[Congressional Record Volume 143, Number 24 (Friday, February 28, 1997)]
[Senate]
[Pages S1785-S1787]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    THE MEDICARE PAYMENT EQUITY ACT

  Mr. THOMAS. Mr. President, I will not, myself, use 30 minutes.
  I rise today to talk about a bill we introduced this week, introduced 
the day before yesterday, along with several of my friends from rural 
areas, including the Presiding Officer and Mr. Grams, who joins me, the 
Senator from Minnesota. We will talk a little bit about the Medicare 
Payment Equity Act.
  I come from a place called Wapiti, WY. It is actually a post office 
between Cody and Yellowstone Park. This is a rural area. So, the unique 
problems of rural medicine are near and dear to my heart.
  We have in the Senate what is called a rural health caucus which, 
actually, 77 Senators have shown an interest in. I do recall the rural 
health group in the House, as well, which was very active and, as a 
matter of fact, the Senator from Kansas, now presiding, was cochairman 
of that group.
  So, we have a bill that deals with rural health care. And there are 
unique problems in rural health care. Other sponsors include Senator 
Burns from Montana, Senator Grassley from Iowa, and Senator Kempthorne 
from Idaho.
  Basically, it is a question of fairness. All Americans pay the same 
rate into the payroll tax for Medicare, and I believe, as I think all 
would believe that each, then, deserves the same kind of health care 
and the same kind of health care choices, the same kinds of services 
for having paid that. But that is not the case. The payments for 
Medicare, managed care within Medicare, are greatly different 
throughout the country. They are greatly different largely because they 
were put into place, as a matter of history, as a matter of utilization 
in the fee-for-service area. So they vary a great deal.
  This chart will give some idea of what they are. Remember, each of 
these folks who receives these benefits has paid in similarly. However, 
the payments for managed care in Medicare, in Arthur, NE, are $221 a 
month. On the other hand, in Richmond County, NY, $767 a month. You can 
see the changes that exist here, and they are basically the highly 
utilized areas, the Floridas, the New Yorks and others who, in history 
of payments, have had high utilization so have a history of higher 
payments. The costs are not necessarily the same, but they are not that 
much different. What has happened is these risk contracts have 
basically been set on history and give enough additional services to 
take up that additional dollar. Not only do they get more money but 
they get more services.
  Here, in Blue Earth County, MN, the yearly payment is $600. Portland, 
OR, had $500; the beneficiary has to pay additional money, as is shown 
in the yellow. However, in Dade County, in Florida, the payment is 
$8,200 dollars a year. Not only do they get the additional payment, 
they have unlimited prescription drugs, a $700 credit for hearing aids, 
and have a great deal of additional benefits. Remember, all of them pay 
the same into the program.

[[Page S1786]]

 So what we have is a bill that would, over time, tend to equalize or 
at least levelize these kinds of payments.
  There are cost differences. The costs in New York City for rent and 
other kinds of things are higher than they are in Greybull, WY. We are 
willing to take that into account. However, expertise, medicines, and 
other kinds of things are just as valuable in Kansas as they are in 
Florida.
  So, what we propose to do and what this bill does is, rather than to 
continue this kind of reimbursement that is so out of place, it would 
gradually bring into account not only the costs that differentiate, but 
also a national average, intending to level these out. We do not 
propose to reduce the costs that are in place in the higher levels but 
we do propose to lift the increases, bring the increases up in the 
bottom levels so Wyoming providers will have an opportunity to compete, 
to provide these kinds of care.

  The other effect, in addition to not getting the kinds of services 
that are available through this inequity, is that users, seniors in 
Medicare who would like to have the option of managed care, really do 
not have it in rural areas because it has not come, due to the 
payments. For example, where is there growth in managed care and 
Medicare? Only 3.6 percent in rural areas have an opportunity for this. 
On the other hand, it is over 70 percent where the benefits are high, 
in the larger areas.
  So, our proposal is to equalize, at least move to equalize these 
payments, to move to equalize these benefits to reflect the fact that 
everyone pays the same and that there ought to be some equity with 
respect to the benefits that are provided. It is a fairness bill. It is 
one we have talked about before and, indeed, was part of the omnibus 
bill last year which was vetoed by the President.
  So we come back with it singled out to show that there is a problem, 
there is an inequity, there is an unfairness between rural and more 
populated areas. This bill, the Rural Medicare Payment Equity Act, will 
move to remove that inequity from Medicare and managed Medicare to all 
seniors of this country.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Minnesota is recognized.
  Mr. GRAMS. Mr. President, I am also pleased to be here this morning 
and to join with my colleagues in introducing the Medicare Payment 
Equity Act, as the Senator from Wyoming has just outlined. The passage 
of this legislation, I believe, is critical in righting the wrongs in 
the Medicare system against States like Minnesota, Kansas, Wyoming, and 
some of the other more rural States in the country.
  There are three points I would like to emphasize, just to add to what 
the Senator from Wyoming has already said. First, again, to reiterate, 
the Medicare reimbursement formula is just plain unfair. While every 
American pays the same payroll tax to the Medicare trust fund, 
Minnesotans find themselves with the second-lowest reimbursement rates 
in the Nation. By the way, every county in Minnesota falls below the 
national average in the terms of Medicare reimbursement.
  Second, the Medicare reimbursement formula discourages quality health 
care. My State of Minnesota has been consistently recognized throughout 
the Nation as one of the most innovative, one of the most efficient and 
cost-conscious States in the terms of health care. Yet these very same 
qualities, the traits which should be encouraged, not discouraged, have 
skewed the Medicare formula against our providers and also against our 
beneficiaries.
  Finally, the Medicare reimbursement formula discriminates against 
senior citizens who live in rural areas of America. These older 
Americans already face fewer health care options than those who live in 
urban centers. That is due to the lower reimbursement rates received by 
health plans. However, there is no incentive for them to offer managed 
care services. So that means fewer choices for the senior citizens who 
are living in rural parts of the United States.
  So, Mr. President, the system needs to be changed and that is exactly 
what our legislation does. By making fundamental corrections to the 
Medicare reimbursement formula, this bill will restore equity, it will 
help to expand access, and will also help to ensure a greater array of 
health care choices to beneficiaries in States like Minnesota as well 
as across rural America. It will change the system, and I am very proud 
to join my colleagues in introducing this very important piece of 
legislation.
  Again, I am pleased to be here to join my colleagues again in 
reintroducing and supporting the Medicare Payment Equity Act.
  I yield the floor.
  Mr. ROBERTS. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Thomas). The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. ROBERTS. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Kansas.
  Mr. ROBERTS. Mr. President, I rise today, as was indicated by my 
colleagues, Senator Thomas and Senator Grams, to speak to the Medicare 
Payment Equity Act of 1997. Like my colleagues have indicated, this 
legislation will hopefully end the longstanding unfairness that denies 
the Medicare beneficiary in rural counties the same services and 
benefits that their urban peers receive. As has been indicated by both 
of my colleagues, all Americans, whether they live in the city or 
whether they live in the country, pay the same 2.9 percent of payroll 
to the Medicare trust fund all during their working lives. All 
Americans who choose Medicare part B pay the same monthly premium, but 
that is where the similarities stop.
  Based on the geographic area where seniors choose to retire, they 
receive vastly different choices and benefits. Seniors living in New 
York City or in Miami, as has been indicated by my colleagues, are 
offered more options to the Medicare system than almost all of Kansas' 
400,000 seniors who rely on Medicare. Many of these plans have no 
additional premiums, and they may include extra benefits, such as 
prescription drug coverage or hearing aids or eyeglasses, just to name 
a few.
  Let me demonstrate what I am talking about. When a Kansas senior 
citizen visits a relative in Miami or New York or Phoenix or some other 
metropolitan area and talks to his brother, his cousin or any relative 
and learns that they receive, under their managed care plan under 
Medicare, free eyeglasses, free prescription drugs, even exercise 
lessons, of course, then that senior citizen goes back to Kansas or 
Wyoming or Minnesota, or any other rural area, and they do not have 
that opportunity. Yet, they pay the same amount.
  Why does this happen? The difference is really due to the payment 
formula used to finance the managed care plans under Medicare. I am 
going to quarrel a little bit with the description of managed care. I 
know that has a connotation in some areas, quite frankly, as rationing 
health care. I know that is harsh. Why don't we use the term 
``physician service network''? The acronym--everything has to have an 
acronym in Washington--is PSN. It allows the local hospitals, local 
doctors, local administrators and the boards to join together, which 
they are already doing, and offer, yes, a managed care plan, but it is 
a physician service network.
  We have something like that in Kansas in Salina where about 13 
hospitals have joined together under something called ``the sunflower 
network.'' We hope and we think that if we can offer that option to our 
seniors, we can hold the Medicare costs down, but we can bring them 
better delivery. It is a voluntary plan, it is not mandatory, and 
certainly we think that is part of the overall Medicare reform plan.
  Basically, under the current system, Medicare rewards any 
beneficiaries who live in an inefficient medical market and punishes 
those who participate in health plans that operate in efficient 
markets.
  Medicare pays these health plans a capitation payment based on 
regional fee-for-service costs. This payment is known as the adjusted 
average per capita costs--here is another acronym--AAPCC rate. That is 
extremely important in regards to the health care field.
  The variation in the AAPCC rate is extreme. As has been indicated by 
my

[[Page S1787]]

colleagues, for example, the AAPCC rate in Richmond, NY, is $767 per 
Medicare beneficiary, while the AAPCC rate for my constituents in 
Republic County, KS--Belleville is the county seat--there it is only 
$265. This county is almost the lowest paid county in the United 
States. In fact, 93 percent of all counties in Kansas are at or below 
the national average of $467.
  Clearly, there are cost factors that account for some of this 
difference, but as Senator Thomas has pointed out, a difference of over 
$500 is simply unexplainable. This legislation really does address this 
issue by creating a new payment formula for managed care plans. 
Specifically, our bill establishes a minimum payment for rural counties 
of 80 percent of the national input price adjusted capitation rate. 
This will ensure all payments, even those in rural counties, will cover 
the comprehensive benefits.
  This legislation also includes an aggressive blend of national and 
local rates that will raise the lower payment areas closer to the 
average, while taking into account actual input cost differences that 
exist from one region to another. This rate, which is based on an 
average of 3 years of past data, will smooth the payments and reduce 
all of the volatility price differences. It is a transition.
  Finally, this legislation excludes the disproportionate share of 
payments and graduate medical education funds from the calculations of 
the formula.
  Mr. President, this inequity must stop. Until we end this inequity, 
Medicare beneficiaries will not have the choices they deserve. We will 
not control the Medicare costs that in some areas are out of control. 
Hospitals and doctors will not have the tools they need to compete in 
today's physician service network markets, and Medicare will continue 
to overpay health plans in inefficient markets.
  I want to add one other thing, lest people misunderstand. This is not 
an either/or choice. Senator Thomas, Senator Grams, myself, and Senator 
Burns are not trying to take away anything from Dade County, FL, or New 
York or any other urban area. Under our formula, the premiums will 
increase by 2 percent. That is not the idea here. We are merely trying 
to equalize this on a transition basis.
  I urge my colleagues to join us in support of the Medicare Payment 
Equity Act. That is precisely what it is.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. ROBERTS. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. GORTON. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Roberts). Without objection, it is so 
ordered.
  Mr. GORTON. Mr. President, is the Senate under any time rules?
  The PRESIDING OFFICER. We are in morning business, with 5 minutes per 
Senator.
  Mr. GORTON. I ask unanimous consent I might be permitted to speak for 
up to 10 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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