[Congressional Record Volume 148, Number 65 (Monday, May 20, 2002)]
[House]
[Pages H2648-H2654]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   MEDICARE PRESCRIPTION DRUG BENEFIT

  The SPEAKER pro tempore (Mr. Issa). Under the Speaker's announced 
policy of January 3, 2001, the gentleman from New Jersey (Mr. Pallone) 
is recognized for 60 minutes as the designee of the minority leader.
  Mr. PALLONE. Mr. Speaker, I would like to take the time this evening 
during this special order to discuss the need for a Medicare 
prescription drug benefit.
  Mr. Speaker, I have been to the floor many times in the last few 
weeks, within the last few months, concentrating on the need for a 
Medicare prescription drug benefit, and the reason I say that is 
because I get more and more calls every day, every week, every month 
from my constituents, my senior constituents, complaining about the 
cost of prescription drugs, the inadequacy of Medicare or whatever kind 
of health insurance they have to cover prescription drugs, because 
Medicare generally does not provide for a prescription drug benefit, 
and most seniors do not have it through any kind of other supplemental 
health insurance that they might have.
  The need for an affordable, adequate prescription drug coverage, in 
my opinion, continues to grow, and I am very

[[Page H2649]]

concerned about the failure of the Republican leadership in this House 
to address this concern in any meaningful way.
  The House Republican leadership presented itself to the media a few 
weeks ago in a way that would suggest that they intended to bring up a 
prescription drug proposal. In fact, they promised to mark up the 
legislation in committee last week and to have it on the floor of the 
House by Memorial Day, by the Memorial Day recess, which most likely 
will begin this Thursday or Friday.
  Obviously, the time has come, and once again promises have come and 
gone unfulfilled. I do not hear anything from the House Republican 
leadership about addressing or bringing up a prescription drug proposal 
this week. The legislation that has been announced for the floor this 
week is the supplemental appropriations bill, bioterrorism conference, 
a few other suspensions, but no mention of prescription drugs, even 
though it was much heralded just a few weeks ago.
  It makes me believe that the Republican leadership does not want to 
even address this issue, but what concerns me even more is that when 
they do talk about it, and again, they are not talking about it much 
right now, what they seem to be planning to introduce is a proposal 
that they claim is under Medicare and that will cover all seniors but, 
in reality, is not under Medicare. It covers very few seniors and is 
administered in a way to give money to private insurance companies in 
the hope that they will insure seniors, and I do not think that will 
ever happen. I do not think that will ever occur.
  Based on what I know about the GOP prescription drug proposal that 
was discussed, not in any detail a couple of weeks ago, but what was 
discussed at a press conference, I think that there is very little 
likelihood that their proposal would provide any kind of meaningful 
relief in terms of prescription drug coverage for most of the 30 
million seniors who have no prescription drug coverage.
  It appears that what they have in mind is trying to provide a benefit 
for very low income seniors, maybe about 6 percent of the seniors, but 
even if that were to be the case, even if they did try to pass such a 
bill, I think because of the way they go about it, as I said before, in 
just trying to throw some money to private insurance companies and 
hoping that they will take care of these very low income seniors is not 
likely to even help those very low income seniors that maybe they are 
trying to help.
  The problem is that when my colleagues talk about privatization, when 
they talk about trying to give money to insurance companies so that 
they offer a drug-only, a prescription drug policy, most of the health 
insurance companies will tell us that they do not want to provide that 
type of coverage. In other words, they tend to provide coverage that is 
more broad-based, not just for prescription drugs, and we even had 
representatives of the Health Insurance Association of America testify 
before the Committee on Energy and Commerce and the Committee on Ways 
and Means in the last session of Congress when the Republican 
leadership tried to bring up a similar type of privatized drug-only 
policy for seniors. We even had the representatives of the Health 
Insurance Association of America say that they wanted nothing to do 
with this kind of a proposal.
  What I would like to explain in a little bit of detail, if I could, 
is that right now when someone has Medicare, Medicare covers every 
senior, about 40 million seniors, and they have their hospitalization 
covered in Part A. They have their doctor bills covered in Part B if 
they choose to participate. They pay a premium of maybe $44, $45 a 
month for their doctor bills and 80 percent of their doctor bills are 
paid for by Medicare but they can go to any doctor if they are in 
a traditional program. If they are not in an HMO, they do not have to 
go any HMO, they can go to any doctor, and 80 percent of the doctor's 
care is covered.

  What the Democrats have been saying is that the easiest way to expand 
Medicare or to provide a prescription drug benefit is to simply expand 
Medicare and add another part, maybe call it Part C to Medicare and use 
Part B for their doctor's care. As an example, in other words, have a 
very low premium that they pay per month, $25, $30, $40, then say that 
the Federal Government will pay, if they use Part B, as an example, 
about 80 percent of the cost of their prescription drug coverage, very 
low deductible, very low copayment, just like Part B, and all seniors 
get a prescription drug benefit, and most of it is paid for by the 
Federal Government.
  It is a very simple concept. It is what Medicare does now, as I said, 
with doctor bills, but what we are finding is that the Republicans do 
not like that. They never liked Medicare from the beginning. When 
Medicare was passed back in the 1960s, most of the Republican Members 
of the House then voted against it, and I think from an ideological, 
rather than a practical perspective, most of the people, most of the 
Members who were in the leadership of the Republican party do not like 
Medicare. So they do not want to expand Medicare, a program they do not 
like in order to cover prescription drugs, and give all seniors a 
guaranteed prescription drug benefit. Instead, they are trying, through 
their ideological mischief, to come up with some kind of program 
outside of Medicare where they would throw money to private insurance 
companies and hope that they will be able to provide policies for low 
income seniors.
  The problem is it does not work, and last week, Mr. Speaker, there 
was a report that was put out by Families USA, which is one of the 
senior organizations that is the biggest advocate for a prescription 
drug benefit under Medicare, and I am not going to read the whole 
report, but I just wanted to run through sort of a summary of what it 
said about trying to cover prescription drugs through private insurance 
or through privatization.
  I am reading from the report from last week. It says, ``The report is 
failing America's seniors. Private health plans provide inadequate Rx 
drug coverage. The United States House of Representatives will soon 
consider legislation to provide prescription drug coverage for 
America's seniors. The proposal that will be considered, developed by 
Republican Ways and Means Committee Chairman William Thomas, relies on 
private health insurance companies to provide drug coverage and to bear 
the financial risk entailed. Insurance companies will be expected to 
offer drug only insurance policies that cover no other health services.
  ``In its reliance on the private sector to provide coverage, the 
pending bill is similar to H.R. 4680, the Medicare Rx 2000 Act which 
passed the House of Representatives on a partisan basis during the last 
Congress. At that time when H.R. 4860 was being considered, the 
insurance industry, acting through the Health Insurance Association of 
America, made clear that it had no intention of offering drug-only 
policies.
  ``The industry reasoned that drug-only insurance policies would be 
subject to adverse risk selection, that is, they would 
disproportionately attract consumers who have existing health 
conditions or are sick or disabled. As a result, the policies would be 
very expensive and would have few takers among younger, healthier 
Medicare beneficiaries.''
  I do not want to go through the whole thing, but I want to read a 
little more here. It says, ``The reliance on drug-only policies is not 
the only troubling feature of the pending Republican proposal. In the 
traditional Medicare program, beneficiaries can count on a uniform 
benefit no matter where they live.
  ``As the following analysis demonstrates, relying on private 
insurance companies to deliver drug coverage for Medicare 
beneficiaries, rather than incorporating a drug benefit into the 
Medicare program, virtually guarantees that coverage will be uneven in 
availability, cost and value.''
  Now, the last point that this Families USA report makes is that the 
problem with privatization in terms of providing drugs already exists 
when we look at the Medicare Plus choice, the HMO program, under 
Medicare. It says in the report, ``This unevenness is common both in 
the Medicare Plus choice program under which HMOs offer Medicare 
coverage, often with some drug coverage, and in medigap policies which 
provide supplemental coverage for seniors. Experience under Medicare 
Plus choice and medigap policies shows that those that offer 
prescription drugs

[[Page H2650]]

are very expensive, are not always available and, when available, offer 
vastly different coverage in their costs from one geographic area to 
another. In addition, the coverage diminishes and the prices increase 
significantly over time. Because of these limitations, such private 
insurance policies provide an unreliable mechanism for delivering much-
needed prescription drug coverage to America's seniors.''
  There is a whole report, Mr. Speaker, about 20 pages here, where they 
have done an in-depth survey to show why the privatization does not 
work. Yet we hear the Republicans talk about it like it is the panacea 
for tomorrow and for all the problems that seniors have with 
prescription drugs.
  I do not understand where the Republicans are coming from other than 
that ideologically they are in some sort of straitjacket that 
determines that they cannot add a Medicare benefit because of some 
right-wing ideology against government.
  I see that one of my colleagues is here who has been out in front on 
this issue, particularly on the rising cost of prescription drugs which 
I have not even mentioned so far tonight. So I would yield to the 
gentleman from Maine (Mr. Allen).
  Mr. ALLEN. Mr. Speaker, will the gentleman yield?
  Mr. PALLONE. I yield to the gentleman from Maine.
  Mr. ALLEN. Mr. Speaker, I thank the gentleman for yielding. I was 
interested in what he was saying.
  We are going to see sometime eventually here over the next week or 
two or three the unveiling of a Republican prescription drug benefit 
plan. It will be dressed up. It will be described as a Medicare 
prescription drug benefit, but it will not be real. That will be the 
paint, that will be the veneer, that will be the cover, but it will not 
be real, and it will not be real for a couple of reasons.
  First, as my colleague mentioned, the Republican plans that we have 
heard of so far are plans which say to the American public, we are 
going to tell my colleagues here is the plan, these will be the 
benefits, and this will be the cost. Of course, we are not going to 
provide it to seniors, they will not be able to get it through 
Medicare; we are going to rely on private insurance companies to come 
in and offer seniors these benefits at this cost.
  In the true private sector, those decisions about benefits and costs 
are made by private insurance companies. They are made by the private 
sector, but the Republican prescription drug plan will basically say 
here they are and now we put all our faith in the insurance industry to 
come in and give seniors these benefits at that cost. That is the first 
problem.
  It is not the real world, and as my colleague pointed out so well, 
this is great theater down here in Washington right now. We have the 
two biggest lobbies in this city, the pharmaceutical industry and the 
health insurance industry. The pharmaceutical industry says what we 
need to do is rely on the health insurance industry. They will provide 
people with stand-alone prescription drug coverage.

                              {time}  2100

  And the health insurance industry says, well, we really do not want 
to do that. And the response of the House Republicans is, well, we 
think you will if we just pass this plan. And it will never happen.
  Back in Maine, I say over and over again to people, you know, if 85 
percent of the people in Maine filed a claim for flood insurance every 
year, you would not be able to buy flood insurance in Maine at any 
price. But 85 percent of our seniors use prescription drugs, and it 
just is not possible for insurance companies that have 20 percent 
overhead and profit that they have to earn, it is not possible for them 
to provide prescription drug coverage to seniors at a price lower than 
Medicare could provide.
  What we are working on is a real prescription drug plan, a Medicare 
prescription drug plan, a plan that will provide a benefit that is 
generous enough to attract everyone, get everyone into the pot. 
Medicare's overhead is generally around 2 or 3 percent, not 20 percent, 
because they do not pay huge salaries to their executives and they do 
not have the same kind of overhead. That is the kind of efficient plan 
that we really, I think, need to pass. But I do not think we will see 
it coming out of the Republican majority right now.
  The gentleman from New Jersey was talking not so long ago about the 
issue of price. Here is another case. If you want to have an affordable 
prescription drug benefit, and by that I mean affordable to seniors on 
the one hand and affordable to the Federal Government on the other, you 
have to contain price. As the gentleman knows, I have a bill that would 
reduce prescription drug prices for seniors by about 35 percent simply 
by saying we will not let you charge our seniors more than you charge 
people in Britain, in France, in Germany, in Italy, in Canada, and 
Japan. That is it, end of story. 35 percent average discount.
  Every time this comes up, the House majority, the Republicans, or the 
pharmaceutical industry will stand up and say you cannot do that. If we 
have discounts of that size, then we will not be able to do research 
and development anymore. We will not be able to develop new drugs, and 
people in this country will not be able to get the medicines that they 
need. And yet these companies have just started promoting their 
discount cards. And what do they say the discount will be? Oh, 25 to 40 
percent.
  One company is out there with a card for a significant percentage of 
Medicare beneficiaries; and they are saying to that group, we will 
charge you $15 a month for all of our drugs. For any of our drugs, $15 
a month. Now, the average cost of those drugs right now at the pharmacy 
is $61 or $62. They are not talking about a 35 percent discount, they 
are talking about a huge discount, from roughly $61, $62 to $15 for all 
their drugs.
  Now, it turns out that, according to them, that discount will not 
affect the bottom line. That discount will not affect their research 
and development. But here is this discount card, here is another 
discount card. What are we really talk about here?
  The bottom line is this, and then I will yield back to the gentleman, 
the bottom line is that if we are to contain drug prices for our 
seniors, all of whom are in a Federal health care plan called Medicare, 
if we are to do that, Medicare has to have the negotiating power to 
drive down price for the benefit of our seniors and for the benefit of 
our taxpayers. That is what we need to do. And if we do that, we can 
have the kind of Medicare prescription drug benefit that will not be 
just a veneer, just a sort of painting, something that will never 
happen in the real world; but it will be something that will be of 
great benefit to all Medicare beneficiaries.
  At some point here I think what we will hear from the other side is 
smoke and mirrors and surface, anything to avoid a confrontation with 
the pharmaceutical industry. But, frankly, we cannot help our seniors 
without doing something that the pharmaceutical industry will not like.
  Mr. PALLONE. Well, I want to thank my colleague from Maine. I am so 
glad the gentleman constantly brings up the cost issue, because I think 
it really is the key. The bottom line is, when my constituents are 
calling, and they do not even have to be seniors, and they are 
complaining about their inability to get prescription drugs, it is 
because of the cost. The cost is the main issue. I think if anyone 
around here, on the Republican or Democrat side of the aisle, thinks 
that we are going to be able to address this issue in a meaningful way 
without reducing costs, they are from another planet.
  As the gentleman knows, in putting together a benefit under Medicare, 
which we as Democrats want, we have to be mindful of how much it is 
going to cost. If you do not find some way for the Secretary of Health 
and Human Services or the government in general to reduce cost, then 
the price of the benefit will skyrocket. It has to be an important part 
of this; otherwise we are kidding ourselves in saying we are going to 
provide a meaningful benefit.

  The Republicans have just totally ignored this. Again, they have the 
press conference in the same way that they say, oh, this is going to be 
a Medicare benefit, and then we find out it is not; in the same way 
they say everyone is going to get this benefit, and then we find out it 
is not, it is maybe just a few low-income people; and then they say, 
oh, and we are going to lower cost, and there is nothing in it to lower 
cost.

[[Page H2651]]

  The only thing we have seen so far, which the gentleman has 
mentioned, was President Bush's pronouncement about the drug discount 
cards. And that is a sham, first of all, because they are already 
available. On closer reflection, when asked by some reporters about 
what the government was going to do, the President actually said we are 
going to promote the existing cards. He was not proposing some new 
program or new benefit, just promotion of what drug companies already 
offer. So what is there? There is nothing. The government is doing 
nothing.
  I guess he announced this about a year ago, this discount card 
promotion; and at that point he said, well, this is just an interim 
measure until we come up with a prescription drug benefit. But now, 
when the Republicans talk about cost, they talk about the discount card 
only. So the interim measure, which was nothing, has now become their 
permanent solution to cost. And, obviously, it is no solution at all.
  There are many ways of going about the cost, and I would just like to 
address a few of them. I think the gentleman's bill is great, and I 
have cosponsored it, and I think now the gentleman links it, he said, 
to the cost in other developed countries. Is that how it is done?
  Mr. ALLEN. Basically, it works the way other companies hold down the 
cost to their citizens. It is really simple. It would allow pharmacies 
to buy drugs for Medicare beneficiaries at what is called the average 
foreign price. That is defined in the bill to be the price at which 
that drug can be purchased in Britain, in France, Germany, Italy, 
Canada and Japan, the rest of the G-7 countries, industrialized 
countries.
  It would obviously hold down costs, because in those countries the 
average foreign price for any particular drug is typically about $60, 
$63 or $64 compared to $100 a month here. So it is about a 35 to 40 
percent reduction that we would be talking about.
  Mr. PALLONE. And the fact of the matter is, and the thing that really 
bothers me, and the gentleman is in Maine so he really sees it, and 
those in Michigan and other border States with Canada, you see people 
taking buses on a regular basis to go to Canada to buy the drugs at a 
significant reduction. It is outrageous they have to do that.
  My understanding is that in some of the border States, like Maine, 
that is routine. People take a bus once a month or whatever.
  Mr. ALLEN. If the gentleman will continue to yield, in my office we 
are helping people all the time purchase their drugs at discount, and 
there are ways to purchase drugs through a Canadian physician and get 
that help.
  But let me tell my colleague about the last bus trip that seniors 
took to Canada from Maine. It was a few months ago. There were 25 
seniors on this trip. Twenty-five. They went over the border. They 
checked in with a Canadian doctor. They got their prescriptions 
written, and they went to the pharmacy and came back. Those 25 people 
saved $16,000 on their prescription drugs; $16,000 for 25 people in one 
bus trip.
  Let us talk about one important drug, Tamoxifen. Tamoxifen, as the 
gentleman knows, for 15 or 16 years has been the standard accepted 
treatment for breast cancer in this country. Well, in Maine, as in I 
assume most of the United States, if someone does not have health 
insurance, a month's supply of Tamoxifen is about $112, $114. In 
Canada, it is $13 or $14. There is a ten-to-one differential. Now, that 
is greater than the average of other drugs, but it gives us some 
indication.

  Here are people out there fighting for their lives, needing Tamoxifen 
in order to get by, low-income people, middle-income people; and they 
have to worry about how on Earth they are going to pay for their drugs.
  I heard a story the other day, an older couple in Maine, both of them 
have significant drug expenses, so what do they do? How do they manage 
to both eat and pay the bills and then purchase their prescription 
drugs? Well, one month he takes his medicine and she does not. The next 
month she takes her medicine and he does not. There is not a doctor on 
the planet that thinks that is the way you should manage your 
prescription drugs. But they have no choice.
  I have talked to people who are basically slowly sliding into 
bankruptcy because of the cost of their prescription drugs. Through my 
office, we do everything we can for them, but what they need is what 
working Americans have. Working Americans who have health insurance 
typically have prescription drug coverage through their health insurer. 
For seniors, the health insurer is Medicare. And yet, on the Republican 
side of the aisle, the thought of strengthening Medicare, strengthening 
Medicare, because it is a Federal Government program, the thought of 
strengthening it to provide a significant additional benefit seems to 
be something they just cannot abide. So they try to find out how 
possibly the private sector could do something that they cannot 
possibly do as efficiently as Medicare itself.
  Mr. PALLONE. It is an ideological problem, I am convinced of that. 
They have a problem with Medicare because it is a government-run 
program, and they do not believe in government-run programs.
  I always say that when you come down here you cannot be that 
ideological. You have to be practical about what works, and Medicare 
works. So we should expand it to include prescription drugs.
  I hate to say this, and I do not want to cast aspersions, but at 
least in Maine there is an option to go someplace. If you are in New 
Jersey, it is too far. And I think that is the unfortunate part of 
this. We are looking at these options, but they are not options really 
for most people.
  The gentleman's bill is great, and I certainly support it and would 
love to see it enacted, but there are many other ways we could reduce 
costs that the Republicans have essentially rejected. Obviously, if you 
have a Medicare benefit, and all 39 or 40 million American seniors are 
in that program, that gives the Department of Health and Human Services 
tremendous bargaining power, like we do with the VA or like we do with 
the military hospitals; and they should be able to negotiate prices 
that would bring costs down.
  There are other things. I know that my colleague, the gentleman from 
Ohio (Mr. Brown), has a bill with regard to generics to try to 
encourage generics, which is another way of bringing costs down. But we 
do not see that happening. Republicans do not like that too much. Some 
do, but the leadership does not, so we do not see anything on that.
  In the other body a couple of weeks ago, one of our former House 
Members, the gentlewoman from Michigan (Mrs. Stabenow), introduced a 
bill, which I will introduce in the House, which basically says you 
cannot get any tax credit or deduction on your advertising expenses. In 
other words, as the gentleman said before, most of the pharmaceuticals 
say, well, we need to drive up prices in the U.S. because you are 
paying for the research.
  Well, I do not know if I agree with that. I do not know why we should 
be paying for all the research here in the United States and no one 
else does in these other countries. But right now they are mixing the 
advertising cost and the research, and they are getting some kind of 
tax deduction or credit for it; and there is absolutely no reason why 
they should get that kind of credit or deduction on the advertising 
portion, which I think is a huge part of it. So her bill says that you 
cannot get the tax credit or the deduction on the advertising.
  There are so many ways to reduce costs, but so far we cannot even get 
the bill in committee at this point. We cannot even get a markup on the 
bill, so they are not even considering some of these cost measures.

                              {time}  2115

  Mr. ALLEN. I am glad the gentleman brought up the question of TV 
advertising. A few months ago the Kaiser Foundation came out with a 
study. They looked at the difference in cost, the difference in 
spending on prescription drugs in the year 2000 as compared to the year 
1999, just that 1-year differential. They found a 20 percent increase 
in expenditures on prescription drugs. Then they started looking more 
closely at particular drugs. They surveyed almost 10,000 drugs and 
looked at the price increases and increased spending on prescription 
drugs. They found that half of that 20-percent increase was related to 
just 50 drugs.

[[Page H2652]]

Fifty drugs accounted for half of the increase. They were the 50 drugs 
that were most heavily advertised. Those were the drugs that were on 
television all the time. So half of the increased expenditure came with 
50 drugs and the other half of the increased expenditure came with 
9,950 drugs. Fifty drugs over here; 9,550 drugs over here. Each of 
those accounted for half of the increased expenditure.
  There is no question that pharmaceutical spending on advertising is 
driving up the cost of prescription drugs in this country at an 
alarming rate. That is why they do it. Let us face it. That is why they 
do this heavy advertising. Part of the problem has nothing to do with 
Medicare. Part of it has to do with our businesses. Health care costs 
for small businesses and large businesses in this country are 
skyrocketing. We have got small businessmen and women in Maine who just 
cannot abide 20 percent, 30 percent, 40 percent increases this year. I 
have been talking to them. I have got a piece of legislation that I 
think would help. But that kind of increase is going to drive the small 
business community out of small business entirely if we are not really 
careful. One of the major drivers is the high cost of prescription 
drugs and one of the drivers for that, it is not really research. It is 
really the advertising.
  Look, the pharmaceutical industry has to maximize the bottom line. 
God bless them, that is the American way. There is nothing wrong with 
that. What is wrong is for government to sit back and do nothing to 
protect our consumers from inflated prices. This is not a free market. 
This is a case where we provide money, tax credits. We do half of the 
basic research through the National Institutes of Health for the 
development of new drugs. Then we provide a research and 
experimentation tax credit to encourage the development of new drugs. 
Through that mechanism, the pharmaceutical industry winds up paying one 
of the lowest taxes as an industry in the country. Yet they are the 
most profitable industry. And we do not do a thing. We give extended 
lengths of time in the patents.
  This is not about them. This is a good industry. They make a good 
product. But the Federal Government has fallen down. We have not 
protected our people. That is why we need a Democratic prescription 
drug benefit, one that works through Medicare, that covers everyone, 
that provides a generous enough form of coverage so everyone will sign 
up. If we do that, we will finally, I think, get this problem of our 
seniors and ultimately of the business community as well, start to get 
this problem of health care costs under control. I get a little wound 
up about this.
  Mr. PALLONE. I appreciate it. I am amazed how people do not even know 
about generics. We know, for example, when we talk about generics that 
in many cases, probably in most cases, there is a generic alternative 
to some of the name-brand drugs; but the problem is that people, 
physicians and seniors just get hit and bombarded with all this 
advertising, they do not even have any education about generics, they 
do not even know whether there is an equivalent, the fact that it is 
just as good, they have no knowledge whatsoever.
  Then, as you say, you get the companies coming in trying to extend 
the patents and using all kinds of gimmicks to prevent the generics 
from even coming to market, using procedural tactics and lawsuits and 
everything else half the time; and if that does not work, then they 
invite a Member of Congress to sponsor a private bill to just extend 
the patent. There is getting to be less of that because it has been 
brought out into the light; but for years that was happening on a 
regular basis, and it is probably still happening.
  But I think the ultimate irony is that they get some kind of a tax 
break for the advertising. Here they are, convincing people that this 
is the only alternative, which is not true; and then they get to take 
some sort of a tax break to pay for the advertising. It is 
unbelievable.
  If I could maybe just conclude, and the gentleman may want to join me 
on this, I just wanted to explain again what we have in mind as a 
Democratic alternative, because I spent a lot of time criticizing what 
I think the Republican plan is going to be, and my biggest concern is 
that they have not unveiled it and they have not moved on it. Maybe I 
will get criticized for saying this, but the way they have handled 
themselves in the last 2 weeks in promising that they were going to 
come out with this, and then promising it was going to come to 
committee and promising it was going to be on the floor before the 
Memorial Day recess and all of a sudden there is quiet and a big hush, 
I have not heard anything for a week and the Memorial Day recess is in 
a couple of days. I am beginning to think they are never going to bring 
this up in this session of Congress, between now and the end of this 
session. I hope I am wrong.

  Mr. ALLEN. We should be so lucky and the American people should be so 
lucky. We would be better off if we got a real plan. There is no reason 
to put up a plan which is just a shell, the kind of plan which is going 
to be supposedly funded or operated by an insurance industry that does 
not want to do it; that purports to cover everyone, but in fact will 
only make economic sense for people at the lower-income levels and at 
the end of the day will not be a Medicare prescription drug benefit at 
all. It will be some sort of shell of a benefit. Many of the proposals 
seem to be saying that one way to pay for this is to drag money out of 
other health care providers. But the doctors and the home health care 
agencies, they cannot keep going.
  When you really think this through, it is worth remembering a little 
bit of history. The reason in 1965 that Medicare was created was 
because the private insurance market would not cover people who were 
older and sicker than the general population, people over 65. In 1965, 
half of all seniors in this country had no hospital coverage. It was 
the trip to the hospital and surgery that would drive people into 
bankruptcy. That is still true today for people who do not have health 
insurance. But our seniors have it. They have Medicare. The problem, of 
course, is they do not have the kinds of prescription drug coverage 
they need. Almost 40 years ago, the answer of the Republican Party, the 
position of the Republican Party, is that somehow the private sector 
will provide; and that is still the same answer today. But if you look 
at the Medicare+Choice, managed care under Medicare, that is not 
working. That is not working. It costs more according to the GAO to 
fund Medicare+Choice, Medicare managed care plans, than it does clunky 
old ordinary Medicare.
  And what are we talking about here? The way to do real Medicare 
reform is to provide seniors with a Medicare benefit that they need, 
not to try to go back to pre-1965 times when it was the insurance 
companies, that we are going to rely on insurance companies to provide 
health insurance and prescription drug coverage to a population that 
they did not want to cover then and do not want to cover now.
  Mr. FRANK. If the gentleman will yield, I appreciate the leadership, 
Mr. Speaker, that both of my colleagues from New Jersey and Maine have 
shown on this issue, but I do not want us to appear too partisan. I do 
want to acknowledge that the Republican Party, the President, Members 
of this body, have not been totally neglectful of the health problems 
of older people. The difficulty is that they really have so far only 
tried to deal with the health problems after they are quite severe, in 
fact, after they are fatal.
  So far, what we have to deal with the problems of elderly people who 
are severely ill is a total repeal of the estate tax. Now we are told 
that we cannot afford to have a Medicare drug prescription benefit 
because there is no room for it in the Republican budget. One of the 
things that crowded it out was the ability of an older person worth $47 
million to die and have the heirs who inherit this pay no tax at all. 
Obviously, older people who have died have had severe health problems; 
and it is not as if, as I said, the Republicans have ignored them. They 
have chosen, however, to focus all of the financial relief on those 
people who were elderly and quite wealthy who died, and that has left 
us no money for the people who were middle class and sick.
  So we do not want to suggest that there was no concern whatsoever. 
If, in fact, we would have adopted a plan that, for example, exempted 
the first $5

[[Page H2653]]

million of someone's estate from taxation and put a reasonable level of 
graduated taxation above that, we would have, as my colleagues know, a 
significantly larger amount of money. And simply doing a reasonable 
reform of the estate tax rather than a total repeal would free up this 
money so you could have a meaningful prescription drug program.
  So we are deciding at what stage in the illness cycle to intervene. I 
think this is a case where our Republican colleagues have waited far 
too long, literally after people have unfortunately passed away, and 
they have taken that money and that is the money that could have been 
used to make a prescription drug benefit a significant one.
  Mr. PALLONE. That is a good point. I think it also dovetails with 
what my colleague from Maine said before, and one of the reasons I 
believe why the Republicans are having difficulty coming up with a plan 
and probably have postponed this at least until after Memorial Day if 
not indefinitely is because they have insisted that if they are going 
to pay for it, they have to take money from other parts of Medicare, in 
other words, cut back on the amount of money that goes to hospitals, 
cut back on payments to doctors. They cannot do those things, 
practically speaking, because hospitals will close, doctors will simply 
close the door and they have put themselves in this financial box, if 
you will, that has made it impossible for them to offer any kind of 
generous plan the way the Democrats feel we need to have it.

  Before we close tonight, I think we should talk a little bit about 
what the Democrats have in mind.
  Mr. ALLEN. Before the gentleman describes the Democratic plan, and I 
know he wants to do that, but the gentleman from Massachusetts made a 
good point and I cannot resist going back to it for a moment, because 
back in the campaign for President, the current President said during a 
time of great economic prosperity that what this country needed was a 
huge tax cut. He said, ``It's not the government's money. It's your 
money.'' Eventually, 5 months after he was put in office, the tax cut 
went through. Of course by the time the tax cut went through, we were 
slipping into a recession. And then the argument was not that the tax 
cut will not overstimulate the economy, it was that the tax cut will 
help stimulate the economy. So whether we were talking in times of 
prosperity and budget surpluses or whether we are talking about a time 
of a bit of a recession and budget deficits, in any case the solution 
is always the same, ``What we really need is a tax cut.'' I should have 
brought down my chart that I have got here, but it is remarkable. The 
gentleman from Massachusetts was talking about the benefits to someone 
who dies with millions and millions and millions of dollars from that 
estate tax. The Republican majority was down here recently saying, We 
have got to make this tax cut permanent. That is what is needed for 
this economy.
  When you look at the numbers, which they will not show you, but when 
you look at the numbers, here is what it shows: the bottom 60 percent 
of people in this country in terms of income run from $44,000 on down. 
Sixty percent of the entire country comes from households of $44,000 or 
less. From the tax cuts that have been passed but not implemented, that 
group will get an average annual tax cut of $104. $104. When you look 
at the top 1 percent, the people in this country who earn over $370,000 
a year, the top 1 percent in income, they will get from tax cuts passed 
but not yet implemented an average annual tax cut of $50,000.
  In other words, the tax cuts that the Republican majority is rushing 
to make permanent, if they can, those tax cuts will give a tax cut on 
an annual basis to people earning over $370,000 a year. They will get a 
tax cut that is more than roughly 60 percent of the people in this 
country even earn in a year. That is somehow described as a notion of 
fairness. But if we are going to do that, if that is a higher priority 
than making sure that seniors struggling to get by on 20 or $25,000 a 
year, struggling to pay for their prescription drugs, if tax cuts for 
those wealthy people are more important than prescription drugs, I have 
to say that is a value system I do not understand.
  I am actually anxious to hear the gentleman's description of the 
Democratic plan which is a real plan, a real Medicare prescription drug 
plan for seniors.
  Mr. PALLONE. I think that what we need to point out is that we are 
talking about expanding Medicare to include a prescription drug benefit 
for all seniors because, practically speaking, we know that Medicare 
works. The reason this works is it makes sense. If you take the 39 or 
40 million seniors that now are eligible for Medicare, all seniors are 
eligible for Medicare, and you make a huge pool that includes all these 
seniors, then it basically goes along with the whole idea of insurance. 
In other words, the idea with insurance policies is to have as many 
people participate in the plan as possible because then those who run 
up huge costs are in it, but those who spend very little if anything on 
drug costs are also in it.

                              {time}  2130

  That evens the cost. We know that the Republicans have boxed us in, 
so to speak, in terms of the financing of this.
  But if you think about it from a practical sense, the best thing to 
do is to pool all the people, which is really what Medicare is all 
about. The Republican proposal, which says give a little money to 
private insurance companies and hope that they will attract some low-
income seniors to this benefit, does not make sense, and the insurance 
companies have said it, because the only people that will seek out that 
option will be people who have huge drug costs and who figure by paying 
so much a month, or whatever, they are going to get a huge windfall in 
terms of their drug benefit.
  If you do what the Democrats are proposing, which is to analogize our 
proposal to Part B, where you pay a very low premium per month, I don't 
know if it will be $25, $35, $40 a month, you get 80 percent under Part 
B of your doctor bills paid for by the Federal Government, the 
deductible, I think, is $100, and, of course, the copay is the other 20 
percent that the Federal Government is not paying, then you are going 
to create an incentive for almost every senior to join. I do not know 
what the percentage is, but it is something like 90-something percent 
of seniors pay the premium and join Part B, because it is worth doing.
  So if you have the same phenomena, where you have a very low premium 
and you get 90-something percent of the seniors to participate in this 
Part C or Part D Medicare benefit, you have created this huge pool, 
which I think from a financing point of view makes sense. That is what 
the insurance pool is all about.
  Then you go ahead and you say through some way, either you give the 
Secretary of Health and Human Services the authority to negotiate 
prices, I do not know if you do something like what the gentleman is 
proposing, or just give a negotiation ability with a mandate to reduce 
prices, he or she is going to have the ability to go out with the 40 
million seniors and really get a good deal, presumably because he has 
such bargaining power. So we are trying to address the costs by giving 
the Secretary that power.
  We are trying to come up with a guaranteed Medicare benefit that 
everyone would be able to take advantage of, which is generous enough 
for people so that they would sign up for it, so that you would have 
everyone participate in it, and I have no doubt it would be as 
successful as what we have under Medicare now with Parts A and B.
  The one thing I would say, because sometimes people say what about 
the seniors who cannot afford the premium, the Democrats would do the 
same thing we do with Part B. If you are below a certain income, then 
the Government pays for your premium, or if you are a little better 
off, you have to pay a little less than the average premium and the 
Government subsidizes your premium. Those people would have the 
advantage now, as they do with Part B.
  Mr. ALLEN. Could the gentleman describe the catastrophic coverage.
  Mr. PALLONE. The catastrophic would also be very low. I will not get 
into the details, but you have to have a very low catastrophic figure, 
too. In other words, above a certain point, whether it be $2,000 or 
$3,000, whatever it is, if your out-of-pocket expenses exceed that, 
then all your costs would be paid for by the Federal Government. That 
should be fairly low as well, if it is going to be meaningful, I would 
say.

[[Page H2654]]

  Again, this is not rocket science here. We are just basically talking 
about what we already have for your hospital bills, and we are just 
saying we want to build on a very successful Medicare program to 
provide coverage for all seniors. There is no magic here. I believe 
that with the cost factor and the large pool, that the cost probably 
would not be that much, considering what we are spending on everything 
else, as our colleague from Massachusetts pointed out.
  So if I could just conclude and thank my colleagues for participating 
tonight, the main concern I have right now, to be perfectly honest, is 
that we do not have any action by the Republicans on this issue. They 
talked about it 2 or 3 weeks ago and promised they were going to bring 
it up before Memorial Day. They have not.
  I disagree with the gentleman in the sense that I would just as soon 
they bring some bill to the floor and have a debate, because I am 
fearful we are not going to get to it at all. Clearly when that debate 
occurs, what the Republican leadership talked about is not acceptable. 
It is not going to do anything. It is not going to provide any 
meaningful coverage for anybody. Hopefully we will have the ability as 
Democrats to bring up a proposal similar to what we outlined today and 
have a debate on something so important to the American people. I would 
say we are going to come back here. I know the gentleman from Maine is 
going to come back here, and we are going to keep talking about this 
over and over again until the Republicans bring it up and allow an 
opportunity to address the issue.

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