[Congressional Record Volume 141, Number 171 (Wednesday, November 1, 1995)]
[Senate]
[Pages S16467-S16469]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                         EXPENDITURE LIMIT TOOL

  Mr. CONRAD. Mr. President, I rise in strong opposition to the budget 
expenditure limit tool, known as the BELT, that would place artificial 
price caps on Medicare and jeopardize the quality of the health care 
received by millions of senior citizens. I ask unanimous consent to 
have printed in the Record at the conclusion of my remarks several 
letters of support for the motion I had planned to make to strike the 
BELT. It is imperative that the Senate strike this ill-advised 
provision in order to preserve Medicare beneficiaries' ability to 
choose their own doctor and health plan.
  The PRESIDING OFFICER. Without objection, it is so ordered
  (See exhibit 1c)
  Mr. CONRAD. In the interest of time, the point-of-order I had planned 
to make against the BELT provision has been included in the omnibus 
Byrd rule point of order being made by Senator Exon. However, I believe 
it is important to highlight the impact of the BELT, because it is a 
potential disaster for the Medicare Program and has not received 
anywhere near the attention it deserves.
  The BELT amounts to what many of us have called a noose around the 
necks of older Americans. The BELT imposes artificial price caps on 
Medicare for the first time in history. And rather than work in a 
balanced fashion, the BELT only attacks fee-for-service Medicare. It 
cuts fee for service and ultimately forces seniors to use health plans 
they don't want and doctors they don't know.
  The reconciliation bill allows seniors to choose coverage options 
other than traditional Medicare fee-for-service. I support that. But I 
only support it as an option. Seniors should not be forced into managed 
care. Unfortunately, the BELT could ultimately make managed care the 
only option for Medicare beneficiaries.
  The BELT renders the so-called choice under Medicare an illusion. 
There will be more choice for a short time. But then the noose will 
tighten. It will slowly bleed fee-for-service Medicare dry. And if we 
learned anything from last year's health care debate, it is that health 
plans with insufficient resources will wither on the vine. And given 
yesterday's remarks by the Speaker of the House, that seems to be what 
some of my Republican colleagues have in mind for the Medicare Program.
  The BELT promises to make even more draconian cuts in Medicare fee-
for-service than the Republicans have already proposed. As the BELT 
tightens, Medicare will have fewer resources to provide needed health 
care to our parents and grandparents. The quality of Medicare fee-for-
service will deteriorate and seniors will have little choice but to 
move into managed care. Medicare fee-for-service will wither on the 
vine.
  During last year's health debate, we heard a great deal about 
artificial government cost controls. Harry and Louise told the Nation 
that arbitrary cost controls could bankrupt the insurance plans on 
which millions of Americans depend, leaving people without adequate 
insurance coverage.
  The BELT provision does to Medicare what Harry and Louise said 
artificial cost controls would do to the national health care system. 
It inflicts arbitrary cost controls on Medicare at a moment's notice, 
and without congressional oversight. And it will force seniors into 
health care plans that may not meet their needs.
  The letters I have entered into the Record expressed the concern of 
beneficiaries and providers, alike, that the BELT will erode the 
integrity of Medicare. The American Association of Retired Persons, 
National Council of Seniors Citizens, American College of Physicians, 
Healthcare Association of New York State, and North Dakota Hospital 
Association are only a handful of those who have expressed opposition 
to the BELT. The Congressional Budget Office has also said the BELT is 
unworkable and unwise, and I ask unanimous consent that CBO's analysis 
also be included in the Record.
  Mr. President, the BELT has no place in this bill. It promises to 
erode and eventually destroy the integrity of Medicare fee-for-service. 
I hope my colleagues will support the point of order and strike the 
BELT provision from the bill.

[[Page S 16468]]


                               Exhibit 1


                            North Dakota Hospital Association,

                                   Bismarck, ND, October 25, 1995.
     Senator Kent Conrad,
     Hart Senate Office Building,
     Washington, DC.
       Dear Kent: The members of North Dakota Hospital Association 
     are in strong support of your amendment to strike the 
     Medicare Budget Enforcement Limiting Tool (BELT) from the 
     Senate Reconciliation Bill.
       It is our understanding that the proposed Senate Republican 
     Medicare legislation to reach $270 billion in Medicare cuts 
     reduces payments to hospitals by more than $86 billion over 
     seven years. On top of that, legislation has been proposed to 
     also reduce Medicaid funds to hospitals by $182 billion 
     during that same amount of time. The magnitude of these 
     reductions causes great concern for North Dakota, which has a 
     large and growing population of citizens over 65 years of 
     age.
       In visiting with our administrators, they are hard pressed 
     to understand how they can cut budget or plan to serve this 
     population and others, when the BELT provision would entail 
     additional reductions based on whether or not certain savings 
     are achieved.
       A number of our facilities, Cavalier County Memorial 
     Hospital in Langdon; Jamestown Hospital in Jamestown, Tioga 
     Medical Center in Tioga and Carrington Medical Center in 
     Carrington have all publicly expressed concerns that the 
     amount of proposed reductions, with lookbacks added, will 
     mean that in seven years they cannot guarantee that their 
     doors will be open.
       Half of our facilities are co-located with and include 
     long-term care facilities. Those that care for a large 
     percentage of Medicare patients in their hospital and mostly 
     Medicaid supported residents in their nursing homes will 
     receive a double hit from which they also might not be able 
     to recover. In a rural state like ours, you can imagine that 
     access becomes a critical issue if a void is left in an area 
     where distances can mean the difference between life and 
     death.
       It seems grossly unfair to single out healthcare providers 
     as the group responsible for obtaining savings not achieved. 
     It also seems grossly unfair to ask a particular segment of 
     the business world in our country to operate with a system in 
     which orderly business operations would be interrupted based 
     on a compliance order not determined until the very last 
     minute.
       Our facilities are operating as cost-efficiently as 
     possible, while still maintaining the quality expected of 
     them by their patients. We feel it is imperative to the 
     solvency and survivability of many of our providers that the 
     BELT provision be excluded. NDHA supports your efforts and 
     hopes your fellow legislators will understand how detrimental 
     this provision would be to the healthcare facilities in our 
     state and also support you in this effort.
           Sincerely,
                                                 Arnold R. Thomas,
     President.
                                                                    ____

                                            Healthcare Association


                                            of New York State,

                                 Washington, DC, October 24, 1995.
     Senator Kent Conrad,
     Hart Senate Office Building,
     Washington, DC.
       Dear Senator Conrad: On behalf of the Healthcare 
     Association of New York State, representing over 400 
     hospitals and health care providers, I would like to take 
     this opportunity to express our support for your amendment to 
     the Senate Budget Reconciliation Bill that would strike the 
     Medicare Budget Enforcement Limiting Tool (BELT).
       The Senate Republican Medicare legislation currently under 
     consideration will be devastating to the health care delivery 
     system. The $270 billion of Medicare cuts that would be 
     required by the legislation would reduce Medicare hospital 
     payments by more than $86 billion over the next seven years. 
     Reductions of this magnitude, combined with $182 billion in 
     proposed Medicaid cuts, would jeopardize the ability of 
     health care providers to adequately care for our nation's 
     senior citizens.
       The Medicare BELT provision could exacerbate these already 
     tremendous reductions. By placing absolute Medicare spending 
     limits in the statute, health care providers that will 
     already be receiving payment updates that do not keep pace 
     with inflation could be faced with additional reductions--
     even if cost overruns are due to conditions beyond providers 
     control.
       There are many factors that contribute to increases in 
     Medicare spending that can not be predicted in advance with 
     absolute certainty. Placing the weight of a Medicare global 
     budget on the backs of health care providers could mean 
     absolute rate cuts and threaten the solvency of many 
     hospitals, nursing facilities, home-health agencies, and 
     other health care providers. It is critical that the BELT 
     provision be dropped from Senate Medicare legislation and 
     HANYS supports your efforts.
           Sincerely,
                                                     Steven Kroll,
     Director of Federal Relations.
                                                                    ____



                                American Hospital Association,

                                 Washington, DC, October 25, 1995.
     Senator Kent Conrad,
     Senate Hart Building, Washington, DC.
       Dear Senator Conrad: We are pleased to lend our strong 
     support for your amendment to strike the budget expenditure 
     limiting tool (BELT) from the budget reconciliation bill.
       As you know, the bill calls for reductions of $86 billion 
     in hospital services over seven years. This unprecedented 
     level of reductions in the Medicare program will have a 
     dramatic impact on the ability of hospitals across the nation 
     to continue to provide high quality care, not only to 
     Medicare beneficiaries but to all our patients. If the BELT 
     remains part of the bill, providers could be exposed to 
     unlimited additional payment reductions beyond the deep cuts 
     already proposed.
       We are not only concerned about potential additional 
     reductions, but also that these reductions would be made for 
     reasons beyond hospitals' control. For example, if certain 
     reforms not related to hospital behavior do not achieve the 
     level of savings estimated by the Congressional Budget 
     Office, then hospital payments would be arbitrarily cut. 
     That's simply unfair given the $86 billion cut we are already 
     being asked to absorb.
       Even CBO, in a letter to Chairman Roth dated October 20, 
     1995, states that the ``use of the BELT would not be 
     necessary.''
       Thank you for your leadership on this important issue.
           Sincerely,
                                                     Rick Pollack,
     Executive Vice President.
                                                                    ____

                                                  National Council


                                           of Senior Citizens,

                                 Washington, DC, October 26, 1995.
     Hon. Kent Conrad,
     U.S. Senate, Senate Office Building, Washington, DC.
       Dear Senator Conrad: The National Council of Senior 
     Citizens supports your motion to strike from the Medicare 
     section of the Reconciliation bill the ``BELT'' provision. 
     This provision would severely cut resources from the 
     traditional Medicare fee-for-service program and would 
     restrict the range of ``choices'' generated by the 
     ``reformed'' Medicare program. Average-to-lower income 
     Medicare beneficiaries would be forced from fee-for-service 
     into cut-rate, managed care programs.
       Senator, a ``choice'' you can't afford is no choice at all.
       We support your motion.
           Sincerely,
                                               Daniel J. Schulder,
     Director, Department of Legislation.
                                                                    ____



                                                         AARP,

                                 Washington, DC, October 26, 1995.
     Hon. Kent Conrad,
     U.S. Senate,
     Washington, DC
       Dear Senator Conrad: I am writing to express AARP's 
     appreciation for the amendment you are planning to offer to 
     strike the Budget Enforcement Limiting Tool (BELT) from the 
     Medicare provisions of the Senate budget reconciliation bill. 
     The BELT proposal would reduce traditional Medicare Fee-for-
     Service (FFS) provider reimbursements if Medicare spending in 
     a fiscal year is projected to exceed an arbitrary amount set 
     in the bill. The Congressional Budget Office (CBO) estimates 
     that the provisions contained in the bill would meet the 
     budget resolution target of saving $270 billion over the 
     period between 1996 and 2002 and that the BELT would not be 
     required. However, the CBO estimate assumes that the plan 
     works, that is, that there is sufficient migration into 
     managed care, that the provider reductions and increased 
     premiums and deductibles control Medicare spending and that 
     CBO's baseline assumptions are correct.
       If any of these variables are incorrect, then the formula-
     driven BELT would reduce FFS spending to meet the targets set 
     in the bill. Formula-driven approaches to budget cutting have 
     always concerned AARP, in part, because of the rigidities 
     they build into the system and their inherent potential for 
     error and misestimation. This bureaucratic mechanism is one 
     of many in the huge 2,000 page budget bill that the public 
     knows nothing about. Older Americans will only find out about 
     in after the Senate acts.
       Congress has structured this bill to create incentives for 
     beneficiaries to move into commercial health insurance plans 
     and has capped the growth of premiums paid into those plans. 
     The BELT provision would then cap the FFS part of the 
     program. AARP is concerned about what kind of coverage will 
     be available at the turn of the century. Will providers still 
     be willing to see patients in a FFS setting? Will commercial 
     health plans be willing to offer comprehensive coverage 
     without huge out-of-pocket costs for beneficiaries? Will 
     Medicare still be able to meet the health needs of older 
     Americans?
       In addition, we believe the current structure of the BELT 
     contains silent beneficiary costs. For instance, under the 
     Senate bill the Part B premium is expected to cover 31.5 
     percent of Part B annual spending. However, because the 
     Senate writes the dollar amount of the premiums into law, 
     rather than the percentage, and if the BELT is tightened and 
     program spending is lowered, these stated premiums would 
     account for more than 31.5 percent of annual spending. This 
     silently shifts more costs onto beneficiaries.
       The same problem occurs with the Part A hospital 
     deductible. The deductible is based, in part, on Medicare's 
     payment to hospitals. If the deductible is calculated before 
     the BELT reduces Part A spending, it would be based on a 
     higher payment amount and would, in turn, shift more costs 
     onto Medicare beneficiaries.
       AARP supports your amendment to strike the BELT provision 
     from the Medicare Reconciliation bill. We feel that the long-
     term 

[[Page S 16469]]

     risks to the program and the silent costs it imposes on 
     beneficiaries would be unfair. Older Americans already pay a 
     lot out of their own pockets for medical care--$2,750 on 
     average in 1995 alone--not including the costs associated 
     with long-term. The Senate bill already increases Part B 
     premiums and deductibles and includes a new income-related 
     premium. Adding hidden costs would add to this out-of-pocket 
     burden.
       Thank you, again, for your leadership on this amendment. 
     Please feel free to contact me (434-3750) or Tricia Smith 
     (434-3770) if you would like to discuss this amendment 
     further.
           Sincerely,
                                                     Martin Corry,
     Director, Federal Affairs.
                                                                    ____



                               American College of Physicians,

                                 Washington, DC, October 26, 1995.
     Hon. Kent Conrad,
     U.S. Senate, Hart Senate Office Building, Washington, DC.
       Dear Senator Conrad: As the Director of Public Policy for 
     the American College of Physicians (ACP), I am writing to 
     express the ACP's support for your amendment to eliminate the 
     budget expenditure limit tool (BELT) from the Medicare reform 
     legislation currently pending before the Senate.
       The ACP is the nation's largest medical specialty society 
     and has more than 85,000 members who practice internal 
     medicine and its subspecialties. The College has consistently 
     objected to the BELT provisions in the legislation because 
     they establish arbitrary budget limits that dictate future 
     payment amounts and impose price controls. These provisions 
     make the simplistic and incorrect assumption that spending 
     increases, regardless of cause, should be recouped by 
     lowering payments to hospitals, physicians, and other 
     providers.
       Rather than arbitrary price controls, the College believes 
     that the more effective way to achieve cost containment in 
     the Medicare program, is to address the long-term factors 
     that contribute to excess capacity and inappropriate 
     utilization of services.
       Thank you for your attention to this important matter.
           Sincerely,
                                                Howard B. Shapiro,
     Director, Public Policy.
                                                                    ____

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                 Washington, DC, October 20, 1995.
     Hon. William V. Roth, Jr.,
     Chairman, Committee on Finance, U.S. Senate, Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office (CBO) 
     has prepared the enclosed cost estimate for the Medicare 
     reconciliation language reported by the Senate Committee on 
     Finance on October 17, 1995.
       The estimate shows the budgetary effects of the committee's 
     proposals over the 1996-2002 period. CBO understands that the 
     Committee on the Budget will be responsible for interpreting 
     how these proposals compare with the reconciliation 
     instructions in the budget resolution.
       This estimate assumes the reconciliation bill will be 
     enacted by November 15, 1995; the estimate could change if 
     the bill is enacted later.
       If you wish further details on this estimate, we will be 
     pleased to provide them.
           Sincerely,
                                                  June E. O'Neill,
                                                         Director.
       Enclosure.


         Fail-Safe Mechanism (Budget Expenditure Limiting Tool)

       The proposal incorporates a complex mechanism designed to 
     ensure that Medicare outlays in a given two year period would 
     not exceed the Medicare outlays specified in the bill for 
     that period. The budget expenditure limiting tool (BELT) 
     would operate both prospectively and retrospectively to 
     control fee-for-service expenditures. Expenditures in the 
     Choice market would not be directly affected because they 
     would be determined by the updates to capitation rates 
     specified in the bill.

                          Overview of the BELT

       The BELT would reduce fee-for-service payment rates in 
     order to eliminate any estimated Medicare ``outlay deficit''. 
     A Medicare outlay deficit would occur if spending in fee-for-
     service Medicare for the current year and preceding one 
     exceeded the combined outlays for those years specified in 
     the bill. On October 15 of each year, the Office of 
     Management and Budget (OMB) would report whether a Medicare 
     outlay deficit was projected for that fiscal year. If so, a 
     compliance order would be issued that would first require all 
     automatic payment-rate updates to be frozen or reduced. If a 
     freeze was insufficient to keep projected spending within the 
     budget targets, proportional reductions would be made in 
     payment rates for all providers.
       The following March, OMB would release a report comparing 
     current estimates of Medicare spending with the estimates 
     released in October. If a compliance order was in effect for 
     the year and the March projection continued to show a 
     Medicare outlay deficit through the end of the year (despite 
     previous rate reductions), the Administration would order 
     further reductions in provider payment rates for the 
     remainder of the fiscal year. Conversely, if the March 
     projection indicates that current payment rates would more 
     than eliminate the Medicare outlay deficit, those rates 
     would be raised for the remainder of the fiscal year.
       Following the release of OMB's October and March reports, 
     the Congress would have a limited time in which to seek 
     modifications to compliance orders. At least 60 percent of 
     the members of each House would be required to approve 
     provisions that would either lower the target reduction in 
     spending or reduce the proposed payment reductions to less 
     than the amounts necessary to eliminate the projected excess 
     spending.
       After fiscal year 1999, the Secretary of Health and Human 
     Services could vary the adjustments in payment rates--in a 
     budget-neutral way--to take geographical differences into 
     account. The Secretary would be required to relate such 
     variations to the contributions of different areas to excess 
     Medicare expenditures.

                          Effects of the BELT

       CBO's estimates assume that the specific policies to reduce 
     Medicare spending in the bill would be sufficient to meet 
     budget targets, and that use of the BELT would not be 
     necessary through 2002. If the BELT was triggered, however, 
     it probably would not be effective in controlling Medicare 
     expenditures.
       Uniform, across-the-board payment rate reductions that 
     would be required by the BELT to meet a dollar savings target 
     would not have uniform impacts on all providers, and would be 
     extremely difficult to implement. A given percentage 
     reduction in payment rates might be more or less stringent 
     depending on the ability of different providers to adjust by 
     increasing the volume and intensity of services they provide. 
     Determining appropriate across-the-board reductions in 
     payment rates to meet the budget targets would be complex, 
     because estimators would have to take into account the 
     variation in behavioral responses from different provider 
     groups when faced with the same proportional reductions in 
     payment rates. Allowing geographic variation in payment rate 
     adjustments would add another layer of complexity to the 
     whole process.
       Rate adjustments under the BELT could be both frequent and 
     inaccurate, and could increase uncertainty among providers. 
     The October adjustment would be based on incomplete data for 
     the previous fiscal year, and no data for the current year. 
     Although more complete data would be available for the March 
     adjustment, it would still include less than six months of 
     data from the current year. Even minor discrepancies between 
     the October and March projections would lead to payment rate 
     adjustments under the BELT. Frequent, unpredictable changes 
     in payment rates could interfere with the orderly business 
     operations of providers.
       The proposal also raises other issues of implementation. 
     Compliance orders issued in October and March are intended to 
     be effective immediately. Even if formal public notification 
     requirements were waived, however, carriers and fiscal 
     intermediaries would presumably require some advance notice. 
     Moreover, the first steps in a compliance order would be to 
     freeze or reduce automatic payment updates. But those updates 
     do not generally occur at the beginning of the federal fiscal 
     year. Updates for Part B payment rates, for example, are made 
     on a calendar year basis while those for inpatient hospital 
     operating payments are made at the beginning of each 
     hospital's fiscal year. How across-the-board cuts in payment 
     rates from the BELT would be integrated with the existing 
     update policy is unclear.

                          ____________________