[Congressional Record Volume 141, Number 159 (Friday, October 13, 1995)]
[House]
[Pages H10066-H10071]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         THE TRUTH ON MEDICARE

  The SPEAKER pro tempore. Under the Speaker's announced policy of May 
12, 1995, the gentleman from Ohio [Mr. Hoke] is recognized for 60 
minutes as the designee of the majority leader.
  Mr. HOKE. Mr. Speaker, we have an off day today, and I thought that I 
would take advantage of the opportunity to both respond to some of the 
charges made with respect to Medicare and then probably, more 
importantly, talk about exactly what it is that we are going to me 
marking up next week with respect to a really very, very needed reform 
of the Medicare program in America.
  I wanted to talk particularly to the senior citizens today, Mr. 
Speaker, because I know that there is a great deal of anxiety and 
concern and some confusion as well. My gosh, if I were watching this 
debate on a day-to-day basis at home and trying to ferret out the truth 
from the confusion, I think it would be a tremendous challenge.
  So what I would like to do is, first of all, think about the one 
charge that has been raised on a daily basis with respect to Medicare 
by the minority party, and then go into the actual details of what we 
are going to do.
  What we have heard here on the floor on a regular basis is that 
Medicare is going to be slashed by $270 billion over the next 7 years 
in order to pay for tax cuts for the rich. I would like to take that 
apart on a piece-by-piece basis and show that it is completely untrue. 
I would like to do it from the back end, because I think that the tax 
cuts for the rich is probably the kind of class warfare that turns one 
off, but has a kind of a hook. It is sort of like pornography. You 
know, people are offended by it, and they recognize that they are 
hearing something that is wrong and that there is something 
fundamentally wrong about it; but, at the same time, there is something 
attractive about it, because it seems as though there is a hook there.
  Well, the hook of class warfare is it is an ugly hook, and it is a 
hook that basically says we should not aspire. It assumes that people 
do not want to aspire to the American dream and they do not want to 
aspire to be able to actually improve their position materially for 
themselves and for their families.
  The fact is that with respect to the tax cut, it has absolutely 
nothing to do, nothing whatsoever, to do with Medicare. It has nothing 
to do with anything other than a tax cut. And the Medicare trust fund, 
which is the part A trust fund, is not affected by whether we raise 
taxes or whether we lower taxes.
  The Medicare trust fund is actually funded by the 1.45 percent 
payroll tax that comes from people who have earned income, workers, 
employees, and employers. Anybody that has earned income gets taxed at 
1.45 percent, the worker, the employee, plus another 1.45 percent on 
the employer. And there is no limit on what that amount of money can 
be. There used to be a cap. You know, the first $60,000 or so of income 
is subject to the Social Security tax, and that that is what funds 
Social Security. But there is a ceiling on that, and the ceiling is the 
first $60,000. There is no ceiling on the amount of money that is taxed 
for Medicare at this 1.45 percent amount.
  All of that money goes into part A of the Medicare trust fund and it 
is part A of the Medicare trust fund, it is that HI, health insurance 
trust fund, that is going bankrupt.
  I have some charts here. The reason we know it is going bankrupt is 
that the trustees of the trust fund are required by law to make a 
report to the President on an annual basis, to talk about and describe 
the actual status of the fund, of the trust fund themselves.
  By the way, this is not a partisan group or political group. If it is 
political, it is partisan in terms of being members of the party of the 
President, whoever the President happens to be. In this case three of 
the members, three of the trustees are Robert Reich, the Secretary of 
Labor, Donna Shalala, 

[[Page H 10067]]
the Secretary of Health and Human Services, and Bob Rubin, the 
Secretary of the Treasury. In addition, there is the Commissioner of 
the Social Security Administration and two private sector trustees. 
They all sign this report. They say, and this was dated April 3, 1995, 
the fund is projected to be exhausted in 2001. That is under the worst 
case scenario. Under the middle case scenario it is projected to be 
exhausted in 2002.
  Now, the money that goes into this fund, and this is the important 
point, the only money that goes into that fund comes from the 1.45 
percent payroll tax that is paid by workers, working people in this 
country. That is where the part A trust fund revenues come from. They 
do not come from tax revenue.

  We could have an increase and make a marginal rate of 70 percent, and 
not one more dollar would go into part A of the Medicare trust fund. 
That is what is going bankrupt.
  You can see right here the trust fund reserves. Right now there is 
actually about $150 billion in the trust fund. This is a chart that is 
reproduced from that same April 3, 1995, annual report of the health 
insurance trustees. By the way, anybody that wants a copy of that 
report, they are available from your congressional office. If you 
simply call the Capitol switchboard and ask for your Congressman and 
talk to their legislative assistant that deals with health care, ask 
them to send you a copy of the trustee's report on the HI trust fund 
dated April 3, 1995. There is a 14-page summary of it. If you call 202-
225-3121 and ask for a copy of it, they will give you the full copy. It 
is well written, plainly written, and it is not a partisan document. It 
simply describes what is going on with this program.
  Anyway, this is a chart reproduced from that report. It shows you 
very clearly that starting in 1996, the fund actually is paying out 
more than it takes in. In other words, it is paying out more to 
hospitals and doctors than it is taking in in revenue in that 1.45-
percent amount. As you can see, you get to zero in about the year 2002, 
where there is nothing left whatsoever in the fund. Once there is no 
money in the fund, there is no money to pay. Without a change in the 
law or a change in the tax rate, that money is exhausted, and it is all 
over for the payments.
  That is why the trustees in their report are so strong and so clear 
about saying Congress has got to act. Congress has got to do something 
to protect this fund if we are going to have Medicare in the future. 
And there has got to be a resolution brought, or we are going to be 
completely without health care for senior citizens with respect to the 
part A.
  So that is what the point is. The point is that the tax issue, this 
issue of raising or lowering taxes for the rich has absolutely nothing 
to do with Medicare part A. Not one penny.
  Now, let us look at the charge with respect to this idea that the cut 
goes to the rich. What did we do in August 1993 in this body? I was a 
freshman Congressman at the time and I remember it vividly. What we did 
is we passed the greatest, the largest tax increase in the history of 
our country. One of the things that we did in that tax increase is that 
we increased the highest marginal rate, first of all to 36 percent, and 
they we put a 10 percent ``millionaire's surcharge'' on top of that, so 
that people that have income of more than $1 million would have an 
additional surtax of 10 percent. So the top marginal rate right now in 
the United States is 39.6 percent.
  Well, there are a lot of people who think that that is bad policy. 
There are a lot of economists that will tell you when you increase the 
marginal tax rate at the top, you are not going to actually increase 
revenue. What you will find is people's behaviors will change. I think 
that those people are correct.
  But the fact is that that change in the law was made in August 1993, 
and it is still the law, and this Congress has not done anything and 
does not intend to do anything and is not going to do anything to 
change that law, to repeal that, to come back and repeal that 10-
percent surtax that was added on.
  Now, if this Congress, if the majority party, the Republican Party, 
wanted in fact to give a tax cut to the rich, would not the first place 
to go be to repeal the add-on, that surcharge that was made into law in 
August 1993? It seems to me that is where we would go. But there has 
been no talk of that. Of course, there has been no talk of that.
  But what we have done is created a tax break to give relief to 
middle-income families. Over 75 percent of the tax relief in the tax 
cut package that is part of the Contract With America goes to families 
making less than $75,000 per year. The tax break goes to families, and 
it goes to working families. It goes to that group of people in America 
who are shouldering the greatest amount of the tax burden, and it tries 
to bring some tax equity so it is easier to raise a family in the 
United States.
  Let us go to the first part of the catechism that you hear so 
frequently in the Chamber, and that is that we are slashing Medicare by 
$270 billion.
  Well, how is it possible? The real problem in Washington, and 
probably the greatest change that we made in this Congress, the most 
important change and one that rarely gets talked about because it is a 
subtle change, but it will have more to do with giving the truth, 
telling the truth to the American people about the money that is spent 
in the U.S. Congress, their tax dollars, is this change away from what 
is known as baseline budgeting.

  Basically baseline budgeting is a kind of phony accounting system 
that is used nowhere in this country except right here with the Federal 
Government. What it does is it says that we predict that we should be 
spending x number of dollars in 1996 while we are spending a number of 
dollars in 1995. We think that in 1996 we will probably be spending 
this amount of money, and because that is what we think we should be 
spending, then if we spend less than that, that is a cut.
  Let us make it in real terms. If we spent in 1995 $175 billion on a 
program, and the Congressional Budget Office says that they think we 
are going to spend $200 billion in the program in 1996, but the 
Congress says well, no, we don't think we need to spend $200 billion, 
we think we can do the same job or a better job for $185 billion, well, 
according to the CBO, that used to be, before we changed the law on 
this, that used to be known as a $15 billion cut, even though we were 
spending $25 billion more in 1996 than we spent in 1995.
  Nowhere else in America, nowhere else in America, is that a cut, only 
right here in Washington. The problem with it is that it confuses the 
public. It confuses the voters and makes it very, very difficult for 
voters to make real choices about whom they want to represent them in 
the U.S. Congress or the U.S. Senate or in the White House.
  What we have done this year, the very first day of the Congress, and 
then we memorialized it again in some other budget language that came 
out with the first budget resolution, is we have changed the law, so 
that now when we talk about spending for 1996 and the numbers that are 
in this budget, the numbers that are in this 7-year budget that go out 
to 2002 are not based on predictions of what we should or could or 
might be spending in the future.
  They are based on what we spent in 1995, the same way that you do 
your accounting at home, the same way that companies all over this 
country do their accounting. It means that, if you spent $150 a month, 
if a person in a family spent $150 a month on utilities in 1995, and 
they spend $160 a month on utilities in 1996, that is a $10-per-month 
increase. That is how much it is. And we are going to use the same 
language right here in the U.S. Congress that everybody else is using 
in this country.
  Well, let us see what that means. What it means is that we, under the 
Medicare proposal that will be debated on the floor next week, that has 
been a subject of many, many hearings in the past 2 years actually, and 
over this summer we will be spending twice as much, twice as much on 
Medicare in the next 7 years than we spent in the previous 7 years.
  To make it more close to home, we will be spending $4,800, we are 
spending right now $4,800 per beneficiary per year right now. That is 
going to $6,700 per beneficiary in the year 2002. By the way, does it 
take into account the predictions on demographic changes in terms of 
new enrollees? Because we 

[[Page H 10068]]
know that more and more we are having increasing enrollment in Medicare 
as we have an aging of our population.
  So what we know is we are going from $4,800 per beneficiary per year, 
that is about $400 per month, up to $6,700 per beneficiary per year in 
the year 2002.
  Now, if that is a cut, where is the cut? How is that a cut? Could 
somebody please explain to me how that could possibly be called a cut? 
It is about a 35-percent increase in spending per beneficiary.
  All right. So let us start with those basics. We have $4,800 a year 
going up to $6,700. Obviously we are increasing the amount of money to 
be spent on Medicare. The real question is, A, can we provide health 
care for every senior citizen in this country over the age of 65 for 
that amount of money? And, B, can we do maybe a better job than the 
traditional fee-for-service medicine which has been the hallmark and 
only way we have distributed Medicare up until very, very recently?
  We have done some pilot programs with managed care models around the 
country now with Medicare. But up until recently, the only kind of 
medical services that were available under Medicare was traditional fee 
for service.
  I happen to think that traditional fee for service is a heck of a 
good way to deliver medical services. But there is a problem when 
nobody is minding the cost factor, when nobody is paying attention to 
how much it costs. Let us face it: If the Government is paying for all 
of it, then the patient does not particularly care about it. If the 
Government is not being vigilant about what things are costing and 
whether or not the bills they are getting are real bills and ought to 
be paid, then you have got terrible problems. That is the situation 
that we have come into with respect to Medicare now.

  In fact, we found out from the Director of the Congressional Budget 
Office at hearings in 1994 that they believe 15 to 20 percent of all of 
the money that the Health Care Finance Administration pays out is in 
fraudulent claims. Can you imagine that? Fifteen to twenty percent of 
that money? That is stunning. And what we have done in the Medicare 
reform proposal that we will be voting on, and I believe passing next 
week in this Chamber, is we have put together an 11-point program to 
ferret out for the very first time, to genuinely and honestly and 
aggressively and with a very tough program, get at waste, fraud and 
abuse in Medicare, and particularly fraud.
  What are we going to do? The first thing we are going to do is make 
the 35 million beneficiaries, Medicare recipients, we are going to make 
out of them, we are going to make 35 million watchdogs of the Federal 
Treasury. And they are going to be given, every single beneficiary will 
be given a financial incentive to actually look at the bills, to ferret 
out the mistakes, to find out if it is a bona fide bill or not a bona 
fide bill.
  Every single Member of this Congress, I guarantee you, has been told 
stories by his or her constituents at home about specific examples of 
overbilling, weird examples of billing that goes on months after a 
person has passed away, double billings, billings for procedures that 
have not been actually performed, billings for procedures that were 
performed but then were rebilled several days later.
  There are more horror stories about the fraud and abuse. You can 
understand that, when you see that, up to 20 percent of all of the 
money that is spent on medical costs under Medicare is believed to be 
fraudulent.
  So we have put together, there is going to be a Commission that will 
specifically look at private sector methods, because I can tell you in 
the State of Ohio, where I come from, that the Blue Cross/Blue Shield 
plans in northeastern Ohio realized there was a terrible problem with 
fraud. They got onto this about 8 or 10 years ago, and they went after 
the problem. They decided they were going to solve this problem.
  What did they do? They contracted with people that ferret out fraud 
and abuse in the private sector. Think about it for a second. We had a 
shoplifting problem in this country up until a number of years ago, 
before the big companies figured out how to get a handle, really get a 
handle, on shoplifting as an overall problem.
  Now we know that, if somebody goes into a place like a K-Mart or a 
Sears, they are not going to be able to get out of there stealing 
things. Why not? Because large retailers decided they were going to do 
something about this problem and they were going to get at it and solve 
it and were not going to allow it to affect their bottom line and 
affect the way they do business.
  That is exactly what insurance companies have done around the 
country, and that certainly is what Blue Cross and Blue Shield of 
northeastern Ohio has done. They have gotten at that problem. That is 
exactly what we are going to do with respect to Medicare. We are going 
to get at that problem. The first way that we do it is with making 35 
million Medicare recipients watchdogs of the Federal Treasury.
  Ms. DeLAURO. Mr. Chairman, will the gentleman yield?
  Mr. HOKE. I yield to the gentlewoman from Connecticut.
  Ms. DeLAURO. I thank my colleague for yielding.
  I just wanted to address a point. I was in my office doing work and 
listening at the same time as we all do, and noted your commentary with 
regard to the trustees and the Medicare Trust Fund. I wanted to take 
this opportunity.
  Mr. HOKE. I would be happy to yield for a question or a comment, not 
a long speech.
  Ms. DeLAURO. I will be quick. The point is in fact I think there is 
some misrepresentation of what the trustees have said. I will quote 
from the September letter from the trustees addressed to the Speaker 
and to the majority leader.
  The trustees have said, because I know that that is a read on which 
my colleague has hung his commentary and his colleagues have hung the 
commentary. And this is a quote from the trustees, from really actually 
the Secretary of the Treasury, Mr. Bob Rubin, a Wall Street business 
person before he came to this position. Simply said, no Member of 
Congress should vote for $270 billion in Medicare cuts believing that 
reductions of this size have been recommended by the Medicare trustees 
or that such reductions are needed now to prevent an imminent funding 
crisis. That would be factually incorrect.
  I just might add the trustees in fact did say that $90 billion was 
more in the nature of what was needed over a period of time to look at 
the solvency issue. And to that end, in the Committee on Ways and Means 
this week, our Democratic colleagues offered a specific amendment that 
talked about a $90 billion savings over the next 7 years to deal with 
the solvency problem to the year 2006.
  That was defeated by the Republicans. The question is, if $90 billion 
is what the trustees have said is necessary and we want to hang our hat 
on what the trustees have said, then what happens to the additional 
$180 billion? You cannot rely on the trustees on the one hand to talk 
about what they have said that we need to do for the solvency, and then 
discount what they say when they say it is not $270 billion, but in 
fact it is $90 billion.
  In response to the cry that the Democrats have not had a plan or 
proposal, in fact and in deed there was an amendment in the Committee 
on Ways and Means for $90 billion. In addition, a commission was set up 
that would deal with the longer solvency problem, what has to do with 
baby boomers, a bipartisan commission set up down the line. That was 
defeated. You have to represent the entire situation rather than just 
wanting to use the trustees as it might satisfy your point.
  Mr. HOKE. Reclaiming my time, I will respond to that.
  Ms. DeLAURO. Mr. Speaker, I would like to put in the Record the op ed 
that was written by the trustees in response to this issue and talking 
about $270 billion being factually incorrect.

              [From the Houston Chronicle, Sept. 5, 1995]

              It's Not Necessary To Cut Medicare Benefits

(By Robert E. Rubin, Donna E. Shalala, Robert B. Reich, and Shirley S. 
                                Chater)

       The United States is involved in a serious examination of 
     the status and future of Medicare. Congressional Republicans 
     have called for $270 billion in cuts over the next seven 
     years, claiming that Medicare is facing a sudden and 
     unprecedented financial crisis that President Clinton has not 
     dealt with, and all of the majority's cuts are necessary to 
     avert it.
       While there is a need to address the financial stability of 
     Medicare, the congressional 

[[Page H 10069]]
     majority's claims are simply mistaken. As trustees of the Part A 
     Medicare Trust Fund which is the subject of the current 
     debate, and authors of an annual report that regrettably has 
     been used to distort the facts, we would like to set the 
     record straight.
       Concerns about the solvency of the Medicare Part A Trust 
     Fund are not new. The solvency of the trust fund is of utmost 
     concern to us all. Each year, the Medicare trustees undertake 
     an examination to determine its short-term and long-term 
     financial health. The most recent report notes that the trust 
     fund is expected to run dry by 2002. While everyone agrees 
     that we must take action to make sure it has adequate 
     resources, the claim that the fund is in a sudden crisis is 
     unfounded.
       The Medicare trustees have nine times warned that the trust 
     fund would be insolvent within seven years. On each of those 
     occasions, the sitting president and members of Congress from 
     both political parties took appropriate action to strengthen 
     the fund.
       Far from being a sudden crisis, the situation has improved 
     over the past few years. When President Clinton took office 
     in 1993, the Medicare trustees predicted the fund would be 
     exhausted in six years. The president offered a package of 
     reforms to push back that date by three years and the 
     Democrats in Congress passed the plan. In 1994, the president 
     proposed a health reform plan that would have strengthened 
     the fund for an additional five years.
       So what has caused some members of Congress to become 
     concerned about the fund? Certainly not the facts in this 
     year's Trustees Report that these members continually cite.
       The report found that predictions about the solvency of the 
     fund had improved by a year. The only thing that has really 
     changed is the political needs of those who are hoping to use 
     major Medicare cuts for other purposes.
       President Clinton has presented a plan to extend the fund's 
     life. Remarkably, some in Congress have said that the 
     president has no plan to address the Medicare Trust Fund 
     issue. But he most certainly does. Under the president's 
     balanced budget plan, payments from the trust fund would be 
     reduced by $89 billion over the next seven years to ensure 
     that Medicare benefits would be covered through October 
     2006--11 years from now.
       The congressional majority's Medicare cuts are excessive; 
     it is not necessary to cut benefits to ensure the fund's 
     solvency. The congressional majority says that all of its 
     proposed $270 billion in Medicare cuts over seven years are 
     necessary. Certainly, some of those savings would help shore 
     up the fund, just as in the president's plan. But a 
     substantial part of the cuts the Republicans seek--at least 
     $100 billion--would seriously hurt senior citizens without 
     contributing one penny to the fund. None of those savings 
     (taken out of what is called Medicare Part B, which basically 
     covers visits to the doctor) would go to the Part A Trust 
     Fund (which mostly covers hospital stays). As a result, those 
     cuts would not extend the life of the trust fund by one day.
       And those Part B cuts would come out of the pockets of 
     Medicare beneficiaries, who might have to pay an average of 
     $1,650 per person or $3,300 per couple more over seven years 
     in premiums alone. Total out-of-pocket costs could increase 
     by an average of $2,825 per person or $5,650 per couple over 
     seven years. According to a new study by the Department of 
     Health and Human Services, these increases would effectively 
     push at least half a million senior citizens into poverty and 
     dramatically increase the health-care burden on all older and 
     disabled Americans and their families. The president's plan, 
     by contrast, protects Medicare beneficiaries from any new 
     cost increases.
       As Medicare trustees, we are responsible for making sure 
     that the program continues to be there for our parents and 
     grandparents as well as for our children and grandchildren.
       The president's balanced budget plan shows that we can 
     address the short-term problems without taking thousands of 
     dollars out of peoples' pockets; that would give us a chance 
     to work on a long-term pan to preserve Medicare's financial 
     health as the baby boom generation ages. By doing that, we 
     can preserve the Medicare Trust Fund without losing the trust 
     of older Americans.

  Mr. HOKE. I think it is really remarkable that what had been a 
completely unpoliticized document, that is, the trustees report of 
April 3, 1995, when that document was actually scrutinized and read 
with great interest by the American people and by Members of Congress 
and was used on this floor to bring to the attention of the American 
people the very calamitous situation that Medicare finds itself in, 
that that, all of a sudden, the trustees--it is not the trustees, it is 
one Mr. Robert Rubin who has written this letter claiming that----
  Ms. DeLAURO. Secretary of the Treasury, Wall Street business person--
--
  Mr. HOKE. Who has written this letter now in a very, very political 
way. He has decided to jump in politically because he sees that 
apparently the President's approach to this, which had been, frankly, 
very evenhanded, which had recognized that, yes, there clearly is a 
problem with respect to Medicare, Medicare has got to be fixed. We have 
got to step up to the plate and fix this problem.

                              {time}  1300

  The President apparently has been more recently, in the past month, 
or even less, 3 or 4 weeks, he has been persuaded by Democrat 
leadership in the House that political points can be scored by 
repeating this mantra of slashing Medicare in order to pay for tax cuts 
for the rich. I think that that is bad politics. It certainly is bad 
policy, and I am not going to yield more time at this point.
  Ms. DeLAURO. Mr. Speaker, I thank the gentleman for the time that he 
did yield.
  Mr. HOKE. Mr. Speaker, the gentlewoman is very welcome.
  With respect to the $90 billion cuts that were actually suggested by 
Democrats in the Committee on Ways and Means, I do not know if those 
were $90 billion scored that way by the CBO or if they would have been 
scored higher. The fact is the cuts the President talked about of about 
$135 or $140 billion were scored by CBO at about $190 billion.
  The truth is that every reasonable person in this body, every 
responsible person who has examined the situation, every responsible 
person in the administration, every person who is looking at it in a 
dispassionate and temperate way, not for political gain, not for 
political purposes but for the purposes of preserving, protecting and 
improving Medicare not just for this generation but also for the next 
generation, has concluded without question that we have to fix the 
problem.
  We believe that we cannot only fix the problem, that is the impending 
problem of bankruptcy, but we can offer so much more to senior citizens 
in terms of what will be available for them under choices that they 
ought to have as senior citizens that are available to other people in 
the country as well.
  Let us look at, first of all, the managed care option, because I 
think it is an interesting and a good option. The truth is there will 
be a lot of senior citizens who will be interested in it because it is 
going to offer them more care for less money. Let us face it, it will 
be less expensive for them. At the same time, in order to qualify, they 
would have to be part of an ``HMO'' or health maintenance organization, 
a managed care plan.
  What does that mean? It means that you go through somebody who 
decides whether or not you are going to see a physician at a particular 
time for a particular ailment.
  What I have found is that senior citizens who can sign up with an HMO 
that has, as one of the physician members in the HMO, if the senior 
citizen's physician is already in the HMO, then that HMO becomes very 
attractive to the senior citizen. If that senior citizen's physician is 
not in the HMO, then they are not particularly interested.
  It is also apparent that the older the senior citizen, the less 
attractive any kind of change to an HMO becomes. That is why it is 
very, very important that senior citizens be reminded by me and by 
others that the first option that they have with Medicare Plus is to 
stay in traditional fee-for-service medicine, exactly the way that it 
is today. If what they opt for is to stay in the Medicare Program, the 
traditional fee-for-service Medicare Program as it is today, with 
exactly the same copayments, with exactly the same deductibles, and 
with exactly the same part B premium, they can do that. That is 
available to them. They can do that.
  What is also to be available to them are a number of other choices 
that emulate and resemble choices that are available in the private 
sector to citizens in the United States today. Let us talk about this 
HMO, because I think it will be an option that will be attractive to 
some senior citizens.
  The reason is that what will happen, I believe, and what can happen 
under the plan, and what has happened in other States already, where 
they have piloted this, particularly in Florida, and there are two 
HMO's in northeastern Ohio, Medicare HMO's, is that, at least in 
Florida, already you can join a Medicare HMO and you can have full 
prescription drug coverage. That is 

[[Page H 10070]]
not true under traditional fee-for-service Medicare. But it is true 
under Medicare HMO's that are being run in Florida right now.
  I think it will probably be even more true in the rest of the country 
when there is a lot more competition. Because if there are 8 or 10 or 
12 or 15 HMO's competing for Medicare senior citizens to be in their 
plan, what you will find is that they will find ways to do it better 
for less money and they will offer greater services.
  But the marketplace will be working and the marketplace will work 
very aggressively. I think it would be reasonable to assume that there 
will be plans that will offer complete coverage for prescription drugs, 
complete coverage for eyewear, complete coverage for chiropractic, and 
additional coverages for maybe psychiatric or other things that are not 
covered fully under Medicare today.
  Why will that happen? Because the marketplace will be at work, and it 
will be working to make the delivery of services more efficient.
  I have to tell you that personally, from my own personal point of 
view, HMO's are not the delivery service of choice or delivery system 
of choice. I think they are decidedly, frankly, un-Republican, in the 
sense that they are top down. They are driven from the top and are 
bureaucratic.
  I would think they would be much more attractive to my friends and 
colleagues on the other side of the aisle. In fact, they have been in 
the past, and it was a big part of what the President was talking about 
in terms of mandating people to get into in the 1993 health reform that 
was so soundly rejected by the American public.
  In any event, there are HMO's that exist today. A substantial number 
of American citizens are covered by HMO's in the private sector, and 
people tend to have varying degrees of satisfaction with them, I 
suppose. The one that I like is the plan that is a medical savings 
account, a Medisave account, plus a high dollar catastrophic, high 
deductible catastrophic insurance policy.

  I think this will be tremendously popular with some senior citizens, 
not all senior citizens. Remember again, this is another option that 
senior citizens will have. They can stay in traditional fee-for-service 
medicine, Medicare. They can get into a Medicare HMO, or they could opt 
for a medical savings account.
  Let us talk about what a medical savings account does, because I 
think there has been a lot of talk about it but not a lot of 
understanding. Medical savings accounts allow you to purchase 
catastrophic illness insurance guarding against extraordinary costs and 
then deposit money into an MSA, a medical savings account, to cover the 
routine costs. The difference between the MSA level and the insurance 
policy's deductible would be certainly less than what today's seniors 
pay for so-called medigap policies.
  I will give you an exact example of how this works so it will make 
more sense to you. Right now we do not really have health insurance in 
this country, we have more like what is prepaid health care. In other 
words, we pay on a monthly basis to cover a whole slew of things that 
we know will go wrong.
  It would be as though you were paying on a monthly basis to have your 
brakes realigned, your oil changed regularly, and your shocks and tires 
rotated. We know there are certain things that we are going to 
experience in terms of our needs, our health care needs. But what 
insurance is supposed to do, real insurance is supposed to protect 
individuals against unaffordable losses due to unforeseen circumstance. 
That is what insurance is supposed to do. It is supposed to create a 
pool of money that allows us to share the risk, the real risk of having 
unforeseen things happen to us that are calamitous and that we cannot 
afford.
  That is what insurance is supposed to do. Specifically, what it 
really does is it allows you to sleep at night so that you know if you 
have some problem you cannot get wiped out as a result of that.
  Well, what the Medisave plan does is it goes back to the real theory, 
the underlying theory of insurance with a high deductible policy. Let 
us say that the first $3,000 is the amount of the deductible. It would 
be like if you had a car insurance policy where the first $3,000 of 
damages would have to come out of pocket. Instead of having to come out 
pocket, that first $3,000 would be in a Medisave account.
  Where does the money come from? Well, let us go back to how much we 
are spending right now per beneficiary per year. We are spending 
$4,800; the Federal Treasury, through the Medicare trust fund, is 
spending $4,800 per beneficiary per year. That money, that $4,800 would 
be divided up between a medical savings account, money placed in a 
medical savings account, or buying a high deductible insurance policy.
  The money that is in the medical savings account, plus money that the 
beneficiary, him or herself, could put in that account. Presumably, 
that would be the money that a senior citizen is now paying for medigap 
insurance. Most senior citizens buy medigap insurance to cover the 
amount that is not covered by Medicare, that money they could use in 
that medical savings account up to the amount of the deductible.
  Now, if they use it, that is great. If they need it, that is great. 
It gets used up, and then after that, the insurance company takes over. 
If they do not, at the end of the year, who does that money belong to? 
Does it belong to the insurance company? No. Does it go back to the 
Government? No. It belongs to the senior citizen. What is the point of 
all this? The point of this is to give incentives to the individual who 
is getting the care. The point is to actually create consumer 
motivation on the part of the patient, the beneficiary, the Medicare 
beneficiary.
  What does it mean? It means that that beneficiary is going to be 
making the same kind of cost conscious consumer decisions in the 
purchase of their health care that they make in every other area of 
their lives, whether it has to do with housing, or whether it has to do 
with clothing, whether it has to do with food. And they are going to 
become cost-conscious consumers of health care as well.
  Now, a lot of people say, well, that is ridiculous; that is not the 
way it works. People do not make good decisions with respect to health 
care based on cost. I will give you a couple of examples of things that 
have to do with health care where people do and where it has been 
extraordinarily successful.
  First of all, and I know that this will, Mr. Speaker, apply to many, 
many people who hear this, it has to do with eyewear. The fact is that 
eyewear is not something covered either by Medicare or, by and large, 
by private insurance. What have we seen in the area of eyewear where we 
do not have third party payers but in fact we have consumers purchasing 
the product? What we see is the following: You can get your eyes 
checked and you can have your eyes examined by any of three different 
people with levels of education and expertise. You can go to an 
optometrist, an optician, or an ophthalmologist at different levels of 
education and expertise and different costs. You can go to any mall in 
this country and actually have your eyes checked and a prescription 
filled the same day. So there is tremendous consumer availability.
  Not only that, but we have seen the prices of glasses on an 
inflation-adjusted basis remain flat for the past 25, 30 years. We have 
seen the prices of contact lenses come down dramatically over the same 
period of time. So, clearly, consumer forces work in the medical area.
  They also work with respect to dental services, which are largely not 
paid for by insurance companies. They even work in the area of 
pharmaceutical supplies and prescription drugs, which also are in many 
cases not covered by insurance. They are not covered by traditional 
fee-for-service Medicare, although they are covered in some Medicare 
HMO plans.
  What does this mean? It means that you have seen the proliferation of 
generic drugs and of discount programs and drugs by mail, and the 
market has responded to bring those prices down. There are other things 
that push drug prices up, such as liability issues and the difficulty 
of getting drugs to market in this country because of FDA hurdles that 
are overwrought and too high. But, in any event, the point is that 
consumer forces can work in the health care area, and medical savings 
accounts will offer senior citizens the 

[[Page H 10071]]
opportunity to make choices themselves, manage their own health care, 
and actually become the drivers and be in the driver's seat when it 
comes to making health care choices. So that is another choice.
  The point of this is the plan that we are going to vote on next week 
is going to do a number of important things. No. 1, is will take us out 
of the 1960's with respect to the delivery of health care to senior 
citizens. It will preserve the traditional fee-for-service Medicare for 
seniors that want it, but it will also give them a number of other 
choices, including managed care plans, including medical savings 
accounts, including some other things that I have not discussed with 
you that are a little bit more complex. But it will give a range of 
choices that will be available.
  What will it do with respect to the spending? It will increase the 
spending from $4,800 per year to $6,700 per year. What does that mean 
over that period of time? It means we are going to spend twice as much 
on Medicare in the next 7 years than we have spent in the previous 7 
years. It also means that we are going to increase the spending on an 
annual basis of about 6.5 percent per year. In other words, we are 
increasing 6.5 percent per year on average from 1995 to 2002.
  What are we doing right now in the private sector? Well, in 1994, a 
big six accounting company report came out and said that the increase 
in the inflation in the health care sector is now down to about 3.1 
percent in the private sector. Think about that for a second. Why has 
it gone down to 3.1 percent? The reason that it has gone down to 3.1 
percent is that America has woken up. Individuals, families, companies, 
employers, they have said we are not going to allow this to continue, 
this kind of double-digit health care inflation. We have had it. We are 
going to do what is necessary to squeeze all the fat out of the 
delivery of health care in this country. We are going to fix the 
problem. That is exactly what the private sector has done.
  What was it that CBO had projected the increase to be at which gives 
the Democrats, my friends on the other side of the aisle, the ability 
to claim this $270 billion cut, which does not exist, of course? Well, 
what was the projection by CBO? They projected we would be increasing 
at 10.5 percent per year over the next 7 years.
  We are saying we are going to increase at 6.5 percent per year. But 
either way, what has made it possible? Why is it that we have gone up 
at 10.5 percent per year in the public sector, with government funding 
of health care, but we are now only going up at 3.1 percent in the 
private sector? The fact is that it goes up at 10.5 percent per year 
because it can, because we have allowed it to, because we have said 
that is what the amount is going to be. We have made it an entitlement, 
and nature abhors a vacuum. so the amount of spending will certainly 
fill the amount that is appropriated. It is absolutely guaranteed that 
will happen.

  My own prediction about what will happen with respect to the Medicare 
reforms is that we will not need the 6.5-percent increase. We will not 
use that much money because these other factors will come into play and 
will actually use market forces to squeeze out the waste, fraud, and 
abuse, to squeeze out the fat, to squeeze out and bring about market 
competitive forces into play.
  So that is what we will be dealing with next week on the floor. I 
think, Mr. Speaker, the American people deserve to know the facts about 
this and that, the more that they learn about Medicare, the more that 
they see exactly what choices will be available to them, the expansion 
of the choices, the more that they will absolutely and utterly reject 
the scare mongering, what the Washington Post called medagoguery that 
has been taking place on the other side of the aisle. And I think it is 
to the discredit of the President of the United States that, while he 
had, up until the past 2 or 3 weeks, been, very frankly, evenhanded and 
accurate in his rhetoric about the problems with Medicare and the need 
to fix those problems, he has now dived into the same muck bucket that 
my friends on the other side of the aisle have been engaged in all year 
by making this a political issue and politicizing it rather than making 
it a policy issue that deserve everybody's attention and that they 
should join us to try to come up with solutions that will be real.
  This letter that Bob Rubin, the Secretary of the Treasury, has 
decided to send now, which is blatantly political, that letter is 
clearly an example of this decision that was probably made in 
consultation with pollsters, handlers, and political consultants to go 
political on the course instead of to talk about it in a dispassionate, 
rational way so that this program that is so important to American 
senior citizens could be preserved. Instead, what you get now is a 
great deal of scare mongering and the attempt to create anxiety on the 
part of senior citizens.
  I know that, Mr. Speaker, they are not going to believe it. I know 
that they know that we have parents who are on Medicare ourselves and 
that we feel the responsibility that responsible legislators everywhere 
in this country feel, and that is to do what is right to preserve this 
program that has been a great success for the American people.
  With that, Mr. Speaker, I will yield back the balance of my time.

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