By Lisa Seachrist

Washington Editor

WASHINGTON - In a Rose Garden ceremony, President Clinton presented a proposal to modernize the Medicare program by injecting market competition and providing a highly desired prescription drug benefit.

In his remarks, Clinton said that, had the Medicare program been written today, no one would envision the program without a prescription drug benefit. The drug benefit in the plan would be available to all seniors and would use private sector managers to keep costs down without employing a federally mandated price control.

"In a nation bursting with prosperity, no senior should have to choose between buying food and buying medicine," Clinton said. "My Medicare plan is credible, sensible, fiscally responsible. It will secure the health of Medicare, while improving the health of our seniors. And we can achieve it."

Clinton called on Congress to embrace a spirit of bipartisanship on the issue in the legislative window between now and the start of the 2000 campaign.

The Clinton proposal would dedicate 15 percent of the federal budget surplus every year to shoring up the Medicare system, so that it can remain solvent through 2027. In addition, it would make the traditional fee-for-service program more competitive through the use of market-oriented purchasing and quality improvement tools, which the administration estimates would save $25 billion over 10 years.

The administration's proposal also calls for price competition between the Medicare managed-care programs by establishing a "competitive defined benefit," which would include the new drug benefit, and allow the plans to compete for the Medicare population. This proposal is estimated to produce $8 billion in savings.

The biggest change in the system is the Prescription Drug Benefit, an extremely popular issue in various forms in Congress. The cost of prescription drugs is the fastest-growing component in the health-care system today and members of congress have offered proposals ranging from federal premium support of private health insurance and granting Medicare beneficiaries the right to federal drug discounts as a means of alleviating the impact of this cost on seniors.

The Clinton administration is calling for a new Medicare "Part D" prescription drug benefit that would be a voluntary program. The program would cost about $24 per month in 2002, when it has a $2,000 benefit cap. By the time it is fully phased in by 2008, the premium would be $44 per month and the benefit cap would be $5,000. Under the proposal, Medicare would pay half the cost of the prescription drugs.

While the program would be available to all seniors, beneficiaries with incomes below 135 percent of poverty would not pay premiums or cost-sharing. Those with incomes between 135 and 150 percent of poverty would receive premium support as well.

The drug benefit plan would be managed by private sector contractors to negotiate volume discounts, Clinton said. He said the administration has no interest in imposing price controls - which the pharmaceutical and biotechnology industries oppose vehemently.

"We have the most innovative research and development in the pharmaceutical industry in the world," Clinton said. "We don't want to do anything to harm that industry."

The full details of Clinton's proposal are expected to be released later this week.

"We were briefed fairly extensively on Friday," said Carl Feldbaum, president of the Biotechnology Industry Organization. "It was evident that what they were talking about wasn't set in stone then, so we won't know anything until the final proposal is released. But they were attuned to the harmful effects of price controls."