Madam Speaker, I submit for the Record a copy of my speech delivered at the summit on the future of Medicare on October 19, 2007. Good afternoon. I want to thank each of you for coming to discuss one of the issues that reflects the values…
Madam Speaker, I submit for the Record a copy of my speech delivered at the summit on the future of Medicare on October 19, 2007.
Good afternoon. I want to thank each of you for coming to
discuss one of the issues that reflects the values of this
country--health insurance for retirees and the disabled. I
want to especially thank the Senior
Voice Coalition, a group of organizations and passionate
individuals who are truly the grassroots leaders in
organizing around issues affecting seniors in our community.
Before I begin, please know that while there are many issues
of importance, we will only be talking about Medicare at this
summit today. If there are other issues on your mind, I would
be happy to discuss them with you if there is time after.
Many of you recall that I held 13 town hall meetings in
2005 during the Social Security privatization debate. At
these town halls, I presented detailed information on the
reasons why I rejected the notion advocated by the President
and some in Congress that there was a ``crisis'' in the
solvency of the combined Old Age, Survivors, and Disability
Insurance Trust Fund. We were told that to correct this
manufactured crisis, the best solution was to privatize
Social Security. Even if there was a ``crisis,'' which did
not actually exist, according to both the Social Security
Administration and the Congressional Budget Office, the worst
solution would be to drain the trust fund more quickly and
therefore undermine the entire program.
Folks, we are on the verge of a very similar debate today
with Medicare, our nation's other social insurance program.
There is a symbiotic relationship between Social Security and
Medicare. But unlike with Social Security, much of Medicare
has already been privatized. Today I want to explore that
with you by looking at two different Medicare programs that
have been the cornerstones of efforts to privatize Medicare
to see how they have performed. First, we'll look at the
Medicare prescription drug plan, also known as ``Part D,''
which leaves enrollees no choice but to go through the
extraneous insurance companies. Second, Medicare Advantage
shoehorns in the option to have private insurance industry
middlemen to dole out health care according to what is
profitable.
Part D
In 2003 came the single biggest Medicare privatization
effort to date, the Medicare Modernization Act. It passed the
House of Representatives only because the then-Majority party
held open a 15 minute vote for over three hours in the middle
of the night so they could strong-arm their way to a passing
vote. Not only did it create an entirely private, chaotic
prescription drug program, but it also dramatically increased
subsidies to Medicare Advantage plans.
Several of us in Congress warned of what we were buying
into with Part D. We warned against the forced inclusion of
the unnecessary middleman--the insurance industry--and its
likely effects on cost and access to meds. We warned about
CMS' inability to negotiate drug prices like the VA does. We
warned of a benefit that was far too complex. We warned of
the now famous doughnut hole that left people without
coverage for a period of time even though they were still
paying premiums. We supported a bill that created a new
prescription drug benefit that did away with all those
problems by keeping the insurance industry out of the benefit
and letting Medicare administer it.
As you know, we were not alone in our fight. At the time,
the Center for Economic and Policy Research released a study
showing that even if we took the modest step of allowing
Medicare to negotiate drug prices, we would save so much
money that we would be able to cover every single beneficiary
with no co-payments, no deductibles, and no premiums . . .
and still have $40 billion dollars left.
Oversight and Government Reform Committee report on Part
D.--I am sad to say that we were right. Just this Monday, the
Committee on Oversight and Government Reform released a
study, which was requested by a handful of my colleagues and
me, on the performance of Part D so far. It found three
things. First, it confirmed the most obvious concern; that
administrative costs are far higher than they should be. This
was expected because of the forced inclusion of the insurance
industry in the benefit. The insurers reported administrative
expenses, sales costs, and profits of almost $5 billion in
2007--including $1 billion in profits alone. The
administrative costs of the privatized Part D program are
almost six times higher than the administrative costs of
the traditional Medicare program.
The second finding was that the insurance industries were
not doing a good job of negotiating with the pharmaceutical
companies to lower prices. One of the main rallying cries of
the Part D privatization effort was that the private insurers
could be more effective negotiators than Medicare. Turns out
to not be true. Now, instead of negotiating for lower prices,
the insurers negotiate for rebates from the drug companies,
which is what the Part D law calls for. The committee
investigation found that drug price rebates negotiated by the
insurers reduce Medicare drug spending by just 8.1 percent.
In contrast, rebates in the Medicaid program reduce drug
spending by 26 percent, over three times as much. Because of
the difference in the size of the rebates, the transfer of
low-income seniors from Medicaid drug coverage to Medicare
drug coverage will result in a $2.8 billion windfall for drug
manufacturers in 2007. Furthermore, the insurers receive no
rebates or other manufacturer discounts for three-quarters of
the drugs used by seniors.
And the third finding was that when insurers do actually
get a rebate from the drug companies, rather than passing the
savings on to seniors in the form of lower prices, they keep
the money for themselves! This year alone, the private
insurers will receive $1 billion in rebates on purchases that
seniors pay for out of their own pockets, thanks to the
doughnut hole. But beneficiaries continue to pay premiums.
Unpredictability in Part D.--Another problem with Part D as
it has been implemented is that stability is lost. Much like
with corporate pension scandals, instead of receiving a
guaranteed benefit, those enrolled in Medicare Part D only
receive a guaranteed bill to pay. Instead of being able to
have peace of mind when it comes to whether or not drugs
prescribed by a doctor will actually be covered, a state of
financial nervousness and uncertainty is par for the course
with Medicare Part D. A consumer's Union study found that
most insurers raise the cost of their drugs during the year--
in one case by 28 percent. The same uncertainty is present in
predicting which month beneficiaries will hit the doughnut
hole and be forced to pay all your drug costs as if you had
no benefit at all.
Clearly, Part D is more of a benefit for the pharmaceutical
and insurance industries than retirees and the disabled. The
Part D provisions of the Medicare bill alone guaranteed $139
billion in guaranteed profits for the pharmaceutical
industry, which amounts to 61 percent of the total spending
in the bill for prescription drugs, according to Boston
University School of Public Health. Even so, Part D is not
where the real money is. The real money is in the Medicare
Advantage, the HMOs, PPOs, PFFSs and other alphabet soup of
private plans offered through Medicare as an alternative to
traditional Medicare. I'd like to talk a bit about these
plans now.
Medicare Advantage
Medicare Advantage plans have been in existence for several
years now, but the 2003 Medicare Modernization Act has
drastically accelerated privatization. Lets take a look at
how the plans have done, starting with how they deal with
customers. I'll start with their efforts to sign you up and
then we'll see how they treat you after you're already on the
plan and are requesting coverage.
Marketing.--An October 7 article in the New York Times
conducted their own review of 91 federal audits of privately
run Medicare plans--both Medicare Advantage Plans as well as
Part D plans. They found that ``tens of thousands of Medicare
recipients have been victims of deceptive sales tactics.''
They also found that ``since March, Medicare has imposed
fines of more than $770,000 on 11 companies for marketing
violations and failure to provide timely notice to
beneficiaries about changes in costs and benefits.'' I want
to read you two other quotes from that article to round out
the picture. ``In July, Medicare terminated its contract with
a private plan in Florida after finding that it posed an
`imminent and serious threat' to its 11,000 members.''
``Medicare officials said that compliance problems occurred
most often in two areas: marketing, and the handling of
appeals and grievances related to the quality of care.''
That stands to reason since that is where the profit is
made.
Humana is a good case study. Humana, which is the second-
largest provider of Medicare Advantage plans, was required to
fulfill corrective action plans for 300 different violations.
The Center for Medicare and Medicaid Services or CMS
administers Medicare. Their audit results for Humana included
findings that marketing agents were not trained or
supervised, enrollees were not informed of changes to plan
formularies (list of covered drugs), and enrollees were not
provided with explanations for claims denials or appeal
rights when their claims had been denied. This is the same
company that gained 4 million new policy holders and reported
to stockholders in April that it had amassed ``record-
breaking revenues,'' according to an article in ``The
Nation.'' Keep in mind that this company pays its agents a
commission five times greater for enrolling individuals into
their Medicare Advantage plan than the commission they
receive for enrolling them into a stand-alone prescription
drug plan. Similar arrangements are true for other leading
insurers like United Health Care, Aetna, and Blue Cross and
Blue Shield. But why would they do that?
Big insurance companies are quite eager to sign up people
for Part D plans. But Part D plans are nothing compared to
the profit to be made in Medicare Advantage. So insurers
offer low price Part D plans in order to get their foot in
the door with those who were on traditional Medicare. Then
they aggressively marketed their Medicare Advantage plans,
too often using the unscrupulous tactics I just described.
Such marketing tactics are especially effective when the
plans are so complex, the customer is easily fooled. In
Humana's case, the tactics worked. They were a relatively
small company before the prescription drug plan and the
Medicare Advantage push. But they were able to get 100,000
people to move to Medicare Advantage plans. An insurance
consultant said ``an additional 100,000 people contributing
to top line revenue is not insignificant--it's an extra
billion dollars.''
Customer Service.--Now that's just the marketing. What do
they do when they have you? The New York Times article found
that both Medicare Advantage and Part D enrollees ``had
claims improperly denied by private insurers.'' Some examples
of other problems found include ``the improper termination of
coverage for people with H.I.V. and AIDS, huge backlogs of
claims and complaints, and a failure to answer telephone
calls from consumers, doctors and drugstores.''
WellPoint, an Indianapolis-based company that covers
360,000 members under Medicare, had a backlog of 354,000
claims under its Medicare plans. Auditors logged an average
wait time of 27 minutes to answer enrollee phone calls and a
16-minute wait time to respond to provider calls. Of the more
egregious offenses, Sierra Health, based in Las Vegas,
wrongfully terminated drug coverage for 2,300 HIV-positive
Medicare Advantage enrollees, improperly claiming they had
defaulted on plan premiums.
Fewer options, not more.--Medicare Advantage advocates
often speak of the greater choice in their plans as opposed
to traditional Medicare. I don't think you can have more
choice than to be able to choose from any doctor, which is
the case with traditional Medicare, but we'll take a look
anyway.
As with Part D plans, there are countless stories of
beneficiaries seeing changes to their plan midyear, including
cost increases, dropping certain drugs from formularies, or
doctors dropping out from frustration with the plans. In
fact, Medicare Advantage plans talk a lot about their
extensive network of doctors but customers frequently find
that when try to go to one, the docs won't take Medicare
Advantage customers. Many doctors don't like it because of
the low pay and because of the insurance industry second-
guessing their diagnoses and choices for providing care. Even
though all these changes can be made at any time in the
enrollment cycle, beneficiaries can only switch plans once
per year.
Some argue that Medicare Advantage offers a better quality
of care than traditional Medicare. The Congressional Budget
Office disagrees, stating ``though Medicare Advantage plans
cost more than care under the fee-for-service program does,
on average, they would be more cost-effective if they
delivered a sufficiently higher quality of care . . . The
limited [quality] measures available suggest that Medicare
Advantage plans are not more cost-effective than the fee-for-
service program.''
Those enrolled in Medicare agree, as traditional Medicare
beneficiaries are less likely to have problems accessing
specialists, according to MedPAC.
Out of pocket costs.--Medicare Advantage insurance
companies make money when they shift the costs onto you and
me. One of the ways they do that is by providing incomplete
insurance or underinsurance. They can offer meager coverage
in specific unnoticeable areas that only matter if you get
the illness that isn't covered well. Because Medicare
Advantage plans are not required to be standardized--meaning
different companies are not required to offer the same plan
structure and compete only for price--these companies can
skew their plans to maximize their profits and decrease
benefits. One tragic result is that people in more need of
services, especially those in need of physician-administered
chemotherapy drugs and dialysis services, pay more under
Medicare Advantage than they would under traditional Medicare
for less service, Their out-of-pocket costs are unexpectedly
and dangerously high. This is one of the biggest health care
problems that we don't hear enough about. About half of all
bankruptcies in this country are related to medical bills. Of
those medical bankruptcies, 75 percent of the people had
insurance before they got sick. But because their insurance
still allowed them to go bankrupt, it was clearly lacking.
Profitable, but lacking.
For those of you that have seen Sicko, the Michael Moore
movie about health care, you know that another way insurance
companies make money is to deny benefits, which is done in
spades under Medicare Advantage. The Medicare Rights Center
who collects many Medicare Advantage complaints told the
story of an 80 year old man enrolled in a private Medicare
plan called HealthSpring. He had a heart attack and went to
the hospital. All of his claims were denied because he didn't
get prior authorization from the plan to enter the hospital.
His hospital bills now top $87,000 dollars.
Propping Medicare Advantage up.--You would think that since
Medicare Advantage beneficiaries are getting such an inferior
product, that it would cost less. It is not so. As with Part
D, Medicare Advantage is far more costly than traditional
Medicare. Both the Medicare Payment Advisory Commission
(MedPAC) and the Congressional Budget Office (CBO) report
that for 2007, it costs taxpayers 12 percent more (on
average) to cover beneficiaries enrolled in private Medicare
Advantage Plans than under traditional Medicare. That is an
extra $149 billion over 10 years. The Chief Medicare Actuary
has said that the beneficiary enrolled in traditional
Medicare pays an extra $24 per person this year because of
overpayments to Medicare Advantage. This overspending also
cuts years off the life of the Medicare trust fund and
diverts money away from hospital and acute care services,
While the Social Security trust fund can pay 100 percent of
benefits until at least the year 2041 without any changes
whatsoever, the Medicare Hospital Insurance (or HI) Trust
Fund can pay 100 percent of claims only until the year 2019,
based on current actuarial assumptions, in large part because
of privatization.
Not only is the program inefficient, but it is growing
steadily. According to the Congressional Budget Office, 18
percent of current Medicare beneficiaries are enrolled in a
Medicare Advantage plan. This number is expected to increase
to 26 percent by 2017. The biggest growth--about 650 percent
since 2005--has been in enrollees in the private fee for
service plans which have enjoyed exclusive access to major
subsidies from Congress as well as exceptions to standards of
quality care. Unfortunately, the fastest growing type of plan
is also the least efficient of all Medicare Advantage plans.
They cost, on average, 19 percent more than traditional fee
for service Medicare. Where does all that money that should
go to health care, actually go? MedPAC found that half of the
overpayments go directly to profits, marketing, and
administrative costs. That's worth repeating. Half of the
overpayments go directly to profits, marketing, and
administrative costs.
These private fee for service plans aren't the only ones to
get corporate welfare. The PPO ``stabilization'' fund is a
slush fund designed to encourage growth of new regional PPOs
of 10 billion dollars over 10 years. That's in addition to
general subsidies for Medicare Advantage plans. But in 2006,
88 percent of beneficiaries had access to a regional PPO. So
subsidies for growth are unnecessary. Even MedPac recommended
eliminating the slush fund.
I mentioned earlier that Medicare Advantage Plans are
lucrative for insurance companies. UnitedHealthcare will make
about 11 percent of its net income for 2007 from Medicare
Advantage. That number is 66 percent for Humana. Between 2005
and 2006, when a lot of these subsidies took effect, United
and Humana saw increases in revenue of over 50 percent.
WellPoint saw an increase of 27 percent. When there is so
much money at stake, it is very cost effective to have not
only a big marketing push, but also a strong lobbying army
to make sure your Congressional subsidies don't go away.
That is what they do.
general discussion
There is a race in the health insurance world to determine
who can provide the lowest quality benefits for the highest
possible cost that consumers, companies, and the government
will accept.
Seniors and disabled individuals who have contributed to
Medicare from a lifetime of work deserve to have simple,
clearly defined benefits which do not change from month to
month, year to year. We should not be paying companies
exorbitant administrative costs and overpayments that
maximize profit margins in order to put beneficiaries,
benefits at risk. All of this is the case with the private
Medicare Advantage and Medicare Part D, and it should be
stopped.
The best, most efficient way to ensure all Medicare
beneficiaries will always have real, reliable, and complete
benefits is to end private involvement in Medicare. That's
why I, along with John Conyers of Michigan, coauthored the
Expanded and Improved Medicare for All Act, H.R. 676, back in
2003. HR 676 captures the enormous savings to be had if
Americans had health care provided through Medicare and uses
them to cover everyone for all medically necessary services
with no copayments, no deductibles and no premiums. This bill
would strengthen Medicare by removing the for-profit
interests, decrease the financial burden to beneficiaries,
and increase the quality of care--all without the confusing
maze that privatized Medicare has become today. There is
enough money that America spends in health insurance and
health care today to cover everybody. Every year, $2.2
trillion is spent, and only about 69 cents out of every
dollar actually goes to providing health care services. We
are all paying for universal health coverage, we just aren't
getting it.
Congress will be required to hold hearings on and propose
changes to Medicare due to the financial situation of the
program which privatization has created. I intend to use this
opportunity to emphasize the best, most comprehensive, and
most cost efficient way to strengthen benefits for those
enrolled in Medicare--H.R. 676.
What's happening in Washington.--Many of you know an early
version of a bill to provide health insurance to millions of
children through a program called SCHIP, also called for cuts
to one of Medicare Advantage slush funds I mentioned earlier.
I supported that bill but the insurance industry mounted an
expensive and aggressive lobbying campaign that ensured their
slush fund stayed in place. Now there is talk of using that
slush fund money to pay for maintaining Medicare payments to
doctors as opposed to allowing scheduled cuts of about 10
percent to take place.
H.R. 676 now has 85 cosponsors and is the only national
health care reform bill that has an entire national movement
behind it. There are two national non-profit organizations
and several regional organizations devoted to its passage.
And it has the official backing of 93 Central Labor Councils,
including several Cleveland and Ohio unions as well as cities
and states across the nation.
There is the possibility of implementing an interim measure
of providing a prescription drug benefit that gets rid of the
insurance companies and lets the benefit be administrated by
Medicare. Doing so would clearly lower costs, increase access
and increase quality. But I would like to hear what you think
of that idea. Would people be willing to give up their
privatized plans for more plans that give greater security
and coverage?
And while I'm asking for your input, I'd like to ask you
about another related issue that has recently come up. As I
understand
it, Ohio Public Employees Retirement System (OPERS) has
announced that it will shift from offering two traditional
Medicare plans to offering one traditional Medicare plan and
one Medicare Advantage plan. I am concerned about this choice
and would like to hear from you about it.
I know you all have been waiting for the opportunity to ask
questions and share your comments, so let's transition to
that right now.