[Senate Hearing 110-729]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-729
 
      SENIORS AT RISK: IMPROVING MEDICARE FOR OUR MOST VULNERABLE

=======================================================================


                                HEARING

                               before the

                       SPECIAL COMMITTEE ON AGING
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             WASHINGTON, DC

                               __________

                              May 22, 2008

                               __________

                           Serial No. 110-29

         Printed for the use of the Special Committee on Aging



  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html



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                       SPECIAL COMMITTEE ON AGING

                     HERB KOHL, Wisconsin, Chairman
RON WYDEN, Oregon                    GORDON H. SMITH, Oregon
BLANCHE L. LINCOLN, Arkansas         RICHARD SHELBY, Alabama
EVAN BAYH, Indiana                   SUSAN COLLINS, Maine
THOMAS R. CARPER, Delaware           MEL MARTINEZ, Florida
BILL NELSON, Florida                 LARRY E. CRAIG, Idaho
HILLARY RODHAM CLINTON, New York     ELIZABETH DOLE, North Carolina
KEN SALAZAR, Colorado                NORM COLEMAN, Minnesota
ROBERT P. CASEY, Jr., Pennsylvania   DAVID VITTER, Louisiana
CLAIRE McCASKILL, Missouri           BOB CORKER, Tennessee
SHELDON WHITEHOUSE, Rhode Island     ARLEN SPECTER, Pennsylvania
                 Debra Whitman, Majority Staff Director
            Catherine Finley, Ranking Member Staff Director

                                  (ii)


                            C O N T E N T S

                              ----------                              
                                                                   Page
Opening Statement of Senator Gordon H. Smith.....................     1
Statement of Senator Sheldon Whitehouse..........................     2
Statement of Senator Ken Salazar.................................     4

                           Panel of Witnesses

Statement of Judy Korynasz, beneficiary witness, caregiver for 
  her Mother, Hillsboro, OR......................................     6
Statement of Barbara Bovbjerg, director, Education, Workforce, 
  and Income Security Issues, U.S. General Accountability Office, 
  Washington, DC.................................................    12
Statement of Joyce Payne, member, AARP Board of Directors, 
  Washington, DC.................................................    33
Statement of Laura Summer, senior research scholar, Georgetown 
  University, Health Policy Institute, Washington, DC............    44
Statement of Lisa Emerson, program manager, The Senior Health 
  Insurance Benefits Assistance (SHIBA)/director, Oregon State 
  Health Insurance Counseling and Assistance Programs (SHIPs), 
  Salem, OR......................................................    55

                                APPENDIX

Prepared Statement of Senator Robert P. Casey, Jr................    75
Statement of Richard Grimes, president and CEO, Assisted Living 
  Federation of America..........................................    75
Statement for the Record from Alliance for Retired Americans.....    76

                                 (iii)


      SENIORS AT RISK: IMPROVING MEDICARE FOR OUR MOST VULNERABLE

                              ------------ 



                         Thursday, May 22, 2008

                                        U.S. Senate
                                 Special Committee on Aging
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:33 a.m. in 
Room SH-216, Hart Senate Office Building, Hon. Gordon H. Smith, 
presiding.
    Present: Senators Smith [presiding], Salazar, and 
Whitehouse.

  OPENING STATEMENT OF SENATOR GORDON H. SMITH, RANKING MEMBER

    Senator Smith. Good morning. With the blessing of Senator 
Kohl, we will begin the hearing. With respect to our witnesses, 
we want to be mindful of your time and take advantage of what 
you have to contribute today to the U.S. Senate Special 
Committee on Aging.
    We have an impressive list of witnesses, all of whom will 
share with us their perspective on the improvements that are 
needed to ensure the Medicare program provides help to 
America's most vulnerable seniors.
    I want to extend a personal welcome to Judy Korynasz and 
Lisa Emerson, both of whom have flown all the way from Oregon, 
a trek I know all too well. Thank you for being here this 
morning despite the jet lag you no doubt feel. I always enjoy 
having Oregonians testify before Senate committees, and we 
truly appreciate your efforts to better our understanding of 
this important issue to America's seniors.
    All too often, seniors and their needs get lost in the 
flurry of debate over spending priorities and the race to 
finish legislation. I want everyone to know that I will not let 
that happen. I intend to fight for seniors and will work to 
ensure that the Medicare package includes policies that make 
healthcare more affordable to our most vulnerable.
    It was just 2 years ago that the Medicare program began 
offering seniors the option of receiving coverage for their 
prescription drugs. Since that time, the program has been 
highly successful, with 85 percent of eligible seniors 
receiving some form of coverage for their medication.
    Every good program, however, always has room for 
improvement. In fact, as I think back on my 12 years here, I 
have never voted on a perfect bill yet. There is always a new 
chapter in democracy and a chance to improve on success.
    As of January 2008, the Centers for Medicare and Medicaid 
Services estimated that of the 12.5 million beneficiaries 
eligible for the low-income subsidy, 2.6 million still have not 
enrolled. In addition, the Social Security Administration has 
reported a significant percentage of those applying for the 
subsidy who qualified based on their income were determined 
ineligible because their assets exceeded the eligibility 
requirement.
    We also must look at other Medicare assistance programs 
that like the Part D low-income subsidy, are intended to help 
our poorest and most vulnerable seniors afford their 
healthcare. Sadly, low utilization, overly restrictive asset 
limits, and poor coordination among our agencies are just a few 
of the reasons these programs also aren't being utilized by 
those who need help.
    Congress must consider creating parity between Medicare's 
different programs. Right now, the low-income assistance 
programs under Part B are significantly more restrictive than 
the help offered under Part D. Even the congressional advisory 
panel, MedPAC, recommends that the program's eligibility 
criteria should be the same.
    We also need to look at policies that ensure the agencies 
are doing a better job of sharing information and coordinating 
application processes. We can and should do better to ensure 
that seniors with the greatest need are eligible and receiving 
assistance.
    Last year, Senator Bingaman and I introduced a package of 
bills to improve Medicare Part D for most of our vulnerable 
seniors. One important aspect of our legislation would help us 
to target beneficiaries who might be eligible for LIS by 
allowing the Internal Revenue Service to share tax-filing 
information with the Social Security Administration. Our 
legislation also raises the asset test limits to allow seniors 
like Mrs. Korynasz, her mother, to qualify for the low-income 
subsidy.
    As Congress continues to develop the Medicare package 
needed to stave off the 10 percent physician payment cut, I 
hope my colleagues will remember that the most vulnerable of 
our seniors also need help. I hope today's discussion will 
provide some valuable information to guide us as we make 
Medicare successful and beneficial for all seniors.
    With that, we have been joined by two of my colleagues. We 
will go to Senator Whitehouse first, then Senator Salazar for 
any opening statement you may have.

            STATEMENT OF SENATOR SHELDON WHITEHOUSE

    Senator Whitehouse. Thank you, Chairman.
    I just wanted to express my appreciation to you for holding 
this hearing. I particularly want to welcome Ms. Korynasz, who 
wins the prize for most miles traveled to get here today, and I 
am glad you did because I think it is an important issue.
    I think that in the discussion, particularly about Part D, 
the powerful vested interests in Washington hold far too much 
sway, and individual seniors are far too often overlooked.
    I am from Rhode Island. Rhode Island has the eighth- 
highest senior population of any State. States that have a 
higher senior population include Florida and Arizona, which are 
destination States for seniors, very often well-off seniors who 
go there to retire and enjoy the benefits of the weather and so 
forth.
    Which leaves Rhode Island as a State that has a uniquely 
high profile of seniors who need the kind of assistance that 
Part D provides. Over and over and over again, we have 
witnessed the tragedy of seniors falling into what is benignly 
and falsely called the ``donut hole'' and what should probably 
be called the Bush senior trap for unforeseen expenses.
    Yes, clearly, if they had looked through all of the fine 
print, they could have seen that this was waiting for them, and 
they would ultimately fall into it. But a lot of the seniors 
who are highly dependent on multiple medications--heck, I will 
confess, I don't read through the complex medical forms that I 
get myself. I think it is a lot to expect elderly seniors who 
are very dependent on multiple medications to do the same. So 
it often comes as a surprise.
    There was a woman from Woonsocket, who had been independent 
her entire life. She lived in a tenement, which is Rhode Island 
for a three-decker, and walked wherever she went. She 
discovered that she had fallen into the trap when she went to 
her pharmacist, and they said, ``Well, you will have to pay for 
these. I am sorry. Your coverage is not good.''
    She had no idea that was going to happen, and she didn't 
have the money. So she had to walk away from the pharmacy 
window empty-handed. It was a terrible and frightening thing 
for her, and she had to face the prospect of losing her 
independence, losing her apartment. I mean, this was a woman 
who had fought for her independence for 90 years, and she did 
not want to give it up lightly.
    But she was really presented with no choice, except for the 
fact that she had a grandson who was willing to come and look 
after her and take care of it. But stories like that play out 
over and over and over and over again. They are all completely 
avoidable, completely avoidable.
    If this organization, the U.S. Congress, would simply have 
the courage to stand up to the pharmaceutical industry and say 
you have to behave like every other business and negotiate over 
the price of pharmaceuticals with buyers, instead of doing what 
we did, which is to disable CMS from negotiating with the 
pharmaceutical industry and allow this industry to dictate 
pricing to our Government and for our seniors.
    I understand that if we had made that simple correction, 
there would be enough savings from the lower prices that we 
would be able to fill this trap into which so many seniors 
unwittingly fall. So, to me, it is really a terrible exercise 
in public policy and shows the power of organized lobbyists, 
surrounded special interests up against folks like Ms. Korynasz 
and her family and like the lady in Woonsocket, who have nobody 
looking out for them other than us. If we are not doing our 
jobs, they are the ones who pay the price.
    Thank you very much, Senator.
    Senator Smith. Thank you, Senator Whitehouse.
    Senator Salazar.

                STATEMENT OF SENATOR KEN SALAZAR

    Senator Salazar. Thank you very much, Senator Smith, as 
Ranking Member, for keeping a focus on the vulnerable.
    I thank Chairman Kohl also for scheduling this hearing 
today.
    Listening to my friend and colleague, Senator Whitehouse, I 
remember our days as fellow attorneys general, when he was 
attorney general of Rhode Island and I was attorney general of 
Colorado, and one of the things that we had a focus on was the 
protection of the elderly, the protection of the most 
vulnerable. In my own State, we had many different summits 
where we brought our senior citizens together and other 
interested stakeholders to make sure that we were protecting 
them.
    Today's hearing really is about how we make sure that the 
programs that we have created are, in fact, programs that are 
made available and that seniors know how to take advantage of 
those opportunities that we have created. This is an excellent 
opportunity to discuss the state of Medicare low-income 
assistance programs and how to reform these programs to meet 
the needs of seniors and to increase enrollment.
    In my State of Colorado and across this country, many 
families are feeling the serious financial pressures as a 
result of the rising cost of energy, gas prices, and medical 
care. Seniors with limited incomes are those who I think are 
particularly most vulnerable. Government programs, such as the 
low-income subsidy, are critical for helping millions of 
seniors cover the cost of care, including 91,000 seniors in my 
home State of Colorado.
    Most Medicare experts, including MedPAC, believe the low-
income programs for Medicare beneficiaries are broken. The 
Congressional Budget Office estimates the participation rates 
of beneficiaries are very low in the various programs. Only 33 
percent of eligible beneficiaries are participating in some of 
those programs, while 13 percent in the SLMB program.
    When you exclude dual-eligibles that were auto-enrolled in 
2006, almost two thirds--that is almost two thirds--of low-
income Medicare beneficiaries qualified for the drug benefit 
low-income subsidy but did not receive the benefit. That is two 
thirds who qualified did not receive the benefit. Reasons cited 
for this include lack of awareness that the program exists and 
an inability to complete the application to receive the 
benefit.
    Compared to other Federal benefit programs, participation 
in Medicare low-income programs falls far, far behind. 
Participation rates are estimated to be 75 percent for the 
earned-income tax credit, 66 percent for supplemental security 
income, and 66 percent for Medicaid. Experts are all in 
agreement that to fix these programs we must align the 
eligibility requirements and significantly improve outreach and 
enrollment.
    It is critical that we have similar, if not better, 
participation rates in our Medicare low-income programs so that 
elderly patients have access to the care they need at the time 
that they need it. Using these programs to increase access to 
care helps us prevent costly and unnecessary treatments for 
advanced disease, which is critical to reducing our healthcare 
spending and improving patients' quality of life.
    We have been working with Senator Smith and my colleagues 
in the Finance Committee on some of these same issues, and I am 
delighted that the Aging Committee is also putting a focus on 
this issue here in this Committee.
    When I consider the programs we are discussing here today, 
I am confident, I am convinced that we can reform our system so 
that low-income seniors are receiving the care they deserve. 
The fundamental principles of the programs are sound, but we 
need to make necessary adjustments to include everyone who 
should be included.
    Thank you, Ranking Member Smith.
    Senator Smith. Thank you, Senator Salazar.
    To introduce our panel for the record, we will first hear 
from an Oregonian, Judy Korynasz. She will be sharing her 
experience with us as a caretaker of her mother, Charlotte 
Wachdorf. I am inspired and appreciative of her time and 
dedication to ensuring her mother continues to receive proper 
quality care and look forward to her testimony.
    Barbara Bovbjerg is no stranger to this Committee. We 
appreciate, Barbara, your being here again. She is the director 
of GAO's Education, Workforce, and Income Security team. She 
will discuss GAO's work regarding the Social Security 
Administration's enrollment of beneficiaries into the LIS 
program and give an update on these efforts.
    Joyce Payne is a member of the AARP Board of Directors. She 
will discuss what AARP is hearing from its members in regards 
to Medicare's low-income assistance programs and elaborate on 
recommendations for reform to these programs to ensure that the 
poorest and most vulnerable seniors receive the help they need 
with their healthcare costs.
    Laura Summer is a senior research scholar at Georgetown 
University Health and Policy Institute. Ms. Summer is a senior 
research scholar at Georgetown University with over 20 years of 
experience in Federal, State government, independent policy 
organizations, and academic institutions. We look forward to 
hearing her testimony and recommendations on the obstacles 
faced by beneficiaries and how we can improve enrollment in 
Medicare's low-income assistance programs.
    Lisa Emerson is also from Oregon, and is the director for 
Oregon's Senior Health Insurance Benefits Assistance Program. 
Ms. Emerson will testify on her experience in this capacity. 
She, her colleagues, and volunteers deserve our gratitude for 
their hard work in helping Oregon seniors navigate the Medicare 
program. I am very interested in her thoughts on what 
improvements can be made to make her difficult job easier.
    So, with that, Judy, why don't we begin with you?

STATEMENT OF JUDY KORYNASZ, BENEFICIARY WITNESS, CAREGIVER FOR 
                   HER MOTHER, HILLSBORO, OR

    Ms. Korynasz. OK. Good morning, Mr. Chairman, Ranking 
Member Smith, and members of the Committee.
    Thank you for inviting me to testify today. My name is Judy 
Korynasz. I am 66 years old, and I live in Hillsboro, OR. I 
have Medicare, as does my husband, John, and my mother, 
Charlotte Wachdorf, who lives with us.
    I am here today to tell you about my family's experience 
with Medicare. In particular, I am going to focus on my 
family's experiences with the Medicare prescription drug 
benefits and its effect on people like us who have modest 
incomes and savings.
    My mother's name is Charlotte Wachdorf. She is 87 years 
old, soon to be 88, and will turn 88 on June 2. She has lived 
with my husband and I since last November. Before that, she 
lived with my brother, a retired Air Force colonel, and his 
wife for 5 years after my father died. When my sister-in-law 
developed serious back ailments, my mother moved in with us.
    My mother's health has been declining for several years. 
She currently has chronic obstructive pulmonary disease, better 
known as COPD, diabetes, neuropathy, which causes nerve damage 
in her feet and up through her legs. As a result of the 
diabetes, she has congestive heart failure, chronic anemia, and 
an aneurysm and a blood clot in her heart.
    She takes more than 15 medications. She takes Procrit once 
a month, and the following medications at least daily. She has 
Synthroid, Detrol, Hydroco, which is a form of Vicodin, 
Gemfibrozil, Folbic, Actos, Lisinopril, Spironolactone, Advair 
Diskus, Combivent, Fluticasone, SennaGen, Mirtazapine, and 
Singulair. Claritin and an iron supplement and a multi-vitamin. 
She also uses a walker and is on oxygen full time.
    The good news is that, thanks to her doctors and these many 
medications, her health has been stabilizing recently. 
Unfortunately, paying for these medications takes up a good 
portion of her financial resources.
    Even with help from Medicare Part D, my mother's only 
income is $1,027 per month in Social Security, an annual income 
of $12,324. She also has, as of this month, $15,213 left in her 
savings. This means she meets the income requirements for the 
Part D extra help program, but she has $3,223 too much in 
savings.
    As a result, every year since Part D started in 2006 she 
has fallen into the coverage gap and has spent over $3,000 of 
her own money on prescription drugs. She has only reached 
catastrophic coverage in December, if at all. Because she has 
been on hospice care during this time as well, she has paid for 
only about half through Part D. If she were not on hospice, she 
would have even higher costs.
    This year, she entered the coverage gap in April, and this 
month, she paid for her Procrit and five other prescriptions, 
which amounted to $585.13 even with a discount that she 
obtained from the Oregon prescription discount program.
    If her health continues to stabilize, she will leave 
hospice care. We are grateful for that, but she will then have 
to pay for the rest of her drugs. I don't know for sure how 
much that will cost, but I expect it would consume most of all 
of her Social Security check while she is in the coverage gap.
    My husband and I will help her as best we can. However, our 
resources are limited as well. Our only incomes are Social 
Security because our former employer went bankrupt, and our 
401(k)s were lost as a result of that bankruptcy. Although my 
health is fairly good, my husband is a colon cancer survivor 
and has glaucoma. He takes several expensive eye drops to 
preserve his sight----Cosopt, Alphagan, and Lumigan.
    This month, due to the amount that he had to pay out before 
he met his--I forget the name of what they call that. Anyway, 
he had to lay out $273.50 just for two medications, and then 
the rest was covered by his Part D and his health insurance. So 
we were grateful for that.
    Unfortunately, my husband has also recently been diagnosed 
with the early stages of Alzheimer's disease. His doctor has 
told us his prescription drugs are likely to increase 
significantly soon. He, too, will probably fall into the 
coverage gap this year.
    If the limits on financial assets for the extra help 
program were increased, my mother would qualify for the 
program. She would not have a gap in her coverage, and she 
would not have to spend most of her income and the little 
savings she does have left on prescription drugs. It would also 
provide my husband and me with considerable peace of mind to 
know that my mother's prescription drugs would be affordable.
    Finally, I would like to let the Committee know about some 
of the difficulty we have had figuring out Medicare Advantage 
and the Medicare drug benefit. Last fall, when my mother moved 
in with us, I called 1-800-MEDICARE to help us choose a 
Medicare plan for her. I tried every day for 2 weeks several 
times a day. The line would ring, and then I would get cutoff. 
I never did get an answer.
    As you know, the Part D program is exceptionally 
complicated. I could not get reliable information for my 
mother's Medicare Advantage plan or the mail-order pharmacies 
either because they would give me different information every 
time I called. I spent hours wading through information to 
figure out the best coverage for my mother, my husband, and 
myself.
    Finally, I received invaluable help from the counselors at 
SHIBA, the Senior Health Insurance Benefits Assistance Program. 
You may know it as Oregon's SHIP program. The staff at SHIBA 
has created an excellent booklet that guides people through 
Medicare, Medicare Advantage, Medigap, and Part D plans.
    The SHIBA counselors were wonderful in helping me 
understand my options and sorting out the information that 
could otherwise be overwhelming. The staff and volunteers at 
SHIBA do a terrific job, and I would like to take this 
opportunity to thank them publicly.
    I want to thank the Committee, and especially Senator 
Smith, for taking an interest in this issue and for inviting me 
to testify about my family's experience with Medicare.
    I hope that the rules can be changed to allow people like 
my mother to get the healthcare she needs without spending the 
last penny she has. It seems to me that in a country as wealthy 
as this one, there should not be people who cannot take their 
medications just because they cannot afford them.
    Thank you.
    [The prepared statement of Ms. Korynasz follows:]
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    Senator Smith. Thank you, Judy.
    Barbara, welcome back.

STATEMENT OF BARBARA BOVBJERG, DIRECTOR, EDUCATION, WORKFORCE, 
AND INCOME SECURITY ISSUES, U.S. GENERAL ACCOUNTABILITY OFFICE, 
                         WASHINGTON, DC

    Ms. Bovbjerg. Thank you, Mr. Chairman.
    Mr. Chairman, Senators, I was originally really pleased to 
be here to talk about Social Security Administration and the 
low-income subsidy of the Medicare Part D program, though I am 
very sobered by the story we just heard. As someone who worries 
a lot about retirement income, I was particularly horrified to 
hear about your 401(k)s, but that is a topic for another day.
    SSA is charged with publicizing the subsidy, with taking 
and evaluating applications, and with determining participants' 
continuing eligibility. My testimony today is going to focus on 
the numbers of applicants that have been approved and denied so 
far for the subsidy and the status of SSA's outreach efforts. 
My statement is drawn from a report that we issued last year 
about this time on this topic and we have updated a little for 
progress since then.
    First, SSA's progress on processing. Since the beginning of 
the program, 7.2 million individuals have applied for the 
subsidy, and SSA has approved about 2.8 million of these. SSA 
received 1.3 million applications in Fiscal 2007, of which they 
approved 43 percent and denied 32 percent. The rest required no 
decision for a variety of reasons, including duplicate 
applications or applications that were withdrawn.
    SSA's goal is to process 75 percent of the subsidy 
applications within 60 days. And in the first 6 months of 
Fiscal 2008, SSA reports they processed 93 percent of 
applications within that timeframe, which is well exceeding its 
service goal.
    Also, we now have more detailed information on income and 
asset levels for those denied the subsidy than we had 
previously. According to SSA data for 2007, over 60 percent 
earned income above the subsidy program's limits. About 17 
percent were denied because their assets exceeded program 
limits, and another 10 percent exceeded both asset and income 
limits. The rest were denied, again, for other reasons, such as 
not being eligible for Medicare to begin with.
    The extent to which denials exceeded the limit varied, but 
a significant percentage were barely disqualified. For income-
related denials, although the median excess income was $4,500, 
10 percent of this group had income that was no more than $500 
over the limit. So they just were barely cutoff. As for assets, 
although the median excess was $13,700, meaning that half were 
above and half were below that amount, about 6 percent of these 
denials were only $500 over the threshold.
    I will turn now to SSA's outreach efforts. When we began 
this outreach campaign in May 2005, SSA sent targeted mailings, 
which included an application form, to almost 19 million 
individuals identified as potentially eligible, and had 
contractors call more than 9 million of those individuals who 
didn't respond to the initial mailing. SSA also conducted other 
specific follow-up efforts, including sending notices to 
individuals they couldn't contact by phone and more than 76,000 
events at senior centers, churches, and other community 
centers.
    Today, however, that focused campaign is more muted. 
Although some subsidy-specific initiatives remain, including a 
new campaign of automated phone calls to those potentially 
subsidy-eligible, SSA has largely incorporated the subsidy 
outreach into its overall outreach activities for the entire 
Social Security program. This is understandable, SSA resources 
are stretched thin, particularly in field offices where much of 
the outreach is carried out, but is likely less effective than 
a more concentrated approach.
    Of course, as we noted last year, it is difficult to know 
whether the outreach measures have been effective or not 
because no one really knows how many people are eligible for 
the subsidy. Reliable data are simply not available to help SSA 
with its task of reaching the eligible population.
    SSA believes that tax data held by the IRS could help. They 
feel that even if many lower-income individuals do not file tax 
returns, they could at least use asset information from the 
Form 1099 and 1098 to eliminate some ineligibles from their 
list.
    However, by law, IRS cannot provide such information 
without specific authorization from the Congress, and IRS staff 
have expressed doubts that tax information would provide 
meaningful help anyway. This is why last year we recommended 
that SSA and IRS work together to assess whether tax data 
could, indeed, help. The two agencies are working together 
today to answer this question and anticipate results next 
month.
    In conclusion, reaching the millions of people who are 
foregoing the subsidy remains a significant challenge. While 
SSA continues to approve applications, its efforts to attract 
new recipients have slowed and been folded into the overall SSA 
outreach. This approach, while likely less effective than a 
subsidy-focused campaign, should not be surprising given SSA's 
workload in its field offices and its likely inability to 
devote more time and attention to this program.
    Better information to narrow the list of who may be 
eligible could help, and we are encouraged that IRS and SSA are 
working together to assess the utility of tax data in this role 
because a better understanding of who is eligible could help 
SSA make more efficient use of its limited staff resources by 
targeting outreach more narrowly to the population who is more 
likely to be eligible.
    That concludes my statement, Mr. Chairman. Thank you for 
the extra time.
    [The prepared statement of Ms. Bovbjerg follows:]
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    Senator Smith. Thank you, Barbara.
    Joyce Payne.

  STATEMENT OF JOYCE PAYNE, MEMBER, AARP BOARD OF DIRECTORS, 
                         WASHINGTON, DC

    Ms. Payne. I am Joyce Payne of AARP's Board of Directors. 
We want to thank you for inviting us to testify on the need to 
strengthen Part D low-income subsidy and Medicare savings 
programs.
    One in four people on Medicare live on incomes of 150 
percent or less of the poverty level. That is just $15,600 for 
individuals and $21,000 for couples. They desperately need the 
help these programs provide.
    The low-income subsidy covers up to 95 percent of drug 
costs and closes the Part D donut hole. The Medicare savings 
programs pay Part B premiums and for those below the poverty 
level all Medicare cost sharing. However, millions of older 
Americans who need the help LIS and MSPs provide are not 
getting it because these programs have a serious flaw, an asset 
test.
    For LIS, beneficiaries can have no more than $11,990 in 
savings, $23,970 for a couple, no matter how low their income 
or how high their living expenses. For MSPs, the asset test or 
the asset limits are even more unreasonable--$4,000 for 
individuals and $6,000 for couples in most States, a limit that 
has not changed for the last 20 years. These amounts are hardly 
enough to get people through retirement. But anyone who has 
saved even one dollar over these limits is not eligible for 
help.
    Asset tests contradict efforts to encourage people to save 
by penalizing those who, despite limited incomes, put away a 
small nest egg for retirement. We should encourage people to 
save for retirement, not penalize those who do. Asset tests are 
also a barrier to enrollment, even for those who meet the 
limits because they make the application process so very 
daunting and invasive. The result is that millions of people 
are not getting the needed assistance.
    AARP believes there should be no asset test in Medicare. 
Again, we should encourage people to save for retirement. As a 
first step, AARP supports the Part D Equity for Low-Income 
Seniors Act introduced by Senators Jeff Bingaman of New Mexico 
and the Ranking Member of this Committee, of course, Senator 
Gordon Smith of Oregon.
    This legislation would increase the asset test limits, 
simplify the LIS application, and help target efforts to 
identify and enroll people. It takes an additional important 
step of allowing Social Security to screen LIS applicants for 
MSPs.
    We are committed to seeing enactment of first steps toward 
that goal this year as part of the Medicare package currently 
being considered by the Senate, and we look forward to working 
with Members of the Congress from both sides of the aisle to 
improve the Medicare prescription drug benefit and to ensure 
that all older Americans have access to affordable prescription 
drugs and healthcare.
    Again, we thank the Committee for this opportunity to speak 
on behalf of our 40 million members who want the Congress to 
strengthen Medicare low-income programs.
    We thank you.
    [The prepared statement of Ms. Payne follows:]

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    Senator Smith. Thank you very much, Joyce.
    Laura Summer.

STATEMENT OF LAURA SUMMER, SENIOR RESEARCH SCHOLAR, GEORGETOWN 
      UNIVERSITY, HEALTH POLICY INSTITUTE, WASHINGTON, DC

    Ms. Summer. Mr. Chairman and members of the Committee, I 
appreciate the opportunity to testify today.
    Much of my work at Georgetown has involved examining the 
impact of Federal and State policies on enrollment for public 
benefit programs and particularly recently for the low-income 
subsidy for Part D as well as the Medicare Savings Programs.
    Today, I would like to discuss some program changes to 
initiate a shift from the current enrollment process, which 
requires that individuals learn about and seek benefits, to one 
that relies on the use of available data to identify and inform 
low-income individuals about their eligibility and to help them 
enroll.
    First, I would like to make an important distinction. We 
often hear that 80 percent approximately of those who are 
eligible for the low-income subsidy are receiving it. But there 
are two groups of people who qualify for the subsidy, those who 
are deemed eligible by virtue of their participation in other 
programs and those who have to file a separate application for 
the subsidy.
    Of that group, the 4.2 million who have to file that 
separate application, it appears from CMS data that only about 
38 percent are receiving the subsidy, and that is obviously a 
very low enrollment rate.
    There is a tendency in thinking about how to improve 
enrollment in a program to want to publicize it more. But as 
Mr. Salazar noted before, low enrollment occurs not only 
because people don't know about the program, but also because 
they find the program difficult to apply for. They aren't 
familiar with the financial eligibility requirements or the 
financial benefits, and they simply don't know how to apply. 
This is what we generally hear when we ask beneficiaries and 
their counselors about the reasons that people don't apply for 
the subsidy.
    So some administrative simplification could really help 
increase enrollment. The elimination of the resource test is a 
key program change to simplify enrollment for beneficiaries and 
for those who process applications. As we have heard already 
this morning, that step would allow us to be able to identify 
the people who really qualify for the subsidy and also to 
target outreach more effectively because we have good data from 
national surveys about the income of these folks. But we don't 
have good information about the resources of low-income 
seniors.
    If the resource test is not eliminated, some steps 
certainly should be taken to increase the resource limit and 
also to simplify the way that resources are counted and 
verified. But simply eliminating a resource test or raising the 
resource limits will not ensure increased enrollment. We have 
an example from the State of Maine, which last year decided 
that they would do without a resource test for the Medicare 
Savings Program.
    Following that decision, they saw very little increase in 
enrollment in that State for the Medicare Savings Programs. But 
then a subsequent decision to deem eligible all of those people 
who were participating in the State Pharmacy Assistance Program 
for the Medicare Savings Programs brought a very dramatic 
increase in enrollment.
    As you have heard from others today, the idea of having the 
Social Security Administration and the IRS work together to 
determine--to use information on hand to determine who might be 
eligible for the subsidy is certainly one that has a great deal 
of merit. Without a resource test, it would be even easier to 
identify those individuals who are eligible for the subsidy.
    At the current time, SSA enrolls Medicare beneficiaries 
when they become eligible in both Parts A and Part B of the 
Medicare program, and there is an option to opt out of Part B. 
Thinking about a streamlined way to promote enrollment, the 
Social Security Administration could also enroll people 
eligible for the subsidy and give them an opt-out provision.
    We have also heard this morning about the fact that LIS and 
MSP benefits are available for a similar, but not exactly the 
same population, and two program changes could achieve 
administrative efficiency and increase enrollment in both 
programs.
    First, a mandate that no matter where a person applies for 
a subsidy or for MSP benefits, they be screened and enrolled 
for the other program, regardless of whether they apply at the 
Medicaid office or through the Social Security Administration, 
and a similar mandate that information be shared between those 
two programs would be very helpful. Of course, aligning the 
eligibility rules for the two programs would foster dual 
program enrollment.
    I also want to mention that ensuring that benefits continue 
uninterrupted from year to year is another very important 
factor in achieving high enrollment rates. Some of the people 
who are counted in those not participating in the program this 
year are people who participated last year, but lost their 
eligibility when they lost their deemed status through Medicaid 
or when they failed to respond to notices from SSA to 
redetermine eligibility.
    Barbara did mention some of the new data that are available 
from SSA, but there are other data that would be very helpful 
to have. It would be good to know about the relative value of 
resources to income for the folks who apply and who receive and 
who don't qualify for the subsidy. It would also be helpful to 
know whether resources change from year to year for this 
particular population. Even if the resource test is not 
eliminated at the time of application, I would suggest it 
certainly should be eliminated at the time of redetermination 
because in our research, we found that generally assets do not 
change for this population over time.
    Finally, I would just say that even with a simpler 
enrollment process, there will still be a need for materials 
and all kinds of materials, not only publicity and 
applications, but also notices, all correspondence to be 
available in a variety of languages so that we have 
linguistically and culturally appropriate information available 
for those people who may qualify for the subsidy.
    We know that beneficiaries tend to seek help from trusted 
sources and that one-on-one counseling is particularly 
effective. Over the past few years, the Federal Government 
really has played an important role in ensuring that there is 
support for that kind of activity. But as the program is more 
established, it is very important to continue to provide that 
sort of support so that one-on-one assistance can continue to 
be available on a community level.
    Thank you.
    [The prepared statement of Ms. Summer follows:]
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    Senator Smith. Thank you, Laura.
    Lisa Emerson.

 STATEMENT OF LISA EMERSON, PROGRAM MANAGER, THE SENIOR HEALTH 
 INSURANCE BENEFITS ASSISTANCE (SHIBA)/DIRECTOR, OREGON STATE 
 HEALTH INSURANCE COUNSELING AND ASSISTANCE PROGRAMS (SHIPS), 
                           SALEM, OR

    Ms. Emerson. Good morning, Ranking Member Smith and Senator 
Whitehouse and guests. I am definitely honored and I very much 
appreciate being here as well to provide testimony today.
    As you know, I am the program manager of the Oregon Senior 
Health Insurance Benefits Assistance Program, also known as the 
State Health Insurance Assistance Program, funded by a Federal 
grant from the Centers for Medicare and Medicaid Services as 
well as some State general fund.
    I would like to take this opportunity to thank Congress at 
this time on behalf of my State and other national partners for 
approving additional funding for SHIPs this year.
    My primary reason for being here today is to provide 
testimony about the low-income subsidy in Oregon and alert you 
to the critical role SHIBA plays with people eligible for Part 
D coverage. Oregon SHIBA is a State-wide free Medicare 
counseling service based in Salem, Oregon's capital. SHIBA has 
a certified volunteer base of approximately 200 volunteers that 
provide one-on-one counseling assistance to many of Oregon's 
over 571,000 Medicare beneficiaries, which makes up 15 percent 
of our total State population.
    The overriding goal of SHIBA volunteers is to help people 
understand and make informed decisions about their Medicare 
benefits, particularly the Part D options because they are 
complex.
    Since January 1 of 2007, the SHIBA counseling network has 
provided one-on-one counseling assistance to over 20,000 Oregon 
beneficiaries based on the data that we collect. The average 
time spent with each beneficiary has been approximately 38 
minutes. The estimated in-kind value to the program for over 
14,740 volunteer work hours during this period translates to 
approximately $250,000. These estimates illustrate the public 
reach and impact of Oregon's SHIP.
    SHIBA cannot recruit and maintain a volunteer workforce 
without the assistance of vital local, county SHIBA partners. 
We currently contract with 22 local SHIBA sponsoring 
organizations throughout Oregon to provide local SHIBA 
counseling services to beneficiaries.
    During today's hearing, you did hear directly from Judy and 
her family's need for the LIS, and she is one of many 
beneficiaries that we speak to in Oregon. These kinds of 
stories illustrate a very small sample of the widespread need 
for more low-income beneficiaries to be eligible for the 
assistance LIS can provide. I have included in the attachment 
some additional anecdotal stories from beneficiaries, and 
again, it is just a sample.
    Oregon SHIBA's experience with Part D prescription 
coverage. Beneficiaries repeatedly have expressed the following 
concerns to SHIBA about the Part D low-income subsidy program. 
The income and asset requirements for LIS are restrictive and 
do not make the benefit available to enough low-income people 
who need additional assistance with paying for their 
prescription drugs.
    They report that the income and asset eligibility 
guidelines for patient assistance programs, also known as PAPs, 
offered by pharmaceutical companies are more generous than 
those for the LIS. And they also report concerns with the 
eligibility criteria of using cash surrender value of life 
insurance policies, in-kind support and maintenance, and 
undistributed funds in retirement savings plans such as 401(k) 
accounts as assets.
    They often receive conflicting information about the LIS 
program from representatives from their Medicare Advantage 
company, private fee-for-service plan, Medicare, and Social 
Security Administration, and even insurance producers or 
agents. There has been a lag in coordination of the reduction 
in prescription co-pay for LIS beneficiaries when they join new 
Part D plans, and it has put the burden of proof that they are 
eligible for the LIS onto the beneficiary.
    Many LIS beneficiaries with 100 percent subsidy report they 
did not realize their subsidy amounts were determined by Social 
Security Administration rather than by the particular plan that 
they had selected. Letters from the Social Security 
Administration can be confusing, and beneficiaries often do not 
realize that they must apply or reapply in order to receive 
LIS.
    I would also like to take this opportunity to address the 
Federal grant for SHIBA and other SHIP programs. But in Oregon, 
the current Federal grant level has--while it has been 
increased slightly, has been insufficient to support the local 
level of resources and the volunteer base needed to meet the 
CMS/SHIP performance measures and standards and manage the 
growing number of calls from retiring baby boomers.
    The creation of Part D increased the complexity of the 
coverage under Medicare and magnified the confusion among 
Oregonians about their choices and the impacts on their out-of-
pocket costs. This, in turn, has increased considerably both 
the volume of calls to SHIBA and the amount of time volunteers 
spend providing assistance to each caller.
    Because the drug benefits offered by individual plans can 
change dramatically from year to year, beneficiaries still 
require annual assistance to ensure that the plans in which 
they are enrolled still cover their prescription medications.
    The CMS/SHIP performance measures implemented in 2005 have 
put an increased burden on State SHIP programs to maintain or 
exceed performance, but the funding base does not support the 
resources needed to develop a force of volunteers with the 
specialized knowledge to counsel the growing number of Medicare 
eligibles.
    To appropriately address the increasing demand for 
assistance from SHIBA, particularly for Part D coverage, it 
would require having a minimum of one counseling site in 
every--or in all of Oregon's 36 counties and a volunteer force 
of not less than 600 active individuals trained in various 
specialty areas of Medicare.
    I could go on, but I would like to say thank you again for 
this opportunity, Senator Smith, members of the Committee, for 
the opportunity to share testimony with you today, and I will 
do my best to answer your questions.
    [The prepared statement of Ms. Emerson follows:]

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    Senator Smith. Thank you, Lisa.
    Laura, as you have studied other States, how is Oregon 
doing?
    Ms. Summer. Well, Oregon really does have a very active 
SHIBA program that is doing a great job.
    Senator Smith. Well, that is great. I appreciate that. As 
you think about the kind of information, the data that would be 
useful in helping Lisa help seniors navigate Medicare's low-
income assistance program, what would be the most useful data?
    Ms. Summer. Evaluate people's potential eligibility and try 
to determine----
    Senator Smith. Exactly.
    Ms. Summer [continuing]. How to reach them?
    Senator Smith. Yes.
    Ms. Summer. Well, as I said before, if we didn't have a 
resource test, then information on the income level of people 
in various parts of the State would be very helpful in 
identifying those who are potentially eligible for the benefit. 
In addition, it is very important not only to know the number 
of people you are trying to reach, but who those people are.
    So, questions about the types of materials, whether they 
are appropriate linguistically or culturally, are very 
important to consider.
    Senator Smith. Do you agree with that, Lisa?
    Ms. Emerson. Yes, I do. I would like to just mention the 
efforts being made by SSA and CMS and the SHIP programs by 
doing a campaign, an LIS outreach campaign for 2008 that is 
getting kicked off right now. There is information on CMS's Web 
site about that.
    Ms. Summer. Although I would like to add that the site 
provides materials in English and Spanish and perhaps should be 
expanded a bit to cover other languages.
    Senator Smith. Such as, in Oregon, perhaps Russian?
    Ms. Emerson. Absolutely.
    Senator Smith. What other languages?
    Ms. Emerson. Asian languages, Russian, Spanish, yes.
    Senator Smith. Judy, like Barbara, I was horrified to hear 
of your retirement difficulties. Your 401(k) is yours. How did 
it fall into the bankruptcy of your employer?
    Ms. Korynasz. Illegally.
    Senator Smith. That is unrelated to this topic, but I am 
just horrified by such a thing.
    Ms. Korynasz. Unfortunately, one of the owner's wives, she 
was the one who administered our 401(k). She owned her own 
business, which was an insurance business.
    Senator Smith. Is anybody in jail?
    Ms. Korynasz. Well--you know, yes. The Federal Government 
came after them for back taxes for a lot of things.
    Senator Smith. This is outrageous.
    Ms. Korynasz. They received punishment. That is true. They 
lost a lot. She lost her business. She lost everything. But 
unfortunately, the people that worked for them lost all that 
they had in their retirement. There was just nothing there.
    Senator Smith. I am so sorry to hear that. That obviously 
complicates all the additional difficulties you are having with 
Medicare, and that takes us to the purpose of this hearing, I 
understand you have had some difficulty with 1-800-MEDICARE. I 
have been all over CMS for some time to try to reduce wait 
times and increase accuracy in information, and I wonder if you 
can discuss some of the problems you experienced?
    Ms. Korynasz. When I tried to reach them, I kept wondering, 
well, why does this number ring through and then clicks off? 
So, I actually had asked--when I got in touch with the SHIBA 
volunteer, I asked if he would know why you couldn't get 
through. He said, ``Well, I think it is the high volume of 
calls. They simply can't handle them.''
    Then I read a little piece in The Oregonian that stated 
that they simply did not have the staff to answer all of the 
calls. So when they were overloaded, it just simply cut them 
off. Not that the staff cut you off, the system did because 
they couldn't answer the calls.
    Senator Smith. Kind of like the Senate phone system when we 
are dealing with immigration or something. It melts down. 
[Laughter.]
    But it points out the need, and I think the pressure that I 
and I know many of my colleagues are putting on CMS to deal 
with this issue. It makes me wonder why the budget requests CMS 
needs in order to manage this problem was not addressed. This 
truly is one of the really crying needs out there.
    Right now, on the Senate Finance Committee, there has been 
a real effort to deal with the issue of what is called the 
``doc fix'' around here. It doesn't do you a lot of good to 
have Medicare if no physicians will take Medicare patients. 
This is why we have to avoid what are scheduled cuts to them.
    My own view is that in taking care of the doctors, which is 
essential not just for providers, but patients, we do need to 
address these low-income issues as well. I am going to be in a 
meeting a little bit later of Finance Committee members, and I 
wonder what you would tell them? Should we just take care of 
the docs, or should we also address these issues?
    Ms. Korynasz. I think it is important to take care of the 
doctors because we ran into that. I mean, my doctor in Medford, 
when we moved up to Hillsboro area, recommended a doctor for me 
that she knew personally. When I made contact with that 
doctor's office, they said, ``Oh, gee, we are really sorry, but 
we don't take Medicare patients. We simply can't handle any 
more than we already have.''
    Then when we tried to find a new doctor recently, we ran 
into the same problem. The doctor that we would liked to have 
had said, ``Oh, we simply can't take any more Medicare 
patients. We have reached our quota on what we can handle.'' We 
had to hunt around to find a doctor that was willing to take on 
new Medicare patients.
    Ms. Payne. Senator Smith, can I elaborate on that?
    Senator Smith. Yes, please, Joyce.
    Ms. Payne. It seems to me that although the doctors are 
very--the physicians are very important to this, that it 
shouldn't have to be an either/or decision. We have to deal 
with the central issue of the cost of health in this country. 
We have to deal with creating the kind of system that will be 
high quality for low-income individuals and for physicians.
    So I think we have enough resources, we have enough 
options. We can look at IT. We can look at evidence-based 
research. We can look at trying to get drugs into the 
marketplace, and we have enough solutions. I don't think we 
have to decide whether it is the physicians or low- income.
    Senator Smith. I agree with you completely, and that is 
going to be my position in the Committee later today.
    Joyce, we are caught between what we need to do, what we 
want to do, and what the budget rules require under the PAYGO 
requirement. You know, PAYGO is a great campaign slogan. ``Pay 
as you go.''
    The truth is, though, that that assumes a static budget and 
that every dollar spent is equal in terms of its economic 
impact, its human impact. Every tax dollar, every tax category 
is equal to every spending dollar. The truth is we don't have a 
static budget. We have a very dynamic one, and I wonder what 
would you counsel my friends on the Democratic side, frankly, 
who insist on this being in there? We are at loggerheads.
    There aren't many other budget cuts to be made in Medicare 
or in other spending programs that they want to make or that I 
believe are advisable to make. There aren't the votes on the 
Republican side to raise taxes. So what do we do?
    Ms. Payne. Well, certainly I am not the budget expert on 
this, but it seems to me that we need to live up to the code 
you have, that beautiful code on the wall about ``E Pluribus 
Unum,'' out of many is one. Because one is Judy's family. One 
is--there are Judy families all over the country. We hear from 
them every day.
    So it seems to me that however this is worked out, it needs 
to be worked out in the best interest of families like Judy's 
who have paid into the system, who have made the kind of 
sacrifices to live a good life, a decent life in retirement, 
and we should be providing incentives.
    When you look at defined benefits fading away and you look 
at the issue that she just raised in terms of her 401, there 
are people who are really hurting. They desperately need these 
services. So, we need to think in terms of out of many is one 
not only for the Senate, but for the country.
    Senator Smith. Well, what happened in the last session of 
this Congress is that it was waived, and I suspect that that is 
what will happen again this Congress, that it will be waived 
because, I agree with you, these are not either/or issues. 
Although we need to take care of the docs, as Judy advises we 
also need to take care of the low-income issues.
    I have asked enough questions. I will turn, before I go to 
a second round, to Senator Whitehouse.
    Senator Whitehouse. Thank you. Once again, I appreciate the 
Ranking Member having chaired this hearing and giving us the 
opportunity to hear from these wonderful witnesses.
    All I was going to do was to say how much I appreciated 
your testimony, particularly Ms. Korynasz's personal testimony 
and Ms. Emerson's, the attachment that told the stories of all 
the different folks on your SHIBA program and what their lives 
were like and what they were going through. It is so easy for 
us to forget that here, when the tassle-shoed lobbyists show up 
from the pharmaceutical industry and try to have their way, 
that it really harms folks who don't have a voice all across 
this country.
    I thought those were really wonderful stories in your 
testimony. I appreciate that you assembled them and brought 
them to us. So that was all I was going to say.
    Then, Ms. Payne said what she said about the need for a 
forum, and I just have to pounce on that because I couldn't 
agree with it more. I think it is absolutely critical.
    We have heard the testimony in the Budget Committee about 
the $35 trillion in healthcare entitlement costs that is coming 
at us. Unless somebody figures out how to repeal the passage of 
time or repeal the aging of humans or make it more likely that 
older humans cost less for medical care than younger humans, 
then this is an inevitable, unavoidable fact that is bearing 
down on us with what our wonderful chairman Kent Conrad has 
called a tsunami of cost.
    If we dawdle around here in Congress and don't do something 
about it until the wolf is really at the door, then the only 
tools left in our toolbox are going to be the fiscal tools that 
can be deployed to solve a problem like this, and there are 
only three of them.
    One is raising taxes. Anybody who knows what American 
businesses pay for healthcare already and what competitive 
posture that puts us in vis-`-vis the rest of the world knows 
that that is a pretty tough sale to make, that American 
business needs to pay more in taxes for this healthcare system.
    The second is to throw folks off of healthcare. In a 
country that has 50 million people already uninsured, which is 
a national disgrace, compared to other developed countries, the 
idea that we would throw more off is pretty awful.
    The third is you cut provider payments, which is what 
Senator Smith was asking about. We are already at the limit 
with provider payments.
    We had this battle in Rhode Island a decade ago when our 
workers compensation system fell apart, and the industry folks 
all came in and said, well, this is easy. You take your 
doctors. You pay them 15 percent less. You chalk up those 
savings. We will take it.
    Common sense, thankfully, prevailed, and instead we went to 
a medical advisory board for workers compensation. They 
established protocols of care, and some discipline was put into 
it. The people from the specialty groups came in and decided, 
OK, for this, here is the program. They were pretty broad, 
solid programs. They weren't forcing doctors to make inch-by-
inch decisions.
    But it really controlled the cost in the workers 
compensation medical care in Rhode Island after that, and we 
didn't have to cut because we knew that would be a foolish 
thing to do. Penny wise for the moment, pound foolish in the 
long run.
    That day is inevitable, and that day is coming soon. Those 
three alternatives that we have to address that day are 
sickening ones, frankly. The only way we are going to get ahead 
of this is if we start doing exactly what you said right now. 
We have to build a national health information technology 
infrastructure that doctors can connect to. To expect them to 
build it all by themselves is as dumb as expecting everybody to 
build their own roads to work.
    There is a national infrastructure issue here, and we have 
to see it that way, and we have to build that national 
infrastructure. Then everybody can connect their machines. But 
there are issues of privacy. There are issues of coordination, 
what goes into an electronic health record and so forth, how 
the health information exchange works that need to be worked 
out on a national level.
    We also need to focus a lot on quality of care improvement 
and prevention. We way under invest in those things in areas 
where we know it will save money. The Rand Corporation says it 
could be as much as $346 billion a year from a health 
information technology system that supports these quality 
improvements.
    There is $2 billion a year in Pennsylvania alone that gets 
burned from hospital-acquired infections that are completely 
unnecessary. We kill 100,000 Americans every year from medical 
errors that don't need to happen.
    There is a huge savings associated with properly targeted 
quality and prevention investments, and we are not pursuing it. 
We are not pursuing it because of the economics of the system. 
So we have to change the way it is reimbursed so that those 
problems get solved.
    But between those three things--a national health 
information technology infrastructure, reform in the area of 
quality improvement and prevention, and a better reimbursement 
system--we can drive enormous costs out of the system. I mean, 
it is burning up 16 percent of our gross domestic product. In 
the next closest country health care is only 11 percent of 
their gross domestic product.
    The average for the European Union is only 8 percent of 
their gross domestic product, and those countries have better 
health outcomes than we do. We are paying twice as much to have 
worse health outcomes. We are the highest- paying country in 
the world, and when you look at the outcomes, we are somewhere 
between 25th and 40th. We rank with countries like Croatia and 
Cuba. I mean, it is embarrassing.
    We have to get after that because we either have to do that 
now or face those horrible fiscal adjustments a decade from 
now. It is really vital, and I know it has taken us off point, 
but I think it is such an important point. I am so glad that 
you raised it.
    I hope that AARP will pick up its stick and go around this 
building and knock everybody upside the head until they get it 
because if we don't do that now, time is short.
    Ms. Payne. We are working on getting a bigger stick.
    Senator Whitehouse. Good. Good. [Laughter.]
    Senator Smith. It is going to grow because, as Senator 
Whitehouse points out, the baby boom generation is here, and so 
the ranks of the AARP will grow.
    I wonder, does AARP have a position--I know how it feels 
about the donut hole that captures lots of low- and middle-
income people, such as Judy's family, is that the wrong place 
for the donut hole? Medicare Part D is means tested already, 
but not very much. Should it be means tested?
    Ms. Payne. Well, we are certainly working on that. We 
obviously want any asset test to be eliminated. We recognize 
that there are some problems with the donut hole, and we are 
certainly working with a number of staffers and trying to 
resolve some of those issues. It is a major problem, and we 
certainly recognize that.
    Senator Smith. Well, we would look forward to your counsel 
on that because those of us who may or may not be here, whoever 
is here is going to have to wrestle with these very, very stark 
and terrible choices.
    Senator Whitehouse. Mr. Chairman, I would suggest that we 
have no farther to look for the solution to the donut hole 
problem, the senior trap problem--I hate calling it the donut 
hole, it really sounds like it is something good--is to the 
Veterans Administration, which has the authority to negotiate 
with the pharmaceutical industry over the price of 
prescriptions.
    When you put the prices they get compared to the prices CMS 
pays for Part D side by side, the savings add up to enough to 
close the coverage gap.
    Ms. Payne. Those are the two priorities we have, the fact 
that we want to eliminate the asset test and certainly give the 
Secretary the authority to negotiate.
    Senator Whitehouse. Authority to negotiate. Why would we 
privilege an industry from being negotiated with?
    Ms. Payne. Absolutely.
    Senator Whitehouse. It is an extraordinary privilege. It is 
a ridiculous privilege, in my view.
    Ms. Payne. We certainly have enough models to follow that.
    Senator Whitehouse. Yes, you have to look no further than 
the VA, which does a wonderful job.
    Thank you, Mr. Chairman.
    Senator Smith. Thank you, Senator Whitehouse.
    I just have a couple more questions for you, Barbara, and 
you know we have talked about LIS and the asset test. What 
would happen if it were increased $5,000, $10,000, or $20,000?
    Ms. Bovbjerg. Well, actually, I looked at what would happen 
if your proposal to raise the asset threshold, almost double it 
roughly, that is in your bill, what would happen there? Based 
on the data that we got from Social Security, it looked like 
about half of the people who were denied on the basis of asset 
levels alone would be brought into the program.
    Social Security has estimated that that is about 25,000 
people. It is about 6 percent of the applicants. It could be 
more because we know there are people who would otherwise be 
eligible who don't apply because either they know or they think 
they know that their asset threshold is too high. So it could 
be a considerable number of people.
    Senator Smith. You mentioned in your testimony that you 
expect a report from Social Security and the IRS in a month?
    Ms. Bovbjerg. Next month, in June.
    Senator Smith. What do you think they are going to say?
    Ms. Bovbjerg. It is hard to say. When we did this work a 
year ago, Social Security felt very strongly that they could 
really use these data to help them narrow the potential 
eligibles and really focus on the people who were more probably 
eligible than the whole 19 million.
    IRS feels equally strongly that it is not going to help. We 
didn't have access to the data either, so we couldn't tell. But 
they have worked together to develop a methodology, and Social 
Security is working with some scrambled data that IRS gave 
them. They have passed some things back and forth.
    It is just hard to say what will happen, but then we will 
know next month. If SSA could use those data to improve their 
targeting, we will know that. I just think that would be a 
really important point if we are to tell IRS that they should 
provide tax information to Social Security.
    Senator Smith. Well, thank you so very much, each of you. 
If any of you have a closing thought or comment you want to 
make, we are going to have a vote momentarily on the floor. So 
any thoughts come to mind that you think we need to have in the 
Senate record, we would certainly welcome those right now.
    Ms. Bovbjerg. I would like to say something about the 
eligible people, that if you raise the asset limit or remove 
it, you will certainly have more eligible people. But we will 
still have this problem of not getting them to apply and not 
contacting them. I think that there is merit in some of the 
ideas about Social Security working more closely with 
community-based organizations. I know that they do that now, 
but perhaps make strengthening those ties would be really 
important.
    Perhaps there are some other things we could look at with 
the way that Social Security communicates with individuals--the 
notices, the letters--that might make a difference as well.
    Ms. Summer. I would add to that that certainly in your bill 
and other pending legislation, there are some relatively small 
administrative changes that can be made. One of the things that 
we have learned is that sometimes people don't apply for the 
benefit because they are afraid that if that benefit is counted 
as income, they will lose other means-tested benefits.
    That is problematic for a number of people who otherwise 
are eligible for the subsidy. We have actually a precedent for 
that when the drug card was being used, that was not counted as 
income for people.
    So, relatively small changes like that, administrative 
streamlining, I think sometimes get lost in the conversations 
about the bigger healthcare system and what we need to do to 
have everyone have access, which I think no one would argue 
with. Those are really daunting problems, but some of these 
small fixes really deserve attention.
    Senator Smith. Lisa.
    Ms. Emerson. I would just like to comment that I hear this 
a lot that from people that I work with is that nothing 
replaces that one-on-one noninvasive or nonthreatening help 
that a neutral counselor can give an individual to walk them 
through the evaluation and application process. That is what we 
are trying to do with SHIBA, but we don't know who these people 
are specifically.
    That is the challenge. We get the data of where they are 
concentrated in the counties, but we don't know their address. 
We don't know their name. So, it is kind of a shooting in the 
dark process, but we are doing our best.
    Senator Smith. Great. Are you in Pendleton, too?
    Ms. Emerson. In Pendleton, we are working to get a formal 
partnership developed there, but we have informal relations 
with the aging community-based organizations there.
    Ms. Korynasz. May I interject something?
    Senator Smith. Sure, Judy.
    Ms. Korynasz. The thing that I found the most frustrating 
when I was trying to get this information was the hours that 
you have to spend talking to people who do not have the answer 
to the problem and will give you what they think is the answer, 
and you wind up with 10 different answers, none of which agree, 
and you don't know where to go after that to get the actual 
answer you need.
    Senator Smith. The right answer.
    Ms. Korynasz. That is why I really believe that the SHIBA 
organization has been the most helpful to us because of all of 
the people that I talked to, and that include people in 
Medicare when I finally could talk to anyone, they had the most 
information, the most helpful information, and the most 
accurate information.
    That is what is important, I think, is not just that 
somebody tells you something. It needs to be accurate.
    Senator Smith. Right.
    Ms. Payne. Mr. Chairman, I would simply reiterate what 
Laura just said, the administrative coordination is very--the 
streamlining of the process is very important, and the Internal 
Revenue working with the Social Security Administration, we 
think that could be a substantial benefit to identifying 
eligible recipients and also getting the word out and outreach 
activities.
    Senator Smith. Well, you have all been just wonderful. You 
have been a great panel. It has been a great contribution to 
the record here in the U.S. Senate. Your time is not in vain. 
There are things happening that we are trying to push in the 
direction I think all of you are suggesting, and we will just 
go to work now.
    With that, we are adjourned with a heartfelt thanks.
    [Whereupon, at 11:46 a.m., the hearing was adjourned.]
                            A P P E N D I X

                              ----------                              


           Prepared Statement of Senator Robert P. Casey, Jr.

    Mr. Chairman, thank you for scheduling this important 
hearing on improving Medicare for our most vulnerable seniors. 
We meet today to discuss what can be done to enroll all 
eligible people in the low income assistance programs in 
Medicare, specifically the low income subsidy in the Medicare 
Part D prescription drug program, and beyond that ways we can 
improve the program to help these individuals.
    When Congress and President Johnson created the Medicare 
program over forty years ago they guaranteed every citizen over 
the age of 65 the right to health insurance. This right is now 
a fixture in the American health care system and as medicine 
has changed and advanced in the ensuing years the program has 
changed as well. One of the largest changes was the addition of 
the optional prescription drug benefit that was included in the 
2003 Medicare Modernization Act. This new benefit acknowledged 
the role prescription drugs now play in maintaining the health 
of everyone, but especially the elderly.
    One important component of the optional Medicare 
prescription drug benefit is the low-income subsidy. This is a 
vital part of the program and without it some seniors would 
still have to choose between taking medications they need to 
live and putting food on the table. This subsidy offers low-
income seniors additional assistance in paying for prescription 
drugs. Specifically, couples earning less than $21,000 and 
having assets worth less than $23,970 are eligible for this 
benefit. At the beginning of this year, 12.5 million Medicare 
Part D beneficiaries were eligible for this subsidy, but of 
those 2.6 million were not enrolled. Two of the main reasons 
given for this are that beneficiaries do not know how to apply 
for this benefit, or that they do not know they are eligible 
for it. I look forward to discussing ways we can work to change 
that.
    The asset limit presents a difficult issue for many 
seniors. Even though their annual income is within the 
guidelines, they are considered too ``wealthy'' to be eligible 
for this program because they have managed to save a relatively 
small amount for their retirement. Asset limits exist in many 
government programs geared towards low-income individuals. 
While it is important to ensure that these benefits go to those 
who truly need them, we must also ensure our senior citizens 
are not punished because they managed to save a small nest egg.
    In my own state of Pennsylvania, in January of this year 
almost 400,000 beneficiaries were enrolled in the low-income 
subsidy program. Clearly many of our constituents are using 
this benefit and it is helping them get the medications they 
need. Now we must look beyond them and see how we can reach out 
to others who are struggling to pay the cost of their 
prescription drug medications.
    Mr. Chairman, I thank you again for organizing this hearing 
and drawing our attention to this most important matter. We 
must continue to examine and develop ways we can help our most 
vulnerable citizens. This is our duty as public servants and 
especially as members of this committee. I look forward to 
hearing the testimony of the witnesses and exploring these 
ideas further. Thank you.
                                ------                                


    Statement of Richard Grimes, President and CEO, Assisted Living 
                         Federation of America

    Ranking Member Smith, Chairman Kohl, and members of the 
Committee, thank you for allowing me to submit this written 
testimony.
    In 2003, Congress enacted one of the most substantive 
changes to Medicare in recent memory, the Medicare 
Modernization Act (MMA). The prescription drug benefit (Part D) 
contained within the MMA has been well documented in providing 
access and affordability of prescription medicines to America's 
seniors. However, while Part D has brought control over their 
own health care into many seniors' owns hands, Part D needs one 
significant change that will benefit over 100,000 seniors.
    Prior to the MMA, all dually eligible individuals (those 
eligible for both Medicare and Medicaid) were exempt from co-
payment for prescription drugs, regardless of the setting in 
which they chose to receive their care.
    Recognizing the vulnerability of very low-income people 
living in long-term care settings such as nursing homes, and 
following the precedent set by previous low-income prescription 
drug assistance programs, the U.S. Congress exempted dually 
eligible individuals living in nursing homes from any co-
payment for Part D prescription drugs.
    Unfortunately, the MMA did not eliminate co-payments for 
dual eligible residents of assisted living, even though the 
residents of assisted living communities are usually ``nursing-
home eligible'' by definition and have similar needs for 
medications. That is, while the individual living in a nursing 
home is exempt from co-payments for Part D prescription drugs, 
the individual living in an assisted living community is forced 
to pay the same co-payments for the same Part D prescription 
drugs.
    Like nursing home residents on Medicaid, the over 100,000 
assisted living residents (dual eligible) have very limited 
financial resources. Their personal needs allowances average 
$60 a month. For many of these assisted living residents, the 
amount of their Part D co-payments exceeds their monthly 
personal needs allowances.
    Residents in nursing homes and assisted living use a 
similar number of prescriptions--approximately 8-10, according 
to recent studies. Even Part D co-payments of $1-$5 per 
prescription can present financial hardships for dual eligible 
assisted living residents, and, as we have heard from 
communities across the country, could impede people from 
receiving needed medications.
    More and more, seniors are looking to assisted living as 
their preferred senior housing option. Time and again, we hear 
from seniors who are concerned about being forced to receive 
their long term care in an institutional setting such as a 
nursing home. As it stands, the MMA is effectively punishing 
those dual eligible seniors who have chosen assisted living--a 
community based alternative to nursing homes.
    Congressional staff from both sides of the aisle have 
indicated to us that the inconsistency in the MMA described 
above occurred for no other reason than simple oversight on the 
part of proponents of this meaningful legislation.
    The stated focus of this hearing was to discuss ways to 
improve Medicare for our most vulnerable Americans.
    Mr. Chairman and members of the Subcommittee: It is not 
often that we have an opportunity to go back and correct an 
oversight. In the upcoming Medicare package, however, you have 
an opportunity to do just that. Over 100,000 dual eligible 
seniors in assisted living would be grateful for your swift 
action to provide this relief with a simple statutory change 
that corrects this oversight.
    Thank you again for this opportunity.
                                ------                                


      Statement for the Record from Alliance for Retired Americans

    The Alliance for Retired Americans commends the Senate 
Aging Committee for holding a hearing on seniors at risk and 
how to improve Medicare for those who are most vulnerable. 
Founded in 2001, the Alliance is a grassroots organization 
representing more than 3 million retirees and seniors 
nationwide. Headquartered in Washington, D.C., the Alliance's 
mission is to advance public policy that protects the health 
and economic security of older Americans by teaching seniors 
how to make a difference through activism.
    The Alliance thanks the committee for a history of 
commitment to addressing the issues faced by low-income seniors 
struggling to survive. For example, the well-intended Low-
Income Subsidy (LIS) program in the Medicare Modernization Act 
(MMA) of 2003 was designed to address the fact that some 
seniors need extra assistance to participate in the Medicare 
Drug program. Notwithstanding this dire need, it is worrying to 
learn that in the five years since its passage, the LIS program 
and other Medicare low-income programs remain underutilized and 
encumbered by the process and administration of these benefits.
    On behalf of our members nationwide, the Alliance for 
Retired Americans believes that the Senate must act now to 
simplify and align low-income assistance programs in Medicare 
such as Medicare Savings Programs (MSPs) and the Medicare Part 
D LIS. It is imperative that Congress compels appropriate 
agencies and interested parties to greatly enhance their 
outreach and participation to the population of seniors 
currently eligible to participate. Incidentally not 
``expanding'' the program, but realizing its initial intended 
success. Additionally, legislative action must be taken to stop 
penalizing seniors for maintaining modest savings. Asset limit 
tests--which have not been updated in the last 20 years--should 
be redrawn to reflect current cost of living standards.
    It is our hope that today's hearing will finally result in 
action appropriate to initiatives highlighted in your previous 
legislative attempts and reflect our simple, yet fundamental, 
recommendations for addressing the needs of this vulnerable 
high-risk population of America's seniors. There is an 
opportunity for these improvements to be included in pending 
Medicare legislation currently being drafted in the Senate. 
These improvements are long overdue, and as this Congress 
considers ways to address concerns in the healthcare industry 
generally, we are encouraged that this committee has taken this 
opportunity to highlight principle ways to make healthcare more 
affordable to the most vulnerable populations through Medicare 
beneficiary improvements. In light of the pending Medicare 
legislation, the timing of this discussion is ideal, and we 
hope that it affects the final legislative product introduced 
in the Senate including Medicare improvements.

          Economic Challenges are Double Jeopardy for Seniors

    The need to improve low-income programs (such as LIS and 
MSP) for at-risk seniors must be considered in the context of 
current national economic trends that make life extremely 
challenging for seniors on low fixed incomes. These seniors 
feel the pressure of rising health care costs. As the price of 
gas and food rises in tandem, many seniors face a daily choice 
between whether they can afford to eat, take their prescription 
drugs, run their electricity, or drive to visit their doctor. 
Hard choices such as these are between elements essential to 
one's survival, and it is shameful to consider any federal 
program a success that has not been able to mitigate this 
situation for its citizens.

                         Program Participation

    As you know, more than 12 million people are thought to be 
eligible for help with paying Medicare cost-sharing, especially 
Part B premiums through the Medicare Savings Programs (MSP) and 
Part D premiums, deductibles and co-payments through Part D's 
Low-Income Subsidy (LIS). The Part D Low Income Subsidy (LIS), 
providing low-income seniors with ``extra'' assistance in 
covering their prescription drug costs, was added to the 2003 
MMA in order to attract additional Senators' support of the 
bill. However, while the intent was noble, we know that more 
than 2.5 million people--about two-thirds of those eligible but 
not auto-enrolled--are not getting the Part D low-income 
subsidy. These participation rates are too low, and with minor 
attention and coordination more eligible seniors could receive 
life saving drugs and benefits.

                              Improvements

    Now is the time to make needed improvements to these 
programs, making sure that those seniors currently eligible, 
and those with low incomes whose eligibility is disqualified 
because they have managed to save a small nest egg, can get the 
help they urgently need. One of the principal challenges of 
participation in these programs is the current asset test 
limits. These limits have not been updated in 20 years. It is 
unfortunate to even have to mention that the program needs to 
be updated to reflect today's cost of living. It is unrealistic 
to apply economic standards of eligibility on values that are 
over two decades old. The asset test limits for both MSP and 
LIS programs needs to be raised to $17,000 for an individual, 
$34,000 for a couple.
    Secondly, the application process seniors must navigate is 
intimidating and complicated. We hope that as Congress 
considers a small number of low-cost recommended improvements 
to simplify and align Medicare low-income assistance programs, 
eligible seniors will be able to participate in the programs 
more efficiently. This can de done by, for example, allowing 
beneficiaries to apply for LIS and enroll in a plan at any time 
without penalty like they can in MSP programs; or by not 
including in-kind support and maintenance (ISM) from the LIS 
eligibility determination. Therefore, actual seniors applying 
to participate in these programs can be discouraged by the 
application process due to the daunting questions, forms, and 
timeline that ultimately even penalizes seniors that have saved 
modestly. Finally, it is critical that Congress require 
agencies to coordinate with each other in more streamlined and 
efficient way. Federal agencies need to work together. The 
Social Security Administration (SSA) and the Centers for 
Medicare and Medicaid Services (CMS) should be compelled to 
coordinate and together enroll needy seniors into Medicare 
assistance programs. For example, since SSA already is 
collecting income and asset information for the LIS 
application, it would be relatively easy to screen for MSP 
eligibility at the same time and forward the results to the 
states.
    Additional funding is also needed to increase outreach and 
enrollment initiatives. Outreach to those currently eligible to 
increase their participation is essential, and special 
attention should be given to cultural and language barriers. 
This coordination and targeting is central to improving 
outreach and enrollment.

                               Conclusion

    The Senate has demonstrated an interest in making 
improvements to the Medicare program on behalf of at-risk 
seniors. Currently we are at a watershed moment in health care 
reform, and it is critical that we enact improvements to 
Medicare at this time. It is critical to award eligible seniors 
with the benefits designed for them in order to keep seniors 
healthy, independent, and in their own homes longer. The 
impending Medicare legislation needs to include long overdue 
improvements to the low-income programs for seniors.

                                 
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