me begin by thanking Heritage and all of those who have worked hard
at Heritage to influence this debate, starting with Bob Moffit, who
for years has been working to inform policymakers about the
benefits of a free-market influence on the government health care
program, joined by Ed Haislmaier and also Walton Francis, an
independent economist, who did some work on behalf of Heritage in
providing us with some great ideas on how to proceed with regard to
have also been helped by others from some other think tanks--those
of us who have been interested in reforming Medicare in addition to
providing a prescription drug benefit.
genesis of the legislation that is before us is really twofold.
After 25 or 30 years, we all recognized that Medicare, which is
supposed to supplement health care for our senior citizens, has
been lacking a critical component.
Unlike when Medicare was created, the
prescription drug is the treatment of choice, at least initially,
for many different diseases and conditions. It wasn't that way in
the beginning. As a result, anyone who seriously looks at providing
quality health care to seniors understands that ensuring their
access to prescription drugs is a critical component of their
treatment. Therefore, we wanted to include some support for
prescription drugs in Medicare.
Knowing that we had that opportunity, but
also knowing that we have a huge challenge in paying for the
benefits that we provide generally to our senior citizens, we
looked at this as an opportunity to reform Medicare now so that we
could actually continue to provide the benefits that have been
promised when the baby boomers retire. The idea was to be able to
provide a prescription drug benefit and also to use that
opportunity to reform Medicare.
I'm going to do today is to talk to you about two general themes
that have animated my approach to this problem. Those two themes
First, I don't think Americans generally
appreciate how important medical care is to them, and as
policymakers we need to help them understand just exactly how
important it is to them and, therefore, what they are willing to
Second, failure to follow three principles
included in the delivery of health care leads to market distortions
which in turn will lead to erosion in the quality of health
How Important is Health Care?
want to begin by asking all of you a question. Other than freedom,
is there anything more important to any of you than your health or
the health of your closest relatives and family? Education is
important; but when my dad was on his deathbed, education was not
really that important to me. So, at the end of the day, the health
of our families and the ability to treat our health conditions is
probably the most important thing to most Americans.
hundred years ago, we had to work just about six, maybe seven days
a week to put the roof over our head and the clothes on our back
and to feed our families. There wasn't any medical care to buy to
speak of, so we spent very little on that.
Today, how long does it take to provide
for those basic necessities of life: maybe two, three days of work?
For a lot of people it's not even an entire workweek. We have a lot
of disposable income, yet we seem to have an attitude in this
country today that somebody else should pay for our health
it's the most important thing to us, then shouldn't all of us be
more concerned about how we're going to ensure good quality health
care when we need it and when our families need it? Shouldn't we as
individuals and families be willing to pay more as communities,
churches, and synagogues, and indeed even as government, as a last
resort? Every one of us that has some role to play in paying for
health care today should consider just how important it really is
to us and then think about our attitude toward paying for it, which
generally is that we want somebody else to pay for it.
That's the first point: What do Americans
think about this? I happened to see a poll in a Washington Post
story from October 20. Eight in 10 said that providing health
insurance to all Americans was more important than holding down
survey also found that six in 10 would prefer a system that covers
everyone, but that support drops below half if such a system meant
a limited choice of doctors or waiting lists for care. That's part
of our education mission right there. Overall, 78 percent of
Americans say they are dissatisfied with the total cost of health
care, and a majority, at 54 percent, say that they are dissatisfied
with overall quality as well, which is an increase of 10 percentage
points just since the year 2000.
There is no question that the quality of
our health care will deteriorate over time if we continue to have
the attitude that even though it's important to us, we want
somebody else to pay for it, because that somebody else will not
care as much about it as you will. Their primary motivation is to
buy it cheaply. Your primary motivation is to get quality care.
A Public Policy
Before I get to my second theme, let me note an interesting
dichotomy that illustrates the problems that we have politically
when we are trying to craft public policy. I don't think either
liberals or conservatives get this right.
Remember: We're talking about Medicare,
not Medicaid, under which we are paying for folks that aren't
getting enough care, we believe, so we are going to chip in and
make sure that they get some support. Because they are poor and
can't pay for the minimum care that they need, as a society, we are
going to chip in.
Medicare isn't like that. Medicare applies
to everybody over the age of 65. It's Medicare or no care.
Basically, you cannot get health care in
this country if you are over 65 because whoever you get it with has
to send the bill the Medicare or they are violating the law. The
only folks to whom that doesn't apply are those who are willing to
say we are not going to take care of any Medicare patients
whatsoever for at least two years and therefore we're not under
contract with the government to send the bill to Medicare--very
few, although it's increasing.
with Medicare, this is something we have said all Americans must
participate in. Now, liberals have a problem because they wouldn't
want anybody to make any money on this. First of all, they wouldn't
want any drug company to make any money. They surely don't want
insurance companies to make any money, not to mention doctors or
for-profit hospitals. Lawyers are a different matter: That's
Conservatives have a problem with it
because, obviously, we're concerned about taxpayer dollars. Just
about every year, I rank number one in frugality from the National
Taxpayers Union and Citizens Against Government Waste and so on, so
I'm arguing this from the standpoint of somebody who's pretty
frugal with taxpayer money.
conservatives view this with a green eyeshade and say, well,
granted this is an important public policy issue, but we want to be
sure and do it cheaply. And remember what happens when a third
party pays for something that's really important to you: They may
not have quality health care first in mind. Frankly, that's where I
think too many conservatives are coming from.
How should we both add this drug benefit to Medicare and
also reform it so we can pay the promised benefits to baby boomers?
The original idea was that we would take care of those in need,
that we would simply provide a drug benefit to those who didn't
Somewhere along the way, however, the
concept of universal care hijacked the reform. The idea became
ensconced in our political culture that it had to be a universal
benefit. That decision has taken hold, and I think it's going to be
impossible to reverse, with the result that there are several
questions that arise.
first is how are we going to encourage employers to continue to
provide the retiree health benefits that they currently have,
probably the number one concern of my constituents, and second, how
are we going to be able to spread the payment universally so as to
still provide a significant health care or drug benefit to people,
but to provide it not just to those who are in need, but basically
Applying Free-market Principles
gets me into the second theme: how some of us believe that applying
free-market principles could actually help solve both of those
problems intelligently. It's this area in which I have a big debt
of gratitude, as I said, to Heritage and others who really provided
a lot of the intellectual firepower for the ideas, some of which I
predict will be included in the legislation.
idea is that adding a private option to traditional fee-for-service
Medicare could provide the flexibility, the choices, the economics
to produce both high quality and lower cost and that this
private-sector option would basically be a reflection of something
like the Federal Employees Health Benefits Program (FEHBP), which
Members of Congress can participate in. This is private insurance,
offered within a government program, that provides a variety of
products at different costs. We all have to meet a basic minimum in
terms of the benefits provided, but we're able to choose, and it's
available everywhere in the United States. There's a postmaster,
remember, in just about every community. All federal employees are
entitled to that.
idea would be to try to fashion an alternative to fee-for-service
Medicare that looks a lot like the FEHBP. That's what the President
originally announced was his intention, and he still believes that
that would be a good model.
People would have a choice when they turn
65. They could either sign up with the traditional fee-for-service
Medicare with a drug benefit added to it now, or they could choose
a private plan, like a PPO (preferred provider organization), or
perhaps an HMO (health maintenance organization), like a
Medicare+Choice organization. It's their choice. Once a year, they
could move back and forth, but they would have a choice.
Within the private sector, they would
probably have several choices, like we do in the FEHBP. This would
be an integrated Medicare plan. It would include all of the
Medicare A and B benefits plus the D benefit of drugs.
was the original concept, and I think that that general notion will
be embodied in the legislation, although it won't be exactly as
I've described it here. But seniors will have a choice between
traditional Medicare and a private option.
The problem is that the liberals in Congress fight the private
option. They just don't like the idea of the private sector being
involved in providing health care. They'd rather have it be a
government program. You've heard Senators like Senator Edward
Kennedy, for example, talk about this and understand that that's
simply where they are as a matter of philosophy.
problem with conservatives is that they don't trust the private
market frequently. This is a strong indictment, but I make it
because I've sat through hours and hours and hours of meetings, and
while the conservatives generally say we want to set up a
private-sector option, they also want to control that, to regulate
it to make sure it works properly.
you have confidence in the market, you understand it: It's
basically a law of nature. It's like water flowing downhill. You
can try to regulate it all you want to, but one way or another it's
going to find its way down hill. The private market will work
because people will respond to the incentives and the disincentives
of the private market, and it can work in health care just as well
as it can work in other areas if you let it.
people in Washington think that they are smarter than everybody
else in the world, so they know how they can actually regulate the
private market just like they regulate the government and it will
all work out just right. Granted, we haven't had very good
experience with regulating Medicare, but we'll learn from that
experience and regulate the private-sector alternative too, so it's
going to work just right.
reason we want to do this is because we don't want it to be too
expensive. Remember: The idea originally was that we were going to
set up a private-sector alternative because we thought that it
could not only provide better quality care, but also at a lesser
expense. It might not do that the first year or two, but over time
we are confident that that would be the case. Experience has shown
Certainly, with the FEHBP I think we have a good model to base it
on. But what if the cost of the private-sector insurance would be a
little bit more than the cost of the fee-for-service Medicare? We
couldn't have that, some people say, so we'll have to regulate it
by making sure by government fiat that the premiums of the
private-sector option are virtually the same as the premiums of
traditional Part A and Part B Medicare.
is the problem that I'm describing. Even conservatives say that
what we should do, if there are 15 percent of the people in an area
that are willing to go with the private and 85 percent that are
sticking with traditional Medicare, then the private plan's premium
is going to be 85 percent fixed by Medicare and 15 percent
influenced by what the private insurer would like it to be.
and GM compete, and they each are affected by each other's prices,
I'm sure. But I don't think that we need the government saying that
if 60 percent of the people buy Chevies and 40 percent buy Fords,
then the cost of a Chevy is going to be 60 percent of what they'd
like it to be and 40 percent of what Ford charges for Ford and vice
That's the problem we have in crafting
something. Philosophically, I think we are confused and we are not
willing to create a private market alternative that really reflects
how the private sector works. As a result, we are having to correct
for potential problems.
is always the problem. The first regulation, since it might not
work, has to have two potential corrections to it. What if the
product is too high or too low? (And, by the way, we are always
either too high or too low.) Then each of those has to have a
correction, and pretty soon you've got 16 different possible
corrections. Because we are not sure that the private sector will
get enough money in the government reimbursements to the plan, you
know the government is either going to pay under traditional
Medicare or it's going to pay a certain amount to the private
insurers to take care of seniors.
figured out that this might not be enough under this formula that
people have been talking about, so we'll need to create some risk
corridors. We need to create a stabilization fund. In other words,
instead of just letting them set their own prices since we may not
pay them enough, based upon how we're going to regulate this, we're
going to compensate for that by setting up some other funds to help
pay them just in case. It would be easier just to do it right in
the first place, but that's an example of the kind of thing that
people have talked about doing.
regard to providing the drug plan, this is taking traditional
Medicare and adding the drug benefit to it. Somebody likened that
to haircut insurance. There's a lot of risk in this because there's
going to be about 100 percent participation. If you've got a drug
benefit, you're going to take advantage of it. So it is a little
bit like haircut insurance.
how are we going to get the private sector to provide that drug
benefit in traditional Medicare? We are going to "dial down" the
risk until we can convince the private sector to play. In other
words, the government will accept the risk up to that magic point
at which the private insurer says, "Okay, now I'm willing to take
on the risk because of the potential profit that I might receive."
For a while, as long as we do that, the government is going to get
part of that profit because, after all, we're going to "dial down"
point is that once you make the first fatal mistake of saying that
you know better and you're going to regulate the private market,
since you know you can't be right in every situation, then you have
to have corrective actions that you can take to correct the
situations, the distortion in the market that you have created, and
pretty soon you're piling one on top of the other, and it bears
little resemblance to the real market forces that could help
me illustrate this also with some examples of what we have in our
current Medicare system--mistakes which I would hope we would not
repeat, but which I fear possibly we might repeat if we're not
careful. We, in traditional Medicare, set the price at which we
will pay doctors and hospitals for services. For hospitals it's
called DRG, diagnostic related groupings, and for 400 or 500
different procedures we know exactly how much we need to pay a
hospital in order to pay its costs plus a little bit to stay in
course, we hardly ever get any of them right.
With doctors we use the SGR, the sustainable growth rate,
as well as some other factors to finally figure out each year how
much we're going to reimburse physicians for providing different
services. Experience shows we either pay too much or too little.
But it's virtually impossible in every case to hit that right on
what do we have to do? Each year we have to correct it, or at least
we should, and frequently we do.
year's correction was only $54 billion for physicians. This was
over 10 years. But we were way low in reimbursing physicians, and
you had a lot of bad news coming out of the physician community
that if this is all we are going to get for treating Medicare
patients, we're simply not going to be able to continue to do that.
Therefore, the red flag went up, and we said we want to make sure
there are some doctors around to take care of seniors, so we'll try
to correct this distortion and we'll pay out $54 billion over 10
A Pattern of
You can see how there is great instability in this
approach. We saw a chart the other day that showed over time what
the payments rate looked like. Every time the payment rate got just
about to the real cost, it dipped down sharply the next year. We
wouldn't want to pay too much, of course.
you had this up-and-down line, great instability. This year,
because the 2002 payment formula would have given a 5.4 percent
cut, we provided some relief for the physicians. They still went up
7 percent, even with that reduction. We give incentives to the
physicians to basically trade quality for volume so they can
continue to make up for what they have lost.
2003, as I said, we provided this additional $54 billion, which
would give the physicians the 1.6 percent increase. This shows you
how big the problem is. If all you get out of $54 billion is a 1.6
percent increase, you can see how much money we're potentially
year they are again looking at a cut under the formula in 2004.
This time it's 4.5 percent. The Senate bill does nothing about
this. The House bill would actually add 1.6 percent for two years.
That's good, but it's not nearly enough. We're not going to stem
the flow of doctors leaving Medicare. We're not going to correct
the problem where they are trying to make up in volume what they've
lost in terms of payments, all of these natural market forces that
tend to try to adjust when you interfere with the real market.
it shows you is that there is a great instability in the way that
government sets these rates. We never are able to get it exactly
right, so we keep trying to correct the situation. If we were
willing to try to be more careful in reimbursing physicians and
hospitals, the nurses and other providers, for their true costs,
we'd be better off. That might cost a little bit more money, but
we'd be better off in providing quality care and we'd have a whole
lot less disruption in doing so.
me just illustrate this with a couple of other points. Here is the
Denver Post: "Ever Fewer Doctors Accepting Medicare." Just a couple
The number of primary care physicians
accepting new Medicare patients dropped substantially for the third
year according to the Colorado Association of Family Medicine
Residencies. About 34 percent of Colorado family physicians are
accepting new members of Medicare, the federal government's health
care program for 65 or older. That's down from 52 percent in
"It's alarming it's gone down this much,"
said one of the executives. Doctors cite shrinking government
reimbursements as the top reason for closing their practices to
is another example, from the Tucson Citizen: "Cancer RX Cuts
Threaten Care." This has to do with oncology, and it's a good
illustration of how, when you try to adjust rather than let the
market work, we very seldom get it right. This article quotes a Dr.
Richard Rosenberg, who's vice president of Arizona Oncology
we've done over time is to cut what we pay oncologists to
administer chemotherapy primarily to cancer patients, over 60
percent of whom are seniors. According to Dr. Rosenberg:
The cuts would be catastrophic, forcing
many of the centers that do this to stop treating Medicare patients
altogether. About 60 percent of the people they treat are on
The centers would have to lay off nurses
and other staff, reduce the clinics they hold in rural areas and
cut their participation in clinical trials of new treatments, he
said. And he noted, oncologists are an older group of physicians as
a population and many would simply opt for early
American Society of Clinical Oncology survey of 900 oncologists
found that 19 percent would stop treating Medicare patients
entirely if the legislation passes. Fifty-three percent would limit
the number of Medicare patients they see or would maybe send them
to emergency rooms.
Rosenberg said--and I think this is a
critical point--"It is true that doctors are overpaid by about 15
to 20 percent for the cancer drugs they provide to their patients."
In other words, they buy the drugs and jack up the prices to make
up for the loss in reimbursements. He also said, "However, they are
vastly underpaid by Medicare for the costs related to administering
the drugs, from nursing and pharmacy services to patient
reform bill that we are talking about now would ratchet their
coverage up to the grand total of 36 percent of their cost--once
again, a distortion. Instead of paying the oncologists based upon
their true costs, plus a little bit to stay in business, we are
going to pay them far less than what we know their costs are. We're
going to let them buy the drugs and jack up the prices, but we're
not going to let them charge as much as we have in the past.
does that make sense? Why not correct the problem? Don't let them
buy the drugs at a discount and then overcharge for them. Why don't
we just pay them what they deserve in the first place? It's the
same amount of money.
you see how, when you try to fuss with the private market, you get
all mixed up and have to keep trying to correct the situation?
There are about 6 million people in
Arizona. Do you know how many oncologists there now are as a result
of this? About 60--less than one per 100,000 people. If any of you
have had to be concerned about chemotherapy, you might just think
about that for a minute. You might not want to move to Arizona if
that's your situation.
How about hospitals? The same thing. We have not paid
hospitals what their expenses are, and as a result, 57 percent of
America's hospitals lose money every time a Medicare patient walks
through their doors. Think about that. Their expenses have
increased significantly despite the fact that we are not
Under the House bill, there is an update
that would add 0.4 percent to what we reimburse hospitals for a
period of three years. Otherwise, they are going to have about a
$12 billion reduction over the next 10 years. That begins to
compensate them for some of the expenses they have.
Roughly one-third of America's hospitals
are in deep financial trouble, and when I discuss the reasons for
this, it's not just because of what I have been talking about. We
all know the high costs to hospitals and physicians from medical
malpractice premium increases from huge regulation.
example, in the case of hospitals, there's a federal law called the
Emergency Medical Treatment and Labor Act, EMTLA, which mandates
that hospital emergency rooms accept anybody that walks through the
door regardless of whether they can pay. This is increasing costs
particularly in the border areas because of the number of illegal
immigrants who are presenting themselves for treatment.
hospitals are stressed for a variety of reasons, as are doctors.
It's not just that the federal government doesn't pay enough, but
when over half of the payments to doctors and hospitals are a
direct result of Medicare or Medicaid, you can see that the federal
government payments have a significant influence.
is now the case in Tucson and other communities where HMOs, for
example, are pegging their reimbursement rates off of Medicare and
in some cases will take the Medicare rate, which is itself
insufficient, and reduce that by 20 percent so the physicians are
getting 80 percent of that.
this circumstance, I think one could legitimately be concerned
about the quality of health care in the future. Hospitals closing
down, emergency rooms shutting down, physicians leaving the
practice--this does not bode well for quality care. It's
unsustainable over time. In the past, we have been able to cost
shift to the private sector, but that can't go on forever.
of the results of this has been that doctors now will simply try to
work a lot harder. The Denver Post article talks about one
physician who never turns anybody down. He's working until 10
o'clock at night now, sees 100 patients, and says, obviously, I
can't go on doing this. Then there are questions about waste,
fraud, and abuse because it's simply impossible for a doctor to see
that many patients in a day.
Another thing that's happened is that
physicians start what they call specialty hospitals. They see that
certain kinds of specialties can make money, so they will create a
specialty hospital to treat just heart conditions, for example.
Then the big urban hospitals that have to take care of every drug
overdose or automobile trauma accident or anything else that comes
along complain because they are getting stuck with the cases that
cost a lot of money, for which there's very little reimbursement,
while the specialty hospitals make money.
Why Not Give the Market a Chance?
the end of the day, people are going to figure out how to stay in
business somehow or other. Instead of just trying to correct every
regulation with another regulation, wouldn't it be better to let
the market work as much as possible in this environment?
is the primary pitch that I have been making during these
negotiations, and to some extent I think folks have listened. We'll
me deal with two other issues.
First, the biggest problem, as I said,
when I go home and talk to seniors is, will I get to retain my
employer coverage, my retirement health care coverage, which
frequently includes drug benefits. Many of these are
union-negotiated plans. They have been told that they should
absolutely oppose the privatization of Medicare. We need to keep
traditional Medicare as it is, no private-sector involvement in it
the same time, however, the most important thing is, you're not
going to take away my private insurance retiree health benefits,
are you? I try to point out to them that there's a bit of a
dichotomy there, but the issue remains. By making this universal,
we give employers zero incentive to continue to provide the retiree
benefits that they currently provide.
Employers: A Good Deal?
How are we going to deal with that? Naturally, we have to
correct one problem by creating some others. We're going to provide
subsidies to employers.
not think this is a bad thing. It's pay me now or pay me later.
We're going to pay, let's say, approximately $950 per Medicare
beneficiary federal subsidy for drug benefits. That's a notional
number, but it's probably not too far off. The value is about $950.
There's an idea that perhaps we could pay employers about $750 for
that same benefit if they would continue the coverage for their
employees, an equivalent amount of coverage, actuarial value
coverage. A lot of the employers say, "We could probably continue
to provide the coverage if you'd give us that much support."
That's a good deal, I would argue. As long
as we've decided to provide government money to do this, I think
it's better to try to keep those private plans in operation
covering those retirees, and actually it costs the government a
little bit less to do that. I would even suggest--again, this is a
Bob Moffit-Joe Antos idea--why not do the same thing for the
integrated benefits under Medicare generally, Medicare A, B, plus
the drug benefit?
Let's say that the value of the federal
government for all of the Medicare service per individual is
$7,000. We're going to give that money to an insurance company to
take care of you, a senior citizen. Under traditional Medicare,
that's about what we're going to pay, and we're going to pay the
same amount to an insurance company to provide an integrated
benefit that includes all of these things. If the private plan that
the folks at Intel or Motorola out in Arizona have generally
provides those same services, why not simply qualify it as a
qualified plan and give that same amount of money to them to
provide the integrated benefit?
There's no reason why you need to limit it
to just one or two big insurance companies around the country.
FEHBP basically says anybody that can provide the benefits can
qualify. Why not have many different insurers providing that
hope that a decision will be made that we're not going to limit the
number of bidders to provide this Medicare benefit per region. One
of the original ideas was that we should limit it to, let's say,
the three lowest bidders. That would drive down the costs. But why
not do like FEHBP and allow anybody that can play and wants to play
to do so as long as they can sell their product? If they can't sell
their product, they're out of business.
we could have no limits on the number of providers who provide the
service--and I think we might be moving toward that decision in
this legislation--we could qualify these private plans and simply
transfer the money to them to continue to provide the benefits.
That would be some cost savings to the government, but it would
keep these people in the private plans, and I think that would be a
That's an illustration of how, in many
senses, there's no free lunch here. Once we've made the decision
that we're going to provide the benefit with government dollars,
then we may as well figure out the best way to do that.
of Prescription Drugs
My final point has to do with prescription drugs. You know
that there's been a big push in this country to import drugs from
countries that buy them much more cheaply than we do for resale in
the United States so people can get the break that they don't get
here in the United States.
vast majority of my constituents and Americans generally believe
that would be a bad idea. Understand why drugs are more expensive
in the United States. The basic reason is that everybody else in
the world has shifted the cost of researching and producing these
drugs to the customer in the United States. Their laws essentially
set government price controls backed up by either an explicit or an
implicit threat that, if the drug company doesn't sell to a
particular country at cost, this country will simply take the
patent and produce a generic drug to compete.
There are a lot of different ways in which
these countries manipulate their laws. It's an unfair trade
practice, and like many unfair trade practices, they don't outright
have a quota on beef or a quota on poultry or whatever; they just
have a hard time inspecting this for health reasons, for example,
and finding that it's a product that's safe coming out of the
United States. What they do with the drugs is to tell the drug
company, "We will sell it to you at your cost plus a penny or two,
and if you don't sell it to us for that, then we are going to
provide it anyway on our own terms."
drug companies go along with that. They don't have much choice. But
our Trade Representative does have a choice, and he ought to be
aggressively pursuing as an unfair trade practice, with both the
multinational and the bilateral negotiations that we have with
these countries, the notion that there should be fairness in the
pricing of drugs, especially by countries that buy in bulk for
their entire citizenry through national health care programs.
we all shared the cost of producing these drugs, the cost on
American consumers would be significantly lower. We wouldn't have
to pay nearly as much as we are preparing to pay for the
prescription drug benefit in Medicare.
are beginning bilateral negotiations with our good trading partner,
Australia. Yet, when I asked the Trade Representative will you
raise this, he said, no, it's already been determined to take that
off the table. I asked why, because Australia is one of these
countries that has this policy, and he said that you have to give
up something to get something. What do you want me to give up,
Symptoms, Not Causes
So, because we haven't been willing to get to the cause of
the problem, we do all kinds of crazy things to treat the symptom
of the problem. Now we are hanging by a thread in terms of policy.
The House has re-importation. The Senate has re-importation, but
with the caveat that we're not going to do it if the drug is not
safe. Well, no Secretary under either Bill Clinton or George Bush
has been able to say that it's safe to re-import these drugs.
perhaps saw the Washington Post story Sunday, "U.S. Prescription
Drug System Under Attack." The real story is the fraud and abuse of
producers in other countries who do not protect the efficacy of
these drugs. Many are produced fraudulently. There's no safety
guaranteed at all. In fact, it's my understanding that in Canada,
while there are strict laws regarding safety of drugs to be
consumed in Canada, there are none with respect to
There are many examples, including a poor
fellow in Arizona who got one of these black market drugs and it
knocked him out while he was driving. He had an accident and was
killed. But there are so many different examples of that.
Another Problem, Not a Solution
Let's not be sucked into the notion that we can correct
one problem by creating another problem, and that's price controls
on drugs. We will kill the golden goose that has produced wonderful
cures for so many diseases. If we put such restrictions on the drug
companies that they won't invest to produce these new drugs, it's
just one more way in which we are going to reduce the quality of
medical care in the future.
Let's not do that. Let's instead attack
the problem at its source and spread the cost all over the
developed nations of the world who are able to pay it.
me conclude with this simple thought. It is no secret that we are
going to move quickly on this Medicare prescription drug reform
legislation. It is probably the most momentous decision, other than
things dealing with national security, that many of my colleagues
and I will have had the opportunity to make within the last several
years, and it's going to affect us for many, many years down the
we be able to control the costs of this as a federal government?
Will we have made mistakes that will result in eventual movements
toward a national health system? Will we make mistakes that prevent
the private sector from really being able to produce a viable
alternative to traditional Medicare? Will we affect the quality of
health care for years to come by the decisions that we make
These all are very difficult questions,
and we are probably not going to have the time to ponder them as
much as most of us would like. You all know that there is a rhythm
in the legislative process. There's a time when you can get things
done and a time when you can't.
believe it's the perception of both the Administration and the
House and Senate leadership that there's one best time to get this
legislation passed, and that's within the next three or four weeks;
that if we wait until the next session, politics could take over
and the momentum is lost. We probably couldn't get it done.
There is a feeling, therefore, that this
opportunity is only going to come this one time and we should take
advantage of the momentum, notwithstanding the fact that there is
no significant public understanding of what we are doing, even
among the policymakers outside of the conference committee in the
House and Senate.
is not an unusual circumstance, as many of you familiar with the
process know. It is simply one of the realities of the legislative
process. But it does create big risks when you're talking about
something as important as this subject.
hope that as we proceed, we will keep in mind the kind of
free-market principles that I've tried to enunciate here and
understand that the importance of providing good health care to a
portion of our population that we say must get it through the
Medicare system is a prime challenge and that we shouldn't try to
do this on the cheap. Even those of us who are really concerned
about taxpayer dollars must understand that if it's the most
important thing in the world to us, we've got to try to ensure that
we don't diminish the quality of care because we have the power, as
the third-party payer concerned about the costs of it, to ratchet
down that quality of care.
The Best of Both
My own view is that if we rely on market principles,
we can have the best of both worlds to the extent that they are
possible. There is still going to be a lot of government
supervision, but the private sector can find ways to provide the
care to people in the way that they would like to have it be
provided at a cost which is reasonable. It's probably a better way
to gauge those two things than having smart bureaucrats in
Washington try to figure it out for everybody.
is my belief that it is important to try to add a drug benefit to
Medicare, and we have a good opportunity to reform the system. I'm
very hopeful, because some of the decisions that I think we've made
are good decisions, that we can put together a bill which on
balance will provide this kind of reform that I've talked
I am raising a red flag, and it's important for those of you who
are knowledgeable in this area, who are motivated by the notion of
principle, to engage in the debate so that in the small amount of
time we have remaining, you can influence that debate in the right
direction and we come out with a product that we can be very proud
of and that will do what we want it to do for the American
The Honorable Jon Kyl is a United States
Senator from Arizona.