to disregard the proportion of males and females at a school and divide the slots equally between the sexes. The commission would even allow schools some leeway--as much as 7%--from that 50-50 split. Women's groups say the recommendations translate to fewer slots for women--a drop of as many as 1.4 million spots in high schools and 78,000 in colleges. President Bush's 2004 budget, set to be unveiled on Feb. 3, will use five-year estimates instead of the 10-year projections used by past Administrations. Budget Director Mitch Daniels says he'll avoid 10-year figures because of the difficulty of predicting economic activity so far into the future. But Democrats say it's a politically inspired ruse to hide the long-term red ink created by back-loaded Bush tax cuts. President Bush is betting that White House hopeful Senator John Edwards' trial-lawyer past will turn off voters. The North Carolina Democrat disagrees, and is writing a book, to be published by Simon & Schuster, about his 20 years representing plaintiffs in medical-malpractice and product-injury cases. Publication is set for January, 2004, just as the Democratic primary season gets under way.

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