Rather than initiating an expensive new federal entitlement to pay for prescription drugs, Washington should step aside and allow seniors to combine Medicare funds with the money they spend on private insurance and pay premiums into a comprehensive private plan instead, health care analysts contend.

• Nearly three-fourths of seniors have sought to fill some of the gaps left by Medicare by coverage through a former employer or by acquiring supplemental Medigap insurance.

• According to the firm Milliman & Robertson Inc., Medicare will spend about $5,800 on each beneficiary this year -- and the most popular Medigap policy costs $1,611.

• Added together, and supplemented by about $150 out-of-pocket, seniors could pay premiums for an HMO with comprehensive health coverage -- including prescription drugs.

They would have to make small co-payments. But they would no longer be subjected to unlimited out-of-pocket drug costs.

Some 16 percent of seniors have already shifted out of traditional Medicare and into an HMO -- of which 95 percent provide a prescription drug benefit. But after the Clinton administration cut Medicare reimbursements to HMOs last year, many dropped the program and left 450,000 seniors stranded -- with another 325,000 expected to join them this year.

Seniors should be allowed to use their Medicare and Medigap dollars to enroll in fee-for-service plans with a high deductible and a Medical Savings Account -- which in many cases would cost seniors less than they pay for Medigap policies.

Out-of-pocket costs under these plans could average about $1,200 a year. The average senior who now has Medigap insurance could save more than $1,000 a year in lower premiums and out-of-pocket costs -- and still enjoy coverage for prescription drugs.

Source: John Goodman (President, NCPA), "Government-Free Rx," Washington Times, February 20, 2000.