[Congressional Record (Bound Edition), Volume 153 (2007), Part 20]
[Extensions of Remarks]
[Pages 28053-28055]
[From the U.S. Government Publishing Office, www.gpo.gov]




                         THE FUTURE OF MEDICARE

                                 ______
                                 

                        HON. DENNIS J. KUCINICH

                                of ohio

                    in the house of representatives

                       Tuesday, October 23, 2007

  Mr. KUCINICH. Madam Speaker, I submit for the Record a copy of my 
speech delivered at the summit on the future of Medicare on October 19, 
2007.

       Good afternoon. I want to thank each of you for coming to 
     discuss one of the issues that reflects the values of this 
     country--health insurance for retirees and the disabled. I 
     want to especially thank the Senior Voice Coalition, a group 
     of organizations and passionate individuals who are truly the 
     grassroots leaders in organizing around issues affecting 
     seniors in our community. Before I begin, please know that 
     while there are many issues of importance, we will only be 
     talking about Medicare at this summit today. If there are 
     other issues on your mind, I would be happy to discuss them 
     with you if there is time after.
       Many of you recall that I held 13 town hall meetings in 
     2005 during the Social Security privatization debate. At 
     these town halls, I presented detailed information on the 
     reasons why I rejected the notion advocated by the President 
     and some in Congress that there was a ``crisis'' in the 
     solvency of the combined Old Age, Survivors, and Disability 
     Insurance Trust Fund. We were told that to correct this 
     manufactured crisis, the best solution was to privatize 
     Social Security. Even if there was a ``crisis,'' which did 
     not actually exist, according to both the Social Security 
     Administration and the Congressional Budget Office, the worst 
     solution would be to drain the trust fund more quickly and 
     therefore undermine the entire program.
       Folks, we are on the verge of a very similar debate today 
     with Medicare, our nation's other social insurance program. 
     There is a symbiotic relationship between Social Security and 
     Medicare. But unlike with Social Security, much of Medicare 
     has already been privatized. Today I want to explore that 
     with you by looking at two different Medicare programs that 
     have been the cornerstones of efforts to privatize Medicare 
     to see how they have performed. First, we'll look at the 
     Medicare prescription drug plan, also known as ``Part D,'' 
     which leaves enrollees no choice but to go through the 
     extraneous insurance companies. Second, Medicare Advantage 
     shoehorns in the option to have private insurance industry 
     middlemen to dole out health care according to what is 
     profitable.


                                 Part D

       In 2003 came the single biggest Medicare privatization 
     effort to date, the Medicare Modernization Act. It passed the 
     House of Representatives only because the then-Majority party 
     held open a 15 minute vote for over three hours in the middle 
     of the night so they could strong-arm their way to a passing 
     vote. Not only did it create an entirely private, chaotic 
     prescription drug program, but it also dramatically increased 
     subsidies to Medicare Advantage plans.
       Several of us in Congress warned of what we were buying 
     into with Part D. We warned against the forced inclusion of 
     the unnecessary middleman--the insurance industry--and its 
     likely effects on cost and access to meds. We warned about 
     CMS' inability to negotiate drug prices like the VA does. We 
     warned of a benefit that was far too complex. We warned of 
     the now famous doughnut hole that left people without 
     coverage for a period of time even though they were still 
     paying premiums. We supported a bill that created a new 
     prescription drug benefit that did away with all those 
     problems by keeping the insurance industry out of the benefit 
     and letting Medicare administer it.
       As you know, we were not alone in our fight. At the time, 
     the Center for Economic and Policy Research released a study 
     showing that even if we took the modest step of allowing 
     Medicare to negotiate drug prices, we would save so much 
     money that we would be able to cover every single beneficiary 
     with no co-payments, no deductibles, and no premiums . . . 
     and still have $40 billion dollars left.
       Oversight and Government Reform Committee report on Part 
     D.--I am sad to say that we were right. Just this Monday, the 
     Committee on Oversight and Government Reform released a 
     study, which was requested by a handful of my colleagues and 
     me, on the performance of Part D so far. It found three 
     things. First, it confirmed the most obvious concern; that 
     administrative costs are far higher than they should be. This 
     was expected because of the forced inclusion of the insurance 
     industry in the benefit. The insurers reported administrative 
     expenses, sales costs, and profits of almost $5 billion in 
     2007--including $1 billion in profits alone. The 
     administrative costs of the privatized Part D program are 
     almost six times higher than the administrative costs of the 
     traditional Medicare program.
       The second finding was that the insurance industries were 
     not doing a good job of negotiating with the pharmaceutical 
     companies to lower prices. One of the main rallying cries of 
     the Part D privatization effort was that the private insurers 
     could be more effective negotiators than Medicare. Turns out 
     to not be true. Now, instead of negotiating for lower prices, 
     the insurers negotiate for rebates from the drug companies, 
     which is what the Part D law calls for. The committee 
     investigation found that drug price rebates negotiated by the 
     insurers reduce Medicare drug spending by just 8.1 percent. 
     In contrast, rebates in the Medicaid program reduce drug 
     spending by 26 percent, over three times as much. Because of 
     the difference in the size of the rebates, the transfer of 
     low-income seniors from Medicaid drug coverage to Medicare 
     drug coverage will result in a $2.8 billion windfall for drug 
     manufacturers in 2007. Furthermore, the insurers receive no 
     rebates or other manufacturer discounts for three-quarters of 
     the drugs used by seniors.
       And the third finding was that when insurers do actually 
     get a rebate from the drug companies, rather than passing the 
     savings on to seniors in the form of lower prices, they keep 
     the money for themselves! This year alone, the private 
     insurers will receive $1 billion in rebates on purchases that 
     seniors pay for out of their own pockets, thanks to the 
     doughnut hole. But beneficiaries continue to pay premiums.
       Unpredictability in Part D.--Another problem with Part D as 
     it has been implemented is that stability is lost. Much like 
     with corporate pension scandals, instead of receiving a 
     guaranteed benefit, those enrolled in Medicare Part D only 
     receive a guaranteed bill to pay. Instead of being able to 
     have peace of mind when it comes to whether or not drugs 
     prescribed by a doctor will actually be covered, a state of 
     financial nervousness and uncertainty is par for the course 
     with Medicare Part D. A consumer's Union study found that 
     most insurers raise the cost of their drugs during the year--
     in one case by 28 percent. The same uncertainty is present in 
     predicting which month beneficiaries will hit the doughnut 
     hole and be forced to pay all your drug costs as if you had 
     no benefit at all.
       Clearly, Part D is more of a benefit for the pharmaceutical 
     and insurance industries than retirees and the disabled. The 
     Part D provisions of the Medicare bill alone guaranteed $139 
     billion in guaranteed profits for the pharmaceutical 
     industry, which amounts to 61 percent of the total spending 
     in the bill for prescription drugs, according to Boston 
     University School of Public Health. Even so, Part D is not 
     where the real money is. The real money is in the Medicare 
     Advantage, the HMOs, PPOs, PFFSs and other alphabet soup of 
     private plans offered through Medicare as an alternative to 
     traditional Medicare. I'd like to talk a bit about these 
     plans now.


                           Medicare Advantage

       Medicare Advantage plans have been in existence for several 
     years now, but the 2003 Medicare Modernization Act has 
     drastically accelerated privatization. Lets take a look at 
     how the plans have done, starting with how they deal with 
     customers. I'll start with their efforts to sign you up and 
     then we'll see how they treat you after you're already on the 
     plan and are requesting coverage.
       Marketing.--An October 7 article in the New York Times 
     conducted their own review of 91 federal audits of privately 
     run Medicare plans--both Medicare Advantage Plans as well as 
     Part D plans. They found that ``tens of thousands of Medicare 
     recipients have been victims of deceptive sales tactics.'' 
     They also found that ``since March, Medicare has imposed 
     fines of more than $770,000 on 11 companies for marketing 
     violations and failure to provide timely notice to 
     beneficiaries about changes in costs and benefits.'' I want 
     to read you 2 other quotes from that article to round out the 
     picture. ``In July, Medicare terminated its contract with a 
     private plan in Florida after finding that it posed an 
     `imminent and serious threat' to its 11,000 members.'' 
     ``Medicare officials said that compliance problems occurred 
     most often in two areas: marketing, and the handling of 
     appeals and grievances related to the quality of care.'' That 
     stands to reason since that is where the profit is made.
       Humana is a good case study. Humana, which is the second-
     largest provider of Medicare Advantage plans, was required to 
     fulfill corrective action plans for 300 different violations. 
     The Center for Medicare and Medicaid Services or CMS 
     administers Medicare. Their audit results for Humana included 
     findings that marketing agents were not trained or 
     supervised, enrollees were not informed of changes to plan 
     formularies (list of covered drugs), and enrollees were not 
     provided with explanations for claims denials or appeal 
     rights when their claims had been denied. This is the same 
     company that gained 4 million new policy holders and reported 
     to stockholders in April that it had amassed ``record- 
     breaking revenues,'' according to an article in ``The 
     Nation.'' Keep in mind that this company pays its agents a 
     commission five times greater for enrolling individuals into 
     their Medicare Advantage plan than the commission they 
     receive for enrolling them into a stand-alone prescription 
     drug plan. Similar arrangements are true for other leading 
     insurers like United Health Care, Aetna, and Blue Cross and 
     Blue Shield. But why would they do that?
       Big insurance companies are quite eager to sign up people 
     for Part D plans. But Part D

[[Page 28054]]

     plans are nothing compared to the profit to be made in 
     Medicare Advantage. So insurers offer low price Part D plans 
     in order to get their foot in the door with those who were on 
     traditional Medicare. Then they aggressively marketed their 
     Medicare Advantage plans, too often using the unscrupulous 
     tactics I just described. Such marketing tactics are 
     especially effective when the plans are so complex, the 
     customer is easily fooled. In Humana's case, the tactics 
     worked. They were a relatively small company before the 
     prescription drug plan and the Medicare Advantage push. But 
     they were able to get 100,000 people to move to Medicare 
     Advantage plans. An insurance consultant said ``an additional 
     100,000 people contributing to top line revenue is not 
     insignificant--it's an extra billion dollars.''
       Customer Service.--Now that's just the marketing. What do 
     they do when they have you? The New York Times article found 
     that both Medicare Advantage and Part D enrollees ``had 
     claims improperly denied by private insurers.'' Some examples 
     of other problems found include ``the improper termination of 
     coverage for people with H.I.V. and AIDS, huge backlogs of 
     claims and complaints, and a failure to answer telephone 
     calls from consumers, doctors and drugstores.''
       WellPoint, an Indianapolis-based company that covers 
     360,000 members under Medicare, had a backlog of 354,000 
     claims under its Medicare plans. Auditors logged an average 
     wait time of 27 minutes to answer enrollee phone calls and a 
     16-minute wait time to respond to provider calls. Of the more 
     egregious offenses, Sierra Health, based in Las Vegas, 
     wrongfully terminated drug coverage for 2,300 HIV-positive 
     Medicare Advantage enrollees, improperly claiming they had 
     defaulted on plan premiums.
       Fewer options, not more.--Medicare Advantage advocates 
     often speak of the greater choice in their plans as opposed 
     to traditional Medicare. I don't think you can have more 
     choice than to be able to choose from any doctor, which is 
     the case with traditional Medicare, but we'll take a look 
     anyway.
       As with Part D plans, there are countless stories of 
     beneficiaries seeing changes to their plan midyear, including 
     cost increases, dropping certain drugs from formularies, or 
     doctors dropping out from frustration with the plans. In 
     fact, Medicare Advantage plans talk a lot about their 
     extensive network of doctors but customers frequently find 
     that when try to go to one, the docs won't take Medicare 
     Advantage customers. Many doctors don't like it because of 
     the low pay and because of the insurance industry second-
     guessing their diagnoses and choices for providing care. Even 
     though all these changes can be made at any time in the 
     enrollment cycle, beneficiaries can only switch plans once 
     per year.
       Some argue that Medicare Advantage offers a better quality 
     of care than traditional Medicare. The Congressional Budget 
     Office disagrees, stating ``though Medicare Advantage plans 
     cost more than care under the fee-for-service program does, 
     on average, they would be more cost-effective if they 
     delivered a sufficiently higher quality of care . . . The 
     limited [quality] measures available suggest that Medicare 
     Advantage plans are not more cost-effective than the fee-for-
     service program.''
       Those enrolled in Medicare agree, as traditional Medicare 
     beneficiaries are less likely to have problems accessing 
     specialists, according to MedPAC.
       Out of pocket costs.--Medicare Advantage insurance 
     companies make money when they shift the costs onto you and 
     me. One of the ways they do that is by providing incomplete 
     insurance or underinsurance. They can offer meager coverage 
     in specific unnoticeable areas that only matter if you get 
     the illness that isn't covered well. Because Medicare 
     Advantage plans are not required to be standardized--meaning 
     different companies are not required to offer the same plan 
     structure and compete only for price--these companies can 
     skew their plans to maximize their profits and decrease 
     benefits. One tragic result is that people in more need of 
     services, especially those in need of physician-administered 
     chemotherapy drugs and dialysis services, pay more under 
     Medicare Advantage than they would under traditional Medicare 
     for less service, Their out-of-pocket costs are unexpectedly 
     and dangerously high. This is one of the biggest health care 
     problems that we don't hear enough about. About half of all 
     bankruptcies in this country are related to medical bills. Of 
     those medical bankruptcies, 75 percent of the people had 
     insurance before they got sick. But because their insurance 
     still allowed them to go bankrupt, it was clearly lacking. 
     Profitable, but lacking.
       For those of you that have seen Sicko, the Michael Moore 
     movie about health care, you know that another way insurance 
     companies make money is to deny benefits, which is done in 
     spades under Medicare Advantage. The Medicare Rights Center 
     who collects many Medicare Advantage complaints told the 
     story of an 80 year old man enrolled in a private Medicare 
     plan called HealthSpring. He had a heart attack and went to 
     the hospital. All of his claims were denied because he didn't 
     get prior authorization from the plan to enter the hospital. 
     His hospital bills now top $87,000.
       Propping Medicare Advantage up.--You would think that since 
     Medicare Advantage beneficiaries are getting such an inferior 
     product, that it would cost less. It is not so. As with Part 
     D, Medicare Advantage is far more costly than traditional 
     Medicare. Both the Medicare Payment Advisory Commission 
     (MedPAC) and the Congressional Budget Office (CBO) report 
     that for 2007, it costs taxpayers 12 percent more (on 
     average) to cover beneficiaries enrolled in private Medicare 
     Advantage Plans than under traditional Medicare. That is an 
     extra $149 billion over 10 years. The Chief Medicare Actuary 
     has said that the beneficiary enrolled in traditional 
     Medicare pays an extra $24 per person this year because of 
     overpayments to Medicare Advantage. This overspending also 
     cuts years off the life of the Medicare trust fund and 
     diverts money away from hospital and acute care services, 
     While the Social Security trust fund can pay 100 percent of 
     benefits until at least the year 2041 without any changes 
     whatsoever, the Medicare Hospital Insurance (or HI) Trust 
     Fund can pay 100 percent of claims only until the year 2019, 
     based on current actuarial assumptions, in large part because 
     of privatization.
       Not only is the program inefficient, but it is growing 
     steadily. According to the Congressional Budget Office, 18 
     percent of current Medicare beneficiaries are enrolled in a 
     Medicare Advantage plan. This number is expected to increase 
     to 26 percent by 2017. The biggest growth--about 650 percent 
     since 2005--has been in enrollees in the private fee for 
     service plans which have enjoyed exclusive access to major 
     subsidies from Congress as well as exceptions to standards of 
     quality care. Unfortunately, the fastest growing type of plan 
     is also the least efficient of all Medicare Advantage plans. 
     They cost, on average, 19 percent more than traditional fee 
     for service Medicare. Where does all that money that should 
     go to health care, actually go? MedPAC found that half of the 
     overpayments go directly to profits, marketing, and 
     administrative costs. That's worth repeating. Half of the 
     overpayments go directly to profits, marketing, and 
     administrative costs.
       These private fee for service plans aren't the only ones to 
     get corporate welfare. The PPO ``stabilization'' fund is a 
     slush fund designed to encourage growth of new regional PPOs 
     of 10 billion dollars over 10 years. That's in addition to 
     general subsidies for Medicare Advantage plans. But in 2006, 
     88 percent of beneficiaries had access to a regional PPO. So 
     subsidies for growth are unnecessary. Even MedPac recommended 
     eliminating the slush fund.
       I mentioned earlier that Medicare Advantage Plans are 
     lucrative for insurance companies. UnitedHealthcare will make 
     about 11 percent of its net income for 2007 from Medicare 
     Advantage. That number is 66 percent for Humana. Between 2005 
     and 2006, when a lot of these subsidies took effect, United 
     and Humana saw increases in revenue of over 50 percent. 
     WellPoint saw an increase of 27 percent. When there is so 
     much money at stake, it is very cost effective to have not 
     only a big marketing push, but also a strong lobbying army to 
     make sure your Congressional subsidies don't go away. That is 
     what they do.


                           general discussion

       There is a race in the health insurance world to determine 
     who can provide the lowest quality benefits for the highest 
     possible cost that consumers, companies, and the government 
     will accept.
       Seniors and disabled individuals who have contributed to 
     Medicare from a lifetime of work deserve to have simple, 
     clearly defined benefits which do not change from month to 
     month, year to year. We should not be paying companies 
     exorbitant administrative costs and overpayments that 
     maximize profit margins in order to put beneficiaries, 
     benefits at risk. All of this is the case with the private 
     Medicare Advantage and Medicare Part D, and it should be 
     stopped.
       The best, most efficient way to ensure all Medicare 
     beneficiaries will always have real, reliable, and complete 
     benefits is to end private involvement in Medicare. That's 
     why I, along with John Conyers of Michigan, coauthored the 
     Expanded and Improved Medicare for All Act, H.R. 676, back in 
     2003. HR 676 captures the enormous savings to be had if 
     Americans had health care provided through Medicare and uses 
     them to cover everyone for all medically necessary services 
     with no copayments, no deductibles and no premiums. This bill 
     would strengthen Medicare by removing the for-profit 
     interests, decrease the financial burden to beneficiaries, 
     and increase the quality of care--all without the confusing 
     maze that privatized Medicare has become today. There is 
     enough money that America spends in health insurance and 
     health care today to cover everybody. Every year, $2.2 
     trillion is spent, and only about 69 cents out of every 
     dollar actually goes to providing health care services. We 
     are all paying for universal health coverage, we just aren't 
     getting it.
       Congress will be required to hold hearings on and propose 
     changes to Medicare due to the financial situation of the 
     program which privatization has created. I intend to use this 
     opportunity to emphasize the best, most

[[Page 28055]]

     comprehensive, and most cost efficient way to strengthen 
     benefits for those enrolled in Medicare--H.R. 676.
       What's happening in Washington.--Many of you know an early 
     version of a bill to provide health insurance to millions of 
     children through a program called SCHIP, also called for cuts 
     to one of Medicare Advantage slush funds I mentioned earlier. 
     I supported that bill but the insurance industry mounted an 
     expensive and aggressive lobbying campaign that ensured their 
     slush fund stayed in place. Now there is talk of using that 
     slush fund money to pay for maintaining Medicare payments to 
     doctors as opposed to allowing scheduled cuts of about 10 
     percent to take place.
       H.R. 676 now has 85 cosponsors and is the only national 
     health care reform bill that has an entire national movement 
     behind it. There are two national non-profit organizations 
     and several regional organizations devoted to its passage. 
     And it has the official backing of 93 Central Labor Councils, 
     including several Cleveland and Ohio unions as well as cities 
     and states across the nation.
       There is the possibility of implementing an interim measure 
     of providing a prescription drug benefit that gets rid of the 
     insurance companies and lets the benefit be administrated by 
     Medicare. Doing so would clearly lower costs, increase access 
     and increase quality. But I would like to hear what you think 
     of that idea. Would people be willing to give up their 
     privatized plans for more plans that give greater security 
     and coverage?
       And while I'm asking for your input, I'd like to ask you 
     about another related issue that has recently come up. As I 
     understand it, Ohio Public Employees Retirement System 
     (OPERS) has announced that it will shift from offering two 
     traditional Medicare plans to offering one traditional 
     Medicare plan and one Medicare Advantage plan. I am concerned 
     about this choice and would like to hear from you about it.
       I know you all have been waiting for the opportunity to ask 
     questions and share your comments, so let's transition to 
     that right now.

                          ____________________