[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




                   MEDICARE PREMIUM SUPPORT PROPOSALS

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 27, 2012

                               __________

                          Serial No. 112-HL10

                               __________

         Printed for the use of the Committee on Ways and Means





[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]









                  U.S. GOVERNMENT PRINTING OFFICE

79-937                    WASHINGTON : 2013
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001



                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

WALLY HERGER, California             SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas                   CHARLES B. RANGEL, New York
KEVIN BRADY, Texas                   FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
GEOFF DAVIS, Kentucky                XAVIER BECERRA, California
DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
CHARLES W. BOUSTANY, JR., Louisiana  MIKE THOMPSON, California
PETER J. ROSKAM, Illinois            JOHN B. LARSON, Connecticut
JIM GERLACH, Pennsylvania            EARL BLUMENAUER, Oregon
TOM PRICE, Georgia                   RON KIND, Wisconsin
VERN BUCHANAN, Florida               BILL PASCRELL, JR., New Jersey
ADRIAN SMITH, Nebraska               SHELLEY BERKLEY, Nevada
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas
ERIK PAULSEN, Minnesota
KENNY MARCHANT, Texas
RICK BERG, North Dakota
DIANE BLACK, Tennessee
TOM REED, New York

                   Jennifer Safavian, Staff Director

                  Janice Mays, Minority Chief Counsel

                                 ______

                         SUBCOMMITTEE ON HEALTH

                   WALLY HERGER, California, Chairman

SAM JOHNSON, Texas                   FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin                 MIKE THOMPSON, California
DEVIN NUNES, California              RON KIND, Wisconsin
DAVID G. REICHERT, Washington        EARL BLUMENAUER, Oregon
PETER J. ROSKAM, Illinois            BILL PASCRELL, JR., New Jersey
JIM GERLACH, Pennsylvania
TOM PRICE, Georgia
VERN BUCHANAN, Florida

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.














                            C O N T E N T S

                               __________

                                                                   Page

Advisory of April 27, 2012, announcing the hearing...............     2

                               WITNESSES

Honorable John B. Breaux, Senior Counsel, Patton Boggs, LLP......     6
Honorable Alice M. Rivlin, Ph.D., Senior Fellow, Economic 
  Studies, Brookings Institution.................................    14
Honorable Joseph R. Antos, Ph.D., Wilson H. Taylor Scholar in 
  Health Care and Retirement Policy, American Enterprise 
  Institute......................................................    23
Honorable Henry J. Aaron, Ph.D., Senior Fellow, Economic Studies, 
  Brookings Institution..........................................    34

                       SUBMISSIONS FOR THE RECORD

AARP, statement..................................................    68
AFL-CIO, statement...............................................    71
AFSCME, statement................................................    73
Alliance for Retired Americans, statement........................    78
Center for Fiscal Equity, statement..............................    81
Consumers Union, statement.......................................    86
Families USA, statement..........................................    92
Health Care for America Now, statement...........................    94
HLC, statement...................................................    98
National Committee to Preserve Social Security and Medicare, 
  statement......................................................   101

 
                   MEDICARE PREMIUM SUPPORT PROPOSALS

                              ----------                              


                         FRIDAY, APRIL 27, 2012

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                    Subcommittee on Health,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 9:00 a.m., in 
Room 1100, Longworth House Office Building, Hon. Wally Herger 
[Chairman of the Subcommittee] presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                         SUBCOMMITTEE ON HEALTH

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
Friday, April 27, 2012
HL-10

                 Chairman Herger Announces a Hearing on

                   Medicare Premium Support Proposals

    House Ways and Means Health Subcommittee Chairman Wally Herger (R-
CA) today announced that the Subcommittee on Health will hold a hearing 
to examine proposals to reform Medicare through a premium support 
model. The hearing will take place on Friday, April 27, 2012, in Room 
1100 of the Longworth House Office Building, beginning at 9:00 a.m.
      
    In view of the limited time available to hear from witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing. A list of witnesses 
will follow.
      

BACKGROUND:

      
    The Medicare program was enacted on June 30, 1965, when President 
Lyndon Johnson signed into law the Social Security Amendments Act (P.L. 
89-97). At the time of its creation, Medicare's Fee For Service (FFS) 
design was modeled after the Blue Cross Blue Shield plans that were 
prevalent throughout the Nation. However, despite repeated and 
significant advances in private insurance over the last 45 years, 
Medicare's FFS delivery design has largely remained unchanged.
      
    Medicare's FFS delivery system and its antiquated and siloed 
benefit design has also led to inefficiencies and financial challenges 
throughout Medicare's history. On numerous occasions, Congress has been 
forced to act to slow the growth of Medicare in order to extend the 
program's solvency. As a result, today's Medicare program is 
unsustainable. According to the 2011 Medicare trustees report, 
Medicare's Hospital Insurance Trust Fund is expected to go bankrupt by 
2024, 5 years earlier than the trustees projected in 2010.
      
    In announcing the hearing, Chairman Herger stated, ``The American 
public recognizes that today's Medicare program faces significant 
financial challenges. Unless Congress acts, the Medicare program that 
seniors and people with disabilities rely on will go bankrupt in just a 
few short years. In order to protect the Medicare program for future 
beneficiaries, Congress must look beyond simply slashing Medicare 
provider reimbursements, which will eventually result in beneficiaries 
losing access to care. The premium support model holds promise to place 
Medicare on sound financial footing while transforming and modernizing 
the program to provide greater choice for beneficiaries. Such proposals 
have enjoyed bipartisan support for decades, and it is time to move 
beyond partisan arguments and focus on the bipartisan solutions that 
will strengthen and improve Medicare for future generations of 
Americans.''
      

FOCUS OF THE HEARING:

      
    The hearing will review the bipartisan support for implementing a 
premium support system in order to modernize the Medicare benefit while 
also improving the program's long-term financial solvency.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Friday, May 11, 2012. Finally, please note 
that due to the change in House mail policy, the U.S. Capitol Police 
will refuse sealed-package deliveries to all House Office Buildings. 
For questions, or if you encounter technical problems, please call 
(202) 225-1721 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov.

                                 

    Chairman HERGER. The Subcommittee will come to order.
    We are meeting today to examine proposals to reform 
Medicare through premium support and the bipartisan support for 
such proposals.
    First, I think it should be abundantly clear that despite 
what some on the other side might say, Republicans support the 
Medicare program. The program serves as a critical function in 
our society, ensuring that American seniors and people with 
disabilities have health care coverage.
    Unfortunately, the program faces significant financial 
challenges and is slated to go bankrupt in 2024. We cannot keep 
tweaking here and tweaking there, hoping to kick the can down 
the road for a year or two. As the Medicare trustees again 
stated in their annual report, Congress must act sooner rather 
than later to reform the program to ensure its viability.
    The Medicare program is in dire need of reform and 
improvement so that it meets the health care needs of its 
beneficiaries in the 21st century.
    The traditional Medicare benefit was created in 1965 and it 
really hasn't been reformed since, despite the fact that the 
delivery of health care and the private insurance market have 
changed dramatically.
    The Medicare fee-for-service benefit design, with its array 
of confusing coinsurance and deductible levels and its siloed 
delivery system, has not kept pace with the rest of health 
care. Can you imagine buying your hospital insurance from one 
insurance company, your doctor's office insurance from another 
insurance company, your prescription drug insurance from yet 
another company and catastrophic spending protections from a 
fourth company? That is exactly what the majority of Medicare 
beneficiaries do today. This outdated design breeds confusion, 
waste, and even fraud.
    Medicare's antiquated design also inhibits care 
coordination, incentivizes overuse, and has led to financial 
challenges throughout Medicare's history.
    So what is to be done? Simply hoping to make the Medicare 
program solvent by cutting payments to providers is 
unrealistic. The Chief Medicare Actuary has warned that the 
cuts already enacted as part of the Democratic health law would 
drive Medicare payments below Medicaid levels, which could 
result in ``severe problems with beneficiary access to care.'' 
Further drastic provider cuts may make Medicare appear solvent 
on paper, but it would do so at the expense of the millions of 
seniors and people with disabilities who depend on the program.
    Instead, we should examine reforms that will protect and 
improve the Medicare program, and premium support is one way to 
do that. Since the term ``premium support'' was coined by Henry 
Aaron, one of our witnesses here today, and Robert Reischauer, 
both Democrats, it has received bipartisan support.
    Moving to a premium support model was advanced by the 
National Bipartisan Commission on the Future of Medicare, which 
was cochaired by Democratic Senator Breaux, another witness 
here today. Writing in support of the proposal, Senator Breaux 
and former Ways and Means Chairman Bill Thomas stated that they 
believe Medicare ``can be more secure only by focusing the 
government's powers on ensuring comprehensive coverage at an 
affordable price rather than continuing the inefficiency, 
inequity, and inadequacy of the current Medicare program.''
    Premium support was also a key component of the 
recommendations from the Bipartisan Policy Center cochaired by 
Senator Pete Domenici and former CBO Director and Clinton 
Administration OMB Director Alice Rivlin, who is also 
testifying today.
    It is in this vein that the 2013 House budget includes a 
premium support proposal. We have drawn upon the ideas that our 
witnesses have proposed over the past 2 decades and put forward 
a plan to protect Medicare for future generations.
    There certainly will be differing opinions about how a 
premium support proposal should work. That is a healthy 
discussion. However, simply hiding our head in the sand is not.
    House Republicans have made it abundantly clear that we 
will not simply watch Medicare become insolvent. My friends on 
the other side may not like our proposal to protect the 
Medicare program but where is yours? Relying on $14 billion in 
savings from so-called ``delivery reforms'' in the health care 
law is not going to save the program. They are already built 
into the Medicare trustees' estimates that predict Medicare's 
demise in just over 10 years.
    There is some time before Medicare faces the dire 
shortfalls that would jeopardize access to care. However, we 
would be wise to heed the charge given to us by the Medicare 
trustees and begin to work together now to place the Medicare 
program on solid financial ground. It is my hope that today's 
hearing would be the beginning of this effort.
    Before I recognize Ranking Member Stark for the purposes of 
an opening statement, I ask unanimous consent that all Members 
written statements be included in the record. Without 
objection, so ordered.
    I now recognize Ranking Member Stark for 5 minutes for the 
purpose of his opening statement.
    Mr. STARK. I would like to thank Chairman Herger for 
holding this meeting. I think it is the first hearing that 
Republicans have held in the Ways and Means Committee to 
advance their plan to end the Medicare as we know it. Basically 
Republicans want to take away Medicare's guaranteed benefits 
and replace it with a voucher and put the insurance companies 
back in charge. I don't like their plan. I appreciate their 
honesty in flying their flag to dismantle Medicare high and 
proud.
    This year they modified their plan by saying that 
traditional Medicare would remain an option. That promise isn't 
worth very much. Traditional Medicare might be theoretically 
available, but would be out of reach of many because the 
voucher would not be guaranteed to cover costs.
    Traditional Medicare would undoubtedly attract sicker 
patients and quickly enter into a death spiral.
    My Republican colleagues don't like the sound of voucher to 
describe their plan so they have made up a new term called 
premium support. They also dislike being the sole owners of 
this plan, so they are holding this hearing today. They want to 
share the blame and are trying to overshadow the fact that 
every single Democrat in the House of Representatives voted 
against their budget, which includes their Medicare voucher 
proposal. I can count on maybe one hand the Democrats who 
support vouchers or similar proposals.
    Dr. Aaron actually has the dubious honor of having coined 
the phrase ``premium support,'' but his written testimony today 
makes clear he is no proponent of the Ryan plan. The only 
Democrat I have heard say nice things about premium support is 
Ron Wyden, and he quickly disavowed the Ryan budget and said I 
didn't write it and can't imagine a scenario where I would vote 
for it.
    I am going to go on record again making clear the strong 
opposition that Democrats have to the House Republican 
proposal. By any name it would be devastating to Medicare 
beneficiaries, raising their costs, negating the gains made 
from Medicare that ensure that all our seniors have quality 
affordable health care. Instead they would return us to a time 
when private health insurers would control what care seniors 
get and what price they are forced to pay.
    The CBO has said it would lead to an increase in overall 
national health spending as seniors and people with 
disabilities are moved into less efficient, more costly private 
plans. It simply takes us in the wrong direction.
    Now, I have to agree with my chairman that there are 
reforms that we can and should continue to make to Medicare. I 
am proud of the provisions we included in the health reform 
bill that are already moving forward, payment and delivery 
system reforms. They are reducing overpayments to private 
health insurers and their plans to cost taxpayers tens of 
billions of dollars each year, adding years of solvency to the 
trust fund through our recent legislation. We did this while 
preserving and even improving Medicare benefits, proving that 
you don't have to kill the patient to save it.
    With that, I look forward to hearing from our witnesses 
today. Thank you, Mr. Chairman.
    Chairman HERGER. Thank you. Today we are joined by four 
witnesses, former Senator John Breaux, who chaired the 1999 
National Bipartisan Commission on the Future of Medicare; Alice 
Rivlin, a Senior Fellow at the Brookings Institution and 
Cochair of the Bipartisan Policy Center's task force on debt 
reduction; Joe Antos, the Wilson H. Taylor scholar at American 
Enterprise Institute; and Henry Aaron, a Senior Fellow at the 
Brookings Institution. You will each have 5 minutes to present 
your oral testimony. Your entire written statement will be made 
a part of the record.
    Senator Breaux, you are now recognized for 5 minutes.

STATEMENT OF HON. JOHN B. BREAUX, SENIOR COUNSEL, PATTON BOGGS, 
                              LLP

    Mr. BREAUX. Thank you very much, Mr. Herger, for inviting 
me. Ranking Member Pete Stark, he and I have been involved in 
this for many, many, many years. Thank you all for inviting me. 
Jim McDermott, who served with me in a great capacity when we 
had the National Bipartisan Commission on Medicare Reform, and 
many of you who I have had the privilege of working with in 
different capacities. Thank all of you for inviting me to talk 
about one of the most important issues and at the same time one 
of the most divisive issues that either party is going to have 
to face, and that is what do we do with Medicare reform?
    Let me say I had the privilege of serving in this body for 
14 years in the House and 18 in the Senate, or the other body 
as we like to have called them over here in the House. So I 
think I fully understand the difficulties that each Member from 
each party has in addressing the very difficult issue of how we 
continue to provide quality health care for our Nation's 
seniors.
    I have observed over the years that some Democrats, not 
all, but some have taken the position that in health care the 
government should do everything and the private sector should 
do nothing. On the other side there are some Republicans, not 
all, but some who take and argue the opposite position that the 
government should do nothing when it comes to health care and 
that the private sector should do everything.
    My opinion is that in order to ever reach an agreement 
between the two parties, Congress is going to have to combine 
the best of what government can do with the best of what the 
private sector can do and put the two together. I would submit 
to this panel that that is exactly what we did in creating 
Medicare Part D. The best of what government can do in that 
legislation is, one, help pay for the program which the 
government can do through the taxation system. Second, 
government can help set up the mechanics and structure of the 
program with standards that the government would put into 
place. And third, government can make sure that private sector 
and companies do not scam the system and can actually deliver 
the product. Government does those things fairly well.
    On the other hand, the private sector needs to be involved. 
The private sector can create competition among competing 
plans. The government doesn't create competition, private 
sector can do that. Second, private sector can bring invasion 
and new products to the market. Government doesn't do that very 
well. And third, the private sector can deliver beneficiaries' 
choices to allow them to select the best plan for themselves 
and their families.
    Now our current Medicare program, as all of you know, was 
signed into law by President Lyndon Johnson back in 1965. And 
the model chosen to deliver those health benefits 47 years ago 
was the fee-for-service model, providers do the service and the 
government pays the fees. To control the cost the government 
fixes the price for everything from bed pans to brain surgery. 
Providers now get around the cost gaps by simply doing more 
services, and the program has remained much the same as it has 
for 47 years.
    A former colleague of mine in the U.S. Senate was Harris 
Wofford, a great guy from Pennsylvania. He was a truly 
committed liberal who served with great distinction in the 
Kennedy Administration as well as in the Senate. He argued very 
strongly that American citizens should have access to the same 
quality health care that his or her Member of Congress has. He 
argued that if it was good enough for Members of Congress it 
should be good enough for all Americans. Now, what each of you 
have and your staffs and millions of other Federal employees, 
and myself included as a retired Federal employee, is a health 
plan that does combine the best of what government can do with 
the best of what the private sector can do. The Federal 
Employees Health Benefits Plan, enacted in 1959, required that 
the Federal Government write the regulations that set up the 
program and then pays up to 75 percent of the cost of the 
health benefits. The beneficiary then pays the rest based on a 
formula set by law. Over 350 private health plans are offered 
under the program and 14 or so are fee-for-service and the 
remainder are what is called premium support plans. Premium 
support plans have the government paying the 75 percent, and 
the government approves a group of private plans that employees 
can choose from that are required by our government to deliver 
the services. And all of this is implemented by the Office of 
Personnel Management.
    When I chaired the National Bipartisan Commission on the 
Future of Medicare back in 1998 and 1999 we examined several 
options on how to improve Medicare. No one, Republican or 
Democrat, on that Commission wanted to end the Federal Medicare 
and a strong majority, 10 of the 17, supported a new delivery 
system based on market based premium support system, where for 
most seniors the premium support would be set at about 88 
percent of the standard plan. Unfortunately, the statute 
created at our Commission did not require a majority to report, 
but a supermajority, so our Commission's plan was never 
formally submitted to the President nor to Congress. However, 
what happened next was that then Republican leader Bill Frist 
and I developed complete statutory language, not an outline, 
not just a print, not just talking points, but complete 
statutory legislation and introduced S. 1895, which 
incorporated the fundamental principles of the Medicare 
Commission proposal.
    The core recommendation of our bill was not to end Medicare 
but to rather restructure Medicare, using what each of you have 
today, the FEHB program, as a model.
    Under our bill beneficiaries would be subsidized by the 
Federal Government for participating in any competing private 
or government plan offered under Medicare, including the 
existing fee-for-service program. The contribution amount by 
the Federal Government would be based--this is important--on 
the national average of the premiums for a standard benefit 
package, weighted by plan enrollment and adjusted for risk and 
for geography, not some arbitrary growth rate like GDP. That 
standard benefit package would be all services guaranteed under 
the existing Medicare statute, as part of the legislation. 
Breaux-Frist set the overall Medicare contribution at 88 
percent of the national average cost of that standard benefit 
package. And under our plan the amount of Medicare's 
contribution would be guaranteed. Also, importantly, under our 
plan, for rural areas many of you represent, where competition 
is less likely, beneficiaries would be protected from paying 
premiums that are higher than the current Part B premium.
    And finally we established the Medicare Board, and this 
would oversee competition among private and government 
sponsored fee-for-service plans and would be the equivalent of 
the Office of Personnel Management, which today manages the 
FEHB program. It would exercise its authority by regulation and 
negotiate with the plans. Overall the Commission estimated the 
proposal would reduce the Medicare growth rate by 12 percent.
    One might ask the question, why tamper with Medicare at 
all? Why change the system that has worked well for 47 years? 
Well, I used to drive a 1965 Chevy II. I really loved that car. 
But I would hate to be driving it today, 47 years later, and 
keeping up with the maintenance of that car and I think none of 
you would want to do the same thing. Perhaps a better answer, 
however, to that question of why tinker with it now is a 
statement made by Rick Foster, Chief Actuary for the Medicare 
and Medicaid services, just this past week.
    Mr. Foster said in the 2012 Trustees' Report on Medicare, 
``Without unprecedented changes in health care delivery systems 
and payment mechanisms, the prices paid by Medicare for health 
services are very likely to fall increasingly short of the cost 
of providing these services.''
    Some good news out there now is that in addition to the 
important changes made in the Affordable Health Care Act, 
ObamaCare made to those under 65 in the private insurance 
market through exchanges and other things, it also included 
promising reforms, moving away from traditional fee-for-service 
Medicare but still under the fee-for-service program. Things 
like value-based purchasing and bundle payment systems, where 
CMS will try to realign incentives and reimburse doctors and 
hospitals for the quality of the care they provide and not just 
the quantity.
    Under the Affordable Care Act, CMS has already started 
testing new and innovative payment and delivery programs 
through the CMMI, the Center For Medicare and Medicaid 
Innovation. The goal of all these payment reforms and 
demonstration projects is to improve patient outcomes while 
lowering the cost.
    In the event that we move to a premium support model where 
there is more price competition between fee-for-service and the 
private plans, the whole system is going to be better off if 
these promising fee-for-service Medicare reforms----
    Chairman HERGER. Senator, if you could summarize.
    Mr. BREAUX. I am summarizing, last paragraph. I used to 
stay that all the time, but they would never stop.
    The great challenge today I would just suggest to both my 
Democratic colleagues and my Republican friends and colleagues, 
former colleagues, is how do both political parties bridge the 
gap between the different political philosophies and produce 
health care reform for America's seniors?
    In 1965, a bipartisan Congress said that fee-for-service 
was the best delivery system back then. Let me suggest that in 
2012 the best delivery system was still what is contained in 
the Breaux-Frist proposal.
    If I can be of any help to any of you, please call on me, 
and thank you very much for your attention.
    [The prepared statement of Mr. Breaux follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman HERGER. Thank you, Senator. Ms. Rivlin, you are 
recognized for 5 minutes.

   STATEMENT OF HON. ALICE M. RIVLIN, PH.D., SENIOR FELLOW, 
            ECONOMIC STUDIES, BROOKINGS INSTITUTION

    Ms. RIVLIN. Thank you, Chairman Herger and Ranking Member 
Stark. I am delighted to have the opportunity to testify on 
reforming Medicare through a premium support model. Medicare is 
a hugely successful program that has dramatically increased the 
availability of health care to seniors, increased the length 
and quality of life of older Americans, and greatly reduced 
their fear of being unable to afford care when they need it. We 
need to preserve Medicare's guarantee of affordable health care 
for older and disabled people and make sure the program is 
sustainable as the number of beneficiaries explode and upward 
pressure on health care costs continues.
    Medicare reform is not just about Medicare. Medicare plays 
a crucial role in two of the most daunting challenges facing 
American policymakers, the relentless increase and the 
proportion of the total spending that Americans collectively 
devote to health care and the unsustainable projected increase 
in publicly held Federal debt. Medicare reform represents an 
opportunity to turn this large publicly funded program into the 
leader in increasing efficiency of health care delivery for all 
Americans.
    I believe that a well crafted, bipartisan bill that 
introduces a premium support model while preserving traditional 
Medicare can help achieve these goals. I will focus my remarks 
on the plan that former Senator Pete Domenici and I devised at 
the Bipartisan Policy Center, but it is very similar to the 
plan offered by Chairman Paul Ryan and Senator Ron Wyden.
    Our proposal would preserve traditional Medicare as the 
default option for all seniors permanently. It would also offer 
seniors the opportunity to choose among comprehensive private 
health plans offered on a regulated exchange. These plans would 
be required to cover benefits with at least the same actuarial 
value as traditional Medicare and would have to accept all 
applicants and would receive a risk adjusted annual payment 
based on the age and health status of their beneficiaries.
    The regional exchanges would collect and manage the prices 
and terms of competing plans within a designated region. And 
those plans would include traditional fee-for-service Medicare 
as well as qualified private plans. The government's 
contribution would be set by the second lowest plan in the 
region, subject to their having sufficient capacity.
    With more accessible information about cost and patient 
outcomes, cost conscious consumer choice will lead the 
providers to emphasize preventive measures, managed care 
coordination of people with multiple chronic diseases and adopt 
more cost effective approaches to the delivery of care.
    However, we don't know in advance what consumer driven 
competition will do. So we have introduced as a fail-safe, 
which we doubt will be necessary, a cap on per enrollee 
government premium contribution over time at the rate of growth 
per capita GDP plus 1 percent.
    There are lots of questions about how well this would work. 
One is can't Medicare beneficiaries already choose among 
private plans under Medicare Advantage? They can and a quarter 
of them do, but Medicare Advantage wasn't properly structured 
to give full competition among plans. And our plan we think 
would structure the competition so that it actually lowered the 
rate of growth of cost.
    And people question whether there is evidence that 
competition leads to lower cost and better quality. Actually 
despite its perverse features Medicare Advantage provides 
considerable evidence that competition works. The impression 
that it is more expensive derives from the fact that Medicare 
often pays plans more than the cost of fee-for-service. But 
under our plan that would not be possible and the competition 
we think would hold plans down.
    Finally, would older and sicker seniors end up in 
traditional Medicare and raise its costs? This fear is based on 
the assumption that risk adjustment can't work and rules 
against cherry picking will not be enforced. But in fact we 
believe that these rules can work, that they are working better 
in Medicare Advantage than they used to and will work still 
better under a new system.
    We believe that health care policy is far too important to 
be driven by a single party's ideology. No matter how the 2012 
election turns out the President and congressional leadership 
should strive to find common ground on how to cover the 
uninsured, how to reform Medicare and Medicaid while 
stabilizing the debt. We believe that our plan contributes to 
that end.
    Thank you very much for giving me the opportunity.
    [The prepared statement of Ms. Rivlin follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman HERGER. Thank you very much. Mr. Antos, you are 
recognized for 5 minutes.

  STATEMENT OF HON. JOSEPH R. ANTOS, PH.D., WILSON H. TAYLOR 
    SCHOLAR IN HEALTH CARE AND RETIREMENT POLICY, AMERICAN 
                      ENTERPRISE INSTITUTE

    Mr. ANTOS. Thank you very much, Chairman Herger and Ranking 
Member Stark.
    Medicare is a vitally important program but it is living on 
borrowed time. Medicare's Part A trust fund will be depleted in 
2024, as you said, and the program faces $27 trillion in 
unfunded liabilities over the next 75 years. With retirement of 
76 million Baby Boomers over the next 2 decade the program will 
consume an ever increasing share of the Federal budget unless 
policies are adopted to bend the Medicare's cost curve. Reform 
based on a principle premium support can responsibly slow the 
growth of Medicare spending and help set this country on a 
sustainable fiscal path. Such a reform relies on market 
competition among health plans to achieve high quality coverage 
at low cost. That is essential if we are to protect the 
Medicare program for future beneficiaries.
    I will address four points about the design of a premium 
support reform.
    First, should traditional Medicare be offered as a 
competing plan option under premium support? I think that is 
the most reasonable course. Perhaps as many as 57 million 
beneficiaries will be enrolled in traditional Medicare 10 years 
from now which is when most proposals will start competition 
under premium support. Traditional Medicare will not disappear 
when premium support begins, even if we do not allow any new 
enrollment. Moreover, traditional Medicare is likely to retain 
a stronghold in rural areas and other markets that are 
dominated by a few providers. For that reason we must find ways 
to reduce unnecessary spending in traditional Medicare in the 
near term as well as after premium support is in place.
    Premium support does not need to exclude traditional 
Medicare. Premium support lets consumers decide for themselves 
which plan provides the best value and gives them a clear 
financial stake in that decision.
    Second, will premium support shift huge new costs to 
Medicare beneficiaries? Let's be clear, the Affordable Care Act 
already shifts costs to beneficiaries. The law imposes 
unprecedented cuts in provider pay rates to generate $850 
billion in Medicare savings over the next decade. According to 
the Medicare actuary, these payment reductions mean that 15 
percent of hospitals and other party providers would lose money 
on their Medicare patients by 2019. That figure rises to 25 
percent in 2030. Large across the board cuts in provider 
payments without changing incentives threaten access to care, 
and that is a real cost to patients that is not reflected in 
higher premiums.
    In contract premium support changes the incentives that 
have driven up Medicare spending. Plans that hope to increase 
their profit margin need to seek more efficient ways to deliver 
necessary care rather than adding another test or procedure. 
There is plenty of room to improve efficiency in health care, 
and plans that ignore opportunities to cut costs will lose 
market share and see their bottom line shrink.
    There is also the market test in premium support. If 
private plans fail to offer a good product at a good price, 
beneficiaries will move to traditional Medicare which remains 
an option. This is an important safety valve that ensures 
seniors will be protected.
    Third, what index should be used to limit the growth of 
Medicare subsidy? An index that ties Medicare spending growth 
to the economy, provides some budget discipline and helps with 
the CBO score, but let's not fool ourselves into thinking that 
the spending target is what produces the reductions in the cost 
of care. Efficiency and innovation in health care, in health 
care delivery determine whether Medicare savings can be 
sustained in the long term.
    Finally, what other reforms are needed? We obviously needed 
modernized Medicare, we need to make the program fairer, we 
need to reduce unnecessary spending. That means we need better 
information, clearer financial incentives and a reformed 
subsidy structure that reinforces rather than undercuts efforts 
to slow spending.
    In my written statement I list a number of reforms. There 
are many that need to be done. Certainly reforming the 
confusing structure of traditional Medicare's cost sharing to 
make it more clear to people what they are paying would be a 
good first step in giving people good information about their 
health plans so that they can make good choices is absolutely 
vital.
    So in conclusion, there is broad agreement that we need to 
bend the Medicare cost curve. The argument is only over how to 
do it. Premium support is not an academic theory, it has been 
effective in lowering cost and enhancing value in the Federal 
Employees Health Benefits Program for the past 5 decades and in 
CalPERS since the nineties. A well design premium support 
program can take full advantage of market competition to drive 
out unnecessary spending and increase Medicare's value to 
beneficiaries. It is about time we tried it, and I think we can 
find bipartisan agreement about moving forward.
    Thank you.
    [The prepared statement of Mr. Antos follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman HERGER. Thank you, Mr. Antos. Mr. Aaron is 
recognized for 5 minutes.

    STATEMENT OF HON. HENRY J. AARON, PH.D., SENIOR FELLOW, 
            ECONOMIC STUDIES, BROOKINGS INSTITUTION

    Mr. AARON. Thank you, Mr. Herger and Ranking Member Stark. 
Also special greetings to Congressman Price, with whom I have 
had the privilege of working in the past.
    You have my written statement and I understand it is going 
to be entered into the record. I would like to begin with what 
I think is the central issue that divides those of us who are 
opposed to the premium support idea from those who are in favor 
of it.
    I think all of us recognize that there are reforms to the 
existing Medicare program that could improve its operation. All 
of us would like to see cost competition play an enhanced role. 
All of us would like to see delivery system reforms that result 
in better quality and lower costs. And we hope they will work, 
but maybe they won't. If they don't, who bears the risk of 
costs rising faster than projections?
    Under traditional Medicare those risks are pooled broadly 
across the population and over time across all Americans. Under 
premium support those risks are shouldered by Medicare 
beneficiaries who will be faced with higher out-of-pocket costs 
themselves. That is the choice I believe, the fundamental 
choice that needs to be made in determining a position on this 
issue.
    Now some years ago Bob Reischauer and I, as you noted, 
coined this term ``premium support'' and we did so with respect 
to a particular plan, which was more than vouchers, and 
actually incorporated one of the features that Senator Breaux 
mentioned just now, that the index to which benefits are tied 
should be a health index not an economic index. And I would 
note that none of the proposals now under discussion meets 
Senator Breaux's standard in that respect.
    In the 17 years since Bob Reischauer and I put this idea 
forward, I have changed my mind and I would like to just list a 
few of the reasons why I have changed my mind and I think I 
would urge you to consider them as well.
    The whole environment of health care policy has been 
transformed. We wrote in the wake of the failure of the Clinton 
health reform effort and at a time when projections of 
insolvency of the Medicare Trust Fund were becoming steadily 
worse and were very near term. Both of those elements has 
changed. And in particular the passage of the Affordable Care 
Act means we have put in place a key element of the premium 
support idea for the rest of the population; namely, health 
insurance exchanges. We are finding those are difficult to 
implement. They are politically controversial. I think they 
will succeed and those problems are solvable.
    The Medicare population is vastly more difficult to deal 
with than the population served under the Affordable Care Act. 
We should prove that the Medicare--that the health insurance 
exchanges work, get them up and running before we take 
seriously, in my view, calls to put the Medicare population 
through a similar system.
    The regulatory climate has changed. It is far more hostile 
to the kinds of regulatory interventions, pretty aggressive 
regulatory interventions that Bob Reischauer and I thought were 
essential to the functioning of a premium support plan.
    We at the time said that no premium support plan should 
move forward until risk adjustment was good enough to 
discourage competition based on risk selection. At the time, 
like Alice, we thought oh, well, it is doable, some time it 
will happen. Alas, it hasn't happened yet. A recent study has 
shown that the risk adjustment algorithm used under Medicare 
Advantage actually has increased the degree of risk selection 
that occurs through Medicare Advantage. We are not there yet. 
When we are, that would be the time to consider whether premium 
support merits consideration.
    And finally, the idea that competition is going to save 
money, as an economist I really want to believe that. I got my 
degrees in that and I was pledged to like markets, I really do. 
The evidence to date is not encouraging. The higher costs of 
Medicare Advantage are not attributable solely to the extra 
payments that are made to them, nor is it attributable to a 
selection of patients. After controlling for all of those 
factors, Medicare Advantage plans are more expensive than is 
traditional Medicare. Furthermore, even Part D drug benefits 
which have come in below cost have come in below cost by less 
than other drug spending outside of the Medicare system has 
come in below the projections that were made at about the same 
time.
    So I want to believe that competition will work and save 
money. The evidence is not supportive at this time. And given 
the risks involved it seems to me important to continue to 
spread the risks from rapid growth of health care spending 
across the general population rather than to impose them on a 
very vulnerable group of people, the elderly and people with 
disabilities.
    Thank you.
    [The prepared statement of Mr. Aaron follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman HERGER. Thank you, Mr. Aaron.
    Senator Breaux, I think it is important to get this out of 
the way right at the beginning of this hearing. Do you think 
premium support will ``end Medicare'' as we know it as some 
have claimed?
    Mr. BREAUX. I think the whole debate politically about 
ending Medicare as we know it, I think we want to change 
Medicare. We want to keep Medicare. I think we want to improve 
the delivery system. I think everybody is committed to having 
the Federal Government provide adequate quality health care for 
our Nation's seniors. But we don't have to do it under a 
delivery system that was formed in 1965. Just like my Chevy II, 
things have changed, things have improved, so our 
recommendation is that we keep Medicare of course, it is a 
great program, but change the way it is delivered to our 
Nation's seniors so they get a better deal, a better product at 
a better price.
    Chairman HERGER. So then you would say that premium support 
does have the potential to improve the Medicare program and 
shore up its long-term finances by harnessing private sector 
innovations?
    Mr. BREAUX. My answer would be yes, but you don't have to 
take my word for it. Look at the things we have done in the 
areas where we implemented premium support. Medicare Part B is 
a classic premium support system. The government helps pay for 
it, and they help set it up with the private sector competing 
for the right to deliver the product. Let me suggest it is a 
program that is more popular today than the Congress that wrote 
it, and I include myself in that group because I was there. The 
seniors love it.
    Second, the second example is even better, every one of us 
up there and me have a premium support Federal Employees Health 
Benefits Plan, that is a classic premium support. People can 
choose from, they can continue fee-for-service if you want to 
stay there, but the Federal Government sets up a premium 
support. We have the Office of Personnel Management 
guaranteeing that everybody that participates can deliver the 
product and negotiate for the price. That combines the best of 
what government can do with the best of what the private sector 
can do. So don't take my word, look at the two times we were 
able do this, and I would think you would agree it works very 
well.
    Chairman HERGER. Mr. Antos, I think it is important for all 
of us to focus on what the Medicare program is facing today. 
The Medicare trustees released their 2012 report just this 
week. When do you expect the Medicare hospital insurance trust 
fund to go bankrupt?
    Mr. ANTOS. Well, I rely on the trustees, who are the 
Secretaries of Treasury, Labor, HHS and two public trustees, 
and they rely on Mr. Foster, who is the Chief Actuary. If 
current law is actually implemented, which means major cuts in 
payments to hospitals and other Part A providers, then their 
projection is that the Part A trust fund will run short of 
funds by 2024. However, under other assumptions it would be 
much earlier than that. And in fact under the so-called high 
cost assumption that the trustees also present, it is 2016.
    Chairman HERGER. So even with the projections that we were 
to make these major cuts, which most dealt very much we would 
make to hospital, what with the bankruptcy--you say 2024, what 
was the bankruptcy date in last year's Trustees' Report?
    Mr. ANTOS. 2024. So some people say that we've held our 
ground. Another way to look at it is we are 1 year closer.
    Chairman HERGER. In other words, we are 1 year closer, as 
you mentioned, to this looming, addressing this looming 
problem.
    The trustees stated that Congress and the executive branch 
``must work closely together with a sense of urgency.'' In 
other words, now is the time to address significant reform of 
the Medicare program.
    Do you agree with this assessment?
    Mr. ANTOS. Yes, sir, it is absolutely vital.
    Chairman HERGER. Ms. Rivlin, the plan you worked on with 
Senator Domenici is similar to the 2013 House passed budget as 
private plans that compete against traditional fee-for-service 
Medicare.
    Can you please explain how this competition will control 
costs, not only for the beneficiaries enrolled in the private 
plans but also for traditional Medicare?
    Ms. RIVLIN. Yes. On a structured exchange where you can 
really see, where the consumer can really see what the choices 
are, the plans that participate would offer their wares and 
they would have to agree to take everybody who wanted to join 
their plan and to give actuarially equivalent benefits to fee-
for-service Medicare and they would be competing directly with 
fee-for-service Medicare. There are lots of new innovations in 
how you treat people, including people with chronic diseases 
and there is evidence that plans can offer better services and 
bring down the cost of treating Medicare beneficiaries. We 
believe that would happen and that through the bidding process 
the cost of the plans would maybe not come down, but not 
increase as rapidly as they otherwise would. And that fact that 
the government contribution would be slowed would be of benefit 
to everybody, including those in fee-for-service Medicare.
    Chairman HERGER. In other words, quality could be higher, 
service could be higher, but the cost could be more?
    Ms. RIVLIN. Yes, we think that would be true. Fee-for-
service Medicare would compete and would probably get better 
over time because otherwise people would leave it. But there is 
a lot of evidence that fee-for-service doesn't coordinate care 
very well. I am a Medicare beneficiary. I watch this happening 
and the coordination among providers is terrible. If you are 
looking at comprehensive capitated plans, whose responsibility 
is to take care of everybody in that plan, you are likely to 
get better results.
    Chairman HERGER. Thank you very much. Mr. Stark is now 
recognized for 5 minutes.
    Mr. STARK. Thank you, Mr. Chairman. Mr. Aaron, would the 
Medicare Trust Fund become insolvent sooner under the 
Republican plan to repeal ACA?
    Mr. AARON. The ACA contained many provisions that extend 
the life of the Medicare Trust Fund. It was a major improvement 
in the financial status. There can be--is grounds for 
legitimate debate about whether every element of the ACA is 
going to be enforced down the road, but there are additional 
revenues and a host of payment reforms that are designed to 
lower cost with scorable savings and others that while not 
scored by CBO contain virtually every idea for payment reform 
that analysts have come up with.
    Mr. STARK. I have a letter from CMS that indicates that 
without the ACA the trust fund would expire 8 years earlier, 
and I would ask the chairman to make that letter a part of the 
record.
    Chairman HERGER. Without objection.
    [The letter from CMS follows: The Honorable Pete Stark]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. STARK. If we had vouchers, or whatever you want to call 
premium support things, the Medicare would stop being a defined 
benefit plan and become a defined contribution plan, would it 
not?
    Mr. AARON. That is exactly what I meant in my opening 
comment about who bears the risk if costs rise more than are 
anticipated.
    Could I inject one comment which I think is important?
    Mr. STARK. Please.
    Mr. AARON. The statement has been made a couple of times 
that Medicare is the same as it was 47 years ago, that just 
isn't true.
    Mr. STARK. You are right, I remember the change.
    Mr. AARON. It has evolved in a number of very important 
ways. It has pioneered in payment reform with the DRG system 
with respect to payment. And as various people have noted, it 
does contain in one form or another, we may like it or not, the 
options for individuals to choose among a large number of 
competing private plans.
    Mr. STARK. I have always suspected it was Republicans, but 
you know these guys who march outside with the billboards over 
them saying the world's going to come to an end. They have now 
crossed that out and say that Medicare is going to come to an 
end in 2024 or whatever--12 years. I can remember when those 
signs said it was going to end in 1 year. And I can remember 
years when the trustees report said we had 20 years.
    But the fact is that to change the existing--the life of 
Medicare costs relatively so little to the population at large, 
I believe that the figure to extend the solvency of Medicare 
beyond the 75-year target that people have talked about would 
cost less than say a 3 percent total increase in the premiums 
or lifting the cap or doing a host of those types of things, so 
that it hardly seems unless you so strenuously object to 
anything that sounds like a tax or a fee, which many of my 
colleagues do, but if you are willing to ask the public who 
will benefit from this plan to pay a reasonable amount over 
their lifetime, I see no reason that it can't be extended 
forever without hurting job growth or putting the country 
further into deficit. Does that make sense to you?
    Mr. AARON. Yes, it does, but I would modify it in one 
direction. I haven't a clue what is going to happen in the 
health care world in 50 or 75 years. What is science going to 
produce, what will be the impact on longevity? In my view, 
trying to look 50 or even 75 years ahead, with respect to 
health care, pensions are different, with respect to health 
care in my view is a fool's game. And it was a bad day when the 
actuaries were required to look 75 years ahead in the case of 
health care. Look 25 years ahead, that is quite a long time and 
there is a lot of uncertainty within that. Over that period you 
could close the Part A trust fund gap with an increase in 
payroll taxes of .35 percent each on workers and employers, or 
more cost sharing on some Medicare beneficiaries, or additional 
payment cuts through what we would hope backed up by 
improvements in delivery, which is one of the goals of the 
Affordable Care Act.
    So I think the idea that Medicare is standing on the brink 
of a dangerous precipice for as far ahead as it is reasonable 
to look is simply incorrect.
    Mr. STARK. Thank you. The 75-year target doesn't bother me 
much, but I will come back and ask Mr. Herger, he will find out 
what it is like. Thank you, Mr. Chair.
    Chairman HERGER. Well, I would agree to a degree we have a 
tough time estimating what is going to happen next year, let 
alone 5 years, 25, 75 years, but one thing we do know, 10,000 
Baby Boomers are now going on Medicare every day and that is 
something we are aware of. And again we have to hopefully in a 
bipartisan way work together to solve this so it does remain 
stable for our children and our grandchildren.
    With that, Mr. Ryan is recognized.
    Mr. RYAN. Thank you, Mr. Chairman. You know, I hesitate to 
say this, but, Dr. Rivlin I think I agreed with everything you 
said in your opening statement. And the reason I hesitate is 
every time I say something nice about a Democrat it gets them 
in trouble, they get viciously attacked. So in light of Mr. 
Stark's opening statement and comments, I am considering making 
really nice comments about you. See if I can direct it over 
from Alice to you. So I will be working on that.
    Look, there seems to be this attempt to undermine premium 
support and how it came to be. Let's remember that it started 
as a Democratic idea. We have the grandfather of the original 
idea here, the author in Congress of its last iteration here. 
And so there is clearly room for the two parties to talk to 
each other about this issue. If we could just calm down a 
little bit, we might be able to save this program.
    Recently I worked with Ron Wyden. I know that is a name. I 
probably got him in trouble right there saying that.
    Here is what Ron Wyden tells me--first of all I think if we 
want real lasting Medicare reform in my judgment it does have 
to be bipartisan. So here is what a Democrat, Ron Wyden, tells 
me: Democrats can't support a proposal that does not have an 
ironclad Medicare guarantee. It must maintain traditional fee-
for-service as a viable option. It needs to guarantee 
affordability for the Medicare consumer and protect the low-
income. It must have strongest consumer protections for seniors 
and aggressive risk adjustment to protect the marketplace.
    So this is what a Democrat in good standing and Member of 
the Finance and Budget Committee in the Senate tells me are 
sort of the essential principles for premium support to move 
forward.
    That seems hardly irrational to me. That, to me, strikes me 
as these are ideas we should talk about with each other and 
there is plenty of room for conversation with one another, and 
we ought to have that conversation. So I think we need to put 
this in perspective.
    This is a program that is going bankrupt. We have the 
actuary come here all the time, whether it is the Budget 
Committee or the Ways and Means Committee, telling us providers 
are going to leave the system, they are going to stop seeing 
Medicare beneficiaries, the trust fund is going bankrupt. All 
those things are known to us now, and it is just so much 
smarter given that 10,000 are retiring every single day to get 
ahead of this problem and prepare the program so that it can be 
a guarantee that is not only there for today's seniors, but for 
tomorrow's seniors.
    There is one thing, Dr. Rivlin, that you convinced me of 
from all our conversations over the years on this, that we 
modified our plan for this, and that is competitive bidding. It 
seems to me a far smarter way to set the rate system. Give me a 
quick synopsis of why competitive bidding is superior, what are 
the attributes to it, and how you propose to set it up, the 
second lowest plan bid and the like?
    Ms. RIVLIN. Yes. I think competitive bidding among plans, 
including fee-for-service Medicare, in a regional exchange, and 
by ``regional,'' we mean a metropolitan area or a large rural 
area, how this would work is the plans would offer their plan 
and bid on the opportunity to serve Medicare beneficiaries with 
the same benefits. And the second lowest bid would determine 
the government contribution. If you chose the lowest bid plan, 
you would get the money back. If you wanted to go higher up the 
scale, you could. You could choose a more inefficient plan or 
one that offered additional benefits for higher cost.
    But most people would look at how can I get these benefits 
at a cost that I can afford. And the government contribution at 
the second lowest bid would then mean if you are in fee-for-
service Medicare, you would have the option, if that plan was 
higher, of moving to one that cost you less and getting the 
same benefits.
    There would be parts of the country where the fee-for-
service plan might be the best plan and you could stay there, 
or other people in other plans could move there. But it seems 
like a good bet for offering seniors comprehensive services at 
the best possible price.
    Mr. BREAUX. Can I add something just really quick to that, 
Congressman Ryan. And that is the point that in some rural 
areas you may not have competition, so you have to take steps 
to protect rural areas where there may not be any competition. 
And we did that in Breaux-Frist by saying that no beneficiary 
would have to pay more than the current Part B premium for his 
standard plan. So you can take care of those areas where there 
may not be sufficient competition to really create a 
competitive model.
    Mr. RYAN. Five minutes goes fast. Thank you.
    Chairman HERGER. Thank you. Mr. Gerlach is recognized for 5 
minutes.
    Mr. GERLACH. Thank you, Mr. Chairman.
    Dr. Rivlin, looking at your testimony and specifically 
quoting you to say I believe a well-crafted bipartisan bill 
that introduces a premium support model while preserving 
traditional Medicare can help achieve these goals, and then you 
go on to say that the Domenici-Rivlin proposal is very similar 
to the bipartisan proposal presented by Chairman Paul Ryan and 
Senator Ron Wyden in December of 2011.
    So as a result of that testimony, I would take it then you 
consider the Ryan-Wyden plan to be a premium support plan, is 
that correct?
    Ms. RIVLIN. Yes, I do.
    Mr. GERLACH. Okay. And since the Ryan-Wyden plan was 
incorporated into the House Republican budget and passed a few 
months ago, therefore that plan as passed by the House is a 
premium support plan, is that correct?
    Ms. RIVLIN. Yes. I think there are some differences between 
the plan put in the budget. A budget resolution is just a 
budget resolution. It isn't a draft of a Medicare law.
    Mr. GERLACH. Correct.
    Ms. RIVLIN. So it is a bit elliptical. And I would stick 
with my statement that I support Ryan-Wyden.
    Mr. GERLACH. As I think of the word ``voucher,'' I think of 
a situation where government would provide a payment to a 
private citizen, either cash or some sort of check form of 
payment, and that citizen would take that and then purchase a 
product or a service with that money received from the 
government. Is that a typical or rational definition of what a 
voucher is?
    Ms. RIVLIN. That is what a voucher means to me, and premium 
support as we define it is definitely not a voucher. You don't 
get a check from the government, you get a choice among plans 
and the plan gets a risk-adjusted payment, a payment that 
reflects your age and health condition. And you don't even know 
what that is as the individual bidder, as the individual 
beneficiary. That is between the government and the plan.
    Mr. GERLACH. So the Domenici-Rivlin proposal was not a 
voucher program, correct?
    Ms. RIVLIN. No, it was not a voucher program.
    Mr. GERLACH. And the Ryan-Wyden proposal was not a voucher 
program.
    Ms. RIVLIN. Not as I understand those terms. No.
    Mr. GERLACH. Thank you so much. I yield back.
    Chairman HERGER. Thank you. Mr. Thompson is recognized.
    Mr. THOMPSON. Thank you, Mr. Chairman, and thanks to all 
the witnesses for being here.
    I am a little heartened actually. There seems to be a lot 
of agreement. Everybody agrees we need to fix Medicare, we need 
to make it work, and so that is the best news I have heard on 
this topic for a long time.
    I would submit, Mr. Chairman, that it might be helpful as 
we are looking at this if we had a plan in front of us. We have 
heard a lot of criticism about Mr. Ryan's plan. We have heard 
criticism about the Ryan-Wyden plan. We have heard those who 
are proponents of that suggesting that maybe it is not what the 
critics say it is. It would be good if we had a plan. We could 
actually see the details of that plan and be able to get down 
in the weeds and look at it. Until that happens, we are just 
going to maybe be spinning our wheels.
    But I do know a couple things for sure. I know that as I 
travel my seven county district, that includes both rural 
areas, Senator Breaux, as well as urban areas, I hear a lot 
from the people that I represent about Medicare and what they 
think about Medicare. And I hear them tell stories juxtaposing 
the Medicare they have today vis-a-vis what their parents or 
grandparents had, and it is clear, and I hear it all the time, 
they like what they have now with Medicare. They like that.
    Now, I hear criticism of Medicare. I hear people say don't 
cut my benefits, and I also hear people say keep your 
government hands off my Medicare, which is one that I always 
kind of chuckle at, because I guess everyone hadn't gotten the 
memo yet that Medicare is, in fact, a government program. But I 
have never heard anybody say please, please, go to a voucher 
system, do away with my defined benefit program. And I don't 
think I am in the minority there. The Kaiser Family Foundation 
did polling on this, and I think 70 percent of the people agree 
with that.
    I think we really need to keep in perspective the fact that 
providing health care to seniors and to people with 
disabilities isn't a huge money maker. It is not a huge money 
maker. And I think that it is important that we note, and I am 
glad that Mr. Antos pointed out the fact that he puts great 
belief and credit in what the trustees say. I want to reiterate 
what Mr. Stark said. The trustees just said that accountable 
CARE Act lengthens the life of Medicare by 8 years, and the CBO 
has said that if we put in place my friend Paul Ryan's 
proposal, they project that the total health care spending 
would grow faster under that proposal and for the typical 65-
year-old, there would be an increased cost between 50 and 66 
percent.
    Mr. Aaron, could you comment on the effects to society of 
health care spending growing that fast and what would it do to 
the, not only health care, but to the greater economy?
    Mr. AARON. I don't think there is a lot of difference among 
the four witnesses on the fact that rising health care costs 
are a problem in this country. They squeeze public budgets, 
they squeeze private compensation. For that reason, systemic 
health care reform is the key to moving ahead. I think there is 
a serious risk of trying to screw down on the costs of just one 
element, even a large and significant element such as Medicare, 
while not attending to the rest of the health care system.
    For that reason, I think that the key now, the most 
important thing to do now is to move ahead with systemic health 
care reform. The law of the land is the Affordable Care Act. 
Nobody I think regards that law as perfect in every way. We are 
going to learn new things as it is implemented and we will 
probably change it down the road.
    But the first job is to make, to the best of our ability, 
to make that system work. To the extent that we do that, we 
then should, in my view, be open minded and willing to come 
back in future years and consider whether changes such as the 
ones that are being proposed here today should be enacted and 
implemented. But I think now is not the time to do that.
    Mr. THOMPSON. Thank you. My time is expired. I yield back.
    Chairman HERGER. I thank the gentleman, and I just would 
like to emphasize that as our witnesses pointed out, the trust 
fund is going bankrupt in 2024. The trustees indicated it was 
going bankrupt in 2024 last year. That means we have 1 year 
less than we did a year ago. So this is something the sooner we 
begin on a bipartisan manner working on this, and not using 
hopefully scare terms like ``voucher.'' I don't know of anyone 
except a few people on the other side that are using that term. 
The purpose of this hearing is to talk about premium support, 
which is a bipartisan suggestion on how we might be able to fix 
the system and preserve it. So I would just like to make that 
point.
    With that, Dr. Price is recognized.
    Mr. PRICE. Thank you, Mr. Chairman, and I want to commend 
the chairman for holding this hearing, and I want to also 
recognize and commend the chairman of the Budget Committee, Mr. 
Ryan, for his work within our conference in educating people 
about the need for reform, but also the positive nature of 
premium support.
    I also want to thank each of the panelists. You all have 
put really a life's work into many things, but not the least of 
which is positive suggestions and reforms for our health care 
system. As a physician, I can tell you that folks are hurting 
out there, not just patients and not just doctors. There are 
real challenges in the current system that we have.
    By way of clarification and to make certain that folks 
understand that our proposal is a guaranteed proposal for 
seniors, it is stated in all of the communication that we have. 
It is also stated in the legislative language. It is a 
guarantee. So seniors need to appreciate that what we are 
trying to do is save and strengthen and improve Medicare in a 
positive way.
    There has been some talk about what is Medicare going to 
look like in 25 years, in 75 years, what the finances are going 
to be. I want to share with you just what the current system 
looks like out there in the real world.
    The status quo is clearly unacceptable. There are new 
Medicare patients. We talk about 10,000 folks reaching 
retirement age or getting on Medicare every single day. If you 
are in a community and you are currently a non-Medicare patient 
reaching Medicare age tomorrow, and you are currently being 
seen by a physician who does not see Medicare patients, the 
challenge that you have in finding a doctor to see you as a 
Medicare patient is huge. The difficulty of new Medicare 
patients to find a physician seeing new Medicare patients is 
massive.
    The physicians out there are going crazy with this current 
system. It doesn't make any sense at all, and it is more and 
more onerous, more and more difficult to be able to just care 
for patients. One out of every three physicians in this country 
limits the number of Medicare patients that they see. One out 
of every eight physicians in this country sees no Medicare 
patients at all. That is not a system that works. So we need to 
find a positive solution, which is what we have been trying to 
put forward on our side of the aisle.
    Ms. Rivlin, I was encouraged by the tenor of your testimony 
and commend you for the work that you have done in the area of 
premium support. You mentioned that your proposal differs some 
from the Ryan-Wyden proposal, and when I got to that area of 
your testimony, which wasn't in your spoken testimony but was 
in your written testimony, one of the areas that you differ 
with the Ryan-Wyden proposal is that you believe we can move to 
a premium support system for seniors sooner than is in our 
proposal. Is that correct?
    Ms. RIVLIN. That is correct.
    Mr. PRICE. And would you expand on that? Our concern was 
that if we didn't what we call grandfather the grandfathers, 
that we would not only take political heat, but the challenge 
of moving in that direction that quickly would be too great. 
Please help me understand why you think we can move there 
sooner?
    Ms. RIVLIN. Because we preserve traditional fee-for-service 
Medicare as the default option. I mean, it does grandfather 
anybody who is in it, and it is a permanent option. If you 
reach that age you are in it, unless you opt into something 
else. And we believe that the changes that would take place in 
the competitive bidding are substantial challenges, but they 
could be met by, say, 2018. We will have some experience in 
setting up exchanges under the Affordable Care Act by then, and 
there is no reason not to start sooner and let everybody have a 
choice.
    You can view this as an improvement on Medicare Advantage 
that makes the competitive bidding--introduces competitive 
bidding and makes Medicare Advantage more accessible and 
better, and if you do it that way, it is not such a big deal.
    Mr. PRICE. I want to thank you for that. And we will go 
back and scrub our numbers, but I want to thank you for what 
hopefully will be the genesis of a new found bipartisan 
opportunity to move forward and save and strengthen and improve 
Medicare by providing for those choices, but guaranteeing that 
seniors have the option of remaining on the current Medicare.
    Thank you, Mr. Chairman.
    Mr. STARK. Would the gentleman yield? I happen to be a fan 
of his bill to get rid of this idea that if a physician doesn't 
take Medicare, they are out of the system for 2 years. I join 
with him in trying to see that we get that changed, because 
that doesn't help anybody. You are to be credited for seeing 
that and trying to change it. Thank you very much.
    Mr. PRICE. Thank you, Mr. Stark. I may fall into the 
category of Mr. Ryan, though. If I start saying nice things 
about you, we may all be in trouble. Thank you very much.
    Chairman HERGER. Mr. Kind is recognized.
    Mr. KIND. Thank you, Mr. Chairman, and thank you for 
holding this hearing. And I want to thank the witnesses for 
your testimony here today.
    Senator Breaux, this is always a delight to hear you and 
your comments. But just for the record, I still have a '68 
Chevy Malibu convertible that I love to drive around. And it is 
one of those cars where you can get under the hood and do your 
own tune-up and oil changes, and you don't have to be a 
computer whiz to do it. And my guess is that if you asked the 
typical senior in Medicare, they feel kind of comfortable with 
the Medicare system right now, and they think it is essential 
to the quality of their life. They want to see improvements 
made, but they also don't want to see it decimated.
    I am one of those dwindling breeds here apparently in 
Congress these days, a moderate, centrist Member of Congress 
trying to find different pathways forward, hopefully in a 
bipartisan fashion, to address the challenges of our time, and 
I can't think of a bigger challenge than the dysfunctional 
health care system and the impact it is having not only on 
people's lives, but on our budget and our national finances.
    I have been encouraged listening to a lot of your testimony 
because there appears to be a lot of agreement on the panel 
today that a lot of the tools that we put in place in the 
Affordable Care Act need time to move forward. Delivery system 
reform, so we get better integrated, coordinated care leading 
to better outcomes; payment reform so it is value-based, not 
volume-based.
    In a lot of respects, this hearing and this discussion we 
are having is premature, and Mr. Aaron and I agree. I think the 
Affordable Care Act needs a chance to move forward to see if 
this stuff works before you can actually have a serious 
conversation about a voucher or a premium support plan, and who 
ultimately is going to bear that risk.
    But I have always been interested in just three things when 
it comes to health care reform: Better quality of care for a 
better bang for the buck, and making sure that all Americans 
have access to that type of care in this country. And how we 
get there is something that we have to continue to talk about.
    But one of my concerns with the Republican budget proposal 
and their voucher or premium proposal is the risk in and who is 
going to bear it. But a bit of a parochial concern that I have 
from the State of Wisconsin, we have traditionally historically 
been one of the lowest Medicare reimbursement States in the 
entire Nation. We share that with the Pacific Northwest and 
some other regions. And under their proposal, apparently the 
rates will get locked in at the lower of either the current 
fee-for-service reimbursement rate, or the second lowest plan 
in that region, which would guarantee in Wisconsin that our 
providers are locked in at the lowest Medicare reimbursement 
rate, which they are struggling to live under today, which 
tells me that they are going to have to continue to cost shift 
the inadequacy of Medicare reimbursements on to the backs of 
businesses large and small, on to the backs of private health 
care plans.
    Mr. RYAN. Will the gentleman yield?
    Mr. KIND. In a second, so I can make my point.
    This will not only continue the death spiral that our 
health care providers are experiencing in the State of 
Wisconsin, but the death spiral that businesses in Wisconsin 
are facing with rising health care costs because of the cost 
shifting that is currently impacting them, making it harder for 
them to compete, not only at home, but globally. And it does 
not make sense that we go down this road, not until at least we 
find out whether delivery system reform and payment reforms 
actually have a chance of working.
    I have tried in my way to work in a bipartisan fashion in 
this Committee. Mr. Aaron, you pointed out that it is crucial 
that these exchanges have a chance to move forward and show 
whether or not they are viable or not. I have been the author 
in previous years of the SHOP Act, which was the basis for 
these health insurance exchanges, and every year I introduced 
that proposal, I had an equal number of Republicans and 
Democrats on that bill. We put it in the Affordable Care Act 
and my Republican colleagues ran for the hills.
    I was one of the authors with Mr. Blumenauer on reimbursing 
our health care providers for counseling on advance directives. 
And every year we introduced that bill, we had at least five or 
six Members of the Committee, Republican Members, who were on 
that legislation. That was put in the Affordable Care Act and 
that turned into ``death panels'' and my Republican colleagues 
ran for the hills. So having that bipartisan conversation is 
difficult to have when you have principles or issues that we 
had previously agreed on that suddenly divide us today.
    I agree with Mr. Thompson, Paul, that to have a serious 
conversation, we need a plan. We need words on paper so we can 
actually see, because we all know, and I think everyone on this 
panel would agree, that the devil is in the details on how any 
type of premium support or voucher plan is ultimately 
structured. And we don't have that.
    I talked to Ron Wyden too, and sometimes I feel like I am 
talking to two different people who are embracing the same type 
of plan. What Paul understands what the plan would mean, and 
what Ron Wyden understands sometimes they are talking past each 
other.
    So unless or until you put something on paper so we can 
truly analyze the impact of this what this is going to mean, 
all this is theoretical.
    Mr. RYAN. If the gentleman would just yield kindly, I will 
send to you and Mr. Thompson the plan that Senator Wyden and I 
coauthored with our signatures, and I will send it over to your 
office.
    Mr. KIND. All right. But, again, I think, Mr. Aaron, I hear 
from you, and John, I think you testified too, that it is 
important that these delivery system and payment reforms as 
part of the Affordable Care Act right now have a chance to 
continue to move forward. And if, for some reason, the Supreme 
Court or this body decides to overturn everything, I think that 
is just going to lead to an absolute state of chaos right now 
in the health care system that may take a generation to recover 
from if we go back to square one again.
    Thank you, Mr. Chairman.
    Chairman HERGER. Mr. Pascrell is recognized.
    Mr. PASCRELL. Thank you, Mr. Chairman. Thank you to the 
panelists.
    I have heard, and I said many times health care reform is 
entitlement reform. Folks on the other side don't want to hear 
that. We haven't touched entitlement reform in the health care 
bill. I think that is utter nonsense. One-third of the health 
care bill is devoted to Medicare and Medicaid. It is very 
specific about the recommendations, and those are 
recommendations that we should be considering if we weren't 
trying to suffocate this legislation before it breathes fully 
in the next 2 years.
    Not only are we going to reduce costs for Medicare, but 
also the Health Care Act reduced costs for beneficiaries, 
unless you don't agree with the CBO numbers. The majority's 
attempt to repeal reform and turn Medicare into, let's not use 
a voucher program, let's not use that word, I call it the more-
out-of-your-own-pocket-folks program. I think that will hurt 
beneficiaries. And there is no doubt about it, this is going to 
mean more money out-of-pocket. No one has denied that. No one.
    So according to the CBO office, the Republican budget will 
dramatically cut spending in Medicare for new beneficiaries by 
more than $2,200 per person per year. That is what the CBO 
says. And we conveniently use the CBO when they support our 
position, and then we tell them that they don't know what they 
are talking about when it doesn't support our position. And 
starting in 2030, by $8,000, by 2050. If you want to talks 
about the future, let's talk about the future.
    We don't have to scrap the current system. In fact, as we 
are sitting here today talking about strengthening Medicare, 
the health care reform bill is already hard at work actually 
testing new payment and delivery systems that will lead 
innovation not only for Medicare, but for the entire health 
care system. And let's talk about that health care system.
    You are talking about competition. Let's increase 
competition in terms of Medicare. We don't have competition in 
the health care system. Many States have only two or three 
companies who write health insurance. Why don't we do something 
about that? If we want to foster competition, let's foster 
competition. We don't merely mean it. This is--it is empty. 
These are words that we use back and forth. This is one-
upmanship. That is all we are after.
    The basics of health care will be changed by the Health 
Care Act for the better of Americans. It will not be a 
socialistic system, thank God we graduated from that, since 
more insurance companies will be involved in order for us to 
gain favor with the people that we are dealing with.
    You know, we are heading back to 1964. I am convinced that 
that is the direction we want to go in, when senior poverty was 
at the greatest since the Great Depression. That is where we 
want to go. Why don't we just say that? We are using a lot of 
pretty words.
    Yes, you may shake your head, Ms. Rivlin, but I am telling 
you, we are marking time in place while many seniors are being 
stopped at the door because they are under Medicare. That is 
what we should be addressing. That is what we should be saying, 
enough of this. The health care system is not working. The 
health care system has been totally taken over by the health 
insurance companies of this country. You know it and I know it. 
We don't have competition.
    In New Jersey, what would do we have, three or four 
companies that write health insurance? This is competition? 
What is this competition? You say, so we will narrow it. Maybe 
next year we will have three companies. Maybe Co. C will take 
over Co. D. In how many States do we have only three or four or 
less companies writing health insurance, and you want to put 
our seniors into that situation? That is not competition. That 
is a joke. You know it and I know it.
    By the way, Mr. Aaron, I want to congratulate you on the 
work you have done. I know since I have been here for 16 years, 
you have been at the forefront of talking about these issues. 
These are critical issues for all of us. I know that it is not 
very popular to try to hold down out-of-pocket expenses. That 
is not a popular position, Mr. Aaron. But I don't care whether 
it is or isn't. You have done the right thing. I admire what 
you are doing.
    We have enough here to work with within the legislation to 
change Medicare, but let's not throw away everything because we 
want to get to a few who will profit only. Thank you, Mr. 
Chairman.
    Chairman HERGER. The gentleman's time has expired.
    Dr. Boustany is recognized.
    Mr. BOUSTANY. Thank you, Mr. Chairman. I thank you for 
holding this hearing.
    I think this has been a nice reprieve where we actually get 
to talk about policy, and I want to thank all the panelists 
here today for the serious work you have done over many, many 
years to advance the debate and to advance real solutions to 
solving health care.
    Senator Breaux, let me publicly thank you for your many, 
many years of service to our State of Louisiana and our country 
and to your continued willingness to do this and to serve in a 
public capacity to advance the debate in health care.
    Mr. Aaron, you raised the point about competition and the 
fact that it has not lowered costs. I would submit that we are 
really stuck right now between a price-controlled system and 
vastly imperfect competition. We don't really have the kind of 
competition that is necessary, both in the health care 
financing arena as well as in the delivery system aspect of 
this. And I think if we could get to more perfect competition 
there, we would see the advantages of lowering costs and 
enhancing quality. And that is coming from somebody who has had 
many years practicing in the health care system as a physician.
    I have some really deep concerns about the tilt toward 
price controls in this, which I think it is pretty indisputable 
that that is what we are operating under right now. And the 
problem is we already have a serious shortage of physicians and 
nurses in this country, and if we continue on this path where 
we have seen--we are facing the cuts in sequestration, we have 
seen cuts year after year to providers, what is this really 
going to mean for access? Because coverage does not equate to 
access to good high quality care.
    I know, Senator Breaux, you and I, actually even before I 
got to Congress back in the 1990s had serious concerns about 
trends we are seeing in the Medicare program whereby, for 
instance, as a heart surgeon, I would see a patient in the 
emergency room and do an emergency coronary bypass operation, 
and then in the aftermath of all that, we couldn't find a 
primary care physician to take care of the patient's basic 
health care needs. I would have to get on the phone and start 
begging physicians in my community that I knew well and worked 
with to take on a new patient. And the whole issue was the 
cost. The cost of care and the cost to these physician 
practices is not being met by reimbursement. So if we can get 
to a system that brings us back to a real competition, I think 
it makes a difference.
    I want to compliment Chairman Ryan. I know he walked out. 
But he has actually taken a lot of the work that Dr. Rivlin and 
Senator Breaux, Mr. Antos, you have worked on, and Mr. Aaron, 
and put it into a body of work along with Senator Wyden to try 
to get us to that. And I don't know of any other alternative.
    So, would anybody comment? Is there another alternative out 
there other than the premium support model?
    Mr. AARON. I think the key to solving the problems that you 
have described, and quite eloquently, I believe, regarding the 
fragmentation of care comes in some of the innovations that are 
in the Affordable Care Act, in particular, two that I would 
focus on.
    One is the creation of accountable care organizations, 
which are groups of providers who would be paid to assure the 
health of people who enroll with them, much as health 
maintenance organizations do; and the second would be bundled 
payments, so that in the event of a coronary artery bypass 
graft surgery case, a payment would be made not just for the 
act of surgery, but for the follow-up care as well, so that 
you, together with a primary care physician and perhaps a nurse 
practitioner who would regularly contact the patient to make 
sure that he or she was taking recommended medications, would 
all work together. That is the key.
    Mr. BOUSTANY. Mr. Aaron, one of the fundamental problems 
not addressed in the Affordable Care Act is the--in the context 
of accountable care organizations is we still have Federal 
barriers in place that prohibit physicians to integrate care 
with hospitals, and that has not been addressed adequately. We 
need statutory relief in that area if we are going to see those 
kinds of innovations.
    Mr. AARON. I agree with you completely, and it is an 
illustration of how the law may need to be amended.
    Mr. BOUSTANY. Senator Breaux.
    Mr. BREAUX. In alternatives, and I think that Congressman 
Kind had pointed this out, Ron talked about the demonstration 
programs that are in the Accountable Care Act. I remember when 
I was in Congress when I wanted to stop something from 
happening, I used to offer an amendment to do a study, or maybe 
to do a demonstration program, hoping it never got completed.
    But I think the things that are in the Accountable Care 
Act, the demonstration programs, are very important, but you 
can be for both going to a premium support system and a 
demonstration project in the Accountable Care Act. If the 
demonstration programs work, it will improve the fee-for-
service delivery system, and then if you have premium support, 
they will be better competitors. And that is what we are trying 
to bring about.
    I think the demonstration programs are helpful, they are 
important, but they are not an either/or situation. You can 
move to a premium support system and support the demonstration 
projects and hope that they work very well.
    Mr. BOUSTANY. Dr. Rivlin, do you want to comment?
    Ms. RIVLIN. Yes, I fully support what Senator Breaux just 
said. It is a mistake to think of these as alternatives. At 
least our plan envisions that the Affordable Care Act 
continues, that the demonstrations and the various institutions 
that were set up to improve the delivery system go ahead, and 
we hope that works. We are only saying that there ought to be 
another way to get these innovations into use, and that would 
be competition.
    Mr. BOUSTANY. Thank you. Mr. Antos.
    Mr. ANTOS. I agree with that. But it would also be a 
mistake to believe that these things are going to materialize 
overnight. As someone said, the devil is in the details, and 
accountable care organizations are devilish.
    Mr. BOUSTANY. Thank you. I yield back, Mr. Chairman.
    Chairman HERGER. I want to thank our witnesses for your 
testimony today. This has been an extremely interesting 
discussion, one that highlights the need for Congress to act 
soon in order to place Medicare on sound financial footing. 
Premium support proposals like those we heard about today hold 
promise to improve how care is delivered, better protect 
beneficiaries against Medicare's cost sharing requirements, and 
utilize competition to control costs for the program as a 
whole.
    As a reminder, any Member wishing to submit a question for 
the record will have 14 days to do so. If any questions are 
submitted, I ask the witnesses to respond in a timely manner.
    With that, this Subcommittee is adjourned.
    [Submissions for the Record follow:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




                                 
