While the Bush administration continues to lead the nation toward a confrontation with Iraq, its two major domestic legislative initiatives, a dividend tax cut and a prescription drug benefit tied to Medicare, appear to be floundering on Capitol Hill. [IMGCAP(1)]

The Medicare initiative, in particular, has generated criticism from both sides of the aisle. Democratic attacks are to be expected, but Sens. Chuck Grassley (R-Iowa) and Susan Collins (R-Maine) and Speaker Dennis Hastert (R-Ill.) have also insisted that the proposal has major flaws.

If President Bush can’t count on the immediate support of the Senate Finance chairman, the Speaker and even the chairman of the Ways and Means Committee (California Republican Rep. Bill Thomas), the administration proposal isn’t merely in trouble — it’s DOA, at least in its initial form.

Most of the criticism of the proposal has centered on a requirement that seniors join a health maintenance organization or preferred-provider organization if they are to receive a new prescription drug benefit. Seniors who continue to choose fee-for-service coverage would be denied the new benefit.

While the White House prefers to see the proposal as offering seniors a choice (because seniors could choose from various plans the way federal government employees currently do under the Federal Employees Health Benefits Program), opponents have successfully focused on the HMO/PPO requirement for pharmaceutical coverage. Any “in-plan” requirement raises concerns among voters about freedom to choose doctors and bureaucratic insurance company requirements.

Bush supporters appear stunned by the political insensitivity of the White House’s prescription drug proposal. “It’s just not very saleable,” a health care policy veteran told me.

But if the plan’s cool reception on Capitol Hill — and even among normally sympathetic interest groups — is a problem for the White House, turnover inside the administration also adds to doubts about the proposal’s viability.

One of the administration’s major players on Medicare reform, Bobby Jindal, the assistant secretary for planning and evaluation at the Department of Health and Human Services, recently left the government to return home to Louisiana, likely to prepare for a gubernatorial campaign. [IMGCAP(2)]

And former White House senior health care policy adviser Mark McClellan left his post last fall, when he was confirmed as commissioner of the Food and Drug Administration.

If K Street insiders are correct, Tom Scully, the administrator of the Centers for Medicare and Medicaid Services, is likely to leave his post later this year. Meanwhile, Scully’s No. 2, Deputy Administrator and Chief Operating Officer of CMS Ruben King-Shaw, who previously ran Florida’s Agency for Health Care Administration, has moved temporarily over to Treasury to deal with health care market reform.

The turnover is another issue for an administration that already faces a skeptical Congress that could be focused on foreign policy and national security over the next few months.

The problem for the president is that Medicare reform and prescription drugs aren’t just any issues. They are the heart of Bush’s “compassionate” agenda for his 2004 re-election campaign.

Just as Bush wooed conservatives with his call for tax cuts and moderates with his emphasis on education during the 2000 campaign, he clearly hoped to use his tax cut and prescription drug proposals to reach both groups of voters, as well as seniors, during his campaign for re-election.

Some political allies of Bush believe that he will ultimately fall back on a tactic that he has used repeatedly and with great success in the past, both in Austin and the nation’s capital.

They foresee him backing off his own proposal and inviting — indeed urging — Congress to come up with its own Medicare legislation that would include a prescription drug benefit for seniors. If he likes the results, he would embrace the new plan as his own, taking credit for solving a problem that only a few years ago seemed intractable.

“Previously, Bush would come up with a set of priorities and tell legislators to put together the details. This time he supplied the details,” said one lobbyist who thinks that the White House should have stuck with its earlier model.

The problem for the White House is that both Medicare reform and prescription drug coverage for seniors are likely to get caught up in the developing presidential election, with the two political parties spending more time pointing fingers at each other than working on resolving fundamental differences.

Democrats need the prescription drug issue to use against Republicans in general and the White House in particular. Now, with the GOP controlling both houses of Congress and the White House, Democrats figure, probably correctly, that voters will blame Republicans for inaction.

Without a bipartisan prescription drug plan Bush might be forced to blame Congress for inaction. But that would be a risky strategy, since Republicans are in charge on Capitol Hill.

“The Republicans are going to have to do something on a drug benefit,” insists a savvy lobbyist. “The political pressure is so great on the White House and up on the Hill that they have to deliver.” But it won’t be easy.