[Congressional Record Volume 146, Number 37 (Wednesday, March 29, 2000)]
[Senate]
[Pages S1899-S1901]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SMITH of New Hampshire (for himself and Mr. Allard):
  S. 2319. A bill to amend title XVIII of the Social Security Act to 
establish a voluntary Medicare Prescription Drug Plan under which 
eligible Medicare beneficiaries may elect to receive coverage under the 
Rx Option for outpatient prescription drugs and a combined deductible; 
to the Committee on Finance.


         voluntary medicare prescription drug plan act of 2000

  Mr. SMITH of New Hampshire. Mr. President, I rise today to introduce 
a bill entitled the ``Voluntary Medicare Prescription Drug Plan Act of 
2000.'' This bill allows seniors to enroll in a new program under 
Medicare which will provide for prescription drug coverage. This is an 
issue about which, as you know, many seniors are very concerned.
  Seniors who join this plan would have a combined Part A and Part B 
deductible of $675, which would include all hospital, medical, and drug 
expenses. After the deductible is met, seniors would receive 50-percent 
coverage of their prescription drug costs

[[Page S1900]]

up to $5,000. If a senior has $2,000 in expenses for prescription 
drugs, $1,000 of that would be paid for under this plan.
  I have spoken to senior groups and health care providers, both in 
Washington as well as in my State over the past several weeks, about 
this proposal. The response has been very enthusiastic. Seniors want a 
prescription drug benefit. Doctors and nurses understand the importance 
of providing coverage for seniors because of the expense of 
prescription drugs in this country. It would be a victory for seniors 
and for health care in this country if we could provide this coverage 
to them.
  I have had discussions with many of my colleagues in the Senate who 
are working on this very issue. We have all heard from our constituents 
about the importance of prescription drugs. Senators Breaux and Frist 
have included prescription drugs in their overall Medicare reform 
package. Senators Kennedy, Snowe, Wyden, Grams, and Jeffords all have 
proposed various plans that provide some level of prescription drug 
coverage in Medicare, and many others are working on separate proposals 
of their own.
  In a recent press conference, President Clinton and Senator Daschle 
outlined their goals for prescription drug coverage. Leaving the 
politics aside, the fact that elected leaders from both parties are 
looking at this issue of prescription drug coverage is good news for 
the senior citizens of America. I have talked with several of my 
Republican colleagues, and it is clear to me there is overwhelming 
support for allowing seniors to have this choice. The only question 
among us all is how we can responsibly structure such a program.
  I have heard from seniors in my State about what they are looking for 
in a prescription drug plan.
  First, they are concerned about the solvency of the Medicare program. 
They want a program that does not add some huge financial burden to the 
trust fund which will be passed on to their grandchildren. They do not 
want to increase the national debt, either. Yes, seniors are concerned 
about the national debt. Ask them the next time you speak to a seniors 
group.
  The President's proposal, as it is written, blows a $168 billion hole 
in the trust fund, threatening its solvency.
  Second, seniors do not want new premiums. My plan requires no premium 
hike for seniors. Zero. The President's plan requires a $51 annual 
premium increase.
  I will repeat that. Seniors do not want to blow a hole in the 
national debt. They do not want to inflate the debt. Yet the 
President's proposal adds $168 billion that is going to come out of 
that trust fund, threatening its solvency. And seniors do not want more 
premiums. My plan has no increase in premiums; the President's plan, 
$51--just to start--annual premium increase.

  The guiding principles of this plan, which may come as a shock to 
some of my colleagues on the other side of the aisle, are the same 
principles as those of the President and the distinguished minority 
leader for any prescription drug plan. I want to repeat the six 
principles the minority leader has introduced on behalf of the 
President. I am going to add three more to those six and make it even 
better. I do not know why we cannot have almost unanimous support for 
this piece of legislation.
  First of all, under the plan the Senate Democrats are committed to 
passing this year, there are six basic principles. I agree with them 
all.
  No. 1, it is voluntary. Medicare beneficiaries who now have 
dependable, affordable prescription drug coverage should have the 
option of keeping that coverage.
  No. 2, it is accessible to all beneficiaries. I agree with that. A 
hallmark of Medicare is that all beneficiaries, even those in rural or 
underserved communities, have access to dependable health care. It 
should be accessible to everybody. I agree with the second principle.
  No. 3, it is designed to provide meaningful protection and bargaining 
power for seniors. A Medicare drug benefit should assist seniors with 
the high cost of drugs and protect them against excessive, out-of-
pocket expenses. I agree with that.
  No. 4, it should be affordable to all beneficiaries, and it should be 
affordable to the Medicare program itself.
  Medicare should contribute enough toward the prescription drug 
premium to make it affordable and attractive for all beneficiaries and 
to ensure the viability of the benefit. I agree with that.
  No. 5, administered using private-sector entities and competitive 
purchasing techniques. In other words, the program is administered by 
using private sector entities and competitive purchasing techniques. 
The management of the prescription drug benefit should mirror the 
practices employed by private insurers. Discounts should be achieved 
through competition, not through price controls or regulation.
  I agree with that.
  We are five for five.
  No. 6, consistent with broader Medicare reform, the addition of a 
Medicare drug benefit should be consistent with an overall plan to 
strengthen and modernize Medicare. Medicare will face the same 
demographic strain as Social Security when the baby boomer generation 
retires. So it is consistent with broader Medicare reform.
  I agree with that.
  There are six principles I can support.
  I would ask my colleagues on the other side of the aisle to join me 
now with three more principles I would add:
  No. 1, that the plan be revenue neutral to preserve and protect the 
financial integrity of the Medicare trust fund. In other words, it does 
not cost the Government any more money.
  No. 2, that the plan does not raise Medicare premiums. Their plan, 
$51 annually to seniors; my plan, zero. So no increase in premiums.
  And No. 3, that full benefits be provided, not in 2009, as the 
administration plan proposes, but in 2001, 8 years sooner.
  So my three principles--revenue neutral, do not raise the premiums, 
provide the benefits in 2001--those three principles enhance and 
strengthen the other six principles put forth by my colleagues on the 
other side of the aisle.
  My plan accomplishes all three of the principles I have outlined.
  Let me briefly explain how it works.
  A senior already enrolled in Medicare Parts A and B--already enrolled 
in Part A, hospital, and Part B, doctor--will have the option of 
choosing my new voluntary prescription drug plan. It is their option. 
Nobody is mandated; they choose. It will cover 50 percent of their 
prescription drug costs toward the first $5,000 worth of prescription 
drugs. If they buy $4,000 worth of drugs--$2,000 for prescription 
drugs; $2,000 is covered.
  How do we do this? How do we make it work? Medicare Part A--under the 
old system, the current system--has a $776 deductible. Medicare Part B 
has a $100 deductible. In other words, if you go to the doctor, the 
first $100 you pay for; if you go to the hospital, the first $776 you 
pay for; the rest, Medicare pays. That is a total of $876 you will have 
to pay.
  My new plan would create one new deductible, combining those two 
deductibles of Part A and Part B into one deductible of $675, which 
would apply to all hospital costs, all doctor visits, and prescription 
drugs--50 cents on the dollar up to $5,000. And the prescription drug 
costs apply to the deductible, so every dollar you pay for a 
prescription moves you forward to meet the deductible.
  Once the $675 deductible is met by the Medicare recipient, Medicare 
then will pay 50 percent of the cost toward the first $5,000 worth of 
drugs the senior purchases.
  However, the senior could not purchase a Medigap plan that would pay 
for the $675 deductible. This must be paid for by the senior. But if 
you have a Medigap plan now as a senior, you will not need it.
  As a result, seniors would save about $550 under Medigap plans if 
they traded their current Medigap plan for my new prescription drug 
plan. Again, it is their option. It is voluntary. Seniors could even 
use their $550 in savings to pay the $675 deductible.
  If you are a senior out there, and you have Part A, Part B, and you 
are paying $675 toward the deductible, and you have Medigap insurance 
of $550, you now can put the $550 toward the $675 to meet your 
deductible. So you are going to have $550 in savings. You can put that 
toward the $675, and you are already two-thirds of the way there.
  But how do you get the cost savings?
  As my colleagues are aware, according to the National Bipartisan 
Commission on the Future of Medicare, the

[[Page S1901]]

Federal Government pays about $1,400 more per senior if the senior owns 
a Medigap plan that covers their Part A and Part B deductible. This, 
generally, is because of our overutilization of hospital and doctor 
visits by the senior. The savings result because Medicare will not have 
to pay this $1,400 per person per year out of the trust fund.
  As I mentioned, all hospital, physician, and prescription drug costs 
would count toward this $675 deductible. Once it was met, the senior 
would receive regular, above-the-deductible Medicare coverage, just as 
you get now. Or if you worked out the numbers and decided against my 
plan, then you would not have to select it; it is your choice.
  I believe the vast majority of seniors will benefit from this plan. 
In fact, every senior with a Medigap plan will definitely benefit. Any 
senior with a prescription drug expenditure of more than $15 a month 
will benefit. Today, the Medicare Part A and Part B deductible totals 
$876, which most seniors cover by an average $1,611 Medigap insurance 
premium.
  These estimates, as well as the estimate that the bill is budget 
neutral, come from Mr. Guy King, formerly chief actuary for the Health 
Care Financing Administration under President Clinton. I received a 
letter just this morning from Mr. King, from which I would like to 
quote:

       Dear Senator Smith: This is in response to your letter of 
     March 9, 2000, asking for my analysis of legislation you 
     intend to introduce in the Senate. The proposed legislation 
     establishes a voluntary prescription drug benefit, the 
     Medicare Prescription Drug Plan, under the Medicare program.
       Under the Medicare Prescription Drug Plan, the current Part 
     A and Part B deductibles would be replaced by a single 
     deductible of $675 which would also be applicable to the new 
     prescription drug benefit. The Medicare program would pay 
     fifty percent of the cost of prescription drugs, up to a 
     maximum of $2,500 after satisfaction of the deductible.

  He goes on to describe it.
  Quoting further:

       As you requested, I performed an analysis of the proposed 
     legislation. This analysis is based on Medicare and 
     prescription drug data I obtained from the Health Care 
     Financing Administration. My analysis indicates that the 
     Medicare Prescription Drug Plan, as described above, would be 
     cost-neutral to the Medicare program if it were made 
     available on a voluntary basis to all beneficiaries except 
     those also covered by Medicaid.

  It is signed by Guy King.
  Let me just conclude speaking on this bill by saying, the benefits in 
this plan are delivered by private companies and regional entities, 
such as pharmaceutical benefit managers. These entities would negotiate 
with large drug companies and provide the drugs to Medicare seniors.
  Finally, according to the actuaries who reviewed the legislation, 
there will be no adverse selection. Both the healthy and the sick will 
have an incentive to choose this plan. Everybody is in.
  There are many different methods of providing prescription drug 
coverage for seniors, but I urge my colleagues--I plead with my 
colleagues--to look to the revenue-neutral methods that fund this 
benefit by the elimination of waste in the present system. I urge my 
colleagues to resist the temptation to raise Medicare premiums on the 
people who can least afford it.
  I have vivid memories of seniors rocking Mr. Rostenkowski's car a few 
years ago when he decided to raise Medicare premiums. Let's look at it 
more specifically. The House's fiscal year 2001 budget--this is 
important--sets $40 billion aside for prescription drugs. In the 
Senate, we are expected to do a budget that is going to set aside $20 
billion.

  We don't need either under my plan. We don't need any more money. We 
don't need $20 billion. We don't need $40 billion. We don't need $2 
billion. We don't need any billions. Let's use the money for debt 
reduction or tax credits for the uninsured rather than providing for 
prescription drugs, when we could use my revenue-neutral prescription 
plan instead.
  I must say, in all candor, some of the deflections I have had put in 
my way on this issue by some in this body are disturbing. I will not 
get into details. I want people to listen and look at this plan. It is 
a good plan. I would like to have the opportunity to be able to talk 
about it in more detail with some of my colleagues, because it makes no 
sense to take $40 billion max, anywhere from $20 billion to $40 
billion, and put it into this prescription plan when we don't need to. 
Let's put it on the debt or let's buy something else with it that is 
worthwhile. We don't need it.
  A neutral plan that does not raise premiums, that takes effect in 
2001 is a good plan. It is a good idea. We need to implement it.
  I urge my colleagues to take a look at this bill.
  I ask unanimous consent that the letter from Mr. King be printed in 
the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                              King Associates,

                                    Annapolis, MD, March 28, 2000.
     Hon. Bob Smith,
     U.S. Senate,
     Washington, DC.
       Dear Senator Smith: This is in response to your letter of 
     March 9, 2000 asking for my analysis of legislation you 
     intend to introduce in the Senate. The proposed legislation 
     establishes a voluntary prescription drug benefit, the 
     Medicare Prescription Drug Plan, under the Medicare program.
       Under the Medicare Prescription Drug Plan, the current Part 
     A and Part B deductibles would be replaced by a single 
     deductible of $675 which would also be applicable to the new 
     prescription drug benefit. The Medicare program would pay 
     fifty percent of the cost of prescription drugs, up to a 
     maximum of $2,500 after satisfaction of the deductible. A 
     beneficiary who chooses the Medicare Prescription Drug Plan 
     would not be allowed to purchase a Medicare supplement policy 
     that fills in the $675 deductible, so special Medicare 
     supplement policies for those who choose the option would be 
     allowed.
       The Medicare Prescription Drug Plan would be available, on 
     a voluntary basis, to any Medicare beneficiary not also 
     covered by Medicaid. The possibility of anti-selection is an 
     important consideration for a plan that is available to all 
     Medicare beneficiaries as an option. I believe that the 
     design features of the Medicare Prescription Drug Plan, as 
     outlined in your legislation, minimize the impact of anti-
     selection.
       As you requested, I performed an analysis of the proposed 
     legislation. This analysis is based on Medicare and 
     prescription drug data that I obtained from the Health Care 
     Financing Administration (HCFA). My analysis indicates that 
     the Medicare Prescription Drug Plan, as described above, 
     would be cost-neutral to the Medicare program if it were made 
     available on a voluntary basis to all beneficiaries except 
     those also covered by Medicaid.
       If you should have any questions regarding my analysis, 
     please don't hesitate to call.
           Sincerely,
                                             Roland E. (Guy) King,
                                                        President.
                                 ______