[Congressional Record Volume 141, Number 127 (Wednesday, August 2, 1995)]
[Extensions of Remarks]
[Page E1591]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                                MEDICARE

                                 ______


                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                        Wednesday, August 2, 1995
  Mr. HAMILTON. Mr. Speaker, I would like to insert my Washington 
Report for Wednesday, August 2, 1995 into the Congressional Record.
              Medicare: Past Successes, Future Challenges

       July 30th marked the thirtieth anniversary of Medicare. 
     Although many in 1965 predicted dire consequences as a result 
     of Medicare's enactment, it is today without question one of 
     the most widely supported federal government programs. And 
     for good reason: Medicare has contributed to enormous 
     improvements in the well-being and quality of life of older 
     Americans. Americans of all ages agree that the assurance of 
     access to medical care for the elderly must be preserved.
       But Medicare also faces many challenges. Health care costs 
     that have significantly outpaced inflation and growing 
     numbers of older Americans have made it difficult to 
     adequately finance the program. Congress has made numerous 
     changes to Medicare over several years, cutting payments to 
     health care providers and placing stricter limits on 
     benefits. But financing problems remain, and will lead to 
     hardships for the 37 million Medicare beneficiaries who 
     depend on the program if the problems are not addressed soon.


                               successes

       The Medicare program consists of two parts: Hospital 
     Insurance (HI), primarily funded through tax receipts; and 
     Supplementary Medical Insurance (SMI) for physician costs, 
     largely funded through general revenues with premiums for 
     enrollees covering the remainder.
       Before Medicare was enacted, less than half of Americans 
     under 65 had health insurance, and 30% lived below the 
     poverty line. Many older persons had to choose between 
     medical care and other necessities because they could not 
     afford both. Financial pressures forced some to forego 
     treatment until it was too late. Today, almost all older 
     Americans--97%--have health care coverage, and the percentage 
     of them living in poverty has been cut by more than half. 
     Life expectancy for an American born today is over five years 
     higher than it is for those born in 1960.
       While Medicare is not perfect, its administrative costs are 
     just over 2% of program spending, considerably lower than the 
     administrative costs of the average large private insurer. 
     And while all Medicare enrollees receive coverage regardless 
     of their incomes most Medicare benefits go to those who need 
     them most--older persons with incomes of $25,000 or less.


                               challenges

       Medicare's impending financing problems are of great 
     concern to seniors receiving Medicare benefits, as well as 
     future beneficiaries who question its availability during 
     their retirement. Medicare expenditures, which were less than 
     $5 billion in 1967, now total over $181 billion. The trustees 
     of the Medicare trust fund project that HI will become 
     insolvent in 2002, just 7 years away. This funding shortfall 
     reflects the high rate of inflation in the health care 
     sector, an aging population, and growth in the quantity of 
     services provided. Since SMI is financed with premiums and 
     general revenues, it does not have the same financing 
     problems as HI.
                            reform proposals

       Long-range deficits have been projected for HI since the 
     early 1970s. In the early 1980s Congress took action to 
     protect Medicare's solvency by increasing tax revenues and 
     reforming how hospitals are reimbursed. These reforms, along 
     with an expanding economy, improved Medicare's financial 
     outlook in the near-term.
       Currently, there are numerous proposals to reform the 
     Medicare system. I believe that Congress should consider 
     these reform proposals with a critical eye. Several proposals 
     have already crated much interest, but long-term funding 
     problems remain.
       One proposal would mean annual limits on spending in the 
     program by giving older people a choice of private health 
     insurance plans as alternatives to a standard federal 
     program. The idea would be to make an expanded choice of plan 
     options available to Medicare beneficiaries at the time of 
     initial eligibility and during subsequent annual open 
     enrollment periods.
       Another idea would require the government to give 
     beneficiaries vouchers to buy private insurance. The Medicare 
     system would cease to be a system of defined benefits and 
     become instead a program providing a defined contribution 
     toward the cost of health care.
       Other proposals would offer options like medical savings 
     accounts or managed care, such as Health Maintenance 
     Organizations and Preferred Provider Organizations. Some 
     would basically keep the current system but increase premiums 
     for new SMI beneficiaries, increase the Medicare deductible, 
     and charge copayments on home health services.


                                my view

       Over the past three decades, Medicare has proven itself an 
     effective and essential element in raising the standard of 
     living of older Americans. Medicare is a commitment to the 
     American people that when health care is most likely to be 
     needed, it will be available. I believe that this core 
     commitment must be preserved. Reforms in the Medicare system 
     must be considered; however, wholesale immediate cuts are not 
     the answer. Reforms cannot be considered without focusing on 
     our inflationary health care system.
       The budget resolution supported by the congressional 
     leadership calls for a huge target of $270 billion reduction 
     in Medicare spending; that's about 30% of the money that the 
     resolution needs to balance the federal budget over the next 
     7 years. I voted against this budget resolution because these 
     cuts simply cannot be made without doing harm to the 
     beneficiaries and the health care system. But it is also true 
     that there is no way to balance the federal budget or even 
     achieve significant deficit reduction over the long haul 
     without reducing the growth of Medicare.
       The cuts proposed in this budget resolution are much 
     greater than what is needed to maintain Medicare's solvency. 
     Instead, I believe we should enact more modest short-term 
     savings that would still extend the life of the trust fund 
     and give us more time to examine the best policy options for 
     longer-term reform. I believe we must be cognizant of certain 
     principles when considering Medicare reform: affordability, 
     universality, quality, cost containment, fairness to seniors 
     and providers. It is not my preference to reduce payments to 
     beneficiaries under Medicare. We must act decisively yet 
     carefully to preserve the promise of Medicare for the next 
     thirty years and beyond.
     

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