Energy Policy Act of 2003-Conference Report-Continued

ENERGY POLICY ACT OF 2003-CONFERENCE REPORT-CONTINUED

MEDICARE

Mr. REED. Madam President, we are debating at the moment the Energy bill, but there is another major initiative that we are all considering. That is the Medicare bill. I would like for a moment to speak about the Medicare bill.

We have a history. For 38 years, Medicare has been a central part of the life of America, not just seniors in America but every American family. Now we are being asked to consider, in the waning days of this session, fundamental changes not just to the addition of a pharmacy benefit for seniors but fundamental changes to the structure of the Medicare Program. We are being asked to do so in the waning hours of this session of Congress.

What we have seen from the situation in the committee is that it was a period of negotiation between very few people, producing fundamental changes for our Medicare system. It is important, I believe, to look at some of the changes today.

Much of the discussion that has taken place in the conference with respect to this proposal has not really been how best to use the $400 billion for pharmacy benefits for seniors but, rather, to make profound changes in Medicare, which I believe undermine, in the long run, the Medicare Program.

One could suggest that the original $400 billion budget allocation for pharmaceutical benefits for seniors was too meager. But we could have addressed at least how to make that money go as far as we could rather than simply using it as, I believe, a subterfuge in some respects to make changes to Medicare that have been promoted by many-particularly conservatives-for years previously.

The purpose of S. 1 and H.R. 1 was supposedly to craft a pharmaceutical benefit. Indeed, what happened is much more profound and more pervasive and indeed will go to undermine our Medicare Program, not strengthen it. I have serious reservations.

We all recognize that seniors need relief. Again, the $400 billion was a small part of the relief they need. It has been estimated by CBO that seniors will spend a total of $1.8 trillion on pharmaceuticals from 2003 to 2012, the 10-year period this bill will likely cover. The $400 billion, in context, is just a fraction of what seniors will pay. Nevertheless, we could have provided, I believe, much more focused, targeted, and beneficial relief to seniors than has been accomplished by this bill. More than that, we could have avoided these very serious and deleterious changes being proposed for Medicare.

Let me address a few issues. There is an issue in the bill that has been discussed, which is cost containment. It represents sort of a doublespeak, if you will. I believe if you asked most of my seniors about cost containment, they would say, hallelujah, finally, you are going to bring down the cost of the pharmaceutical drugs.

Wrong. In the language of this bill, cost containment is limiting the amount of money the Federal Government will contribute to the Medicare Program-not just pharmaceuticals but to the Medicare Program. In fact, if you look at what they have done with respect to the cost of pharmaceuticals they have made it very difficult for the Federal Government, through the Medicare Program, to negotiate lower prices.

Once again, if you asked any senior in this country, or any American, about cost containment, in the context of pharmaceutical drugs, they would say it has to be the reduction in the costs charged to seniors, not a reduction of the contribution this Government will make for seniors. It has turned the whole notion of containment upside down, topsy-turvy. Again, it will go a long way not to help seniors but to continue the unchecked increases in pharmaceutical costs we have seen.

There are reasons for this. Frankly, everyone has to recognize that revolutions in pharmaceuticals have provided a higher quality of health care in the United States. But my expectation, and my hope, was that if we were talking seriously about a Medicare benefit for seniors with respect to pharmaceuticals, we would have been able to use the market power of a nationwide Medicare Program to control prices-not set them but control them through the marketplace.

A large number of beneficiaries, purchasers, could go to pharmaceutical companies, through the Medicare system, and negotiate prices, which represents the buying power of millions of seniors. That is not going to happen because, quite deliberately and consciously, this program fragments seniors; it creates regions where certain programs will vie for the business of seniors through the Medicare system. That is not going to control costs. Yet we are talking about cost containment, not in that context at all but in the notion of just limiting the contribution we will make.

Again, I think what we have to recognize is that this is not going to be the way to deal with the crisis we face today and the crisis of the years ahead.

There is a provision in the legislation which essentially says that as the Medicaid Program exceeds 45 percent of the general fund contribution-our contribution to Medicare exceeds 45 percent of total program expenditures, and then the President must submit a plan to Congress, and there is pressure for Congress to move. But that is a rather arbitrary and artificial way to approach the cost of Medicare.

First of all, it doesn't consider the number of beneficiaries. It doesn't consider other factors, such as quality issues. It is an arbitrary device which I think will not control the real costs, which is the cost of drugs, but it will really inhibit and hamper our ability to serve our seniors. Again, this is one aspect of the legislation that I find particularly troublesome.

There is another doublespeak, and that doublespeak is premium support. Again, if you asked any senior in Rhode Island, Michigan, or Maine about premium support, they would say: Hallelujah, you are going to help me pay my premium; I have been waiting for that. That is not the case. It is helping the private insurance companies by assisting them not only in their operating expenses but with their bottom line in the process. That is not what most people thought about when we talked about premium support.

It will provide wide variations of premiums throughout the country, State by State, and even within States, region by region. Essentially, it will also encourage cherry-picking, a term we are all familiar with, in which these private companies that are being encouraged to now go after the seniors' business will be able to structure their marketing and their appeals to take the healthiest, younger seniors, leaving the older seniors-the most vulnerable and most expensive-to be covered in the Federal program. This will be great for their bottom line, but it will drive the cost of traditional Medicare up and up, and it will run right back into the cost containment trap we set up.

Medicare will be less "efficient" than private plans. Therefore, it will be subject to increased Federal pressure to lower the cost. All of this violates a fundamental principle of insurance, which is that you pool risk by aggregating a range of risk. You don't segregate the healthiest people and say we will ensure just those-well, if you are a profitable private insurance company, you do. But if you are trying to plan for a national program to assist seniors, you certainly don't do that.

It also defies the fundamental facts of history. In 1965, when the Medicare Program was created, seniors could not get health insurance because they were expensive to insure. They were a bad risk. No private insurance company would step up in any systematic way to insure them-unless you were phenomenally wealthy and you could probably pay for all of your medical care out of your wealth. For the average senior, in 1961, 1962 and 1963, you were not getting private insurance. That is why we stepped in. That hasn't changed.

Seniors today are still, on average, much more expensive to insure than younger people because of the nature of life and nature of disease and morbidity-all of this. This legislative proposal totally ignores that 35 years of history and the experience we all have.

Again, going back to our experience, it was not uncommon when I was a youngster, teenager or younger, to visit homes of my friends and there was at least one grandparent there-a grandmother or grandfather. Why? Because their health needs required somebody to care for them. It was the families, the 40-year-olds, 35-year-olds. Much of that changed in 1965 because now seniors had the ability to obtain health care coverage.

This whole system is being threatened by premium support, which will incentivize private insurers to come in and attract and subscribe the youngest healthiest seniors, leaving the traditional Medicare Program with the older, most expensive population to cover; and, again, all of this is leading into that trap in which cost containment will tell the Federal Government, oh, stop, we are paying too much money for seniors.

I believe this is, again, a profoundly poor concept, and it is further complicated and exacerbated by another aspect. We are creating a $12 billion stabilization fund, again, for private insurers. We are taking Medicare money, the money which our seniors-in fact, all Americans believe we are earmarking for senior health care and setting up a fund-a slush fund-that will provide further incentives to private health care purveyors and further unbalance the playing field between traditional Medicare and these new private plans.

We could have done much with this stabilization fund. We could have lowered the so-called donut hole when benefits expire for some seniors and then renew themselves after several thousand dollars of additional expenses. We could have closed that gap. We could have done a lot of creative, innovative things that not only would have assisted seniors but would also make a real concerted effort to control the cost of the program in a principled way. Yet we didn't do that.

We have created a situation in which, again, the deck has been stacked against traditional Medicare and against, I believe, the logic of insurance of aggregating as many risks as possible across regions, across the country, across ages from the youngest seniors to the oldest seniors, the healthiest seniors to the ones who are sick and frail.

We are also going to hit and create a situation where we will give incentives to these companies to fragment the Medicare system. Frankly, if insuring seniors was a profitable area of endeavor, 35 years ago we wouldn't have had to step in and create Medicare. If it was a profitable endeavor today, we wouldn't have to have a $12 billion stabilization fund, and we wouldn't have to have premium support.

We will spend more money than we have to and we will get less for our money and seniors will get less in terms of the benefits, not just pharmaceutical benefits but the overall Medicare Program. I emphasize again, this is not just trying to tailor and contain the cost of pharmaceuticals. This applies across the board.

Ms. STABENOW. Madam President, will my friend yield for a question?

Mr. REED. Yes.

Ms. STABENOW. I thank my friend from Rhode Island for laying out in a clear and concise way what our concerns are about this bill.

Madam President, wouldn't the Senator agree that our first goal should be to do no harm, rather than the items he is talking about? That the first goal of any plan to provide Medicare prescription drug coverage should be to make sure people are paying less and getting more coverage and getting more help? This bill doesn't do that, does it?

Mr. REED. I concur with my colleague from Michigan. Our first goal should have been to do what we told seniors for years we were going to do: help them buy pharmaceuticals, not change, undermine Medicare but to help them buy pharmaceuticals.

We could have applied all that $400 billion to do that. We didn't. We have stabilization funds to encourage private health concerns to compete with the traditional Medicare Program; we have health savings accounts, with billions of dollars there to encourage the insurance industry to sell health care plans to individuals. All of that very scarce money could have been used simply to say how much can we help the seniors to buy drugs and maintain our program. I agree with the Senator.

Ms. STABENOW. If I may ask another question, what the Senator is saying is there are billions of dollars being used in this plan on items that have nothing to do with helping pay for medicine, helping people get their care; is that right? The Senator is talking about billions of dollars going to HMOs, to insurance companies to help them compete against Medicare, which costs less, and that money could be used to buy medicine for people?

Mr. REED. The Senator from Michigan is absolutely right. I said this before. This represents, in some respects, the greatest bait and switch in the history of the Republic. Seniors think they are getting pharmaceutical protections, and they will wake up and discover the Medicare Program they thought was there forever has been changed irrevocably.

Indeed, even the pharmaceutical protection is not that extensive, comprehensive, or effective. The Senator's point about the cost of traditional Medicare is well taken. We already have experience with this. We have had the Medicare+Choice plans. These are private plans that are not able to provide a benefit as cheaply as traditional Medicare.

The 2003 Medicare trustees report estimated that reimbursement from managed care enrollees would exceed traditional Medicare costs. We are reimbursing HMOs more to care for their Medicare beneficiaries than we are through the traditional Medicare Program. We know that. That is 2003. That is the report of the trustees of the Medicare system. Yet we are still under this illusion that if we pour more money into the private HMOs through slush funds, through premium support-through all sorts of mechanisms-somehow we will change the reality.

We are not going to change the reality. The reality is that this general Medicare Program is efficient, is effective, it has stood the test of almost 40 years, and it is a system that I think every American sees as being effective, efficient, and, indeed, an important part of their family's well-being in the future as it has been in the past.

Ms. STABENOW. If I may continue with questions, when the Senator is saying this shifts money to HMOs and to insurance companies, I assume-at least my understanding of HMOs is-you don't choose your own doctor. We are talking about seniors who now can go anywhere. I know in Michigan, they can go from the Upper Peninsula over to Detroit over to the west coast and the cost is the same. They can choose their doctor and go to the hospital they want.

Madam President, is it true that what Senator Reed is talking about will take away people's ability to choose their own doctor and hospital?

Mr. REED. The Senator from Michigan is right again. Not only do you not have the ability to choose your own doctor, but sometimes it is the HMO that chooses you. We had the experience in Rhode Island of seniors signed up for HMO programs and the HMO said: We are not making enough money; we are leaving. They left the seniors high and dry. They found care by going back to the general Medicare system or another HMO. They found coverage, of course.

This is a one-way street. It is not a two-way street. You get to do what they tell you you can do. That is the way they make money. It is a profit-making enterprise. Frankly, there is nothing wrong with that, and if we were the managers of these companies, we might be pursuing the same techniques of carefully selecting our beneficiaries and questioning the doctors in every instance about whether this procedure is right or wrong. In fact, the greatest criticism of HMOs comes not from seniors but doctors. They can't abide working with them. It is accountants, not health care people, who are making the decisions.

We are setting this system up again. It is unbelievable, in some respects, that having had the experience of Medicare+Choice, having had the experience of a private insurance system that wouldn't touch a senior in 1965, and having the success of Medicare, we are entertaining these notions as if this is a good change, this is a good thing. We haven't learned.

This represents a triumph of aspirations or hope over the facts and reality of 30-plus years of experience and of the dynamics of the marketplace.

I thank the Senator from Michigan for her intervention because it has been useful in clarifying the discussion.

There is one other area that concerns me, and that is the notion of means testing. In the doublespeak of this bill, it is not means testing, it is income relating. It is like cost containment and premium support. It is income relating. It is really means testing.

What it does is it begins to lower the effective subsidy that the Federal Government provides the seniors based on their income. Frankly, starting off at a level of $80,000-you may say, well, maybe it is not too bad; maybe people that comfortable should be able to pay.

The point is, it begins to add another way in which we will segregate participants in the Medicare system because if your subsidy falls from 75 percent, which is what it is roughly today, down to 20 percent, that will be wealthy Americans, if this plan goes through, what it does is start raising questions: Why should I be in Medicare?

If I have to pay copays and I have to do this and I only get small support, why should I be in Medicare? A multiple class of health care is being created in this country. For all these reasons, I hope we have time to debate. I hope we have time to look at the legislation very carefully and not in the last few moments vote because time ran out.

I yield the floor.