[Congressional Record (Bound Edition), Volume 153 (2007), Part 1]
[Extensions of Remarks]
[Page 842]
[From the U.S. Government Publishing Office, www.gpo.gov]




                    FIRST, DO LESS HARM IN MEDICARE

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                      Wednesday, January 10, 2007

  Mr. STARK. Madam Speaker, as we vote later this week on negotiating 
better prices for Part D drugs in Medicare, we must remember that the 
debate is about much more than prescription drugs. Requiring the 
Secretary to negotiate for lower drug prices is just one small step in 
the fight against Medicare privatization and the conservative push to 
end the Medicare entitlement.
  Madam Speaker, I ask that the Paul Krugman Op-Ed from the January 5, 
2007, edition of the New York Times be printed in the Record.

                          First, Do Less Harm

                           (By Paul Krugman)

       Universal health care, much as we need it, won't happen 
     until there's a change of management in the White House. In 
     the meantime, however, Congress can take an important step 
     toward making our health care system less wasteful, by fixing 
     the Medicare Middleman Multiplication Act of 2003.
       Officially, of course, it was the Medicare Modernization 
     Act. But as we learned during the debate over Social 
     Security, in Bushspeak ``modernize'' is a synonym for 
     ``privatize.'' And one of the main features of the 
     legislation was an effort to bring private-sector 
     fragmentation and inefficiency to one of America's most 
     important public programs.
       The process actually started in the 1990s, when Medicare 
     began allowing recipients to replace traditional Medicare--in 
     which the government pays doctors and hospitals--with private 
     managed-care plans, in which the government pays a fee to an 
     H.M.O. The magic of the marketplace was supposed to cut 
     Medicare's costs.
       The plan backfired. H.M.O.'s received fees reflecting the 
     medical costs of the average Medicare recipient, but to 
     maximize profits they selectively enrolled only healthier 
     seniors, leaving sicker, more expensive people in traditional 
     Medicare. Once Medicare became aware of this cream-skimming 
     and started adjusting payments to reflect beneficiaries' 
     health, the H.M.O.'s began dropping out: their extra layer of 
     bureaucracy meant that they had higher costs than traditional 
     Medicare and couldn't compete on a financially fair basis.
       That should have been the end of the story. But for the 
     Bush administration and its Congressional allies, 
     privatization isn't a way to deliver better government 
     services--it's an end in itself. So the 2003 legislation 
     increased payments to Medicare-supported H.M.O.'s, which were 
     renamed Medicare Advantage plans. These plans are now heavily 
     subsidized.
       According to the Medicare Payment Advisory Commission, an 
     independent federal body that advises Congress on Medicare 
     issues, Medicare Advantage now costs 11 percent more per 
     beneficiary than traditional Medicare. According to the 
     Commonwealth Fund, which has a similar estimate of the excess 
     cost, the subsidy to private H.M.O.'s cost Medicare $5.4 
     billion in 2005.
       The inability of private middlemen to win a fair 
     competition against traditional Medicare was embarrassing to 
     those who sing the praises of privatization. Maybe that's why 
     the Bush administration made sure that there is no 
     competition at all in Part D, the drug program. There's no 
     traditional Medicare version of Part D, in which the 
     government pays drug costs directly. Instead, the elderly 
     must get coverage from a private insurance company, which 
     then receives a government subsidy.
       As a result, Part D is highly confusing. It's also 
     needlessly expensive, for two reasons: the insurance 
     companies add an extra layer of bureaucracy, and they have 
     limited ability to bargain with drug companies for lower 
     prices (and Medicare is prohibited from bargaining on their 
     behalf). One indicator of how much Medicare is overspending 
     is the sharp rise in prices paid by millions of low-income 
     seniors whose drug coverage has been switched from Medicaid, 
     which doesn't rely on middlemen and does bargain over prices, 
     to the new Medicare program.
       The costs imposed on Medicare by gratuitous privatization 
     are almost certainly higher than the cost of providing health 
     insurance to the eight million children in the United States 
     who lack coverage. But recent news analyses have suggested 
     that Democrats may not be able to guarantee coverage to all 
     children because this would conflict with their pledge to be 
     fiscally responsible. Isn't it strange how fiscal 
     responsibility is a big concern when Congress is trying to 
     help children, but a nonissue when Congress is subsidizing 
     drug and insurance companies?
       What should Congress do? The new Democratic majority is 
     poised to reduce drug prices by allowing--and, probably, 
     requiring--Medicare to negotiate prices on behalf of the 
     private drug plans. But it should go further, and force 
     Medicare to offer direct drug coverage that competes on a 
     financially fair basis with the private plans. And it should 
     end the subsidy to Medicare Advantage, forcing H.M.O.'s to 
     engage in fair competition with traditional Medicare.
       Conservatives will fight fiercely against these moves. They 
     say they believe in competition--but they're against 
     competition that might show the public sector doing a better 
     job than the private sector. Progressives should support 
     these moves for the same reason. Ending the subsidies to 
     middlemen, in addition to saving a lot of money, would point 
     the way to broader health care reform.

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