    [House Document 110-96]
    [From the U.S. Government Publishing Office]

    110th Congress, 2d Session - - - - - - - - - - - - - House Document 110-96

      PROPOSED LEGISLATION: MEDICARE FUNDING WARNING RESPONSE ACT OF 2008

                                   __________

                                 COMMUNICATION

                                      from

           THE SECRETARY, THE DEPARTMENT OF HEALTH AND HUMAN SERVICES

                                  transmitting

    A DRAFT OF PROPOSED LEGISLATION ENTITLED THE ``MEDICARE FUNDING WARNING
                             RESPONSE ACT OF 2008''

     February 21, 2008.--Referred jointly to the Committees on Energy and
     Commerce, Ways and Means, and the Judiciary and ordered to be printed
                                The Secretary of Health
                                            and Human Services,
                                     Washington, DC, February 15, 2008.
    Hon. Nancy Pelosi,
    Speaker of the House of Representatives,
    Washington, DC.
        Dear Speaker Pelosi: Under the Medicare Prescription Drug,
    Improvement, and Modernization Act (Public Law 108-173), a
    Medicare funding warning is triggered whenever the Trustees
    determine, for two consecutive years, that more than 45 percent
    of total Medicare spending will be derived from general
    revenues within the current or following six years. In April
    2007, the Trustees issued the first such warning. The President
    has assigned me the task of submitting proposed legislation to
    respond to this Medicare funding warning, and I am accordingly
    submitting the enclosed bill.
        The Medicare program is on an unsustainable path, driven by
    two principal factors: projected growth in its per-capita
    costs, and increases in the beneficiary population as a result
    of population aging. Excess cost growth will not be brought
    under control until there is comprehensive reform changing
    Medicare's underlying structure. The funding warning is merely
    one near-term signal illuminating a small piece of a much
    larger problem. That problem is an unsustainable design in
    which government controls too many aspects of health care. In
    traditional fee-for-service Medicare, the government decides
    what treatments are provided and what the price should be.
    Until this system is modernized to offer greater choice and
    price accountability to individual consumers, the program's
    finances will remain on a path to insolvency.
        In the meantime, we urge the Congress to pass the Medicare
    savings submitted with the President's fiscal year 2009 Budget.
    Enactment of these savings would improve Medicare's long-term
    outlook--reducing the 75-year unfunded obligation by nearly
    one-third. It would also respond to the 2007 funding warning
    and maintain quality of care in a fiscally responsible way.
        The enclosed proposal that I am submitting in response to
    the funding warning takes a three-step approach to
    strengthening Medicare. In developing these proposed reforms,
    we have been guided by the highly successful experience of the
    Part D program, which made a prescription drug benefit
    available to 44 million beneficiaries. By empowering individual
    consumers, projected Part D costs have decreased by $244
    billion relative to original estimates for the 2004-2013 time
    period. Market-based principles must be further applied to
    Medicare to allow it to operate more efficiently, as it must
    for the long-term.
        Title I of our proposal provides the Secretary of Health
    and Human Services the authority and responsibility to
    introduce principles of value-based health care in the Medicare
    program, consistent with the President's Executive Order 13410
    of August 22, 2006. This title directs the Secretary to develop
    and implement proposals that reduce Medicare spending by
    increasing provider efficiency and encouraging beneficiaries to
    be wise health-care consumers. The specific elements included
    in the legislation are:
               Improved health information technology,
            including electronic medical records;
               Transparency of pricing information;
               Transparency of quality information; and
               Incentives for providers to deliver, and
            beneficiaries to choose, high-quality, low-cost health
            care.
        Title II of the proposed legislation would implement the
    President's medical liability reform agenda. To address the
    rising cost of health care, we must have a rational medical
    liability system. Our courts are littered with junk lawsuits.
    The current medical liability system encourages defensive
    medicine, which raises the costs of Medicare, Medicaid,
    Veterans Affairs, and other Federal health-care programs by an
    estimated $28 billion per year (and national health care costs
    by $60-$100 billion). The medical liability crisis has resulted
    in 1,500 counties in the United States that do not have an
    obstetrician-gynecologist. This legislation would take the
    first steps to addressing this growing crisis.
        Finally, Title III of the proposed legislation would
    provide for income-relating the Part D premium. This provision
    was contained in the President's most recent two Budgets and
    would save over $900 million in 2013 and nearly $3.2 billion
    over five years.
        This legislative package, particularly if enacted in
    concert with the President's Budget, would take the first step
    of responding to the funding warning in the Trustees' 2007
    report. Perhaps more importantly, it would begin to address the
    long-term challenge and lay the foundation for the
    comprehensive Medicare reforms that are necessary to strengthen
    and improve the program for future generations. Accordingly, we
    urge the Congress to promptly pass the proposed legislation.
        The Office of Management and Budget advises that the
    transmittal of this legislation is in accord with the
    President's program.
                Sincerely,
                                                    Michael O. Leavitt.
        Enclosure.