[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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