[Senate Hearing 108-229]
[From the U.S. Government Publishing Office]
S. Hrg. 108-229
ENHANCING MEDICARE FOR THE 21ST CENTURY: A PRESCRIPTION BENEFIT FOR
SENIORS
=======================================================================
HEARING
before the
SPECIAL COMMITTEE ON AGING
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
ST. LOUIS, MO
__________
AUGUST 27, 2003
__________
Serial No. 108-19
Printed for the use of the Special Committee on Aging
90-720 U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2003
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
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SPECIAL COMMITTEE ON AGING
LARRY CRAIG, Idaho, Chairman
RICHARD SHELBY, Alabama JOHN B. BREAUX, Louisiana, Ranking
SUSAN COLLINS, Maine Member
MIKE ENZI, Wyoming HARRY REID, Nevada
GORDON SMITH, Oregon HERB KOHL, Wisconsin
JAMES M. TALENT, Missouri JAMES M. JEFFORDS, Vermont
PETER G. FITZGERALD, Illinois RUSSELL D. FEINGOLD, Wisconsin
ORRIN G. HATCH, Utah RON WYDEN, Oregon
ELIZABETH DOLE, North Carolina BLANCHE L. LINCOLN, Arkansas
TED STEVENS, Alaska EVAN BAYH, Indiana
RICK SANTORUM, Pennsylvania THOMAS R. CARPER, Delaware
DEBBIE STABENOW, Michigan
Lupe Wissel, Staff Director
Michelle Easton, Ranking Member Staff Director
(ii)
C O N T E N T S
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Page
Opening Statement of Senator James Talent........................ 2
Panel I
Claude Allen, Deputy Secretary Department of Health and Human
Services....................................................... 5
Panel II
Ron Levy, President and CEO for SSM Health Care, St. Louis, MO... 23
Audrey Vallely, Senior Citizen, Pacific, MO...................... 29
Frederick G. DeFeo, M.D., President of Missouri State Medical
Association.................................................... 33
(iii)
ENHANCING MEDICARE FOR THE 21ST CENTURY: A PRESCRIPTION BENEFIT FOR
SENIORS
---------- --
WEDNESDAY, AUGUST 27, 2003
U.S. Senate,
Special Committee on Aging,
St Louis, MO
The committee met, pursuant to notice, at 10 a.m., in
Little Theater, Harris-Stowe State College, 3026 Laclade
Avenue, St. Louis, MO, Hon. James M. Talent presiding.
Present: Senator Talent.
Mr. Givens. Good morning. I am Henry Givens, Jr. I am
President of Harris-Stowe State College and we are honored to
have all of you with us this morning. The Honorable Senator
James Talent, distinguished panelist, city and state
legislators, community leaders, members of the Harris-Stowe
State College family, distinguished guests, ladies and
gentlemen, welcome to Harris-Stowe State College and a special
welcome to this historic event.
Harris-Stowe is greatly honored and privileged to have been
chosen as a site for this Congressional hearing relating to
healthcare benefits. The information that you will receive
today, is one of the utmost importance to a significant portion
of the population in metropolitan St. Louis and in the Nation
at large.
We are all deeply indebted to our U.S. Senator from
Missouri who has brought these distinguished panelists to our
community. As you know, Senator Jim Talent campaigned for the
U.S. Senate on a platform of healthcare, job economic growth
and national defense. Missourians elected him to serve our
great State in the U.S. Senate last November.
Senator Talent served for 8 years in the U.S. House of
Representatives and 8 years in the Missouri House. Now, as a
freshman U.S. Senator, he holds important Senate leadership
positions and is working diligently to be Missouri's healthcare
advocate.
Let me just mention a few of the important bills that he
has already sponsored in the U.S. Senate. The Small Business
Fairness Act to provide healthcare to small business owners and
workers.
Another key legislation is the Sickle Cell Treatment Act to
expand treatment and services for patients with this disease.
This legislation has been rightfully called the most
significant sickle cell disease legislation to be introduced in
20 years.
Senator Talent has a long record of public service to the
citizens of Missouri and now to the American people all across
the nation. It is, therefore, my distinct privilege and great
honor to introduce the convener of this highly important
congressional hearing, the Honorable James M. Talent, Senator
from the great State of Missouri. Senator Talent.
OPENING STATEMENT OF SENATOR JAMES M. TALENT
Senator Talent. Thank you, Henry. That was more than I
deserve and better than I often get, so I appreciate that very
much. It is a great pleasure to be here at Harris-Stowe. When I
visited last, Dr. Givens said, you need to come by and see our
new Emerson Center. I said, well, not only am I going to come
by and see it, we may use it for something that we are doing in
town, and he was very generous and offered, and we took him up
on it. It certainly is a magnificent facility, a part of a
magnificent institution.
I could spend the whole hearing talking about Harris-Stowe,
but suffice it to say that, under Henry Givens leadership, this
institution has continued to play a vital role in the African-
American community, but more broadly speaking, in the St. Louis
community as well.
We were just talking about the partnerships in which
Harris-Stowe is at the center. I know that that role is going
to grow, and I have been pleased to help in any way I can. We
are grateful, again, to the college and to Dr. Givens for
allowing us to be here.
I am going to convene now, a hearing of the U.S. Senate
Special Committee on Aging. It is a committee that I wanted to
be on and was pleased to be appointed to when I went into the
Senate, because of the importance of the issues that this
committee confronts, one of which, of course, is prescription
drugs, but also the future of Medicare in general, how to
strengthen it, and how to strengthen Social Security.
These issues are our key not only to the tens of millions
of seniors today, but to all of us, because all of us are
hoping, if we are not already senior citizens, to someday
become senior citizens. We are all going to have to confront
these issues.
Today we are going to discuss improvements to the Medicare
program that I hope and believe are going to provide Missouri
seniors and the disabled with access to quality, affordable
healthcare, including prescription drug coverage.
Whoever is chairing the hearing gives a brief opening
statement and then introduces the first panel, and I am going
to do that, and then asks some questions of the panel.
Typically, we do not have questions directly from the
audience in a Senate hearing. I chafe at that. But what we've
done is ask you to fill out question cards and I have one here.
Medicare consists of two distinct parts, Part A, which is a
hospital coverage, and Part B, which is the supplementary
medical insurance, which is technically voluntary but which
almost everybody participates in.
Medicare has been that way since it was introduced in 1965,
and I like to refer to Medicare as a tremendously important
program that's done good for millions and millions of people,
including both of my parents. But it is a program that was
devised in 1965 and has not, structurally, really changed
since.
Now in 1965, if you think about it, really nobody who had
health insurance coverage had prescription drug coverage. It
was a pretty small part of people's treatments. I have asked
physicians about this--we have physicians here today. In those
days, you got prescription drugs if you had any problems with
infections, usually on a short term, or for pain. It just was
not a regular course of disease management or treatment. In
fact, disease management really wasn't known that much then.
So Medicare reflects those times. It was fine when it was
introduced, but now, just about everybody who has health
insurance coverage has prescription drug coverage, and most
people who have coverage have access to options that will help
them with things like wellness and disease management.
About 16 percent of the Missouri population is enrolled in
the Medicare program. This is a vital issue for Missouri
seniors, and today's hearing is going to focus on the
legislation which Congress is currently working on and how it
can help seniors and the disabled have access to quality,
affordable prescription drug coverage.
Now the good news: Legislation has recently passed the
Senate and the House to provide for prescription drug coverage
in a context where we are going to strengthen access to
Medicare for everybody. We have an historic opportunity. This
is something people have been talking about for a long time.
The window is now open, and I am hopeful that we are going to
get this bill through this window in the next couple of months.
We are going to hear testimony from several panels of
witnesses on several related issues. The Senate passed bill
provides benefits to seniors including new prescription drug
coverage as well as a voluntary option that offers seniors the
kind of choices that other people who are insured currently
enjoy.
I am going to introduce the panelists at the end of my
remarks. Let me say also a comment about this hearing and the
context of it. I did a number of town hall meetings earlier in
the year on prescription drugs and heard from seniors about
what they wanted in a prescription drug plan. It was all common
sense. It was exactly what you would expect.
They wanted coverage that would apply to everybody, be
voluntary, as immediate as possible, have reasonable co-pays
and deductibles, and not force them or their doctors to
prescribe only certain kinds of prescription drugs.
The bills that have passed the House and Senate, I am
pleased to say, are consistent with all those principles.
They're very different, but each of them respects those
important principles.
I am hopeful that the conference committee between the
House and Senate will produce a final bill in the next couple
of months. When it does, we will have another series of
meetings around Missouri to explain what is in the bill so that
people know the details of it.
We don't have those details available, but I wanted to have
a hearing to touch base on the underlying principle. I wanted
to get an authoritative official from Washington who could
discuss these issues and be available to answer questions, and
that's really why we are here today.
Under both the House and Senate bills, seniors will pay an
estimated $35 a month premium, about a dollar a day, for
prescription drug coverage delivered through a Medicare--
approved healthcare plan. The deductibles in the House and
Senate bill vary from $250 to $300 a year.
Both bills provide additional help for lower income seniors
and people who have very high prescription drug costs. So folks
in those situations will save more, although everybody will
save.
Both bills provide for immediate implementation of a
Medicare drug discount card that will save people from 10 or 15
to 25 percent. We can do that right away. The rest of the plan
will take several years to set up, so there is some immediate
relief, which is something that is important to me. The
President has asked Congress to provide seniors with that card
starting in 2004.
Low-income seniors will also immediately receive--or
receive within the six months after the President signs the
legislation, which is as close as Washington gets to immediate,
a $600 to $800 subsidy in each of the next 2 years while the
full plan is implemented.
In addition to the prescription drug benefit, the Medicare
package would allow seniors to choose from a variety of
Medicare-approved health care plans to fit their individual
health needs. The idea here is to try and create a system for
seniors which is similar, if they choose, to the Federal
Employee Health Benefit Plan, which has worked very well for
Federal employees.
These plans will offer seniors more benefits, such as
better preventative care for diseases like cancer, heart
disease and obesity. Care coordination, which is like disease
management for conditions such as diabetes, heart disease and
Alzheimer's Disease, protection against high out-of-pocket
costs, and greater choice of the doctors and hospitals they
want for treatment.
Everything about the new Medicare plan is voluntary, and
that is important--and that's both in the House and Senate
bills--and that will be in the conference report as well.
Both bills include provisions that seniors have told me are
important and I agree reasonable deductibles, strong
catastrophic protection, provisions to help low income seniors
and voluntary options.
Senator Talent. Today's hearing is divided into two panels.
I will briefly introduce the panelist, they will testify, and
then I'll ask some questions, including questions that have
been submitted to me from the audience.
The first panel features Claude Allen, is the Deputy
Secretary of Health and Human Services at the U.S. Department
of Health and Human Services in Washington. He flew into town
this morning just to participate in the hearing. I am pleased
that he was able and willing to do that.
Our second panel features Missourians who will testify
about their hands on experiences with the Medicare program. The
first witness on the second panel is Audrey Vallely a senior
citizen. I had a chance to meet Audrey before, and she's going
to tell us about her experiences on Medicare.
I expect that she will be a very effective witness, and we
are looking forward to hearing your story, Audrey. I want to
thank you for being here, and also congratulate you on the
birth of your first great-granddaughter. You must have married
very, very young to have a great-granddaughter.
The second witness on the second panel is Dr. Frederick
DeFeo, the President of the Missouri State Medical Association,
which represents 5,000 doctors.
Our third and final witness on the second panel is Ron
Levy, who's wearing two hats for us today. He's the Regional
President and System Vice President of SSM Health Care. He's
going to speak on behalf of that organization, as well as on
behalf of the Missouri Hospital Association.
I want to thank all of the witnesses for being here and
everybody in the audience for coming. I also want to say that I
will be available after the hearing, along with my staff, to
visit with the folks here. If you have additional questions
about prescription drugs or any other issue, if you don't have
a chance to speak with me today, I invite you to call my office
here, which is 432-5211.
Thank you all. We will go right to the first panel. Usually
the first panelist is somebody working in the Administration,
and we have a very high-ranking official from the Department of
Health and Human Services, Claude Allen.
Deputy Secretary Allen is the No. 2 man at the Department.
He's at the Federal Government's principal agency for
protecting the health of all Americans and providing essential
human services.
The Department includes some 300 programs covering a wide
spectrum of activities. As Deputy Secretary, Mr. Allen works
closely with Secretary Tommy Thompson on all major policy and
management issues, and he serves as the Department's Chief
Operating Officer.
He's going to describe the President's plan to strengthen
and modernize Medicare, and he'll focus on the prescription
drug and voluntary health plan components.
Thank you, Secretary Allen. I appreciate your interrupting
a vacation to come in, so I am very grateful. Please proceed
with your testimony.
STATEMENT OF CLAUDE ALLEN, DEPUTY SECRETARY DEPARTMENT OF
HEALTH AND HUMAN SERVICES
Mr. Allen. Thank you, Senator. Thank you very much. Senator
Talent, I want to thank you and Chairman Larry Craig for
inviting me to Harris-Stowe State College here in St. Louis to
discuss Medicare reform, and in particular, the value of a
prescription drug benefit in the Medicare program.
I have submitted written testimony for the record and I
will summarize here in my oral statement.
Senator Talent. Yes, please do.
Mr. Allen. Thank you. President Bush and Secretary Thompson
are strong believers in Medicare and know the tremendous
benefit it has been to our country. Medicare is nearly 40 years
old, however, and is out of date with modern medicine. That is
why the President has urged Congress to provide more choices
and benefits to Medicare beneficiaries.
Senator Talent, I want to thank you for your leadership on
this important issue and for helping pass Senate Bill 1.
Through your hard work and the work of your colleagues in
Congress, we truly are in the midst of making the most sweeping
changes to Medicare since the program began in 1965.
To bring about real change in Medicare, we need to combine
the strength of the current program with the best of the
current private sector and health insurance market, the Federal
Government's experience in running the largest employer
sponsored health insurance program and Medicare's experience in
running a program for 40 million seniors and Americans with
disabilities.
As successful as this program has been, it has not kept
pace with decades of dramatic improvements in healthcare. As a
result, Medicare beneficiaries today lack many of the options
and benefits, such as prescription drug coverage, available to
millions of other Americans.
If we were creating the Medicare program today, we would
model if after what consumers are receiving in today's
healthcare marketplace, more choices and better benefits. All
seniors should have the option of a subsidized prescription
drug benefit as part of modernized Medicare, as well as better
coverage for preventative care and serious illnesses.
Beneficiaries should have the option of keeping the
traditional plan with no changes, but we must offer more
choices for better health plan options like those available to
all Federal employees and their families.
Medicare legislation should strengthen the program's long
term financial security with better management, streamlined
regulations and administrative procedures and stronger fraud
and abuse enforcement. Most importantly, Medicare should
encourage high quality healthcare for seniors.
The President's framework in both bills in Congress, gives
seniors the choice of options and under all of the options
seniors get more benefits, including prescription drug
assistance.
I want to just go over those options with you briefly. In
the first option, seniors can stay and from additional Medicare
and get the fee for service system they enjoy currently with
more benefits including prescription drug coverage.
In the second option, seniors can choose enhanced Medicare
and get prescription drug coverage, full coverage for disease
prevention, including screenings for cancer, diabetes, and
osteoporosis, and protection from high out of pocket costs
associated with lengthy hospital stays or lengthy care.
Then last, under the third option, seniors can choose what
we are calling Medicare Advantage. Medicare Advantage will give
the benefits of low cost, high coverage managed care plans,
which many seniors prefer and receive currently, and a
subsidized prescription drug benefit.
All comprehensive Medicare drug benefit proposals will
require significant lead time prior to implementation. But we
know that seniors need help right now. That is why the
President's framework and Congress both have designed to
provide significant and immediate assistance to low income
beneficiaries with their prescription drug costs.
To ensure that seniors are provided help with their
prescription drug costs as soon as possible, they will be
provided with a drug discount card that is estimated to achieve
discounts of 10 to 25 percent on the costs of prescriptions by
pooling the buying power of Medicare participants and other
cost saving measures. In addition to the discount card, the
President's framework would provide low income seniors with a
$600 annual subsidy for drug coverage.
One of the priority areas that I deal with on a daily basis
at the Department, is the elimination of health disparities
that we see in healthcare among communities of color. Statistic
after statistic shows that communities of color fare worse than
White Americans among diseases such as cancer, diabetes,
cardiovascular disease, HIV/AIDS and conditions such as obesity
and hypertension.
The Medicare options that I described will increase the
options for healthcare services for minorities. By providing
better benefits and more choices, African Americans, Native
Americans, Hispanic/Latino and Asian American/Pacific Islander
seniors will have better options for obtaining healthcare.
By providing assistance for health insurance, increasing
sources of primary care, such as through the president's
community health center initiative, and working with
communities of color to break down the stereotypes and distrust
of the healthcare profession, we can end health disparities in
this country.
I would be remiss if I did not mention the great work of
historically Black colleges and universities, like Harris-Stowe
State College, perform every day to help end health
disparities.
Senator Talent, seniors and people with disabilities in
America need access to a prescription drug benefit. They need
modern benefit options in Medicare. This is the year to get it
done and we look forward to working closely in a bi-partisan
manner with the conference committee to get a good bill on the
president's desk as soon as possible.
Again, I want to thank you for inviting me here today and
look forward to answering any questions that you may have or
the audience informs will be presented.
[The prepared statement of Mr. Allen follows:]
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Senator Talent. Thank you, Mr. Deputy Secretary. Now I am
going to ask you some questions that I have heard from seniors
around Missouri and others. Of course, this subject is
something that those of us who have elderly parents--and my Dad
died last October and my Mom died about 15 years ago--are as or
even more interested in understanding than they are----
Mr. Allen. Absolutely.
Senator Talent [continuing]. Because sometimes folks aren't
as interested in their own health as their kids may be.
Mr. Allen. That's right.
Senator Talent. There's many children of folks on Medicare
who are worrying about their mom and dad getting their
prescription drugs. So everybody is concerned about it and they
raised these issues with me. Let me just raise some of them
with you----
Mr. Allen. Certainly.
Senator Talent [continuing]. Since you are the expert on
this. Assuming we get this bill passed this year, let's start
with the drug discount card, how soon will that be available?
Mr. Allen. As we said, we would like to have it available
as soon as possible, and so what we are predicting is, as soon
as the legislation's signed, the drug discount card--the 10 to
25 percent discount that seniors and those on Medicare would be
entitled to--would be available within 6 months after the date
of passage. So we are anticipating that will be 6 months after
signing of the legislation.
Senator Talent. Now I hope that we will expedite that as
much as possible, No. 1, and No. 2, that the procedures for
getting the card will be as clear as possible and we'll make it
available to seniors as soon as possible.
Mr. Allen. That's exactly right. At the centers for
Medicare/Medicaid services, we have already begun working in
this area. As we have had some experience already with drug
discount cards, we believe we can get it up and operational in
that amount of time. Six months is the outside window that we
are shooting for. We would try to get it sooner, if possible.
Senator Talent. You understand the skepticism of
Missourians who have dealt with big bureaucracies before and, I
mean, 6 months is an outside target for me. Since we are fairly
certain that this is going to happen, I hope the Department is
planning now and will be able to swing into gear.
Mr. Allen. That's exactly right. We are already planning
for that. It is a high priority for both the President and
Secretary Thompson because we know that, of all the benefits,
while we are looking at Medicare needing major reforms, are
they going to take a period of time?
The one area that seniors cannot wait for is getting the
prescription drugs.
Senator Talent. Particularly for those with the greatest
need. Along those lines, there will be an additional subsidy
for low-income seniors. Now I have to preface this by saying
that we are discussing what we think will be in the bill when
it comes out of what's called a conference committee. But the
details haven't actually been finalized, much less voted on by
either House. However, this is what we expect.
There will be a subsidy of $600 to $800 for lower income
seniors. Now what do we mean by lower income, what do you think
the bill is going to have?
Mr. Allen. That is an area that is being worked out in the
conference committee, we don't know that right now.
Senator Talent. Right.
Mr. Allen. So that's one of the areas. But we do know that
both in the Senate bill and the House bill, that there is
clearly provision for a benefit of between $600 and $800. I
believe the figure right now is $600, that low income will
receive. But the question as to what qualifies as low income
has not been finalized yet, and that is one of the issues the
conferees are working through.
Senator Talent. Well, I am going to stick my neck out just
so you all get a ballpark figure and the percentage I have
heard tossed around is 135 percent of the Federal poverty line,
which would be roughly an income of about $12,000 a year for an
individual.
Mr. Allen. That is correct.
Senator Talent. Now it could be somewhat higher, somewhat
lower than that, but that's the ballpark.
Mr. Allen. That has been----
Senator Talent. Is that a fair ballpark?
Mr. Allen [continuing]. Pretty much, that is a fair
ballpark I'd say, yes.
Senator Talent. I am going to add one point about
implementation because it's a little bugaboo of mine. I went
back and looked up how long it took the government to institute
all of Medicare in 1965 when it was passed, because we've said
that system was great then, it's a little out of date now,
we've been a little critical of it, and I think, properly so.
But they were able to get it all instituted in 8 months in
1965. It would seem to me that we could try to do this
additional benefit inside of the 2 years that we are now
planning.
Mr. Allen. Right. Right.
Senator Talent. So I know that you will attempt to do that,
and I feel like we should be able to.
Mr. Allen. Certainly. Senator, I think the point that you
made at the outset, Medicare as we know it is 40 years old. The
Centers for Medicare/Medicaid Services, they're using 40 years
old software. I don't know of any major corporation in this
country today--major insurer--that uses 40 year old software.
So there's a lot of work that has to be done and that's
such reforms are necessary. So we will be working very
diligently to get it done. That's why, again, the first part,
the prescription drug card, will come on line within 6 months
after passage. Then we've targeted 2006 for full implementation
of the Medicare program.
Senator Talent. OK. Well, it's good to give an outside date
so people don't get disappointed, but I would hope we could do
it faster than that. All right, another issue that comes up
concerns a seniors keeping existing coverages, will the new
program be voluntary?
So let's first ask a questions submitted by Velda O'Guard
from Mexico, Missouri, Velda, where are you? Are you here
today? There you are, ma'am. Thank you.
She asks--and this is a question I often get--if the bill
passes, will it affect her Medigap insurance? Would you like to
address Medigap/Medicare supplemental?
Mr. Allen. Certainly.
Senator Talent. Tell us how you think it will affect that.
Mr. Allen. That is a question of great concern that many
seniors that I have heard from as well, whether it will affect
your Medigap Insurance, and the answer to it is that, most
seniors who are currently receiving and utilizing Medigap
Insurance will be unaffected at all by this.
However, there will likely be some changes for those
seniors who get some of their insurance through private
coverage. If you get some of your drugs through private
coverage, you may be affected in your Medigap plan. But the way
we are trying to structure the legislation and implement the
legislation will be to your advantage.
It will work this way: while the final details are still
being worked out, it is possible that the final bill will
recommend some changes to Medigap plans that cover prescription
drugs so that they better fit with the new coverage scheme.
Therefore, the Medigap will be benefited to you, as a
recipient, under the Medicare plan and having a Medigap plan
will actually get an increased benefit through. So you should
not be harmed, but you should actually be benefited is what we
are targeting.
Senator Talent. Working to make certain that any changes
are favorable. It's like if the bank finds that you are out of
balance, but it's to your benefit.
Mr. Allen. Correct.
Senator Talent. I mean, that's the idea here. For example,
Medigap options now, as I understand them, don't have very good
catastrophic coverage, isn't that right?
Mr. Allen. That's correct, they don't have very good
catastrophic coverage.
Senator Talent. One of the emphasis here is that we need to
protect seniors from catastrophic prescription drug costs. I
mean, one of the things I want from this bill is that, once it
passes, nobody will have to go to bed at night worried that if
they get some new prescription or set of prescriptions, the
cost will take all their savings away. That there will be great
coverage on that high end.
Probably Medigap will be pushed more in the direction of
providing good catastrophic.
Mr. Allen. That's right. I think, Senator, the point that
you made is very clear, that the way that we are trying to
structure this is that the benefits will be to your advantage
rather than to your detriment. So if you can think of it as
enhancing your benefits rather than taking something away from
you, that's what we are trying to structure it as. But, again,
this is all being worked out still in conference.
Senator Talent. Now we have said several times--and this is
something I insisted on from the beginning in discussions with
everybody, and not just me--most of the Senators did as well --
that this program be voluntary.
That people who want to stay in traditional Medicare
coverage can and still get prescription drug coverage, and
people who want to take advantage of these new options can and
will get prescription drug coverage.
One point I want to make to folks is that newly retired
seniors in today's world are generally coming off of privately-
sponsored health insurance that looks a lot more like what
these new options are going to look like, then what traditional
Medicare looks like.
If we want to give them the opportunity to stay in the kind
of coverage they're used to, we have to be able to provide more
choices because that's what they're used to. So I think this is
the kind of situation where, if the Congress does this right,
we'll find many seniors choosing to stick with the traditional
Medicare because that's what they're used to, but then as folks
retire over the years, more and more of them will go into one
of those options because that's what they're used to. Would you
anticipate that happening?
Mr. Allen. We do. In fact, one of the key issues is that
currently about one in ten seniors currently receive their
benefits through a private corporation plan.
Senator Talent. That was going to be my next question, so
why don't you go ahead and----
Mr. Allen. I think that's right.
I think your point is exactly right. Because of this,
companies tend to be the larger firms, almost one in three
Medicare beneficiaries is actually receiving their healthcare
coverage from a former employer.
So we are looking at a number of issues here. There was
recent study put out by the Employer Benefit Research Institute
that completed analysis. What they had said is that they
believe that it is possible that about 1 to 3 percent of all
Medicare beneficiaries will be impacted by the changes.
What Congress and the administration are working to guard
against, is having those private companies drop their coverage
and therefore leave many of their employees in a lurch. So we
are working very closely to ensure that that does not happen by
giving incentives to employers to continue their coverage for
their retirees by providing two options.
One option would be to either continue the primary drug
coverage that the company has for their employees, or, two, to
accept the new government subsidy by wrapping around the
private employers coverage around the Medicare program.
So we are trying to minimize the impact of those
individuals who will be retiring who have private company
insurance coverage, so that they're not impacted adversely and
that we also do not damage the work that's being done in the
private sector because it's very important that insurance is
far better than a government program.
Senator Talent. Now on behalf of the Missourians I have
talked to--and really for the record here since I get this
question probably more often than any other because about one
out of three people get some kind of benefit from the employer
from which they are retired--how will the new benefit affect
retiree coverage in terms of what the law may say and also
employer practice. Employers may just say, oh well, now that
the Federal Government's covering this, I am going to drop my
coverage. I am glad you raised that issue.
We are caught in a tension because employees are dropping
that coverage already.
Mr. Allen. Right.
Senator Talent. If we don't do anything because we are
afraid that if we do something, employers may drop the
coverage, we'll be in a situation where we have no safety net
as time goes on as more and more drop coverage.
Mr. Allen. Right.
Senator Talent. Much less for the folks who don't have the
coverage in the first place. So what we are trying to do--and
this is going to be hard so--I will look at this very carefully
when it comes out of the conference committee--is to try and
structure this so that we can provide the benefit without
giving any kind of great incentive to companies that are free
to do so contractually to drop their existing coverage.
Mr. Allen. Right. I think that's exactly right, that we
have to be very careful not to structure the benefit package so
it provides an incentive for private employers to drop
coverage, but at the same time does not prevent them from
making business decisions and put their employees at risk--
their retirees at risk--because it's a contractual obligation
that has been to those employees.
Senator Talent. Right. Where it is a contractual
obligation, they have that protection. It is a concern, but I
personally don't think it should keep us from moving forward.
Sarhonda Browne is here. Where are you, Sarhonda? There you
are. Good to see you. She's from North View Village Nursing
Home. I enjoyed my Saturday morning there. We had hot dogs and
a little music festival. She's asking, how would the new
Medicare prescription drug coverage benefit affect long-term
care seniors, those in a long term residential care setting?
Mr. Allen. Those long term care residents in residential
settings, if they are on Medicare, for example, if Medicare is
supporting their stays in those facilities, they, too, will
benefit by both the discount drug card.
But more specifically because they're low income, they will
be benefited by the direct subsidy, the $600 to $800 subsidy,
that will be provided in terms of drug purchasing power that
they'll be provided.
So if they're already participating in the Medicare
program, receiving those benefits, those will be their benefits
as well, enhanced under the program. So it will be consistent
with what we are doing across the board.
Senator Talent. Yes, my understanding as we debated this
bill is that those residents will benefit like others who are
under Medicare, so they'll get whatever additional benefits
that they can get.
Mr. Allen. Exactly.
Senator Talent. The bill does not itself contain anything
extra for them as residents of a long-term care facility. Now
earlier in the year, when Congress resolved the budget issues,
you probably recall Congress passed money through to state
governments, and a large part of that money was passed through
for Medicaid, which is where most of those residents, of
course, get most of their governmental support. Not all of
that, what was passed through for Medicaid, ended up going into
Medicaid, as you know.
Mr. Allen. Exactly.
Senator Talent. But that was the intention at the time,
that that money--and there was a considerable amount of money--
be used to help residents at that time.
Mr. Allen. Right. The Medicare reform does not address that
in that regard. At least not so far as from the conference
committee that we've seen.
Senator Talent. I'll tell you another question I get from
folks, as seniors and as taxpayers, is what's the final cost of
the legislation going to be? You know, can we afford it? This
is a good question. Let's hear your response and I'll tell the
folks I see.
Mr. Allen. The President has stated very clearly that the
program will be $400 billion over 10 years, and this represents
a significant expansion of the Medicare program thus far. In
fact, it's about a 10 percent increase over the current
projected Medicare spending. At the same time, it will not
cover all of the projected drug spending over the next decade,
so we will be looking at that.
It's important that any final program is targeted to those
seniors who need it most and who need the most help, low income
seniors, those with lower incomes and those with higher drug
costs, while providing some relief for all seniors who want to
enroll.
So we are trying to make sure that we are addressing across
the board seniors, but, again, our focus will be on low income
and those who have the highest drug costs.
It is also important that this benefit expansion be coupled
with the reforms that are necessary. That's what we are trying
to be very careful about, is making sure that we are providing
the prescription drug coverage, but the reforms that are
necessary to ensure the longevity of Medicare and the stability
of Medicare and to the future for the next generation of those
who will be retiring, those with disabilities that will be
needing the program.
So those are the areas that we are--but the dollar figure
that we are looking at, and continue to stick by, is the 400
billion over 10 years.
Senator Talent. That money has been budgeted. This is a
fair question, and I think that of all people, seniors know
what it's like to be on a budget. They are often the ones that
ask the question. There are three responses that I give them,
and part of it is what you say. First of all, that's one of the
reasons why it is important that the benefit target the
assistance, so that while everybody will benefit, those who are
the neediest, who have the highest drug costs or the lowest
income would benefit the most from the bill. Both the Senate
and House bills do that.
But everybody is going to benefit, and there's no reason
why you can't when you have a pool as big as the pool of
Medicare recipients. It should be possible to put together
plans that really take into account the deficiencies of that
kind of a big purchasing pool.
The second point--and it is a kind of an emotional point
with me but I have just talked to too many people, we are going
to hear one of them in the second panel--there are too many
people who really are choosing between other vital needs and
their health. They're skimping on their health.
The government undertook to provide this benefit 35 years
ago. The rest of the health care world is updated, and it is
time for the Congress to do the same thing with Medicare. I
mean, I think it's owing.
I also believe if it's done right, it may not cost that
much, because if somebody is able to stay on a prescription
drug program that keeps them healthy, they don't have to go to
the hospital, which, by the way, Medicare pays for. So we can
end up, in many cases, avoiding traumatic episodes that will
cost us a lot more.
The other thing, and that's why it is key that we, at the
same time as we provide the benefit, do it in the context of
voluntary options that strengthen and improve Medicare. You
mentioned this as well. Because the whole idea here is through
competition and choices to make the dollars go further and
still provide good quality healthcare. If we do that, then we
help solve some longer-term problems with Medicare.
Mr. Allen. That's right. Senator, I think you are
absolutely right in what you raise, and two points I would make
about that. To give you some good examples, we continue to talk
about the need to give voluntary options to seniors, those who
would be personally in Medicare.
Well, one example of it is, is that while we think we can
not only put out say $400 billion over 10 year, both the bills,
the House and the Senate bill, contains a trust fund that
would--the money would go into--that would be, in a sense,
ensure that money would be available for that purpose.
But one of the things that, and why it's so important that
we reform Medicare is make it modern, to update it. The keys to
ensuring that we can bring down the costs of the services and
the cost of, for example, prescription drugs, is by using
modern techniques, disease management, addressing preventative
care. These are issues that are going to ensure that seniors
will have the available programs and services, but at the same
time, help us to achieve those efficiencies across the board.
Two examples right here in Missouri I'll give to you that
show you. Currently, under the traditional program Medicare, we
don't cover diabetes management. This is a map of Missouri here
that demonstrates across the board diabetes management. It
talks about those counties in Missouri that are below the state
average--are in the red--those that are below the national
average are in the blue.
When you look at this, you'll see that diabetes management,
by managing someone's diabetes, you have an opportunity to
bring down the cost of care. Well, that currently is not
provided under the traditional program. Under the enhanced
Medicare program and Medicare Advantage program, these will be
standard parts of the benefits that you would receive for
diabetes management.
The same is true when you look at something like influenza
and pneumococcal immunizations. Regular immunizations for
pneumococcal and influenza should be standard practice for
seniors. Currently, again, in the blue you see those areas
where Missouri is below the national average. We are below the
state average are the red counties.
Here's another example, by having options that are
voluntary for those who choose them, can get these services as
a standard part without additional costs to those
beneficiaries.
Senator Talent. When you're in Washington you'll often have
people describe some additional benefit or something and say
it'll really end up saving us money. After a while you get a
little skeptical, but this is something that really can save
money 5 percent of the folks in Medicare for those who get
sick, cost us--isn't it about 55 percent of the cost?
Mr. Allen. Exactly.
Senator Talent. Many of those folks have chronic diseases
like diabetes and kidney disease where, in the rest of the
health care world, insurance has adapted over time to emphasize
more and more management, wellness, and prevention of traumatic
episodes.
Mr. Allen. Exactly.
Senator Talent. Traditional Medicare, as good as it is,
just doesn't do that very well.
Mr. Allen. That's correct.
Senator Talent. To the extent that we can get people into
disease management coverages like that, we will save them ill
health episodes and also end up making the system more
affordable in the long run.
Senator Frist, who's the Senate Majority Leader, and I put
a provision in the Senate bill that--you're aware of the pilot
program?
Mr. Allen. Yes.
Senator Talent. We believe so strongly in this--Senator
Frist is a physician, and I have often been a patient, so we
each have our own expertise in this area. We believe so
strongly that we want to put more resources into identifying
the high-risk type of cases and diseases and helping our
hospitals and our doctors manage that care better in our
patients. I hope we can save that provision in the conference
committee.
Mr. Allen. Senator, just one last point on that, and to
bring it home once again, and we are here at Harris-Stowe State
College, and the importance that this has to communities of
color.
The African American community, the Latino/Hispanic
community, the Native American community, Asian American/
Pacific Islander communities have a great disease burden in
terms of the diabetes, cardiovascular disease, cancer, all of
these different diseases, and what these maps show, and what we
do know, is that many of these individuals benefit from
Medicare, and yet their the ones who need the greatest choice.
So, therefore, when we talk about Medicare reform, we are
also talking about closing the health gap and ending healthcare
disparities. That's why I take it personally as a mission on
behalf of the Department, the Secretary, the President, to talk
in communities of color, to raise this issue that we need to be
getting behind Medicare reform now because it's our people,
it's our families, it's our loved ones who are bearing the
disease burden here.
Giving them the choices and the options to have access to
quality care that they choose is a vital issue of great
importance to all of us because if we help those who carry the
greatest disease burden, we are helping all of us because it
increases all of the quality of health that we all have.
Senator Talent. Well, Secretary Allen, I think I'll let you
have the last word. I know you have to go and catch a flight,
but thank you for being here. I think it was informative.
We are going to have our second panel, and I want to
emphasize, again, that I'll be around afterward to visit with
folks personally. So why don't we take a 5-minute break while
we assemble the next panel.
Mr. Allen. Thank you, Senator. [Recess.]
Senator Talent. We are reconvening the hearing and will go
right to our second panel. I will just briefly reintroduce
them, they will give their statements and then we will ask some
questions.
Our first witness is Ron Levy. As I mentioned earlier, Mr.
Levy is the Regional President and System Vice President of SSM
Health Care, St. Louis. He's also going to speak on behalf of
the Missouri Hospital Association, which represents 140
Missouri hospitals and health systems.
In his position with SSM, Mr. Levy oversees 1700 physicians
and 10,400 employees who work in seven hospitals, three medical
groups and a managed care organization. He has a distinguished
27-year career with SSM Health Care.
He currently serves on the boards of the Missouri Hospital
Association's St. Louis Regional Health Commission, the St.
Louis ConnectCare and a variety of community service
organizations, including Catholic Community Services.
He is going to describe for us how he thinks the
Prescription Drug and Medicare Improvement Act of 2003 will
benefit hospitals and the patients they serve, and discuss any
concerns that he may have as well.
Thank you for being here, Mr. Levy. Please, give us your
statement.
STATEMENT OF RON LEVY, PRESIDENT AND CEO FOR SSM HEALTH CARE,
ST. LOUIS, MO
Mr. Levy. Thank you, Senator Talent, and thank you for the
opportunity to testify here today. SSM Health Care is very
proud to the be the first ever healthcare provider to win the
nation's highest quality award, and that's the Malcolm Baldrige
National Quality Award. This award was presented to SSM this
past May by Vice President Dick Cheney and the Secretary of
Commerce, Don Evans.
SSM Health Care, our national system, has more than 23,000
employees dedicated to caring for patients and their families
in four states, Illinois, Missouri, Oklahoma and Wisconsin,
where we also operate not just hospitals, but long term care
facilities and home health agencies.
In 2002, our healthcare system discharged more than 170,000
people and provided more than one million outpatient visits. Of
those hospital discharges, more than 67,000 were Medicare
beneficiaries. For SSM hospitals, that represents 40 percent of
the care and service we provide to our patients is provided to
Medicare beneficiaries.
As the Senator mentioned, I am also representing the
Missouri Hospital Association here today, and the MHA has been
serving Missouri hospitals for more than 80 years. The
Association currently represents 141 hospitals. It counts among
its membership all the licensed Community Acute Care Hospitals
in the State of Missouri.
SSM Health Care and the Missouri Hospital Association are
pleased to express support for Senate Bill 1 and the
Prescription Drug and Medicare Improvement Act for 2003.
In times of need, Americans depend upon the promise of
hospitals to be there 24 hours a day, 7 days week should any
healthcare need arise. Medicare beneficiaries are no different
and now, by this bill, those beneficiaries will enjoy an
enhanced quality of life as a result of this additional
benefit. The Medicare program should enjoy savings as a result
of drug therapies that will reduce hospital admissions and
lengths of stay.
The payment updates included in Senate Bill 1 are more
important than ever before for our nation's hospitals and our
hospitals here in Missouri. The adequacy of Medicare payments
is especially important as society takes steps to promote
further competition in the healthcare marketplace, and as we
also experience additional regulation in an effort to contain
healthcare cost.
Adequate payments will help hospitals invest in the latest
technology and sustain a professional workforce to most
efficiently deliver the needed services.
Moody's Investor Service recently forecast greater credit
volatility for not-for-profit hospitals and health systems in
the future citing the luminous financial challenges, including
the rising healthcare cost for our labor and benefits to our
employees, the increasing cost of drug supplies that we provide
to our patients, such as the new drug alluding stint for
cardiac catheterizations. Obviously, we are facing a major
increase in medical liability insurance. So these costs are
having a major impact on our healthcare delivery system today.
Senate Bill 1 does assist hospitals in a number of ways,
and these include the following:
First, by providing a full market basket update and payment
for hospitals for the first time in almost 20 years.
Second, eliminating the disparity between small urban and
rural hospitals and large urban hospitals by equalizing the
inpatient base payment.
Third, by eliminating the cap on small urban and rural
hospitals that qualify for a disproportionate share of hospital
payments.
Fourth, improving and expanding the critical access
hospital program.
Fifth, by restoring a more reasonable indirect medical
education payment for our teaching hospitals.
Sixth, provision of payments for rural home health agencies
and many other supportive provisions.
I'd like to highlight a few of these important provisions
in a little more detail. First, our inpatient services.
According to the American Hospital Association, Missouri
hospitals stand to gain $530 million in new funding because of
this bill over the period of 2004 to 2013. The additional sum
set forth in the Senate Bill will go a long way to help seniors
receive the inpatient care that they need and we support.
Regarding rural hospitals. The Senate Bill provides about
$25 billion over the next 10 years to increase Medicare payment
to rural hospitals and physicians starting in 2005. As rural
hospitals struggle to survive--and I know because I used to be
a rural hospital administrator in a previous life--we
appreciate the language in a Senate Bill that eases the
disparity between Medicare reimbursements for rural and/or
urban hospitals.
There's also a temporary fee increase for rural ambulance
services that are currently stretched thin.
We note----
Senator Talent. Let me jump into clarify while it is fresh
in the minds of folks who are listening. These updates for
rural hospitals--maybe you could describe why they are
necessary and comment on this.
For years, the government's reimbursement for rural
hospitals has been based on the assumption that their costs are
less than for urban hospitals, which in some areas is true but
increasingly in other areas they are not. So they're actually
getting less than hospitals in other areas are getting.
So this update really just brings them up to where the
other hospitals are. Do you want to elaborate on that a little
bit?
Mr. Levy. Yes, and actually, why my current expertise is
probably more urban oriented----
Senator Talent. Right.
Mr. Levy [continuing]. But I do remember--and it has been
an issue for a number of years. Just as you said, Senator,
rural hospitals, while we think they may cost less in their
care delivery, they have other challenges; economies of scale,
they pay the same prices for drugs and supplies--in fact they
may pay more because they don't have access to large purchasing
groups, et cetera.
So their costs of care delivery has escalated at a similar,
if not a greater rate, than urban hospitals.
Senator Talent. It may cost them more, not less, to get
physicians practicing in that area, for example.
Mr. Levy. Yes. The ability to bring them up to a level of
payment that is at or equal to the urban counterparts, is a
very positive thing to do. We have to realize that rural
hospitals are really the fabric of our rural communities; we
can't afford to see any further closure or diminishing levels
of service they provide in those communities.
Senator Talent. Thank you for that clarification.
Mr. Levy. I was just going to say that Senator Talent is a
strong supporter of full funding for rural hospitals and I
think you can see that and hear that, and we do appreciate your
efforts, Senator, to maintain these rural health provisions as
the bill moves through Congress.
Regarding indirect medical education. There's also a small
increase in the Senate Bill in subsidies for teaching
hospitals. Every state has a teaching hospital, and the
indirect medical education dollars are essential to training
physicians in the future.
Missouri currently has 32 teaching hospitals, including two
within SSM, SSM Cardinal Glennon's Children's Hospital and St.
Mary's Health Center in Richmond Heights, which also receive
the indirect medical education funding. This provision would
allow millions of more dollars to flow to Missouri to help
train physicians of our future.
Senator Talent. That's crucial for Missouri indirect
medical education--the extra costs that hospitals have for
teaching residents and medical students. At the same time that
physicians are providing care, residents and interns that go
around with the physicians during their rounds and that costs
money.
Yet teaching is essential to the quality of the whole
healthcare system. We have a disproportionately large number of
teaching hospitals in Missouri, so this is a very important
provision for Missouri.
Mr. Levy. It is, and I think at the same we are very
fortunate in Missouri to have the number of teaching hospitals
we do.
Senator Talent. Oh, yes. It's a real plus.
Mr. Levy. Because it can provide additional physicians for
us in this state.
Senator Talent. Yes.
Mr. Levy. Regarding disproportionate share payments, both
bills increase the funds that states would be allotted under
Medicaid for hospitals that treat a disproportionate share of
the poor, starting in 2004. Again, Senator Talent, we
appreciate you signing on a bipartisan letter to the Medicare
conferees in support of the increase disproportionate share
adjustment.
The Medicare statute requires that states make DISH
adjustments to the payment rates of certain hospitals treating
large numbers of low income and Medicaid patients. DISH
payments help reimburse hospitals' costs for treating Medicaid
patients, particularly those patients with complex medical
needs, such as those duly eligible for Medicare and Medicaid,
and make is possible for communities to care for those who lack
health coverage.
Missouri would receive approximately $67 million in fiscal
year 2004 and $57 million in fiscal year 2005 under the
proposal advocated in our letter.
In conclusion, all in all, we believe that the Prescription
Drug and Medicare Improvement Act in 2003 and the Senate Bill 1
that was passed in the Senate will benefit hospitals, will
benefit our senior citizens by providing them with the
hospitals with increased reimbursement and flexibility to
manage patient care, and certainly help our senior citizens in
paying for the care and drugs they need.
What this means is that hospitals like SSM will have more
opportunities to help patients and/or community through
improved service, which is one of the hallmarks of quality of
care.
Again, I thank you for the opportunity to testify today.
Senator Talent. Thank you, Mr. Levy, and we will probably
have a couple more questions after the other witnesses are
finished.
[The prepared statement of Mr. Levy follows:]
[GRAPHIC] [TIFF OMITTED] 90720.008
[GRAPHIC] [TIFF OMITTED] 90720.009
Senator Talent. Now a real treat for the Committee: Audrey
Vallely is here to testify. As I mentioned earlier, Audrey is a
St. Louis senior citizen who is currently on Medicare. She is
the mother of two and a grandmother of four. She currently
lives in Pacific, where I have discovered we have several good
mutual friends. She lives across from her great-granddaughter.
Like many seniors, Audrey's on limited income and has
difficulty paying for her prescription drugs and doctor bills
because the current Medicare benefit is simply not generous
enough. She's told me that sometimes she doesn't take her
medicine for her ailments because she can't afford to pay for
them.
Today she will share her experiences as a Medicare
beneficiary and explain why she's hopeful that the improvements
in Medicare will benefit her and other seniors, and also any
concerns she may have.
Audrey, thank you for coming and sharing with us. Please,
give us your statement. Thank you.
STATEMENT OF AUDREY VALLELY, SENIOR CITIZEN, PACIFIC, MO
Ms. Vallely. Thank you. Good morning. My name is Audrey
Vallely. As Senator Talent said, I live in Pacific. I am the
mother of two children, who are with me today; the grandmother
of four children; and the great-grandmother of a new baby girl.
I am also a senior who is enrolled in the Medicare program.
I have been on Medicare since I was 62 years old, and I am
proud to be 77 today. I have osteoarthritis, a degenerative
bone disease, and another sinus disease called Meniere's that
causes me to become dizzy. I had an operation for the sinus
condition, but the dizziness returns from time to time.
I should be taking at least two types of prescription drugs
for these conditions. My medicine costs over $100 a month for
maybe 15 pills. Because I am living on a limited income, I
cannot afford to pay for these medicines. Instead, I go to my
local pharmacy and take over-the-counter pain relief. Sometimes
that makes me feel better, sometimes it doesn't.
I know I should see my doctor for these conditions, but I
simply cannot afford to do this as often as I want. One office
visit costs me $107. I know that I am lucky that my health is
not bad, especially as some of my friends with diabetes and
cancer pay over $200 or $300 a month for just their medicines.
Still, sometimes it is a choice between buying prescription
drugs or paying rent, buying food or just living with air
conditioning in the summer. Also, I have to drive to the doctor
and gasoline costs $1.74. It goes up and down.
Everyday I am hopeful that Congress will pass a meaningful
prescription drug bill to help me and other seniors. I
understand that the bill now in Congress will help lower my
prescription drug costs, and the cost of my doctor's visits to
give me enough money to live on.
I also like that I'll be able to go to my pharmacist if I
need to refill a prescription. Anything you can do to lower my
price of prescription drugs and doctor's visits will go a long
way to help me and my friends at the Route 66 Senior Citizens
home in Eureka.
Thank you very much for letting me be a part of your
program today.
[The prepared statement of Ms. Vallely follows:]
[GRAPHIC] [TIFF OMITTED] 90720.010
[GRAPHIC] [TIFF OMITTED] 90720.011
Senator Talent. That was excellent, and just let me add, I
am also a member of the Energy Committee, and your comment
about gasoline and the price of it going up and down showed
more common sense than I have heard in about 8 months on that
committee, so I appreciate your contribution there as well.
Mr. Levy, I understand, has to leave pretty soon. Is that
correct, Ron?
Mr. Levy. That's OK.
Senator Talent. Can you stay?
Mr. Levy. Yes.
Senator Talent. OK. Well, that's good, I don't have to
reshuffle that, and we'll go right to Dr. DeFeo.
Our final witness is Dr. Frederick DeFeo who's the
President of the Missouri State Medical Association, which
represents 5,000 Missouri doctors. The MSMA's mission is to
serve its members by promoting the science and art of medicine,
protecting the health of the public and bettering the medical
profession in Missouri.
Dr. DeFeo specialized in internal medicine. He's an
Associate Professor of Medicine at the University of Missouri,
Kansas City. He's here today to explain the concerns that
doctors have with the current system, concerns he feels
patients have, and how the Senate passed prescription drug bill
might benefit them, as well as any other concerns that he may
have.
We are very honored to have you with us. Thank you for your
time, Doctor. Please, go ahead.
STATEMENT OF FREDERICK G. DeFEO, M.D., PRESIDENT OF MISSOURI
STATE MEDICAL ASSOCIATION
Dr. DeFeo. Thank you, Senator. Medicare is 38. I remember
the promise of President Johnson's great society, but, as a 19
year old, I was far more interested in the goings on in that
little country across the Pacific. How different the world is
today, and how different is medicine.
In 1965, when a patient had a problem, the standard was to
admit that patient to the hospital, do appropriate tests
resulting in a diagnosis, and then some kind of therapy. Now
the hospital has almost become the venue of last resort and
more work is done in the outpatient setting.
In 1965, chronic disease was likely to result in early
death and disability. Even presidents with coronary artery
disease were likely to have heart attack after heart attack.
Diabetics developed blindness and died of kidney and heart
disease. Chronic lung patients were admitted to hospitals in
the fall and died in great numbers as colder air came in.
Now care of patients with chronic disease out of the
hospital is standard. Heart disease patients live longer, more
productive lives. Diabetics have preserved their sight and
their kidneys, and chronic lung disease patients stay out of
hospitals and breathe better.
In 1965, the paperwork burden for physicians was minimal.
Now Medicare regulations seem more numerous than the tax
regulations, and requirements for such unfunded mandates as the
Advance Beneficiary Notice, the counting of points when I try
to do a history and physical of a patient so that I can get the
correct billing, and form after form after form that requires
the physician personally to note such things as oxygen
saturation and frequency of diabetic testing.
In 1965, the list of available pharmaceuticals was small,
with the most expensive common drugs being the new antibiotics
that might be used for a relatively short term for an
infection.
Now we have new, more powerful and safer drugs for many
chronic diseases, but they are far more costly and used for a
far longer percentage of the patient's life span. But they
better control cholesterol, diabetes, lung disease,
hypertension, gastrointestinal disease, and even cancer with
successful outcomes that were undreamed of in the 1960's.
The realities of the 21st Century show up in the design
flaws inherent in this mid-20th Century program. Short term
problems, financial hardships for many Medicare beneficiaries
because of an antiquated cost sharing requirements. Without
supplement insurance, the Medigap insurance, beneficiaries
might pay more than $34,000 a year out of pocket. Who can
afford that on a fixed income?
Fewer employers provide supplemental insurance as part of
retirement benefits. The cost of Medigap insurance is rising,
perhaps even faster than Medicare spending, and there is no
coverage for prescription drugs.
Medicare beneficiaries are finding fewer physicians willing
to provide care. Physician revenue, worse than hospital
revenue, is generally decreasing because of such flawed ideas
as the Sustainable Growth Rate formula, which ties physicians'
payments to the economy, rather than the acuity of the patients
they're taking care of.
Physician costs over all are increasing with very little
ability for physicians to pass these costs on. Regulatory
burdens drive physicians away. Audits for Medicare are so
onerous that they may actually destroy a physician's practice.
Rural physicians and hospitals have significant payment
bias against them in favor of urban. The best percentage in
Missouri is still less than the one national average. The rural
gets about .92, in St. Louis and Kansas City it's about .97,
but still less than the one that's the national average.
Medical education, which at Truman Medical Center and UMKC
I am long a part of, is being imperiled because of decreasing
payments to our teaching hospitals. The long term problems. The
funding for the current system is a tax-based, pay-as-you-go
system, but the myth of a trust fund for all these years still
persists.
Recent changes, rather than adding any new dollars to the
system, merely cut the pie into more pieces, thus ensuring
decreased payments for everyone. The solution is hard:
modernize Medicare.
Reconfigure the cost sharing to a single modest deductible
for all services, including those services not covered by
Medigap insurance.
Add a pharmaceutical benefit designed to help those with
catastrophic drug expenses. Decontrol prices. Consumer concern
and competition should ensure lower prices in the long run.
Review, revise and simplify the regulatory burden for
physicians and require that Medicare carriers give clear
guidance for their regulation. Reconfigure the basis for
funding Medicare while there is still time.
The Senate passed Medicare bill is a good beginning. It
provides the prescription drug benefit as has been described.
If patients cannot afford to take their medication, then they
will be admitted to the hospital for far more expensive after
the fact care.
It provides some relief for rural hospitals, teaching
hospitals, and hospitals in a critical area--and that's the
Rural Equity Act, Senate Bill 816, co-sponsored by Senator
Talent--eliminating the cap on small rural hospitals for
disproportionate share programs, and establishing a floor on
geographic adjustments for physician services, and increasing
payments for health clinics, helping medical education and
critical access programs by increasing payments for these
areas.
It provides critically needed regulatory relief for
physicians. Reforming the appeals process to simply the appeal
of a Medicare denial of claim, streamlining the process for
reviewing doctors' billing records, simplifying the process by
which doctors correct Medicare billing mistakes and appeal
actions against them, and exempting doctors for penalties when
rules violation were the result of false written advice from
the government.
Finally, the Senate resolution expressing the need to
address the flawed physicians Sustainable Growth Rate formula
should be a part of the final bill. Patients cannot see
physicians who are not there. Medicare reform is necessary. The
prescription drug benefit, regulatory relief, and help for our
poorest hospitals and clinics will mean more patients with
quality healthcare that is affordable.
Fixing the SGR formula will ensure physicians will be there
to treat our elderly. Our seniors deserve no less. We will all
join them far too soon. Thank you.
[The prepared statement of Dr. DeFeo follows:]
[GRAPHIC] [TIFF OMITTED] 90720.012
[GRAPHIC] [TIFF OMITTED] 90720.013
Senator Talent. Thank you, Doctor, that was a very
compelling testimony. I have a few questions. We covered a fair
amount of ground with Secretary Allen in terms of what the bill
is designed to do, so I think I'll go a little bit into where
we are currently.
Mr. Levy, maybe you could explain a little bit more the
market basket issue that you raised. You mentioned that it
hasn't been updated for 20 years. Now that's a phrase that's
very well known to those in the field, and maybe not so well
known to people outside it, so just say exactly what that means
so that people understand how important that is.
Mr. Levy. Essentially, it is the general rate increase that
our hospitals will receive for the payments by patient. We have
received increases, they've just not kept up with the rate of
medical inflation or general inflation and so, when we use the
market basket, does this basket of service keep up with the
general inflationary trend.
This is the first time that I recall we are potentially
going to receive a full increase of 3\1/2\ percent, which is
roughly the rate of inflation, probably a little less than
medical inflation, so that's the biggest increase that we've
seen in years.
Senator Talent. Audrey, I had a couple of questions which
your testimony addressed. You talk about the choices that you
are making because of the high cost of prescription drugs and
the fact that you don't have any coverage in basic Medicare.
Of your friends who are also on Medicare, would you say the
situation you're describing is common? Is it uncommon? Are most
of your friends making those same kinds of choices or only a
few? Give us a picture of what's going on. I know that you go
to the Senior Center a lot, and you know a whole lot of folks
so you're in a pretty good position to tell us this.
Mr. Levy. Well, from just my----
Senator Talent. Oh, I was asking Audrey, but then you can
comment on it, Ron.
Mr. Levy. Oh, I am sorry.
Senator Talent. Unless you're going to the Senior Center a
lot, too.
Mr. Levy. No, no. I have gone to Senior Centers to visit. I
am sorry.
Senator Talent. So have I.
Ms. Vallely. You are welcome to ours. From what I overhear,
a lot of people in our Center, some of the husbands worked at
the automobile factory, so therefore they have good coverage
for insurance.
My insurance alone--I have ACF. ACF is no more. They turned
it over to United Health, but United Health did not want to pay
it anymore, so now I have to pay for United Health. So the
insurance that my husband thought he was leaving for me, it's
no more. OK, so I have to pay for that, plus pay for everything
else.
Some of the ladies that come to the Center, that may be the
only meal they get. They can pay $2 for a meal and get a good
substantial meal, but it is a good meal.
Senator Talent. It is pretty good. I have had those meals.
Ms. Vallely. I mean, they try to give you a good meal.
Senator Talent. Right.
Ms. Vallely. They don't have transportation. When they go,
they have to go on the bus, OK. Now a lot of those ladies that
I had talked to, if they have a dental appointment, that means
they can't go to the doctor in the same month because the
dental problem is way up there and Medicare doesn't take care
of that.
Another one has an ongoing--she has so many problems and
she takes like 20 to 40 pills a day. Her children have to help
her with that because her husband was a farmer and she does
have Medicare, but there's not much else coming in.
Senator Talent. You mentioned farmers. A whole other issue
is farmers and small business people getting access to
healthcare. They can't leave anything for widows if they don't
have the health insurance themselves.
Ms. Vallely. Right.
Senator Talent. So you are one of those in a situation
where you had, initially, some retiree health benefits through
your husband and that was then ended.
Ms. Vallely. I did have--the insurance and the Medicare
took care of my husband. He had eight strokes, he had a stomach
aneurism, he had five ruptured disks, he had all these and
massive mastoid operation, two carotid arteries--they paid for
that fine, with his insurance. We didn't have any out of
pocket.
When he died, it took care of it, you know. But here I am
and I have to go to a doctor that is--in Florida, where I
lived, the doctor bill was $64 because my insurance never paid
for the doctor's visits. Now it's jumped up to $107 here.
In Florida you could go to the little health centers and
get most of your stuff done and it was like going to the
emergency room, and then Medicare would pay for it. But up here
you can't do that.
Senator Talent. You raise a point that bears on this issue
because if people have a chronic problem, we want them to be
able to go in and see their physician as much as they need to.
In fact, more up to date insurance coverages encourage people
to do that because it actually saves money if they stay well.
But you----
Ms. Vallely. Go to the dentist often.
Senator Talent. Yes. That's another point. You've made the
point that traditional coverage under Medicare actually is a
disincentive to get that kind of regular wellness and
consultation that keeps you healthy, and then you get sick, you
go to the hospital, and Medicare has to pay a lot more.
So one of the things we want to do is give people choices
that will enable them to stay healthy over time.
Ms. Vallely. Also, may I point out, that the doctor that I
go to is tied up with HMO. So he doesn't see you but every 3
months. When you go into to see him, he looks at you, sometimes
he takes blood pressure, sometimes they weigh you, but it's
still $107 for him to write out that little piece of paper.
Senator Talent. Are you in Medicare+Choice, are you in
traditional Medicare, what are you in?
Ms. Vallely. I am sorry.
Senator Talent. I am sorry, ma'am. Are you in a Medicare
option, an HMO or are you in the traditional Medicare?
Ms. Vallely. Oh, I am not in HMO.
Senator Talent. That's right. So you're in the traditional
Medicare.
Ms. Vallely. Right. It's hard and it's hard on me. I make
just so much money, half of what my husband was drawing.
Together we were fine, but now that he's gone, I am very
limited. Sometimes it is hard.
If you have to go to the dentist or the eye doctor--I was
supposed to go to the eye doctor to check on my eyes in April.
Well, I haven't gone because I had to go to the dentist, I had
a broken tooth. That cost $900. I have--that's money, plus what
my little dental insurance, 80 percent off, did.
What I want to know is, are we going to have a $250
deductible on all this insurance?
Senator Talent. It's quite likely there will be a
deductible, although it will be lower or won't be there if you
are below a certain income level. What that income level----
Ms. Vallely. Do you have to pay for it?
Senator Talent. Yes, ma'am. There will be a deductible--I
mean, I can't be absolutely certain, but I am 95 percent
certain that the bill that emerges will have a deductible for
seniors who are earning above a certain amount.
Now if you're below a certain amount, the deductible will
essentially be gone. There may be a small co-pay. What exactly
that figure's going to be, we are going to have to work on.
It's hard to predict now.
Ms. Vallely. Well, and sometimes----
Senator Talent. You mentioned dental care. The House bill
contains some provisions for a dental care option, the Senate
bill doesn't. I agree with you--and we were talking before--
that this is very common, periodontal disease is the most
common disease, and we don't, as a system, do a very good job
of taking care of it.
Ms. Vallely. If you can't eat, if you can't use your teeth
to eat, then you don't eat, which makes problems in your
stomach, which sends you to the bathroom.
Senator Talent. But the two most miserable common things to
have are a backache and a toothache.
Because Audrey talked about emergency rooms, maybe you or
Dr. DeFeo would tell us how a prescription drug benefit might
take some of the strain off of emergency rooms in hospitals.
Dr. DeFeo. Well, I can tell you from the viewpoint of
Truman Medical Center in Kansas City, which is the inner city
hospital in Kansas City. Our emergency room was overflowing
every day, and part of the reason are people who come in who
cannot afford their medications.
Not just the senior citizens, but other indigent patients
or--this is not for Medicaid, but that the Medicaid benefits
for drugs have gone down so far, that they haven't met the
other requirements for Medicaid. So this is an every day
occurrence at Truman Medical Center.
Approximately, I would say, 5 percent of our admissions
have to do with patients who could not get their drugs, and if
they had gotten them, would not have been admitted to the
hospital.
Senator Talent. That's bad for them, but also our emergency
rooms are under stress now. One of the reasons is that there
are a number of folks who are there who, we would prefer would
get care some other way, because they don't have what we think
of as a true emergency, but they are there because they don't
have any other options. Would you----
Dr. DeFeo. That's correct.
Senator Talent [continuing]. Agree, Mr. Levy?
Mr. Levy. I would totally agree. One of the things that
we've started to track very closely is the readmission rates
for our patients to our hospital. Particularly our diabetic
patients, congestive heart failure patients.
Generally if the cost is so high for the medications, as
Audrey has so well described, and people aren't accessing the
needed medications, particularly those that do have chronic
disease, the formula is simple.
If it is a cost that is too high and it limits the access,
the emergency rooms get busier, these patients wind up being
readmitted to the hospitals, and it winds up costing us more
for the care and treatment of those patients.
The bottom line is, it just complicates the care delivery
for the senior citizens of our country. It is like playing a
chord on a piano, but we are missing a few notes and the chord
doesn't sound very good.
Senator Talent. You are hearing from a couple of people who
are not, speaking for themselves individually--it is not that
these two gentlemen would stand to gain personally from this
benefit, but the institutions or the systems that they
represent is paying extra costs now in doing things that they
would rather not do because a benefit doesn't exist.
Let me go into something that you mentioned, Dr. DeFeo,
because it's a concern I have had, and I just don't think the
average person is aware of it, and so I am going to be make a
brief statement then ask you to comment. By the way folks,
you've all been very patient and we are wrapping this up. I
only have a couple more questions.
You mentioned regulatory reform for people in the system.
Now what I don't want anybody in the audience to think is, OK,
here's a doctor who's trying to get out of filling out some
necessary form for quality or safety. The next time you're in
to see your physician, ask him or her about this issue.
Ask to see the facilities--just to stick your head in and
see what they have to do to maintain the records that are
necessary to submit in the current system, many of which I just
have to believe really don't do any good for anybody.
Another thing that's a concern. Several years ago, when I
was in the House, I had some hospital officials come up to me
and say that the government had claimed they had filed
overcharges in Medicare amounting to several thousand dollars,
and was now trying to recover criminal penalties of hundreds of
thousands of dollars from this hospital, which is especially
unfair when you figure that--I would guarantee you, if you were
the most expert person in the world in filling out these forms
for reimbursement, you would occasionally make mistakes because
they're much more difficult than even tax forms.
We have some folks from CMS, which is the organization that
runs this, and I want to say this on behalf of what you said.
This is not a group of people who are trying to get out of
legitimate responsibilities. Do you want to elaborate on that?
Are you aware of the fact that the conference has reached some
conclusions about reg reform, and I think they're going to keep
all those Senate provisions in that you like.
Dr. DeFeo. I have heard that they had reached conclusions,
I haven't heard what they're going to mean, yet. For instance,
when I admit a patient to the hospital, in order to submit a
reasonable charge, I have to document four, five things in one
category, eleven things in a second category, nine things--kind
of like a check list.
If you think of a typical high school dropout, they would
say, OK, did he check A, B, oh, he missed D, there's F and G,
oh, he didn't have eleven of them, so therefore the payment
can't be X. It has nothing to do with the patient and his
severity. It has to do with can I mark these boxes down. It's--
--
Senator Talent. Then think of the time that physicians, who
we want to be spending time with patients--Audrey, you
mentioned that one. They didn't go to med school to sit around
filling out forms. It is extremely demoralizing being in the
profession.
Dr. DeFeo. I teach medical students and residents, I take
care of patients, and it seems like I spend half my time
filling out paperwork. We have a----
Senator Talent. It may be. If not half, I bet it's close.
So this is important, because we are all paying for this. We
have a system where there's never enough hours to go around, so
I get particularly upset whenever I see money being wasted. I
mean, that gets us nothing. I am glad you raised that, and I
think we are going to do something about it.
The funny thing is, all these voluminous forms do not keep
that small percentage of the shrew corner cutters and the
cheaters from cheating. They're still out there cheating. They
find ways around it.
One other thing I wanted to raise, and maybe, Ron, you
might be in a position to address this because you talked about
reimbursement rates being driven down and held down. With the
system that we have now, the government tries to figure out,
based on its analysis, what a particular procedure should be
compensated for.
I have now been around long enough, 10 years in the
Congress, to constantly see situations where the government
sets a price and somebody concludes, after a while, that it was
too high, so people are making too much off of that, and then
what the government will do is drop it like an ax. This
happened in the home health business a few years ago.
It creates tremendous instability in the system and drives
people out of business; or, and this has been more common,
driving it down, down below what people need to get their cost,
and then physicians and hospitals can't afford to take care of
Medicare patients. Do you want to comment on this at all?
Mr. Levy. I think that's an experience that has been
ongoing for the last 20 years, ever since we implemented the
system of payment called DRGs where you get paid by case. The
concept is a great concept, and for a while it really worked
because the incentive is, how can we deliver care better and
more efficiently.
At SSM, we really do believe it's not an either/or. We
believe that the more we work on improving the quality of care
by improving our work processes, by reducing our variation, by
putting standards of care in place, when we do that, we do
improve the quality, because we measure the outcomes, and we
also become more efficient in the delivery of care.
But the more efficient we become in the delivery, instead
of gaining that incentive of here is what you are going to be
paid, that price has dropped.
Senator Talent. Yes.
Mr. Levy. There's nothing wrong with continual cycles of
innovation, we have to continue to do that and continue to be
efficient in our care delivery. It's gets to a point, when you
add on the regulation that you're talking about in the
paperwork, where difficult decisions are being made that you
can no longer provide the service.
In St. Louis, I think everybody's familiar with what we
face in North County with one of our hospitals, DePaul Health
Center, making a decision that we might not be able to provide
trauma care anymore.
Senator Talent. Yes.
Mr. Levy. I think that your point is an important point. If
there is one thing that you could do, it is on the issue of
regulation. I think we have to free up some of our time to be
able to provide the care and service to our patients. Seventy-
five percent of a nurse's time is paperwork.
Senator Talent. Now, repeat that?
Mr. Levy. Seventy-five percent of a nurse's time is
paperwork. That's not what they're supposed to be doing.
They're supposed to be at the bedside caring for the patient
and working with our physicians.
The burden on physicians today and the burden on hospitals
is--that's probably one of the many cost inflators, and so we
have to continue to pay for nursing care, what our physicians
do, technology changes and patients are sicker in our
hospitals.
I think your point about not continually depressing or
quickly dropping the prices--we have to have a sustained
commitment to paying for the care of the elderly and the
indigent in this country.
Senator Talent. Thank you, and I raised that and I'll close
now, because it bears on what we were discussing before when
people ask about the cost of the prescription drug benefit. It
really is true that if we can take steps to strengthen and
improve the system at the same time we adopt this benefit, then
we can get efficiencies, we can get savings that will free up a
lot of dollars for this kind of care. They've just described
some of them.
I am pleased and grateful to this set of witnesses, and if
I may say so, especially to you, Audrey. I appreciate you
coming. The other two gentlemen are honorable in their service,
but you came a ways and I am grateful to you, grateful to
everybody here in the audience and, again, to Harris-Stowe,
thank you very much.
I will be available afterwards to visit with folks and
discuss any concerns that you may have.
Thank you all for coming, I'll adjourn the hearing.
[Whereupon, at 11:55 a.m., the Committee was adjourned.]