By Lisa Seachrist

Washington Editor

WASHINGTON - Establishing a Medicare drug benefit has become fashionable in Washington, and Sens. Olympia Snowe (R-Maine) and Ron Wyden (D-Ore.) have entered what they call "a bipartisan and credible" option into the growing fray.

The plan, which the senators intend to introduce the week after Congress returns from its July 4th recess, relies on price supports for purchasing private sector drug-benefit insurance. The proposal would supplant the supplemental Medigap policies, as they are known today.

"We are about to unveil legislation to address a major gap in Medicare coverage for seniors," Snowe said. "We would give all seniors access to the plan and subsidize based on income."

The Seniors Prescription Insurance Coverage Equity (SPICE) Act will establish a menu of competing private sector benefit plans, and provide comprehensive coverage of prescription drugs for Medicare-eligible seniors with the federal government covering all or part of the premiums.

Seniors earning below 150 percent of the poverty level would pay no part of the premium, while people earning between 150 percent and 175 percent of the poverty level will have between 100 percent and 25 percent of their premium paid by the federal government. People earning over 175 percent of the poverty level will enjoy a 25 percent subsidy.

The participating private sector plans would be overseen by a SPICE board that would establish a model plan, and a cap on out-of-pocket spending for prescription drug expenses. Beneficiaries would be able to choose between the various programs and pay for annual deductibles and co-payments. The SPICE board would also ensure that participating plans would be unable to "cherry pick" the healthiest seniors. The Snowe-Wyden proposal is similar to the Federal Employees Health Benefit Program.

"We continue to embrace the concept of universal access to Medicare," Snowe said.

The senators intend to fund the subsidies by accelerating the 15-cent tax increase on cigarettes, set to begin in 2001, to the year 2000, and by using the 55-cent increase in tobacco taxes proposed in President Clinton's budget this year. Snowe pointed out that during passage of the budget resolution, 54 senators agreed that additional tobacco taxes should be used to provide a Medicare drug benefit. The measure would have needed 60 yes votes to have passed.

"Suffice it to say that cynics are now saying, 'Can the U.S. afford to cover prescription drugs?'" Wyden said. "I believe that we can't afford not to. This isn't some pie-in-the-sky program. It's a reasonable idea that actually provides coverage for needy seniors through a delivery system that's senior-friendly, and uses marketplace competition and consumer choice to hold down costs."

In addition to the tobacco funding, a special reserve fund for prescription drugs will provide revenue if a the Senate Finance Committee reports legislation significantly extending the solvency of the Medicare program. After the Bipartisan Commission on Medicare Reform failed to reach consensus to reform and modernize Medicare, many believe the atmosphere is too toxic for extensive reform of the program.

For that reason, Snowe and Wyden have jumped on their plan to provide a prescription benefit, regardless of whether extensive reform of the Medicare program is completed during the 106th Congress. With a post-impeachment Congress that is already eyeing the 2000 presidential race, passing even a simple drug benefit could prove difficult.

"We are going to try to see Congress beyond the smallness and pettiness that erupts during the falls of the even numbered years," Wyden said. "There is a choice. Either you can have a fight and an issue, or you can provide a solution. It's time to knock off the rhetoric and get some results."

The SPICE Act, which lacks firm legislative language, has proved intriguing to the pharmaceutical and biotechnology industries, which fear federal price controls that would stymie innovation.

"This is a sincere effort by Sens. Wyden and Snowe," said Carl Feldbaum, president of the Biotechnology Industry Organization. "On first reading, its concept appears better than the Allen bill [which advocates price controls.]"

However, Feldbaum is concerned that adding a prescription drug benefit outside the context of overall Medicare reform and modernization may prove an ineffective means of preserving the program.

Jeff Trewhitt, media spokesman for the Pharmaceutical Research and Manufacturers, said that group has "some concerns about the drug benefit being tacked on to Medicare, rather than integrated into a coordinated package. It does it the right way through private sector involvement, but we would rather see the benefit sharing the overall Medicare budget in a complete package."