[Congressional Record Volume 147, Number 48 (Wednesday, April 4, 2001)]
[House]
[Pages H1470-H1475]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  MEDICARE PRESCRIPTION DRUG COVERAGE

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 3, 2001, the gentleman from Iowa (Mr. Ganske) is recognized for 
the remainder of the majority leader's hour, approximately 30 minutes.
  Ms. KAPTUR. Mr. Speaker, will the gentleman yield?
  Mr. GANSKE. I yield to the gentlewoman from Ohio.


                            The U.S. Economy

  Ms. KAPTUR. Mr. Speaker, I am very grateful to the gentleman from 
Iowa (Mr. Ganske) for yielding to me to continue a Special Order that I 
began last night during this 5-minute segment on the condition of the 
U.S. economy. I am very grateful for these few minutes just to 
continue, as I will every evening where I have a chance.
  Mr. Speaker, this relates to America's great need for a new 
declaration of economic independence and my great disappointment at the 
debate that occurred in the Congress here in the House last week 
concerning the tax measures that were before us and then again today, 
where if we count up the cumulative total of all of these measures we 
are talking about $3 trillion over the so-called 10-year window. This 
is an enormous amount of money for a country that currently has over 
$5.6 trillion worth of debt that we have to pay back, and every year we 
are paying more and more in the way of interest on that debt.
  This year alone we are projected to spend well over $450 billion just 
on the debt alone.
  In addition to that, the United States has the worst-ever current 
account trade deficit amounting to over $500 billion last year, that 
essentially requires that we sell our assets or borrow $1.5 billion a 
day net from foreign interests. Now, the trade deficit is basically 
about more goods coming into our country than our goods going out. This 
essentially results from flawed trade agreements that have enabled 
countries like the People's Republic of China, that is now holding 24 
of our military personnel, to gain perhaps a $100 billion advantageous 
this year from their net exports to this country versus our ability to 
export into that economy.
  So what is wrong with the Bush tax and budget plan? First, the 
President's tax and budget plan does not pay down the overall debt. In 
fact, his budget is based on what I would call wildly optimistic, 10-
year projections that, in fact, cause the debt to spiral, particularly 
when over $3 trillion is being returned in that period to a country 
that still owes $5.6 trillion.
  Now, it is interesting that the 10-year window is used for 
projections when, in fact, the President is only elected for 4 years 
and we here in Congress only budget one year at a time. So we cannot 
use a 10-year window. If experience is a good teacher, as it surely 
should be, we know that projections in the past have been off by vast 
magnitudes, sometimes as much as 75 percent in one year.
  Now major revenue hemorrhages are going to occur after the year 2005 
because Social Security and medical care bills will rise as more people 
from the baby boom generation begin retiring. The administration budget 
risks ratcheting up what is already a spiraling debt burden, 
particularly after 2005. So his proposals threaten long-term economic 
growth and the long-term solvency of both Social Security and Medicare.
  Moreover, the administration's budget is inherently unfair, because 
nearly half of the tax benefits go to people earning over $900,000 a 
year, only the top 1 percent of earners in this country. It is no 
question in my mind that the President's powerful allies are setting 
their own table for slashing corporate income tax rates from 35 percent 
to 25 percent, as most corporations, many of them, do not pay taxes 
even now; none at all. I will be reading into the Record, when we 
return later in the month, the names of many of the corporations in our 
country that pay absolutely no taxes at all.
  Many of these same interests want to cut the corporate capital gains 
tax, repeal the corporate alternative minimum tax and other technical 
changes like faster depreciation for faster write-offs. These corporate 
titans, the ones that are pushing us to make these changes here, saw 
their pay increases at over 535 percent over the last 10 years. Imagine 
that. Imagine your salary quintupling over the last 10 years. And now 
they want that to double again in the next decade.

[[Page H1471]]

  Now, is there any doubt whatsoever that the measures that have been 
before us are truly lopsided? The shower of tax cuts for the wealthy 
and corporations will dramatically increase the tax burden on millions 
of people in the middle class. All one has to do is look at the fine 
print of the bill. It does nothing for low-wage workers and literally 
leaves out over 12\1/2\ million families with children.
  The President claims that the typical family of four would get a 
$1,600 tax cut. However, more than 85 percent of taxpayers will get tax 
cuts less than that amount and many will get nothing at all. One-third 
of families with children in our country will get nothing from the 
entire package. The basic tax grab for those at the top end, along with 
lowering rates for only some, does absolutely nothing to lift those in 
our society burdened by low wages and high taxes, largely payroll 
taxes.
  We know that the regressive payroll tax has to be adjusted, but the 
plan that came before us did absolutely nothing about that.
  So while the rich get richer, thanks to the Bush plan, the impact of 
his tax schemes will cut funding for the environment in half over the 
next 10 years; spending on veterans will be slashed; Justice programs 
such as the COPS program and in-schools and community policing programs 
all will be cut; agriculture will be cut; transportation will be cut by 
nearly one-fifth with our roads jammed and our air control towers not 
being the most modern in the world.
  We are going to see cuts in Medicare and cuts in Social Security if 
that program is adopted by the other body.
  Not only is the administration doing nothing to ease the California 
energy crisis, their budget cuts certain critical Department of Energy 
programs as much as 30 percent.
  So America really does need a new declaration of economic 
independence because rising interest payments on the Federal debt are 
at a post-World War II record high, as American family savings rates 
move downward.

                              {time}  1730

  U.S. trade deficits are at record levels, with China now being the 
largest holder of U.S. dollar reserves, $100 billion more this year 
alone. The number of Americans who believe Social Security will be 
there for them when they retire is down, at the same time as we see so 
many families losing their 401(k) assets because of what has been 
happening in the stock market. The relative portion of taxes being paid 
by the middle class and poor Americans is going up. At the same time, 
the relative portion of taxes paid by American and foreign corporations 
making record profits in the United States as they ship jobs to the 
Third World is going down. Enforcement of antitrust laws is down.
  So, Mr. Speaker, let me just say that the administration and its 
powerful allies will be back for more bites of our Republic's apple. I 
really do think that we need a responsible budget. We expect the 
President of our country to lead us to a higher calling. The future of 
our country and its stability should be our primary goal, not the 
gratification of powerful special interests that was so evident here 
during last week and, in fact, today.
  Mr. Speaker, I want to thank the gentleman from Iowa, who has been 
such a voice for attention to the problems of agricultural America, for 
yielding to me.
  Mr. GANSKE. Mr. Speaker, how much time is remaining on my time?
  The SPEAKER pro tempore (Mr. Graves). The gentleman from Iowa (Mr. 
Ganske) has 46 minutes.
  Mr. GANSKE. Mr. Speaker, prescription drugs have been a health 
blessing for Americans. Millions of lives have been saved, prolonged, 
and enhanced by prescription drugs. But those same drugs have also been 
an economic burden for American consumers and taxpayers. The problem of 
rising drug costs is too important to ignore any longer, and I will 
tell my colleagues, this is not just a problem for the elderly.
  Mr. Speaker, this is a photo of William Newton. He is 74 years old. 
He is from Altoona, Iowa. He is a constituent in my district. His 
savings vanished when his late wife Wanita, whose picture he is 
holding, needed prescription drugs that cost as much as $600 per month. 
Mr. Newton said, ``She had to have them. There was no choice.'' And 
then, in speaking about the whole problem of high prescription drug 
costs, he said, ``It's a very serious situation, and it isn't getting 
any better, because drugs keep going up and up.''
  How about Mr. James Weinman of Indianola, Iowa, and his wife Maxine. 
When they make their annual trip to Texas, the two take a side trip as 
well. They cross the border to Mexico, and they load up on prescription 
drugs, which are not covered under their Medigap policies. Their 
prescription drugs cost less than half as much in Mexico as they do in 
Iowa.
  That problem is not localized to Iowa; it is everywhere. The problem 
that Dot Lamb, an 86-year-old woman from Portland, Maine, who has 
hypertension, asthma, arthritis and osteoporosis, was paying for her 
prescription drugs is all too common. She takes 5 prescription drugs 
that cost over $200 total each month, and that is over 20 percent of 
her monthly income. Medicare and her supplemental insurance do not 
cover prescription drugs.
  Mr. Speaker, about a year ago I received this letter from a computer-
savvy senior citizen who volunteers at a hospital I worked in before 
coming to Congress:
  ``Dear Congressman Ganske: After completing a University of Iowa 
study on Celebrex, 200 milligrams for arthritis, I got a prescription 
from my M.D. and picked it up at the hospital pharmacy. My cost was 
$2.43 per pill with a volunteer discount.''
  He goes on, ``Later on the Internet I found the following: I can 
order these drugs through a Canadian pharmacy if I use a doctor 
certified in Canada, or my doctor can order it on my behalf through his 
office for 96 cents per pill, plus shipping. I can order these drugs 
through Pharma World in Geneva, Switzerland, after paying either of two 
American doctors $70 for a phone consultation, at a price of $1.05 per 
pill, plus handling and shipping. I can send $15 to a Texan and get a 
phone number at a Mexican pharmacy, which will sell it without a 
prescription at a price of 52 cents per pill.''
  Well, this constituent closes his letter to me by saying, ``I urge 
you, Dr. Ganske, to pursue the reform of medical costs and stop the 
outlandish plundering by pharmaceutical companies.''
  Well, Mr. Speaker, I want to make it very clear. I am in favor of 
prescription drugs being more affordable not just for senior citizens, 
but for all Americans. Let us look at the facts of the problem and then 
talk about a commonsense solution.
  There is no question that the prices for drugs are rising rapidly. A 
recent report found that the prices of the 50 top-selling drugs for 
seniors rose much faster than inflation. Thirty-three of those 50 drugs 
that are most frequently used by seniors rose in price at least 1\1/2\ 
times as fast as inflation; half of the drugs rose at least twice as 
fast as inflation; 16 drugs rose at at least 3 times inflation; and 20 
percent of the top 50 drugs that are used by senior citizens rose at 
least 4 times the rate of inflation.
  The prices of some drugs are rising even faster. Furosemide, a 
generic diuretic, rose 50 percent in 1999. Klor-con 10, a brand-name 
drug, rose 43.8 percent. That is not just a 1-year phenomenon; 39 of 
those 50 drugs have been on the market for at least 6 years. The prices 
of three-fourths of that group rose at least 1.5 times inflation; over 
half rose at twice inflation; more than 25 percent increased at 3 times 
inflation; and 6 drugs at over 5 times inflation. Lorazepam rose at 27 
times inflation, and furosemide, a diuretic, rose at 14 times 
inflation.
  Prilosec is one of the two top-selling drugs prescribed for senior 
citizens. The annual cost for this 20-milligram gastrointestinal drug, 
unless one has some type of drug discount, is $1,455 a year. For a 
widow at 150 percent of poverty, so that is an income of $12,500 a 
year, the annual cost of that one drug, Prilosec alone, would consume 
more than 1 in $9 of her total budget.
  My friend from Des Moines, the Iowa Lutheran Hospital volunteer 
senior citizen, as do the Weinmans from Indianola with their shopping 
trips to Mexico for prescription drugs, know that drug prices are much 
higher in the United States than they are in other countries.
  A story in USA Today last year, towards the end of last year, 
compared

[[Page H1472]]

U.S. drug prices to prices in Canada, Great Britain and Australia for 
the 10 best-selling drugs, and it verifies that drug prices are higher 
here in the United States than overseas. For example, Prilosec is two 
to two-and-a-half times as expensive in the United States. Prozac was 
two to two-and-three-quarters times as expensive. Lipitor was 50 to 92 
percent more expensive. Prevacid was as much as four times more 
expensive. Only one drug, Epogen, was cheaper in the U.S. than in other 
countries.
  Look at some of the comparison of prices between the United States 
and Europe. Here we have Premarin, 280 .6-milligram tablets, in the 
U.S., $14.98; in Europe, $4.25. How about Coumadin; that is the blood 
thinner. For 25 10-milligram pills in the United States, you would have 
to pay $30.25, but in Europe it would cost $2.85. How about Claritin? 
Claritin is one of the most commonly used antihistamines, very popular 
drug in the United States. Twenty 10-milligram tablets in the United 
States will cost $44; in Europe it will cost $8.75. That just gives us 
an example of some of the disparity between the drug costs in the 
United States and in other countries.
  Mr. Speaker, this has been a problem for the past decade. Two GAO 
studies in 1992 and 1994 showed the same results. Comparing prices for 
121 drugs sold in the United States and Canada, prices for 98 of the 
drugs were higher in the U.S. Comparing 77 drugs in the U.S. to the 
United Kingdom, 86 percent of the drugs were priced higher in the 
United States, and 3 out of 5 were more than twice as high.
  Now, the drug companies claim that drug prices are so high because of 
research and development costs. I want to be clear. I think there is a 
lot of need for research. For example, around the world, we are seeing 
an explosion in antibiotic-resistant bacteria like tuberculosis, and we 
are going to need research and development for new drugs to take care 
of these antibiotic-resistant bacterias, as well as other types of 
drugs.
  The industry has spent a lot of money. They spent an estimated $26 
billion in research and development last year. That is up from $15 
billion 5 years earlier. According to PhRMA, an industry trade group, 
only 1 in 5,000 compounds tested in the laboratory becomes a new drug, 
and it takes quite a while to get a new drug, anywhere from 12 to 15 
years to bring it to market. It may cost as much as $500 million, 
although some suggest that that is a somewhat higher number than is 
actual cost, because some of those costs are actually borne by U.S. 
taxpayers who are involved with doing some of the basic research.
  But, I would say this: Even with the cost and the risk of drug 
development, the industry is doing pretty good. Data from PhRMA that I 
saw presented in Chicago last year showed actual little increase in the 
last couple of years in research and development, especially in 
comparison to significant increases in advertising and marketing 
expenses. Since the 1997 FDA reform bill, advertising by drug companies 
has gotten so frequent that Healthline reported that consumers watch on 
average nine prescription drug commercials every day. Just the other 
night I was watching the NCAA championship game. Anyone who was 
watching that would know how many drug commercials were on during that 
game.
  Take 1998 figures for the big drug companies. Marketing, advertising, 
sales and administrative costs exceed research and development costs. 
In 1999, four of the five companies with the highest revenue spent at 
least twice as much on marketing, advertising, and administration as 
they spent on research and development. Only 1 of the top 10 drug 
companies spent more on research and development than on marketing, 
advertising and administration. The real increase has been in 
advertising expenses.
  For the manufacturers of the top 50 drugs sold to seniors, profit 
margins are more than triple the profit rates of other Fortune 500 
companies. The drug manufacturers have a profit rate of 18 percent, 
compared to approximately 5 percent for other Fortune 500 companies. 
Furthermore, as recently cited in The New York Times, of the 14 most 
medically significant drugs developed in the past 25 years, 11 had 
significant government-financed research. For example, Taxol is a drug 
developed from government research which earns its manufacturer, 
Bristol-Myers-Squib, millions of dollars each year.
  As I said at the start of this Special Order, I think the high cost 
of drugs is a problem for all Americans, not just the elderly, but many 
nonseniors are in employer plans, and they get a prescription drug 
discount. In addition, there is no doubt that the older one is, the 
more likely one is to need prescription drugs.

                              {time}  1745

  So let us look at what type of drug coverage is available to senior 
citizens today.
  Mr. Speaker, Medicare pays for drugs that are part of treatment when 
the senior citizen is in the hospital or in a skilled nursing facility. 
Medicare pays doctors for drugs that cannot be self-administered by 
patients; i.e., drugs that require intramuscular or intravenous 
administration.
  Medicare also pays for a few other outpatient drugs, such as drugs to 
prevent rejection of organ transplants, medicine to prevent anemia in 
dialysis patients, and anti-cancer drugs that are taken by mouth.
  The program also covers pneumonia, hepatitis, influenza vaccines. The 
beneficiary is responsible for 20 percent of the co-insurance of those 
drugs.
  About 90 percent of Medicare beneficiaries have some form of private 
or public coverage to supplement Medicare, but many with supplemental 
coverage have either limited or no protection for prescription drug 
costs, those drugs that we buy in a pharmacy with a prescription from 
our doctor.
  Since the early 1980s, Medicare beneficiaries in some part of this 
country have been able to enroll in HMOs which provide prescription 
drug benefits. Medicare pays the HMOs a monthly dollar amount for each 
enrollee. Some areas, like Iowa, my home State, have had such low 
payment rates that no HMOs with drug coverage are available. This is 
typically a rural problem, but some metro areas have unfairly low 
reimbursements, as well.
  Employers may offer their retirees health benefits that include 
prescription drugs, but fewer employees are doing that. From 1993 to 
1997, prescription drug coverage of Medicare-eligible retirees dropped 
from 63 percent to 48 percent.
  Beneficiaries with MediGap insurance typically have coverage for 
Medicare's deductibles and co-insurance, but only three of the 10 
standard plans offer drug coverage. All three impose a $250 deductible.
  Plans H and I cover 50 percent of the charges, up to a maximum 
benefit of $1,250. Plan J covers 50 percent of the charges, up to a 
maximum benefit of $3,000. Premiums for those plans are significantly 
higher than the other seven MediGap plans because of the high cost of 
the drug benefit.
  So let me repeat, there are three MediGap plans that currently do 
offer prescription drug benefits, but the premiums are significantly 
higher for those plans.
  This chart shows the difference in annual costs to a 65-year-old 
woman for a MediGap policy with or without a drug benefit. For a 
MediGap policy of moderate coverage, she pays $1,320 for a plan that 
does not have a drug benefit, but she pays $1,917 for a policy with a 
drug benefit. If she wants more extensive coverage, she can buy a 
MediGap policy without drug coverage for $1,524, but it would cost her 
$3,252 for insurance with drug coverage.
  So why is there such a price gap between the plans that offer drug 
coverage and those that do not? Well, it is because the drug benefit is 
voluntary. One has a choice whether to sign up for that, and usually 
only those people who expect to actually use a significant quantity of 
prescription drugs will sign up for a MediGap policy that has drug 
coverage. But because only those with high costs choose that option, 
the premiums have to be higher because there is a higher average 
expenditure.
  So what is the lesson we can learn from the current plan? The lesson 
is, adverse selection tends to drive up the per capita cost of 
coverage, unless the Federal Treasury simply subsidizes lower premiums.
  The very low-income elderly and disabled Medicare beneficiaries are 
also eligible for payments of their deductibles and co-insurance by 
their

[[Page H1473]]

State's Medicaid program. These are called dual eligibles. They are 
eligible for Medicare, and they are also eligible for Medicaid.
  The most important service paid for entirely by Medicaid is 
frequently the prescription drug plans offered by all States under 
their Medicaid plans. There are several groups of Medicare 
beneficiaries who have more limited Medicaid protection. Qualified 
Medicare Beneficiaries, QMBs, otherwise known as QMBS here in 
Washington parlance, have incomes below the poverty line, $8,240 for a 
single and $11,060 for a couple, and assets below $4,000 for a single 
person and $6,000 for a couple. Medicaid pays their deductibles and 
their premiums.
  Specifically Low-Income Medicare Beneficiaries, known as SLIMBs, have 
incomes up to 20 percent of the poverty line, and Medicaid pays their 
Medicare Part B premium.
  Qualifying Individuals, Q1s, have income between 120 percent and 130 
percent of poverty. Medicaid pays only their Part B premium, but not 
deductibles. Qualifying Individuals, Q2s, have incomes from 135 percent 
to 175 percent of poverty, and Medicaid pays part of their Part B 
premium.
  But the QMBs and the SLIMBs are not entitled to Medicaid's 
prescription drug benefit unless they are also eligible for full 
Medicaid coverage under their State's Medicaid program. Q1s and 2s are 
never entitled to Medicaid drug coverage.
  A 1999 HCFA report, that is Health Care Financing Administration, the 
agency that runs Medicare, showed that despite a variety of potential 
sources of coverage for prescription drug costs, beneficiaries still 
pay a significant proportion of drug costs out-of-pocket, and about 
one-third of Medicare beneficiaries have no coverage at all.
  It is also important to look at the distribution of Medicare 
enrollees by total annual prescription drug expenditure. This 
information will determine, based on the cost of the benefit, how many 
Medicare beneficiaries would consider the premium cost of a 
``voluntary'' drug benefit insurance policy to be ``worth it.''
  This chart from the Medicare Payment Advisory Commission, known as 
MEDPAC, report to Congress, shows that in 1999, 14 percent of Medicare 
recipients had no drug expenditures, 36 percent had from $100 to $500, 
19 percent had from $500 to $999. We had 12 percent with expenses from 
$1,000 to $1,499; 14 percent from $1,500 to just about $3,000, and 6 
percent above $3,000.
  I want Members to note something here. Some of these figures are a 
little different today. These are about 2 years old now, but they will 
not be that much changed.
  If we add up senior citizens who have no drug expenditures, that is 
14 percent, plus those that have less than $500, that is 36 percent, so 
we now have 50 percent of Medicare beneficiaries, plus another 19 
percent that have less than $1,000, and we have a pretty high 
percentage of senior citizens that have less than, say, $1,000 of 
expenses.
  As we look at plans to change Medicare to better cover the cost of 
prescription drugs, we are going to have to face some difficult choices 
for which there is not public consensus, and for that matter, there has 
not been consensus among policy-makers. There are many questions to 
answer. Here are a few.
  First, should coverage be extended to the entire Medicare population, 
or should we target the elderly widow who is not so poor that she is in 
Medicaid, but is having to choose between paying her home heating bill 
and her prescription drugs?
  Should the benefit be comprehensive or catastrophic?
  Should the drug benefit be defined?
  What is the right level of beneficiary cost-sharing?
  Should the subsidies be given to the beneficiaries, or directly to 
the insurers?
  How much money can the Federal Treasury devote to this subsidy?
  Can we really predict the future cost of this benefit?
  I think we need to go back and look at what Congress has done in the 
past on this, so let us look at the fact that the desire to add a 
prescription drug benefit is not a new idea. It was actually discussed 
back in 1965, when Medicare was started. It has been discussed many 
times since then.
  The reason why adding a prescription drug benefit is such a hot issue 
now is because there has been an explosion in the new drugs available; 
huge increases in the demand for those new drugs, fueled in large part 
by all the advertising that we see on TV; and there has been a 
significant increase in the cost of these drugs in just the past few 
years.
  Many of these drugs are life-preserving, as those that my dad takes. 
They are important. That is why this issue is on the table for this 
Congress, and I think we need to do something about this.
  Before I discuss previous Democratic and Republican proposals, I 
think it is instructive to look at what happened the last time that 
Congress tried to do something about prescription drugs in Medicare. 
That is because the outcome of the reform bill that became law in 1988 
has seared itself into the minds of the policymakers who were in 
Congress then and are committee chairs now.
  The Medicare Catastrophic Coverage Act of 1988 would have phased in 
catastrophic prescription drug coverage as part of a larger package of 
benefit improvements. Under the Medicare Catastrophic Coverage Act, 
catastrophic prescription drug coverage would have been available in 
1991 for all outpatient drugs, subject to a $600 deductible and 50 
percent co-insurance.
  The benefit was to be financed through a mandatory combination of an 
increase in the Part B premium and a portion of the new supplemental 
premium which was to be imposed on higher-income enrollees.
  It is also important to note that the Congressional Budget Office 
estimated the cost back then at $5.7 billion. Only 6 months after the 
bill became law the cost estimates had more than doubled, because both 
the average number of prescriptions used by the enrollees and the 
average price had risen more than estimated.
  The plan passed the House by a margin of 328 to 72, passed the 
Senate, and President Ronald Reagan enthusiastically signed that law 
into place as the largest expansion of Medicare in history.
  The only problem was that once seniors learned that their premiums 
were going up, they did not like the bill very much. They even started 
demonstrating against it. We had scenes of the Gray Panthers hurtling 
themselves onto the car of the chairman of the Committee on Ways and 
Means, Dan Rostenkowski. Those scenes were then broadcast across the 
Nation on the nightly news programs.
  Talk to some of the Congressmen who were here in 1988 and 1989. The 
switchboards here at the Capitol were flooded with phone calls from 
angry senior citizens. So what happened? The very next year, the House 
voted 360 to 66 to repeal the Medicare Catastrophic Coverage Act of 
1988, and President Bush, then President, signed the largest cut in 
Medicare benefits in history, 1 year after President Reagan had signed 
the largest increase in Medicare benefits in history.
  That experience has left scars on the political process ever since, 
and it is evident in both the Republican and the Democratic proposals 
that we debated here on the floor last year.

                              {time}  1800

  What was the lesson? Last year former Ways and Means Chairman Don 
Rostenkowski wrote an article for the Wall Street Journal that I think 
should still be required reading for every Member of this Congress. His 
most important point was this, the 1988 plan was financed by a premium 
increase for all Medicare beneficiaries. Rosty said in his op-ed piece 
in the Wall Street Journal: ``We adopted a principle universally 
accepted in the private insurance industry. People pay premiums today 
for benefits they may receive tomorrow.''
  Apparently, the voters did not agree with those principles. And by 
the way, the title of his op-ed piece was ``Seniors Won't Swallow 
Medicare Drug Benefits.'' He does not think that seniors have changed 
much since 1988.
  Last year we voted on two comprehensive Medicare prescription drug 
benefit bills whose drafters apparently agreed with him, because the 
key point the spokesmen for each of those bills made was that their 
plans were voluntary.

[[Page H1474]]

  There were shortcomings in both of those bills. The insurance model 
plan that passed was estimated to cost seniors $35 to $40 a month in 
2003 with possible projected increases of 15 percent a year. Premiums 
could vary among the plans. There would be no defined benefit package; 
the insurers could offer alternatives of ``equivalent value.'' There 
would be a $250 deductible and the plan would then pay half of the next 
$2,100 in drug costs. After that, patients were on their own until they 
had out-of-pocket expenses reaching $6,000 a year, when the government 
would pay the rest.
  This insurance plan would pay subsidies to insurance companies for 
people with high drug costs. If subscribers did not have a choice of at 
least two private plans, then a ``government'' plan would have been 
available. A new bureaucracy called the Medical Benefits Administration 
would oversee these private drug insurance plans.
  Under the insurance plan, the government would pay for all the 
premium and nearly all of the beneficiary's share of covered drug costs 
with people with incomes under 135 percent. For people with incomes 
from 135 percent to 150 percent, the premium support would have been 
phased out. It was assumed that drug insurers would use generic drugs 
to control costs.
  The costs of that plan was estimated to be $37.5 billion over 5 years 
and about $150 billion over 10 years, but the Congressional Budget 
Office had a pretty hard time predicting the costs because there was 
not a standard benefit definition.
  The premiums under the Democrat bill, the second plan that was 
debated, were estimated to cost those seniors who signed up. Remember, 
it was a voluntary plan like the first plan, $24 a month in 2003 rising 
to $51 a month in 2010, but the bill's sponsors later added a $35 
billion expense for a catastrophic component, and that would have 
increased the premiums more.
  Under their plan, Medicare would pay half of the costs of each 
prescription, and there would be no deductible. The maximum Federal 
payment would be a $1,000 for $2,000 worth of drugs in 2003, and it 
would rise to $2,500 for $5,000 worth of drugs in 2009.
  And under the Democratic plan debated last year, the government would 
assume the financial risk for prescription drug insurance; but it would 
hire private companies to administer benefits and negotiate discounts, 
similar to what HMOs do today. They are called pharmaceutical benefit 
managers. It would have aided the poor similarly to the Republican bill 
that passed the House.
  But here is the crucial point on both of those bills. In order to 
cushion the costs of the sicker with premiums from the healthier, both 
plans calculated that their premiums based on an 80 percent 
participation rate for all of those in Medicare. They both thought that 
80 percent of seniors would sign up. The attacks on both plans began 
immediately. The supporters of the Democratic bill basically said that 
the supporters of the insurance plan were putting seniors in HMOs; that 
HMOs provide terrible care; and that it was not fair to seniors.
  Supporters of the Republican bill said that the Democratic bill was 
``a one-size-fits all plan, that it was too restrictive and puts 
politicians and Washington bureaucrats in control.''
  I could criticize both plans in some depth, but I do not have that 
much time remaining. Suffice it to say that the details of each of 
those plans was very important on how they would work or, for that 
matter, if they would work.
  I believe that if you let plans design all sorts of benefit packages, 
as did the Republican bill, it would be very difficult for seniors to 
be able to compare plans from one to another.
  I also think that plans could tailor benefits to try to get the 
healthier into their plans and leave the sicker seniors out. And it was 
interesting, because representatives of the insurance industry seemed 
to share that opinion in a hearing before my committee. In my opinion, 
a defined benefit package would have been better.

  I have concerns about the financial incentives that the bill that 
passed the House would have offered to insurers to offer and enter 
markets where there were not any drug plans available. Would those 
incentives encourage insurers to hold out for more money?
  I have doubts that private insurance industry would have ever offered 
drug-only plans. In testimony before my committee, Chip Kahn, the 
president of the Health Insurance Association of America, testified 
that drug-only plans simply would not work.
  In testimony before the Committee on Commerce on June 13 of last 
year, Mr. Kahn said ``private drug-only coverage would have to clear 
insurmountable financial, regulatory and administrative hurdles, simply 
to get to market. Assuming that it did, the pressures of ever-
increasing drug costs, the predictability of drug expenses, and the 
likelihood that the people most likely to purchase this coverage will 
be the people anticipating the highest drug claims would make drug-only 
coverage virtually impossible for insurers to offer a plan to seniors 
at an affordable premium.''
  And Mr. Kahn predicted that few, if any, insurers would have offered 
the product.
  I could similarly criticize several particulars of the Democrat bill 
that was offered as a substitute, but I think there was a fundamental 
flaw to both bills, and that is what is called adverse-risk selection.
  Under those bills, let us just look at the Democratic bill that was 
offered last year. If the Democratic bill had comparable costs for a 
stop-loss provision for the catastrophic expenses like the Republican 
bill did, the premium costs would have been comparable in both bills; 
and under those bills, a person who signed up for drug insurance would 
pay about $40 a month or roughly about $500 per year.
  After the first $250 out-of-pocket drug costs, that is the 
deductible, the enrollee would have needed to have twice $500 in drug 
costs or $1,000 in order to be getting a benefit that was worth more 
than the costs of the premiums for that year.
  If you put it another way, the enrollee basically in both of the 
plans that we debated last year would have had to have somewhere 
between $1,000 to $1,200 in drug costs a year to make it worthwhile for 
them to sign up for the bill; otherwise, they would have been paying 
more for their insurance premium than they were getting a benefit for.
  Who would sign up for those plans? Would it be the people who had 
Medicare who do not have any drug costs now? Would it be the people in 
Medicare who today have less than $500 a year? I do not think so. Why 
do I not think so? Because we already have a drug benefit bill and 
Medigap policies. A senior citizen today already can choose a Medigap 
policy that has a drug benefit, but only the people who have high 
prescription drug costs sign up for those bills.
  Mr. Speaker, I just think that it is highly doubtful that anywhere 
near 80 percent of seniors would have signed up for either of those 
plans; and if only those with high drug costs signed up for those 
plans, then we know what would happen by looking at the current Medigap 
policies. Only 7.4 percent of beneficiaries enrolled in standard 
Medigap plans were in the drug coverage plans, H, I, and J.
  One way to avoid adverse-risk selection would be to offer the drug 
benefit for one time only. Another way to do it would be to require all 
to be in it.
  You could try to set up some ways to estimate the sickness of 
enrollees. We have tried that in the past. Those are called risk-
adjustment programs systems. They are very hard to design and 
implement. It remains to be seen whether our risk-adjustment systems 
already on the books are going to work.
  You could have a similar benefit package, and I think that would 
help. And as I said, one sure way would be to mandate enrollment, but 
that was the approach that legislators here took in 1988, and we saw 
what happened to that law.
  To say that mandatory enrollment has little appeal to policymakers 
today, I would say is an understatement. That gets me to what can we do 
to fix this, this problem. I introduced a bill today, it is called the 
Drug Availability and Health Access Improvement Act of 2001. We have 
bipartisan cosponsors all across the ideologic spectrum on this bill.
  It does three things. Here is a modest three-step proposal for 
helping seniors and others with their drug costs.

[[Page H1475]]

  Number one, we could allow those qualified Medicare beneficiaries, 
those select low-income Medicare beneficiaries and qualifying 
individuals, one and two, up to 175 percent of poverty to qualify for 
the State Medicaid drug programs. States could continue to use their 
current administrative structures. This could be implemented almost 
immediately. About a third of Medicare beneficiaries would be eligible, 
especially those most in need.
  The drug benefit would encourage them to sign up, and a key feature 
of that is that the program is already in the States. State programs 
are entitled to the best price that the manufacturer offers to any 
purchaser in the United States.
  Judging from estimates from the Bipartisan Medicare Commission, that 
expansion of benefits would probably cost somewhere between $60 billion 
and $80 billion over 10 years.
  Second, we could fix the funding formula, what is called the Annual 
Adjusted Per Capita Cost, that puts rural States and certain low-
reimbursement urban areas at such a disadvantage in attracting 
Medicare+ plans, because those Medicare+ plans offer a prescription 
drug benefit. My plan would increase the floor to $600 per beneficiary 
per month. That would be an enticement for the Medicare+ Choice plans 
to actually go to States like Iowa. That way senior citizens and rural 
States would have the same opportunities to sign up for an HMO that 
offers a prescription drug benefit that those in New York, Miami, Los 
Angeles now can get.
  Third, in response to my constituents who want to purchase their 
drugs in Canada, Mexico or Europe, we should stop the Food and Drug 
Administration from intimidating seniors and others with threats of 
confiscation of their purchases when they try to buy their drugs from 
overseas.
  At the end of last year, we attempted to solve that problem; however, 
there were some loopholes in the bill that we passed last year, and we 
need to clarify current law to allow importers to use FDA-approved 
labeling without charge. Current law explicitly allows labeling to be 
used for ``testing purposes'' only and does not prevent drug companies 
from charging very, very high fees for using the label.
  FDA approval for labeling provides safety and efficacy. We can allow 
importers to obtain the best price available on the market. There are a 
number of things that we need to do to make sure that our retailers in 
this country are able to purchase from wholesalers overseas at lower 
rates so that they can pass on the savings to everyone.

                              {time}  1815

  Mr. Speaker, I think that would go a long ways to reducing 
prescription drug prices in this country vis-a-vis where it is, 
significantly lower in the foreign countries around the world that I 
talked about earlier in this talk.
  The bill that I introduced today meets those goals and ensures that 
we provide prescription drug coverage to those who need it most. It 
gives them access to health insurance and the drugs that they cannot 
now afford. I hope that we end up with a comprehensive prescription 
drug bill, something that covers all senior citizens. But when I look 
at that, I think we ought to do that in the context of a comprehensive 
Medicare reform bill, something that will help make sure that Medicare 
is financially sound for when the baby boomers come into retirement.
  But I also recognize that today we have some senior citizens who are 
just barely getting by. They are not so poor that they are in Medicaid, 
but they are just above that, and they are having to make choices today 
whether to pay their heating bills or food bills or rent, or whether to 
fill their prescriptions. These individuals are already getting a 
discount on their Medigap premiums, the qualified Medicare 
beneficiaries, the select low-income Medicare beneficiaries, the 
qualifying individuals one and two.
  We could implement that benefit for them immediately. We could give 
them a Medicaid drug card. They could go to any pharmacy in their 
State, get their prescription drugs filled at no cost, and we would pay 
for that from the Federal side. We would not ask for a State match on 
that, so the Governors and State legislators do not need to worry that 
we will be adding additional costs to their budgets.
  I think we can do that for a reasonable amount of money, and it would 
not require reinventing the wheel. Every State has this program now. It 
would be easy to administer. All of those State Medicaid programs are 
overseen to help prevent fraud and abuse. I think this is the 
commonsense answer if, Mr. Speaker, later this year or next year we 
find that we are not moving to a comprehensive Medicare reform bill and 
we are not moving to a bill that covers a prescription drug benefit for 
everyone.
  I just think that it would be a shame if this Congress does not 
address high prescription drug costs for the seniors that need it most 
and try to do something to lower the high cost for everyone. And that 
is where the reimportation issue comes into play.
  So, Mr. Speaker, we have a solution. I encourage my colleagues to 
look at the bill that I introduced today, the Drug Availability and 
Health Care Access Improvement Act of 2001. It does not mean that you 
cannot be for a more comprehensive bill. It simply means at the end of 
the day, if we are not getting that more comprehensive bill, then we 
should not leave town before the next election without at least 
providing help to those who need it the most.

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