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Letter to Administrator Mark McClellan, Centers for Medicare and Medicaid Services

Location: Unknown

June 15, 2004

The Honorable Mark McClellan
Administrator, Centers for Medicare and Medicaid Services
Department of Health and Human Services
Washington, DC 20201

Dear Dr. McClellan:

We are very troubled by statements related to the Medicare drug benefit by various business leaders at a recent conference. According to press reports, Medco Chief Executive Officer, David Snow, commented that your Administration "wanted" to encourage seniors to join HMOs. These comments were echoed by Caremark CEO, Mac Crawford, who stated: "What the Administration was really trying to do was to drive people out of traditional Medicare into the Medicare HMO population." We find this an unacceptable goal and will continue to fight to ensure that Medicare beneficiaries are not forced or coerced into HMOs.

As you know, a multitude of bills related to problems in the new Medicare law have been introduced in the Senate. Many of those bills have addressed the issue of the new law's misguided attempt to push seniors out of traditional, fee-for-service Medicare and into private HMOs. Most Medicare beneficiaries have already rejected that choice. Furthermore, our seniors learned from the Medicare + Choice experiment that they do not want to be at the mercy of private plans that drop beneficiaries at their whim.

Nevertheless, these lessons were ignored by lawmakers who crafted the drug plan. First, the new law creates an un-level playing field between traditional Medicare and HMOs by providing billions of dollars in slush funds and overpayments to private plans. Second, the benefit contains no assurances for a beneficiary who wishes to stay in fee-for-service Medicare and obtain drug coverage through a stand-alone plan because an affordable drug plan may not be available in a given region.
Rather, the new law only provides that one such option must exist in each region. If that option is very expensive, many beneficiaries who want drug coverage will be forced into HMOs. Even more egregious, under the new law, in 2010, more than 6 million beneficiaries could be subjected to a Medicare privatization experiment.

At last week's business conference, Snow also stated what most of us have known for a long time: "Most health insurers will not underwrite stand-alone insured drug benefits for individuals." This is not the first time we have heard this. In fact, during the Medicare debate, we pointed out on numerous occasions that health insurance industry leaders had said these plans will not work. Your predecessor at the Centers for Medicare and Medicaid Services stated that such stand-alone drug plans "do not exist in nature."

Furthermore, Snow agreed with what we have long believed, that the "risk corridors" set out in the new law will not bring insurers to the table and that the drug benefit itself "is a half-baked plan today." Similarly, Crawford said that he did not expect Caremark to offer a stand-alone drug plan. These observations differ markedly from your Administration's optimism that there will be no need for the fallback plan in 2006.

In light of these facts, we invite you to work with us to create a real Medicare prescription drug benefit. We urge you to reject the current law's flaws and work with us to create a comprehensive benefit in Medicare that will bring down drug prices by using the power of the program's 41 million beneficiaries to negotiate lower prices. Such a benefit, offered through the Medicare program, would ensure that no senior will have to give up the Medicare they know and trust to further an ideological privatization agenda.


Senator Tom Daschle (D-SD)

Senator Edward Kennedy (D-MA)

Senator Bob Graham (D-FL)

Senator John D. Rockefeller IV (D-WV)

Senator Debbie Stabenow (D-MI)

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