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REMARKS BY:

TOMMY G. THOMPSON, SECRETARY OF HEALTH AND HUMAN SERVICES

PLACE:

Four Seasons Hotel, Washington, D.C.

DATE:

February 17, 2004

Address to the Blank Rome Health Leadership Forum

Thank you, David, for that kind introduction.

Ladies and gentlemen, the greatest health care system the world has ever known operates right here in America, and the people in this room are a part of it. Our system is great because doctors and nurses, hospitals and clinics, manufacturers and researchers, investors and pharmacists have the freedom to compete to offer the best choices possible.

My job as Secretary is to do everything I can to make Americans strong, healthy, and independent. And we’ve done that in countless ways—from increasing organ donation to expediting the FDA approval of new drugs so they can save more lives more quickly.

Over the past three years, we have approved Medicaid waivers and state plan amendments to allow state governments to expand access to health coverage for more than 2.6 million people, and to expand the range of benefits offered to 6.7 million other Americans.

And the care provided by our system continues to improve. Private investors spend $32 billion every year on health care research, and taxpayers spend another $32 billion. Their research yields new drugs that are replacing surgeries and hospitalizations. They also produce better screenings and more advanced preventive care.

Naturally, private health insurance plans have competed to cover recent advances in medicine. But until recently, Medicare didn’t. Seniors who saw others taking advantage of modern medicine naturally wanted it, too, and they wanted it through Medicare. That’s why President Bush recently signed into law the most significant improvements to Medicare since it was created in 1965. The new law will save seniors money on prescription drugs, make more preventive benefits available, and improve access to care in rural areas.

In many cases, benefits will be enhanced immediately. We are already reviewing the new benefit proposals submitted by Medicare Advantage plans. It appears that more than half of current enrollees will see better benefits and that almost as many will see reduced premiums or out-of-pocket savings. The average premium may shrink by as much as a third.

Let me give you a few examples. Independent Health and Univera Healthcare will reduce premiums for Medicare Advantage plans in New York by 13 to 50 percent. Independent Health also expects to enhance benefits. Plans in Colorado are planning to cut premiums by 50%. In Massachusetts, Tufts is cutting premiums from $147 to $80. And members of the Medicare Blue Value plan of Horizon Blue Cross Blue Shield of New Jersey will no longer pay the $52 premium.

Over all, we expect that 2 million Medicare Advantage beneficiaries will pay lower premiums, 2 million will save money on cost sharing, and 3.4 million will get enhanced benefits. For example, 32 percent of beneficiaries today have coverage that includes brand name drugs. We project this number to rise to 45 percent. The bottom line is that the increased payments to insurance plans have resulted in better benefits and reduced premiums for seniors.

Congress and the President have an ambitious timeline for implementing the Medicare-endorsed drug discount card. Our Centers for Medicare and Medicaid Services have been working with State governments, the Social Security Administration, and other partners to identify people eligible for the card, set up communications systems for information sharing, create a price comparison web site, and review the card provider applications.

We received 106 applications. 57 of these would serve the general Medicare population, nationally or regionally, while 48 applications are from Medicare Advantage plans that want to provide cards to their enrollees. Many types of entities applied, including insurers, wholesalers, PBMs, pharmacy chains, and manufacturers. We are reviewing these applications to see which ones meet our requirements.

Seniors can begin enrolling in the card by May of this year. We will add transparency to the prescription drug market by making public the price of each drug under each card. Competition among the cards will drive down drug prices, probably very significantly, as people compare the prices each card offers for the drugs they typically take.

So, a senior citizen, let’s call her Mrs. Jones, can sit down with all of her prescriptions in front of her and call 1-800-MEDICARE. Our representative will review with Mrs. Jones the discount cards in her area, and tell her the price she will pay for her prescriptions under each card. Mrs. Jones can choose the card that will give her the best deal for the prescriptions she’s taking. If Mrs. Jones has a computer, she will be able to go to our web site and get the exact same information.

And it’s not only the law and our advisors that are making medicine more affordable. We’re also delighted by the news that some drug manufacturers will be generously providing drugs to low-income seniors with deep discounts or outright gifts. We’ll include these discounts in our prescription drug assistance tool on medicare.gov. So when Mrs. Jones calls, we’ll be able to quote drug prices that include both the drug card discounts and any manufacturer discounts that apply to her.

Here’s how the card will roll out. We have the applications. We’ll announce which cards we’ve approved in March. Sponsors will market the cards in April. Beneficiaries can sign up for cards in May. And the discounts will begin in June.

In addition to the discount card, the law also provides $600 Transitional Assistance to low-income Americans. We are working with the Social Security Administration, SHIPS, safety net providers, and pharmacists to find and enroll as many eligible Americans in the program as possible. Of course, we’ll also make it easy for people to identify themselves. Those who are interested in receiving the assistance will fill out an enrollment form that we will use to determine eligibility and the appropriate level of co-payments. The companies will keep track of the $600 on each card.

State governments have great latitude in how they interact with the new benefit, and CMS has been working with them to ensure that the both the drug card and the drug benefit are coordinated with state Medicaid programs. For example, the $600 Transitional Assistance is not available to dual eligibles because they already receive a generous drug benefit from Medicaid. CMS is focusing on those states with state pharmaceutical assistance programs (SPAPs).

As you know, I’m a big proponent of improving the efficiency of our health care system by improving information technology. That’s why we provided a computer language, SNOMED, to providers at no charge. That’s why we’re leading the way in developing standards for electronic medical records.

And Medicare is no exception. We are going to make sure we fulfill all the new requirements as we implement the legislation. CMS has developed an entire modernization plan, which is even more important with the MMA’s addition of the drug card, the drug benefit, chronic disease management, and contractor reform.

On January 1st, 2005, the “Welcome to Medicare Physical” benefit will begin. For the first time, seniors entering into Medicare will be offered the physical and a number of preventive services.

Finally, to make all the new programs as effective as they can be, we must help seniors to understand them. The Medicare Modernization Act requires the Social Security Administration to send letters explaining the drug card and the Transitional Assistance program to 18 million lower-income people with Medicare. At about the same time, CMS will send letters to 36 million Medicare households to introduce the card and the TA program. These letters will be complemented by a TV ad campaign on the card.

The press has charged some companies with marketing a Medicare-approved card well before we’ve authorized any cards. I want to assure you that Federal officials are on the case, and we’ll clear up any misimpressions created by deceptive marketing. This is yet another reason why our education campaign is so important.

All of these efforts, from enrolling people in Transitional Assistance to mailing out letters, will help seniors understand their choices in preparation for the full benefit in 2006. Starting this dialogue now will help them learn about formularies, branded drugs vs. generic drugs, and other important concepts.

Adding significant benefits to a very large government program is a major task, and we expect there will be bumps along the way. But the response so far—in drug card applications, in reduced premiums, in drug manufacturer discounts—has been gratifying to us, and, most important, very helpful to seniors.

We’ve started running our first ad to prepare seniors for the new Medicare benefits. Some on Capitol Hill have charged that this ad is too political. I thought I would play it for you and let you make up your own minds.

Last Revised: February 17, 2004

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