[Congressional Record Volume 141, Number 154 (Friday, September 29, 1995)]
[Senate]
[Pages S14771-S14772]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                                MEDICARE

 Mr. JEFFORDS. Mr. President, I rise today to address one of 
the most important legislative changes the Congress will be addressing 
this year--changes in the way we finance and the way senior citizens 
and persons with disabilities receive Medicare coverage. I 
wholeheartedly support reducing the Federal deficit, as well as, moving 
the Government out of the role of running a health plan, for the 
elderly and disabled, and into the role of contracting with private 
health plans. I commend Chairman Roth and the Finance Committee for its 
commitment to these very important goals.
  Having studied the health care system in the United States for many 
years I have come to the conclusion that the reason the Government's 
health care spending is out of control is really twofold. First, is the 
way we have chosen to pay for and purchase services. When Medicare was 
designed in the 1960's it was modeled after private Blue Cross fee-for-
service plans. The Government paid providers directly for each 
procedure.
  Paying for services rendered at a distance without any effective 
utilization control has been a disaster. Our failed attempts to control 
costs, by continuing to cut payments to providers and increasing costs 
to beneficiaries, is a major reason why our Federal deficit is so 
exorbitant.
  I hope that in our efforts to reduce the deficit, we have not set 
ourselves up to cut too deeply into the Medicare payment system. Many 
technical changes have been suggested by the Finance Committee to the 
reimbursement policies for hospitals and providers. Some of these 
changes have allocated additional funding to rural areas. I look 
forward to discussing the total cost impact on Vermont with both the 
hospital association as well as other provider groups in Vermont, as 
well as with my colleagues on the Finance Committee.
  Second, by segregating the elderly and disabled, into separate risk 
pools, the Government has become responsible for providing health 
insurance for the riskiest members of society. This segmentation has 
not provided any incentives for the private sector to find innovative 
ways to manage the highest cost cases in the delivery system. 
Unfortunately, it was the private market's failure to provide 
affordable coverage on reasonable terms, to the elderly and disabled, 
that led to the political demand for the Government to create Medicare 
and Medicaid in the first place.
  Providing Medicare beneficiaries a choice of private health plans is 
a wonderful idea and one that I have been advocating. Hopefully, the 
impact will not be the same as the greatest criticism against the 
Federal employee plan. One experience with this program has found 
adverse selection among plans--that is the people that need the most 
care seem to migrate to the high option Blue Cross fee-for-service 
plan--creating an upward cost spiral for members of this plan.
  Now I'd like to turn to the two charts I have here. The first chart 
was duplicated from hearings on the Eisenhower administration's health 
reinsurance legislation back in 1954. This was before we had Medicare 
and Medicaid. As you can see, 41 percent of the population had no 
insurance protection at all and 36 percent of the population had what I 
would call limited coverage. More startling only 3 percent of the 
population has what most Americans take for granted today--
comprehensive coverage.
  Compare this chart with my second chart which does not emphasize the 
type of coverage but the source of coverage. Over 55 percent of 
Americans in 1993 had coverage provided through their employer. As you 
can see, 15 percent of the population is uninsured--compared to 41 
percent in 1953. Medicare is the primary insurance for 12 percent of 
the population and 9 percent of the population receives coverage 
through Medicaid.
  As we tackle one of the biggest problems for the Federal Government, 
our deficit, we must keep in mind a goal we all agreed to last year--
the goal of moving towards universal coverage for all Americans. We 
must keep in mind that any changes we make to the public programs of 
Medicare and Medicaid must not add to the rolls of the uninsured, 
especially if it is due to unintended consequences of our changes to 

[[Page S 14772]]
these programs. More uninsured Americans will only increase total costs 
to the health care system.
  We must keep in mind that Medicare and Medicaid were created because 
proper incentives were never placed in the private market to enable it 
to accept the risks associated with insuring the elderly and disabled. 
As we encourage the Medicare population to move into private health 
plans we must be sure to do what President Eisenhower tried to do over 
40 years ago--we must be sure to place the proper incentives in the 
private market that will encourage it to compete for the chronically 
ill high cost population on quality and price.
  As we move to a system in which we offer Medicare beneficiaries 
throughout the country greater choice and coordinated care, we must not 
forget to address the following concerns. First, what types of choices 
will be available for rural and underserved areas which have little or 
no penetration of the private managed care marketplace? Second, how can 
we provide coordinated care for beneficiaries who decide to stay in the 
current fee-for-service Medicare program? Third, how can we address the 
bifurcated finances and benefits offered to the aged and disabled 
population through the Medicare and Medicaid programs?

  Many rural and underserved areas of this country, like Vermont, which 
do not have an over abundance of hospitals and other health providers, 
have not seen the benefits experienced by a mature managed care 
marketplace such as Minnesota or Washington. I was very pleased to see 
that the Finance Committee has recommended that the AAPCC be modified 
to increase the per month payment per Medicare beneficiary in rural 
area. Hopefully, more managed care plans will decide to start up 
business in rural parts of this country. But this change will take some 
time.
  Market alternative's to managed care health plans have been springing 
up all over rural America. For example, although Vermont does not have 
a multitude of managed care health plans operating, providers have been 
developing networks that offer a continuum of care to Vermonters. 
Networks that provide acute, home health and residential care. They 
provide direct medical care, as well as, the personal services needed 
for individuals to manage their own care needs. This coordination of 
care is very similar to what Blue Cross of western Pennsylvania is 
providing its fee-for-service clients through case management. Like 
Blue Cross, many private sector fee-for-service health plans have begun 
to provide case management on a voluntary basis to individuals with 
high-cost conditions, generally chronic or catastrophic care cases. 
These programs offer greater flexibility in the array of services 
needed, on a case by case basis, and have proven very cost effective.
  HCFA has demonstrated that a small proportion of Medicare 
beneficiaries account for a high proportion of payments. In 1992, about 
9.8 percent--3.5 million--of all Medicare enrollees accounted for 68.4 
percent--$82.6 billion--of all Medicare payments. The experience for 
the last 20 years of the program has shown that 80 percent of the 
beneficiaries account for only 20 percent of the costs of the Medicare 
program. In the Medicaid program 30 percent of the population, the aged 
and disabled, accounts for 70 percent of Medicaid expenditures. 
Furthermore, this is the cost in the Medicaid Program that is growing 
the fastest. Finding a means to manage high cost cases in these two 
programs is essential if we are going to reduce costs in both of these 
programs.
  To add to the distortion and inefficiencies in providing care for 
elderly and disabled persons is that many of these people are both 
Medicare beneficiaries and Medicaid recipients. These people are termed 
dually eligibles today. This creates numerous clinical, operation, and 
financial problems, particularly as these two programs are taking 
extraordinary steps to control spending. In order to access the full 
range of care that is necessary an individual must deal with two very 
different systems. The care received by a dually eligible consumer is 
therefore, often fragmented, reimbursement driven, and inappropriate.
  Service decisions are routinely made by providers based on which 
program pays better. This result is not always a care plan that is in 
the best interest of the consumer or the most cost effective. Because 
two payors offering distinct yet overlapping benefit packages with 
different sets of rules are responsible for the same consumer, much 
confusion exists for all parties. It is often impossible for States to 
know what service decisions, which ultimately tap Medicaid funding, are 
being made while the senior citizen is in the Medicare system. Another 
source of much provider discontent and inefficiency is the dual 
administration of claims payments. One of the major reasons for this 
problem is that Medicare and Medicaid claims processing systems are not 
compatible and Medicare and Medicaid payment policies differ. The 
result is needless inefficiencies and expense.
  As attempts to control Medicare spending and to block grant Medicaid 
move forward, the problem of dual eligibles becomes an obstacle to 
achieve both goals. Medicare cannot control the cost of this population 
unless Medicaid funded services are used to lower Medicare's acute care 
costs. Medicaid cannot manage and coordinate the care of the elderly 
and disabled unless it is given responsibility for the full continuum 
of care. One answer is a case managed system for the dual eligibles 
which merges Medicare and Medicaid coverage and is administered by the 
States on Medicare's behalf. This would be a thoughtful approach in 
addressing the highest cost cases in both programs by replacing the 
fragmented, costly and inefficient system of today with an integrated, 
managed care approach designed to keep people healthier and lower costs 
for both public programs.
  I have been working with Senators Kassebaum, Cohen and Chafee on this 
very key issue as we look forward to restructuring our public programs. 
Once we have created a delivery system that provides high quality, 
appropriate, cost effective care for the people who need the system the 
most--we will have restructured a health care system that works for all 
Americans. Mr. President, I look forward to working with my colleagues 
on both sides of the aisle in a thoughtful debate on how to modify both 
Medicare and Medicaid.

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