Copyright 2000 Federal News Service, Inc.
Federal News Service
June 14, 2000, Wednesday
SECTION: CAPITOL HILL HEARING
LENGTH: 49841 words
HEADLINE:
HEARING OF THE HEALTH AND ENVIRONMENT SUBCOMMITTEE OF THE HOUSE
COMMERCE COMMITTEE
SUBJECT: MEDICARE AND PRESCRIPTION DRUGS
CHAIRED BY: REPRESENTATIVE MICHAEL BILIRAKIS (R-FL)
LOCATION: 2322 RAYBURN HOUSE OFFICE BUILDING, WASHINGTON,
D.C.
TIME: 10:00 AM. EDT DATE: WEDNESDAY, JUNE 14, 2000
WITNESSES:
NANCY-ANN MIN DEPARLE,
ADMINISTRATOR, HEALTH CARE FINANCING ADMINISTRATION;
KAREN
IGNAGNI, PRESIDENT AND CEO, AMERICAN ASSOCIATION OF HEALTH PLANS;
CRAIG L. FULLER, PRESIDENT AND CEO, NATIONAL ASSOCIATION OF DRUG STORES;
CHARLES N. KAHN III, PRESIDENT, HEALTH INSURANCE ASSOCIATION OF
AMERICA;
PATRICK B. DONOHO, VICE PRESIDENT OF GOVERNMENT AFFAIRS
AND PUBLIC POLICY, PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION;
NANCY DAVENPORT-ENNIS, FOUNDING EXECUTIVE DIRECTOR, PATIENT ADVOCATE
FOUNDATION;
JUDY FEDER, DEAN OF PUBLIC POLICY STUDIES, GEORGETOWN
UNIVERSITY;
RON POLLACK, EXECUTIVE DIRECTOR, FAMILIES USA;
BODY:
REP. MICHAEL BILIRAKIS
(R-FL): The hearing will come to order. The topic of today's hearing is
Prescription Drugs: Modernizing Medicine for the 21st Century. I believe that
this title is especially appropriate because we must examine broader reforms to
preserve Medicare for the future as we consider adding a prescription drug
benefit to this already financially troubled program. In three prior hearings,
we discussed prescription drug plans which had been introduced to date or
concepts talked about. Today we will hear more about the specific details of
different coverage options.
As most of you know, our committee
colleagues, Congressmen Bliley, Burr, and Hall, yesterday announced a bipartisan
plan called Medicare RX and Modernization 2000, a plan to help senior citizens
by expanding access to prescription drugs in a context of Medicare
modernization. As our panelists and members of this subcommittee are aware, in
any effort to add a prescription drug benefit to Medicare, the devil truly is in
the details.
The plan to a sensible, salient plan is riddled with
potential landmines, and we must tread carefully and cautiously. Among the
issues we will discuss today, this hearing will shed light on the possibilities
for disease management services, the role of pharmacies, and the fate of
Medicare plus choice. As July the first approaches, we are beginning to hear
about more Medicare plus choice plans withdrawing from the program. An important
part of the Medicare RX and modernization plan 2000 would put the administration
of the Medicare plus choice program under the purview of the Medicare Benefits
Administration, the same new agency that would administer the new prescription
drug benefit. I look forward to hearing the views of the insurance industry
represented by our witnesses, Karen Ignagni and Chip Kahn about how this
proposal could help stabilize the Medicare plus choice program.
As I
have continued to examine the issue of prescription drug coverage under
Medicare, the role of pharmacies and pharmacists is an issue we all have
carefully considered. What is the appropriate role and function for pharmacists
and organized pharmacies, and how can they help in the administration of
prescription drug benefits. I hope that Craig Fuller from the National
Association of Chain Drugstores can shed some light on these questions.
Today's hearing will again underscore the need for prescription drug
coverage for Medicare beneficiaries. I am hopeful that it will also help us
better understand all aspects of a new prescription drug benefit, including
administration, pricing, choice, and cost.
I would also like to welcome
all of our panelists. Our first witness is Nancy-Ann Min-DeParle the
administrator of the Health Care Financing Administration. It
has been some time since you last appeared before the subcommittee, and I know
that my colleagues join me in extending in our congratulations on the birth of
her child. I look forward to hearing from all of our witnesses, and I would like
to thank them for their time and effort in joining us today.
In the
interests of time, after the opening statement of the ranking member, Mr. Brown,
I would encourage my fellow subcommittee members to limit their opening
statements to three minutes. I know that we all want to hear what our witnesses
have to say and still have ample time for questions. Thank you, and the chair
now yields to Mr. Brown.
REP. SHERROD BROWN (D-OH): Thank you, Mr.
Chairman. I would first ask unanimous consent to enter into the record Mr.
Dingell's statements and the statements of any other member.
REP.
BILIRAKIS: Without objection, the statement of Mr. Dingell and all members of
this subcommittee will be made part of the record.
REP. BROWN: Thank
you, Mr. Chairman. I'd like to thank Nancy Ann and other distinguished witnesses
for joining us today. So, Chairman, I'm glad we have been given the opportunity
to discuss the need for Medicare prescription drug coverage today. I am
concerned, however, that the Republican proposal that prompted this hearing is
being taken seriously when, frankly, it shouldn't be.
How can you try to
convince seniors that you are helping them when the only thing you have promised
to them is a low income subsidy? You are not helping seniors above 150 percent
of poverty by subsidizing insurers. You are helping the insurers. Your plan
guarantees nothing other than some assistance for the lowest income seniors.
In my district, prescription drugs are not just a low income problem.
Seniors who thought they were financially secure are watching their savings go
straight into the pockets of drug makers. And you're trying to tell seniors that
there will be a choice of reliable, affordable, private prescription drug
insurance plans available to them. Based on what? Certainly not history.
Even the insurance industry is balking at this idea. It should tell us
all something, that insurers don't sell prescription drug coverage on a
stand-alone basis today even to young and healthy individuals. That is because
it simply doesn't make sense. Medicare is reliable; it is a large enough
insurance program to accommodate the risk associated with prescription drug
coverage. Individual, stand- alone prescription drug policies are not.
You are actually trying to convince seniors who stand firmly behind the
Medicare program that expanding the current benefit package is less efficient,
more onerous than manufacturing a new bureaucracy and conjuring up a new
insurance market.
Seniors are too smart for that. I don't want to ask
seniors in my district and across the country to rely on a market that doesn't
want the business to provide a benefit not suited to stand-alone coverage to a
population that, let's face it, has never been well served by the private
insurance market.
I don't want seniors in my district and across the
country to be coerced into managed care plans in order to avoid dealing with
three different insurance plans, Medicare, Medigap, the individual prescription
drug coverage. And I don't want seniors in my district or across the country to
receive a letter from their employers telling them their retiree prescription
drug coverage has been terminated on the premise that, "The government is
offering private insurance now."
I don't want to forsake volume
discounts and economies of scale by segmenting the largest purchasing pool in
this country and then waste trust fund dollars on insurance company margins and
insurance company marketing expenses. And I don't think the individual
health insurance market is a reasonable model for Medicare
prescription drug benefits.
In fact, as anyone who has had to purchase
or sell coverage in that market will tell you, the individual
health insurance market isn't even a good model for individual
health insurance. It is the poster child for selection
problems, for rate spirals, and for insurance scams. The very fact that the drug
industry-backed Citizens for a Better Medicare supports the private plan
approach is a giant strike against it. The drug industry and their puppet
organization clearly feel that undercutting seniors' collective purchasing
power, relegating seniors to private stand-alone, you're on your own
prescription drug plans is the key to preserving discriminatory, outrageously
high prices.
My office has been deluged by faxes and post cards, as we
all have, from Citizens for a Better Medicare warning us, "not to force seniors
into a federal, government run, one size fits all prescription drug plan." But
Medicare itself can be characterized as a federal, government run, one size fits
all insurance program. It is also the most popular and successful public program
in our nation's history.
Medicare came into being because half of all
seniors were uninsured, not by their choice. Medicare, a
nationwide plan with a risk pool over 30 million strong, is a stable, reliable
way of insuring coverage for seniors. Medicare works because it guarantees the
same basic benefits to all beneficiaries, regardless of where they live,
regardless of their income, regardless of their health status.
Simply put, it is equitable.
The Republic proposal, leaving seniors to
search for private coverage, means varying premiums in varying levels of
restrictiveness on access to prescription drugs.
One other thing, Mr.
Chairman. The subsidy to insurers means completely unpredictable liability for
the federal government. The single most important objective we can fulfill this
year is to secure a meaningful prescription drug benefit for Medicare
beneficiaries. Let's not make a mockery of that objective by focusing on an
option that is neither responsible nor realistic. I thank the chairman.
REP. BILIRAKIS: Thank you, gentleman. Mr. Deal for an opening statement.
REP. NATHAN DEAL (R-GA): Mr. Chairman, I'll yield my time in an effort
to expedite the testimony of the witnesses.
REP. BILIRAKIS: I appreciate
that.
Mr. Waxman, an opening statement.
REP. HENRY A. WAXMAN
(D-CA): Thank you very much, Mr. Chairman. I welcome this hearing. I think a
drug benefit for seniors under Medicare is long overdue. But I'm disturbed by
the evident intention of this subcommittee to use this hearing to justify our
committee and to the House floor in pushing a Republican bill that has not yet
been made available to the public, that our witnesses haven't even seen, that
has been explained only in vague and contradictory terms, and that apparently
fails to meet critical conditions for effective, available, and affordable
prescription drug coverage.
In my view, we can only meet our obligations
to Medicare beneficiaries if we make coverage of prescription drugs a benefit
that all Medicare recipients are entitled to, a benefit that covers all
medically necessary drugs, a benefit that is available in every part of this
country, a benefit that is accessible and affordable for seniors, in fee for
service Medicare as well as Medicare plus choice plans, and a benefit that
assures Medicare beneficiaries will no longer face the discrimination in drug
prices which has resulted in their paying the highest prices out of their own
pockets.
But that is not the approach of the Republican bill. It tells
seniors that they can purchase a private insurance drug policy patterned on
Medigap policies, which already fail to deliver an affordable drug benefit. That
is a cruel hoax. Except for the poor, the Republican bill doesn't help seniors
pay their premiums. It subsidizes the private insurance companies and tries to
claim that that will help seniors.
What that really does is mislead and
confuse people about the help that is available. And the Republican bill shifts
the responsibility to insurers to try to provide a benefit when they know there
is going to be an adverse selection almost certainly to make their product
unaffordable and unavailable. That is not a responsible choice. The drug
companies might like it. It will pay what the drug companies want to continue to
be paid. But seniors will not like this plan.
I know that the
Republicans have a public relations consultant, and we have a document that came
out of their consultant's distribution to their Republican members. And they
suggested for the Republicans that they tell the American people that I care. It
is easier to say I care. And then the consultant told Republican members it is
more important to communicate that you have a plan as it is to communicate what
is in the plan.
Well, that approach tells seniors they can purchase this
policy, and it is not going to really be available to them. The Republican bill
doesn't help seniors pay their premiums. It subsidizes private insurance
companies, and then tries to claim that seniors will have a benefit.
The
drug companies might like this bill. It is rhetoric, but it is not reality. And
I think the cynicism is breathtaking. Seniors don't need us playing politics
with their health care. Seniors need real coverage for
prescription drugs. They can't afford the high price of drugs. They can't afford
to pay twice what the big buyers pay. And they don't need another Medigap. They
need a Medicare drug benefit.
Let's join together in a bipartisan way,
in a responsible way, to do exactly that. I yield back the balance of my time.
REP. BILIRAKIS: Dr. Norwood for an opening statement, three minutes,
please, for members other than the chairman and the ranking member.
REP.
CHARLIE NORWOOD (R-GA): Thank you, Mr. Chairman. I want to begin by thanking you
very much for holding this hearing. As we move forward on this issue, it is
important to express our gratitude to you for the series of hearings for which
you have held which I believe make us far better equipped to address a drug
benefit for seniors.
Now from my perspective, I believe there are many
critical issues that we must address in any bill we consider, but I'll mention
just two. If there is one thing we can be absolutely of, it is that a three-week
stay in the hospital typically is far more expensive than taking medications
that have been prescribed for you. And when seniors are forced to ration drugs
or stop taking drugs because of their expense, they incur the likelihood that
they will end up in the hospital, which in the long run draws down on the
Medicare trust fund.
Any drug benefit proposal we consider must be
targeted to help those seniors who can least afford expensive medications.
Ultimately, we know those seniors are most at risk to face the consequences of
not taking their medication.
As I have discussed this issue with seniors
in my district, I have heard again and again that seniors are most concerned
about the seemingly endless cost of prescription drugs. The one thing we can do
to help all seniors most, I believe, is to provide a drug benefit that gives
them some peace of mind, that makes clear that there is only so much a senior
will have to pay out of pocket.
Providing seniors with stop loss
coverage for their prescription drugs will frankly ease that concern. And, Mr.
Chairman, I am very pleased to read that my colleagues have addressed these two
key issues in Medicare treatment 2000. I am actually looking forward to reading
the bill. It would certainly make a real difference in the concerns experienced
by my constituents. And I appreciate the attendance today, Mr. Chairman, of our
witnesses, and look forward to their testimony.
REP. BILIRAKIS: I thank
the gentleman.
Mr. Pallone, for a three minute opening statement.
REP. FRANK PALLONE, JR. (D-NJ): Thank you, Mr. Chairman. Mr. Chairman, I
can't help but express my frustration this morning over the fact that the
Republicans apparently have put together some sort of proposal on prescription
drugs, which we have not really had a copy of, which is not in legislative form,
but the points have been put out there. And frankly, from what I can see, this
Republican proposal is just an imaginary drug benefit that does nothing for
seniors, and it is just political cover and empty promises.
Mr. Waxman
has pointed out that the House Republican Conference put out a presentation by
Glenn Bolger (ph) on June 8th that basically talks about this from a
communications point of view. And I have to say that that is all this is. There
is nothing here. It is just an effort to try to pretend that they are doing
something which will never pass, will never go anyplace, but will be used to try
to show that somehow they are trying to address this issue for the next campaign
in November.
From what I can see, the Republican proposal is not a
defined benefit. It is a premium support bill. It gives people whatever the
insurance companies can provide. You know, we don't know what the insurance
companies will give them, and they leave it up to the insurance companies to
decide what kind of benefit it is going to be.
It is very cumbersome. It
is ineffective. It is almost nutty, I would say. And what this should be, and
Democrats have proposed, is this should be a benefit plan. I don't understand
the whole concept of saying that somehow we are going to have drug insurance
only policies because we know that insurance is risk oriented. This is something
that everybody is going to take advantage of. Everybody is going to need
prescription drugs at some point. So it shouldn't be used in the insurance
model. It should be a benefit program under Medicare. It shouldn't vary from
state to state or from region. It should be defined.
Also, from what I
can see about the Republican proposal, it does nothing to put any pressure on
price, and price discrimination is the main thing that most of the seniors talk
about today.
Now rather than proposing a prescription drug benefit that
is part of the Medicare program itself, the Republicans want to force the
insurance industry to offer prescription drug only policies outside of
Medicare's umbrella that the industry itself says will not get the job done.
Indeed, just yesterday, Chip Kahn, the head of the Health
Insurance Association of America, told the Ways and Means Committee that the
likelihood that the people most likely to purchase this coverage will be the
people anticipating the highest drug claims would make drug only coverage
virtually impossible for insurers to offer to seniors at an affordable premium.
The insurance industry's opposition to a Republican plan that proposes
to pump billions of federal dollars into its coffers is very telling. This is,
in my view, a clear reason why the majority once again seems poised to offer a
proposal on a pressing health issue that it knows has no chance
of going anywhere. And, Mr. Chairman, I have to say it is just like the
Patient's Bill of Rights. We know the conference got bogged down. The
Republicans have no intention of passing a Patient's Bill of Rights or
addressing HMO reform, just like they have no intention today or anytime between
now and the end of the year of addressing Medicare prescription drugs.
REP. BILIRAKIS: The time has expired.
REP. PALLONE: Thank you,
Mr. Chairman.
REP. BILIRAKIS: Thank you.
Mr. Whitfield, opening
statement.
REP. ED WHITFIELD (R-KY): Mr. Chairman, thank you very much.
I'm glad we're having this hearing. I find it interesting that our friends on
the other side complained about not seeing the bill and then yet are very
specific in their criticism of the bill. Most of us on this side have not seen
it either, but the importance of this hearing is simply to start addressing this
issue. It is complex, and we look forward to hearing the testimony of our
witnesses as we work to fashion an effective prescription drug benefit plan.
REP. BILIRAKIS: Mr. Towns for an opening statement.
REP.
EDOLPHUS TOWNS (D-NY): Thank you very much, Mr. Chairman. Let me say that I
think this is a very serious matter, and we should not be playing games with it.
I think that we have a third of our seniors out there during a period of the
year without coverage of any sort. And I think that we owe them more, that I
think they need to have coverage. And I think that this is an opportunity to do
it. But to move forward with this kind of a legislation and these kind of ideas
and have everybody in the dark to me just does not make a lot of sense if we are
serious about doing what is right on behalf of our seniors.
Our seniors
in many instances, of course, have paid a tremendous debt. And, of course, to
come to this in time in their life and have to worry about whether or not they
will be able to pay for their medication to me does not make a lot of sense. So
I'm hoping that we get very serious here and begin to look at this because when
I look at New York City -- New York state, I should say -- New York has 2.3
million seniors who rely on Medicare.
By 2025, that number will rise
approximately to 3.3 million. Only 24 percent of New York firms offer retirees
health insurance. And the monthly premium for Medigap,
including prescription drugs, average $159, which is out of
reach for many seniors in New York. And Medicare enrollment in New York in the
coming years is increasing, while at the same time access by retired
health insurance and Medicare managed care is decreasing or
inadequate.
This situation is not unique to New York. Other states also
fall into this same pattern. The economy is doing well. With our budgetary
surpluses, it is time we start addressing our seniors' concerns about affordable
prescription drug coverage. I think we should do it. We should do it now. And,
Mr. Chairman, on that note, I yield back. And I say to you that I think that we
need to make certain that information is shared among all members because this
is a very serious issue. And I'm hoping that this is not being used for any kind
of political maneuver. I yield back.
REP. BILIRAKIS: I thank the
gentleman.
Mr. Ganske for an opening statement.
REP. GREG GANSKE
(R-IA): I thank Mr. Chairman and thank you for having this hearing.
I
certainly think some seniors in particular need help with their pharmaceuticals.
There is a group that do not qualify for Medicaid if they are in the QMB or SLMB
(ph) groups, the groups that are just above the requirement for Medicaid, then
they get help with their premiums, and in some cases with their deductibles, but
not -- they cannot get into the Title 19, the Medicaid drug programs. And they
definitely have a problem.
I also think that all Americans are concerned
about the high cost of the drug prices. I hear this from employers who are
having to deal with 18 percent increases, annual increases, in their
prescription drug costs, and from individual citizens.
I hear from
seniors that they are concerned, and from others that they are concerned about
the cost differential in drugs between Canada, Mexico, Europe, and the United
States, and they don't think that it is fair.
So I want to say that I do
have a plan, and I do have some ideas on how we can accomplish this. I sat
through eight hours yesterday of the Ways and Means testimony, and I took
copious notes on this. Why did I have to do that? Why did I have to listen to
questions to Chairman Thomas yesterday? It is because I haven't seen a bill.
I am told that there is a bill in Speaker Hastert's office. I am told
that ledge (sp) counsel has a bill. And I am told that CBO has a bill. I won't
gainsay some of the members who have worked hard on this. But, you know, this is
way, way too important an issue to be making a decision on the biggest benefits
expansion in Medicare history without fully vetting this process. I want to plea
in. This is an issue that should go through regular order, hearings, more than
one, a subcommittee markup, a full committee markup, both in the Commerce
Committee and in Ways and Means. Why? Not for the benefit of the members of this
committee, but for the benefit of our colleagues so that this issue is fully
vetted so that they understand fully what they are going to be voting on.
It would be a tragedy to put a bill on the floor that most members don't
understand what the implications would be. I just can't support a bill that goes
through that kind of process.
What did I learn from the chairman,
Chairman Thomas, yesterday? I learned that there will be a sop made to rural
members with some increase, some modest increase in the AAPPC to try to buy
their vote. It will never be enough to get HMOs into those rural districts like
mine, which are composed of elderly citizens that the HMOs don't want to cover
that have medical problems.
I heard yesterday that there will be a whole
new separate bureaucracy set up in the GOP plan. I don't think -- you know, we
need to think about that. But what is the big problem?
REP. BILIRAKIS:
The gentleman's time is expired.
REP. GANSKE: Mr. Speaker, could I ask
unanimous consent for one additional minute?
REP. BILIRAKIS: Well, now,
if we start that, Greg, we are never going to get to the hearing.
REP.
GANSKE: I understand that, Mr. Chairman. But how big an issue are we going to
face?
REP. BILIRAKIS: Well, this is a big issue, and we spent a lot of
time on it. We are going to continue spending an awful lot of time on it. I'd
appreciate it --
REP. GANSKE: All right.
REP. BILIRAKIS: -- if
the gentleman would withdraw his request.
REP. GANSKE: I can take up
further comments later.
REP. BILIRAKIS: Ms. Eshoo for an opening
statement.
REP. ANNA G. ESHOO (D-CA): Good morning, Mr. Chairman, and
all of the members of the committee, and certainly to the distinguished
individuals that are going to testify at this important hearing today. I have,
of course, a fuller statement for the record, but let me just try to summarize
in a brief period of time. There are time limits around this. I know that that
is important. We want to hear from the witnesses. But as the gentleman just
stated, this is an issue that is not just large; it is a giant issue. And we
really have to be devoted to giving the kind of time to the scrutiny of the
ideas and plans that are being placed before us here in the Congress.
We
know what the problem is. It is not an issue of whether we should do something
about it, but rather how to. I'm very proud to have introduced legislation that
really builds upon the president's plan, but it moves beyond it because it
really incorporates competition to bring down pricing, and seniors are paying
too much for their prescription drugs. But I think that we also have to reduce
the inefficiencies that could be there relative to the administration of a new
program of a benefit.
This legislation, the Medicare Prescription Drug
Act of 2000, H.R. 4607, I'm very proud to be originally cosponsored by many
Democrats on this committee. Suffice it to say that at least in my view, and I
think in many members' views, that this is a benefit that needs to be consistent
for seniors. I don't believe that insurance companies hold a great deal of
credibility today with seniors. They didn't a couple of years ago with HMOs. Now
it seems to me that there is a move to HMO/insurance prescription drug benefits.
The insurance industry says that they don't want to insure this or that
they can't. And today, in my district, and I think districts around the country,
insurance companies are pulling out of the market. If there is anything that my
mother wants is some consistency in her life, you know. I mean, she has gone
through the peaks and valleys of life, and there are some things that she and
her peers really want to be able to rely upon.
So I think that the
Congress really needs to move in the direction to make this benefit a benefit
that can be counted on in Medicare, a full benefit. And if someone has this
benefit through their previous employer as a retiree, so be it. If they want to
count on it as a Medicare benefit, it should be there. But we shouldn't be
back-dooring it through some kind of insurance plan.
I, too, spent a
great deal of time yesterday, along with my Republican colleague and many others
at the Ways and Means Committee, to testify on my bill.
REP. BILIRAKIS:
The gentlelady's time has expired. Please finish up.
REP. ESHOO: I think
that the direction at least that Mr. Thomas is taking is really not the most
prudent one for seniors. So I look forward to hearing from our witnesses today,
and I thank you, Mr. Chairman, for holding this hearing.
REP. BILIRAKIS:
Mr. Bryant for an opening statement.
REP. ED BRYANT (R-TN): Thank you,
Mr. Chairman. I, too, want to add my appreciation to both you for calling this
hearing and the panel, the very distinguished panel we will have today. I think
when I came to Washington about six years, I was an optimist, and I felt like we
can come up here and work in the system, and both sides wanted to get a solution
that would help everybody. And over a period of time, that somewhat eroded, as I
have seen partisanship not just on one side, but certainly on both sides. And,
you know, we have a problem in this country of seniors having access to
affordable prescription drugs, and we all want to solve it, I think.
And
then I come in today, and I hear something about we have got a public relations
guy helping us. And, gosh, that is a shock up here in Washington (laughing).
Then I hear this term Republican bill and Republican bill, rather than a
bipartisan bill. And there are some Democrats on this. And it kind of makes me
believe what I read in one of the papers up here the other day that on the
Senate side, the Democrat senator who is cosponsoring one of the Republican
bills is facing sanctions over there, punishment for doing that because he is
not playing politics because everybody up here knows -- maybe it is unspoken
today -- that some people want this to be the issue in the election, rather than
trying to get down to business and solve the problem.
I think we can do
that. I think both sides, when you really look at it, aren't that far apart,
particularly on dollars. I know our plan, we have worked very hard on it. It is
a universal plan. It is a voluntary plan. It is a force out there to the
citizens. It helps those in financial need. It helps on the high end to prevent
people from having to sell their homes or use up their savings account if they
have a catastrophic drug bill each year. It is a good bill. I guess I would like
to reach down and bring back up some of that optimism and hope that we can work
together and not have this as a campaign issue but work together to get a bill
that will help, truly help, our senior citizens. And I will yield back my
remaining time.
REP. BILIRAKIS: I thank the gentleman.
Mr.
Stupak for an opening statement.
REP. BART STUPAK (D-MI): Thank you, Mr.
Chairman.
REP. BILIRAKIS: And, Bart, our sincere sympathy, publicly.
REP. STUPAK: Thank you, Mr. Chairman. Mr. Chairman, we have really not
seen the bill, but the talking points we have seen reminds me of the old golden
rule that seems to be following this bill. Do not hurt the pharmaceutical
profits, increase the insurance company profits, and make coverage as complex as
possible.
The GOP bill says trust private insurers, trust the
pharmaceutical companies whose profits are $20 billion, whose
net operating profit is 28.7 -- after all of the research, after all of the
advertising, it is 28.7 percent on pharmaceuticals when the rate of inflation is
less than 3 percent. It is price gouging.
This is a study for my
district in October of 1998. Take any drug you want, Zolcor (ph) for
cholesterol. If you are the federal government, you pay $42.95.
If you are a major wholesaler, you pay $85.47. The average
price is $106.84. If you are chain market, it is
$101.29; independent pharmaceutical companies or stores pay
$99.38. The average retail price is $100.33;
price differential, 134 percent. That is in my district in northern Michigan.
That is price gouging. That is price discrimination. Those who can least afford
it, who do not have the insurance coverage, pay 134 percent more.
The
GOP plan has more bureaucracy. There are no real protections. The GOP plan
really says to the American people, look, each senior, you go out and negotiate
whatever you want with the private insurance companies, with the big HMO plans.
We are not going to help you. You negotiate. We will then give you some money,
not to the American people, but to the insurance companies and to the HMO. Your
pharmaceutical company will reap the benefits. Government will give you nothing,
nothing. This is the same GOP plan. Remember, they are ones who want to
privatize social security. Now they want to privatize your prescription drug
coverage. And that is the same group that want to let social security wither on
the vine.
If you take a look at it, we privatized Medicare -- excuse me,
Medicaid in Michigan two years ago. Two years ago, the state of Michigan ran it.
$28 million was the administrative cost. Two years later, after
it was privatized, the administrative cost is $141 million in
two years, $141 million. It is unbelievable what you can do
when you can privatize systems like we did in Michigan.
Medicaid,
Medicaid, unbelievable -- look at those administrative costs, 28 million to 141
million. That is exactly what is going to happen to our prescription drug plans.
Look, the Democrats for two years had the Allen bill out there. We had
the Stark bill. We had the president's plan. Give us some hearings on it.
Universal coverage, that is what we need. Stop and think. We need universal
coverage where all seniors are covered. Stop the price gouging. If you don't,
the profits will remain at 28.7 percent. No problem with profits. But if you are
going to continue to price gouge, we are all in trouble. Most Americans --
REP. BILIRAKIS: The gentleman's time has expired.
REP. STUPAK:
-- after this over will not be able to afford any type of drug coverage.
REP. BILIRAKIS: Ms. Cubin for an opening statement.
REP. BARBARA
CUBIN (R-WY): Thank you, Mr. Chairman. I would like to begin by associating
myself with the remarks of several of my colleagues, Mr. Brent and Mr. Towns,
stating that this issue is far too important to politicize. And what we need to
look out for are the best interests of our senior citizens.
I don't
think anyone here at all underestimates the value and the importance of drafting
a prescription drug proposal program for our seniors. We all want the lifesaving
drugs to be available, and no one should go without food to get them. Our
intentions are good, and our expectations are very high. And that makes crafting
a drug plan all that much harder.
Seniors are looking to us to help make
a difference in the quality of their life. They are not looking to us to
politically attack one another and to try to find grounds to do that.
Today we are going to be considering some very pointed aspects of the
issue. How do we administer a prescription plan, should it be voluntary, should
it be market based, or should it be government run? What kind of benefits are to
be offered? How much should the government subsidize? How does it affect
Medicaid?
I agree that all of these questions have to be adequately
addressed for any plan to be successful. But I think there is one critical
component that is not getting the attention that it deserves, and that is how
does any plan affect rural America. As most of you know, I represent the state
of Wyoming, which is the most rural state in the country. And while you may be
able to identify Jackson Hole and Yellowstone National Park with Wyoming, I
don't think that it is easy for some people to be aware and grasp the concept of
the state's true size and the amount of vast, open spaces.
With
approximately 480,000 people covering almost 100,000 square miles, we sometimes
have to drive hundreds of miles just to access medical care. Oftentimes that
means going to another state. We have to rely almost exclusively on fee for
service in Wyoming. And because of that, seniors in Wyoming have less access to
drug coverage than seniors would in California, for example, where there are
many Medicare HMOs.
Programs within the present Medicare system, such as
Medicare plus choice, have not been beneficial to rural areas as originally
envisioned due to a lack of customer base in these areas. So as a result,
options for rural populations of our country are often very limited or many
times nonexistent.
Having said that, I worry that a similar problem may
occur in any prescription drug plan benefit that does not adequately address the
needs of rural Americans. I urge all of my colleagues on the committee to keep
that in my mind because there are a lot of people who live in rural America that
could be very adversely affected by any program that doesn't take these elements
into consideration. Thank you, Mr. Chairman.
REP. BILIRAKIS: Mr. Green
for an opening statement.
REP. : Mr. Chairman, I thought Mr. Strickland
was here earlier.
REP. BILIRAKIS: Well, I don't know. I'm taking you by
order of seniority, those who are here.
REP. : Oh, I'm very generous.
REP. BILIRAKIS: Go right ahead.
REP. GREEN: Okay. Thank you, Mr.
Chairman.
REP. BILIRAKIS: That's unusual. (Laughter)
REP. GENE
GREEN (R-TX): I'll be glad to take my time from my colleague from Ohio. But, Mr.
Chairman, I want to thank you for calling this hearing today. I appreciate the
number of hearings we have had on prescription drug initiative, and hopefully we
will actually have legislation to look at to actually mark up. Sadly, it appears
that what I see in the press, the effort is not as bipartisan as I would like it
to be. What we see is a press release that gives some ideas but not actually
legislation.
Hopefully, by our committee working together -- it is the
tradition of the Commerce Committee that we can come up with a plan that the
majority of the Americans will support, a plan that actually puts money into the
pockets of seniors for prescriptions and not necessarily insurance carriers.
Working together, we can put together a plan. Unfortunately, what I have seen up
until this point, we haven't been able to. And I hope our subcommittee can do
that. And again, all we are working from today is a press release, so that's
where I'll base my remarks on.
Medicare was created in 1965 because
private sector insurance could not provide coverage for senior citizens.
Everyone was a claimant.
Everybody had a claim. So you couldn't --
profit and loss wouldn't work. We're having the same example today with
prescriptions. Every senior citizen has prescriptions, in fact, sometimes half a
dozen of them. And that's why the private sector can't work except in this press
release we are using shows that that is what it will do.
The proposal is
a new drug benefit only policy that the experts say will be ineffective and
expensive. A drug only benefit will have adverse selection for seniors. And even
worse, it allows the insurance companies to select what drugs they will cover
and how much they will charge. There is no guaranteed standard benefit. Allowing
insurance companies to set the benefit and price is like letting the wolf guard
the chick house, and any savings would not go to those seniors.
And some
in the insurance industry will be able to set the prices. I wonder how instead
of using taxpayer dollars wisely, the proposal we have is it will create a new
bureaucracy, Medicare Benefits Administration, an MBA, which duplicates what
HCFA and our committees already do. So we are going to take money straight out
of the Medicare Trust Fund to pay for this new bureaucracy. Medicare is the most
efficient administration. It is less than 1 percent. And I think that can be
comparable to any other insurance plan.
America's senior need
prescription drug. They are sick and tired of the Medigap policies, the Medigap
policies we have now. The costs are going up so substantially. And this would
add just another Medigap policy to senior who are already having to pay upwards
from 200 to 300 a month in some cases.
So, Mr. Chairman, I hope we will
see a bill. And hopefully the press release that I have seen and the guidelines
is not what our committee is going to be looking at. Thank you.
REP.
BILIRAKIS: I thank the gentleman.
Mr. Bilbray, opening statement.
REP. BRIAN P. BILBRAY (R-CA): Thank you, Mr. Chairman. Mr. Chairman, I
would really like to echo the words of my colleague from New York, Mr. Towns,
and also my dear friend from Wyoming.
The partisanship sounds great in
Washington. And the bickering between Republicans and Democrats may play well to
the afternoon news. But I think the American people are sophisticated enough to
see that not only is this issue important enough to be able to ignore partisan
lines, but they are sophisticated enough to know when people are trying to
manipulate issues for political reasons on both sides. And I think they will
hold us both accountable if we approach this issue from a partisan point of
view. And I would just ask my colleagues to understand that as we snipe across
the aisle, we don't make the other person look bad, we make ourselves look bad.
I would just ask us to consider the fact that there is a lot of common
ground that we have here, not just political differences. We have parents that
need to live healthy. We have children that need not to be taxed to death to
support their grandparents' health care. We have the challenge
of how we are going to administer the next level of service to our seniors in
this country.
Now there has been some sniping about the creation or the
alternative way of administering this new benefit. The fact is Democrats and
Republicans agree in many instances that HCFA is not the agency to administer
this program. And I want to commend my colleagues on the other side of the
aisle, who have been brave enough to say we not only can do better than HCFA, we
have to do better from the HCFA.
Now we may disagree with the president.
And I think Democrats and Republicans can convert the president over to our way
of thinking that there needs to be a better way than the traditional HCFA way.
And I want to thank my colleagues on the Democratic side for being brave enough
to say that.
I just ask us to really let's listen to the facts, let's
not find reasons to find -- to snipe. Let's look at these issues where we have
common ground. We can build on this common ground and build a foundation that
not only makes us look good in the eyes of the voters, but also is going to
provide the services that will make us look good in the pages of history of the
future.
I just ask you to consider the fact that we are going to be
making decisions that are not only going to affect us, they are going to affect
our parents, and they are going to affect our children and our grandchildren.
And I think that come November, we are going to be judged by how well we worked
together, not how quickly we found excuses to fight. I yield back, Mr. Chairman.
REP. BILIRAKIS: The chair thanks the gentleman.
Mr. Strickland.
REP. TED STRICKLAND (D-OH): Thank you, Mr. Chairman. My colleague from
Tennessee said a few moments ago that some would like for this to be an election
issue. I don't know if that is true. But I do know that it is true that it is
going to be an election issue, and it is going to be an election issue because
this issue is important to the American people. They are paying attention. And
when I hear my friend Dr. Ganske talk, I realize that it is not a totally
Democrat/Republican controversy, but it involves political philosophy, and it
involves each member deciding who it is that we were sent here to represent. And
I think we will be held accountable, district by district, member by member.
This bill, as we have read about it, does nothing that I can see on the
cost side. In my district, just as in Rep. Stupak's district, my senior citizens
are paying twice as much for these life saving medications as are large HMOs or
large insurance companies or the federal government. As far as I can tell, this
bill does nothing about that problem.
The American people are rightly
outraged, outraged that American tax dollars are used to develop medications
that are being sold in Canada, in Mexico, and everywhere else around the world,
or one-third to one-half for what the American senior citizen has to pay for
that very same medication. They are outraged. They are not going to tolerate it
any more. We have got to do something about that.
For one, I am just
tired of going to my district and seeing senior citizens stand in these public
meetings with trembling voices, quivering hands, and talking about their
problems. We are representatives. Our response to this issue will decide who it
is that we represent. Yesterday, in the House of Representatives, there was a
vote. It was fairly simple. It said that if tax dollars are used by
pharmaceutical companies to develop drugs, those drugs should be then sold to
the American consumer at a reasonable rate. And it failed to pass.
I
think that says something about why we sometimes talk about this issue in
partisan terms. It is not totally Democrat/Republican. But as I said before, Mr.
Chairman, it does reflect our political philosophies and our value systems. I
yield back my time.
REP. BILIRAKIS: Ms. Capps for an opening statement.
REP. LOIS CAPPS (D-CA): Good morning, Mr. Chairman, and thank you for
holding this hearing on one of the most pressing health care
issues facing our country today, which is prescription drug coverage.
The creation of Medicare in 1965 found seniors more likely to undergo
surgery for major health problems than to use prescription
drugs. Today it is the opposite. Prescription drugs are often the only method of
treatment for many illnesses and diseases. In fact, 77 percent of all seniors
take a prescription drug on a regular basis, and yet nearly 15 million Medicare
beneficiaries have no insurance coverage at all for prescription drugs. Most of
us today would agree that Medicare's most glaring problem is the lack of drug
coverage.
Clearly, no one would design a health
insurance program for seniors today that doesn't include a drug benefit. I don't
think anyone here would voluntarily choose a plan for their family that didn't
cover this. And Medigap policies, which were designed to fill this need are too
often expensive and inadequate.
We hear again and again about seniors on
modest, fixed incomes choosing between food on the table and lifesaving
medication.
At this time of prosperity and strength, we can and should
do better than that for older Americans. This problem is getting worse.
According to Families USA, the price of prescription drugs most often used by
seniors has risen at double the rate of inflation for six years in a row.
Congress can no longer sit idly by.
As we consider different plans to
tackle this problem, I believe that any worthy proposal would provide certain
key elements. A strong plan would be universal, voluntary, affordable,
accessible to all, based on competition. It must also address the issue of
catastrophic coverage. Many worthy legislative proposals have been raised, for
example, the Allen bill, the Stark-Dingell bill, the Pallone bill. Most
recently, I have cosponsored H.R. 4607, Medicare Prescription Drug Act of 2000,
introduced by our colleague, Anna Eshoo.
Like the president's proposal,
the Eshoo bill creates a new voluntary Part D prescription drug benefit in
Medicare that is optional and available to all beneficiaries regardless of
income. It includes a defined stop loss benefit to prevent any individual
beneficiary from being bankrupted by a single catastrophic event that causes
unusually high costs, and it uses proven market based approaches to promote
competition, drive down prices. The Office of Personnel Management would
administer the plan in coordination with HCFA.
Mr. Chairman, Democrats
have offered many different approaches to this problem. But I am disappointed
that we do not yet have a finalized bill from the majority. It would be my hope
that we could work together in a bipartisan fashion as we craft the best
possible legislation for older Americans.
As I think about the countless
seniors in the district I represent on the central coast of California that have
shared their personal stories with me about crushingly high drug prices, I know
in my heart that prescription coverage is not a political issue. It is simply
the right thing to do as we seek to honor our seniors and care for them as they
move into their golden years.
And so I thank you, Mr. Chairman, for
holding this hearing. I hope we can move legislation as soon as possible on this
most pressing issue for our country.
REP. BILIRAKIS: I thank the
gentlelady.
Mr. Shadegg for an opening statement.
REP. JOHN B.
SHADEGG (R-AZ): Thank you, Mr. Chairman. I'll be brief. With your consent, I'll
insert my entire opening statement in the record.
REP. BILIRAKIS:
Without objection.
REP. SHADEGG: I simply want to thank you, Mr.
Chairman, for holding a hearing on this very, very important subject. I agree
with much of the comments that my colleagues have made. Clearly, no one in our
society and certainly not a member of Congress representing a state like Arizona
with many senior citizens can not be concerned about the cost of prescription
drugs for our seniors today. And so I think it is important, and indeed
essential, that this Congress look at the issue and address it and do so in a
thoughtful and bipartisan fashion.
I think it is clear, however, that as
we proceed that we make sure that we do not do more harm than good. And I think
that is one of the injunctions that we have to be aware of. Our efforts have to
make sure that we do not unduly burden the current Medicare system, that we do
not create for it a financial obligation that it cannot fulfill and burden its
ability to do the other tasks that it has to pay for the other parts of
health care. This is indeed I think one of the toughest
challenges we face in this Congress.
I think it is also important in
focusing specifically on the drug issue that in what we do we do not cause the
cost of drugs to go up. And I compliment you, Mr. Chairman, and the other
members of this Congress on both this committee and others that are looking at
the reasons behind the dramatic increase in drug prices and examining whether or
not the drug industry is in fact abusing the American marketplace in some
fashion and that there are not other things that we need to be doing to ensure
that drug prices are not going up in this country in an unfair fashion.
So I think we have to keep those issues before us. I think we have to
act thoughtfully. I think it is appropriate that we hold this hearing, and I'm
anxiously awaiting seeing the full proposal that will be before us, I guess,
early next week if not sooner. And again, Mr. Chairman, I compliment you for
holding this hearing. I look forward to working with you. And I do urge all of
my colleagues that we look at whatever costs we incur and whatever obligation we
place on future generations in what we do to this legislation. Thank you.
REP. BILIRAKIS: I thank the gentleman.
Mr. Barrett.
REP.
THOMAS M. BARRETT (D-WI): Thank you very much, Mr. Chairman, and thank you for
holding this hearing. I appreciate the work that you have done on this issue.
I sense from the comments of some of my colleagues on the other side of
the aisle that there is a frustration or a feeling that this has become a
partisan issue. I would simply ask them and those who are listening to
re-examine this and understand the frustration that is felt by the members on
this side of the aisle because for over two years now, sometimes as long as four
years, we have been talking about this issue, introducing bills, trying to get
hearings, trying to get this Congress and this Republican Party to focus on this
issue. And we have met time and time again with nothing but roadblocks.
I am extremely pleased that finally this logjam has broken and we're
able to move forward. I do think -- and I think probably most of us recognize --
part of the reason for that is every single person at this panel knows that this
issue is literally off the charts when it comes to seniors in this country. This
is a real world issue. And I would bet anybody on this panel who has held a town
hall meeting in the last six months has heard about how serious a problem this
is for real people in our districts. And it is democracy working at its best
when we respond to it.
So I'm delighted to have the conversion, the
pre-Fourth of July recess conversion that we are seeing here that is allowing us
to at least consider the merits of a bill. I think having said that, we can move
to the next level, and the next level is where do we go. And here I think we can
have a legitimate debate over what the best course of action is.
I don't
buy into the notion that somehow we are going to create a new insurance industry
for prescription drugs. I think that if there were a market for prescription
drugs that could be handled by the insurance companies, that would have occurred
long ago. I compared it coming from Wisconsin to saying, well, let's create a
market for snow insurance. Anybody who doesn't want to get snowed upon can buy
snow insurance. Well, nobody wants to get snowed on, but everybody is going to
get snowed on. And in the same vein, nobody wants to buy prescription drugs, but
everybody needs prescription drugs, especially when you are elderly.
So
no one in Wisconsin is going to sell snow insurance. And my guess is no
insurance company voluntarily is going to come and say, oh, sure, we'll start
selling prescription drugs, knowing every single person who buys this policy is
going to make a claim. It is just not realistic.
So we have to focus on
the benefit. And I think that the plan that the Democrats have developed is one
that rightfully recognizes that this is a benefit program. And of course we are
going to pay for it. Of course we have to pay for it. But to somehow suggest
that the laws of economics, which for decades have prevented a creation of this
industry will somehow be translated shortly before an election because we pass a
piece of legislation, I think defies economic logic. It is just not going to
happen. And I think we're trying to sell people a pig in a poke if we are
telling them that is what they are going to do.
So again, I look forward
to the debate on the merits. I think the American people deserve this benefit. I
think the American people need this benefit. And I think it is our obligation to
provide it to them. And I would yield back the balance of my time.
REP.
BILIRAKIS: I thank the gentleman.
Mr. Deutsch, opening statement.
REP. PETER DEUTSCH (D-FL): Thank you, Mr. Chairman. I think Congressman
Barrett made some points that I think are really worthy of a follow-up. I
believe most of us have probably had town meetings within the last six months.
And for any of my colleagues who haven't, they should because this is an issue
if you are having a town meeting and you are opening up the floor, people are
going to talk about it. If you are in your office and you are looking at your
mail, it is things you are going to hear about.
We did a town meeting,
an electronic town meeting, where we sent follow-up letters where we had 9,000
people in my district send specific -- propose specific incidences of problems
that they have had in terms of Medicare coverage with prescription drug. And
that is off the charts in terms of any response that we have had on any other
issue. We had another electronic town meeting recently with the same type of
overwhelming real -- we have had physical town meetings with people. And the
stories that you hear are what our job is about, the personal suffering, the
personal tragedies, the things that are disheartening because each of us on this
committee know that we can do something about it. And we can do something about
it within a policy context with only doing good.
I mean, the trade-offs
that exist are really not there. It is a question of the political will to make
this happen.
Several colleagues, and my colleague, Ms. Capps, pointed
this out. And I think this is also something that we need to really focus on. If
we were sitting here in 1965 and creating Medicare, there is no chance we would
not have included a prescription drug coverage like we as Democrats and the
president is proposing.
The whole concept of Medicare as a national
insurance program for seniors is illogical in a sense without prescription drug
coverage. And that is what we are proposing. I think it is important to
understand that there is a fundamental distinction between at least the drafts
and the press accounts of what the Republicans are proposing. The Republicans,
at least by press accounts, are in fact proposing a fundamental change in the
concept of Medicare.
One of the reasons why Medicare has existed so well
-- and I think sometimes we need to pinch ourselves to remind ourselves that at
one point in time Medicare didn't exist. And it doesn't exist by an act of God.
It exists because of an act of people in the united States Congress and passed
in legislation, but that the --
REP. BILIRAKIS: The gentleman's time has
expired. Please finish up.
REP. DEUTSCH: Thank you, Mr. Chairman. And
I'll just close that the Republicans, at least the proposals that we have been
able to read about, are changing the fundamental concept of universality within
the Medicare concept. It is an attempt to really change Medicare in an
incredibly, I think, in a long term negative way.
REP. BILIRAKIS: The
gentleman's time is expired.
REP. DEUTSCH: I urge the debate to continue
so ultimately we'll vote on the floor on a proposal that --
REP.
BILIRAKIS: Dr. Coburn, opening statement.
REP. TOM A. COBURN (R-OK):
Yes, thank you. Mr. Chairman, I find myself in the peculiar position of being
opposed to any Medicare benefit for drug benefit, simply because we are fixing
the wrong problem. We have this tremendous rise in drug prices, and we need to
ask ourselves why that price rise is there. And I honestly believe that it is
there because there is a lack of competition in the drug industry, and I plan on
demonstrating that on prices that have been surveyed throughout this country on
competing drugs that have been introduced in the last years. And if there is no
competition, there certainly is collusion among the drug industry as they
introduce new products.
So I find it ironic that no matter whose program
we put forward, the Republicans or the Democrats, we are putting forward a
program that is going to spend too much for existing drugs because there is way
too much collusion within the industry. And I hope in the next six weeks to
prove that to the American people.
I think the other thing is that
Medicare is actuarily unsound, and there has never been a time where this
government has correctly estimated the costs of any new benefit to Medicare. As
a matter of fact, the closest they have come that my staff can find is they
missed it 700 percent. So if you take the conservative estimates of both the
Democrats and the Republicans, you are talking about $280
billion over five years added to Medicare. That is something that will sink
within about six years. And we must not forget that once we add a benefit, we
are not going to be taking it away, as what we saw in the late 1989, 1990.
The other thing that is important is the distribution by MedPAC of the
total prescription drug expenditures in this country. Six percent of the
Medicare patients spend over $3,000, 14, 1,500 to 29.99.
Fourteen percent don't spend any money on drugs. So whatever plan we devise,
what we have to do is to make sure that the price that is paid for the drug is
based on a competitive model that most properly allocates the scarce resource in
this country. And it is my contention that that does not exist in this time. And
no matter what we do in terms of Medicare benefit, we are not doing a good job
for the public until we have assured ourselves that there is in fact competition
in the drug industry.
And with that, I yield back.
REP.
BILIRAKIS: REP. BURR, opening statement.
REP. RICHARD BURR (R-NC): Thank
you, Mr. Chairman. It is difficult to listen to just the opening statements of
members of this subcommittee, and probably members from the House of
Representatives at large, and not get a feel for how difficult this task is.
This is the most difficult thing I have ever worked on since I came to this
institution.
Mr. Deutsch hit on a very good thing. We ought to look at
people that have looked at the entire situation and look at the advice they gave
us, not as it relates to Medicare. I think it is the Medicare Commission who
spent over a year looking at every aspect and said not only should there be
drugs. There should be comprehensive modernization of the Medicare system.
Our seniors deserve the best. Well, politically we all know that the
reality is we can't do it. In the absence of that, we try an approach that
addresses the most severe need of 38 million seniors and disabled who qualify
for Medicare to make sure that a benefit, a benefit designed within the limits
of the financial tools that we have got available, exists.
Now we have a
fundamental difference between those on the left side of this dais and the right
side. It is the argument over whether government controls this new benefit or
whether in fact we use the competition of the private sector to monitor and to
hopefully make it successful and cost effective. That is a huge difference. It
is a huge difference, and it may in the end defeat this effort.
But I am
confident that if we can put words aside like nutty, cruel hoaxes, we can take
consultants out of it at a time that we're out purchasing $25
million worth of TV ads for the fall to hit on this issue, that we can take
politics out of the debate on the Medicare drug benefit, that we can work with
Democrats, insurance companies, PBMs, that Mr. Pallone's impression of insurance
companies will be the same as the day he introduced his bill, which was
insurance based, and not the day where insurance companies are bad.
But
we have got to get passed this. Now, Mr. Chairman, I am hopeful that we will get
on the words accessible, affordable, voluntary, but that also every member will
get in their vocabulary security, that without a stop loss, we have done nothing
for seniors.
Without the ability to say to a senior here is a dollar
amount that you will not be responsible for one penny after that point, that we
have fallen short of the predictability they need to plan in a time of their
life where their incomes are limited. We can help to make their futures
predictable.
I am hopeful that this hearing today, which is not about
our bill, Ms. Eshoo's bill, Mr. Pallone's bill, Mr. Allen's bill, or the
president's bill -- it is here to educate us as to what should be part of a bill
for seniors and disabled in America.
I hope that we can move forward,
not only today, but before the end of this session of Congress.
And I
yield back.
REP. BILIRAKIS: I thank the gentleman. Well, waiting
patiently is our first panelist, the Honorable Nancy Ann Min DeParle,
administrator of the Health Care Financing Administration.
Madame Administrator, welcome. As per usual, we will set the clock to ten
minutes for you, and you of course take whatever time you feel you might need.
Obviously, your written statement is a part of the record.
MS. NANCY
-ANN MIN DePARLE: Thank you, Mr. Chairman.
REP. BILIRAKIS: If we can
have order before the administrator starts.
MS. DePARLE: Thank you very
much, Chairman Bilirakis and Congressman Brown and other distinguished
subcommittee members. I appreciate the opportunity to be here today to discuss
prescription drug coverage for 39 million Medicare beneficiaries who need it.
I'm glad to be with you, and, Mr. Chairman, I appreciate your kind words.
Your subcommittee has been very interested in the topic of Medicare
prescription drugs. I sit here and look at many members who have themselves
introduced bills to try to deal with this subject. The administration welcomes
this opportunity to further our bipartisan dialogue. As you indicated, I have
submitted written testimony for the record that goes into much more detail about
the president's proposal and why we hope this committee will view it favorably.
But I want to say this morning that we are encouraged by the growing
commitment embodied in the new proposal announced yesterday by Congressman Burr,
Congressman Thomas, Congressman Peterson and others to address this issue. We
want to continue working with you to enact legislation that meets the key
principals that President Clinton has laid out for a Medicare drug benefit. The
drug benefit should be voluntary, and it should be accessible to all
beneficiaries. It must be affordable to beneficiaries and to the Medicare
program. It should be competitive, and it should have efficient and effective
administration. It should ensure access to needed medications and encourage high
quality care. And it should be consistent with broader reform.
We have
said many times that we are flexible on the details of how Medicare drug benefit
is provided, as long as the design ensures that we meet these key principles.
The plan that was announced yesterday appears to mark some important progress
towards those principles. But as you pointed out in beginning the hearing, Mr.
Chairman, the devil is truly in the details. We need to see the details and then
engage in a serious discussion and dialogue about our differences, as well as
the places where there are similarities.
Unfortunately, from what little
we know about it so far, the plan does not appear to meet the president's test
of a meaningful prescription drug benefit that is affordable and accessible for
all beneficiaries, and I want to talk about why.
Key among our concerns
is the plan's heavy reliance on participation by private insurers, who have made
clear that stand- alone drug policies are not feasible. Our concern is that even
if some insurers do offer coverage, they would likely come in and out of the
market. They would be likely to move to more profitable areas, and they would be
likely to significantly modify benefit design from year to year based on the
prior year's experience.
We have seen this before, and it is not a good
thing for beneficiaries. We are concerned that it would result -- this kind of
structure would result in the same instability and the same pullouts and
uncertainty that we see in managed care today. The new proposal's suggestion of
a fallback mechanism whereby the government -- and here I am speculating, but
presumably the traditional Medicare program would step in -- seems to
acknowledge the difficulties inherent in trying to guarantee access through a
drug only program.
The fallback mechanism also raises, I think from a
health policy perspective, serious risk selection issues. These
are very, very difficult issues, and we need to have a serious discussion once
we have seen the details. We continue to believe that the new prescription drug
benefit must be integrated into the Medicare program and that Medicare should
provide drug coverage the same way that virtually all private insurers do, by
contracting directly with pharmacy benefit managers in each region of the
country, and that is what our proposal does. And Mrs. Eshoo also has a proposal
that is slightly different but also relies on pharmacy benefit managers.
This will ensure that all beneficiaries have access and that Medicare
gets the best prices through the pharmacy benefit managers, who will negotiate
the best prices on behalf of beneficiaries.
Another critical concern
that we have with what we have seen so far about the new plan that was announced
yesterday is that it does not appear to provide direct premium subsidies to
individuals with incomes above $12,600 a year. Instead, it
relies on indirect subsidies to the private insurance plans to lower premiums.
And I heard one person today refer to this as a sort of a form of premium
support, and I thought that was interesting because I think it is sort of
analogous to that.
It is unclear whether that amount of subsidy would
ensure that affordable coverage is available to all and would be equally
affordable in all regions of the country. But I can tell you that we looked at
this very closely, this idea of what level of subsidy is necessary. And I
believe it would need to be substantially more than 25 or 30 percent to avoid
risk selection problems.
We have additional questions that are outlined
in my written testimony, and we look forward to discussing them with you. And I
want to say that I think that Congressman Burr is right. This is a terribly
difficult issue, and it is important that we see the details. I don't want to be
speculating about what is in their plan because it, I believe, has changed from
the first version I saw, and I want to provide you with the best answers I can
about what we are talking about here.
But I do think the most critical
question of all -- and I heard many of you raise this question, but it bears
repeating -- is how does this plan, the one that was announced yesterday, the
president's plan, whatever the plan is, how does it really meet the needs of
Medicare beneficiaries, the 39 million Americans who are depending on us to try
to do something here.
Is the plan really a defined benefit that is
guaranteed? Can Medicare beneficiaries depend on it being affordable and
accessible? Will the new plan really result in more efficient and effective
administration of Medicare? These are important questions. They are difficult
questions.
While all of these critical concerns remain, I do think the
good news is that we appear to have broad consensus that a Medicare drug benefit
is needed. It is now time to get into the all-important, deeper, and very, very
tough details of how to make sure the benefit can succeed, that it can succeed
for the Medicare beneficiaries and that it can succeed for the Medicare program.
We look forward to getting the details of this new plan because it is
obvious that a great deal of work remains, and it is time to sit down and get it
done. I look forward to continuing to work with you as we enter the next phase
on this critical issue. Thank you, Mr. Chairman.
REP. BILIRAKIS: Thank
you, Madame Administrator. You're, of course, correct. The legislation in terms
of its specificity is still not out there. But one thing that seems to be
relative specific is the establishment of the new entity to manage the program.
And, of course, you state in your testimony that establishing a new entity to
manage a drug benefit program would simply be, and using your words, adding a
new layer of bureaucracy. And I'm not sure that anybody would disagree with
that, that yes, it does add that.
But clearly, the bipartisan Medicare
2000 Act plan is not the only proposal, as you know, which suggests that the
management of the drug benefit be administered by a separate entity outside of
HCFA. Ms. Eshoo's plan proposes that OPM manage the benefit, as I understand it.
Mr. Pallone's plan establishes a board outside of HCFA, as does the Breau-Frist
bipartisan proposal in the Senate.
So maybe can you -- I would ask you
the question do you believe that all of these bills seek to establish redundant
beneficiaries, but more importantly, why don't you just respond to the fact that
so many plans feel it should be managed outside of HCFA.
MS. DePARLE:
Well, I think the one thing I believe I have heard this morning is we all agree
that a new prescription drug benefit, if it is added to Medicare, should be
administered in an effective and efficient way. And I think over the past two
years that I have been at HCFA, I have probably talked to every single member on
this committee about concerns you have about Medicare's administration. Some of
them are very specific about providers in your districts.
Certainly we
can do better. And I would like to have the opportunity at some point to show
you all of the things we have done to improve the way we administering Medicare.
One of the members -- I think it was Mr. Green -- pointed out that we are very
efficient in our administration, and that's true. Our administrative costs run
-- hover around 1-1/2 percent. I don't think there is any insurance company in
the country that would attempt to run a program as complicated and as important
as the one we are running with as many beneficiaries and more than
$200 billion of taxpayer dollars with that kind of
administrative expenses.
In my view, sometimes we are a little too
efficient. And I want to thank the committee because I have made this point with
many of you, and you have helped us in the past with our budget to make sure
that we got the resources we need to do a better job.
But I think we
have to go back to the question that Dr. Coburn posed, which is we have to think
carefully about what is the problem we are trying to fix here. And I think what
you want is an efficient and effective administration. I think it is possible to
do that the way the president's plan proposes, using private pharmacy benefit
managers like private insurers do and having us contract with them. And what I
would say to you is we are eager to get into that discussion with you. If you
give us the authority and the resources to do that job, I can promise you that
we will do a good job of it.
REP. BILIRAKIS: Well, I expect there
probably will be others who will explore the area that you mentioned about the
private drug benefit managers and how its usage is intended under the
president's plan. But I would go to an area that I think practically everybody's
opening statements refer to, and that is the need to help those with the real
high drug costs, stop loss, the catastrophic, if you will, a word that we don't
like to use up here for obvious reasons.
The president's plan did not
provide for that. Afterwards, of course, sometime afterwards, he decided to set
aside funds for patients with high out-of-pocket costs to begin in 2006, not to
begin now or even close to now, but 2006. So I guess I would ask you, and I
think we all wonder because we haven't seen anything in that regard, how would
you propose those funds be sent. Has HCFA, has the president come up with a plan
that would use those funds in order to help those people with a very, very high
out-of-pocket costs?
MS. DePARLE: Well, Mr. Chairman, we did not propose
the stop loss benefit, the catastrophic coverage, in our original proposal two
years ago. The president did propose it in this year's budget, but he said we
would set aside $35 billion to start in 2006, and we wanted to
sit down and work with the Congress to talk about the details of that.
We have been looking at various benefit designs. There are a number of
proposals up here already looking at various benefit designs, and we are ready
to sit down with the Congress whenever you all ready to talk about how best to
design such a program.
REP. BILIRAKIS: All right. My time is about to
expire, so I am just going to go ahead and yield to Mr. Brown at this point.
REP. BROWN: Thank you, Mr. Chairman. In light of your comments about the
devil being in the details, and Administrator DeParle's echoing the same thing,
and going through a very dispassionate, well thought through analysis of some of
the strengths and weaknesses of this legislation, of the proposals, and Dr.
Ganske's point of how serious a matter this is and how we don't have the
legislation yet and need to learn more, I was shown a letter to Chairman Bliley
from Speaker Hastert saying it is his intention to have legislation addressing
prescription drugs on the House floor the week of June 19th.
I would
just hope that we would be able to -- I would hope we could go through the
process of this subcommittee and this full committee with markup both places
prior to that date, if possible, so we really do have a better understanding of
this issue. And we haven't seen the bill yet, and members on this side certainly
have opinions and have seen outlines and have seen -- we have heard rumors and
everything else. We know about the bill, or we think we know about the bill. But
I think it is important that we have that opportunity, the subcommittee, on an
issue that is enormously complex as this and is so important for so many people
in this country.
I'd like to talk about the PBMs that the chairman
mentioned, Administrator DeParle. The president's plan proposes using these
private entities for pharmaceutical benefit managers to provide the benefit to
seniors. How do you ensure that these private sector entities are actually
providing the care that they promise?
MS. DePARLE: Well, we would have
quality standards. It wouldn't just be competitive bidding based on price,
Congressman. And we would do a competitive bidding in various areas of the
country. We met with pharmacy benefit managers who currently provide this kind
of service to other private insurers, and I believe they would be able to do a
good job of doing it with Medicare. We would have to be very specific with them
about what we wanted. We might want them to do some disease management. We might
want them to do utilization review and provide us with data about that kind of
thing. We would just have to be very specific in contracting with them and
telling them what we expect, and then we would have to make sure they got it
done.
REP. BROWN: The Republican plan relies on the private sector to
administer the Medicare drug benefit. In this proposal, private insurance
companies are being charged with running the program. How does that plan assure
that these private sector plans are providing the care that they promise to
seniors?
MS. DePARLE: Well, I suppose the new Medicare benefits
administration that is referred to in the document that I saw yesterday would be
in charge of contracting with private insurers. It sounds to me almost like a
Medigap model, although yesterday I did attend a hearing in Ways and Means, and
I heard some of the sponsors of the bill say that it is not supposed to be that.
But it sounds like a Medigap model.
In that model, our oversight is
quite limited. It is not clear how much ability the Medicare benefits
administration would have to oversee the provision of prescription drugs by
these plans.
I would add another thing, too, which is there is a real
tension here between what I heard yesterday from the sponsors, who talk about
wanting to provide seniors with as many different choices as possible. And that
is a philosophical view, and it is something I have talked to Congressman Burr
and others about, that they would like to see lots of different kinds of plans
out there, I think.
There is a tension between that and the thing that
Mrs. Eshoo talked about earlier and that I hear when I talk to seniors, which is
their desire to have a reliable, guaranteed benefit and to know what their costs
are going to be from year to year. And that is something that is going to, I
think, be a very difficult issue for this committee and for your colleagues to
grapple with. How much do you go in the direction of choice, and what does that
do in terms of risk selection?
It enables plans then to cherry pick the
healthier seniors. What sort of oversight would you need to have over that kind
of thing, and what are the results of that? And one of the results would much
higher premiums for everyone if the seniors are cherry picked into certain
private plans. And that what happens in the areas where these plans don't go in?
There are a lot of questions here, and it is unclear to me how we would
ensure that the private insurers, if they exist and if they come into the
market, are providing what they are supposed to be providing.
There
isn't a defined benefit, as I understand it, in this plan.
REP. BROWN:
You mentioned Medigap. And one of the major criticisms of Medigap is that it is
simply not affordable to a large number of people. In a private plan model such
as the Republicans have suggested, talk about the affordability for seniors
there. Would they be affordable for most seniors?
MS. DePARLE: Well,
again we have to see the details. As I understood it yesterday from Mr. Thomas,
there would be an indirect premium subsidy to the plans, so that would
indirectly subsidize individuals who chose those plans if they were available.
There are a lot of ifs here. My concern is the level of the subsidy as he
described it at around 25 or 30 percent. From my discussions with the
independent actuaries who work for the Medicare program and the Medicare
trustees, as well as with private insurance company executives, what they have
suggested is that that level of subsidy won't be enough to attract most senior
to join. So then you would end up with the same problem Medigap has, which is
the problem, I guess, that Congressman Barrett described, where they are trying
to provide health insurance for the sickest people or drug
insurance coverage for the sickest people who are going to use the most drugs.
It starts a spiral that our actuaries call a death spiral in terms of
the premium getting higher and higher, fewer people being able to afford it.
This is a complicated issue that we really would have to spend time analyzing.
REP. BROWN: Thank you, Mr. Chairman.
REP. BILIRAKIS: I thank the
gentleman. REP. BURR, to inquire.
REP. BURR: Let me say welcome.
MS. DePARLE: Thank you.
REP. BURR: It is a long, difficult
process. But the one thing that we can feel confident is that at some point we
will get to the end of it. And the question today is will we get it right.
Let me ask you, from the plans that you have read or read about, is
there anybody that is not aspiring to the belief that every plan has to be
voluntary?
MS. DePARLE: No.
REP. BURR: So we can take one of
those four things that we talked about and say everybody agrees that voluntary
is an absolute necessity.
MS. DePARLE: Yes. But if I can --
REP.
BURR: Sure.
MS. DePARLE: The first principle is it should be a voluntary
benefit accessible to all beneficiaries. The voluntary part, yes, sir.
Accessible I'm not so sure about, yes.
REP. BURR: You mentioned
yesterday in the Ways and Means hearing that it had to be voluntary, but we had
to guarantee. Could you distinguish between the two? What do you mean?
MS. DePARLE: When I talk about guarantee, I mean that just like a
Medicare beneficiary today knows they have physician coverage, they have
coverage if they need to go to their doctor, and just like they know they have
coverage if they need to go to the hospital, they need to know they really have
drug coverage. I don't think it can be something that is contingent on whether a
private insurance plan comes into their area.
REP. BURR: So as long as
there is a provision in a bill that one would see in the absence of everything
that could exist, nothing exists, here is the answer -- as long as that exists,
then the guarantee exists for all eligible.
MS. DePARLE: Well, I would
have to see the language. But I believe as I understood yesterday from the
description, there has been a change and that, yes, the plan that I heard
described is attempting to say that there will be something provided for
everyone, that a drug benefit will be available if there is not a private
insurance plan. That is what I heard.
REP. BURR: Given the approach that
you are familiar with to a large degree, to have more than option, more than one
choice for seniors in a given market, whether it is a benefit manager or whether
it is an insurance product or whether it is a new entity that we haven't even
discovered yet, is it beneficial to the eligible beneficiaries out there?
MS. DePARLE: Well, you know, I would like to give you a yes or no
answer, but I really can't. It can be beneficial. The problem is it also --
every time you segment the market more, you introduce more likelihood of risk
selection.
REP. BURR: Why doesn't OPM only allow a small number of
health plans for federal employees then? Why is the list in
North Carolina some 30 people that I have to pick from? Does that not help them
to negotiate?
MS. DePARLE: I assume because the law -- well, I think you
would have to ask them. I think -- so your contention is it helps them to
negotiate better prices somehow? The problem is it may help you some on the
negotiating side, but it also hurts you some in that you segment the market. You
introduce risk selection so plans can --
REP. BURR: We spread the risk
out.
MS. DePARLE: -- varying -- not as much as you do if you have only a
couple of plans. If you had just -- the president's plan, for example, has you
can go to an HMO and we would reimburse them directly for providing prescription
drugs, which we don't today because it would be a Medicare guaranteed benefit.
And then you could also be in the fee for service plan.
When you go
beyond that, you start introducing in more and more risk selection by segmenting
the market, and you get -- plans will be smart enough to design benefit packages
that could end up excluding some people and picking out the healthiest people.
Now if your desire is to provide as much choice as possible, you may see
that as an advantage. My concern is it raises the premium costs for
beneficiaries. It can result in the people being left in a plan that is more
expensive. And then, as I said, you start this sort of death spiral with the
premiums.
REP. BURR: If I understand you correctly, the more people who
might join a plan, the cheaper the premium gets because of volume.
MS.
DePARLE: In general, that is what -- yes, yes, sir. In general, that is what
insurance is. You spread the risk over as many people as possible because then
you lower the chances that you are going to get just sick people who are going
to need to really heavily use the benefit. So you have to weigh that against
your desire to have choice. And as I said, you and I have discussed this, and I
know why you like that.
The other thing, though, I would raise is what
Mrs. Eshoo raised about her mother and what she wanted. And when I talk to
seniors -- maybe we talk to different ones -- some of them may like choice. But
the main thing I hear is I need to know what my costs are going to be. I need to
know.
REP. BURR: It needs to be predictable, doesn't it?
MS.
DePARLE: Yes, sir, it does.
REP. BURR: And that is an important aspect.
Let me just --
REP. BILIRAKIS: The gentleman's time is expired.
REP. BURR: I thank the chairman.
REP. BILIRAKIS: Mr. Waxman.
REP. WAXMAN: Thank you, Mr. Chairman. What is so frustrating to me about
this hearing is that we don't have a bill before us. We have some concepts on a
piece of paper, really just a couple of pages, and we are asking very specific
questions which you can't answer because you don't see -- you can't see the
proposal.
And we're being told this proposal may be on the House floor
next week. So you wonder what a committee is supposed to do and why we have
witnesses here if we can't get testimony about a specific proposal.
But
we have a communications document that the Republicans have put out. And I want
to ask you about what you understand that proposal and that document to mean. Is
it correct to say that there is no defined benefit in the Republican plan? In
other words, you don't know what you are actually going to get if you are in
Medicare if you are able to buy an insurance policy for prescription drugs. And
do we know any way from their communications, how much are people going to have
to pay out of their pockets for these pharmaceuticals, or even for their
premiums?
MS. DePARLE: Well, I don't know it from the paper I saw
yesterday. I did hear discussion at the Ways and Means Committee of I think the
sponsors are still in active negotiations and deliberations with the
Congressional Budget Office, trying to get the premium numbers down. But I did
not see a defined benefit in what I looked at yesterday.
Now I will say
the president's bill has been up here since March. We spent a lot of time
drafting it. So I would be happy to discuss that. And, of course, when the other
bill does come out, if we can provide any technical assistance, we will.
REP. WAXMAN: Well, could it mean that if you are on Medicare and you
need certain kinds of drugs, you may not have an insurance policy that will
provide those drugs that you need?
MS. DePARLE: It could mean that if
there is not a defined benefit.
REP. WAXMAN: And if all they are saying
is you have a chance to buy some insurance, could it mean that there is no
insurance really available for you to buy or affordable for you to buy? Could it
mean that you can only have a chance to get some drugs covered if you sign up in
a managed care plan, and that's it, maybe have a choice of two managed care
plans?
MS. DePARLE: If there is no defined benefit, there could be lots
of variation about what is provided. And it would be very important for people
to know, I believe, what is in the plan, how much they are going to be expected
to pay. And that cuts against some of the arguments about having lots of
choices.
REP. WAXMAN: But choices are great if everybody wants you to
choose them. But when you are a real sick elderly person who is going to
represent a huge cost to an insurance company, they are not anxious to have you
sign up with them. They would like you to choose someone else. And when we
adopted the Medicare program, we said no matter how sick you are, no matter how
wealthy or poor you might be, you are going to be guaranteed coverage for your
doctor bills when it is medically necessary or hospital bills when it is
medically necessary, and a lot of other services. Shouldn't we say that you are
going to be guaranteed coverage for prescription drugs? Isn't that what this is
all about? Isn't that what the American people really want?
MS. DePARLE:
Well, I believe that is what we should do. I believe that that is consistent
with Medicare's principles. And I do believe it is different from the way the
federal employees health benefits program has been structured
under the law. There there are choices, and it is more a defined contribution
program. Medicare has been a defined benefit. And there is a discussion in the
materials I saw yesterday about an actuarial equivalence in dollar terms. But it
is not, as I understand it, a defined benefit, as Medicare has traditionally
had.
REP. WAXMAN: The most peculiar thing to me about this proposal is
we don't give anybody anything. We just tell them we are going to give you a
chance to buy private insurance. But since private insurance companies don't now
have affordable plans for drug coverage, we are going to give the money to the
insurance companies, not to the beneficiaries, in hopes that they will lower
their prices and make a plan available, and maybe some people can afford it.
Is there any beef there? Where is the beef in all of this? If a senior
is watching this hearing, can they feel that if this plan is adopted, they will
know that drugs are going to be covered and they are going to be able to buy any
policy wherever they may live in this country?
MS. DePARLE: Well, I
don't know that yet. I think that, as I said, we have questions based on what we
have seen about the affordability and accessibility of the plan that we are
discussing today. We are eager to see the details. We heard from the sponsors
that they intend to provide a fallback mechanism so that there will be something
available. But we need to see the details on that.
REP. WAXMAN: Well, I
think you're right. We have to see the details. But this may be the only hearing
this committee, which has jurisdiction over these issues, will ever have on this
proposal so that when that details come out, we may just see them, whether it is
already on the House floor, and we are told you vote yes or no. And if you vote
no, there is nothing there. But if we vote yes, we may not have anything that is
really worth it when all is said and done. Thank you.
REP. BILIRAKIS:
The gentleman's time has expired.
Mr. Whitfield.
REP. WHITFIELD:
Thank you, Mr. Chairman. REP. BURR was focusing on the importance of choice and
using the federal insurance plan for federal employees as an example. Of course,
philosophically, one of the reasons that many of us advocate choice is we feel
like the competition can keep prices in line. And as Dr. Coburn mentioned
earlier, we know that in the long term, there are some real financial
difficulties facing the Medicare program, its solvency. And do you agree that
choice is a way to promote competition, and in doing that can maybe keep the
costs down of a prescription drug benefit?
MS. DePARLE: Well, choice can
be a way to promote competition. But what we have seen in the past is that the
past is that the competition has really not been on price in the same way that
you would expect.
You refer to the federal employees
health benefits program. In our discussions with the Office of
Personnel Management -- and they actually testified with me in front of the
Senate Finance Committee -- they made the point that you have to take into
consideration that the two programs and the populations they serve are really
very different in that Medicare serves an elderly population with much more
intense and predictable health care needs than the federal
employees program does.
And again, when OPM negotiates with plans, under
the statute it is pretty much open to any plan that meets a certain requirement.
(NOTE: Hearing room audio systems flickers on and off for a few
minutes.)
REP. PALLONE: Thank you, Mr. Chairman. I wanted to go back to
what Mr. (Inaudible). The way I understand the president's proposal, you have
access to medically necessary drugs. That's a part of the language. And that to
me means by your physician, pharmacist, whatever, about what's medically
necessary, and that's a defined benefit. On the other hand, under the Republican
proposal we're getting language, and, again, I'm looking at apparently what
Congress describes that says that the benefits have to equal an actuarial value
of $740, the actuarial equivalent of a certain dollar amount.
I think my concern is that the way I see the Congress proposal, it is
essentially a voucher linked to a certain dollar amount because of the language
about actuarial equivalent. On the other hand, the president says medically
necessary drugs. Would you just comment on the discretionary matter? I know
you've sort of gotten into this, but I think there is a big difference here. One
links to a dollar amount.
The other one links to a specific description
about what's medically necessary.
MS. DePARLE: Well, as I understand
(inaudible), Medicare (inaudible) it allows insurers to offer (inaudible) their
talk about actuarial equivalence (inaudible) refers to (inaudible). But if I
understand it, only the (inaudible) amount is really specified. So I'm sure that
(inaudible) really make seniors want and need all of these different choices and
whether that kind of structure guarantees good selection and then difficulties
with unaffordable premiums and access.
I do want to add, though, that it
mentioned something about covering major, therapeutic classes of drugs, and
we're not sure how that is defined. It is different.
The language is
different than saying all necessary medications because we don't know whether
that is intended to signify that dangerous sub-terminal marginal or whether it's
just (inaudible). I guess (inaudible) I don't know at this point (inaudible)
covered in terms of drugs.
REP. PALLONE: I think the fear is that even
if you signed up for a particular plan and you had some general notion about
what it was (inaudible) (inaudible) day-to-day and year to year. Theoretically
there might be some selection to the (inaudible) that we have. But on the other
hand, what is to stop them from (inaudible) In both cases it's the formulary --
is that not correct? -- that there is a formulary in the president's plan and in
the Republican plan, and caps in each plan?
MS. DePARLE: (Inaudible.)
REP. PALLONE: I'm glad you raised that, because my understanding is you
don't have the formulary.
MS. DePARLE: Well, I don't think I'm clear --
REP. PALLONE: PBMs would establish formularies in both instances.
MS. DePARLE: They are permitted to --
REP. BILIRAKIS: Your time
is up.
REP. PALLONE: Thank you, Mr. Chairman.
REP. BILIRAKIS:
Dr. Ganske?
REP. GANSKE: Thank you, Mr. Chairman. I hope that our
electrical problems this morning are not indicative of how the grid will work
after electric deregulation.
Well, Ms. DeParle, I want to first start
out with a comment that is a follow-up to a question that Chairman Archer asked
you yesterday, and you have already alluded to it in some of your answers. I
will be bipartisanally critical of both plans as I've seen them so far.
I would point out that when we're talking about bipartisanship on these
bills, it will take more than two or three members of the other side of the
aisle, as much as I love Ralph Hall, to make a bipartisan bill and be able to
move a big issue like this. But this is what I see as the big problem with both
the president's proposal and what I'm seeing coming out of the Republican plan.
And it relates back to 1988, when Congress passed a catastrophic bill
that had prescription drugs in it. That applied to all senior citizens, and it
involved a premium increase. And I want to read what Chairman Rostenkowski said
recently about that experience. He said, "We adopted a principle universally
accepted in the private-insurance industry. That is that people pay premiums
today for benefits they receive tomorrow. Apparently, the voters did not agree
with those market principles."
So, what has been the lesson in
Washington on that experience? The lesson has been, well, by George, we had
better make this voluntary. This has to be a voluntary benefit. But this is the
problem, and we were able to get some of this information from the hearing
yesterday. Chairman Thomas, when he testified, pointed out that the Republican
bill will cost somewhere between $450 to $500
a year in premiums plus a 50 percent co-pay, and we know that the president's
plan, I think, originally cost about something like $25 per
month, but that you are willing to talk about stop loss or it would be higher
than that.
Congressman Burr in a previous hearing aptly pointed out that
under the president's plan, for this to be a cost-effective maneuver by a
Medicare beneficiary, they are going to have to have out-of- pocket expenses of
somewhere around $1,200. It will probably be somewhat similar
to that with the GOP plan, and this is the problem.
If you look at the
data from MedPAC, they show that if current Medicare beneficiaries -- this is
1999 data -- 14 percent of Medicare beneficiaries today spend nothing on
prescription drugs. Thirty-six percent spend from $1 to
$500. So you've got 50 percent of Medicare beneficiaries today
with less than $500 out-of-pocket expenses.
Now, if
you're a senior citizen and you are looking at having to have expenses of
greater than a thousands bucks for either the GOP plan or the Democratic plan,
to make signing up for this voluntary program cost effective for you, why on
earth would you do that? Why on earth would 50 percent of people do that? The
answer is they won't. They won't, and so that gets into the adverse-risk
selection of those who will. These are going to be the seniors, that six percent
or 14 percent who have expenses more than $1,500.
What
do we know happens from the current program under that scenario? Well, we know
what happens, because there already are Medicare supplemental programs that
provide that drug benefit, and the only people who sign up for them are those
who have a lot of expenses, and what happens? The premiums are very high for
those programs.
So unless we take a huge amount of extra dollars from
the general fund to cushion that shock for those who will sign up for it, I
think we are looking at significantly higher expenses. This is what I think the
solution should be, and I think that's the fundamental problem with both.
I happen to agree with Mr. Kahn on this. Here is what he said. He
represents insurance. I'm happy to say this because not always do I agree with
the insurance industry. I've got Karen Ignagni here, too. He said
private-drug-only coverage to clear insurmountable financial, regulatory, and
administrative hurdles simply to get to the market. Assuming that it did, the
pressures of ever-increasing drug costs, the predictability of drug expenses,
and the likelihood that the people most likely to purchase this coverage will be
the people anticipating the highest drug claims would make drug-only coverage
virtually impossible for insurers to offer to seniors at an affordable premium.
REP. BILIRAKIS: The gentleman's time has expired.
REP. GANSKE:
So I would just finish by saying, you know, we have a big, adverse-risk problem
in both of the plans that have been presented, and I look forward to additional
time. Thank you.
REP. BILIRAKIS: Well, let's see here.
Mr.
Stupak.
REP. STUPAK: Thank you, Mr. Chairman. You asked some questions
by REP. BURR and Mr. Whitfield on choice and risk. In the Federal Employees
Health Benefit Package that basically reflects people like
ourselves, where prescription-drug risk you're talking about would be people who
are 65 and older, is it not?
MS. DePARLE: I think that in talking to the
people at OPM who run and manage the FEHP program, they do believe that the two
populations are very different, and --
REP. STUPAK: -- and the risks are
very different.
MS. DePARLE: (In progress) -- the risks are very
different for an insurer facing those populations. And I think the insurance
companies would tell you the same thing.
REP. STUPAK: Okay. I understand
that yesterday the president released a report prepared at the request of
Senator Max Baucus that showed rural elderly are 60 percent more likely to fail
to get needed prescription drugs because of the cost. Could you please discuss
some of the conclusions of that, since I have a large rural district myself?
MS. DePARLE: Yes, and I've been to your district.
REP. STUPAK:
Yes, you have.
MS. DePARLE: I do know that. It is the cost as well as
the fact that if you look at the Medicare population, the people who are
fortunate enough to have prescription-drug coverage have it primarily because
they worked for large employers which are less likely to be in rural areas, so
as retirees they got that coverage from their former employer.
They are
less likely to have that. As well, they are less likely to have access to a
Medicare HMO.
REP. STUPAK: We don't have any up there.
MS.
DePARLE: You don't have any up in the upper peninsula. And in the past, in some
areas of the country where those are available beneficiaries go to a Medicare
HMO to get prescription-drug coverage. So those two things, combined with some
of the factors that you raised in your opening statement about price
discrimination and the fact that it's harder to negotiate on behalf of large
numbers of beneficiaries in a rural area mean that they have less access.
REP. STUPAK: Well, how would the president's plan, then, address
prescription-drug coverage in rural areas like mine?
MS. DePARLE: Well,
under our plan we would have pharmacy-benefit managers in different areas of the
country that would cover a region and would negotiate on behalf of those
beneficiaries who lived in that region to get the best drug prices possible for
them under this defined benefit, and then when the beneficiary had gotten up to
the cap they would still get the benefit of those negotiated lower prices if
they needed to go further than that.
REP. STUPAK: From what we know of
the Republican plan, and I understand you were at the hearing yesterday, what
does the Republican plan do to help elderly in rural areas like mine?
MS. DePARLE: Well, what I know about that is what I heard discussed by
the members of Congress who were talking about that plan, and Mr. Peterson, who
is from Minnesota, --
REP. STUPAK: That's a rural area.
MS.
DePARLE: (In progress) -- said he believed it would help rural areas in, I
guess, two ways. One is that he believes that there will be a fallback mechanism
whereby the government would step in where plans aren't available and provide
prescription-drug benefits. As I said, we have a lot of questions about whether
that would really be affordable and accessible and what the premiums would be,
but that is what he said would be there for rural beneficiaries. And also I
believe the plan includes some additional payments for Medicare HMOs in rural
areas, and he thinks that will entice them to come into some rural areas and
provide Medicare HMO coverage, which they have not in the past.
REP.
STUPAK: Okay. So if we don't have an HMO, like up in my district, or no HMOs in
my area, then the government would be the fallback here and negotiate those
prices. Is that your understanding?
MS. DePARLE: That's my understanding
of what he said.
REP. STUPAK: Well, what would stop, then, the
government being a fallback, whether in a rural area or an urban area, as
insurance companies cherry pick only the healthy seniors to put in their plan?
MS. DePARLE: That's my concern, is that the more you segment the market
like that, the more it results in adverse selection and then higher premiums for
the people who don't have other choices and subsidies for people who do have
other choices, and I'm not sure that's the right direction to go in.
REP. STUPAK: There has been some talk about Medigap policies and the
administrative costs. In fact, I brought up the Medicaid situation in Michigan
where the state ran it for $28 million. Now they have turned it
over to these private companies, including private HMOs, and now the
administrative cost is $141 million in Michigan per year. The
Medigap; is that the administrative cost to run the plan and market it to
individuals? Is that high, the Medigap policy? Is it low? For example, Medicare,
you said you run it at about one and a half, --
MS. DePARLE: Yes.
MR. STUPAK: (In progress) -- two percent. You have zero overhead.
Medigap plans; do you know what their administrative costs are?
MS.
DePARLE: Well, on average, their administrative costs are around 10 times higher
than Medicare's, according to National Association of Insurance Commissioners'
statistics.
REP. STUPAK: So 20 percent is their administrative cost?
MS. DePARLE: Well, no. I guess it would be 10 or 11 percent, if ours is
one and a half percent.
REP. STUPAK: All right. Okay.
REP.
BILIRAKIS: Mr. Norwood. I beg your pardon.
Are you finished?
REP. STUPAK: Just one more. If the administrative costs are higher than
the 20, the 15 percent, then the money that the seniors would be paying would
not go necessarily for a drug benefit, but more money would go for the
administrative costs. Right?
MS. DePARLE: Well, both the seniors and the
federal government, because this is a 50/50 proposition in the president's plan,
but I assume that some of this would be paid by the federal government in their
plan as well. It's not clear. But, yes, we would be paying for higher
administrative costs.
MR. BILIRAKIS: It's your time now, Dr. Norwood, to
inquire.
REP. NORWOOD: Thank you, Mr. Chairman. Nancy, how many people
are on Medicare?
MS. DePARLE: Thirty-nine-million-plus, sir.
REP. NORWOOD: Could we examine your first sentence in your statement?
You said that 39 million people need drug benefits. Are you saying that
everybody on Medicare needs a government-run, drug- benefit plan?
MS.
DePARLE: No, sir. I'm not saying that. Because in our plan
REP. NORWOOD:
So it's not 39 million that need drug benefits?
MS. DePARLE: If I can
finish, in our plan we have proposed to include some subsidies to encourage
employers who are currently providing coverage to continue providing it and hope
they will.
REP. NORWOOD: Let's get to the answer. Do 39 million people
need drug benefits, or don't they?
MS. DePARLE: I believe they need a
guaranteed, Medicare prescription-drug benefit. They don't have that now.
REP. NORWOOD: All 39 million?
MS. DePARLE: Yes, sir, because
they don't have security right now that they have a drug benefit. Some of them
happen to have it.
REP. NORWOOD: Even the 50 percent that Dr. Ganske
referred to that is very happy with their supplemental drug plans paying zero or
very little; they need it, too?
MS. DePARLE: What I find when I talk to
seniors -- maybe the ones in your district are different, but when I talk to
them they are concerned about the rising costs of drugs and the fact that they
don't have coverage. Some of them have retiree coverage, but they are not sure
it's still going to be there. So what I'm talking about here --
REP.
NORWOOD: They are not sure Medicare is going to be there either, the way we act.
But the point is, you couldn't make the statement that 39 million Americans need
or even want a government- run, prescription-drug plan. That is not a true
statement.
MS. DePARLE: I don't want to argue with you, Mr. Norwood, but
what I'm trying to say is --
REP. NORWOOD: You can't argue with them. I
know them in my district who don't want it, so don't tell me everybody out there
on Medicare wants the government to take over their medications. They don't. I
just want you to be honest before this committee.
MS. DePARLE: I am
being honest, sir.
REP. NORWOOD: You said that all 39 --
REP.
GANSKE: Mr. Chairman.
REP. NORWOOD: You may not interrupt, sir. You said
all 39 million Americans can't wait for a government-run, prescription-drug
plan.
MS. DePARLE: That's not fair. That isn't what I said.
REP.
NORWOOD: That is what you said, 39 million people need a drug-benefit.
REP. BILIRAKIS: The witness will respond as best as she can, and then
let's go on.
MS. DePARLE: We obviously have a philosophical difference
here.
REP. NORWOOD: No. I'm just trying to find out if you actually
believe that every American wants to have a government-run, medication plan.
That's all. You obviously believe they do. I know they don't.
Now, let
me go to the next question because my time will run out. (Laughter.) It seems to
me that presently when you're 65 years' old you have to go into the
government-run health care known as Medicare. You don't have
any choice about that. If you are a patient over 65 years' old and you wish to
seek treatment from a physician, for example, who maybe doesn't take Medicare or
wish to seek, for example, a treatment that Medicare doesn't cover, we today, as
a Congress and as a government, say, you go to that physician and if that
physician treats you, we're going to give that physician a great deal of pain,
whether it's putting them in jail or fining them or whatever. Now, that's
presently what we do in Medicare.
If the president's plan were to be put
into Medicare, would that then mean the same thing for seniors in terms of their
prescription medication? Would that mean they would have no other choices but
then to use the two options in the president's plan?
MS. DePARLE: Well,
no, sir, and I don't agree with your characterization of what happens now. If
beneficiaries need or want treatments that are not covered by Medicare, that
would not be the case.
REP. NORWOOD: It is not the case that they can
leave, then, and go to the physician of their choice, and the physician of their
choice treats them, and the federal government comes down on that physician to
take their license or put them in jail or fine them. That's not true.
MS. DePARLE: That's not the case. No, sir.
REP. GANSKE: Will the
gentleman yield here?
REP. NORWOOD: I will yield.
REP. GANSKE:
Can I referee here a little bit? The physician, if he gets a disclaimer
notifying the Medicare patient that this is not a covered benefit, the
government can't touch him. The problem is if your nurse fails to get a
disclaimer.
REP. NORWOOD: Or if it's a benefit that happens to be
covered where you wish to go to a physician who doesn't take Medicare. That is
what happens, whether you say it is or isn't. That is what we do.
I'm
asking you, if we put this president's plan into Medicare, does that mean, then,
the senior citizens, half of them who presently have supplemental plans that
they seem to enjoy and like, would no longer be able to use them but would have
to simply use those two offered by the president's plan?
MS. DePARLE:
No, sir. It does not mean that.
REP. NORWOOD: I'll yield back or yield
to REP. BURR.
REP. BILIRAKIS: You only have seven seconds left to yield.
(Laughter.)
REP. NORWOOD: Clearly us Southners can't ask you to do that.
(Laughter.)
REP. BILIRAKIS: Amen to that. (Laughter.)
MS.
DePARLE: Nor can I answer that. (Laughter.)
REP. BILIRAKIS: Mr.
Strickland, you have already? Yes, Mr. Strickland.
REP. STRICKLAND:
Thank you, Mr. Chairman. Mr. Chairman, I would like to correct the record on
something I said in my opening statement. Although the amendment I referenced,
Mr. Sanders'
amendment, did pass the House, it was opposed by well over
100 members.
I would like to give you a chance to explain, if you can,
to my colleague what it is that you mean by that sentence that apparently is in
question. I think you are an honest person, and I don't think you are trying to
mislead us, and so I would like to give you a chance to explain the difference
of opinion that apparently exists between Dr. Norwood and yourself on that
particular statement.
As I read it, it says it includes a voluntary,
affordable, accessible, competitive, efficient, quality, drug benefit that will
be available to all beneficiaries. I don't interpret that as you saying that
every Medicare-eligible person would choose, and the fact that it's voluntary is
in there seems to me to be rather clear that it's not something you are wanting
to impose upon all Medicare beneficiaries.
MS. DePARLE: That's right,
and, in fact, the president's plan, as I was trying to explain, includes some
subsidies so that people who are fortunate enough to have coverage through their
employer now as retirees would continue that coverage, that the employers would
find it to be in their interest financially to continue providing coverage.
I think the philosophical difference I have with Dr. Norwood, and I
actually agree with him on a lot of things, but I think on this what I'm saying
is that I believe that beneficiaries need the same kind of assurance that they
are going to have their physician visits covered and that they are going to have
their hospital visits covered about prescription drugs, and right now, today,
they don't have that.
Some of them are fortunate enough to have
prescription-drug coverage. That's great, and we want to that to continue, but
unfortunately there are many seniors who have unreliable coverage, who are
losing coverage, who might have it one month and not another, whose Medicare HMO
has left, and so what we're talking about here partly is a philosophical issue
about whether they need that security and insurance or whether they don't.
REP. STRICKLAND: Thank you for that clarification.
I have a
document that is supposed to be an analysis of the Republican plan, and on the
covered drug section it says: "The proposal will cover all outpatient
prescription drugs, excluding those already covered by Medicare Part B." And
then it says: "Individual plans may establish formularies, however, that may
limit beneficiary access to certain drugs." And then it goes ahead to say that
if your physician feels like you need a drug that's not a part of the formulary,
there can be an appeal process.
Now, one of the reasons many of us want
a patients' bill of rights is that we think decisions are made than what a
physician would choose.
And then it says: "Individual plans may
establish formularies, however, that may limit beneficiary access to certain
drugs." And then it goes ahead to say that if your physician feels like you need
a drug that's not a part of the formulary, there can be an appeal process.
Now, one of the reasons many of us want a patients' bill of rights is
that we think decisions are made that are different than what a physician would
choose.
Do you see a problem with setting up a system where the
physicians may have to once again advocate for something that they think is in
the best interest of the patients when we are finding it very difficult to
develop an appeals process, even under a patient's bill of rights? Is this a
problem, in your judgment, in terms of drugs that would be available?
MS. DePARLE: I think it's a problem any time we are not clear about
what's covered and what's not covered, and I think that in working together to
design this, both of us should try to do everything we can to make sure that
physicians' medical judgment about that is allowed to govern.
REP.
STRICKLAND: And lastly, I'm troubled that under the president's plan the
stop-gap measure kicks in in 2006. That's a long way away. And could you briefly
compare what it is you know about the Republican plan stop-gap measures versus
the Democratic plan, because, quite frankly, I think the president's plan is
very troublesome to me?
MS. DePARLE: Well, as I said, the president's
plan, really the only detail that he specified was that we had reserved
$35 billion, set aside that to work with the Congress to design
a stop-gap plan and his does start in 2006, and, frankly, that's a question of
the availability of the dollars that we think will be necessary to design such a
benefit.
The House Democrats announced the outlines of a plan a few
weeks ago that has a stop loss that begins at $3,000 of
out-of-pocket spending for a beneficiary, and I believe it would start right
away, or 2002, earlier than the president's plan had talked about. And the plan,
the Medicare RX-2000 plan, looking here, again, I believe that it starts at the
same time the plan does. Maybe I should ask Congressman Burr, and I think it
starts at $6,000. Is that right? So there are two or three
ideas on the table. It's not clear. I think they said their premiums were going
to be $35 to $40, and I guess that includes
the catastrophic or stop-loss protection. That's what we know so far.
REP. BILIRAKIS: The gentleman's time has expired.
REP.
STRICKLAND: Thank you.
REP. BILIRAKIS: Mr. Bryant is back, so Mr.
Bryant.
REP. BRYANT: Thank you, Mr. Chairman. Welcome, and I apologize
for having to step out to attend a conflicting meeting here, and I missed -- I
did hear your statements and missed most of your examination. As I hear bells
ringing, we may be leaving to have to go vote.
But I wanted to pick up
on my friend from Ohio's questions because they are important. And I think one
of the key things that makes our proposal attractive, because many of the bills
that are offered today that are out there do rely on private-sector insurance
companies and management of those outside of HCFA. So this is not an idea unique
to a particular bill that the Republicans have been talking about.
But
one of the things that makes that bill particularly attractive is the stop-loss
provision. And like, I assume, so many of us that buy regular
health insurance that are healthy, we buy that insurance to
help us against that catastrophic -- apparently we don't like that word around
here, I don't know, but those bad things that can happen to you. And we would
envision the same concept at the level of prescription drugs and senior citizens
in this bill. Not every senior citizen uses prescription drugs, and obviously
some use more than others, but it's that concept that's very important.
And that's why I want to go back to Mr. Strickland's questions about the
president's plan taking to 2006, and even then, in reviewing the language, and I
hope I'm not quibbling over semantics here, but as I read that particular
language, he does reserve that $35 billion from our surplus for
either debt reduction or in the event that the president, he and Congress agree,
whoever the president may be, a policy that provides for protection against
catastrophic-drug costs for Medicare beneficiaries or policies that otherwise
strengthen the Medicare program.
So I think there is some probably
flexibility his proposal that that $35 billion is not
specifically dedicated to the stop-loss-type program. And, again, I think that's
one of the things -- ours is. It's dedicated for that. It's a guarantee, as much
as we can guarantee anything.
So I would hope that as the administration
looks at that very important piece of this modernization, that there is more of
a lock-in and more of a guarantee to that rather than leaving it up to the
administration and the Congress at that time. Do you follow that?
MS.
DePARLE: I do, and as I said to Chairman Bilirakis, we clearly need to sit down
with all of you and discuss what the contours of a catastrophic or stop-loss
protection should be. I think the good news is that everyone here agrees that
that needs to be a component only, with the possible exception -- I did listen
carefully to what Dr. Ganske said about some of the documents in designing this,
but I think we ought to sit down and talk about it.
REP. BRYANT: Well,
you know, we have, I think, a very good benefit on this committee of having some
doctors who really have first-hand experience and add so much to the committee
in discussions like this. And, I think, many of us, if I understand, on the
other side now agree that it is a very important issue that we have to begin to
sort of set that partisan politics aside and continue to work towards solving
this problem together.
But I think that any bill that comes up with the
underlying principles that it's going to be universal, it's voluntary for people
to be in or stay in, a very good program they might be in already as far as drug
costs, and they are going to have choices within that, and you have got this
stop-loss provision. So I think as long as we all maintain those concepts, that,
again, I'm becoming perhaps more of an optimist that we can work this out and
solve a very important problem. Do you have any comments on that?
MS.
DePARLE: Well, I'm optimistic, too. Thank you.
REP. BRYANT: I yield
back.
REP. BILIRAKIS: Ms. Eshoo to inquire? Anna?
MS. ESHOO:
Yes. Thank you. Mr. Chairman, I'm sorry I had to step out of this all-important
hearing, but there was an all-important bill on the floor on digital signature.
So while that may not seem so related to everything that's going on here, we've
gone past pen and quill and ink, and all of that, even wax imprints, and now in
a new century we are going to be able to transact things in cyberspace. So
that's being done on the floor.
Thank you, Madam Administrator, for your
opening statement. Let me just try to get some socks on this octopus. And as I
said in my opening statement, it's no longer a question of whether we should or
shouldn't do this. The reason why this hearing is so important is because we're
trying to flesh out how to do this. And it seems to me that at the heart of this
debate of how to is the benefit package. And I know that you touched on that in
your opening statement.
I haven't had the benefit of some of the
questions and your responses, but could you for the record just for a moment,
because I want to come back in on the coverage part of this, why, in your view,
is it so important for beneficiaries to have a defined, Medicare drug benefit?
MS. DePARLE: Well, for several reasons, and first and foremost, really
is the one that you mentioned in your opening statement, which is that the
seniors I talked to want to know what they have, how much they have to expect in
terms of their costs. They want it to be predictable, and they want to know
what's covered. And that is one of the, I think, very positive things about
Medicare today, is they know that they are covered to go to the doctor, they
know they are covered to go to the hospital, and they need to have that same
level of assurance about their prescription- drug coverage.
I also think
that if we don't have a defined benefit, that we introduce a really scary
element of additional risk selection into this. And several of the members on
this committee have talked about that, and I can tell that everyone is trying to
grapple with it. And that is if you allow plans to design lots of different
benefit packages, that promotes choice, which is a value that some members want
to promote, but you have to be very careful not to introduce cherry picking of
the healthiest seniors and risk selection. And then also, Mr. Whitfield raised
the question of confusion for beneficiaries and the fact that it would be very
difficult for them to navigate among the plans. All of those things are things
that we are really going to have to look at carefully.
MS. ESHOO:
Because there are warning signals in terms of how we should design this.
Let me just cover two other points, and they both have placement and
direct attention in the legislation that I introduced. And there are different
ideas out there on this, and that's what we're talking about today, ideas: the
idea of how stop loss, catastrophic insurance, and how that is designed and how
it kicks in.
Now, there are different ideas about it. In the bill that I
introduced, the out-of-pocket expense of the beneficiary is
$2,500, the government, Medicare, picking up the other half. So
once you reach the ceiling of $5,000, then the stop-loss kicks
in.
There are other plans out there that don't work that way. There is a
gap between what's covered, what the beneficiary pays out of pocket, and how
long they have to wait until stop loss kicks in. And I put this out more as kind
of a red flag because members are going to have to consider this because their
constituents will face it. The reason why I think it's important to have stop
loss is very obvious, that I don't know how many of us would be able to afford
some of these drugs, even with our salaries, and the insurance coverage that we
have, once it goes past the out of pocket. So I say this to this subcommittee
that's going to have something to do with that.
The other thing is the
administration of this. With great curiosity, yesterday I listened to Mr. Thomas
talk about the bureaucracy that he is designing, which I think, I'm assuming, is
going to be in my Republican colleague's bill. I'm issuing a warning on that. I
really don't think we need to do that. Right now, in the bill that I've
introduced, and 10 Democrats on the Commerce Committee have cosponsored,
original cosponsors of it, I do not have, as you know, Madam Administrator, your
agency administering the program. Rather, I put it into OPM.
Now, I'm if
first to admit that many of the problems that HCFA has are congressionally
inspired, but there are problems. I think that you are --
REP.
BILIRAKIS: The gentlelady's time has expired.
MS. ESHOO: Can I take just
30 seconds so that she can answer this?
REP. BILIRAKIS: Well, not 30
seconds, but a very brief answer.
MS. ESHOO: Okay. I think that you are
understaffed and overburdened. Do you have a problem with OPM administering
this, or do you feel strongly that HCFA must administer it? Maybe you could just
answer that. I think it's a tough question, but nonetheless I want to ask it.
MS. DePARLE: I feel very strongly that this benefit needs to be
integrated into the Medicare program, and I believe that HCFA can administer it
the most efficiently and effectively, and I would like a chance to convince you
of that.
REP. BILIRAKIS: Ms. Cubin to inquire?
MS. ESHOO: Thank
you. Thank you, Mr. Chairman.
MS. CUBIN: Mr. Chairman, I yield to Dr.
Ganske.
REP. GANSKE: I thank the gentlelady. I will get to a question. I
think we need to look at will either the Republican plan or the president's plan
work; how much will it really cost? I've already expressed some reservations
about the first. I don't think we really know the second. I think we need to
think about making sure that we continue drug research.
Drug-research
companies or the drug companies have had basically a flat line in R&D. They
have increased their marketing a lot, but we've got a lot of
antibiotic-resistant bacteria out there that could cause some very, very
significant problems to everyone who flies in an airplane and is worried about
antibiotic-resistant tuberculosis, for instance. We need some real dollars going
into that, so I don't want to hurt that.
I don't think it's fair for me
to criticize plans without offering a solution, so my question at the end of
this is going to be will the administration think about this if this is the only
way that we can get something done this year, and this is what I think a partial
solution to this could be. I sat on the bipartisan Medicare Commission for a
while. In the context of comprehensive care we were looking at expanding
basically the prescription-drug benefit because there is some prescription-drug
benefit for dual eligibles, i.e., Medicare beneficiaries who are so poor they
qualify for Medicaid.
There are two groups in Medicare that have enough
assets that they aren't quite in Medicaid, but they get some assistance on their
premiums and some assistance on their co-payments and deductibles. They are
called qualified Medicare beneficiaries, QMBs and SLMBs (ph), and it is that
group, the poor widow, who is existing on her social security, who has to make
that choice between her rent, her food, and her prescription drugs, who isn't
quite so poor that she is in Medicaid, that I think we need to significantly
look at helping and sooner rather than later.
So when we looked at this
in the bipartisan Medicare Commission, we thought we can expand the Medicaid
prescription-drug benefit to those people, and the cost would be about
$61 billion over 10 years. And furthermore, to prevent a notch,
you could create a spend-down group, so that if those people, Medicare benefits,
who have some additional expenses, higher expenses, they could deduct that from
their income, and then they could get into that qualifying group. That helps the
neediest.
But we also have 40 million people in this country who have no
insurance at all, and I think we need to look at how do we cover them, and we
also have to think about the fact that in a few years we know that the Medicare
program is not going to have sufficient funds for any of the benefits that it's
offering.
So my solution would be this. Do the QMB/SLMB with a
spend-down, address the issue of cost in some way for all Americans, whether you
are looking at something like proposed modification or something proposed by Tom
Allen or Gil Gutknecht, or simply saying to the FDA and Customs, you can warn
people who order their drugs from Geneva, Switzerland, but you can't intercept
an individual's drugs. So it's buyer beware.
There are many ways that we
could look at trying to get some competition into that market for everyone, not
just looking at a senior citizen.
My question to you, Ms. DeParle, is
this. If it looks like this is just going to be a simply straight-line,
Democratic vote on a Democratic bill, the president's bill that will go down, or
a straight-line, partisan vote on a Republican bill that the president will
veto, is the administration interested at looking at any compromise type of
legislation?
MS. DePARLE: Well, Dr. Ganske, you know that your
suggestions are always thoughtful, and you know that I will listen to them. I'm
from Tennessee like Congressman Bryant. I'm an optimist here, so I think we can
work together to get something done.
I would say, I hear you on the
low-income benefit, and I'm concerned about those people, too, but when I look
at our numbers, as you have done, I see that 60, 70 percent of our beneficiaries
have less than $16,000 a year, something in that range. So
while I hear you about the very, very low income, my concern is if we have an
opportunity here to do something that assures security on prescription drugs for
all beneficiaries, I would like to do that. I don't want to give up on that.
REP. GANSKE: But we shouldn't forget --
MR. BILIRAKIS: The
gentlelady's time has expired.
REP. GANSKE: Thirty additional seconds.
MR. BILIRAKIS: Well, the gentlelady has the time, and it has long
expired.
REP. GANSKE: I'll ask next round, Mr. Chairman. Thanks.
REP. BILIRAKIS: Ms. Capps.
REP. CAPPS: Thank you, and if you
would like, Dr. Ganske, you can have 30 seconds of my time.
REP. GANSKE:
I thank the gentlelady. I think it's fair to point out that there are a
significant number of Medicare beneficiaries who do have a drug benefit. They
have it from their employers, and that helps keep their out-of-pocket expenses
down. We have a significant number of Medicare beneficiaries who have a pretty
low out-of-pocket expense. As I said, forMedPAC, 50 percent have less than a
$500 out- of-pocket expense.
So if we're looking at
trying to balance, you know, providing some health-care
assistance to those who don't even have anything, much less a prescription-drug
benefit, wouldn't it be advisable to take a little bit more global approach to
where we are heading than to try to piecemeal this and have some unintended
consequences for the later fiscal solvency of the program or, for that matter,
not being able to have sufficient funds to handle those who don't have any
insurance at all?
MS. DePARLE: Well, if I understand your question, by a
global approach you're referring to what you talked about covering the
uninsuranced, I would love to sit down with you and talk to you about that, and
I'm listening to what you have to say.
REP. GANSKE: Thank you.
REP. CAPPS: Thank you. And I'm going to be brief. I'm going to ask you
about two different things, and, Administrator DeParle, I thank you for
enlightening us and for being willing to go through this conversation. It's very
helpful to me.
I'm sitting here as we've been discussing this, thinking
about me, all of us on this subcommittee, being a part of arguably one of the
best benefit packages of any employee of the federal government, and there is a
lot of comparison between the federal government benefit plan and Medicare.
And maybe you could articulate, and I know it's repetitive a little bit,
so that we're clear, we're a very different kind of pool across this country of
employees, working people, hopefully fairly healthy, compared with the
population that Medicare serves. And this issue of the importance that some
would say to giving seniors choices of their plan, I would like you to contrast
that with what I hear frequently, seniors saying, I need to take this particular
heart medicine to keep me alive, and my HMO won't cover it.
MS. DePARLE:
Well, you've raised some issues that we have been grappling with this morning.
On the differences between Medicare and the FEHBP program, I think you're
exactly right. In speaking with the people who run FEHBP at OPM, they say the
populations are very different, that the insurance companies who come in to
participate in the FEHBP program say the populations are different, and that the
risks that you are assuming is quite different among the two populations.
Medicare beneficiaries tend to be poorer, sicker. They are not active employees.
There are a lot of factors that lead to higher expenditures.
REP. CAPPS:
Now, could I raise one caution also about, as we are entertaining these various
plans? I represent a rural district about a hundred miles north of Los Angeles
where there is a great reimbursement rate from HCFA. Ours is about half of that.
Our cost of living is about half of that in Los Angeles. This disparity that
impacts service, whether through hospitals or providers, is so pervasive. There
are no HMOs in a large part of my congressional district. Seniors have no choice
there.
And any kind of plan that's going to come in in discussion in my
district is going to meet a jaundiced ear, both about HMOs and people's
disenchantment with that form of service for medicine and also with the
comparing of that with delivery of a vital part of seniors'
health care, which is prescription drugs. That's an enormous
hurdle I believe that we have to get through in this discussion.
MS.
DePARLE: I agree that it's a hurdle, and as you know, the amount that we pay the
managed-care plans is based on historical costs under Medicare for fee for
service. One of our doctors left, but Dr. Ganske is still here, who can talk
about why is it that it's so different in different areas of the country. But
that's what's payments rates are based on. And let me say, too, that we are not
reimbursing managed-care plans right now to provide prescription drugs, --
REP. CAPPS: I know.
MS. DePARLE: (In progress) -- which they
tell us they need to offer to seniors in order to get them to join.
So
one of the things we need to do is to reimburse HMOs to provide prescription
drugs, and that's one of the things we want to do.
REP. CAPPS: I turn
back the rest of my time. Thank you.
REP. COBURN (presiding): Thank you.
I'm sitting for Chairman Bilirakis, and I believe I'm the next in order, so I'll
recognize myself for five minutes. I believe that's accurate.
I wanted
to ask you the most important question today, is, how is your baby?
MS.
DePARLE: He's great.
REP. COBURN: Great.
MS. DePARLE: Thank you
for asking.
REP. COBURN: You know, I made some statements, some
sentences and statements, in my opening statement about the best way to allocate
a scarce resource is vigorous competition. And I don't know if you're familiar
with some of the FTC actions of late against several drug companies and four
others that are pending on inclusion that have cost American citizens a ton of
money, several hundred million dollars in the last year. And I just wondered if
you had a comment about that, because no matter what we do, and I'm sure we're
going to do something despite my "no" vote, whatever we do is going to cost more
if we're not sure that there is competition there, and I just wondered what your
thought was about that.
MS. DePARLE: Well, I think you're right. There
does need to be competition. The way we go about it -- there are different ways
of doing it -- the way we go about it is have pharmacy-benefit managers to
negotiate to get the best prices, but it is a very difficult problem, and I am
somewhat familiar with, just from what I read in the newspapers, with what's
going on over at the FTC, and it's a difficult problem to get your arms around.
REP. COBURN: Does it surprise you that retail pharmaceutical prices, not
including new drugs, rose eight percent last year, when the cost increases were
about two percent?
MS. DePARLE: No, and I've talked to a lot of
employers and managed-care-plan executives who tell me their costs, their
spending, is going up 17 and 18 percent.
REP. COBURN: Does the
administration have a position as to allowing the decision made in 1997 for
direct-television advertising for prescription drugs?
MS. DePARLE: I
don't know, Mr. Chairman. I'm aware of the decision, but I don't know about any
position that we have on that.
REP. COBURN: Just for the record, there
was $1.9 billion this last year, and that goes straight to the
bottom. And I think Dr. Ganske made note of the fact that expenditures on
R&D -- I think he was in error -- the expenditures in R&D in the
pharmaceutical industry are rising. They are not flat lined, but the
expenditures for advertising and promotion direct to the consumer have gone up
significantly.
Have you calculated from inside HCFA the increased
utilization rate of Medicare based on television advertising in the
pharmaceuticals?
MS. DePARLE: You know, we haven't, but our actuaries
have been looking at the kind of data that you and Dr. Ganske have been
discussing and assessing what the cost of this would be, and I know CBO has been
looking at it as well. I don't think we've looked at whether it's increased any
mode-care utilization.
I guess you would be suggesting physician visits
and things like that.
REP. COBURN: I'm suggesting that because of
promotional advertising, demand pull-through advertising by the drug companies,
what we're seeing is increased -- I'm seeing it in my practice. More people are
coming in because the drug company told them they had to because they couldn't
get well without this wonderful drug. I would like unanimous consent to
introduce into the record the FTC cite listing the consent decrees with those
two large pharmaceutical companies and make that a part of the record.
MR. : No objection.
REP. COBURN: No objection. There was some
discussion made about the efficiency of HCFA in terms of its cost. I think it's
important for the record for people to know that one of the reasons HCFA is
efficient is the vast majority of the work has been transferred to the provider
in terms of the paper work and the clearance and everything else, and so it's
important, although the same amount of work is being done, a large amount of
that work now is done in the providers' hospitals and physicians' offices across
the country. And it is true. I believe you are very efficient for what you are
asked to do. I don't like the system very well, but I think you do a great job.
If we were to start all over, and this is the last question, and you
could tell us, how can we go take care of those people who really are making a
choice between necessities of life and their medicine in this now- politicized,
kind of who is-going-to-win-the-next-election environment, would you have any
advice for us to solve this problem to really meet the needs of people without
ruining the drug industry, without ruining pharmacy-benefit providers? Because I
see the same thing happening on pharmacy-benefit providers that have the
clinical labs.
That's what's going to happen. We're going to have three
or four major pharmacy-benefit providers, and that's it. And so I just wondered,
is there any advice that you could give us if we were to start over on this,
that would take it out of the political to where we really went to solve the
problems?
MS. DePARLE: You always ask the easy questions. You know,
Medicare is going to be 35 years' old next month, so I actually just was
watching recently the video of the signing of Medicare and the speeches that
were given, and there is no question that there have been difficulties and
challenges that Medicare has faced and continues to face, but I think it was a
great thing to do.
I think if you were looking at it today, you would
put prescription-drug coverage into Medicare, and I think we should figure out a
way to do it, and I do believe it should be something that is universal and
voluntary. It's going to be very tough, and I already heard you say that you
think the problem is so tough and the challenges that Medicare faces are so
great already, that you would not go there. But I hope that we can have some
conversations, and I can convince you that for our generation and the generation
to follow that it is the right thing to do, because I believe it is.
REP. COBURN: Thank you. I just wanted to make one comment before I
recognize Mr. Greenwood -- is Mr. Deutsch next? -- is that we are adding a cost
to a program that is technically bankrupt from an actuarial standpoint, and it's
important that the American people know that. They may want us to do that, but
there is no actuarial that would go out there and say you should add another
cost to this program based on what the numbers look like today. Mr. Deutsch, I
yield.
REP. DEUTSCH: Thank you, Mr. Chairman. I want to give you a
chance, at least, to respond because I think to leave a statement like that open
ended would be a mistake, that the system is not bankrupt. That is an actuarial
system that in the eight years that I've been in Congress we've made changes
which have increased the actuarial stability of the Medicare system, and a lot
of the actuarial problems are high-class problems, high-class problems, in that
part of the average life expectancy of Americans has gone up dramatically, and
one of the incredible statistics, in 1965, when Medicare was created, the
average life expectancy of Americans was, in fact, 65, and now we're talking
about over 75.
So as a person who administers Medicare, I want to give
you the opportunity to respond a little bit to the chairman's comments about the
system being bankrupt.
MS. DePARLE: Well, and you also highlighted the
reasons why I say Medicare was a great thing and why -- I can remember what it
was like when my grandmother didn't have Medicare coverage and then when it came
into effect, and I know what a difference it's made in the lives of not just
senior citizens, but, frankly, our generation, that we haven't had to worry as
much about providing for them and that we have been able, therefore, to
concentrate on our educations and other things. So I do think it's been a great
thing.
I think what the chairman is talking about is the fact that while
we have made some very tough decisions together up here which have been
extremely difficult for all of you and things that providers in your districts
have been very unhappy about, that has extended the life of the trust fund
through 2025. I think that was the right thing to do. I also think it was a
very, very difficult to do, and, frankly, I think it's one of the reasons why
HCFA isn't the most popular agency in town these days.
He is right,
though, that we face a huge demographic challenge, as all of us in the next 20
years come into Medicare.
REP. DEUTSCH: Can I, again, just interject and
highlight something you just said? There's two separate issues. You just talked
-- Medicare is an insurance plan where there is an obligation for it to be
actuarially sound. So what you've just stated, I think, is saying something
people need to hear.
Until the Year 2025, under the present projections,
we are actuarially okay out to 2025, which is 25 years from now -- not to say
that we shouldn't do something about that actuarial basis today, but I think it
really is somewhat disingenuous to say the system is bankrupt today. It's not
bankrupt today. There is the baby-boom issue, the demographic issue, that we are
going to have to deal with.
But a reason not to do a complete Medicare
prescription-drug plan under the premise that the system is bankrupt is just not
-- it's not credible. The system is fundamentally sound until 2025. I wish we
did it this year. Hopefully, we'll do it this year. I doubt we're going to do it
this year. We can do it next year, in terms of dealing with the baby-boom issue,
which we can do. But that is not a reason not to do prescription drugs under a
universal Medicare program today, which is really the essence of the follow-up
question, which is something also that you've talked about.
And I
mentioned in my opening statement as well, the fundamental difference between
what the Republicans are proposing and what we are proposing is really that
issue. I think what we are saying and what the president is saying that we ought
to suspend Medicare to include prescription drugs, and what they are saying is,
hey, you can't do that. You ought to do it maybe just for people 135 percent to
poverty or at poverty or a limitation.
And I think if you can elaborate
a little bit more about that fundamental difference and what type of impact that
would have on Medicare in general or, for that matter, I think, the whole, the
stability since Medicare has existed. I strongly believe that one of the
successes of Medicare is that it has been a universal system, that if it was
funded at 135 percent of poverty when it was created, it probably wouldn't exist
today because the political will to push the testimony, to make the hard choices
that you talked about, to change the actuarial dates that we've done in the last
eight years, I don't think you would have had the political will to do that if
it was a system that only provided for coverage 135 percent of poverty.
MS. DePARLE: I agree with you, Congressman. I think that one of the
great strengths of Medicare is that it has been a program that is available for
everyone. Everyone pays into it. Everyone participates in it, and I think that's
been one of its strengths. And as I said, I believe there's a way to provide the
prescription-drug benefit for all beneficiaries, and I think that's the right
way to do it.
REP. DEUTSCH: And I guess, just because I think it really
is the essence of the difference, if we're talking about the Republican
proposal, even if it's 135 percent of poverty, we're really talking about
prescription drugs from a welfare context.
And I think just as a
Congress, which collectively and with the president we've eliminated welfare as
we know it, which was a positive thing, that's really what they are proposing
effectively. And I just see -- we've just gone through the process of
eliminating welfare as we know it, to come back and sort of create welfare for
Medicare beneficiaries is almost --
REP. COBURN: The gentleman's time
has expired. The gentleman from Pennsylvania.
REP. GREENWOOD: Good
afternoon. You indicated earlier that you are optimistic that we can get this
job done, and I am optimistic, too, and I think there are reasons for us to be
optimistic. The president clearly wants to do this. I think he wants this to be
part of his legacy, that he leaves office having accomplished a Medicare
prescription-drug benefit.
Clearly, Republicans in the House and the
Senate want to get this done. The Democrats in the House and the Senate want to
get this done. We all want to do it this year, and whether it's the third of the
Medicare beneficiaries that have no coverage, they certainly want us to do it,
and whether it's the half that maybe have either no or inadequate coverage, they
certainly want to do it. So there is a huge national consensus, I think, to get
this thing done.
The only thing that would make me pessimistic is the
extent to which partisanship creeps in, because obviously you have a Republican
Congress and a Democratic president, and if everyone gets partisan about it, the
job not will get done. The president is not going to sign a bill he doesn't
like, and we're not going to send him a bill that we don't like, so it has to be
bipartisan.
It seems to me that there's two ways that partisanship
creeps into this debate. The first one is, and we've heard it here in the course
of this hearing already today, the first is the what-took-you- so-long argument
or what's taking you so long. You don't have a bill yet. Get on the mark and get
this done.
The reality is, and I don't want sound partisan in this, but
the fact of the matter is that the democrats controlled the Congress for 40
years since the birth of Medicare and didn't come up with a prescription-drug
benefit. The president has been in office for seven and a half years, and it
took him that long to get one on the table, and it's taking us a little while,
too, because it's hard.
But the fact is that the reason it wasn't done
sooner is because we were in deficit spending for most of that time, and now
because of a lot of things that have gone on in this town in the last several
years, we have a balanced budget, we have a surplus, we have taken social
security off the budget, and now we have the ability fiscally to do this, and I
think that we can do it.
The other way that partisanship creeps in is we
accentuate the differences between the bills. We spend all of our time saying,
well, the president's bill does this, and yours doesn't, or ours does this, and
the president's doesn't, and that's what the people hate about what happens in
this town because we accentuate our differences instead of looking at how we can
find commonalties. But there are more commonalities, it seems to me, than there
are differences if you look at the two plans.
The fact is that both
plans are based on the reality that we have finite resources. We would all love
to just say everybody go get free drugs, and Uncle Sam will pay for it, whatever
it is for, however much money you have, but we don't have the resources to do
that. We have limited resources, and that's why both of us are looking at
premiums, both of us are looking at co-pays, both are looking at deductibles,
both are looking at the some kind of limitation or a cap on the benefit. And
that's because reality dictates that both the president and the Republicans, a
bipartisan bill actually that we will be introducing later this week, both want
to make sure that we don't disincentivize or create disincentives to the private
sector continuing to produce the benefit. You're for that; we're for that.
That's good.
Neither of us wants adverse selection. We have to have a
process that makes sure we don't have that problem. Both of us see the value of
the private sector being involved, whether it's PBMs or whether it's insurers or
both. The private sector has to be involved, it seems to me, because the pace of
change in the prescription-drug world is so fast that it would be impossible for
a bureaucracy to keep adding this drug to the benefit and that drug to the
benefit. You have to have the private sector out there being able to move at a
much quicker pace so that the seniors can benefit from these changes.
Both of us see the need for a stop loss. You have indicated today
repeatedly that that's something that's not in the president's plan, but you see
the value of it. It's in our plan, and we need to get there. Both of us agree
that it needs to be voluntary.
So my question is, if you were to sit
down with Republican leaders who have been most familiar with this issue
tomorrow, and you said, let's get this compromise done, let's get a hybrid bill
here between what the president has put on the table and what Republicans and
some Democrats who have joined with us have put on the table, what would be the
areas, maybe two, three, four areas, where you think we would have to work the
hardest? Where are the differences that we need to compromise in order to get to
plan that we can all happily feel good about?
MS. DePARLE: Well, I would
start with whether or not there is a defined benefit package, and we've had a
lot of discussion about that today, and I think that's very important.
REP. GREENWOOD: And I would say I think that's very malleable to that
kind of work. I think we're pretty much on the same page there, that we want
medically necessary drugs to be available.
MS. DePARLE: And then I would
also want to look at whether the plan, as I've heard it described, that
Congressman Burr and others are working on, right now, I still think relies, too
heavily on private insurance plans. I believe this needs to be a guaranteed
benefit, an entitlement. There's lots of views about that up here, too, but
that's what I believe.
So I would be looking to see is this thing really
affordable, is it really accessible, and the question I have there, and,
frankly, I think it's partly -- it may be malleable, but it's partly governed by
what's in the budgeted resolution. I'm not sure that the subsidy and the way
it's provided, the indirect subsidy, is enough to provide a benefit package
that's attractive enough to attract most beneficiaries and, therefore, guarantee
access and affordability. So I would want to spend a lot of time working with
you on those issues.
REP. GREENWOOD: Thank you, Mr. Chairman.
REP. COBURN: Mr. Barrett?
REP. BARRETT: Thank you, Mr. Chairman.
I want to talk about the merits of the plan that's being proposed, but first I
have to just address for a moment the comments of the previous speaker, who I
think implied that somehow the Democrats, because we controlled the Congress for
40 years, didn't address this problem.
As you said in your statement,
this was not an issue when Medicare was created. It was not an issue in 1965.
And the reason it's become an issue in the last five years is because the price
of prescription drugs has gone totally through the ceiling, and that's why
people are mad about it, and that's why it's been an issue for the last three or
four years, and why we have had Democrats in Congress who have tried desperately
to try to move this issue as a national issue.
I thought perhaps one of
the most telling indicators was just the vote we had yesterday, the vote that
was the tripartisan amendment, with Bertie Sanders and Republicans and
Democrats, that called for some cooperation with pharmaceutical companies, if
they have benefited a greatly from NIH grants. And when we had a vote on that
four years ago it garnered 180 votes. When we had the vote on it yesterday there
were over 300 votes in favor of the same amendment.
You don't need a
weather man to tell which way the wind is blowing, and it's clear that the
American people are sending a message through their elected representatives that
this is a problem now, and it's a much more serious problem now than it was even
four year ago.
REP. GANSKE: Would the gentleman yield?
REP.
BARRETT: I would be happy to yield briefly.
REP. GANSKE: I agree with
the gentleman that because the price, the cost, of drugs has gone up a lot and
the volume, the usage, has gone up a lot, that it's on the radar screen, but I
think it's also fair to say that, you know, if you look at the record, 1965,
pharmaceutical benefit was discussed, and it's been discussed many times over
the last 30 years. The predominant problem as has always been, as Chairman
Rostenkowski has said, where is the money coming from for that.
REP.
BARRETT: Well, I agree, and I reclaim my time. I want to get to that point now.
In terms of the plan that's being proposed, and specifically, as I understand
the plan, and we haven't seen the plan, is that this would rely primarily on
private insurance companies.
My question for you is, is there a market
out there right now, is there a number of private insurance companies that are
offering prescription-drug-only plans? Are companies interested in doing that?
Where is this supply going to come from?
MS. DePARLE: Well, the closest,
I guess, experience that we have is with Medigap. There are some Medigap plans
that are primarily there because they offer prescription- drug benefits. And the
experience there hasn't been great, partly because I think the benefit design
isn't rich enough to attract a lot of seniors to join it, and, therefore, the
premiums are very high, and you don't get much for what you pay.
So I do
think, as I've said several times today, that there are some real difficulties
inherent in trying to do a plan that relies so heavily on private insurance
plans. Now, should there be Medicare HMOs offering a prescription- drug benefit?
Yes, and we intend under our plan to reimburse them for doing it, but a
drug-only plan, I think the industry suggested, isn't an attractive risk for
them to assume.
REP. BARRETTE: In your plan one of the problems that
some of us have is the Medicare reimbursement rate, and there are wide,
geographic disparities in this. How do you address that?
MS. DePARLE: Do
you mean the Medicare-plus-choice plan?
REP. BARRETTE: My good friend
from Florida, Mr. Deutsch, who just left, represents what those of us in other
parts of the country call the poster child of Medicare reimbursement rates,
where the Medicare reimbursement rates are much higher than they are in Florida
than they are in Minnesota or Wisconsin.
REP. COBURN: Not in all of
Florida, by the way, Tom, only South Florida.
MS. DePARLE: That's true.
It's not in Mr. Bilirakis' area. There is only -- you know, I guess I was
talking about Medicare turning 35 next month, and it's appropriate, therefore,
to look at the history. The history of this is that the from the beginning
Medicare reimbursement rates were supposed to be tied to what physicians were
charging or hospitals were charging in a particular area. That's a heavy part of
it. And, therefore, the volume and intensity of what's provided by doctors and
hospitals is reflected in the cost, and that is what Medicare HMO payments under
the statute are tied to, is to those payments. So that's why you have such
dramatically differences around the country in what the capitation payments are.
REP. BARRETT: And I do think that at some point if the parties are
interested in working something out, that there will be some sort of compromise,
but I think that what we're seeing is in some parts of the country you can have
a generous prescription-drug benefit, and in others you can't.
MS.
DePARLE: Right, and that's what I don't think is fair. I think this is a
national program, and all beneficiaries should have access to an affordable drug
benefit.
REP. BARRETT: Thank you. I would yield back.
MR.
BILIRAKIS (presiding): Thank you, Tom. Well, Madam, Administrator, thanks so
very much for your patience and for being here. You've been very helpful. I
don't know what the future holds, but obviously -- I honestly feel that we all
want a prescription-drug plan, and hopefully if we all work together and put the
partisanship aside, we'll get it done. But we always say that, and then it never
really happens, does it? We'll do our best. Thank you very much.
MS.
DePARLE: Well, I'm optimistic, and I want to thank the committee for your
serious commitment to helping beneficiaries.
MR. BILIRAKIS: Thank you.
The second panel that will come forward, please, consists of Ms. Karen Ignagni,
president and chief executive officer of the American Association of
Health Plans; Mr. Craig Fuller, president and chief executive
officer of the National Association of Chain Drug Stores; Mr. Charles N. Kahn,
president of the Health Insurance Association of America; Ms.
Judy Feder, dean of public policy studies, Georgetown University; Mr. Patrick B.
Donoho, vice president of government affairs and public policy with the
Pharmaceutical Care Management Association; Mr. Ron Pollack, executive director
of Families USA; and Ms. Nancy Davenport, founding executive director, Patient
Advocate Foundation of Newport News, Virginia.
Ladies and gentlemen,
your written statement as per usual, is a part of the record, and we'll set the
clock at five minutes, and ask you to sort of supplement, if you will,
supplement your written statement. We'll start off with Ms. Ignagni.
MS.
IGNAGNI: Thank you, Mr. Chairman and members of the committee. I would like to
make four points in speaking with you this afternoon.
First, our members
support creating a drug benefit for Medicare beneficiaries. It's a long-overdue
matter that this Congress can and should confront, in our view. Making
prescription-drug coverage available is an essential part of the effort to bring
the 1965 program in synch with the benefits programs of today.
In fact,
a linchpin of effective disease-management strategies is actually the presence
of prescription drugs, and many physicians report around the country that they
have barriers to prescribing the right and most appropriate procedures for
beneficiaries because of the absence of prescription drugs in this population.
Number two: In our view, an essential part of ensuring that seniors have
access to affordable prescription will be to build on what works. To that end,
we have been encouraged, both this morning and in the Ways and Means Committee
discussions yesterday, and, indeed, in the public dialogue, that choice is a key
principle within so many proposals.
And, second, there is a growing
recognition about the need to preserve what exists as a building block for
taking the next step.
Number three: Medicare-plus-choice providing drug
coverage to millions of beneficiaries who otherwise wouldn't have access.
However, in little over three weeks our plans face a deadline to let HCFA know
whether they are going to be able to continue to participate in the
Medicare-plus- choice program. We have seen pullouts. We have seen plans being
forced out because of the unintended consequences of the Balanced Budget Act,
which this committee has spent a great deal of time on, as well as the sheer
number of regulations and instability and unpredictability.
REP.
BILIRAKIS: Ms. Ignagni?
MS. IGNAGNI: Thank you, Mr. Chairman and members
of the committee. I'd like to make four points in speaking with you this
afternoon.
First, our member support creating a direct benefit for
Medicare beneficiaries, it's a long overdue matter, that this Congress can and
should confront, in our view. Making prescription drug coverage available is an
essential part of the effort to bring the 1965 program in synch with the
benefit's programs of today. In fact, the lynchpin of effective disease
management strategies is actually the presence of prescription drugs and many
physicians report around the country that they have barriers to prescribing the
right and most appropriate procedures for beneficiaries, because of the absence
of prescription drugs in this population.
Number two, in our view, an
essential part of ensuring that seniors have access to affordable prescription
will be to build on what works.
To that end, we have been encouraged,
both this morning and the Ways and Means Committee discussions yesterday and,
indeed, in the public dialogue that choice is a key principle within so many
proposals. And second, there's a growing recognition about the need to preserve
what exists, as a building block for taking the next step.
Number three,
Medicare Plus Choice is already providing drug coverage to millions of
beneficiaries, who otherwise wouldn't have access. However, in little over three
weeks, our plans face a deadline to HCFA know whether they are going to be able
to continue to participate in the Medicare Plus Choice program. We've seen
pullouts. We've seen plans being forced out, because of the unattended
consequences of the Balanced Budget Act, which this committee has spent a great
deal of time on, as well as the sheer number of regulations and instability and
unpredictability within the regulatory environment. Now, to her credit, the
administrator DeParle has recognized many of these problems, as well, and has
already embarked on a strategy designed to deal with some of the
unpredictability, but more needs to be done.
You have it in your power
to stabilize this program and we urge you to act now to preserve the program
that has, in fact, served so many low and moderate income beneficiaries, who
have nowhere else to turn for protection from high, out-of-pocket costs and the
traditional Medicare benefit, catastrophic benefits and prescription drugs.
Also, I'd like to comment, Mr. Chairman, there's been some discussion this
morning about rural areas and whether managed care is interested in being in
rural areas, and I would suggest to the committee and happy to talk about it,
that planned decisions are very much influenced by the willingness of single
hospital-based systems in rural area to, in fact, contract with our plans.
Finally, number four, in testimony, we've offered principles for your
consideration in designing prescription drug coverage. These principles are
embedded in many of the proposals being discussed today, beginning with the
concept of universality, which is that all benefits -- beneficiaries should be
eligible to participate in this benefit. We believe that that's common to both
proposals, as we've heard them discussed. Subsidies for low-income
beneficiaries, that seems to be common to both proposals. Sustained funding is a
challenge for all proposals in this area, as it would be for any new benefit.
And options and flexibility, you're having a great deal of discussion about
that. We commend you for that. And, finally, a floor package of benefits, which
we understand the concept of a floor is common to both.
In conclusion,
Mr. Chairman, we stand ready to work with you, to contribute to the committee's
efforts, and we support the objective, which we know all of you share, of
providing this important benefit and this important population with affordable
prescription drug coverage.
Thank you.
REP. BILIRAKIS: Thank
you, Karen. Mr. Fuller, nice to see you, sir.
MR. FULLER: Thank you, Mr.
Chairman and members of the committee. It's a pleasure to be here. I've
submitted a statement that you have for the record. It may be during the
questioning we can address some of the issues there. I thought that I might
reflect a little bit on some of the comments that were made by the members in
their opening statements, as well as some of the questions, because there is
much that we agree with and many very fine questions raised.
I represent
150 chain pharmacy companies, 32,000 pharmacies, and for many of the seniors
that are without drug coverage today, I sense something of a train wreck coming.
I fear that with thoughtful deliberation, which you're having today and in other
places of the Congress -- most of us spent eight hours yesterday at Ways and
Means. We're prepared to -- and happily, we'd spend eight hours with you today
to advance this, some of us would.
(Laughter.)
REP. BILIRAKIS:
Because it's -- and it's serious issue. But at the end of the day, if nothing
passes this Congress, for hundreds of thousands of Americans, who will go into
those 32,000 pharmacies today, they're going to continue for years to face the
same problem.
We worried about this some months ago. And as a result,
we, at the National Association of Chain Drug Stores, considered an approach
slightly different than what's been talked about during much of the day, but it
relates to some of the issues that have been raised, because if you take the 39
million people on Medicare and you take out the 70 percent that have some
prescription drug coverage now, and you look, then, as we have done, at the
individuals that are 200 percent of the poverty line and below, you could
provide coverage for them through the states, with a grant of
$30 billion at the federal level, supplemented by the states,
or you could put 41 billion (dollars) out there to the states and cover it all.
You might have a co-payment at the state level. You wouldn't have a cap.
You wouldn't have a premium. You could make it -- put it into effect fairly
quickly, because somewhere, Chip and I are close, we say 15, he says 19, we're
approaching 20 states that already are, and you can do it this year, and you can
provide them with the coverage fairly quickly. So that with all the fine
deliberation that's going on, you would give yourselves next year, with the
Congress and a new administration, the chance to really tackle major Medicare
reform, which we are all for, and I think we all believe should have --
REP. BILIRAKIS: So, you would do that outside of the scope of Medicare?
MR. FULLER: Pardon me?
REP. BILIRAKIS: The suggestion would be
outside of the scope of Medicare?
MR. FULLER: It would be provided by
the states, outside of HCFA and -- yes -- yes, sir. And, in fact, it would be
similar to a state- based approach, Chairman, that you have offered as H.R.
2925.
REP. BILIRAKIS: That's just coincidental.
MR. FULLER: It
is coincidental. But, we find much to recommend it.
My statement says
and we really have applied three tests to our plan and to others. We said, look,
first of all, there needs to be a sense of urgency about this. I've addressed
that. It needs to be enacted this year.
Secondly, it needs to recognize
and it ought to enhance patient care and patient outcomes. After all, at the end
of the day, what we want to make sure of is that seniors are getting the kind of
care they need. You raised, Mr. Chairman, in your opening remarks, comments
about the role of pharmacy. I have great respect for insurance companies. I have
great respect for pharmacy benefit managers. But, frankly, it's pharmacists that
manage health care for patients, working with their doctors.
And if we turn the program over -- or hope to turn some of these programs over
to institutions that don't recognize the role of the pharmacist -- I'm not
suggest that insurance companies don't recognize it -- but if we don't recognize
the role of pharmacists clearly, the kind of program that Mr. Stupak, where a
patient buys a prescription for $100, whether he agrees or
disagrees with the price, for a drug that has to be used properly or it isn't
worth anything, we're going to see a further erosion of the quality of patient
care. So part of our plan and part of our senior Rx goal plan would specify the
kind of pharmacy services that should be covered.
And, finally, and I'll
close with this, the third question is a fair return of community pharmacy. Now,
10 years ago, 75 percent of people purchased their prescriptions at retail.
Utilization has increased. The quality of pharmaceutical medication has
dramatically increased. They are of tremendous benefits to people. Certainly,
the cost has increased, but so has the whole process by which -- the processes
evolved, by which we pay for this medication.
Today, most of the chains
that I represent, 90 percent of the prescriptions are paid for by a third party
client, usually involving a PBM, which has driven down the price. A CBO study,
which I can provide you with, shows most of the costs are driven out by
attacking costs at the pharmacy level. But, pharmacy, the margin is about 2
percent or less. They are not going to find much more savings there. And you
are, in fact, making it more and more difficult for community pharmacy to
provide the kind of services they should be able to provide. Perhaps I can
discuss that more in some of the questions.
Thank you.
REP.
BILIRAKIS: Thank you, Mr. Fuller. Mr. Kahn?
MR. KAHN: Thank you, Mr.
Chairman. As you know, Mr. Chairman, over a decade ago, I worked long and hard
on the last attempt by the Congress to develop a drug benefit for seniors in
Medicare catastrophic. Later, I staffed the members, who led the effort to
repeal that law, also. So, I have a deep and personal understanding of how truly
difficult it is to develop a federal policy to assist seniors in purchasing
drugs.
If nothing else, as has been pointed out today, I think it is
critically important that seniors have full confidence from the get go, in
whatever policy you develop, and that they understand there will be cost
sharing, that cost sharing is found to be acceptable to them before you enact
anything. This and other lessons of that Medicare catastrophic debate are
important to draw upon, as the committee examines this complex issue.
I,
also, assisted in the development of Medicare Plus Choice and share the
subcommittee's concerns about the future of that program. I believe that the
future of market oriented approaches to preserving Medicare depends on keeping
Medicare Plus Choice viable.
Mr. Chairman, I believe there is a
consensus today that seniors need help with prescription drugs. Advances in drug
therapies have vastly improved medical care, as well as the very
health of millions of Americans. However, at the same time,
these advances come at a tremendous cost. A study done for HIAA and the Blue
Cross Blue Shield Association by the University of Maryland projects that the
nation spending for prescription drugs will increase by 15 to 18 percent
annually over the next five years; I repeat, over the next five years. This
reflects more than a doubling of annual drug costs to 212 billion (dollars) by
2004. These growing drug costs are clearly putting a squeeze on the nation's
seniors.
Mr. Chairman, we all agree on the goal of helping seniors with
drugs. But, as you and the subcommittee consider solutions, I urge you to weigh
carefully the consequences of the policy alternatives.
The lessons of
unintended consequences were learned well in 1988 and 1989. I will be happy to
comment specifically on the new bipartisan drug coverage plan when the
legislative details are available.
I can say, however, from my
understanding of the proposal, it appears to provide a realistic approach to
assuring seniors that coverage for drugs will be available to them, since it has
a fall back. However, HIAA continues to maintain its strong conviction that the
much discussed private drug only insurance option is unworkable and will not
fulfill the expectations of seniors. In my written testimony, I provided a
detailed critique, which elaborates on our company -- our member company's
concerns. Additionally, as you consider options, because of the expensive nature
of drug coverage, we are equally concerned that simply mandating that Medicare
HMOs or Medigap plans cover our patient prescription drugs will not serve
beneficiaries well.
Next, the bipartisan proposal recognizes that
Medicare Plus Choice plans are severely underpaid and action is necessary now to
save this important option that so many seniors depend on. Most Medicare HMO
plans now offer prescription drug coverage. However, sustaining this benefit
will be difficult, since payment inequities and regulatory burdens are major
hurdles. Medicare Plus Choice cannot continue to offer even the basic Medicare
benefits, if the status quo remains. Therefore, for a senior's drug program to
be successful, Medicare must make a firm commitment to provide payments to
Medicare HMOs that keep pace with escalating medical costs, including those for
pharmaceuticals.
Finally, the proposal for a new Medicare board to
replace HCFA has great potential. Our experience indicates that HCFA has had
great difficulties implementing the Medicare Plus Choice program and a fresh
start is needed. Last week, HIAA released a white paper by Bruce Freed (sp), the
former director of HCFA's HMO office. The paper well documents the problems that
have been -- that have caused many HMOs to throw up their hands and either exit
all or part of the Medicare program. I urge you to review the Freed (sp) report
and consider his recommendations.
In conclusion, I would like to
reiterate the point that if the Congress and administration do not address the
pressing problems facing Medicare HMOs, it will be difficult, if not impossible,
to succeed at developing true market-oriented approaches to reforming Medicare.
Thank you, very much, Mr. Chairman. I'd be happy to answer any questions
that the subcommittee may have.
REP. BILIRAKIS: Thank you, Chip. Ms. --
Dr. Feder, we've had the pleasure of having you here before us before and it's
good to see you again. Please proceed.
MS. FEDER: Thank you, Mr.
Chairman. Mr. Chairman, Congressman Brown, members of the committee, it's a
pleasure to be with you this afternoon, to discuss the design of a Medicare
prescription drug benefit.
In brief, it is my view, first, that a
meaningful benefit is sorely needed. Prescription drugs have become a
fundamental part of medical treatment. It is a travesty that prescription drug
coverage has become a standard part of insurance coverage for the working age
population and is still not provided to the population over age 65, who most
needs the protection.
Second, it is my view that the way to provide the
benefit is to build on the success of the Medicare program, not to pretend that
a means tested voucher or reliance on a private insurance market can be any
substitute for the financial access and financial protection that is achieved by
a universal public program.
Let me elaborate. First, very briefly on the
need, despite the widely recognized importance of drug protection, the sources
of that protection are deteriorating, not improving. In recent years, we have
seen a dramatic decline in the number of employers, who are providing
prescription drug coverage for their employees; Medicare Plus Choice plans have
restricted the benefits they are providing; and Medigap plans have to charge so
much for their limited coverage, that it's hard anymore even to call that
insurance. In short, the sources of protection are indeed drying up.
Happily, we see less debate today than even a year ago that the limited
availability of affordable coverage is a significant problem; but, as shown this
morning, we still see significant debate about how to address that problem. Some
argue that public support is needed only by the low income population. That
argument ignores lots of evidence and lots of experience. First, it ignores that
the problem of affordability does not stop at incomes of 133 or 150 percent of
poverty. An individual with 15 (thousand dollars), 16 (thousand dollars), or
$17,000 is no better able to afford insurance coverage than an
individual at 12 (thousand dollars) or $13,000. And for people
with these incomes, even relatively modest expenses on drugs can be
catastrophic.
Second, it ignores that means tested programs, in the
words of Congressman Waxman, tend to be mean programs. They tend to pose
barriers to participation, rather than promoting ready access. They are likely
to offer lower quality care. Think for a minute whether members of Congress
would like to be in the lowest cost plan. And, as compared with programs that
bring together all -- people of all income, as Medicare does, they are likely to
be vulnerable to inadequate political and financial support.
Some, also,
argue that the appropriate vehicle for coverage is a private insurance market,
again ignoring lots of evidence and experience. The Medigap and the Medicare
Plus Choice markets show us that competition does not provide beneficiaries
service and efficiency they can count on. On the contrary, competition creates
tremendous uncertainty as to what plan or what benefits will be available to
beneficiaries at any given time. And competition tends to divide the healthy
from the sick and the modest income from the better off, as plans compete to get
good risks and avoid those in need of service. It is disconcerting, at best,
that even when insurers, themselves, acknowledge that they are not the ones to
count on for stable, affordable coverage, that some, nevertheless, continue to
insist that they can do the job.
Today's arguments about means testing
and private insurance and even about the destruction of industry of the private
sector are remarkably similar to the arguments that were made prior to enactment
of Medicare in 1965. We rejected those arguments as a nation in 1965; it's time
to reject them again.
Contrary to what some would have us believe,
Medicare is an enormously successful program. It is time to incorporate the
prescription drug coverage that ought to be there within it, according to
Medicare's principles. In brief, the drug benefit must be designed to provide,
not just claim, that it is a universal entitlement for all Medicare
beneficiaries. That --
REP. BILIRAKIS: Please summarize, if you would,
Doctor.
MS. FEDER: Absolutely. It must be affordable for all
beneficiaries, which means subsidies must go across the income spectrum, so that
we have universal participation to match universal entitlement and the benefit
must be defined, specific, and uniformed for everyone, because we cannot have an
entitlement unless beneficiaries know what they are entitled to. In sum, the
evidence and experience makes clear that the right thing to do is to incorporate
a prescription drug coverage into Medicare, not to invent or create an
alternative that is doomed to failure.
Thank you, Mr. Chairman.
REP. BILIRAKIS: Thank you. Mr. Donoho?
MR. DONOHO: Mr. Chairman,
Mr. Brown, members of the committee, my name is Patrick Donoho. I'm Vice
President of Government Affairs and Public Policy for the Pharmaceutical Care
Management Association. PCMA represents managed care pharmacies and
organizations, who, as a substantial part of their business, is managing
pharmacy benefits. We are the PBM industry.
I'm pleased to provide you
some of our outlooks on views on providing the prescription drug coverage under
Medicare. Our members currently provide care for over 10 million Medicare
beneficiaries through employee retirement plans and Medicare Plus Choice plans.
Collectively, they cover benefits for over 150 million Americans. We are pleased
that many of the pending proposals recognize that it would be more efficient to
use existing drug benefit managers in an expanded Medicare drug benefit program,
than to attempt to recreate these capabilities in HCFA.
Let me give you
our six basic principles that we think would make a successful program. First,
the benefit should be delivered in a manner that enhances the
health of seniors and the disabled. It is essential that the
program not simply help pay for drug costs, but, also, protect the
health of seniors. Some drugs are inappropriate for use among
the elderly, others are used at different dosing levels and are appropriate for
younger populations. Seniors without prescription drug coverage do not currently
benefit from the safety of drug interaction screening mandated by over 90 for
Medicaid recipients in presently and virtually all third-party programs.
Second, legislation should provide the benefit to the private sector.
Competition among private sector PBMs deliver significant cost savings and has
spurred innovation in the use of advanced technology for administering those
benefits. A new drug benefit should embrace and promote competition among these
entities and ensure the vitality of innovation through competition. We had a
slight discussion yesterday in Ways and Means and repeated here today about
rural coverage. Many of the plans in the private sector today mandate that you
have rural coverage. I think there are 52,000 pharmacies in the United States
and we have to ensure that we have coverage for the people in the plans that we
administer.
Third, the legislation should retain flexibility and cost
controls within the private sector. Prescription drug coverage for Medicare
enrollees must permit pharmacy benefits managers to continue such programs, as
pharmacy network management, formulary development and management, mail service
pharmacies, disease management, prescription compliance and adherence programs,
utilization review, and provide a profiling for adherence to best medical
practices.
Fourth, legislation should encourage the continuation of
current prescription benefit plans. A prescription drug benefit plan for seniors
should contain some incentives for employers to continue to provide prescription
drug coverage for their -- to their current retirees.
Fifth, a plan
should be designed to protect beneficiaries against catastrophic liability.
And sixth, the goal of an agency overseeing the administration of a
prescription benefit should be to foster innovation and competition. The
legislation should not freeze in time the management techniques used today by
PBMs.
In examining the various proposals that have been announced and
introduced, we see much commonality. In particular, most proposals appropriately
focus on PBMs, encouraging or mandating use of the latest tools to improve
health outcomes and to eliminate medical and medication errors.
Where proposals differ is on whether we, as PBMs, will have the flexibility to
use our tools in management of the benefit. Any legislation that does not
empower us, as PBMs, to negotiate discounts and the pricing concessions from
drug manufactures and pharmacies, as we do today in private plans, will not be
able to deliver in the anticipated cost savings.
We share the concerns
expressed by the Congressional Budget Office and the General Accounting Office
that political pressures and policymakers on PBMs might limit the tools
available to a PBM, making it more a transaction processor than a benefit
manager. We, also, share the concerns of some of the authors of proposals that
HCFA is unlikely to favor competition over regulation. Therefore, we are pleased
to see that some legislation envisions new structures for administering a
Medicare drug benefit.
I'm willing to answer questions thereafter and
we're willing to help you craft a bill. Thank you.
REP. BILIRAKIS: Thank
you. Thank you for that, Mr. Donoho. Mr. Pollack?
MR. POLLACK: Mr.
Chairman, thank you, very much for inviting us to lunch. I appreciate it.
(Laughter.)
MR. POLLACK: In my testimony, I focused on the need
for a prescription drug benefit and for moderating prices. Here, I'd like to
focus on the legislation that we've been talking about this morning, mainly
because there appears to be a rush to mark up this legislation. And
notwithstanding the fact that this is still a work in progress, I think we know
enough to say there is reason for abundant caution. Clearly, the proposal looks
much better from a distance than it does closer up. Let me suggest to you five
areas that I would like to see us look more carefully at.
First, there's
the question about the reliance on the private insurance industry to provide
this policy. We've had ample discussion about this this morning. We know that
the industry, notwithstanding the fact that it has been offered very significant
subsidies, has balked at offering this coverage through its own private plans.
But, we don't need merely the protestations of the industry to tell us that we
have to look at this with abundant caution. We have experience with the Medigap
program, which for many years has been offering a prescription drug benefit. And
I would suggest, if I may, if you look at Appendix II that's appended to my
testimony, one of the things we looked at were the difference in prices that
people experience for very comparable policies, one that provides prescription
drug coverage and another that does not.
Now, what we find, first of
all, is that only 8 percent of American seniors in the Medicare program have
opted into a Medigap plan that provides prescription drug coverage. This is a
mature product and, yet, only 8 percent of American seniors have opted into it.
If you look at the comparison between plan F and plan J, under Medigap, with J
being the one that provides a prescription drug benefit, you'll see, on average,
the price differential is over $1,700. It gives you good reason
why it is unlikely that the industry is going to be able to develop a plan
that's going to be usable.
Secondly, and if I can accentuate one thing,
it is the second point, and that is I don't think that seniors are going to get
good value for their premium dollar under this proposal. There are three reasons
for that. One reason, Mr. Ganske has already explained, and that relates to
adverse selection.
I'd be happy to discuss what I think is a real
comparison between the potential adverse selection problems in the
administration's proposal and this one. I think there's a major difference. But,
obviously, there is a significant adverse selection problem.
But, there
are two other concerns, and that is that Medigap plans use about 35 percent of
the premium dollar on items that have nothing to do with claims benefits,
whether it includes agent's fees, advertising and marketing, profits, and
administration, it is considerably more expensive than it is under the Medicare
program and that means less value is provided.
But perhaps the most
important reason really goes to the question as to why the pharmaceutical
industry sight unseen is giving us full page advertisements, telling us why they
support legislation that has not even been crafted into language. But, I think
the reason is very obvious. The pharmaceutical industry knows that if we
establish private insurance policies, we're not going to have the same kind of
marketing power that exists in the Medicare program. We'll have very organized
bargaining power, when you have various insurance companies negotiating for
seniors, as opposed to the Medicare program that can really bring clout to the
table. And, frankly, that's the bottom line difference between this bill and the
administration's bill. Under this bill, there would not be that bargaining power
to reign in the prices and, as a result, senior citizens would not get the value
that they would receive under Medicare.
Third, it is really absurd to
now pull at the shred of the genius of the Medicare program, which is a program
that brings people together irrespective of their age, irrespective of their
health conditions, and irrespective of their income, and now,
we want, in effect, provide a means tested benefit. Now, I don't want to take
second seat to anyone and saying I support special care for the poor. But, as
Judy Feder indicated, we're talking about a very miserly standard here. When
we're talking about 150 percent of the federal poverty level, we're talking
about $12,525 a year in income for a widow.
And if I
may just refer you to Appendix VIII in the testimony, let's take a look at what
the costs are for that widow and what a bite out of her income it will take,
when she has just minor health conditions. If she has a problem
with diabetes, hypertension, and cholesterol, she's going to take Gluophage,
Procardia XL and Lipitor 10, an that's going to cost her as much as
$2,295 a year. That comprises over 18 percent of her income,
one out of every $6 of her total income just for those three
pills, and we're saying we're not going to provide benefits for people at that
income level.
REP. BILIRAKIS: Mr. Pollack, your time has long expired.
If you could summarize with just a few seconds, I would appreciate. You will
probably have an opportunity to make these points, which are very good ones,
during the inquiry section.
MR. POLLACK: Well, I guess the last point I
would make very shortly is the question about this fallback. What is this
fallback? Is this fallback, in effect, going to be a public program for those
portions of the population that the industry does not wish to serve? If it does,
we're going to have wonderful segmentation. We're, in effect, inviting the
insurance industry to provide coverage for those people, who are the easiest to
cover: the least sick, the youngest, and those portions of the geography of our
country that they think they can make a profit in. And, of course, then, perhaps
the Medicare program would wind up holding the bag for all the rest. And I fear
years from now, we're going to come back and look at --
REP. BILIRAKIS:
Mr. Pollack, I'm sorry --
MR. POLLACK: -- and we're going to say the
Medicare program is not functioning well.
REP. BILIRAKIS: -- I'm sorry
to cut you off, but I've really got to move on. Ms. Davenport-Ennis, please
proceed.
MS. DAVENPORT-ENNIS: Thank you, Chairman Bilirakis and members
of the committee for your invitation to be here this afternoon. I'm Nancy
Davenport-Ennis. I'm the Executive Director of two national organizations, one
of which is the National Patient Advocate Foundation. Our organization supports
public policy that ensures patients timely access to cutting edge therapies. Our
affiliate, the Patient Advocate Foundation, provides oncology, nurse case
managers, coding and billing specialists, and attorneys, to both consult and
intervene on behalf of patients, who have faced denial of access to care in the
health care delivery system in this country.
Based on
the work of our organizations, we are pleased to share our ideas for the design
and implementation of such a program. Our ultimate goal is a rational and valid
prescription drug program that will meet the needs of all seniors, including
individuals with serious and life-threatening diseases. Because of our
experience with cancer patients and perhaps because I am a twice survivor of
cancer, I am the mother-in-law of a cancer survivor, I'm the aunt of a now
deceased 34- year old niece, who died after five-year battle with ovarian
cancer, and perhaps because I have the opportunity to interface with case
managers that served over 29,000 Americans last year, who were facing denial of
care, many of my recommendations will be specific to the issue of cancer
protection. I would, also, like to cite, for the record, that because I have not
had access to the bill that has been introduced, I am here to talk about
Medicare modernization and not to address specific tenets of specific
legislation.
I'd like to go back to the evolution of cancer care and
cite that Medicare does pay for prescription drugs, as you know, that are
provided incident to a physician's services. Because most current anti-cancer
drugs are administered intravenously by physicians, they are already covered by
Medicare. Cancer patients have come to expect and, in fact, prefer dramatically
care in the community setting. And I thank the Congress for their role in seeing
that we have been able to maintain continuity of care in this particular area,
with regard to the future of cancer care.
Medicare currently pays only
for those oral chemotherapy agents that are a replacement for intravenous
chemotherapy agents. Oral chemotherapy drugs that are not a replacement for
existing IV drugs will be a critical part of cancer care in the future and
cancer patients have expressed a strong desire to use these medications.
Medicare reimbursement will play a key role in the acceptance and proper use of
these drugs. It will not be sufficient for physicians to give a patient a
prescription for these drugs and have no further responsibility for that
patient's use of the drugs.
The payment system has recognized that these
drugs will need to be monitored more carefully than many other self-administered
drugs, because of issues of side effects and compliance. Therefore, physician
reimbursement for supervision of this therapy must be adequate. In order to
prevent financial disincentives against the use of these drugs, including the
imposition of unreasonably large co- payments or coverage caps, oral
chemotherapy drugs should be incorporated in the existing Medicare drug coverage
system.
Our constituents, cancer patients and others with serious and
life-threatening illnesses, will benefit from a new prescription drug benefit,
only if it is administered fairly and consistently. In administering any
benefit, it is essential that a balance be achieved between the availability of
the benefit and the preservation of funding for the benefit. At times, it
appears as though the balance struck by HCFA is weighted more towards
preservation of financing than availability of benefits. I base that, again, on
the fact that we have served so many Americans that have confronted problems
with denial within the Medicare program. Last year alone, patients from 44
states contacted us for help, with regard to denial of Medicare benefits.
A series of agency actions, both recently and historically, confirm our
concerns about HCFA's administrative approach. These actions include development
of an outpatient perspective payment system that would have severely limited, if
not eliminated, cancer care in the hospital outpatient department. The problems
in this proposal were remedied legislatively after an outcry from patients and
others.
We are concerned about the policy for injectable drugs and
certainly the Congress has been successful, and once again, making certain that
patients will continue to have access to physician point of service injectable
drugs.
The issue of average wholesale pricing has, also, been a concern.
HCFA has repeatedly sought to reduce reimbursement for Medicare outpatient
drugs, threatening a situation where oncologist would suffer a loss of drugs
administered to Medicare patients.
Cancer patient groups have made clear
their objections to these changes, unless some modifications are accompanied by
appropriate and adequate adjustments and chemotherapy administration fees.
With regard to clinical trials coverage, the cancer patient community
celebrated a victory last Wednesday, when the president announced a policy of
Medicare coverage for routine patient care costs for those enrolled in clinical
trials. We are now quite concerned to learn that HCFA has prepared a program
memorandum implementing the president's directive that would, in fact, negate
the president's announcement on this fact.
REP. BILIRAKIS: Please
summarize, Ms. Davenport-Ennis.
MS. DAVENPORT-ENNIS: I will be happy to.
I am here this afternoon to say to each of you, we are most willing to share
with you data that we have, as a result of our patient cases, that may be
beneficial to you, as you design a new Medicare program that is going to work in
the area of prescription drug benefits. We will be happy to share the specifics
of what we feel would be important in that and we're most happy to answer
questions from members of the panel this afternoon.
REP. BILIRAKIS:
Thank you, ma'am. I -- you've been so patient sitting here all of these hours
and sharing lunch with us, and, you know, so I really hesitate and hate to cut
off anyone. But, we've got to have a structure, I suppose, in order to be able
to function, so I hope you will forgive me, in that regard.
Ms. Eshoo,
I'm glad to see that she's still here, coined a phrase earlier, which probably
said it better than any of us could, when she talked about this problem being
like putting socks on an octopus. It says it all, I think. It's just so very,
very difficult, and to try to do it right -- not just to do it, but try to do it
correctly.
I have as much -- personally, I have as much optimism, I
suppose, as maybe all of us I like to think have, in getting the job done and
getting it done this year. We have to be practical, will we be able to get it
done this year? Politics is -- it certainly is a very large part in all of this,
partisanship, things of that nature, not being certain that we've gotten certain
parts right and that sort of thing.
So, I would ask -- raise the
question, and Mr. Fuller touched on it, there are people out there that are
hurting. And I know that a couple of you made comments about means testing and
that sort of thing and I don't know -- for the life of me, I can't really
understand when there's just a limited amount of resources available, why we
can't rightly focus those resources for those who really more truly need it than
others. But, that's beside the point. But, if we're not able to get the job done
now -- I mean, Mr. Fuller referred to programs that are in place already,
approximately 20 states around the country. Other states -- as I understand, the
National Governor's Conference met -- I know they met up here just a few days
ago, maybe a month ago or something like that, and I understand that one of
their top priorities was some sort of prescription drug program in their states.
Florida just recently completed their legislature and they are putting a program
into place.
If we have these programs in place, what is wrong with until
-- until we can get it right and make it a part of Medicare -- and I haven't
heard, frankly, anyone in this Congress, and I won't say that they're aren't
some, but I haven't heard anyone in this Congress say that prescription drugs
should not be a part of Medicare. But, until we can get it right, what is wrong
with maybe complementing, if you will, and supplementing those programs that
already exists with federal dollars -- call it block grants, call it whatever
you will?
They will then be able, I trust, if it's done right, to help
even more people; maybe double, if you will, the number of people that they take
care of. And, of course, if you take -- if you add to that, hopefully, some help
for those people, who maybe don't qualify as being the very core, if you will,
if you add to that the stop loss concept for those, who would not qualify for
the subsidy, but, at the same time, have prescription drug costs that would be
out of the roof and really run them into the hole -- so, I raise that question.
Very quickly, I don't have that much time, if each of you can take maybe just a
few seconds to respond to that, I'd appreciate it, negative or positive,
whatever.
MR. KAHN: Well, Mr. Chairman, HIA believes that the issue
you're raising is an important one, which is we ought to do now what can be done
and clearly states are showing they can very rapidly implement these programs.
It has grown from around 13 to about 19 in just a few short weeks, actually. And
I think anyone at the table has got to admit that the current pricing of drugs
is Byzantine and the complexity of adopting any kind of benefit, whether it's
private sector or public sector, that's universal is such that it will take
years. And so, we believe firmly that the best to do now would be to help those
most in need immediately, because otherwise, it's going to be years.
MR.
FULLER: I would just maybe supplement what I said by saying in the month that
we've been working on this, we have seen the American Pharmaceutical Association
come on board supporting it. They represent the nation's pharmacists. The
American Society of Consultant Pharmacists, Food Marketing Institute, and the
National Consumer's League all signed on to the programs. And we think there's
growing attraction to this state-based approach.
I would, also, add that
we would recommend that the program be sunsetted; that this not continue
forever. Sunset in five years or whenever there is a major Medicare reform; but,
we keep the pressure. It's the kind of pressure, in which there could be --
REP. BILIRAKIS: Yes. That would be a concern, you've got to keep the
pressure on, that's for sure.
MS. IGNAGNI: But, Mr. Chairman, I think
that without a doubt, in with the choices doing something or doing nothing,
something is always better than nothing. Having said that, we have a time of
tremendous prosperity in this country, probably like no other we've seen in a
very long time. There are two issues that are -- remain to be addressed in
health care and probably many, many others, but two large ones
loom over us: one is the matter of prescription drugs, to update this 1965
benefit program; and the second is the matter of the uninsured,
which looms large and will undoubtedly get larger, as the economy slows. So, we
would say, on the part of our members, that we would like to sit with you, to
sit with members of the minority and work together, to try, at this juncture, to
address this unique opportunity to fulfill that promise that was made in 1965 to
beneficiaries.
REP. BILIRAKIS: Dr. Feder?
MS. FEDER: I actually
agree with Karen Ignagni, that the promise of Medicare of mainstream protection
is no longer being fulfilled without the prescription drug protection.
REP. BILIRAKIS: Agreed; agreed.
MS. FEDER: Good. And the barrier
-- the barrier really is political. Sure, it's hard to do the specific design
and it takes effort and there is contention around it. But, we are capable of
agreeing, as policy analysts, on a design. The greatest underlying problem that
I see in reaching agreement is that rather than having a political consensus on
the value of the Medicare program, the Medicare program, even its basic benefit,
in addition to its administration, has been under siege for the last five years.
And it seems to me that to go in a direction of very modest means test to
benefits, which we know from the outset would be inadequate, is to walk away
from what we need to do and have the resources to do, which is to strengthen and
recognize and support the program that we know works.
REP. BILIRAKIS:
But, in the meantime, of course, there's an awful lot of needy people out there,
who would not have --
MS. FEDER: But that's because we're not willing to
act. We can do it.
REP. BILIRAKIS: Mr. Donoho?
MR. DONOHO: Mr.
Chairman, I guess -- you know, our association starts with the premise that
Medicare needs to be reformed. We spent a year or more in the last couple of
years studying this issue. What we're here today about is taking a piece of that
study and enacting it for Medicare.
From what I understand, and I guess
the concern I'd express, because our association hasn't taken a position on a
state-based plan, is that once you give it to the states as a block grant or
however you do that, how do you bring it back under a Medicare-style program? I
mean, it's just a question. And once you get a program operating similar to
Title XIX Medicaid, how do we achieve reform and how do we come back to it, in
terms of Medicare, itself?
REP. BILIRAKIS: Which is a question that
would have to be answered. Mr. Pollack?
MR. POLLACK: Mr. Chairman, let
me tell you that we actually have worked with numerous states actually to
establish some of these programs. Having said that, let me make clear what the
impulse was on the part of the states and why I don't think it's the right
direction to go here. The states have done this, because they've thrown their
hands up and they said we're waiting for the federal government. We can't do
anything else.
We are at a position today where we can do something much
more significant. I have two -- I have three fears. One fear is that if we move
in this direction, we are not going to keep the same sense of urgency about the
real reform that we need. Secondly, these low- income programs have very poor
participation rates. If you look at things like the qualified Medicare
beneficiary program, the SLMB program, as well, they have very low participation
rates, because they're treated very differently than when you have a universal
program. And lastly, these programs do not have the opportunity of containing
costs and containing prices. And so, if we don't contain those costs and prices,
that benefit quickly will be less meaningful.
REP. BILIRAKIS: Well, all
right. Ms. Ennis, very briefly, if you can, since you are last?
MS.
DAVENPORT-ENNIS: I would like concur with remarks that Karen Ignagni made, in
terms of the need to absolutely look at addressing prescription drug benefits
while we have an economy that will allow us to do that. I think, also, from our
experience, we must do something to deal with the uninsured
population.
I would, also, have to say that based on our experience in
state legislation, before moving to the federal level in that activity, each
time that we worked on a state to effect reform, what we found was that the
process was usually a slow process. It was a hit-or-miss process. We ended up
with citizens in one group of states having one set of services and in other
states, having no services at all.
With regard to the block grant
program, we would share the same concern that has previously been voiced, that
if we get it started at the state level, how are ever going to get it back? And,
as you say, Chairman Bilirakis, there are so many people that are hurting and
right now the one vehicle that we have available to them in all states is to try
to get them into an indigent drug program, either through their state or through
a pharmaceutical manufacturer. And I can share with you in great detail that
that's --
REP. BILIRAKIS: Please don't today.
MS.
DAVENPORT-ENNIS: No, I won't go in great detail, but I will share with you that
it's very difficult to affect remedy for the at- risk populations that find
themselves needing this help the very most.
REP. BILIRAKIS: Thanks. I
asked for it; I got it.
(Laughter.)
REP. BILIRAKIS: Mr. Brown? I
appreciate the committee's indulgence.
REP. BROWN: Thank you, Mr.
Chairman. Mr. Pollack, you held up a larger, but a black and white version, of
-- this was in Congress -- I think in Congress Daily today, private drug
insurance lowers prices 30 percent to 39 percent, shouldn't seniors have it.
Your point was that it segments the market and not using -- not using Medicare
buying power, if you will.
There's another underlying perhaps
inadvertent message, I think, that says something else; that is that in
background, you hear the drugs companies over and over talk about
$500 million -- costing $500 million to
research a new drug. They've never really provided evidence of that 500 million
(dollars), but that's the number that even the media sometimes accept without
really any documentation. It's almost become part of the rap in this town, that
it costs $500 million, no questions asked, even though 50 --
almost 50 percent of prescription drug research and development is paid for by
taxpayers. That's rarely mentioned in all of this. The drug companies are going
to see any action by Congress to reduce prices in any way would make the drug
companies unable to do this wonderful, and it's wonderful, research that they
do.
But, this ad says if all seniors had access to private market
discounts in medicine, then on average, it would cost 30 to 39 percent less.
Private prescription drug insurance is the cure. One-hundred- fifty million
Americans don't pay full price for their medicines, why should any senior? Are
they suggesting, in your mind, that if senior citizens could get a 30-39 percent
discount, that they still would be able to do all of this research?
MR.
DONOHO: I made that very point in testimony yesterday in the Senate with Allen
Holmer (sp), the present of the Pharmaceutical Research and Manufacturer
Association. In effect, they seem to be saying, come at us with 30 to 39 percent
discounts. It's not going to be harmful to us.
The point you're making,
I think, is amplified in Appendix XII to my testimony. If you look at the
various companies, you'll see that they're spending considerably more on
marketing, advertising, administration, than they're spending on research and
development. They take considerably larger amounts in profits than they spend on
research and development.
If I just might give you two illustrations.
Merck spends three times -- two-and-a-half times as much on marketing-related
costs than it does on research and development. It receives profits that are
three times as high as what they spend on research and development. Eli Lilly
spends one-and-a-half times as much on marketing and takes one-and-a-half times
as much of research and development for profits. Clearly, if we moderated
prices, it would not hamper the ability to undertake research and development,
and the industry seems to be admitting this with their advertisement.
REP. BROWN: Dr. Feder, if I could switch to you for a moment. The
republicans claim that relying on the private sector would permit flexible
benefits and avoid a one size fits all approach, that Medicare has traditionally
successfully used. Give us the downsides of that in a prescription drug program.
MS. FEDER: Sure. I think that the one size fits all language is intended
to be pejorative and if we step back -- number one, we need to step back and
look at what the one size that does fit all is being advocated; that being that
we're saying that everybody is -- ought to be entitled -- very senior ought to
be entitled to a defined prescription drug benefit. That kind of protection
everybody does indeed need. So the label, itself, is misleading.
When
they talk about flexibility, I think that they are implying that there ought to
be a variation in benefits, a wide choice of plans, and we've heard a lot of
problems in that argument discussed this morning. One is that the flexibility
that is talked about, in terms of relying on a private market, is a flexibility
to serve some areas and some people and not others. It is a flexibility and
uncertainty that has plans coming and going from markets and changing their
benefits, because that's the way the market works. So, we've heard a lot of
discussion about the uncertainty that it creates for beneficiaries.
In
terms of the flexibility of benefits, it means we -- as we've heard many others
say this morning -- many members of the panels say, the committee say, that it
creates concerns about what people can expect, as well as a competition in the
marketplace that is designed to avoid risky patients, rather than to really
provide care efficiently.
So, I would say, in all those respects, and
add to them, the administrative costs and the marketing costs and the lack of
knowledge that consumers will have going into a plan on what they are really
getting with formularies, for example. That's what is being called flexibility
is really confusion and fragmentation.
REP. BILIRAKIS: The gentleman
from Pennsylvania, Mr. Greenwood.
REP. GREENWOOD: Thank you, Mr.
Chairman. In a quick response to Mr. Brown's commentary, I would agree it would
be a good idea for us to get documentation of what exactly it costs to produce a
drug, because I know I use that $500 million for a drug figure
and by virtue of this statement, I'd like -- hope that the pharmaceutical
industry would provide us with that substantiation. I'd, also, like some
substantiation of the gentleman from Ohio statement, that 50 percent of the
profits of pharmaceutical companies come from -- are taxpayer funded, because
that gets bandied around, too, and needs some substantiation. So, I'd hope we
can provide the committee with that.
Mr. Pollack, in your testimony, you
say that prescription drug coverage should be added to the Medicare benefits
package, in such a way the beneficiaries have the same guaranteed coverage for
drugs that they have today for hospital physicians and other Medicare coverage
services. I want to understand what your proposal is. Would you assume that
there's -- that the beneficiaries pay a premium for that
MR. POLLACK:
Yes, I do.
REP. GREENWOOD: And would you assume that there's a co-pay?
MR. POLLACK: Probably, yes, with a possible -- with a probable hopeful
exception for those of lower income, who would have that subsidized.
REP. GREENWOOD: You assume that there's a deductible?
MR.
POLLACK: Not necessarily. It might; might not.
REP. GREENWOOD: Okay.
Would you assume that there's a stop loss? In other words, would you assume that
there's a cap, I should say, to beneficiaries have access to whatever the costs
are, if it's 10,000 (dollars), 20,000 (dollars), 30,000 (dollars) --
MR.
POLLACK: There should be a catastrophic benefit, yes.
REP. GREENWOOD:
Okay. And what would that cost?
MR. POLLACK: Well, it depends on how it
was designed. I'm not an actuary, so I'm not -- I don't think I can give you
that cost and, of course, it would depend very much on a variety of factors. So,
I don't know how I can give you an estimate of that without knowing the details.
REP. GREENWOOD: Well, in your testimony, you say we've been engaged in
analyzing the implications of changes in Medicare program and Medicare
beneficiaries for some time. You talk about your research you do and you come to
the committee and made a clear recommendation. And I'm a little surprised if you
haven't any idea what your recommendation would cost, because that's -- we have
to --
MR. POLLACK: I did not say that we're coming in with a proposal.
We said the approach should be to incorporate this into the Medicare program.
There are many ways to do it and those different ways are going to cost very
different amounts of money.
REP. GANSKE: Would the gentleman yield?
REP. GREENWOOD: Well, I'll yield briefly, Mr. Ganske.
REP.
GANSKE: Thank you.
REP. GREENWOOD: I think people yield to you before
and lose their time.
REP. GANSKE: One additional question to you, sir,
and that is if it sounds to me like Mr. Pollack is saying that this should be a
standard part of Medicare and that to me means that if it's like physician
services or other services, that it is not voluntary.
MR. POLLACK: Well,
Part B is voluntary and --
REP. GREENWOOD: Reclaiming my time, as the
gentleman -- to further describe the gentleman's proposal, would yours, in fact,
be voluntary or would it be a requirement that everyone participates in Medicare
pay this premium, whether they already have coverage from their employer or not?
MR. POLLACK: I think the likelihood is that it would be voluntary. I
think -- I don't think it's feasible probably politically to enact a plan that
was not voluntary.
REP. GREENWOOD: In all due respect, Mr. Pollack, you
spend a lot more time criticizing the proposals that are on the table than you
have proposing something yourself, and all -- continued in all due respect,
that's the easy part of this process. The easy part of this process is knocking
other people's ideas; the hard part of the process is coming up with something
that we can afford and that makes sense and I haven't seen that in your
testimony.
Do you believe that the pharmaceutical industry ought to be
nationalized or do you think it ought to remain in the private sector?
MR. POLLACK: No, I think the -- I think the pharmaceutical industry
should be in the private sector.
REP. GREENWOOD: Okay. If you were going
--
MR. POLLACK: But even in the private sector --
REP.
GREENWOOD: Thank you for answering the question. Let me just get to the -- where
I want to go here. If you were running a private sector pharmaceutical company,
would you forego marketing, advertising, and administration of profits, or any
of those?
MR. POLLACK: Of course not and I'm not saying they should. I
am say, however, that when the industry keeps on asserting research and
development is going to go down the tubes if we do something to moderate prices,
I suggest to you that's very misleading --
REP. GREENWOOD: Well, let me
--
MR. POLLACK: -- because there are much larger pots of money,
including marketing, advertising, administration, and profits, that lower the
amount of money that is spent on research and development. And to say that when
we moderate prices, the only thing that's going to happen is that we're going to
limit research and development is absurd.
REP. GREENWOOD: Well, the
reality is that if you were running a company, whether you were making
pharmaceuticals or whether it might be widgets, you can't survive if you don't
have marketing. You can't survive -- and you can't compete if your marketing
isn't robust. You can't survive if you don't have administration, unless
management is going to work for free. You can't survive if you don't have
profits, because nobody is going to invest in your company. So, research is the
one thing that then becomes dispensable, because that's the one thing that's not
necessary to survive. You can survive into the future without research, but you
can't survive without those other costs.
MR. POLLACK: Oh contraire, I
don't -- I just -- I don't believe that for a moment. First, I'm not suggesting
at all that we should do away with marketing and do away with advertising. And
I'm not saying there should be x amount spent on it or y amount on profits.
That's not the point I'm making. But what I am saying is that when the industry
tells us the only thing that's going to give is research and development, that's
plain nonsense.
And it is in the industry's interest to undertake
research and development. It doesn't do this merely for altruism. The reason it
undertakes research and development is it brings new products to market for
which they can make a profit. It is in the interest of any company to do
research and development. But to say if we moderate prices, that the only thing
that's going to be harmed is research and development, is a wild exaggeration.
REP. GREENWOOD: I'd love to respond; my time has expired.
REP.
BILIRAKIS: I thank the gentleman.
Mr. Pallone?
REP. FRANK J.
PALLONE (D-NJ): Thank you, Mr. Chairman. I wanted to ask Mr. Pollack a question.
But, I mean, to me, I think you've been quite clear in basically suggesting that
something like the president's proposal, that has a -- that is part of the
Medicare program, it's universal, that, you know, is affordable, that has some
kind of effort to deal with the price discrimination issue is certainly, you
know, one way to go, and that you've been concerned about, you know, this Thomas
-- I call it the Thomas proposal or republican proposal, as not accomplishing
those goals.
And what I wanted to ask Mr. Pollack is that, you know, I
try to get down the specifics and give an example, if we can maybe contrast the
Thomas proposal with the president's, with an example, and I'm going to give you
an example of a widow living at 150 percent of poverty, who has diabetes,
hypertension, high cholesterol, no supplemental drug coverage, drug costs for
medication to treat these illnesses consume over 18 percent of her income. What
kind of prescription drug benefit does she need? And, you know, keep in mind the
two options, the Thomas versus the president's.
MR. POLLACK: Well,
clearly, the proposal we've been talking about this morning does not provide a
subsidy for that individual. The way the plan is structured, as I understand it,
is that it provides a subsidy up to 133 percent of poverty and then it phases
down, and it phases completely out at 150 percent. So, this widow is provided
with no subsidy whatsoever, and so she's going to have to bear the brunt of
those costs.
Under the administration's proposal, there would be a
subsidy, in effect, for everybody and so this individual would get assistance.
There would be a significant contrast.
REP. PALLONE: I mean, I think
that's the bottom line, is how this is going to apply to individuals. But, thank
you.
I wanted to ask Mr. Kahn -- and I may have misunderstood what you
said, but let me say if I can clarify it. You said that private drug insurance
-- the private drug insurance option is essentially unworkable and you said how
you were pleased with the Thomas having the possible fallback on a government
program; and then you talked about how Medicare Plus Choice needs more dollars,
particularly for drug coverage. Are you basically saying to us that -- I mean, I
don't know what this fallback is, because that's been very unclear to me. You
don't really want to see private insurance with a fallback. Wouldn't it make
more sense to have some kind of a -- you know, Medicare program along the lines
of what the president suggests to begin with, rather than have this private
insurance with a fallback?
MR. KAHN: The president's plan presumes that
Medicare Plus Choice will continue on into the future and Medicare Plus Choice
offers a comprehensive benefit. We're only talking about a piece of that benefit
when we're talking about pharmaceutical. So, presumably, whether it's the
fallback or whether it's the president's plan, there will be money in there to
subsidize the coverage in the Medicare Plus Choice plan for pharmaceuticals.
REP. PALLONE: And there is, in fact. But, I guess what I'm trying to
pinpoint is, you know, I don't -- I think you were saying clearly that the
private drug insurance option is unworkable. I mean, it doesn't seem to me to
make sense to say, okay, we'll try that and if it doesn't happen, you know,
we'll fall back on the government. I mean, it would seem to me to make more
sense, if you really believe that the private insurance option is unworkable, to
simply do something like the president, rather than hope that somehow, you know,
we're going to fallback on something that's undefined, at this point.
MR. KAHN: Well, my member companies haven't chosen to endorse any of the
universal plans. That's one of the reasons when the chairman asked the question,
I answered positively about our member companies feeling about helping the low
income elderly through the block grant. But, I guess my answer to you is that
either the fallback or the president's plan, if it's universal, it answers your
problem of making sure there is something for all Medicare beneficiaries,
depending on how it's structured.
REP. PALLONE: Well, let me just ask
one more thing, because I think my time is up. In the Thomas plan, what we're
told is that, you know, there's a subsidy of like 30 to 35 percent. Do you feel
that if there were a larger subsidy, that, you know, private drug insurance
options would be workable? Is it just a question of the level of subsidy? Or you
just think the idea is unworkable?
MR. KAHN: I think the idea is
unworkable. I mean, let's say, in Part B right now, you have 75 percent subsidy
and you have 98 percent compliance with a voluntary program. But, it is a
universal program and, also, the premiums are collected with your Social
Security check. So, there's a sort of big hammer there to make sure those
premiums are collected.
I guess we have our doubt, both on the
administrative side, the risk selection side, and just the cost in payment side
of providing any kind of drug only benefit in any form. Drug only, I need to
stress that, because Medicare Plus Choice and comprehensive benefits are
fundamentally different than a drug only benefit.
REP. PALLONE: Thank
you.
REP. BILIRAKIS: REP. BURR, to inquire?
REP. BURR: Thank
you, Mr. Chairman. Craig, let me say to you, I hope you'll be happy when this
bill is finalized, to read that we do understand the importance of pharmacists;
but more importantly, we have written in language that will address the
medication management, disease management function that many druggists around
the country currently perform, and it's a very important part of the overall
healthcare system today. It's going to be up to plans to determine some
reimbursement; but, hopefully, there is a framework that has thought through
everybody, who plays a role in this.
Mr. Pollack, let me go to you,
because you were very specific on the 150 percent of poverty and that there not
be a means test, and I don't think anybody has portrayed it as one. The
president's plan cuts off at 150 percent of poverty. Does that make you
objectionable to the president's plan?
MR. POLLACK: No. What the
president does --
REP. BURR: The president's plan cuts off at 150 --
MR. POLLACK: No, no, no, no. What the president -- what the president
does is very different than this proposal. Now, let's --
REP. BURR: Mr.
Pollack, you haven't read our plan.
MR. POLLACK: Well, I've read what
you have issued. You don't have a bill.
REP. BURR: Well, then, to make a
statement that you just made, the president's --
MR. POLLACK: Sir, I can
only go with what you have released so far.
REP. BURR: The president
subsidizes everybody's premium, correct?
MR. POLLACK: Correct.
REP. BURR: He has 150 percent cutoff of poverty on where additional
subsidies go.
MR. POLLACK: That is correct; that's correct.
REP.
BURR: If Ms. DeParle is correct, that we use instead of a subsidy to the
premium, we use our subsidy to buy down the high risk and by her statement, our
subsidy might be a little bit larger, but we go to the same 150 percent of
poverty, we're just using the subsidy not for the premium, but to buy down the
high risk, now where is the difference?
MR. POLLACK: I think there's a
significant difference. First of all, the subsidy that is provided, in effect,
goes directly to the beneficiary and so it, in effect, pays for 50 percent of
the cost of that benefit.
And I --
REP. BURR: Do you think first
dollar of coverage --
MR. POLLACK: And I have --
REP. BURR: --
or long-term is more important?
MR. POLLACK: Pardon me?
REP.
BURR: Ms. DeParle said that predictability was one of the primary objectives.
And I think Ms. Davenport, you know, she speaks for the groups that are out
there, but she didn't face behind this issue. Do these people want to know that
there's a point they can reach in an illness in a given year and not have any
financial exposure?
MS. DAVENPORT-ENNIS: Yes. I'm delighted to answer
that question. Absolutely, the patients that contact us will say often, is there
a vehicle for insurance for me that is going to tell me how much I need to pay;
how much will be my co-pay; where will my stop loss be; what happens to me if I
cancer or need a heart transplant and have a catastrophic event that I need
coverage for; and what's it going to cost me when I'm 65, 70, and 75.
I
brought with me today two stories of two Americans. One is a woman in
Nicholasville, Kentucky, 68 years old. Her total income per month is
$830. She is a widow. She has throat cancer. She needs to take
eight maintenance medications for this cancer, to keep her in remission. The
total cost of that medicine per month is $600 a month. She does
not have $600. When she called us to help, she had been eight
months with buying two medicines a month and each month, she would switch to
another two medicines.
REP. BURR: And the reality is that --
MS.
DAVENPORT-ENNIS: And the reality was --
REP. BURR: -- Part B probably
has gone up, because of some medical need in the meantime.
MS.
DAVENPORT-ENNIS: Absolutely. And then what we did was we assisted her in an
application process to get her into -- it was referred to as SLMB program
through Medicaid, which she is now paying a $45 a month premium
for, but she can get the medicine and she can have the care. So --
REP.
BURR: Well, hopefully, she'll have some options that might be less than the
$45.
MS. DAVENPORT-ENNIS: Absolutely.
REP.
BURR: Let me go on to one last thing for you and that's the issue of
self-injectable drugs. I'm sure that you have watched HCFA, who had drugs that
they reimbursed on, and the cost of technology now allow those drugs to be
self-injectable. HCFA has determined they're no longer reimbursable. What
comfort level would you have with that experience at HCFA, at putting them in
charge of determining the coverage determinations of a new prescription drug
benefit?
MS. DAVENPORT-ENNIS: I think for our organization and perhaps
we are joined, I know, by other professional organizations in the country, the
physicians and the nurses, we feel that the medical decision has to be made by
the physician -- by the treating physician. And if the treating physician
determines that a medication can be self-administered, is appropriate for that
patient, we still want to see a vehicle for reimbursement for that American
consumer to have. Our experience with HCFA, as we have seen program memoranda
that have changed from state to state and medical director to medical director,
is one of inconsistency. And inconsistency is a simple word for us to say today,
but it's not a simple process to reverse, when it impacts an entire state at a
time and you have to go through a process to change it.
So, to answer
your question summarily, we would be very troubled, if we added another area of
responsibility to an agency that, at this point, we feel as very good
intentions, is over burdened, is understaffed, and we feel the issue of
administering a prescription drug benefit program is a complicated program that
needs a fresh approach, high energy, and complete attention to the details that
would be part of that process.
REP. BURR: I thank you. Mr. Chairman, let
me, also, point out for the purposes of the members, because I know Ms. Eshoo
and others, we have worked aggressively for a number of years to try to change a
policy at HCFA relating to immunosuppressant drugs, drugs that are needed to be
taken by every person, who gets an organ transplant, for their entire life.
Medicare's policy still is that we pay for three years. Now, we'll pay for an
additional organ transplant, when they reject it, because they can't afford the
continuation of the drugs. It is ludicrous for us to believe that we can have
example after example after example and not consider a new entity to do nothing
to administer --
REP. ESHOO: Would the gentleman just yield for a
moment?
REP. BURR: I have no time.
REP. BILIRAKIS: The
gentleman's time has expired, but I -- it is now the gentlelady's turn.
REP. ESHOO: It is now my time. Thank you, Mr. Chairman. I just the
reason I was asking you to yield was to point out that Congress put what you
just described in place as law on the books, and that's why we are trying
through Congress, as members of Congress, to change that. But, that's not HCFA,
okay. I mean, what's fair is fair.
REP. BURR: Regarding injectable
drugs, though, you would agree
REP. ESHOO: Exactly; exactly.
REP. BURR: -- it was HCFA.
REP. ESHOO: Thank you. Every single
one of the --
REP. BURR: The gentlelady would be happy to know that --
REP. ESHOO: Every single one of the panelists, I think whether members
agree or disagree with different parts of what you've said, I think you're just
absolutely terrific. I think if all of the members of this subcommittee, both
sides of the aisle, and all of you could stay in this room for the next 48 or 60
hours, we'd really come up with something, because we've got the expertise here
in front of us. So, thank you, very much.
I want to go to something that
I think has been touched, but perhaps members don't have the clearest of
understanding about, and that's the whole issue of risk -- of risk. Now, there
are different ideas; i.e., proposals. The Thomas proposal, although it is not in
writing -- again, I spent a lot of time at Ways and Means yesterday listening,
and what I believe is the case with the Thomas proposal, which will be in
legislation, is that the risk is assigned to insurers. Now, to Mr. Kahn, you
were saying that -- and I think you've caused some people considerable
heartburn, but, nonetheless, you know, I mean, you have said, look, we will not
and cannot design a vehicle freestanding for drug only insurance. But, the
Thomas plan assumes that the risk will be assumed, at least partially, by
insurers.
Can anyone tell me who these insurers are and how you assign
this risk? And I think that it's an important question; you're touching on some
of it and others have in different ways. Medicare human beings are called
beneficiaries. So, is there -- are they going to assume the risk? Are we, as a
nation, through a system, going to assume the risk? Or is there a vehicle that's
going to assume the risk and what is this vehicle?
So, in designing a
plan, members, especially of this subcommittee, because we have a huge
responsibility here -- or maybe we don't. Maybe it will be ripped out of this
subcommittee and just be dragged to the floor, which has happened before, too.
But, I mean, I want to be respectful of this, and who can answer this question
for us -- not just me, but for us? Anyone want to take a stab at it? Maybe Mr.
Kahn should start.
MR. KAHN: If there is a fallback or if there is a
government -- a broad program, then the risk is spread and the taxpayers are
paying part of it and the beneficiaries, through whatever premiums you charge,
are paying the other part, and then they're paying whatever the co-payment is
the cost sharing.
So, the rest of the risk is --
REP. ESHOO:
I'll just jump in. I mean, it's some advertising for my legislation. I mean, we
say that we encourage PBMs to bring the price down, whatever. Now, in the -- I
believe in the Thomas approach, they're required to do that. So, you know, I
mean, again, the whole idea of risk bearing, I don't --
MR. KAHN: You
really need to separate the -- the role of the PBMs, they're the mediators --
REP. ESHOO: Right.
MR. KAHN: -- and they can contain the base
cost and possibly the growth over time. But, they're -- I don't want to speak
for them, but, I mean, I don't think they're waiting here to accept 100 or even
50 percent of the risk.
REP. ESHOO: No, they're not. It's not the way
the work.
MR. KAHN: Because the dilemma --
REP. ESHOO: It's not
why they work well either.
MR. KAHN: Right. The dilemma here is that you
have many people who use no drugs and many people who use drugs in a very
predictable way, because they have a chronic illness or because of their
situation. And so, those who have a predictable use will want to buy the
coverage and those who don't will be less likely to. So, the selection is
obvious. And they you've got a product -- one product that you can't manage
across the whole comprehensive benefit package.
REP. ESHOO: But does
everybody understand this answer, though? I don't know if the members do; but,
again, what I'm trying to do, as you are -- each one of you are, I guess, is to
highlight the areas that we have to really be very concerned about, because if
there is an assignment of risk to a vehicle -- because we're all dealing with
words right now. I mean, you can dress up these vehicles. There was on the front
page of something yesterday, where they can wrap automobiles. Well, there's like
a vinyl wrap around this thing and we've got to know what the words mean. I
would much rather be up- front and say, as a nation, we are going to assign the
risk collectively to ourselves. And most frankly, members, if you're not willing
to assign dollars to this, then you're not for a drug prescription benefit,
because you can't do this on the skinny. You can't be skin flints and say we're
for it. It won't work.
So, I don't know if anyone else wants -- Karen,
do you want to take a stab at this risk business?
MS. IGNAGNI: Thank
you, Ms. Eshoo, I appreciate the opportunity. I'm not talking about a specific
proposal now. We, too, are looking forward to seeing all of the proposals and
analyzing them.
But, just in terms of the issue of risk and how you go
forth, one option that's been discussed by a number of members very well on the
panel has been the issue of government program risk pooling. Another way that's
often adopted in the private sector, and sometimes it works well and sometimes
it doesn't quite frankly, but there are opportunities, I think, to build on it,
which is the option of risk pooling. So to the extent you were taking
catastrophic costs and aggregating them and trying to distribute those costs
across a broad population and subsidizing from that, that's one strategy --
REP. ESHOO: I know what pooling -- risk pooling and that is. But, if
we're going to design a benefit, I think the question that needs to be answered
legislatively is who pays the risk.
MS. IGNAGNI: And I think that's one
of the issues that the committee is going to need to zero in on, as you look at
details of proposals. However, what we've seen is that there are ways to
distribute risk, other than one particular approach, and I think that that would
be part of the art of crafting the right proposal.
REP. ESHOO: Or, you
know, in a cruder language, who is left holding the bag. And so, you know, we
will have a revolution in this country, if, in fact, there is something that's
designed and marketed to be one thing and then turns out to be something else.
It's all going to come back on us for future members of Congress.
REP.
BILIRAKIS: It won't be the first time, though, will it?
REP. ESHOO: Mr.
Chairman, I think probably my time is up --
REP. BILIRAKIS: Yes, it is.
REP. ESHOO: -- but ask unanimous consent to insert these letters
relative to this issue in the record.
REP. BILIRAKIS: Without objection,
that is --
REP. ESHOO: Thank you, very much.
REP. BILIRAKIS: Dr.
Ganske -- REP. ESHOO: And thank you to all the panelists. I think you're
terrific.
REP. GANSKE: Thank you, Mr. Chairman. Well, I'm having a good
time of this. It's much more fun to sit in front of you than behind you. At the
Ways and Means hearing, they actually face you. I, also, think that there's a
likelihood that this will probably be the last time this committee looks at this
issue. It's my understanding that in Ways and Means, on Monday, or sometime next
week, this issue will be rammed through the committee. Republicans will march
lock step, vote for a bill, and it will come to the floor, and I think that
that's unfortunate on this issue, because there are a lot of issues in the
details that we need to know about.
There have been rumors, for
instance, that there will be a provision in this bill that would allow private
employers to opt out of their current promises on prescription drug benefits for
retirees at ?some buy out.? Who knows what that would be. Who knows, you know,
how much the taxpayer will be taking on for that provision.
When you
talk about a government fall back program, if there are no private programs,
would there be a government fall back program if, for instance, the Medicare
beneficiary didn't like either of the two private plans? Where will that
government program be? How do you compare apples to apples, in terms of
benefits? We've gone over a whole bunch of issues today that need to be
answered.
Ms. Ignagni and Mr. Kahn, you'd be happy to know that I'm not
going to ask you any questions about managed care today, with patient protection
-- patient protection at all. I'm not even going to ask you how much the
republican leadership had to lean on you to mute your criticism of the ?plans,?
as have been reported in the press.
I do, however, want to address the
essential problem, which many of you have addressed, and that is that when you
look at the current program and you look at those Medigap policies that do offer
prescription drug, as has been so aptly described by Mr. Pollack, because only
the beneficiaries that need it sign up for it, who have the expenses, then you
end up with very high premiums and this gets to Mr. Kahn's and Ms. Ignagni's
point about adverse risk selection. Now, you can cure that by requiring all
Medicare beneficiaries to be in the program. However, as Mr. Pollack aptly
pointed out, that's very difficult politically. And we're really looking, I
think, at a political logjam on this. So, I want to go to then the other chart
that Mr. Pollack pointed out, and that was, you know, for that widow living on
$12,500 a year.
And my question ties in with the
chairman's question. Now, he proposes a block grant, to somehow go back to the
state. I propose additional funding to go into expansion of QMB, SLMB with a
spend-out. So for instance, you could go for some specified percentage above
those programs, so that if a person has additional pharmacy expenses, they'd
deduct that from their income and then they get into the programs. And I
honestly think, then, that if you add a prescription drug benefit to those
programs, you'll see a much-increased participation, because seniors will really
like it and that will take care of some of the objections that Mr. Pollack has.
I think that, you know, in where we're at this year, I don't see the QMB program
as welfare. I see this as assistance to people, who are above the Medicaid
program, assistance with their premiums, and assistance with their co-payments.
Now, there -- you can say, well, maybe we shouldn't do anything on that
right now, because that could take some steam out of a more comprehensive
benefit later on. We see that argument frequently with bills on the Hill, don't
we? You know, don't put a little benefit on there, because it could prevent
overall reform. I think we're going to be facing overall reform regardless. But,
I do see that for this widow here, that would be a significant help.
My
question to you is this, okay: we've been talking about Medicare recipients a
lot. This is a very informed group. I think we ought to be looking at the high
costs of drugs for everyone. If you address that issue and you help the QMB,
SLMBs, then you're going to be helping those Medicare beneficiaries, who are
above them, with their prescription drug prices, just as you would be helping
everyone else with their prescription drug prices. So, my question is this: what
else can we do on this prescription drug cost problem that would have not just
Medicare beneficiaries, but everyone? Do you have any suggestions for us on
this? There are some proposals out there in Congress, as you know about. And we
can start with Ms. Ignagni. That's my question.
MS. IGNAGNI: Thank you,
Dr. Ganske. I'll be very quick, because I'm sure my colleagues want to interact
on this question, as well. I think that you raise a very I important point.
Remember, and you know well, that the increase in expenditure are roughly,
according to researchers, one-third price, two-thirds use. To really need to --
what we've tried to do in our manage care programs is create formularies, create
a range of strategies to, in fact, allocate resources as broadly as possible.
And what we face in the context of patient protection discussion is a continuous
chipping away and sometimes direct assault at many of the strategies that we've
used.
And by the way, as we look at the president's proposal, we know
he's talking about similar kinds of strategies to get costs under control. So,
if both proposals contemplate that, we think we can build on that. But, you
really need to look both at the use side and whether or not there's pressure to
go forward with two drugs, when other drugs can substitute. How do we encourage
generics and how do we get our hands around this issue, without necessarily and
unilaterally agreeing on one solution that is probably going to be limiting in
what can ultimately come out of it.
So, I think you're right, that this
carries over to patient protection and a number of the strategies that have been
proposed would do a very good job of continuing to get costs under control. It
will be harder to do.
REP. BILIRAKIS: The gentleman's time has expired.
Well, I think we have --
REP. GANSKE: Gentleman, could we hear from the
rest of the panel on that?
REP. BILIRAKIS: If the rest -- if the rest
take that much time, we're -- no, we -- I don't think we ought to give the rest
of the panel --
REP. GANSKE: Are we going to have another round, Mr.
Chairman?
REP. BILIRAKIS: I'm not contemplating another round. We've
been here since 10:00 this morning.
REP. GANSKE: Could I have a yes or
no question -- answer on --
REP. BILIRAKIS: By all means, a yes or no
question.
REP. GANSKE: Yes or no. Okay, here's my question: should we
repeal the advertising portion of the FDA reform bill?
MR. KAHN: Yes.
REP. GANSKE: Mr. Kahn said yes. Can we go down the line?
MS.
FEDER: No comment.
REP. GANSKE: No answer.
MR. POLLACK: Yes.
MR. DONOHO: I'm not fairly versed on the issue, so I can't give you a
good answer. I'd be happy to get back to you.
REP. GANSKE: Mr. Fuller,
did I hear from you?
MR. FULLER: We have no position.
REP.
GANSKE: Karen?
MS. IGNAGNI: Our members haven't taken a position on
this. I think that if you begin to do it in one sector, you're under pressure to
do it in others, and the question is, is that the right strategy. But, I don't
want to preempt our members. They have not taken a position.
REP.
GANSKE: Thank you, Mr. Chairman.
REP. BILIRAKIS: That was a very good
question, by the way.
Mr. Stupak?
REP. STUPAK: Thank you, Mr.
Chairman. In my opening statement, I showed this chart from my district, where
we have different prices for the same drug -- with Zolcor (ph), whether you're
in a federal supply service, major wholesaler, chain store, independent, average
retail, average wholesale price. Any of the plans before Congress right now
would stop this prices discrimination?
Karen?
MS. IGNAGNI: I
don't know the answer to that.
REP. STUPAK: Mr. Fuller?
MR.
FULLER: (Off mike.)
REP. STUPAK: Mr. Kahn?
MR. KAHN: No, they
wouldn't stop it, but they would get some people better prices.
REP.
STUPAK: Okay. Dr. Feder?
MS. FEDER: They would provide -- the
president's plan, for example, would provide people for a specified premium,
subsidized premium, drugs they could count on with known cost sharing. It would
be very different in that situation.
REP. STUPAK: Mr. Donoho?
MR. DONOHO: I think my colleague, Chip Kahn, said it best, no, it will
just change the market, in terms of who is available, to which price.
REP. STUPAK: Mr. Pollack?
MR. POLLACK: The administration's plan
would do a great deal to reduce those disparities.
REP. STUPAK:
Davenport-Ennis?
MS. DAVENPORT-ENNIS: Yes, and because, once again, we
have not had an opportunity to review all the plans, our constituents have not
taken a position.
REP. STUPAK: So the only way to get these prices down,
to get them somewhat reasonable, so we don't have 134 percent difference, is who
has the -- really the clout at the table, so to speak, to when they negotiate,
on behalf of uninsured seniors, right, basically?
MR.
DONOHO: Yes.
REP. STUPAK: Yes, yes?
MR. DONOHO: That's a very
big factor.
REP. STUPAK: Okay. Let me ask a more specific question,
then, Dr. Feder.
AAHP testified that many seniors, who wouldn't
otherwise have access to drug coverage, either because they don't have retiree
coverage or drugs -- they just can't afford them, can't buy them, so if they
can't afford a Medigap policy that covers drugs, are able to get drug benefits
through their Medicare+Choice Plan, won't we use that model as a way to get drug
coverage to all seniors? There's been some instability in that Medicare Plus
Choice market, but couldn't we provide extra funding, so that more plans would
get back to the market and provide drugs?
MS. FEDER: I think what we --
we certainly can provide -- through Medicare and through Medicare Plus Choice
plans, we can provide prescription drug coverage, but the way to do that is to
incorporate it into the core benefit of Medicare and then have the plans offer
that benefit. The way we're doing it now, and if I'm hearing you correctly, just
put some extra money in the plans, it's available in some places and not
available in others.
REP. STUPAK: Well, it's not in mine. But, at some
length --
MS. FEDER: Correct, in some places. But, it is a function of
where the plans find that given a -- given level of payment, they can profitably
offer that benefit. And as we have worked over the last several years, to
constrain Medicare costs and eliminate the deficit, we have constrained both fee
for service and Medicare Plus Choice Payments, and we're finding that there's
not as much room in this extra payment to offer this benefit. It's not a way to
do it, because it doesn't guarantee the availability of that benefit everyplace.
It should not rest on whether a plan wants to be there, whether they find it
profitable. That's not the way to do it.
REP. STUPAK: Karen?
MS.
IGNAGNI: I appreciate the question and I believe we have a track record that can
be built on and with additional resources, that's a major start at moving in
this direction. But, I don't want to mislead you about the need for additional
resources now on the basic side before we get to additional. But, it's a model
that can be built on.
REP. STUPAK: And I don't totally reject the model
and if we had some more resources, maybe we can get there, but how do you
overcome what I see, and maybe I'm using the wrong words, instability in the
private market insurance? I still see a cherry picking going on. My district,
they probably don't even offer it. I'm sure if I am 70 years old, I start having
a battle with cancer, I'm sure I'm going to be dropped, because I get too
expensive.
MS. IGNAGNI: Well, actually, Mr. Stupak, as you know, one of
the accomplishments of our programs actually is to do a better job managing
chronic illness. The existence of prescription drugs in most of the Medicare
Plus Choice programs has actually recruited in not only the lower income, and
the HCFA data confirm that absolutely, but people with the highest
health care costs, because of our ability to coordinate that
care and offer them more. That's, I think, a model that can, in fact, be built
on. And in the rural areas, one of the major barriers, our
health plans would very much like to serve the rural community,
has been the unwillingness of single health care systems that
don't have any competition to actually contract with our plans. So, we need to
talk about that, as we think about going forward. We would love to be
participating in your area and other areas where we haven't had the opportunity.
REP. STUPAK: Do you want to add anything further, Dr. Feder?
MS.
FEDER: Just that I think it's critical that if you don't define the benefit,
you're leaving too much discretion to plans. What you need to do is define the
benefit and then have the payment mechanism that plans can know what it is that
they're suppose to bid on or offer and proceed that way.
MS. IGNAGNI:
And we agree with that. We agree with the defined benefit, for purposes of
bidding.
MR. KAHN: And it's, also, important to point out that the
pharmaceutical benefits that are generally offered now by
health plans under Medicare Plus Choice are not as generous as
the ones you -- all these different plans anticipated. So, there's got to be
more funding to get those drugs at the level that these different bills
anticipate.
REP. STUPAK: So, we're going to have someone ?negotiating?
and you've got to have a defined plan, if that's what I'm hearing.
MR.
KAHN: The plans can do the negotiation or work through PBMs. The question is the
money.
MS. IGNAGNI: And define benefit --
REP. STUPAK: Defined
-- yeah, you've got to have defined. Thank you, Mr. Chairman.
REP.
BILIRAKIS: I thank the gentleman. Mr. Bryant?
REP. BRYANT: Thank you,
Mr. Chairman, and the panel. It's been a long day so far. Let me just take you
back on a couple of questions my friend from Michigan led us in to. Mr. Donoho,
you've been quiet here for a while. Let me ask you a question directly. In your
statement, you indicate that the drug benefit should be administered through the
private sector and, also, the competition among private sector PBMs would
deliver significant cost savings and spur innovation. In light of this issue of
the cost that we've been talking about, the high cost of drugs, would you expand
on your statement?
MR. DONOHO: Well, it's been our experience in the
private sector, anyway, that the competition has spurred the cost savings. If
you talk about decision directly let's take on drug costs, it's the competition
within an PBM to -- in terms of formulary development, after you've done your
P&T analysis, you've looked at your -- you've covered all of your classes of
product and you find out that there are two competing products in the
marketplace today, then you can go back and get a reduced reimbursement. The
question, I think, in my opening statement was: has the federal government --
our concern, in terms of the federal government operating a program, is the fact
do they have the will to put that kind of hard decision on the table, because
the hard decision on the table, then, is to say to somebody, listen, this
product, if you have competing plans, you can have choice; but if you have the
hard decision of saying I'm not going to cover this particular product and then
you've got no choice to seniors, then you've got a different kind of kettle of
fish and you've got to have a prior authorization, like our plans do. But the
question then becomes, and that's the way you get leverage to negotiate it, it
isn't based on volume -- let me make sure that you understand that -- it's based
on market share. If you can move market share for drug manufacturers, they'll
negotiate on price. That's been our experience.
REP. BRYANT: Okay. Thank
you. Let me jump to another issue very quickly, in terms of those of us that, in
this whole concept, are, also, concerned with consumer protections. The
bipartisan bill that we're talking about today primarily -- I would indicate
that in that, for the first time, we create an office of beneficiary assistance
within this MBA, this outside of HCFA agency that will administer this. It's an
office of beneficiary assistance and its purpose is to provide education
materials to the beneficiaries without the entire Medicare program. Within the
office of beneficiary assistance, there will be a Medicare ombudsman, whose sole
purpose is to assist beneficiaries, when they're having trouble with claims and
appeals, getting access to care, and generally need help or answers to
questions. Such a one-stop central beneficiary assistance oriented office does
not currently exist within the HCFA and for those reasons I think, again,
particularly the panelists on the end that are from citizen's groups and family
groups and so forth, that, also, should be of interest there.
Ms.
Ignagni, on the end, a question -- I think we've talked about this a little bit,
but let me clearly get your response to this, in terms of the criticism of this
bipartisan bill and building in flexibility that would allow
health plans to provide a standard benefit or a benefit that is
actuarial equivalent. That criticism that that would encourage
health plans to develop proposals only to attract the
health beneficiaries, cherry picking, how do you respond to
that particular issue?
MS. IGNAGNI: Well, first of all, I think, as I
understand the proposal, and I appreciate the question, it is to have a full
benefit. There will be a clearly set out benefit. The concept of actuarial
equivalence would then allow us to do better than the floor, which is what we do
now in Medicare Plus Choice, as you know. We have a floor set of Medicare
benefits. We meet that floor.
But because we are more efficient at
disease management, coordination of care, etc., we can for the same dollar value
offer beneficiaries more, which is why it's such a travesty that three weeks
before the date on which we have to notify HCFA of what plans will be forced out
of this program who are serving 6.2 million people, that we're not moving to do
something about that.
We've taken heart that this committee in fact has
made that a major part of its agenda over the years.
So the idea that
actuarial equivalents would somehow mean that there would be no baseline benefit
is not something that I understand this proposal before you, and we're all
looking for the details to be.
So I think what we all are saying on this
panel is we agree with the concept of a floor. That's where you start. We in the
health plan community can do better than that for
beneficiaries. We would like to be able to be given the opportunity to do better
than that for beneficiaries.
REP. BRYANT: Just following up on that, I'm
curious if you have an opinion about our move from the administration of this
from HCFA over to an outside agency that we established. Do you think it would
help planned health plans, do you think this would help
health plans participate in the Medicare Plus choice?
MS. IGNAGNI: Two and a half years sago --
REP. BRYANT: -- on
this on Medicare Plus Choice, as you know.
MS. IGNAGNI: Two and a half
years ago there was a reorganization at HCFA which I believe based on what we've
seen from the administrator recently, is an acknowledgement of much of what our
members have said for two and a half years, that that reorganization has not
worked.
The administrator herself, to her credit, has begun to A,
recognize it; B, put in place in some strategies to respond to that.
The
concept here is whether you set up a new agency within HHS or whether you
aggregate the responsibilities of HCFA differently. We have to do things
differently than the way we're doing it now. We have instability, we have no
predictability with respect to the regulatory environment. We have 900 pages of
regulatory compliance that we started with, but then virtually every two weeks
there's been a policy letter which we have to comply with.
I'm pleased
that the administrator has recognized this. She's moving in a particular
direction. I think there are many options, and for us the most important thing
is to aggregate these responsibilities, somehow make progress on the conflict
within HCFA which is purchaser, regulator, competitor. How are we going to sort
that out?
There was a model that worked well in the past. We're
beginning to go back to that model. I think that's a big and important step
forward.
REP. BRYANT: I thank the panel and yield back.
CHAIRMAN
BILIRAKIS: Mr. Barrett, the current ranking member to inquire.
REP.
BARRETT: Thank you, Mr. Chairman.
Mr. Kahn, notwithstanding the red
tinge in your beard, I don't think of you as a flaming radical. (Laughter) And
it strikes me almost as counterintuitive that you're here today representing the
insurance agency and yet telling us that your industry feels that this approach
that's being advanced has some problems to it.
It strikes me as again
odd, although I must admit that my feelings run the same way.
Can you
talk a little bit more, just about the adverse selection issue that you see out
there that I've got to believe you think is a fatal flaw to this proposal or you
wouldn't be so up front about it.
MR. KAHN: Let me say, I believe that
in the case of drug-only policies and the fact that 35 percent of Medicare
beneficiaries have no coverage and another number has sort of mixed coverage,
you would assume that if this was a good product he would be there. It's not.
There are not companies seeking to do it, and actually those companies that have
supplemental policies, the H, I, and J, a lot of companies have left that, and
there are a few companies left in it, but they're not enthusiastic about that
coverage because they end up paying actually there the highest prices just like
the beneficiaries who have no coverage.
But I think part of the adverse
selection issue goes down to this. You've got some people that don't use any
drugs; a very large number that use between $500 and
$2500 worth of drugs which can be significant on somebody's
budget, particularly if you're just living on social security or a little bit
extra above social security, but at the same time that's not enough money to
call it catastrophic.
And the fact is only four percent of expenditures
for drugs is over four percent.
Actually, one of the interesting things
here for the elderly is that drugs are different from all other kinds of
health expenditures. In all the areas of
health, when you look at the total, most of the spending is
done by a few people. The trouble with drugs is it's done by many people and
it's frequently predictable, and that's why we don't think you could sell an
affordable policy.
At the same time, there's another factor. I'll just
take -- I wish I had copies of this chart to pass around.
The HCFA
actuaries projected drug costs in March of '99 and they thought that by 2007
they would grow to about $170 billion. Six months later, they
decided no, they were wrong, looking at the market, seven or eight years out
they'd be at $223 billion.
The point I make is that
when an actuary looks at numbers like that and that kind of volatility, if he's
stuck or she's stuck with a recommendation for a premium on 399, and the
insurance commissioner or whoever says that's the premium, then when they go
back and say wait a second, we miscalculated because there's a new report now
that says six months later that we were wrong, they're going to be stuck. That's
how the actuaries look at this. This is just not an individual benefit that we
can provide insurance for.
REP. BARRETT: Ms. Davenport-Ennis talked
about your patients or your clients, and say a person with cancer or a person
with a disability.
I'm going to ask each of you just a yes or no
question. Do you think that there is a private insurance company out there that
would sell a drug-only policy to a person with cancer, and that person, say at
200 percent of poverty, could afford it?
Ms. Ignagni?
MS.
IGNAGNI: Our plans would do it in the context of Medicare Plus Choice.
REP. BARRETT: That wasn't my question. My question was a drug- only
policy.
MS. IGNAGNI: It depends on what the rules are.
REP.
BARRETT: What do you mean, it depends on what the rules are?
MS.
IGNAGNI: We haven't seen the proposal, we're looking forward to seeing the
proposal.
REP. BARRETT: But I think we understand what we're talking
about here. It would be a private company --
MS. IGNAGNI: Let me give
you an example --
REP. BARRETT: I don't want an example.
MS.
IGNAGNI: Okay. Well, if you want to understand the answer I need to give you an
example.
REP. BARRETT: I'll go to Mr. Fuller.
MR. FULLER: I
really have to yield to the people in the insurance -- I don't know.
REP. BARRETT: Intuitively, what do you think?
MR. FULLER: No. I
can't speak for all companies but at least my own, I doubt they would offer the
policy in the first place.
REP. BARRETT: Dr. Feder?
DR. FEDER:
I'd defer to Chip Kahn.
MR. KAHN: I don't know.
REP. BARRETT:
Intuitively, as a businessman. Would you sell this product -- Do you think you
could make money selling a drug-only insurance policy to a 68 year old woman
making $20,000 a year who has breast cancer?
MR. KAHN:
Intuitively, maybe not. Probably not.
REP. BARRETT: Mr. Pollack?
MR. POLLACK: It may be possible. I wouldn't take the odds with me to Las
Vegas.
MS. DAVENPORT-ENNIS: I guess that as a ten year survivor, and one
who does not have to take medications to deal with my former diagnosis, I would
not be able to answer you as a specialist. I would only be able to say that if
you bet the odds on me you would have done all right in selling the policy, but
I can't answer the question for the community.
MR. KAHN: Mr. Barrett,
excuse me, but I think you really ask the wrong question. The question is, are
there enough people who are well but concerned that they might have a risk that
would buy the policy so that you could sell it to the 68 year old who already
has --
REP. BARRETT: Why would I buy the policy if I were well?
MR. KAHN: In our society people buy insurance every day for a lot of
reasons. My point is that if you could get enough people to buy insurance in
this case, you could insure the risk. Our concern is that those people who are
well now, because of the costs in the payoff year, are not likely to buy it.
REP. BARRETT: My time has run out, but let me follow up on that then.
If this bill became law tomorrow, a 40 year old man, 40 year old woman,
would they buy this policy? Of course not.
MR. KAHN: I would say a 65
year old who was perfectly well would probably not buy it, and that's the
problem.
REP. BURR: Would the Chairman entertain a question? The acting
Chairman?
REP. GANSKE: The Chair would recognize the gentleman for one
minute.
REP. BURR: Thank you. Maybe the Chair could help us on this,
because this is one of the details of the plan that we don't know about. That
is, will everybody when they turn 65 be given one chance to enter this? Or will
you have an annual chance to get into this program? Most people, if they have an
annual chance, and they have no prescription costs, will not. But they may think
well, maybe I'll get, maybe I'll need some prescription drugs in September or
August. I could just eat those costs until January 1 comes up and then since I
need the drugs then I'll get into the plan.
Can the Chair answer my
question? Is there an annual up for this? Or is this a one-time offer? Or is the
detail being worked out?
REP. BURR: The Chair is not on today's panel,
but I'd be happy to turn that over to Mr. Kahn. (Laughter)
MR. KAHN: I
haven't seen the bill. This is an important question.
REP. BURR: It is
an important question, and the gentleman's time has expired.
The Chair
would announce to the members that we're going to do a second round.
Has
the gentleman from Ohio gone yet?
REP. STRICKLAND: Nope, I haven't.
REP. BURR: Then the Chair would recognize Mr. Strickland for five
minutes.
REP. STRICKLAND: Thank you.
This is a fascinating
hearing. I'm glad we're having it. I think if we've kept our ears open and
listened we've probably learned a lot.
I'd just like to say, Mr. Fuller,
you make a statement in your testimony that you think the highly efficient
community pharmacy infrastructure needs to be protected, and I feel the same
way.
Are you familiar, sir, with Mr. Allen's bill? And if so, would you
tell me what you think of that bill and why you either think it's a good idea or
a bad idea.
MR. FULLER: First, I thank you for sharing the concern about
community pharmacy. I also appreciate the comment that the Chairman made earlier
that some of the provisions that we've talked about are in fact being
incorporated into the legislation.
I'm familiar with the Allen bill. I
probably am not going to satisfy you. We have not taken a position on it. Our
companies have not taken a position on it. We're concerned about a number of
elements in it. Any kind of price control mechanism philosophically is a concern
to us, no matter who it applies to because it at some point is going to trickle
down to the pharmacy and be in force, so we're concerned about that. We haven't
taken a position on it.
REP. STRICKLAND: Thank you.
I
continuously hear comments from seniors who are concerned about the cost, and I
think the cost is something we ought to be concerned about as well. And we know
that as Mr. Pollack has said in his testimony, that tax dollars are used to
promote research and that research leads to new pharmaceuticals and those
pharmaceuticals are sold to consumers -- to American consumers and to foreign
consumers. And I don't think there's any real debate about the fact that foreign
consumers, pharmaceutical medications, pay significantly less than American
consumers. And you're here because you're experts.
I would just like
your personal opinion. You don't have to even speak for the agency or
association or university you're with, but I would like your personal opinion.
Do you think the government should be concerned about that and should
try to find some way to keep American consumers from experiencing this type of
price discrimination given the fact that so many of these pharmaceuticals are
developed with American tax dollars in part?
MS. IGNAGNI: I do, Mr.
Strickland, and I think there are other ways, however, in addition to price
controls that one can get at that issue.
MR. FULLER: I think we have to
be concerned about it, and certainly we're seeing seniors every day that are
going across the border to get drugs. There's proposals to allow drugs to be
purchased internationally and brought here. There's concern. So I think it's
going to have to be examined pretty carefully.
I would add that there's
also very noticeable differences in the availability of certain drugs and
medicines, both generic as well as branded drugs in these countries that control
prices, so there are some offsets here that you would also have to take into
consideration when you look at the overall issue.
MR. KAHN: I think
there needs to be a complete reevaluation.
I'm not an expert in trade
law, but of our trade law. It would be good to put some pressure on the rest of
the world because it doesn't make any sense for us to pay the basic price and
everybody else to pay the price at the margin.
DR. FEDER: I guess I'd
look at it from the opposite perspective. I think the reason it is this way is
because everybody else in the world provides everybody in their country
health insurance and decides what essentially they're willing
to pay. We don't do that in this country.
There are many ways for us to
consider beginning to lower what we're willing to pay and I think that's what we
ought to be doing.
MR. POLLACK: I think we have to be concerned about
price controls, and being an American I think I'd turn around and say maybe we
should look at designing a system to take better advantage of competition within
the system.
If you look at what we've done on price controls to date,
like on Title 19 Medicaid, what's the impact been? And like our people's
business, since you have a best price can we negotiate down below best price
without impacting the Medicaid program?
We've got competition in the
market. How do you design a system to take advantage of that competition I think
is the answer we'd give.
MR. DONOHO: Mr. Strickland, I would say that we
need to do something not just because there are inequities from one country to
another. This is an affordability crisis for a lot of people. That's why we need
to do something.
I don't think we need price controls. I think we need
to give the Medicare program the same kind of leveraging authority that other
institutions have. Hospitals, HMOs, others, they use their leveraging authority
to get prices down. We should do the same thing for seniors through the Medicare
program.
MS. DAVENPORT-ENNIS: Certainly I would agree that for our
constituents there is not a patient that we deal with when we get into debt
crisis resolution as a result of their diagnosis that the cost of all
health care does not become problematic for them including the
cost of pharmaceutical agents.
As we look at many discussions in which
we talk about what the pharmaceutical agents are sold for abroad, what they are
sold for in America, there are three conclusions that we come back to routinely.
Why is that happening? What are the pressures that we can put in place in this
country to look thoughtfully at why is there such a wide variation from this
country to another country? And what can we do to empower the individual
consumer in America, and particularly the senior consumer, to negotiate for the
most attractive prices available to them in purchasing the agents that they
need.
We are not a part of the pricing structure for the pharmaceutical
industry. Therefore we don't have any concept of how those figures are
originally introduced to the market, and I think it's a fair piece of the
evaluation, that that would also have to be looked at as a nation.
REP.
STRICKLAND: Mr. Chairman, can I make a concluding sentence?
REP. BURR:
The gentleman may.
REP. STRICKLAND: We hear about the world economy and
the fact that we're a part of it, but as long as other nations have controls and
our nation does not have some control, it is inevitable, it seems to me, that
the American consumer is going to subsidize the foreign consumer.
Thank
you.
REP. BURR: The gentleman's time has expired. The Chair would
recognize the gentleman from Iowa, Dr. Ganske, for five minutes.
REP.
GANSKE: Thank you, Mr. Chairman. I want to try to get a handle on the Medicare
HMOs, and Ms. Ignagni you can help me on this. There have been a lot of reports
about the Medicare HMOs dropping out of the market because you haven't received
a large enough update increase.
Are we seeing Medicare HMOs drop out of
markets where their AAPCC is say above 450?
MS. IGNAGNI: We have, and we
may as July 1 approaches. I think that one of the things that we're working very
hard, and are looking forward to working with this committee is trying to avoid
that, stabilizing this program, and continuing to allow this to be a choice for
people because they can receive so many benefits. These are people on very fixed
incomes, limited means.
REP. GANSKE: This is even despite the fact that
Medicare HMOs are increasing their deductibles and co-payments for their
prescription drug coverage.
MS. IGNAGNI: Yes, sir.
REP. GANSKE:
Just so everyone is clear, the Medicare HMO is paid on a monthly basis per
enrollee an amount determined by a formula called the AAPCC, adjusted per capita
cost something.
How much additional funds do you need for a prescription
benefit do you think, for Medicare HMOs to be able to continue to offer
prescription drug coverage?
MS. IGNAGNI: First of all, sir, I think the
first thing we need is to stabilize the program. Before we get to additional
benefits we need -- There's a great deal of unfinished business to fulfill that
promise that was made to people in 1997 that they would have a choice.
One of the most effective strategies there is to impose a safety net so
that the purchasing power of the Medicare Plus Choice capitation or
reimbursement to the plan is actually keeping pace with what the costs of
purchasing health care from the academic teaching centers, from
the physicians in that community, et cetera.
What we have is a major
problem because we've lost that relationship.
REP. GANSKE: So you would
like to see an increase across the board.
MS. IGNAGNI: Across the board
--
REP. GANSKE: So for instance there are some counties where the
payment for a senior citizen could be as much as $750. What
you're saying is that those, in order to stabilize your drug benefit programs,
even for those in those areas they need a higher increase in their adjustment.
Is that right?
MS. IGNAGNI: Yes and no. Number one, we have to stabilize
those programs across the country, and there are a range of strategies to do
that. We have to deal with the particular problems of the blend, counties,
making sure that that's funded, irrespective of what happens on budget
neutrality, et cetera. Number one.
The floor issue, number two. We have
to have a better risk adjustment system than we do now. The one we have on the
table does not work, is not encouraging disease management or the kinds of
strategies we've employed so well.
Once you do that, and that can be
done and it can be done this year. Once you do that then you need to do
something additional for the prescription drug question.
REP. GANSKE:
You're telling me you're seeing Medicare HMOs drop out of AAPCC areas that are
significantly above $450. And we heard in Ways and Means
yesterday that they're talking about raising the AAPCC to a floor of
$475.
Now that's only about $50 higher
than what it currently is in Des Moines, Iowa where there really aren't any
plans being offered.
How high would you have to get that AAPCC to see
HMOs move into more rural areas where there have been lower AAPCCs? Because we
know in the rural areas we have a disproportionate number of very elderly that
have a higher percentage of prescription drug costs than in some of the more
urban areas.
Do you have any ideas what levels we would be looking at?
MS. IGNAGNI: In many cases, Dr. Ganske, and I know that you know this
because we've had some discussions about it, that this issue about presence of
Medicare Plus Choice in rural areas in many cases has little to do with payment.
It has much more to do with whether a provider system, often with no
competition, is actually willing to negotiate with the health
plan. In a number of situations because there is not competition in the market
in the provider community, individual systems are unwilling to contract.
REP. GANSKE: I understand there are other factors that enter into it,
but it would appear to me that on the face that one would have to significantly
increase that floor above what I hear is currently being proposed. I think
you're looking at something more in the range of $600 or
$650.
MS. IGNAGNI: I think if we think that the way to
solve the Medicare Plus Choice systemic challenge now is to only increase the
payment in rural areas, then I think we're kidding ourselves and I think we will
let a number of beneficiaries down. There is more that needs to be done.
I'd be happy to spend some time with you on some of the specifics
because what I'm excited about is people are beginning to talk very specifically
about them.
REP. GANSKE: Yesterday Mr. McDermott asked Chairman Thomas a
question about well, if studies have shown that payments to Medicare HMOs have
actually cost more than what they would have, and you're familiar with some of
those studies, why is it that Republicans want to move Medicare beneficiaries,
all Medicare beneficiaries into HMOs? And Mr. Thomas said this, and I'd like
your response to this.
He said, "Well, that only tells half the story."
In other words, he agreed with the initial premise. Then he said, "We'd like to
see competitive HMOs."
Is it your position that you would like to see
the majority of Medicare beneficiaries in Medicare HMOs?
MS. IGNAGNI: I
think we offer opportunities for Medicare beneficiaries. Right now in the here
and now, and I couldn't responsibly answer any other way, we have to build
capacity to accommodate all beneficiaries, so I don't want to mislead you about
that, so I wouldn't make that promise. But what I can actually tell you is
these, the systems that we have have done a better job in managing the chronic
care challenges of people who are over 65, and the literature is beginning now
to support that.
So we have coordinated care, we have early
intervention. But what we've done is create a promise that hasn't been funded.
So we need to do the second step which is to fund the promise so that more and
more seniors can take advantage.
And there's no lack of interest.
There's a great deal of interest. But now because plans have been forced out,
seniors in fact are faced with situations where in many markets there is not a
plan, or likely to be no plan in the future. And that's not what we promised in
'97, and that's not what people indicated they wanted. We have the highest
degree of satisfaction in the Medicare population in our health
plans because of the comprehensiveness and the breadth of the intervention here,
and we want to be able to partner with the best physicians and best facilities
around the country to continue to do this job.
REP. GANSKE: You are an
effective spokeswoman. I would point out that sometimes patients when they get
sick decide to leave Medicare HMOs and then go into fee for service and there
may be some adverse risk selection.
But I appreciate the Chair's
indulgence. Thank you.
REP. BURR: I thank the gentleman for his
question.
The Chair would recognize Mr. Deutsch.
REP. DEUTSCH:
Thank you Mr. Chairman.
Ms. Ignagni, if I could follow up a little bit
on some of the questions that Dr. Ganske was talking about.
From your
perspective why is it important to stabilize the Medicare Plus Choice program if
we are going to eventually have prescription drug coverage for all Medicare
beneficiaries even who are not in Medicare HMOs?
MS. IGNAGNI: Because I
think we can build on this model and we can do better. So to the extent that you
establish a floor benefit package, however you construct the proposal, whether
you look at the bipartisan proposal, where everyone is looking for the details,
and we're looking for them as well, and will be looking to analyze them; or the
President's proposal; or the Democrats' proposal that we've seen thus far. I
think there is a broad scale recognition that once you establish a floor,
because of the nature of coordinated care systems we can do more for seniors,
and we're looking forward to doing that.
But we can't build on that
track record unless we stabilize the existing program.
REP. DEUTSCH:
It's interesting, in my district I have both an urban setting, a traditional
health care urban setting, and as you're aware also, Monroe
County, the key is actually technically a rural health system
because Monroe keep [tape skip] a competitive HMO market. And in fact one of the
phenomenon is people using fake addresses to actually get prescription drug
coverage because they can't get HMO coverage and the only way they can get the
prescription drug coverage is by using a neighbor, a friend, a relative's
address in a county that has an HMO that services -- which is illegal, and I
don't know the enforcement side of it or how much enforcement is going on. But
it sort of talks about the problem.
In terms of just seeing how many
join HMOs because of that need, do you have any feel or any empirical data in
terms of that marketing tool, that coverage of prescription drugs, what it
means?
MS. IGNAGNI: We know that a number of beneficiaries have joined
our plans because of the existence of prescription drugs. So the tenor of your
question is absolutely right.
However we also know, and I think the next
point is not often recognized or not recognized enough, that people on fixed
incomes value the cost containment protection number one, the cost sharing
protection, I'm sorry.
The second that they value, element of what we
provide, is this notion of catastrophic coverage which as we've heard this
morning was embarked upon in the traditional Medicare program, and then
ultimately that was repealed.
We continue to offer not only cost sharing
protection but catastrophic coverage, and that's a very, very strong value for
individuals on a limited income.
REP. DEUTSCH: We had about five minutes
on our introduction, let me sort of follow up, and it's really not a question,
may a rhetorical question. But I think one of the interesting things about
prescription drug coverage, it's really sort of fascinating talking to
constituents -- not just Medicare constituents, but people's parents are on
Medicare, but also I think what's really interesting is talking to physicians
who are not participating in HMOs, how supportive they are of prescription drug
coverage. Because I think physicians who I've talked to literally see people
leaving their practice because of HMO coverage because they have someone who is
a middle class senior who's spending $500 a month on
prescriptions and that person, even though they don't want to leave their
cardiologist or whoever, effectively they don't have a choice and have to join
an HMO to get the prescription drug coverage. And they know that if there was a
prescription drug coverage under Medicare, that's a person who they see, who
they talk to, who they know as a patient, who wouldn't leave.
It's kind
of a strange phenomena.
If anything, we keep trying to shift the
pendulum where it's an even choice, where consumers really have a choice and
it's level, and in some cases, maybe the incentive to join an HMO has gotten too
high. Reimbursement might have been too high. The extra benefits,
health care benefits everything else, might be too much, and
then this sort of, we've leveled it maybe now the other way. So this can kind of
level back.
One of the interesting things that maybe you can share as
well, and if anyone else on the panel, let me just open this up as well to
anyone else who wants to respond. But one of the issues that we have talked
about in prescription drugs is the actual potential cost savings of providing
prescription drug coverage. Because avoiding adverse health
consequences because people don't tale it.
From the HMO perspective,
where you're basically indemnifying the person, do you have empirical evidence
to sort of talk about your savings, about people getting the drugs regardless of
their cost, which is effectively the way HMOs can do that.
MS. IGNAGNI:
Yes, because the existence of prescription drugs allows us to do the early
intervention to prevent the catastrophic illness down the road. There's no
question about that.
REP. DEUTSCH: Does anyone else want to respond to
that?
MR. POLLACK: I'll give you a real life example. One of the issues
with the elderly is hypertension. If you look at hypertension in a managed
benefit, hypertension non-compliance is about 49 percent. If you look at that
about a third of them, this is a study done by one of our members, if you look
at a third of those require hospitalization. The average hospitalization is at
$15,000 a year.
So if you can increase compliance, if
you can maintain people on hypertension, look at the money that you're saving.
It's just one simple study.
MR. KAHN: I think we're looking at Medicare
from the standpoint of drugs because of the discussion today, and I think you
tend to get a little bit perverted. I think from the standpoint of the
beneficiary, you're describing how they join HMOs because in a sense they get a
deal, and that's why they give up fee for service.
I think we have to,
and I can't say this year or next year, but there is a point in the future where
in a sense Medicare Plus Choice isn't the problem, fee for service Medicare is
the problem. Because whether it's home health, skilled nursing
facilities, outpatient hospital departments. I've spent 13 years working on
payment policy and I can tell you it's about over.
The way HCFA applies
the rules that Congress passed is such that it's going to be very hard for the
infrastructure through this old fee for service system to be sustained. I don't
know what the crisis is, and obviously in the skilled nursing facility area you
can make the argument there are a lot of people that came in and abused Medicare
for years. A lot of providers. You can see what the stock market is doing to
them today. Half of them are in bankruptcy.
But the point is that from
an infrastructure standpoint to serve the beneficiary, I think the fee for
service system is extremely sick and that if we let the managed care
infrastructure fade, which it's about to do, I think we're going to have some
real organizational problems in terms of how to get services to beneficiaries.
And this is a serious problem.
There are a lot of physicians now that
don't like to take fee for service Medicare because of the way Medicare pays.
DR. FEDER: Mr. Deutsch, I can't let that one stand. I deferred once to
Chip, I can't do it again.
It seems to me that what we have, there is an
ongoing issue in managing the Medicare program which I think is intrinsic to
managing a health insurance program which is trying to balance
what we want to pay and the access to quality care that we desire.
It is
true that in the last few years we have adopted some new prospective payment
systems that need work, and I think will continue to need work. But to say that
the fee for service system is sick when it continues to guarantee millions of
Medicare beneficiaries access to care and has simultaneously been able to slow
its cost growth so that we've extended the life of the trust fund to 2025,
doesn't make any sense to me.
I think on the contrary, it really is that
there were claims made for managed care and what it could deliver, and I don't
think we've seen delivery on those claims and performance.
My view is
that we should not have a situation, as I said before to Mr. Stupak, when you
talk about having a level playing field, we need that core benefit. And we need
to have people not moving in and out of fee for service and managed care because
they can get extra benefits one place and not another.
We need to have a
core benefit, make it a reasonable price or a reasonable system of paying for
that core benefit in fee for service and S5 and then enable beneficiaries to
choose.
REP. BURR: I thank the gentleman from Florida.
You've
got nine minutes.
I really did have a goal when I got in the seat to try
to get these witnesses out by 3:30, and you have had an extremely long day.
I will not ask you questions but I will summarize the questions that I
would have asked with my won answers, if that's okay, with you. (Laughter)
We've got a huge challenge. I think that's evident by the varying
degrees of answers, but more importantly the questions that still remain
unanswered. That means that we have to go into new ground and to plow that
ground.
Illness is not predictable. Illness is not predictable if you're
young, illness is not predictable if you're old. It puts a unique challenge on
us to provide not only the coverage for those who are at risk, whether it's
because of a financial point in the sand that was set or because of a current
health problem, but we're also challenged to produce a product
that really resembles more of a life insurance product. A product that ensures
individuals who have the means today to pay for drug costs that they're
protected against the drug costs of tomorrow. But more importantly, against the
terminal illness that might strike and that the resources might not be there for
an unpredictable outflow of money.
So the challenge for us is to make
that predictable, to bring some parameters to the process and to respond to not
only those who choose between food and drugs, but to try to design a program
that fits the needs of the long term security and predictability that has been
expressed by many of you.
One of the other most difficult things is to
integrate a new program into a system that has had a difficult time at making
new coverage decisions. I think every member of the subcommittee at some point
in any given month has dealt with a manufacturer of a medical device, a
pharmaceutical, a member of a patient's group who seeks to try to accelerate the
coverage decisions at HCFA. Because technology changes with such a fast pace
today HCFA, for whatever reason, is unable to make those coverage determinations
in a fashion that we would all want for the quality of care of the patient. I
think that's one thing that has contributed to many of us looking outside of
HCFA, to create a new entity whose sole focus it is to administer the Medicare
prescription drug benefit, regardless of how it's configured.
I would
say that in the proposal that hopefully will be out next week, we would also
create a new responsibility within the benefit administration, Medicare benefit
administration, which would be a Medicare ombudsman.
One place for
everybody to go, whether it's for an appeals process, a coverage determination,
somewhere that you can go that covers not only what HCFA's got responsibility
for, but hopefully the new drug entity and the administration of that.
Somebody mentioned earlier stock prices or Wall Street.
Believe
it or not, that is a consideration in this plan, too.
We understand that
our hopes at bringing down drug costs and meeting the challenges of a doubling
of the population under Medicare in many cases can only be met through new
technological breakthroughs and non-invasive medical devices, and
pharmaceuticals that actually do cure things that today we treat and maintain in
a very expensive way.
We're confident that we have to continue a
commitment. Not only a public commitment to the NIH for research, but we have to
make sure that the incentive exists in the system for private sector companies
to continue their research and development to find those breakthroughs. Without
that, the future will be predictable, and I think Chip you alluded to a
deterioration in one part of the system. That we're talking about is a
deterioration of the entire system.
I remember three and a half years
ago when I landed in the Czech Republic and had an opportunity fresh into a new
democracy to sit down with their Minister of Health. They had a
hybrid Soviet system that they had continued over from their independence.
I also had an opportunity to go back last year on the day that the
Minister of Health was headed to the government to drop off
their new health care plan. It very much resembled the hybrid
of our managed care system. But the question was why?
They went through
a very detailed statement about the lack of money, and they cut reimbursements
to try to save money, and when they cut reimbursements, doctors began to leave.
When doctors began to leave, hospitals began to close. And all of a sudden they
had a quality of care issue that they realized they created because they tried
to treat it in the wrong way.
We understand that we need our entire
system to be strengthened. If I had my choice, it would be comprehensive reform.
It would be something that mirrors more what the Medicare Commission which I
think put partisanship aside and addressed some very long term needs of our
health care system for seniors. Unfortunately, I don't believe
that that's possible to reach this year. But I believe it will continue to be
our goal to make sure that we reach it in the not too distant future.
I
hope that the stand-alone drug effort is a step in the right direction. It is
not a solution to the problem, but I don't believe it is a step in the wrong
direction.
Clearly, we didn't expect to find consensus today, and
clearly every member will leave with additional questions that I hope we'll find
answers as we move through whatever markup process, whatever floor activity
process we go through. I am confident of one thing. That this subcommittee, both
Republican and Democrat, is engaged in this issue, is willing to learn. From
those that feel shorted from today's opportunity to testify, please take the
opportunity to go see those members and educate them further. It will contribute
to a much more accurate debate as we move to House activities.
Let me
once again thank all of you for your willingness to be here today.
This
hearing is now adjourned.
END
LOAD-DATE: June
17, 2000