Text of
Printed Hearing
The Committee on Energy and Commerce
W.J. "Billy" Tauzin, Chairman
Medicare Modernization: Examining the President's Framework for Strengthening the Program
Subcommittee on Health
July 26, 2001
09:15 AM
2123 Rayburn House Office Building
<DOC>
[107th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:74847.wais]
MODERNIZING MEDICARE
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
JULY 26, 2001
__________
Serial No. 107-53
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
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COMMITTEE ON ENERGY AND COMMERCE
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
JOE BARTON, Texas HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia SHERROD BROWN, Ohio
STEVE LARGENT, Oklahoma BART GORDON, Tennessee
RICHARD BURR, North Carolina PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
GREG GANSKE, Iowa ANNA G. ESHOO, California
CHARLIE NORWOOD, Georgia BART STUPAK, Michigan
BARBARA CUBIN, Wyoming ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois TOM SAWYER, Ohio
HEATHER WILSON, New Mexico ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi TED STRICKLAND, Ohio
VITO FOSSELLA, New York DIANA DeGETTE, Colorado
ROY BLUNT, Missouri THOMAS M. BARRETT, Wisconsin
TOM DAVIS, Virginia BILL LUTHER, Minnesota
ED BRYANT, Tennessee LOIS CAPPS, California
ROBERT L. EHRLICH, Jr., Maryland MICHAEL F. DOYLE, Pennsylvania
STEVE BUYER, Indiana CHRISTOPHER JOHN, Louisiana
GEORGE RADANOVICH, California JANE HARMAN, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
David V. Marventano, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Health
MICHAEL BILIRAKIS, Florida, Chairman
JOE BARTON, Texas SHERROD BROWN, Ohio
FRED UPTON, Michigan HENRY A. WAXMAN, California
JAMES C. GREENWOOD, Pennsylvania TED STRICKLAND, Ohio
NATHAN DEAL, Georgia THOMAS M. BARRETT, Wisconsin
RICHARD BURR, North Carolina LOIS CAPPS, California
ED WHITFIELD, Kentucky RALPH M. HALL, Texas
GREG GANSKE, Iowa EDOLPHUS TOWNS, New York
CHARLIE NORWOOD, Georgia FRANK PALLONE, Jr., New Jersey
Vice Chairman PETER DEUTSCH, Florida
BARBARA CUBIN, Wyoming ANNA G. ESHOO, California
HEATHER WILSON, New Mexico BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona ELIOT L. ENGEL, New York
CHARLES ``CHIP'' PICKERING, ALBERT R. WYNN, Maryland
Mississippi GENE GREEN, Texas
ED BRYANT, Tennessee JOHN D. DINGELL, Michigan,
ROBERT L. EHRLICH, Jr., Maryland (Ex Officio)
STEVE BUYER, Indiana
JOSEPH R. PITTS, Pennsylvania
W.J. ``BILLY'' TAUZIN, Louisiana
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Thompson, Hon. Tommy G., Secretary, Department of Health and
Human Services............................................. 22
Material submitted for the record by:
Advanced Medical Technology Association, prepared statement
of......................................................... 60
National Association of Chain Drug Stores, prepared statement
of......................................................... 62
(iii)
MODERNIZING MEDICARE
----------
THURSDAY, JULY 26, 2001
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Health,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:15 a.m., in
room 2123, Rayburn House Office Building, Hon. Michael
Bilirakis (chairman) presiding.
Members present: Representatives Bilirakis, Barton, Upton,
Greenwood, Burr, Whitfield, Ganske, Wilson, Bryant, Buyer,
Tauzin (ex officio), Brown, Waxman, Strickland, Barrett, Capps,
Towns, Pallone, Eshoo, Wynn, Green, and Dingell (ex officio).
Staff present: Anne Esposito, policy coordinator; Pat
Morrisey, majority counsel; Nolty Theriot, legislative clerk;
Karen Folk, minority professional staff; and Bridgett Taylor,
minority professional staff.
Mr. Bilirakis. The hearing will come to order. Good
morning. I now call to order this hearing on modernizing
Medicare. Today this subcommittee will hear testimony from the
Secretary of Health and Human Services Tommy Thompson. We were
all excited by the President's announcement of his framework to
modernize and strengthen Medicare last week. This framework
provides valuable guidelines for us to use in developing
legislation to modernize Medicare and its benefit package.
During this Congress, our committee has taken a very active
interest in the Medicare program, to say the least. This year
alone, we have held eight hearings covering topics such as
modernizing the program, adding a prescription drug benefit to
Medicare, and making administrative and programmatic changes to
improve services and operations.
One of the first things you did, Mr. Secretary, was to
change HCFA's name to CMS, Centers for Medicare and Medicaid
Services, which I sometimes refer to as CM2S. This name change
will help with morale and the look of the Agency, and I know
this is only the start of the changes you hope to make.
As I mentioned, this subcommittee has held several hearings
this year on ways to modernize the Medicare program and provide
an updated benefits package, including a prescription drug
benefit. At hearings we have titled Patients First, we received
expert testimony on both provider and beneficiary regulatory
burdens. We examined the advantages in policy and implications
of merging Parts A and B of the program, we discussed
innovative ideas and brought forth new information to lay the
groundwork for a prescription drug benefit, and we explored
contractor reform issues.
I am very proud of where this committee has come in the
past several months. I look forward to working on a bipartisan
basis with my colleagues to come together around a plan to
strengthen and modernize Medicare. The success of such a plan
is also contingent on the support of you, Mr. Secretary, and
that of the administration, and that is why I am particularly
pleased with the President's principles for modernizing the
Medicare program. Like the President, I believe that all
seniors should have the option of a subsidized prescription
drug benefit as part of Medicare. I also agree that Medicare
legislation must ensure the long-term financial viability of
the program.
And, finally, I am pleased that both you and the President
have agreed to take a closer look at Medicare's regulations and
administrative procedures. I am confident that your
comprehensive review will identify areas requiring legislative
action to streamline and reform the Centers for Medicare and
Medicaid Services, formerly HCFA. I was very grateful that the
President and the administration have developed a plan to
provide some temporary immediate and real relief--and I will
underline ``temporary immediate''--and real relief to our
seniors struggling with high prescription drug costs. I, of
course, am referring to the recent announcement that Medicare
will endorse drug discount cards. This echoes what I have said
for months, that this administration is not one that sits on
the sidelines. They will propose and enact solutions now.
I know that this is not the final solution to the problem
that our seniors will face in buying their medicines, however,
it is a good first temporary step. We hope to continue working
with you, Mr. Secretary, and the President, as the details of
this plan become more clear in the coming months, and to ensure
that no one sector of the drug distribution chain is
responsible for the discounts--and we have talked about that.
I am also very pleased that the President has recognized
the importance of preventative care--very, very pleased. I have
always believed that we should modernize Medicare to ensure
proper coverage of preventive care and serious illnesses. It is
unfortunate that Medicare coverage of mammograms, prostate
cancer screenings, and flu vaccination began only recently.
While I am pleased that coverage has been initiated, we can and
must do more to ensure that Medicare's coverage of preventative
care no longer lags behind that of private health insurance
plans.
In closing, I want to again thank you, Mr. Secretary, for
your time and effort in joining us today to share the
administration's views on the important issue of Medicare
reform. I will now recognize the ranking member, Mr. Brown.
Mr. Brown. Thank you, Mr. Chairman, and welcome, Secretary
Thompson, it is nice to have you again in front of us. I am
concerned about what the President's principles do not say, and
I am concerned about what they imply. These principles say the
President wants to offer at least some beneficiary subsidized
prescription drug coverage. It is not clear whether seniors
would need to buy private plans to be eligible for the subsidy,
but I will get to that in a moment.
These principles do not say the Federal Government must
tackle unjustifiably high prescription drug cost as part of its
commitment to Medicare prescription drug coverage. A laissez
faire attitude from the administration and from this Congress
toward unreasonably high prices and the anti-competitive
behavior on the part of the drug industry squanders billions of
dollars that could be put toward meaningful prescription drug
coverage.
These principles say that Medicare should provide better
health insurance options like those available to all Federal
employees. They say all beneficiaries in modernized Medicare
should have the option of subsidized prescription drug
coverage. They say modernized Medicare should provide better
coverage for preventive care and serious illness. They say
current beneficiaries and those approaching retirement should
have the option of keeping traditional plans with no changes.
But these principles imply that private health insurance is a
better option than traditional Medicare. They imply that the
current Medicare plan will not be available to future Medicare
beneficiaries. They imply that enhanced benefits and
prescription drug coverage would be available to all
beneficiaries who opt for a private plan.
I read these principles and then I went back to the Bush-
Cheney campaign Website and read one of the President's
campaign speeches on ``modernizing Medicare.'' During his
campaign, the President was prone to using rhetoric we are all
familiar with, ``Medicare is a one-size-fits-all program,
Medicare beneficiaries deserve more choices.''
He was also forthcoming about tying access to subsidized
coverage for prescription drugs and other new benefits to
private health plans, and about the fact that seniors, not the
Federal Government, would pay for the benefit enhancement that
would make these plans comparable to the Federal plans, to the
FEHBP plans for Federal employees.
In a speech he said that under his plan, during his
campaign, Medicare beneficiaries can ``choose the basic plan
for no cost at all, or can choose to pay a little more for the
plan with additional benefits.'' I would like to think that the
President's principles reflect a turnaround in thinking. I
would like to think he truly wants to enhance the Medicare
benefits package for all enrollees regardless of income,
regardless of whether they choose to stay in the fee-for-
service plan or enroll in an HMO, but his principles don't add
up.
You can't simultaneously increase spending and reduce it.
His principles say he wants to do both. He links prescription
drug coverage to fundamental changes in Medicare. I think it is
safer to go with what his principle imply than what he actually
said. Unfortunately, I think it is safer to assume the
President is trying to wrap appealing but misleading rhetoric
around new benefits and choices in choices around Medicare
privatization because it is simply easier to impose
privatization on the public that way.
I think it is safe to say that underlying these principles
is the desire to see traditional Medicare or as it is portrayed
in the President's principles, the government Medicare plan,
wither on the vine.
When I go home and talk to my constituents about Medicare,
I hear complaints, but they are rarely about traditional
Medicare. They are often, almost always, about the +Choice
program. I think it is fair to say that Medicare beneficiaries
aren't asking us to make Medicare look more or act more like
FEHBP, they certainly, certainly are asking us to make +Choice
plans more reliable, but they are not asking for more choices,
as many like to say. That is because traditional Medicare
offers maximum choice--choice of doctor, choice of hospital,
choice of nursing home, choice of all providers. Those are the
kinds of choices that actually make a difference to the
consumers of health, to our constituents. A choice between 2,
or among 3, or among 50 HMOs affords less choice--in spite of
what my friends on the other side of the aisle say--affords
less choice than traditional Medicare.
My constituents are asking for prescription drug coverage
delivered through the Medicare program. They are not asking for
private prescription drug plans. They are not asking for a drug
card that might save $5--might knock $5 off the $100-plus cost
of Prilosec--when most seniors without coverage have incomes
below $15,000 a year. Five or ten dollars in savings is not
going to cut it.
I wonder if any of my colleagues, Republicans on that side
or Democrats on this side, included in their campaigns last
year a pledge to privatize Medicare, or even mention a desire
to expand a desire to expand the role of private insurers into
the Medicare program.
Many of us in our campaigns talked about strengthening
Medicare, about preserving Medicare, but few, if any, of us
talked about privatizing it. The idea of privatizing Medicare,
of turning as much of the program as possible over to the
private insurance industry, is an inside-the-Beltway idea being
spun this way and that as its proponents in Congress and in the
private sector try to sell it to the public. They may not use
the word ``privatization,'' but that is what they are doing.
The idea of privatizing Medicare did not arise as a response to
the needs or the desires of Medicare beneficiaries. People at
home are hardly clamoring for privatization of Medicare.
One of the President's principles, Mr. Secretary, is that
Medicare should encourage high quality care for all seniors. It
is the Nation's most popular public program because it doesn't
just encourage high quality health care for all seniors, as you
know, it ensures it. Let us work together to build on that
commitment by adding prescription drug coverage and other
enhancements to the existing program. Let us work together to
eliminate waste in spending by combatting fraud and abuse in
all forms including outrageously high prescription drug costs.
Let us work together to improve the way, as you have begun, the
way that CMS functions. But please don't practice ``Medi-
scare,'' telling seniors and the next generation that Medicare
is in perilous trouble, in need of privatization. Don't ask us
to exploit seniors' need for prescription drug coverage and
lower out-of-pocket health care costs to lure them into a
privatized health care system. They are beneficiaries, their
families, and every American who invests in and will someday
benefit from Medicare deserves something better than that.
Thank you, Mr. Chairman.
Mr. Bilirakis. The gentleman's time has expired. The Chair
now recognizes the chairman of the full committee, Mr. Tauzin.
Chairman Tauzin. Thank you, Mr. Chairman, and I
particularly want to welcome our friend, the Secretary, to this
hearing, and thank him for coming to share with us the
administration's views on this most important question that, as
you know, was ``the'' first priority of this Committee when we
reorganized this year, and that is improving not only the
Medicare system, but also the delivery system of the government
agency that manages the system. And I want to thank you for the
decisions you have already made, Mr. Secretary, particularly in
making sure that when Members of this body representing the
people of this country communicate with your CMS agency now,
that we are going to get our answers in a reasonable time
instead of some 12 months delay, I think, that was formerly the
case with CMS, which was, I think, formerly known as
``Prince,'' I think, I am not sure what it was known as before.
But let me tell you when we are really going to be happy on
this committee. We are really going to be happy when you and I
and the Chairman and this committee completes our reform of CMS
so that patients don't have to wait 12 to 18 months to get an
appeals case heard by a DLJ. We are going to really be happy
when the DLJ is specifically trained to do Medicare appeals
instead of just Social Security appeals. We are going to really
be happy when seniors and patients don't have to wait 2 years
to get approval on new medical technologies that could be
saving their lives. We have got some real work to do, and I am
so pleased that you are onboard to help us help your agency in
accomplishing those kind of reforms because, as we have titled
this project, it is Patients First, and when CMS and Medicare
remembers its mission of taking care of patients instead of
simply piling up data it doesn't even use, in a warehouse
somewhere, and not answering phone calls and appeals and
approving new technologies in a timely fashion, then I think we
will all be able to rest a bit and know that we have done our
job. And I want to thank you for committing yourself to this
Herculean effort.
Whether we are eligible for Medicare today, or we have
family members who are eligible, or we will be eligible in a
couple of years--and by the way, you know who you are and I
know who I am--we all have a strong interest obviously in
addressing challenges facing the program.
You know, we were thinking about 1965 when the program was
first commenced, and what things looked like then, and how
medical was provided then, and how insurance programs worked
then, and we can understand, looking back, why the Medicare
program was structured the way it was. But if we were given the
task today of creating a Medicare program out of just thin air,
just building a new one, no one would build it on the structure
and design the way it is currently structured and designed.
No one, for example, would not include a drug benefit in
the program, recognizing now that drugs and outpatient service
is becoming such a large part of the health maintenance effort
for our seniors. No one would divide it into Parts A and B
coverage because we know insurance programs don't do that
today. Hospital services and physician services are provided
together in a common plan. And no one would build it on some
sort of monopoly delivery of drug benefits, there would be
competitive deliveries and competitive choices available for
Americans, just as they are for Members of this body and other
Federal employees.
We would probably structure it more like the Federal
Employee Benefits Plan, where there are, in fact, choices and
competition and seniors would have the benefit that Federal
employees have of choosing different options, such as sticking
with what they have got or choosing something different that
might be better for them.
We would designed this plan totally different this year,
and we would design it keeping in mind that the people we are
talking about, the patients we are talking about in this case,
represent the greatest generation of Americans.
I agree with Rush Limbaugh when he said that, you know, our
generation is a bunch of wusses compared to that generation. I
mean, these are the people that sacrificed everything to keep
the world safe for freedom and democracy. They are the people
that knew what it was to be an adult at 18, and we are
struggling to find out in our generation, how to become adults
at 50 and 60. And these are the patients we are talking about.
They are the most--I guess the patients are the people we owe
the most to in our country, and yet we have got a Medicare
program designed for them on an old, outdated model that
doesn't take care of the most important needs today in
prescription drug benefits.
We have got a huge challenge in front of us, and I say
again, none of us should rest, Mr. Secretary, until we have a
new CMS that puts those patients first, that ends some of the
unnecessary bureaucracy in this system. I don't care whether it
is 60,000 pages or 130,000 pages of instructions to providers,
but we ought to simplify that system. We ought to make the
rules of the road clear for the providers. We ought to make
easy access to appeals available to patients, and new
technology approvals on a timely basis, and we ought to make
sure the program is structured as good, or better, than the
Federal Employees Health Benefits Program, with as many good
choices and competition working for seniors as works for the
rest of us in this society.
And so I want to thank you for challenging us and
challenging the whole country to rethink how we plan for and
provide for health care coverage for our seniors, and for
working with us to build a better program.
We can differ on the edges of that debate. We can differ on
what works better. But I think we all agree that what we have
got is in desperate need of repair. And the surveys sent out by
our committee to all the stakeholders makes the case. The more
people focus on what is wrong with our current program, the
more they are asking us to work with you to change it, and the
fact that you have come to Washington and committed to help us
change it is deeply encouraging, and I thank you for that, sir.
I yield back the balance of my time.
[The prepared statement of Hon. W.J. ``Billy'' Tauzin
follows:]
Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee
on Energy and Commerce
Thank you, Mr. Chairman. I am pleased that today we are discussing
.9 topic of utmost importance to all Americans--the Medicare Program.
Whether we are eligible for Medicare today, have family members who
are eligible, or will be eligible in a couple of years--you know who
you are--all of us have a strong interest in addressing the current
challenges facing the program.
Medicare has provided health care security to millions of
Americans, seniors and disabled, since 1965. It has been serving us
well, but we now must work to modernize this program--to bring Medicare
into the 21st Century--and ensure that it is strengthened financially,
for the short and the long term.
The Medicare program simply has not kept up with rapid advances in
medical care or innovations in health care delivery. Modem medicine has
undergone many changes since President Johnson signed the Medicare
program into law over 35 years ago. Yet prescription drug coverage is
still not included in Medicare's basic benefit package, although it is
a standard feature in private,, employer-sponsored health plans. Most
private insurance plans set limits on out-of-pocket expenses-
unfortunately, Medicare doesn't.
The Energy and Commerce Committee is committed to modernizing the
Medicare program. To date, we have held hearings on several critical
issues related to Medicare--all to improve the quality of care seniors
receive. We've examined the prospect of merging parts A and B of the
Program, contractor reform, and prescription drug benefits. We've also
looked at ways to improve the current Center for Medicare and Medicaid
Services (formerly HCFA) so that Medicare is administered more with
patients in mind.
Clearly, a combination of administrative reforms and legislative
changes are necessary to update Medicare's traditional system so that
it can effectively meet the needs of the beneficiaries and providers in
the years to come.
Today's hearing focuses specifically on the President's framework
forstrengthening the Medicare program.
As we'll see, the addition of a prescription drug benefit is a high
priority, and for good reason. Almost 400 new drugs have been developed
in the past decade to battle diseases like cancer, heart disease,
diabetes and arthritis. But Medicare doesn't currently cover outpatient
prescription drug coverage. Our ``Greatest Generation'' relies on
Medicare for their health care needs and they don't even have this
basic benefit. Clearly, our seniors deserve better.
Advances in medicine have given us the capability to prevent
sickness, not just treat it. For this reason, I am also pleased that
preventive health care is another component of the President's Medicare
principles. The Administration proposal to eliminate co-payments on all
preventive procedures will go a long way to give our seniors better
protection against serious illnesses.
We need immediate bipartisan solutions to the funding problems
facing the Medicare program. We must forge a bipartisan consensus to
strengthen Medicare's long-term financial status and to ensure that
Medicare benefits remain a reality for seniors for a long time to come.
Mr. Chairman, I thank you again for holding this important hearing,
and for directing our attention to the problems in the Medicare
program. I welcome the Secretary and thank him for coming here today to
answer our many questions about the President's reform agenda.
Mr. Bilirakis. I thank the gentleman. Mr. Dingell, for an
opening statement.
Mr. Dingell. Mr. Chairman, thank you. I thank you for
convening this hearing on an issue of great importance, and I
commend you for your interest in this subject.
Mr. Secretary, welcome, glad to see you here. This is a
very important subject that we are inquiring into today, and I
look forward to hearing your comments about the President's
Principles for Medicare Reform and a Medicare prescription drug
benefit. I am indeed pleased that the President has sent us a
set of principles. I would note with regret, however, these
principles do not provide enough detail to discern much of
anything about what seniors can expect if they are enacted into
law.
The President has been in office for 6 months now. He has
managed to send details on a tax bill, on a faith-based
initiative, on an energy policy, but when it comes to seniors
we have only vague principles. But some of the things we see
and hear in those vague principles I find very troubling,
indeed.
I believe there is one principle that we ought to put
first, before all others, and that is the wise ``first, do no
harm.'' We must make sure that whatever Congress does, we
protect the program that has served our seniors so well for
many years.
I would note to you that I was in Congress when we passed
Medicare because I was one of the authors of it, as was my Dad,
and I know what seniors did not have before, and I know what
they have now. I know how important passing Medicare was to
them. It has gotten a bit out-of-date, but not distressingly
so. There are changes which could be made which will make it
better, which won't cost much, and I hope we can work together,
Mr. Secretary, on those matters.
I would note that this program is enormously popular with
our Nation's seniors and, as I have noted, there are gaps in
Medicare's benefit package and that seniors' out-of-pocket
expenditures for health care services are, indeed, a heavy
burden. Seniors are looking to Congress to strengthen and to
improve the traditional Medicare program by adding preventive
benefits, to which you wisely alluded in your comments today,
and also to reduce some cost-sharing requirements, but the
overwhelming message that I get from seniors as I talk to
them--and I suspect you did this in your days as Governor--is a
plea to add a meaningful prescription drug benefit to Medicare,
and to do so as soon as possible.
Now, I will say parenthetically, I don't think that seniors
are sufficiently unsophisticated to not ask for a drug benefit
that is affordable, that is universal, that is guaranteed, and
that is a part of our traditional Medicare program. That is
really, Mr. Secretary, what they want.
The President has proposed certain temporary administrative
actions which he says will help seniors without insurance, with
the high cost of prescription drugs. I must confess myself
singularly unimpressed with the discount card plan which mimics
plans already available to seniors, which they have found
largely unworkable and unrewarding, and which, interestingly
enough, would have the practical effect of doing several
things. First, the cards would hurt the pharmacies, and have
achieved already the almost universal opposition of the
pharmacies.
Second, they would, in many instances, in fact, increase
the cost to seniors of certain prescription pharmaceuticals
under that plan.
The third thing they would do is a dead certainty, and that
is those cards would benefit, protect and enhance the earnings
of pharmaceutical manufacturers, who seem to, if I read the
daily financial reports, be doing splendidly.
The President also states that he is committed to enacting
a drug benefit for seniors. I hope that he is willing to
acknowledge that broader Medicare reforms, which involve many
complex and contentious issues, will take longer than seniors
should have to wait for a prescription drug benefit.
The enactment of a prescription drug benefit should not be
held hostage to a larger reform plan that will take years to
develop. And I would note to you, Mr. Secretary, I served on
the Medicare Commission, and I listened to some of the talk of
some of those people who would reform it and, quite frankly,
some of the gray hairs in my balding head come from some of the
statements and some of the plans and some of the goals that
were expressed during that time.
The President has also said that he is committed to a
prescription drug benefit for all seniors, regardless of
whether they are in Medicare+Choice or the fee-for-service
plan. Real access means making a drug benefit a part of the
traditional Medicare program. If his access refers to private
drug-only insurance plans that seniors may purchase, I note
that this isn't going to work, and the health insurance
industry testified before this very subcommittee last year that
this approach simply would not work.
Frankly, Mr. Secretary, seniors may not have much
confidence in private insurance plans given the instability
that has plagued Medicare+Choice markets in the past few years,
and the continuing withdrawal of HMOs from that program.
I think we need to act quickly. I am delighted that you are
here, and I hope that we can work together to enact a
prescription drug benefit that is affordable, universal,
guaranteed, and part of the Medicare program.
Mr. Secretary and my colleagues, the clock is ticking.
Thank you, Mr. Chairman.
[The prepared statement of Hon. John D. Dingell follows:]
Prepared Statement of Hon. John D. Dingell, a Representative in
Congress from the State of Michigan
Chairman Bilirakis, thank you for convening this hearing on an
issue that is of fundamental importance to our nation's seniors, people
with disabilities, and generations of Americans who expect that
Medicare will be there to care for them in the future. Secretary
Thompson, I look forward to hearing your comments about the President's
principles for Medicare reform and a Medicare prescription drug
benefit.
I am pleased to see that the President has sent us a set of
``principles.'' However, these principles do not provide enough detail
to discern much of anything about what seniors can expect. The
President has been in office now for six months. He has managed to send
details on a tax bill, on a faith-based initiative, on an energy policy
-but when it comes to seniors, we only have vague principles.
I have one principle that we should adhere to: first, do no harm.
We must make sure that whatever Congress does, we protect the program
that has served our seniors so well for so many years. The traditional
Medicare program is enormously popular with our nation's seniors.
However, there are gaps in Medicare's benefit package, and seniors'
out-of-pocket expenditures for health care services are a heavy burden.
Seniors are looking to Congress to strengthen and improve the
traditional Medicare program by adding preventive benefits and reducing
some of the cost-sharing requirements.
But the overwhelming message seniors are sending us is the plea to
add a prescription drug benefit to Medicare--and to do that as soon as
possible. Seniors are asking for a drug benefit that is affordable,
universal, guaranteed, and part of the traditional Medicare program.
The President has proposed certain temporary administrative actions
that he says will help seniors without insurance with the high cost of
prescription drugs. I must confess to being singularly unimpressed with
the discount card plan, which mimics plans already available to
seniors, and would hurt pharmacies while protecting pharmaceutical
manufacturers.
The President also states that he is committed to enacting a drug
benefit for seniors. I hope that he is willing to acknowledge that
broader Medicare reforms--which involve many complex and contentious
issues--may take longer than seniors should have to wait for a
prescription drug benefit. The enactment of a prescription drug benefit
should not be held hostage to a larger reform plan that could take
years to develop.
The President has also said that he is committed to a prescription
drug benefit for all seniors, regardless of whether they are in
Medicare+Choice or the fee-for-service plan. Real access means making a
drug benefit a part of the traditional Medicare program. If his
``access'' refers to private, drug-only insurance plans that seniors
may purchase, I note that the health insurance industry testified
before this Subcommittee last year that this approach simply would not
work. And, frankly, seniors may not have much confidence in private
insurance plans, given the instability that has plagued the
Medicare+Choice market in the past few years.
We must act quickly to enact a prescription drug benefit that is
affordable, universal, guaranteed, and part of the Medicare program.
The clock is ticking.
Mr. Bilirakis. I thank the gentleman. Under the rules, the
Chair exercises its prerogative to limit the remaining opening
statements to 3 minutes, and I ask the cooperation of the
members. Mr. Burr is recognized.
Mr. Burr. Thank you, Mr. Chairman. Welcome, Mr. Secretary.
As I sat here thinking about this hearing, I could only think
of my parents who both participate in the Medicare program, and
my mother, who just several years ago had extensive surgery and
spent time not only in the hospital, but in skilled nursing,
and then eventually participated in the home-care benefit.
The one thing my parents did after that experience was to
bring their bill for that event to me and ask me to explain it
to them. For any of you that have ever seen a Medicare bill, it
is pretty difficult. I found it to be impossible. I turned to
the then HCFA, now CMS, and said, ``Explain this to me.'' In
some cases, they couldn't do it.
I knew then that we had a system that if it was difficult
for me to understand, it had to be impossible for most seniors
to understand. My parents are lucky because they carry a
supplemental from my dad's former employer. It does cover
deductibles and pharmaceuticals, and they are not faced with
the problem that many seniors are faced with because many don't
have it. Not many are faced with decisions between this and
that.
As a Member of Congress, I think we have an obligation to
always do what we think is right. We missed a tremendous
opportunity last year when this body passed a prescription drug
bill that ended up going nowhere. It wasn't what we ultimately
all wanted, but it was a great step in the right direction.
I want to commend you, Mr. Secretary, and the President and
this administration, because you have clearly communicated the
blueprint, the principles of what is the right thing, but you
have left it up to this body to fill in the blanks, the
specifics.
The only way that we can fail is if we miss this
opportunity again, like we did last year, and not have a bill
that is enacted into law. We have an opportunity right now to
accomplish that. We have an opportunity to clear up the
confusion that exists between A and B, by merging it, by making
sure that a system that is 30-some-years-old is, in fact, a
21st Century system.
We have an opportunity to package a new set of preventative
care benefits into a system that up until this time ignored
preventative care because of the cost and couldn't look at a
potential savings down the road. We have an opportunity to
restructure the co-pay, the deductible, to make sure that we
don't charge seniors the most when they enter the hospital than
any other point in the Medicare system, which is wrong. And,
most importantly, we have the opportunity for that drug
benefit, a drug benefit that takes into account where
technology has gone.
Mr. Bilirakis. Would the gentleman please finish up?
Mr. Burr. I would be happy to. Mr. Chairman, I am excited
about the opportunity. I think even with the differences that
we will have on many of these points, America is ready for us
to bring this system up to the 21st Century. I thank you and I
yield back.
Mr. Bilirakis. Thank you. Mr. Waxman.
Mr. Waxman. Thank you, Mr. Chairman. Mr. Secretary, I am
pleased to see you and welcome you to our committee. Mr. Burr
says he is excited. I, too, am excited if we can do something
constructive. He says you have given us a blueprint. What I am
troubled about is I think that blueprint is too sparse in the
details for us to know what the administration really is asking
from us.
I don't think it is the duty of Congress or this
administration to rewrite Medicare as if we are doing it from
scratch. Medicare is a program upon which millions of people
rely. It is the only program they have for their health care
services.
Mr. Tauzin said this is the greatest generation in the
history of this country that is relying on Medicare. That is
why we shouldn't experiment with them. This should not be an
experiment to see whether if we try different ideas, maybe they
will work because, if they don't work, we are taking a program
that people think is pretty good and doing a lot of harm to
those very people who rely on it. That would happen if they
can't find private insurance available to them or if they have
to come up with more money that they can't afford.
The general statements by the administration I certainly
applaud. We are all for more preventive services. We are all
for better management. We all want to see a Medicare system
that will provide prescription drug coverage. But when you get
beyond these broad statements, I still don't know what the
details are. I hope you will be able to help us understand
those details.
For example, is the administration asking that we have
Medicare beneficiaries rely on private insurers to provide them
with prescription drug coverage, even though the insurance
industry has said they can't handle such a thing, or are we
going to have a proposal that will cover everybody in Medicare?
When we get to the so-called ``modernization'' of Medicare, the
administration has said current beneficiaries and those
approaching retirement should have the option of keeping the
traditional plan, but what about everybody else? And are we
going to find that the prescription drug option is simply going
to be a lever to get beneficiaries to go into something other
than traditional Medicare if they don't want to?
This raises serious questions about why the President
hasn't been more specific. We really don't know what kind of
plan you all favor. It may be because you haven't come to grips
with the broad outlines or the details, or it may be that you
are simply unwilling to expose your plan to any detailed
scrutiny.
We should work together. I want to work together with the
administration in this area, but let me just point out, this is
not like the Federal Health Insurance plans for the government
employees. With Medicare, we are talking about a population
that is older and sicker, that don't have the same range of
income. The risk pool is certainly not the same. We are talking
about people who need to know that they are going to be
protected, that they are going to have benefits that will be
there to pay for their medical bills. We ought not to
experiment on the greatest generation, leaving them perhaps
without the promises that have been made to them. Thank you
very much.
[The prepared statement of Hon. Henry A. Waxman follows:]
Prepared Statement of Hon. Henry A. Waxman, a Representative in
Congress from the State of California
Secretary Thompson, I'm pleased to see you here today to elaborate
for the Subcommittee on the principles announced by the President for
changes in the Medicare program.
In my view, those principles provide little real information on the
kind of changes this Administration has in mind. On the one hand, they
reflect what we might call universal truths--things that nobody could
disagree with:
--we're all for high-quality health care.
--we're all for strengthening the management of the program so that it
can provide better care, and for reducing fraud and abuse.
--we're all supportive of preventive care.
--and we all agree that seniors need a subsidized prescription drug
benefit as part of a modernized Medicare.
But of course, the devil is in the details. And those are pretty
scarce.
It's great to be for better coverage of preventive care, but where
is the commitment in the budget to pay for it? Should we assume you
want to reduce the coverage of current benefits--or increase the
deductible and cost-sharing obligations of the current program--to pay
for those preventive services? That might not be such a good deal.
It's also welcome to know that the President endorses a subsidized
drug benefit for all seniors. But frankly, it's hard to tell what the
Administration has in mind.
Could this mean a plan where Medicare beneficiaries have to rely on
private insurers to provide them prescription drug benefit coverage,
even though the insurance industry itself said it wouldn't offer such
plans? Or has the President decided that kind of limited proposal
wouldn't be acceptable? You can't tell from his principles. But it's
going to make a big difference to the people who need help.
Then there's the issue of the so-called modernization of Medicare.
You say that current beneficiaries and those approaching retirement
should have the option of keeping the traditional plan. Does that mean
that there is no commitment to keeping the traditional plan for others?
Is it your intention to let it wither on the vine, to use the phase of
one of our former Republican colleagues?
You indicate that Medicare should provide a variety of health
insurance options. But is there any commitment to assure that
beneficiaries would always have the option to pick traditional Medicare
if they want it, and would they have an assurance that they wouldn't be
stuck paying higher premiums because the good risks have been siphoned
off to private plans?
And for beneficiaries who do chose traditional Medicare--and
frankly, I think most of them will, do you intend to assure that they
have access to a guaranteed defined set of drug benefits as part of
traditional Medicare or not?
There's a lot of important questions here, and unfortunately the
President's principles give us--and more importantly, the American
people--very little indication of what he really supports.
In fact the only thing you've been specific about is the public
endorsement of private drug discount cards. And that raises very
serious questions about putting a Medicare seal of approval on private
cards that may or may not deliver what they promise to people.
The studies my staff have done at the Government Reform Committee
indicate that the savings are nowhere near to what the hype has been.
In fact, the programs we looked at deliver only a few percentage point
savings--less of a discount than you could get without any card--or
paying an enrollment fee--at all.
All of this raises in my mind some pretty serious questions about
why the President hasn't been more specific about what his plan is. Is
it that this Administration really doesn't know what kind of a plan it
favors, that it hasn't even come to grips with the broad outline, let
alone the details? Or is it simply that you are unwilling to expose
your plan to any detailed scrutiny?
I hope today we can begin to understand better what this
Administration really intends to do to the Medicare program that 40
million beneficiaries rely on.
I hope we can get some clarity on exactly what the commitment is to
provide a specific and guaranteed prescription drug benefit to all
Medicare beneficiaries, not as a lever to force them out of traditional
Medicare, but as an improvement which assures that traditional Medicare
better meets their health care needs.
I look forward to your answers today, and many more specifics in
the future. Thank you.
Mr. Bilirakis. Thank the gentleman. Mr. Ganske.
Mr. Ganske. Thank you for being with us, Mr. Secretary.
Last winter I received letters from a lot of constituents in
Iowa, who were elderly, their home heating prices were going
out of sight because we came up against a natural gas shortage
and the spikes were very significant, and some of those letters
indicated that people were actually having to make choices
between keeping their home heated in the winter, in the middle
of an Iowa winter, and actually paying for their prescription
drugs. And as my parents are both in Medicare, they have some
very significant prescription drug costs, I see their bills. I
get letters from constituents.
This committee is working on both of these issues. We are
working on an energy policy and we need to address the
prescription drug issue.
One of my concerns about a comprehensive prescription drug
policy is that it would be very, very expensive. And I
represent both a major metropolitan area, Des Moines, but also
southwest Iowa with a lot of small town hospitals, and the
Medicare reimbursement for those hospitals is a very large
percentage of their income. They are already really close to
not having enough money to stay open. If a hospital would close
in a town like Red Oak or Harlan, that would be terrible in
terms of the access to medical care, but it would also
potentially be disastrous for the town and for the economic
survival of that community.
And so when we look at adding a benefit like prescription
drug, we need to also be aware that we are not going to then be
shifting funds or make it more difficult to provide other
services that are necessary in Medicare, i.e., that if we give
a prescription drug benefit, that we are not going to clamp
down so tightly on the other services that, for instance, we
could end up losing hospitals in small towns. I mean, it would
be great to have a better prescription, or ``a'' prescription
drug program for our seniors, but it wouldn't be so great if
now they had to drive 125 miles into Des Moines to get to a
hospital. So this is a balancing act.
I have proposed that at least in the interim, that we take
care of the low-income Medicare beneficiaries and the qualified
Medicare beneficiaries up to 175 percent of poverty, and
utilize the State Medicaid drug programs, which you are very
familiar with, but pay for that from the Federal side so that
you are not imposing an additional financial burden on the
States. That may be something that we will get a chance to talk
about a little later.
Mr. Bilirakis. Would the gentleman please finish up.
Mr. Ganske. Thank you, Mr. Chairman. I do want to say that
on June 28 I gave Mr. Scully a copy of a floor speech I gave
that had 26 suggestions for Center for Medicare Services
reform. He promised me a prompt reply. I still have not
received any paper from Mr. Scully on that. And I will provide
you with a copy also.
Mr. Bilirakis. The gentleman's time has expired. Ms. Capps.
Ms. Capps. Thank you, Mr. Chairman, for holding this
hearing. I think it is very important for the members of the
subcommittee and the Congress as a whole to take a good, hard
look at some of the ideas put forward by the President for
reforming Medicare. I want to express my appreciation to the
President, and to you, Mr. Secretary, for the hard work that
undoubtedly went into the framework we are reviewing today, but
I am concerned that this framework is very short on details.
Certainly, I think we can all agree that there are some places
where we would like to make changes and improvements in
Medicare. Often we can even agree on what the problems are, but
difficulty in reshaping a program like Medicare is almost
always in the details and the implementation. For instance, the
President cites the need to have a prescription drug benefit
for Medicare seniors, but it doesn't say how this should be
done.
Would the benefit be under the Medicare program, or would
it be contracted out to private organizations? What kind of
cost-sharing mechanisms would there be? Is it going to apply to
all Medicare beneficiaries, or just some seniors in
particularly dire straits.
I think that just about everyone on this dias agrees that
there should be a drug benefit, but if there is ever going to
be one, we need to answer the questions above. I am frankly
disappointed with the one specific proposal this administration
has put out on prescription drugs--the discount card plan. This
proposal, because it does not permit Medicare to regulate the
discounts or have any enforcement role, does nothing to lower
the overall cost of prescription drugs. Additionally, it is not
clear what kind of savings this card would yield for seniors.
One of the strengths of the Medicare benefit is that the
collective buying power of all the seniors in the program could
reduce the price of these drugs, but this plan will divide up
that group and does not explain how the savings will be
achieved or from whom they will be extracted.
I am also concerned about what I see as a desire to rely on
the private insurance companies and their example for their
reform. The marketplace can and has been a place for a
wonderful efficiency, but it can also be ruthless in its drive
for profit, and we cannot allow health care decisions for our
seniors to be strictly business decisions.
Government works best when it is harnessing the incredible
potential of the private sector, but softening some of its
harsher edges. Today the House should have been debating the
Patient's Bill of Rights to do just this. Sadly, we have put
that aside, but we on this subcommittee can at least make sure
that our seniors are protected under Medicare from the abuses
of the marketplace.
It would be a terrible injustice to our seniors to open
Medicare unshielded to the cruelties of the business world.
Medicare is a sacred program to many of today's seniors. They
count on it, and they should be able to do that in the future.
We as a society have made a pledge to them that they will have
health care. Prescription drug coverage is part of health care.
It is, I would add, a cost-effective often a preventive health
care measure that if it is not followed through with and
seniors, as many of we know personally, have to choose which of
their prescriptions they will take, it can be a less expensive
alternative than being admitted to an acute care facility.
So, I look forward to working with you, Mr. Secretary, on
this framework and on what you have to say, and I want to hear
from you and your panelists. Thank you very much for coming.
Yield back.
Mr. Bilirakis. I thank the gentlelady. Mr. Buyer.
Mr. Buyer. Thank you, Mr. Chairman. Mr. Secretary, thank
you for being here. This is your second appearance before the
subcommittee. I would like to applaud the President's
principles for moving forward with reform for Medicare, and
also applaud not only the President, but your commitment to a
viable financially sound program with an added prescription
drug benefit.
The President and you, Mr. Secretary, are to be commended
for being forthcoming about the shortcomings in Medicare and
for seeking to make improvements in the program. Medicare is
crucial to the well being of the Nation's 40 million seniors
and disabled individuals. It is important that we deal honestly
and forthrightly with our seniors and younger generations about
the program structure and finances. While Medicare provides
payment for vital health care services, it also impacts the
health care practices of nearly every doctor, hospital, and
skilled nursing facility in the Nation. They often see a side
of Medicare that the beneficiaries do not see. Providers of
services see regulations and paperwork and the daunting threat
that if they inadvertently fall out of line, they could be
subject to treble damages.
Reducing the tremendous regulatory burden on providers
should ease its administration for the provider and the
government alike. It should also ensure that seniors will
continue to have access to quality care. This paperwork burden
is especially acute for many providers in my rural district.
They don't have the access to the technology or the personnel
to keep up with the burden, Mr. Secretary. Any efforts that you
can take to relieve this burden on the providers, especially
those in rural areas, is welcome.
I also noticed in your prepared testimony that you
initiated listening sessions around the country for those who
deal with the Medicare rules in the real world. I compliment
for doing that. I would also be happy to welcome those
listening sessions in Indiana, and if you want to come to one
of the rural towns and see what that impact is not only in the
quality of care, but the impact upon the providers, I welcome
you, and please have your staff be in touch with me. I
appreciate you being here. Thank you.
Mr. Bilirakis. Thank the gentleman. Mr. Towns.
Mr. Towns. Thank you very much, Mr. Chairman. Let me thank
you, Mr. Secretary, for being here today. I want to thank you
for acting on the concerns that I expressed about the advance
beneficiary notice during your last appearance before this
committee. As a result of your positive action, health agencies
will only have to submit the ABN forms once for patients rather
than continue submissions every 60 days eliminates a major
paperwork burden, and I want to thank you for that.
I want to congratulate you, Mr. Secretary, on implementing
these improvements in such a short timeframe. Your actions
demonstrate that bureaucracy can be moved in the right
direction. I hope to be able to continue to work with you on
regulatory reform issues, like due process for home health and
hospice agencies.
As we continue our dialog on Medicare reform, let me thank
you again for moving so swiftly and, on that note, Mr.
Chairman, I yield back. Thank you.
Mr. Bilirakis. The Chair thanks the gentleman. Mr.
Whitfield.
Mr. Whitfield. Thank you, Mr. Chairman, and, Mr. Secretary,
we are delighted you are with us today. There has been some
discussion this morning about experimenting with Medicare, and
I am convinced that there is not any Member of Congress nor
anyone in the administration that wants to do a lot of
experimenting to the detriment of senior citizens, but we do
want to explore new ways to be more effective in delivering
better health care to our senior citizens, and I believe that
these fundamentals that have been set out are designed to do
that.
While we all agree that a prescription drug benefit is
vitally important and is probably the most important thing, I
know there has been some criticism of the administration about
the discount card, and I notice that you, in your testimony,
say that the discount card is simply a first step and is not
meant to be a substitute for a comprehensive drug benefit, and
that is what we are all working toward.
Another way that we can help senior citizens--and I know
that this will be addressed as well--is that providers today
are quite frustrated as they ask questions of contractors and
try to determine answers to and speed up their reimbursement,
and many of them are quite confused about that. And I know that
trying to streamline the regulations and administrative
procedures will help address that problem as well.
I would also just mention one other thing. Lois Capps and
I, along with others, have introduced legislation to try to
address the shortage in the nursing area and the pharmaceutical
area, and hope that you will work with us in that area because
that is very important also as we try to address the health
problems of senior citizens. I yield back the balance of my
time.
Mr. Bilirakis. The Chair recognizes Mr. Green for 3
minutes.
Mr. Green. Thank you, Mr. Chairman for holding the hearing.
Mr. Secretary, welcome again. The entire committee and I
appreciate your commitment to addressing our Nation's health
needs.
I have reviewed the material from today's hearing. I am
confident that, as you already hear from our opening
statements, there will be a spirited debate. And I just want to
say a few words about the President's proposal on prescription
drug savings card.
Under his plan, from the way I see it, Medicare would
endorse and promote several privately administered discount
cards. And while this program sounds good on the surface, with
closer exam it doesn't offer anything that seniors can't do
now. In fact, in some ways it could actually limit their
sources. Currently, seniors can receive a discount card through
AARP, Reader's Digest and other sources. In fact, seniors can
buy any of these plans based on their individual prescription
drug needs. Under the President's plan, seniors would be
limited to one discount card, which bothers me because under
the free market system they can purchase all of them if they
want because each card may cover only certain types of
prescriptions. And as we know, seniors take a variety of
prescriptions and they have total coverage. And according to
some estimates, seniors can save more by comparative shopping
than they could through a prescription card.
A study by the Government Reform Committee reveals that
discount cards result in less than 2 percent cost savings below
the average drugstore.com price, and these savings don't even
take into account the cost of signing up for the program. The
proposal would cost $35 million, which would be really a
commercial for these private prescription discount cards and at
the taxpayers' expense. And the fact that I am concerned about
is that we need a prescription drug benefit, and I appreciate
the President saying this is a first step. But even that first
step needs to be one that is as effective as we can make it.
The President's proposal does address the need for
prescription drug benefit, and there is a lot of good ideas on
preventative care and streamlining administrative procedures
that you have in your program, and some are controversial, such
as the voucher program and other proposals that require a lot
of time to work out.
Mr. Chairman, I know we hope to mark up a Medicare reform
bill in September, but I have some concerns that it might take
much longer than that for the House and the Senate to really
work our will. We need a meaningful prescription drug benefit,
and we need it as soon as possible. And with that, Mr.
Chairman, I yield back my time.
Mr. Bilirakis. Mr. Greenwood, for an opening statement.
Mr. Greenwood. Good morning, Mr. Secretary, welcome. Yield
back.
Mr. Bilirakis. Mr. Barrett.
Mr. Barrett. Thank you, Mr. Chairman. I won't be quite as
brief as Mr. Greenwood. Thank you for holding this hearing and,
Mr. Secretary, welcome back to the committee, it is nice to see
you back here again.
As I listen to the opening statements of my colleagues and
reflect on the town hall meetings that I have held on this
issue in Wisconsin, I think the one thing that we all agree on
is that the older Americans want us to act, and I appreciate
the fact that you have come forth with a plan. As Mr. Green and
others have indicated, there are some concerns with the plan,
but I think the most important thing is that we have begun the
dialog in what I think will ultimately be an effective
resolution to this problem because both Democrats and
Republicans recognize that this is a real-world problem, that
people are really affected by this. And it is tough when you
sit in a hearing or a town hall meeting and listen to an older
person say that they really can't afford to purchase the drugs
that they need.
So, I am pleased that you are here. I look forward to
hearing your testimony, and because I want us to have an
effective resolution as fast as possible, I will yield back the
balance of my time.
Mr. Bilirakis. Thank the gentleman. Mr. Upton.
Mr. Upton. Thank you, Mr. Chairman. I, too, just want to
welcome the Secretary and look forward to his testimony, and I
yield back.
Mr. Bilirakis. Mr. Strickland.
Mr. Strickland. Thank you, Mr. Chairman. Mr. Secretary, I
want to begin by thanking you. When you were here before, I
shared with you the story about a young woman in my district,
Patsy Haines, 31 years old, who need a bone marrow transplant
and was unable to secure that from her insurer. You took that
to heart. You looked into her situation. You wrote me a long,
thoughtful letter, and I shared that with her, and I have
shared that with my constituents.
Still, the insurance company did not budge, but I have good
news this morning. Her friends and neighbors, as I said, were
holding bake sales and community auctions. They were able to
raise a threshold amount of money, and I was just informed a
few hours ago that the hospital is willing to accept what they
have raised as a community to negotiate, and very soon she will
receive her transplant and we hope that that will save her
life. But I want to thank you for following through and for
your obvious concern for her.
I also want to thank you because when you were here before
I expressed some frustration with the former HCFA and some
doubts as to whether or not the Agency would ever be
manageable. My experience in the few months that you have been
there has been more positive than in the past. I would like to
say that Mr. Scully of your staff and I have worked on a matter
with Representative Thurman, and he has been responsive. He has
returned phone calls and he has shown concern. So, I want to
thank you for that.
You indicated that you were going to the office in
Baltimore and spend some time yourself, and I think you invited
any of us who may be interested to go along with you. I was
unable to do that. If you ever do that in the future, I would
be most interested in participating.
In regard to our hearing today, I have read your testimony
and I have looked over the principles. I have some concerns
about the principle that said today's beneficiaries and those
approaching retirement should have the option of keeping the
traditional plan with no changes, and I have questions about
that. At what age should we be concerned that those of us will
find that Medicare won't be around in the traditional sense,
and I hope in today's hearing we can get some answers,
especially regarding that particular principle. But most of
all, I wanted to thank you for your follow-through and your
concern. I yield back, Mr. Chairman.
Mr. Bilirakis. I thank the gentleman. Mr. Pallone.
Mr. Pallone. Thank you, Mr. Chairman, for holding this
hearing on the President's Medicare Modernization Principles,
and I wanted to thank you also for what you said yesterday at
our meeting about wanting to work with both sides, with the
Democrats as well.
I think the most important issues that need to be addressed
are adding a prescription drug benefit that would cover all
seniors who want it, and increasing protections while ensuring
that Medicare remains affordable for all beneficiaries. The
lack of an affordable prescription drug benefit is without
question the biggest problem that Medicare faces today, and I
don't think it can be corrected piecemeal by simply devising a
plan to cover the poorest seniors, a comprehensive affordable
drug benefit should be available to all seniors regardless of
income because 50 percent of Medicare beneficiaries without
coverage are middle-class seniors. Instead of providing a
meaningful benefit through Medicare, it seems--and I say it
seems because I hope I hear differently today from the
Secretary--but it seems as though President Bush and the
Republican leadership are preparing to either provide drug
coverage to only low-income beneficiaries or some type of
catastrophic coverage, and neither of these will allow
beneficiaries to receive a comprehensive affordable guaranteed
benefit.
In addition, the drug discount card program proposed by the
President is not an interim solution, in my opinion, to
providing a comprehensive prescription drug benefit. Many
companies already provide these cards at little or no expense.
Drug manufacturing companies are not held accountable, while it
places the entire burden of any possible savings on hometown
pharmacies, and it does not require Medicare to pay even a
portion of the Medicare recipient's cost of prescription drugs.
When talking about reforming or modernizing Medicare, a
drug discount card or privatization is not helpful, in my
opinion, to seniors. We need a comprehensive benefit.
At a time when seniors can barely afford the prescription
drugs, Mr. Chairman, I also think it is important to discuss or
to ensure that health costs to seniors for basic services do
not increase, and this merging of Parts A and B of the program
may contribute to a rise in the cost of the Medicare program
which would be financially detrimental to seniors nationwide.
If both Parts A and B are combined, it seems clear that most
seniors would face a higher deductible. The deductible for Part
A is $776, but only 15 percent of seniors utilize it. The
deductible for Part B is $100, and an overwhelming 85 percent
of seniors use it. Combining these two parts and finding a
deductible that falls in between A and B I think presents a
majority of beneficiaries with a significantly higher
deductible, which means that most seniors would have to pay
more out-of-pocket before their Medicare benefits kick in.
Again, these are the concerns I have, and I hope that
rather than focus on these interim solutions in terms of a drug
discount card, we get right to the heart of the matter which is
providing a comprehensive benefit for everyone. Thank you, Mr.
Chairman.
Mr. Bilirakis. I thank the gentleman. Mr. Bryant.
Mr. Bryant. Thank you, Mr. Chairman. Mr. Secretary, thank
you for being here and sitting very patiently while we all go
in and out and come back just in time to make our statements
and pontifications and so forth. I know this is a regular
routine that a Secretary has to undergo, but I appreciate again
your willingness to sit and listen to us and to attend this
hearing.
I think there are some very good points that are being made
by my colleagues and members, and while many of us have to go
in and out to other hearings, which I am in the process of
doing today, again, I appreciate your patience with us.
Let me very quickly, without taking all of my time, go
through a couple of questions because I want, if I could, you
to answer these today if you could, and if you don't get it all
down and can't, if you could late-file your testimony to these
questions, and they are a little bit more narrowly drawn than
some of the general comments I have heard being made this
morning, and concern the issue of U.S. renal care in this
country and reimbursement in that regard.
The first one is that the administration's plan speaks of
Medicare contract reform and also encourages innovative
programs such as disease management demonstrations. There is no
better place for these types of reforms that in the End-Stage
Renal Disease, the ESRD program. Would the administration
welcome congressional authority to permit CMS to directly
contract with the ESRD providers so that dialysis and other
health care services could be provided through a disease
management model, perhaps even a risk-sharing with CMS in the
treatment of these patients? That is the first question.
The second question is, Section 422(c) of BIPA 2000
directed the HHS Secretary to develop a system which adds an
expanded number of laboratory test in drugs which are currently
separately billable under the program, add these into a bundle
of dialysis services reimbursed under the ESRD composite rate.
A report on this is due Congress in July of 2002. This new
payment system seems to be very consistent with the
administration's interest in reducing bureaucratic complexity
while improving the quality of care. And my question here is,
would the administration commit to meeting the statutory
deadline, July 2002, and would it consider sharing any
preliminary findings with this subcommittee as soon as such
findings become available?
And if you could, when it is appropriate for you to answer
and respond to us, if you could do that today, and if you can't
do that today, if you could, again, share your answer to us in
written form. Thank you, sir, and I would yield back the
balance of my time.
Mr. Bilirakis. I thank the gentleman. Ms. Eshoo, for an
opening statement.
Ms. Eshoo. Thank you, Mr. Chairman, for having this
hearing, and I will submit my full statement for the record. I
want to welcome the Secretary. This is your maiden voyage here,
and I want to welcome you and wish you well with the
responsibilities that you shoulder. I look forward to asking
you some questions and, most importantly, is this the best we
can do?
I want to work with you on reforms, I think they are very
important. I offered legislation last year on prescription drug
coverage that was really based on a competitive model with
multiple PBMs, so I look forward to working with you because,
after all, we are here to work for the American people, and let
us see how we can push the edges of the envelope out and get
some good things done.
So, thank you, Mr. Chairman, and welcome, Mr. Secretary,
and I wish you well in your position because there are a lot of
people that are counting on you to make good on the things that
haven't been done and I think that we all want to accomplish.
Mr. Bilirakis. I thank the gentlelady. Mr. Barton, for an
opening statement.
Mr. Barton. I don't have a formal opening statement, Mr.
Chairman, I just want to welcome the Secretary. We have talked
by telephone several times, and you have always been very
receptive and accommodating, and many of us are supporting Alan
Slobodan to be General Counsel at the FDA and your people are
working on that. So, we look forward to your testimony, and
welcome to the subcommittee.
Mr. Bilirakis. The Chair thanks the gentleman. Ms. Wilson,
for an opening statement.
Ms. Wilson. Thank you, Mr. Chairman. I will forego a formal
opening statement as well. I want to welcome the Secretary and
look forward to working with him and, as the chairman knows,
and other members of the committee, I have worked very hard on
the discrimination against rural States and small States in
Medicare+Choice, as well as the modernization of the Medicare
and Medicare bureaucracy, the HCFA bureaucracy, so that we can
focus on care to people rather than on compliance with
regulations that sometimes seemingly have no purpose. And as
the Secretary also knows, children's mental health is an area
of keen interest of mine, and whether it is today or at some
other point, I would like to visit with you on the progress
being made in that area. Thank you, Mr. Chairman.
Mr. Bilirakis. I thank the gentlelady. I believe that
completes all the opening statements. The written opening
statements of all members of the subcommittee are, without
objection, made a part of the record.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress
from the State of Wyoming
Thank you, Mr. Chairman. I appreciate your efforts in making
Medicare reform a top priority of this subcommittee, not just today but
during this Congress.
Medicare will touch all of our lives at one point or another, and
for obvious reasons. So it is in everyone's best interest to work
together to come up with some sound reforms that will improve the
program for the long term.
The President's proposal for Medicare reform takes positive steps
toward strengthening the program, and I am encouraged by what I have
heard so far.
His plan places greater emphasis on preventative care services and
the need for prescription drug coverage. Seniors can also keep their
existing Medicare coverage without having to make any changes if they
don't want to.
I think we are also making some real progress in identifying those
problem areas within the program that need our attention, like
contractor reform, improving the appeals process, and streamlining what
has become a complex bifurcated structure of Part A and Part B
services.
I would like to focus my attention on an area of particular
importance to rural communities across this country, one that perhaps
stands on the periphery of the reform debate, but one that we must
address--regulatory relief.
Providers in my home state of Wyoming are quite honestly screaming
out with frustration over the constant flood of Medicare regulations
coming down the pike--a new regulation every five hours I'm told.
There comes a point when a rural provider with a small practice in
tiny town U.S.A. simply cannot keep up with the regulations, not for
any fault of their own, but because they do not possess the resources,
manpower, or technology to keep up.
By the same token, when Medicare reimburses rural providers at a
lower rate that urban providers, it has particularly devastating
effects on health care services in rural areas.
I do not profess to fully understand the Medicare reimbursement
formula used by Medicare, but what I do know is that Wyoming ranks last
among the lower 48 states when it comes to Medicare payments.
Not only that, providers in Wyoming have become so paranoid about
the stringent Medicare coding procedures fearing that at any moment
they are going to be audited--or worse, charged with fraud and be faced
with monetary penalties.
When we add all these things up, we literally force the provider to
withdraw from Medicare and do you know who suffers the most in the long
run?--our seniors.
As we continue to work through this issue, I hope we all keep in
mind that rural America is the very backbone of this country. If we are
going to strengthen the Medicare program and allow it to do what it was
intended to do--provide medical care to all seniors--then we have got
to ensure the survival of rural health care services.
I stand ready to work with this subcommittee and this
Administration on any and all ideas related to regulatory relief--as I
do in all other areas of Medicare reform.
With that, Mr. Chairman, I yield back the balance of my time.
______
Prepared Statement of Hon. Eliot L. Engel, a Representative in Congress
from the State of New York
Mr. Chairman, I want to thank you for having this hearing and
continuing to examine different ways to improve Medicare for seniors.
Let me also thank you Mr. Secretary. I appreciate your efforts in this
regard and look forward to working with you on this issue. Today we
will examine the President's framework for Medicare reform. I am
optimistic that in developing legislation we can work in a bipartisan
manner to the benefit of our seniors.
The 89th Congress had the pleasure of designing the Medicare
program which has endured numerous changes over the years. However,
this Congress is faced with the most significant challenge since
Medicare's inception. Not only do we intend to provide a prescription
drug benefit but we are also undertaking the enormous challenge of
modernizing the Medicare program as a whole. This Congress is saddled
with the responsibility of determining what aspects of Medicare have
been successful, what aspects have failed, what new services should be
included in a modernization package, and how to do that in a fiscally
responsible manner. As this and other Committees study different
modernization models, we must keep in mind that this is a program
designed for the elderly. It must remain affordable, it must maintain a
high level of care, and it must allow seniors to live with dignity. To
do less would be an injustice to the millions of seniors who rely on
Medicare.
In reviewing the President's prescription drug discount plan, I am
a bit concerned about his commitment to implementing real drug coverage
for all seniors. I have heard talk of providing coverage for low-income
individuals along with a catastrophic provision. My concern through all
of this is that middle-income seniors will be left out and the promise
of coverage will be in the discount card, which clearly is not enough.
While the discount program may be well intentioned, I think it
detracts from the real goal of meaningful prescription drug coverage,
which should be our focus. In fact, the $300 billion that the President
has set aside for a drug benefit is wholly inadequate. It does not
allow this Congress to develop a real benefit. The benefit that $300
billion provides will give seniors some relief, but they will be forced
to pay a fairly high premium for very little coverage and will still
have high out-of-pocket expenses. The President's tax cut further
exacerbates this problem by squandering the surplus when it should have
been used to provide a real, meaningful prescription drug benefit for
seniors. I hope that we will examine alternatives to increase the level
of funding for a Medicare drug benefit.
I understand the complex changes that the delivery of health care
has endured over the last 36 years and realize that we need to take a
good hard look at the Medicare program. Seniors deserve high quality
care and if changes are needed we need to make them. I look forward to
hearing your testimony, Mr. Secretary, and working with you and the
Members of this Committee to develop meaningful legislation that will
benefit our seniors.
Mr. Bilirakis. The Chair now will recognize the Secretary.
Sir, we will set the clock at 10 minutes, but you take as much
time as you need to communicate your message to the Congress.
STATEMENT OF HON. TOMMY G. THOMPSON, SECRETARY, DEPARTMENT OF
HEALTH AND HUMAN SERVICES
Mr. Thompson. Thank you very much, Mr. Chairman, Chairman
Bilirakis, Congressman Brown, and all the other members of the
committee. Let me just say at the beginning I was very
appreciative of the comments that everybody said in the
committee, and I would like to just point out that this
administration and my office wants to work with each and every
one of you. We have a tremendous opportunity to improve
Medicare, and if we can set aside our differences and work on
the goal of improving Medicare, I think there are enough good
ideas out there that everybody can buy into it and accomplish
something that the American people really want; a strengthened
Medicare system with a prescription drug benefit for all
seniors. I was very heartened and encouraged by hearing
everybody's remarks and appreciate that, and that is what I
wanted to say up front.
Distinguished subcommittee members, I thank you very much
for inviting me to appear before you today. I am very delighted
to have this opportunity to discuss President Bush's framework
for strengthening the Medicare program so that it can better
serve America's seniors and individuals with disabilities.
As you know, the President's plan for improving and
strengthening Medicare is based on eight principles, which I
will discuss in a moment. These principles reflect ideas
developed over many years of work by many people, including a
lot of members on this subcommittee, and I thank you for
working to ensure that Medicare is better and stronger for all
that need it.
President Bush's Medicare principles recognize the need to
improve the current benefit package so that it more effectively
meets the needs of seniors. The principles also place Medicare
on a secure financial footing for future generations. The
President is committed to working with Congress on a bipartisan
basis to meet these shared goals.
For 36 years, Medicare has been immensely successful, as
all of you have pointed out, in helping America's seniors
achieve the promise of secure access to needed health care. Yet
as medical practice has improved dramatically in the past
decades, the Medicare benefit package and delivery system has
actually not kept pace. When Medicare was created in 1965, the
benefit package was based on the most popular private health
insurance packages which were offered at that time. Since then,
the health insurance options available to most Americans have
changed as the practice of medicine has changed, but Medicare
has in many ways remained rooted in the 1960's.
As you all know, one of the most glaring omissions is the
lack of prescription drugs in Medicare's benefit package. But
even when benefits are covered, Medicare's patchwork benefits
leave serious gaps, as all of you have pointed out, as too many
seniors discover when they experience serious illnesses. These
problems are illustrated not only by prescription drugs, but
also by other types of care such as preventive medicine, which
I personally believe is one of the biggest failings of
America's health care system today. And I would welcome any
ideas you would have that would help me improve that system.
Additionally, Medicare's current cost-sharing structure
does not include protections for the most vulnerable
beneficiaries, those with the highest medical costs. For
example, individuals who need hospital care face deductibles of
almost $800 for each hospital stay, as well as additional cost-
sharing requirements, and our private health insurance programs
do not require that $800 cost-sharing deductible each time we
go in the hospital. While most private insurance plans also
include stop-loss limits to protect against very high out-of-
pocket medical expenses, Medicare has no such protections. And
even the benefits now available to our seniors are not secure.
The oncoming rush of Baby Boom retirees jeopardizes the ability
of Medicare to meet its most fundamental obligations.
The President is not content to wait for comprehensive
Medicare improvements to strengthen the system, he is taking
bold and effective action now so that we will be able to begin
the process of improving every aspect of the way Medicare
functions.
We have taken immediate action to give all Medicare
beneficiaries access to the kind of discounts on drug prices
that Americans with private health insurance have available to
them.
Now, I know some of you question the need and the use and
the quality of the health card, but these discounts are
incorporated right now in all the major Medicare drug benefit
proposals pending before Congress. People with Medicare could
use these cards right now instead of waiting until we implement
Medicare, which may be 1, 2, 3 years away; could use these
cards when they buy prescriptions to get discounts of up to 25
percent off the retail prices. And I want to point out that we
had an information meeting this past Monday, and over 100
individuals representing many companies came and were very
enthusiastic about the choices and the opportunity and the
chances to drive down drug prices and to be able to negotiate
directly with the pharmaceutical companies. The drug discount
card is only the first step.
Today I am announcing three other actions that I believe
will also significantly enhance the way that we provide health
care in America. First, we are now issuing the final Skilled
Nursing Facility Prospective Payment System. It includes the
Skilled Nursing Facilities, commonly referred to as SNF,
provided by swing-bed hospitals. Our plan supports swing-bed
hospitals in providing quality care--this is going to help
rural areas especially--while still maintaining accurate
Medicare payments. I am working to reduce the burden on swing-
bed hospitals by pushing back the implementation date of the
new rule until July 1, 2002. This is going to give the swing-
bed facilities time to prepare for their new role.
We are also reducing the questions from 400 to 100, eight
pages that have to be filled out to two pages of rules and
regulations, which is a tremendous reduction, 75 percent.
Second, I am announcing that CMS will provide new
techniques to assist States in developing and implementing
changes to their Medicaid programs. And one of the best ways to
improve the waiver process is to be able to enable States to
learn from each other so they know what the best waiver ideas
are and what is available and what needs to be done.
I did this when I was Chairman of the National Governors
Organization starting best practices. I am trying to do the
same thing through CMS; put it on the Internet and the Websites
so States will know what is out there, what is available. As
part of this initiative, CMS will integrate State-to-State
learning and information-sharing into the waiver application
process through interactive templates on the Internet. State
officials and, yes, all Members of Congress, will be able to go
online and obtain information on how other States have designed
their waivers. State officials will also be able to interact
directly with other States that have experience in designing
innovative waivers and will be able to work with our staff, CMS
staff, on designing approvable waivers.
CMS is also issuing a new guide book that highlights the
way States can better help families, especially those with
children, who will be able to gain access to and retain
Medicaid benefits.
Third, I am announcing several Medicare+Choice
improvements--for example, provider credentialling for
Medicare+Choice has been taking place every 2 years, adding
unneeded regulatory pressure. From now on, it will occur every
3 years.
We are also adding a dose of commonsense to the
requirements that we place on providers that participate in
Medicare+Choice. For example, CMS will allow new providers to
participate once their training is complete or while they are
awaiting official credentialling. And we are revising the
Medicare+Choice quality improvement requirements to decrease
the administrative burden, allow increased flexibility, and
reward high performance. For a full list of all these
improvements, I have outlined them in my Medicare+Choice
program and also in the record.
Improving Medicare+Choice represents the kind of change we
need if Medicare is going to be able to meet the needs of
nearly 80 million Americans who will be served by this program
in 2030. It is also why the President has worked with Members
of Congress from both parties to develop a framework to guide
legislative program efforts to modernize the Medicare program
and to keep the Medicare benefits secure. Let me review them
with you now.
First, all seniors--all seniors--should have the option of
a subsidized prescription drug benefit as part of modernized
medicine and modernized Medicare. About 27 percent of Medicare
beneficiaries have no prescription drug insurance and must pay
for the drugs entirely out of their own pocket, or go without
needed medication. That is unacceptable to you and to the
administration, and I hope it will be able to be changed this
year under your leadership.
Second, modernized Medicare should provide better coverage
for preventive care and serious illness. Preventive care is
something we all have to address if we are going to hold down
health costs. Medicare's preventive benefits should have zero
co-payments and should be excluded from the deductible.
Medicare's traditional plan should have a single indexed
deductible for Parts A and B, provide cost protection for high-
cost illnesses, and take other steps to protect seniors from
high expenses.
Third, today's recipient and those approaching retirement
should be able to keep the traditional plan with no changes, no
higher premiums, no changes in cost-sharing or supplemental
coverage, period, and they should have a period of time to
switch back to the original plan if they prefer.
Fourth, Medicare should provide better health insurance
options like those available to the Federal employees. Plans
should be able to compete to provide Medicare's required
benefits, and beneficiaries who would choose less costly
options should be able to keep most of the savings even if that
means that they pay no premiums at all.
Fifth, Medicare legislation should strengthen the program's
long-term financial security. Medicare relies primarily on
payroll and income taxes to finance its benefits, but the
significant increase in retirees means that there will be fewer
workers to help sustain the Medicare program. So, to support
good planning for the entire program, Medicare's separate trust
funds should be unified to provide a very straightforward and
meaningful measure of Medicare's overall financial security
that is not vulnerable to accounting gimmicks. Financial
security cannot be achieved simply by increasing reliance on
unspecified financing sources.
Sixth, the management of Medicare should be streamlined so
that Medicare can provide better care for seniors and disabled
citizens. For example, we really need contracting reform so
that Medicare can use competitive bidding tools to improve
quality and reduce costs. A number of recent studies show that
this could reduce costs upwards to 25 percent.
Seventh, Medicare's regulations and administrative
procedures should be updated and streamlined, and instances of
fraud and abuse should be dramatically reduced if we do our job
right. Too often, the regulations are complex, variable and
inconsistent. They need to change, and I want to tell you, they
will.
I am directing CMS to hold listening sessions around the
country, much like the town hall type meetings that many of you
hold in your districts. And I want to point out that several of
you have asked us to come into your districts and hold town
hall meetings, Democrats and Republicans alike, and I
appreciate that. I don't know if we are going to be able to
accommodate all of you, the list is getting quite long, but we
will try to get to as many as possible. But we want to gain the
input not only from you, but seniors and physicians,
administrators and nurses, from everyone involved. Their
recommendations will help form the basis of practical
commonsense effective regulatory reform.
Finally, Mr. Chairman and members, Medicare should
encourage high-quality health care for all seniors. For this
administration, there is no more important goal than ensuring
that seniors and disabled Americans get the highest quality,
and most error-free health care. These are the principles
around which the President has committed to building consensus
in Congress to strengthen and improve Medicare. The President
and I are absolutely committed to working with each of you and
the entire Congress to make Medicare stronger and better.
I personally look forward to working with you, with your
staff, to realize our mutual goal of improving and transforming
this vital program. I thank you very much for giving me this
opportunity, and now I look forward to your questions.
[The prepared statement of Hon. Tommy G. Thompson follows:]
Prepared Statement of Hon. Tommy G. Thompson
Chairman Tauzin, Congressman Dingell, and distinguished Committee
members, thank you for inviting me to appear before the Committee
today. I am delighted to have the opportunity to discuss President
Bush's framework for strengthening and improving the Medicare program
so that it can fulfill the promise of providing health care security
for America's seniors and people with disabilities in the coming
decades. This framework is based upon ideas developed over long years
of dedicated work by many people including many Members of this
Committee. It recognizes the need to improve the current benefit
package so that it better meets the needs of seniors including the
addition of a prescription drugs benefit. It also seeks to place the
program on a secure financial footing for future generations. The
President is committed to working with Congress on a bipartisan basis
to meet these shared goals. To this end, he has put forth eight
principles that together form the basis of a framework for
strengthening the Medicare program. Working together we can ensure that
Medicare keeps it promise not only to today's seniors but also the
seniors of tomorrow.
For 36 years, Medicare has been successful in helping America's
seniors achieve the promise of secure access to needed health care. Yet
as medical practice has improved dramatically in the past decades, the
Medicare benefit package and delivery system have not kept pace. When
Medicare was created in 1965, the benefit package was based on the most
popular private health insurance packages offered at that time. Since
then, the health insurance options available to most Americans have
changed as the practice of medicine has changed but Medicare has in
many ways remained rooted in the 1960s. As you all know, one of the
most glaring omissions is the lack of prescription drug coverage in
Medicare's benefit package. But even when benefits are covered,
Medicare's patchwork benefits leave serious gaps, as too many seniors
discover when they experience serious illnesses. These problems are
illustrated not only by prescription drugs, but also by other types of
care such as preventive medicine.
Additionally, Medicare's current cost sharing structure does not
include protections for the most vulnerable beneficiaries --those with
the highest medical costs. For example, individuals who need hospital
care face deductibles of almost $800 for each hospital stay, as well as
additional cost-sharing requirements. While most private health
insurance plans include stop-loss limits to provide protection against
very high out of pocket medical expenses, Medicare has no such
protections. And finally, even the limited benefits now available to
our seniors are not secure in the coming decades with the retirement of
the Baby Boom generation.
THE PRESIDENT'S FRAMEWORK FOR STREGTHENING MEDICARE
Medicare must be strengthened and improved now if it is to meet the
needs of the nearly 80 million Americans who will be beneficiaries of
the program by 2030. The President has worked with members of Congress
from both parties to develop a framework to guide legislative reform
efforts to modernize the Medicare program and to keep Medicare's
benefits secure.
We believe that Medicare improvement should be guided by the
following set of eight principles:
1. All seniors should have the option of a subsidized prescription drug
benefit as part of modernized Medicare.
Prescription drugs are an essential part of the health care system
for Medicare beneficiaries. One recent study found that while Medicare
beneficiaries make up about 14 percent of the population, they
accounted for 40 percent of prescription drug spending. Yet, over one-
quarter of beneficiaries have no prescription drug insurance and must
pay for drugs entirely out of their own pocket or go without necessary
medications. Worse, this financial burden falls heaviest on those least
able to afford it. Of beneficiaries with incomes below poverty, those
with drug coverage filled nearly twice as many prescriptions in 1998 as
those beneficiaries without coverage (29 prescriptions compared to 15).
A prescription drug benefit will do more than protect beneficiaries
from the risk of high prescription drug expenses. Quality private-
sector prescription drug benefits also help make prescription drugs
more affordable through the use of innovate tools to reduce drug costs.
Private insurance plans usually work with pharmacy benefit managers to
negotiate volume discounts. They also improve the quality of
prescription drug use by working with pharmacists and physicians to
provide individualized information on more effective, and lower-cost,
drug options. Their computerized support systems can help avoid adverse
drug interactions, which are far more common in seniors than in any
other part of the population.
Medicare's subsidized drug benefit should protect seniors against
high drug expenses and should give seniors with limited means the
additional assistance they need. All seniors should have the
opportunity to choose among quality private plans. Further, the drug
benefit should be implemented in such a way as to encourage the
continuation of the effective coverage now available to many seniors
through retiree health plans and private health plans. While we must
support these continuing options, we should encourage a multiplicity of
new choices. The new drug benefit should be available through Medigap
plans and as a stand-alone drug plan for seniors who prefer these
choices. When Medicare implements the drug benefit, states should not
face maintenance of effort requirements for their own drug programs
outside of Medicaid.
2. Modernized Medicare should provide better coverage for preventive
care and serious illness.
Medicare's existing coverage should be improved so that its
benefits provide better protection when serious illnesses occur and
provide better coverage to help prevent serious illnesses from
developing. Medicare has been slow to cover proven treatments for
preventing illnesses and saving lives. Coverage often comes long after
preventive treatments are widely available in private insurance plans
and the cost sharing required to receive these preventive benefits may
discourage many from seeking potentially life saving tests. This
Congress understands the value of Medicare preventive benefits and
crafted important legislation in 2000 to expand preventive benefits for
Medicare beneficiaries. Yet gaps remain. For example, colorectal cancer
is the second leading cause of cancer death and more than 90 percent of
cases occur among individuals over the age of 50. It is also one of the
most treatable forms of cancer if it is detected early. However, at the
present time, less than 40 percent of colorectal cancer cases are
detected early. While Medicare covers colonoscopy for high-risk
beneficiaries, the most complete form of screening for this disease,
coinsurance requirements may pose a barrier to early detection.
Coinsurance for a colonoscopy can range as high as $130 (assuming the
beneficiary has already met their Part B deductible). If a beneficiary
is at average risk for colorectal cancer, a colonoscopy is covered once
every ten years. For an individual at high risk, the procedure is
covered once every two years.
Advances in medical technology have made it possible for more
seniors to survive illnesses that would have been fatal only a few
years ago. Unfortunately, the sickest Medicare beneficiaries are likely
to pay the most for their health care costs--exactly the opposite of
the way that logical insurance plans should work. For example, Medicare
copayments related to serious illnesses such as complex chemotherapy
treatments for cancer may exceed 40 or 50 percent. Indeed, the sickest
beneficiaries, those who incur over $25,000 in program costs (about
730,000 individuals in the most recent year for which figures are
available) averaged more than $5,000 in cost sharing payments alone.
This figure does not include items and services such as prescription
drugs that are not covered by the program. Beneficiaries within this
group include individuals requiring intensive life support following
major heart attacks or breast reconstruction surgery following a
mastectomy. In general, for patients with multiple hospital outpatient
visits and procedures, the costs quickly add up. To protect
beneficiaries when they need help the most, private insurance plans
generally include ``stop-loss'' limits. Stop-loss provide guaranteed
protection against very high medical expenses. Despite its important
coverage gaps, Medicare has no stop-loss protection.
We believe that Medicare's existing coverage should be improved so
that its benefits provide better protection when serious illnesses
occur and provide better coverage to help prevent serious illnesses.
These changes should not reduce the overall value of Medicare's
existing benefits. Medicare's preventive benefits should have zero
copayments and should be excluded from the deductible; Medicare's
traditional plan should have a single indexed deductible for Parts A
and B to provide better protection from high expenses for all types of
health care; and Medicare should be provide better coverage for serious
illnesses, through lower copayments for hospitalizations, better
coverage for very long acute hospital stays, simplified cost sharing
for skilled nursing facility stays, and true stop-loss protection
against very high expenses for Medicare-covered services.
3. Today's beneficiaries and those approaching retirement should have
the option of keeping the traditional plan with no changes.
Many people in Medicare today, and others, who are approaching
retirement, have good supplemental coverage for prescription drugs and
other medical expenses. If they wish to continue in the traditional
Medicare plan with no changes in their premiums, benefits, or
supplemental coverage, they should be able to do so. Beneficiaries who
opt for the improved Medicare benefits should be allowed one year to
switch back to the original plan.
4. Medicare should provide better health insurance options, like those
available to all Federal employees.
Medicare beneficiaries do not have access to the same range of
choices available to most Americans with private health insurance. The
Federal government, many state governments, and most large private
employers help their employees get the care that is best suited to
their needs by offering them several health care plans, along with
useful information to help them choose the best one for their budget
and needs. The contrast is most striking here in our Nation's capital.
Federal employees and Members of Congress living in the Washington area
have twelve different health plans to choose from, including a variety
of fee-for-service plans, and health maintenance organizations (HMOs).
But their neighbors with Medicare have only two choices--the
traditional fee-for-service plan and a single HMO. This pattern occurs
throughout the country. For many beneficiaries, particularly those in
rural areas, Medicare offers only one health insurance plan--it is
strictly one-size-fits-all. Previous legislation to address this
problem, including the establishment of the Medicare+Choice program,
has not had the intended effect of providing more reliable health
insurance options for all Medicare beneficiaries. Currently, no senior
has access to any of the new kinds of private insurance that have
become popular with other Americans, such as point of service plans
that give beneficiaries the cost savings of networks of providers along
with the flexibility of coverage for services from all providers.
Plans should be allowed to bid to provide Medicare's required
benefits at a competitive price, and beneficiaries who choose less
costly plans should be able to keep most of the savings--so that a
beneficiary may pay no premium at all. In areas where a significant
share of seniors choose to get their benefits through private plans,
the government's share of Medicare costs should eventually reflect the
average cost of providing Medicare's required benefits in the private
plans as well as the government plan. Low-income seniors should
continue to receive more comprehensive support for their premiums and
health care costs. Beneficiaries should have access to timely and
comparative information on the quality and total cost of all their
health care coverage options.
5. Medicare legislation should strengthen the program's long-term
financial security.
Since 1965, Medicare has provided a guarantee of health care
coverage for more than 90 million seniors and people with long-term
disabilities. Medicare has made the same promise to millions of
Americans who are currently contributing their hard-earned dollars
through payroll and income taxes. These Americans are counting on the
financial stability and integrity of the Medicare program. But Medicare
faces substantial financial challenges in the not-too-distant future.
Within the next thirty years, the number of Medicare beneficiaries is
expected to nearly double to almost 80 million people. As the number of
beneficiaries rises, the payroll taxes of fewer workers will be
available to support the program. Rising health care costs will also
strain Medicare's resources.
Careful planning is required to ensure that Medicare continues to
keep its promises to future generations. We believe that legislation is
necessary to improve the program's long-term financial security. To
support good planning for the entire program, Medicare's separate trust
funds should be merged to provide a straightforward and meaningful
measure of Medicare's overall financial security that is not vulnerable
to accounting gimmicks. Only by ensuring reliable data and planning
ahead can drastic, undesirable changes in Medicare or other Federal
programs be avoided.
6. The management of the government Medicare plan should be
strengthened so that it can provide better care for seniors.
Medicare's traditional plan is falling short in important respects
other than its benefits. It has not been able to use competitive
approaches to keep its costs down. Its contracting requirements are
outdated, making it more difficult to providers and patients to work
effectively with a complex claim processing system. And perhaps most
importantly, traditional Medicare does not provide integrated services
for many seniors who need support for managing their illnesses,
particularly in cases of chronic disease.
Contracting reform should be implemented to improve efficiency and
performance. Medicare is restricted o using certain insurance companies
to process certain types of claims. Other businesses have the
experience and capacity to provide these claims processing services but
Medicare is prohibited by law from contracting with them. The program
also cannot reward or penalize a contractor based on their performance.
Medicare also does not have the authority to use competitive bidding
tools to improve quality and reduce costs. Enrollees in traditional
Medicare frequently require use of medical supplies such as hospital
beds, wheelchairs, and oxygen equipment. Prices for these items are set
by Medicare and are frequently higher than prices paid by private
plans. A number of recent studies indicate that the cost of supplies
could be reduced between 15 and 30 percent if Medicare used the same
kind of competitive bidding tools that help reduce costs for non-
Medicare patients. However, Medicare should not be allowed to create
newprice controls and should ensure that seniors continue to have
choice of suppliers.
Medicare also needs to reform its medical management tools. Many
Medicare beneficiaries are among the sickest and most vulnerable
individuals in our society, often suffering from numerous chronic
conditions. Unfortunately, Medicare's traditional approach to paying
only for discrete visits and services has denied many seniors the
opportunity to take advantage of advances that have been pioneered by
integrated health plans in coordinating care for complex conditions and
chronic diseases. Private plans have developed disease management
programs to improve the quality of care for individuals with specific
conditions like heart disease, diabetes, asthma, and gastrointestinal
disorders. These programs have the potential to increase quality of
care and encourage appropriate health care utilization. While the
elderly suffer disproportionately from these conditions, few of them
have access to these innovative programs. We believe that beneficiaries
who wish to participate in programs such as disease management and
coordination of care should be able to do so. We also believe that
Medicare's process for covering new technologies should be streamlined.
7. Medicare's regulations and administrative procedures should be
updated and streamlined, while the instances of fraud and abuse
should be reduced.
Medicare's system of regulations and administrative procedures is
too complex, too variable and too inconsistent. Needed relief in
regulation and oversight, including some bipartisan proposals from
members of Congress, should be implemented. This will allow providers
to spend more time and effort on patient care and less on paperwork and
unexpected and complex rule changes. At the same time, we must continue
to assure the integrity of Medicare's trust funds. Medicare's
administration should be restructured so that program staff can work
more effectively with beneficiaries, health care providers, and health
plans.
I have already begun to address the issue of regulatory relief. As
I announced last month in Chicago, I am doing a top to bottom review of
all Department agencies looking for opportunities to streamline
regulations to streamline regulations without increasing costs or
compromising quality. We look for regulations that prevent hospitals,
physicians and other health care providers from helping people in the
most effective way possible. This initiative will determine what rules
need to be better explained, what rules need to be streamlined and what
rules need to be cut altogether while still providing beneficiaries
with high quality care and protecting the interests of taxpayers. To
this end, we will listen to the public most affected by the results of
our regulations--beneficiaries and providers. I am directing CMS to
start holding listening sessions around the country, in the areas where
people have to live and work under the rules we develop. I want our
people in CMS to hear from local seniors, the disabled, large and small
providers, State workers, and the people who deal with Medicare and
Medicaid in the real world. I want to get their input so we can run
these programs in ways that make sense for real Americans in everyday
life. To ensure that CMS responds to these ideas and comments, we will
assign a senior level staff person to work with each provider industry.
We will also take advantage of the years of expertise developed by the
Department's dedicated staff. We will encourage them to think
creatively about how we can operate the Medicare program more simply
and effectively without increasing costs or compromising quality.
We will do more than listen--we will take action. We are going to
use all of this wonderful input, and we are going to improve the way we
do business and make Medicare and Medicaid easier for everyone involved
with them. This action has already begun. As I announced last week, I
am seeking to eliminate unnecessary data that has been demanded of
hospitals and skilled nursing facilities in their Medicare Cost
Reports. There is a statutory requirement that, for payment, hospitals
report their overhead for old capital costs and new capital costs. We
will eliminate these reporting requirements for most hospitals as soon
as we can after September 30, 2001, when they expire in law. This will
shrink the cost report by about 10 percent. This is just the
beginning--there will be much more to come.
8. Medicare should encourage high-quality health care for all seniors.
For this Administration, there is no more important goal than
ensuring that seniors and disabled Americans get the highest quality,
error-free health care. Physicians and other health care providers
unquestionably share this goal. But currently, there are too many
instances where beneficiaries fail to get recommended treatments. There
are too many instances where medical errors result in serious
consequences for seniors.
The problems of benefit gaps, lack of coverage options, outdated
management practices, and excessively complex administrative burdens
undoubtedly contribute to these problems. There is also evidence that a
range of private sector and public-private initiatives can help
providers deliver better and safer care. For example, many hospitals
and other health care institutions have launched collaborative efforts
to use information related to quality, giving providers and patients
information they can use without increasing data collection burdens on
providers.
Medicare should revise its payment system to ensure that quality is
rewarded without increasing budgetary costs. Medicare's risk adjustment
system for private plans should reward health plans for treating the
toughest cases and finding innovative ways to provide care and reduce
complications for chronically ill, high cost patients, without creating
added paperwork burdens.
TAKING ACTION NOW
In the context of these eight principles, the President is
committed to working with Congress to strengthen and improve Medicare.
We also intend to begin the reform process administratively--to take
advantage of the flexibility that Congress has already provided to us
to ease the regulatory burden facing program providers and to provide
increased services to beneficiaries. As a first step, we are also
taking immediate action to give all Medicare beneficiaries access to
the kind of discounts on drug prices that Americans with private health
insurance have available to them. These discounts are incorporated in
all of the major Medicare drug benefit proposals pending before
Congress.
Medicare RX Discount Card--While Congress debates Medicare reform
and the creation of a prescription drug benefit, Medicare beneficiaries
without drug coverage continue to pay the full cost of their
medications out-of-pocket. Because beneficiaries without coverage have
no source of bargaining power, they also often pay higher retail prices
for their prescriptions. Beginning this fall, all Medicare
beneficiaries will have access to greater bargaining power.
Beneficiaries will be able to choose among Medicare-endorsed Rx
discount cards, offered by competing drug discount card programs. These
cards will provide a mechanism for beneficiaries to gain access to the
tools currently used by private health insurance plans to negotiate
lower drugs prices and provide higher-quality pharmaceutical care.
Discount cards are currently available in the marketplace through a
variety of sources, including pharmacy benefit managers (PBMs), some
Medigap insurers, and retail drugstores. Medicare Rx Discount card
programs may use formularies, patient education, pharmacy networks, and
other commonly used tools to secure deeper discounts for beneficiaries.
People with Medicare would be able to use the cards when they buy
prescriptions to get discounts of perhaps between 10-25 percent off
retail prices.
We are moving to implement this program quickly Beneficiaries will
be able to enroll in a program of their choice beginning on or after
November 1,2001 with discounts scheduled to take effect no later than
January 2002. Discount card programs endorsed by Medicare will conduct
marketing and enrollment activities, with support provided by the
Centers for Medicare & Medicaid Services (CMS). Enrollment is limited
to Medicare beneficiaries and beneficiaries will be permitted to enroll
in only one Medicare discount card program at a time.
To receive endorsement by Medicare, Medicare Rx Discount Cards
would have to meet a number of qualifications:
<bullet> No plan could charge an enrollment fee greater than 25
dollars. This would be a one-time fee to cover enrollment
costs. Some plans might not charge any fee.
<bullet> No plan could deny enrollment to any beneficiary who wished to
participate.
<bullet> Plans would have to provide a discount on at least one brand
and/or generic prescription drug in each therapeutic class.
<bullet> Plans would have to offer a broad national or regional network
of retail pharmacies.
<bullet> Plans would be required to offer customer service to
participating beneficiaries, including a toll-free telephone
help line.
<bullet> Plans would have to participate in and fund a private
consortium. The consortium will comply with all federal and
state privacy and consumer laws and regulations and perform
numerous administrative functions for the program.
<bullet> All discount card applicants that meet the qualifying criteria
would be endorsed by Medicare.
We believe this initiative will provide a number of additional
benefits for seniors that many of them do not enjoy now:
<bullet> First, we believe that providing comparative information to
the elderly and disabled about actual drug prices will spur
greater competition and lower prices than we see today. Because
seniors can switch to a card that offers better pries and
services, the discount cards will have strong incentives to get
the best possible prices.
<bullet> Second, we believe these cards will create market pressures
that will allow Medicare beneficiaries to benefit from drug
manufacturers; rebates--something most seniors cannot obtain
currently in the discount card market now. Combined with
existing retail pharmacy discounts, these rebates will help
make prescription drugs more affordable to seniors.
<bullet> Third, we believe these competitive pressures will lead to
other innovations that improve quality and patient safety--like
broader availability of the computer programs to identify
adverse drug interactions, and better advice on how seniors can
meet their prescription drug needs at a more affordable cost.
To make sure that beneficiaries understand the benefits of this
program, CMS will include information about these cards in its
extensive education campaign and we expect that the organizations
endorsed by Medicare to offer Rx discount cards will conduct their own
marketing campaigns. A primary goal of the initiative is to make sure
that people with Medicare are fully aware of the program and what it
offers. The education campaign will also make clear that the Medicare
endorsed Rx discount card is not a Medicare drug benefit.
Regulatory Relief--As you know, I am taking aggressive steps to
bring a culture of responsive to all of HHS. As part of this effort, I
am taking several steps today that will highlight our commitment to
improving our responsiveness to our stakeholders.
SWING-BED HOSPITAL IMPROVEMENTS
An important component to strengthening and improving Medicare for
our seniors and disabled individuals is how we treat our providers in
Skilled Nursing Facilities. Today, I am happy to announce that we
issued the final Skilled Nursing Facility Prospective Payment System
(SNF PPS), and it includes the SNF services provided by hospitals with
swing beds. I have revised in the initial proposal in several ways that
minimize paper work burden and support swing-bed hospitals in providing
quality care white still maintaining the accuracy of Medicare payments.
Like all other providers under the SNF-PPS, swing-bed hospitals are
require to submit various data to us in order to bill Medicare. Under
our initial proposal, swing-bed hospitals would have had to complete
the full six-page Minimum Data Set (MDS) that nursing homes complete,
as well as other information. After reviewing comments on the proposed
rule, I am establishing a unique MDS assessment tool for swing-bed
hospitals, reducing the number of pages they have to complete from six
to two. This represents a decrease in the number of data elements from
approximately 400 to about 100. In addition, CMS will collect only
those items it needs to pay these providers and analyze the quality of
patient care in their hospitals. This should make these providers'
interactions with Medicare simpler and less time-consuming. We are
looking at the length and complexity of the MDS for all providers who
use it.
I also am taking a number of other steps to reduce burden and
provide education and assistance to hospitals with swing beds. I am
pushing back the implementation date of this rule, to begin on the
latest date permitted by the statue--that is, cost reporting periods
starting on or after July 1, 2002. Additionally, CMS will develop and
distribute a swing-bed manual that will include instructions on using
the new MDS, as well as other information. CMS also is planning a
series of training programs to help hospital staff understand how to
complete the MDS and transmit materials electronically. In addition,
CMS has committed to develop customized software that will be available
free of charge to providers. We will establish Help Desks to respond to
clinical and technical questions from hospital staff. These initiatives
will reduce burden for swing-bed hospitals and make it easier for these
providers to interact with Medicare, and for Medicare to pay them the
right amount and on time. I am committed to ensuring that we minimize
the disruption to swing-bed operations and provide needed support to
these providers during the transition period to the SNF PPS.
MEDICAID IMPROVEMENTS
As you probably know, before I came to HHS, I was governor of
Wisconsin for 14 years, and I used to have regular discussions with HHS
trying to push through our Medicaid State waivers. Well, since I
started here at HHS, we've been making sure that waiver applications
that come in that are identical to waivers we have already approved for
other States receive priority review, and we are looking at other ways
to further improve the waiver application process. Today I am
announcing that CMS will provide new techniques to assist States in
developing and implementing changes to their Medicaid programs. And we
are going to take advantage of the Internet to improve the waiver
process. I am directing CMS to develop web-based templates for waivers
and State plan amendments. These online templates will provide States
with a clear, concise way to ensure they are providing all of the
information the Agency needs for a State to apply for, and operate, a
waiver or State plan amendment under Medicaid.
In addition, I want States to be able to learn from each other, so
they know which waiver ideas are good ones that we can approve quickly,
and which are not. As part of this initiative, CMS will integrate
State-to-State learning and information sharing into the waiver
application process through interactive templates. State officials will
be able to go online and click on resource icons to receive more
information on how other States have designed their waivers. They also
will be able to interact directly with other States that have
experience in designing innovative waivers. They also will be able to
work directly with CMS staff for advice to design approvable waivers.
Not only is it important that we make it easier for States to apply
for and operate waivers and State plan amendments, and it is important
that States know how easy it is to provide Medicaid benefits to the
people who need them--especially families with children. Toward this
end, CMS is issuing a new guide, ``Continuing the Progress: that
highlights ways States can accommodate families with children,
particularly working families, so they can more easily access and
retain their Medicaid benefits. Federal law gives States a lot of
flexibility to do this now. CMS's new guide features successful steps
some States have taken, so other States might follow their example. For
example, successful State practices highlighted in the guide include:
<bullet> coordinating Medicaid enrollment with the school lunch
program;
<bullet> using community-based organizations to reach working parents;
<bullet> reaching out to Medicaid-eligible families in the community;
<bullet> establishing one-stop shopping for public benefits; and
<bullet> making it easier for migrant workers, immigrants, and other
families to apply for Medicaid.
Additionally, the guide explains how States can implement Federal
policy options that allow families with two working parents to be
eligible for Medicaid or that allow children as well as pregnant women
to receive on-the-spot Medicaid benefits, through presumptive
eligibility. Finally, the guide includes tables with comparable, State-
by-State information on the application, enrollment, and renewal
processes for children in Medicaid and SCHIP. It is not enough simply
to give States ways to help people, we have to help them understand how
to accomplish their goals, and we have to help States to share good
ideas with one another so that we help as many people as possible.
MEDICARE+CHOICE IMPROVEMENTS
Today I am announcing several initiatives to make the
Medicare+Choice program more consistent with the private sector managed
care plans and reduce regulatory burden. For example, CMS recently
announced in a proposed rule that it plans to reduce the frequency of
the Medicare+Choice provider credentialing process to make
credentialing requirements consistent with those of States and private
accreditation organizations. Previously, provider credentialing for
Medicare+Choice had to happen at least every two years. Now, it will be
required only once every three years. In addition, we are bringing a
dose of common sense to the requirements we place on providers to
participate in Medicare+Choice. We want these requirements to mirror
those of the States and other credentialing organizations. For example,
we will allow for pending Drug Enforcement Administration (DEA) numbers
so physicians can provide care even if their DEA number is not yet
finalized. In order to align M+C's requirements with those of private
accrediting organizations, CMS will allow new physicians and health
care practitioners to participate once their training is complete as
they await their official credentialing.
Additionally, in response to concerns raised by Medicare+Choice
plans, we are committed to thoroughly reexamining the Medicare+Choice
Quality Improvement requirements, commonly referred to as Quality
Assessment Performance Improvement (QAPI) projects. These changes will
decrease administrative burden, as well as allow for increased
flexibility and reward high performance. Specifically, in judging
whether a plan's quality improvement is successful CMS has moved to an
approach that is more consistent with the private sector. Finally,
plans demonstrating high performance by meeting or exceeding a quality
standard will be excused from participating in the national quality
improvement project for that year.
CONCLUSION
While we believe that the Medicare Rx Discount Card is an important
first step to provide immediate assistance to Medicare beneficiaries
and to improve the program for them, I want to stress again the
importance that the importance that the Administration attaches to the
need for broader Medicare reform. The discount card is not intended as
a substitute for a comprehensive prescription drug benefit combined
with other needed legislative reforms. I am committed to working with
you to strengthen and modernize the Medicare program, improve its
benefit package, protect its financial future, and increase access to
high quality, innovative treatments for our nation's seniors and
disabled populations now and in the future. I hope that the eight
principles I have outlined here will provide the basis for constructive
dialogue to meet these goals that we all share.
Mr. Bilirakis. Thank you very much, Mr. Secretary. We will
have 5-minute inquiries, but we will have a second round.
Mr. Secretary, I think it was Mr. Pallone who made the
comment that we need a comprehensive benefit. I think, for all
practical purposes, we all said that we need a comprehensive
benefit, and I would like to think by now it is clear that
these discount cards are something to cover the time between
now, and when a comprehensive plan finally goes into effect.
All of the plans that have been discussed up here over the
years, the prior administration's plan, the Democratic plan,
and the Republican plan, take time to be fully implemented,
which leaves beneficiaries without any help. And so, as I
understand it--and please correct me if I am wrong--the
discount card is a temporary thing intended to cover that
particular implementation gap, is that correct?
Mr. Thompson. That is absolutely correct. There is 27
percent of the seniors that don't have any coverage right now,
and the problem, Mr. Chairman, is these are the individuals
that pay the highest cost because they don't have anybody
running interference for them. They go into the drugstore and
pay the sticker price.
We think with the card and with the full force of the
Medicare population, we are going to be able to go to the drug
companies and be able to get the discounts there and pass them
on to the beneficiaries.
Mr. Bilirakis. Can you expand upon that, please, sir? Many
of us have talked to your staff--who, frankly, have been very,
very cooperative and very helpful. However, we have been
hearing from our constituents especially pharmacists, who are
concerned that the burden of the discounts will
disproportionately fall on them.
Mr. Thompson. And I know that is a tremendous concern, and
I appreciate their concerns, Mr. Chairman, as you do. The
pharmacists are very important people. They are the front lines
on health care delivery, and we want to be able to give them as
much support as we possibly can.
We think with the size of the Medicare population, that the
PBMs will be able to go directly to the pharmaceutical
companies and be able to get the discounts there and pass them
on to the drugstores, who will then voluntarily enroll and be
able to have increased customers coming into their pharmacies.
So, we really think it is going to be a win-win situation.
And I know there is some criticism and some concern, and
all I can tell you is we are going to work with them and we are
going to work with you, and we think this is going to turn out
to be truly a win situation, especially for the uninsured
seniors who pay the highest price for their prescriptions.
Mr. Bilirakis. Did I understand you to say they would go
directly to the pharmacists? How about the drug manufacturers?
Mr. Thompson. I said directly to the pharmaceutical
companies.
Mr. Bilirakis. Pharmaceutical companies. I guess I missed
that.
Mr. Thompson. That is what I said.
Mr. Bilirakis. That is really the contemplation, that they
would go directly----
Mr. Thompson. That is why we are doing this, so that we
will have a big enough force to be able to go and negotiate
directly with the pharmaceutical companies.
Mr. Bilirakis. No portion of that negotiation will take
place with the pharmacies, it will all be with the drug
manufacturers?
Mr. Thompson. That is our intent, Mr. Chairman.
Mr. Bilirakis. That is your intent. And will you include
safeguards to be sure that there aren't increases in costs,
that would then counteract the discount, which means not really
a lower price?
Mr. Thompson. The beauty of this is that a year from now
all the PBMs are going to have to list their drugs, the 100
most common drugs, and the prices that they will be selling
them for. And so it is going to be very hard for the companies
to increase those prices because seniors will be able to
compare with all the PBMs that are going to be enrolled in this
program, to be able to make those comparisons. So they are
going to have a listing. We think the listing is probably going
to have more of an impact than anything else to drive down the
cost of prescription drugs for seniors. But as you have said,
this is the first step, and I want to make sure that everybody
knows that this is just only the first step--to be able to use
the full force of the Medicare population hopefully, and we
believe properly so, to reduce the amount of the drug prices.
Mr. Bilirakis. To what degree has the administration
communicated with the PBMs to be sure that they will be
willing, available, and there will be enough of them to cover
the waterfront?
Mr. Thompson. Well, we had the first meeting, and we were
absolutely surprised that on Monday of this week we had over
100 individuals representing many different companies, a lot of
companies we did not even know about, that came in to get
information, and all of them were looking together. Smaller
PBMs were looking at joining together into a larger consortium
so that they would be able to have a larger force. We think
there is going to be, when we put out these specifications, a
lot of responses, a lot of bids, and we are fairly confident
that there is going to be several--I don't want to pick a
number because I don't know--all I know is the enthusiasm for
the PBM market has increased much more so than we thought when
we first announced it.
Mr. Bilirakis. Good to hear. Thank you very much, sir. Mr.
Brown.
Mr. Thompson. I can tell you the five biggest ones have
already said that they are going to bid on them, and several
other individuals have indicated they will.
Mr. Brown. Thank you, Mr. Chairman. One of the President's
principles, Secretary Thompson, said that seniors should have
the option of prescription drug benefit as part of modernized
Medicare. Clarify that, if you would. Does that mean you are
planning to create a prescription drug benefit within
traditional Medicare, or must seniors join one of the
modernized Medicare plans in order to get the prescription drug
benefit?
Mr. Thompson. Could you say that again? I am sorry.
Mr. Brown. You had said the prescription drug benefit
should--the principle said that seniors should have the option
of a drug benefit. As you propose to modernize Medicare with
these principles, does that mean that everyone in Medicare, not
just those that have taken--that have joined one of the
modernized Medicare plans?
Mr. Thompson. We want everybody in Medicare to be able to
have prescription drug coverage.
Mr. Brown. So people that stay in traditional Medicare fee-
for-service, under your plans, will have an option for
prescription drug benefit--will be included with a prescription
drug benefit?
Mr. Thompson. That is our understanding, that is our
position but, of course, this committee and the Ways and Means
Committee will be the final determiners of that particular
position.
Mr. Brown. But that is your position?
Mr. Thompson. Yes.
Mr. Brown. Good. I am glad to hear that. Gene Lambrut,
former Associate Director of the Office of Administration and
Budget, testified sometime ago in our committee, and said that
in order to provide Medicare beneficiaries with the same type
of prescription drug benefit that Federal employees have--and
you have talked--you have and the President has and people on
this committee have talked about the positive aspects of FEHBP
and all the benefits that it offers.
She said Congress would need to spend $520 billion over 10
years to provide an equal kind of drug benefit. How do we do
that? I mean, how can Medicare provide that plan when FEHBP,
which you want to model some of this on, has to spend that kind
of money? We have, at most, $300 billion available if Congress
doesn't spend that even with the tax cut and all. Where are we
going to go? How are we going to do this?
Mr. Thompson. I don't know what your figures are based
upon, Congressman. All I can tell you is that from our
preliminary costing out of this, we think that we can do it
within the $300 billion set-aside over 10 years to allow this
benefit.
Now, I don't know the statistics or the figures that you
have, and I haven't compared them to our plan.
Mr. Brown. And you think you can, even as generous a drug
benefit as FEHBP--is that what you are modeling it on, that you
can do as generous a drug benefit? I mean, you have talked
about the beauties of FEHBP. Can we do a prescription drug
benefit as generous as that within your Medicare proposals,
regardless of what her estimate of the cost of FEHBP is?
Mr. Thompson. Congressman, we didn't make a dollar-for-
dollar accounting or comparison of FEHB and the drug benefits
and the seven--up to seven plans that they have. We just used
that as a model, and these are the principles. We would have to
cost-out the prescription drug proposals, like you are going to
when you start working on this thing. We think that it is
available. We think that we can have a very generous drug
benefit for all seniors, but we do not have a comparison of
dollars at this point in time.
Mr. Brown. Well, I am concerned that I hear lots of
people--the chairman of the full committee and others--talk
about FEHBP and what a good program it is, and we can do a lot
of those same things in Medicare, yet FEHBP offers all kind of
preventive benefits and better cost-sharing, limit on
catastrophic out-of-pocket expenses, all kinds of other
benefits that Medicare doesn't, and yet I just wonder how we
are going to pay for this if we are going to model a lot of
this on FEHBP.
Let me go back to the cards. You said it is a first step.
You want to use the full force of the whole Medicare population
in order to extract these discounts, if you will, not just from
pharmacists but from the prescription drug manufacturers.
I don't understand today, those companies that do those
cards, I would think today would operate under the same
principles. Those companies that do those cards want to extract
the biggest--they are selling these cards, they are marketing
these cards, whether it is Merck Medco, whether it is AARP or
anybody else. They want to extract the biggest breaks they can
get today. They have access to the whole Medicare population.
They have access to the whole population in society. Where does
big government come in and get them under your plan to all of a
sudden get these discounts up to 25 percent, as you say--it
seems pretty high to me--but how do they get the drug
manufacturers to do it today--do it in the future, when they
are not doing it today? What is the difference?
Mr. Thompson. I think the difference, Congressman, is based
upon the fact that the Federal Government is going to put the
good seal of approval on it. It is going to be very well
publicized, and I think the fact that you are going to list a
year from now all the 100 drugs from all the pharmaceutical
companies that are on that particular PBM, and what they are
charging, and so on. And seniors are smart, they are going to
make a comparison. And when you have 5, 6, 10, 12 PBMs out
there, with the Medicare population having all of those drugs
listed and the cost to them, I think that the seniors are going
to pick the ones that are going to be the best for them, and
the pharmaceutical companies are going to say they want that
business. So they are going to drive down their prices because
of the cost comparison that is going to be public.
Mr. Brown. Wouldn't it be a whole lot simpler if rather
than seniors getting direct mail and telephone solicitations
from all these companies saying, ``If you buy these drugs at
this price,'' another one will say, ``These drugs are this
price,'' that to do something like have you at HHS negotiate on
behalf of 40 million Medicare beneficiaries to get a better
price on all drugs, or follow the Canadian model where the
Canadian Government, on behalf of 30 million people at a cost
of $2 million office in Canada, negotiates prices with
prescription drug companies and gets discounts of 50, 60, 70
percent, wouldn't that be simpler to seniors, and a better
price only for seniors?
Mr. Bilirakis. The gentleman's time has expired. The
question, I guess, started before the 5 minutes was up. Maybe a
brief response, Mr. Secretary.
Mr. Thompson. Congressman, we have the opportunity to do
this immediately, that is the beauty of it. We can set it up
without any further congressional action, and that is what we
are doing. In order to do what you are asking would have to
have some congressional authority----
Mr. Brown. Would you support it?
Mr. Thompson. At this point in time? Let us see if this one
works.
Mr. Bilirakis. Mr. Burr, to inquire.
Mr. Burr. Thank you, Mr. Chairman. Again, Mr. Secretary,
welcome. In the administration's principles, one area that was
highlighted was an expansion of services to potentially include
preventative care which has been a difficult discussion in the
past up here, as it related to Medicare services, that
expansion into certain areas of preventative care. What do you
expect that would cost participants in co-payments and/or
deductibles?
Mr. Thompson. We would like to be able to have the
preventive coverage not have any deductibles at all. We think
the beauty of it is to encourage people to get preventative
health and start taking care of themselves personally. We think
it will pay many dividends to the taxpayers in the future by
driving down health care costs, but also improving the health
of the individual. And we think the mammograms and the pap
smears and also the PSAs and all of these things are so
important. They are in there now, but we need to do more. We
need to have a better diet, and more exercise. We have an obese
Nation that is getting fatter and exercising less. We have
diabetes that is going to be an epidemic if we don't do
something about it.
So, if we are not going to face up to the facts that we
have this problem confronting us, it seems to us the best way
to address this is through preventive health and encourage
people to do something about it.
Mr. Burr. Well, I commend the administration for taking the
initiative to put it in, and I think that that will have
overwhelming support from this committee and from this
Congress.
Mr. Thompson. Thank you.
Mr. Burr. Mr. Secretary, throughout the BBA, Congress, I
think, did a disservice to the long-term care industry. We
placed in jeopardy reimbursements. The result of that, with
less predictability in their reimbursements, financial markets
responded, capital dried up, they were faced with financial
ruin in many cases.
The facts are that by 2030, 77 million seniors will
potentially be in the market for long-term care needs. We are
in a situation that without predictable and fair
reimbursements, without some type of action on their workforce
numbers, without reassurance to the financial markets, we won't
be prepared for this onslaught of seniors with our long-term
care facilities.
Are there proposals, or will there be proposals from the
administration that specifically address these problems within
this industry that I think is vital to our future?
Mr. Thompson. I think, Congressman, you really address
something that is badly needed in America, and we need, I
think, three important concepts, big concepts, if we are going
to improve the delivery of health care. One is long-term care.
We have really not addressed this as a Nation.
The second one, and probably the most important one, is
preventive health which I have already addressed. But the third
one is the way we deliver health care in America is just wrong.
You know, grocery stores are more technologically advanced than
hospitals and clinics. And we need to put some dollars,
somehow, into advancing the technology in the hospitals to
reduce down the kind of pharmaceutical mistakes, the kind of
mistakes that are costing up to 98,000 individuals to lose
their lives.
So, those three principles--and you have addressed two of
them--but if we could address those three, we could improve the
quality of health care so dramatically in America and we would
all be very proud of it. I think we would save a lot of money
in the process.
Mr. Burr. Well, you have segued me into my next question,
which is, what has been an inability at CMS to see or to have a
vision of what was being approved in the way of new
technologies at the FDA, and the delay that exists which truly
does affect the quality of care for seniors, in our
implementation of a code and a reimbursement for those
procedures within the Medicare system. Can we expect some
changes in that?
Mr. Thompson. Mr. Burr, I can guarantee you are going to
see changes made there because you have addressed the three
most important things that I believe are needed if we are going
to really improve the quality of health care. The new
technology is out there. If we use the new technology that is
available, we could reduce the number of deaths, the number of
medical mistakes tremendously in this country, and overall
improve the quality of care. So, absolutely, the reimbursement
formulas need to be updated and modernized, as well as
Medicare. Prevention has to be a part of that, and also the
approval of new technology, but also a way to get the new
technologies into clinics, into doctors' offices, and into
hospitals. It is just, to me, somewhat ridiculous that we still
are writing out prescriptions that nobody can understand or
read, and then giving the drugs and not have any kind of check
on the interaction of different drugs and whether or not the
drugs have been given.
Mr. Burr. I thank you.
Mr. Bilirakis. The gentleman's time has expired. Mr.
Waxman.
Mr. Waxman. Thank you, Mr. Chairman. Mr. Secretary, I would
like to get a clear answer on several points. Is the
administration committed to maintaining traditional Medicare
with its fee-for-service structure and full choice of
providers, is it committed to maintaining Medicare as most
seniors know it, and are you committed to maintaining it not
only for current beneficiaries and people about to retire, but
as a permanent part of the program not just for the next 5 or
10 years, but on a continuing basis?
Mr. Thompson. I didn't hear the last----
Mr. Waxman. Not just for the next 5 or 10 years, but on a
continuing basis.
Mr. Thompson. Congressman, we believe that if we pass an
improved Medicare system, that most seniors will want to go
into the improved system. But, if they don't, they should have
the opportunity, as you have indicated, to stay in the current
fee-for-service system. And I have no difficulty with that, and
that is going to be a decision that this Congress will have to
make.
Mr. Waxman. Then let us get to the really key point, are
you committed to assuring that seniors and disabled
beneficiaries will not face financial pressures to move out of
traditional Medicare if this is where they want to stay? In
other words, will they have to pay relatively higher premium
amounts just to stay in the traditional program, or not? And I
ask this because, as you know, this is one of the basic
criticisms of the so-called Breaux-Frist No. 1 proposal, the
good risks go to cheaper plans, the average premiums are used
to set the Federal contribution, the portion of traditional
Medicare paid by the government falls, and then the beneficiary
is left paying more just to stay in the traditional program.
Have you rejected that approach?
Mr. Thompson. I don't think rejection is the right word
because what we have is we didn't start there. We didn't
include it, we didn't reject it, it wasn't part of it. We
started on our principles off of Breaux-Frist No. 2 where part
were being included, but that wasn't where we really ended up.
We ended up in a whole new system and principles that we think
can be endorsed on a bipartisan basis. And what we are trying
to do is--as you know, Part B costs are going to go up. We
don't want to put the cost on any segment of the Medicare
population. We want to have the fairest system as we possibly
can.
Mr. Waxman. Well, we want to be fair. If they just want to
stay with what they have, what I want to know is, are you
committed to assuring the seniors and disabled beneficiaries
that the Federal contribution to the premium for traditional
Medicare will not be reduced as a portion of the cost for the
fee-for-service program from what it is today? In other words,
are we going to assure people who choose traditional Medicare
that they are not going to face negative financial consequences
for making that choice and they are not going to have to pay
more just to keep what they have at the present time?
Mr. Thompson. Congressman, that is my position, but this
Congress is the one that is going to make the final position on
that.
Mr. Waxman. But your position is to allow people to keep
traditional Medicare and not have to pay----
Mr. Thompson. It is our position to allow individuals to
keep the current----
Mr. Waxman. And not to have to pay a financial penalty
because they make that choice.
Mr. Thompson. That is correct.
Mr. Waxman. I appreciate that answer, and I agree with you
on that. Let me ask you a quick question.
Mr. Thompson. But you also have to understand Part B keeps
going up on an annual basis, as you fully well know.
Mr. Waxman. On the Medicare cards, these prescription drug
discount cards, I have doubts whether you will really get the
discounts. My staff did a study showing that people can go
ahead and get these cards now, but they can get drugs at an
even cheaper price than by using some of the cards. But let us
say that we have these cards. I am concerned about the privacy
rights for people who enroll in these programs. Independent of
the President's plan, there may be a question about whether
these discount cards will be covered under privacy regulation.
Is it your view that drug discount cards are covered by the
recently issued privacy regulations?
Mr. Thompson. I haven't taken a position. I haven't studied
it. I would presume absolutely.
Mr. Waxman. I guess the second question is, the Department
has said it will require these Medicare-endorsed programs to
comply with HIPPA, but it is not clear what that means. How is
the Department going to structure the relationship to ensure
that individuals who use these programs are given the
protections of the privacy regulations? You may want to get
back to me with an answer on this, but I assume you want to
make sure that we apply those privacy protections if they go
into these private prescription drug cards.
Mr. Thompson. I am a full believer that if we pass rules
for everybody else, we should comply with them ourselves,
Congressman, and absolutely we will.
Mr. Waxman. Of course, we pass those rules to apply to
ourselves. I want them to apply to everyone else when our
seniors are involved and the government is giving its stamp of
approval.
Mr. Thompson. So do I, Congressman.
Mr. Bilirakis. The gentleman's time has expired.
Mr. Waxman. Could we leave the record open for elaboration
on----
Mr. Thompson. I would be more than happy, if the gentleman
wants to submit some questions.
Mr. Bilirakis. Is the gentleman expecting a response from
the Secretary regarding that question?
Mr. Waxman. Yes, and I will write a letter to the Secretary
so we can get an exact answer.
Mr. Bilirakis. Mr. Barton.
Mr. Barton. Thank you, Mr. Chairman. Mr. Secretary, I want
to go back to Chairman Bilirakis' questions on the prescription
drug card for seniors. I watched the President's press
conference on that, and within 2 hours my telephone was ringing
with retail pharmacists in my district afraid that those
discounts were going to come out of their operating margins,
which are pretty slim.
Now, I have read all the material that is generally
available to the Congress and the public on the prescription
drug discount card, and I want to reinforce what Chairman
Bilirakis said, and that is I think the committee is all for
giving seniors lower drug prices, and a prescription drug card
is a way to do that, but the discounts that are generated need
to be shared by the manufacturer and the wholesaler, in my
opinion, and I would assume in the committee's opinion.
What--I won't say ``guarantees''--but what mechanism is
built into the program to try to facilitate that the discounts
come from the manufacturers and the wholesalers as opposed to
at the retail level?
Mr. Thompson. Congressman Barton, it is a fact that the
current discount card companies have not gotten the discounts
from the manufacturers. They have negotiated with the
pharmacists, and that is where the pharmacists are very
concerned. And that has been a failure of the current cards.
And what we think that we are going to be able to do with
putting the government supporting this concept, that the
discounts are going to have to come from the manufacturer,
pharmaceutical company, and that is where the discounts are
going to come.
And the second thing that we are going to ensure is the
fact that they are going to have to list what the prices are,
and I can't imagine a drug company that is going to be looking
at these lists are going to want in any way to have one of
their drugs at a higher cost than another----
Mr. Barton. How do we do that?
Mr. Thompson. That is the insurance that we have. We don't
have any law to give us, you know, any supervisory power to go
in and get the discounts ourselves, but we think the
marketplace itself is going to accomplish this.
Mr. Barton. Well, why hasn't it done it already, then?
Mr. Thompson. Because they haven't had the power, they
haven't had the CMS or----
Mr. Barton. If we are not going to change the law or an
Executive Order or some regulation that somehow encourages
these discounts to come from the manufacturers, if the
discounts under the current system are coming from the retail
pharmacists--and, again, we are not changing anything other
than the President is putting out the idea--what makes the
President and you think that it is all of a sudden going to
come from the manufacturers? I am not being argumentative, I am
on your side, but I am fixing to go home to town meetings, and
I won't have you by my side to take the arrows when the retail
pharmacists show up in droves and say, ``You are our
Congressman, what are you going to do about this?'' And I say,
``Well, I talked to Secretary Thompson, he assured me that it
is okay,'' and they say, ``Well, that is great, now how do we
know''----
Mr. Thompson. I don't want to be argumentative either, of
course, but I want to point out that this is a concept that is
going to allow one card per senior, and is going to increase
the purchasing power and the negotiating power, and which each
one of these PBMs are going to have to have at least 2 million
seniors that are going to be enrolled----
Mr. Barton. Define the PBM for me. I am more of an energy
guy than a health care guy, so what is a PBM?
Mr. Thompson. That is these companies that have these
discount cards, and they are going to be issuing one card, the
Pharmacy Benefit Management----
Mr. Barton. They are in existence today?
Mr. Thompson. They are in existence, and they have
indicated at our meeting on Monday that they feel that the
discounts will be coming out of the manufacturing companies,
and they think that they will be able to--with the sheer force
of the negotiating power of the size of the number of people in
that group, that they will be able to go to the pharmaceutical
companies and demand reductions.
And the third thing, the listing of the prices is going to
have, I think, a tremendous impact on lowering the prices from
the pharmaceutical manufacturers, and that is--and the
drugstores, the pharmacists can enroll or they don't have to.
This is a voluntary thing. But the PBMs are going to have to
negotiate with the pharmacists in your area so that every
senior in a particular area has at least one drugstore that is
enrolled.
Mr. Barton. Now, one of the President's talking papers--Mr.
Chairman, could I ask one final question?
Mr. Bilirakis. Make it quick, please.
Mr. Barton. It talks about that the retail pharmacists can
organize their own discount program. Is there anything that we
need to do in terms of an antitrust exemption to give those
pharmacists the ability to do that?
Mr. Thompson. I don't think so, but I am not sure.
Mr. Barton. Thank you.
Mr. Bilirakis. Possibly we might ask the Secretary to look
into that, it certainly is a good question.
Mr. Barton. Thank you, Mr. Chairman.
Mr. Bilirakis. Ms. Capps.
Ms. Capps. Thank you, Secretary Thompson, for the
opportunity to have a discussion with you. I am not going to
spend time on what you call a very temporary, perhaps stop-gap
measure anyway, than what we have been talking about the
discount cards. I have serious questions about them partly
because of their enforceability and, also, to use that as a
segue, the one modernization that I have seen experienced in my
district with Medicare to include the possibility of
prescription drug coverage has been the Medicare+Choice
program, and the new discussion about modernizing Medicare,
particularly the Breaux-Frist plan, kind of pushes this in the
direction of involving the private sector even more. And I want
to have you hear from me about my concerns with the
Medicare+Choice market as it is reflected in my very rural
district on the Central Coast of California.
We have many complaints from seniors about the plan that
have pulled out because it is not cost-effective for them. They
can't make the profits that they wanted to. And it is not just
my district, but in many areas across the country.
Mr. Thompson. All over America.
Ms. Capps. So, seniors I represent are very jaundiced about
the possibility of modernizing Medicare by enticing more
seniors into more plans such as the Federal Government has for
its own employees and so forth. That is why I think we are
continually saying what about the traditional fee-for-service
Medicare plan? That is what seniors really would like to see
include prescription drug coverage, the way that would include
all of them.
I want to just ask you to comment on the BIFA, the
Beneficiary Improvement and Protection Act of 2000, in
increased payments to Medicare+Choice organizations by $11
billion over 10 years, hoping that they would get a better
return and come back and they would be more involved in the
Medicare program.
In addition, we required these plans to put this extra
money toward increased benefits or lowering the cost, including
more preventive measures, as you and I both support. However,
many seniors are even more disappointed as time goes on, with
the way these plans have worked out for themselves. And that is
why I want you to give me some reassurance and talk to me about
how the prescription drug option the President is considering
offered by private drug-only insurance companies, how can this
be an improvement on what many of us would call a dismal
performance so far?
Mr. Thompson. Congresswoman Capps, I have got to agree with
you that Medicare+Choice has had some real difficulties, and I
think a lot of those difficulties have been brought on by us--
stiff regulations, unable to get a decent return--and I think
it is important for us to direct our attention to see if we can
improve it. I think it is important to keep the Medicare+Choice
companies in the mix and be able to offer the services.
I think also that if we have more choices and better
opportunities, your seniors are going to be able to pick what
is the best insurance coverage for them, and we have to make
sure it is available. Now, under the FEHB, as you know, every
county in America has to be covered by at least the choice up
to seven plans.
Now, we think that if we pass something like this, that we
will have that kind of choice throughout America, and rural
California, as it is in rural Wisconsin, and that is what I
think you would like to see happen. I know it is what I would
like to see happen. And I can't stand here, or sit here, and
tell you that automatically I have a magic wand that is going
to do that, but that is what I want to work toward to make that
happen.
Ms. Capps. Through incentives, because we have added a lot
of incentives and it hasn't worked. As I speak to you, one of
the remaining companies is considering to withdraw. They have
raised their premiums time and time again.
Mr. Thompson. I know, they have contacted us.
Ms. Capps. Thank you. You see, we have a jaundiced eye
toward this as a plan. I haven't seen it work in my district,
and seniors who worked hard all their lives, choose
Medicare+Choice so that they can get the prescription benefit,
that is their major reason for choosing that plan, and then
those companies leave because they can't make a profit. You
can't make them stay, this is the private sector. Why would we
go down this path further?
Mr. Thompson. Well, I think we go down this path to make
sure that we do cover them with prescription drugs.
Ms. Capps. You make them come? You make them stay in my
district?
Mr. Thompson. Well, I don't know if that is make it, I
think that we can certainly set it up so that they want to stay
and expand. That is what I think is a much better model than
forcing people to stay because they won't do a good job. And so
you want the best services for your constituents as I want for
your constituents, and I think we have to work together to
accomplish that.
Mr. Bilirakis. The gentlelady's time has expired. I made
the announcement earlier that we would have a second round. I
should have also said subject to the Secretary's time schedule,
and I understand he has to be gone from here by noon. So, let
us all cooperate as much as possible, if we would like to even
touch that second round. Mr. Ganske.
Mr. Ganske. Thank you, Mr. Chairman, and once again
welcome, Mr. Secretary. I keep wanting to refer to you as
Governor. I am sure there are a few times when you are dealing
with some of these contentious issues that you wish that that
might still be the case.
Mr. Thompson. I hope you don't ask that question,
Congressman.
Mr. Ganske. I won't request a reply to that. Part of the
problem that I see with the pharmaceutical benefit manager
plans is that I know they are being bought up by the
pharmaceutical companies, and I think there is a potential for
some real conflict of interest in terms of whether they would
then function in a fair way or in a way that could produce any
savings.
I want to, though, focus on--I am just curious, how did the
State of Wisconsin provide a drug benefit for its Medicaid
patients.
Mr. Thompson. We added it sometime ago, Congressman.
Mr. Ganske. What was the mechanism? I mean, did you do it
through a managed care plan? Did you just simply provide a card
for somebody who qualifies for Medicaid to go to a pharmacy,
and then you added everything up and you got your negotiated
discount?
Mr. Thompson. It was through managed care.
Mr. Ganske. So that in essence the managed care company
that is providing Medicaid for Wisconsin was then doing the
negotiations, their negotiations with the pharmaceutical
companies.
Mr. Thompson. That is correct.
Mr. Ganske. Now, you already have a mechanism in place for
Wisconsin then for your Medicaid beneficiaries, plus you are
under that situation getting discounts from the pharmaceutical
companies. What would be wrong with extending that benefit to
those low-income seniors, the elderly widow who is just above
your Medicaid level but still is living off her Social Security
primarily, but maybe has a little bit of property so she can't
get into Wisconsin Medicaid--what would be wrong with just
giving her one of those Wisconsin cards and letting her go to
any pharmacy in Wisconsin and participate in the discount that
your HMO has already negotiated with the pharmaceutical
companies? Wouldn't that be a simple way to give this benefit
to those who need it the most, without creating an additional
bureaucracy and also having, in effect, a legitimate way to
negotiate discounts either through HMOs or through the
mechanism that is already there for other Medicaid programs?
Mr. Thompson. Congressman, we didn't have that option. We
wanted to move, and we wanted to get something up right now,
and we felt that it was important for us to do so, and the
prescription drug discount was a way in which we could do that,
and we set it up. And I want to tell you that the kind of
responses that we are getting has been very encouraging for us
to believe that this is going to work.
Mr. Ganske. If Congress, though, would pass a provision
like this, it would seem to me it would be relatively easy to
implement it. Now, as a former Governor, I would expect that
you would hope that if Congress is going to extend this benefit
above the poverty line, as defined, that since we would be
prescribing that we would also pay for that. In other words, I
would suspect that as a former Governor you would probably not
want to see a cost-share on that additional coverage. Would I
be correct that that would be sort of what most Governors would
say?
Mr. Thompson. If I was still a Governor, I would absolutely
concur.
Mr. Ganske. But if you were still a Governor, I think that
if the Federal Government were offering your State an extension
of benefit and paying for it entirely from the Federal side,
wouldn't that be a way that you could then be telling your
constituents in Wisconsin that we are helping those low-income
seniors who aren't quite so poor that they are in Medicaid but
are really struggling, and we have a program in place, we are
just going to let you participate in that? Wouldn't that be a
relatively simple way to handle that?
Mr. Bilirakis. The gentleman's time has expired, but please
answer the question.
Mr. Thompson. That is a simple way and it would provide
some benefits, but that requires congressional action, and this
program that we were able to put out there did not require
congressional action, we could get it up and running, and we
think that we will be able to get those discounts to all
seniors across America, not only Wisconsin but across America.
Mr. Ganske. Thank you.
Mr. Bilirakis. Mr. Strickland, to inquire.
Mr. Strickland. Mr. Secretary, I have two questions that I
think are fairly practical and not particularly theoretical.
One of the President's Medicare principles mentions the need to
update and streamline Medicare's regulations and administrative
procedures. And in your testimony before the Ways and Means
Committee, you discussed reducing the regulatory and the
administrative burden on providers. However, providers aren't
the only ones that face regulatory and administrative burdens.
Seniors face these barriers.
This subcommittee has heard many times that participation
rates in the Medicare low-income assistance programs, the
qualified Medicare beneficiary and the specified low-income
Medicare beneficiaries programs, the QMB and the SLMB programs,
that the participation is very low. One of the reasons that
seniors do not take advantage of these programs is because of
the fact that seniors have to go to their local Welfare office
and sign up for either of these programs, something that many
seniors feel is burdensome and in some cases embarrassing to
them.
I believe a much better solution is to allow seniors to
enroll in these programs at their local Social Security Office.
And so my question is this: Do you support reducing these
burdens on seniors, and could you support allowing seniors to
enroll in these two programs at their local Social Security
Offices rather than at the Welfare office?
Mr. Thompson. Let me just say, Congressman, I really
applaud you. I thank you for new ideas, and that is what I
really enjoy coming in front of a committee like this and
finding out that some of the thinking that is going on by you
and other members of this committee, and I will take it back. I
can't imagine we would be opposed to it. But let me just point
out that we are going to put $35 million into a public
informational campaign starting in October of this year, for
Medicare seniors across America to be able to find out what
really is out there and give them the best opportunity to
really find out what they need and to explain to them in common
terms what Medicare is all about and the programs available. We
also are going to set up a hot-line that is going to be open
24-hours-a-day, 7-days-a-week so that seniors in your
congressional district as well as seniors all over America are
going to be able to pick up that 1-800 number and call in for
information. And we are also going to train librarians in
respective areas across America to teach seniors how to use the
Internet, to be able to get information and to be able to
apply.
Now, you may have the best idea of allowing seniors to go
down to the Social Security Office and apply. I can't imagine
who would be opposed to that, but I would like to be able to
have just a little opportunity to reflect on that and get back
to you, but I would think, at first blush, it would very much
be endorsed.
Mr. Strickland. Thank you. And I suspect that if you set up
that 24-hour hot-line, some of us who are Members of Congress
may be using it from time to time to get answer ourselves.
Mr. Thompson. It is going to be set up this fall,
Congressman.
Mr. Strickland. One other question, Mr. Secretary. Many of
us are concerned about traditional Medicare and what the future
holds for traditional Medicare. In the Statement of Principles,
it indicates that seniors and those near retirement should have
the option of keeping the traditional plan with no changes. I
am not sure what that means, but it seems to imply that no new
benefits will be added to a Medicare fee-for-service system. Is
that what is meant by that statement, or am I misinterpreting
the intent?
Mr. Thompson. Congressman, we have not made a
determination. We have not got down to the finite details. We
get criticized if we come in with too many details that tell us
that we are legislating, and we didn't want to get involved in
that. We know that this is a very contentious subject, and we
want to work with you, we want to work with the members of this
committee to come up with the best program possible.
We put out these principles. We think that the seniors
should not be forced into another program. They like the
current program. They should have that opportunity to do so.
But in regards to increasing the benefits to that, that has got
to be a determination by this committee and Congress.
Mr. Strickland. Thank you, and I yield back my time, Mr.
Chairman.
Mr. Bilirakis. I thank the gentleman. Mr. Whitfield, to
inquire.
Mr. Whitfield. Thank you very much. Mr. Secretary, I know
that Medicare is divided up into regions. It is my
understanding there are ten regions in the U.S., and there are
50 contractors that are either fiscal intermediaries or
carriers, and there seems to be a lack of uniformity in
decisions made on reimbursement. And, also, there seems to be
maybe a lack of the ability to determine which contractor is
doing a really good job and which is not. What are your all's
suggestions or thoughts on dealing with that issue?
Mr. Thompson. Thank you for asking that question,
Congressman, because the way it was set up back in 1965, it was
set up to such a degree that we are hampered by doing the best
job possible because the fiscal intermediaries have got to be
nominated by the health care system in that particular State,
that particular region, and then it is based upon cost. And we
have too many fiscal intermediaries, we have too many carriers.
We should be able to put it out in an RFP, Request for
Proposal, to get the best technology, the best contractor to be
able to go in and administer it on a more uniform basis, and
that is what we would like to do. We can't do that without
Congress changing the law and allowing us to have performance
contracts and to be able to limit the number of fiscal
intermediaries and carriers, and I am asking Congress to give
us that. I know it is contentious and controversial, but I
think that the time is right to update the contracting out so
that we can get the best services and have more uniformity in
our decisions.
The second thing we are trying to do is we are going to be
setting up not only the town hall meetings, but we are going to
be contacting a lot of the carriers, or all the carriers, all
the fiscal intermediaries, but a lot of the providers, and
finding out from them what is working, what are the best
practices out there, which region is doing the best. I am a big
believer in taking what is working and adapting that to other
areas that are not doing quite as well, and that is what we
intend to do.
Mr. Whitfield. Well, I am delighted to hear that because I
have had a lot of town meetings also with providers, and have
met with Regional Directors of HCFA, now CMS, and we have
brought in some of these contractors, and it is kind of
embarrassing how unresponsive they are to consider basic
questions. So, I think that is an area that definitely needs to
be addressed, a problem area.
Mr. Thompson. You are absolutely correct, and there is no
basis for performance--no basis for performance because
everything is based upon cost, whatever it costs we pay. What a
foolish system.
Mr. Whitfield. Right. Well, I am delighted to hear you are
going to be pursuing that, and I know many member----
Mr. Thompson. Can't do it without your help, though, I have
got to have Congress' help on that.
Mr. Whitfield. [continuing] many members look forward to
working with you on that. I yield back my time.
Mr. Bilirakis. I thank the gentleman so much. Ms. Eshoo, to
inquire.
Ms. Eshoo. Thank you, Mr. Chairman, and thank you once
again, Mr. Secretary, for being here today so that we can start
this conversation with you. Let me just make a couple of quick
observations. On this discount card, we all like discounts, you
know, and I think maybe the older we get, the more we look
forward to them. It is a tradition, I guess, to be a senior and
get a discount. But I do have to say, look, anything that we
can do to ease the burden, how can anyone be against that? But
I think that some sand has been thrown in the gears here, and
that is by the pharmacists. You have got some problems, you
have a bumpy start on this thing. I don't know how it was put
together. I don't know who was in the room to have it explained
to, but it seems to me that some of the major players were
maybe left out, and some of the more obvious people, because
you have heard members from both sides of the aisle talk about
this. So, I don't know how you get the genie back in the
bottle, but you have got a bumpy start on this card business.
I think that anyone that markets wants lists, and so I
think it is going to be up to you to satisfy and answer this
issue on privacy because, if I were in the drug business, I
would want the list of names of everybody in the country so you
can keep marketing to them. So, I don't know how you are going
to satisfy that, but that is up to you to do. You are offering
this, I think, because it is quick, it is early, it speaks to
some things that can be done and not be done legislatively. So,
really, the burden, so to speak, is on you, but I do think some
sand has been thrown in the gears by the very people that you
need to do business with or have a conversation with, and that
is just an observation. I think we agree that it is a bumpy
start, and you are going to have to repave the road on this
thing.
Mr. Thompson. If I could just make a quick comment, it is
not as bumpy as you would think.
Ms. Eshoo. Well, I don't know, I am just reading the paper,
and it is not so good.
Mr. Thompson. The response has been quite overwhelmingly in
favor.
Ms. Eshoo. Really? By whom?
Mr. Thompson. People.
Ms. Eshoo. People?
Mr. Thompson. PBMs, companies that want to get involved.
Over 100 people came out to a meeting. We expected maybe ten or
15. A hundred people came to the meeting in Baltimore.
Ms. Eshoo. Well, I would expect--and I have a lot of
friends in the PBM community because I have worked with them--
of course they would support this. I mean, it is their
business. But pharmacists are in the pharmaceutical business,
dispensing it. I am an observer. I am sitting on this side
observing and reading. I am not trying to be harsh on you, I am
just saying that I think it is off to a bumpy start, and I
think there are members on both sides that would.
Now, we have got cards, I have just commented on that.
Reforming Medicare. Everybody is for it until you get close to
it, and then it starts falling apart. My sense is that--well,
first of all, let me ask you this question. It started out with
cards. You have talked about reform, every administration does,
or the previous one, that is since I came in, and now the new
administration, and we all acknowledge that there should be
prescription drug coverage added.
Are you going to take on reform first and then prescription
drug coverage? Are you going to do it all together? I know that
you have put principles out there for Medicare. Are you going
to add any meat to the bone? Which comes first? I mean, in many
ways, it is a chicken-and-egg thing, you know, and I think that
it is just far too important to get these next steps really
bollixed up early on with the administration.
I saw opportunities with the previous administration, most
frankly, squandered because of the way some things were
handled. That is why I am saying bumpy start on one. Now are
you going to do reform first and then prescription drug?
Mr. Thompson. We want to do it all together.
Ms. Eshoo. You want to do it all together.
Mr. Thompson. You know, you make a very good analogy
because what we want to do is we want to work with you. You
have got some wonderful ideas on both sides of the aisle, and
if we do it properly, we can come up with a comprehensive
package that is going to strengthen Medicare, add benefits
including the drug benefit, and do the job up right, and that
is one of the reasons we wanted to come up with the principles
early, so that we could start fleshing them out, start talking
to you and finding out, you know, your ideas on how we might be
able to incorporate your ideas as well as other ideas to make
this program more workable.
We are very fearful that if we just do the prescription
drugs, nobody will have the courage or the intestinal fortitude
to stick in there to do the rest of the hard lifting to get the
job done. With prescription drugs as part of it, we think we
can get the whole thing done at the same time.
Mr. Greenwood [presiding]. The gentlelady's time has
expired.
Ms. Eshoo. May I ask for just 30 more seconds, unanimous
consent?
Mr. Greenwood. Without objection.
Ms. Eshoo. Thank you, Mr. Chairman. Mr. Secretary, the
district that I represent has one of the most distinguished
medical centers in it, Stanford Medical Center. And when you
read in the newspapers that the President of Stanford
University is saying--and I pray, I don't think it will come to
that--but that they could be forced to sell. Something is wrong
with our reimbursement system. So, what I want to say to you in
these reforms, that if, in fact--I mean, you have got to have
the intestinal fortitude as well to say ``This is what it is
going to cost.'' It is going to cost something to do these
things. And it seems to me that is what people are afraid to go
near.
If you think there is some little sand in the gears with
this card business, I mean, you ain't seen nothing yet. So, I
encourage you to have the intestinal fortitude within the
administration, to come forward and say, ``You know what, if we
are going to do this, it is going to cost something, and these
are the cost factors as well,'' because in order to reform--I
know we can save on some sides, but we are going to have to
invest on the other. So, I will work with you on that, but we
have got a lot of things to fix, we really do.
Mr. Greenwood. The time of the gentlelady has expired.
Mr. Thompson. I have the intestinal fortitude, and I
appreciate that, and I want to work with you as well.
Ms. Eshoo. Thank you.
Mr. Greenwood. Mr. Pallone.
Mr. Pallone. Thank you, Mr. Secretary. I want to talk about
and return to the discussion on Medicare+Choice. I think that
the work that you are doing, and your staff is doing, and the
President is doing on modernizing Medicare is first-rate. I am
looking forward to it. I think we are going to have better
options for seniors in the future.
A lot of where we are looking in all of this is modeled
after Medicare+Choice, building on the Medicare+Choice concept.
As we all know and as you have acknowledged in your comments
this morning, the Medicare+Choice program, which started out
gangbusters--no premiums, prescription benefits, other
benefits--was very popular with seniors and, as we all know,
for a number of reasons, one of them micromanagement, poor
regulatory processes over at the old HCFA, and an irrational
system for paying plans based on an AAPCC and then raising it
by small amounts. Rather than keeping up with inflation, it has
deteriorated.
Now, the people who we want to move most rapidly into our
new and improved, modernized Medicare are probably those people
who have demonstrated in the past the willingness to leave
traditional fee-for-service and move into something that offers
them more opportunity.
I am very worried that the very people who will be looking
forward to make that first step are going to have a bitter
taste in their mouths having taken the Medicare+Choice step and
then been disappointed. So, for that reason, I think it is
critical that in the immediate future--I am talking about the
calendar year coming upon us--we do what is necessary to get
Medicare+Choice back up-to-snuff so that we can, indeed, build
on it. That means changing the way CMS does its business, but
it also means money. We are going to have to pay these plans if
you want them to stay in Congresswoman Capps' district. You are
going to have to pay them enough.
My question is, is this administration committed in this
appropriation cycle, between now and the fall, to put the
dollars into Medicare+Choice so that it does return as a viable
option, so seniors will see that we don't disappoint them when
they leave traditional Medicare fee-for-service?
Mr. Thompson. I think we have to. It seems to me that the
Medicare+Choice program has got a lot of support, but it is one
of reimbursement and being able to stay in business, and we
want this opportunity for our seniors to be able to have those
kind of choices. And I want it in my home State, and I know you
want it in yours, and several other States--the Congresswoman
from California has just indicated that there is a company
there that is contemplating whether or not they are going to be
able to stay in, and that is true across America, and that is
because they are losing money.
Mr. Pallone. And we have intentionally moved forward the
date by which the Medicare+Choice plans have to delineate what
their benefits will be in the coming calendar year, and what
their premiums will be, so that we can catch up to the process
here, but we can't be into late fall without some certainty as
to how we are going to pay these companies, or they will have
to retrench further and compound the existing problem.
Mr. Thompson. Really, it is going to be up to Congress to
do it, but I hope that Congress does. I support it, and I hope
that we can get the job done this year.
Mr. Pallone. We will push for it, and we are going to need
your support.
Mr. Thompson. And I hope, Congressman, we can get this done
in the context of overall reform. I mean, there are so many
pieces out there.
Mr. Pallone. Well, the problem is we may or may not get
this plan of ours signed into law in the next couple of months,
and we know we have got some heavy lifting here.
Let me quickly go to another issue that I think is similar
in that it is an issue. While we don't have prescription drug
benefit for most pharmaceuticals today, Medicare does pay for a
lot of them--they tend to be the infused drugs, chemotherapy,
et cetera--this issue of average wholesale price. You and I
have talked about it a little bit in my office. We have got a
problem here. We are spending almost $2 billion a year more
than we should be spending for these drugs because of an absurd
and irrational payment system. Seniors are ending up paying 20
percent co-pay for prices that are 5 and 10 times what the
doctor is actually paying for those drugs.
Do you have folks over there in your shop looking hard at
how we can fix this AWP issue and redesign it so that we take
care of the oncologist, we take care of the other specialists,
and pay a fair price but not an absurdly inflated prices for
these drugs?
Mr. Thompson. I want to tell you, Congressman, we have the
CMS staff working on so many different problems, this is one of
many that we are looking at. We can't address them all, but we
are trying to systematically go through them and come up with
solutions. As you know, we have moved mountains already, on
waivers and changing the name and reducing rules and
regulations, and we are going to continue doing that throughout
my term. I made it a point and I have told everybody out there
that I abhor the status quo, and it is time to move forward and
make some changes and to find ways to say ``yes'' instead of
trying to find ways to say ``no.''
Mr. Pallone. Thank you.
Mr. Greenwood. I think what we are going to have to do here
is we are going to have to recess for about----
Mr. Pallone. Mr. Chairman, I have already voted, so I
wouldn't mind----
Mr. Greenwood. The problem is that there is no Republican
to take the Chair, and I don't trust you that this committee
for----
Mr. Pallone. I can't say I blame you for your point of
view.
Mr. Greenwood. So we will recess for 5 to 10 minutes until
the chairman returns.
[Brief recess]
Mr. Bilirakis. Mr. Waxman, 2 minutes.
Mr. Waxman. Thank you very much, Mr. Chairman. Mr.
Secretary, I want to talk some more about this prescription
drug plan. My question is whether we are going to give seniors
quality private sector--in your Ways and Means testimony, you
said we were going to give seniors private sector insurance
prescription drug coverage. I want to know exactly what private
sector prescription drug benefits means because I assume that
means private drug-only insurance plans. I am interested in
your explanation as to why you chose this model of providing
drug benefits to seniors, given the reaction of the Health
Insurance Association of America last year when Chip Kahn, who
was representing them at the time, said that a stand-alone
drug-only insurance policy simply wouldn't work in the real
world in practice, and he said that there were so many hurdles
that they didn't think the insurance companies would offer
these plans. Is that what you are looking at for a drug policy
for seniors under Medicare?
Mr. Thompson. Congressman, we think that it will work, and
I know that there are the skeptics out there that have
indicated that it would not, but we don't know how else you
could do it and really make it work. I know Senator Gramm's
bill has got PBMs doing it, and we certainly would look at
that, but we think that the private sector is the best way to
go.
Mr. Waxman. It is interesting because you compare what you
would like to see for Medicare to what we have for Federal
Health Insurance Benefit policies. They don't have stand-alone
insurance coverage for prescription drugs, it is part of the
plan, and the same is true for major corporations.
Mr. Thompson. But, Congressman, that is what I thought I
said. I am sorry. We do want it to be included as part of the
package.
Mr. Waxman. So you are not talking about buying private
health insurance coverage for stand-alone prescription drug
benefits?
Mr. Thompson. No.
Mr. Waxman. You are talking about making it part of the
Medicare itself.
Mr. Thompson. Right.
Mr. Waxman. Thank you.
Mr. Bilirakis. I thank the gentleman. Mr. Secretary, just
very quickly, you know, we have heard concerns and, frankly, we
all have some concerns on the merging of Parts A and B. Now, I
know that this is sort of a work-in-progress and I am not sure
whether the administration has come up with a dollar figure as
far as the merged deductible is concerned, but could you go
into that, and then I think what we will probably excuse you at
that point.
Mr. Thompson. The President and I feel very strongly that
if we are going to have a real strengthened Medicare program,
you have to be really fair and straightforward and not allow
for shifting of one to another and having different co-pays for
Part A versus Part B. We think of a unified system.
If we are going to go into this and strengthen Medicare,
which I hope that we do, we should be able to combine Part A
and Part B, and then be able to have a unified Medicare system,
which everybody thinks we do have. And it is only, you know,
people that really understand the system that know that we have
two different entities that are set up, and when you put them
together there is a deficit of about $643 million, and Part A
was going to have a deficit in a couple of years until Congress
moved the home health from Part A to Part B, and we think that
brings itself to--you know, allows for a lot of financial
gimmicks, and we feel that it is much more straightforward to
combine them, have one co-pay, and be able also to have one in
which you wouldn't be able to shift one program when it is
going broke, to another program, and that is why we are doing
it.
Mr. Bilirakis. How would you respond to the concern that
only a small percentage of beneficiaries meet the high Part A
deductible amount, but more are able to meet the limited Part B
level and a new higher combined deductible could adversely
affect these beneficiaries.
Mr. Thompson. Well, we think that we can develop a system
that is going to allow for a real equitable contribution that
is fair, and it is going to have to go through this committee,
but we think overall the--the overall, the objective, is to
strengthen Medicare, and we think we can strengthen it by
combining Parts A and B, and we don't think we will accomplish
the financial security of the system by maintaining two
separate systems.
Mr. Bilirakis. Have you determined a deductible figure?
Mr. Thompson. No, we have not.
Mr. Bilirakis. You have not.
Mr. Thompson. We have not.
Mr. Bilirakis. Anything you wanted to inquire regarding
that point?
Mr. Waxman. Well, I was going to ask exactly that question,
you haven't decided how much.
Mr. Thompson. No, we have not.
Mr. Waxman. Because that is going to be a big increase for
a lot of people because they don't pay the deductible regularly
for Part A unless they use inpatient services, so now they are
going to have to pay a lot more money with a combined
deductible.
Mr. Thompson. We don't think so. We think we can structure
a plan that would not increase it very much at all,
Congressman.
Mr. Waxman. Mr. Chairman, may I ask unanimous consent to
put a report into the record on the problems with the
prescription drug discount cards, prepared by my staff on the
Government Reform Committee?
Mr. Bilirakis. I don't see any reason why not. Without
objection, that will be the case.
[The information follows.]
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Mr. Bilirakis. All right. Mr. Secretary, you are always so
very gracious, and we appreciate your willingness to work with
us. I don't know whether you have anything else you would like
to say, but I am about to just adjourn the hearing.
Mr. Thompson. I would like to, for the record, say that if
anyone wants to submit questions, we would be more than happy
to answer them.
Mr. Bilirakis. Yes. Well, as per usual, that is always the
case. Mr. Pallone.
Mr. Pallone. Thank you, Mr. Secretary. As you know, in the
previous Congress the Republican leadership put up what I call
an insurance-only drug plan--in other words, basically the idea
of giving money to the insurance companies to provide insurance
just for prescription drugs for seniors, and I was very
critical of that. I didn't think it would work.
We had an example in Nevada where the State of Nevada did
something similar and it didn't work and, of course, a lot of
the insurance companies testified before this committee and
said that they didn't see any of these policies actually being
available, regardless of what the government intentions were.
And I just was hoping that you are not going to go down that
route, in other words, that that isn't one of the things that
the administration is looking at in terms of a prescription
drug benefit because I don't really see it as something that
could work or that would provide any kind of comprehensive
coverage, and I just wanted you to comment on that, if you
would.
Mr. Thompson. Congressman, a similar question was asked by
Congressman Waxman. We would like to be able to include it in
the Medicare benefits, but we also are going to have options,
and individual options that would have a stand-alone drug
prescription, and it is going to be a private mechanism, but it
is also going to be a public one. And so we think there is a
combination and a lot of different choices that individuals
will be able to have, and we think the seniors are smart
enough--I know they are--to be able to pick and choose what is
best for them.
Mr. Pallone. So that is one of the options that you would
consider.
Mr. Thompson. It is one of the options that we would
consider.
Mr. Pallone. Thank you.
Mr. Bilirakis. I thank the gentleman. The hearing is
adjourned, and I know that you are available for any questions.
Thank you so much, sir.
[Whereupon, at 11:55 a.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
Prepared Statement of Advanced Medical Technology Association
AdvaMed represents over 800 of the world's leading medical
technology innovators and manufacturers of medical devices, diagnostic
products and medical information systems. Our members are devoted to
helping patients lead longer, healthier and more productive lives
through the development of new lifesaving and life-enhancing
technologies. AdvaMed is pleased to present this testimony on behalf of
our member companies and the patients they serve.
AdvaMed applauds President Bush's Principles for Medicare Reform,
released on July 12, 2001, which emphasize the importance of
encouraging high-quality health care for all seniors, better coverage
of preventive care and treatments for serious illnesses, increased
patient access to the most modern health care options and improved
management of the program. Medical technologies are key in helping to
realize these goals.
Medicare should encourage high-quality health care for all seniors,
including better coverage for preventive care and serious
illnesses.
The rapid pace of innovation for diagnosing, treating and curing
diseases and illnesses continues to drive the high quality of health
care available to Americans. However, according to the President,
``Medicare takes way too long to authorize new treatments. We must act
now to ensure that the next generation of medical technology is readily
available to America's seniors.''
The President's statement underscores the importance of reducing
the current delays of 15 months to five years in Medicare patients'
access to new technologies. By keeping pace with advances in medical
technology, Medicare can improve patients' quality of care and put
Medicare on solid financial ground.
The Administration can make substantial progress in reducing
Medicare delays by:
<bullet> Properly implementing key technology access reforms in the
Benefits Improvement and Protection Act of 2000, including
provisions calling for temporary, transitional payments for new
technologies in both the inpatient and outpatient settings.
<bullet> Creating a Medicare Office of Technology and Innovation to
improve the Centers for Medicare and Medicaid Services' (CMS)
accountability, openness and coordination in making timely
decisions.
<bullet> Establishing decision deadlines to improve accountability. For
technologies subject to a national coverage decision, CMS
should take a total of 6-12 months to set coverage, coding and
payment policy and make the technology available to patients.
<bullet> Maintaining and strengthening the local Medicare coverage
process as an important channel for early patient access to new
technologies. CMS should support local decision making
processes to ensure the continuation of timely, flexible access
to new technology. A wide range of local contractors should
continue to work with public stakeholders in creating new
medical policies and assign local codes as needed.
Medicare should provide better health insurance options, and the
management of the government Medicare plan should be
strengthened so that it can provide better care for seniors.
AdvaMed strongly supports reduced bureaucracy and streamlining, but
we are concerned that contractor consolidation could impair local
coverage decision-making for critical new therapies. AdvaMed emphasizes
the continued importance of local decision making to help ensure the
prompt and appropriate use of new technologies.
AdvaMed also supports broader reforms to the Medicare program to
give consumers the ability to choose among a range of competing health
plans, as well as the traditional Medicare program. We believe it will
be critical to ensure a minimum number of competing health plans in
each geographic area, so consumers who are empowered to choose among
competing health plans will make sure they have access to the high-
quality, innovative medical technologies and procedures they need.
However, implementation of the President's plan should not expand
Medicare purchasing authority prematurely. AdvaMed firmly believes in
the benefits of market-based competition for providing patients with
choices for the most current, high quality health care but the way this
important change is implemented will have profound effects on its
success. It will be crucial not to implement expanded purchasing
authority for the Medicare fee-for-service program before a sufficient
number of competing private plans are available in all major geographic
areas.
Conclusion
AdvaMed believes that these reforms, and other important changes
related to prescription drugs, will help provide Medicare beneficiaries
with the modern, state-of-the art care that they deserve, within a
framework of market-based, competitive health plans. At the same time,
the President's plan would address the solvency of the Medicare trust
fund--an essential part of any reform proposal.
The President's proposal provides great opportunities for seniors
to benefit from the unprecedented advances in innovation happening in
health care today. We look forward to working with this Committee, the
Congress and the Administration on ways to improve the quality of care
available to seniors through Medicare and foster the delivery of
innovative therapies for patients.
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