The Politics of Medicare Reform

IntroductionMedicare politics has been remarkably turbulent in recent years. The current debate over Medicare prescription drug coverage is only the latest episode in a decade-long political drama. In 1995, the Republican congressional leadership, led by Speaker of the House Newt Gingrich, proposed sweeping changes in the program. A rancorous debate with President Bill Clinton and congressional Democrats ensued. It was, in fact, the most high-profile, acrimonious, and sustained debate over Medicare since the fight that preceded the program's enactment in 1965. Still, Republican congressional majorities passed their Medicare reform bill in 1995, only to have President Clinton veto the bill. After all of the political tumult and calls for program restructuring, Medicare reform deadlocked.Only two years later, the direction of Medicare politics reversed: with scant public attention or political theater, Congress and the Clinton administration agreed to a major overhaul of Medicare as part of the 1997 Balanced Budget Act (BBA). Many policymakers and analysts viewed passage of the BBA as a milestone in Medicare politics. Managed care was ascendant in the private sector, as growing numbers of Americans enrolled (or were enrolled by their employers) in Health Maintenance Organizations, Preferred Provider Organizations, and a host of new plans that promised to control health spending. Medicare, whose basic structure had remained largely intact since its adoption in 1965, appeared to a growing number of observers to be out of step and badly in need of modernization. The BBA, they believed, would at long last usher in a historic transformation of Medicare by introducing competition, choice, and market dynamics into the program.Yet by 2003, the expected transformation still had not materialized. Indeed, many effects of the 1997 Medicare reforms were exactly the opposite of what observers had anticipated: managed care plans abandoned Medicare or raised premiums while cutting covered benefits; beneficiary enrollment in Medicare HMOs stalled; and the expected diverse menu of private insurance options for Medicare beneficiaries never developed.1 The reality of Medicare reform thus bore little resemblance to the rhetoric of market transformation. judged against some of its central aims, today Medicare+Choice appears to have been a classic case of public policy failure.After a decade of largely failed reform efforts, then, the future of Medicare is unclear. Medicare's exposure to the political spotlight, however, is hardly a thing of the past. In recent years, the political momentum to add outpatient prescription drug coverage to Medicare has intensified and finally culminated in adding a prescription drug benefit to Medicare in December 2003. President Bush declared in his January 28, 2003 State of the Union address that "health care reform must begin with Medicare."2 The benefit links an ambitious and politically divisive vision of program reform seeking to expand the role of private insurers in Medicare.3 Under the original Bush plan, Medicare beneficiaries receive broader coverage for prescription drugs only by joining a private managed care plan; Medicare enrouees not enrolling in "enhanced Medicare" but remaining in traditional Medicare would have received a more limited prescription drug benefit.4The Bush administration's failure to recommend a significant Medicare drug benefit for all beneficiaries and its decision to load the dice against traditional Medicare immediately drew criticism from Democrats5 and some Republicans.6 Representative Billy Tauzin (R-La.) quipped that "you couldn't move my mother out of Medicare with a bulldozer."7 The administration produced only a framework for legislation, leaving the crucial details to Congress.8 In June of 2003, though, there was an unexpected breakthrough in the Senate, leading to enactment of a Medicare drug bill with bipartisan support; the House of Representatives followed by passing their own bill. …