^{Posted on November 29, 2003}

Back-scratching and arm-twisting win Medicare fight

By William M. Welch
USA TODAY

GOP leadership plays every ace on Democrats — and own party members — to

secure passage

WASHINGTON — Exhausted from a yearlong struggle, Republican congressional leaders could see their hopes for delivering a prescription-drug benefit to seniors slipping from their grasp one evening two weeks ago in a basement room of the U.S. Capitol.

In a remarkable journey that few thought would be completed this year, the decisive moments for the overhaul of Medicare passed by Congress this week may have come that Wednesday and the day after. A key Republican negotiator walked out in anger, jeopardizing President Bush’s top legislative priority. ”It looked pretty grim,” Bush’s top negotiator, Health and Human Services Secretary Tommy Thompson, recalled later.

The talks ultimately yielded the most far-reaching changes in the health program for 40 million elderly and disabled Americans since its creation in 1965. To get there, Republicans alternately catered to conservatives, compromised to win over moderates and lured the nation’s most powerful seniors’ group to their side.

It was a victory that required the patience of a heart surgeon, the boldness of a former Madison Avenue executive and the raw political muscle of a former wrestling coach. It was built over pizza and pistachio nuts, sealed with billion-dollar giveaways and, ultimately, passed by making time stand still.

The debate really began six years ago. It was then, in a joint presidential-congressional study commission, that some of the players who ultimately wrote the legislation first joined two vexing issues: providing seniors a new drug benefit and restraining Medicare for the costly retirement of the baby boom generation.

”I’ve got six years invested in this,” said Sen. John Breaux, D-La., 59, who co-chaired that commission in 1997-98. He became one of only two Democrats allowed by Republicans to join the negotiations this fall. ”I wanted to get this done before I’m on Medicare.”

The debate resumed in January, when Bush set aside $400 billion over 10 years for the drug benefit. It was only one-fourth of what seniors would spend on medicine over that period, critics said. Still, it was a big commitment, especially while the federal government was borrowing record amounts.

But there was tension between Bush and Congress over how it would work. Administration health advisers worked on a proposal, and when it leaked, congressional Republicans were horrified. The administration’s idea was to offer the drug benefit only to seniors who agreed to join managed-care plans. On Capitol Hill, both parties saw that as coercion.

House Speaker Dennis Hastert, R-Ill., moved quickly to quash the plan. He rejected the idea in a meeting with hometown newspaper reporters and editors. By spring, Bush had sent Congress merely a list of goals. He would leave it to Republicans in the House of Representatives and Senate to flesh out the details.

Piling up pistachios
The gloom was measurable two weeks ago around the long oval table in the hideaway office of Rep. Bill Thomas, R-Calif., the headstrong chairman of the House Ways and Means Committee.

The headline issue, the one seniors were clamoring for, had been settled in that same room weeks earlier: a uniquely shaped benefit to assist Americans 65 and older with the costs of medicines. Yet the fight over seemingly tangential issues was proving intractable. They had divided conservatives from centrists over Medicare’s future: whether it would continue as a government program or be run by private insurers.

Though they sent out for pizzas when the talks dragged on, a constant presence was pistachios. The small salty nuts are a leading cash crop around Bakersfield, Calif., Thomas’ home. He kept silver bowls filled with white pistachios throughout the months of negotiations. By that November evening, the shells were piling up fast.

”When the going was really heavy and controversial, we ate more pistachios,” Thompson said. ”Thomas said we were now eating 4 pounds of pistachios per meeting. It was getting pretty frayed.”

The deadlock threatened the dreams of Bush, Senate Majority Leader Bill Frist, a heart surgeon, and Hastert, a former wrestling coach. They were united by a determination to turn the issue into a singular success that could reap rewards in 2004 and, perhaps, cement Republican majorities for years to come.

Thomas had become recognized as part of the problem. Smart but overbearing, the Ways and Means chairman is one of the few members of Congress who understands how Medicare works. But his abrupt, lecturing manner alienated even allies. His Senate counterpart, Finance Committee Chairman Chuck Grassley of Iowa, got so mad at one point that he withdrew his aides from meetings.

Thomas’ strength was his mastery of arcane details. Hours were spent with him instructing colleagues on the legislation’s fine points. On that November day, Thomas felt he had reason to stew. Frustrated by more than three months without a resolution, Hastert and Frist had taken over the talks. They had concluded Thomas was incapable of closing a deal.

”It was stalemate,” Frist, R-Tenn., recounted later. ”The speaker and I made a decision to come in.”

The final four
There were four issues left:

Competition. Thomas and his conservative allies insisted that Medicare be forced to compete with private insurers by the end of the decade. Known as ”premium support” to health technocrats, it was a concept few members of Congress could explain. But its intent was clear: Medicare recipients would no longer be guaranteed health care at a fixed cost.

Cost controls. Conservatives demanded strict limits on Medicare spending. They feared that the drug benefit’s cost would far outstrip the $400 billion Congress and the president were allocating from now to 2013.

Tax-free savings accounts. As a price for their support, conservatives wanted to expand tax breaks for those who save to pay their own medical expenses.

Employer benefits. Everyone was afraid that employers would stop offering more generous drug benefits to their retired workers. AARP, which represents 35 million Americans age 50 and up, wanted financial incentives for employers to keep covering retirees.

Frist and Hastert thought that if they could solve the competition issue, the others would fall into place. They worked out a proposal to test competition in a handful of cities and regions, starting in 2010. It was not enough for conservatives, too much for liberals, but just right for the emerging center.

Thomas, however, was not in the center. Furious at being eclipsed, he stalked out of the meeting. Some feared he would head for the airport and California. Hastert began cajoling him by phone and in person, reminding him of the consequences of failure.

By the next day, Thomas relented. Negotiators returned to his office and accepted what Hastert described as a ”demonstration” of competition. Frist and Hastert let Thomas shape the details to, in his words, ”make it workable.”

The leading liberal signs on Earlier in the year, Frist had begun meeting weekly with an unlikely partner, Sen. Edward Kennedy, D-Mass. Kennedy is the Senate’s leading liberal and a fierce defender of Medicare. But he’s also a legislator, rather than an ideologue. At 71, expanding Medicare represented a potential legacy.

The odd couple met in Kennedy’s hideaway office off a rarely traveled hallway on the Capitol’s third floor.

In June, Kennedy stunned colleagues when he and Frist cut a deal. Though some Democrats opposed it as inadequate, Kennedy’s backing brought enough Democrats to win relatively easy initial approval in the Senate.

In the House, Hastert prodded Thomas to bring his own Medicare bill through his committee. A far more conservative alternative, it won approval in the House by one vote. The table was set for the real bargaining to begin.

When the competing bills were sent to a House-Senate conference committee, Thomas refused to let House Democrats join in. Two Senate Democrats were allowed to attend: Breaux, a dealmaker, and Sen. Max Baucus, D-Mont., regarded as pliant by Republicans. Kennedy, whose support had delivered the Senate, was barred.

Thomas had a hard time forging agreement within his own party. Talks that began in August became intense in September and October. Much time was spent neutralizing potential opposition. Doctors won an increase in reimbursement rates, and the American Medical Association fell in line. Insurers, managed-care plans, home health care providers, hospitals and other groups all got provisions to boost their bottom line.

A key obstacle was winning — some said buying — rural legislators. For Grassley and Baucus, both from farm states, a top priority was higher payments for rural hospitals that feel shortchanged by Medicare payment rates. A $25 billion sweetener for rural health care was added; Grassley and Baucus announced it together in the Senate TV studio.

The ‘seal of approval’
With agreement on the long-range test of competition, the leaders worked through the weekend on the final obstacles. Political solutions emerged.

Instead of automatic Medicare cuts, they inserted a provision requiring Congress to consider action if spending targets were exceeded. It was a political fig leaf.

A trade solved two final issues. For conservatives, a $6 billion provision expanding health savings accounts was added, allowing people who buy high-deductible health insurance to put away up to $5,150 a year tax-free. In return, AARP won a provision giving employers $18 billion in subsidies to keep offering drug coverage.

With Kennedy cut out of the deal and threatening a filibuster, Frist needed to woo more Democrats. He had one ace left.

One of the first groups Frist had reached out to after taking the majority leader’s job in January was the AARP and its strategic-thinking CEO, Bill Novelli. He had met with AARP’s board of directors and legislative counsel in a private room at the Hotel Monaco, down the street from AARP’s headquarters. AARP’s leaders voiced frustration over years of delay and ideological distractions. In the months that followed, Frist called Novelli often.

By the decisive week in November, Frist was pressing for an endorsement. He phoned Novelli on Saturday, Nov. 15, to present the deal. The next day, Novelli convened a closed-door meeting of AARP’s board of directors, who flew in from around the country. This time they met at the Hyatt, several blocks from the group’s offices. The afternoon meeting stretched until 8 p.m.

Novelli wanted to throw support to the Republicans. A former advertising and marketing executive who cut his teeth on Richard Nixon’s 1972 re-election campaign, then made a fortune on Madison Avenue, Novelli claimed allegiance to neither party. He saw the endorsement as a dramatic move that would expand his group’s appeal to aging baby boomers.

When Novelli walked out of the room, he had agreement. Democrats were outraged. Protests flooded the group’s phone lines and e-mail. But Novelli didn’t flinch. In fact, he joined Frist and Hastert before TV cameras to announce the deal. Hastert called AARP’s support ”the Good Housekeeping seal of approval.”

Stopping the clock
With AARP on board, the outcome seemed assured. But there were still some surprises left.

House conservatives felt Hastert and Thomas had given up real cost restraints and limited the role of private insurers. Bush, wrapping up a trip to London, called conservatives in a bid to change minds. His top political aide, Karl Rove, phoned from Air Force One.

At 10 p.m. last Friday, about 20 conservatives met for dinner at Hunan Dynasty, near the Capitol, to escape the pressure. ”It felt a little like the Last Supper,” Rep. Mike Pence, R-Ind., said.

When the voting began around 2:30 a.m. Saturday, Pence took up a position on the back rail of the House. He was stunned as Hastert kept the 15-minute electronic vote open for nearly three hours, so GOP leaders could round up votes.

Two hours into the voting, one GOP leader told Pence that Hastert was ”out of aces.” The vote stood at 216 for, 218 against. Bush, now back in the White House, phoned conservatives in the predawn hours. GOP leaders warned of political catastrophe if the bill died.

Finally, Reps. Trent Franks of Arizona and Butch Otter of Idaho stepped forward to switch their votes, and a few other Republicans fell in line. The bill passed 220-215. The Senate followed suit three days later, 54-44.

Bush, Hastert, Frist and AARP could start planning their party.