Gop Outlines Plan To Divide Medicare Program In Two Millions Would Leave Old Plan For Private Insurance Options

In an atmosphere that was part pep rally, part pre-game prayer, Republican leaders outlined Thursday a new Medicare plan in which millions of elderly Americans would leave the traditional program for a variety of private insurance plans.

“Medicare is the heart of this fight,” House Speaker Newt Gingrich told House and Senate Republicans in a rare joint caucus on the GOP’s drive to balance the federal budget by 2002. “Medicare is the core of whether or not we can do it.”

The $178-billion-a-year program provides health care for 37 million elderly and disabled beneficiaries, reaching virtually every American family. It is one of the most popular government programs and the biggest middle-class benefit to come under the budget ax.

With costs growing at about 10 percent a year, Medicare’s hospital trust fund is on schedule to go bankrupt by 2002. Republicans want to slow that growth to about 6 percent annually, saving $270 billion over seven years and extending the life of the trust fund to 2014.

After briefing their rank-and-file lawmakers in a closed meeting, House Republican leaders released a sketch of the plan that did not include any estimates of how much the proposals would save. However, they assured reporters that the savings goal would be met.

Lawmakers said no savings estimates were released because many important details still need to be worked out.

But Democrats scoffed at the lack of detail. “The Republicans’ secret plan to reform Medicare is still a secret,” said Louisiana Sen. John Breaux.

Senior Democrats complained that Republicans are trying to ram their plan through Congress without adequate hearings.

The GOP outline calls for dividing Medicare in two: the traditional program and a “Medicare Plus” program in which the elderly would choose from health maintenance organizations (HMOs), networks of doctors and hospitals, medical savings accounts and other private insurance options.

Retirees could switch back and forth with some limitations.

All private plans would be required to offer the basic Medicare benefit package but would be free to add benefits. Insurance plans could not exclude retirees on account of illness or age.

No one seemed to have a firm idea of how popular private plans would be with the elderly.

Some lawmakers predicted at least 75 percent of beneficiaries would be enrolled in private plans within seven years; others said half. Outside experts say they doubt it would be higher than 40 percent.

About 9 percent of Medicare beneficiaries are in HMOs now. Those organizations offer benefits that are more comprehensive, plus lower outof-pocket costs, in exchange for restrictions on patient choice.

Both traditional Medicare and Medicare Plus would operate under strict cost controls.

Reminiscent of the old GrammRudman balanced-budget bill, traditional Medicare would be subject to “fail-safe” automatic cuts in payments to hospitals, doctors and other providers if spending exceeds limits.

There also would be new spending controls for home health care and Medicare’s limited nursing-home benefit.

Costs in Medicare Plus would be controlled in a different way: The government would pay a fixed amount per person each year. The payment would go directly to health plans instead of giving beneficiaries a voucher from the government.

Plans with rich benefits or greater choice of doctors could charge beneficiaries more. Retirees would pay the difference.