[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.
    
    
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