there was little incentive for doctors or patients to limit the resources they consumed, which was crucial to holding down costs.
I saw reforming Medicare as a way to solve two problems. First, by adding a prescription drug benefit, we would modernize the program and provide seniors with the quality health care their government had promised. Second, by delivering the drug benefit through private insurance plans that compete for seniors’ business, we could inject market forces into the health care system. Reforming the program would also create an opportunity to expand Medicare Plus Choice, later renamed Medicare Advantage, which allowed seniors to obtain all their health care through flexible, affordable private insurance plans.
I knew Medicare reform would be a tough political issue. Introducing market forces into a government health program would upset the left. Adding an expensive prescription drug benefit would be unpopular with the right. But I decided to take on the challenge.
Under our plan, seniors who wanted the new prescription drug benefit would have to choose private plans instead of government-run Medicare. We would change Medicare’s funding formula so that the government-run program had to compete with private plans on a level playing field. Both reforms would introduce more market forces and help address the rising costs of health care.
Before announcing my plan publicly, I previewed it with Republican leaders in the House. They told me my proposal didn’t stand a chance on Capitol Hill. Democrats would never support a bill that required seniors to give up their government-run Medicare coverage to receive a prescription drug benefit. Some Republicans wouldn’t either.
I faced a tough decision. I could fight for a lost cause or make a compromise. I decided to propose a prescription drug benefit that would be administered by private health plans but open to all seniors, including those who wanted to keep government-run Medicare coverage.
My Medicare team** worked closely with Senate Majority Leader Bill Frist and Finance Committee Chairman Chuck Grassley of Iowa. Chuck wisely brought two key Democratic counterparts, Senators Max Baucus of Montana and John Breaux of Louisiana, into the drafting process. They produced a solid bill that garnered support from thirty-five Democrats. The Senate passed the bill in June by a vote of 76 to 21.
In the House, some conservatives balked at the cost of the drug benefit, which we eventually estimated at $634 billion over ten years. But Speaker Denny Hastert, Majority Leader Tom DeLay, and Ways and Means Committee Chairman Bill Thomas built a fragile coalition to pass the bill 216 to 215. Just nine House Democrats voted for a benefit they had demanded for years. The rest voted no. During the debate on the floor of Congress, not a single Democrat criticized the Medicare bill for costing too much. Most wanted to spend more money.
The razor-thin House margin made it essential that the House and Senate bills be combined in a way that retained Republican support. To address cost concerns, we included a so-called trigger provision that would take effect if Medicare spending rose faster than expected. Congress would then be required to make reforms to address the problem.***
We also highlighted health savings accounts, an innovative new health insurance product created by the House bill. Designed to make coverage affordable for small businesses and individuals, HSAs coupled low-premium, high-deductible insurance against catastrophic illness with a tax-free savings account to pay routine medical expenses. Employers or individuals could contribute to the account, which belonged to the individual and could be taken from job to job. Because HSA owners paid their own health-care expenses and kept any money left over, they had incentives to stay healthy, shop for good deals, and negotiate better prices.
In mid-November, AARP, the influential seniors’ advocacy group, endorsed the compromise bill. “This is not a perfect bill, but America cannot wait for the perfect,” CEO Bill Novelli said. He was then excoriated by Democratic leaders, labor unions, and liberal editorial pages. But his stand went a long way with wavering members of Congress.
The decisive vote came on November 21, 2003. Laura and I had long been scheduled to spend that day in Great Britain, as part of the first official state visit there by an American president since Woodrow Wilson. Some suggested postponing the trip. I refused. “They have phones in London, you know,” I reminded the team.
Laura and I enjoyed spending time with Queen Elizabeth II, a gracious, charming woman with a keen sense of humor. In 2007, Her Majesty and Prince Philip came to celebrate the four hundredth anniversary of the Jamestown settlement. In my welcoming remarks before seven thousand people on the South Lawn, I thanked the queen for her long friendship with America. “You helped our nation celebrate its bicentennial in 17 …” I caught myself before I could finish the date, 1776, a rough year in U.S.-British relations and an unflattering commentary on the queen’s longevity. The eighty-one-year-old monarch glanced at me with a wry smile. “She gave me a look that only a mother could give a child,” I said. At a dinner at the British embassy the next night, Her Majesty said, “I wondered whether I should start this toast by saying, ‘When I was here in 1776 …’?”
With Queen Elizabeth and Prince Philip.
Queen Elizabeth’s hospitality at Buckingham Palace during our 2003 state visit was exquisite. We received a forty-one-gun salute, inspected the royal troops in the courtyard, and slept in the immaculately appointed Belgian Suite. Our room had been occupied by Queen Elizabeth’s uncle, King Edward VIII, before he abdicated the throne in 1936 to marry an American divorcee. It included a three-hundred-year-old mirror, some 10 million British pounds’— $15 million—worth of antiques, and a beautiful view of the palace gardens. At our afternoon tea with Her Majesty and Prince Philip, I asked the queen about her dogs. A few minutes later, a royal footman appeared with her famous corgis. They were friendly and polite. My only hope was that if Barney ever met the queen, he would behave as well as they did—and not bark for Scottish independence.
That evening, Her Majesty and Prince Philip gave an elegant state banquet in our honor. Our places were set with ten pieces of silverware and seven crystal wine goblets. Evidently, word hadn’t reached the royal pantry that I had quit drinking. Before I stood to make my toast in white tie and tails, I looked over at Laura in her beautiful burgundy gown. I wondered if she was thinking what I was:
At Buckingham Palace.
The stateliness of Buckingham Palace marked a stark contrast to what awaited on the flight home. As Air Force One took off, legislative director David Hobbs called me with a list of about a dozen wavering House members, mostly conservatives. I started dialing for votes over the Atlantic. Several congressmen were unavailable to take my call. One junior member did answer. “I didn’t come to Washington to increase the size of government,” he told me.
“You know what, I didn’t, either,” I answered. “I came to make sure the government works. If we’re going to have a Medicare program, it ought to be modern, not broken.”
“This is just another entitlement that will keep growing forever,” he said.
“So are you for abolishing Medicare?” I responded. “This is an opportunity to introduce competition into the system and hold down costs. Just so you know, this is a helluva lot better deal than you’re going to get from any other president.”
He wasn’t persuaded. When I landed in Washington, I made another round of calls. We were making some headway, but it was going to be tight. When the House voted at 3:00 a.m., the initial count came up short. Speaker Denny Hastert took the rare step of holding the vote open in the hope he could persuade a few congressmen to change their votes. Just before 5:00 a.m., David Hobbs woke me up with a call from the Capitol. “We need two more votes,” he said. “Can you talk to a few more members?”
He passed his cell phone around to several Republicans who might be persuaded to change their minds. I argued the case as best I could, given my jet lag. David called back a little while later. Miracle of miracles, the House had passed the bill, 220 to 215. The Senate followed a few days later. I signed the Medicare Modernization Act of 2003 on December 8, 2003, at Constitution Hall. Behind me on the stage was a group of seniors who would benefit from the new law. One was Mary Jane Jones, the woman from Virginia who had to reuse her needles to afford insulin. The prescription drug benefit would save her an estimated $2,700 a year.
The new law called for the prescription drug benefit to take effect on January 1, 2006. Skeptics said that seniors would have trouble picking from all the competing private options. I disagreed. I believed that seniors were
