[Congressional Record Volume 141, Number 162 (Thursday, October 19, 1995)]
[House]
[Pages H10476-H10483]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




         REPUBLICANS PRESERVE MEDICARE FOR GENERATIONS TO COME

  The SPEAKER pro tempore. Under the Speaker's announced policy of May 
12, 1995, the gentleman from Illinois [Mr. Hastert] is recognized for 
60 minutes as the designee of the majority leader.
  Mr. HASTERT. Mr. Speaker, I thought we would take some time this 
evening to talk about the bill that we passed today, the Medicare bill 
where the Republican proposal to save and preserve Medicare for 
generations to come was passed in this House.
  It was interesting to listen to some of the previous speakers and 
some of the shameless rhetoric that we have heard through the last hour 
or so about some of the proposals that were supposedly proposed in the 
Medicare bill, and in the next hour I would like to talk about some of 
those fallacies that were presented here and talk about why Republicans 
decided that we had to look at a system that has been in place for 25 
years, or actually 30 years, since 1965.
  Mr. Speaker, what happened last April, the President's Board of 
Trustees for Medicare came forward and said that Medicare is going to 
go broke, that we start going into arrears next year, in fiscal year 
1996, and by the year 2003 or 2004 Medicare would be totally bankrupt. 
So we had a choice. Basically, Democrats and others today had a choice 
in this Chamber. You could vote for a program that was going to save 
Medicare, preserve Medicare and give seniors choices, or you could vote 
no and let Medicare go bankrupt so there would be no Medicare system in 
the next year or 2 years or 7 years, and let seniors down, take away a 
promise that has been there for a number of years.
  In developing the Medicare plan that we had before us today, I would 
just like to take a minute and say that I think we went beyond the 
traditional square of how politicians think. We brought in health care 
recipients, organizations like AARP and other consumer organizations 
for seniors. We brought in management, risk managers of the Fortune 500 
companies, we brought in hospital folks, we brought in nursing home 
folks, we brought in doctors and other providers to listen to what 
their problems were and how to design a Medicare system for the future.
  We asked people to do one thing, and that was to think beyond either 
cutting down the benefits that have always been there to squeeze down 
the dollars that we spend on Medicare and hold back those benefits, or 
hold back the dollars that the providers got, or those types of 
traditional ways that the previous leadership in this House has behaved 
towards Medicare, or to try to think beyond the traditional square. How 
do you create a new system, how do you create a Medicare system that 
will reach into the future that will give people better services, 
better choices, and be a system that really starts to move towards the 
private sector?

  Well, we decided that the fee-for-service system that has always been 
the traditional Medicare delivery system in this country was near and 
dear to many people. We did not want to upset seniors, and we wanted to 
make sure that that system was always there if people chose to take it. 
Also then, we wanted to offer an array of choices, and those choices, 
one of them is about 10 percent of our seniors in Medicare today 
already take the choice of managed care, or what we call HMO's, or 
Health Maintenance Organizations.

[[Page H 10477]]


                              {time}  2000

  Along with that, they do not have those choices today, but PPO's are 
also part of that choice system. In this system, a health maintenance 
organization may offer somebody prescription drug benefits, prepaid, 
and they offer to do away with copayments and they even offer to pick 
up part B premiums. So there is a real incentive to give people a 
better product at a lower price. Of course, that is the real market 
system starting to develop.
  People also might want to develop what we call a provider service 
organization, where doctors and hospitals get together and offer a new 
system to health care recipients, to the Medicare recipients in this 
country. Of course, people may want to go to a medical savings account 
that we are going to talk about here tonight, where people can make 
choices of where they want to keep their traditional doctor, what kind 
of health care they want to buy, and if they do not spend a prescribed 
amount of money they get to keep it. That is certainly a unique idea in 
this country, especially when you deal with huge bureaucracies that 
formerly controlled the health care in this country.
  Then, finally, the seamless coverage, that if you have had a health 
care insurance system where you worked for the last 30 years, you liked 
that system but all of a sudden you are reaching 65 years of age and, 
my gosh, you have to give up the insurance you have always known and 
try to find some other kind of a fee-for-service system in the Medicare 
system, that is a very traumatic experience to some folks. If your 
insurance company has agreed to stay within the system, now you can 
have that seamless coverage and stay with that traditional insurance 
that you have always had.
  Those are the choices. But some of the things we want to talk about 
here tonight, talk about some of the fallacies that one friends on the 
other side of the aisle have brought up but also some of the positive 
things about those positive choices that people will enjoy and at the 
same time trying to squeeze out the fraud and abuse that we have in 
health care. We think up to 10 to 15 percent of the dollars that we 
spend in Medicare today are wasted in fraud and abuse under the present 
system. We need to change that. We have brought in tough new provisions 
to make that happen.
  I would like to defer, first of all, to my friend, the gentleman from 
Connecticut [Mr. Shays], who has also been on the ground floor of 
putting this program together; and we are going to talk about the 
inception of the change, the new system of Medicare. Plus we have with 
us the gentleman from New Mexico [Mr. Schiff] and the gentleman from 
Oklahoma [Mr. Coburn]. It will be interesting to hear from these 
gentlemen as well.
  Mr. SHAYS. I thank the gentleman for yielding and want to say that I 
have seen our conference work on this legislation for well over a year, 
because we started, in fact, when we were in the minority to deal with 
this very serious problem of reforming our health care system and 
making it a better system for all.
  One of the first fallacies, and there are going to be a lot of 
fallacies that we have to deal with, is this whole concept that we are 
in fact cutting Medicare. You can look at it in three different ways. 
Each way it is a significant increase.
  In the last 7 years, we spent $926 billion on Medicare. We expect to 
spend in the next 7 years $1.6 trillion. It is about a $675 billion 
increase in new money over the next 7 years. We are going to spend 73 
percent more money in the next 7 years than we spent in the last 7 
years. Only in this place, in Congress and in Washington, when you 
spend 73 percent more during the next 7 years do people call it a cut.

  We could look at it in terms of how much we spend today on Medicare. 
We spend $178 billion. In the 7th year we are going to spend $274 
billion, estimated. That is a 54 percent increase in the 7th year. So 
we are going to spend in the 7th year 54 percent more than we spend 
today. Only in Washington when you spend 54 percent more would people 
call it a cut.
  But then people said, Well, wait a second. There are a lot more 
beneficiaries. So we said, Yeah, let us see the impact on each 
individual beneficiary. We put aside for every senior approximately 
$4,800 per beneficiary, per senior. In the 7th year, that is going to 
go up to $6,700. That is a 40 percent increase per beneficiary in the 
kind of money we are putting into the system.
  Mr. HASTERT. So what the Democrats are saying, that we are cutting 
Medicare, actually, we are expanding Medicare 40 percent over the next 
7 years, is that correct?
  Mr. SHAYS. Per beneficiary. We are putting in 73 percent more money 
in the next 7 years over the past 7 years. We are spending 54 percent 
more in the 7th year than we are spending today. Any way you look at 
it, we are spending a colossal amount of increased funds in this 
program.
  Mr. SCHIFF. If the gentleman would yield on the same point, I want to 
say that I voted against the tax cut when it was first proposed; and I 
did not vote against it because I do not agree with tax cuts. I did not 
buy the class warfare argument being offered by the other side. I do 
not believe the proposed tax cuts go primarily to the rich; and, in any 
event, I think people keeping the money they have earned is desirable.
  I voted against it for one major reason. That is, that I simply felt 
that we should concentrate on deficit reduction first. I make that 
point because the argument that is being made from the other side is 
that everything we are doing is simply for a tax cut and a tax cut for 
the wealthy. Therefore, I think I am in a credible position to talk 
about that since I personally did not vote for the tax cut.
  It is important to emphasize on the gentleman from Connecticut's use 
of the word cuts in explaining that, that our colleagues on the 
Democratic side are using the word cuts or have used the word cuts to 
mean spending less than a projected increase, even though you are still 
spending more.
  Only in Washington, of course, is spending more called a cut. But 
here is what I want to emphasize. The original position of many of our 
colleagues on the Democratic side was that nothing needs to be done 
with Medicare, everything is fine, everything the Republicans are 
proposing is simply to fund a tax cut for the wealthy.
  Now, this morning they changed that position. This morning, or this 
afternoon, I guess I should say, in their substitute that they offered 
here they are proposing to cut Medicare using the word cut as they use 
it. They themselves have proposed spending less than certain target 
figures that have existed in government projections.
  Why would they propose cutting Medicare unless they now acknowledge 
there is a real problem here, that Medicare faces bankruptcy unless 
action is taken? That is something that they have largely denied 
through the past several months.
  Mr. SHAYS. If the gentleman would yield, the President came in with 
this 10-year plan. In this 10-year plan, he said we needed to reduce 
the growth, which is the proper term, of Medicare, $127 billion. And 
what he did not acknowledge, though, that was scored by OMB. The 
President, in fact, I just want to add weight to it, was suggesting by 
reducing $190 billion the growth in Medicare.
  Mr. SCHIFF. I wanted to make the point that on the House floor today 
the Democratic counterproposal called for a cut in Medicare as they 
have used the term cut for the last number of months, spending an 
increase but not as much of an increase as projected targets. I thinks 
that that is an important concession that Medicare indeed is in serious 
projected financial trouble, and somebody had to come forward and start 
taking the lead on this.
  I am going to yield back to the gentleman, but at some point I would 
like to analyze their current argument which is the difference is now 
to fund a tax cut.
  Mr. HASTERT. If the gentleman would yield, one of the interesting 
things when they are talking about a $270 billion cut, what they are 
talking about is they want the inflationary rate of over 10.5 percent 
to go on unfettered. Our good Democrat friends on the other side of the 
aisle, who just got done speaking, are saying, let us not try to hold 
in inflation. Of course, we know what inflation does, especially to 
seniors. But they want that inflation to go at 10.5 percent. That is 
how they get to $270 billion more spending.

[[Page H 10478]]

  Mr. SCHIFF. If the gentleman would yield for one moment, and I will 
not belabor this, but I want to make the point that, of course, more 
spending is not a cut. But to the extent that some of our colleagues on 
the other side have said we are cutting Medicare, they proposed today 
to cut Medicare, too. That is a concession that there really are 
Medicare problems that we have to address.
  They now say, well, the difference between our cut and your cut would 
fund the tax reduction for the wealthy. That is not true, either. I 
hope to address that when I get the floor again.
  I yield to the gentleman from Oklahoma [Mr. Coburn].
  Mr. COBURN. I heard a wonderful example on how to explain this. I 
have three grown daughters. But I did have teenage daughters. If I gave 
one of them $20 a week allowance and we come to negotiate again the 
next year and she wants $40 a week and I say I will give you $25, then 
she comes to tell me that I have given her a cut? No, I have given her 
a $5 increase. When you put it in the terms, it is what it would be 
versus what it should be.

  I want to go back to the real point of why we are doing what we need 
to do. We are not getting value for our dollars in Medicare today. If 
we are going to assume a 10.5-percent growth, then we are going to 
assume that we are going to continue to not get value for our dollars.
  So we have to ask the question, do we have an obligation to the 
seniors that are on Medicare today, to those of us that are working, 
paying for Medicare through our payroll deductions and to the children 
that are going to have to pay for it in the future to get the best 
value for every dollar that we spend? If you look at this plan, that is 
an attempt to move in that direction.
  We are giving an allowance. It is going up. It is not going up as 
much as it has in the past in terms of inflation.
  Mr. SHAYS. Thank goodness it is not going up as much
  Mr. HASTERT. It is interesting. When we talk about growing Medicare, 
and the gentleman from Connecticut [Mr. Shays] talked about how much 
more dollars that we are going to put in the system over the next seven 
years, we base that at about 5.5 percent, which is even less than what 
the private sector medical growth has been.
  When you look at the rate of inflation that the Federal Employees 
Benefit Plan has had across the country, they have had an average under 
5 percent in the last couple of years. We are giving the people the 
benefit of the doubt, and we are letting Medicare grow at about 5.5 to 
6.3 percent.
  But the amazing thing is when we say that, no, we are not going to 
hold in inflation completely, that we are going to let it go, our 
friends on the other side have said, ``Well, we will let it go, we will 
let inflation go up to 10 or 15 percent.'' That is where they get the 
$270 billion. That is wasted money. That is inflation. That is money 
that never was, never will be, but people would have to pay extra out 
of their pockets and not get any more in return.
  Mr. COBURN. If the gentleman would yield, I think one other critical 
point, is it morally right to allow Medicare to grow faster than what 
it should, to be more inefficient than what we can make it? It is 
morally wrong to do that, and we should do everything in our power to 
make this an efficient system that delivers affordable quality health 
care with choice for our seniors.
  We can do that. But we have to do that by being honest with what the 
problem is, being honest with what the numbers are, and then carrying 
that honesty out and say, yeah, we made the hard votes to do the right 
thing. To do anything else, we would be shirking our responsibility.
  Mr. SHAYS. If the gentleman would yield, what we are really going to 
do is we are going to just take each of the points that were made by 
our colleagues on the other side of the aisle and just talk about how 
valid they were, if they had any validity.
  I just make this point. Of the $270 billion of savings to the growth, 
$133 billion are going to go into the Medicare part A trust fund. That 
is the trust fund that individuals pay in their payroll tax, the 2.9-
percent if you are self-employed, 1.45 percent that you pay if you have 
an employer; and the other $137 billion are going into the Medicare 
Part B trust fund. That is the fund that funds all the health services.

  My colleague just brought up the issue of taxes; and since I serve on 
the Committee on the Budget, I would just like to respond to this issue 
and deal with this other issue that somehow they are linked. They are 
not linked at all.
  When the tax cut passed, and this is a plan that I voted for, we paid 
for it through the fiscal dividend of getting our financial house in 
order. The Congressional Budget Office said we had a fiscal dividend of 
$170 billion by immediately getting our financial house in order. We 
saved the taxpayers $170 billion on unnecessary interest payments and 
so on.
  Mr. HASTERT. If the gentleman would yield, we paid for those tax 
cuts.
  Mr. SHAYS. That is the point I want to make. I want to say that 
before we even took up Medicare, we paid for each part of those tax 
cuts. We paid for them in cuts in discretionary spending, in slowing 
the growth of our entitlement programs that we specified and through 
our fiscal dividend. So it was paid for through very serious and in 
some cases difficult votes.
  Our logic was, why have a program, for instance, a government program 
that is supposedly helping a family when 20 to 30 percent get taken off 
by the bureaucracy before it gets to the family, with all the 
bureaucratic requirements of the government program, and why not just 
get that family the money? A major part of it is the $500 tax credit, 
$500 for each child.

                              {time}  2015

  Mr. HASTERT. Can I ask you a question and then let the gentleman from 
New Mexico ask, too? The Democrats are saying this is a tax break for 
the rich. You are saying tax breaks here are for families with 
children.
  Mr. SHAYS. Anybody can just ask themselves, if you have a child that 
is under 18, you would get a $500 tax credit. If you are listening 
today and you feel you are rich, then you would qualify under their 
definition. And the Senate, on this $500 tax credit, has said it should 
only go, Republicans in the Senate said it should only go to families 
under $75,000. But 75 percent of all families make less than $75,000.
  So the biggest part of our tax cut will go to individuals with 
families with children. If they have three children, they get $1,500. 
If they have four, they get $2,000.
  I just would love to make this point, if I could. I would like to 
make the point that when my parents were raising me and my older 
brothers, they were able to take a deduction in today's dollars off 
their income of $8,000, and they could reduce their income. My family, 
in today's dollars, could reduce $32,000 from their income and not pay 
tax on that $32,000. You have seen what was then equated to today.
  And my family, when they were having to, my mom and dad were raising 
us, they had to pay less than 20 percent in taxes to Federal, State, 
and local governments. A family today pays approximately 40 percent in 
Federal, State, and local. So what we are trying to do is focus the 
bulk of that tax on families and families that need it.
  Mr. HASTERT. The other part of the tax cuts for the wealthy that our 
friends on the other side talk about, and it is somewhat laughable, 
because part of those tax cuts are for senior citizens who want to work 
that earn under $30,000 a year and ones who do not have all the income 
coming in and rents or interest rates or dividends from stocks or 
people who have to really go out and work for a living and people who 
have done that their whole life. But if you earn under $30,000, you do 
not have to pay that extra income tax or that deduction that you get on 
your Social Security.
  Mr. SHAYS. Even taking into account the capital gains exemption, 
which we have to score as a loss in revenue, which most economists say 
will actually generate revenue, this is how Democrats equate it to a 
wealthy man. If you make $40,000 and you have a one-time capital gain 
of say 100,000 on the sale of a home or something else and you, 
therefore, have earned $40,000 in income and then you have this capital 
gains of 100,000, they say, see, you are a wealthy person, you made 
$140,000. And they put you on that equation of $140,000.

[[Page H 10479]]

  Mr. SCHIFF. I want to stay on the subject of the relation of our 
Medicare bill to the tax cuts. As I indicated, I did not support the 
tax cut only because I would like to see some real time history of 
budget savings rather than go on a plan. But the point is, for the 
purpose of this debate, on Medicare, I very strongly argue that the 
accusation made that this is to fund any tax cut for any purpose is 
simply incorrect.
  I would just like to say that we start at the same place now. We have 
proposed reducing the rate of growth of Medicare, which they have 
called a cut. They now propose reducing the rate of growth in Medicare, 
which they call a cut. So we are now heading in the same direction.
  They have conceded the fact that Medicare is heading towards 
insolvency. The argument that we heard for the last hour was the 
difference between the two figures, the amount of additional reduced 
growth, which we say is necessary for the long-term fiscal health of 
Medicare, they say is to fund the tax cut. I want to take a couple 
moments to say to my colleagues why that is just not true and why in 
fact the tax cut in the plan is funded in other ways.
  In the first place, part A of Medicare, the hospital trust fund, 
which is the larger portion of Medicare spending, is funded by a 
payroll tax. That payroll tax is not affected by other taxes. In other 
words, other taxes can be raised or other taxes can be lowered. The 
fact of the matter is, the Medicare trust fund has the exact same 
source of income which is the payroll tax. So nothing we do in lowering 
or in fact raising taxes elsewhere has anything to do with part A.
  Part B of Medicare that deals with funding physician and other 
services is paid for, approximately 31 percent, by beneficiaries and 
approximately 69 percent is subsidized by the general treasury. So the 
argument can be made, well, the tax cut is being funded by reduced 
spending in part B, because that is general funds.
  The problem with that argument is that every Medicare beneficiary 
knows that part B regularly, I think annually, goes up in cost as the 
cost of the program goes up.
  The current system is projected to raise the part B premiums for 
beneficiaries for the general fund in the next several years. The 
President's proposal will raise the contribution of beneficiaries and 
the general fund for part B in the future.
  The point is, as I have seen the figures, the final figures projected 
to exist in 7 years for part B for beneficiaries are very close 
together. I think the widest range difference I have seen projected is 
that the Republican plan will, in seven years, not for seven years but 
in seven years would be $7 a month higher per beneficiary than the 
President of the United States. The point is, you do not fund a 
multibillion dollar tax cut out of a $7 a month difference.
  Mr. HASTERT. One of the things that when we looked at our system and 
what we have tried to do, the rate today is 31.5 percent. And we keep 
that tax rate in place.
  Now, there is a proposal or under law that this would drop to 25 
percent. And if it did, indeed, drop to 25 percent, then taxpayers 
would have to pick up that extra amount and taxpayers would be 
subsidizing the part B premium about 75 percent. So the other side of 
the story, as some people use that terminology, our friends on the 
other side would actually have a tax increase for those people.
  Mr. SCHIFF. It is my understanding that explains the difference 
between the Republican plan and the President's plan. We would keep the 
subsidy level of part B the same and not increase it out of the 
Treasury. But the difference is still too small, is still too small for 
anyone to say that is funding a multibillion dollar tax cut. It is just 
not correct.
  Mr. SHAYS. I just would love to make sure that we just establish the 
arguments that are being made and whether they are credible.
  First, we are not cutting Medicare. We are allowing it to grow 
significantly per beneficiary over 40 percent a year. The second 
argument is that somehow the tax cut is related to what we are looking 
to do to save, strengthen Medicare. There is absolutely no 
relationship.
  The next argument they make is they say we are increasingly co-
payments, which simply is not true. Co-payments remain the same. They 
say we increased deductibles. That simply is not true. The deductible 
remains the same.
  Then their argument is that we increase premiums. We are keeping 
premiums in fact at 31.5 percent, and 7 years from now they will stay 
at 31.5 percent. As health care costs grow, that 31.5 percent will cost 
slightly more as it has during the last 7 years. There has been that 
growth.
  So what gets us into this is the exciting fact that we have an option 
beyond, you can say, in this fee-for-service program. You are not being 
forced out. No new co-payment, no new deductible, no increase in 
premium, no relationship between our effort to slow the growth in 
spending in the tax cut. In fact, no cut in this program, an increase. 
And it gets into this extraordinary opportunity we have with Medicare-
plus.
  Mr. COBURN. I just wanted to add, 7 years ago the part B premium was 
about $26. And it is $46 and 10 now. It is going to rise. It is going 
to rise a small amount each year for the next 7 years. But it is still 
going to stay at 31.5 percent of the total cost for the part B program. 
I think it is important for people to realize that the rate of rise is 
not going to be significantly different than what the rate of rise has 
been in the past.
  Mr. SCHIFF. The gentleman has just made an extremely important point, 
that the part B program has been costing more every year and the amount 
that beneficiaries pay has gone up every year. What the other side 
argued was the entire projected increase in the part B premium was a 
result of the Republican bill and for tax reduction. The point is, the 
increases are coming anyway. The increases are posed in the President's 
budget. The difference is very small, and the difference is the result 
of do you want, in this season, in this time frame of deficits, do we 
want to be increasing the amount of subsidy from the general Treasury.
  Mr. HASTERT. I think one of the most important things that we want to 
get to and I think we should walk through the choices that people have. 
traditional fee-for-service and the other choices are there, part of 
this Medicare Program.
  Mr. SHAYS. Is it true that you will be forced to get out of your fee-
for-service program?
  Mr. HASTERT. Absolutely not. The fee-for-service, we believe that our 
CBO tells us about 75 percent of seniors will stay in the traditional 
fee-for-service. We think that there is too good an opportunity out 
there for seniors and seniors who really look at the opportunities they 
have will move from fee-for-service.
  Mr. SHAYS. But they do not have to.
  Mr. HASTERT. It is their choice if they want to.
  Mr. COBURN. There is 9 percent already in a managed care option who 
are very satisfied.
  Mr. HASTERT. Nine to ten percent are there and looking at that. When 
those folks get involved, they have options of getting prescription 
pharmaceuticals paid for. They get co-payments paid for in many of 
those plans, and we talked about part B premiums. These options are 
that the system can even pick up the part B premium for the Medicare 
recipients. So there are some real pluses there.
  Mr. COBURN. Mr. Speaker, one of the advantages that I have had in 
dealing with Medicare is I am a practicing physician. I continue to 
practice on the weekends. I know Medicare both from a 
patient perspective and as well as a provider perspective. It is unique 
to be able to understand; it is very, very complicated. That is one of 
the reasons our seniors are so concerned, not only because of the 
rhetoric but because it is very difficult to understand. As we have 
changed Medicare, we really are going to give four very simple options.

  Mr. HASTERT. I would like the gentleman as a physician and a 
practitioner, a person who deals with both patients and the system, one 
of our options is a medical savings account. Why do you not talk about 
that medical savings account and how that can affect patients and the 
system itself.
  Mr. COBURN. I would be happy to. First of all, I think we need to 
correct what we heard a minute ago, that there 

[[Page H 10480]]
was a $20,000 deductible. That is not even allowed under this plan. So 
it is not going to be one of the options, and the information stated 
was incorrect.
  A medical savings account is an account like I presently have as a 
physician. I have a deductible, and I pay a premium each year for that 
deductible. It is a high dollar deductible. It is $10,000 for my entire 
family. I am fortunate enough to be able to have that kind of 
deductible. I am responsible for the bills in between it.
  Under the Medicare Program, we will have deductibles, high deductible 
medical savings account available, which the Government will place into 
that account, the average payment for that area to purchase a high 
deductible policy; and what is left over can be used for medical care 
for that person for that period of time.
  Mr. HASTERT. So basically, let us say that next year the Federal 
Government, and we are just using numbers generally, but next year the 
Government will pay 5,000, average payment per person will be about 
$5000 in the next fiscal year. So a person could buy a $3000 deductible 
catastrophic health care policy for about $2,000. Then the Government 
would put the balance of that $3000, the balance of 2000 from 5000 
average, into their medical IRA. That money would be there.
  They would choose where they want to go for health care. They would 
choose their doctor, what kind of care they wanted. They would also be 
pretty responsible then for looking at what the cost of that health 
care is. They actually would go out and shop because, if they do not 
spend it, they get to keep it. That is one of the things that would 
rolL over in that medical IRA account. Then eventually, if they want to 
use that for long-term care insurance or some other type of health 
care, they could. But the thing is, it is their money. What a unique 
situation. All of a sudden, people are protective of those dollars and 
looking into that when it is their money.
  I know we have been joined by one of our colleagues who has been a 
leader in health care for many, many years here, the gentlewoman from 
Connecticut.
  Mr. SHAYS. The distinguished gentlewoman from Connecticut is an 
expert on this issue.
  Mr. HASTERT. I would like to yield to the gentlewoman at this time.
  Mrs. JOHNSON of Connecticut. I thank the gentleman for the 
opportunity to join him at this special order to discuss the 
Republicans' approach to reforming Medicare in order to secure for 
current seniors and to ensure that it is going to be there for future 
retirees.
  I wanted to pick up on what the gentleman is talking about. One of 
the things that was very distressing about the debate this afternoon 
was the claims by opponents that we could not fund a premium that would 
buy a good plan in the market.
  When we look at what is really happening out there right now already, 
the Medicare premium that seniors are paying would buy much more for 
them than Medicare is giving them. In the Boston area, there were two 
HMO's. Seniors have the right to choose to join an HMO. Not everybody 
wants to be in an HMO. If you do not like the staff or the doctors in 
the HMO, you cannot go outside.

                              {time}  2030

  I personally am not high on joining an HMO, but they had two very 
good HMO's in the market in Boston. One of them was the Harvard Health 
Plan, and the other was the Fallon Plan. Each of those HMO's had 
developed quite large senior participation, but they were not growing.
  Well, into the market came three new managed-care plans offering not 
only all Medicare services, but additional services, for a zero 
premium. That is just the Medicare premium. Now thousands of seniors 
every month are joining one of these five plans because what did the 
Harvard plan do? They dropped their premium from $89 a month to $15 a 
month. What did the other plan do? Its premium was over $50. They 
dropped their premium to zero. Now the seniors in the Boston area have 
the choice of four plans, four zero-premium plans, the Harvard $15-a-
month plan, and for that they get all Medicare services plus copayments 
and deductibles plus some other, in some cases, prescription drugs, in 
some cases preventive-care coverage.
  Mr. HASTERT. So you are saying that deductibles, this is something 
plus. I mean before a traditional fee-for-service health care and 
Medicare seniors have to pick up a copayment; is that right?
  Mrs. JOHNSON of Connecticut. Right.
  Mr. HASTERT. They would have to pay, pick up a deductible; is that 
right?
  Mrs. JOHNSON of Connecticut. Right.
  Mr. HASTERT. They have to pay for their own prescription drugs; is 
that right?
  Mrs. JOHNSON of Connecticut. Correct.
  Mr. HASTERT. And sometimes pay for their own eyeglasses?
  Mrs. JOHNSON of Connecticut. Correct.
  Mr. HASTERT. And under these programs you are saying that they are 
more efficient, a better system of delivery, and that the can pick up 
these costs so seniors really save.
  Mrs. JOHNSON of Connecticut. Absolutely. Not only do seniors really 
save, but they choose these plans, they choose to go to a system that 
they believe serves their needs better, and they are choosing at such a 
rapid rate that while Medicare managed care used to be 5 percent of 
that market, it is now 10 percent
  Now what does that tell you about our plan? Some people have been 
concerned, including some of our colleagues, that if our plan does not 
save as much as we think it will, we will have to make deeper cuts 
later on.
  Well, our Budget Office thinks that over 7 years only 15 percent more 
seniors will choose MedicarePlus plans like this. Ten percent are in 
HMO's now, and they think that, when we offer them all these choices, 
Medicare-plus plans, medical savings accounts, that only 15 percent 
more over 7 years will join.
  In Boston they have already increased it in 2 years by 5 percent. I 
mean the Budget Office cannot take into account human choice and human 
motivation, and so they use old data to make old projections, and then 
they try to force us to make irrational decisions.
  Mr. SHAYS. If the gentlewoman would yield, I would just love to 
emphasize again because we just continually, I think, need to based on 
what was said on the other side of the aisle. Any senior who wants to 
can stay in their traditional fee-for-service and have the same doctors 
they have presently, and I want to continue to make the point that they 
are never taken out unless they choose to be transferred to a private 
plan.

  Now I just think there is one cautionary element that we need to 
make, especially coming from our area. It is probably going to be 
easier for people in the Boston, and New York, and Miami area to see 
greater opportunities in private health care plans. I suspect in an 
area like Oklahoma they may not see all the same ability to get some of 
those plans because we are dealing with high-cost areas and low-cost 
areas, and we have not yet fully resolved that issue, but I think we 
are on the way to doing that.
  Mr. HASTERT. The gentleman from Oklahoma, if I could yield to him for 
a minute, I would like him to talk about that difference and also one 
of the new innovations we have called provider service organizations.
  Mr. COBURN. Thank you. I would like to make one point so that seniors 
know a provision of this bill is that, if you would decide you wanted 
to go into an HMO and did not like it for the first 2 years, you can 
get out any time you want. So what we have also done is increased----
  Mrs. JOHNSON of Connecticut. Beyond that, every single year you can 
get out, every single year you get a new choice, and you can stay in 
the plan you are in, you can change plans, or you can go back to 
Medicare, and in every single market there are medigap insurance plans 
that do not discriminate so you can always go back to that combination 
of Medicare and medigap if you prefer it.
  So this is a totally voluntary choice plan that we are providing, and 
we do have overwhelming actual experience that shows that the Medicare-
plus plans will be able to provide a lot more benefits for the same 
dollar, and if I could just add one thing before unfortunately I have 
to catch a plane, it is 

[[Page H 10481]]
that, you know, both for the people who stay in Medicare and for the 
people who choose MedicarePlus, we are going to increase funding for 
both the premiums and for the fee-for-service system by $2,000 per 
recipient in the next 7 years. That is exactly as much as we increased 
it in the preceding 7 years.
  So we are planning a healthy, reasonable, responsible, practical 
increase in spending in Medicare. We are simply not going to overpay 
for fraud and abuse. We are not going to overpay for unnecessary care. 
We are not going to overpay because, if we overpay in Medicare, then 
people who are working have higher taxes.
  Mr. HASTERT. I certainly appreciate the gentlewoman from Connecticut 
joining us for a few minutes. Your work and contribution to health care 
reform in this country has been legend, and we certainly appreciate you 
spending a few minutes with us.
  Mrs. JOHNSON of Connecticut. Thank you. It is interesting for the 
people who are watching to see the gentleman from Illinois [Mr. 
Hastert] is a member of the Committee on Commerce, I am a member of the 
Committee on Ways and Means, two committees that have direct 
responsibility for Medicare and Medicaid. The gentleman from Oklahoma 
[Mr. Coburn] is also a member of the Committee on Commerce, but he is a 
physician. He brings a special perspective. The gentleman from New 
Mexico [Mr. Schiff] is a member of the Committee on the Judiciary. He 
brings special knowledge of the fraud and abuse problems. And my 
colleague, the gentleman from Connecticut [Mr. Shays], is from the 
Budget Committee, and he has the responsibility to look at these issues 
in the context of America's future and how do we get to a balanced 
budget in 7 years, and he, of course, is on the Health Subcommittee of 
the Committee on the Budget and, therefore, is a special part of our 
team.

  This is the first time in Congress' history that there has been this 
level of integrated committee cooperation and action to solve a major 
problem that we face, and right here amongst the five of us you can see 
that whole body of the Congress, and how it has come together to think 
about this problem and produce an answer that we know is going to serve 
our seniors. So I am proud to have joined you for a few minutes and 
regret I have to leave.
  Mr. HASTERT. I yield to the gentleman from New Mexico [Mr. Schiff].
  Mr. SCHIFF. Mr. Speaker, I just think it is important to emphasize 
the main purpose of that last entire discussion. We have been talking 
about the fact that both parties recognize that we have to reduce the 
rate of growth of Medicare. If we do not, there will not be a Medicare. 
The costs would not be sustainable.
  What the last discussion has meant is the fact that reducing the rate 
of growth does not have to mean reducing the level of services, that 
the projected rate of growth that we are talking about and that we have 
to avoid assumes that it is business as usual without change year after 
year, and we can explore ideas that might through alternative 
approaches, through just competition, reduce the rate of growth and 
still keep the level of service at at least what it is today.
  Mr. HASTERT. I thank the gentleman.
  I yield to the gentleman from Oklahoma.
  Mr. COBURN. I was going to discuss another one of the options, 
Medicare-plus, and that is the opportunity. Heretofore physicians as 
groups have not been allowed to get together and offer their services 
as a group in hopes to lowering the costs and attracting more patients, 
and one of the options under the Medicare Preservation Act is to allow 
us in conjunction with inpatient hospital facilities and outpatient 
hospital facilities to offer a provider services network program where 
we go and offer our services for a fee which would be paid through the 
Medicare program where we can vastly expand the benefits and also lower 
the costs.
  Doctors for years were saying, ``Let use compete, let us go in. We'll 
show you that we can deliver the service.'' And now it is time for the 
doctors to show that in fact they do that, and I believe that they 
will. It will allow you to keep your doctor and still go into a 
Medicare-plus, if that is fact is what you want to do.
  Mr. SCHIFF. I believe the gentleman is talking about proposals to 
relax the antitrust laws as it refers to physicians.
  Mr. COBURN. That is true.
  Mr. SCHIFF. And as a member of the Committee on the Judiciary, I very 
much support that.
  The fact of the matter is for the system to operate there has to be a 
balance of competition, and we have seen the rise of HMO's health 
maintenance organizations, which essentially are conglomerates of 
offering services from an unified place. Many citizens like HMO's and 
they enroll in them. Other citizens do not want to enroll in HMO's, but 
the point is, given their existence, there is now a justification to 
allow physicians with each other and physicians with hospitals and 
other health care institutions to unite to offer a group-practice kind 
of policy to citizens that would compete with HMO's to give the 
citizens choices on an equal playing field.
  So, I very much support that change in the antitrust laws.
  Mr. COBURN. I think we might just talk about fraud and abuse for a 
minute.
  Mr. HASTERT. Let us make it perfectly clear for everybody here so we 
can understand a little bit about our provider service organizations.
  For instance, if you had 25 or 30 doctor in a large community, all 
specialists and general practitioners who you chose of the highest 
quality that you think are good practitioners of health care, and then 
you found one of the hospitals that was the best orthopedic hospital 
and another hospital that maybe is the best cardiac hospital, if you 
join together to provide those services to seniors, then you can give 
the seniors the best service at the lowest costs.
  Is that the whole idea behind this?
  Mr. COBURN. That is right, and do that in a unified package that we 
would know up front what their costs are, know what to expect, and know 
that they had quality and service.
  Mr. SHAYS. What I think is exciting is that, you know, we are 
affecting the hospitals and doctors, and we are asking them to deal 
with lesser payments in some instances, but on the other hand we are 
also allowing them to compete directly with HMO's, directly with 
insurance companies, and provide their own organization of health care, 
and I have heard from so many doctors and hospitals that they feel they 
can reduce costs significantly and provide extra benefits to attract 
people into that system, and I think it is very exciting that we are 
allowing that to happen.
  Mr. SCHIFF. If the gentleman would yield for just a moment, the point 
that our colleague from Oklahoma is making is that under existing 
antitrust laws physicians talking to each other and talking about 
joining together in the providing of services and offering joint rates 
is very restricted under the antitrust laws, but given the fact that 
the HMO's represent a group kind of practice which do exactly that, it 
makes very good sense to me to allow other groups to form together to 
offer their packages and then let the beneficiaries in Medicare, and 
other patients, make their own selection.
  Mr. HASTERT. One of the things that we talked about as well as the 
choices that seniors have, and we talked about a couple of those 
choices out here, medical savings accounts, HMO's and PPO's, and then 
now the provider service organizations that we just got done talking 
about, we always thought also that there is a huge and historically 
huge amount of dollars, of Federal tax dollars, that go into Medicare 
that are wasted because of fraud and abuse. We estimate between 10 and 
15 percent. That is a huge amount of money when you are talking about 
hundreds of billions of dollars.
  Now we have two experts here on fraud and abuse, certainly the 
gentleman from New Mexico [Mr. Schiff] from the Committee on the 
Judiciary who looks at that type of issue all the time, and our friend 
from Oklahoma is an expert on that, but let us talk, talk to us a 
little bit about the provisions in this bill and how we start to 
curtail fraud and abuse.
  I am happy to yield to the gentleman.
  Mr. COBURN. I think the first thing we do is realize we have a 
problem, and 

[[Page H 10482]]
every Federal Government agency that has testified before the House 
Committee on Commerce admitted that we had significant problems. 
Anywhere from 5 to 15 percent was common, with most saying 10 to 11 
percent. We have to ask ourself the question why have we not been able 
to attack the fraud and abuse that is there. I mean why for the last 15 
years have we allowed 10 percent of the dollars for Medicare to go to 
fraud? I mean it is inexcusable. It is also inexcusable for us to now 
when we start to change it for the Attorney General's office and the 
Inspector General's office to say, ``Oh, wait, wait, don't change it,'' 
because obviously we have not put into effect what we need to put into 
effect to correct the problem.

                              {time}  2045

  Our goal is to eliminate fraud and abuse. The way we do that is to 
make sure we change the expectation of those who are defrauding and 
abusing; that we, in fact, will catch them. If we change that 
expectation, then we will limit greatly the amount of people, and 
number of people, who attempt to defraud.
  That requires two main things: First, you have to clarify the rules; 
and second, you have to have an aggressive fraud and abuse program. I 
think this program that is in this bill is a very aggressive program.
  Mr. HASTERT. We hear stories all the time, Mr. Speaker, that a senior 
will get a bill, they usually do not get the bills from Medicare, 
hospital bills, but when they do get those bills and they look through 
there and they see that they have been charged a great deal of amount. 
Some of those dollars are cost-shifting, but actually, of course, the 
story that is going around the Capitol is the lady who looks at her 
bill and sees that she has been charged for an autopsy, and obviously, 
she did not receive the autopsy.
  She calls in and says, ``I did not receive this autopsy.'' And the 
person on the other end of the line says, ``It must have been for your 
quadruple heart bypass.'' She said, ``I did not receive one of those, 
either.'' What would a senior do under this bill when he gets into a 
situation like that?
  Mr. COBURN. The program is designed to allow the senior to, first, be 
involved, to encourage them to report it, and also to benefit, if in 
fact they benefit----
  Mr. HASTERT. How do they benefit?
  Mr. COBURN. They benefit in that if the savings, I believe, are above 
$1,000, they share in the savings. They also benefit because they put 
on notice providers that are not honorable, that they are going to be 
caught, and it will not take long for the people who are presently 
abusing this system to recognize that we are going to have 36 million 
people out there helping us help them do the right thing.
  Mr. HASTERT. Is it not a fact, too, that HCFA, the huge Health Care 
Financing Agency of the Federal Government, a huge bureaucracy that has 
grown in the last 40 years here in Washington, they have not been very 
effective in weeding out fraud and abuse, have they?
  Mr. COBURN. No, they have not. I think the important thing, everybody 
that has a credit card, whether it is a BankAmericard or Visa card, 
when they use that today their bank knows it tonight. If they use it in 
Japan, they know it tonight. If they use it in South America, they know 
it tonight.
  Our Medicare computer system, we do not know it and we will never 
know it if it is between two different divisions. It will never be 
tracked together, so in fact, we have in the past, through this 
bureaucracy, not even kept up the pace with 1970's computer knowledge 
and placement. We have spent the last 9 years trying to get a tracking 
system that will not be available for 3 or 4 more years.
  Mr. HASTERT. That is one of the reasons in this bill, instead of 
throwing billions of dollars, again, at a huge Federal bureaucracy that 
is not very effective and certainly not efficient, that we have been 
going out in the private sector and finding those private CPA's who do 
a good job, who make a living doing that day in, and day out, and have 
to produce in order to be part of the system, to go out and do that job 
in fact also; is that correct?
  Mr. COBURN. That is correct.
  Mr. SHAYS. If the gentleman will yield, and then I would like to 
yield to the expert on this very issue, my committee and the Committee 
on Government Reform and Oversight, the Subcommittee on Human Resources 
and Intergovernmental Relations, has conducted a number of hearings on 
health care fraud.
  We have learned incredible misuses, finding people who have been 
kicked out of the system, but they continue to be able to do business 
with the government. We know of agencies that have been fined $150 
million because they have been so crooked, different organizations, but 
they are still allowed to participate. That is one of the things we are 
pressing our government to start to put an end to.
  More importantly, we are learning the incredible fraud that exists 
and the failure to really get at it with some strong laws.
  One of our efforts has been that the gentleman from New Mexico [Mr. 
Schiff] and I have introduced legislation that was incorporated into 
our Medicare bill. I thought the gentleman from New Mexico could 
describe that a bit.
  Mr. SCHIFF. If the gentleman will yield, I want to say first, though, 
Mr. Speaker, that the term ``fraud and abuse'' in this context is used 
as a broad umbrella for many things. It, of course, includes criminal 
conduct, which I would like to talk about in a moment, but it includes 
many other things which might be recorded as inefficiencies. It does 
not mean there is less of a loss to the system, but the gentleman from 
Oklahoma [Mr. Coburn] was right on point when he said that the system 
that Medicare uses just to check billings is antiquated compared to 
private industry doing the same thing, as I understand it.
  In fact, the number one complaint I heard from senior citizens 
meeting in my district on this subject is many of them would spot 
something wrong in a bill, a service was listed that was not provided 
to them, and this may not be fraud in a criminal sense, it could simply 
be an error in billing, but they would contact the Medicare Program 
through whichever contractor was administering it and tell them about 
it, and the contractor would simply say, ``It is not enough to bother 
about.''
  Yet, I heard citizen, after citizen, after citizen, enunciate this 
kind of problem that they encountered with the system. If we can set up 
a beneficiary reward program where any kind of overbillings, assume the 
most accidental and inadvertent, if identified, results in a reward to 
that beneficiary, then that will force the system to respond.
  Mr. SHAYS. I think the gentleman really needs to get into the whole 
criminal side. We have only about 5 minutes left before we lose our 
time.
  Mr. SCHIFF. Time goes fast, as they say.
  I want to say that included in the bill through the Committee on 
Rules was a provision in the bill that I and the gentleman from 
Connecticut [Mr. Shays] wrote, which contains a number of criminal 
provisions.
  We are talking about, here, that small group, but nevertheless, a 
group that causes a lot of damage that deliberately and fraudulently 
overbills the system. The essence of these provisions are to make 
health care fraud a crime.
  Right now health care fraud is not a crime under Federal law. If the 
U.S. attorneys want to prosecute, they have to prosecute under wire 
fraud, mail fraud, or any other type of statute. This requires a kind 
of a circular means of prosecuting.
  Included in the bill now, based upon our bill, are provisions that 
make theft, fraud, kickbacks related to health care, a Federal offense, 
and further, it does not matter who the provider of the health care is, 
whether it is a government program or a private insurance company, 
because that small group that engages in really criminal fraud will 
defraud anybody. As soon as we can convict them, as soon as we can take 
them off the street, the better we all are.
  Since we are winding down, I will yield to the gentleman from 
Oklahoma.
  Mr. COBURN. Mr. Speaker, first of all, I want to thank the gentleman 
for the criminal provisions put in there. I also would add that we 
doubled the money penalties, we put mandatory sanctions on providers so 
they could 

[[Page H 10483]]
not continue to participate in the Medicare system, and we are trying 
to straighten out the computer problem as well.
  I just want to say, as a practicing physician, although physicians 
will, in fact, get less money than what they would have, which is a 
cut, or a slowdown in growth, as we hear from the other side, that to 
act irresponsibly and not save this program is wrong.
  This bill has lots of things that I do not agree with in it in terms 
of detail, but the underlying bill is a good bill, to do what the 
American people want done; that is, control the growth and make sure a 
quality health care program for our seniors that has choice and is 
affordable is there. I think this bill does it.
  I can say to all providers, not just doctors, but hospitals and 
others, that we will have to work harder to be more efficient, to do 
the right thing, to be careful and to work in a constructive manner to 
change the system, to make it more efficient, but we can do it. We owe 
it to our children and our grandchildren to make sure we do that.
  Mr. HASTERT. Just the provisions that you gentlemen put in the bill 
on fraud and abuse, if you can squeeze $10 billion or $12 billion out 
of fraud and abuse every year and put that back into health care for 
seniors, what a positive thing this is, just in that one small aspect.
  Mr. SHAYS. That is $50 billion of your 270.
  I would love just to weigh in and say that we as a Republican 
majority have three basic desires to accomplish during the course of 
the next 2 years: We want to get our financial house in order and 
balance the budget. We want to save our trust funds, particularly 
Medicare, and we want to transform the social and corporate welfare 
state into an opportunity society.
  Today, we began that journey very significantly in our effort to save 
and strengthen and preserve our Medicare trust fund, and we did it by 
allowing this program to continue to grow. We are going to put $1.6 
trillion in in the next 7 years, and spend $73 billion more than in the 
past 7 years. I will turn to my colleague, if he could just conclude.
  Mr. HASTERT. I certainly appreciate my colleagues joining me tonight 
to talk about this, Mr. Speaker. I think the bottom line is that we 
have our parents and grandparents, and we want to make sure Medicare is 
there for them, a good Medicare Program that could go beyond the bounds 
of what has traditionally been there and give them some choices, but 
most of all, to give them quality health care and give them the 
assurance that that health care is going to be there for the rest of 
their lives.
  Then on the other side, we have out children and our grandchildren, 
that we want to make sure that we are not wasting their dollars. That 
is why we are cutting that inflationary $270 billion that the Democrats 
just want to leave there, so that they do not have to pay those extra 
dollars out of what money they have to earn.
  It is estimated that a child that is born today has about $186,000 of 
debt that he has to work off or she has to work off in her adult 
lifetime. Let us hold that down. Let us be prudent in how we spend the 
taxpayers' money.
  I think this bill gives seniors choices. It secures health care and 
Medicare for their decision-making process for the rest of their 
lifetime, and it establishes and holds firm a principle of Medicare, 
something that seniors have had in this country for years to come. I 
certainly appreciate your participation in this special order tonight, 
and I know that the seniors of this country will join me in thanking 
you very much.

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