[Congressional Record Volume 143, Number 10 (Thursday, January 30, 1997)]
[Senate]
[Pages S880-S883]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GREGG:
  S. 246. A bill to amend title XVIII of the Social Security Act to 
provide greater flexibility and choice under the Medicare Program; to 
the Committee on Finance.


                          MEDICARE LEGISLATION

  Mr. GREGG. Mr. President, this piece of legislation which I have just 
sent to the desk is an update of the legislation which I introduced 
last year to address what is obviously one of the most critical issues 
which we face as a Congress, and that is the question of the solvency 
of the Medicare trust funds and the proper way to deliver health care 
to our senior citizens.
  Last year the bill that I am introducing was basically used as the 
core concept for the structural reform which was included in the 
balance budget bill which was passed by this Senate and by the Congress 
and sent to the President, which he unfortunately decided to veto.
  The bill that I have just introduced is an attempt to once again 
bring forward what I consider to be a number of very constructive and 
important initiatives in the area of making Medicare a more effective 
system of health care for our senior citizens.
  We have all heard the facts, the facts being that the Medicare system 
is broken, that it is not only broken but that it is headed 
aggressively toward bankruptcy, that this year it lost $9.2 billion or 
spent $9.2 billion more in the part A trust fund than it had taken in, 
that the losses are increasing and will be more than $40 billion 
annually by the year 2000, and that, as I mentioned, the part A trust 
fund in Medicare will be broke, will be insolvent as of the year 2001, 
the early part of 2001, actually January.
  I think the actuaries may have fudged a little bit there so they 
would not have to say 2000. I think we are going to find quickly that 
the insolvency of the trust fund is going to occur in the year 2000, 
which is not very far away from us.
  What happens when the part A trust fund goes insolvent? Basically, 
the senior citizens do not have a health care system and do not have an 
insurance system. There is no provision in the law today that allows us 
to supply health care if there are no funds to pay for it in the part A 
trust fund. So the system will literally not exist, and senior citizens 
will be without a health insurance system.
  We should have addressed this last year, of course. And there was an 
attempt to address it last year. But because of the politics of the 
season, because we were in an election year--both for this Congress and 
for the Presidency--it was not addressed, even though sincere attempts 
were made from this side of the aisle.
  Those sincere attempts included, in significant part, the bill which 
I have

[[Page S881]]

just reintroduced. But they were confronted by an opposition which 
demagoged the issue and said that the proposals to try to bring about 
solvency in the Medicare part A trust fund were actually going to 
undermine that system when in fact what is undermining the system is 
the pending insolvency of the trust fund.
  President Clinton, this year, to his credit, has decided to step up 
to the issue of Medicare or at least said he is going to publicly, and 
suggested that he will propose $138 billion in savings in the Medicare 
accounts.
  Of course, last year when Republicans proposed savings in the 
Medicare accounts, they were accused of cutting Medicare. I will not 
use that term because I believe that we need to pursue an effort of 
constructive dialog here. But it is ironic that this year the President 
would be calling his proposal to save $138 billion as a constructive 
attempt to address Medicare when last year it was characterized as a 
savaging and extreme act, both by members of the President's party and 
by the Vice President, when we proposed savings not much higher than 
what are being proposed by the President today.
  Unfortunately, in proposing his $138 billion in savings, the 
President has used a lot of old ideas and what you might call attempts 
to address the Medicare system at the margin. Unfortunately, also, 
although not accounted for allegedly in the $138 billion of savings, he 
has also used a massive bookkeeping gimmick of moving home health care 
out of the part A trust fund allegedly into the part B trust fund, so 
actually it is under the taxpayers of America and into the general 
fund. It is an incredible act of flim-flam and one which hopefully will 
not be accepted by this Congress.
  Independent of that, the real problem of the $138 billion is not that 
it is inappropriate; it is that it does not address the underlying 
structural problem of Medicare. It addresses lower payments to 
providers, mostly. But the problem of Medicare is not the extra dollar 
we are paying to this provider or the extra 5 percent we are paying to 
that provider, it is the fact that it is presently structurally not 
supportable, the fact that the costs of Medicare are simply going up 
much faster than the cost of the Government generally and the rate of 
inflation. Not only generally, but also the rate of inflation in the 
health care industry.
  The system is designed as a 1960's automobile. It was created in the 
1960's. In the 1960's it was not a Cadillac system. Everybody knows 
that. It was probably an Oldsmobile. But it is the exact same 
Oldsmobile designed in the 1960's that is now on the road in the 
1990's. It has been patched and repaired and fixed up here and there, 
but we are still driving down the road in the 1990's in a 1960's car. 
It is not working. It is not working because it does not acknowledge 
the fact that the health care delivery system in this country has 
changed fundamentally since the 1960's.
  In the 1950's and 1960's most people had a doctor by name, an 
individual. Most people pursued what was known as fee-for-service 
medicine where they hired their doctor. Their doctor referred them to 
another doctor if they had a problem. They hired that doctor, and they 
went around hiring individual doctors. Today, health care is not 
provided that way in the private sector, or, for that matter, in the 
public sector, if you are a member of the Federal Government. Today, 
the way it is provided, usually you have a prepaid plan where you pay 
an amount upfront and you participate in a plan that provides you a 
variety of options with a variety of different physicians to go to. It 
may be in the form of an HMO or PPO or PSO, or it may be in the form of 
some hybrid, but there are usually a variety of different ways you get 
health care. Only rarely today in the private sector and in the Federal 
employee sector is that health care provided in the manner of going out 
and hiring an individual physician and then moving forward on a fee-
for-service basis through the system.
  Yet, we still have Medicare delivering the vast amount of its care, 
the vast amount of its service, under the fee-for-service system, which 
has created an inflation factor in the Medicare system in the cost of 
delivery of that system which is basically making it unaffordable and 
leading to the bankruptcy of the part A trust fund. Because there is no 
competition today in the senior citizens' health dollars, because the 
system remains a closed system where fee-for-service really is only the 
viable way--there are a few HMO's, but they are very limited in their 
applicability--then, as a result, we have not brought the market force 
into the system, we have not brought efficiencies into the system, and 
we have not seen occur in Medicare what has occurred in the general 
health care delivery system in this country.

  Over the last 3 years, the rate of inflation of health care costs in 
this country, the inflationary rate of growth of health care costs in 
this country, were less than the general rate of inflation. The general 
rate of inflation was about 3 percent. The rate of growth of health 
care costs was below that number in the last 3 years in the private 
sector. Yet, in the Medicare system, the rate of growth of health care 
has remained about 10 percent.
  What my legislation does essentially is give seniors more options. 
That is why it is called choice care. It says to senior citizens, you 
can go out in the marketplace and participate in the system you 
presently have if you want to, in the fee-for-service system. There is 
no reason you cannot stay in the system you are presently in, or, 
alternatively, you can go into one of the other delivery systems--HMO, 
PPO, or PSO--whatever you want to pursue. It gives the senior citizen, 
if you want to simplify it, it gives the senior citizen the same 
options, essentially, that a person who works for the Federal 
Government has who is under the Federal employee health benefits 
program. I, as a Member of Congress, have an option to choose a number 
of different health care plans. Why should not the senior citizens have 
that same option?
  Basically, we asked that question, and we say they should. They 
should. Not only would it be more advantageous for a senior citizen to 
be able to go out and pick any number of health care programs, but it 
would be more advantageous for us, the Federal Government, and for the 
taxpayers to have those options, because we would bring competition 
into the system and hopefully, as a result, bring market forces into 
the system and, as a result, help to reduce the rate of growth of 
health care costs to something closer to what we are seeing in the 
private sector.
  We never expect that a program designed for seniors will have the 
same rate of growth of health care costs as the private sector because 
seniors, regrettably, have more health problems. We know we can do 
better than a 10-percent annual rate of growth. In fact, to make the 
trust fund solvent, we do not have to get to the private sector rate of 
growth. We do not have to get to a 3 percent or less rate of growth. We 
can make the trust fund solvent with rate of growth somewhere between 6 
or 7 percent annually.
  We are only talking about reducing the rate of growth of the Medicare 
trust fund by 3 percent; we are talking about continuing to allow it to 
grow by 6 to 7 percent. This is a huge increase, a huge amount of new 
dollars flowing into the health care system every year. It is a result 
of the fact we are able to still balance the trust fund and make it 
solvent with that type of rate of growth that we create a huge 
marketplace incentive for people to compete for senior dollars in 
health care. It is that desire for competition, that use of competition 
which will lead us to a more competitive system, a more efficient 
system, and for a system which will actually deliver better health care 
to seniors.
  We put some protections in here, also, to make it clear that seniors 
are not giving up anything by participating in choice care. First off, 
as I mentioned, they have the right to stay with fee-for-service, their 
present plan, if they want to. Second, any plan that wants to compete 
for a senior citizen dollar must provide the core services which are 
presently provided under the Medicare system. You may say, if that is 
the case, why are they ever going to be able to charge less if they 
have to provide the same amount as the senior presently gets? It is 
called the marketplace. There are ways to provide the same services and 
pay less for them and have them cost less by having more efficiencies 
in the provider. The

[[Page S882]]

marketplace will produce that sort of efficiency and you will have less 
costs.

  Also, we give seniors the right to opt out if they choose another 
type of health care delivery service. If they are uncomfortable with 
it, they can disenroll from that service.
  Furthermore, and most importantly, we do not allow people who are 
competing for the seniors' dollars to discriminate. In other words, if 
you are a provider and you are going to make yourself available to 
supply senior citizens with health care, you have to take all comers. 
There cannot be any attempt to screen out people because they have 
preexisting conditions. So it will not have adverse risk selection.
  The practical implications of this are that a senior will annually 
receive a booklet or proposal, much like we receive as Federal 
employees, which will outline the various health care systems which are 
available to that senior. What I see happening is that there are going 
to be a lot of health care providers who will say, ``Hey, we can 
provide that senior with the same health care they are getting today,'' 
because of the 6 to 7 percent annual increase. ``We can provide that 
senior with that same health care and throw some other benefits in, 
too. We can offer prescription care, we can offer eyeglasses, we can 
offer a variety of things that are not presently available under 
Medicare because we know that we can more efficiently deliver the 
service than the senior is presently getting on fee-for-service.''
  What I expect will happen and what I am pretty confident will happen 
and what people who have looked at this in depth say will happen is 
that the marketplace will bring forward a variety of different options 
from which seniors will have a choice. At the same time, we will give 
seniors an incentive to go out and look at those choices because what 
we will say to seniors is, ``Listen, today, we pay about $4,800 a year 
for your health care per senior. You, senior citizen, to the extent you 
choose a health care delivery service,'' which, again, has to have the 
core delivery services that you presently get so they cannot reduce 
their price because they are not delivering you what you need,'' to the 
extent you choose a delivery service which costs less than $4,800, we 
will let you, the senior, keep 75 percent of the savings.''
  So if the annual premium of an HMO supplying seniors with the same 
service is say $4,500 and the senior chooses to go with that HMO 
because the senior maybe has a family member--a son or daughter who is 
working and a member of that HMO--and the son or daughter say, ``They 
can give us pretty good service,'' that senior will get to keep the 
difference between $4,800 and $4,500, or $300. That senior will get to 
keep 25 percent of that difference, and 75 percent will be returned to 
the trust fund.
  So what we have created here is a market event where a senior citizen 
can get a savings by shopping thoughtfully and efficiently for their 
health care, and where the health care providers have an incentive to 
come in and compete for that health care dollar. What does that cause? 
That causes efficiency. It causes the marketplace to create efficiency. 
We have learned that the Federal Government can't produce efficiency. 
We have learned that by having a nationalized system, which is what 
Medicare is, you do not have an efficient system; that you have an 
inefficient system. What we know from experience is the way you create 
efficiency and lower costs is by having competition and having a 
playing field where the consumer is protected, which is exactly what 
this does.
  So this proposal would give the seniors an incentive to be thoughtful 
purchasers, and would give the marketplace an incentive to come in and 
be thoughtful competitors, or strong competitors for the senior citizen 
dollars.
  Another issue that is raised and is legitimate is the question of 
reimbursement and how we are going to reimburse these provider groups. 
The President has proposed that we cut the rate of reimbursement for 
HMO's from 95 to 90 percent arbitrarily across the board. I am not 
going to criticize the President for trying to address the cost of 
growth. I think that is important. But there is a better way to do 
this. The fact is that the reimbursement system as it is presently 
structured is out of kilter. For health care services which are 
identical--and in some cases they are better in the lower-cost States 
than the higher-cost States--the reimbursements are not identical. They 
are totally out of whack.

  For example, there is a beneficiary reimbursement in South Dakota of 
about $200 per person. But on Staten Island it cost about $767 per 
person. Studies by Dr. Weinberg at Dartmouth, and a number of other 
professionals, have concluded that the service isn't any better but 
that it is simply an issue of regional disparity. And in fact in New 
Hampshire, which happens to be one of the lowest-cost health care 
States in the country--a little more than South Dakota but not much 
more--we are rated the No. 1 State in the country for health care 
delivery systems. Yet, our delivery systems are done at a cost which is 
one-third the price of what it cost on Staten Island.
  So this regional disparity has basically penalized States and areas 
that are trying to be efficient and effective in delivering their 
health care.
  Take Hawaii, for example. Hawaii has one of the highest costs of 
living in the country because of the fact that it is an island, and 
everything has to be shipped in, I guess. But at the same time Hawaiian 
medical care is one of the most efficient cost delivery systems in the 
country. So they are penalized. Those health care systems are penalized 
by a lower reimbursement rate.
  What we suggest--and this is a complicated issue--we are suggesting 
that as we go forward with this Choice Care proposal that we begin to 
level out the playing field on reimbursement so that we no longer are 
rewarding the inefficient, and so that the efficient receive the proper 
payment. We do this by not cutting anybody because we are increasing 
funding for Medicare throughout this period by 6 to 7 percent. We do 
not have to cut anything. What we are going to do is slow the rate of 
increase to those areas that have a much higher reimbursement and 
accelerate the rate of increase to those with lower reimbursement 
areas.
  As a result, we will at some point--there is a timeframe in our bill 
that allows for this--about 5 to 7 years from now get to a period where 
we have everybody in a much narrower band of reimbursement which leads 
to a much more efficient market.
  So the underlying theme here is simple. Under the Choice Care plan, 
which as I mentioned was adopted in significant proportions, or the 
concepts were adopted in significant proportions in the last budget, 
seniors should be given essentially the same choices that members of 
the Federal Government have and that the average working American has--
the ability to go out in the marketplace and choose from a variety of 
different health care providers. And in making that choice they should 
be given an incentive to be efficient.
  So we are going to reward them by giving them a return on the amount 
that they save, and at the same time we are going to say to the 
marketplace we are no longer going to disproportionately reward 
inefficient areas at the expense of efficient areas, and at the same 
time we are going to say to the seniors, ``You have a variety of 
options to choose from. But, if you want to stay where you are, and you 
are happy where you are, you can do that.''

  So how does this help the Federal Government in the end? How does 
this get Medicare costs under control? It basically amounts to a major 
structural reform of the system. It is not playing at the edges the way 
the President proposes. It is a major structural reform. In the end we 
will have brought the marketplace into the system, we will have created 
an atmosphere where seniors will be looking at a variety of choices for 
health care, and where efficiency will be something that will have to 
be undertaken by the provider groups. They are going to be able to get 
the seniors' participation, and those seniors today who are in their 
fee-for-service probably are not going to opt into this overly 
aggressively because they were raised in the 1950's and 1960's with 
fee-for-service. We understand that. But what we also understand is 
that the coming generation of seniors has been in a workplace 
environment where the variety of health care service delivery system 
has been available to them. They are comfortable with a variety of 
health care delivery systems. And as such they are not going to shy 
away from taking advantage of the marketplace.

[[Page S883]]

  So, as we go down the road we will get the type of savings we need. 
We will see that rate of growth reduced from 10 percent back to 6 or 7 
percent. That is still a substantial rate of growth. Then we will have 
put in place something that can give us a long-term lasting hope for 
restructure of reform, or reform in the Medicare trust fund in order to 
avoid the bankruptcy. If we do not do this, the trust fund part A goes 
bankrupt. It is that simple. That is not acceptable.
  If we do not undertake structural reform, if we simply undertake the 
reform at the margins, like the President has proposed, we put off that 
bankruptcy maybe for 2, 3, or 4 years. But it still occurs. Our 
obligation as policymakers is to make the more fundamental broader 
changes that are needed for a long-term solution to this problem. And 
this is one major step in that direction.
  Mr. President, I appreciate your time and yield the floor.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. HATCH. Mr. President I really enjoyed the remarks of my 
distinguished colleague from New Hampshire. He makes a lot of very 
telling and important points in the field of health care. I think he 
deserves to be listened to, as certainly the distinguished doctor 
sitting in the chair, the Presiding Officer. As everybody knows, he has 
great interest in health care matters.
  And I just want to say that I appreciate the work of both of these 
Senators, the Senator from New Hampshire and the Senator from 
Tennessee, in this area.
                                 ______