[Congressional Record Volume 140, Number 124 (Thursday, August 25, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: August 25, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                             COST SHIFTING

  Mr. GRAMM. Mr. President, I want to share with my colleagues an 
outstanding article written by Jerald R. Schenken, M.D., of Omaha, NE, 
Whose clear thinking I commend to my colleagues as the health care 
debate continues on this floor.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

              Cost Shifting: You Think It's A Problem Now

                          (By Jerry Schenken)

       Health Care cost shifting, a system where insured patients 
     are charged more so that the costs of the uninsured or under-
     insured are paid, represents a major problem for business, 
     for individuals and for taxpayers. It produces such bizarre 
     situations as paying patients being charged two times or more 
     what underpayers--such as Medicare and Medicaid and no-payers 
     pay. These shifts present serious ethical, fiscal, political, 
     social and medical challenges. If anything like the Clinton 
     plan is enacted into law, cost shifting of a much more 
     pernicious extent than we now have is sure to follow. The 
     Clinton's bureaucratic health alliances, price fixing and 
     global budgets and federal control combined with political 
     and demographic forces will assure these shifts. Here's from 
     whom to whom, how and why.
       From old to young: The severity of illness--and thus cost 
     of care--rises with age. Community rating of premiums with 
     its age-leveling creates the shift.
       From urban to rural: The medical costs driven by poverty, 
     crime, single parenting, etc., are more concentrated in urban 
     areas. Political gerrymandering, as is seen with property 
     taxes, will surely follow.
       From cities to suburbs: For the same reason, flight to the 
     suburbs for their lower insurance rates will stimulate 
     political efforts to recapture the fleeing tax base.
       From unhealthy lifestyles to those who care: The cost of 
     caring for conditions that follow voluntary decisions to 
     smoke, drink, overeat and underexercise will be transferred 
     to the people who are working to stay well.
       From criminals to those who obey the law: Violence, drug 
     abuse, failure to use seat belts and helmets etc. are 
     associated with extremely high medical (not to mention 
     social) cost. In a bizarre way, universal insurance 
     subsidizes this criminal conduct.
       From individuals to families: Experts estimate that the 
     Clinton's ``community rating'' will raise insurance costs to 
     families and reduce it to individuals, compounding the other 
     marriage tax penalty that is already part of current law.
       From large states to small ones: Many of the incentives to 
     shift described above are present in populous states. 
     Political pressure in the House of Representatives (one man-
     one vote) will surely move toward ``equalization'' and its 
     required shift. Billions are currently being shifted from 
     small rural states such as Iowa and Nebraska to New York, 
     Florida, Michigan, etc., to pay for the higher Medicare costs 
     there.
       Insurance represents a tradeoff: voluntary cost sharing 
     (and ultimately shifting) for security and piece of mind. The 
     arrangement is upfront, deemed desirable and entered into 
     voluntarily, at least for the choice of plans. However, 
     clandestine, cost shifts described above have and will create 
     perverse incentives which will interfere with even such 
     consensus reform goals of portability, reinsurability and 
     affordability for most Americans.
       Cost shift issues must be analyzed and discussed openly and 
     completely. Shifts must be minimized and their unintended and 
     often undesirable consequences be eliminated. But most 
     importantly we must not allow hidden costs shifts to 
     introduce demand-side incentives into the health care system 
     that will make insurance too costly for all of us and 
     ultimately lead to rationing. And we must certainly not 
     continue the bizarre situation where universal insurance with 
     community based ratings would in effect subsidize illegal 
     criminal activity. There must be a way for those of us who 
     work at being well to be rewarded and those who work at 
     getting ill pay more. Incentives are important.
       Practicing Pathologist, Omaha, NE.

   USDA DECISION ON FEDERAL MILK MARKETING ORDERS ANOTHER INSULT TO 
                        WISCONSIN DAIRY FARMERS

  Mr. FEINGOLD. Mr. President, last week, Wisconsin dairy producers 
were dealt yet another blow by the Department of Agriculture. The 
recently released Amplified Final Decision on Federal Milk Orders by 
Secretary of Agriculture Mike Espy is just another sign that career 
bureaucrats have maintained their stranglehold on this program that 
systematically discriminates against Wisconsin dairy producers. The 
apparent lack of substance of the amplified decision is proof positive 
that this system cannot be rationalized on its merits.
  This system, in short, Mr. President, provides dairy farmers higher 
fluid milk prices the further they are located from Eau Claire, WI. 
This ridiculous policy was based on assumption about dairy markets that 
no longer hold true in 1994.
  It was based on the assumption that the Upper Midwest is the only 
surplus milk producing region of the country. But, Mr. President nearly 
95 percent of the surplus dairy products sold to the Government come 
from farmers and plants from the West. In fact, Wisconsin plants have 
started shipping milk in from the South and Southwest in order to meet 
our processing needs. The most recent data for this year indicate that 
supposed fluid deficit areas of the country sell more surplus to the 
Government than Wisconsin and the entire Midwest region put together.
  This system was also based on the assumption that Wisconsin and 
Minnesota had the lowest milk production costs in the country--this 
also is no longer true.
  It was based on the assumption that we needed to provide price 
incentives for milk producers in other parts of the country to produce 
milk for the local market. Not only are incentives no longer necessary 
due to the high profit nature of dairying in some of these regions, but 
they are no longer appropriate when technology allows us to easily ship 
fluid milk anywhere in the country.
  Despite all of these facts and at the expense of family dairy farmers 
in the Upper Midwest, Washington bureaurcrats refuse to let go of this 
program.
  Upper Midwest dairy producers have been fighting the Federal Milk 
Marketing Order system since 1985 when Congress further distorted milk 
markets in the Farm Bill. Since that time, Mr. President, Wisconsin has 
lost over 11,000 dairy farms, in part, due to this antiquated pricing 
system. Other Upper Midwestern States have fared equally poorly.
  While USDA held extensive administrative hearings on reform of Milk 
Marketing Orders in 1990 and issued their final rule last year just 
after Secretary Espy joined the Department, very little about this 
program has changed. I was very disappointed last year to see the new 
Secretary rubber stamp the policies of a previous administration--an 
administration that clearly didn't care about dairy farmers. I was 
optimistic that this Administration would take a different approach on 
the inequities faced by the Upper Midwest regarding marketing orders. 
Mr. President, that hasn't proven to be true to date for the dairy 
farmers in the Upper Midwest.
  In anger and frustration, the Minnesota Milk Producers Association 
challenged the decision of the Secretary by filing suit against him in 
Federal court. The farmers rightfully charged that the orders 
unlawfully discriminate against Minnesota producers and create 
artificially high profits and surpluses in other regions of the country 
while depressing Upper Midwest milk prices.
  Late last year those farmers got their day in court. In April of this 
year, a District Court Judge ruled that the Secretary's 1993 decision 
not to change the fluid milk differentials of the Federal Milk 
Marketing Order System was arbitrary and capricious because the 
Secretary did not consider factors required under law in his final 
decision. The Judge ordered Secretary Espy to issue an amplified 
decision on the differentials within 120 days, which he released last 
week.
  After having met personally with the Secretary to ask him to do the 
right thing--to propose substantive changes to the orders that would 
end the discrimination, to put Wisconsin dairy farmers on a level 
playing field, to do what Congress could not--I was even more 
disappointed last week to see the Secretary simply reinforce what was 
already a bad decision.
  The Secretary's amplified decision is a slap in the face to Wisconsin 
dairy producers. The Department attempted to rationalize all of the 
existing Class I differentials by claiming that the current Minnesota-
Wisconsin Price is reflective of national supply and demand conditions 
which the Department is required to consider by law. The reliance on 
the M-W price series is incredible given that it is located in the 
states of Minnesota and Wisconsin--a series that even USDA's National 
Agricultural Statistics Service believes is no longer statistically 
reliable based on the dwindling number of both Grade B producers and 
processing plants.
  Mr. President, I will also do everything I can in this legislative 
body to change the milk orders but I am well aware of the difficulty in 
pursuing this issue as a legislative matter. I was hopeful that the 
Secretary would resist the temptation to kick this matter to Congress. 
I was hopeful that he would have the courage to propose changes which 
are not necessarily politically popular, but which are honorable and 
defensible. As I said, Mr. President, I am disappointed. While I and my 
colleagues have introduced legislation to change Federal Milk Marketing 
Orders, I am not overly optimistic this body will change a program that 
benefits most regions of the country at Wisconsin dairy farmers' 
expense.
  I sincerely hope that the producers who raised this lawsuit continue 
in their efforts to challenge this amplified decision. Despite my best 
efforts and the efforts of producers and others in Wisconsin dairy 
industry, it is clear that the Secretary and his staff will never 
voluntarily change this outmoded and antiquated system. It is a sad 
commentary on the Department of Agriculture.

                          ____________________