Unlocking The Truth: Evaluating 2008 Election Issues For Elderly Minorities As A Key To Understanding Medicare Reform Susan E. Cancelosi*

INTRODUCTION

In a child's game of pick-up sticks, success depends on identifying and extracting individual sticks without disturbing the remainder of the pile.1 In the early 2008 United States presidential campaign, the candidates 2 approached Medicare reform similarly, treating the nation's health care system for the elderly like a pile of unrelated problems to resolve piecemeal. This strategy may skirt a political minefield in an election year,4 but just as moving one stick in the child's game often results in an unanticipated and unwanted shift elsewhere, so too it is with Medicare's tangled web of interrelated issues. As 5 illustrated by the potential impact of certain proposals on elderly minorities,

. Assistant Professor of Law, Wayne State University Law School; B.A./B.B.A., Southern Methodist University; J.D., Cornell Law School; LL.M., Health Law, University of Houston Law Center. The author would like to thank Peter Hammer, Linda M. Beale, Derek E. Bambauer and Lance Gable for their insightful comments on various drafts of this Article. 1. See Pick-up Sticks, http://en.wikipedia.org/wiki/Pick-upsticks (last visited Apr. 27, 2008). 2. As of December 14, 2007, before the primary season began, most media organizations were tracking 16 potential candidates for the U.S. presidency. This Article focuses on those candidates as a historical snapshot that reflects an underlying problem in how the country approaches Medicare reform. On the Democratic side, there were Joe Biden, Hillary Clinton, Chris Dodd, John Edwards, Mike Gravel, Dennis Kucinich, Barack Obama, and Bill Richardson. On the Republican side, there were Rudy Giuliani, Mike Huckabee, Duncan Hunter, John McCain, Ron Paul, Mitt Romney, Tom Tancredo, and Fred Thompson. See, e.g., Election Center 2008: Meet the Candidates, CNN, http://www.cnn.com/ELECTION/2008/ (last visited Dec. 14, 2007). Joe Biden and Chris Dodd both withdrew from the Democratic race on January 3, 2008; John Edwards withdrew on January 30, 2008; Dennis Kucinich withdrew on January 25, 2008; and Bill Richardson withdrew on January 10, 2008. Rudy Giuliani withdrew on January 30, 2008; Mike Huckabee withdrew on March 4, 2008; Duncan Hunter withdrew on January 19, 2008; Mitt Romney withdrew on February 7, 2008; Tom Tancredo withdrew on December 20, 2007; and Fred Thompson withdrew on January 22, 2008. See, e.g., Presidential Candidates Who Have DroppedOut, BOSTON GLOBE, http:llwww.boston.com/news/politicsl2008lcandidatesl Droppedout candidates/ (last visited Apr. 27, 2008). 3. See discussion infra Section II. 4. See, e.g., infra notes 165-167 and accompanying text. 5. See discussion infra Section III. 2008] UNLOCKING THE TRUTH

Medicare reform that achieves its goals without unwanted side effects requires systemic analysis of issues, with recognition and careful balance of the competing tensions often entangled in a single proposed change. The original Medicare program - today often referred to as "traditional Medicare" - exemplifies one version of public health insurance. 6 Under traditional Medicare, everyone - no matter how sick or how healthy, no matter how poor or how wealthy - pays for and receives the same insurance coverage through the federal government. The federal government establishes what traditional Medicare will cover and reimburses private health care providers for providing needed care. On one hand, the basic benefit package in traditional Medicare falls short of comprehensive coverage. 7 As a result, various reforms over the decades have targeted expansion of Medicare's benefits, particularly in 2003 with the introduction of an outpatient prescription drug benefit as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the "MMA"). 8 On the other hand, traditional Medicare's expenses have troubled many onlookers since the program's introduction, prompting frequent cost-control proposals. 9 Private market advocates have consistently argued for private insurance alternatives to traditional Medicare as a way to drive down costs through competition, and their efforts have resulted in significant changes to Medicare. 0 Today, private insurers under a program called "Medicare Advantage" compete to offer a range of benefit packages to induce Medicare beneficiaries to join particular private plans instead of traditional Medicare.II The federal government subsidizes the private insurers' costs through 2 complicated reimbursement schemes.' In late 2007, despite a full slate of potential candidates in both major 3 political parties, Medicare reform proposals were few and finite in scope.' Almost all candidates who addressed Medicare steered away from system-wide considerations and confined their suggestions to either limited improvements in the existing structure 14 or narrow cost-reduction strategies.15 They sidestepped inherent conflicts between improving benefits and cutting expenses as well as

6. Because Medicare provides its services through private entities (physicians, hospitals, etc.), it is not a completely public system like, for example, the Department of Veteran's Affairs (VA). See infra note 158. For overviews of the Medicare system, see MARILYN MOON, MEDICARE: A POLICY PRIMER (2006), and CCH, MEDICARE EXPLAINED (2007). 7. See discussion infra Section I.A. 8. Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, 117 Stat. 2066 (2003) (hereinafter MMA). 9. See discussion infra Section I.F. 10. Id. 11. See discussion infra Section I.B. 12. Id. 13. See discussion infra Section II. 14. See discussion infra Section II.A. 15. See discussion infra Section ll.B. 228 BERKELEY JOURNAL OF AFRICAN-AMERICAN LAW & POLICY [VOL. X:2 underlying tensions between public and private insurance solutions.' 6 With an eye to the 2008 presidential election and its impact on the future direction of Medicare, this Article provides a brief overview of the current Medicare system, explaining the traditional government-run public pieces of the system and the private insurance components that have been implemented in recent years. Against this background, the Article surveys the early 2008 presidential candidates' Medicare reform proposals and discusses how their piecemeal approach missed relevant systemic considerations and ignored important underlying policy tensions. The Article then considers the ramifications for elderly minorities of certain key proposals - particularly involving Medicare Advantage. plans - when viewed against the backdrop of the overall Medicare system and in the context of competing considerations of benefit expansion, cost reduction, and public-private balance. The Article concludes that narrowly focused reforms put the entire system at risk because of the ramifications such proposals tend to miss.

I. MEDICARE BASICS

Enacted in 1965 as part of President Lyndon B. Johnson's Great Society 18 reforms, 17 the Medicare system forms Title XVIII of the Social Security Act. Medicare in 2006 provided broad health insurance coverage to approximately 43 million individuals, including 36 million people age 65 or older.' 9 Of the 43 million, more than 20 percent belonged to racial or ethnic minority groups.20 That percentage is expected to increase. Projections indicate that by 2030 more than one in four older Medicare beneficiaries will belong to a racial or ethnic minority group and that by 2050 minorities will comprise almost 40 percent of 2 1 the elderly population.

16. See discussion infra Section II.C.iii. 17. THE WHITE HOUSE, BIOGRAPHY OF LYNDON B. JOHNSON, http://www.whitehouse.gov /history/presidents/lj36.html. 18. Social Security Amendments of 1965, Pub. Law No. 89-97, 79 Stat. 286 (1965). 19. BDS. OF TRUSTEES OF THE FED. HOSP. INS. & FED. SUPPLEMENTARY MED. INS. TRUST FUNDS, 2007 ANN. REP. OF THE BDS. OF TRUSTEES. OF THE FED. HoSP. INS. & FED. SUPPLEMENTARY MED. INS. TRUST FUNDS 2 (Apr. 23, 2007) (hereinafter 2007 ANN. TRS. REP.), available at http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2007.pdf. 20. HENRY J. KAISER FAM. FOUND., DISTRIBUTION OF MEDICARE ENROLLEES BY RACEiETHNiCITY, STATES (2005-2006), U.S. (2006), http://www.statehealthfacts.org/ comparebar.jsp?ind=297&cat=-6 (last visited Dec. 13, 2007). Nationally, in 2006, ten percent of all Medicare beneficiaries were black, seven percent were Hispanic, and four percent belonged to other non-white racial or ethnic minority groups. Id. 21. FAMILIES USA, MEDICARE: IMPROVING HEALTH FOR A GROWING MINORITY POPULATION 1 (Mar. 2006), http://www.familiesusa.org/assets/pdfs/minority-health-tool- kit/Medicare.pdf 2008] UNLOCKING THE TRUTH

A. TraditionalMedicare (MedicareParts A and B)

From the beginning, Medicare coverage has been available through what are called Medicare Parts A and B - sometimes collectively known as "traditional" Medicare. 24 Medicare Part A provides coverage for a range of institutional services, such as inpatient hospital expenses, some skilled nursing facility care and home health care, and hospice care. 25 Part B covers the cost of services from physicians and other health care providers, as well as various other medical expenses, including outpatient services and durable medical equipment. 26 The Social Security Act specifies the broad scope of benefits covered by traditional Medicare, 27 with administration through the Centers for Medicare & Medicaid Services ("CMS"). 28 The federal government reimburses Part A providers generally under an "inpatient prospective payment system," with a set payment amount assigned to the treatment of a particular 2 9 type of illness or injury (known as a "diagnosis-related group" or "DRG"). Part B providers receive payment from the government in most cases based on fee schedules established by CMS.30 In early 2007, an estimated 81 percent of 3 all Medicare enrollees received coverage through traditional Medicare. ' All beneficiaries enrolled in traditional Medicare are entitled to the same

22. 42 U.S.C. §§ 1395c-1395i-5 (2000). Part A is titled "Hospital Insurance Benefits for the Aged and Disabled" in the Social Security Act. Id. 23. 42 U.S.C. §§ 1395j-1395w-4 (2000). Part B is titled "Supplementary Medical Insurance Benefits for the Aged and Disabled" in the Social Security Act. Id 24. See, e.g., AARP, MEDICARE PLAN CHOICES, http://www.aarp.org/health/medicare/ traditional/a2003-04-25-hc-medicarechoices.html (last visited Apr. 28, 2008), and Press Release, The White House, Fact Sheet: Framework to Modernize and Improve Medicare (Mar. 4, 2003), http://www.whitehouse.gov/news/releases/2003/03/20030304- I.html. 25. 42 U.S.C. § 1395d (2000 & Supp. 5 2006). 26. 42 U.S.C. § 1395k (2000). 27. See, e.g., 42 U.S.C. §§ 1395d (2000 & Supp. 5 2006), 1395k (2000). 28. See, e.g., CTRS. FOR MEDICARE & MEDICAID SERVS. (CMS), INTERNET-ONLY MANUALS, http://www.cms.hhs.gov/Manuals/IOM/list.asp#TopOfPage (last visited Apr. 28, 2008). 29. 42 U.S.C. § 1395ww(a) (2000 & Supp. 5 2006). See also CMS, ACUTE INPATIENT PPS OVERVIEW http://www.cms.hhs.gov/AcutelnpatientPPS/01_overview.asp (last visited Apr. 28, 2008). Under certain circumstances, additional amounts can be paid to Part A providers to reflect unusually high costs of particular cases. Id. 30. 42 U.S.C. § 1395u(b)(3) (2000 & Supp. 5 2006). See also CMS, FEE SCHEDULE- GENERAL INFORMATION OVERVIEW, http://www.cms.hhs.gov/FeeScheduleGenlnfo/ (last visited Apr. 28, 2008). 31. HENRY J. KAISER FAM. FOUND., MEDICARE FACT SHEET (Mar. 2007), http://www.kff.org/medicare/upload/2052-09.pdf. In 2005, an analysis of comparative enrollment rates by Medicare-eligible beneficiaries found that 85 percent of African Americans, 75 percent of Hispanics, and 87 percent of other non-white minority populations were enrolled in traditional Medicare as compared to 87 percent of whites. MedicareAdvantage: Key Issues and Implications for Beneficiaries: Hearing of H. Comm. on the Budget, 110 h Cong. exh. 7 (June 28, 2007) (testimony of Patricia Neuman, Henry J. Kaiser Fam. Found.), available at http://www.kff.org/medicare/upload/7664.pdf(hereinafter Neuman Testimony). 230 BERKELEY JOURNAL OF AFRICAN-AMERICAN LAW & POLICY [VOL. X:2

coverage package without regard to their health or wealth.32 The coverage under Parts A and B is generous but not comprehensive. For example, the majority of Medicare Part A beneficiaries do not pay a monthly premium,3 3 but are subject to deductibles, cost-sharing payments, and benefit caps 34 that are geared toward coverage of short-term, acute illnesses rather than chronic conditions. 35 Medicare Part B enrollees pay a monthly premium, a yearly 36 deductible, and 20 percent co-insurance for most services and equipment. Beyond these expenses, some health care costs fall outside traditional Medicare's coverage altogether.37 These coverage "gaps" - whether due to an individual's exceeding coverage limits or due to a policy choice that Medicare excludes a particular expense - mean that individuals with traditional Medicare

32. Medicare is available to all "individuals who are age 65 or over and are eligible for retirement benefits under title II of this Act...." 42 U.S.C. § 1395c (2000). No income test applies. The requirement of eligibility "for retirement benefits under title II of this Act" means eligibility for Social Security retirement benefits. At the end of 2006, more than 90 percent of those aged 65 or older received Social Security retirement benefits. ALISON SHELTON, AARP PUB. POL'Y INST., SOCIAL SECURITY: BASIC DATA 1 & n.1 (June 2007), http://assets.aarp.org/rgcenter/econ/ddl59_ss.pdf The benefits available under Medicare Parts A and B are specified in the Social Security Act. See supra note 27 and accompanying text. 33. 2007 ANN. TRS. REP., supra note 19, at 168. The Social Security Act permits voluntary enrollment, for a premium, in Part A by some individuals who otherwise do not qualify for Part A benefits. 42 U.S.C. § 1395i-2 (2000 & Supp. 5 2006). See also CMS, MEDICARE PART A FOR AGED UNINSURED INDIVIDUALS, http://www.cms.hhs.gov/OrigMedicarePartABEligEnrol/ 04_Part%20A%20for/2OAged%20Uninsured%20lndividuals.asp (last visited Apr. 28, 2008). 34. 42 U.S.C. § 1395e (2000). 35. Beneficiary cost-sharing in Part A depends on a "spell of illness," defined generally as a period of inpatient care that ends only when an individual has not been an inpatient of a hospital, skilled nursing facility or other similar institution for a period of at least 60 consecutive days. 42 U.S.C. § 1395x(a) (2000 & Supp. 5 2006). For each spell of illness, a beneficiary in 2008 will pay a $1,024 deductible for the first 60 days of inpatient hospital care, plus a $256 per day co-payment for each of the next 30 days (days 61-90). After 90 days of inpatient hospital care in a spell of illness, the beneficiary begins to dip into what are called "lifetime reserve days" for which a beneficiary must pay a $512 per day co-payment in 2008. Medicare limits each beneficiary to a maximum of only 60 lifetime reserve days, no matter how many spells of illness. Other Part A benefits - such as home health services, skilled nursing facility care, and hospice care - are subject to different cost-sharing requirements and caps on benefits. For example, skilled nursing facility care is covered for a maximum of 100 days in any spell of illness. Long-term or custodial care is completely excluded. CMS, MEDICARE AND You 2008, at 11I (Jan. 2008), available at http://www.medicare.gov/Publications/Pubs/pdf/10050.pdf (hereinafter MEDICARE AND YOU 2008). 36. Under Part B, a beneficiary is subject to an annual $135 (in 2008) deductible, then - for most services and equipment - to a 20 percent co-insurance amount based on the applicable fee schedule for the approved services or equipment. MEDICARE AND YOU 2008, supra note 35, at 112. Beneficiaries must also pay a premium for Part B ranging in 2008 from $96.40 to $238.40 per month, depending on income levels. Id. at 110. The income-based premium level became effective in 2007, a change implemented by the MMA. 42 U.S.C. § 1395r(i) (2000 & Supp. 5 2006); MMA, supra note 8, § 811 (a). 37. For a summary of the key gaps in coverage, see CTR. FOR MEDICARE ADVOCACY, INC., MEDICARE SUPP. INS. "MEDIGAP", http://www.medicareadvocacy.org/FAQMedigap.htm#Gaps (last visited Apr. 29, 2008). 2008] UNLOCKING THE TRUTH can still incur significant out-of-pocket expenses. 38

B. Medicare PrivateInsurance (MedicarePart C)

Medicare today offers an alternative to Parts A and B through Part C,39 originally known also as "Medicare+Choice" but renamed at the end of 2003 as "Medicare Advantage.""O Medicare Part C offers health insurance coverage through private insurers who contract with CMS 4 1 to provide at least the same benefits as are available under traditional Medicare Parts A and B. 42 Most Medicare Advantage plans also offer supplemental benefits not available under the traditional system, often including coverage for preventive dental care, vision care, and prescription drugs.43 A Medicare beneficiary may elect to receive Medicare coverage either through traditional Medicare or through a Part C Medicare Advantage plan. 4 With some variation depending on the type of plan,45 the federal government pays Medicare Advantage plans a monthly amount per enrolled beneficiary. The monthly payment rate is calculated under a complex formula that takes into account the difference between a bid amount submitted by the plans to the government and a Medicare-determined administrative "bench- mark.'' 6 Private plans receive a partial "rebate" of the difference between the

38. See, e.g., DAVID GROSS & NORMANDY BRANGAN, AARP PUB. POL'Y INST., OUT-OF- POCKET SPENDING ON HEALTH CARE BY MEDICARE BENEFICIARIES AGE 65 AND OLDER: 1999 PROJECTIONS (Dec. 1999), http://assets.aarp.org/rgcenter/health/ib4 Ihspend.pdf, and STEPHANIE MAXWELL ET AL.,URBAN INST., GROWTH IN MEDICARE AND OUT-OF-POCKET SPENDING: IMPACT ON VULNERABLE BENEFICIARIES (2000), http://www.urban.orgiUploadedPDF/growth-in- medicare.pdf. One study found that a couple retiring in 2008 would need about $225,000 to cover out-of-pocket medical expenses even with Medicare. News Release, Fidelity Investments, Fidelity Investments Estimates $225,000 Needed To Cover Retiree Health Care Costs (Mar. 5, 2008), http://personal.fidelity.com/myfidelity/InsideFidelity/index -NewsCenter.shtml?refhp=pr. 39. 42 U.S.C. §§ 1395w-21-1395w-28 (2000 & Supp. 5 2006). 40. MMA, supra note 8, § 201(b). 41. 42 U.S.C. § 1395w-27 (2000 & Supp. 5 2006). 42. 42 U.S.C. § 1395w-22(a)(1) (2000 & Supp. 5 2006). 43. 42 U.S.C. § 1395w-22(a)(3) (2000 & Supp. 5 2006). Typical supplemental benefits include vision care, preventive dental care, hearing care, basic physical exams, and prescription drug coverage. MEDICARE AND You 2008, supra note 35, at 38. See MARSHA GOLD ET AL., AARP PUB. POL'Y INST., 2006 MEDICARE ADVANTAGE BENEFITS AND PREMIUMS (Nov. 2006), http://assets.aarp.org/rgcenter/health/200623 medicare.pdf, for a detailed analysis of Medicare Advantage plans' coverage and costs. 44. 42 U.S.C. § 1395w-21(a) (2000 & Supp. 5 2006). 45. Common types of Medicare Advantage plans include health maintenance organizations (HMOs), preferred provider organizations (PPOs), private fee-for-service (PFFS) plans, medical savings account (MSA) plans and special needs plans (SNPs). MEDICARE AND YOU 2008, supra note 35, at 38-39. 46. 42 U.S.C. § 1395w-23 (2000 & Supp. 5 2006). See also GEO. WASH. UNIV., NAT'L HLTH POL'Y FORUM, THE BASICS: MEDICARE ADVANTAGE 1-2 (Nov. 29, 2005), http://www.nhpf.org/pdfs basics/Basics MA_ 11-29-05.pdf. Special computations apply to so- called regional Medicare Advantage plans, which cover large geographic areas in an effort to make Medicare Advantage available to rural beneficiaries. Id. See also MEDICARE PAYMENT 232 BERKELEY JOURNAL OF AFRICAN-AMERICAN LAW& POLICY [VOL. X:2 bid and benchmark amounts if their bids come in lower than the benchmark.47 Plans must use the rebate to provide additional benefits beyond the traditional Medicare benefits or to reduce beneficiary cost-sharing, including premium costs. 4 8 By mid-2007, slightly more than 8.3 million - approximately 19 percent of Medicare's 43 million total - beneficiaries were enrolled in some type of Medicare Advantage plan.49 As long as a Medicare Advantage plan covers at least the same expenses as traditional Medicare, the private insurer offering the plan may design the coverage almost any way it wishes. 50 As a result, unlike traditional Medicare, Medicare Advantage plans vary in what they cover and what costs they shift to beneficiaries. 51 Most beneficiaries in Medicare Advantage pay the basic Part B premium, plus an additional premium for any supplemental benefits they receive 52 as well as various co-payments.553

C. Medicare PrescriptionDrug Coverage (MedicarePart D)

Beginning in 2006, the MMA added a new Part D to Medicare through 54 which Medicare beneficiaries can receive prescription drug coverage.

ADVISORY COMMISSION (hereinafter MedPAC), REP. TO THE CONGRESS: ISSUES IN A MODERNIZED MEDICARE PROGRAM 74 (June 2005), available at http://www.medpac.gov/publications/congressional-reports/June05_Entire report.pdf. 47. Id. 48. 42 U.S.C. § 1395w-24(b)(1)(C) (2000 & Supp. 5 2006). See also HINDA RIPPS CHAIKIND & PAULETTE C. MORGAN, CONG. RES. SERV. REP. FOR CONGRESS: MEDICARE ADVANTAGE PAYMENTS 2 (Sept. 29, 2004), available at http://www.law.umaryland.edu/ marshall/crsreports/crsdocuments/RL32618.pdf. There has been some concern that Medicare Advantage plans are not necessarily using the rebate as prescribed. See, e.g., Robert Pear, Medicare Audits Show Problems in Private Plans, N.Y. TIMES, Oct. 7, 2007, at Al, and U.S. GOVT. ACCT. OFFICE, REP. NO. GAO-08-359: MEDICARE ADVANTAGE: INCREASED SPENDING RELATIVE TO MEDICARE FEE- FOR-SERVICE MAY NOT ALWAYS REDUCE BENEFICIARY OUT-OF-POCKET COSTS (Feb. 2008), available at http://www.gao.gov/new.items/d08359.pdf. 49. HENRY J. KAISER FAM. FOUND., TOTAL MEDICARE ADVANTAGE (MA) ENROLLMENT, 2007, http://www.statehealthfacts.org/comparetable.jsp?ind=327&cat-6 (last visited May 17, 2008), and FACT SHEET: MEDICARE ADVANTAGE (Mar. 2007), http://www.kff.org/medicare/upload/2052-09.pdf. A study of 2005 enrollments found that 15 percent of African Americans, 25 percent of Hispanics, and 13 percent of other non-white minorities were enrolled in Medicare Advantage, as compared to 13 percent of whites. Neuman Testimony, supra note 31, at exh. 7. 50. The Social Security Act permits Medicare Advantage plans to "provide to individuals enrolled under this part [Part C] ... supplemental health care benefits that the Secretary may approve. The Secretary shall approve any such supplemental benefits unless the Secretary determines that including such supplemental benefits would substantially discourage enrollment by [Medicare Advantage] eligible individuals with the organization." 42 U.S.C. § 1395w- 22(a)(3)(A) (2000 & Supp. 5 2006). 51. See GOLD, supra note 43. 52. FACT SHEET: MEDICARE ADVANTAGE, supra note 49. See also MEDICARE AND YOU 2008, supra note 35, at 41. 53. GOLD, supra note 43, at tbl. B-5. 54. 42 U.S.C. §§ 1395w-101-1395w-152 (Supp. 5 2006). 2008] UNLOCKING THE TRUTH

Medicare prescription drug coverage is available through private insurers, not through traditional Medicare Parts A and B.55 Beneficiaries electing general health insurance coverage under traditional Medicare must enroll separately in a free-standing Part D prescription drug plan through a private insurer to obtain the coverage; beneficiaries electing a Medicare Advantage plan either obtain drug coverage through that plan, if available, or also elect a stand-alone Part D plan. 56 The federal government pays Part D insurers a monthly amount per beneficiary that takes into account a bid amount from the insurer, with a variety of technical adjustments intended to limit the insurer's risk, minus beneficiary premium payments.57 By January 2007, approximately 54 percent of all Medicare-eligible beneficiaries had enrolled in Medicare prescription drug 58 coverage through Medicare Advantage plans or stand-alone Part D plans. Private insurers offering either stand-alone Part D plans or prescription drug coverage through Medicare Advantage must provide coverage that is at least "actuarially equivalent" 59 to the standard Medicare Part D benefit prescribed by the MMA, but have considerable freedom as to the details as long as the overall package meets the equivalence requirement and is approved by CMS. 60 As a result, like Medicare Advantage plans, the details of Medicare prescription drug coverage vary from plan to plan. 61 The standard prescription

55. 42 U.S.C. § 1395w-151 (Supp. 5 2006). 56. 42 U.S.C. § 1395w-101(a) (Supp. 5 2006). See also HENRY J. KAISER FAM. FOUND., FACT SHEET: THE MEDICARE PRESCRIPTION DRUG BENEFIT (Oct. 2007), http://www.kff.org/medicare/upload/7044_07.pdf. Beneficiaries covered by a supplemental private employment-based retiree health plan may also obtain prescription drug coverage through that plan in lieu of enrolling in either a stand-alone Part D prescription drug plan or a Medicare Advantage plan. HENRY J. KAISER FAM. FOUND. & HEWITT ASSOC., RETIREE HEALTH BENEFITS EXAMINED: FINDINGS FROM THE KAISER/HEWiTT 2006 SURVEY ON RETIREE HEALTH BENEFITS 24 (Dec. 2006), http://www.kff.org/medicare/upload/7587.pdf (hereinafter KAISER/HEWITT SURVEY) ; CMS, MEDICARE PRESCRIPTION DRUG COVERAGE: AN INTRODUCTION FOR EMPLOYERS AND UNIONS, http://www.cms.hhs.gov/EmplUnionPlanSponsorlnfo/Downloads/ 9100505EmployerBROOnline.pdf (last visited Dec. 13, 2007). 57. 42 C.F.R. § 423.315 (2005). See MARY ELLEN STAHLMAN, GEO. WASH. UNIV., NAT'L HLTH POL'Y FORUM, THE NUTS AND BOLTS OF PDPS (Nov. 8, 2006), http://www.nhpf.org/pdfsib/fB817PDPlI 1-08-06.pdf, for a more detailed explanation of how prescription drug plan payments are determined. See also MARK MERLIS, HENRY J. KAISER FAM. FOUND., MEDICARE PAYMENTS AND BENEFICIARY COSTS FOR PRESCRIPTION DRUG COVERAGE (Mar. 2007), http://www.kff.org/medicare/upload/7620.pdf. 58. FACT SHEET: THE MEDICARE PRESCRIPTION DRUG BENEFIT, supra note 56. Approximately 6.7 million (16 percent of all Medicare-eligible beneficiaries) obtained prescription drug coverage through their Medicare Advantage plans in 2007; the remainder were covered by stand-alone Part D prescription drug plans. Another 10.3 million beneficiaries obtained coverage through employer retiree health plans (including the federal employees retirement plan and TRICARE for military retirees), about 4.9 million were believed to have coverage from other sources (particularly the VA), and about four million were believed not to have prescription drug coverage at all in 2007. Id. 59. The term "actuarially equivalent" is defined for purposes of Medicare prescription drug coverage in 42 C.F.R. § 423.100 (2005). 60. 42 U.S.C. § 1395w-102(c) (Supp. 5 2006). 61. It has been said that "if you've seen one PDP, you've seen one PDP." STAHLMAN, 234 BERKELEY JOURNAL OF AFRICAN-AMERICAN LAW& POLICY [VOL. X:2 drug benefit for 2007 included a $265 deductible, covered 75 percent of all approved drug costs from $265 up to an initial coverage limit of $2,400, and then covered nothing until a beneficiary incurred $3,850 in out-of-pocket costs. 62 After the out-of-pocket threshold is reached, Medicare coverage provides what might be considered catastrophic coverage, covering approximately 95 percent of all costs after the threshold.63 The period during which a beneficiary is responsible for 100 percent of all drug costs after exceeding the initial coverage limit and before reaching the catastrophic coverage threshold is often called the "donut hole." 64 Beneficiaries are also responsible for premiums established by the plans in accordance with CMS 65 guidance.

D. Medicare Supplemental Insurance Because of the gaps in Medicare coverage, 66 Medicare beneficiaries have long sought supplemental coverage to offset their out-of-pocket costs. Supplemental coverage most often comes from employer-sponsored retiree health plans that wrap around Medicare and cover - up to the private plan limits - whatever Medicare does not.6 7 Almost as popular are private supplemental Medicare insurance plans, known as "Medigap" plans,68 that offer gap coverage under one of a fixed number of options specified and regulated by the federal government. 69 Medicare beneficiaries may also

supra note 57, at 6. In fact, relatively few Medicare prescription drug plans - only about 12 percent for 2008 - actually offer the standard benefit package. Deductibles vary considerably, with an estimated 59 percent of all Medicare prescription drug plans in 2008 requiring no deductible. Most insurers also require tiered co-payments in lieu of the standard benefit's fixed 25 percent coinsurance up to the donut hole. FACT SHEET: THE MEDICARE PRESCRIPTION DRUG BENEFIT, supra note 56. 62. 42 U.S.C. § 1395w-102(b) (Supp. 5 2006). The numbers are updated each year. 63. Id. 64. About a third of plans offer some coverage in the standard benefit's donut hole, but generally limit that coverage to generic drugs only. FACT SHEET: THE MEDICARE PRESCRIPTION DRUG BENEFIT, supra note 56. 65. 42 C.F.R. § 423.286 (2005). 66. Medicare generally is estimated to cover only about 45 percent of a beneficiary's health care costs. HENRY J. KAISER FAM. FOUND., FACT SHEET: MEDICARE AT A GLANCE (Feb. 2007), http://www.kff.org/medicare/upload/1066-10.pdf. See also Patricia Neuman et al., How Much 'Skin In The Game' Do Medicare Beneficiaries Have? The Increasing Financial Burden Of Health Care Spending, 1997-2003, 26 HEALTH AFF. 1692, exh. 1 (Nov./Dec. 2007), available at http://content.healthaffairs.org/cgi/content/full/26/6/1692/TI. 67. In 2006, an estimated 12 million Medicare beneficiaries had employer-based supplemental coverage. KAISER/HEwIrr SURVEY, supra note 56, at 1. 68. In 2003, an estimated 27 percent of Medicare beneficiaries obtained supplemental coverage through Medigap policies. CRAIG CAPLAN & NORMANDY BRANGAN, AARP PUB. POL'Y INST., OUT-OF-POCKET SPENDING ON HEALTH CARE BY MEDICARE BENEFICIARIES AGE 65 AND OLDER IN 2003, fig. 5 (Sept. 2004), http://assets.aarp.org/rgcenter/health/ddl01 _spending. pdf. 69. 42 U.S.C. § 13 95ss (2000 & Supp. 5 2006). 2008] UNLOCKING THE TRUTH attempt to fill in Medicare's coverage holes by electing a Medicare Advantage plan with supplemental benefits, and very low-income individuals can obtain supplemental coverage - other than prescription drug assistance - through state Medicaid programs. 70 The Medicare program itself provides prescription drug assistance to low-income individuals. 71 Relatively few Medicare beneficiaries face Medicare's coverage gaps without any kind of supplemental insurance protection, 72 but those who do often belong to racial or ethnic minority 7 3 groups. The most popular existing supplemental coverage options have their own limitations. Employer plans often impose their own premiums, deductibles, and cost-sharing requirements. 74 In 2006, for example, the average large employer retiree health plan premium for new retirees age 65 or older totaled $3,240 per year.75 Federal law limits Medigap plans to one of twelve fixed benefit packages (denominated by the letters "A" through "L"), each with limited coverage. 76 Medigap premiums also can be expensive. For example, in 2006, the national average Medigap Plan C annual premium was $1,766. 77 In that same year, in households with the head of household age 65 or older, the median annual income was only $27,798. Some individuals thus may find

70. In 2003, 13 percent of all non-institutionalized, elderly Medicare beneficiaries participated in a Medicare+Choice plan, and another 13 percent had supplemental coverage through Medicaid. CRAIG CAPLAN & NORMANDY BRANGAN, supra note, 68. Only very low- income individuals qualify for coverage through Medicaid. See, e.g., CMS, MEDICAID-AT-A- GLANCE 2005 (2005), http://www.cms.hhs.gov/MedicaidEligibility/Downloads/Medicaidata Glance05.pdf. 71. 42 U.S.C. § 1395w-l14(a) (Supp. 5 2006). The MMA shifted responsibility for prescription drug assistance from Medicaid to Medicare, creating significant subsidies within Medicare to assist impoverished beneficiaries - generally those with incomes below 150 percent of the federal poverty level and with limited assets - with Part D premiums, annual deductibles, and cost-sharing payments. See HENRY J. KAISER FAM. FOUND., Low-INCOME ASSISTANCE UNDER THE MEDICARE DRUG BENEFIT (July 2007), http://www.kff.org/medicare/upload/ 7327 03.pdf. As of January 2007, about 13.2 million Medicare beneficiaries were eligible for some type of low-income subsidy under Part D. Id at 2. 72. In 2003, only seven percent of non-institutionalized, elderly Medicare beneficiaries had no supplemental coverage at all. CRAIG CAPLAN & NORMANDY BRANGAN, supra note 68. 73. See infra notes 138-142 and accompanying text. 74. KAiSER/HEWITT SURVEY, supra note 56, at 15. 75. Id. 76. 42 U.S.C. § 1395ss (2000 & Supp. 5 2006). Plans F and J also are available in high- deductible options. As an example of Medigap's limitations, one of the most popular options - Plan C - covers the Part A coinsurance required after the first 60 days of inpatient hospital care and provides 100 percent payment for an additional 365 lifetime reserve days, but does not cover custodial care even during an at-home recovery period following illness, injury, or surgery and does not impose a cap on beneficiary's total out-of-pocket costs. See CMS, 2008 CHOOSING A MEDIGAP POLICY: A GUIDE TO HEALTH INSURANCE FOR PEOPLE WITH MEDICARE (Sept. 2007), available at http://www.medicare.gov/publications/pubs/pdf/02110.pdf. 77. Blue Cross Blue Shield of Michigan, Statement of Blue Cross Blue Shield of Michigan on Attorney General Mike Cox Hearing Request on Medigap Rates (June 25, 2007), http://www.bcbsm.com/pr/pr_06-25-2007 16780.shtml. 78. U.S. CENSUS BUREAU, INCOME, POVERTY, AND HEALTH INSURANCE COVERAGE IN 236 BERKELEY JOURNAL OF AFRICAN-AMERICAN LAW& POLICY [VOL. X:2 that Medicare Advantage plans provide a preferable path to supplemental insurance.79 The average annual Medicare Advantage premium in 2006, for a plan including prescription drug coverage, was only $573.24, less than the average employer or Medigap plan premium.80 This potential for additional benefits at lower cost has fueled claims that Medicare Advantage plans 8 particularly benefit minority members of the Medicare population. '

E. Medicare'sFinancial Future

Despite the gaps in coverage and the need for supplemental insurance for beneficiaries, many perceive Medicare as an expensive program. 82 In 2006 alone, the Medicare program spent $408 billion, an amount equal to approximately 3.1 percent of the nation's gross domestic product.8 3 Medicare is funded by a combination of payroll taxes, beneficiary premiums, and general government revenue.8 4 Payroll taxes are dedicated to a trust fund that supports traditional Medicare Part A. Beginning in 2007, Part A expenditures each year are expected to exceed the payroll taxes collected in that year, forcing the program to dip into the trust fund to meet expenses.8 5 By 2019, according to the 2007 Medicare Trustees' Report, that trust fund is expected to run out of 86 previously accumulated assets based on current spending and income levels.

THE UNITED STATES: 2006, at 5 (Aug. 2007), available at http://www.census.gov/prod/2007pubs/ p60-233.pdf. 79. This is debatable. For example, the initial premium cost savings may fade depending on the quantity of health care services a beneficiary uses and the cost-sharing features of the particular Medicare Advantage plan selected. See, e.g., BRIAN BILES ET AL., COMMONWEALTH FUND, MEDICARE BENEFICIARY OUT-OF-POCKET COSTS: ARE MEDICARE ADVANTAGE PLANS A BETTER DEAL? (May 2006), http://www.commonwealthfund.org/usr-doc/927_BilesMedicare beneOOPcosts MA ib.pdfsection=4039. 80. GOLD, supra note 43, at tbl. B-3. 81. See AMERICA'S HEALTH INSURANCE PLANS, CTR. FOR POL'Y & RESEARCH, LOW- INCOME & RURAL BENEFICIARIES WITH MEDIGAP COVERAGE (Feb. 2007), http://www.ahipresearch.com/PDFs/FullReportLowlncomeRuraReportFeb2007.pdf; ADAM ATHERLY & KENNETH E. THORPE, VALUE OF MEDICARE ADVANTAGE TO LOW-INCOME AND MINORITY MEDICARE BENEFICIARIES (Sept. 20, 2005), http://www.bcbs.com/issues/medicaid/research/Value-of-Medicare-Advantage-to-Low-Income- and-Minority-Medicare-Beneficiaries.pdf; and infra notes 204-205 and accompanying text. See also Timothy Stoltzfus Jost, Racial and Ethnic Disparities in Medicare: What the Department of Health and Human Services and the Centers for Medicare and Medicaid Services Can, And Should, Do, 9 DEPAUL J. HEALTH CARE L. 667, 691-700 (2005), for an argument that Medicare Advantage plans could provide a key tool in reducing racial and ethnic disparities in healthcare for Medicare beneficiaries. 82. See, e.g., William M. Welch, Medicare: The next riddlefor the ages, USA TODAY, Mar. 16, 2005, at 10A, and Robert Pear, About Those Health Care Plans by the Democrats..., N.Y. TIMES, Mar. 3, 2008, at A16. 83. 2007 ANN. TRS. REP., supra note 19, at 4. 84. Id. at 185. 85. Id. at 100. 86. Id. at 15. Projections of exhaustion of the Part A trust fund change from year to year and are dependent upon the particular assumptions employed. In 2002, for example, the Medicare 2008] UNLOCKING THE TRUTH

A combination of beneficiary premiums and general government revenue finances the remaining parts of Medicare. Because Part B premiums continue to increase and contributions from general revenues can be adjusted upward as87 needed, Part B income is structured to balance expenditures each year. However, Part B costs have increased by an average of almost 11 percent per year over the past five years, and the Medicare Trustees' Report projects future growth of at least six to nine percent annually, requiring ever-higher premiums 88 and government revenue contributions to ensure Part B solvency. Meanwhile, Part D expenses are projected to grow at 12.6 percent per year over the next decade. 89 Taken together, Medicare expenses are expected to consume 11.3 percent of the nation's gross domestic product in 75 years, a matter of 90 concern to many onlookers.

Trustees' Report projected exhaustion of the Part A trust fund in 2030. BDS. OF TRUSTEES OF THE FED. HosP. INS. & FED. SUPPLEMENTARY MED. INS. TRUST FUNDS, 2002 ANN. REP. OF THE BDS. OF TRUSTEES OF THE FED. HOSP. INS. & FED. SUPPLEMENTARY MED. INS. TRUST FUNDS 3 (Mar. 26, 2002), available at http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2002.pdf. In 2004, exhaustion was projected by 2019. BDS. OF TRUSTEES OF THE FED. HOSP. INS. & FED. SUPPLEMENTARY MED. INS. TRUST FUNDS, 2004 ANN. REP. OF THE BDS. OF TRUSTEES OF THE FED. HoSP. INS. & FED. SUPPLEMENTARY MED. INS. TRUST FUNDS 2 (Mar. 23, 2004), available at http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2004.pdf. In 2005, the projected date of exhaustion changed upward to 2020. BDS. OF TRUSTEES OF THE FED. HOSP. INS. & FED. SUPPLEMENTARY MED. INS. TRUST FUNDS, 2005 ANN. REP. OF THE BDS. OF TRUSTEES OF THE FED. HosP. INS. & FED. SUPPLEMENTARY MED. INS. TRUST FUNDS 2 (Mar. 23, 2005), available at http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2005.pdf. 87. 2007 ANN. TRS. REP., supra note 19, at 28. 88. Id. at 20. 89. Id. at 23. 90. Id. at 10. See also, e.g., TRACY L. FOERTSCH & JOSEPH R. ANTOS, HERITAGE FOUND., PAYING FOR MEDICARE: AN ECONOMIC LOOK AT THE PROGRAM'S UNFUNDED LIABILITIES (Oct. 11, 2005), http://www.heritage.org/Research/HealthCare/wm880.cfin; Geoff Colvin, The $34 trillion problem, FORTUNE, Mar. 17, 2008, at 30; and CONG. BUDGET OFFICE, THE LONG-TERM OUTLOOK FOR HEALTH CARE SPENDING (Nov. 2007), http://www.cbo.gov/ftpdocs/87xx/doc8758/11-13-LT-Health.pdf. The U.S. Comptroller General in 2007 said: "Our longer-range federal fiscal outlook, owing significantly to federal health care entitlement spending, remains grim; Medicare and Medicaid spending threaten to consume an untenable share of the national economy in the coming decades." U.S. GOVT. ACCT. OFFICE, REP. NO. GAO-07-1155SP: HEALTH CARE 20 YEARS FROM Now: TAKING STEPS TODAY TO MEET TOMORRow'S CHALLENGES (Sept. 2007), available at http://www.gao.gov/new.items/ d071155sp.pdf. Some of the presidential candidates also voiced concern over Medicare's finances in 2007. For example, John McCain stated that "[t]he growth of spending on Medicare threatens our fiscal future." John McCain, McCain Tax Cut Plan, http://www.johnmccain.com/ Informing/Issues/0B8E4DB8-5BOC-459F-97EA-D7B542A78235.htm (last visited May 15, 2008). Hillary Clinton acknowledged that "Medicare ... faces significant financial challenges." Hillary Clinton, Health Care: Long-term care insurance (Aug. 15, 2007), available at http://www.hillaryclinton.com/news/speech/view/?id=3890. Some caution is advised when evaluating these statements, however. See Theodore Marmor et al., Medicare and Political Analysis: Omissions, Understandings,and Misunderstandings,60 WASH. & LEE L. REv. 1127, 1158-1160 (2003), for a discussion of the risk of exaggerated political rhetoric when applied to the Medicare program's finances. 238 BERKELEY JOURNAL OFAFRICAN-AMERICANLAW& POLICY [VOL. X:2

F. Recent Medicare Reform

Medicare's financial forecast makes reform a perennial issue. In traditional Medicare, reform efforts tend to focus on the provider side, striving to encourage cost-efficient care and limiting reimbursement rates. For 91 example, after escalating costs raised concern in the program's early years, Medicare in the 1980s adopted the prospective payment system and DRGs to rein in reimbursement rates for certain institutional providers under Part A and then established fee schedules in the early 1990s to control other provider costs under Part B. 92 Since then, Congress has continued to tinker with how providers in traditional Medicare are paid. For example, the Balanced Budget Act of 1997 (the "BBA") imposed a number of additional limits on payments to hospitals, all intended to reduce traditional Medicare's costs in that area, and 93 expanded the prospective payment system method to home health agencies. The BBA also revised how fee schedules for Part B payments for physicians are updated from year to year. 94 The MMA in 2003 also included numerous provisions changing how certain types of providers are paid under either Part A or B; 95 and most recently President George W. Bush's Fiscal Year 2009 budget

91. The original Medicare program reimbursed hospitals on the basis of their reported costs, after the costs had already been incurred. Physicians were reimbursed on the basis of their "reasonable charge." THEODORE R. MARMOR, THE POLITICS OF MEDICARE 85 (1973). This approach led to tremendous annual increases in overall Medicare expenses - an average of 40.2 percent in 1968 and 1969. JONATHAN OBERLANDER, THE POLITICAL LIFE OF MEDICARE 47 (2003). 92. The prospective payment system was introduced by the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. No. 97-248, 96 Stat. 324 (1982). The use of fee schedules for Part B expenses began with the Omnibus Budget Reconciliation Act of 1989, Pub. L. No. 101- 239, 103 Stat. 2106 (1989). See JONATHAN OBERLANDER, supra note 91, for an overview of the first four decades of the program and various reform efforts. See also M. Kenneth Bowler, ChangingPolitics of FederalHealth Insurance Programs, PS 202 (Spr. 1987), for a discussion of the first two decades of Medicare reform efforts. 93. The Balanced Budget Act of 1997: A current look at its impact on patients and providers: Statement before the Subcomm. on Health & Environment of the H. Comm. on Commerce, 106 th Cong. 1-2 (July 19, 2000) (statement of Gail R. Wilensky, Medicare Payment Advisory Commission), available at http://pages.stem.nyu.edu/-jasker/BBAl.pdf (hereinafter Wilensky Statement). Before the BBA, home health agencies were reimbursed on the basis of their costs, similar to the way hospitals and other institutional providers had been paid in the first two decades of Medicare. Id. at 8. 94. The BBA introduced a formula that takes into account changes in inflation and a factor (called the "Sustainable Growth Rate" or "SGR") based on the nation's Gross Domestic Product to determine the appropriate update amount. 42 U.S.C. § 1395w-4(b), (d) (2000 & Supp. 5 2006). See also CMS, ESTIMATED SUSTAINABLE GROWTH RATE AND CONVERSION FACTOR, FOR MEDICARE PAYMENTS TO PHYSICIANS IN 2007 (Nov. 2006), http://www.cms.hhs.gov/SustainableGRatesConFact/Downloads/sgr2007f.pdf. The SGR formula has proved problematic in recent years as health care spending has outpaced the nation's economic growth, and Congress has intervened to stabilize provider payments from year to year. See, e.g., MMA, supra note 8, § 601, and Tax Relief and Health Care Act of 2006, Pub. L. No. 109-432, 120 Stat. 2922 (2006). 95. See, e.g., MMA, supra note 8, §§401,404,411. 2008] UNLOCKING THE TRUTH

96 included yet more adjustments in Medicare provider payments. Alongside reform efforts directed at cost control in traditional Medicare, private insurance advocates have argued for introducing competition and private insurers into the system.97 In the mid-1990s, those advocates scored a degree of success with the passage of the BBA and its creation of Medicare Part C with Medicare+Choice. 98 Proponents of Medicare+Choice saw it both "as a vehicle to provide Medicare beneficiaries with richer benefits" - at lower costs - than in traditional Medicare and as a way "to help set the stage for future changes in the structure of Medicare." 99 Private insurance supporters hoped Medicare+Choice would expand the availability and attractiveness of private plan options in Medicare, 00 but Medicare+Choice did not fare well.10 Not only did many beneficiaries outside urban areas fail to obtain access to a 1 2 Medicare+Choice plan, 0 but large numbers of existing plans withdrew or increased premiums within a few years of the program's enactment, often leaving beneficiaries with little if any choice other than to return to traditional Medicare. 1° 3 Medicare+Choice's failures were largely blamed on expense: Many private insurers claimed that they could not sustain the plans under the 0 4 prevailing reimbursement systems.' The most significant reform effort in recent years came in 2003 with passage of the MMA. In addition to the introduction of Part D prescription drug coverage, the MMA created structural and financial incentives for beneficiaries to choose private plans. 10 5 Perhaps most significant among the structural incentives was the MMA's effective limitation of Part D prescription drug coverage to private insurers, not traditional Medicare.'0 6 This structure

96. WHITE HOUSE, MAJOR SAVINGS AND REFORMS IN THE PRESIDENT'S 2009 BUDGET 153-156 (Feb. 2008), http://www.whitehouse.gov/omb/budget/fy2009/pdfsavings.pdf. 97. See JONATHAN OBERLANDER, supra note 91. As an example of mid-1980s interest in private market solutions, see Frank W. Porell & Stanley S.Wallack, Medicare risk contracting: determinants of market entry, 12 HEALTH CARE FIN. REV. 75 (Wint. 1990). 98. Balanced Budget Act of 1997, Pub. L. No. 105-33, 111 Stat. 251 (1997). 99. Wilensky Statement, supra note 93, at 12. 100. See, e.g., Lynn Etheredge, The Medicare Reforms of 1997: Headlines You Didn't Read, 23 J. HEALTH POL. POL'Y & L. 573 (June 1998), and Nancy-Ann DeParle, As Good As It Gets? The Future of Medicare+Choice,27 J. HEALTH POL. POL'Y & L. 495 (June 2002). 101. Wilensky Statement, supra note 93, at 12-14. See also U.S. GOV'T ACCT. OFF., REP. No. GAO/HEHS-00-183: MEDICARE+CHOICE: PLAN WITHDRAWALS INDICATE DIFFICULTY OF PROVIDING CHOICE WHILE ACHIEVING SAVINGS (Sept. 2000), available at http://www.gao.gov/archive/2000/heOO183.pdf, and U.S. GOV'T ACCT. OFF., REP. No. GAO-02- 202: MEDICARE+CHOICE: RECENT PAYMENT INCREASES HAD LITTLE EFFECT ON BENEFITS OR PLAN AVAILABILITY IN 2001 (Nov. 2001), availableat http://www.gao.gov/new.items/ d02202.pdf. 102. See, e.g., Michelle Casey et al., Medicare Minus Choice: The Impact of HMO Withdrawals on Rural MedicareBeneficiaries, 21 HEALTH AFF. 192 (May/June 2002). 103. See Wilensky Statement, supra note 93, at 12-14. 104. See supra note 101. 105. See infra notes 106-110 and accompanying text. 106. 42 U.S.C. §§ 1395w-101, 1395w-151(a)(13-14) (Supp. 5 2006). 240 BERKELEY JOURNAL OF AFRICAN-AMERICAN LAW& POLICY [VOL. X:2 means that beneficiaries who wish to remain in traditional Medicare for their general health insurance must navigate a wide range of private insurance options' ° 7 to select a stand-alone Part D prescription drug plan and must then deal with two different sources of coverage for health care expenses - traditional Medicare for everything other than outpatient drugs, and a private insurer for drug benefits. Given the coverage gaps in traditional Medicare, most beneficiaries enrolled in Parts A and B will also pursue some form of supplemental coverage if they can afford it,10 8 bringing a third source of insurance into the mix. In contrast to this complexity, beneficiaries who elect a Medicare Advantage plan that includes prescription drug coverage can enjoy "one-stop shopping" for all their health insurance needs, especially if the plan they choose also provides needed supplemental benefits. To counteract many of the perceived causes of the Medicare+Choice failures, the MMA also increased reimbursement rates for Medicare Advantage plans and authorized regional plans to ensure coverage for Medicare beneficiaries outside urban areas. 10 9 The effect of the bid/benchmark and rebate payment system has resulted in payments to Medicare Advantage plans that are estimated at approximately 112 percent of the average cost of covering beneficiaries under traditional Medicare." 0 By 2007, seemingly attractive Medicare Advantage plan options proliferated, with at least one private plan available to almost all beneficiaries."' The MMA also made other changes intended to improve Medicare. For example, the legislation introduced demonstration projects - Medicare's way of testing new ideas - in chronic disease management' 2 and coordination of

107. The difficulties for Medicare beneficiaries in choosing among the stand-alone Part D plan options has been widely reported. See, e.g., Tom Baxter & Bob Kemper, Medicare drug plan draws yelps, ATLANTA JOURNAL-CONSTITUTION, Jan. 30, 2006, at IA; and Robert Pear, Rolls Growing For Drug Plan As Problems Continue, N.Y. TIMES, Jan. 18, 2006, at A 17. 108. See discussion supra Section I.D. 109. See supra note 46 and accompanying text. 110. The Medicare Advantage Programand MedPAC Recommendations: Statement before the H. Comm. on the Budget, 110' Cong. 5 (June 28, 2007) (testimony of Mark E. Miller, MedPAC), available at http://www.medpac.gov/documents/062807_Housebudget Med PAC testimonyMA.pdf. Payments in 2006 to Medicare Advantage plans were calculated by MedPAC to range "from 110 percent of FFS for HMOs to 119 percent of FFS for private fee-for- service (PFFS) plans," where "FFS" means the average cost for beneficiaries in traditional Medicare. Id. at 6. See also The Medicare Advantage Program: Enrollment Trends and

Budgetary Effects: Statement before the S. Comm. on Finance, 11 0th Cong. (Apr. 11, 2007) (testimony of Peter R. Orszag, Cong. Budget Off.), available at http://www.cbo.gov/ftpdocs/79xx/doc7994/04-11-MedicareAdvantage.pdf. See discussion supra Section I.B. for an explanation of the bidibenchmark payment system. 11. See Marsha Gold, Medicare Advantage in 2006-2007: What Congress Intended?, 26 HEALTH AFF. (May 15, 2007), http://content.healthaffairs.org/cgi/content/abstract/hlthaff. 26.4.w445, for a discussion of the pros and cons of Medicare Advantage plans, including both benefits and drawbacks for beneficiaries. 112. MMA, supra note 8, §§ 648, 721, 723. 2008] UNLOCKING THE TRUTH care. 113 Specifically, the MMA required the Secretary of Health and Human Services ("HHS") to "phase in chronic care improvement programs in traditional fee-for service," specifying a focus on "clinical quality and beneficiary satisfaction" (as well as cost management) for individuals with conditions such as congestive heart failure and diabetes.' 14 Coverage for a range of additional preventive screenings - including an initial physical exam 5 and diabetes screenings - was also added to traditional Medicare."

II. MEDICARE AND THE PRESIDENTIAL CAMPAIGNS Many of the presidential candidates in 2007 did not directly address Medicare even when they focused on health care issues.1 6 When they looked

113. MMA, supra note 8, § 646. 114. MMA, supra note 8, § 721. See also CMS, CMS LEGISLATIVE SUMMARY: SUMMARY OF H.R. 1, MEDICARE PRESCRIPTION DRUG, IMPROVEMENT, AND MODERNIZATION ACT OF 2003 (Apr. 2004), available at http://www.cms.hhs.gov/MMAUpdate/downloads/PL108- 173summary.pdf. 115. MMA, supra note 8, §§ 611-613, providing coverage of an initial preventive physical exam, cardiovascular screening blood tests, and diabetes screening tests. 116. This Article looks at candidates' platforms primarily as published on their official websites in October and November 2007. Mike Gravel, a former Senator from Alaska, advocated universal health care through vouchers that would allow all citizens to purchase health coverage. His official website list of issues did not reference the Medicare system. Mike Gravel, How Mike Stands on the Issues, http://www.gravel2008.us/issues (last visited May 18, 2008). In another forum, Mr. Gravel stated that his plan "would be to keep in place Medicare and Medicaid and phase them out over time." On the Issues: Mike Gravel on Health Care, http://www.ontheissues.org/2008/Mike GravelHealthCare.htm (last visited May 18, 2008). Dennis Kucinich called for "Medicare for all" (characterized as a "Universal, Single-Payer, Not- for-Profit health care system") to solve the problems of the uninsured younger than 65. His website's issue list did not offer specific reform provisions for the existing Medicare system. Dennis Kucinich, A Healthy Nation, http://www.dennis4president.com/go/issues/a-healthy-nation/ (last visited Oct. 2, 2007). Rudy Giuliani's "12 Commitments" platform did not reference Medicare directly although he included a pledge to "give Americans more control over and access to health care with affordable and portable free-market solutions." Rudy Giuliani, 12 Commitments, http://www.joinrudy2008.com/commitment (last visited Nov. 22, 2007). During a Republican candidate debate, Mr. Giuliani did call for a "private solution" to both Medicare and Medicaid. On the Issues: Rudy Giuliani in 2007 GOP primary debate in Orlando, Florida, Oct. 21, http://www.ontheissues.org/Archieve/2007 GOPFloridaRudy_Giuliani.htm (last visited Apr. 30, 2008). Mike Huckabee opposed "universal health care mandated by federal edict," but avoided mentioning Medicare in his list of health care issues. Mike Huckabee, Issues: Health Care, http://www.mikehuckabee.com/index.cnfm?FuseAction=Issues.View&Issueid=8 (last visited Nov. 22, 2007). Ron Paul also did not mention Medicare directly, but his website included the following statements: "The federal government decided long ago that it knew how to manage your health care better than you and replaced personal responsibility and accountability with a system that puts corporate interests first. Our free market health care system that was once the envy of the world became a federally-managed disaster." Ron Paul, Health Care, http://www.ronpaul2008.com/issues/health-care/ (last visited Nov. 22, 2007). In other settings he indicated he would abolish the "federal entitlement to Medicare." On the Issues: Ron Paul on Health Care, http://www.ontheissues.org/2008/Ron Paul HealthCare.htm (last visited Nov. 22, 2007). Mitt Romney called generally for "extending health insurance to all Americans, not through a government program or new taxes, but through market reforms." He, too, did not directly address Medicare reform in his discussion of health care issues. Mitt Romney, Issue 242 BERKELEY JOURNAL OF AFRICAN-AMERICAN LAW& POLICY [VOL. X:2 at Medicare, they typically suggested either targeted corrections (or expansions) in the existing benefit structure or cost reduction measures. None of the candidates directly addressed how Medicare reform might affect elderly minorities.' 17 Even when their health care proposals for the younger uninsured involved broad policy discussions, the candidates steered clear of comparable debate in Medicare." As a result, their Medicare proposals seemed myopic and disjointed, with no apparent effort to place a particular suggested change in the context of the overall system or to evaluate how that change might alter the balance between competing policy concerns.

Watch: Extending Health Care to All Americans, http://www.mittromney.com/Issue- Watch/HealthCare (last visited Nov. 22, 2007). Tom Tancredo similarly avoided mentioning Medicare, but said on his website that the "way to address America's health care problems is not through bigger government programs, litigation, regulation, or additional government spending." Tom Tancredo, Health Care, http://teamtancredo.org/pdfs/healthcare.pdf (last visited Apr. 30, 2008). Fred Thompson did not explicitly reference Medicare, but said that "[c]urrent government programs must ...be streamlined and improved so that those who truly need help can get the health care they need" and also noted that "[t]hose who propose a one-size-fits-all Washington- controlled program ignore the cost, inefficiency, and inadequate care that such a system offers." Fred Thompson, On the Issues: Health Care, http://www.fred08.com/Principles/Principles Summary.aspx?View=OnThelssues (last visited Nov. 22, 2007). 117. Although not addressing the issues of older minorities, several of the candidates at least acknowledged the serious health disparities that exist between members of racial and ethnic minority groups and other individuals in American society. John Edwards, for example, stated that "[p]eople of color are more likely to be diagnosed with cancer and less likely to receive timely and effective treatment." John Edwards, Universal Health Care Through Shared Responsibility, http://johnedwards.com/issues/health-care/health-care-fact-sheet (last visited Apr. 30, 2008) (hereinafter John Edwards, Universal Health Care). To address those concerns, Mr. Edwards called for "medical research into disparities, reduc[ing] the pollutions and toxins that disproportionately harm communities of colors, and support[ing] translation services to address language barriers." Id. Mr. Edwards also linked universal health insurance efforts to disparities: "By helping all Americans get insurance, I will also address disparities in health caused by disparities in insurance." Id. Bill Richardson echoed those statements: "All too often in the United States, health outcomes differ based on race and ethnicity. For example, minorities suffer disproportionately from diabetes, heart disease, and H1V/AIDS, are more likely to be uninsured, and are less likely to have a regular doctor than white Americans." Bill Richardson, Issues: Health Care: American Choices: Bill Richardson's Plan for Affordable Health Coverage for All Americans, http://www.richardsonforpresident.com/issues/healthcare?id=0002 (last visited Nov. 25, 2007) (hereinafter Bill Richardson, Plan for Affordable Health Coverage). Bill Richardson also said he would "work to reduce health disparities by ensuring access to affordable health care coverage for every American, supporting increased training for minority health professionals, and supporting efforts to increase the number of minorities who have medical homes, which will help to reduce health disparities by ensuring they receive timely medical care and appropriate preventive services." Id. Hillary Clinton noted that "[tlhe problem of affordability of insurance also contributes to racial disparities in health outcomes. ... Lack of access to health care due to lack of coverage, even for a short period of time, can lead to worse health outcomes and financial insecurity." Hillary Clinton, American Health Choices Plan: Quality, Affordable Health Care for Every American, http://www.hillaryclinton.com/feature/healthcareplan/AmericanHealth choicesplan.pdf (last visited May 14, 2008) (hereinafter Hillary Clinton, Health Choices Plan). 118. See, e.g., infra notes 168-171 and accompanying text. 2008] UNLOCKING THE TRUTH

A. Proposalsto Improve Existing Structure A number of proposals focused on correcting perceived failures in Medicare's existing benefit structure have been offered. 119 For example, several candidates in mid-2007 called for eliminating the Part D prescription drug coverage "donut hole,"'120 a source of confusion and concern since the MMA's enactment. 121 Slightly more than 30 percent of Part D eligible beneficiaries in 2007 were expected to have drug expenses that exceeded the initial coverage limit and reached into the donut hole.' 22 Individuals with chronic conditions requiring expensive maintenance medications are particularly at risk. 123 Some beneficiaries may obtain coverage by electing a Medicare Advantage or stand-alone Part D plan that offers some level of coverage in the donut hole, 124 and very low-income individuals qualify for subsidies that cover the gap.' 25 History, however, suggests that some number of remaining beneficiaries - those who do not qualify for government low- income assistance, yet do not have the resources to cover drug costs out of

119. Joe Biden, for example, called for "treating mental health services the same as other health services," including an increase in the government's share of outpatient psychiatric service costs. Joe Biden, Issues: Health Care, http://www.joebiden.com/issues?id=0020 (last visited Nov. 22, 2007) (hereinafter Joe Biden, Issues: Health Care). Traditional Medicare imposes separate limits on certain mental health services. See CHRISTOPHER LOFTIS, GEO. WASH. UNIV., NAT'L HLTH POL'Y FORUM, THE BASICS: MEDICARE'S MENTAL HEALTH BENEFITS (Feb. 14, 2007), http://www.nhpf.org/pdfsbasics/BasicsMedicareMentalHealth.pdf, for an overview of Medicare's treatment of mental health services. 120. Joe Biden, Issues: Health Care, supra note 119. Chris Dodd also included eliminating the donut hole in his health care issue list. Chris Dodd, The Dodd Plan to Strengthen Retirement Security, http://chrisdodd.com/issues/seniors (last visited Nov. 22, 2007) (hereinafter Chris Dodd, Retirement Security). 121. See, e.g., Jim Spencer, New Medicare 'doughnut hole' hard to swallow, DENVER POST, Dec. 28, 2003, at BI; Marvin Adelman, Medicare Drug Bill Hurts Middle Class, SOUTH FLORIDA SUN-SENTINEL, Dec. 29, 2003, at 18A; Davis Bushnell, More Questions than Answers on Changes to Medicare, BOSTON GLOBE, Dec. 11, 2003, at 3; Editorial, Seniors Weigh In on Medicare Change - and Not Kindly, AKRON BEACON J., Dec. 10, 2003, at B3; and William Neikirk, Bush Signs Bill on Medicare, but Doesn't End Flap, ALBANY TIMES UNION, Dec. 9, 2003, at A3. The donut hole's inclusion in the Part D standard benefit package reflected an effort to control costs. See, e.g., Robert Pear, Deal 'in Principle' For Medicare Plan To Cover Drug Costs, N.Y. TIMES, Nov. 16, 2003, at Al. Shortly after passage of the MMA, the Congressional Budget Office estimated that closing the donut hole would increase the then-estimated cost of the Part D prescription drug benefit to at least $320 billion by 2023. 122. FACT SHEET: THE MEDICARE PRESCRIPTION DRUG BENEFIT, supra note 56. See also JENNY MINOTT, CHANGES IN HEALTH CARE FINANCING & ORGANIZATION, ROBERT WOOD JOHNSON FOUND., FINDINGS BRIEF: MEDICARE ADVANTAGE AND THE IMPACT OF MEDICARE HMOS ON INPATIENT UTILIZATION (Oct. 2007), http://www.hcfo.net/pdf/findings 1007.pdf. 123. See, e.g., Bob Rosenblatt, Chronic Ailments Increase the Challenge of Picking a Part D Plan, CALIF. HEALTHLINE (Dec. 19, 2005), http://www.califomiahealthline.org/articles/ 2005/12/19/Chronic-Ailments-Increase-the-Challenge-of-Picking-a-Part-D-Plan.aspx?a =1#. 124. About 29 percent of all Part D plans provide some coverage in the donut hole although that coverage is typically limited to generic drugs. FACT SHEET: THE MEDICARE PRESCRIPTION DRUG BENEFIT, supra note 56. 125. 42 U.S.C. § 1395w-1 14(a)(1)(C) (Supp. 5 2006). See also supra note 71. 244 BERKELEY JOURNAL OF AFRICAN-AMERICAN LAW& POLICY [VOL. X:2

pocket - may stop taking drugs when27 they are faced with costs they cannot afford,126 with adverse health effects. 1 Some candidates suggested adding prescription drug coverage to traditional Medicare as a way to resolve Part D issues, a proposal that could undo one of the main privatization incentives of the MMA. 12l Two candidates called in their campaign materials for traditional Medicare to establish a direct prescription drug benefit. 129 Another candidate did not focus on the public plan option on the campaign trail, but co-sponsored a bill in October 2007 to create a new prescription drug benefit in traditional Medicare to compete with the private plans. 130 That bill would not necessarily have closed the donut hole. Instead, it proposed allowing traditional Medicare to "offer supplemental prescription drug coverage in the same manner as other qualified prescription 31 drug coverage offered by other prescription drug plans."']

126. For example, pre-MMA studies of Medicare-eligible adults found that significant percentages failed to take their prescription drugs as prescribed when faced with drug costs without insurance coverage. HENRY J. KAISER FAM. FOUND., PRESCRIPTION DRUG TRENDS (Oct. 2004), http://www.kff.org/rxdrugs/upload/Prescription-Drug-Trends-October-2004-UPDATE.pdf. 127. See 70 Fed. Reg. 4194, 4474 (Jan. 28, 2005) (to be codified at 42 C.F.R. pts. 400, 403, 411, 417, and 423). 128. See discussion supra Section I.F. Because the vast majority of Medicare beneficiaries remain in traditional Medicare for their general health insurance, allowing traditional Medicare to offer a drug benefit might easily take significant numbers of beneficiaries away from the stand- alone Part D plans in which they are currently enrolled. This could prove particularly true if Medicare's bargaining power proved sufficient to drive down prescription drug costs in the traditional plan below what private insurers could achieve. See MEDICARE RIGHTS CTR., THE BEST MEDICINE: A DRUG COVERAGE OPTION UNDER ORIGINAL MEDICARE (Oct. 2007), http://www.medicarerights.org/TheBestMedicine.pdf, and Ruth Lopert & Marilyn Moon, Toward A Rational, Value-Based Drug Benefit For Medicare, 26 HEALTH AFF. 1666 (Nov./Dec. 2007), for additional discussions of the issues surrounding addition of a prescription drug option in traditional Medicare. 129. Bill Richardson called for "allow[ing] the Medicare program to provide a direct prescription drug benefit, and ... allow[ing] the program to negotiate for lower prices with drug companies." Bill Richardson, Plan for Affordable Health Coverage, supra note 117. John Edwards also wanted to "give Medicare beneficiaries the choice of a public plan for their prescription drugs." John Edwards, Security, Dignity and Choice: A Declaration Of Independence For Older Americans, http://www.johnedwards.com/issues/seniors/ (last visited May 14, 2008) (hereinafter John Edwards, Older Americans). 130. Barack Obama was a co-sponsor of the Medicare Prescription Drug Savings and

Choice Act of 2007, S. 2219, 110 th Cong. (1 Sess. 2007). On the campaign trail Mr. Obama focused on a different solution to Part D problems: more information to allow participants to compare drug plans effectively. Barack Obama, Fulfilling our Covenant with Seniors, http://www.barackobama.com/issues/seniors/ (last visited Nov. 23, 2007) (hereinafter Barack Obama, Seniors). 131. Medicare Prescription Drug Savings and Choice Act of 2007, S. 2219 and H.R. 3932, 110 th Cong. (1" Sess. 2007). Because other Part D prescription drug plans can design coverage to at least partially cover the donut hole, presumably so, too, could traditional Medicare's prescription drug coverage. The October 2007 legislative proposals specifically authorized CMS to "implement strategies similar to those used by other Federal purchasers of prescription drugs, and other strategies, including the use of a formulary and formulary incentives ....to reduce the purchase cost of covered part D drugs." Id. 2008] UNLOCKING THE TRUTH

Several proposals included expanding Medicare coverage for low-income beneficiaries. Such expansion could come from relaxing eligibility requirements to bring more low-income individuals within the scope of Medicare's existing low-income assistance,' 32 or it could involve direct enhancement of Medicare's coverage for those low-income individuals currently eligible for assistance.133 Significant percentages of Medicare beneficiaries could be considered low-income.134 For example, in 2005, 33 percent of Medicare beneficiaries age 65 or older lived at or below 150 percent of the federal poverty level for individuals that year ($13,590). 135 In 2006, 16 percent of all Medicare beneficiaries lived in households below 100 percent of the federal poverty level ($20,614 for a family of four in 2006), and another 30 136 percent lived in households below 200 percent of the federal poverty level. Members of racial and ethnic minority groups disproportionately fall into these low-income cohorts, with almost 70 percent of all Hispanic and African American/non-Hispanic Medicare beneficiaries in 2005 living below 200 percent of the federal poverty level.137 Many of these individuals are so poor

132. Hillary Clinton said she would loosen "overly restrictive asset-test rules" to expand eligibility for low-income assistance. Hillary Clinton, Health Choices Plan, supra note 117. Ms. Clinton specifically recommended implementing Medicare "policies to improve access to programs that provide cost-sharing protections to low-income beneficiaries." Id. Similarly, John Edwards said he would use savings from other reforms "to ensure that low-income Medicare beneficiaries have access to the care they need." John Edwards, Older Americans, supra note 129. Currently, the primary low-income subsidies in Medicare exist in Part D. See supra note 71. Most other assistance for low-income beneficiaries comes from state Medicaid programs that cover a range of health expenses not met by Medicare. See CMS, DUAL ELIGIBILITY: OVERVIEW, http://www.cms.hhs.gov/DualEligible/01_Overview.asp#TopOfPage (last visited May 18, 2008). See also LAURA SUMMER & LEE THOMPSON, COMMONWEALTH FUND, How ASSET TESTS BLOCK Low-INCOME MEDICARE BENEFICIARIES FROM NEEDED BENEFITS (May 2004), http://www.commonwealthfund.org/usrdoc/summer-assettestsib_727.pd.section=4039. 133. Bill Richardson proposed directly expanding Medicare's coverage to "fill in gaps in care currently being funded by the states" for the so-called "dual eligibles" (those individuals who are eligible for full benefits under both Medicare and Medicaid). Bill Richardson, Plan for Affordable Health Coverage, supra note 117. Bill Richardson also said he would focus specifically on coordination of care for dual eligibles, claiming that the current system - where Medicare and Medicaid are responsible for different costs for the dual eligibles - results in "more fragmented care, extra hassles and double the bureaucratic paperwork for patients, providers and states." Id. 134. CMS, MEDICARE: A PROFILE: MEDICARE 2000: 35 YEARS OF IMPROVING AMERICANS' HEALTH AND SECURITY 12-13 (July 2000), http://www.cms.hhs.gov/TheChartSeries/Downloads/35chartbk.pdf. 135. HENRY J. KAISER FAM. FOUND., MEDICARE BENEFICIARIES AGE 65 AND OVER LIVING BELOW 150% OF THE FEDERAL POVERTY LEVEL, STATES (2004-2005), U.S. (2005), 2004- 2005, http://www.statehealthfacts.org/comparetable.jsp?ind=313&cat=6 (last visited May 17, 2008). 136. HENRY J. KAISER FAM. FOUND., DISTRIBUTION OF MEDICARE ENROLLEES BY FEDERAL POVERTY LEVEL, STATES (2005-2006), U.S. (2006), http://www.statehealthfacts.org/ comparetable.jsp?ind=295&cat-6&yr=l&typ=2 (last visited May 17, 2008). 137. In 2005, 34 percent of Hispanic Medicare beneficiaries age 65 or older had family incomes below 100 percent of the federal poverty level for a family of four that year ($19,971), and 35 percent had family incomes between 100 and 199 percent of the federal poverty level. 246 BERKELEY JOURNAL OF AFRICAN-AMERICAN LAW& POLICY [VOL. X:2 that they qualify for supplemental health coverage through state-run Medicaid programs, and in fact the ranks of the "dual eligibles" - people eligible for full benefits under both Medicare and Medicaid - are filled disproportionately with minority members.1 38 Many other low-income minorities, however, may have income or assets just high enough to keep them from qualifying for either state Medicaid coverage or Medicare's current low-income assistance.' 39 Such 4 individuals may have limited alternatives for supplemental health coverage: 0 Medigap premiums are often expensive,'14 and minorities are less likely to have employment-based health insurance while working, 142 dooming their chances

Similarly, 30 percent of African-American/non-Hispanic elderly Medicare beneficiaries had family incomes below 100 percent of the federal poverty level for a family of four that year, and another 37 percent had family incomes between 100 and 199 percent. The numbers were somewhat better for Asian and Pacific Islander elderly Medicare beneficiaries (28 percent were below 100 percent of the federal poverty level, and 23 percent were between 100 and 199 percent) and for American Indian/Alaska Native elderly Medicare beneficiaries (26 percent were below 100 percent of the federal poverty level, and 33 percent were between 100 and 199 percent). By contrast, only 10 percent of white/non-Hispanic elderly Medicare beneficiaries had family incomes below 100 percent of the federal poverty level, and 28 percent were between 100 and 199 percent. HENRY J. KAISER FAM. FOUND., KEY FACTS: RACE, ETHNICITY & MEDICAL CARE fig. 5 (Jan. 2007), http://www.kff.org/minorityhealth/upload/6069-02.pdf (hereinafter KAISER KEY FACTS). The numbers have not been improved over time. In 2002, more than 60 percent of all African-American and Latino Medicare beneficiaries fell below 150 percent of the federal poverty level. HENRY J. KAISER FAM. FOUND., A PROFILE OF AFRICAN AMERICANS, LATINOS, AND WHITES WITH MEDICARE: IMPLICATIONS FOR OUTREACH EFFORTS FOR THE NEW DRUG BENEFIT 2 (Nov. 2005), http://www.kff.org/minorityhealth/upload/A-Profile-of-African-Americans- Latinos-and-Whites-with-Medicare-Implications-for-OUtreach-Efforts-for-the-New-Drug- Benefit-Chartpack.pdf (hereinafter KAISER PROFILE). In 2002, the federal poverty level for an individual was $8,860. Id. 138. In 2000, of Medicare dual eligibles age 65 or older, 19 percent were African American, 17 percent were Hispanic, and another eight percent belonged to other racial or ethnic minority groups. HENRY J. KAISER FAM. FOUND., DUAL ELIGIBLES: MEDICAID'S ROLE IN FILLING MEDICARE'S GAPS tbl. 1 (Mar. 2004), http://www.kff.org/medicaid/upload/Dual- Eligibles-Medicaid-s-Role-in-Filling-Medicare-s-Gaps.pdf. In 2002, 30 percent or more of both African-American and Latino Medicare beneficiaries age 65 or older received Medicaid coverage. KAISER PROFILE, supra note 137, at fig. 5. 139. Although significant percentages of elderly minority group members have low-income levels, Medicaid income qualification levels are often even lower. See supra note 137 for 2005 statistics on income levels for elderly Medicare beneficiaries who are also members of racial or ethnic minority groups. See CMS, DUAL ELIGIBLE CATEGORIES, http://www.cms.hhs.gov/ DualEligible/02_DualEligibleCategories.asp (last visited May 17, 2008), for a summary of Medicaid eligibility rules. 140. See discussion supra Section I.D. Historically, as compared to whites, individuals belonging to racial or ethnic minority groups have been more likely to go without any form of supplemental Medicare coverage, less likely to have employment-based retiree health coverage, and far less likely to have Medigap coverage. See Nadereh Pourat et al., Socioeconomic Differences In MedicareSupplemental Coverage, 19 HEALTH AFF. 186 (Sept./Oct. 2000). 141. See supra note 77 and accompanying text. 142. See KAISER KEY FACTS, supra note 137, at fig. 16. In 2005, for example, 69 percent of white, non-Hispanic individuals under age 65 had some form of employment-based health insurance as compared to 40 percent of Hispanics and 48 percent of African American/non- Hispanic individuals. Id Among low-income (defined as individuals with family income less than 200 percent of the federal poverty level) individuals in 2005, the statistics are worse: Only 2008] UNLOCKING THE TRUTH of access to such coverage in retirement. Other proposals clustered around encouraging preventive care, 143 chronic disease management, 144 and coordination of care. 145 For example, one

20 percent of low-income Hispanic individuals under age 65 and 23 percent of low-income African American/non-Hispanics under age 65 had employment-based health insurance. Id. at fig. 17. 143. Hillary Clinton did not expressly call for expanding Medicare coverage of preventive services, but in a document describing the impact of her proposed "American Health Choices Plan" on seniors, she stated that the "American Health Choices Plan will require coverage of preventive services that experts deem proven and effective, such [as] blood pressure, blood glucose, cholesterol, vision and hearing screenings and more.... Preventive efforts are useful to Americans of any age but are especially important to seniors, as many people tend to develop illnesses as they age." Hillary Clinton, The American Health Choices Plan: Hillary Clinton's Plan to Ensure Affordable, Quality Health Care for Seniors, http://www.hillaryclinton.com/files/pdf/ senior impactreport.pdf (last visited May 14, 2008) (hereinafter Hillary Clinton, Health Care for Seniors). Bill Richardson said he would require that "evidence-based preventive services [such as cancer screenings, tobacco cessation counseling, and immunizations] are covered in all public ... health plans." Bill Richardson, Plan for Affordable Health Coverage, supra note 117. Although not in connection with Medicare, Mike Huckabee called for the country to "get serious about preventive health care." Mike Huckabee, Issues: Health Care, supra note 116. John McCain also indirectly called for more preventive care: "Doctors must do a better job of managing our care and keeping us healthy and out of hospitals and nursing homes." John McCain, John McCain on Health Care (Oct. 11, 2007), http://www.johnmccain.com/Informing/News/Speeches/8f5febd6- cdca-4136-b0d8-a97f5287235d.htm. Fred Thompson, while steering clear of Medicare, still called for a "healthcare system that: ... [i]mproves the individual health of all Americans by shifting to a system that promotes cost-effective prevention, chronic-care management, and personal responsibility." Fred Thompson, On the Issues: Health Care, supra note 116. Although Joe Biden did not call directly for more preventive care in his specific Medicare reform proposals, he highlighted his previous efforts in "protection and prevention," noting that he "helped lead the effort to require Medicare to cover annual mammograms for women over the age of 65 and to exempt these procedures from the annual Medicare Part B deductible." Joe Biden, Issues: Health Care, supra note 119. Chris Dodd also did not directly call for expanding preventive care and chronic disease management in Medicare, but generally advocated a national health care plan that "will focus on chronic disease management and preventive measures." Chris Dodd, Health Care for All: The Dodd Plan, http://chrisdodd.com/node/1924 (last visited Nov. 22, 2007) (hereinafter Chris Dodd, The Dodd Plan). Barack Obama wanted to put a greater emphasis on prevention to strengthen Medicare. See Barack Obama, Seniors, supra note 130. 144. Citing statistics that "84 percent of Medicare patients with common chronic diseases see at least six doctors, putting them at risk for medication errors, emergency room visits, and preventable hospitalizations," Bill Richardson called for the expansion of "state-of-the-art chronic disease management programs already being provided to Veterans' Administration and Medicare patients with severe chronic diseases" to all chronically ill Medicare beneficiaries. Bill Richardson, Plan for Affordable Health Coverage, supra note 117. Hillary Clinton said her American Health Choices Plan "will ensure higher quality and better coordination of care by using state-of-the-art chronic care coordination models within federally-funded programs to provide care for Americans afflicted with these costly, multi-faceted illnesses." Hillary Clinton, Health Care for Seniors, supra note 143. 145. Hillary Clinton wanted to "align Medicare payments with performance to both promote quality and reduce the geographic variation in care." She also wanted to "promote chronic care management programs as well as innovative models such as 'medical homes'." Hillary Clinton, Health Choices Plan, supra note 117. Closely related was Bill Richardson's proposal to require CMS "to lead a public-private effort to streamline ... regulations [involving reporting requirements for physicians and hospitals] to ensure patient safety and free health care providers to spend more time on patient care." Bill Richardson, Plan for Affordable Health 248 BERKELEY JOURNAL OFAFRICAN-AMERICANLAW& POLICY [VOL. X:2 candidate recommended changing Medicare payment systems "to compensate providers for diagnosis, prevention, and care coordination." 146 The prevalence of chronic conditions - many of them arguably preventable or at least mitigated by preventive care - is a significant and growing problem among Medicare beneficiaries. 47 A study reviewing the top 10 medical conditions among Medicare beneficiaries over a 15-year period found that more than half of all such individuals received medical treatment in 2002 for at least five different chronic conditions.1 48 The more health care an individual needs, the greater the chance that the individual will reach one of Medicare's gaps in coverage. Unless that individual has supplemental coverage, he or she must pay out of pocket for care or go without.1 49 Elderly minorities tend not only to be in worse health overall than other Medicare beneficiaries,' 50 but also to suffer

Coverage, supra note 11 7. John Edwards wanted to "promot[e] proactive disease management, ensuring that doctors regularly check up on their patients, encouraging doctors to communicate with each other, and making sure that every American with chronic conditions has a patient- centered 'medical home' allowing a doctor to coordinate their care and promote life-improving care as well as treat life-threatening emergencies." John Edwards, Older Americans, supra note 129. 146. John McCain, John McCain on Health Care, supra note 143. John McCain also said, "We need to change the way providers are paid to focus their attention more on chronic disease and managing their treatment. This is the most important care and expense for an aging population." Id. Bill Richardson called for "[i]mproving coordination of care and reducing bureaucracy for millions of seniors and persons with disabilities enrolled in both Medicare and Medicaid." Bill Richardson, Plan for Affordable Health Coverage, supra note 117. 147. See COMMONWEALTH FUND, QUALITY MATTERS: JUNE UPDATE FROM THE COMMONWEALTH FUND: ISSUE OF THE MONTH: CHRONIC DISEASE MANAGEMENT IN MEDICARE (June 21, 2005), http://www.commonwealthfund.org/publications/publicationsshow.htm? doc id=280563#issue. 148. Kenneth E. Thorpe & David H. Howard, The Rise in Spending among Medicare Beneficiaries: The Role of Chronic Disease Prevalence and Changes in Treatment Intensity, 26 HEALTH AFF. w378, exh. 1 (Aug. 22, 2006), http://content.healthaffairs.org/cgi/content/fll/25/5/ w378?maxtoshow=&HITS= 0&hits=10&RESULTFORMAT=&authorl =thorpe&andorexactfullt ext=and&searchid=l &FIRSTINDEX=0&resourcetype=HWCIT. Common chronic conditions included heart disease, mental disorders, trauma, arthritis, hypertension, cancer, diabetes, pulmonary conditions, and cerebrovascular disease. The numbers were noticeably higher in 2002 than in 1987, attributed at least in part to "increases in obesity levels." Id at w38 1. 149. Studies consistently show that lack of health care insurance correlates to lower use of health care services. See, e.g., Joseph S. Ross et al., Use of Health Care Services by Lower- Income and Higher-Income UninsuredAdults,295 J. AM. MED. ASSOC. 2027 (May 3, 2006). 150. For example, in 2002, 43 percent of African-American Medicare beneficiaries and 38 percent of Latino Medicare beneficiaries were reported to be in fair or poor health as compared to 30 percent of all Medicare beneficiaries similarly reported. KAISER PROFILE, supra note 137, at 2. The disparities for Medicare beneficiaries are often attributed in part to the fact that many minorities do not have access to health insurance before they reach age 65. Once members of minority populations reach age 65 and become eligible for Medicare, there is some evidence that Medicare eligibility begins to improve health disparities. For example, Medicare policies in the late 1980s and 1990s are credited with some balancing of health care expenditures among all groups of Medicare beneficiaries. See, e.g., Jose J. Escarce et al., Racial and Ethnic Differences in Public and Private Medical Care Expenditures among Aged Medicare Beneficiaries, 81 MILBANK Q. 269 (2003). The Medicare system has made some effort to reduce racial and ethnic health disparities. See, e.g., Kathryn M. Langwell, Strategiesfor Medicare health plans serving 2008] UNLOCKING THE TRUTH disproportionately from chronic disease. For example, in 2002, studies indicated that approximately 30 percent of African-American and Latino Medicare beneficiaries suffered from diabetes as compared to only 18 percent of non-Latino whites. 51' Such statistics make treatment of chronic illnesses critical for the minority population.

B. Proposalsto Reduce Costs

Most other candidate proposals in 2007 fell under a cost-reduction umbrella. 152 For example, several candidates argued that the federal I53 government should negotiate prescription drug prices for Medicare Part D. racialand ethnic minorities, 23 HEALTH CARE FIN. REV. 131 (Summer 2002). See also Timothy Stoltzfus Jost, supra note 81, for a careful analysis of the issue of racial and ethnic disparities in Medicare and approaches that CMS could take to improve the situation. 151. KAISER PROFILE, supra note 137, at 2. The same study indicated that 71 percent of African-American Medicare beneficiaries had hypertension as compared to 59 percent of non- Latino whites. Id. See INST. OF MED., UNEQUAL TREATMENT, CONFRONTING RACIAL AND ETHNIC DISPARITIES IN HEALTH CARE (Brian D. Smedley et al. eds., 2003), for a comprehensive discussion of racial disparities in health care. 152. Proposals that seemed to have quality of care as their primary motivation are grouped under the previous Section, whereas proposals with cost as their main incentive are placed here. An unusually technical cost-related reform proposal, and not one that clearly saves Medicare money, came from Joe Biden who called for MedPAC "to study and report to Congress on replacing the use of the sustainable growth rate as a factor in determining the update for such payments with a factor that more fully accounts for changes in the unit costs of providing physicians' services." Joe Biden, Issues: Health Care, supra note 119. See supra note 94 for a discussion of the SGR rate. 153. "Medicare must have the authority to negotiate with pharmaceutical companies for lower prescription drug prices," according to Bill Richardson. Bill Richardson, A Strong Commitment to Our Nation's Seniors, http://billrichardson.cachefly.net/pdf/issueflyers/Seniors Flyer.pdf (last visited May 14, 2008) (hereinafter Bill Richardson, Seniors). Mike Huckabee initially appeared to endorse the idea of permitting government negotiation, but later withdrew support and did not address the issue on his official website. Jeffrey Young, Candidates See Drug Plan as a Double-Edged Sword, THE HILL, Sept. 5, 2007, http://thehill.com/leading-the- news/candidates-see-drug-plan-as-a-double-edged-sword-2007-09-05.html. John McCain missed the vote early in 2007 on proposed legislation that would have allowed the government to negotiate prescription drugs, but later indicated he would have supported it. Id. See also Robert Pear, Senate Bars Medicare Talks for Lower Drug Prices, N.Y. TIMES, Apr. 19, 2007, at A20. Mr. McCain did not, however, address the issue on his official website. Although not specific to seniors, Hillary Clinton's website claimed that her American Health Choices Plan would lower the cost of prescription drugs not only by allowing Medicare to negotiate prescription drug prices, but also by "creating a pathway for biogeneric drug competition; removing barriers to generic competition; and providing more oversight over pharmaceutical companies' financial relationships with providers." Hillary Clinton, Health Care for Seniors, supra note 143. Barack Obama said he believes that the federal government should negotiate for lower drug prices for seniors in the Medicare program. Barack Obama, Seniors, supra note 130. So, too, Chris Dodd claimed that he would "ensure that Medicare harnesses the enormous purchasing power of the millions of seniors enrolled in the Part D Prescription Drug Benefit to bargain for lower drug prices." Chris Dodd, Retirement Security, supra note 120. Joe Biden also called for negotiation of prescription drug prices by Medicare: "[T]he Medicare and Modernization Act of 2003 expressly forbids the federal government from interfering in drug negotiations between pharmaceutical companies and the numerous private insurers spread out across the country that offer Part D coverage. Simply 250 BERKELEY JOURNAL OF AFRICAN-AMERICAN LAW& POLICY [VOL. X:2

"America's seniors must never be forced to choose between groceries and the medication they need to stay healthy," said one candidate.' 54 Currently, each private insurer providing a Part D prescription drug plan negotiates its own prices with pharmaceutical manufacturers and develops its own formulary of covered drugs. 155 The MMA expressly barred the Secretary of HHS from "interfer[ing] with the negotiations between drug manufacturers and pharmacies and [prescription drug plan] sponsors" and further prohibited the government from "requir[ing] a particular formulary or institut[ing] a price structure for the reimbursement of covered Part D drugs."' 56 Candidate proposals to change this part of the MMA followed unsuccessful Congressional efforts to do the same. 157 Proponents of negotiation argue that the federal 58 government's bargaining power would drive down costs.'

put, this 'noninterference clause' dilutes Medicare's bargaining position." Joe Biden, Health Care: Four Practical Steps Toward Health Care for All, http://www.joebiden.com/issues?id=0003 (last visited Oct. 26, 2007) (hereinafter Joe Biden, Health Care: Four Practical Steps). 154. Bill Richardson, Seniors, supra note 153. 155. See U.S. GOVT. ACCT. OFFICE, REP. NO. GAO-08-47: MEDICARE PART D: PLAN SPONSORS' PROCESSING AND CMS MONITORING OF DRUG COVERAGE REQUESTS COULD BE IMPROVED 1-5 (Jan. 2008), available at http://www.gao.gov/new.items/d0847.pdf, for a description of how drug plan sponsors establish drug prices and make coverage decisions. Medicare requires that certain classes of drugs be covered, but does not specify which drugs. 42 U.S.C. § 1395w-104(b)(3)(C) (Supp. 5 2006). 156. 42 U.S.C. § 1395w-1 11(i) (Supp. 5 2006). 157. The prohibition on the federal government's negotiating prescription drug prices has been controversial since enactment. See, e.g., Bill Thomas & Edward Kennedy, Dramatic Improvement or Death Spiral - Two members of Congress Assess the Medicare Bill, 350 N.E. J. MED. 747 (Feb. 19, 2004). For detailed discussions of the politics of the MMA, see Jonathan Oberlander, Through the Looking Glass: The Politics of the Medicare Prescription Drug, Improvement and Modernization Act, 32 J. HEALTH POL. POL'Y & L. 187 (Apr. 2007) and Thomas R. Oliver et al., A Political History of Medicare and Prescription Drug Coverage, 82 MILBANK Q. 283 (2004). In early 2007 a bill to require the Secretary of Health and Human Services to "negotiate lower covered part D drug prices on behalf of Medicare beneficiaries" passed the House. Medicare Prescription Drug Price Negotiation Act of 2007, H.R. 4, 110 th Cong. (1st Sess. 2007). The related bill died in the Senate. Medicare Prescription Drug Price Negotiation Act of 2007, S. 3, 110" Cong. (I" Sess. 2007). For more background, see Robert Pear, Senate Bars Medicare Talks for Lower Drug Prices, N.Y. TIMES, Apr. 19, 2007, at A20, and Robert Pear, House Democrats Pass Bill on MedicareDrug Prices, N.Y. TIMES, Jan. 13, 2007, at A13. 158. Proponents of negotiation often point to the (VA), which does bargain for drugs, as a model for how using the bargaining power of the federal government can drive down costs. See, e.g., JIM HAHN, CONG. RES. SERV. REP. FOR CONG.: THE PROS AND CONS OF ALLOWING THE FED. GOV'T TO NEGOTIATE PRESCRIPTION DRUG PRICES (Feb. 18, 2005), available at http://www.law.umaryland.edu/marshall/crsreports/crsdocuments/RS2205902182005.pdf. For example, Joe Biden asked, "The federal government successfully uses its bulk purchasing power to keep costs low in the Veterans Administration health system - why not allow it to do the same for our nation's seniors who rely on Medicare?" Joe Biden, Health Care: Four Practical Steps, supra note 153. Barack Obama said that, "[t]o help lower the cost of pharmaceuticals, ... the federal government should negotiate for lower drug prices for seniors in the Medicare program, just as it does to obtain lower prices for our veterans." Barack Obama, Seniors, supra note 130. Despite its popularity, using the VA model as an example for Medicare is risky because the VA model is not the same as even traditional Medicare, much less the private options available under 2008] UNLOCKING THE TRUTH

Another popular candidate cost-reduction strategy targeted the MMA's financial incentives for Medicare Advantage plans. 159 Several candidates advocated lowering reimbursements to Medicare Advantage insurers to bring the costs in line with those under traditional Medicare.1 60 For example, charging that "excessive subsidies cost the government billions of dollars every year and create an incentive structure that has led to fraudulent abuses of seniors," one candidate argued for paying Medicare Advantage plans "the same amount it would cost to treat the same patients under regular Medicare."'1 61 As with proposals to allow government negotiation of prescription drug prices, all of the calls from candidates to reduce Medicare Advantage payments mirrored 62 failed Congressional proposals in this area.

C. Concerns Raised by CurrentApproach

i. Understanding the Reasons

Taken as a group, the proposals presented a somewhat random collection of reform ideas. Each proposal focused almost entirely on a single concern, with broader systemic considerations left either unrecognized or unacknowledged. Perhaps this reflects Medicare's history: Until the mid- 1990s, change in Medicare took place largely without fundamental policy conflict due to what has been perceived as a general bipartisan acceptance of

Medicare Advantage and Part D. For example, although both traditional Medicare and the VA offer a fixed benefit package, Medicare uses only private providers (hospitals and doctors) to provide care whereas the VA uses its own doctors and medical facilities, exerting far more control over providers than Medicare does. See U.S. DEP'T OF VETERANS AFF., CURRENT BENEFITS, http://wwwl.va.gov/opa/vadocs/current benefits.asp (last visited May 18, 2008), for a description of VA system benefits. 159. See supra notes 109-111 and accompanying text. See also Staff, Clinton Details Proposed Changes in Medicare Advantage; Obama and Edwards Are Less Specific, MEDICARE ADVANTAGE NEWS (Sept. 17, 2007), http://www.aishealth.com/ManagedCare/Medicare/MAN_ clinton MAchanges.html. 160. Hillary Clinton called for eliminating "excessive Medicare overpayments to HMOs and other managed care." Hillary Clinton, Health Choices Plan, supra note 117. John Edwards also argued for reducing payments to Medicare Advantage plans. John Edwards, Edwards Introduces Plans To Stand Up To Big Insurance Companies That Hurt Rural Seniors, http://johnedwards.com/issues/health-care/20071025-insurance-companies/ (last visited May 14, 2008). Barack Obama made similar proposals. See infra note 161 and accompanying text. Bill Richardson noted that "all Medicare beneficiaries are paying for this extra overhead [the extra Medicare Advantage payments] even if they don't benefit from it." Bill Richardson, Plan for Affordable Health Coverage, supra note 117. 161. Barack Obama, Barack Obama's Plan for a Healthy America: Lowering health care costs and ensuring affordable, high-quality health care for all, http://www.barackobama.om/pdf/ HealthPlanFull.pdf (last visited May 14, 2008). 162. See, e.g., HENRY J. KAISER FAM. FOUND., Democrats Discuss Eliminating Medicare Advantage Plan Overpayments To Fix Scheduled 10% Reduction in Medicare Physician Rates, KAISER DAILY HEALTH POL'Y REP. (Mar. 7, 2007), http://www.kaisemetwork.org/daily_ reports/rep index.cfmhint=3&DR ID=43416. 252 BERKELEY JOURNAL OF AFRICAN-AMERICAN LAW& POLICY [VOL. X:2

Medicare as a universal, government-run, public health insurance program.63 After the 1994 elections, however, that bipartisan agreement began to disintegrate with the growing dominance of at least a rhetorical ideological 164 commitment to private market solutions, resulting eventually in the MMA. The political landscape shifted again with the 2006 Congressional elections, and the 2008 presidential candidates entered the campaign in an uncertain world where it may have been difficult to ascertain which approach to Medicare reform would play best to the electorate.' Medicare often is called the "third rail" in politics because of the perceived risk of reform proposals that anger powerful senior voters. 166 In the 2008 presidential election, perhaps the 167 more narrow the Medicare target, the more limited the perceived risk. Myopia about Medicare may also reflect attention focused elsewhere. Expanding health insurance for the younger uninsured catapulted high on the issue list early in the campaign for the 2008 election.168 Many of the candidates proposed detailed health care reform plans; others espoused general commitments to either public or private solutions. 69 On either side, because no

163. JONATHAN OBERLANDER, supra note 91, at 156. See also Bruce C. Vladeck, The Strugglefor the Soul of Medicare, 32 J. L. Med. & Ethics 410 (Fall 2004). 164. JONATHAN OBERLANDER, supra note 91, at Ch. 7. See Theodore R. Marmor & Gary J. McKissick, Medicare'sFuture: Fact, Fiction andFolly, 26 AM. J. L. & MED. 225 (2000), for a view from 2000 of the political conflicts over Medicare reform. 165. Public health care preferences in general may be difficult to ascertain. For example, recent Gallup polls suggest that, while the vast majority of Americans want change in the health care system on a theoretical level, they also don't want change if it will impact their pocketbooks negatively. See, e.g., Kevin Freking, Health CareDilemma Close-Up, SEATTLE TIMES, Dec. 12, 2007, at A3. 166. See, e.g., Adam Clymer, Of Touching Third Rails and Tackling Medicare,N.Y. TIMES, Oct. 27, 1995, at 21, andDick Thompson, The ThirdRail of U.S. Politics, TIME, Feb. 27, 1995, at 21. For a definition of "third rail" in politics, see Wikipedia, Third rail (metaphor), http://en.wikipedia.org/wiki/Third rail_(metaphor) (last visited May 15, 2008). For a brief explanation of the term's origins, see William Safire, Third Rail, N.Y. TIMES, Feb. 18, 2007, §6, at 20. 167. It is also possible that the more narrow the target, the easier it is to explain to beneficiaries. Medicare reform is so complex that even experts in the area may have difficulty addressing the subject adequately. See Theodore R. Marmor et al., supra note 90, for an overview and critique of Medicare scholarly literature as of 2003. 168. See, e.g., Christopher Lee, Health Care Already a Key Issue in 2008 Race, WASH. POST, Mar. 6, 2007, at A3; Jonathan Oberlander, Election 2008: PresidentialPolitics and the Resurgence of Health Care Reform, 350 N.E. J. MED. 2101 (Nov. 22, 2007); Robin Toner, Unveiling Health Care 2.0, Again, N.Y. TIMES, Sept. 16, 2007, §4, at 1; Susan Page & William Risser, War not the only root of anxiety; economy, health care also top issues, poll finds, Domestic Concerns Rise in Poll, USA TODAY, Dec. 5, 2007, at IA. 169. See Joe Biden, Health Care: Four Practical Steps, supra note 153; Hillary Clinton, Health Choices Plan, supra note 117: Chris Dodd, The Dodd Plan, supra note 143; John Edwards, Universal Health Care, supra note 117; John McCain, Straight Talk on Health System Reform, http://www.johnmccain.comVInforming/Issues/19ba2flc-cO3f-4ac2-8cd5-5cf2edb527cf.htm (last visited Oct. 13, 2007); Duncan Hunter, Core Principles: Values Issues, http://www.gohunter08.com/inner.asp?z=4 (last visited Nov. 23, 2007); Rudy Giuliani, Empower Patients and Families, Not the Government, http://www.joinrudy2008.com/commitment/indepth/8 (last visited Oct. 2, 2007); Mike Huckabee, Issues: Health Care, supra note 116: Dennis Kucinich, 2008] UNLOCKING THE TRUTH national health program for those under 65 exists, candidates had no choice but to focus broadly and address the underlying policy considerations. Any national health insurance reform for those under 65 would likely influence Medicare, but the candidates generally failed to mention that. 70 At best they hinted at cost savings for Medicare through introducing preventive and chronic disease care for younger individuals.171

ii. Raising Additional Questions Approaching Medicare reform piecemeal tends to result in policy that prompts additional questions. For example, proposals to close the prescription drug donut hole, expand low-income assistance, or add preventive care and chronic disease management are all efforts to plug holes in traditional Medicare's existing benefit structure. For the individuals affected by the gaps, coverage may be critical. But the gaps currently drawing attention represent only a few of the holes in Medicare coverage,1 72 and no single gap affects a significant majority of Medicare beneficiaries. 173 Why, then, these particular gaps and not others? Similarly, prescription drug costs and Medicare Advantage plan reimbursements represent only two parts of a much larger financial picture. Both involve costs the Medicare system incurred only after passage of the MMA, yet Medicare's finances were raising concern long before the MMA. 174 The candidates largely ignored problems with traditional Medicare's payment structure. 175 But why address Part D and Medicare

A Healthy Nation, supra note 116; Barack Obama, Creating a Health Care System that Works, http://www.barackobama.com/issues/healthcare/ (last visited May 14, 2008); Ron Paul, Health Care, supra note 116; Bill Richardson, Plan for Affordable Health Coverage, supra note 117; Mitt Romney, Issue Watch, supra note 116; Tom Tancredo, Health Care, supra note 116; Fred Thompson, On the Issues: Health Care, supra note 116. 170. Barack Obama indirectly suggested the connection when, under the heading "Protect and Strengthen Medicare," he said, "Ultimately we need to reduce waste in the Medicare system and tackle fundamental health care reform across the economy." Barack Obama, Seniors, supra note 130. 171. For example, Barack Obama also wanted to "put a greater emphasis on prevention" to strengthen Medicare. Barack Obama, Seniors, supra note 130. Joe Biden argued for expanding Medicare to the near elderly (age 55-64) as a way to reduce chronic care costs for the Medicare program. "By the time people become eligible for Medicare at age 65, many are already dealing with numerous chronic health conditions," according to Mr. Biden. "Providing an earlier window to participate in Medicare can allow treatment of chronic diseases to start at an earlier age that can save Medicare costs in the long run." Joe Biden, Health Care: Four Practical Steps, supra note 153. Bill Richardson made similar arguments. See Bill Richardson, Plan for Affordable Health Coverage, supra note 117. 172. See discussion supra Section I.A. 173. See discussion supra Section II.A. 174. See discussion supra Section I.F. 175. One candidate did acknowledge issues in the existing system: "While it is tempting to control Medicare costs by simply reducing payments to providers, that approach does not address the issue of volume of services used - and also creates an access problem, as many providers drop out of publicly-run programs when reimbursement drops too low. Our current system reimburses 254 BERKELEY JOURNAL OF AFRICAN-AMERICAN LA W & POLICY [VOL. X:2

Advantage expenses and not those of the traditional system? And why advocate bringing Medicare Advantage payments in line with costs under 76 traditional Medicare' - without reference to whether or not those costs separately require reform? Even suggestions to have the federal government negotiate Medicare prescription drug prices raise questions when evaluated in the context of the overall system. For example, given that prescription drug coverage currently exists in Medicare Part D only through private insurers who negotiate their own separate arrangements with pharmaceutical manufacturers, what exactly would the federal government negotiate? If the government negotiated system-wide drug prices for all Medicare beneficiaries, private insurers would be left with little basis on which to distinguish themselves from their competitors. Those currently able to negotiate lower prices for certain drugs would lose a competitive edge. Would private insurers continue to offer different formularies? There would be little value if the individual insurers no longer controlled the price of covered drugs. In many respects, each private insurer would become no more than an alternative plan administrator. What, then, would be the reason to reserve Part D plans to private insurers instead of adding a drug benefit to traditional Medicare? Day-to-day administration of traditional Medicare already takes place through a number of private insurance companies that contract with CMS. 77

iii. Ignoring Competing Tensions Taking a piecemeal approach to Medicare reform also ignores the relationship between issues. Competing tensions run throughout Medicare - between desires for benefit enhancement and cost reduction as well as between public and private insurance solutions. In the early 2008 campaign, candidates touched on each of these tensions almost entirely without acknowledgement of the counter positions. For example, despite general candidate consensus that Medicare's finances pose a problem,' 78 their proposals appeared almost to providers on the volume of services used, without truly examining what services work best." Joe Biden, Health Care: Four Practical Steps, supra note 153. Mr. Biden was also the only candidate with a specific proposal directed at provider reimbursement: having the MedPAC review use of the SGR rate in updating payments. See supra note 152. Admittedly, the proposals to improve preventive care, chronic disease management, and care coordination could be characterized as cost-reduction strategies for traditional Medicare. If so, is it possible that these few provisions alone are all that is needed to rectify traditional Medicare's payment structure? 176. See discussion supra Section lI.B. 177. CMS is authorized to enter into contracts for administration of Medicare under 42 U.S.C. § 1395kk-1 (2000). See CMS, INTERMEDIARY-CARRIER DIRECTORY, http://www.cms.hhs.gov/ContractingGenerallnformation/Downloads/02_ICdirectory.pdf (last visited May 18, 2008), for a listing of current entities providing administrative services for Medicare. 178. John McCain, for example, said, "[B]y 2019, Medicare will be broke. We are currently spending more on Medicare than we are collecting in payroll taxes and cashing in the 2008] UNLOCKING THE TRUTH ignore Medicare's overall financial state and the inherent conflict between providing a better benefit package and reducing expenses, 179 They recommended expansions in the existing benefit structure - for example, through eliminating the donut hole or expanding coverage for low-income 180 beneficiaries - with at best limited consideration of the associated costs. Concurrently, the candidates sidestepped the potential impact of their cost- reduction proposals on benefits. In some cases, the same candidate argued for both lowering Medicare Advantage payments and expanding coverage, apparently overlooking the fact that Medicare Advantage plans - thanks to 181 enhanced reimbursement rates - may provide needed supplemental coverage. When the government reduced reimbursement rates to Medicare+Choice plans in an earlier cost-savings reform, the additional benefits provided by Medicare+Choice plans vanished.1 82 The same could happen with Medicare Advantage plans. The candidates also skirted the tension between private and public insurance solutions for Medicare. 183 At most they indirectly referenced the conflict.1 84 For example, allowing the federal government to negotiate prescription drug prices would curtail the MMA's privatization shift by eliminating the primary basis on which private insurers compete, converting those insurers into little more than administrators for a government-run benefit.18 5 This impact went unmentioned by the candidates. So, too, direct

few IOUs left in the trust fund. In the meantime, more and more of our retirees' social security checks will also go to pay for Medicare leaving our seniors with less money for their everyday expenses." John McCain, John McCain on Health Care, supra note 143. John Edwards made similar statements: "Skyrocketing health care costs have put pressure on Medicare and threatened its long-term solvency." John Edwards, Older Americans, supra note 129. Barack Obama said that "[e]nsuring the long-term solvency of the Medicare trust fund may be our toughest fiscal challenge." Barack Obama, Seniors, supra note 130. See also supra note 90. 179. See, e.g., Heather Jerbi, Presidential Prescriptions 2008, CONTINGENCIES 20, 24 (Nov./Dec. 2007), available at http://www.contingencies.org/novdec07/presidential.pdf, and Staff, Democraticcandidates duck tough 'boomsday 'choices, USA TODAY, Dec. 5, 2007, at 12A. 180. When costs were mentioned in connection with proposals for preventive care, chronic disease management and coordination of care, most candidates tended to frame the proposals in terms of cost reduction. See discussion supra Section II.A. and supra note 171 and accompanying text. 181. See discussion supra Section I.B. 182. See discussion supra Section I.F. 183. The significance of this conflict should not be underestimated. See supra note 157 and Bruce C. Vladeck, supra note 163. 184. John Edwards, for example, charged that "[i]nstead of strengthening Medicare for our seniors, George Bush has surrendered it to the drug companies and HMOs." John Edwards, Older Americans, supra note 129. Talking generally about health care, but with Medicare clearly in mind, Mike Huckabee said, "We don't need universal health care mandated by federal edict or funded through ever-higher taxes." Mike Huckabee, Issues: Health Care, supra note 116. Dennis Kucinich stood alone in calling for a "universal, single-payer, not-for-profit health care system," what he also calls "Medicare for All." Dennis Kucinich, A Healthy Nation, supra note 116. 185. See discussion supra Section ll.C.ii. 256 BERKELEY JOURNAL OF AFRICAN-AMERICAN LAW& POLICY [VOL. X:2

proposals to add a prescription drug benefit to Medicare tended not to consider the effect on the system's public-private balance. 18 6 In fact, adding a prescription drug benefit to traditional Medicare would make the traditional system a direct competitor of the private insurer Part D prescription drug plans. A significant majority of beneficiaries choose traditional Medicare for everything other than prescription drugs, 187 and many of those beneficiaries might also elect traditional Medicare for prescription drugs if the option existed. Were they to do so, the traditional system would enjoy considerable bargaining power in negotiating the price of prescription drugs with pharmaceutical manufacturers. That bargaining power would likely exceed the bargaining power of any single private insurance company and drive the cost of drugs in traditional Medicare below what private insurers could offer. This would give traditional Medicare a competitive advantage that could eventually undercut private insurers, counteracting a key privatization effort of the MMA. Similarly, reducing reimbursement rates for Medicare Advantage plans would remove a key MMA incentive for those plans.' 88 The candidates treated these proposals primarily as cost-savings measures, 189 focusing on the reports that Medicare Advantage plans cost more to treat beneficiaries than traditional Medicare. 90 Lowering the reimbursement rates to the private insurers would save money if traditional Medicare provides the same care at less expense, but that is not all. The MMA increased reimbursement rates for Medicare Advantage plans in an effort to correct a perceived major cause of the failure of the predecessor Medicare+Choice private plans - i.e., not enough funding to convince private insurers to remain in the Medicare market.' 9' Cost considerations did not completely drive the analysis, however; proponents hoped to push Medicare away from the government-run model of traditional Parts A and B and toward private insurers. 92 To now remove the financial incentives for Medicare Advantage insurers would thus represent a policy reversal, possibly resulting in the withdrawal of many such plans from the Medicare market.

186. See discussion supra Section II.A. For example, both John Edwards and Bill Richardson included adding prescription drugs to traditional Medicare in the same sentence with allowing the federal government to negotiate prescription drug prices to cut costs. See supra note 129. 187. See supra note 31 and accompanying text. 188. See discussion supra Section I.F. 189. See discussion supra Section II.B. 190. See supra notes 160-161 and accompanying text. 191. See discussion supra Section I.F. and supra notes 99-100 and accompanying text. 192. See supra notes 1 10- 111 and accompanying text. 2008] UNLOCKING THE TRUTH

III. ELDERLY MINORITIES AND MEDICARE REFORM ISSUES

Because of racial disparities in health and income status among the elderly, 93 the potential impact of certain proposals on elderly minorities illustrates the risks of a piecemeal approach to Medicare reform that neither considers systemic ramifications nor attempts to balance competing tensions.

A. Systemic Analysis

Benefit expansion proposals may appeal to elderly minorities facing a combination of poor health, low-income status, and absence of supplemental coverage through traditional sources.' 94 Because of the high drug costs associated with chronic diseases,' 95 and the prevalence of chronic conditions among members of racial and ethnic minority groups, 19 6 closing the Part D prescription drug donut hole or improving chronic disease management, preventive care, and coordination of care' 97 would help many in the minority population. Similarly, loosening the income and asset tests for Medicare's low- income assistance would assist those elderly minorities currently without supplemental insurance. But what makes these particular coverage gaps the most crucial out of the wide array of traditional Medicare's coverage holes? Other coverage limits might be equally relevant to these populations. For example, changing the structure of traditional Medicare Part A's inpatient hospital benefit - a benefit that works well for acute care, but not necessarily for chronic illness' 98 - might prove a more valuable benefit improvement for elderly minorities than closing the donut hole.' 9 9 So, also, might expanding Medicare coverage for home health care help prevent certain medical complications and related expenses that eventually drain individuals' resources and drive them toward Medicaid. A gap like the prescription drug donut hole may seem easier for a politician to explain than more complex parts of traditional Medicare, but coverage changes should be made taking into account the Medicare benefit structure in all its complexity. Expansions should target areas that will best improve the overall health status of the greatest number of beneficiaries, based on systemic analysis of the various populations' needs.

193. See supra notes 137-142 and 150-151 and accompanying text. 194. See supra notes 137-142 and accompanying text. 195. See supra note 123 and accompanying text. 196. See supra note 151 and accompanying text. 197. See discussion supra Section II.A. 198. See supra note 35 and accompanying text. 199. The argument is not that one coverage gap deserves closure more than another, but rather that it is misleading to single out only one hole when there are so many that might be equally deserving. 258 BERKELEY JOURNAL OF AFRICAN-AMERICAN LAW& POLICY [VOL. X:2

B. Competing Tension: Benefit Expansion and Cost Reduction

Medicare reform that achieves its purpose without undesirable side effects requires evaluating and balancing the competing tensions pulling the system in various directions. For example, systemic analysis of Medicare's coverage gaps as they affect elderly minorities might suggest that all of the 2008 candidate benefit expansion proposals should be adopted alongside a number of other proposals to close holes in the benefit structure. A richer benefit structure would assist all Medicare beneficiaries, but particularly those who are poorer and sicker. Financial constraints place complete coverage beyond reach, however, creating constant competition between benefit expansion and cost reduction proposals. The debate over Medicare Advantage plans reflects this tension between benefit expansion and cost reduction. For the many elderly minorities without access to either Medicaid or employment-based retiree health insurance, and unable to afford Medigap premiums, 200 a Medicare Advantage plan with comparatively low-cost supplemental benefits may offer a beneficiary a financially viable alternative. 201 This possibility has attracted support for Medicare Advantage plans from advocates within the minority community. In the spring of 2007, the director of the Washington, D.C. bureau of the NAACP 20 and the national president of LULAC 203 sent letters to members of both the Senate and the House of Representatives in support of maintaining government funding for Medicare Advantage plans. 20 4 The NAACP and LULAC both relied on insurance industry claims that Medicare Advantage plans "disproportionately provide coverage to low-income and racial and ethnic minority beneficiaries." 20 5 Those claims have since been disputed,2 6 but

200. See supra notes 139-142 and accompanying text. 201. Seesupra note 81. 202. "NAACP" is the commonly used acronym for the National Association for the Advancement of Colored People. 203. "LULAC" is the commonly used acronym for the League of United Latin American Citizens. 204. HENRY J. KAISER FAM. FOUND., Minority Groups Oppose Proposed Reduction in Funds for Medicare Advantage Plans, KAISER DAILY HEALTH POL'Y REP. (Mar. 16, 2007), http://www.kaisernetwork.org/daily reports/print report.cfm?DRID=43645&dr-cat=3; Rosa Rosales, LULAC National President, Letter to Member of Congress (Mar. 14, 2007), available at http://www.lulac.org/advocacy/press/2007/medicareadvantageletter.pdf; and Hilary 0. Shelton, Director, Washington Bureau, NAACP, Letter to Member of Congress (Mar. 14, 2007), available at http://republicans.waysandmeans.house.gov/showarticle.asp?ID=32. 205. Id. 206. See, e.g., Paul Krugman, The Plot Against Medicare, N.Y. TIMES, Apr. 20, 2007, at A23; Edwin Park & Robert Greenstein, CTR. ON BUDGET & POL'Y PRIORITIES, CURBING MEDICARE OVERPAYMENTS TO PRIVATE INSURERS COULD BENEFIT MINORITIES AND HELP EXPAND CHILDREN'S HEALTH COVERAGE (May 14, 2007), http://www.cbpp.org/5-10- 07health.htm; MEDICARE RIGHTS CTR., MEDICARE PRIVATE HEALTH PLANS VS. MEDICARE SAVINGS PROGRAMS: WHICH IS THE BETrER WAY TO HELP PEOPLE WITH Low INCOMES AFFORD HEALTH CARE? (Sept. 2007), http://www.medicarerights.org/MAvsMSP.pdf.; Neuman 2008] UNLOCKING THE TRUTH traditional Medicare remains riddled with coverage holes and Medicare Advantage plans may provide needed assistance. Candidate proposals in 2007 to cut Medicare Advantage payments did not take into account the availability of supplemental benefits.2 °7 If Medicare Advantage reimbursement rates drop, Medicare Advantage insurers could choose either to withdraw from the market altogether, to eliminate supplemental benefits, or to charge beneficiaries for more generous benefit packages. Under any of those options, the value of the plans to many elderly minorities would decline, if not vanish altogether. This concern is what prompted the NAACP and LULAC to protest reductions in Medicare Advantage reimbursement rates.20 8 They focused on the benefits provided by the plans; the 2008 presidential candidates focused on the cost of the plans. But the two concerns are inextricably linked with Medicare Advantage. Rather than focusing on one without considering the other, the goal of an expanded Medicare benefit package should be balanced with its costs, evaluating alternatives for providing enhanced benefits directly rather than proceeding as though cost-reduction strategies can be disconnected from concern over gaps in coverage.

C. Competing Tension: Public-PrivateBalance Similar tension runs between maintaining traditional Medicare with its government-managed structure and shifting to a system dominated by private insurance alternatives. Questions have long been raised as to whether private plans in Medicare offer the best solution for chronically ill and!or low-income beneficiaries. 209 Despite the apparent attractiveness of Medicare Advantage plans for many elderly minorities, embracing private insurance as the long-term answer to Medicare could put low-income elderly minorities at long-term risk. If Congress eventually reduces Medicare Advantage plan reimbursements, plans that remain in the market and maintain enhanced benefit packages most likely will increase their premiums to compensate. At some point, poorer

Testimony, supra note 31, at 2; and Mark Merlis, NAT'L HEALTH POL'Y FORUM, MEDICARE ADVANTAGE PAYMENT POLICY (Sept. 24, 2007), http://www.mhpf.org/pdfsbp/BPMAPayment Policy_09 24 07.pdf. The NAACP later tempered itssupport for Medicare Advantage plans. See Jeffrey Young, NAACP may temper supportfor Medicare Advantage, THE HILL (May 15, 2007), http://thehill.com/business--lobby/naacp-may-temper-support-for-medicare-advantage- 2007-05-15.html, and Robert Laszewski, The Debate Over Medicare Advantage Funding - The NAACP Goes "Whoops!" and Stark Tries to Start a "Food Fight" Over Who Has to Come Up With the Money, HEALTH CARE POL'Y & MARKETPLACE REV. (May 17, 2007), http://healthpolicyandmarket.blogspot.com/2007/05/debate-over-medicare-advantage- funding.html. 207. See discussion supra Section lI.B. 208. See supra notes 202-205 and accompanying text. 209. See, e.g., Marilyn Moon, Will The Care Be There? Vulnerable Beneficiaries And Medicare Reform, 18 HEALTH AFF. 107 (Jan./Feb. 1999), and Peter D. Fox et al., Addressing The Needs Of ChronicallyIll Persons Under Medicare, 17 HEALTH AFF. 144 (Mar./Apr. 1998). 260 BERKELEY JOURNAL OF AFRICAN-A MERICAN LAW& POLICY [VOL. X:2 beneficiaries may be priced out of the Medicare Advantage plans and forced to return to traditional Medicare while wealthier beneficiaries gravitate toward the more generous private plans. Traditional Medicare over time could devolve into another Medicaid, viewed by many as a less desirable "welfare" program 2 1 and vulnerable to cuts in benefits that today would be considered untenable. 1' The risk that traditional Medicare could eventually lose its broad-based support underlies all Medicare reform proposals that push the system toward private insurance alternatives and away from a uniform government-managed program. Proposals such as allowing the federal government to negotiate prescription drug prices or adding a prescription drug benefit to traditional Medicare may reverse the risk. For elderly minorities who have much to lose if the protections inherent in traditional Medicare fail over time, this shifting balance between government-managed and private insurance alternatives adds yet more complexity to the analysis of Medicare Advantage. Medicare Advantage plans in the short run may give lower-income minorities a much- needed opportunity to fill in Medicare's coverage gaps, but supporting those plans inherently favors private insurance over traditional government-run Medicare. For elderly minorities in poor health and with limited financial resources, that favoritism may cause concern because of the long-term risks.

CONCLUSION: TAKING A BROADER VIEW

Politicians shy away from tackling anything but limited issues in Medicare for politically sensible reasons. The complexity of the Medicare system - with its public-private hybrid approach and forty-year history of conflicting reform approaches - makes it a difficult program to address. Moreover, the United States is currently in the throes of conflict over the even- bigger health care dilemma of how to provide health insurance to the estimated 47 million currently uninsured individuals under age 65. 2 12 Medicare is also an enormously popular entitlement program that is viewed as dangerous to touch. It still demands attention, however, and the 2008 presidential candidates could easily incorporate systemic Medicare reform into their broader health care proposals.

210. See, e.g., JONATHAN OBERLANDER, supra note 91, at 104, and Timothy Stoltzfus Jost, The Most Important Health Care Legislation of the Millenium (So Far): The Medicare Modernization Act, 5 YALE J. HEALTH POL'Y & ETHICS 437, 446 (Wint. 2005). See also Dorothy A. Brown, Race and Class Matters in Tax Policy, 107 COLUM. L. REv. 790 (Apr. 2007) for a discussion of the risks of a program being viewed as "welfare." 211. See supra note 166 and accompanying text. 212. U.S. CENSUS BUREAU, supra note 78, at fig. 6. Uninsured rates are higher for members of ethnic and racial minority groups. For example, in 2006, the Census Bureau estimated that 20.5 percent (or 7.6 million) of all African Americans, and 34.1 percent (or 15.3 million) of all Hispanics, were uninsured. Id. at 19. 2008] UNLOCKING THE TRUTH 261

To bring Medicare into the national debate and lead the program forward, the candidates must look beyond isolated proposals and instead embrace system-wide consideration of core issues and the complex tensions that tie those issues together. To do otherwise will result at best in reform that falls short of solving serious needs in the system - for example, by failing to identify and close the most critical gaps in coverage. At worst, ignoring relationships between Medicare issues could result in negative and unanticipated consequences for what is already a vulnerable population. The quandary of Medicare Advantage reform for elderly minorities spotlights this risk. Are the programs a positive source of much-needed, affordable supplemental benefits? Do they cost the system more than they should? Should they be supported by minorities for the potential short-term value? Or should they be opposed because of the long-term potential of shifting the Medicare program too much toward private insurance? Balancing these and other questions is the challenge of Medicare reform, a challenge that can be met only by looking at Medicare with a wide and clear lens.