[Congressional Record Volume 141, Number 116 (Tuesday, July 18, 1995)]
[House]
[Pages H7158-H7163]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


        THE STATUS OF THE MEDICARE PROGRAM IN THE UNITED STATES

  The SPEAKER pro tempore. Under the Speaker's announced policy of May 
12, 1995, the gentleman from Ohio [Mr. Hoke] is recognized for 40 
minutes and the gentleman from Florida [Mr. Bilirakis] will be 
recognized for 20 minutes as the designees of the majority leader.
  Mr. HOKE. Mr. Speaker, tonight during the time that we have allotted 
in the leadership hour for special orders I have asked some of my 
colleagues to help me talk about the status of the Medicare program in 
the United States and to try to elucidate for the American people 
exactly where we are at, where we are going, what our responsibilities 
are and how we are going to meet those responsibilities, and I am going 
to, before I yield any time to my 

[[Page H 7159]]
good friends, I want to read a little bit from this report.
  This report, Mr. Speaker, is called the Status of the Social Security 
and Medicare Programs. It is a summary of the 1995 annual reports of 
the Social Security and Medicare Board of Trustees. It is a very 
important report because what it does is it forms the basis of all the 
problems that we have got with Medicare in the U.S., and frankly I urge 
all Americans to call their representatives at (202) 224-3121 and ask 
for a copy of this report. Particularly senior citizens will be 
interested in this.
  Let me read to you a little bit about it. It is called A Message to 
the Public. The Federal Hospital Insurance HI Trust Fund which pays 
inpatient hospital expenses will be able to pay benefits for only about 
7 years and is severely out of financial balance in the long range. The 
trustees believe that prompt, effective and decisive action is 
necessary. This is signed by six trustees: Robert Rubin, Secretary of 
the Treasury; Robert Reich, Secretary of Labor; Donna Shalala, 
Secretary of Health and Human Services; Shirley Chader, the 
Commissioner of Social Security; Stanford Ross and David Walker, both 
trustees.
  Now what are the trust funds? There are four trust funds that have 
been established by law to finance Social Security and Medicare. For 
Medicare, the Hospital Insurance Trust Fund HI pays for hospital and 
related care. This is often called part A, for people that are over 65 
years old and workers who are disabled. The Federal Supplementary 
Medical Insurance Trust Fund; this is the SMI Fund, pays for physician 
and outpatient services, often called part B, for people that are 65 
and over and workers who are disabled.
  Who exactly are the board of trustees? These are six people who serve 
as trustees on the Social Security and Medicare Boards, Secretary of 
the Treasury, Secretary of Labor, Secretary of Health and Human 
Services, the Commissioner of Social Security and two members appointed 
by the President and confirmed by the Senate to represent the public. 
The Boards are required by law to report to the Congress each year on 
the operation of the trust funds during the preceding years and the 
projected financial status for future years.
  So this report is all about the financial status of Medicare in the 
United States of America in the future, and, as you will see, they have 
various scenarios that they are required to follow to let us know 
exactly what the status will be.
  How are the trust funds financed? Well, the trust funds are financed 
in different ways, but the HI Fund, the hospital insurance fund that is 
part A, is financed by a tax on earnings. It is unlimited. Beginning 
with 1994 the taxes are paid on total earnings with no ceiling at 1.45 
percent. The part B program is financed in a way that is similar to 
yearly renewable term insurance, health term insurance. Participants 
pay premiums that in 1994 covered about 30 percent of the costs. That 
means the other 70 percent of the cost is covered by the taxpayers out 
of the general fund of the United States.
                              {time}  2030

  The rest is paid for by the Federal Government.
  The 1995 monthly premium is $46.10 per month.
  How is the financial status of the trust funds tested? Several tests, 
based on the intermediate assumptions, are used to review the financial 
status of the trust funds. There is a short-range test, a long-range 
test, and a future outlook test.
  And, finally, although the trust fund ratio line for the part A fund 
is over the 100 percent level at the beginning of the 10-year period, 
it falls below that level in 1995, and, as a result, it does not meet 
the short-range test.
  Under the intermediate assumptions, the projected year of exhaustion 
for the HI Trust Fund is 2002. Under more adverse conditions, as in the 
high-cost alternative, it could be as soon as 2001.
  The cost rate for the part A trust fund is higher than the income 
rate. We are spending more than we are taking in by rapidly growing 
amounts throughout the 75-year projection period, and by the end of the 
period the cost rate is projected to be roughly three times greater 
than the income rate.
  The conclusion is that the status of the Medicare program can be 
summarized by looking at the results of the tests used to evaluate the 
financial status of the trust funds and the number of years before each 
trust fund is expected to be exhausted under the intermediate 
assumptions.
  Here are the conclusions, and my colleagues will not be able to see 
this, but what they say is that the Social Security Trust Fund will not 
be exhausted for 36 years. At that point, it will be exhausted, in 36 
years; the Disability Insurance Trust Fund, in 21 years; the combined 
trust funds in 35 years of those two. But the Hospital Insurance, the 
Part A Trust Fund, will be exhausted in seven years.
  It will be able--and here are the written conclusions. ``The Part A 
trust fund will be able to pay benefits for only about 7 years and is 
severely out of actuarial balance. Because of the magnitude of the 
projected actuarial deficit in the program and the high probability 
that the trust fund will be exhausted just after the turn of the 
century, the trustees urge the Congress to take additional actions 
designed to control Part A program costs and to address the projected 
financial imbalance in both the short range and the long range.''
  This is the section that is called, ``A Message from the Public 
Trustees: The Need for Action.''
  ``During the past 5 years, there has been a trend of deterioration in 
the long-range financial condition of the Medicare programs and an 
acceleration in the projected dates of exhaustion in the related trust 
funds, but to some extent the increasingly adverse projections have 
come from unforeseen events and from the absence of prompt action in 
response to clear warnings that changes are necessary.
  ``These adverse trends can be expected to continue and indicate the 
possibility of a future retirement crisis as the U.S. population begins 
to age rapidly. We urge that concerted action be taken promptly to 
address the critical public policy issues raised by the financing 
projections for these programs.
  ``We feel strongly that comprehensive Medicare reforms should be 
undertaken to make this program financially sound now and over the long 
term.''
  This is from three members of the President's Cabinet, the 
Commissioner of Social Security, and two other people nominated, 
appointed, by the President and confirmed by the Senate. Let me repeat 
it.
       We feel strongly that comprehensive Medicare reforms should 
     be undertaken to make this program financially sound now and 
     over the long term. The focus should be on making Medicare 
     itself sustainable, making it compatible with Social Security 
     and making both Social Security and Medicare financially 
     sound in the long term.
       And, finally, we strongly recommend that the crisis 
     presented by the financial condition of the Medicare trust 
     funds be urgently addressed on a comprehensive basis, 
     including a review of the programs' financing methods, 
     benefit provisions and delivery mechanisms. Various groups 
     should be consulted and reform plans developed that will not 
     be disruptive to the beneficiaries, will be fair to current 
     taxpayers who will in the future become beneficiaries, and 
     will be compatible with government finances overall. We 
     strongly recommend that the crisis represented by the 
     financial condition of the trust funds be urgently addressed 
     on a comprehensive basis.

  These are the words of three members of the President's Cabinet, the 
Commissioner of Social Security, and two other individuals appointed by 
the President and confirmed by the Senate.
  Mr. GEKAS. Mr. Speaker, would the gentleman yield?
  Mr. HOKE. I would be happy to yield to the gentleman from 
Pennsylvania.
  Mr. GEKAS. Just as I expressed to the gentleman from Oklahoma for 
taking the floor and telling the American people the truth about the 
situation in Medicare, I want to commend the gentleman for 
recapitulating this issue this evening.
  Now, let us get this straight. The President of the United States 
says that Medicare, and the positions that he has undertaken with 
Medicare, do not constitute cuts in Medicare. Rather, they are slowing 
the increases of expenditures in Medicare under his plan. That is No. 
1.
  Mr. HOKE. That is correct. That is exactly correct. He has said very 
clearly that he is not, we are not, nobody 

[[Page H 7160]]
is--the Republicans are not suggesting cuts in Medicare but, in fact, 
slowing the rate of growth in Medicare.
  Mr. GEKAS. So the President says that and the gentleman from Oklahoma 
has indicated the Republican plan says that, that we are not interested 
in cutting Medicare. Nobody ever threatened to do that, but, rather, we 
have to fix the problem, and one of the ways to do it is to recognize 
that we must slow the growth of Medicare.
  OK, so now we have the President of the United States and we have the 
Republicans in the House of Representatives saying the same thing.
  Now, did not the President--I ask the gentleman from Ohio, did not 
the President say all these things way in advance of the report to 
which the gentleman has referred this evening from the trustees?
  Mr. HOKE. That is correct.
  Mr. GEKAS. So now we have the confirmation of what could be 
determined by the Democrats as a Republican political ploy to say these 
things, or even if they want to counter their own President who said 
these very same things, but now how do the Democrats, who are opposing 
all of these programs of the Republicans, how are they describing the 
report of the trustees? I have not heard much.
  Mr. HOKE. I have not heard them talk much about the report of the 
trustees. Apparently, the Democrats think that they can score political 
gain by misrepresenting or distorting or in some way not telling the 
truth about Medicare and the problem.
  Mr. KINGSTON. Will the gentleman yield?
  Mr. HOKE. I would be happy to yield to the gentleman.
  Mr. KINGSTON. Does the gentleman have the Democrat plan, the Gephardt 
plan, or the Daschle plan or the Clinton plan?
  Mr. HOKE. Yes, I do. Is that the plan you are referring to?
  Mr. KINGSTON. That is the plan I have heard that is out there, and 
that, we have laughed about this for a long time, and today there still 
has not been a plan offered to save or protect Medicare by the 
administration, even though it is the administration who reports it is 
going broke.
  Mr. HOKE. I think it is important that we start out with the 
fundamental understanding, the premise that there is a crisis. We did 
not make up the crisis. We did not create the crisis. We have not been 
running this place. But the fact is, there is a crisis. It is right 
here, honestly.
  I urge all senior citizens to call up their representative. They can 
get a copy of this at (202) 225-3121, (202) 224-3121, I think they both 
work, and ask for a copy. It lays out the crisis. The crisis is real.
  It seems to me, Mr. Kingston, that it would be grossly irresponsible 
for elected Members of Congress not to do something about a financial 
crisis that is about to affect--and I mean about--in either 6 or 7 
years, depending on which scenario one buys into from their report, it 
is about to engulf senior citizens.
  Mrs. SMITH of Washington. Will the gentleman yield?
  Mr. HOKE. I would be happy to yield to the gentlewoman from 
Washington.
  Mrs. SMITH of Washington. I listened to the debate, the one today and 
the one I have been hearing on and off all day. It seems like every 
time someone stands up, they say, The sky is falling.
  I want people to know out there who are relying on Medicare that your 
bills are going to be paid tomorrow and they are going to be paid the 
next week and do not worry. A lot of the scare tactics are to scare you 
into reacting.
  I do know that if we do not fix this system that there will come a 
time where we cannot pay bills. That same report states the law. This 
trust fund was set up for Medicare to be a trust fund when the money 
runs out; it cannot pay any more bills. There is enough money there and 
there is enough money coming in from people's payroll checks, that is 
where the money comes into, then it pays your medical bills. There is 
enough money now.
  It goes into a problem next year, folks, and we can draw to that 
trust fund for awhile, but just like your savings account that is 
giving you interest each month, you are maybe living off of the 
interest, when you get into the principal, it can run out. And what is 
going to happen is it is going to run out.
  Now, do not let anybody scare you, but do what seniors are doing all 
over this Nation, come and tell us how. You have told us some things 
that are right. Fraud and abuse is right. I am finding terrible things 
in the system. But I do not want to also tell you that it is very----
  The SPEAKER pro tempore. Gentlewoman shall sustain. Members are 
reminded of the policy of the floor that when you address the House, 
you are to address Members of the House. You are not to address the 
viewing audience. Just a gentle reminder. The gentlewoman may proceed.
  Mr. HOKE. Will the gentlewoman yield for a moment?
  Mrs. SMITH of Washington. Certainly.
  Mr. HOKE. I think what the gentlewoman is talking about with respect 
to the exhaustion of the trust funds is shown pretty clearly by this 
chart.
  As the gentlewoman can see, we have got about $150 billion in the 
Part A trust fund right now. This is what I was just reading about 
earlier. By the year 2002 or 2001, depending again on the scenario, 
here is the zero line. You can see that we are depleting that trust 
fund and that it goes down to zero. And then 2003, 2004, these are 
according again to the projections of the annual report, and this chart 
is directly out of that annual report. You can see that we are going to 
run out of money. We are going to exhaust the funds.
  And one of the things you will hear claim is that somehow tax 
increases will have some impact on this trust fund. The reality is, it 
will have no impact whatsoever because the tax on earnings that funds 
the Part A Trust Fund at 1.45 percent of the employee's earnings is 
set. It is fixed. And nothing short of changing that law will make any 
difference.
  So it does not matter if we increase taxes, income
   taxes, or decrease them. It has no effect on the trust fund.

  Mr. FOX of Pennsylvania. Will the gentleman yield?
  Mr. HOKE. Be happy to.
  Mr. FOX of Pennsylvania. Congressman Hoke, I think the gentleman is 
on target with a very important reality here as well. We know from the 
bipartisan task force, even the President's secretaries of different 
agencies, that Medicare will run out of money in 7 years. But we in the 
Republican majority of Congress are not going to let the money run out.
  As Congresswoman Smith had stated, we are going to look for the 
initiatives from within the Congress and also the public. I have 
formed, and many other Congressmen on our side of the aisle and others, 
a Medicare Preservation Task Force. The fact is that health care costs 
generally are going up 4 percent a year, but Medicare is going up 10 to 
12 percent a year, and part of that is the fraud.
  Mr. HOKE. May I interrupt for a minute because I think that that fact 
the gentleman just mentioned really gives room for a tremendous amount 
of hope with respect to the ability to save Medicare. Because what are 
we trying to do as Republicans? We are trying to save, we are trying to 
preserve, protect, and in fact improve it, make it even better.
  Mr. FOX of Pennsylvania. Exactly.
  Mr. HOKE. If the gentleman is telling me that in the private sector 
we have got health insurance--I am sorry, health care inflation at 4.5 
percent, 4 percent, and in the public sector we are at over 10.5 
percent, it seems to me that we ought to be able to follow the lead of 
the private sector here and get that inflation down.
  Now, what we are doing is terms of out own projections?
  Mr. FOX of Pennsylvania. The fact is, if the gentleman would yield, 
$44 billion, billion, that is, with a B, $44 billion is in waste, 
fraud, and abuse between Medicaid and Medicare. Now, if we can attack 
that problem and make the changes within this House and the Senate, 
then we will go a long way toward preserving Medicare and making sure 
we give the kind of health care for our seniors that we want to give.
  Mr. KINGSTON. If the gentleman would yield, the gentleman knows on 
waste, fraud, and abuse, most of it probably--I am not sure what the 
breakdown is--actually Medicare legal, 

[[Page H 7161]]
meaning if a person, and this happened in the district I represent, 
that a woman needed her stitches removed, an elderly woman on Medicare, 
and an ambulance--because the transportation was provided, an ambulance 
picked her up at her house and instead of taking her to a hospital in 
her town, took her to a hospital in another town, and instead of 
billing $200, billed about $1,200, and Medicare pays that.
  It is legal, and it is never argued, it is never checked, it is never 
questioned. And one of the things that we think would help protect and 
preserve Medicare is to crack down on those kinds of just absolutely 
wasteful practices that show that people running certain businesses 
want to take advantage of Medicare, have the ability, and we need to 
stop that.
  Mrs. SMITH of Washington. Will the gentleman yield?
  Mr. KINGSTON. Yes.
  Mrs. SMITH of Washington. The task force that we had in our district, 
we have a task force and then we had 900 people come in and talk to us 
about Medicare so far, elderly people. They have come up with one 
overriding thing that is a problem, and that is their ability to read 
their bills. And they find that when they can figure out what is going 
on, they are their own best watchdogs.
  So I think one of the best things that has come to me from them is 
better readable billing. Now, that is pretty simple, and if they could 
be their own watchdogs, they could look for mistakes, duplicate 
billing, and sometimes some really gross things.
  I just found one, in looking at one of the reports, of a man who is 
dying who had $8,000 in therapy that would never apply to a man in his 
condition billed to him in 1 month. Now, that are things like that 
going on, and yet, when people cannot understand their own bills, then 
they have got a problem. Sure does seem that that is a commonsense 
thing that the people have brought to us that we should be able to deal 
with.
                              {time}  2045

  Mr. HOKE. Certainly one of the things that we are looking at and 
considering is to give beneficiaries personal incentives to scrutinize 
those bills and to ferret out themselves the way that they would look 
at a bill from the dry cleaner or look at a bill from the phone 
company.
  Mrs. SMITH of Washington. Have you tried to look at those bills? I 
challenge you to take a look at a hospital bill billed under Medicare. 
But you are right. They need to look at that.
  Mr. HOKE. Those people also need to be given incentives to do that. 
That is one of the things we are considering. It is important.
  I have another chart here I want to just talk about for a moment. One 
of the things you will hear a lot about on the rhetoric and the 
demagoguery on this issue that I do not think is particularly helpful 
is that we are slashing Medicare, cutting Medicare. You typically hear 
this during debate on the floor. One of the things we get to do in 
these special orders is we get to dissect an issue and look at it more 
carefully, thoughtfully, and reflectively as opposed to in a rhetorical 
and demagogic fashion.
  The question here is where is the cut. This tells you exactly on a 
yearly basis how much the per-beneficiary per-month amount goes up. 
Here in 1995 we are spending about $401 per beneficiary, per senior 
citizen on Medicare per month. That goes up in 1996 to $423, in 1997 to 
440, up until the year 2002, it is $561. Per year it goes from about 
$4,800 to over $6,800. That is a substantial increase. In fact on a 
compounded basis it is about 6.5 percent per year.
  This amount, by the way, this per-beneficiary, per-month, it takes 
into account that we are going to have more people coming in than are 
going out. When you think about it, this is one of the big problems not 
only with Medicare but with Social Security as well. That is, that the 
number of workers per beneficiary in 1995 is 3.3. But the number of 
workers per beneficiary in the year 2025 will be 2.1.
  Mr. KINGSTON. If the gentleman will yield, we have a lot of things we 
are trying to resolve and address at once. But one of the things we are 
trying to do is deregulate businesses so that they can expand and 
create more jobs. We are also trying to get people who are able-bodied 
off of welfare so that they will go out in the workplace. In doing 
that, what we are going to do is increase revenues and then have that 
worker-to-retiree ratio go up. Because many, many years ago it was a 
19-to-1 ratio, and the 3.3 is scary enough. We need to actually 
increase the number or workers to retirees, not just for practical 
purposes like in Medicare but to decrease the welfare rolls, decrease 
the rolls on public assistance in general, increase revenues, self-
esteem, and make the world a better place so that everybody can enjoy 
the socioeconomic mainstream of America.
  Mr. FOX of Pennsylvania. If the gentleman will yield, just to carry 
forward what the gentleman from Georgia [Mr. Kingston] just said, not 
only have we in the Republican majority here in Congress made inroads 
on welfare reform, we also did it with regulatory and legal reform, all 
ways to help businesses grow, produce and hire and help us be able to 
find the funds for actual services to make sure that Medicare, which is 
going to help people in their health care, in fact, have the quality of 
life they want but decrease the number of bureaucrats that we have in 
Washington and the bureaucracy in Washington. I think we want to go to 
direct services and less regulation.
  Mr. HOKE. I think one of the things that is important to emphasize as 
we talk about the Medicare debate is that we are absolutely committed 
to keeping the current system for anyone who wants to stay in it 
exactly as it is today. I think that it is very important that senior 
citizens know that, that they understand and they expect that, and they 
can look forward to that and be confident that they know that their 
representatives in Washington, that the Republicans that are now in 
control of the Congress, are committed to that. I think it is also 
important for them to know that we are considering various options that 
will give them choices with respect to Medicare that will in fact not 
only preserve it, which we are committed to doing, but will actually 
improve it. Maybe we could talk about some of those choices that we 
expect to see in the future.
  For example, one of the choices would be HMO-type programs, the 
managed care model where you become a part of a network that provides 
everything. There are managed care programs today under Medicare in 
Florida, for example, where everything is covered, including 
prescription drugs, which right now is not a Medicare benefit, and in 
some programs even optical benefits are covered.
  Mr. FOX of Pennsylvania. I believe hearing aids would also be 
available through the managed care.
  Mr. HOKE. I do not know if it is in any of these programs, but it 
certainly could be.
  Mrs. SMITH of Washington. If the gentleman will yield further, I am 
hearing some scary things out there. Some people do not want to go into 
managed care. I think what I like in here at this point in the debate, 
not between the two of you, but in Congress is that most people are 
saying that should be an option. If you choose that option and it is a 
little less costly, we are going to give you more benefits in that 
option. But if you choose to have another option that is a little more 
costly, you may need to share in the cost of a more costly option. But 
you still have a choice.
  I think the most exciting thing that I see coming is we are going to 
have options the seniors have not had before. I think we are going to 
have better plans. I look at it, and I am going on six grandkids so I 
have a little bit to go but not as long as some of you. I look at it 
not on choices. In fact, I want choices now. I want the next 10 years 
for me to develop a plan where I can take care of myself and I can 
transfer and not have Medicare. Maybe I can buy my own private plan. 
Those are some of the things we are talking about. Not just those that 
are on but those coming on and then the younger ones who are just 
coming into the work force. What do we do about them? It would be 
irresponsible to not consider that. We are looking at all three age 
levels.
  Mr. KINGSTON. One of the things that I think is very, very important, 
and the gentlewoman has certainly touched on it, is that with our 
senior citizens, more than options, they want certainty. We are going 
to provide for 

[[Page H 7162]]
that certainty by strengthening and protecting Medicare from a 
financial standpoint. Then for the folks who want options, it is going 
to be out there if they want it. Then for health care in general, as 
the gentleman from Pennsylvania [Mr. Fox] said earlier, the Medicare 
inflation has been so atrocious compared to the private sector or the 
normal medical inflation, that we are going to work on health care 
reform in general, portability of coverage so that you can move if you 
are in a managed care plan from one to the other, if you are in the 
traditional fee-for-service insurance
 plan, you can move from that to another, if you want to have a 
medisave option where you are willing because of your economic bracket 
to take a higher deductible and pay more of the front-end cost on your 
own to reduce your premium but still have catastrophic coverage, you 
can do that. But the great effect of that is actually to help the 
marketplace become more competitive because people will start shopping 
around and seeing where they can get the best buy on a lot of health 
care services.

  There are a lot of exciting things that are going on out there, but 
it is all going to be built on a solid bedrock of certainty for our 
valued seniors who are on Medicare.
  Mr. HOKE. If the gentleman would yield on that point, I think this 
idea of different options is very important.
  I also want to say to the gentlewoman from Washington, I think you 
are absolutely right with respect to HMO's and managed care. It is a 
funny thing. The biggest problem that people have with managed care is 
the concern that they will not be able to be treated by their own 
doctor. I think that is a very real concern. It certainly is a concern 
that I take seriously. When you survey you find that people who are 
able to keep their own doctor going into an HMO are much, much happier 
with that situation. But I think it would be absolutely wrong to force 
anybody to be a part of some program that they do not want to be a part 
of.
  Mrs. SMITH of Washington. If the gentleman will yield, I was just 
picturing a person that is very close to me. If she is listening, she 
will know who it is. It is a family member. Her doctor is in an HMO, 
not a system with many doctors coming together for a managed system but 
an actual HMO. She is happy there, she does not worry, she feels good.
  We need to make sure that anybody that is somewhere they feel good 
and safe gets to stay there and that we protect and preserve that. The 
last thing we want in all of this is for anyone to be out there being 
afraid that they will not be able to be taken care of. The mongers that 
would blow this into an issue politically will try to scare people. I 
think I can safely say the people I am working with on both sides of 
the aisle will leave very secure those people that rely on Medicare. 
Those that rely on it can still rely on it.
  Mr. KINGSTON. I think that is a good point, because in this debate, I 
know there are a lot of people on one side of the aisle who do not want 
to admit that Medicare is in trouble, but let us just say that the 
responsible approach is to say the Clinton trustees have said Medicare 
is going broke. Now, what are we as Members of Congress going to do 
about it, not as members of the Democrat or the Republican Party but as 
Members of Congress, what are we going to do about it? Then you have a 
choice in here. Are you going to work for Medicare or are you going to 
work for mediscare? I think there are people who have decided it is 
more politically expedient----
  Mr. HOKE. Excuse me, did you say Medicare or mediscare?
  Mr. KINGSTON. I think we should put that on the easel so people can 
see it. I think it is very important that people know that 435 Members 
of Congress can take the choice. Are they going to work for Medicare or 
are they going to work for mediscare? One is political and one is 
responsible.
  Mr. HOKE. Let me wrap this up because there is another subject I 
would like to get to. We only have 10 minutes left in our portion of 
this hour. I do want to emphasize once more that I would strongly urge 
senior citizens, people about to become senior citizens, and anybody 
that is particularly interested in this problem, and it is a problem 
for every American, particularly tax-paying Americans, because the fact 
is that health care is the fastest growing segment of the Federal 
budget. Call your Representative, 202-224-3121, and ask for a copy of 
the ``Status of the Social Security and Medicare Program Summary.'' It 
is a 14-page summary. It will explain why there is a real problem and 
why it would be absolutely irresponsible of us not to deal with that 
problem.


                 audit of the house of representatives

  Mr. HOKE. Mr. Speaker, I want to change the subject, if I may, to 
something that was released just today, the House audit which was 
called for by Republicans on the first day of the 104th Congress. I am 
going to read very briefly from the report of the Price Waterhouse 
independent auditors of the U.S. House of Representatives.
  Mr. KINGSTON. If the gentleman would yield just before you do that, 
auditing exactly what, or generally what?
  Mr. HOKE. What they are doing is they are auditing the books of the 
House of Representatives. We spend in the House, to run your office, my 
office, the office of the gentleman from Pennsylvania [Mr. Fox], the 
office of the gentlewoman from Washington [Mrs. Smith], and all of the 
various business organizations of the House, the committees, the 
committee structure, all of the benefits, all of the people that run 
this, $700 million per year. That is the budget. Think about that.
  Mr. KINGSTON. Is this an annual audit that is done every year?
  Mr. HOKE. Excuse me? The House has never, ever, ever, ever, in its 
entire history been audited by an outside auditor.
  Mr. KINGSTON. How often do businesses get audited?
  Mr. HOKE. Once a year. Publicly traded companies must be audited once 
a year and they must file reports with the SEC.
  Mrs. SMITH of Washington. If the gentleman will yield, is this a 
private audit? This is not just something we did ourselves. Did we hire 
these people, pay them?
  Mr. HOKE. We hired one of the Big Six accounting firms, Price 
Waterhouse, to conduct this audit.
  Mrs. SMITH of Washington. Everyone knows Price Waterhouse.
  Mr. HOKE. They came in, and I do not know how many people came in. 
They must have had a team of 20 or 30 accountants who came in and went 
through the books. That is what they do. They go over the ledgers 
literally page by page.
  Mr. FOX of Pennsylvania. If the gentleman will yield, every State 
government, local government, and school board has to audit. The House 
has never audited before?
  Mr. HOKE. We have never had an external audit, from an external 
auditor. We did have an internal audit. I am told it was in 1954. That 
was the last time we had an internal audit of the House's books.
  Mrs. SMITH of Washington. Good enough to hold us that long, huh?
  Mr. HOKE. Apparently yes. Let me read some of this. It is stunning. 
This is the report of the independent accountants, Price Waterhouse.

       The House lacks the organization and structure to 
     periodically prepare financial statements that even after 
     significant audit adjustment and reconstruction are accurate 
     and reliable. The House Clerk's report is a voluminous 
     quarterly document that lists over 90,000 disbursements, but 
     it does not summarize the disbursements in logical groupings 
     or accounts, does not accumulate them beyond one quarter or 
     otherwise place them in a context that could be easily 
     understood. The individual financial reports of House units 
     were of limited use to understanding the finances of the 
     house as a whole because they only constituted small 
     components of the House. The statement of accountability 
     which purportedly accounted for all House transactions 
     reported collections and disbursements in broad account 
     categories but little else. None of the financial information 
     or statements periodically produced by the House's financial 
     and administrative units were suitable for reporting 
     consolidated information in an acceptable financial 
     statement.

  Finally, let me read the conclusion, because this is the most 
stunning part:

       Because the House's accounting and reporting methods were 
     outdated and of limited utility, the accompanying financial 
     statements required significant adjustment to attempt to 
     conform them to generally accepted accounting principles. 
     However, the shortcomings in the House's information systems 
     and the weaknesses in its internal control structure were so 
     severe that they affected the availability and reliability of 


[[Page H 7163]]
     the data and information supporting the financial statements. Those 
     conditions also made it impractical for us to extend our 
     audit procedures to the degree necessary to determine the 
     effect that these shortcomings might have had on the House's 
     financial statements.
                              {time}  2100

  For the reasons stated, we are unable to and do not express an 
opinion as to whether the supplemental schedules are fairly stated in 
relation to the consolidating financial statements taken as a whole, 
and we do not express an opinion on these consolidating financial 
statements. That is the worst situation, I don't know, are any of you 
CPAs?
  Mrs. SMITH of Washington. Will the gentleman yield?
  All I can tell you is if my business had that kind of an audit, I 
could never get a loan again. I think what it says is there can be no 
beginnings. I looked at that, and I am like the person with the shovel, 
you know, digging and looking for the pony.
  Mr. HOKE. Looking for the pony.
  Mrs. SMITH of Washington. And I looked at it and I thought, some 
things were obvious. Even before we came in in January, we started 
making changes, we started digging around, we started opening up files 
and we started closing things that were not efficient. We started 
looking at the mail room, we started looking at the way things were 
done.
  My understanding is that this audit said certain things should 
change. We are already doing a lot of them. But I do not think we will 
ever know for sure all of what happened between the 1954 audit and the 
1995 audit. That is a long time.
  What I would like to see us do is go forward. I would love to see us 
look at this and say, we are a new Congress, we want to go forward. So 
I was excited to see that we were not going to mess with the results. 
We were going to turn them over to an independent counsel and let 
anybody else deal with them outside of this place so that it was not 
political. I like that, and it kind of excited me that we were already 
starting along the path to repair.
  Mr. FOX of Pennsylvania. To follow up with what Congresswoman Smith 
just said, the fact is we just passed a resolution unanimously in this 
House this afternoon giving the Inspector General the authority to move 
forward to make the kinds of changes we need. Because in the report, if 
I can just follow up, the appropriations limits were ignored, bills 
were paid late in the House, House property and equipment was 
unaccounted for, and there were significant security problems with 
their own computer system. So these changes, in order to really help 
our country and to lead by example, I think it is good that we have 
this kind of audit and that we actually do the follow-up, as 
Congresswoman Smith just stated.
  Mr. HOKE. I think that is right, and that we now have audits on an 
annual base, which is exactly what we are committed to doing.
  I think we would be remiss in not pointing out two things: No. 1, 
that this audit was taken under the first Republican Congress in 40 
years; and, No. 2, that we made the promise to the American people that 
we were going to start out the 104th Congress with an audit, and that 
is exactly what we did. It is another promise made, another promise 
kept.
  Mr. KINGSTON. If the gentleman will yield, was this done on an 
inventory and on a cash basis? Because my question that I am leading to 
is, did we count the number of personal computers? Did we count the 
papers? Is there inventory missing? And is there cash missing? Is the 
cash done on an accrual basis, is it done on a cash basis, or could the 
auditors even tell one way or the other? Because what I am really 
hearing is, they gave up and they said, this is just too much of a 
mess.
  Mr. HOKE. Well, they tried to do it properly, and I don't think they 
really gave up. What they did is they kind of threw their hands up in 
despair and frustration and said, we can't give you the kind of report 
that you wanted.
  Mr. KINGSTON. Well, if the gentleman will yield, Price Waterhouse 
also does the audit for Washington, DC. Did they say that this was 
comparable?
  Mr. HOKE. My understanding was that the books for Washington, the 
District of Columbia, were in much better shape than the books for the 
Congress.
  I will read one other thing from this, because I think it is 
interesting. It says the House used cash basis accounting as its 
primary means of managing its financial resources and preparing 
internal and external financial reports.
  This meant that the House tracked when it received or spent cash, but 
not what liabilities or legal obligations or commitments it was 
incurring, or the value of the assets properly recorded, accumulated 
and reported in accordance with the rules, policies and procedures that 
are established by the House itself.
  Mr. KINGSTON. So perhaps we can get somebody from the Washington, DC 
City Council to come show the House how to take care of the books.
  Mr. HOKE. Perhaps we can.
  Mr. KINGSTON. Not necessary any more, is it?
  Mrs. SMITH of Washington. Let's do better than that.
  Mr. HOKE. I want to extend my appreciation to the gentlelady from 
Washington [Mrs. Smith], the gentleman from Pennsylvania [Mr. Fox], and 
the gentleman from Georgia [Mr. Kingston] for participating with me in 
this special order.
  Mr. Speaker, I want to yield the balance of this hour at this point 
to the gentleman from Florida [Mr. Bilirakis] to discuss Cyprus. I hope 
that I will have an opportunity, since it just happens that this is 
also an issue that is near and dear to my heart, to join him on that 
issue.

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