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ROBERT KUTTNER

The rush to kill Medicare

THE BUSH administration's Medicare bill is a calculated first step toward ending universal Medicare in favor of vouchers. President Bush and his congressional allies have deftly baited this hook with meager prescription drug benefits.

With legislators wanting to go home for Thanksgiving, the White House hopes to force a vote by this weekend. The haste is understandable: The more this cynical bill is exposed, the less legislators will fear voting against it. Consider:

Skimpy Drug Benefits. The administration refused to confront the pricing power of drug companies. So the government would be billed at exorbitant prices, and the new $40 billion a year in benefits would cover only a fraction of consumers' drug expenses.

Under the formula, if you incurred $3,600 of annual drug costs, the program would cover only $1,285. (It covers 95 percent after $3,600, but a lot of people would not participate at all because they couldn't afford the upfront costs.)

Capped Benefits. The administration's real goal is to shift Medicare from a public program to a private one, with the government's contribution capped. For the right, it's a threefer: contain government's costs, shift risks to consumers, and let private industry cash in. Heathier and wealthier people could supplement the voucher with their own resources. Poorer and sicker ones would get diminished coverage.

The bill authorizes "experiments" in six metropolitan areas, where private insurers subsidized by the government could lure healthy seniors away from traditional Medicare. However, past experiments with Medicare HMOs demonstrate that they are far less efficient than public Medicare and leave government holding the bag for the sickest patients. Medicare works because it is a universal insurance pool. Fragmenting that pool can only raise costs, divert profits, and compromise care.

Means-testing. The bill subjects poorer seniors to an assets test and raises Medicare premiums for middle- and upper-income seniors. It also effectively bans drug imports from Canada. And it actually reduces drug benefits for people on Medicaid and those with private retiree coverage.

It's dismal policy. Viewed as a bill for special interests, however, the Medicare legislation is sheer genius.

Pharmaceutical companies get to sell more drugs at prices they set. Hospitals and doctors receive additional payments. Insurers get to run a lucrative new program with government subsidies. And corporations that are paying health benefits to retirees get new tax breaks worth $18 billion.

The administration also deftly coopted the feeble giant AARP. As recently as last July, the AARP's president, William Novelli, warned that "any final conference agreement should not destabilize Medicare nor penalize those beneficiaries who choose to stay in the current Medicare program." But this is exactly what the conference bill does.

Sources close to AARP say that Novelli and his lobbyists, often allied with Democrats, wanted to point to a bipartisan accomplishment.

When AARP's $7 million advertising program in support of the bill was announced, the organization's switchboard jammed with angry calls. AARP has long been a business conglomerate selling products to the elderly posing as an advocacy group. Novelli is taking a huge gamble. The more his members appreciate what's really in this bill, the more his move could backfire.

Last spring the Senate passed a more moderate bill in which liberals led by Senator Ted Kennedy somewhat reluctantly traded expanded drug coverage for sponsorship by private insurers rather than via public Medicare. However, Kennedy's bottom line was: no serious tampering with the rest of Medicare.

Democrats gambled that the Republicans, in order to get a bill, would have to meet liberals halfway. But White House officials concluded that by playing interest-group politics they could peel away enough votes for their plan and ignore the liberals.

Bush's bet is that the Democrats are damned either way. Either voters don't read the fine print and Democrats get tarred for opposing a drug benefit bill in an election year or they are made to collude in voucherizing Medicare.

While two center-right Democrats, John Breaux of Lousiana and Max Baucus of Montana, supported the conference bill, Kennedy as well as the Democratic leader, Tom Daschle of South Dakota, and whip Harry Reid of Nevada oppose it, as do most Senate Democrats and seven moderate Republicans.

If the Senate's liberals and moderates can withstand the pressure for a quick vote, the bill's deficiencies will come to light. And at least 40 senators -- the number needed to filibuster -- will realize that it's better election-year politics to resist wrecking a much-loved program than being complicit in its demise.

Robert Kutter is co-editor of The American Prospect. His column appears regularly in the Globe.

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