[Congressional Record (Bound Edition), Volume 149 (2003), Part 11]
[Senate]
[Pages 14873-14890]
[From the U.S. Government Publishing Office, www.gpo.gov]




         PRESCRIPTION DRUG AND MEDICARE IMPROVEMENT ACT OF 2003

  The ACTING PRESIDENT pro tempore. Under the previous order, the hour 
of 2 p.m. having arrived, the Senate will proceed to the consideration 
of S. 1 which the clerk will report.
  The assistant legislative clerk read as follows:

       A bill (S. 1) to amend title XVIII of the Social Security 
     Act to make improvements in the medicare program, to provide 
     prescription drug coverage under the medicare program, and 
     for other purposes.

  The ACTING PRESIDENT pro tempore. The Senator from Nebraska.
  Mr. HAGEL. Mr. President, I wish to acknowledge my colleague, the 
distinguished Republican assistant majority leader, for his remarks.
  I see Senator Kennedy in the Chamber.
  Senator Kennedy, thank you for your leadership.
  I have a statement, and my understanding is that we will then rotate 
statements on both sides for the rest of the afternoon.
  Over the next 2 weeks, the Senate will begin a historic effort to 
reform and strengthen Medicare. What we do here over the coming weeks 
will affect every American and future generations. Health care is a 
defining issue for our Nation. We must take the long view and recognize 
that if we do it right, the changes we make in health care, in the 
delivery of that care, will result in improved access to quality care 
and lower costs for Americans well into the future. This must be our 
objective.
  The Senate Finance Committee bill represents a good solid beginning. 
The Senate Finance Committee, under the leadership of Chairman Grassley 
and Ranking Minority Member Baucus, deserves great credit for its hard 
work and efforts in bringing the bill to the floor of the Senate. Over 
the next 2 weeks, the Senate will work with members to improve upon 
their bill.
  Medicare is one of the two largest programs in the Federal 
Government. Today, Medicare covers over 40 million Americans, including 
35 million over the age of 65 and nearly 6 million younger adults with 
permanent disabilities.
  Medicare serves all eligible beneficiaries without regard to income 
or medical history. It is projected to pay out $269 billion in both 
Part A and Part B benefits this year. This accounts for 13 percent of 
the Federal budget and $1 out of every $5 spent in America on health 
care.
  In 1965, when Medicare was created, only about half of America's 
seniors had health insurance and fewer than 25 percent had adequate 
hospitalization insurance. Now, because of Medicare, nearly all seniors 
have coverage. Medicare has been good for seniors and has become a 
dominant part of the U.S. health care system.
  But Medicare does more for seniors than protect their health. 
Medicare improves their quality of life. Since Medicare was enacted, 
people are living longer and living better. Life in America has changed 
dramatically over the last 40 years, especially health care.
  Medicine today addresses all conditions and diseases, with a special 
emphasis on preventive medicine and management of chronic conditions. 
This includes an emphasis on prescription drugs, diet, exercise, and 
lifestyle--health dynamics that were not given much consideration when 
Medicare was enacted in 1965.
  Medical technology has exploded, and we have experienced a revolution 
in the development of new and effective pharmaceuticals. Outpatient 
treatment and prescription drugs have become mainstays of medical care, 
but the Medicare Program does not reflect these changes in health care. 
Like medicine itself, the Medicare Program must adjust and reform to 
address these new realities in health care delivery, consumer demand, 
and costs. Medicare is a 1960s model trying to operate in a 21st 
century world. Our goal in this debate is to bring this valuable 
program in line with today's health care needs in a responsible and 
sustainable program and prepare for the future.
  As we look forward, we should also heed the lessons learned when 
Medicare was created. When Medicare was enacted in 1965, the Federal 
Government's lead actuary at the time projected that the hospital 
program, Medicare Part A, would grow to $9 billion by 1990. But the 
program actually ended up costing more than $66 billion by 1990. Even 
after adjusting for inflation and other factors, the cost of Medicare 
Part A in constant dollars was 165 percent higher than the official 
Government estimate according to the actuary who produced those 
numbers. In unadjusted dollars, actual costs were 639 percent above 
estimates.
  A 1968 Tax Foundation study found that public spending on medical 
care had nearly doubled in just the first 3 years of Medicare. A recent 
example of these accelerating costs is that since 1999, drug prices 
have risen about 20 percent. The average cost of these lifesaving 
pharmaceuticals will likely continue to increase, placing further 
pressure on seniors with fixed incomes.
  In addition to the internal problem of the changing realities of 
health care, Medicare is facing a looming external program. The largest 
generation in American history, the baby boomers, is aging. These 
Americans--over 75 million--will be added to the Medicare rolls over 
the next few years. The baby boom generation has changed and shaped 
every market in which it has ever participated. Medicare health care 
will be no exception. We have a responsibility to address this 
demographic pressure now or risk the system collapsing under its own 
weight in the future.
  The task before us is immense but so is the opportunity. Although 
Congress has been working with health care professionals, we must 
continue to listen carefully to those who know most about health care. 
We need to assure the American people that the promises made to them 
will be kept and that seniors on Medicare today will not be forced to 
change or lose their benefits, but for the future enhancement and 
viability of Medicare, changes will be required. The American people 
must have confidence in the medical reform process, the process we use 
to reform Medicare. This is important because as we move forward, all 
Americans, especially seniors, must then have confidence in the 
results.
  Facing these challenges will require difficult decisions. There will 
be no perfect solutions. There will always be imperfect solutions at 
the end of the day. At the same time, we must be responsible with our 
efforts. We are adding a costly new benefit to America's largest health 
entitlement program. In

[[Page 14874]]

making decisions, we must not discount or minimize what we know has 
worked and what has not worked.
  Much of the debate over the next 2 weeks will focus on prescription 
drugs. Medicare does not currently cover outpatient prescription drugs. 
Adding a responsible, sustainable, and meaningful drug benefit is a top 
priority for most in the Senate. Seniors are expecting to spend nearly 
$1.9 trillion on drugs over the next 10 years. Clearly, the Federal 
Government simply cannot take on all of that expense. But seniors need 
help. They need help now. More than one-third of Medicare beneficiaries 
have no prescription drug coverage.
  Mr. Joseph Antos of the American Enterprise Institute was quoted in 
the New York Times on Saturday as saying:

       These seniors are the last people in America who are paying 
     retail. When I turn 65, I'd hate to be the only one in the 
     pharmacy line who's not in some kind of pain.

  Also in Saturday's New York Times, Mr. Dana Goldman of the RAND 
Corporation, said:

       What you really want to do is insure against very high 
     expenditures. A catastrophic plan would be a cautious 
     approach to sticking your toe in the water.

  We should heed their advice as we move forward.
  Any Medicare drug benefit must be sustainable. The benefit must deal 
with the realities that people are living longer and better, and have 
higher health care expectations than ever before.
  A new drug benefit should strengthen public/private partnerships that 
work. Any new drug benefit must pay particular attention to those in 
greatest need who have no options today, but this should not be at the 
exclusion of other seniors.
  We must take care that we do not inadvertently stifle innovation in 
the private pharmaceutical, medical research, and healthcare sectors.
  We know advances in research and medicine have been the critical 
factors in our increased lifespans, better health, and improved quality 
of life. The public/private relationship in these areas has been 
essential to that success.
  The United States leads the world in medical innovation. Our actions 
over the next 2 weeks must not jeopardize that continued innovation 
but, rather strengthen it for the future.
  The special healthcare needs of rural areas are of great importance 
to me and many of my colleagues. What we do in this body over the next 
2 weeks should enhance rural healthcare as well as urban healthcare.
  Tough choices and difficult decisions will have to be made. Not 
everyone will agree with the choices we make, but we owe it to the 
American people to face these challenges and produce a reformed 
Medicare program that will take America's seniors well into the 21st 
Century. That is doable, and I look forward to working with my 
colleagues in this important effort.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Montana.
  Mr. BAUCUS. Mr. President, let me begin by praising the chairman of 
the Senate Finance Committee, Senator Chuck Grassley, for his fine 
leadership and cooperative management of this bill. He has been very 
good. I know the folks in Iowa know that, but I want everybody else 
tuning in to know it as well. The chairman of the Senate Finance 
Committee, Chuck Grassley, has done a tremendous job. He deserves a lot 
of praise for this bill.
  On that point, sometimes we fail to recognize just how historic some 
legislation is. This is truly a historic bill. This is not some garden 
variety piece of legislation that has come up and will pass in the 
Senate. This is a major expansion of Medicare--major. It is going to 
make a huge difference in the lives of many senior citizens in America. 
I again thank Senator Grassley for his help putting this together.
  I also thank many Senators who have helped bring us here today. 
Senator John Breaux from Louisiana has been tireless in his effort on 
the Medicare Commission and other efforts to get prescription drug 
benefits and to try to reform Medicare. His work has been 
indispensable.
  Senator Olympia Snowe from Maine, Senator Hatch from Utah, Senator 
Jeffords from Vermont, have all contributed mightily to these efforts. 
It would take me a long time to go through all the efforts they have 
undertaken if I were to recite chapter and verse all they have done. It 
has been monumental.
  Any discussion for the long struggle for improved health care in 
America would be absolutely incomplete without the mention of the 
longstanding effort of the Senator from Massachusetts, Mr. Kennedy. 
Senator Kennedy is on the floor. He is probably going to speak a little 
later. Without Senator Kennedy and his efforts, I am not so sure we 
would be here today, on cusp of passing truly historic legislation.
  We are here today to make a meaningful improvement in health care for 
our seniors. That is why we are here. We are here at last to bring 
prescription drug coverage to Medicare.
  On July 30, the Nation will celebrate the 38th anniversary of the 
enactment of Medicare. Without exaggeration, Medicare is simply one of 
the most successful enterprises ever taken by a free people working 
through their government. Today we are about the business of making it 
even better.
  Medicare took a long time in coming. Following the enactment of 
Social Security in 1933, progressives called unsuccessfully for a 
program of national health insurance. President Harry Truman repeatedly 
advocated national health insurance funded through payroll deductions, 
but as we know, his plan went nowhere. But the fact remains, retired 
Americans had a particularly difficult time getting health insurance in 
the private sector.
  In 1951, planners at the Federal Security Agency, recognizing that 
difficulty, examined extending health insurance to this population. The 
idea slowly gained popularity in the 1950s.
  Senator John Kennedy raised health care as a campaign issue in his 
successful 1960 Presidential campaign. Taking the reins of the 
Presidency from his fallen predecessor, President Lyndon Johnson spoke 
of moving, ``not only toward the rich society and the powerful society, 
but upward toward the Great Society.''
  At the height of legislative action of President Johnson's Great 
Society in July 1965, Congress enacted Medicare into law in the Health 
Insurance for the Aged Act. With President Truman at his elbow, 
President Johnson signed the bill in Independence, MO. President 
Johnson at that time said, ``No longer will older Americans be denied 
the healing miracle of modern medicine.''
  And President Truman told President Johnson, ``You have made me a 
very happy man.''
  Since then, over the nearly four decades of its life, Medicare has 
improved the lives of over 100 million Americans. Medicare now provides 
health insurance coverage to more than 35 million seniors, virtually 
everyone aged 65 or older, and 6 million disabled enrollees for 
hospital or related care under the Hospital Insurance Program. It 
covers nearly as many for doctors' services, outpatient hospital 
services, and other medical expenses under the Supplemental Medical 
Insurance Program.
  Medicare has been a success. Health care expenses used to impoverish 
seniors. In conjunction with Social Security, Medicare has 
significantly reduced poverty among seniors. Despite progress on 
poverty among seniors, they are by no means an affluent group. From 
2001 data, we can see that nearly two-thirds of Social Security 
beneficiaries rely on Social Security for most of their income. A third 
of beneficiaries rely on Social Security for 90 percent or more of 
their income. In 2001, the median income for all eligible households 
was $19,000, and one-fifth have incomes under $10,000; thus, vast 
numbers of America's seniors need Medicare and Social Security to keep 
out of poverty.
  With the nearly universal health insurance coverage and decreasing 
poverty achieved by Medicare and Social Security, seniors are also 
living longer. Before Social Security and Medicare, in 1930, for 
example, a 60-year-old had a life expectancy of 77 years of age. In the 
year 2000, 70 years later, a 65-year-

[[Page 14875]]

old-man could expect to live to 81 and a 65-year-old woman could expect 
to live to 84. Partly because of Medicare, more and more Americans are 
living into their late eighties and into their nineties.
  Medicare has also improved the quality of seniors' lives. It has 
helped them to combat debilitating illnesses. It has helped them be 
free from pain. It has helped them to live fuller, better lives.
  But the practice of medicine has also progressed since Congress set 
up the structure of Medicare. Prescription drugs have taken on a much 
greater role in maintaining health, replacing procedures, as has more 
prevention. Prescription drugs are just proportionately so much more 
important today than they were when Medicare was created.
  The Congress that created Medicare did not envision that role of 
prescription drugs. Although former employers and other private 
insurance plans cover some seniors, about 10 million seniors have no 
prescription drug coverage at all.
  Because seniors are not a wealthy group, for many this reality means 
a painful choice between filling their prescriptions and buying food.
  I visited a community health center and talked to an internist--a 
doctor--the administrator of that health center. She told me she had to 
cut back on her medicine. She has to give up some of her medicine. Why? 
In order to pay for the medicines for her mother. Just think of it. A 
doctor who has to cut back on medicines for herself because they are so 
expensive and because her mother can't afford them. The doctor is 
sacrificing her health care to make sure her mother has prescription 
drug benefits. That is not an isolated incident. It is happening over 
and over again in America, and it is wrong.
  Seniors should not have to choose among necessities in order to 
maintain their health. We can do something about that today.
  To maintain Medicare's success, we must expand it to address the 
health care delivery structure that we have today. The bill that we 
bring to the floor would take a substantial step in that direction.
  This bill would make available Medicare prescription drug insurance 
universally to all seniors. It maintains the important principle of 
universalism that has held together the remarkable social compact of 
Medicare and Social Security.
  This bill would ensure that 44 percent of Medicare beneficiaries--
those with the lowest incomes--would have truly affordable prescription 
drug coverage with minimal out-of-pocket costs. For these lower-income 
seniors with incomes up to 160 percent of the poverty level, co-
payments would never exceed 20 percent of the cost of drugs.
  Just think of that--never more than 20 percent.
  This bill would make it so that an elderly retired couple in Great 
Falls, MT with an income of $16,000 a year, would be able to buy their 
prescription drugs without ever having to pay more than 10 percent of 
the cost of the drugs.
  This bill would thus ensure that those who have been least able to 
receive what President Johnson called ``the healing miracle of modern 
medicine'' would now be able to do so. Millions of people would have a 
better quality of life. Lives would be saved.
  This bill would create a strong government fallback. Seniors would 
have access to at least two private plans for a prescription drug 
benefit or the government would provide a standard fallback plan. If 
there is no true competition, then traditional Medicare would provide a 
fallback.
  Now some have raised fears that the competition that this bill seeks 
to foster would lead to the privatization of Medicare. This is not so. 
The Department of Health and Human Services would continue to oversee 
these plans. The plans would operate within tightly-controlled limits. 
This bill includes strong consumer protections.
  This bill does not tilt the playing field. This bill does not make 
private plans a better deal than traditional Medicare.
  But those of us who believe in traditional Medicare should not fear 
the entry of private options. For either they will work and make things 
better for beneficiaries, or traditional Medicare will still be there. 
It is another opportunity. Either private plans will deliver the 
efficiencies that their advocates on the other side of the aisle 
promise for them--in which case the beneficiaries who choose them will 
get more value for their contributions--or traditional Medicare will 
still be there.
  Others have found fault with the costs that this bill would ask 
beneficiaries to pay. Some have focused on what they call a break-even 
point--of a little more than a thousands dollars in drug spending--
below which higher-income beneficiaries would spend more on the plan 
than they would receive in benefits. Yes, from a third to half of 
beneficiaries might spend more in a given year than they receive in 
benefits. But that means that from half to two-thirds will get more in 
benefits than they spend.
  But it should not be surprising that some will pay more in premiums 
than they receive in benefits. That is the nature of insurance. We pay 
for insurance to protect against the risk of something that we hope 
will not happen. Most of us would be thankful if we do not encounter 
the ailments that require us to use our health insurance. Many would 
count that a blessing.
  But this bill would provide a substantial subsidy for the health 
insurance need of Medicare beneficiaries. That is the nature of the 
cost of this bill. We as a society are choosing to make this insurance 
available at a substantial subsidy to all seniors.
  For millions of Americans who are less fortunate, who have lower 
incomes and health needs, this bill will make a dramatic difference. 
For the 44 percent of Medicare beneficiaries with lower incomes, this 
plan would provide very affordable benefits. And remember that this 
lower-income population includes precisely the group most likely to be 
doing without prescription drug coverage today.
  I acknowledge that some may have legitimate concerns with this bill. 
I note, in particular, that I and other drafters of the bill have 
become struck by CBO's high estimate of the percentage of beneficiaries 
whose former employers would drop their coverage, if Medicare started 
providing it. I would also like to find a way to make it so that 
seniors who were in a fallback plan could stay with that plan longer. 
I, for one, will look for opportunities during this process to address 
these concerns and improve the bill.
  But this bill would create a $400 billion expansion of a major 
entitlement program. Yes, we could have done more with more money. But 
this is a historic opportunity to make a fundamental change for the 
better, for millions of Americans.
  In so doing, this bill would finally do something that the 
overwhelming majority of industrialized nations have already done; that 
is, provide prescription drug benefits to their seniors.
  Medicare took a long in coming. But it came quickly when it did. 
Sometimes, the time is simply ripe.
  The Health Insurance for the Aged took several decades to come to the 
Senate floor in 1965. But when the Senate took it up in 1965, it 
finished its debate in 4 days--July 6 through July 9 of 1965--and 
passed the bill with 68 votes.
  Starting today, we will spend 2 weeks on this debate. And we should. 
And I look forward to a full and open airing of the issues.
  But in the end, I also look forward to passage of this new benefit, 
with substantial support from both sides of the aisle.
  The time was ripe in the summer of 1965, when Congress enacted the 
Health Insurance for the Aged Act and created Medicare. I believe that 
the time is ripe again, today.
  The time is ripe for a new chapter in the successful story of 
Medicare. And we begin that chapter today.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Massachusetts.
  Mr. KENNEDY. Mr. President, I want to at the opening of this debate 
and discussion recognize the guiding lights of this legislation, 
Senator Grassley and Senator Baucus, for bringing this legislation to 
the floor.
  This legislation in one form or another has been before the Finance 
Committee for 5 to 6 years in recent times,

[[Page 14876]]

actually going back to 1978 when legislation was introduced by myself, 
Senator Thurmond, and others at other times. But this is a major 
breakthrough, as was pointed out by the Senator from Kentucky. This 
legislation is going to lead to conference and eventually it will be 
signed by the President of the United States.
  So this is good news for all the seniors of this country. It isn't 
all that all of us would like to have achieved. But, nonetheless, it is 
a solid downpayment.
  I will take a few minutes of the Senate's time to indicate what I 
find to be the most compelling reasons for the legislation, and also 
discuss areas which I hope in the time we have to debate that the 
Senate will give some focus and attention to.
  But we should not minimize the extraordinary work that has been done 
by the chairman, and the ranking member, Senator Baucus of Montana, in 
moving this legislation through the committee; and also other members 
of the committee. I also add to that the majority leader, Senator 
Frist. Senator Frist is a member of the Committee on Finance but he is 
also on the Committee on Health, Education, Labor, and Pensions. He 
brings a very unique background and experience in health care policy 
matters. Clearly, he has had a very important influence in the shaping 
of this legislation. All of us welcome his involvement in the health 
care debate. We have worked together on a number of the bioterrorism 
pieces of legislation and in other areas. I think we are fortunate to 
have his expertise in the Senate on health care matters. We are 
grateful for his involvement in this legislation.
  I was here in the spring of 1994 when the Medicare legislation was 
defeated. It was defeated by a significant number--I think 15 or 18 
votes--at that particular time. And then I was here again in 1995--
about 10 months later--when again the Senate considered the 
legislation, and it passed overwhelmingly; and a number of those who 
voted against it actually voted in favor of it.
  The principal intervening event between 1964 and 1965 was the 1964 
election, where this was front and center in terms of President 
Johnson's election. It had been in the 1960 election, but in 1964, 
given the fact that Medicare had been defeated, it was a matter of 
enormous concern to seniors.
  As has been appropriately pointed out, it isn't just the seniors who 
are interested in this legislation, it is generational because so many 
of those who are not seniors are involved in the quality of life for 
those who are seniors. They are the children and the grandchildren, and 
they care very deeply that their parents and grandparents are going to 
live in peace and security and dignity.
  When we passed the Medicare proposal, we gave the assurances to our 
seniors that if they played by the rules, paid into the health care 
system, paid into the Medicare system, that their health care needs 
would be attended to. That was true with regard to hospitalization. It 
was true with regard to physician services. We did not anticipate the 
third leg of that stool of Medicare was going to be the prescription 
drugs. Only about 3 percent of the total private insurance company 
plans at that time had a prescription drug program. It was not 
included.
  And now, if you look at the needs of our senior citizens, we ask 
ourselves, why didn't we have the foresight to see that need? And why 
haven't we taken action in order to remedy that loophole?
  It has taken a long time, but we are finding a strong downpayment in 
meeting that obligation today. I have always believed that every day we 
fail to pass a prescription drug program we are violating our 
commitment, our promise, our guarantee to the elderly people in this 
country in that solemn promise we made when we passed Medicare: Pay 
into the system, and you will be assured that your health care needs 
will be attended to. So it has been a long time in coming.
  There are those who have been strongly opposed to a prescription drug 
program for ideological reasons. They are strongly opposed to Medicare. 
You can go back and look and read the history of the debates on 
Medicare--both in the past and the statements made in recent times, and 
as recently as in the past few weeks--where we have found Members, 
primarily our friends on the other side of the aisle, who do not 
believe in Medicare and who never believed we ought to have a 
prescription drug program that was rooted in the Medicare system.
  There are recent times most of us can remember where statements were 
made. There was the Speaker of the House who talked about the Medicare 
system, that they wanted to see the Medicare system wither on the vine, 
and so there was an ideological commitment that said: If we are ever 
going to pass a prescription drug program, it has to be rooted not in 
Medicare, but it has to be rooted in the private sector, and we will do 
everything we can to make sure it is. We will provide all the financial 
incentives. We will effectively bribe individuals into the private 
sector or coerce them into the private sector and let the Medicare 
system wither over here.
  If that was the program, there would not be anyone on this floor who 
would take stronger issue with it than I would, as one who has followed 
the Medicare system, believes in it deeply, and has seen the benefits 
it has provided to hundreds of thousands of the citizens of my own 
State of Massachusetts and around this country and knows the great 
sense of confidence our seniors have in this system and the Social 
Security system.
  In fact, these are the men and women who brought us out of the 
Depression, who fought in the World Wars, who fought in Korea, who 
faced the challenge of nuclear terror and the dangers of the expansions 
of communism. They have sacrificed for their children and their 
grandchildren, and they are entitled, in the richest country in the 
world, to live in some security and dignity, and the lack of being able 
to get prescription drugs is denying them that opportunity. They 
believe in Social Security and the Medicare system. This legislation 
will give them the assurance that if that is their desire, they will be 
able to receive prescription drugs under Medicare. That is why I 
support this legislation. Those who believe it should be just a private 
system are not going to vote for this bill. They shouldn't vote for it 
because it isn't going to be a private system. We will have the 
opportunity to explain that in more detail.
  I will take a moment to review some of the facts that are known to 
every senior citizen in this country. I think they are reflected on 
this chart I have in the Chamber.
  First of all, let's look at what has happened in terms of the cost of 
the prescription drugs our seniors need.
  The yellow on the chart shows the COLA for Medicare, Social Security. 
The blue shows the increased costs of prescription drugs over the same 
period of 1998, 1999, 2000, 2001, 2002, 2003, with the increased costs, 
respectively, being 10 percent, 19 percent, 16 percent, 15 percent, 14 
percent, 13 percent. This all comes out of the income of individuals 
who effectively have fixed incomes, and this with a modest COLA.
  You can see with these extraordinary escalations of costs what is 
happening to our seniors. Often on the floor we have seen and heard our 
good friend from Michigan, Senator Stabenow, who has provided great 
leadership--as have others--about the hard and harsh choices that are 
taking place in homes all over this country, where seniors are making 
choices between the prescription drugs which are vital to their health 
care and the food they need to eat, or in our part of the country, it 
is the heating so they can survive in the winter, or in other parts of 
the country, it is the cooling to make life at least livable in the 
South.
  There has been an extraordinary escalation and continuation of costs. 
We will have an opportunity during the debate and the discussion on 
this issue to consider legislation that has come out of our Human 
Resources Committee, out of the Health Committee, that was initiated by 
Senator McCain and Senator Schumer that we addressed last year on the 
floor of the Senate and which passed the Senate, which will help and 
assist generic drugs to come

[[Page 14877]]

further forward. And, in the meantime, over the period of these past 
months, with a lot of hard work, there is legislation that now has very 
broad support, which was virtually unanimous out of our committee, with 
the support of Senator Gregg, myself, and others who are strongly 
behind it. I supported it last time. We are hopeful of doing something 
in the totality, not only in the area of coverage, but also in the 
areas of cost. We are not going to solve all of the problems in either 
area, but this kind of debate and discussion is going to include both 
the issues of coverage and the issues of cost.
  Let me review very quickly where we are in terms of the coverage for 
our senior citizens. Of the 38 million seniors, we know 13 million lack 
any kind of quality drug coverage. They are effectively on their own. 
They buy at the top price. They do not really get any deduction, and 
they are virtually without any kind of coverage. Another 10 million 
have employer-sponsored coverage. Another 5 million have Medicare HMO, 
2 million are under the Medigap, and 3 million are under Medicaid.
  I believe when we used to debate this issue in years past, we would 
say the only group among these seniors that was really guaranteed 
affordable, dependable, reliable prescription drugs were the 3 million 
under Medicaid. That is not true any longer. Let's see what has 
happened.
  There is a general kind of profile of where our seniors are with 
regard to the quality of their drug coverage. Let's take, No. 1, the 
employer-sponsored programs. This will raise an issue on one of the 
challenges this current bill is facing. But let's just review very 
quickly what has happened in terms of employer-sponsored coverage in 
recent times. If you go back to 1988, it was about 80 percent. In 1994, 
only 40 percent of all the retirees were included in the program. Look 
at this, as shown on the chart: Going down from 1994 to 2002, now it is 
about 22 percent, and falling rapidly.
  The bottom is falling out in terms of the kinds of guarantees for the 
millions of Americans who have employer-sponsored plans. So we have one 
large group of Americans with nothing. We have another group that has 
employer-sponsored plans, but the total number of programs now 
providing these is dropping down, and employers who have them in many 
instances are dropping them. So there is no guarantee for that group of 
Americans.
  What about this other group of Americans, those with regard to the 
Medicare HMO? If you look at what is happening with regard to the 
Medicare HMO, you will find out the drug benefit is only offered as an 
option of the HMO. Thirty-four percent offer no drug coverage at all; 
more than 2 million Medicare beneficiaries lost their HMO coverage 
since 1999, so they are dropping. But this is the other insidious 
factor: 86 percent of HMOs limited the coverage to less than $1,000 in 
2003; 70 percent limited coverage to $750 or less in 2003. So you can 
say on the one hand, some are covered with the employer-based system, 
but you can see that the system is at the point of collapse. Others say 
HMOs are offering coverage. But, they are dropping them on the first 
hand, and they are putting the blockage there to protect themselves, 
and that is, of course, a disaster for many other seniors.
  We say we have the Medigap coverage that provides for 2 to 3 million. 
You all are familiar with the absolute explosion of the cost and 
increasing numbers. Both have dropped it.
  This is the background. We find millions have no coverage. Even for 
those who have coverage there is uncertainty, even if they are employer 
based. If it is HMOs, we are finding increasing restrictions that make 
it unreliable. We have a whole population that is faced with a serious 
challenge and a serious need.
  Now, what does this proposal do? How will our senior citizens under 
Medicare benefit under this program? What is basically the delivery 
mechanism that has been a key element in terms of trying to make sure 
we were going to give the assurances to our seniors that there will be 
somewhere, in any part of America, the guarantee that Medicare will be 
there but also permits the private plans, if they are in local areas, 
to be able to, if that is the desire at least, if they are going to 
meet the obligations? We will have a chance during the course of debate 
to review it. I know the ranking member and chairman have gone over in 
the markup those particular provisions that talk about the guarantees 
of the program and why the various kinds of conditions to make sure we 
are not going to have the excess charges and how we are going to have 
the standards and how we are going to have a good benefit package.
  On the one hand, there is the traditional Medicare Program. The 
individual will be able to continue. The Government delivers the 
doctors, hospital, and other services. Then, in many areas, the 
individual will have a choice between two different private plans and a 
guaranteed fallback of the Medicare system, if the private plans are 
not successful. So there is the guarantee there. And in the cases where 
there is the Medicare Advantage and the private plans, you will have 
the PPOs and the local HMOs that will be able to submit the plans. We 
will have the guarantee on the one hand through the Medicare system, 
and the opportunity on the other. We will have an opportunity to go 
through it in greater detail.
  Let me mention, for those who are watching this broadcast, what this 
can really mean to individuals. We know the average cost for seniors is 
$2,300. That is the average cost per year. As we have pointed out, and 
it has been mentioned earlier, the elderly are going to spend $1.7 
trillion, $1.8 trillion over the next 10 years on drugs. This is only 
$400 billion, 24 or 25 percent. So we know there are large gaps. This 
will not be everything for everybody, but it is going to provide 
important coverage to about 35 to 40 percent of our elderly under 
Medicare, those of the lowest income who are in desperate need, and 
also be sensitive to those with catastrophic kinds of health needs. And 
it also provides some important relief for those in the middle, 
although not all of what we would like because individuals will for a 
period of time fail to get the coverage, the area that we call the 
donut, and then pick up coverage later on.
  But let me use the example of a typical income which would be about 
$15,000 for a senior. This is the chart that will indicate what the 
savings would be. The typical one is $15,000. The typical prescription 
drug cost would be $2,300. The premium would be $420. Their cost 
sharing would be $1,250. They would save $600 in this program. I wish 
it was a good deal more, but that is $600 over the cost of the year.
  Take that same individual, $15,000, they have $10,000 in health care 
costs. They would spend $400, and they would save $5,462 under the 
bill. This is a dramatic savings for those on the upper end, and let me 
tell you what it would be on the lower end.
  Let's take an individual with $15,000 income who might have expenses 
at the lower level. I will have a chart for this. I am sorry I don't 
have it. What we are trying to do with each example is to give 
individuals who might be watching some idea as to what would happen to 
them. Say a senior with an income of $9,000 and they currently have 
monthly drug bills of $500. They would, under this bill, pay a total of 
$15 and have $484 in savings. Low-income people who have drug bills of 
$500 would have $484 of savings. If they are $12,000, they would have 
$468 in savings, if they spend $500. And if they are $13,500, which is 
the 160 percent of poverty on this thing, and had $500 a month, they 
would save themselves $416.
  So we see for the very needy it is a very important benefit. For 
those who will be facing catastrophic drug costs, it is a great help. 
For those in the middle, it is some help but not all the help we would 
like to see, or that they deserve.
  Beyond this, one of the other features I find enormously appealing is 
what they call the card, the discount card that seniors will be issued. 
It is called the prescription card. It will be issued next January. 
Basically, what that will do, for approximately 5 million low-income 
seniors, if this bill

[[Page 14878]]

gets passed and signed into law, basically, again, the 5 million low-
income seniors, they will be able to get a card for $25 and be 
guaranteed up to $600 at their pharmacy. If they don't spend it all the 
first year, say only $400, the remaining $200 will kick over for the 
next year. That will begin immediately.
  This legislation will take time. It will take 2 years before they are 
able to set up the various kinds of structures which I outlined earlier 
to achieve it.
  There are important areas I am hopeful we can address in this area. 
This is $400 billion. It is a lot of resources. But we have also seen 
where this Senate has passed tax cuts for $2.3 trillion. This is $400 
billion. So it does seem to me we ought to be able to find some way to 
help middle-income seniors more than we have by providing additional 
resources to this particular proposal. An effort certainly will be 
focused on that.
  There is a second area which is of central concern. That is the 
retirees. The way this legislation has been constructed, there may be 
those companies that feel that rather than continue to provide coverage 
for retirees, this will be a way to drop them off and have them picked 
up under this program rather than meeting their obligations and their 
responsibilities under the agreements which they have had and committed 
themselves to over time.
  We believe that is an area that needs focus and addressing during the 
course of the debate. You cannot get away from the fact that this 
legislation is, as Senator Baucus has pointed out, major legislation in 
terms of the unfinished business and in terms of Medicare, particularly 
in the area of prescription drugs. Many of us believe this is the life 
sciences century, where we have seen breakthroughs that are coming, 
like the mapping and sequencing of the human genome which has permitted 
us to be able to screen and inform people who might have a 
predisposition in terms of breast cancer, for example. We are 
considering legislation to make sure people will not be discriminated 
against in terms of employment and getting medical insurance because of 
these kinds of indications. But we are able to find out through the 
work on the human genome so much about the types of illnesses that 
people have proclivities to develop.
  So we are in the century of the life sciences and breakthroughs. We 
have doubled our basic commitment in terms of basic research. We are 
seeing the breakthroughs in these extraordinary kinds of developments 
of pharmaceutical drugs that can be lifesaving and can relieve the most 
challenging and difficult illnesses and diseases that we face in the 
country and around the world. We are going to face a challenge about 
how we are going to get the best of those prescription drugs into the 
homes of people who need them. That will be a challenge. That will be a 
challenge for us here as a matter of national priority, I believe.
  A defining aspect of our humanity and decency is whether we are 
prepared as a nation to make it a priority to be able to do that. This 
is a downpayment on that commitment. That is why this legislation is of 
essential importance and consequence and why I look forward to the next 
days in terms of the debate and discussion that we can move this 
process forward and move to making sure we are meeting the challenges 
that our seniors are facing in all parts of the country.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Sununu). The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. THOMAS. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. THOMAS. Mr. President, I am pleased we now have gotten to the 
floor with this bill. Certainly, most everyone agrees that this may be 
one of the most important issues that we will undertake this year. 
Along with that, of course--which I guess is not unusual--it will be 
one of the most difficult. I think there is a strong feeling that this 
needs to be done. I believe that will drive us. We certainly have had a 
good deal of support from the administration, from the President, and 
from Secretary Thompson. So we have an opportunity to move forward.
  This is a very difficult issue. It is one that is hard to deal with, 
to make sure that everybody is treated properly. It is hard to deal 
with in terms of costs. It is also hard to deal with in terms of 
different parts of the country and how you have a delivery system that 
fits everywhere. It will be a challenge, but I believe we have no 
greater domestic challenge than reforming Medicare and providing 
seniors with access to prescription drugs. We will hear a great deal of 
the same sort of conversation during this week. We will also find that 
there are different ideas about how this is done.
  The committee approved a prescription drug bill last Thursday night 
after an all-day markup, which was interesting--by a substantial 
bipartisan majority, which is very good. So it is a promise that most 
of us have made to take a look at Medicare and to be able to strengthen 
it. It has been mentioned that it is more than 30 years old and hasn't 
been changed a great deal. The greatest change that has come about is 
in pharmaceuticals, which has become one of the most expensive aspects 
of health care and has not been covered under Medicare in the past.
  So I think we have two things we are seeking to do, and I hope we 
don't lose sight of them. One is to make the Medicare delivery system 
work better. Second is to include a reasonable access to pharmaceutical 
drugs. The program we have had has been difficult in a number of ways. 
We have had more and more providers that will not provide care under 
Medicare because the fees have not been equal to what they get in the 
private sector, and therefore access is not available. That is a 
difficult issue, particularly in rural areas where there are not a lot 
of providers. So we have to make sure we have a plan that puts this 
kind of program basically in competition with the private health care 
sector. The program has been inefficient and, no doubt, we need to 
change some things, particularly with respect to chronic illness.
  A relatively small percentage of the elderly use a very high 
percentage of the total expenditure. So it has to be oriented somewhat 
toward dealing with those things that we know are the most expensive, 
and this cannot be done without some special attention to those things. 
These are the people who need the most expensive drugs. We ought to 
have a plan in which seniors could choose what fits them best.
  We will be continuing to have the general plan that is in place now. 
If people find they want to stay with it, they will be able to do that. 
Nobody will be forced to change--at least in the near future. But there 
will be another plan, an alterative. We have felt that we could follow 
the plan that is used by Federal employees, generally, as an option. 
That would be one where there would be a plan laid forth, where we 
would have different sorts of insurance coverage, and providers will 
bid on doing that job. Maybe we would take the lowest bids--maybe the 
three lowest bids, or whatever. It would be a little different--sort of 
a PPO program, preferred provider program. Some say if you have a PPO, 
it won't cover everybody. In Wyoming, there are not formal PPOs, but we 
still have coverage for Federal employees, and there will be an 
arrangement made so where they are without a form of specific PPOs, 
they will still be available in the private sector. So I think that is, 
indeed, the way it ought to be. If we follow that plan, I think it 
would be one that we can really make available.
  One of the things we have been working on--and I happen to be 
chairman of the Rural Health Caucus--there has always been a 
considerable amount of difference in the health care programs between 
urban areas and rural areas. One of the things is, there has not been 
equity in payments. Payments in urban areas have been higher than in 
rural areas. They have thought the costs are not as high in rural 
areas. In fact, because of lower volume, they may be higher in rural 
areas than in urban areas.

[[Page 14879]]

  I had an experience recently where an MRI in one town costs almost 50 
percent more than the larger city simply because they didn't have the 
volume. This bill, by the way, has that sort of remedy in it so that we 
will have urban areas and rural areas that will have equity in the way 
they are handled. We hope we can do that.
  Some have a concern about small counties. We have a situation now in 
Medicare where we deal with each county to determine the price of 
service. Here we will have 10 regions over the whole country, so it 
will be a broader base, which is the basis for insurance, to spread 
that over a broader number of people so that there is better equity for 
everyone. I think a lot of provisions in this bill will be much more 
advantageous for users than what we have had in the past.
  We will all be talking about this bill in more detail. I hope we can 
make some changes and we can remember the objectives. There are so many 
details involved with Medicare and with health care, as a matter of 
fact, that I think we have to focus on what it is we are seeking to do 
and to stay with that.
  I hope we can develop a vision of what we want this to be when we are 
through and try and stay within the parameters of that vision. The 
objectives will be to strengthen Medicare and provide accessible 
pharmaceuticals.
  There are, as we go about our work, lots of issues involved in health 
care, many of them beyond Medicare. We have to deal with those issues 
at another time. I hope we do not try to remedy all problems in health 
care and get it confused with this program, which is a specific 
program. For instance, we had some amendments having to do with 
refugees and legal immigrants. That is an issue, and it is a tough 
issue, but it is not part of Medicare and we ought to separate those 
issues so we keep it that way. I hope we maintain our focus so 
unrelated issues do not become wrapped up in this bill.
  We also need to be conscious of spending. We have a budget of $400 
billion, an amazing amount of money. But when we compare it to health 
care costs, it is not huge. I did not think I would ever say $400 
billion is not huge. Cost is something, and we have to do something 
that is efficient. Money is not endless, particularly when it relies 
largely on what you and I pay in every month. If we have total 
expenditures that continue out of control, we have to do something 
different as to how they are paid. We should keep that in mind.
  One of the keys--even though we should recognize the needs of low-
income people certainly, and that is in the plan and we should do that, 
as opposed to higher income people--I think it is important everyone 
who is a beneficiary have some responsibility. When we have a program 
paying for all of the health care, we get overutilization, without 
exception. So there has to be some first dollar payment in this 
program, even though it can be very small, I believe.
  We need to take advantage of the opportunity with the volume of 
pharmaceuticals we will be using, for example, to hold down the costs 
somewhat. Health care has been going up almost 13 percent a year, which 
is much higher than almost every other activity. Part of it is because 
times change and we are doing things so people are healthier, and 
people are living longer partly because of that. Nevertheless, if you 
start adding up 13 percent a year on these costs, it would be an almost 
unmanageable program over time.
  I already mentioned this will serve all eligible seniors, whether 
they are rural or urban. I am hopeful as we go through this very 
complicated and difficult program. I am very pleased, particularly 
serving on the committee of jurisdiction, to have been involved in this 
debate and to see we are as far along as we are, and I am very 
confident we are going to come out with a package. That, of course, is 
our responsibility and what we ought to do. As we do that, I hope we 
have a vision of where we want to be when it is over and take a look at 
the issues we do in the interim and see if they are going to contribute 
to providing that program we envision for the future. It is one that 
ought to strengthen the program. It is one that ought to be available 
to people all over the country. It is one that ought to recognize the 
special needs, particularly of very low-income people. It is one that 
ought to give choice of different kinds of programs so you can choose 
something that fits you.
  I think we have to have a program that does not have runaway spending 
so that it destroys the whole program over time and that we also 
recognize related programs, whether it be VA or retirement. These had 
to be fit in so we could have a total package.
  I am looking forward to 2 weeks of considerable debate. I think with 
all these various issues, we will, frankly, have hundreds of 
amendments, most of which will be dealt with, and that is good. But as 
we look at all these different issues, I suggest to my friends in the 
Senate that we try to focus on what we want the result to be and 
measure these amendments against that.
  I am looking forward to the debate. I am sure most of us are. I think 
we can come up with a program that will be much better and provide 
services for the needy better than we have in the past.
  Mr. President, I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. HATCH. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. HATCH. Mr. President, I rise to express my strong support for S. 
1, the Prescription Drug and Medicare Improvement Act of 2003. Medicare 
beneficiaries have been waiting decades for a comprehensive and 
permanent prescription drug benefit. Debate on this legislation is 
truly a landmark occasion for America's seniors, the disabled, and the 
United States of America, including our own Senate. I congratulate both 
the Senate Finance Committee Chairman, Senator Grassley, and the 
ranking member, Senator Baucus, on a job well done. Both of them worked 
well together. It has been bipartisan. They have done everything they 
possibly can to bring people together so that we can pass a bill out of 
the Senate, and they both deserve a lot of credit.
  Both of them have been able to put together a Medicare prescription 
drug bill that not only has bipartisan support but was also approved by 
the Senate Finance Committee, both remarkable feats. I am so proud of 
both of them.
  The majority leader, Bill Frist, also deserves credit for his 
commitment to this issue. He is to be congratulated not only for his 
behind-the-scenes efforts to move this bill forward but also for his 
vision in developing with Senator Breaux the model upon which many of 
the improvements in this bill are based. Of course, Senator Breaux 
deserves a great deal of credit. He has consistently fought to try and 
get a prescription drug benefit bill, and of course was a member of the 
tripartisan group in the last Congress.
  Finally, I would be remiss unless I recognized the central role the 
President played in this matter by insisting that Medicare drug 
coverage must be a top domestic priority. Many believed it could not be 
done, especially in this, a non-election year.
  President Bush's persistence, his commitment, and, indeed, his 
leadership on this issue will prove those naysayers wrong.
  At last, we will provide senior and disabled citizens across the 
country with the prescription drug coverage they need.
  In fact, prescription drug coverage for Medicare beneficiaries has 
been one of my top priorities, as well, and think everyone knows.
  I was the principal cosponsor with then-Chairman Bill Roth of the 
1997 legislation creating the Bipartisan Medicare Commission.
  That commission, as my colleagues are aware, was charged with making 
recommendations on how to improve the current Medicare program.

[[Page 14880]]

  And although commission members were unable to report a 
recommendation due to the ``super-majority'' vote requirement, the work 
they did laid the groundwork for efforts to improve Medicare by 
including the private competition that could provide prescription drug 
coverage.
  Through their leadership on the commission, my friend and colleague, 
Senator John Breaux, and our House colleague, Ways and Means Committee 
Chairman Bill Thomas, were instrumental in laying the groundwork for 
Medicare prescription drug legislation.
  More recently, I worked closely with Chairman Grassley, Senator 
Snowe, Senator Breaux, and Senator Jeffords in an effort to develop a 
centrist, Medicare prescription drug bill that the Congress could adopt 
free from partisan politics. This was an 18-month effort.
  We called our effort ``tripartisan,'' because Senators participated 
from the Democratic, Republican and Independent parties.
  I took great pride in our effort, which I believe would have passed 
the Senate but for election-year maneuvering.
  The goal of the tripartisan legislation was to provide all Medicare 
beneficiaries with quality drug coverage through private health plans. 
In addition, the tripartisan bill gave seniors and the disabled a 
choice in health coverage: They could have traditional Medicare, a 
Medicare+Choice plan or a new enhanced Medicare plan.
  It was truly a labor of love. We are proud of that effort and the 
fact that it laid the foundation for S. 1, the Prescription Drug and 
Medicare Improvement Act of 2003, which we are considering today.
  I predict that S. 1 will not only pass by the Senate by the end of 
the month, it will be signed into law at the end of the summer. What a 
difference a year makes.
  S. 1 builds on several important foundations we laid in the 
tripartisan initiative.
  And, in many ways, it is far superior to our tripartisan initiative.
  It offers beneficiaries a meaningful and reliable drug benefit 
through the private sector with reasonable and fair cost-sharing. 
Beneficiaries will have the ability to obtain the drugs of their choice 
without Government interference and with better coverage choices.
  In contrast to last year's bill, the measure we have before us today 
provides beneficiaries with several choices: A stand-alone drug 
benefit, a drug benefit through a Preferred Provider Option, PPO, or a 
drug benefit through an HMO.
  Those who do have drug coverage will have the choice of remaining in 
the existing plans or choosing a Medicare prescription drug benefit. S. 
1 also offers beneficiaries a temporary drug discount card available to 
seniors no later than January 1, 2004. This drug card would be in 
operation until the Medicare prescription drug benefit is fully 
implemented.
  In sum, S. 1 offers additional assistance to those who cannot afford 
to purchase their prescriptions.
  In a country as prosperous as ours, we can no longer tolerate 
situations where seniors have to split their pills in half or cannot 
fill necessary prescriptions because they do not have the money.
  A land as great as ours owes it to needy seniors and disabled to help 
these individuals who many times cannot help themselves.
  Another important point is that S. 1 also ensures access to drug 
benefits for beneficiaries who live in rural areas. This is a must-do 
for my home State of Utah. S. 1 provides reliable coverage everywhere 
in America. Wherever there is Medicare coverage, there will be Medicare 
prescription drug coverage.
  In addition, this bill includes important consumer protections. Every 
plan offered to Medicare beneficiaries will have to be certified by the 
Federal Government.
  A key point is that S. 1 recognizes the role of employers in 
providing their retirees with health coverage. Let me make it perfectly 
clear that the intent of this plan is not to disrupt that important 
relationship between employers and their retirees. We should encourage 
employers to continue to offer retiree health coverage.
  Finally, I must note that this legislation does nothing to dismantle 
or weaken the traditional Medicare program. The bill offers 
beneficiaries more coverage options, and does nothing to disrupt the 
existing physician-patient relationship. That is a fundamental 
principle that was very important to me as I worked with committee 
members to draft this legislation.
  At this point, I would like to take some time to go into the details 
of the principles I have just outlined. First, and most important, this 
legislation provides beneficiaries with more coverage choices.
  Let me emphasize, S. 1 does not, I repeat, does not, take anything 
away from Medicare beneficiaries. If beneficiaries like what they have, 
they may keep their current coverage. However, if they want coverage 
similar to private health insurance, S. 1 offers them this choice.
  Those remaining in traditional Medicare will be able to receive 
prescription drug coverage equal to that received by beneficiaries who 
elect to receive their prescription drug coverage through the new 
MedicareAdvantage program. MedicareAdvantage is the new name for the 
current Medicare+Choice program, also known as Medicare Part C.
  As my colleagues are aware, today we have Medicare Part A, which is 
for hospitalizations, and Part B, which is for outpatient and physician 
coverage.
  This legislation will then add Part C, for Medicare Advantage. And, 
beginning on January 1, 2006, a Medicare prescription drug benefit will 
be established under a new program which will be codified as Part D of 
Medicare.
  Beneficiaries will have the choice of either adding a new stand-alone 
drug plan to their current coverage, delivered through fee-for-service 
reimbursement or they may participate in a program which integrates 
their basic medical coverage with added pharmaceutical benefits through 
either a health maintenance organization, HMO, or a preferred provider 
organization, PPO.
  There will be a new Center for Medicare Choices established at the 
Department of Health and Human Services, with an administrator who will 
oversee both the new drug plan under Medicare Part D and the new 
MedicareAdvantage program under Medicare Part C.
  To operate the prescription drug plan, the Administrator will create 
at least 10 regions throughout the country, which must be at least the 
size of a state. States will not be allowed to be divided among 
regions.
  Private-sector entities will bid to provide coverage. For PPOs, they 
will contract to provide the entire spectrum of Medicare services, 
including drug coverage, for the region. For HMOs, they will contract 
to provide Medicare services, including drugs, for a county.
  If a beneficiary elects to remain in the traditional Medicare 
program, he or she may receive pharmaceutical assistance through a new 
add-on program which will be administered by a private insurer who has 
been certified by the government to provide coverage in that region. 
Many have been concerned that in some areas of the country there will 
not be private sector entities that wish to provide this new coverage. 
I share that concern, especially after my own State's experience with 
Medicare+Choice program.
  For this reason, we worked very hard to make certain that there was a 
safety net, a ``fall-back'' plan that would provide seniors with the 
coverage they need if no private sector plans came forward.
  I will discuss how the fall-back operates in a few minutes, but I did 
want to assure my constituents that there will be safety net if it is 
needed.
  Another assurance this bill provides to our constituents is that 
beneficiaries will be allowed to change plans on an annual basis. We do 
not want any beneficiary to feel that he or she is locked into a 
program that is not a good fit. So, I have insisted that the 
flexibility to change plans was present in the bill, and I am pleased 
it was included.

[[Page 14881]]

  As I mentioned earlier, one important principle of our plan is that 
beneficiaries who continue in traditional Medicare or those who enter a 
new integrated plan should have the same level of coverage.
  So beneficiaries can either purchase standard coverage form an 
insurer or they will have the benefit of participating in a new HMO or 
PPO plan that includes pharmaceutical coverage valued at the equivalent 
amount of the subsidy the government is providing for the stand-alone 
plan.
  In 2006, standard coverage would have a $275 annual deductible. For 
spending over the deductible up to $4,500, beneficiaries would pay one 
half, and the government the other half.
  Eighty-eight percent of Medicare beneficiaries will not reach this 
limit of $4,500 in 2006.
  Even so, the plan envisions generous subsidies for beneficiaries who 
cannot afford their drug coverage, in this case those with incomes less 
than 160 percent of the federal poverty level.
  However, for those with incomes at the above 160 percent of the 
federal poverty level, there would be no government subsidy for out-of-
pocket expenditures once drug costs in total reach $4,500, of which the 
government would have paid roughly half once the deductible was 
satisfied.
  As a protection against extremely high drug costs, which can prove 
catastrophic to a beneficiary, we have included a provision limiting a 
beneficiary's spending to 10 percent of costs once their out-of-pocket 
expenditures for drugs reaches $3,700.
  We want this program to be as affordable as possible for 
beneficiaries. Indeed, the committee was torn.
  We needed to make certain that the program is affordable to Federal 
taxpayers and does not exceed the $400 billion we have planned for in 
our budget.
  On the other hand, we wanted the coverage to be meaningful and really 
help seniors and disabled who need assistance.
  This is one reason the bill contemplates an affordable, national 
average premium for pharmaceutical assistance of $35 per month. I know 
this can be very confusing--even for those of us who drafted the bill--
so I want to take this opportunity to explain the standard drug plan 
and the actuarial equivalent drug plan--the two types of drug plans 
that will be offered to Medicare beneficiaries.
  First, both the standard drug plans and the actuarial equivalent drug 
plans would have the same deductible.
  Second, beneficiary out-of-pocket expenditures would be the same in 
both the standard and actuarial equivalent plans.
  Both the stand-alone drug plan and the MedicareAdvantage PPO plan 
could offer beneficiaries standard coverage that is described in the 
statute, or they can offer differing coverage as long as certain 
provisions are met: The actuarial value of the prescription drug plan 
would have to be at least equal to the actuarial value of the standard 
plan; and the coverage would be designed to cover the same percentage 
of costs up to the initial benefit limit as that provided under the 
standard plan. Again, the limits on beneficiary out-of-pocket expenses 
and annual deductibles would be the same in both the standard plan and 
the actuarial equivalent plan.
  Finally, actuarially-equivalent plans would be allowed to vary the 
monthly beneficiary premium and the beneficiary copayments. In 
addition, if these plans wanted to offer additional benefits to 
seniors, they may do so and the beneficiary would be responsible for 
paying additional costs.
  In sum, a beneficiary is permitted to choose a drug plan that best 
suits his or her health care needs.
  In S. 1, we are offering seniors choice in drug coverage. Medicare 
beneficiaries may stay in traditional Medicare fee-for-service and 
receive their drug plan through a stand-alone drug plan. Or, they may 
receive their drug coverage through the new MedicareAdvantage program 
either through an HMO or the new PPO option.
  The plans offered through MedicareAdvantage are integrated health 
plans which means these plans are similar to private health insurance 
which combines health and drug benefits in one insurance plan. In order 
to encourage plans to participate as stand-alone drug plans, interested 
entities would submit bids to the administrator. This bid would include 
information on benefits, the actuarial value of the prescription drug 
coverage, the service area for the plan, and the monthly premium.
  Plans could submit bids to provide coverage for a specific region, as 
established by the Administrator, or the entire area covered by 
Medicare. Plans could also submit bids for more than one region and 
they may also bid nationally.
  A plan would not be accepted by the Secretary unless the premium, for 
both standard coverage and for any additional benefits, accurately 
reflected the actuarial value of the benefits.
  The administrator will work with bidding plans so a region will have 
at least with two stand-alone drug plans that will offer prescription 
drug coverage to Medicare beneficiaries in an area. These contracts 
would be awarded for 2 years. Finally, the stand-alone drug plans would 
be required to accept some level risk.
  If only one plan, or even no plans, are unwilling to offer stand-
alone prescription drug coverage within a region, the Administrator 
will enter into an annual contract with an entity to provide a 
prescription drug fallback plan. This fallback plan, which would be 
given a 1 year contract, would offer Medicare beneficiaries the 
standard drug plan.
  We have designed this fallback plan to ensure that seniors will have 
prescription drug coverage across the country. In addition, seniors 
could be offered prescription drug coverage through a MedicareAdvantage 
HMO or PPO.
  During the Finance Committee mark-up, an amendment was offered that 
would have given the fallback plan a two-year contract instead of a 
one-year contract.
  While I am sympathetic to some of the concerns raised about the 
administrative difficulties surrounding choosing a fallback plan within 
a few months, I do not believe that a 2-year fallback plan is the 
solution.
  I believe that having a two-year fallback plan makes it even more 
difficult to encourage other private plans to bid in a region. As a 
result, a two-year fallback plan could prevent a private plan from ever 
wanting to enter the region and beneficiaries are left with a fallback 
plan that does not offer much flexibility. Therefore, I would strongly 
oppose such an amendment.
  With regard to the low-income, I believe that we should provide 
additional assistance to the low-income Medicare beneficiaries when it 
comes to prescription drug coverage. S. 1 provides additional subsidies 
for drug coverage for Medicare beneficiaries under 160% of the federal 
poverty level, individuals with income limits of $14,368 for 
individuals and $19,360 for couples.
  Let's face it, these beneficiaries, in many cases, are struggling 
with their bills and are barely making ends meet. These are the 
individuals who are deciding between paying the rent and paying for 
food. This population makes up 37.4 percent of Medicare beneficiaries.
  S. 1 continues to provide drug coverage for the dual eligible 
population, those who are currently eligible for both Medicare and 
Medicaid, through the Medicaid program.
  Dual eligibles have incomes that are below 74 percent of the Federal 
poverty level--annual income limits are $6,555 for individuals and 
$8,848 four couples.
  During the Committee's consideration of S. 1, I authored a provision 
that would reward states that already provide both Medicare and 
Medicaid coverage for low income individuals between 74 percent and 100 
percent of the Federal poverty level.
  For the 19 States that have expanded their Medicaid coverage to these 
seniors, the Federal Government would pay for the Medicare Part A cost-
sharing of these beneficiaries. The provision is important because it 
gives incentives to States that expand their dual eligible programs.
  This legislation provides these beneficiaries who are below 160 
percent of

[[Page 14882]]

poverty with additional subsidies for their drug coverage.
  There are some who are concerned about the Federal Government heavily 
subsidizing this population because drug coverage is so expensive. In 
my opinion, providing additional assistance to these lower-income 
beneficiaries is the right thing to do. End of story.
  With regard to the comprehensive drug program, some have expressed 
concern that the program will not begin until January 1, 2006. I 
understand the concerns of those who advocate for immediate coverage 
for seniors. That's why we created the Medicare Prescription Drug 
Discount Card available to Medicare beneficiaries no later than January 
1, 2004 and would provide discounts up to 25 percent on their 
prescription drugs.
  Medicare beneficiaries would be charged an annual enrollment fee of 
$25 and could only be enrolled in one endorsed card program. The 
prescription drug card program would continue to operate for at least 6 
months after the implementation of the Medicare Prescription Drug 
Benefit Plan.
  At the beginning of 2004 and 2005, low-income beneficiaries under 135 
percent of poverty would be given $600 per year for their drug 
expenses. These beneficiaries would be permitted to carry any left-over 
money from year to year. Additionally, spouses may share their drug 
cards.
  I worked very hard to make certain that our new plan does not 
disadvantage rural areas such as my home state of Utah. The bill before 
us provides assurances that any Medicare beneficiary, regardless of 
where he or she lives, will have access to prescription drug coverage.
  For example, the legislation requires that at least two stand-alone 
drug plans would be offered to Medicare beneficiaries in each region. 
And, if only one plan, or worst case scenario, no plans, bid to offer 
stand-along coverage, there will be a fallback plan to provide 
prescription drug coverage. No beneficiary, regardless of where he or 
she lives, would be without prescription drug coverage.
  In addition, for those living in rural areas, the MedicareAdvantage 
plans will offer beneficiaries a maximum of three PPO plans per region. 
If PPOs decide not to bid in a specific area, these beneficiaries still 
will have coverage through traditional Medicare and will also have 
optional prescription drug coverage.
  S. 1 also gives the Secretary of Health and Human Services the 
discretion to make adjustments in geographic regions so there will not 
be a large discrepancy in Medicare prescription drug premiums across 
the country.
  However, our first and foremost goal in S. 1 is to provide drug 
coverage to those who currently have no coverage. We need to help 
beneficiaries first, but we also need to continue our work with the 
employer community to ensure that they will continue to offer retiree 
health benefits.
  Finally, I want to take a minute to talk about traditional Medicare 
and why I believe that the PPO option under the MedicareAdvantage 
program is the better choice.
  Most will agree that the current Medicare program is an archaic 
system that still looks very much like the program when it was created 
in 1965. Do any of you remember what was popular in 1965? Most of you 
probably do not but, unfortunately, I do.
  What we are trying to do in S. 1 is provide seniors with the same 
health choices available to those under 65 today, and not offer them 
only health choices that were available in 1965! While most seniors are 
comfortable with the current Medicare coverage, traditional Medicare is 
outdated in several ways. Besides not offering seniors prescription 
drug coverage, it does not provide protections for the sickest 
beneficiaries. To me, that is a major flaw of the program. Most drug 
plans offer catastrophic coverage for seniors once they spend a certain 
amount of money for their health care costs. Not traditional Medicare. 
Medicare requires the sickest seniors to continue to pay for their 
health coverage out of pocket without assistance.
  In addition, beneficiaries currently receive their coverage through 
Medicare Part A, which covers hospital expenses, and Medicare Part B, 
which covers providers' expenses, such as physicians. There are 
deductibles for Medicare Part A, which is $840 in 2003, per spell of 
illness.
  Simply put, this means that a beneficiary who is admitted to the 
hospital for different illnesses ends up paying this hospital 
deductible more than once per year. The Medicare Part A program also 
has copayments and other beneficiary cost-sharing that could be very 
expensive. On top of it, beneficiaries also must pay a $100 annual 
deductible for Medicare Part B, along with beneficiary copayments for 
these services.
  The bottom line? Medicare beneficiaries are paying two different 
deductibles each year for different health services. How fair is that 
to seniors? And why should seniors be the only ones who have to adhere 
to such a crazy system?
  Private health insurance does not operate like this. Those under 65 
do not have to pay arbitrary copayments and deductibles. They have 
prescription drug coverage in many cases. And they typically do not 
have to pay extra money out of pocket if they are seriously ill.
  I believe that Medicare beneficiaries should have those same choices 
and that's why we created the MedicareAdvantage program in S. 1.
  MedicareAdvantage improves the choices offered to beneficiaries. They 
would have their choice of coverage in MedicareAdvantage through HMOs, 
the same Medicare+Choice plans many have been offered or the new 
preferred provider organization, better known as PPOs.
  MedicareAdvantage PPOs would have a network of providers that will 
agree to offer Medicare beneficiaries coverage for benefits in the 
traditional Medicare program. Through this PPO system, beneficiaries 
will be able to see their same doctors, and go to the same hospitals.
  If these medical providers are in the PPO network, the beneficiaries 
will pay the standard coverage for participating network providers. If 
they do not participate in the PPO network, seniors will pay more to 
see them. The important point is that, through PPOs, beneficiaries 
would still be able to see the doctor of their choice.
  Similar to the regions created for the Medicare prescription drug 
benefit, S. 1 also creates 10 regions for PPO coverage. To make things 
simpler, the secretary of Health and Human Services would be allowed to 
use the same regions as the ones established for the prescription drug 
program.
  Again, these regions must include at least one State--and parts of 
one State could not be divided up into separate regions. A maximum of 
three PPO plans per region would be offered to Medicare beneficiaries. 
The HHS Secretary would calculate what the benchmark payment from the 
federal government would be for these new PPOs. This benchmark would be 
based on the higher payment of traditional Medicare FFS or the 
Medicare+Choice payment for the specific region.
  The MedicareAdvantage PPO will provide beneficiaries with the health 
coverage that is similar to private health insurance. Instead of the 
crazy patchwork of deductibles and copayments imposed on beneficiaries 
in traditional Medicare, it would offer them a combined deductible, 
instead of separate deductibles like traditional Medicare.
  MedicareAdvantage PPOs will offer beneficiaries with catastrophic 
health coverage. If beneficiaries choose the PPO option, they will not 
longer be completely responsible for bills associated with catastrophic 
illnesses. The PPO plans would determine appropriate levels of 
beneficiary cost-sharing--deductibles, catastrophic limits and 
copayments, not the federal government.
  In addition, plans under the MedicareAdvantage program will provide 
beneficiaries with coordination of care.
  It is unfortunate that the traditional Medicare program does not have 
any

[[Page 14883]]

disease management or chronic care management programs available for 
all Medicare beneficiaries. This is something many of us had hoped to 
improve for years.
  Under S. 1, MedicareAdvantage plans will create disease management 
programs and, in my opinion, do a much better job of monitoring the 
health care needs of individual Medicare beneficiaries than traditional 
Medicare.
  In the worst case scenario, if PPO plans do not offer coverage for a 
specific region, the Medicare beneficiary would have traditional 
Medicare coverage along with a prescription drug benefit. Seniors will 
always have health insurance coverage and the option of prescription 
drug coverage as well.
  Before I close, I want to address one of other important priority of 
mine.
  Although we have worked for several years to pass a Medicare 
prescription benefit in the Senate, we have worked just as long to pass 
a Medicare regulatory reform bill.
  That is why I am delighted that the ``Prescription Drug and Medicare 
Improvement Act of 2003'' includes ``The Medicare Education, Regulatory 
Reform and Contracting Improvement Act'' a bill that I am introducing 
this year in the Senate. This bill is called MERCI [mercy] because it 
provides regulatory relief for Medicare providers and improved services 
for beneficiaries.
  Medicare's antiquated regulations--three times longer than the U.S. 
tax code--prevent providers from delivering health care efficiently and 
beneficiaries from receiving the care they need.
  Secretary Thompson has said, ``Patients and providers alike are fed 
up with excessive and complex paperwork. Rules are constantly changing. 
Complexity is overloading the system, criminalizing honest mistakes and 
driving doctors, nurses, and other health care professionals out of the 
program.''
  Failure or just the perception of failure to follow Medicare's 
needlessly complex rules can result in audits, withholding of payments, 
and crippling of a physicians' practice. Furthermore, obsolete 
restrictions on Medicare contracting authority impose burdens and 
inefficiencies on contractors, taxpayers, providers and beneficiaries.
  This bill improves the Medicare program for beneficiaries and 
provides by clarifying regulations, rewarding quality and by enhancing 
services.
  The bill decreases waste, fraud and abuse in Medicare in ways that 
are just and fair for beneficiaries, contractors, and providers by 
eliminating retroactive application of regulatory changes, and by 
expediting the appeals processes for beneficiaries, providers, and 
suppliers of Medicare services.
  It improves communication between HHS and both Medicare providers and 
beneficiaries by enhancing central toll-free telephone services and 
providing for provider and beneficiary ombudsmen. It increases 
competition, improves service and reduces costs by providing for a 
competitive bidding process for Medicare contractors that takes into 
account performance quality, price and other factors that are important 
to beneficiaries.
  And, it decreases Medicare billing and claims payment errors by 
improving education and training programs for Medicare providers and at 
the same time creates an expedited appeals process for Medicare claim 
denials.
  These provisions will improve the delivery of health care services to 
Medicare beneficiaries by enhancing the efficiency of the program for 
all concerned.
  It is high time that we made Medicare more user-friendly. I want to 
thank my colleagues Senators Grassley and Baucus for working with me on 
these provisions.
  In conclusion, I believe that this will assist all Medicare 
beneficiaries, especially those without prescription drug coverage, by 
providing them with a choice of quality prescription drug coverage and 
a choice of quality health coverage. Passing this legislation is the 
right thing to do for our seniors.
  It is remarkable to me that close to a year ago, we were having the 
same debate on the Senate floor.
  Last year's outcome was a major disappointment to me and my 
tripartisan colleagues. At the time, I honestly believed that last year 
was our final chance to make improvements to the Medicare program for a 
long time.
  But here we are, almost a year later, debating this important issue 
once again. Thankfully, we have a Finance Committee chairman who has 
been able to guide this legislation through the Senate in a timely 
manner. Thankfully, we have a President who made Medicare prescription 
drug coverage for seniors one of his top priorities.
  This year is different than 2002.
  This year, we have accomplished what we could not accomplish last 
year.--We have put partisan politics aside and written a bill that is 
truly bipartisan.
  And because of this bipartisan effort, I believe a Medicare 
prescription drug benefit will become a reality for Medicare 
beneficiaries across the country. The wait for Medicare prescription 
drug coverage will soon be over thanks to the hard work of the Senate 
Finance Committee, especially Senator Grassley, Senator Baucus, Senator 
Snowe, Senator Breaux and Senator Jeffords.
  This is a historic time for the United States Senate.
  I notice my esteemed colleague who has done so much in the field of 
health care in the House, and who has started anew here in the Senate 
in many ways, is here to speak.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Oregon.
  Mr. WYDEN. Mr. President, before he leaves the floor, I just want to 
commend the distinguished Senator from Utah on all his extraordinary 
work in the health care field. If you look at what the Senator from 
Utah has achieved in the S-CHIP area, his work that led to the Hatch-
Waxman legislation, and what he has done on a whole host of health care 
issues, the senior Senator from Utah has made an extraordinary 
contribution.
  As we begin this discussion on Medicare reform, I commend the Senator 
from Utah on an excellent statement. I think the Senate will have 
another success over the next few weeks. After the Senator's success on 
S-CHIP, Hatch-Waxman, community health centers, and other areas, there 
will be yet another significant milestone the Senator from Utah will 
have helped to achieve in the health care area. He and I are working on 
a variety of initiatives now. I commend the Senator on an excellent 
statement and wish to associate myself with his remarks.
  Mr. HATCH. Mr. President, I thank my colleague. He is a definite 
leader in health care. I enjoy working with him and appreciate his kind 
remarks.
  Mr. WYDEN. Mr. President, a Congress that can find hundreds of 
billions of dollars in money for tax cuts and the money to rebuild a 
foreign country must find a way to make Medicare work better for the 
Nation's vulnerable senior citizens. That is what the next two weeks 
are all about, and they are historic weeks for the Senate.
  Updating Medicare is an issue I have felt very strongly about for 
several decades because my public service career began in the early 
1970s, when I served as codirector of the Oregon Gray Panthers and ran 
the Oregon Legal Services Program for the elderly. Back then, the old 
saw was that Medicare was just half a loaf. Of course, from its 
beginning, Medicare did not cover eyeglasses, hearing aids, dental 
care, and a host of services that are so important to vulnerable older 
people. But of particular concern, even then, was the fact that 
medicine, in so many instances, was both unaffordable and inaccessible. 
Now the Senate has an opportunity to do something about that in 
providing a real measure of relief for the Nation's older people. I 
believe over the next couple of weeks what the country is going to ask 
is not what a particular philosophical approach of a Senator was, but 
whether that Senator was part of an effort to find the common ground in 
finally getting real results for the Nation's older people.
  Senator Olympia Snowe and I offered the first bipartisan amendment to 
the budget resolution to fund a Medicare prescription drug program back 
in 1999. We followed that action up by introducing the first bipartisan 
proposal

[[Page 14884]]

called SPICE, the Senior Prescription Insurance Coverage Equity Act. I 
am very proud to be able to stand on the floor today and say that 
because of the dedication of members of the Finance Committee, the 
leadership of both sides, many of the provisions Senator Snowe and I 
have been advocating for a number of years have been included in the 
legislation the Senate will vote on over the next couple of weeks.
  We were concerned then that traditional Medicare not be skimpy, that 
it be a good benefit package, and that it would be affordable for older 
people. Suffice it to say, under the legislation the Senate will be 
considering, traditional Medicare will survive. The millions of seniors 
who want to take that program will be able to do so. Traditional 
Medicare will not wither. It will not vanish as a result of being 
underfunded or having provisions that would make it less attractive for 
seniors to choose.
  A number of important consumer protection provisions are included in 
this legislation, something I think is absolutely critical if you are 
going to allow private plans to play a bigger role in delivering this 
benefit.
  I have had a great interest in this area since the distinguished 
minority leader, Senator Daschle, and I wrote a Medigap law a number of 
years ago which eliminated a lot of the unscrupulous practices that 
were taking place in the insurance market designed to supplement 
Medicare. Now there are standardized benefit packages for these Medigap 
supplements, and a lot of the abusive activity that used to go on, that 
used to exploit older people, has been eliminated.
  Many of the consumer protections in this legislation have been 
borrowed from the Medicare Choice Program, really building on what 
Senator Daschle and I wrote into the Medigap law years ago, and are a 
significant step in the right direction.
  I think there are also important steps included in this legislation 
to make medicine more affordable to the Nation's older people. It seems 
to me by giving seniors more choices, you make it possible for seniors 
to have the opportunity to get medicine that is more affordable because 
for a private plan to attract a senior subscriber, that private plan is 
going to have deliver medicine in an affordable way. So there will be a 
concrete incentive to actually hold down the cost of medicine because 
those private plans will not be in a position to make money, they will 
not be in a position to be profitable if they cannot attract seniors by 
keeping down the cost of medicine.
  So it is important that this legislation be enacted. I have always 
felt Government really comes down to people, and it comes down to those 
who tell us exactly what their experience has been with health care and 
various other areas of Government.
  What has really colored my judgment on this issue are the accounts I 
have heard from seniors, many of them going back to my days with the 
Gray Panthers. Not long ago a woman from my hometown of Portland, with 
$806 in monthly income, had prescription drug bills totaling $150 a 
month, and she got no help from Medicare whatsoever. My staff and I 
inquired about how she was able to get by, and her answer was just 
heartbreaking. She said: I just do without, and I pray.
  I do not think that is good enough. As I said earlier, I think a 
country and a Congress that can find hundreds of billions of dollars 
for tax cuts and a hundred billion dollars or so to rebuild a foreign 
country can do better by seniors on Medicare. So this legislation 
provides an opportunity to do that.
  I think there are a number of important issues for the Senate to zero 
in on as we begin this debate, the first of which is the cost. A number 
of Senators have said this legislation is costly and it will be 
difficult to finance in the years ahead. What I would say, Mr. 
President and colleagues, is this country cannot afford not to cover 
this vital service for older people.
  Not very long ago a physician in Hillsboro, OR, wrote me and said he 
put a senior citizen in the hospital for something like six weeks 
because that person could not afford their medicine on an outpatient 
basis. That is pretty bizarre by anybody's standards. If a senior is 
hospitalized, they get their medicine covered under part A of the 
Medicare program. But, of course, if the senior faces a serious health 
problem and is not hospitalized, they have to resort to outpatient 
services, and Medicare part B historically has not picked up the bill 
for drugs.
  So what we saw in Hillsboro, OR, not long ago is that it costs 
thousands and thousands of dollars for a senior to be hospitalized in 
order to get the Medicare benefit. It would have cost a small fraction 
of that if the drugs were covered on an outpatient basis.
  When seniors and others wonder about the cost of this benefit, and 
for Senators who are asking if the Nation can afford prescription drug 
relief for older people, my message is, America cannot afford not to do 
this. America cannot afford inaction and having older people 
hospitalized, facing serious health problems simply because they are 
not able to get medicine in a cost-effective kind of way.
  Second, as we look at this issue, we ought to understand that older 
people are getting hit by a double whammy when they try to afford their 
medicine. First, Medicare does not cover their purchases. But secondly, 
the older people of this Nation are subsidizing those who do have 
bargaining power, the health plans and big buyers who are using 
bargaining power to knock the price down. What we have been trying to 
do, going back to the days when Senator Snowe and I introduced the 
SPICE legislation, is give seniors some bargaining power, a chance to 
be on a level playing field with the big buyers, with the HMOs, with 
those who have bargaining clout. This legislation puts seniors on a 
more level playing field so that they are able to better afford their 
medicine and that is a step in the right direction.
  There are going to be a number of issues that will come up in the 
course of the debate. One that my State feels very strongly about is 
the fact that Medicare's payment system penalizes those who have been 
efficient. Historically, States such as Oregon that have been 
innovative in the health care area have taken concrete steps to hold 
costs down. You would think the Federal Government would reward them. 
You would think the Federal Government would give them a break for 
stressing cost containment. The reality has been just the opposite. The 
Medicare Program has penalized States for holding costs down.
  This legislation doesn't do as much as I would like it to do to 
remove the penalties against those who have been efficient, and I am 
hopeful that as we consider the legislation more can be done in that 
area.
  It does take significant steps to address the question of rural 
health care, something that has been particularly important to me. 
Senator Smith and I have included it in our bipartisan agenda for the 
State of Oregon. All who represent States like ours know that States 
that are largely rural find it extremely hard for seniors to get the 
care they need. Very often they don't have hospitals or doctors in 
close proximity and clearly need extra help in order to ensure that our 
rural communities survive. The fact is, without rural health care, you 
cannot have rural life. I am not prepared to sit by and let rural 
communities become sacrifice zones. That is why the provisions in this 
legislation to provide better reimbursement for rural health care are 
heartening.
  The provisions in the legislation for rural health take strong steps 
forward. It would adjust hospital payments to account for the higher 
costs associated with low-volume hospitals. It makes changes to what is 
known as the ``swing bed concept'' which will help critical-access 
hospitals, and it creates a floor for geographic payments for 
physicians and offers improvements for rural health clinic 
reimbursement.
  More needs to be done to assure that provider reimbursement is 
adequate. Better reimbursements obviously keep more qualified doctors 
and other providers in the Medicare system. That, of course, provides 
more choice and better care for the Nation's older people.

[[Page 14885]]

  I have been involved in a number of efforts with respect to trying to 
help seniors with their prescription drugs over the years. I have been 
involved in measures to expand access for generic drug coverage. I have 
been involved in efforts to give more bargaining power to public 
programs, particularly the Medicaid Program, and the program for the 
Veterans Administration. I have believed, even most recently with the 
drug Taxol, which is the largest and biggest selling cancer drug in 
history, that the Government has to do a better job of striking a 
balance between the need to get drugs to market quickly and be 
sensitive to making sure that medicine is affordable and that the 
interests of taxpayers are protected.
  But all of those steps together, which have been of some help in 
terms of making medicine more affordable for older people, do not rival 
what the Congress is facing now in terms of modernizing the Medicare 
Program and providing concrete relief to the millions of the country's 
elderly who are watching now and urging the Congress, after years of 
partisan action, to actually produce results and address their drug 
costs.
  The fact is, Medicare reform isn't easy. No Senator walks away with 
everything he or she wants. But there is a chance now to make sure 
seniors don't walk away empty handed. It is not going to be 
inexpensive. There will be some who want to spend more. Certainly, I 
have believed the key issue for all these years has been to try to find 
the common ground, to act on a bipartisan basis--Senators Baucus and 
Grassley have done that--and we must not let this legislation go by the 
wayside once more.
  For my part, I will do anything over the next couple weeks to build 
the bridges that are necessary to make health care more accessible and 
more affordable for the Nation's older people. This is the issue I care 
the most about, the question of making health care more affordable and 
more accessible. We have the most talented, dedicated, and caring 
health care providers on Earth. They deserve a Congress that does a 
better job of setting in place the governmental policies that allow 
them to deliver the best and most affordable health care that is 
possible. This has been my goal since I came to the Congress. This is 
the issue that has been most important to me throughout my years in 
public service.
  More than 25 years ago, when I was codirector of the Oregon Grey 
Panthers, we were talking then about what it would take to modernize 
the program, to turn that program that began as just half a loaf into a 
program that would deliver the best possible services to the Nation's 
older people. You cannot do that without covering prescription drugs 
for vulnerable elderly. This is an opportunity, if not to do everything 
that needs to be done, to take substantial steps in the right 
direction.
  I urge my colleagues over the next couple of weeks to work together 
on a bipartisan basis to finally accomplish the reforms that are 
necessary.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. KYL. Mr. President, I rise to address this historic opportunity 
for strengthening Medicare and providing prescription drug benefits for 
our seniors. I am pleased that as a member of the Finance Committee I 
was able to participate in the construction of the legislation which is 
before us now and to be able to speak to this historic legislation on 
the first day we are considering it.
  My understanding is that as of Wednesday we will be able to begin 
offering amendments to the legislation, and I know it is the leader's 
intention that we complete it before the end of the following week so 
that the bill can be merged with the House bill which should be adopted 
at roughly the same time. We can go to a conference committee, iron out 
whatever differences we have, and get this bill to the President as 
soon as possible. It is the President who has led on this initiative 
and who has promised the American people that we are going to provide 
both a new prescription drug benefit for America's seniors and a 
strengthening of Medicare so that we know that this program can 
continue on into the long-distant future and not be troubled by 
financial problems that we can see on the very short-term horizon.
  So this Medicare reform legislation, S. 1, that is before us now 
offers us a historic opportunity, one I think we must be very careful 
not to squander. In that regard, let me discuss, first of all, the 
problems we are going to be trying to deal with here, the way the 
Finance Committee bill attempts to deal with them, and then I will 
conclude with some concerns I have about some changes I believe we are 
going to need to make to ensure this will work for the benefit of our 
Nation's seniors.
  First, let me discuss the need. There are a couple of key things to 
keep in mind here. Just as with the Social Security system, of which 
Medicare is actually a part, Medicare cannot continue to pay the 
benefits we have promised America's seniors, primarily because of the 
good news that America's seniors are living longer, and we are finding 
more and more ways to treat their diseases and illnesses, all of which, 
of course, costs money. But we should not consider that bad news. In 
fact, we consider it a very fortunate dilemma that we face, in which we 
are not only able to prolong life but enhance the quality of life for 
our seniors. That is the reason we want to deal with this problem now.
  But as seniors are living longer, this is going to provide a greater 
financial burden on taxpayers, and we find that the number of taxpayers 
paying for it is actually decreasing in relative size. Therefore, we 
see a financial insolvency for Medicare not too far down the road. In 
fact, by the year 2026, the system will be, technically, out of 
balance. By 2012 or 2013, we are going to have to begin paying out of 
the trust fund for Medicare, which means that the general fund is going 
to have to be tapped to help to pay for the Medicare funding and the 
hospital insurance program is going to be in debt. The long-term costs 
for Medicare are staggering when you stop and think about it, although, 
again, this can be looked at as good news since we are finding ways to 
treat our illnesses. And while it costs money, it still preserves our 
quality and length of life. Therefore, we should be happy for this 
condition. But it will cost money.
  To give you an idea, over the next 75 years, the average deficit of 
the hospital insurance program is 2.4 percent of taxable payroll, which 
is 71 percent greater than the projected funds coming into the program 
over the same period. So we have a huge deficit we are going to face in 
how to fund our Medicare commitments to seniors.
  In addition, when Medicare was created in 1965, it was a very 
different program than Americans have become accustomed to now. For one 
thing, it didn't have a drug benefit. We are all committed, I think, to 
the proposition that we have to add a drug benefit to Medicare, among 
other things, because now, unlike in 1965, treating through 
prescription drugs, through medication, has become really the preferred 
option in most cases. We no longer need acute surgical care, for 
example, to treat many situations. We are able to control the illnesses 
through the use of medications. Isn't that a much more humane and 
satisfying way to treat diseases than through some intrusive kind of 
treatment, such as surgery?
  So medical advances have permitted us to accomplish a great goal. We 
are going to have to add this benefit to Medicare, however, if we are 
to achieve the degree of success we would like to achieve. Nobody who 
has health insurance in the private sector has a structure like 
Medicare does today. For example, in the private sector, you usually 
only have one deductible for your insurance. And then your copayment--
if it is for drugs or some other kind of benefit--is usually at the 
front end of most of those services. Most of the time in the private 
sector, people have catastrophic insurance coverage. In other words, 
you will pay a deductible and there will be some copayment for the 
other services you derive along the way. But if your illness is so 
severe as to cause huge medical costs, that catastrophic care is paid 
for with your private sector insurance premium. Not so with Medicare.

[[Page 14886]]

  With Medicare, it is almost exactly the opposite. There are two 
deductibles, one for part A and one for part B, for hospital stays and 
physician services. It is especially complicated for hospital stays. 
And you have high copayments under Medicare that are toward the back 
end of the coverage. You have no catastrophic coverage at all, as a 
result of which seniors have had to go through a distribution of 
Medigap insurance, private sector coverage, coverage sometimes from 
their employer, and the Government's Medicare Program and, in some 
cases, some even do without. There is no drug benefit today as a part 
of Medicare.
  So all of this has to be dealt with. Clearly, we cannot continue to 
work with a program that is not going to be able to treat our senior 
citizens as we have moved into the 21st century, which is the historic 
opportunity we are presented with. The first way to respond to that is 
to add a drug benefit to Medicare. Clearly, as I said, we are all 
committed to doing that.
  S. 1 provides a generous universal benefit for prescription drugs. I 
think, given our budget constraints, the bill put together by the 
chairman and ranking member of the Finance Committee is a very good 
start to providing that kind of universal benefit of covered 
pharmaceuticals.
  Now, importantly, the way the bill is constructed, no senior will 
have to leave the traditional Medicare. The first option is you can 
stay right where you are, and there is a drug benefit added to 
traditional Medicare. It will have the same actuarial value as the drug 
benefit added to the alternative choices that will also be provided 
now. For those who are satisfied with Medicare, except they would like 
to have a drug benefit, that is precisely what will be available to 
them. For those who would like to or are used to having a private 
sector insurance plan, that option or alternative will be available as 
well. You don't have to choose it, but if you do choose it, it will 
have a drug benefit with the same actuarial value as that provided or 
added to the traditional Medicare. But it will also have a variety of 
other kinds of options.
  For example, you will probably have just one premium, one deductible, 
and copayment then for some of the services at the front end. There 
will probably be catastrophic coverage at the back end. In other words, 
you will be protected against the very large medical expenses you may 
face. That catastrophic coverage will be part of the premium and part 
of the subsidized care from the Government.
  This new option that is being provided is primarily being structured 
like the preferred provider organizations, or PPOs, which currently 
serve a lot of our population in the private sector today. If you are 
part of an employer-based insurance plan, for example, chances are you 
are enrolled in a PPO, or preferred provider organization. What is 
this? It is an insurance plan that pays you benefits with a premium, 
deductibles, and copays, as I said. There is provided a list of 
physicians you can go to, including specialists, generalists, and so 
on. Ordinarily, you can even go to a physician not on the list, but you 
may have to pay a little bit more for the coverage. In other words, the 
insurance will pay up to a certain amount and you may have to pay the 
difference. It is your choice. If you want to do that, you can. If you 
don't want to, you don't have to do that. That is what a lot of us are 
used to.
  There is a third kind of insurance, called the HMO, or managed care. 
Some people are very happy with the Medicare version of that. It is 
called Medicare+Choice. That is only available in certain parts of the 
country. We are not touching that. If you are happy with 
Medicare+Choice and you are in that, you will be able to continue to 
participate in that. As a matter of fact, it is hoped there will be 
more of those kinds of plans operating as a result of the private 
insurance option that will be made available. But nobody has to 
participate in that if they don't want to.
  The drug benefit that will be provided will have the same actuarial 
value as that of the PPOs and of traditional Medicare. Think of it in 
terms of traditional Medicare on one hand, plus a drug benefit and this 
new option of PPOs on the other hand. It, too, will have the same 
actuarial value drug benefit.
  On the PPO, however, there will be more integrated care. In other 
words, there will be a group of physicians who are taking care of you 
and they may have you do more preventive care, more tests. It would be 
to their benefit to not have to pay a lot of money for your heart 
attack, for example, so they want to keep you healthy and not get that 
heart attack. It enables you to take care of yourself in such a way 
that, hopefully, you will not have the heart attack. Under traditional 
care, you may not go to the doctor until you are really sick, at which 
point, of course, then are you not only going to be in trouble but 
there will be higher bills to pay.
  The idea of PPOs is maybe to reduce the overall cost of providing the 
care by taking care of you better so, of course, you will be more 
healthy, which is to the benefit of everybody.
  It is not going to work out that way for everybody, but at least the 
alternative or the option is there. Therefore, if you decide this is a 
better option for you, you will be able to participate in the PPO.
  I identified the need briefly, and I went into some description of 
the alternative plans provided in this legislation. Let me turn now to 
the one concern I have because I think we all want to make sure that if 
we are going to provide an alternative, it works.
  If we are really going to strengthen Medicare so people will have 
options or have choices, we expect those choices to provide better 
care, perhaps for a lesser amount of money, perhaps not, but better 
care should be the primary goal here. If we are going to attract people 
to enroll in that option, then we have to make sure it works.
  One of the concerns some of us have is that the way the bill is 
structured currently, it is less likely to succeed than it would if it 
were as the President originally proposed it. Let me go into a bit more 
detail what I am talking about.
  One of the problems with Medicare today is that we have price 
controls on the health care providers. The Government decides exactly 
how much it is going to reimburse doctors, for example, and that is how 
much they get reimbursed. The problem with that is we are trying to 
control costs, and so the Government keeps ratcheting down what we pay 
the doctors until we find the doctors are deciding not to treat 
Medicare patients anymore, until they decide they just cannot afford to 
continue to be part of Medicare.
  At this point, because we want to make sure seniors have plenty of 
health care providers available to take care of them--and, frankly, we 
do not want to put any of the health care providers out of business, 
obviously--then all of a sudden we are going to pay more to allow them 
to stay in operation, and that costs a lot of money. We put that back 
into the system. Then we begin to ratchet down what we pay again. It is 
the traditional problem of price controls.
  Nobody knows better than the market what the price of a good or 
service ought to be, but some bureaucrats, the idea goes, know better 
than the market. Whenever it is tempting for us to think that, we ought 
to look to history for a lesson. Price controls never work.
  Think of it in the way earthquakes occur. We have the great tectonic 
plates of the country, and they are constantly under stress. We may go 
for quite a long time without an earthquake, but if we have those 
tectonic plates stressing, all of a sudden, it is going to get to the 
point where they just cannot stand to be together anymore, and they are 
going to move. That creates an earthquake.
  It is a lot like that when it comes to price controls. We may be able 
to keep the lid on prices for a while, but the inevitable pressure will 
increase to the point that eventually something has to give. One thing 
that can give is that we no longer have the providers willing to 
provide the service because they are not getting paid enough to stay in 
business. Therefore, we have a little

[[Page 14887]]

revolution on our hands where people say: Look, they are all leaving 
the practice. We want to be cared for; can't you pay them more money? 
The Government says: OK, we will do that. We provide the money. What 
have we saved?
  It would have been much simpler to have allowed the market to work 
along the way so that the providers could be reimbursed what they need 
to stay in practice, the beneficiaries of care continue to be provided 
that care, and we have a more stable financial situation as well.
  Price controls simply do not work, and they have not worked in 
Medicare where we have tried to control the prices of the providers.
  What makes us think that controlling the prices of the PPOs is going 
to be any more successful? It clearly is not going to be, and yet that 
is, in effect, what we have in this bill.
  We have said we want to provide a private sector option, and then we 
place price controls on how much we are going to pay the providers. 
Some people say we might as well just stick with the current system of 
price controls on the providers. If we are going to provide a real 
private sector alternative, then do not turn around and cap the prices 
we are going to pay.
  The Government has a legitimate obligation to keep prices down, and I 
will get to that in a moment. But by the same token, we have an 
obligation to provide high-quality health care. If we are going to make 
the decision to provide an alternative to traditional Medicare, one 
which provides choices for people and relies upon the private sector to 
design plans that best meet the needs of different seniors all over 
this country, then we need to let those plans work.
  The way the administration designed it was that in deciding which 
PPOs would be allowed to provide the services, they would simply allow 
a competitive bid process. The plan is to have approximately 10 regions 
in the United States, to have the country divided; 50 States divided 
into 10 regions. Think of it as roughly 5 States per region, although 
that is not exactly how it will work out.
  In each region, if you are an insurance company and you want to 
provide this alternative to Medicare, you would bid and the three 
companies that provided the lowest bids would have the opportunity to 
provide this care. They would then be reimbursed by the Government at 
the level of the middle bid.
  In other words, if you had $10,000 for the top bid and $9,000 for the 
middle bid and $8,000 for the third bid, then all three companies would 
be reimbursed at the $9,000 per patient level, speaking hypothetically, 
of course. That competitive bidding process would enable the insurance 
companies to figure out how much money they need to make to stay in 
business, but also how little they can charge in order to get the 
business.
  It is the same process that any company undergoes. For example, a 
construction company wanting to build a highway bids on the highway. If 
they bid too high, they are not going to get the job. If they bid too 
low, they are not going to be able to pay all their workers and make a 
go of it. So they have to calculate what it is going to take to stay in 
business, to make a little profit, and still get the business. That is 
what encourages them to be careful with how they spend their money--to 
be economical, frugal, and thoughtful with what they do, and keep the 
customer happy.
  The same thing happens with insurance companies. When the Government 
comes along and says, We are not going to take the three lowest bids, 
we are going to put a cap on how much you can bid, they have totally 
distorted the process. So if the Government came along and said, for 
example, that $10,000, $9,000 and $8,000, no, we are not going to do 
that, we are going to say no company can bid more than $8,000, what is 
that going to do? The company that bid $10,000 is going to say: We 
cannot make any money at that; we cannot even serve the patients; and 
we are not going to try to fool anybody and go into debt. So we are not 
going to bid.
  The company that bid $9,000 is going to say: I do not know if I can 
make it work. We had better not bid for the same reasons.
  The company that bid $8,000 is going to say: We can make a go; the 
Government says we cannot bid more than $8,000; we are going to bid 
that. What kind of choice do the consumers have? One company.
  What if the Government decides it knows best and the bureaucrats 
decide to set the level at $7,000? Then how many companies are going to 
bid? This is precisely the problem the Congressional Budget Office 
identified.
  The Congressional Budget Office said when you set the bid at the 
Medicare payment level, which is the way the bill is constructed, that 
is what the level is going to be, you may end up with nobody bidding. 
Do you know what the Congressional Budget Office says the participation 
rate is going to be under the bill? Two percent. Effectively nobody is 
going to bid. Nobody is going to be able to participate because the 
Medicare level--remember the price control level I talked about 
before--that level is going to be the level set under the bill.
  What they are saying is almost nobody is going to be able to work 
under that artificial capped rate. So only 2 percent of the people are 
going to participate in these plans. The plans are not going to be able 
to provide a robust enough benefit, a benefit that attracts people into 
the plan. What are the plans going to do? Obviously, they are not going 
to participate. What kind of option have we created?
  There are some on the far left, I suppose, who will say that is 
great; that proves the only thing that works is a Government, one-size-
fits-all medical benefit, and we can finally get to the single-payer 
system some wanted to do all along. Those, on the other hand, who want 
to see the private market system work, will say: No, let's try to 
adjust the bill; it will not take a huge adjustment, to be sure it can 
actually work. The way we would adjust it is we would simply substitute 
this Medicare capped rate, the price control rate, for that which the 
President originally proposed; mainly, take the three lowest bids. The 
bids still have to be low enough to get the business, so there is still 
a big incentive to keep the cost down, but at least you know you are 
going to get some people bidding.
  The estimate in this instance is the participation would be somewhere 
between 30, 40, or maybe even more than 40, 48 percent, something like 
that, 43 percent. That is a lot more people participating in the plan. 
It at least would have a chance to work then.
  It seems to me, if we are dealing between estimates of 2 percent on 
one hand and over 40 percent on the other hand, that is too big a 
difference for us to be rushing to pass this bill.
  Nobody knows for sure what the answer is. Will it be 2 percent? Will 
it be 40 percent? If we are dealing with that kind of uncertainty, it 
seems to me we should not be rolling the dice, especially since what is 
at stake is the quality of health care for our senior citizens. We 
ought to take our time and do it right.
  As I said, fortunately we have the answer in front of us. It is what 
the President originally proposed, take the three lowest bids and then 
use the middle of those three bids. We could easily substitute that for 
what is in the bill today. If I had my druthers, we would even go one 
step further.
  Those of us who say what we are providing for our seniors is very 
much like what Members of Congress get in health care are almost right 
but not quite. Under the FEHBP, the Federal Employees Health Benefits 
Plan, all of us, plus the other 10 million Federal employees, get a 
chance to enroll in one of several PPOs.
  Do the PPOs that provide the care for Federal employees, including 
Members of Congress, have price caps on them? No. Do they even have to 
take the three lowest bids? No. Whatever companies would like to bid 
that will offer the benefits that the Government promises to its 
employees, if they are qualified companies and they offer the benefits, 
it does not matter what they bid; they get to offer those benefits to 
the employees.
  Now, if they bid way too high, they can still bid and they can still 
offer the

[[Page 14888]]

plan, but none of us are going to join because it will cost too much 
money. So they still have to be reasonable. But if they want to 
participate at a rate higher than some of the other plans, they can 
try. If they can sell their product, then who is hurt? Not so with 
Medicare. What the President has said is in order to keep the costs 
down, we are going to take the three lowest bids. Well, that is not as 
good as what the Federal employees have, but we believe it is a system 
that can be made to work. What cannot work is to go to the lowest 
common denominator, and that is the Medicare artificially controlled, 
capped price control rate that CBO says will not work. That is the 
change we are working with the chairman and the ranking member of the 
committee and the administration to effectuate in this legislation. We 
have to get the score from the Congressional Budget Office; that is to 
say, they have to tell us how much the two different versions would 
cost so that we would know and be able to fold that into the $400 
billion budgeted amount with which we have to work. It is my hope over 
the next few days that we will be able to do that and be able to offer 
an amendment that can be supported by all of us that would permit a 
more plausible scenario for the preferred provider organizations to 
succeed so that we can honestly say to our seniors they have two 
legitimate options.
  They can stay in traditional Medicare or there is a good PPO option, 
their choice, and have some confidence that the PPO option will 
actually work and will be a good option for them.
  I am going to close with this thought: Whenever there is a third 
party paying for something that is near and dear to you, you have to be 
very careful because that third party is going to have a dual loyalty. 
If it is an employer or the Federal Government, let's say, and they are 
buying your health insurance, they want to take care of you, your 
employer wants you to be happy and healthy, and in a plan like 
Medicare, the Government certainly wants to take care of the senior 
citizens, but there is another motivating factor for either the 
employer or the Government. What is it? It is, how much does it cost 
me? The employer can only afford to pay so much for the health care of 
his or her employees. The Government, because it is taxpayer money, can 
only afford to pay so much for the care it provides to senior citizens 
under Medicare. So you always have to ask the question: If I am relying 
upon my employer's provided insurance or the Government's provided 
insurance, am I getting the best quality care I can get? Reasonably. Am 
I getting affordable, high quality care? It is a question you should 
always be asking because when a third party pays, there are mixed 
loyalties.
  If I am paying for it all out of my own pocket, and I can afford to 
do that, then I am going to pay for good care for me and my family. But 
if I am paying for a complete stranger's care just ask yourself: Do I 
care quite as much? Am I going to be quite as concerned about the 
quality of care or am I going to be at least equally motivated by how 
much it costs?
  Being concerned about saving money, am I going to maybe skimp and 
save a little bit? What is the result of that skimping and saving? Is 
it going to be a lower quality care?
  When we set a price and say you can only bid so much, what is the 
potential effect of that? It is lower quality care. That is the 
tradeoff we have to be very careful of. We are buying care for senior 
citizens and we have to be very careful that in our concern about 
wasting taxpayer dollars and being able to afford this quality care, 
that quality does not suffer as a result.
  I submit the best way to do that, when the third party, the 
Government, is paying for the bulk of this care, is not to set a price 
cap because the inevitable result will be the ratcheting down of the 
prices and very uneven, if not poorer, quality care but, rather to 
allow the insurance companies to bid what they think they have to to 
win the contract but enough to provide high-quality care.
  Will that cost less than traditional Medicare? A lot of people at 
CMS, the Government-run Medicare system, think it will be actually less 
than traditional Medicare. Will it be more than traditional Medicare? 
It might be. CBO thinks it will be more. The experts are not sure. I 
suggest that actually there is no one answer. It will depend upon how 
things evolve. So we cannot know for sure one way or the other.
  So why should bureaucrats or Senators think we are so smart as to be 
able to predict this in advance when, again, one Government agency says 
2 percent and another one says over 40 percent? Clearly, the experts 
are in disagreement. Why would we be so arrogant as to think we know 
best and can set those prices? Let the market work and determine what 
can be bid for companies to stay in business but provide high-quality 
care. Then let the customer, the consumer, the seniors, decide are they 
getting their money's worth or not. If they think this is a good deal 
for them, they will choose that option. If they think it is not, they 
always have the traditional Medicare option to stick with. So it is the 
best of all worlds.
  That is what this is all about, not trying to shoehorn everybody into 
a one-size-fits-all plan. Regions of the country are different. Urban 
versus rural is different. The needs of seniors are different. There 
are so many different factors that we should not presume to know best. 
We need to be willing to spend what it takes for high-quality care. The 
only way we are going to know what that amount is, is to let the market 
work, not to impose an artificial control on it. That is why I think we 
are going to have to make a change in this bill.
  Fortunately, it is a relatively modest change, but I think it is a 
critical change because it could mean the difference between a 
successful Medicare Program and one which is not, and we will have 
missed a historic opportunity to strengthen Medicare if we fail to 
address these kinds of issues in the legislation that we are dealing 
with over the course of the next 2 weeks.
  I thank the chairman and ranking member of the Finance Committee for 
their hard work, the administration for the work it has put in, my 
colleagues who have worked a lot on this, and I am hoping over the next 
several days we will be able to come together in a bipartisan way to 
craft a plan that truly provides new drug benefits for our seniors, 
choices that they will like and appreciate, and a private sector 
alternative that has a chance at working.
  The PRESIDING OFFICER. The Senator from Maine.
  Ms. COLLINS. Mr. President, today the Senate begins a truly historic 
debate on landmark legislation that will make affordable, comprehensive 
prescription drug benefits available to our Nation's seniors as well as 
to people with disabilities who receive Medicare benefits. This 
legislation is long overdue, but I am confident the Senate will, in 
fact, approve it before the Fourth of July. That is good news for our 
Nation's seniors.
  The Prescription Drug and Medicare Improvement Act that the Finance 
Committee approved last week represents the most significant expansion 
of the Medicare Program in its 38-year history. I commend the chairman, 
the ranking member, and the other members of the Finance Committee, 
including my senior colleague, Senator Snowe, for their hard work in 
devising and developing this important package.
  We now have an unprecedented opportunity to make the improvements 
necessary to ensure that the Medicare Program can provide peace of mind 
to our Nation's seniors and true health security, not only to the 40 
million American seniors who rely on Medicare today but to future 
generations as well. We want a strong Medicare Program that meets the 
needs of our grandparents, our parents, and our children's generation.
  With recent advances in research, prescription drugs can become 
literally a lifeline for patients whose drug regimen protects them from 
becoming sicker. Prescription drugs reduce the need to treat serious 
illness through hospitalization and surgery. Soaring prescription drug 
costs, however, have placed a tremendous financial burden

[[Page 14889]]

on millions of our seniors who must pay for these necessary drugs out 
of their own pockets. Monthly drug bills of $300, $400, or even $500 
are not at all uncommon for older seniors living on limited incomes.
  For example, Emery Jensen of Gorham, ME, has an annual drug bill of 
about $4,600. That is about one-quarter of the entire income he and his 
wife receive from Social Security. Another constituent from coastal 
Maine sent me a 2-page list of the medications her husband took over an 
8-month period before he died. The total cost: Nearly $4,000. More and 
more, I am hearing disturbing accounts of older Americans who are 
running up huge high-interest credit card bills in order to buy 
medicine they could not otherwise afford. Even more alarming are the 
accounts of patients who are either skipping doses to stretch out their 
prescriptions or forced to choose between paying the bills or buying 
the pills that keep them healthy.
  I will never forget an elderly woman coming up to me in the grocery 
store in Bangor and saying to me she was only able to get half the 
number of pills her doctor had prescribed because otherwise she would 
not be able to buy the food she needed. No senior in our country should 
be forced to choose between putting food on their table and buying the 
pills they need to remain healthy.
  It is critical we bring Medicare into line with most private sector 
insurance plans and expand the program to include coverage for 
prescription drugs. The legislation before the Senate today will make 
prescription drug coverage a permanent part of Medicare. This is an 
important improvement over previous versions of this bill which had 
sunset dates which would have created tremendous anxiety for our 
seniors on whether this would be only a temporary program.
  This bill will make this coverage permanently part of Medicare. It 
provides a comprehensive prescription drug benefit that will be 
available to all seniors in Medicare, regardless of where they live. 
Moreover, that benefit will be equal for everyone, both for those who 
choose to stay in the traditional program as well as for those seniors 
who elect one of the new programs, the new plan options available in 
the Medicare Advantage Program which is modeled after the Federal 
Employees Health Benefits Program.
  Beginning in 2006, seniors will be able to get comprehensive 
prescription drug coverage, including both upfront and catastrophic 
protection, for $35 a month premium. Moreover, low-income seniors will 
receive generous subsidies and get additional protections and 
assistance. The more than 9 million seniors nationwide, including 
60,000 seniors living in Maine, who have incomes below 135 percent of 
the poverty level will not have to pay any premium to secure coverage. 
That 135 percent of poverty equals $12,120 for a single person and 
$16,360 for a couple. It is important we provide that extra assistance 
for these very low income elderly people who would be hard pressed even 
to afford that $35 a month. Unfortunately, this is not going to happen 
overnight. It will take some time for this new benefit to come online.
  To provide some interim assistance, starting next year seniors will 
get prescription drug discount cards that will save them between 15 and 
25 percent on each drug purchase. Lower income seniors will receive a 
benefit of $600 on top of that starting next year.
  There are also some other significant features in this bill. 
Medicare's reimbursement systems have historically tended to favor 
large urban areas and failed to take into account the needs of more 
rural States. This simply is not fair to States such as New Hampshire, 
which the Presiding Officer represents so ably, or my home State of 
Maine.
  Ironically, Maine's low payment rates are also the result of its long 
history of providing cost effective high-quality care. We have a 
strange system where, if you delivered care in a low-cost manner, the 
formula actually penalizes you for doing so. In the early 1980s, lower 
than average costs in Maine were used to justify lower Medicare 
payments to doctors and hospitals. Since then, Medicare's payment 
policies have only served to widen the gap between low- and high-cost 
States.
  This is an issue on which I have been working my entire time in the 
Senate. I remember in the previous administration meeting with the head 
of what was then called the Health Care Financing Administration and 
her telling me that in fact the State of Maine ranked dead last in 
Medicare reimbursements. Since that time, I have worked hard to improve 
the reimbursements to Maine, and now we are up to about 46, but that 
still represents a tremendous inequity.
  I am, therefore, particularly pleased the legislation before the 
Senate takes steps to strengthen the health care safety net by 
increasing Medicare payments to physicians and hospitals in rural 
States such as Maine to help even out the reimbursement and eliminate 
the inequities that have hurt rural States.
  According to the American Hospital Association, the provisions in 
this bill will increase Medicare payments to hospitals in Maine by 
approximately $63 million over the next 10 years. That is a step in the 
right direction. It will be particularly helpful for our small 
community hospitals which are struggling to make ends meet. Those same 
hospitals tend to serve a population that is older, poorer, and sicker, 
so they particularly suffer when Medicare reimbursements are unfair 
because they simply do not cover the cost of treating this older, 
poorer, sicker population.
  This legislation also restores funding to some extent for home 
health. That benefit has been cut far more deeply and abruptly than any 
benefit in the history of the Medicare Program. Earlier this month, 54 
Senators, at my request, joined me in sending a letter to the chairman 
and the ranking member of the Finance Committee asking that they avoid 
any further cuts in home health care and extend the additional payment 
for home health services in rural areas that expired on April 1 of this 
year.
  I am pleased the legislation before the Senate does provide for a 
full inflation update for home health agencies and also extends the 
rural add-on that is vital to sustaining home health care in rural 
areas of our country. Surveys have shown the delivery of home health 
services in rural areas can be as much as 12 to 15 percent more costly 
because of the extra travel time required to cover long distances 
between patients, higher transportation expenses, and other factors.
  While I am disappointed the Finance Committee reduced the add-on 
payment from 10 percent to 5 percent, at least it has been extended, 
and that will help to ensure that Medicare patients in rural areas 
continue to have access to home health care services.
  The Prescription Drug and Medicare Improvement Act was approved by 
the Finance Committee by a strong 16 to 5 bipartisan vote. I think that 
bodes very well for the future of this legislation. At long last, this 
legislation holds out real hope to our seniors that they will finally 
receive an affordable, comprehensive Medicare prescription drug 
benefit.
  Since the cost of providing a meaningful drug benefit will only 
increase as time passes, it is imperative that we act now. I am pleased 
the majority leader has scheduled this legislation and set a goal of 
its passage before we adjourn for the July 4 recess.
  Our senior citizens deserve no less from us. We must act. I am 
confident we will act to provide a long overdue prescription drug 
benefit.
  I yield the floor and I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Fitzgerald). The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. CORNYN. Mr. President, I ask unanimous consent the order for the 
quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. CORNYN. Mr. President, I ask unanimous consent I be permitted to 
speak as in morning business for no longer than 15 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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