[Congressional Record Volume 141, Number 131 (Monday, August 7, 1995)]
[Senate]
[Pages S11715-S11726]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           PRESERVE MEDICARE

  Mr. FRIST. Mr. President, over the next hour, a number of Senators 
will be presenting a very simple message. That message is that we, 
together, must work to save Medicare for the current generation, to 
strengthen it for all future generations, and to simplify it for 
everyone to make it easier to use and easier to understand.
  I now turn to the Senator from New Mexico to make an opening 
statement on our efforts to preserve Medicare.
  Mr. DOMENICI. Mr. President, this morning I want to continue our 
Medicare discussion with the American people.
  For 30 years, Medicare has provided health protection to the elderly 
and disabled citizens. Medicare has been a successful program. It has 
provided an important source of health security and needed benefits to 
millions of Americans since its inception 30 years ago. Today, 37 
million Americans receive the benefits and health security that 
Medicare provides. 

[[Page S 11716]]

  Medicare has become an expensive program, and everyone, including the 
President, agrees that the system needs fundamental structural reform.
  Medicare is running out of money. Unless we make changes now, 
Medicare will not continue to provide the same level of health security 
in the future.
  Nevertheless, 1 week ago, the President held a rally for Medicare. 
All he talked about was the past. The President forgot the most 
important element of an anniversary celebration--he forgot to look 
forward to the next anniversary and the next anniversary after that. If 
the President fights the reforms necessary to save Medicare's future, 
then in just 7 years, on the 37th anniversary of Medicare, the program 
will be bankrupt.
  In the President's first budget, which he sent to us in February, 
Medicare would go bankrupt in the year 2002. Seven more years--that is 
all we would give the Medicare Program in terms of its existence. After 
that, there would be no money to pay Medicare hospital benefits. The 
President would let you choose your doctor, he says, but there would be 
no money to pay your hospital bills.
  The President's original Medicare proposal was great--for the next 7 
years. But the 37th anniversary of Medicare would be its last. Under 
the President's original plan, if you are on Medicare, you better not 
get sick 8 years from now.
  Back in January, the President did not listen to his own Cabinet 
Secretaries. Three of his own Cabinet officers--Secretaries Bentsen, 
Shalala, and Reich--are trustees of the Medicare system. Along with two 
public trustees they told the President and the Congress that the 
Medicare hospital insurance trust fund had only enough money to pay 
benefits for the next 7 years.
  The President chose to ignore that. The Republicans in the Congress 
did not. We invited the public trustees up to Capitol Hill to tell us 
what needs to be done. We listened carefully. Now we are taking their 
advice.
  Let me read from the summary of the trustees' report. The full board 
of trustees says:

       The Hospital Insurance Trust fund * * * will be able to pay 
     benefits for only about 7 years and is severely out of 
     financial balance in the long range.

  This is the report, the summary of it, ``Status of Social Security 
and Medicare Programs.'' It clearly indicates:

       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 
     program's financing methods, benefit provisions, and delivery 
     mechanisms.

  This is what the public trustees of Medicare recommend that we do so 
that we can strengthen Medicare and have many, many, anniversaries to 
come. This is exactly what we are trying to do now.
  There are those who claim, Mr. President, that we are making changes 
to Medicare for other reasons. They say we are changing Medicare to 
balance the budget. We are changing Medicare to lessen the tax burden 
on working families. That is what some people say.
  Both of those claims are false. We are making changes to the Medicare 
system to save the program, to strengthen Medicare so it can survive 
into the next century. Even if we are not going to balance the budget, 
Mr. President, even if we are not going to balance the budget, we need 
to save Medicare. And whether or not we cut taxes, we still have to 
save Medicare.
  Any attempt to link the two is no more than blue smoke and mirrors 
from the opponents of reform who think the status quo will last 
forever,
 and that we will have a 40th anniversary of Medicare by just leaving 
it alone, when it is patent it will not be there in 10 years.

  The Republicans in Congress have chosen to look toward Medicare's 
future. We decided this spring that we would save Medicare from 
bankruptcy, control the growth of costs of the program, and ensure that 
the program would survive past its 40th anniversary. We developed and 
passed a budget plan in June that guaranteed a strong Medicare into the 
next century.
  Suddenly--and to some extent we are grateful for this--the President 
decided to join us. In June, he submitted the outlines of a new budget 
proposal, one which he claimed would save Medicare.
  In June, the President made a good start. His budget would save $127 
billion from Medicare over the next 7 years. He is now comparing that 
with our budget, which will slow the rate of growth by $270 billion 
over the next 7 years.
  If I believed that we could save Medicare by doing what the President 
wants to do, I would do it in a second. But after a long hard look at 
the numbers and the program, and after extensive discussions with the 
Congressional Budget Office, I do not think the President's plan will 
save Medicare.
  You see, the President assumed that the costs of the program would 
not grow as fast as projected by the nonpartisan Congressional Budget 
Office.
  The President's June budget outline assumes that a serious Medicare 
problem does not exist. He says the problem is not as hard to solve as 
the neutral Congressional Budget Office says. The President, therefore, 
is much more optimistic in his assumptions than the Congressional 
Budget Office.
  I wish it were true, but I am afraid it is not. As much as the 
President wishes it would, the problem will not go away.
  The President has come a long way since his first budget in January. 
Now all he has to do is use the Congressional Budget Office numbers, 
and we will have an excellent starting point for discussions.
  All he has to do is live up to the commitments that he made in his 
first State of the Union Address, his promise that we would use the 
Congressional Budget Office as the neutral analyst of budget 
information.
  We in Congress use that neutral body. The honest, responsible way to 
budget is to rely on one single source of assumptions, and that is what 
we did, both in our budget plan and in our Medicare estimates. We did 
not make the problem go away by wishing that it would go away. We asked 
the Congressional Budget Office and the trustees what it would take to 
save Medicare, to keep it alive to its 40th anniversary.
  The trustees have told us what we must do. The Congressional Budget 
Office has told us what we must do. And now we have to get on with 
doing it.
  We are going to slow the rate of growth of the program. Medicare 
spending will grow 6.4 percent per year under the reform plan. Over the 
next 7 years, Medicare spending is going to increase from $4,800 per 
person to $6,700 per person. Let me repeat. Medicare spending in the 7 
years of the budget plan is going to increase from $4,800 per person to 
$6,700 per person--$1,900.
  I know older Americans are seriously concerned about the future and 
what it will bring to them and what it will bring to their children and 
grandchildren. I have found that senior citizens are extremely 
concerned about the crushing burden of the debt that our current 
policies will place on their grandchildren. All I know is that they 
also want a Medicare Program that is fair, both for them and for 
generations yet to come.
  I also know that a 65-year-old couple that starts receiving Medicare 
this year will, over their lifetimes, receive $117,000 more in Medicare 
benefits than they will put into the system in payroll taxes and 
premiums. I know that this will concern many seniors, who want Medicare 
to be there in the future for them, for their children, and for their 
grandchildren. We are going to spend nearly 5 percent more per year on 
Medicare beneficiaries in this budget. So anyone who says we are 
cutting Medicare is just not telling the truth.
  What, honestly, should scare America's senior citizens and disabled 
citizens is the prospect that we will do nothing. For if we do nothing, 
seniors will have a hospital benefit plan for only 7 more years. If we 
do nothing, seniors will be able to keep their doctors but only for the 
next 7 years. After that, you will still have your doctor, but he will 
not be able to treat you in a hospital. After that, the hospital 
insurance trust fund will run out of money and Medicare will not be 
able to pay hospital benefits.
  I want to make sure that our seniors can keep their existing 
coverage. I want to give them the opportunity to choose other health 
plans, just like my colleagues and I in the Senate can choose our own 
health plans. And I believe this is exactly what the Republicans in the 
Senate want to see happen. They want to give the seniors the 
opportunity to choose other health plans just like we choose every 
year. 

[[Page S 11717]]

  Most important, I want to make sure that they can do all of these 
things for more than just 7 years. In September we are going to report 
legislation that will strengthen Medicare. We are going to simplify 
Medicare, and we are going to make sure that every Medicare beneficiary 
has the right to choose his or her health plan, just like my fellow 
Senators and I have. We need to strengthen Medicare. And to do that we 
have to control the program's rate of growth.
  The first thing we are going to do is to attack the waste and fraud 
in the system. Every senior recently receiving Medicare knows the 
system is inefficient, complex, and filled with opportunities for waste 
and fraud. We are going after that money first.
  But all experts tell us that will not be enough. We are going to do 
that, but then we are going to have to look at changes to the program, 
in both the short and the long term.
  In the short run, we are going to have to look at how much we pay 
doctors and hospitals--that is in the short term-- and the way we pay 
doctors and hospitals for the services seniors receive. We are going to 
create the right incentives, so that doctors and hospitals are smart 
about how they spend your money.
  Most importantly, we are going to offer seniors more choices. As a 
Senator, I have, as has everyone in this body, an opportunity to choose 
my health plan once a year. If I want a generous program with lots of 
benefits and no deductibles, I pay a bit more.
  In some of the areas of the country, Medicare already is 
experimenting with this, and seniors have a choice. But that is a very 
small portion. For the most part, the Medicare Program is stuck in the 
rigidities of a 30-year-old program while health delivery in America 
has moved strongly away from that to various choices for our people, 
not just one choice.
  We are going to expand this program and gradually change the system 
so that all seniors will have choices like we have in the Senate. Some 
seniors are going to have to pay a little more. There is no way we can 
get around that. But we going to come to seniors last after we have 
attacked fraud and waste and after we have made changes to the way we 
pay doctors and hospitals and after we have started to phase in changes 
that provide seniors with many choices.
  Any changes are going to be phased in gradually over time. We are 
concerned and considerate with seniors. They do not want rapid changes. 
We do not think that is necessary. We know that seniors who are on 
fixed incomes have difficulty adjusting to dramatic changes, and we are 
taking that into account.
  We are not going to let Medicare go bankrupt. Yes, I too celebrate 
the 30th anniversary of Medicare. It has been an important program 
critical to health of America's older and disabled people. But right 
now I am thinking about how we are going to make sure that Medicare has 
a 40th anniversary and beyond.
  I yield the floor.
  Mr. FRIST addressed the Chair.
  The PRESIDING OFFICER (Mr. Jeffords). The Senator from Tennessee.
  Mr. FRIST. Mr. President, I would like to continue our discussion 
this morning on Medicare and our efforts to save it, to strengthen it 
and to simplify it for the current generation.
  As the distinguished Senator from New Mexico just said, this is the 
30th anniversary of the Medicare system, a program, a system that is 
beloved by over 37 million Americans.
  Mr. President, a birthday celebration is--by definition--a 
recognition of the past and not the future. In commemorating the birth 
of a loved one, we honor all that he is and has done to earn our 
esteem. As much as we may wish it, however, whether that person lives 
to celebrate future birthdays, is out of our hands.
  Perhaps that is why when President Clinton celebrated the 30th 
anniversary of the birth of Medicare last Saturday--a system beloved by 
more than 37 million Americans--he spent the day reminiscing about its 
past, and ignoring its future.
  But just as blowing out all the candles will not guarantee that your 
wish comes true, closing our eyes to the facts about the health of the 
Medicare system will do nothing to prolong its life.
  Mr. President, on April 3 of this year, Medicare was diagnosed as 
terminal. Unless Congress takes ``prompt, effective, and decisive 
action''--we were told--Medicare will be dead in 7 years.
  Who made this diagnosis? Not a band of wild-eyed, budget-cutters on 
Capitol Hill. Not a horde of Robin Hood-like raiders who want to steal 
from the old to give to the rich, as the President and some in his 
party would like the American people to believe.
  No, Mr. President, it was the bipartisan board of Medicare trustees--
a board which includes the Commissioner of Social Security, two public 
trustees appointed by Democrats and Republicans, and three members of 
Mr. Clinton's own Cabinet: Robert Rubin, the Secretary of the Treasury; 
Robert Reich, the Secretary of Labor; and Donna Shalala, the Secretary 
of Health and Human Services.
  It has already been pointed out in this report by the Medicare 
trustees.
  So why is the President ignoring their advice? Perhaps because the 
President has no plan of his own to save Medicare. Perhaps because he 
believes that if he just ignores the problem long enough, it will go 
away. More likely, Mr. President, it is because he hopes that senior 
citizens will simply be too scared to understand that they can take 
control of their own health care without the Government telling them 
what to do.
  Mr. President, Medicare's impending bankruptcy is not a Republican 
nor a Democrat issue--neither one. It is just a plain fact. It is a 
fact because the average 65-year-old couple retiring today will consume 
about $120,000 more in Medicare benefits than they paid into the 
system, than they paid into this trust fund, in terms of premiums, in 
terms of taxes over their lifetime.
  It is a fact because it now takes the taxes of more than three and a 
half workers to pay for one retiring couple's health care regardless of 
that couple's income. It is a fact because before long the number of 
senior citizens on Medicare will far exceed the number of tax-paying 
workers. And it is a fact because for years Congress has been putting 
off reform, ignoring the warning signs and tinkering around the edges 
by raising payroll taxes and by cutting payments to providers. Well, we 
can tinker no longer.
  It is a fact because next year for the first time in its history 
Medicare will be spending more that year than it takes in. And once 
that happens, the trust fund begins to go broke. Once that happens, the 
trust fund will be bankrupt in 7 years.
  Mr. President, when it goes bankrupt, when that happens under Federal 
law, no hospital bills can be paid. In just 7 years seniors will not 
have less Medicare; they will have no Medicare.
  Mr. President, unlike President Clinton and some other Members of the 
Democrat Party, Republicans simply are not willing to abandon 37 
million Americans to a wish and a prayer.
  Our birthday present to Medicare will be a plan to save it, to 
strengthen it, and to simplify it--to save it for every citizen who 
depends upon it now today, to strengthen it for every person who is 
counting on it in the future, and to simplify it for everyone to make 
it easier to use and easier to understand.
  Let me make three points very quickly.
  First, under the Republican plan, Medicare will continue to grow. 
Yes, it will be at a slower but a more sustainable rate that will 
preserve it, that will save it over time.
  Today, Medicare spending is growing at the rate of 10.4 percent per 
year--that is more than three times the rates of inflation, and more 
than twice the rate of private health care spending.
  Under the Republican plan, Medicare spending will continue to grow--
at the rate of 6.4 percent per year--which is still more than twice the 
rate of inflation.
  Spending per beneficiary will increase from $4,800 per senior this 
year to $6,700 per senior by the year 2002--an increase of more than 
$1,900 per beneficiary, and
  Under the Republican plan, by the year 2002, the Federal Government 
will have spent $96 billion more on Medicare beneficiaries than it 
spent in 1995.
  Mr. President--any way you slice it--that is not a cut.
  The second point: The Republican plan will also guarantee that every 
senior citizen will have the right to choose:

[[Page S 11718]]

  The same traditional fee-for-service Medicare insurance they have 
right now; the same insurance as any Member of Congress; the same 
insurance their children have; and preretirees will have the right keep 
their current benefit package, without having to change to a Government 
system that offers them less care than they had in the private sector.
  Mr. President, under the Republican plan, seniors will not lose their 
Medicare entitlement. They will continue to be entitled to the right to 
receive all of Medicare's benefits--including inpatient hospital care, 
skilled nursing facility care, home health care, hospice, care, 
physician services, laboratory and diagnostic tests, and x ray and 
radiation therapy.
  They will continue to be entitled to the right to remain in the 
current Medicare system that they know today.
  But they will also be entitled to a right that is denied them today 
under the current Medicare system, the right to choose insurance that 
is available to other younger Americans, insurance that may offer them 
more benefits, be it prescriptions, be it eyeglasses, than they have 
today, and quite possibly at lower costs.
  The third point is that we must take time to do it right. Mr. 
President, Medicare is just too critical. As a physician, I have had 
the opportunity to see it work, doctor to patient, every day for the 
last 18 years. It is too important to apply politics as usual. It must 
be a bipartisan effort. But the longer we do nothing, the worse 
Medicare's financial status becomes.
  We must act now--act now to save Medicare for those who are on it 
today.
  We must begin that process today of strengthening the Medicare system 
for those who will be counting on it in the future. We must work 
together, and we must do it right.
  Mr. President, in closing, just as every birthday offers a new 
opportunity to change in many ways to a healthier lifestyle and a 
reminder of what will happen if we do not change, so too does this 
Medicare anniversary, this Medicare birthday provide us with the 
incentive we need to begin the process, a process that, indeed, will 
guarantee Medicare not just a 7-year survival but a long life and many 
happy returns of the day.
  Mr. President, I thank the Chair. I look forward to continuing the 
discussion over the next 30 minutes or so, and at this juncture I would 
like to turn to the distinguished Senator from Wyoming, who has 
coordinated much of what we call the freshman focus which reflects what 
many of us in the freshman class, the 11 new Senators, want to 
accomplish, and that is significant change, effective change, because 
that is what our mandate was from the American people.
  I thank the Chair and I yield the floor.
  The PRESIDING OFFICER. The Senator from Wyoming is recognized.
  Mr. THOMAS. I thank the Chair.


                       Strengthening of Medicare

  Mr. President, I rise to speak in support of the strengthening of 
Medicare, to continue some of our dialog this morning about this 
important issue. As my friend from Tennessee said, those of us who came 
to the Senate this year I think have been particularly interested in 
dealing with those questions that require change. I think we all came 
with a renewed idea of the feeling of voters because we were elected in 
this last election, a feeling of voters that there does need to be a 
change; that there does need to be an honest evaluation of programs; 
that we do need to react to the needs of programs, to change them when 
they need to be changed, and not simply seek to apply some sort of 
political remedy that makes everybody feel good. So we have found 
ourselves dealing with some pretty tough issues and intend to continue.
  So I rise in support of strengthening Medicare, of course. I think 
most everybody at this point understands that there has to be change. 
Everybody I know of wants to strengthen the Medicare Program. Everybody 
I know of thinks that there is value in this program, thinks it is a 
program that needs to be maintained, one that needs to continue to be 
available, not only for the 37 million people who currently participate 
but, frankly, it means a lot to some of us who do not yet participate, 
yet who have mothers, as in my case, who do participate, and I feel 
very good about that. She feels good about it as well. She feels 
confident that there will be care for her as she grows older.
  So it is not a question of whether we want the program or whether we 
like the program. We do. The question is, How do we preserve it? The 
question is, Do we respond to the facts that are readily available, 
most graphically portrayed in the trustees' report, that you have to do 
something or the program goes broke? That is fairly clear. Or I suppose 
you can seek to use it as sort of a political tool and then spin it 
into a protectionist sort of thing and try to use it in 1996.
  I hope that is not the case. In fact, Mr. President, that causes me 
to reflect just a moment on something that bothers me quite a little 
bit, in that this issue has become something of a victim of that 
tendency to spin and merchandise issues for their political value 
rather than really being willing to deal with them as the facts 
dictate.
  That is not something unique to the Democrats or unique to the 
Republicans or, indeed, unique to groups that are outside of the 
parties that deal in political issues. Frankly, it troubles me a great 
deal. If we are, as we are, a Government of the people and by the 
people and for the people, then the people who are going to ultimately 
make the decisions need to make those decisions based on facts.
  It is almost an irony that the technology of information has changed 
so much that we have more information available to us, more quickly, 
wherever we live. In Wapiti, WY, where I come from, people can see when 
Yeltsin gets up on the tape 10 minutes after it happens. Imagine this 
compared to 50 years ago or 100 years ago when issues and facts and 
Government only came to people after months of communications.
  So it is an irony to me that we now have for each of us as voters the 
best opportunity to know facts and to know them quickly. However, we 
are faced with this notion of a continuing growth in the idea of 
spinning issues so that the facts are not there.
  It is legitimate to have a different view as to how you solve 
problems. It is legitimate to have great debates. It is legitimate to 
say I wish to go this way and you want to go that way, but they ought 
to be based on facts. In this instance, the facts are before us. The 
facts are put forth by a bipartisan group, not only bipartisan but made 
up a majority of this administration's Cabinet. So there are facts 
there.
  I do not know what there is new to say except to reiterate the 30th 
birthday of Medicare. Two weeks ago, the Democrats flocked to 
Independence, MO, to celebrate, as they should, a successful program, 
but there were two words missing. One was bankruptcy and the other was 
2002 which the facts tell us should be what we are really concerned 
about in making the changes necessary to strengthen Medicare.
  My colleague from Tennessee mentioned 37 million people by whom the 
program is beloved. It is also beloved by many others who feel 
confident that their mothers and fathers are going to be taken care of. 
Unfortunately, the program has major financial concerns and the 
administration has chosen to ignore them. The administration has chosen 
to attack those who want to strengthen the program by making some 
changes.
  The fact is there are two choices that will be available if we do not 
do something. One is we will have to eliminate the coverage for 
hospital services and home care and the other is raise taxes by $711 
billion. Neither option is acceptable. Seniors cannot afford to go 
without health care and no one suggests that they should. Indeed, we 
are here to strengthen it. The payroll tax needed to make the part A 
hospital insurance trust fund permanently sound would be an increase of 
over 3 percent on top of the 2.9 percent that is now paid. This would 
more than double the withholding. It means the payroll tax for a worker 
earning $45,000 would be increased by $1,584, nearly $1,600 a year.
  One of the interesting notions is the attempt to tie the tax 
reduction proposal to the changes being proposed in Medicare, but it 
really does not fit there at all. Part A of this program, which 
provides coverage for hospital, home health care, and skilled nursing 
facility services, is financed by Social Security payroll taxes, not by 
general 

[[Page S 11719]]
funds. And for the first time next year, we will be digging into the 
reserves to pay for that.
  So those are the options that are before us. While it has already 
been described, we need to make a change that reduces the annual rate 
of growth from 10 percent to roughly 7 or 6.5 percent. This will allow 
spending to increase from $4,800 to over $6,700 per individual. That 
takes into account the growing number of individuals. We also must 
change from a defined benefit program to a defined contribution 
program. Older people come in all kinds of financial conditions. They 
want to make choices with regard to the type of coverage they want and 
should be able to do that.
  We had hearings last year in the House, specifically in the Committee 
on Government Operations which I was a member of, on fraud and abuse. 
The witnesses testified that fraud represented 10 percent of overall 
costs in terms of the amount of money that is spent on health care. 
That is almost $90 billion. Clearly, we must do something about fraud 
and abuse.
  Another change that must be made is to encourage all of us, and the 
elderly in particular, to look at their bills to see if double-billing 
or over-billing exists. Taxpayers should no longer tolerate the 
response, ``What do you care? You don't have to pay for it anyway.'' I 
ran into this in a nursing home in Cheyenne, WY, where the materials 
that were sent there just happened to be a mechanical thing that cost 
about three times what it ought to cost them. The answer was, ``It 
doesn't matter because you don't have to pay for it.'' I disagree 
because it does matter.
  So, Mr. President, I am pleased Medicare is high on our agenda. I am 
pleased we are focusing on a problem that needs to be fixed. I am 
pleased that we are trying to strengthen the program so it may continue 
to exist and provide benefits not just on the 30th anniversary, but the 
40th, and the 50th. That is our goal.
  Mr. President, I yield the floor.
  Mr. FRIST addressed the Chair.
  The PRESIDING OFFICER. The Senator from Tennessee.
  Mr. FRIST. I see that the distinguished Senator from Arizona is here 
as we continue our discussion to save Medicare and to strengthen it for 
the current seniors, individuals with disabilities, as well as for the 
next generation.
  I should also thank the Senator from Wyoming for his statements and 
simply add that, if we were to do nothing--when he brought up taxes and 
how Medicare is paid for--by the year 2020, we would have to pay twice 
as much in taxes, in payroll taxes, as we pay now to keep that trust 
fund afloat.
  We must act and we must act now.
  Mr. KYL addressed the Chair.
  The PRESIDING OFFICER. The Senator from Arizona.


                           Crisis In Medicare

  Mr. KYL. I would like to thank the Senator from Tennessee for 
yielding this time. I think it is fortunate that in the Senate now we 
have a distinguished surgeon, someone very familiar with the delivery 
of health care, who can help us in the crafting of legislation to deal 
with this important problem that faces us today, the reform of our 
Medicare system to preserve and to protect and to strengthen Medicare. 
That is the challenge that faces us today. And I appreciate the time to 
talk on that.
  Before I begin that discussion, however, I would like to ask 
unanimous consent that, after my remarks, there be printed in the 
Record a copy of an editorial that was carried this morning in the Wall 
Street Journal dealing with the subject we debated much last week and 
which, hopefully, will be concluded this week. The editorial is 
entitled ``GOP Stakes Missile Defense.'' It is about our missile 
defense program and the work that the Senate has done to foster that 
program.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. KYL. Mr. President, my colleague, John McCain, and I have been 
conducting a series of townhall meetings in the State of Arizona for 
the last several months to talk about this question of how we preserve 
and protect and strengthen Medicare. We have listened to our 
constituents. And I think the first thing we ought to do here, when we 
begin to craft solutions, is to find out what they think is important 
to retain and what needs to be fixed and how to do that.
  So I am hoping that our colleagues will utilize what little time 
might remain of the August recess to hold such meetings with 
constituents, come back with new ideas about how to address the problem 
when we really begin work on this in September.
  People might wonder why we are talking about this particular subject 
this morning. Of course, the reason we are doing it is because, 
hopefully, at the end of this week we will be leaving Washington for 3 
weeks or so for the so-called recess. And it does offer us that 
opportunity to begin to talk to people about it. We want to begin that 
conversation right now.
  There has been much conversation already about the Medicare trustees' 
report. I do not think that anyone now who is familiar with the problem 
will deny that there is a problem, that we have to do something right 
away to fix that problem, to take quick action. If we do not, as has 
been noted before, Medicare will be bankrupt beginning in the year 
2002. Let me quote one small portion from the Medicare trustees' 
report.

       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 program's financing methods, benefits 
     provisions, and delivery mechanisms.

  Mr. President, that is something that I like to begin meetings with 
when I talk to my constituents in Arizona, because the Medicare 
trustees say we need to look at all three of these aspects.
  First, a review of the program's financing aspects. This means 
talking about taxes and premiums primarily, as my colleague from 
Wyoming just pointed out. The Medicare part A payroll tax paid by 
workers would have to be increased by up to 600 percent if we are going 
to solve the financial condition of Medicare by a payroll tax increase. 
If we are going to deal with it by increasing the premiums, the part B 
premiums, they would have to be increased by up to 700 percent. I ask 
seniors in Arizona, ``Is anybody here in favor of raising taxes or 
premiums?'' It might not be surprising that no hands go up, at least 
very few hands go up on that.
  All right. Let us turn then to the second thing that the trustees say 
we have to review, a review of the program's benefits provisions. 
Likewise, it might not surprise anyone here that when you ask whether 
or not anyone would like to see benefits reduced, you see very few 
hands go up in the audience. And, indeed, limiting benefits would 
merely exacerbate the Medicare coverage limitations that force seniors 
to spend millions per year on MediGap supplemental insurance.
  If we are talking, on the other hand, about restricting Medicare 
reimbursements to providers, that has been tried in the past. That is 
how we have tried to deal with this problem so far. And it has not 
worked. It only increases the incentives for rationing. We have seen 
the results of that because Medicare pays only between 60 and 70 
percent of the cost of care. More and more providers have decided not 
to provide that kind of care. So that limits the choice for seniors.
  Well, the third thing that can be done in dealing with Medicare 
reform, according to the trustees, is review of the delivery 
mechanisms. And that is where the real savings are to be found. That is 
where the real incentives for providing better care at an ultimately 
reduced cost is going to be found, I think.
  I think review of delivery mechanisms divides itself into two 
convenient ways of discussing the problem. The first are specific 
things that we can do in the delivery of this care, that we know will 
save money and will not at all adversely affect the care that seniors 
receive. When we hold these townhall meetings, we like to ask the 
people in attendance, ``Has anybody here ever reviewed a bill for 
something that they received and had Medicare pay for and found a 
mistake in the bill?'' Well, almost every hand goes up. And as a matter 
of fact, during the question and answer period, again, it is not 
surprising that you have tens of seniors coming up telling their 
personal stories about the surgery that they had to have or their 
spouse had to 

[[Page S 11720]]
have and the bill, and they cannot believe what they charged. They 
asked about it, and it was, ``Yes, it is an overcharge, but we do not 
have the mechanism for trying to deal with that. Somebody else is 
paying for it. Do not worry about it.''
  That frustrates seniors very greatly because they saved all their 
lives, paid taxes and they see the waste and abuse and, yes, sometimes 
fraud. And it makes them mad. It ought to make all of us mad. They want 
that dealt with. Before there is any talk about increasing any 
contribution that they may want to make or having to deal with the 
delivery of health care differently, they want to know that we have 
squeezed every dime of savings that can be squeezed out of this program 
in eliminating the waste and the fraud and even the abuse.
  One of the ideas we talked about to deal with this is some kind of 
reward whereby those who find the mistakes receive, let us say just 
hypothetically, 10 percent of all of the mistakes that have been 
certified to have existed or the fraud that has resulted in 
overpayments. So that is one way to deal with the problem.
  There is also a need, obviously, for tort reform, because there is 
too much excess spending in the program that results from the necessity 
of physicians and hospitals having to practice what we call defensive 
medicine, having to protect themselves from liability lawsuits and, 
therefore, ordering extra, unnecessary, and costly tests and 
procedures. So we need to have tort reform as a part of this overall 
reform.
  There are other things like computerized billings and some other 
things that we know will save a lot of money and does not affect the 
delivery of care at all.
  But we also know the second part of this discussion has to involve 
actual changes in the way that the various health care options are 
presented to seniors so that they can then have a wider array of 
choices and, with that wider array of choices being presented, the 
competition by the providers will naturally result in driving costs 
down.
  We also know that if they have the option of making choices 
themselves, where they may be able to keep some of the savings that 
result, there will necessarily be savings because it is no longer a 
third party paying it without consequence, it is rather the seniors 
being able to exercise a choice and save some of the money that is 
saved in the system.
  So we think these are additional ways by which we can save money.
  Now, we do not have a secret plan out there as to how to do this. 
That is why we want to talk to our constituents to find out what they 
think is the best way to do this. But there have been some pretty good 
ideas out there. And they basically enhance choice. They say, if you 
like the current kind of system, you can keep that. If you think it 
would be beneficial to you to go to an HMO, you can do that, although 
there should not be any disincentives for those who do not want to go 
to an HMO.
  Some people like the idea of going to PPO's and some like the idea of 
the medisave account. Frankly, I think this presents a great 
opportunity for us because, as I said a moment ago, with a medisave 
account you basically provide seniors with an amount of money they can 
spend so long as they can buy a major medical policy that can take care 
of their major medical expenses.
 They then have enough money left over to pay the out-of-pocket 
expenses that they have to pay until they reach the limit that would 
then kick into a major medical or a catastrophic policy. But if they do 
not spend that money, they get to keep what is left over and that 
provides a powerful incentive not to be spending as much on health 
care. That is the bottom line.

  We have to decrease the rate of growth from about 10 percent down to 
about 7 percent, which is still twice the rate of increase in the 
private sector and twice the rate of inflation increase.
  So as we go out to visit with our constituents this August, Mr. 
President, I suggest we visit with them about some of these options, 
ask them what is on their minds, how they would see the solution to the 
problem being developed. And when we come back in September, hopefully 
we will have developed some kind of consensus so we can present the 
plans, debate them, have a good, thorough debate around the country, 
but eventually this fall come up with legislation that can preserve, 
protect, and strengthen Medicare for the seniors who are currently 
beneficiaries and all of us in the future.
  Again, I thank the Senator from Tennessee for conducting this 
important discussion this morning.
              [From the Wall Street Journal, Aug. 7, 1995]

                               Exhibit 1

                       GOP Stakes Missile Defense

       Missile defense is back. In an important 51-48 vote last 
     week, largely upon party lines, the Senate approved 
     construction of a system to defend the nation against attack 
     by ballistic missile. The House approved a similar bill this 
     spring. Beyond taking a crucial step to ensure the country's 
     future security, the Republican Senate has thrown down a huge 
     political marker for the coming presidential campaign.
       The part of the bill that has gotten the most attention is 
     the plan to build a network of land-based missile-defense 
     sites over the next eight years. Even more important is its 
     increased funding for an upgrade of the Navy's Aegis air-
     defense system, which could provide a rough defensive 
     capability for the continental U.S. by the year 2000. It also 
     ups the spending for Brilliant Eyes, a space-based sensor 
     capable of detecting missile launches and tracking missiles 
     in flight. In the long run, space-based defenses--Star Wars--
     are the most efficient and effective way to defend against 
     missile attack.
       It's hard to overstate the significance of the Senate vote. 
     It is a long-delayed recognition of the need to prepare now 
     for a future threat. This is not a bad lesson to remember in 
     the month that we are commemorating the 50th anniversary of 
     the end of a terrible war that we were unprepared to fight. 
     It's a lesson, however, that the Administration rejects; it's 
     threatening to veto the Senate bill, so the campaign issue is 
     clearly drawn.

                    Nations with ballistic missiles

     Afghanistan
     Argentina
     Brazil
     Britian
     Belarus
     China
     Egypt
     France
     India
     Iran
     Iraq
     Israel
     Kazakhstan
     Libya
     North Korea
     Pakistan
     Russia
     Saudi Arabia
     South Africa
     South Korea
     Syria
     Taiwan
     Ukraine
     U.S.
     Vietnam
     Yemen

     Sources: Heritage Foundation; other sources.

       As to the threat, consider the nations on the nearby list 
     that already possess ballistic missiles with conventional 
     weapons capabilities of some range (either developed 
     indigenously or bought from a superpower). It's hardly 
     difficult to imagine that once some madman gains this power 
     in one of the Bagdhdads or Pyongyangs of the world, he'll be 
     sorely tempted to threaten a San Francisco or New York with 
     it.
       ``Already North Korea is developing missiles that could 
     attack the military installations in Alaska,'' warned Senator 
     Ted Stevens of Alaska in Thursday's debate. When that 
     capability eventually exists, it will of course be too late 
     for the U.S. to start cobbling together a national missile 
     defense.
       A more immediate reminder of the need for a national 
     missile defense comes from China. Two weeks ago in a 
     ``routine test,'' it launched six missiles that splashed down 
     in the Taiwan Strait. China already has an ICBM capable of 
     reaching California. The Taiwan ``test'' didn't cause a big 
     news stir, but imagine what would be our response if someday 
     it ``tested'' one of those unarmed missiles by lobbing it 
     into San Francisco Bay, say, during the visit of a Taiwan 
     official to Ithaca, New York? There would be a popular 
     upheaval in this country.
       Apart from the welcome attention it gives to the need for a 
     national missile defense, the second significance of the 
     Senate vote lies in the message it sends about arms control. 
     The Senate has said, in effect, that it no longer is going to 
     let the tail wag the dog. From now on, it's going to tailor 
     arms-control treaties to suit national security policy, not 
     the other way around.
       That ultimately means the demise of the 1972 Anti-Ballistic 
     Missile Treaty, in which the U.S. made the reckless promise 
     not to defend itself against missile attack. The 
     Administration is screaming that the Senate bill would 
     violate that treaty, and put in jeopardy the two Start 
     treaties, under which the U.S. and Russia are dismantling 
     their nuclear arsenals. Just so. Those treaties have always 
     been invoked as the reason for according the ABM treaty 
     sacred status, thereby foreclosing any intelligent debate on 
     missile defenses themselves. While Republicans are talking 
     publicly about modifying the ABM Treaty, many have come to 
     the private conclusion that it has to go.
       As a technical matter, that is easier said than done. There 
     is a withdrawal clause, but it's up to the executive branch 
     to exercise it. That's something that will almost certainly 
     have to wait until the next President because this one 
     subscribes to the ancient arms-control dogmas. We wonder how 
     that will play in the summer of 1996.
       The pro-missile defense group, Committee to Defend America, 
     has been raising that issue in focus groups around the 
     country in recent months. Along the way it has discovered 
     that most citizens think we now can shoot down an incoming 
     ballistic missile. 

[[Page S 11721]]
     When they find out we have the ability to develop such a capability but 
     choose not to exercise it, the overwhelming response is 
     outrage--and a demand that we build it immediately.
       Ultimately, of course, the Republican candidates also have 
     to credibly convince voters they recognize the modern 
     realities. But if the party's candidates hold to the position 
     staked out by the Senate last week, this will be one issue on 
     which Bill Clinton will be sounding like a very old Democrat.

  Mr. FRIST addressed the Chair.
  The PRESIDING OFFICER. The Senator from Tennessee is recognized.
  Mr. FRIST. Mr. President, as we continue our discussion this morning, 
there have been four central things: First is that Medicare will be 
bankrupt in 7 years; second, under the GOP plan, Medicare spending will 
continue to rise; third, that seniors truly deserve the right to 
choose, to have more than they have today, though they can preserve 
their traditional fee-for-service system; fourth, we must take time to 
do it right, but we need to act and to act now.
  To continue our discussion this morning on how best to save and 
strengthen Medicare, I turn to the distinguished Senator from Idaho.
  The PRESIDING OFFICER. The Senator from Idaho is recognized.
  Mr. CRAIG. Mr. President, let me thank my colleague for yielding, but 
also let me thank him for taking out this special order to discuss with 
the Senate and those who might be watching this morning the 
tremendously important issue of Medicare.
  I think I, along with him and many others, are dismayed and amazed at 
the recent attempts to attack the integrity of the Medicare trustees' 
report on the status of the Medicare trust fund.
  There has been a great deal of partisan rhetoric on the validity of 
the report, as well as criticism of the budget resolution the Congress 
has adopted this year in reflection of that report in an attempt to 
handle it in an up-front way.
  When you look at those who are members of the board of trustees, it 
becomes clear that the report is certainly not a partisan effort to 
spin one idea or another about Medicare. The Medicare trustees are 
Robert Rubin, the Secretary of the Treasury; Robert Reich, the 
Secretary of Labor; Donna Shalala, Secretary of Health and Human 
Services; Shirley Chater, Commissioner for Social Security; Stanford 
Ross; and David Walker.
  These six people serve on the Social Security and the Medicare boards 
of trustees. The last two members, Stanford Ross and David Walker, were 
appointed by the President and confirmed by the Senate to represent the 
public. The boards are requested by law to report to the Congress each 
year on the operation of the trust funds and to project the financial 
status of those funds.
  The Medicare trustees, in their annual report on the Medicare trust 
fund released in April of this year, concluded that action is needed to 
be taken if Medicare is going to operate after the year 2002. The 
following is an excerpt that other Senators this morning may have 
mentioned, but I think it is clearly noteworthy and ought to be a part 
of the Record. Let me read from that trust fund report:

       The Federal hospital insurance--

  HI as it is known.

     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 urge 
     the Congress to take action.

  Let me repeat that:

       The trustees urge the Congress to take action.

  That is their job, Mr. President, to tell us what is wrong and to 
suggest to us what we ought to do, and they urge us to take action 
designed to control the Federal hospital insurance trust fund to 
address the projected financial imbalance in both the short range and 
the long range through specific program legislation as part of a broad-
based health care reform. The trustees believe that prompt, effective 
and decisive action is just critically necessary.
  So some people will say this is not an urgent issue because the 
trustees have reported these concerns of solvency, or lack thereof, 
over the past and it still continues to exist today. We hear Members of 
the other body shrugging their shoulders and saying, ``This isn't big 
news. This isn't important news. We've heard these reports before.''
  It is because the Congress in the past has heard those reports, Mr. 
President, and has micromanaged making the minor adjustments over the 
years to control the costs that have allowed us to maintain the trust 
funds.
  However, those artificial cost controls, lower reimbursement rates, 
the growing paperwork that has been a result of these reactions to 
reports and the solutions now no longer work, or at least that is what 
the trust funds are saying, that we have to make the adjustments and we 
have to do it now or the Medicare beneficiaries in rural States like 
mine are simply not going to be served as they have been served in the 
past.
  At or below-cost reimbursement rates have made it difficult to 
recruit new physicians in my State of Idaho and have forced many 
doctors to limit the number of Medicare patients they will treat. In 
other words, our actions of the past, while trying to save the system, 
have now squeezed it into a situation where doctors are dividing and 
sorting out and saying, ``We will, but we won't, and we'll limit our 
practices and we'll limit our ability to receive and care for Medicare 
patients.''
  As I said many times both on the floor of the House of 
Representatives when I served there and now in the Senate, rural Idaho 
is not just 20 miles down the interstate. It is something that 
sometimes requires hundreds of miles of distance and time. Of course, 
if it is the middle of the winter, it may be that very difficult 
passage over a snowbound pass that results in the care or lack of care 
delivered, and that is all a part of this Medicare equation that we 
have to talk about.
  I will say that even the President realizes this is a problem now 
that he cannot walk away from and it is why he dealt with it in his own 
budget. Although his rhetoric does not match up with the figures of his 
own budget, he, too, unlike a lot of other Members of his party, 
recognizes the critical nature Medicare is in and has to be addressed.
  President Clinton has launched a number of attacks on the Congress 
for spending too little on Medicare. However, when you start comparing 
numbers, there is little difference between the President's plan for 
Medicare over the next 7 years and the budget targets set in the 
congressional budget resolution. They are just a little ways apart.
  According to the Office of Management and Budget, President Clinton 
proposes to spend $1.697 trillion on Medicare over the next 7 years. 
That figure is very close to the $1.62 trillion--and I said 
``trillion''--that was targeted for Medicare spending under the 
congressional budget resolution.
  In real money terms, Mr. President, the difference is less than a 
nickel on the dollar between the President and the Congress. On some of 
the graphs I have seen, it is almost nondiscernible.
  In addition, the spending targets in both the Congress' and 
President's budgets are not cuts in spending, as others would like to 
have us believe. Rather, they are lower rates of growth. Under the 
Republican plan, Medicare's annual spending will increase by $178 
billion this year to $274 billion in the year 2002. That is an annual 
growth rate of 6.4 percent, and yet, there is this wringing of hands to 
suggest that we are severely slashing Medicare to its recipients.
  Let me suggest that it is a 6.4-percent growth, and that is 
substantially larger than current rates of health care increases on a 
cost annualized per patient.
  Right now we are spending over $4,816 a year per Medicare recipient 
and, by 2002, under the Republican plan to strengthen and maintain 
Medicare, we would be spending $6,732.
  Regardless of which figure you use, both represent increases in 
spending about one and a half times higher than the rate of growth in 
private sector health care spending.
  That level of growth can be achieved without breaking the trust. 
However, the trust cannot continue to grow more than twice as fast, 
because that path leads us to bankruptcy.
  Mr. President, just 19 months ago, the President proposed major 
reductions in Medicare in order to pay for his Government-run health 
care proposal. He said at that time that those reductions were not 
cuts:

       Today, Medicaid and Medicare are going up at three times 
     the rate of inflation. We propose to let it go up at two 
     times the rate of 

[[Page S 11722]]
     inflation. That is not a Medicare or a Medicaid cut. So when you hear 
     all this business about cuts, let me caution you that is not 
     what is going on.--President Bill Clinton, speech to the 
     AARP.

  So, what is all this rhetoric about? It's about politics. Not policy. 
Not the future of Medicare, Mr. President. And, certainly not about 
meeting the needs of America's seniors. The facts are pretty clear: No 
one is cutting Medicare; the proposed spending levels are very similar; 
and, Clinton's proposal doesn't protect, preserve or improve Medicare.
  Mr. President, another accusation I have heard about the spending 
targets proposed over the next 7 years is that they are being made to 
pay for a tax break for the wealthy. Reading the summary of the 1995 
annual report will dispel that story.
  Mr. President, this is not about tax cuts or spending cuts. This is 
about bankruptcy. The President agreed, and said so on June 11 of this 
year.

       We cannot leave the system the way it is--when you think 
     about what the baby-boomers will require--that's going to 
     require significant long-term structural adjustment. We'll 
     just have to look at what we can do there. But the main thing 
     we can't do--we can't have this thing go broke in the 
     meanwhile.

  In addition, three members of president Clinton's Cabinet and the 
Commissioner of Social Security were in agreement and said so on April 
3 of this year.
  The Medicare trustees stated in their report issued on the third of 
April that, ``under all sets of assumptions, the trust is projected to 
become exhausted even before the major demographic shift begins.''--
Page 3 of the report.
  Some people will avoid responsibility, and will say that there is no 
problem. They are wrong. Next year, for the first time in the history 
of the Medicare Program, more money will go out of the trust fund than 
will come in. The debt will continue to grow until the trust fund is 
completely depleted.
  Mr. President, I am concerned that the trustee's annual report is no 
longer in print.
  In addition, Mr. President, I hope my fellow Idahoans will take the 
time to review this summary.
  I will be sending copies of today's Congressional Record to each of 
my State offices and will have it available for review in the office. 
The summary is not very long, but speaks volumes about this problem.
  I hope my colleagues will do the same to make sure that this document 
gets out and the American people can read for themselves the financial 
problems that the Medicare Hospital Insurance Trust fund faces.
  Mr. President, to cast stones and ignore this problem is not an 
option. Regardless of age, we all need to be concerned about the 
solvency of Medicare. We must act now.
  Mr. President, I had the pleasure of celebrating my 50th birthday in 
July of this year. As I embark on my second half century, a few harsh 
realities are drawing near. I may not be knocking on the door of my 
retiring years, but they are coming fast.
  Issues like health care are of interest and concern to me, like all 
Americans. I want Medicare to continue to exist for those who are now 
beneficiaries.
  I also want it around for my wife and me. But, more importantly, I 
want the program to be there for my children, and my children's 
children, and so on.
  An individual from Idaho that I know fairly well contacted me 
recently, to let me know that I would be in big trouble if anything 
were done to Medicare. The conversation progressed and finally, this 
individual told me they didn't care if Medicare went bankrupt in 7 
years because there was no way in the world they'd still be alive.
  Well, Mr. President, we laughed a little at that. And, then, it was 
as if it were finally becoming clear. This individual realized that 
when he was gone, someone else would be in his situation, that the need 
would still exist, and the situation, if not addressed would be far 
worse. After all, the baby-boomers are no longer thirty-somethings. I 
know, because I am a baby-boomer.
  In the end, my caller agreed that what we needed to focus on was 
long-term solutions that would reform Medicare in a way that will shore 
up the solvency of the trust fund. Mr. President, it is a tall order, 
but there is no alternative. It must be done.
  I ask unanimous consent that the executive summary, the 1995 annual 
report of the Social Security and Medicare board of trustees also be 
printed in the Record immediately following my comments.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

          Status of the Social Security and Medicare Programs


                  a summary of the 1995 annual reports

                        A message to the public

       The Boards of Trustees are pleased to present this Summary 
     of the 1995 Annual Reports of the Social Security and 
     Medicare trust funds. The reports include extensive 
     information about these important social programs and, we 
     believe, fully and fairly present their current and projected 
     financial condition.
       In particular, we encourage current and future 
     beneficiaries to consider what the reports mean for them as 
     individual citizens. Based on the Trustees' best estimates, 
     the reports show:
       The Federal Old-Age and Survivors Insurance (OASI) Trust 
     Fund, which pays retirement benefits, will be able to pay 
     benefits for about 36 years. The Board believes that the 
     long-range deficit of the OASI Trust Fund should be 
     addressed. The Advisory Council on Social Security is 
     currently studying the financing of the program and is 
     expected to recommended later this year ways to achieve long-
     range actuarial balance in the OASI fund.
       The Federal Disability Insurance (DI) Trust Fund, which 
     pays disability benefits, is projected to be exhausted in 
     2016. The Board believes that the long-range deficit of the 
     DI Trust Fund should be addressed. The Advisory Council on 
     Social Security currently also is studying the financing of 
     the DI program and is expected to recommend later this year 
     ways to achieve long-range actuarial balance in the DI fund.
       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 urge the Congress to take 
     additional actions designed to control HI program costs and 
     to address the projected financial imbalance in both the 
     short range and the long range through specific program 
     legislation as part of broad-based health care reform. The 
     Trustees believe that prompt, effective, and decisive action 
     is necessary.
       The Federal Supplementary Medical Insurance (SMI) Trust 
     Fund, which pays doctor bills and other outpatient expenses, 
     is financed on a year-by-year basis and, on this limited 
     basis, is adequately financed. The Trustees urge the Congress 
     to take additional actions designed to more effectively 
     control SMI costs through specific program legislation as 
     part of broad-based health care reform. The Trustees believe 
     that prompt, effective, and decisive action is necessary.
       Pubic discussion regarding the financing of the Social 
     Security and Medicare programs needs to take account of the 
     critical differences among the four individual trust funds 
     and, at the same time, the important relationships among 
     them. A key aspect of thinking about future financing of 
     these trust funds is recognition that under current law the 
     timing and magnitude of the financing problems facing the 
     programs are distinctly different. This summary presents the 
     current and projected financial status of these four programs 
     both separately and together in the hope that it will enhance 
     public understanding of them and encourage necessary program 
     reforms.
       By the Trustees:
     Robert E. Rubin,
       Secretary of the Treasury, and Managing Trustee.
     Robert B. Reich,
       Secretary of Labor, and Trustee.
     Donna E. Shalala,
       Secretary of Health and Human Services, and Trustee.
     Shirley S. Chater,
       Commissioner of Social Security, and Trustee.
     Stanford G. Ross,
       Trustee.
     David M. Walker,
       Trustee.


 status of the social security and medicare programs--a summary of the 
                          1995 annual reports

       What Are the Trust Funds?--Four trust funds have been 
     established by law to finance the Social Security and 
     Medicare programs. For Social Security, the Federal Old-Age 
     and Survivors Insurance (OASI) Trust Fund pays retirement and 
     survivors benefits; and the Federal Disability Insurance (DI) 
     Trust Fund pays benefits after a worker becomes disabled. 
     When both OASI and DI are considered together, they are 
     called the OASDI program.
       For Medicare, the Federal Hospital Insurance (HI) Trust 
     Fund pays for hospital and related care (often called ``Part 
     A'') for people over 65 and workers who are disabled. The 
     Federal Supplementary Medical Insurance (SMI) Trust Fund pays 
     for physicians and outpatient services (often called ``Part 
     B'') for people over 65 and workers who are 

[[Page S 11723]]
     disabled. These two trust funds are not usually considered together, 
     because they are funded differently.
       Who Are the Boards of Trustees?--Six people serve on the 
     Social Security and Medicare Boards of Trustees: the 
     Secretary of the Treasury, the Secretary of Labor, the 
     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.
       What Were the Trust Fund Results in 1994?--Assets of all 
     trust funds except SMI increased during calendar year 1994. 
     At the end of the year, 42.9 million people were receiving 
     OASDI benefits and about 37 million people were covered under 
     Medicare. Trust fund operations, in billions of dollars, were 
     (totals may not add due to rounding):

------------------------------------------------------------------------
                                   OASI     DI    OASDI     HI      SMI 
------------------------------------------------------------------------
Assets (end of 1993)............   369.3    9.0    378.3   127.8    24.1
Income during 1994..............   328.3   52.8    381.1   109.6    55.6
Outgo during 1994...............   284.1   38.9    323.0   104.5    60.3
Net Increase....................    44.1   14.0     58.1     5.0    -4.7
Assets (end of 1994)............   413.5   22.9    436.4   132.8    19.4
------------------------------------------------------------------------

       What Were the Administrative Expenses in 1994?--The cost of 
     administrative expenses in fiscal year 1994, shown as a 
     percentage of benefit payments from each trust fund, was:

------------------------------------------------------------------------
                                         OASI    DI   OASDI    HI   SMI 
------------------------------------------------------------------------
Administrative Expenses (FY 1994).....     0.7  2.8      0.9  1.2    3.0
------------------------------------------------------------------------

       How Are the Trust Funds Financed?--Most OASDI and HI 
     revenue consists of taxes on earnings that are paid by 
     employees, their employers, and the self-employed. The tax 
     rates are set by law and, for OASDI, apply to earnings that 
     do not exceed a certain annual amount. This amount, called 
     the earnings base, rises as average wages increase. In 1995, 
     the earnings base for OASDI is $61,200. Beginning with 1994, 
     HI taxes are paid on total earnings. The tax rates for 
     employees and employers each under current law are:

------------------------------------------------------------------------
               Year                 OASI     DI    OASDI     HI    Total
------------------------------------------------------------------------
1990-93..........................    5.60   0.60     6.20   1.45    7.65
1994-96..........................    5.26   0.94     6.20   1.45    7.65
1997-99..........................    5.35   0.85     6.20   1.45    7.65
2000 and later...................    5.30   0.90     6.20   1.45    7.65
------------------------------------------------------------------------

       People who are self-employed are charged the equivalent of 
     the combined employer and employee shares, but only on 92.35 
     percent of net earnings, and may deduct one-half of the 
     combined tax from income subject to Federal income tax.
       All the trust funds receive income from interest earnings 
     on trust fund assets and from miscellaneous sources. The 
     OASI, DI and, beginning in 1994, HI Trust Funds also receive 
     revenue from the taxation of Social Security benefits.
       The SMI or Part B program is financed similarly to yearly 
     renewable, term insurance. Participants pay premiums that in 
     1994 covered about 30 percent of the cost; the rest is paid 
     for by the Federal Government from general revenues. The 1995 
     monthly premium is $46.10.
       In all trust funds, assets that are not needed to pay 
     current benefits or administrative expenses (the only 
     purposes for which trust funds may be used) are invested in 
     special issue U.S. Government securities
      guaranteed as to both principal and interest and backed by 
     the full faith and credit of the U.S. Government.
       How Are Estimates of Trust Fund Balances Made?--Short-range 
     (10-year) estimates are reported for all funds, and, for the 
     OASI, DI, and HI Trust Funds, long-range (75-year) estimates 
     are reported. Because the future cannot be predicted with 
     certainty, three alternative sets of economic and demographic 
     assumptions are used to show a range of possibilities. 
     Assumptions are made about economic growth, wage growth, 
     inflation, unemployment, fertility, immigration, and 
     mortality, as well as specific factors relating to 
     disability, hospital, and medical services costs.
       The intermediate assumptions (alternative II) reflect the 
     Trustees' best estimate of what the future experience will 
     be. The low cost alternative is more optimistic; the high 
     cost alternative is more pessimistic; they show how the trust 
     funds would operate if economic and demographic conditions 
     are better or worse than the best estimate.
       What Concepts Are Used to Describe the Trust Funds?--The 
     measures used to evaluate the financial status of the trust 
     funds are based on several concepts. Some of the important 
     concepts are:
       Taxable payroll is that portion of total wages and self-
     employment income that is covered and taxed under the OASDI 
     and HI programs.
       The annual income rate is the income to the trust fund from 
     taxes, expressed as a percentage of taxable payroll.
       The annual cost rate is the outgo from the trust fund, also 
     expressed as a percentage of taxable payroll.
       The percentage of taxable payroll is used to measure income 
     rates and cost rates for the OASDI and HI programs. Measuring 
     the funds' income and outgo over long periods of time by 
     describing what portion of taxable earnings they represent is 
     more meaningful than using dollar amounts, because the value 
     of a dollar changes over time.
       The annual balance is the difference between the income 
     rate and the cost rate. If the balance is negative, the trust 
     fund has a deficit for that year.
       The actuarial balance is the difference between the annual 
     income rates and cost rates summarized over a period of up to 
     75 years, and adjusted to include the beginning fund balance 
     and the cost of ending the projection period with a trust 
     fund balance equal to the next year's outgo; if the balance 
     is negative, the fund has an actuarial deficit.
       The trust fund ratio is the amount in the trust fund at the 
     beginning of a year divided by the outgo for the year. It 
     shows what percentage of the year's expenditures the trust 
     fund has on hand. For example, a trust fund ratio of 100 
     percent would reflect an amount equal to 1 year of projected 
     expenditures.
       The year of exhaustion is the first year a trust fund is 
     projected to run out of funds and to be unable to pay 
     benefits on time and in full.
       How Is the Financial Status of the Trust Fund Tested? 
     Several tests, based on the intermediate assumptions, are 
     used to review the financial status of the trust funds.
       The short-range test is met if, throughout the next 10 
     years, the trust fund ratio is at least 100 percent. Of, if 
     the trust fund ratio is initially less, but reaches 100 
     percent within the first 5 years and stays at or above 100 
     percent, and there is enough income to pay benefits on time 
     every month during the 10 years, the short-range test is met.
       The long-range test is met if a fund has an actuarial 
     deficit of no more than 5 percent of the cost rate over the 
     75 years, and if the actuarial deficit for any period ending 
     with 10th year or later is a graduated amount of 5 percent. 
     If the long-range test is met, the trust fund is in close 
     actuarial balance.
       The test for SMI actuarial soundness is met for any time 
     period if the trust fund assets and projected income are 
     enough to cover the projected outgo and there are enough 
     assets to cover costs incurred but not yet paid. The adequacy 
     of the SMI Trust Fund is measured only for years for which 
     both the beneficiary premiums and the general revenue 
     contributions have been set.
       What Is the Future Outlook for the Trust Funds?--The status 
     of the OASI, DI, and HI Trust Funds is shown together on 
     charts because they are financed the same way. SMI is 
     financed differently, so its status is described separately.

                  The short-range outlook (1995-2004)

       Chart A shows the projected trust fund ratio under the 
     intermediate (alternative II) assumptions for OASI, DI, and 
     HI separately. It also shows the ratio for the combined OASI 
     and DI trust funds. (Chart not reproducible in Record.)
       The OASI trust fund ratio line is over the 100 percent 
     level at the beginning of the 10-year period and stays over 
     that level through the year 2004. Therefore, the OASI Trust 
     Fund meets the short-range test of financial adequacy.
       The trust fund ratio line for DI starts at 54 percent, 
     reaches 100 percent in 1996, and remains above that level 
     throughout the remainder of the period. Thus, the DI fund 
     also meets the short-range test.
       The trust fund ratio line for the combined OASI and DI 
     Trust Funds begins above the 100 percent level and stays over 
     that level throughout the 10-year period; therefore, the 
     OASDI program, as a whole, meets the short-range test of 
     financial adequacy.
       Although the trust fund ratio line for HI is over the 100 
     percent level at the beginning of the 10-year period, it 
     falls below that level in 1995. 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 financing for the SMI Trust Fund has been set through 
     1995, and the projected operations of the trust fund meet the 
     test of SMI actuarial soundness.

                   The long-range outlook (1995-2069)

       Chart B shows the actuarial balance, as a percentage of the 
     cost rate, for OASI, DI, and HI separately under the 
     intermediate (alternative II) assumptions, as well as for the 
     combined OASI and DI Trust Funds. (Chart not reproducible in 
     Record.)
       For a trust fund to meet the long-range test of close 
     actuarial balance, the actuarial balance line for that trust 
     fund must stay above the shaded area throughout the 75-year 
     period. The triangle above the shaded area but below the zero 
     percent level shows the range of allowable deficits a fund 
     can have and still be in close actuarial balance.
       None of the three trust funds is in close actuarial balance 
     over the next 75 years. However, the chart shows that the 
     actuarial balance line for OASI, as well as for the OASDI 
     program as a whole, stays above the shaded area for many 
     years to come.
       The actuarial balance line for DI alone starts above the 
     shaded area but declines below it in about 2009 and continues 
     to decline significantly for about an additional 25 years 
     before the rate of decline slows. The actuarial balance line 
     for HI starts well into the shaded area and declines 
     continuously over the long-range period.
       The year of exhaustion for the OASI Trust Fund under 
     intermediate assumptions does not occur until 2031--36 years 
     from now. For the combined OASI and DI Trust Funds, the year 
     of exhaustion would be 2030--in 35 years. However, combined 
     OASDI expenditures will exceed current tax income beginning 
     in 2013. Thus, as Chart C illustrates, current tax income 
     plus a portion of annual interest income will be needed to 
     meet expenditures for 

[[Page S 11724]]
     years 2013 through 2019, and current tax income, annual interest 
     income, plus a portion of the principal balance in the trust 
     funds will be needed for years 2020-2029. (Chart not 
     reproducible in Record.)
       Another useful way to view the outlook of the trust funds 
     is to compare the income rate for each fund with its 
     estimated cost rate. Over the 75-year period the income rates 
     for OASI, DI and HI remain relatively constant, while the 
     cost rates generally rise steadily.
       For OASI, the income rate is projected to remain 
     significantly above the cost rate for a number of years. 
     Starting in about 2010, however, the OASI cost rate will 
     begin increasing rapidly as the baby boom generation begins 
     to reach retirement age. In 2014 and later, the cost rate for 
     OASI will exceed the income rate.
       The income rate for DI is slightly higher than the cost 
     rate only until 2004, after which the annual shortfall of tax 
     income is projected to increase slowly over the entire 75-
     year period.
       The cost rate for HI is higher than the income rate, by 
     rapidly growing amounts, throughout the 75-year projection 
     period--by the end of the period, the HI cost rate is 
     projected to be roughly 3 times greater than the HI income 
     rate. Chart D shows the virtually level income rates and 
     rising cost rates for OASI, DI and HI. (Chart not 
     reproducible in the Record.)
       An additional way to view the outlook for the trust funds 
     as projected under current law is in relation to the economy 
     as a whole. The table below shows the estimated outgo from 
     each trust fund as a percentage of estimated gross domestic 
     product (GDP) from 1995 to 2069. OASI and DI increase at 
     about the same rate over this period, while the increases in 
     HI and particularly in SMI are much greater.

   OASI, DI, HI, AND SMI OUTGO AS A PERCENT OF GROSS DOMESTIC PRODUCT   
------------------------------------------------------------------------
                                                                 Percent
            Trust fund               1995   2020   2045   2069  increase
------------------------------------------------------------------------
OASI..............................   4.18   5.05   5.72   5.98        43
DI................................   0.60   0.87   0.87   0.86        44
HI................................   1.62   2.83   4.05   4.46       175
SMI...............................   0.99   3.18   4.01   4.29       333
------------------------------------------------------------------------

                              Conclusions

       The status of the Social Security and Medicare programs can 
     be summarized by looking at the results of the tests used to 
     evaluate the financial status of the trust funds and at the 
     number of years before each trust fund is expected to be 
     exhausted under the intermediate assumptions:

         FINANCIAL STATUS OF THE OASI, DI, HI, AND SMI PROGRAMS         
                 Is the test of financial adequacy met:                 
------------------------------------------------------------------------
                                   Short-range   Long-range  Years until
            Trust fund               10 years     75 years    exhaustion
------------------------------------------------------------------------
OASI.............................          Yes           No           36
DI...............................          Yes           No           21
OASDI (combined).................          Yes           No           35
HI...............................           No           No            7
------------------------------------------------------------------------

       The SMI Trust Fund meets its test of actuarial soundness.
         Based on the Trustees best estimates (alternative II)

       The OASI Trust Fund is expected to be able to pay benefits 
     for about the next 36 years while the DI fund will be 
     exhausted in about 21 years. In view of the lack of actuarial 
     balance in the OASDI program over the next 75 years, the 
     Board believes that the long-range deficits in the OASI and 
     DI programs should be addressed. Accordingly, the Board 
     recommended last year that the 1995 Advisory Council on 
     Social Security conduct an extensive review of Social 
     Security financing issues and develop recommendations for 
     achieving long-range financial stability for the OASDI 
     program. The Council will submit its report later this year.
       The HI Trust Fund will be able to pay benefits for only 
     about 7 years and is severely out of actuarial balance over 
     the next 75 years. Because of the magnitude of the projected 
     actuarial deficit in the HI program and the high probability 
     that the HI Trust Fund will be exhausted just after the turn 
     of the century, the Trustees urge the Congress to take 
     additional actions designed to control HI program costs and 
     to address the projected financial imbalance in both the 
     short range and the long range through specific program 
     legislation as part of broad-based health care reform.
       The SMI program, though actuarially sound, has experienced 
     rapid growth in costs: program outlays have increased 53 
     percent in the last 5 years and grew 19 percent faster than 
     the economy as a whole. Because this growth shows little sign 
     of abating, the Trustees urge the Congress to take additional 
     actions designed to more effectively control SMI costs 
     through specific program legislation as part of broad-based 
     health care reform.

                   A message from the public trustees

       This is the fifth set of Trust Fund Reports on which we 
     have reported as Public Trustees. It is also, under the terms 
     of our appointment, our last report, and we use this occasion 
     to summarize our views on some major aspects of the Social 
     Security and Medicare programs. As representatives of the 
     public, our efforts have been to assure the American public 
     of the integrity of the process and the credibility of the 
     information in these reports. We feel privileged and honored 
     to have been able to take part in this important exercise in 
     public accountability, and want to provide our best advice on 
     directions for change of these important programs in the 
     years ahead.

                          The Need For Action

       During the past 5 years there has been a trend of 
     deterioration in the long-range financial condition of the 
     Social Security and Medicare programs and an acceleration in 
     the projected dates of exhaustion in the related trust funds. 
     To some extent, this has been predictable because when doing 
     annual 75-year projections, an additional deficit year in the 
     2060s is being added with each new projection. 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.

                    Projections As A Guide To Action

       We believe it is important for the public and the Congress 
     to understand more about what the projections in the Trust 
     Fund Reports really mean and how they are intended to be 
     used. These projections represent the best estimates the 
     Trustees can make based on the best available information and 
     methodologies. We have, during our period of service, 
     attempted to test assumptions, question methodologies and 
     work with the Offices of the Actuary of SSA and HCFA and 
     others in and out of government to seek improvements in the 
     projections. We have also stimulated thought through a 
     symposium and publication of papers on how methods and 
     assumptions might be improved to better estimate the future 
     income and health care needs of the elderly and disabled. 
     Action should be taken to continue and extend survey and
      other data development efforts and to improve modeling 
     capability regarding the income and health circumstances 
     of future retirees. Such information is critical to the 
     legislative and regulatory activity that will be required 
     for both public and private income security and health 
     care programs in future years.
       However, with even the best data and models, projections 
     ultimately are only estimates and must necessarily reflect 
     the uncertainties of the future. They are useful if 
     understood as a guide to a plausible range of future results 
     and if acted on in a timely and responsible manner. They are 
     not helpful if ignored, or if used improperly, or if 
     distorted. We hope that more policymakers will come to grips 
     with the strengths and limitations of projections such as 
     those in the Trust Fund Reports and how those projections can 
     be used most productively.

                        Social Security Program

       The Old-Age and Survivors Insurance Trust Fund shows a 
     deficit of 1.87 percent of payroll in the long run. It is by 
     far the best financed of the trust funds, and we believe 
     strongly that the OASI program can and should be maintained 
     over the long term. Yet even here reforms should be 
     undertaken sooner rather than later to ease the transition to 
     providing financial stability in the next century. We note 
     the recent work of the Bipartisan Entitlement Commission and 
     the current work of the Advisory Council on Social Security 
     regarding the long-term financing of the OASI program. We 
     hope that this kind of work will continue and that this 
     problem will be addressed in a timely fashion.
       The condition of the Disability Insurance Trust Fund is 
     more troublesome. While the Congress acted this past year to 
     restore its short-term financial balance, this necessary 
     action should be viewed as only providing time and 
     opportunity to design and implement substantive reforms that 
     can lead to long-term financial stability. The research 
     undertaken at the request of the Board of Trustees, and 
     particularly of the Public Trustees, shows that there are 
     serious design and administrative problems with the DI 
     program. Changes in our society, the workforce and our 
     economy suggest that adjustments in the program are needed to 
     control long-range program costs. Also, incentives should be 
     changed and the disability decision process improved in the 
     interests of beneficiaries and taxpayers. We hope that this 
     research will be completed promptly, fully presented to 
     Congress and the public, and that the Congress will take 
     action over the next few years to make this program 
     financially stable over the long term.
                            Medicare Program

       The most critical issues, however, relate to the Medicare 
     program. Both the Hospital Insurance Trust Fund and the 
     Supplementary Medical Insurance Trust Fund show alarming 
     financial results. While the financial status of the HI 
     program improved somewhat in 1994, the HI Trust Fund 
     continues to be severely out of financial balance and is 
     projected to be exhausted in about 7 years. The SMI Trust 
     Fund, while in balance on an annual basis, shows a rate of 
     growth of costs which is clearly unsustainable. Moreover, 
     this fund is projected to be 75 percent or more financed by 
     general revenues, so that given the general budget deficit 
     problem, it is a major contributor to the larger fiscal 
     problems of the nation.

[[Page S 11725]]

       The Medicare program is clearly unsustainable in its 
     present form. We had hoped for several years that 
     comprehensive health care reform would include meaningful 
     Medicare reforms. However, with the results of the last 
     Congress, it is now clear that Medicare reform needs to be 
     addressed urgently as a distinct legislative initiative. We 
     also believe strongly that Medicare reform should be included 
     as an integral part of any broader health care reform 
     initiative which may be considered in the future.
       There are basic questions with the scale, structure and 
     administration of the Medicare program that need to be 
     addressed. For example, is it appropriate to have a Part A 
     and Part B today, or should this legacy of the political 
     process that enacted Medicare in the mid-1960s be revised to 
     create a unified program? Is it appropriate to combine 
     participants' social insurance tax contributions for Part A 
     and premium payments for approximately one-quarter of Part B 
     with general revenues? If so, what should be the proper 
     combination of beneficiary premiums, taxpayer social 
     insurance contributions, and general revenues? How are each 
     of these kinds of revenue sources to be justified and what 
     rights to benefits and responsibilities to pay benefits are 
     thereby established? How can the program become more cost-
     effective? How can fraud, abuse and waste be better 
     controlled?
       We feel strongly that comprehensive Medicare reforms should 
     be undertaken to make this program financially sound now and 
     over the long term. The idea that reductions in Medicare 
     expenditures should be available for other purposes, 
     including even other health care purposes, is mistaken. The 
     focus should be on making Medicare itself sustainable, making 
     it compatible with OASDI, and making both Social Security and 
     Medicare financially sound in the long term.
       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 
     program's financing methods, benefit provisions, and delivery 
     mechanisms. Various groups should be consulted and reform 
     plans developed that will not be disruptive to beneficiaries, 
     will be fair to current taxpayers who will in the future 
     become beneficiaries, and will be compatible with government 
     finances overall.

                      Institutional Considerations

       We have as Public Trustees tried over the past 5 years to 
     provide continuity and improve the institutional framework 
     surrounding the Social Security and Medicare programs. We 
     have bridged two Administrations (one Republican and one 
     Democratic), two Advisory Councils (one appointed by a 
     Republican Administration and one by a Democratic 
     Administration), and many changes in the ex officio Trustees. 
     We have consulted with each of the Advisory Councils, as well 
     as the working group of the prior Public Trustees, the 
     Bipartisan Entitlement Commission, the Notch Commission and 
     many other government entities. We have testified before both 
     the House Ways and Means Committee and the Senate Finance 
     Committee and held regular briefings for Congressional staff 
     on the Trust Fund Reports. We know that with the advent of 
     the new Social Security Administration as an independent 
     agency, many of the institutional relationships in these 
     areas will change. We hope that the Public Trustees in the 
     future will continue to make a contribution towards a 
     coherent institutional structure that serves the interests of 
     the public.
       Finally, we note that although the statute provides that 
     one of the Public Trustees must be from each of the major 
     political parties, we have operated as independent 
     professionals on a nonpartisan basis. Every statement we have 
     made over 5 years has been joint and consensual, and without 
     partisan content or political dissonance. We believe these 
     programs are too important to be politicized and urge that a 
     highly professional, nonpartisan approach continue to be 
     followed in future reports to the Congress and the public.
     Stanford G. Ross,
     David M. Walker,
       Trustees.
  Mr. CRAIG. I yield whatever time there may be to the organizer of the 
special order.
  The PRESIDING OFFICER. The Senator from Tennessee has 3 minutes 
remaining.
  Mr. FRIST. Mr. President, in closing out our special order this 
morning, our message has been very simple: to strengthen and to 
simplify.
  In our remaining 2 minutes, we will have a closing statement by the 
Senator from Maine. I yield to him for that purpose.
  Mr. COHEN. Mr. President, last April the trustees of the Social 
Security and Medicare trust funds issued a stark warning that the trust 
fund that pays Medicare benefits will be bankrupt by 2002, and that 
``the Medicare Program is clearly unsustainable in the present form.''
  In his speech a few weeks later to the delegates at the White House 
Conference on Aging, President Clinton echoed the trustees' warning 
about the pending Medicare crisis, saying that he ``cannot support the 
status quo, and neither can you.''
  The Medicare trustee's report sounds an alarm that we simply cannot 
afford to ignore. Medicare is on a collision course toward bankruptcy. 
The longer we wait to change this course or apply the brakes, the more 
certain we are to crash.
  Mr. President, last week, the House minority leader, Mr. Gephardt, 
circulated a letter characterizing the pending Medicare crisis as 
``more fiction than fact.'' Apparently, those who are dedicated to 
waging class warfare are prepared to resort to the tactic of treating 
fact as fiction. It is not a novel tactic, but ironically, one that is 
drawn from a novelist's nightmare vision of the future: Repeat a 
falsehood often enough and the people eventually will accept it as 
truth.
  The truth is that the 1995 trustees' report paints a bleak picture 
for the future of Medicare. Next year, the trust fund will start paying 
out more in benefits than it gets in revenues from the payroll tax.
  To quote Franklin Delano Roosevelt:

       Any government, like any family, can for a year spend a 
     little more than it earns. But you and I know that a 
     continuance of that habit means the poorhouse.

  Right now, Medicare is on a sure path to the poorhouse. By 2002--less 
than 7 years from now--the Medicare trust fund will be totally 
bankrupt. By law, it will be unable to pay benefits, leaving 36 million 
of our most vulnerable Americans--the aged and disabled--without 
coverage to pay their hospital bills.
  Politically, it would be easy to ignore the pending crisis and 
continue with business as usual. However, as Samuel Johnson once wrote:

       When a man knows he is to be hung in a fortnight, it 
     concentrates his mind wonderfully.

  Reforming Medicare is not about providing tax cuts, nor is it about 
balancing the budget. Even if the Federal budget were in balance, the 
Medicare trust fund would still be in jeopardy and the same reforms 
would be necessary to preserve and improve the program.
  Let there be no mistake--Medicare needs reforming for Medicare's 
sake. Let us also be clear that no one is talking about cutting 
Medicare spending. Under the budget resolution passed last June, 
Medicare spending will continue to grow at an average rate of 6.4 
percent over the next 7 years and will increase to $273.3 billion in 
2002. That's $92.2 billion more than the $181.1 billion that will be 
spent in 1995.
  So far most of the focus has been on resolving Medicare's short-term 
bankruptcy crisis. However, we cannot ignore the fact that Medicare's 
real problems begin in about 2010, when the baby boomers begin to 
retire, dramatically increasing the numbers of people eligible for 
Medicare and reducing the size of the work force.
  The demographics of the next century are daunting. Today there are 33 
million Americans 65 and over. But the aging of the baby boom 
generation will swell the number to 70 million by 2030, imposing new 
burdens and challenges for the Medicare and Social Security systems.
  Today, it takes four workers to support a Medicare beneficiary. By 
the middle of the next century, there will only be two workers 
available to support each beneficiary, greatly increasing the amount 
each will have to pay in taxes to support the program. Medicare must 
therefore undergo
 significant structural changes if it is to survive to meet the health 
care needs of future retirees.

  The ability to change is key to survival, and the fact is that the 
Medicare Program has changed very little in the 30 years since its 
creation.
  While private health care systems have evolved over the years, 
Medicare has remained stagnant. We must find ways to make the program 
sensitive to the needs of older persons while at the same time making 
it more cost-effective.
  Sixty-three percent of working Americans get their health care 
through some kind of managed care program. By contrast, only 90 percent 
of Medicare beneficiaries are enrolled in the kinds of managed care 
plans that have become a way of life for their children and 
grandchildren.
  Most care continues to be provided on a fee-for-service basis, which 
offers 

[[Page S 11726]]
no incentives for efficiency and, in fact, encourages higher costs and 
overutilization of services. As a consequence, Medicare costs are 
rising in excess of 10 percent a year, while private health spending is 
growing at less than half that rate.
  There continues to be gaps in Medicare coverage. Medicare generally 
does not pay for preventive care and beneficiaries do not have access 
to benefits like prescription drugs that are routinely provided through 
private health plans. Many Medicare beneficiaries would gladly elect to 
trade their current fee-for-service coverage for a more coordinated 
system of care that gives them expanded coverage for prescription drugs 
and other benefits they currently do not enjoy.
  Americans in the private health care system generally have some 
choice about the kind of health plan they are enrolled in. Most 
Medicare beneficiaries do not. Congress should consider giving Medicare 
beneficiaries a full range of choice of health care plans, with 
incentives for beneficiaries to choose cost-efficient coverage.
  We should also consider allowing people to stay in their employer's 
health plan when they turn 65, even after they have retired. Medicare 
could reimburse employers for the cost of the premiums and perhaps 
provide a tax break as an additional incentive for them to continue 
coverage. This would not only allow Medicare beneficiaries to remain in 
a health plan they are comfortable with, but it would also keep them in 
a pool with younger, healthier people to lower the cost of their 
coverage.
  And, finally, we must rid Medicare of the fraud and abuse that robs 
the program of as much as $18 billion a year. Medicare has become a 
prime target for opportunists who bilk the system by overbilling, 
unbundling services, and doublebilling. I have introduced legislation 
for the past 2 years to crack down on fraud and abuse, and it is time 
to pass these reforms.
  There are no easy answers--either substantively or politically--to 
Medicare's financial problems in either the short or long term. If we 
are to summon the political will to overcome the current crisis and 
revitalize Medicare to meet the needs of the future generations, we 
must abandon the politics of fear and take up the politics of trust.
  This should not be a partisan issue. Those who hold a fiduciary duty 
to oversee the Medicare system say that immediate action is necessary, 
and the President apparently agrees. Given the sheer magnitude of the 
financing shortfall, bipartisan cooperation is essential if we are to 
establish the kind of lasting reforms that will be necessary to keep 
the promise of Medicare for not just current but future generations.
  Mr. REID addressed the Chair.
  The PRESIDING OFFICER. The Senator from Nevada.

                          ____________________