[Congressional Record Volume 141, Number 69 (Thursday, April 27, 1995)]
[Senate]
[Pages S5744-S5745]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       MEDICARE TICKING TIME BOMB

  Mr. FRIST. Mr. President, yesterday I began discussions on the 
pending insolvency of Medicare, predicted to occur in the year 2002, 
just 7 years from today.
  I called Medicare a ticking time bomb. I expressed my concern that 
this body has not addressed that ticking time bomb. We must act now to 
preserve Medicare, to protect it, to save it, to disarm that ticking 
time bomb.
  I will continue those discussions this morning.
  Congress and all Americans must realize that it is the Federal 
Government, through the Medicare program, that is the purchaser of 
health care for this country's seniors and people with disabilities. 
The same Government that brought you $100 hammers is also shopping for 
scalpels and stethoscopes. The Federal Government spends more money on 
health care than individuals, and more than employers. But, it's not 
our money. If it were, we would likely be more prudent consumers. We 
would likely react more quickly and more responsibly to skyrocketing 
costs.
  So whose money do we spend? For the answer, we should revisit the 
creation of the program and remind ourselves of its intended role in 
our health care system when it was created in 1965. Also it is time to 
understand the shortfalls of the program.
  Because the program was created to increase seniors' access to acute 
care, Congress mandated participation for hospital services, called 
Medicare part A. After seniors pay for a relatively low deductible--
$716 in 1995, Medicare fully covers expenses for 60 hospital days. If a 
senior's hospitalization exceeds the 60 days in 1 year, he or she is 
responsible for a co-insurance fee--$179 per day for the 61st through 
90th days, and $358 per day beyond that.
  Medicare part A comprises 63 percent of all Medicare spending. It is 
funded by the Medicare portion of the Social Security payroll tax--a 
tax of 2.9 percent of all income--split evenly between employer and 
employee. Taxes collected from today's workers go directly to pay for 
services delivered to today's beneficiaries. It is important to 
understand that contributions to Medicare do not actually sit in the 
hospital insurance [HI] trust fund and wait for you. Rather, they are 
paid out immediately to meet the needs of today's seniors and people 
with disabilities. Beginning in 1997, the part A expenditures will 
exceed total income annually.
  Medicare's part B goes to pay doctor bills and is voluntary. It is 
funded 30 percent from beneficiary premiums and 70 percent by automatic 
withdrawals from Treasury general revenues. Today, a senior opting for 
Medicare part B pays $46.10 each month and is responsible for a $100 
annual deductible and 20 percent co-insurance for most services. 
General revenues provide a 70 to 75 percent premium subsidy and cover 
80 percent of most services.
  Theoretically, the funding arrangement for part A--the hospital 
insurance--would work fine if the demographics of the population were 
constant, if medical technology were constant, and if the growth of 
overall expenditures were constant. But, as we all know, this is not 
the case.
  First--and most importantly--the elderly population is growing much 
faster than the overall population. In 1990, 2.1 million Americans 
qualified for Medicare. But in the year 2020, 3.9 million new enrollees 
will qualify--almost twice as many new enrollees will be qualifying 
that year. And who pays the bill? The working generation, which is not 
growing nearly as fast. When Medicare was created, two workers would 
cover the costs of the Medicare beneficiary. By the time I qualify for 
the program, it will take four workers to cover the same cost.
  Consider the consequences of delaying Medicare reform. I have three 
sons: Bryan is 7 years old, Jonathan is 9, and Harrison is 11. In the 
year 2020, they will be 32, 34, and 36 years old. I will be 68 and 
eligible for Medicare benefits. My sons and their generation will pay 
for the services for my generation. It will take the taxes of all my 
three sons plus another individual just to pay for my own Medicare 
benefits. It is intolerable to punish our children, the next 
generation, with this inequity.
  Second, medical breakthroughs are allowing people to live healthier 
and longer lives. Take my own field of heart disease as an example. 
Thirty years ago, there were few heart intensive care units in the 
country. Coronary artery bypass surgery had never been performed. 
Cardiovascular drugs were in their infancy. Heart transplants were but 
a dream for the future. Today, because of advances in medical science 
and technology, people who used to die of their heart disease are 
living 10, 20, or 30 years longer, and those new technologies are 
expensive.
  Back to my earlier question, ``Whose money is this?'' Medicare is 
paid for by three vehicles: a 2.9 percent payroll tax, split by 
employers and employees; general revenue tax dollars; and beneficiary 
premiums, copayments, and deductibles.
  I think it is safe to say that taxpaying workers are more watchful of 
the money coming out of their pockets than is the Federal Government. I 
know the employers are. We have recently seen their impact on the 
health care system as they have struggled with increasing costs. I have 
witnessed through my own parents that seniors are prudent purchasers of 
health care services. Since Medicare was not designed as a 
comprehensive insurance program, seniors already shop for additional 
health care coverage. Most seniors today live within a fixed budget. 
They are careful to judge the value of their health care dollar.
  By failing to mend this program, we are failing all of these groups 
who will suffer from our inattention in the years to come. Yet, there 
is an ongoing premise that the Federal Government should not attempt to 
manage its spending of the Medicare dollar. Every other purchaser has 
to manage his or her money. Why should the Federal Government be 
exempt?
  And, how does this country pay for our failure to manage the Medicare 
Program? First, employers pay in the form of higher health care costs. 
For the last 10 years, Congress has chosen to repeatedly cut payments 
to physicians and hospitals for services delivered. This reduces 
program costs incrementally, but does little to reduce the overall rate 
of growth of expenditures. Lower Medicare payments, especially when 
coupled with even lower Medicaid payments, simply lead providers to 
shift costs and to charge self-pay and privately insured patients more. 
This increases everyone's insurance premiums. In east Tennessee, a 
recent survey of physician fees found that the private sector is paying 
physicians, on average, 220 percent above Medicare rates. Depending on 
the specific procedure, these private plans are paying anywhere from 43 
to 461 percent above Medicare rates. Without Medicare reform, private 
health insurance will continue to climb even further out of reach and 
all Americans will suffer reduced access and thus reduced overall 
quality.
  Second, the working generation pays for our mismanagement of Medicare 
through increased taxes. Over the last 
[[Page S5745]] 30 years, Congress has dramatically expanded both the 
tax base and the tax rate supporting the Medicare trust fund. 
Initially, Medicare relief on a 0.6-percent payroll tax on the first 
$6,600 earned. Today, the program relies on nearly a 3-percent payroll 
tax on all income earned. Next year for the first time in its history, 
the trust fund will begin spending more money than it is taking in. 
Without reform, a tax increase is around the corner. And at best, this 
tax increase would only prolong the program a few years.
  Third, beneficiaries pay for Medicare's failures. Skyrocketing costs 
of the program force the same rate of growth on the direct expenditures 
by our seniors and disabled. Their out-of-pocket costs are directly 
related to overall program costs. Medicare does provide a generous 
subsidy, making it a better deal than anything else out there. But not 
all services are covered, the coinsurance and deductibles are 
substantial, and premiums are calculated to cover a defined amount of 
program costs. Only 1 out of 10 or 11 percent of seniors rely solely on 
Medicare for their health care insurance. Most seniors still purchase 
private supplemental medical coverage or have access to additional 
employer-sponsored coverage. Beneficiary costs will continue to climb 
as the overall program spending spins out of control.
  Medicare is an entitlement. I do not suggest we take away that 
concept. However, I do ask us to remember what it entitles us to. Quite 
simply, the entitlement was intended to provide access to the private 
system. Our predecessors did not create a system which limited 
beneficiaries to public hospitals or Government-employed physicians. 
Rather, it provided financial access to private physicians and 
hospitals, the same providers Americans used before they turned 65.
  If we viewed the Medicare subsidy today as it was originally 
intended--allowing beneficiaries to use it to access private coverage--
seniors would then be able to choose health care plans that better meet 
their needs. Today they do not have that choice. We should provide that 
choice to our seniors.
  Mr. President, I will continue this discussion over the next several 
days as we look forward to better ways to save, to preserve our 
Medicare Program.
  I yield the floor.

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