[Congressional Record Volume 150, Number 125 (Wednesday, October 6, 2004)]
[Senate]
[Pages S10578-S10581]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BINGAMAN (for himself, Ms. Mikulski, Mr. Graham of 
        Florida, Mr. Corzine, Mr. Harkin, Mr. Durbin, Mr. Feingold, Mr. 
        Rockefeller, and Mr. Kohl):
  S. 2906. A bill to amend title XVIII of the Social Security Act to 
provide for reductions in the medicare part B premium through 
elimination of certain overpayments to Medicare Advantage 
organizations; to the Committee on Finance.
  Mr. BINGAMAN. Mr. President, on a late Friday afternoon back on 
September 3, 2004, the Bush Administration announced, just before the 
Labor Day holiday weekend, that there will be a 17.4 percent increase 
in the Medicare Part B premium for seniors and people with 
disabilities. The increase would raise premiums for seniors and people 
with disabilities from $66.60 per month to $78.20 per month and 
represents the largest dollar increase in the history of the Medicare 
program.
  In fairness, the premium is set in statute to reflect 25 percent of 
Medicare Part B spending. However, a large share of the increase is due 
directly to provisions that were included in the Medicare prescription 
drug bill that passed last year that did far more to help HMOs, 
insurance companies, and drug companies than it did for Medicare 
beneficiaries. In fact, because of this formula, the dramatic increase 
in payments made to HMOs and insurance companies also has the very 
unfortunate effect of increasing the Medicare premium, even for seniors 
and people with disabilities that either do not have access to an HMO 
or choose not to enroll in an HMO.
  As a result, today I am introducing legislation, the ``Affordability 
in Medicare Premiums Act,'' with Senators Mikulski, Graham of Florida, 
Corzine, Harkin, Durbin, Feingold, Rockefeller, and Kohl, that would 
reduce the 17.4 percent premium increase announced by the 
Administration and instill greater fairness in the Medicare premium in 
the future. It would do so in three ways.
  First, the bill recognizes that one of the contributing factors in 
the dramatic increase in the Medicare premium was the enactment of 
provider and managed care plan payment increases in the Medicare drug 
bill. In the case of payments targeted exclusively to managed care 
plans, the Congressional Research Service has estimated that payments 
to HMOs will increase by 17.4 percent between 2004 and 2005. The CMS 
Office of the Actuary estimates that the vast majority of the increase 
comes from payments to HMOs over and above that made to traditional 
Medicare for either preventive services or in the physician payment 
adjustment.
  As a result of these targeted increases in payments just to HMOs, Dr. 
Brian Biles, with George Washington University and the Commonwealth 
Fund, has estimated that HMOs will be paid $2.7 billion, or 7.8 
percent, in excess of traditional, fee-for-service Medicare in 2005. 
Moreover, the Medicare Payment Advisory Commission, or MedPAC, has 
found that in almost one-third of the counties in the United States 
will have payments to HMOs that will exceed that of traditional 
Medicare by more than 20 percent.
  I voted against the Medicare prescription drug bill, in part due to 
the overpayments made to HMOs in that legislation. If the rhetoric 
behind private insurance plans is that they will modernize and save 
Medicare money, it certainly makes little sense to overpay them by what 
the CMS Office of the Actuary estimates to be $50 billion over the next 
10 years. That is why I have cosponsored legislation to eliminate that 
overpayment.
  In the meantime, for the 89 percent of Medicare enrollees that choose 
not to enroll or do not even have access to a Medicare HMO, they 
certainly should not have to pay 25 percent of the Part B costs of the 
overpayment or excessive subsidies to managed care plans through what 
is now called the Medicare Advantage program, as they are required to 
now.
  Consequently, our legislation, the ``Affordability in Medicare 
Premiums Act,'' would eliminate that part of the Medicare premium that 
is attributable to the costs associated with these overpayments to 
HMOs. Just as somebody should not have to pay the premium of another 
for choosing a more costly health plan, our Nation's senior citizens or 
people with disabilities should not have to pay higher premiums because 
the Administration and Congress choose to overpay HMOs in the Medicare 
program.
  Unfortunately, as it works now, if more Medicare beneficiaries 
decided this year to enroll in Medicare HMOs, then Medicare spending 
increases, on average, by at least 8.4 percent for each new managed 
care enrollee. With that increased cost, all Medicare beneficiaries, 
even those that neither have access to nor choose not to enroll in an 
HMO must pay higher premiums.
  Second, the bill recognizes that HMOs are also overpaid by Medicare 
even further due to the Administration's decision to not appropriately 
``risk adjust'' payments to health plans. As MedPAC explained in its 
March 2004 Report to the Congress, ``From the time plans were first 
paid based on capitation, the program has adjusted the capitation rates 
to reflect expected health care spending differences among plans based 
on the characteristics of their enrollees.'' In 1997, Congress required 
the Secretary to improve the risk adjustment system. However, in 
implementation of the new system, which is phased in to cushion the 
impact on health plans, the Centers for Medicare and Medicaid Services, 
or CMS, went further by estimating the impact of the new system on 
aggregate plan payments and has restored the difference.
  MedPAC has argued against this and points out that without accurate 
adjustments it results in even further inequity between traditional 
Medicaid and private health plans. As MedPAC says, ``If plans in 
general attract healthier-than-average beneficiaries, the Medicare 
program pays more than these same beneficiaries would cost in the [fee-
for-service] program.''
  Dr. Biles estimates that the CMS policy will add another $1.4 
billion, or 4.0 percent, to health plan overpayments. The CMS Office of 
the Actuary estimates that if this policy continues over the next 10 
years that it will cost the Medicare program an additional $54 billion 
in overpayments. HMOs should not reap a significant financial windfall 
by avoiding serving Medicare beneficiaries who have greater health care 
needs than average. Moreover, once again, those that do not have access 
to or choose not to enroll in a Medicare HMO should not be required to 
pay higher premiums for these overpayments.

  Therefore, the legislation requires CMS to risk adjust health plan 
payments and dictates that these Part B savings be redirected into 
reducing the Medicare Part B premiums for all Medicare beneficiaries. 
Furthermore, Part A savings would be applied to reduce the federal 
deficit and extend the solvency of the Medicare Trust Fund.
  And finally, our bill repeals the $10 billion that was established in 
the Medicare drug bill to allow the Secretary to pay health plans for 
what is called a ``health plan stabilization fund.'' This fund truly 
serves no other purpose than to further increase overpayments and 
subsidies to health plans. Savings in Medicare Part B from the repeal 
of the provision are also redirected into reducing Medicare premiums 
for all Medicare beneficiaries. Once again, Part A savings would be 
applied to reduce the federal deficit and further extend the solvency 
of the Medicare Trust Fund.
  If nothing is done in the next two months, this premium increase will 
result in a cumulative increase in premiums of 56.4 percent between 
2001 and 2005. That is unacceptable to our nation's senior citizens and 
disabled citizens who often live on fixed incomes. Rather than hiding 
this fact, as the Administration has sought to do, we urge them to do 
something about it by supporting this critical and urgent legislation.
  The ``Affordability in Medicare Premiums Act'' is all about 
priorities. For

[[Page S10580]]

the 89 percent of Medicare beneficiaries that are not enrolled in an 
HMO, they should not have to pay added premiums as a result of an 
estimated $114 billion in overpayments to HMOs over the next 10 years. 
We have chosen to help senior citizens and people with disabilities 
living on fixed incomes over HMOs. It is a matter of simple fairness.
  Dr. Biles estimates that the average premium would decline for 
Medicare beneficiaries by at least $5 per month if our legislation is 
passed.
  I would also underscore that by requiring risk adjustment and 
repealing the $10 billion PPO fund, about half of those savings would 
be Medicare Trust Fund or Part A dollars. As a result, the legislation 
has the effect of both extending the solvency of the Medicare Trust 
Fund and also saving taxpayers over $30 billion in coming years.
  And finally, the Medicaid program would also save hundreds of 
millions of dollars over the next ten years due to the fact that 
Medicaid pays the cost-sharing and premiums for low-income senior 
citizens and the disabled who are both enrolled in Medicare and 
Medicaid. The Federal Funds Information for States, or FFIS, has 
estimated that the Medicare Part B premium increase will cost the 
Medicaid program over $800 million in 2005. By reducing the Medicare 
premium, the Medicaid program--and thereby, both federal and state 
governments and taxpayers--will see spending decline in this area.
  I would like to thank Senators Mikulski, Graham of Florida, Corzine, 
Harkin, Durbin, Feingold, Rockefeller, and Kohl for working with me on 
introducing this important legislation on behalf of our nation's 
seniors and disabled enrolled in Medicare.
  I ask for unanimous consent that the Fact Sheet supporting the 
legislation and the text of the bill be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                 AFFORDABILITY IN MEDICARE PREMIUMS ACT

       Senators Jeff Bingaman, Barbara Mikulski, Bob Graham, Jon 
     Corzine, Tom Harkin, Russ Feingold, Jay Rockefeller, and Herb 
     Kohl are introducing legislation entitled the ``Affordability 
     in Medicare Premiums Act.'' The bill would substantially 
     reduce the growth in the Medicare Part B premium scheduled to 
     take place in 2005 and instill greater fairness in the 
     Medicare Part B premium in the future. It would do so in a 
     fiscally responsible manner while also managing to extend the 
     solvency of the Medicare Part A Trust Fund and reduce the 
     Federal deficit.


                               Background

       On September 3, 2004, the Bush Administration announced 
     that the Medicare Part B premium will rise from $66.60 per 
     month in 2004 to $78.20 per month in 2005--a 17.4 percent 
     increase. This $11.60 monthly or $138 a year increase for 
     Medicare enrollees represents the single largest in the 
     history of the Medicare program.
       One of the major factors contributing to the dramatic 
     increase was the enactment of provider and managed care plan 
     payment increases in the Medicare Modernization Act. In the 
     case of payments to managed care plans, the Centers for 
     Medicare and Medicaid Services (CMS) Office of the Actuary 
     estimates that payments will increase by 14.4 percent between 
     2004 and 2005. This will occur on a base payment to HMOs that 
     was already estimated by the Commonwealth Fund to exceed fee-
     for-service costs by 8.4 percent or $552 per Medicare 
     Advantage plan enrollee in 2004.
       Since the increase in payments to Medicare Advantage health 
     plans attributable to Part B spending is paid for by 
     increased premiums for all Medicare beneficiaries, the result 
     is that senior citizens and people with disabilities that are 
     not enrolled in Medicare HMOs have been and will increasingly 
     be cross-subsidizing overpayments to these Medicare HMOs.


  Reduces Part B Premiums for the 89 Percent of Those Not Enrolled in 
                             Medicare HMOs

       The legislation would eliminate this cross-subsidization by 
     making sure that the 89 percent of Medicare enrollees that 
     currently choose not to enroll or do not have access to a 
     Medicare HMO are no longer paying for the overpayments to 
     these plans. The legislation would achieve this by requiring 
     CMS to estimate the Part B premium for Medicare beneficiaries 
     at what the cost would be if HMOs were paid at 100% of the 
     cost of traditional Medicare fee-for-service.
       In short, rather than subsidizing HMOs, the legislation 
     allows seniors and people with disabilities--many on fixed 
     incomes and with large out-of-pocket costs (an estimated 
     $3,455 for senior citizens enrolled in Medicare)--to have 
     their Part B premium reduced to use these dollars on their 
     own health care rather than for overpayments to HMOs that 
     they have chosen not to enroll in or to which they do not 
     even have access.
       For example, according to the Congressional Research 
     Service (CRS), as of March 2003, the following states had 
     either no enrollment or less than 5 percent of their Medicare 
     beneficiaries enrolled in managed care plans: Montana, 
     Wyoming, Utah, North Dakota, South Dakota, Nebraska, Iowa, 
     Wisconsin, Michigan, Illinois, Indiana, Kentucky, Arkansas, 
     Mississippi, Georgia, North Carolina, Virginia, West 
     Virginia, Maryland, Delaware, New Jersey, New Hampshire, 
     Vermont, Maine, and Alaska.
       As the Commonwealth Fund has found, ``Over 40 percent of 
     Medicare beneficiaries, particularly those living in rural 
     areas, do not have access to a Medicare Advantage plan. Nor 
     do all Medicare beneficiaries in urban areas have their 
     physicians in Medicare Advantage plan networks.'' As a 
     result, virtually all of the Medicare beneficiaries in 
     these states, often with no access to a Medicare HMO at 
     all, are paying for the overpayment to managed care plans 
     operating in other areas in the country.
       Furthermore, even for states with larger enrollment in 
     Medicare HMOs, such as California, Massachusetts, New York, 
     New Mexico, or Rhode Island, it makes little sense for those 
     not enrolled in managed care plans to pay the rapidly growing 
     Part B premium due to HMO overpayments that were already 
     occurring in Medicare but are now scheduled to increase much 
     more rapidly as a result of the Medicare Modernization Act.


  Improves Health Plan Payments and Further Reducing Premiums for All 
                           Medicare Enrollees

       The bill further recognizes that HMOs are overpaid by 
     Medicare in two ways--first, by the direct overpayment in 
     legislation, and second, by the failure of the Bush 
     Administration to appropriately ``risk adjust'' payments to 
     health plans based on the fact that health plans attract, on 
     average, healthier people than those in traditional Medicare. 
     Congress passed legislation in 1997 as part of the Balanced 
     Budget Act that required payments to plans to be adjusted or 
     ``risk adjusted'' based on the health of their enrollees. 
     However, CMS has interpreted the law to allow it to risk 
     adjust payments in a ``budget neutral'' manner by 
     redistributing plan overpayments among all plans.
       The CMS Office of the Actuary estimates that the Bush 
     Administration's failure to adjust for the health of plan 
     enrollees led to an overpayment of $3 billion in 2004 and 
     would lead to another $54 billion in overpayments if payments 
     are not risk adjusted through 2014.
       Therefore, the legislation requires CMS to risk adjust 
     health plan payments in a manner that saves the Medicare 
     program these funds. Furthermore, those savings will be 
     further plowed back into reducing the Medicare Part B premium 
     for all Medicare beneficiaries, including those enrolled in 
     Medicare Advantage plans.
       And finally, it repeals the $10 billion that was 
     established in the Medicare Modernization Act that allows the 
     Secretary to pay PPOs for what is called a ``health plan 
     stabilization fund.'' This fund serves no purpose other than 
     to increase overpayments to PPOs over and above what Medicare 
     Advantage plans already receive. Savings from the repeal of 
     this provision are also plowed back into reducing the 
     Medicare Part B premium for all Medicare beneficiaries, 
     including those enrolled in Medicare Advantage plans.


               saves the Medicaid Program Funding As Well

       The Federal Funds Information for States has estimated that 
     the Medicare Part B premium increase will cost states by over 
     $800 million in CY 2005. This legislation would significantly 
     reduce that impact.


    Ensures Legislation is Fiscally Responsible Manner, Extends the 
  Solvency of the Medicare Part A Trust Fund, and Reduces the Federal 
                             Budget Deficit

       The savings from these two changes in payments to HMOs are 
     used to reduce the Medicare Part B premiums for seniors 
     citizens and people with disabilities in a fiscally 
     responsible manner while also extending the solvency of the 
     Medicare Part A Trust Fund, reducing spending in the Medicaid 
     program, and reducing the federal deficit.

                                S. 2906

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Affordability in Medicare 
     Premiums Act of 2004''.

     SEC. 2. REDUCTION OF MEDICARE PART B PREMIUM FOR INDIVIDUALS 
                   NOT ENROLLED IN A MEDICARE ADVANTAGE PLAN.

       Section 1839(a) of the Social Security Act (42 U.S.C. 
     1395r(a)) is amended--
       (1) in paragraph (3), in the first sentence, by striking 
     ``The Secretary'' and inserting ``Subject to paragraph (5), 
     the Secretary''; and
       (2) by adding at the end the following new paragraph:
       ``(5)(A) For each year (beginning with 2005), the Secretary 
     shall reduce the monthly premium rate determined under 
     paragraph (3) for each month in the year for individuals who 
     are not enrolled in a Medicare Advantage plan (including such 
     individuals subject to an increased premium under subsection 
     (b) or (i)) so that the aggregate amount of such reductions 
     in the year is equal to the aggregate amount of reduced 
     expenditures from the Federal Supplementary Medicare 
     Insurance Trust Fund that the Secretary estimates would 
     result in the year if the annual Medicare+Choice capitation 
     rate for the

[[Page S10581]]

     year was equal to the amount specified under subparagraph (D) 
     of section 1853(c)(1), and not subparagraph (A), (B), or (C) 
     of such section.
       ``(B) In order to carry out subsections (a)(1) and (b)(1) 
     of section 1840, the Secretary shall transmit to the 
     Commissioner of Social Security and the Railroad Retirement 
     Board by the beginning of each year (beginning with 2005), 
     such information determined appropriate by the Secretary, in 
     consultation with the Commissioner of Social Security and the 
     Railroad Retirement Board, regarding the amount of the 
     monthly premium rate determined under paragraph (3) for 
     individuals after the application of subparagraph (A).''.

     SEC. 3. FUNDING REDUCTIONS IN THE MEDICARE PART B PREMIUM 
                   THROUGH REDUCTIONS IN PAYMENTS TO MEDICARE 
                   ADVANTAGE ORGANIZATIONS.

       Section 1839(a) of the Social Security Act (42 U.S.C. 
     1395r(a)), as amended by section 2, is amended--
       (1) in paragraph (3), in the first sentence, by striking 
     ``paragraph (5)'' and inserting ``paragraphs (5) and (6)''; 
     and
       (2) by adding at the end the following new paragraph:
       ``(6) For each year (beginning with 2005), the Secretary 
     shall reduce the monthly premium rate determined under 
     paragraph (3) for each month in the year for each individual 
     enrolled under this part (including such an individual 
     subject to an increased premium under subsection (b) or (i)) 
     so that the aggregate amount of such reductions in the year 
     is equal to an amount equal to--
       ``(A) the aggregate amount of reduced expenditures from the 
     Federal Supplementary Medicare Insurance Trust Fund in the 
     year that the Secretary estimates will result from the 
     provisions of, and the amendments made by, sections 4 and 5 
     of the Affordability in Medicare Premiums Act of 2004; minus
       ``(B) the aggregate amount of reductions in the monthly 
     premium rate in the year pursuant to paragraph (5)(A).''.

     SEC. 4. APPLICATION OF RISK ADJUSTMENT REFLECTING 
                   CHARACTERISTICS FOR THE ENTIRE MEDICARE 
                   POPULATION IN PAYMENTS TO MEDICARE ADVANTAGE 
                   ORGANIZATIONS.

       Effective January 1, 2005, in applying risk adjustment 
     factors to payments to organizations under section 1853 of 
     the Social Security Act (42 U.S.C. 1395w-23), the Secretary 
     of Health and Human Services shall ensure that payments to 
     such organizations are adjusted based on such factors to 
     ensure that the health status of the enrollee is reflected in 
     such adjusted payments, including adjusting for the 
     difference between the health status of the enrollee and 
     individuals enrolled under the original medicare fee-for-
     service program under parts A and B of title XVIII of such 
     Act. Payments to such organizations must, in aggregate, 
     reflect such differences.

     SEC. 5. ELIMINATION OF MA REGIONAL PLAN STABILIZATION FUND 
                   (SLUSH FUND).

       Subsection (e) of section 1858 of the Social Security Act 
     (42 U.S.C. 1395w-27a), as added by section 221(c) of the 
     Medicare Prescription Drug, Improvement, and Modernization 
     Act of 2003 (Public Law 108-173), is repealed.

  Ms. MIKULSKI. Mr. President, I rise today to join my colleagues in 
introducing the Affordability in Medicare Premiums Act of 2004. This 
bill would protect seniors against the outrageous increases in their 
Medicare costs. It does this by preventing HMOs from taking money out 
of the pockets of seniors.
  Health care costs are skyrocketing, and seniors are paying a greater 
share out of their pockets each year. Medicare premiums are on the 
rise. Prescription drug costs are shooting through the roof. Seniors 
are facing higher co-pays and deductibles for doctor visits, and 
hospital and skilled nursing home visits. While seniors are paying more 
and more, the administration has just announced the largest increase in 
Medicare premiums in the history of Medicare.
  Just last year this administration supported a Medicare benefit that 
provides seniors only a hollow promise for a prescription drug benefit. 
This new benefit will force over 2 million seniors to lose their drug 
coverage, coerce seniors into HMOs, while doing nothing to stop the 
soaring cost of prescription drugs.
  Now this administration announces a 17.4 percent increase in Part B 
premiums. That's an extra $11.60 out of a seniors pocket each month. 
Seniors are falling further and further behind, while their Medicare 
premiums are getting larger, and their Social Security barely keeps up 
with inflation. Our seniors are struggling to buy the basics like food, 
clothing and other simple necessities. And that's not okay.
  I ran the numbers and here's what I found. Medicare Part B insurance 
premiums are rising faster and faster every year. In 2003, they rose 
8.7 percent. This year, Medicare Part B premiums rose by 13.5 percent. 
Next year these premiums will rise by 17.4 percent, which is the 
biggest increase in Medicare history.
  In contrast, Social Security cost of living adjustments (COLA's) rose 
by a mere 1.4 percent in 2003; and 2.1 percent in 2004; and are 
projected to rise only about 3 percent for 2005. So, there's less and 
less of a senior's Social Security check to make ends meet.
  Medicare provides health insurance coverage to 41 million seniors and 
disabled. Roughly 570,000 Marylanders rely on Medicare. These benefits 
need to be stable and secure. That's what I'm fighting for.
  I believe honor thy mother and father is not just a good commandment 
to live by, it is good public policy to govern by. This bill would 
eliminate the 17.4 percent increase in premiums, which saves seniors 
$11.60/month. This bill would also lower premiums paid by seniors below 
today's rate of $66.00/per month by using the savings from stopping 
subsidies to HMO's. My bill is fully paid for by stopping the 
overpayments to HMOs. I do not believe that HMO's should not get higher 
reimbursements to serve seniors than traditional Medicare. My bill 
would also eliminate the $10 billion HMO slush fund for insurance 
companies to participate in the new Medicare drug plan. This would save 
a senior at least $115 next year to a senior on a fixed income. This is 
a small fortune.
  This bill is not an answer to skyrocketing health care costs, but it 
is a stopgap measure. It will give seniors a little breathing room.
  I am working hard on several bills to fix the Prescription Drug 
Benefit that was passed last year, including legislation that protects 
seniors Social Security COLA's; legislation that provides a real drug 
benefit for seniors; and, legislation that allow the government to 
negotiate with drug companies to lower the cost of prescription drugs. 
I am fighting to end the giveaways to insurance companies, and use 
those savings to improve Medicare.
  Congress created Medicare to provide a safety net for seniors. It is 
time to stop putting money in the pockets of HMOs and use that money to 
provide quality care for seniors. This bill is a good first step down 
that road, but a you can see, it is not the only step. Seniors cannot 
afford 17 percent increases in their Medicare premiums.
  I urge my colleagues to join me in expressing support for this bill.
                                 ______