Sen. Edward Kennedy (D-Mass.) says Congress has “a real shot at” passing a Medicare prescription drug bill this year. According to Thomas Scully, the White House’s Medicare administrator, “The odds are better than 50-50.”

They’re not alone in being upbeat. Rep. Billy Tauzin (R-La.), chairman of the Energy and Commerce Committee that has partial jurisdiction over Medicare, told me, “I’m very optimistic.” His colleague on Medicare, Ways and Means Chairman Bill Thomas (R-Calif.), is said to share that view.

[IMGCAP(1)] And so does the AARP’s national policy director, John Rother. “I’d say the odds are 60-40 at this point,” he told me. “And if we can get the right tone next week in the Senate Finance Committee and if there are substantive talks between Senator Kennedy and [Senate Majority Leader] Bill Frist [R-Tenn.], I might go higher.

“If [Senate GOP leaders] get a deal with Kennedy, they can pass a bill not with a bare 60 votes, but with 80 votes.”

For all kinds of reasons, personal and political, it really does look as if the long war between Democrats and Republicans over a drug benefit for seniors may be ending.

Republicans claim that Kennedy and GOP negotiators were on the edge of an agreement just before the 2002 elections — with the Republicans accepting a $450 billion price tag — before then-Majority Leader Tom Daschle (D-S.D.) stopped the talks in order to preserve Medicare as an election issue.

But, said a source close to Senate Democrats, “It didn’t work as a campaign issue. The Democrats don’t think they can get any more traction with it. You don’t see any of the presidential candidates talking about it, do you? They’ve moved on.

“And also, Kennedy wants [ a bill] and the Republicans need it. The president wants a Rose Garden signing ceremony. He’ll sign anything that has ‘Medicare’ attached to it to show that he’s ‘compassionate.’”

There are still potential stumbling blocks, especially the Bush administration’s insistence on using bigger drug benefits as an incentive for seniors to join managed care plans such as preferred provider networks or HMOs.

Originally, the administration floated a plan — immediately hooted down by both Republicans and Democrats — to deny a drug benefit to seniors who remain in traditional fee-for-service Medicare plans.

Now, the administration wants a so-called “differential benefit,” but that is not finding much favor, either. Democrats are adamantly opposed to it, threatening to filibuster any Senate bill that contains it and likely dooming its chances of passage.

According to Congressional aides, neither a bipartisan bill nearing markup in the Finance Committee nor the House measure worked out by Thomas and Tauzin contains a differential benefit.

Both bills reportedly do respond to the administration’s urging that Medicare include an enhanced PPO/HMO option with non-drug incentives to make it an attractive choice for seniors — and, more so, for about-to-retire baby boomers who are used to managed care plans.

Republicans are convinced that Medicare needs to be reformed or “modernized,” using private insurance models, in order to save it from going bankrupt under the weight of baby boomers’ demands for increasingly expensive medical services and drugs.

Democrats deride the GOP plans as attempts to “privatize” Medicare and “force” or “coerce” seniors “to leave their family doctor and join an HMO.”

Nonetheless, the two sides appear to be nearing a deal whereby Republicans would be allowed to create new insurance-based reform schemes as long as all seniors get the same drug benefit.

The Finance Committee draft measure gives seniors enhanced preventive services, better chronic care management and protection against catastrophic medical costs — but not a richer drug benefit — if they join so-called “Medicare Advantage” plans.

An administration study indicates that as many as half of current seniors would opt for the managed care plan envisioned by Thomas and Tauzin, which offers premium rebates as an inducement to sign up.

Besides “differentials” and “reform,” the cost or “adequacy” of a drug benefit always has been a barrier to agreement, although Kennedy confirmed in a meeting with Roll Call editors and reporters on Tuesday that he and GOP negotiators were close to an agreement in 2002 that would have cost $450 billion over 10 years.

This year, Republicans have budgeted $400 billion for a drug benefit — up from $320 billion in Thomas’ 2001 bill. Democrats want more, but Kennedy indicated that the kind of budgetary gimmicks Republicans used to pass Bush’s recent tax cut might apply to Medicare.

“I’ll sign on to the [best] number that Republicans will sign on to,” he said, “and we’ll expand it over a period of time. … You can phase it in and gradually close the doughnuts in it,” referring to gaps in protection at various levels of seniors’ drug expenditures.

“I don’t like it,” he said, “but you don’t like a lot of things that you vote for.”

If a drug benefit actually passes this year, a lot of the credit will go to Kennedy, who decided to put ideology and partisan politics aside to get seniors drug coverage and never stopped talking to Republicans after last year’s near-miss.

It’s not a done deal, but Frist is determined to get a bill through the Senate before the Fourth of July recess. The House presumably will act with equal or greater dispatch, and Frist hopes that final passage could come before the August break.

The danger would be in delay. The nearer Congress gets to an election year without passing the benefit, the more politicians will be tempted to exploit it as an issue one last time.