What Congress and the White House have done so far about Medicare's looming bankruptcy could be compared to stabilizing a patient in the emergency room. The emergency still exists, and if not attended to directly, the patient will die.

The budget deal signed this year cuts the growth of Medicare spending enough so that instead of going broke in 2002, the Medicare hospitalization trust fund will remain solvent for a little more than 10 years. Then it will go broke.

But there is a glimmer of hope. Hidden deep in the fine print of the budget deal are provisions that allow senior citizens to make very limited choices about their health plans. For example, they can choose to enroll in "PPOs" (preferred provider organizations) rather than merely accept the "one-size-fits-all" deal set up by Medicare bureaucrats. The budget deal also sets up a "demonstration project" in which 390,000 elderly Americans will be allowed to open special "medical savings accounts" (MSAs) to pay for routine medical expenses.

Few Americans understand the significance of these provisions. But the fact that lawmakers were able to agree on them shows that Capitol Hill and the White House are finally beginning to understand what's really wrong with Medicare.

It's not that the program can't get enough money. It's that it wastes money. Medicare would demand more money no matter how much Congress appropriated for it. The problem was never Republican or conservative stinginess. Instead, what is crying out for reform is Medicare's structure and methods, its lack of choices and competition, and its flouting of the laws of supply and demand.

Medicare is a bureaucratic and economic monstrosity. It is governed by more than 22,000 pages of federal rules, regulations and guidelines. Filling out Medicare forms now takes up 25 percent of the typical doctor's time. Processing a simple decision to cover the cost of a new medical treatment can take the Medicare bureaucracy anywhere from two months to 12 months. If the treatment is more complicated, it can take years.

Since costs are not based on supply and demand, Medicare's pricing system is notoriously arbitrary: It pays too much; or it pays too little; or the price controllers don't have enough data (they never have enough data); or they didn't take into account the right factors. Medicare is so inept that a recent attempt to save money through "managed care" actually backfired: The General Accounting Office (GAO) found that Medicare wound up spending more money than it would have if it had simply left things alone.

Medicare's complexity and ambiguity invite manipulations and cheating. Federal investigators estimate the program loses an incredible $23 billion to fraud each year. The $20 billion-per-year home health-care program loses as much as 40 cents out of every dollar to what is quaintly referred to as "unnecessary expenditure." As The Washington Post reported on Aug. 8, "The regulatory maze has spawned an industry of billing consultants who help health-care businesses maximize their reimbursements and avoid fraud."

Who picks up the tab for this constant flow of wasted dollars? The taxpayer, of course. Most elderly Americans think the Medicare premiums they pay are what sustains the system. They couldn't be more wrong. For every $1 paid in Medicare premiums by the elderly, taxpayers today put up $5, according to Guy King, former actuary for the Health Care Financing Administration (HCFA) Medicare's price-setting body. As the U.S. population ages, this disparity will widen.

Is there a way to fix this monstrosity? There is. But because it will involve not just tinkering with the system, but a full-scale overhaul, lawmakers are skittish about tackling it. That's why the new provisions allowing a tiny bit of choice into the system are so modest. Lawmakers fear constituents will storm the political barricades when they hear Congress is "restructuring Medicare," no matter what that might mean.

What lawmakers don't realize is that they already have a tried-and-true example of how Medicare could be restructured; a health-care system that is already in place, with a track record people can examine to their own satisfaction. Not only that, but this example has a built-in public-relations appeal of its own, which can be used to overcome public fears.

Think about it: What if Americans were told that Congress wants to fix Medicare by giving the elderly the same kind of health-care system lawmakers and their families use? It's highly ironic that the real solution to Medicare's problems has been sitting, literally, under the noses of federal lawmakers during this entire, tiring, seemingly endless debate.

I refer to the Federal Employees Health Benefits Program (FEHBP), a consumer-driven system that delivers better health care more efficiently than Medicare does now. By allowing federal employees and retirees to choose their own health plans based on their own personal needs, FEHBP helps foster efficiency in the health-care market and competition among providers of both insurance and medical services. These are precisely the qualities whose absence dooms Medicare.

The 37-year-old federal health insurance program offers beneficiaries more than 600 health-care options nationwide, ranging from large, traditional fee-for-service plans to geographically based HMOs. It serves not only members of Congress and their staffs, but the president and vice president and their families, as well as federal and postal service employees and some 1.6 million retirees and their dependents, altogether almost 9 million people.

Does it work better than Medicare?

How could it fail to do so? Besides giving government workers and retirees a wide range of choices, FEHBP has kept its premium increases far below those of either Medicare or even private-sector health insurance. On average, FEHBP premiums increased by 3.7 percent per year from 1989-97. By stark contrast, Medicare premiums increased an average of 8.2 percent per year from 1989-96, and private-sector premiums increased 7.9 percent on average from 1989-95 (both latter figures are from the latest years for which figures are available).

If Congress is ever going to break the ice on Medicare reform, how better to alleviate public fear than to offer the elderly the same kind of health-insurance system lawmakers themselves use for their own families: a government program that offers better choices for less money?

People would be allowed to stay in the traditional Medicare setup if they want. The decision to leave the current system should be purely voluntary. Retirees who want to stay with the private insurance plan they have with their employer or union also should be able to do so, or have the freedom to move to another plan that better suits their needs -- an HMO, managed-care, preferred provider, fee-for-service, or any other innovative option the market might develop.

Instead of Medicare bureaucrats dictating what benefits are provided, the government would give each retiree enough money to pay for a typical health-care plan, and let them decide how to spend the money. This is the arrangement that works so well for FEHBP. Retirees who buy plans that cost less than the government's contribution would be able to pocket the savings. Those who want to purchase more coverage also could do so, at their own expense, just as federal employees and retirees do.

Such a system would discourage fraud and abuse. As The New York Times noted in an Aug. 1 editorial, "Health plans that collect a fixed dollar amount for treating Medicare enrollees will have no reason to overbill Washington for treatments that are inappropriate or dangerous."

Participating private health plans would be required to present their services and costs in plain English, just as federal plans do. This would enable retirees to pick and choose among plans with greater ease and reduce or eliminate confusion. The role of bureaucracy would be reduced. Instead of more than 22,000 pages of laws, rules, regulations and guidelines, FEHBP's laws and rules cover just 79 pages.

By changing the Medicare system in this way, Congress would open up opportunities for private-sector organizations and institutions -- including fraternal groups, professional and trade associations, health-care charities, and even religious institutions -- to sponsor heath plans or monitor their quality and performance.

The idea of reforming Medicare along the lines of FEHBP is gaining support from individuals and institutions from across the political spectrum -- among them the American Medical Association, the Progressive Policy Institute, the Federation of American Hospital Systems and The New York Times.

Details differ. But the breadth of support should surprise no one. It's a great idea. What's surprising is that Capitol Hill has taken so long to notice that a solution is sitting right under its nose.

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Note: Robert E. Moffit, Ph.D. a former HHS and OPM official, is deputy director of domestic policy studies at The Heritage Foundation, a Washington-based public policy research institute. Additional information about The Heritage Foundation can be found on the World Wide Web (www.heritage.org).