[Congressional Record Volume 142, Number 18 (Friday, February 9, 1996)]
[Senate]
[Pages S1174-S1175]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           MEDICARE SHORTFALL

  Mr. LOTT. Mr. President, the headline in Monday's New York Times, 
February 5, was even more chilling than Washington's weather. It read, 
``Shortfall Posted by Medicare Fund Two Years Early. A Surplus Was 
Expected.''
  The chief actuary of the Health Care Finance Administration observed, 
``Things turned out a little worse than we expected.'' I will say they 
did. The administration had projected a $4.5 billion increase in the 
Medicare fund balance for fiscal year 1995. Instead, the balance fell 
by $35.7 million. The reason for the shortfall was twofold. First, 
income from payroll taxes was less than expected. Second, and more 
important, outlays were higher because of more hospital admissions than 
were expected.
  Whatever the reasons, the day of reckoning is coming sooner than 
anyone had expected. Throughout last year, the Republicans in the House 
and the Senate have urged a solution for Medicare's fiscal ills. We 
have hammered home the estimates by the Medicare trustees that the 
program would slip into the red ink by 1997, and would go bankrupt by 
2002.

  Now it turns out even that dire forecast was on the optimistic side. 
Medicare has already started paying out more than it takes in. I cannot 
help but wonder how the White House will respond to this news. The 
administration spin experts must be wracking their brains on this one. 
In the face of all the facts, they have to come up with some way to 
portray President Clinton as the champion and savior of Medicare.
  The fact is that instead of cooperating with the Congress, who wanted 
to preserve and protect Medicare last year, President Clinton launched 
his Medicare campaign and played Medicare politics ruthlessly, and I 
regret to say, somewhat successfully. He convinced or he scared many 
Americans into believing that our proposal to strengthen Medicare was 
instead a cut in its funding when, in fact, it would allow over the 
next 7 years for over a 60-percent increase. Only in Washington is a 
60-percent increase in the level of spending over 7 years considered a 
cut.
  They were somewhat successful in scaring the people into believing 
that. When he vetoed that proposal last December, he posed as the 
defender of Medicare against extremists in the Congress.
  Now, the fiscal chickens are coming home to roost and they are headed 
for the roof of the west wing of the White House. Mr. President, 
Clinton's game plan for Medicare--to stonewall about the problem's 
financial peril in hope of getting safely reelected in another term 
after this year have been overtaken by the events that have occurred 
recently. He is trapped in a maze of his own mapping.
  Here is the dilemma: To make it through this year, I guess he will 
have to come up with a Medicare salvage package of his own, but in 
order to do that he will have to call for a massive job crippling and 
probably recessionary hike in payroll taxes, or he will have to adopt 
most of the Republican plan to preserve Medicare. That would be the 
same plan he vetoed just last year with such gusto, and with Lyndon 
Johnson's pen, no less.
  Of course, he will want to do neither. So, he will look for another 
way out for an escape, make an evasion. My guess is he will call for a 
national commission or a similar proposal to postpone the decisions 
that have to be made now. I hope I am wrong. I hope the President will 
take another look at the legislation of congressional Republicans, the 
work we have drafted, the year we spent developing this plan to save 
and protect and preserve Medicare for the future. I hope he will 
reconsider his bias against health care choices for seniors. That is a 
major part of what we tried to do.
  I hope he will renounce his animus against the medical savings 
accounts. When I suggest to my senior citizens and even my mother about 
the idea of a medical savings account of your own, where you have it to 
use, or you do not have to use it, a novel idea, it is yours. It would 
help cut out some of the unnecessary use of the system. It is the 
American way. Let you choose, let you use your own money, let you save 
and get a little interest.
  I do not know why the President was so opposed. Maybe he will 
reconsider. That could be the final catalyst that brings together a 
real budget agreement--not a deal, an agreement--that is good for 
America.
  Well, maybe I should prepare for the worst, which would be yet 
another abdication of sensibly dealing with the problems of Medicare. 
We demonstrated that last year that we really could not, as a 
government, face up to it. This is not an issue we can walk away from. 
It is there. It is not good. It is going to get worse soon. There is 
too much at stake for 35 million Americans, the elderly, and the 
disabled, for whom Medicare is, quite literally, a lifeline.
  It is time we put partisanship and politics aside and address the 
real problems for the future of Medicare, for our parents, and for our 
children.
  I ask unanimous consent the New York Times article by Robert Pear be 
printed in the Record, entitled ``Shortfall Posted by Medicare Fund Two 
Years Early.''
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                [From the New York Times, Feb. 5, 1996]

           Shortfall Posted by Medicare Fund Two Years Early

                            (By Robert Pear)

       Washington, Feb. 4.--New Government data show that 
     Medicare's Hospital Insurance Trust Fund lost money last year 
     for the first time since 1972, suggesting that the financial 
     condition of the Medicare program was worse than assumed by 
     either Congress or the Clinton Administration.
       In a report to Congress in April, the Administration 
     estimated that the amount of money in the trust fund would 
     increase by $4.7 billion in the 1995 fiscal year, which ended 
     on Sept. 30. In fact, officials said in interviews, the 
     balance in the trust fund fell by $35.7 million, to $129.5 
     billion.
       ``Things turned out a little worse than we expected,'' said 
     Richard S. Foster, chief actuary of the Federal Health Care 
     Financing Administration, which runs Medicare for 37 million 
     people who are elderly or disabled. ``We had projected that 
     1997 would be the first fiscal year with a deficit.''
       Income to the trust fund, primarily from payroll taxes, was 
     slightly less than expected, Mr. Foster said, and outlays 
     were somewhat higher. There were more hospital admissions 
     than anticipated, patients were 

[[Page S1175]]
     somewhat sicker and hospitals filed claims faster than expected, he 
     said.
       The deficit, while relatively small, is significant because 
     once the trust fund starts to lose money, the losses are 
     expected to grow from year to year. No tax increases are 
     scheduled under current law, and Federal officials do not 
     expect a reduction in the rate of growth in Medicare spending 
     unless there is a budget deal between President Clinton and 
     Congress.
       No such deal is in sight. The two sides have not held 
     serious negotiations in three weeks, and they evidently 
     intend to fight out their philosophical differences in the 
     November elections.
       Moreover, neither party's proposals go far enough to 
     guarantee the solvency of Medicare for the baby boom 
     generation, whose members start to reach the age of 65 in 
     2011.
       In general, health policy experts say, the changes needed 
     to shore up Medicare can be relatively small and gradual if 
     they are made in the near future, but they will have to be 
     larger and more abrupt if they are deferred.
       Bruce C. Vladeck, administrator of the Health Care 
     Financing Administration, said: ``We are still analyzing the 
     Medicare data to see what last year's experience might say 
     about changing patterns of care or need among the elderly. 
     In-patient hospital volume went up a bit more than we had 
     projected. We are trying to figure out why.''
       Officials at the American Hospital Association said the 
     increase was puzzling because it followed more than a decade 
     of decline in Medicare hospital admissions.
       Donna E. Shalala, the Secretary of Health and Human 
     Services, and three other Administration officials serve as 
     trustees of Medicare. In the report in April, they said the 
     hospital trust fund would run out of money late in the year 
     2002.
       Republicans seized on that prediction to justify their 
     proposals for vast changes in the structure of Medicare. They 
     said they were cutting the growth of Medicare not to balance 
     the budget, but to ``preserve, protect and strengthen'' the 
     program. Mr. Clinton vetoed the proposals, saying they would 
     hurt beneficiaries and ``dismantle Medicare as we know it.''
       In view of the financial shortfall in 1995, the Hospital 
     Insurance Trust Fund could go bankrupt earlier than 
     anticipated, perhaps a year sooner, but that is not certain.
       ``It's hard to say what the implications are for future 
     estimates,'' Mr. Foster said. ``It's possible this could 
     advance the depletion date, or the trust fund might be 
     depleted earlier in the same year, 2002. In any event, it 
     doesn't help. That's a safe conclusion.''
       The trustees and the actuary will make new forecasts in 
     their next annual report, which under Federal law is to be 
     submitted to Congress by April 1. The report may be a month 
     late because of time lost while the Government was shut down 
     in November and again in December.
       The actuary and his staff write much of the trustees' 
     report. Medicare actuaries have a tradition of independence 
     and a history of providing objective information to Federal 
     officials and Congress. This year's report will be closely 
     scrutinized since it comes in an election year, when Medicare 
     is an important campaign issue. Under Federal law, the chief 
     actuary must certify whether the Administration's conclusions 
     are based on reasonable assumptions and cost estimates.
       Private employers have slowed the growth of health costs in 
     recent years by prodding employees to join health maintenance 
     organizations and other forms of managed care. While the 
     number of Medicare beneficiaries in H.M.O.'s is growing 
     rapidly, only about four million people, representing 11 
     percent of the beneficiaries, are in H.M.O's.
       Medicare's Hospital Insurance Trust Fund pays for hospital 
     care, skilled nursing homes, home health agencies and 
     hospices. The trustees' report in April predicted that 
     outlays would grow an average of 8 percent a year from 1995 
     to 2002, while income to the trust fund would grow 4 percent 
     a year.
       Referring to the disparity between income and outlays, Mr. 
     Foster said: ``This gap, which barely showed up in 1995, will 
     grow in future years. In the absence of legislation, it will 
     keep getting worse. Obviously, you can't continue very long 
     with a situation in which the expenditures of the program are 
     significantly greater than the income. We have enough assets 
     to cover the shortfall in each of the next few years. But 
     once the assets of the trust fund are depleted, there is no 
     way to pay all the benefits that are due.''
       While Congress and the Administration recognize that 
     Medicare is unsustainable in its current form, they disagree 
     on the urgency of the problem. In 1993, President Clinton 
     described a health care crisis, demanding transformation of 
     the entire health care system. But last year, when the debate 
     focused on Medicare, he expressed less alarm and resisted 
     many Republican proposals, saying they would have ``Draconian 
     consequence for the elderly.''
       Doctor and laboratory bills are paid by a separate Medicare 
     trust fund under Part B of the program. It is much smaller 
     than the hospital trust fund and is financed in a different 
     way, with beneficiary premiums and general revenues.
       This separate Medical Insurance Trust Fund ended the fiscal 
     year 1995 with a balanced of $13.9 billion,which was $1.7 
     billion more than predicted it is virtually impossible for 
     this trust fund to run out of money because it has a sizable 
     cushion and the premiums and matching Government 
     contributions are adjusted each year to cover the expected 
     costs.
       Medicare outlays for doctors' services are rising faster 
     than those for hospital care, in part because complex 
     services once performed in hospitals are now often done in 
     out-patient clinics and doctors' offices.
       Mr. Clinton and the Republicans agree on many proposals to 
     curb Medicare payments to hospitals, doctors and other 
     health-care providers. But it appears unlikely that such 
     cutbacks will be approved this in the absence of a general 
     agreement on how to balance the Federal budget.
       ``No deal is preferable to a bad deal,'' said Mr. 
     Vladeck,the head of the health care financing agency, who 
     expresses the Administration's views. ``Everybody agrees on 
     many things that could be done to save money and to make the 
     Medicare program better. But we can't do them because members 
     of the Congressional majority are unwilling to separate those 
     items from their ideological agenda.''
       Repblicans, by contrast, say Mr. Clinton has thwarted their 
     efforts to save the program from bankruptcy. Under their 
     proposal, elderly people would have a range of health 
     insurance options like those available to people under 65, 
     and the Republicans assume that many would choose H.M.O.'s, 
     which try to control costs by providing comprehensive care in 
     return for flat monthly premiums.

  Mr. LOTT. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. KYL. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Lott). Without objection, it is so 
ordered.

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