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Tommy Thompson, Secretary of the Health & Human Services Dept., is in the vortex of the Capitol Hill battle over reform of Medicare, the federal health program for seniors, and Medicaid, the joint federal-state medical system for the poor. In late June, the House and Senate passed competing versions of a Medicare-reform plan, including a $400 billion drug benefit. They hope to send a final version of the bill to President George Bush by fall.
While the bills have some differences, especially in how much competition they would eventually allow between private managed-care companies and traditional fee-for-service Medicare, they take a similar approach. Each would create a drug discount card that seniors could use, starting in 2004, to reduce prescription costs. Beginning in 2006, retirees would be able to buy new drug insurance through private companies for a premium of about $35 a month. Most seniors would either buy that coverage as an add-on to old-style Medicare, or they'll be able to purchase full medical insurance, including doctor and hospital care as well as drugs, from private managed-care players.
POLITICS AS USUAL? A key issue is whether insurers will be willing to offer either stand-alone drug coverage or broader medical packages. Many carriers worry that they won't be able to make a profit offering government-mandated plans. They point to a late-1990s managed-care experiment called Medicare+Choice. In that program, Washington refused to increase payments to insurance outfits sufficiently to cover rapidly rising health costs, and many insurers simply dropped out.
Thompson, the former GOP governor of Wisconsin, met on July 2 with BusinessWeek Washington Correspondents John Carey and Howard Gleckman to discuss action on both Medicare and Medicaid. Thompson argued that seniors want more choice in Medicare health plans. And despite concerns that insurers will be reluctant to offer new Medicare managed-care plans, Thompson insists that many carriers will eventually participate (see BW, 7/14/03, "This Medicare Reform Is No Cure").
He concedes, however, that the current versions of Medicare reform don't do enough to encourage companies to keep retirees on their health-insurance rolls. Thompson blames congressional Democrats for stalled efforts to restructure Medicaid. He also says his office's efforts to encourage all Americans to exercise, lose weight, and quit smoking can save the health system billions of dollars. Here are edited excerpts of that interview:
Q: What would the new legislation fix? A: The new legislation…is going to be a tremendous help to older Americans, who are having a very difficult time purchasing the drugs they need. It will be extremely appreciated by the senior citizens of America. Things have changed a lot since 1965 [when Medicare was created] -- except Medicare.
There are three major problems [with Medicare now]: There's no competition, no choice. I, as a federal employee, [can choose insurance coverage,] and we have to make certain we give the same choices to our senior citizens. The second big problem is that Medicare doesn't cover drugs. It will cover the heart operation -- but not the drugs to prevent the heart disease. The [third] problem with the current system is that it's going broke.
The legislation doesn't have all the reforms I would like, but it certainly is a step in the right direction. It will have to be addressed again in the future, but at least we can put the reforms in and put Medicare on a more solid financial footing.
Q: Conservatives say the legislation doesn't really create a market. Do they have a point? A: A market is being created. A lot of senior citizens have indicated to us they want to have a choice. There are 42 million Americans right now in Medicare. If you're going to be in the health-insurance business, how could you not get involved in bidding on this growing population? How could you just write off this huge bloc of business?
I don't think the conservatives realize the sheer numbers and the potential for this market. The size and the needs of that population are going to encourage a lot more competition.
Q: But insurance companies are holding back. None of them have said they'll participate. A: We've contacted several large [Blue Cross plans]. They've indicated their interest. But how could you ever expect an insurance company to say it will definitely bid on a product not knowing the final bill and how the regulations are going to be set up in the next two years?
We went out and solicited companies, and they told us: "We have to see the details." They got burned in Medicare+Choice. They're reluctant to go where they potentially could lose money. So I can understand that we're not going to have a lot of people standing up saying they're going to bid right now. Once we get the regulations out, companies are going to look at the potential of a growing market, and they're going to be hard-pressed not to be players.
Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
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