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S. HRG. 107–789

EXPANDING AND IMPROVING MEDICARE:

PRESCRIPTION DRUGS: AN OREGON PERSPECTIVE

FIELD HEARING

BEFORE THE

SPECIAL COMMITTEE ON AGING

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

BEAVERTON, OR

AUGUST 15, 2002

Serial No. 107–33

Printed for the use of the Special Committee on Aging

(

SPECIAL COMMITTEE ON AGING

JOHN B. BREAUX, Louisiana, Chairman

HARRY REID, Nevada

HERB KOHL, Wisconsin

JAMES M. JEFFORDS, Vermont

RUSSELL D. FEINGOLD, Wisconsin

RON WYDEN, Oregon

BLANCHE L. LINCOLN, Arkansas

EVAN BAYH, Indiana

THOMAS R. CARPER, Delaware

DEBBIE STABENOW, Michigan

JEAN CARNAHAN, Missouri

LARRY CRAIG, Idaho, Ranking Member

CONRAD BURNS, Montana

RICHARD SHELBY, Alabama

RICK SANTORUM, Pennsylvania

SUSAN COLLINS, Maine

MIKE ENZI, Wyoming

TIM HUTCHINSON, Arkansas

JOHN ENSIGN, Nevada

CHUCK HAGEL, Nebraska

GORDON SMITH, Oregon

MICHELLE EASTON, Staff Director

LUPE WISSEL, Ranking Member Staff Director

(II)

C O N T E N T S

Page

Opening Statement of Senator Gordon Smith ....................................................... 1

PANEL OF WITNESSES

Bobby Jindal, Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services ................................................................. 4

Roy Dancer, Retired Educator and Senior Citizen ............................................... 21

Lydia Lissman, Assistant Director, Oregon Department of Human Services,

Seniors and People with Disabilities .................................................................. 26

Michael Kositch, M.D., Medical Director for Primary Care Services, Kaiser

Permanente Northwest Region ........................................................................... 35

(III)

(1)

EXPANDING AND IMPROVING MEDICARE:

PRESCRIPTION DRUGS: AN OREGON PERSPECTIVE

THURSDAY, AUGUST 15, 2002

U.S. SENATE,

SPECIAL COMMITTEE ON AGING,

Beaverton, OR

The committee met, pursuant to notice, at 10:34 a.m. in the Beaverton City Council Chambers, 4755 S.W. Griffith, Beaverton, OR,

the Hon. Gordon Smith presiding.

OPENING STATEMENT OF SENATOR GORDON SMITH

Senator SMITH. Good morning, ladies and gentlemen. I would

like to welcome you all to this special field hearing of the Senate

Committee on Aging. It is the purpose of this hearing to explore

the Oregon perspective on prescription drugs for seniors, and we

are very thankful that each of you has come and have an interest

in this.

We are going to hear from two panels today, and they are going

to share with us their expertise, and their testimony will become

part of the congressional record, as we use this hearing to help try

and move along the national debate on prescription drugs in a

more productive and informative way.

If time allows, the panelists will also address questions from the

audience, and if you would like to pose a question to them or to

me, please write it down on one of the cards the staff will provide,

and we’ll try to get them answered, time permitting.

Please also make sure that your name and address are clearly

printed on the cards, because if we run out of time, we will make

sure your questions are answered by mail and also make them part

of the congressional record. When you fill out your card, please

hold it up so that our staff can collect it.

Before we move forward to the first panel of witnesses, I would

also like to draw your attention to some of the services that are

available to you today at this hearing. Case workers from my staff

and also from the staff of my colleague, Senator Wyden, who is not

able to be with us this morning, are here to help resolve problems

that you may have with Medicare, Social Security, or other government entities.

In addition, experts from the Centers for Medicare and Medicaid,

the agency which administers Medicare, are also on hand to help

answer questions and resolve problems. Representatives from the

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Senior Health Insurance Benefits Assistance Program, or SHIBA,

are also here.

On behalf of the committee, I am also pleased to welcome members of the Governor’s Commission on Senior Services. We appreciate that you are here.

On behalf of the committee, I would also like to thank all of the

other agencies that have sent representatives to today’s hearing for

the seniors who have turned out for this event today.

They include the Multnomah County Aging and Disability Services, Washington County Aging and Veterans Services, Clackamas

County Aging and Disability Services, Oregon Alliance of Senior

and Health Services, Oregon Gerontological Association, Elders in

Action, RSVP of Washington County, Elsie Stuhr Community Center in Beaverton, the King City Senior Center, Irvington Covenant

Center, Oregon Health Sciences University, Social Security Administration, and Medicare Northwest. I think that must cover pretty

much everyone in the room.

We’re very pleased that you’re here, and we want this to be informative to you and helpful to this national debate.

I have a statement that I will include in the record and share

with you in part.

I will tell you that prescription drugs for seniors is truly an issue

whose time has come. Medical and technological breakthroughs in

recent years have made it possible to extend and improve life while

controlling illness in ways never thought possible before, even 50

years ago. People are living longer and living better with the help

of new treatments and therapies.

But these improvements have come at a price. While Medicare

has done much to reduce poverty for Americans over 65, it has not

grown and adapted to keep pace with the health expenditures for

the 34 million seniors and 5 million disabled younger adults who

rely upon the program.

On average, the Americans over age 65 spent an estimated 22

percent of their income for health services and premiums in the

year 2000. However, seniors in poor health and without supplemental coverage spent even more, about 44 percent of their incomes on, health care.

In 1965, when Medicare was created, the average senior spent

$65 per year on prescription drugs. Wouldn’t that be nice? Today,

the average senior spends $2,149 each year on prescription drugs,

35 times more.

Well, drug prices are currently the fastest growing segment of

national health care spending, and yet more than a quarter of all

seniors, many seniors have no source of coverage for their prescriptions. This is a particularly important issue, because Americans

over age 65 consume three times more prescription drugs than people under the age of 65. Looking around the room, I probably don’t

need to tell you this, but virtually all Medicare beneficiaries use

prescription drugs on a very regular basis.

One of the purposes of this hearing is to understand prescription

drug use among Oregon seniors. I would like to hear from you how

many of you use one or more prescription drugs. Can you raise

your hand if you are currently taking a prescription drug pretty

much all around?

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There may be a few that don’t have to, and I am glad for you.

How many of you are taking three or more drugs at this time?

A pretty good number. I am not surprised.

Surveys have shown that seniors with some drug coverage will

fill, on average, 22 prescriptions a year, while those without the

coverage will fill less than 15. How many of you spent more than $100 last month on prescription drugs, a show of hands?

There you go.

A new survey just released by the Kaiser Family Foundation and

the Commonwealth Fund found that nearly one in four seniors skip

doses in medication or do not fill a prescription due to cost. Among

lower income seniors, the numbers are much higher. The lack of

drug coverage is more than simply a financial burden; it is a serious health risk for seniors.

Going without prescribed medications can lead to serious adverse

consequences for the health of seniors. Medications can control

chronic conditions and avert acute health conditions if taken as

prescribed, and it can keep people out of the hospitals, which is

much, much more expensive. If taken incorrectly, seniors’ health

and quality of life can terribly suffer and lead to much more expensive care.

I have spoken to all seniors around Oregon. If there’s an issue

on their minds, it is prescription drugs that resonates most clearly.

I feel strongly that the loss of one’s health should not be the loss

of one’s home, and I have been working to add prescription drug

coverage to the Medicare program, so that all seniors will have access to affordable drugs.

I regret to tell you that, over the last 3 weeks, the Senate worked

on this. That is before the August recess. We spent 3 weeks debating and working and amending various prescription drug proposals.

As you already know, we did not clear the 60 vote threshold that

the Senate imposes for all of these important kinds of issues.

In working with Senator Graham of Florida, my colleague across

the aisle, I tried my best to come up with a compromise between

the two positions that would provide an affordable benefit to seniors and to government.

But, unfortunately, politics won the day, and I am now working

with him to see if we can’t modify our proposal to reach another

agreement to bring the issue up again in September so that our nation’s seniors will not have to wait yet another Congress for the

prescription drug benefit that they need and deserve.

Now, in the absence of other members of the Senate committee

with us today, I am going to turn to the true experts in this debate

by introducing our witnesses. Today we will hear testimony from

two panels of witnesses. The first witness, Mr. Bobby Jindal, is the

Assistant Secretary for Planning and Evaluation at the U.S. Department of Health and Human Services. He has analyzed several

prescription drug proposals and can help us understand the history

of Medicare and the effects of different bills under consideration.

Mr. Jindal is also a former state Medicaid Director from Louisiana.

Mr. Jindal, Oregon welcomes you, and we hope you brought some

Cajun cooking and maybe some Zantac after that. So, Bobby, before

I turn to you——I would like to welcome Mr. Roy Dancer, a senior

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citizen from Oregon. He is a retired and distinguished school teacher. His wife is with him.

How long have you been married?

Mr. DANCER. About 47 years.

Senator SMITH. Well, three more and we’re going to have a party.

That, folks, is the best success story anybody can issue. We congratulate you.

In addition to being a school teacher, he will share his experience

of getting access to prescription drugs since becoming eligible for

Medicare.

Mr. Dancer, it is my pleasure to welcome you here, as well, on

this first panel.

Bobby, we’ll turn first to you.

STATEMENT OF BOBBY JINDAL, ASSISTANT SECRETARY FOR

PLANNING AND EVALUATION, U.S. DEPARTMENT OF

HEALTH AND HUMAN SERVICES

Mr. JINDAL. Thank you, Senator. I also want to thank you on behalf of the Administration. I was just with the President down in

Texas for his economic summit. I want to thank you on behalf of

the Administration for your leadership and hard work on this

issue. I know you and your staff have worked tirelessly, as has the

Administration, on adding a prescription drug benefit to Medicare.

It is an honor to be in front of you today. It’s an honor to be here

in Oregon, where the weather certainly is cooler than in my home

State of Louisiana.

Senator SMITH. You may have trouble selling that to Oregonians.

Global warming is in full force right now.

Mr. JINDAL. I do take the opportunity to come to you to talk

about this important topic. As I said, the President is down in

Texas at his economic summit, and one of the messages that came

across loud and clear during the health security panel, the President made it very clear you cannot have economic security without

health security.

One of the messages that came across very clearly is that a top

priority is that we must make prescription drugs more affordable

to seniors. We must add that benefit to the Medicare program.

Across the country and around the world, scientists, doctors, and

innovators have developed new technologies and treatments that

weren’t even imagined in 1965. The private sector has been transformed. When you look at modern insurance today, it would be impossible to provide a comprehensive medical insurance package to

the private sector without prescription drug coverage.

During that same time, even though Medicare has provided security for millions of Americans since it was created, it has not kept

pace with the changes in the world around it. Today the program

is threatened by a system that has failed to deliver health plan options for all seniors and by an outdated benefits package that includes very limited drug coverage.

President Bush believes very strongly Medicare must be

strengthened and must be improved to meet the needs of the 21st

century, to meet the needs of today’s seniors. It is vitally important

for the Congress and the Administration to work together to fulfill

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Medicare’s promise of health care security for our nation’s seniors

and people with disabilities.

To this end, the President is working with Members of Congress,

including yourself and other members from both parties, to develop

a framework for strengthening and improving Medicare programs.

In July 2001, the President presented a framework that included

the following eight principles. First, all seniors should have the option of a subsidized prescription drug benefit as part of a modernized Medicare program. Second, modernized Medicare provides better coverage and preventative care for serious illness.

Third, today’s beneficiaries and those approaching retirement

should have the option to keep the traditional plan they prefer with

no changes. Fourth, Medicare should make available better health

insurance options like those available to all Federal employees.

Fifth, Medicare legislation should strengthen the program’s longterm financial security. Sixth, the management of Medicare should

strengthen and improve care for seniors. Seventh, Medicare’s regulations and administrative procedures can be updated and streamlined while instances of fraud and abuse should be reduced. Finally, eighth, Medicare should provide high quality heath care for

all seniors.

The President’s framework for strengthening Medicare and improving the program for seniors and disabled Americans calls for

fair payment options for Medicare beneficiaries. Through their

Medicare+Choice plans, a lot of beneficiaries receive more enhanced benefits than are available under traditional Medicare. Enhanced benefits can include prescription drugs. These programs

provide better preventative care services and benefits widely available to millions of Americans who are working today.

Frequently, private plans are providing Medicare benefits at a

much lower cost as well. Not surprisingly, private plans have long

been the preferred choice for over 5 million Medicare beneficiaries.

As you know, Medicare+Choice has been particularly popular

with seniors in Oregon, and 28 percent of your beneficiaries have

chosen to enroll in the Medicare+Choice plan, compared to 13 percent of the beneficiaries nationwide.

The Portland area, indeed, was one of the first areas to participate in Medicare’s managed care program and remains one of the

areas where the program is strongest. Six plans serve beneficiaries

in Oregon, and four companies are right here in Washington County. In addition, three plans offer coverage for prescription drugs.

In spite of this popularity, however, the future of

Medicare+Choice is in question. Since a new payment system was

implemented in 1998, hundreds of private plans have left the program or reduced their service areas, adversely affecting coverage

for millions of beneficiaries, reversing what had been a upward

trend in plan availability and enrollment. Here in Oregon there are

16,000 fewer enrollees now than at the peak enrollment 2 years

ago.

The Administration’s proposal is to move toward a more secure,

equitable, and fair payment system for Medicare+Choice plans.

This proposal will modify the current formula to better reflect actual health care cost increases and allocate additional resources to

counties that most need them.

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This will make it possible for more private plans to remain with

Medicare. Proposals to help sustain plan choices in Medicare are

supported by both Democrats and Republicans.

The President has also proposed a new system for new types of

plans to enter the program to encourage a variety of new plans,

like preferred provider organizations, to participate. Even though

these are incredibly popular in the under 65 population, there are

currently few or no such choices in the Medicare program. Just in

the next few days we’re rolling out a demonstration program to encourage these types of options to be available to today’s seniors.

Another important step in bringing Medicare into the 21st century is we are forming Medigap plans. Two-thirds of seniors rely

on individual or employer sponsored supplement plans, and yet

Medigap premiums have been rising at an alarming rate.

In the current Medigap structure, all plans offer first dollar

wrap-around coverage, and yet there are two problems for these

plans. First, they are expensive for beneficiaries; and, second, they

do not offer beneficiaries the benefits they want, and create incentives for excess utilization.

According to a recent study by the HSS, it is far easier for beneficiaries to buy foreign travel insurance than to buy prescription

drug coverage under Medigap. It is clear most people would prefer

drug coverage.

The President, therefore, has proposed adding two new Medigap

plans to the existing ten. The new plans would offer prescription

drug coverage to protect beneficiaries against catastrophic health

care costs and include modern beneficiary cost sharing. For these

changes, they are expected to offer a more affordable price than the

existing popular Medigap plans.

As you know, since his first days in office, the Secretary of

Health and Human Services, Tommy Thompson, has made the prevention of disease one of his top priorities. He has often said, our

current medical system waits too long, and it’s far more expensive

and far less effective to treat disease after the fact.

The Administration is determined to promote prevention of disease by eliminating barriers for beneficiaries. Yet today, beneficiaries who receive screening for osteoporosis, for breast, prostate

or colorectal cancer, must first meet the deductible, or pay a 20

percent copay, or both.

Beneficiaries who need diabetes self-management education and

training, which is important to maintain control of diabetes in reducing mortality, also face that kind of cost. Under the President’s

proposal, all these important preventive services will be excluded

from the deductible and from co-payments. In other words, we

would make free to seniors the type of preventative care that also

reduces cost for the program.

In June, the House of Representatives took a step in the right

direction by passing a bill calling for these changes. Furthermore,

as the Secretary has made clear, we are committed to helping

Americans to prevent and reduce disease by encouraging changes

in diet and exercise.

These are important elements in our plan to strengthen and improvement the Medicare program. The most pressing challenge remains the lack of drug coverage among seniors. Seventy-seven perVerDate 11-MAY-2000 10:26 Jan 02, 2003 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 C:\DOCS\83251.TXT SAGING1 PsN: SAGING1
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cent of seniors have some prescription drug coverage today, but 10

million beneficiaries do not.

Forty percent of these beneficiaries earn less than 150 percent of

the poverty level. In fact, those beneficiaries that do not have coverage through private insurance are the only Americans today,

along with the uninsured, who commonly pay full price for prescription drugs. Just as you said, beneficiaries without drug coverage spent $617 for drugs out of their own pockets, compared to only $352 for those

with coverage. That is simply unacceptable, and the problem must

be addressed.

Significant numbers of beneficiaries face unprecedented difficulties in obtaining drugs at a time when drug therapies have become

more important than ever in treating and preventing diseases. Recent breakthroughs and those still in the pipeline have and will

continue to transform treatment of many terrible diseases.

For example, there are now several new treatments in the pipeline to treat high cholesterol, including drugs designed to interfere

with the body’s absorption of the cholesterol, and that could actually prevent the conversion of the good into the bad cholesterol,

HDL to LDL. But these and other breakthroughs, as exciting as

they are, will not help our seniors if they have no means to attain

them or afford them.

For this reason, the program needs a drug benefit that will allow

such innovations out of the lab and into the medicine cabinet without stifling future innovations. Many in Congress have supported

a variety of reform proposals, and yet one of the concerns of the

Administration is that, under any of these proposals, it will take

at least until 2005 to get a comprehensive drug benefit up and running.

Seniors need help now, and there are steps that can be taken

now—for example, low income subsidies and other steps—to help

seniors become immediately a part of a larger, overall comprehensive legislation, not as a substitute, but rather as a first step.

Make no mistake. We are committed to strengthening Medicare.

We are committed to providing a meaningful prescription drug benefit for all of America’s seniors and people with disabilities, and we

are also committed to providing assistance immediately.

Last year, the President took the first step when he proposed a

creation of a new mandatory endorsed drug card initiative. The

house endorsed the plan, and the Administration is hopeful the

Senate will, as well.

The drug card is not a drug benefit and it’s not a substitute for

one. It is, however, an important first step in helping seniors afford

the drugs they need today. It is modeled on private health insurance programs where seniors benefit, where they are receiving discounts of 10 to 35 percent.

Under the President’s proposal, Medicare endorses private drug

cards that meet certain standards, and seniors get information they

need to obtain manufacturer discounts and other available pharmacy services.

These plans negotiate discounts and rebates directly from drug

companies and pass the savings on to beneficiaries who choose to

participate. Beneficiaries could switch cards, and they would not be

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charged more than a nominal, annual enrollment fee, to make sure

that they get the best discounts, the best prices on drugs, but also

get services like drug interaction programs and other services designed to promote preventative care and to reduce medical errors.

The Administration has also proposed immediate support for a

comprehensive drug benefit for Medicare beneficiaries up to 150

percent of poverty, or about $18,000 for a family of two.

This program, called the transitional Medicare low income drug

assistance program, would expand existing administrative structures operated by the States that already serve the low income and

would also allow the States to use the new low income drug card

to provide low income assistance for other seniors.

As an incentive, Medicare would pay for 90 percent of the cost

of the program to serve the seniors who live in 100 percent to 150

percent of poverty. This policy is projected to expand coverage to

3 million beneficiaries and would also allow the States to use the

new low income drug card to provide low income assistance for

other seniors.

As an incentive, Medicare would pay for 90 percent of the cost

of the program to serve seniors in 100 to 150 percent of poverty.

This policy is expected to expand drug coverage to 3 million beneficiaries who don’t have drug coverage today.

Combined with the low income assistance, the drug card, the Administration is also doing something today, while Congress continues to deliberate the comprehensive legislation, called Pharmacy

Plus. This is a program that allows States to provide a drug card

for Medicare beneficiaries up to 200 percent of poverty. We’ve already approved Pharmacy Plus for over 800,000 people in five

States and received other applications from an additional five

States.

I would like to close by saying the President is committed to

working with Congress to enact legislation consistent with his principles. By strengthening and improving Medicare and putting prescription drug benefits in place, we can keep the promises we made

to seniors and disabled Americans today and for those who will rely

on Medicare tomorrow.

The Administration and Congress must take this opportunity to

take important steps to strengthen and improve the program. Seniors should have a program to provide better benefits, better value

both for them and for the government, a program that is fiscally

sound, does not cause disruption to but that strengthens the coverage they currently have and continues the rapid pace of medical

innovation which will bring tomorrow’s cures to America’s seniors.

On June 28, the U.S. House passed the Medicare Modernization

and Prescription Drug Act of 2002, H.R. 4954, a good step toward

making Medicare a better prescription drug program for all seniors.

The Senate now has an opportunity to follow the house’s example.

We believe by working together, seniors can have a Medicare program that fulfills the promise of secure and vibrant retirement.

Senator Smith, I will close where I started. Again, I came to

Portland directly from Texas, from the President’s economic summit, where time and time again the President heard from real

Americans like you’re doing today, senior Americans saying that

we must make prescription drugs more affordable.

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I will also close again by thanking you for your leadership. The

Secretary and the President send their personal regards, and they

want to tell you again how much they appreciate the hard work

you’re doing to make the Medicare drug benefit a real part of the

program.

[The prepared statement of Mr. Jindal follows:]

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Senator SMITH. Thank you, Bobby.

I think one of the biggest debates, in the Senate anyway, and I

am sure it is in the House, is the delivery system a prescription

drug benefit we would use. Everybody agrees that there ought to

be a prescription drug benefit system. The debate is over two ways,

both of which can work, and the question is, what do people want

and which will work the best?

You can do it through Medicare. In other words, the government

manages these things, and it does it under a formulary, or you can

do it through existing private insurance, and that can work, as

well. Some insurance companies say they’re interested and others

say they’re not. I have voted for both versions, anxious to get something to conference so we can get something to the President and

get some relief quickly.

I think what you’re telling me is that the discount card that

you’ve come up with can be done immediately, and that is not a

substitute for one of the other two delivery systems.

Mr. JINDAL. That is correct. Senator, you know, I applaud you.

I know that you’ve been very willing to work in a bipartisan way

to move this thing forward. Today’s seniors in America want the

drug benefit, and we agree with you.

We obviously believe that a delivery system should preserve

within the private sector the innovations that are happening. We

don’t want to see something where the government is picking

which drugs seniors can receive access to. We think it’s better to

give seniors options and want them to decide, and their doctors to

decide, which medicines they get.

Like you, we also agree it doesn’t make any sense to wait and

continue fighting. The drug card is something that can be done

right away. The low income assistance program is a program that

can be done right away, as the Medigap options. Pharmacy Plus

has already provided drug coverage to 800,000 seniors and will

probably serve several more.

The Medigap reforms I am talking about can provide coverage for

another 1.5 million seniors, including half of them whom that don’t

have coverage today. The low income program can provide coverage

to 3 million seniors.

The drug discount card can provide 15 to 35 percent discounts

to every senior. None of these is a substitute for comprehensive

coverage. But you’re absolutely right; that is one way we can take

some immediate first steps while we put in place the more comprehensive coverage that serves every senior.

Senator SMITH. Just so you all know, the way I evaluated two

bills and, frankly, the reason I supported the compromise, was my

democratic colleague, Bob Graham. The democratic bill had two

major flaws.

I don’t have a problem with Medicaid or Medicare being the delivery system, frankly. It can work, and so can the other way. But

it had two horrendous flaws. It was very open-ended in terms of

availability and very little in terms of deductibles and things like

that of requirements on Medicare.

But it was sunseted—I mean, the program ended in 7 years.

Moreover, it had a formulary in order to control the cost that was

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so limited that it only offered 10 percent of current available prescription drugs. That’s all you could get.

I voted against that bill for that reason; in particular, the gimmick of the sunset, No. 1, and, frankly, a formulary that said the

government was substituting its judgment for the prescriptions you

need for that of your doctor. So I found that that policy was just

wrong. It was very limited.

The Republican version, the version used in a private sector delivery, had a much more generous formulary system and ultimately

left more discretion to you and your doctors to get what you need.

So these are the tradeoffs that you get, unless you’re prepared

to say everything is free, in which event, we’re really fooling you.

You’ve got to draw some lines, and this is the fight between the

two contending views. But the frustrating part is that we’re close,

and we ought to get it done in this Congress and not the next.

Bobby, before I let you go, I have a couple other comments. Ron

Wyden and I have been fighting pretty hard to get additional

money for the Medicare+Choice program, and that’s something that

is very popular in Oregon. I wonder if the Bush Administration will

support additional funding for that.

Mr. JINDAL. Absolutely, and we do applaud you and your fellow

Senator from Oregon for doing that and for sending a letter to Senator Daschle and others. As part of the Administration’s 2003

budget, we ask that Medicare providers be reimbursed in the budget in a neutral way, so that any additional spending will go to benefit beneficiaries.

One exception that we made was to say that we do think there

needs to be additional funding for the Medicare+Choice program to

stabilize enrollment and to provide those options that seniors want.

I am not saying that everybody will want that and that anybody

should have to be forced to choose that, but rather to say, for seniors that want those choices, they should have those choices. They

should have those choices.

We do support efforts to stabilize that program. Since 1998, up

until 1998, the program was flourishing, it was growing, providing

more and more options, low premium programs, no premium programs for prescription drug coverage.

Since 1998, since those changes in many counties, these programs have received 2 percent updates per year. Anybody that has

been reading the newspapers, anybody that’s been watching the

news, knows that medical inflation has been growing at a much

higher rate than 2 percent per year.

So when you look at the cumulative effect, we had plans over the

last several years that maybe received 11 percent inflation updates,

whereas the government program received much more than that.

So all we’re saying is, let’s simply balance the playing field. Let’s

give those clients additional resources so they can continue offering

preventive services and lower payments for seniors.

Senator SMITH. Bobby, has the Administration done any estimating in terms of savings to Medicare in terms of hospital costs with

the addition of a prescription drug benefit? I would be interested

to know what those savings are. The way these plans were costed

out, they ranged anywhere from $370 billion over 10 years to $570

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billion. But, in truth, one plan was probably a trillion dollars over

10 years, if the real costs were totaled up.

So I guess my question is, OK, those are potentially the costs.

What are the savings? Do you have a calculation there?

Mr. JINDAL. I think you’re absolutely right to ask that question.

Part of the rationale in the Pharmacy Plus is we’re allowing States

who serve already 800,000 seniors and a lot of additional States to

serve more. We know if we provide prescription drug coverage, we

will keep seniors out of hospitals, out of nursing homes with a

more comprehensive Medicaid package.

Up until now it’s been all or nothing. You needed every benefit

and you had to spend down into poverty or you’d get no assistance.

Well, we’re telling States it’s more cost effective for the government

to provide prescription drug assistance to help keep seniors out of

the nursing homes, out of the hospitals, and living in the community.

In terms of the more comprehensive Medicare benefit, I know

this is an issue that’s been debated frequently by government actuaries and nonpartisan actuaries that do these form of estimates for

Republicans and Democrats both. They continue to go back and

forth on this question that I am exploring.

The Secretary is a strong believer—for example, not only will

prescription drugs have some offsetting savings in other parts of

the program, but adding things like preventive benefits will also

have savings, doing things like allowing seniors to have free access

to these types of screenings. The house added an upfront physical

if you join the program, so your doctor can get an assessment of

services you might need.

He’s a strong believer that prevents other health care spending.

This contingency is a source of debate. What other nonpartisan experts look at, they’ve never given us a tremendous number of savings. They’ve scored, for example, preventive services being quite

expensive and will continue to do that.

Senator SMITH. Thank you, Bobby.

Mr. JINDAL. Thank you, Senator.

Senator SMITH. Roy Dancer.

STATEMENT OF ROY DANCER, RETIRED EDUCATOR AND

SENIOR CITIZEN

Mr. DANCER. Thank you, Senator, for the opportunity to come

and make our presentation.

My name is Roy Dancer, and I reside at 108080 Southwest Davies Road, Beaverton, OR, 97008. I was born in Oregon, I was

raised in Oregon, I was educated in Oregon, and I have lived in Oregon my entire life. I am 76 years old, and I reside at Hearthstone

and Murray Hill with 165 other senior citizens.

In the last 2 weeks, I have gone around at both lunch and dinnertime and visited with every table in the lunchroom and the dining hall of both the assisted living and the independent living, and

my comments today are made from those observations and conversations with my fellow senior citizens.

I am certain that I speak for many of them this morning regarding the high cost of prescription drugs and how it has greatly impacted their standard of living. My wife is 77-years old. I didn’t

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mean to point out that I married an older woman, but she is 5

months older than I am.

Senator SMITH. You may not make that 50 years after all.

Mr. DANCER. I think she has her cane with her this morning.

I have heart disease which has resulted in numerous surgeries,

including several angioplasties and two triple bypass, one 2 years

ago in October, plus I have ulcers. My ulcer is kept under control

by a prescription drug twice per day at a cost of $121 per month.

Currently I am taking eight prescription drugs daily. I am far over

the average that you found earlier.

My wife, Betty, is being treated for her high blood pressure, her

diabetes, and her arthritis. Betty’s drug prescriptions are also sky high. Betty and I spent over $5400 last year, as documented on our

Federal income tax, over and above insurance. This was an out-ofpocket expense. Betty has Blue Cross HMO, and I have Medicare

and an ODS supplement. The $5400 was over and above insurance.

I don’t know what people do without insurance.

I have talked to residents throughout our retirement community,

and I discovered several of them have out-of-pocket expenses for

prescription drugs which have exceeded $5,000 last year. I thought

we were the only ones; we’re not. I talked to one resident last week

who has drug expenses which exceed $700 per month, and she has

no insurance.

Three years ago when we were in Arizona visiting our daughter

and family, Betty and I traveled to Mexico to buy prescription

drugs and found them to be much cheaper. For example, my wife

had paid $320 for a 3-month supply of two of her drugs here in the

United States. In Mexico she bought a 6-month supply of not only

those two drugs but six other prescriptions for $340. We’re wondering why the difference between Mexico and the United States.

Carol Wiley, a 63-year-old cancer patient, saves over 80 percent

of the retail price of her drugs by ordering from a Canadian mail

order company. Carol buys one drug, which costs $52.50 U.S.

money for 100 tablets of 20 milligram tablets. Portland area pharmacies charge her $300, six times that amount, for 100 tablets.

This is related in the Northwest Senior Life, August 2002, page

30. The Hillsboro Argus reported last week that prescription drugs

had gone up over 30 percent in the last year, much higher than the

cost of living.

Oh, a member of our community came up to me this morning

and told me that she had ordered a drug 2 months ago, got a 60-

day supply, went to reorder it yesterday, and the increased cost of

the same drug, same company, had gone up 10 percent in 2

months. That’s 10 percent in 2 months, 30 percent over the course

of the year.

For us senior citizens who are on a fixed income, it is imperative

that Congress give us major relief on our prescription drugs now.

Thank you.

[The prepared statement of Mr. Dancer follows:]

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Senator SMITH. Do you think your experience that you’ve just

testified to is not just your experience but everybody you live with

at the center?

Mr. DANCER. Yes. As I said, I went around and visited every

table in both the assisted living and the independent living, got

ideas from them, and talked to them about the cost of their drugs.

You know, I went to a table and said, what do you think about the

high cost of prescription drugs? I went down like you did and said,

how many of you spent over $100 last month? Then when I got to

this $700, I almost fainted.

Senator SMITH. You know, I think one of the factors of the debate

between Canada and Mexico versus us, we just have to admit and

understand as American people that the pharmaceutical industry

is located in the United States, not in other countries. Even foreign

developers, they come here for the simple reason that we are not

a socialist system in terms of producing pharmaceuticals.

As a result of that, there is still a profit motive that is there.

There have been abuses by pharmaceutical companies in terms of

patents and things. We passed a bill to stop those before we left

Congress. We hope that gets out of conference and the President

signs it. We’re certain he will.

There is also another, yet another bill, in terms of re-importing

from Canada or Mexico, drugs that they buy through their national

governments. There is one side of this story that everybody ought

to understand. You can go to Canada or Mexico to buy some drugs;

you cannot go there to buy all drugs. Because their governments,

frankly, are riding on the back of our private industry to buy in

volume what they approve on their formulary, and I don’t know

how expensive their formulary is.

But the other untold story is of Canadians coming to America to

buy the miracle drugs because their government, through their taxpayers, do not buy those drugs. So you and I—unfortunately, are

bearing the burden of other countries who buy in volume or,

through their provinces, large amounts of a number of prescription

drugs.

We buy individually or through our insurance plans. What we

have to do is simply figure out how to better pool, either through

Medicare or insurance companies or larger groups, ways to buy a

generous enough group of drugs under a formulary that would

cover 90 percent, not 10 percent of your needs.

In answer to your question, why the difference, that is the difference, and we are on the case. We’ve got to finish the deal.

Thank you very much for your excellent testimony.

Senator SMITH. Now, we will invite our second panel forward.

We’ll begin with Ms. Lydia Lissman, Assistant Director for seniors

and people with disabilities for the Oregon Department of Health

Services.

Ms. Lissman, better than anyone else I know, can describe the

characteristics and demographics of seniors in Oregon, as well as

future trends. Ms. Lissman, the committee welcomes you, and

thanks you for being here.

Our final witness will be Dr. Michael Kositch. Dr. Kositch is the

Medical Director of the operations and primary care services at

Kaiser Permanente Northwest. Dr. Kositch will address the clinical

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aspects of prescription drug use and the availability of Medicare

benefits, beneficiaries for Medicare+Choice enrollees at Kaiser

Permanente.

Dr. Kositch, the committee also welcomes you. But Ms. Lissman,

we’ll start with you.

Ms. Lissman. Thank you.

STATEMENT OF LYDIA LISSMAN, ASSISTANT DIRECTOR,

OREGON DEPARTMENT OF HUMAN SERVICES, SENIORS AND

PEOPLE WITH DISABILITIES

Ms. LISSMAN. Good morning, Senator Smith. I am Lydia

Lissman, Assistant Director for the Oregon Department of Human

Services, and I am responsible for the statewide programs and policies for seniors and people with disabilities.

I am also the Director of the State unit on aging, responsible for

programs and services that are provided through the Older American Act.

First of all, Senator Smith, before I begin with my testimony, I

would like to thank you for your efforts to increase the Federal

medical assistance percentage as a part of the prescription drug

initiatives considered last month in the Senate.

As you know, Oregon’s economy lags severely behind many other

States, while the demand for human services has been on the rise,

so we sincerely appreciate your recognition of this reality.

I also want to thank you today for holding this field hearing to

look at the impact of prescription drugs on Oregon seniors. My

written testimony today touches on a number of issues, and I am

going to limit my remarks this morning to a couple of things.

I am going to touch upon the demographic issues and changes a

little bit on access and payment, and then I am going to talk a little bit about one of Oregon’s own efforts to better serve seniors in

the area of prescription drugs. Last, but not least, I will offer a few

recommendations that will echo what you have heard from the first

two presenters.

Seniors represent a very large and growing portion of Oregon’s

population. Between now and the year 2030, our State will experience an unprecedented shift in the age of our population. According

to the U.S. census in the year 2000, the population in Oregon that

was 65 or over the age of 65 was nearly 13 percent of the total Oregon population. That is a little bit higher than the national average, which is just over 12 percent. But what is significant is that

by the year 2030, which really isn’t that very far off, the senior

population will comprise more than 20 percent of the Oregon population.

What’s really important to know about now is there are areas of

Oregon, counties in Oregon, that are already at or above 25 percent

of their population being the age of 65 or older. There are areas

that are seeing very rapid growth. Some of those include Coos,

Curry, Jackson, Josephine, and Deschutes counties. In those areas,

we have fast approached that point.

Senator SMITH. So 25 percent are at 65 and older in those rural

counties?

Ms. LISSMAN. They are getting very close to that, yes, in those

rural counties. Because we have had unprecedented growth, and

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some of these areas have been very popular areas for seniors

to either locate in for retirement, or they have been areas where,

in fact, the population is simply aging. We don’t have as many

young people coming into the area or people staying in the area,

which is, in part, reflective of the economic environment that we

have.

Senator SMITH. Maybe housing and fixed costs like that, are

cheaper there, so they are not coming, moving to populated areas.

Ms. LISSMAN. Those are some of the issues, as well. So in some

of the areas we have people staying. But again, because of the economic issues, families are not moving into those areas, so the proportion of the population that is older is disproportionate to other

areas.

Medications play a very crucial role, as you’ve heard today, in

maintaining and managing the health of Oregonians and, in particular, seniors. I think the last presenter certainly illustrated that.

Slightly more than 37,000, out of a total of 438,000, seniors in

Oregon receive Medicaid. I think people are aware of the very low

standards of income and assets to qualify for Medicaid. While seniors represent about 8.9 percent of the total number of Medicaid recipients in Oregon, this group accounts for 23 percent of all the

Medicaid pharmacy expenditures in this State.

It is estimated that slightly over 30 percent of all the seniors in

Oregon have income below 200 percent of the Federal poverty level.

That is a significant number. I think, again, this is reflective, in

part, of the cost of living increases we’ve seen over time, inflation.

Senator SMITH. Can you state that number again for the record,

please?

Ms. LISSMAN. Slightly over 30 percent of seniors in Oregon have

incomes below 200 percent of the Federal poverty level.

Senator SMITH. You know, it’s interesting. The bill Senator

Graham and I produced, it covered seniors at 100 percent of coverage. Below 200 percent of poverty, the average in the Nation is,

it would have covered about 47 percent of seniors. Nearly half of

seniors live at 200 percent below the poverty level, which is pretty

remarkable, actually. We’re relatively better off than many other

places in the country.

Ms. LISSMAN. There are several major issues that affect seniors

and their access to vital prescription medications, and you’ve heard

about a couple of those today.

Again, I have some information in my written testimony, but certainly access and ability to pay is a significant issue, and I am

going to talk a little bit more about that. But medication management, chronic disease self-management, and medication administration are very significant issues, and those also have been mentioned.

What I would say about the access and cost is that seniors make

a lot of dangerous choices in Oregon, as they do in other places, because of the expense of prescription drugs. Some of them forego

even filling prescriptions or they forego some of these prescriptions

that are newer prescriptions and perhaps more costly and have a

significant impact on the quality and length of their lives.

They skip dosages or they reduce dosages or they try cheaper

remedies. Noncompliance with what a physician indicates is reVerDate 11-MAY-2000 10:26 Jan 02, 2003 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 C:\DOCS\83251.TXT SAGING1 PsN: SAGING1
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quired for their prescriptions results in very poor health outcomes,

and those range from progression of a chronic disease to increase

in preventable complications and disability.

Let me tell you from a State’s perspective, as has been mentioned, and as you yourself mentioned, Senator Smith, it not only

results in a very significant impact on the quality of lives, but on

loss of productivity and on the increase of costs as a result of avoidable hospitalizations and premature need for long-term care services.

Certainly what I hear from our field offices is that we see people

who come into the long-term care system because their condition

has degenerated as a result of either the lack of appropriate use

of prescriptions or the lack of prescriptions, and those are very significant issues. This increased cost is borne by both the public and

private sector, so there is definitely a shift of cost related to this.

What I would like to talk about now, very briefly, is one of the

efforts that Oregon is making to seek some solution, but I also

want to point out there are some real limitations to this solution.

In the last Oregon legislative session in 2001, the Oregon legislature authorized a senior prescription drug program.

This is a program that seniors will be able to apply for. It’s hoped

that it will become available and implemented in November of this

year. It’s a one-page application, and, for a $50 fee, Oregonians

over 65 with incomes less than 185 percent of the Federal poverty

level will be able to purchase their medications at the current Medicaid rate.

The current Medicaid rate is 100 percent of the average wholesale price minus 14 percent, so that will be available to Oregonians. We estimate that somewhere around 100,000 seniors may be

eligible.

But the important thing here I want to point out is that there

is also an asset limitation, and it mirrors the asset limitations for

Medicaid that’s $2,000. That’s a very small amount of assets. It

does not include your home or vehicle, but that is not very much

in terms of——

Senator SMITH. Anything above that disqualifies you?

Ms. LISSMAN. That’s correct.

Senator SMITH. So 200 percent of poverty is—— Ms. LISSMAN. 185 percent for one individual senior would be roughly $1,366 a month gross.

There are a number of other things. But first, let me move now

to my closing remarks, which would be the things that, from my

perspective, I really want to encourage the Special Committee on

Aging to pursue. Certainly foremost is the coverage of prescription

medications through the Medicare program.

This is extremely important to maintaining the health of our

aging Oregonians and to reducing both the Medicare and Medicaid

acute and long-term care costs. We encourage you to support Medicare coverage for medication and chronic disease management that

has been mentioned previously, and we encourage you to urge the

pharmaceutical industry to consolidate and simplify and provide

outreach for their reduced cost of medication programs.

I want to acknowledge that they do have these programs, and I

want to acknowledge our Area’s Agencies on Aging who really

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make every attempt to connect our senior population with those

programs. But much more needs to be done in that arena, and

there’s certainly not funding locally to support that.

I want to encourage the committee also to seek and, where possible, fund solutions to what is a crisis in this country, a growing

crisis, around the work force shortage of nursing and other caregivers. Very important.

Also, it’s important to support those efforts that are being made

around national caregivers and family caregivers for our aging population; and last, to fund Medicare coverage of technology. There’s

terrific new technology that’s emerging in the area of medication

and administration, including the smart pill bottles, and technology

that can remind people to take medications that are very important

for seniors to remain safe and independent.

I want to thank you for the opportunity to share my thoughts on

this challenging issue, and I want to commit to you that we look

forward to working with you and our other Federal partners to

identify solutions to what is a very difficult and challenging problem that is very much to the hearts and minds of our senior population here in Oregon.

[The prepared statement of Ms. Lissman follows:]

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Senator Smith. Lydia, thank you, for your excellent testimony.

The point of this hearing is to get an Oregon perspective on the

prescription drug issue, and you did that very, very nicely.

Dr. Kositch, welcome. It is nice to have you here.

STATEMENT OF MICHAEL KOSITCH, M.D., MEDICAL DIRECTOR

FOR PRIMARY CARE SERVICES, KAISER PERMANENTE

NORTHWEST REGION

Dr. KOSITCH. Thank you for the opportunity to speak to you

today about the role of prescription drugs and health care needs of

our Oregon senior citizens.

I have been in the practice of medicine for over 15 years here in

Oregon, and I am certified in both internal medicine and geriatric

medicine. I work with Kaiser Permanente Northwest, which is a

fully integrated health care system that operates in Portland and

Salem in Oregon, as well as Southwest Washington.

Our regional membership is 450,000. 225,000 members live in

Oregon and 128,000 are in Washington. Among those members we

have 46,000 Medicare members, 42,000 enrolled in our Senior Advantage, our Medicare+Choice program, and also 4,000 in our Senior Advantage II, our social HMO program.

In the early part of the 20th century, discovery of the first effective antibiotics was the beginning of the development of effective

medical prescriptions as a fundamental tool in providing quality

healthy care. Now, medications are very much the cornerstone of

nearly all medical care, particularly for the elderly who struggle

with a large number of chronic illnesses.

Innovations in pharmaceuticals over the last half of the last century have contributed to a substantial increase of lifespan and an

improved quality of that longer life for all Americans. In the 20th

century, prescription drugs are now irreplaceable tools that physicians use in the treatment of acute and mostly chronic illnesses affecting the disabled and those over 65. I believe that the medications enable practicing physicians to shorten the hospital length of

stays and, in some cases, eliminate need for hospitalization. For

example——

Senator Smith. Do you have a number on that, a percentage?

Dr. KOSITCH. No, I think it’s too hard to separate it from everything else that’s gone on with diet and exercise in our society, and

to attribute it all to one cause is unfair.

Senator Smith. But it’s reasonable to deduce from that there

would be some savings on hospital and other acute care?

Dr. KOSITCH. Yes, on an annual basis. The quandary is is that

we will lengthen people’s lives. If you lengthen people’s lives, they

will use more health care. I can tell you individuals may use more

costs over the rest of their lives, but I can tell you individuals will

use less cost in a given year.

An example along those lines is, 40 years ago, a 65-year-old man

who suffered a heart attack, a myocardial infarction, frequently

was hospitalized for 3 weeks and usually was unable to resume

work or any—he was advised not to do any physical activities at

all recreationally.

Now, many times that person doesn’t have that heart attack or

has it much later in life. If they have that heart attack, they might

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expect only 3 to 6 days in the hospital, and they have a very good

expectation of eventually resuming a level of activity similar to

what they had before.

As with any tool, these prescriptions, to be effective, have to be

used according to specific instructions. Dosage strength, frequency

of admission, and the duration of treatment all are key in predicting the benefits. When any of these parameters are changed or interrupted, the expected outcome will be altered and may not be

achieved at all.

That means that the benefits that patients take their medicines

for may not ever occur. Compliance with the drug administration

is important to getting those successes. But when a barrier exists

to the use of prescription drug medicines, high quality effective

health care that is available in the 21st century is compromised.

Among senior citizens, the most disturbing barrier for prescription drug usage is the financial cost. The difficulty in admitting patients to obtain these benefits creates an inability to get the services that we can give them in modern medical care. Patients are

frequently having to choose whether they can afford their medicines.

This problem exists in Oregon as well as throughout the country.

Seniors choose either to forego the prescribed medicine altogether,

or they make choices about which medicine to fill, sometimes eliminating the medicine that has the most benefit for preventing future

complications in favor of one that is either more affordable or one

that perhaps minimizes their symptoms.

Many of these patients, as a result, may live in pain, may see

their condition not improve as we can hope for, or actually experience a worsening of their condition due to the cost of prescription

medicine.

Senator SMITH. Doctor, along that point, I think what we’ve seen

a lot of seniors do is to emphasize what it means when a senior

will reduce the dosage, cut it in pieces, stretch it out. What is the

impact of that, in your medical opinion?

Dr. KOSITCH. Well, the three most common chronic diseases in

our elderly Americans are hypertension, diabetes, and high cholesterol. In each one of those medicines, the benefits of treatment are

in many ways proportional to the degree of reduction in the abnormal blood values that they monitor.

So by reducing your dose in half, crudely, one can say you’re getting half the benefit. It’s better than nothing, and I am thankful

that they do take some. But there are more opportunities for it improving the health, delaying first major events, and improving the

quality of that longer life, as well.

Senator SMITH. In the converse of that, my wife always tells me,

if one works, that doesn’t mean two works better.

Dr. KOSITCH. I do encourage my patients, as your wife does, to

talk to their doctor first before making that change.

Now, I am proud to report that for Kaiser Permanente members

here in Oregon and Washington, the situation may not be quite as

bad as it is for many other Americans, because both of our

Medicare+Choice plans offer a prescription drug benefit and always

have since the early 1980’s when these programs were first offered.

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It is the policy and practice of Kaiser Permanente Northwest to

offer a comprehensive health plan, and the definition of a comprehensive health plan includes some prescription benefit. As a

physician, I work at Kaiser Permanente because I knew an inability to use prescriptions would effectively tie my hands in helping

patients.

In our standard plan, prescriptions are covered at a 30 percent

benefit, and the out-of-pocket outlay for a member is capped, so

they would pay no more than $75 for one prescription.

In our social HMO, Medicare+Choice program, Senior Advantage

II, we offer one of the most comprehensive programs in the Nation.

A member only pays a $10 copayment for generic and a $20 copayment for brand name drugs. There is not an annual drug dollar

limit on the pharmacy benefit, and it does not expire.

Last, I would like to thank you, Senator Smith, for introducing

Senate bill 2782 to propose making Senior Advantage II a permanent rather than a demonstration project. In many ways, the social

HMO is the preferred health care model for the future, I believe,

and I thank you for your foresight in leadership in converting this

product from a time-limited demonstration product to perhaps a

permanent offering for all Oregonians.

[The prepared statement of Dr. Kositch follows:]

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Senator SMITH. Thank you, Doctor.

I talked earlier about the delivery system; do you do it through

Medicare or do you use private insurance? You work for a private

insurance company, an HMO, and a good one, from everything I

have ever heard. I am wondering if you think that the private sector can carry this benefit to our Medicare population.

Dr. KOSITCH. Well, it’s a complex question. I think either delivery

system creates its own complexities. Speaking to your earlier comments, your concerns about a formulary restricted from 90 percent

of the medicines is the one that I have concern about. It’s quite

clear to me that marketing by pharmaceutical companies, that they

can drive demand for medications which are more expensive but

are not more effective in any scientifically proven way.

In covering 90 percent of the medicines, it looks to me like it’s

Medicare encouraging that sort of behavior rather than encouraging a cost effective prescribing to be done by physicians and used

by their patients. I welcome discussion from my patients when they

say, is there another medicine that works as well as that but

doesn’t cost as much?

I think if you cover 90 percent, there’s no incentive for a drug

company to create a cost effective medicine, only one that has a

good ad budget.

Senator SMITH. That’s a wonderful question. Everybody has probably followed the whole debate about formularies and are much

more educated than most folks about this very issue the doctor has

cited, and it is really one that deserves the best thinking we can

put to it.

In my view, 10 percent of available medicine was a fatal flaw of

the proposal of the other side and warranted a no vote on my part.

But 90 percent, you’re saying, is too much. What is, you know, the

Goldilocks? What is just right?

Dr. KOSITCH. It’s a process rather than a number.

Senator SMITH. OK.

Dr. KOSITCH. We currently don’t have a standard, but the FDA

could easily be a group that was charged to take evidence based

medicine and indicate which medicines are cost effective within a

certain range.

I believe the economic forces that drive pharmaceutical companies could cause them to have a certain interest in that. Just as

the elaborate rules around patent expiration and extension that

you dealt with, a formal Federal review of cost effectiveness would

put a counterweight, and what percentage of medication on a formulary—somewhere between 10 and 90 is a fine number with me.

It’s the process of getting to a second part of the conversation, I

think, is a more important part.

Because I can live with even 90 percent if it’s 90 percent that an

objective agency is looking at and saying, these medicines make

sense, not that these medicines just don’t hurt you.

Senator SMITH. A formulary should have enough, not flexibility

but adaptability that, as new drugs are developed, some can be

added and others can be dropped.

Dr. KOSITCH. Absolutely. In our organization, one of my colleagues sits on committees as a physician, and they review dozens

of medicines every month trying to understand, is this a new mediVerDate 11-MAY-2000 10:26 Jan 02, 2003 Jkt 000000 PO 00000 Frm 00046 Fmt 6633 Sfmt 6633 C:\DOCS\83251.TXT SAGING1 PsN: SAGING1
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cine bringing a new benefit? Is this a new medicine bringing the

same benefit or more convenience or better cost or better safety, or

is this just what we call a me too medicine, another medicine that

someone else can put on an ad and have patients say, I want the

new thing.

Senator SMITH. Doctor, it’s been very, very helpful.

We do have 15 minutes remaining in this hearing, I believe, and

so we do have some time for questions from the audience of our

panel. We invite the earlier witnesses to come forward, and I will

read the questions you’ve turned in in the order I received them.

So the first one is by Dick Means. Dick says, when doctors prescribe more and when seniors take more than they need, should

prescription drugs become a government benefit?

Many of you might have that thought. Would doctors churn this

system? Would they give more than the seniors need if the government took it over? In other words, if everything is free——

Dr. KOSITCH. People could take more. Would they take too much?

I think it goes to your belief of the human condition. Because I

would believe it’s always good to have some recognition of the cost.

On the other hand, no one likes going up to open up one of those

impossible-to-open bottles and taking out one of those impossibly

small pills and putting it in their mouth three times a day.

Senator SMITH. The next question is by Phyllis Rand. Will lawmakers act to get a prescription drug benefit in Medicare this year?

I think, honestly, the chance is sort of 50/50, and I will explain

why. We are in the middle of a political season. I have been in politics for 10 years, and what I have noticed is that, after each election, when the Congress or legislature goes back into session,

there’s a window of opportunity where problem solvers can form

majorities across the aisle, and you can actually make policy.

As you get closer to elections, politics trump policy. That’s an unfortunate thing, but it’s part of our democratic process, and it leads

to an election that will lead, in some cases, to new players and in

a new dynamic that leads you back to making policy.

Having said that, I would say the political imperative on this

issue is so acute that I think both sides have incentive to revisit

this issue in September. If we do, I think we can get something.

We should get something that hits 60 votes in the Senate and then

goes to a House/Senate conference, which then works with the

White House to come up with a final package, goes to the White

House for the President’s signature.

I think it’s a 50/50 proposition. But if we don’t get it done in the

6 weeks of work time remaining, I think at that point the stars will

surely align in the President’s own reelection effort, and the Congress and the new Members of Congress with the President surely

will have to have this resolved on some level.

Anybody want to correct me on that?

Senator SMITH. The next question is from Bobby Jindal. I am

sorry if I am mispronouncing your name.

I am fortunate I am not taking prescription drugs at this time.

I do receive chiropractic and acupuncture for back pain which is

not part of Medicare. But the Medicare claims process is so complex that it can be months before a claim is paid.

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That’s just a fact. You know, we talk about the complexities of

going the private route versus the public route. I mean, Medicare

isn’t exactly the most efficient system that you’ve experienced in

life, I suspect, and adding to its complexity doesn’t mean it’s going

to get more efficient and better.

But again, it can work. It’s just that government works slowly.

HMOs and private insurance can work. But then you’ve got a gatekeeper in the private sector with a financial incentive to say no. It

can work, but it’s frustrating to seniors. Again, these are the tradeoffs we’re wrestling with.

Is there any hope that Medicare claims can be simplified, and

can coverage be extended to cover acupuncture and other alternative treatments?

I think, Bobby, you’re the one to answer that. You represent the

Secretary of Health and Human Services.

Mr. JINDAL. Sure. I would say two things about that. First, in

terms of simplifying the claims and speeding up payment, there

was a bipartisan bill that actually I think was approved—if not

unanimously, with one or two exceptions—out of the House of Representatives that’s intended to modernize and streamline the Medicare program; to do things like encourage electronic billing and

electronic payment, speed up the process. It has bipartisan support

and that of the Finance Committee, as well. So we do anticipate

that reaching the President’s desk.

However, I think that the woman with the question, the person

who wrote that question, reaches a more profound point, which is,

the CEO of the Mayo Clinic, counted 130,000 pages of rules and

regulations in the Medicare program. He basically testified that the

Medicare commission in the Congress, that’s the fundamental challenge for providers and beneficiaries staying in the program.

Senator SMITH. How many pages?

Mr. JINDAL. 130,000 pages.

Senator SMITH. That’s bigger than the Bible.

Mr. JINDAL. Sir, I don’t believe anybody in Washington has

130,000 pages of things to tell the Mayo Clinic on how to practice

medicine or provide health care. So there’s a question of, what is

the best way to make the program more flexible and responsible?

When you look at the history of the program, it has never been

particularly aggressive in adding benefits. Whether it’s been preventive services, immunizations, or other services, it’s really lagged

behind the private sector.

One of the reasons the Administration was very encouraged by

that tripartisan approach—one of the things I should have said, because Senator Breaux is chairman of this panel, you know, and we

encourage the work that he has done with Senator Jeffords and

other members of the Senate, including your support is to encourage the use of private plans and private options.

Historically, those private plans are much more nimble and

much more quick and responded much more quickly to these seniors and adapted new preventive services. So probably the best way

for Medicare to add new benefits and be more responsive in the

marketplace is to give seniors more choices. What we have seen

does not work is to allow the Federal Government to make those

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decisions. It is a very political process and very slow process when

that happens.

Senator SMITH. I appreciate those comments. Hopefully we’ll get

that to the President, and we can at least bring Medicare billing

up to today’s technology and make it work.

Next is from Naomi Ballard. She writes, increasingly physicians

in Washington County are opting out of Medicare. This limits access to Medicare. What plans are being made to alter this trend?

Again, that goes back to Bobby.

Mr. JINDAL. Sure. There’s something called the sustainable

growth rate, one of these complicated formulas used by Medicare,

to reimburse physicians. Back in 1998, 1999, everybody agrees

there were some mistakes built into a formula which resulted in

last year almost a 5 percent decrease in Medicare payments to doctors. This year there will be another decrease and, until we fix it,

it will continue to have decreases.

Now, the Administration, we consistently think any new spending should benefit the beneficiaries. We’ve been firm to say, we

want the first thing that Congress does is to have a prescription

drug benefit. We’ve also said of the providers, we absolutely do

think that the physicians do make a good case and have presented

convincing data.

We need to do something to help our physicians. I think everybody agrees that we needed to do something to adjust the formula

to acknowledge that.

Senator SMITH. Very good.

Jacqueline Stoble writes, most times patients are forced to use

generic drugs. Many times generics are not quite the same. If you

can’t tolerate generics, will you be denied brand medicines?

In all of the plans that I have seen, both are offered. Generics

come at a lower copay than the brand, which has a higher copay.

Instead of 2.50, it’s like a $5.00 copay. So it’s not substantially

more, but they are available.

Mr. JINDAL. Senator, also remember, in the tripartisan and other

bills, it was also an option for medical appeals that if you and your

doctor certify that the patient has a clinical reason for a drug, that

there will be a way to cover that drug. So you’re absolutely right.

Senator SMITH. This is a question for you, Bobby. You’re on the

hot seat right now.

This is from Mary Ann Warhol. Mary Ann writes, many believe

that the universal health care, such as Hawaii’s, which includes a

prescription drug benefit, is the best long-term solution for Oregonians. Do you support this notion? Why or why not?

Mr. JINDAL. Two things. One, I work for a Secretary that used

to be the Governor of Wisconsin who, in turn, worked for the President, who used to be the Governor of Texas. Both of them are very

eager to give their fellow Governors and their States more flexibility for programs.

Almost 2 million people have additional benefit and additional

coverage. Almost 5 million people have gotten additional benefits,

simply by the Secretary saying, we want the States to have the

flexibility. They receive Federal assistance. We want them to have

flexibility. We don’t want them to be tied up in red tape.

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The Secretary supports giving States more flexibility to be the

innovators, the ones blazing new paths to show how health care

can be more efficient. The second aspect of that question deals with

universal care. It is one of the challenges facing our health care

system. We have 38.7 million uninsured. That number only

dropped in the last 2 years and probably will increase now, despite

10 years of rapid economic growth.

By having that many uninsured, you have individuals who are

not getting access to preventive care, but are going to the emergency room. They are shifting costs to other individuals, and so

they’re receiving the more expensive, least effective type of care,

and we do believe that’s wrong.

That’s why the President has proposed almost $80 billion in refundable tax credits to allow the working poor to have coverage.

That’s why he’s made over $3 billion available in expiring SCHIP

dollars. That is why he’s supporting doubling the number of community health centers, as well as 40 million additional dollars for

health professionals to go in shortages to pay their costs, their

loans, their tuition, so they can go serve the underserved population.

So the Administration strongly believes that the answer is in allowing people to have the best access to high quality, affordable insurance. Our message is consistent with our message on Medicare.

We want to help those who cannot afford coverage. We don’t want

to displace coverage that exists, but we also don’t want to increase

government bureaucracy.

Senator SMITH. Sounds to me like a no on universal coverage.

Mr. JINDAL. The answer to universal coverage is to allow States

to have the flexibility so they can do—— Senator SMITH. If they want to have it like Hawaii.

Mr. JINDAL. That’s right. The States should have the flexibility

to do that. The Federal Government, we don’t support the Federal

Government nationalizing or socializing the health care system. We

do support everybody having access to health care coverage,

though.

Senator SMITH. Absolutely.

This is for Dr. Kositch. Does the fact that Kaiser applies evidence-based research in setting a prescription drug formulary in

practice help better assure patients and physicians that they

choose the right drug for the best price? Should this approach be

carried forth beyond an HMO model?

Good question from Jeffrey Cohen.

Dr. KOSITCH. It sounds like I wrote that question for myself. The

short answer is yes. I think it spoke to what I said earlier, that

if there is a rigorous, scientific approach to encouraging effective

use of medications that should be a goal to provide as much coverage for many as people as possible by trying to identify what

works the best and what things are priced at a market whim rather than any scientific basis.

Senator SMITH. The answer to that will change with every research fund.

Dr. KOSITCH. It does. But I think you can easily say on an annual basis you could update such a list. While there are people who

would want it to be done sooner, an annual basis is more than

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enough. As long as it’s understood there is a process that will go

on year after year, and it wasn’t a one-time thing.

Senator SMITH. Very good.

This is to you, as well, Doctor.

Oregon’s innovative prescription drug research authorized under

some Senate bills this year provides consumer health care providers with consumer reports like Gray to identify the right drug at

the right price, called evidence based research. Oregon’s process

has been praised by PHRMA and AARP alike. How can Congress

support and promote expansion of this work?

Dr. KOSITCH. I am unfamiliar with this specific product, although

I am very aware that the state Medicaid program comes to us asking for advice on how to screen prescriptions for effectiveness, so

I am assuming it’s a related process.

Giving information to consumers is another way, as I said, also

giving the information to the FDA, of using scientific knowledge in

a way of allocating a resource.

Senator SMITH. There are a couple other questions, but they really do duplicate ones that have already been asked. So before we adjourn, I would like to remind all of you that caseworkers from my

office and Senator Wyden’s office are present. Raise your hand if

you’re from my office and Senator Wyden’s office to help here.

These folks are here to answer your questions and tell you about

programs available in Oregon and help you deal with any problems

you may be having. There’s also coffee and cookies available in the

back.

I truly hope that you have found this Oregon focus on the prescription drug issue of value. I have, and I return to Congress as

committed as ever, but more determined to get a result, the sooner

the better, and I hope in the 107th Congress. Because this is an

issue, as I said in the beginning, whose time has come, not for debate but for resolution.

Thank you all.

[Whereupon, at 12 p.m., the committee adjourned.]

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