Confusion reigned as Washington lawmakers went home for Thanksgiving after passing the biggest entitlement expansion in decades. Airport interviews with federal lawmakers eager to get out of Dodge confirmed absolutely that the new Medicare law either moves us along the road toward socialized medicine or dramatically advances free-market reform. One or the other, the experts agree.

"It's the thin edge of the wedge that's moving us more and more toward government control of health care," says Sally Pipes, president of the Pacific Research Institute, a free-market think tank in San Francisco. But Greg Scandlen, the director of the Galen Institute's Center for Consumer-Driven Health Care, who usually agrees with Pipes on health-care issues, says the bill "opens the door for more modernization" and "creates the necessary conditions for reform."

Adding further confusion for grass-roots conservatives were frenetic declamations by liberal Sen. Ted Kennedy (D-Mass.). "The legislation before us is a partisan document that embodies this administration's right-wing ideology and its desire to fuel the profits of the wealthy and powerful," Kennedy declared on the Senate floor. "It cynically uses the elderly's need for prescription drugs as a Trojan horse to reshape Medicare. This is a calculated program to unravel Medicare, to privatize it."

The instinctive reaction of conservatives is that anything Kennedy is strongly against is something they should be for. But it was hard to see why he should be so strongly opposed to a program of new spending that is projected to cost at least $400 billion within a single decade and possibly more. Conservative groups, including the Heritage Foundation, warned that the new entitlement could eat away at Bush's tax cuts while swamping future generations with a tidal wave of unfunded liabilities.

Many observers saw the comments of Kennedy and other Democrats as a ploy to take the tarnish off of Bush's political victory. Although polls showed seniors initially skeptical of the new plan, Bush's approval rating in early December shot up to 61 percent in an Annenberg Election Survey, largely because of his Medicare victory and surprise Thanksgiving visit to Iraq . It was widely believed on Capitol Hill that Kennedy's remarks were to kick off a campaign against Republican "stinginess" and play for still more spending to fill the program's alleged gaps in coverage.

Yet optimists hope that one silver lining may overwhelm the pull toward big government. Even critics of the bill concede that the Bush administration and congressional Republicans made Democrats pay a steep ideological price for the new entitlement - inclusion of universal medical-savings accounts (MSAs), or as they now are to be called, health-savings accounts, for those younger than 65. For years promoted by conservatives as a way to control health-care costs while preserving individual choice, including the MSAs provided a fig leaf for many wavering Republicans to vote for the bill. One of those was Rep. Paul Ryan (R-Wis.), a supply-side tax cutter on the House Ways and Means Committee who still is very concerned about the new spending but tells Insight he voted for the bill largely because he believes "MSAs will spark a consumer revolution." He adds, "We would have never gotten MSAs so pure through an ordinary tax bill." In fact, Ryan says that a major reason for Kennedy's hysterics was that national health-care "advocates like Kennedy see MSAs as the antithesis of socialized medicine."

A common refrain among conservative supporters of the bill is that some type of prescription-drug benefit was inevitable, and there was no other way to get the 60 votes needed to overcome a Senate filibuster to pass MSAs as comprehensive as these. The earlier MSAs that passed as part of a health-care bill in 1996 were loaded with restrictions and applied only to a limited number of self-employed workers, largely at the insistence of Kennedy and the Clinton administration. "We now have complete MSAs, which we never would have gotten under any other circumstances," says Dan Perrin, executive director of the Archer MSA Coalition, an alliance of activist and business groups that back the savings accounts. "Conservatives and others say we could have gotten MSAs some other way. They are delusional. ... We would have not gotten 60 votes in the Senate for another 10 years."

Perrin concludes, "I see this bill as socializing one small part of an already-socialized Medicare system, which is the drugs, and trading it for reforms and preventing the socialization of the entire free-market health-care system." He says it was urgent to get the savings accounts passed because as employers continued to drop coverage due to exploding costs, the pressure would build for some type of national health-care system such as the single-payer model from Canada .

The accounts as passed would allow any individual, regardless of income, who gets an insurance policy with a deductible of at least $1,000 to contribute or let his or her employer contribute as much as $2,600 a year for a single person and $5,150 for a family in pretax dollars. The buildup in interest or capital gains would be untaxed, and the account holders could withdraw money for premiums, costs under the deductible and other health-care expenses. Unlike the current pretax "flexible-spending accounts" employers offer that expire at the end of the year, the health-savings accounts can be rolled over from year to year. This means someone could come into retirement with $20,000 in such an account. They can even be left to survivors, says Perrin.

Senate Minority Leader Tom Daschle (D-S.D.) already has introduced a bill to "correct" the one that just passed by, among other things, getting rid of the MSAs. In sync with the Democrats, liberal media are portraying these accounts as tax cuts for the young, healthy and rich. "Medicare Bill Includes New Tax Shelter," screams a headline in the International Herald Tribune, owned by the New York Times. "Younger, healthier and wealthier Americans had reason to thank Congress as the bill headed to President Bush's desk just before Thanksgiving," the story intoned.

But John Goodman, president of the Dallas-based free-market National Center for Policy Analysis who was one of the first promoters of the MSA concept, says the biggest beneficiaries are working-class folks, who no longer will have to suffer micromanagement of their health care by their insurance company. "When you choose higher deductible plans you save money; it doesn't matter whether you're poor or you're rich," Goodman tells Insight. "People can still join HMOs [health maintenance organizations], but this gives people an opportunity to control more of their own health-care dollars. Instead of giving all the money to Blue Cross, you're now going to be able to control some of those health-care dollars yourself." And as patients shop around, and directly negotiate with doctors, costs should come down without the government having to ration care, say Goodman and other proponents.

Goodman, from his base in Dallas , advised then-Gov. Bush about MSAs for his 2000 presidential campaign, says the president understands MSAs and has always seen them as part of the solution for the health-care crisis. After a speech at a church in Florence , S.C. , during the South Carolina GOP presidential primary, this reporter watched and listened as candidate Bush gently explained MSAs to a middle-aged, blue-collar worker concerned about health-care coverage.

Still, as much as Goodman loves the health-savings accounts that came out of the legislation, he still was against the Medicare bill because of its costly main provisions. He says there was no reason to create a new universal entitlement when 75 percent of seniors already had prescription-drug coverage. His group predicts that only $1 of every $16 spent on prescription drugs in the new entitlement will go for drugs that seniors currently aren't getting; the rest simply will replace their current types of coverage. "It's going to be taxpayer money replacing money that somebody else is providing right now," he says. "It includes state government through the Medigap program, it includes the employers like General Motors, as well as the [private] insurance Medigap plans. We're just replacing one set of dollars with another set of dollars and piling up a new burden for taxpayers in the process."

Robert Moffit, director of the Heritage Foundation's Center for Health Policy Studies, accuses Republicans of giving away the store for MSAs. "This is a headlong retreat from [their] original standards of Medicare reform," he says. "It is not serious reform and it will ultimately have a profound impact on the future of tax cuts and the future of tax reform." Moffit favors reshaping Medicare to be like the Federal Employees Health Benefits Plan, in which a set voucher could be given to senior citizens to spend on their health care, be it doctor visits or prescription drugs, and they could supplement that with their own money. A bipartisan commission in the late 1990s headed by Sen. Bill Frist (R-Tenn.), now the Senate majority leader, and Sen. John Breaux (D-La.), recommended a system called "premium support" in which private plans would compete with Medicare to provide coverage, and the private plans could cover prescription drugs. Instead, the new legislation contains a much smaller pilot in 2010 that covers just a few metropolitan areas.

But Scandlen and other reluctant conservative supporters say the MSAs, which begin the first day of next year, could be the impetus for real Medicare reform. "I think they're going to have a major role in changing health-care financing for 250 million Americans, and I think the consequences on Medicare, although indirect, will also be important," he says. "As more and more people get money in their accounts, and then all of a sudden become eligible for Medicare, I don't think they're going to be very happy about just going into some bureaucratic system. They're going to want to have more control over their own resources, and I think that will end up changing Medicare itself."

And turning more and more workers into investors could have political benefits for the GOP, says Perrin, who also is executive director of the Republican Leadership Coalition. They will be more likely to embrace private accounts for Social Security and realize that Democrat business-bashing is attacking their livelihoods, he argues. "We are talking about guys who bring their lunch pail to work," he says. "Just imagine them having a Wall Street Journal under the other arm because they're checking the distribution in their MSA and determining which fund is the better buy. That's what we're talking about in huge terms."

One thing conservative supporters and opponents agree on is the battle for Medicare reform is far from over. In fact, it now has shifted into high gear. "We will be fighting liberals in hand-to-hand combat over this issue for the next 10 years," Ryan says. "It's a race between new spending and effective reforms."

Moffit says the "Democrats will campaign against stingy Republican gaps in coverage." What Republicans and the Bush administration should do, he says, is work to remove Medicare's increasingly burdensome regulations on the doctors it pays. He cites a PricewaterhouseCoopers study which found that for every hour a Medicare patient spent in a hospital the staff had to spend a half-hour in paperwork. And many doctors are worried that simple billing errors could result in jail time for Medicare fraud.

And then there are the Draconian Clinton restrictions on private contracting. In preventing patients from going outside the system, "Medicare is far more authoritarian than the British National Health Service," Moffit says. The Clinton Department of Health and Human Services (HHS) under secretary Donna Shalala sent doctors warning letters saying they would be penalized for double-billing if they contracted with Medicare patients outside the Medicare system. The policy was being challenged in court for lack of authority provided by law, but an effort in 1997 to allow doctors to contract out of the program backfired when the Clinton administration outmaneuvered Republicans and threatened to veto the entire budget if there were not a two-year ban on receiving any payments from Medicare if doctors treated even one elderly person outside the system. This was the first actual legislative restriction preventing doctors from contracting out of the system, Moffit says.

Many Democrats and the AARP have opposed private contracting "because they want a unitary system where everyone is treated the same," Moffit says. But when baby boomers become eligible for Medicare the MSAs will run headlong into the private contracting systems and prevent them from using the money to seek better care. "Unless doctors are liberated to provide private contracting, the MSAs will not work," he says. Sue Blevins, a former nurse who is now president of the free-market Institute for Health Freedom adds, "Without that real private contracting, there is nothing private in this bill."

Although the 1997 restrictions on private contracting are not explicitly repealed, Ryan says his reading of the language in the new bill would allow the department to lift the restriction. And he notes that HHS Secretary Tommy Thompson has an ideology quite different from that of Shalala.

Repeal of this restriction would be one action that could demonstrate Bush's commitment to more health-care freedom for Americans and for seniors in general. Bush has built up tremendous political capital and good will from this bill, and he faces a decision of whether to use that capital simply to get more votes or to fight for principled Medicare restructuring another day in the not too distant future. Whether history will record this bill as a step toward more government control or free-market health-care reform, say Capitol Hill insiders, likely will depend on what Bush does next.