Republicans push $400bn health reform

The Republicans last night appeared close to pushing through Congress a $400bn (£235bn) reform of Medicare, in what would be a major coup for President Bush ahead of his 2004 re-election campaign.

Under the plan, the largest shake-up for the US government programme for the elderly and disabled since its inception in 1965, Medicare beneficiaries would gain extensive new prescription drug coverage.

It could also lead to a part-privatisation of the largest federal entitlement programme, by encouraging private insurance companies to create schemes geared for old people. Republicans claim these will prove more attractive than the traditional Medicare coverage in operation for the past 38 years.

The plan has been bitterly criticised by Democrats - indeed, six of the party's nine 2004 challengers to Mr Bush argue it is merely a give-away to the deeply unpopular health insurance industry, which will leave some poorer seniors worse off than they are under the current system. But the measure has gained potentially decisive backing from the American Association of Retired People (AARP), the main lobbying group representing seniors, and among the special interests most courted by politicians of both parties.

Though some AARP members oppose the bill, Republicans calculate that its passage will boost their appeal to older people, who vote in the greatest numbers of any age group. Traditionally the elderly have been a rich source of support for the Democrats, perceived as the party of "big government", committed to publicly supported health and welfare.

Now, however, Republicans can boast they are spending a further $400bn to help seniors - and the sum could turn out considerably higher.

With health care costs rising much faster than inflation, many economists warn the true cost could be close to $1,000bn (£587bn). This, they say, will make it even harder to rein a federal budget deficit already running at close to $500bn (£293bn).

Senate and House votes on Medicare reform could take place today. Last night, Republican managers on Capitol Hill offered further improvements in the prescription drug benefits to win swing votes.