[Congressional Record Volume 146, Number 112 (Wednesday, September 20, 2000)]
[Senate]
[Pages S8773-S8776]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                                MEDICARE

  Mr. GRAMM. Mr. President, I thank the leader for allowing me the 
opportunity this morning to talk about Medicare and about 
pharmaceutical benefits.
  I will talk about these issues, recognizing two things: One, that 
Medicare is second only to Social Security as the most important 
government program in operation today; and two, recognizing that in 
1965, when Medicare came into existence and it was focused primarily on 
hospital care, physician care, and surgery, that reflected the practice 
of modern medicine in 1965. Today, Medicare is still focused on 1965 
medicine. However, pharmaceuticals have taken the place, in many cases, 
of hospital stays and surgery, and yet Medicare does not pay for 
pharmaceuticals.
  What I will address is the cold reality of where we are, what we want 
to do, but the dangers we face if we do it wrong. I view this as a 
statement on the problems we face in trying to provide pharmaceuticals 
in Medicare.
  I hope to do this with a series of charts. I begin with the good 
news. The good news--the glorious news--is that 68.8 percent of all 
Medicare recipients already have some form of prescription drug 
coverage--68.8 percent. That level of coverage is a level of coverage 
virtually unmatched in terms of the structure of private health 
insurance. What it means is that almost 69 percent of people in America 
already have some form of pharmaceutical coverage when they are under 
Medicare.
  Obviously, what this says is, whatever we do, we don't want to do 
anything that imperils the 69 percent of people who already have 
pharmaceutical coverage in our effort to try to provide it to the 31 
percent of people who don't.
  Where does this coverage come from? If we look at this chart, we can 
see that 44.6 percent of the people who have pharmaceutical coverage in 
Medicare are getting it through their employer. This is part of the 
benefit for which they worked a lifetime. They are getting it through 
an employer-sponsored program. Obviously, we don't want to do anything 
to induce employers to drop that coverage, nor do we want to do 
anything to substitute taxpayer money for the private money that is 
currently going into private health insurance to cover our seniors for 
pharmaceutical coverage.
  There are 15.2 percent of those who have pharmaceutical coverage who 
get it from Medicaid; 11.9 percent get it from HMOs as part of 
Medicare; 10.6

[[Page S8774]]

percent who switched coverage during the last year and went from one 
form of coverage to another, so they are not counted as being in one 
category for the year that they had it. Then finally, 15.2 percent get 
pharmaceutical coverage through Medigap policies. That is the way my 
momma, for example, gets her pharmaceutical coverage--through a Medigap 
policy.
  What is the point of all this? What does this mean? Why should 
anybody care about this?
  The point is, 69 percent of Americans already have something we want 
to provide to 31 percent of Americans. We want to be very sure--we 
might even have a bipartisan agreement on this at some point--we want 
to be very sure we don't do anything, in trying to help the 31 percent, 
that could endanger, destroy, eliminate, or replace the coverage that 
69 percent of those on Medicare already have.
  What is it going to cost for the various plans that have been 
proposed? My colleagues will remember--I am sure the Presiding Officer 
remembers--that when Lyndon Johnson sold the Senate on passing 
Medicare, it was going to cost less than $1 billion a year. Medicare 
has now become the second largest program in America. It is on its way 
to becoming the most expensive program in the history of America or the 
history of the world. The point being, we don't always have the ability 
to predict what costs are going to be.
  Nothing shows this more clearly than the official estimates that have 
been made of the Clinton-Gore drug plan. When they first introduced 
their plan, the Office of Management and Budget estimated that the plan 
would cost $118.8 billion over the first 10 years.
  By April of that year, the official estimate from CBO was $149.3 
billion. By May, the estimate by the Congressional Budget Office had 
risen to $160 billion. By July, the estimate from CBO had risen to 
$337.7 billion.
  The point is, what happened to the program between the first estimate 
made when it was proposed and July? Well, the program was never 
implemented. What happened is--the President made some changes in it, 
but what really happened is people started looking deeper and deeper 
into the program.
  The plain truth is, we don't know what the actual cost is going to 
be. But we know if you are going to have the federal government take 
over and basically federalize pharmaceuticals so that you are going to 
have the taxpayer paying for benefits, when currently 44.6 percent of 
the people who have pharmaceutical coverage are getting it from their 
former employer--when you have the government take it over and pay for 
not just the 31 percent who don't have it but for the 69 percent who 
do, obviously it is going to cost a lot of money.
  Secondly, remember that the level of usage clearly is affected by who 
pays. There are many different figures you can use, but let me just use 
one figure. For those on Medicare who do not have third party coverage 
for pharmaceuticals--that is, they don't have somebody else paying 
their pharmaceutical bills in total or in part--they are spending, on 
average, less than $400 a year. But for Medicaid beneficiaries where 
the federal government is paying for all of their pharmaceutical bills, 
they are spending over $700 a year.
  Now some people would say, you either need pharmaceuticals or you 
don't. The point is, as is true in anything, it makes a difference 
whether there are copayments, whether there are deductibles, and who is 
paying. The point this chart makes very clearly is that we have already 
seen, in one year, the estimated cost of the Clinton-Gore drug plan 
rise from $118.8 billion to $337.7 billion, and it is not implemented. 
The point is, we really don't have any idea about how much it is going 
to cost. As costs go up, what happens? As costs go up, first premiums 
go up, and then there is political resistance to premiums.
  What happened in England with a program similar to the Clinton-Gore 
plan? What happened in Canada? What happened in Germany? As costs rise, 
with political pressure to keep premiums down, what happens? In every 
country in the world that has adopted a one-size-fits-all government 
program, one thing has happened--and it is not as if it were different 
in Germany from in Britain, or different in Britain from in Canada. One 
thing has always happened: When you have a one-size-fits-all government 
program and costs explode, they ration health care.
  Great Britain is a good example. They delay the implementation of new 
drugs until the cost of those drugs comes down. That may make sense in 
controlling government costs, but if your mama is sick or your baby is 
dying, that is rationing health care. And every country in the world, 
to try to deal with this exact problem of exploding costs, when they 
have the government take over with a one-size-fits-all program, they 
end up rationing pharmaceuticals.
  So we have people in the Senate who stand up and say that in Great 
Britain you can get X drug cheaper. What they don't explain is that it 
wasn't introduced for 2 years because of the cost, because it was 
rationed by the government. That is something we have to be concerned 
about because nobody in America wants to be in a situation where, when 
their mama is sick, they end up talking to some bureaucrat about cost 
instead of to a doctor about health care.
  This is the greatest dilemma we face in doing something about 
pharmaceuticals. This is not a problem of anything other than 
arithmetic. Today, half of the people who receive Medicare spend less 
than $500 annually on prescription drugs. That is a fact. When people 
hear on television that we are debating having the government set up a 
program to pay for their pharmaceuticals, they think we are talking 
about the government paying for their pharmaceuticals. But the plain 
truth is--as anybody who has actually looked at the plan that has been 
proposed by Clinton and Gore knows--the first thing they discover is 
that when it is fully implemented, you are going to have to pay $662.40 
in annual premiums for a plan that pays for half of your 
pharmaceuticals up to, ultimately, $5,000.

  Here is the point. Half of all of the seniors are in the position 
today where their pharmaceutical bills are $500 or less. If we 
implement a program that has the government take over prescription 
drugs so that we don't have 68.8 percent of people covered by other 
health insurance, as we have today, but we have everybody in a 
government-run program, the premium cost of this is very high. And 
remember, this is based on a cost estimate which, if we know anything 
about these programs, is a gross underestimation. The annual premium 
cost is $662.40, and for that the government pays half of your 
pharmaceutical costs.
  So here is the point. If the government is paying half of a Medicare 
beneficiaries prescription drug costs, most Medicare beneficiaries are 
going to get out of this program less than $250 of benefits, but they 
are going to pay $662.40 in premiums just to be in the program.
  Now how many seniors understand that half of them are going to get 
$250 or less worth of benefits, but are going to end up paying $662.40 
a year in premiums? What kind of bargain is it to pay $662.40 to get a 
benefit worth $250 or less? It is a very bad bargain, which explains 
why it is mandatory--why either you have to take it the first day you 
are eligible or you can never get into the program. They have to find 
ways of forcing people into this bad deal because they are not content 
to try to help the 31 percent of the people who don't have the 
insurance. They are trying to force everybody into one program run by 
the government, of course; and in doing so, for every one person to 
whom you provide new coverage, you in essence take away coverage that 
two people already have, which is not funded by the government.
  That is why these cost estimates on a one-size-fits-all government-
run program are so cataclysmic and why, if you ask people, Do you want 
government to provide pharmaceutical coverage in Medicare? the vast 
majority of people say yes. But when you explain to them that half of 
the people on Medicare today spend less than $500 on prescription drugs 
and, when the program is fully implemented, the annual premium is going 
to be $662.40 that will pay for only half of your pharmaceuticals up to 
the point you spend $5,000, people will look and see that half the 
people are getting $250 in benefits, and they are spending $662.40 
initially when the program is fully implemented and see it isn't a good 
deal. But

[[Page S8775]]

does anybody doubt the program will be at least twice that when it is 
ultimately in place? I don't think so.

  In this political environment we are in, people are always talking 
about risky schemes. We have all heard it. It is amazing to me that 
people will talk about spending trillions of dollars, but if you want 
to give half that amount in tax cuts, it is a risky scheme--spending it 
is not risky, but giving it back to working families is risky.
  Let me talk about how risky this government takeover of the 
pharmaceutical benefits in America for seniors is. The Clinton-Gore 
plan is back-end loaded. What do I mean by that? I mean that the first 
year it is very cheap because it doesn't even go into effect for 2 
years from now. Then it becomes very expensive. The first year of the 
program advertises that it will cost only $13.5 billion. When the 
program is fully implemented, it costs $59.7 billion, or almost $60 
billion a year. When we run this out over a 10-year period and we look 
at the estimates that are being made when fully implemented, whereas 
the initial estimate by the Office of Management and Budget was the 
program would cost $118.8 billion, when we take its cost at full 
implementation and what we already know, its actual cost is $597 
billion over 10 years.
  How are we going to make up this difference? Britain has a 
government-run benefit on pharmaceuticals. Germany has one. Canada has 
one. How did they make it up? They made it up by raising the premiums 
initially, and when political resistance occurred, they start rationing 
health care. That is what we would be buying into here.
  There is one other difference, and this is from the Congressional 
Budget Office ``Analysis of the Health Insurance Initiatives in the 
Mid-Session Review'' that they published on July 18. I urge my 
colleagues to look at it. They analyzed the Clinton-Gore drug plan. 
Most people are obviously focused on, what is it going to cost? The 
Congressional Budget Office, the nonpartisan budgeting arm of Congress, 
finds that not only is it going to cost a tremendous amount more than 
what is being claimed, but equally disturbing to me is this quote:

       The Congressional Budget Office estimates that after 10 
     years, the average price of drugs consumed by the Medicare 
     beneficiaries would be 8 percent higher if the President's 
     proposal was enacted.

  In other words, not only will taking over pharmaceutical coverage for 
all Medicare beneficiaries, when only 31 percent don't have it, cost a 
tremendous amount of money, but it will drive up the cost of 
pharmaceuticals to everyone. This is not just to seniors, this is to 
everyone.
  What is the alternative? Interestingly enough, the best alternative 
is a bipartisan proposal from a bipartisan commission that was led by 
Senator Breaux, a Democrat, from Louisiana.
  I have a very revealing chart. I will give Michael Solon on my staff 
credit for this. I think this is one chart that tells a very important 
story. Here is what it is based on. The question it asks is the 
following: If you left everything exactly as it is, and you held the 
growth of government discretionary programs to the budget, how long 
could the government pay Medicare and Social Security benefits as they 
are currently promised? In other words, when would the government run 
out of money to pay for Medicare and Social Security benefits under the 
best of circumstances?
  He finds, under the current system, the federal government would run 
out of money in the year 2027. If we don't spend the money or use it 
for anything else, we keep spending in real terms where it is, and we 
use all the money in the budget to fund just Social Security and 
Medicare, the federal governments runs out of money in 2027. That means 
everybody 40 and over would, for all practical purposes, be covered, 
but everybody under 40 would be vulnerable to the federal government's 
inability to pay Medicare and Social Security benefits.

  If you adopted the Clinton-Gore plan, what you would do is, by 
driving up costs, move this doomsday or day of reckoning--whatever you 
want to call it--from 2027 to 2022, which means that only people 44 and 
above would have their Medicare and Social Security benefits secured. 
Stated another way, 17 million people who are between 40 and 44--those 
17 million middle-aged people in that 4-year bracket--would have their 
Medicare benefit and their Social Security benefit imperiled by the 
adoption of the Clinton-Gore plan.
  What is the alternative? The alternative is a bipartisan proposal. 
The estimates that were done of the bipartisan commission--and I remind 
my colleagues, people were appointed by the Speaker and the minority 
leader, by the majority leader and by the minority leader, and by the 
President--they put together a proposal that a majority supported. But 
because all of President Clinton's appointees voted against the final 
package, it did not get the supermajority needed to make a formal 
recommendation.
  However, the majority supported the Breaux proposal. The Breaux 
proposal basically reformed Medicare and provided pharmaceutical 
benefits to the 31 percent of the people, or most of them, who don't 
have Medicare, don't have coverage for pharmaceutical benefits. The 
important thing was that the reform of Medicare contained in the Breaux 
commission report--by reforming Medicare, extended its lifetime from 
2027 to 2059, which would mean anybody over 8 years old would have 
their benefits guaranteed if we adopted the bipartisan Breaux 
commission report.
  What is the point of this speech? The whole point of this is the 
following, and I think these points were very important and I want to 
just run through them real quickly. Point one, you have 69 percent of 
all seniors who have some pharmaceutical coverage already. Why would 
you want to have the government come in and pay for that, especially 
when 44 percent of them are having it paid for by their former 
employers? That doesn't make any sense.
  The only case in which you would want to do that is if you had some 
political agenda that said we ought to have a government-run health 
care system. I submit, based on the record of this administration, when 
they tried in 1993 and 1994 to have the government take over and run 
the health care system, that is exactly what their agenda is. But, 
notice--and this is easy to explain--if you have a problem with 31 
percent of the people but you have 69 percent who already have a 
benefit, don't tear up what they have trying to help the people who 
need it. That is the first point.
  The second point is that when you try to have a program that covers 
everybody, and you start substituting government dollars, tax dollars 
for other health insurance that 69 percent of the people already have, 
you are forced into a system where most seniors will not benefit.
  As I explained earlier, today over half of all Medicare beneficiaries 
spend less than $500 a year on prescription drugs. Yet under this one-
size-fits-all, government-runs-it, government-controls-it plan that has 
been proposed by the President and endorsed by the Vice President, when 
that plan is phased in, in order to get coverage where the government 
will pay half of your prescription costs up to you spending $5,000, it 
costs you $662.40 a year in premiums. But half of all Medicare 
beneficiaries would only get benefits of $250 or less. Needless to say, 
when you say to seniors, ``We have a great deal for you, we are going 
to give you a benefit for $662 a year that half of you will find to be 
worth less than $250 in any given year,'' they are not excited about 
it. So how do you deal with that?
  You deal with that by trying to mislead people about what it is going 
to cost. You don't phase in the whole program. You don't even start the 
program for 2 years, so, boy, it is cheap for the first 2 years because 
you don't have a program. Then you phase it in.
  The point is, when you do that, you start out cheap--$13.5 billion. 
But when you get it fully phased in, even based on the estimates of the 
Congressional Budget Office--and we know the real costs will be 
higher--you are already up to about $60 billion a year when you get it 
fully implemented.
  Obviously, anybody who is trying to be critical of what is being 
proposed has the obligation to propose an alternative. Fortunately, as 
a member of the Medicare Commission with Senator Breaux and Senator 
Kerrey--the two Democrat members who worked on the majority position--
there was a proposal made. That proposal was a comprehensive reform of 
the system.

[[Page S8776]]

  That comprehensive reform, which provided pharmaceuticals for 
moderate-income people but let the 69 percent of the people who already 
had pharmaceutical coverage keep it, didn't substitute tax dollars for 
General Motors' money on retirement health care. What happened was, 
whereas the Clinton-Gore plan would actually endanger the Medicare and 
Social Security benefits of people between the ages of 40 and 44 by 
driving up costs and by forcing those systems into insolvency or into 
fee increases or into tax increases sooner, the bipartisan proposal of 
the Breaux commission would have actually expanded the life of Medicare 
to 2059. That would mean everybody 8 years old and older would be 
protected. It would give us an opportunity to further refine the 
system.
  I thank my colleagues for giving me this opportunity. These are 
important issues. They deserve prayerful consideration. I urge my 
colleagues to look at them before we change Medicare.
  I yield the floor.
  The PRESIDING OFFICER (Mr. L. Chafee). The Senator from Alabama.
  Mr. SESSIONS. Mr. President, I thank the Senator from Texas for his 
insight and leadership and expertise and courage and ability to 
explain, in common language, some of our most complex financial issues 
facing this country. It is an extraordinarily valuable asset to our 
country, to have Senator Gramm in this body as a trained economist. I 
never cease to be amazed and appreciative of what he contributes.

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