[Congressional Record Volume 143, Number 40 (Tuesday, April 8, 1997)]
[Senate]
[Pages S2813-S2817]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                            MEDICARE REFORM

  Mr. WYDEN. Mr. President, as I indicated yesterday, I intend to come 
to the Senate floor each day this week as part of an effort to build 
bipartisan support in the Senate for Medicare reform. It is very clear 
to me that there is a rare window of opportunity now for the Senate to 
act on this issue, a window, an opportunity I think would be a serious 
mistake to not exploit.
  We know that the Federal deficit is a bit lower than was anticipated 
this year, in the vicinity of $108 billion. We are seeing that there is 
a fairly benign economic environment. Certainly, there are still folks 
hurting in our country, but, overall, the economy has been positive. We 
know that we are a few years away from what I believe is sure to be a 
demographic earthquake, with many more older people in our country, and 
older people who need and deserve good quality health care.
  Yesterday, I tried to outline what I thought were the central 
principles of comprehensive Medicare reform. Beginning today, Mr. 
President, I intend to

[[Page S2814]]

try to outline some of the specific aspects of what Medicare reform 
ought to consist of and how to get this program on track for the 21st 
century so that it operates in a fashion that is good for both older 
people and for taxpayers.
  Right now, in much of the United States, the Medicare Program is a 
30-year-old, ``Tin Lizzy''-style operation that rewards waste and 
penalizes frugality. This is particularly unfortunate since the end 
result is that in communities like my own in Portland, OR, that hold 
down costs, the end result for all the heavy lifting is simply a 
smaller reimbursement check. I believe what we have today under the 
Medicare Program is a situation where because of the reimbursement of 
formula, a sleep-inducing, eye-glazing concept known as the average 
adjusted per capita cost, you have a situation where in much of the 
United States there are few, if any, choices for older people under 
Medicare because health plans are reluctant to come to those markets, 
or you have a situation where it is almost impossible for an older 
person to navigate the system simply because they cannot obtain 
understandable, coherent information about their Medicare choices.
  Mr. President, it would be impossible for you to be able to see this 
chart, but I intend in the days ahead to blow this up because it makes 
my point with respect to how Medicare has made it difficult to have 
true competition like the competition that exists in the private sector 
for health care. This chart, which obviously is going to be difficult 
for you, Mr. President, and those who may be watching to see, involves 
a wall that has been set up in Los Angeles with all of the information 
that an older person has to go through in Los Angeles to make choices 
about choosing a health plan. It clearly illustrates, in my view, what 
we have seen with the Medicare Program over the last few years.
  Because the reimbursement formula encourages waste and penalizes 
frugality, we will have, in many areas, few choices for Medicare, 
discouraging competition, or, as I have shown through this chart and 
picture developed by the General Accounting Office, you will have just 
a blizzard of information that older people find it very difficult to 
navigate and make sense out of, thereby making it hard for them to have 
real choice in their health system.

  The irony, of course, is that every Member of the U.S. Senate knows 
what a competitive health system could look like, and a competitive 
health system that avoids the kind of problems I have just demonstrated 
with this chart from the General Accounting Office. Mr. President, 21st 
century Medicare could really be modeled around the very program that 
Members of the U.S. Senate participate in, known as the Federal 
employee health benefits plan. The Federal employee health benefits 
plan offers enrollees a portfolio of plans, each one with somewhat 
different service offerings. Consumers are helped to make appropriate, 
independent choices because the managers of the Federal employee plan 
pay attention to the details, including the way plans develop written 
explanations presenting what individual policies will or will not do.
  So for Members of the U.S. Senate, it is possible to get 
understandable, coherent information about what is available for 
Senators and their families. But if you are an older person who wants 
to compare and shop for health care, you have to try to figure out how 
to make sense of this incomprehensible picture that I just showed, 
demonstrated by the General Accounting Office.
  In addition, in the Federal employee health system, policies are 
inspected and reviewed on performance, and Federal employee plan 
participants are then given what amounts to report card grades on many 
of the important care provisions so that average consumers can sit down 
at their kitchen table and make plan-against-plan comparisons when they 
choose their coverage.
  Again, the difference between what is available to older people in 
many parts of the United States for Medicare and what is available to 
those Federal employees and Members of the U.S. Senate is striking in 
its contrast. Members of the Senate and Federal employees are going to 
be in a position where they can make plan-against-plan comparisons so 
as to inject some competition in the system. Again, the General 
Accounting Office tells us that no such features exist in much of 
Medicare.
  Finally, the Federal employee benefits managers look for high-quality 
service at competitive rates for employees. They work on a competitive 
basis to upgrade the quality and prices for the plan, while keeping 
premium rates at the lowest possible level. At the same time, these 
managers work to diminish risk selection by the plans, so that the 
older individuals who are part of the Federal employee plan, or persons 
with disabilities or chronic conditions, will not be eliminated from 
coverage when they want to enroll.
  Again, we see an effort to deal with the central questions that face 
health care reform in America, making sure that people are in a 
position to compare their plans so that there is real competition, and 
to make sure that nobody is left behind just because they are older or 
they suffer from a chronic condition.
  So, in addition to these very positive features, in recent years, 
average Federal employee health plan premium increases have stayed 
below 3 percent per year per enrollee, while the Medicare Program has 
seen average annual increases of almost 9 percent during the same 
period.
  So, Mr. President, what we are seeing is that well-structured 
competition, like in the system that Members of the Senate belong to, 
can work. It can work for patients and consumers in making sure they 
have good quality care. It can work for taxpayers in that it holds 
costs down, and it, for all practical purposes, is very similar to the 
system that we have in my hometown of Portland, OR.
  In my hometown, Portland, we have the highest percentage of older 
people in the Nation now participating in managed care. It is about 60 
percent. Certainly, while not perfect, it avoids much of the set of 
problems that we have seen in other parts of the country. You don't see 
the gag clauses, for example, in our plan. And, hopefully, the U.S. 
Senate will pass the legislation this session that Senators Kyl, 
Kennedy and myself have introduced to make sure that, as we go to the 
21st century, all patients understand their options and all of them 
know about the various services that are available. But we don't have 
those gag clauses in Portland, and we do have high-quality managed 
care, and we are able to do it for substantially less than much of the 
rest of the Medicare system. The per capita rate in my hometown, the 
per person rate for Medicare participants, is still $60 to $80 below 
the national average for Medicare.
  One of the things that I hope the Senate will do, on a bipartisan 
basis, is lift these penalties against towns like my home community 
that have done the heavy lifting and have ended up being penalized for 
it. I think, on a bipartisan basis, the U.S. Senate should make changes 
in Medicare to lift the reimbursement for low-cost counties, 
particularly in rural communities, and by doing so, benefit both 
seniors and taxpayers. Seniors will benefit from having the opportunity 
to get good-quality health plans in their areas, and it will also bring 
real choice and real competition for the first time to those areas. The 
fact of the matter is, many of those communities haven't been able to 
unleash entrepreneurial and competitive forces into their health 
systems such as we have in the private sector, because Medicare isn't 
paying those low-cost communities a fair rate. I have made changes in 
that discriminatory reimbursement proposal in my Medicare reform plan, 
and I hope the U.S. Senate will accept that in this session.
  I was pleased to see that, in the last week or so, the head of the 
Health Care Financing Administration, Dr. Vladeck, has indicated that 
there is a significant backlog of needed changes required to bring 
Medicare up to date. I hope that we will see more discussion of that in 
the days ahead. I felt that it was positive news to see those comments 
from the head of the Health Care Financing Administration.
  Mr. President, finally, let me say that I think, in addition to 
promoting competition, using the model of the Federal employee health 
plan, it's time for Medicare to look to the Federal employee health 
plan and the private sector for ways to improve quality in our health 
system. Again, there is nothing

[[Page S2815]]

partisan about the agenda to improve health care quality, but this is 
an area where Medicare has also lagged, both in relation to Federal 
employees and the private sector. In other parts of our health system, 
it's possible, for example, to get good statistics on disenrollment, 
people leaving because they are not satisfied with the plan. It is 
possible to get information about providers who leave a system because 
they, too, feel it doesn't adequately address the needs of patients in 
providing good-quality health care.

  In other parts of the health system, there are grievance procedures, 
and we know, for example, how long it takes people to get through a 
grievance procedure, or how long it takes to get a referral, or what 
happens when you are denied benefits. In each of these areas so central 
to providing quality health care in America, Medicare is lagging behind 
the Federal employee health system, and Medicare is lagging behind much 
of the private sector. In my legislation, we would change that. We 
would require that these critical measures of quality be made available 
through report cards and other measures. I emphasize that today, Mr. 
President, because I think that, as we look to the 21st century of 
Medicare, we have an opportunity over the next few years to redesign 
the system and try to get it on track for the next century when we will 
have many more older people depending on Medicare.
  So the alternative is very clear: A bipartisan effort to bring 
competition and choice and a new focus on quality in the Medicare 
Program, or to continue business as usual and face what the General 
Accounting Office has told us will be a program that has simply run out 
of money when we hit the next century. I believe that, after years of 
bickering and partisanship on this issue, there is an opportunity now 
to address Medicare reform in a bipartisan way. Democrats have been 
right in the Senate to call on making sure that benefits are defined, 
that older people have guaranteed, secure benefits. Republicans have 
been correct, in my view, in calling for more competition and more 
choice in the system. Today, I have tried to talk about how that 
competition and choice exists in the program that Members of the Senate 
belong to and is also available in much of the private sector.
  Mr. President, this issue is so important that in the next century I 
believe that the public is going to ask every Member of the U.S. 
Senate, ``What were you doing to try to get Medicare on track?'' This 
program isn't just an important part of the Federal budget. It is going 
to be the Federal budget for the next 15 or 20 years. So now is the 
time to act to get the program on track. I believe that this can be 
done in a bipartisan way.
  Mr. WYDEN. Mr. President, as I have said, I intend to come to the 
Senate floor each day this week part of an effort to help build 
bipartisan support in this body for Medicare reform.
  Not via an independent commission. Not in the next Congress. But now, 
and by us, the Members of the 105th Congress.
  I think we have an historic opportunity to transform Medicare from a 
30-year-old, tin-Lizzie style social welfare program into a 21st 
century, comprehensive seniors health care system that is humane, cost-
efficient and sustainable.
  The reformed Medicare Program I envision, and which I think is within 
our grasp, is a health plan that is about choice, quality and access, 
and also about the efficiencies that characterize much of the Nation's 
private health care marketplace.
  But changing Medicare will require tough decisions, tough votes and, 
as in turning a battleship in mid-ocean, a good deal of time and 
patience on the part of beneficiaries and health care providers.
  We must start by making the right moves, the right changes, today, 
before some 75 million baby boom generation retirees begin swamping the 
Medicare Program in 2013.
  In my private conversations with colleagues, I've been arguing that 
this is the classic pay-me-now, or pay-me-later situation. Structural 
changes enacted in the next year or two will not be easy. But in the 
face of what Congress would have to overcome beginning early in the 
next century, these changes will seem like child's play.
  Medicare's problems are a snowball rolling down hill, picking up 
speed and mass on almost a daily basis. Now is the time to slow-down 
that snowball, if not stop it because in a few more years the program 
will be crushed by its weight.
  Each year without structural reform makes the task that much harder, 
and the risk to balanced Federal budgets that much more significant.
  And assigning the task to a bipartisan commission without first doing 
our best to solve Medicare's problems is a retreat not just from our 
responsibility, but from opportunity as well. I think there's a fervent 
desire among my colleagues to try to fix Medicare in the current 
Congress.
  I think we gain little by assigning that job in the first instance to 
a bi-partisan committee, only to have to try to make tough votes on 
their recommendations in 1998, an election year for those who need to 
be reminded.
  The path to reform is not easy. Fortunately, however, there are sign 
posts and trail markers along the way, offering meaningful models for 
changes and reform.
  I think we see these possibilities for a 21st century Medicare 
program in systems as diverse as the Federal Employee Health Benefits 
Program, which serves many Members of this body, to the Medicaid 
Program which now operates in my home state of Oregon under a special 
Federal waiver.
  The Federal Employees Health Benefits Program offers its enrollees a 
portfolio of plans, each one with somewhat different services 
offerings. Consumers are helped to make appropriate, independent 
choices because the managers of FEHBP pay attention to the details, 
including the way plans develop written explanations presenting what 
individual policies will or won't do.
  Further, those policies are then inspected and reviewed on 
performance, and FEHBP beneficiaries are then given what amounts to 
report card grades on many of the important care provisions so that 
average consumers can sit down at their kitchen tables and make plan-
against-plan comparisons when they choose their coverage.
  Finally, FEHBP smart-shopper managers negotiate high-quality service 
at competitive rates for enrollees. These government managers work with 
their plans on a continuous basis to upgrade the quality and range of 
services offered by the plans while keeping premium rates at lowest 
possible levels. At the same time, these managers work to diminish risk 
selection by the plans, so that older FEHBP members, or persons with 
disabilities or chronic conditions aren't eliminated from coverage when 
they want to enroll.
  In recent years, average FEHBP plan premium increases have stayed 
below 3 percent per year, per enrollee, while the Medicare Program has 
ballooned to average annual increases of almost 9 percent during the 
same period.
  Oregon's ground-breaking Medicaid plan also helps mark our way toward 
an improved national Medicare system.
  In Oregon, we've expanded the traditional Medicaid Program to cover 
not only the federally qualified participants but also tens of 
thousands of working poor Oregonians who can't afford private 
insurance, but whose incomes would disqualify them for traditional 
Medicaid.
  The result has been a tremendous reduction across the State in 
unreimbursed hospital charity care, more preventative medicine for 
youngsters and young mothers, and a per capita Medicaid cost rate that 
is 10 percent below the national average.
  More care.
  Less cost.
  Efficient, preventative services that keep children and adults out of 
the hospital.
  Managed care has played a dominant role in this success story, as it 
has in Oregon's Medicare experience.
  Oregon's Medicare-qualified seniors have the highest penetration rate 
in the Nation in coordinated care. In Portland, nearly 60 percent of 
the Medicare beneficiaries are in managed care.
  And in this, the State's highest reimbursed city for Medicare 
beneficiaries, the per capita rate is still 60 to 80 dollars below the 
national average for Medicare.
  I suggest that we may be doing some things right, out West and in the 
FEHBP program. And sad to say, these good things we see happening in 
Medicaid and Medicare are almost in spite of

[[Page S2816]]

a Federal regulatory structure that hamstrings Medicare and Medicaid in 
terms of increasing both efficiency and quality, and expanding 
enrollment to the uninsured and under-insured.
  This is a problem that is recognized even within the bowels of the 
Medicare management structure.
  Mr. President, I was heartened to see the comments of my good friend 
Dr. Bruce Vladeck in the trade press last week. Specifically, Bruce 
acknowledged that there is a tremendous backlog of needed statutory 
changes required to bring Medicare up-to-date.
  Gail Wilensky of Project Hope, puts it even more succinctly:

       In sum, the present structure of Medicare hardly makes it 
     surprising that it is facing financial problems. The elderly 
     have limited options in the health care plans available to 
     them. Medicare pays most of the costs for services it covers 
     and almost all of the elderly have coverage that is 
     supplemental to Medicare, either privately purchased Medigap 
     or Medicaid.
       That means there is little reason for an elderly person to 
     seek out cost-effective physicians or hospitals, or to use 
     lower cost durable medical equipment, laboratories or 
     outpatient hospitals.

  Dr. Wilensky goes on to say that there is little reason for 
practitioners to provide cost effective care ``if there is any medical 
gain to be had from providing services and some reason to fear legal 
repercussions if they do less than they might have done and the patient 
has an adverse outcome.'':
  And because payments to capitated plans now follow payments for local 
fee-for-service Medicare, Medicare HMO's in many high-cost counties are 
extravagantly over-paid, while in low-pay counties plans and HMO 
enrollment languish because of under-reimbursement.
  We throw money at fat health plans in big counties, while we starve 
the system of both choice and access--and I would argue quite probably 
quality as well--in counties where the payments are below the national 
average.
  This current state-of-affairs is precisely antagonistic to our goal.
  Let me postulate that it is nuts to reimburse Medicare HMO's in high-
cost counties at the same level, more or less, of the highest-cost fee-
for-service practitioners in those counties. That fact alone is one of 
the big reasons why, quite rightly, the administration has argued that 
we have a general HMO over-payment problem.
  But the administration's argument that every HMO should be cut, 
however, to cure that problem is like saying amputation is an 
appropriate treatment for bunions.
  Holy Dr. Kildare. In any other economic model or sector, a 
proposition like our current average adjusted per capita cost [AAPCC] 
formula would seem nuts. But that's the way it works in our creaking, 
inefficient and decidedly consumer unfriendly Medicare system.
  Clearly, we must provide incentives for beneficiaries to choose just 
the cost-effective health care they need, and to demand that 
physicians, hospitals and other providers limit practice to cost-
effective medicine.
  This can be done while preserving the Medicare guarantee of a basic, 
good quality package of health services to every eligible senior, no 
matter what their health status or income level.
  Here are components of a new Medicare system that provides both 
choice and quality, with cost efficiency:
  First, radically reform the formula by which we determine how 
Medicare managed care programs are paid so that reimbursements are 
geared to the actual costs of managed care among elderly populations in 
a particular county, or region, rather than the local cost of fee-for-
service medicine.
  At the same time, scale-back payment increases in our high-
reimbursement counties, and accelerate payments in the low-
reimbursement counties where, because payments have been too thin, 
beneficiaries have only fee-for-service Medicare to choose from.
  In other words, give millions of disenfranchised Medicare 
beneficiaries a real choice.
  Second, require Medicare managers organize open bidding between plans 
in high-pay counties where profit margins are exorbitantly high.
  Make the plans that are currently, hugely over-paid bid against one 
another, on price, for Medicare beneficiaries in those counties.
  I believe such competitions should take place in every county where 
the average adjusted per capita cost--the AAPCC--is 120 percent of the 
national average.
  In sum, make adjustments in the HMO payment formula that decrease 
reimbursements in counties that we know are substantially over-
compensated; increase payments in counties that are so under-
compensated as to discourage HMO entry and competition; and resist 
proposals to reduce all county payments, alike, from 95 percent to 90 
percent of the local AAPCC rate--a crude tool that will hurt the cost-
efficient counties much more than the ``fat'' counties.
  Mr. President, I believe that accelerating the growth of good quality 
managed care, such as we have in Oregon, can be a major factor in 
curing Medicare's financial ills. Changing this AAPCC formula in a way 
that makes sense--in a fashion that does not kill our efforts to bring 
Medicare into vast areas of this country where no choice but fee-for-
service medicine exists for beneficiaries--must be a high priority 
piece of the solution.
  Third, put our two fastest growing portions of Medicare--home health 
care and skilled nursing facility care--on a financial management diet.
  That regimen is called prospective payment, and it means that in much 
the same way we control hospital costs we would create a schedule of 
daily maximum service costs for different aspects of care in each of 
these important areas.
  In my bill, S. 386, the Medicare Modernization and Patient Protection 
Act, prospective payment provisions for home health and skilled nursing 
facilities would, together, save approximately $20 billion over 5 
years, according to the Congressional Budget Office.
  Eventually, but quickly, I think we ought to impose these kinds of 
financial management tools on other aspects of fee-for-service 
Medicare.
  I see no reason why, as a matter of global budgeting, that 
practitioners in this field ought not be held to the same kind of case 
management that HMO's require as part of their plans.
  One method might be to require all Medicare fee-for-service 
practitioners to join a Medicare-sponsored provider network, which has 
at its core a case management system that ensures all participating 
beneficiaries get the care and quality they need, but that 
practitioners and other providers don't over-bill or overprescribe.
  This kind of PPO management would bring case gate-keeping into fee-
for-service Medicare, ultimately producing reasonable price and cost 
controls in the system.
  Fourth, require competitive bidding for durable medical equipment 
purchases and eliminate what Dr. Vladeck has termed the ``current silly 
inherent reasonableness'' process.
  I know many of my colleagues may not have looked hard at this bit of 
Medicare arcana. But let me say that this is all about getting medical 
equipment paid for by the program at the lowest possible cost as 
determined by the market.
  At the same time, we need to know more about what procedures and 
services work, and which don't, so that we can save money for the 
program and ensure that beneficiaries are getting optimum care.
  The Health Care Financing Administration must be required to collect, 
analyze, and act on more of the available data, in this regard, and 
that admonition needs to be part of comprehensive Medicare reform.
  Fifth, require HCFA to do local service-provider report cards for 
beneficiaries. This sort of qualitative analysis should extend both to 
HMO's and their practitioners, and to local fee-for-service doctors and 
other providers.
  This needed reform would include authorizing the program to demand 
and collect all relevant data from Medicare participants.
  Sixth, the program must move much more aggressively in establishing 
special plans and services for the sickest, frailest enrollees; these 
are the Medicare beneficiaries who are usually qualified for both 
health and income reasons to receive benefits from Medicaid as well.
  These enrollees are the fastest growing group of Medicare 
beneficiaries, and the most expensive with costs to both programs 
amounting to about $100 billion per year.

[[Page S2817]]

  Lack of systems to deal with the huge comprehensive care problems 
these folks face has resulted in the worst possible scenario; much 
money is wasted while many folks don't receive the type or quality of 
care they need.
  Fortunately, there are a number of highly specialized programs called 
social HMO's or PACE programs, that provide coordinated care--using 
both Medicare and Medicaid bucks--for populations of these 
beneficiaries in less than two dozen communities. One of those 
programs, ElderCare at Providence Hospital in Portland, is up and 
running in my hometown, and it is serving these frail elderly at well 
below the national average cost for the so-called dual-eligibles.
  Why don't we have more? HCFA currently requires each of these 
programs to apply on a waiver basis every time an individual community 
wants to start a social HMO or PACE program. This is expensive and time 
consuming, and it limits the reach of a very good, cost-effective 
system.
  And again, something that takes about 5 minutes to start up in the 
private sector, takes about 5 years through the Federal Government.
  For this group we must create greater access for highly specialized, 
dual-eligible programs by giving organizers clear and certain and 
uniform rules of entry through the Medicare Program; eliminate the so-
called 50-50 rule, requiring 50 percent non-Medicare enrollment for any 
HMO serving Medicare beneficiaries, based on enhanced performance and 
quality standards; develop tougher restrictions on adverse risk 
selection making it harder for plans to deny enrollment to sicker, 
frailer beneficiaries; and set up a so-called outlier fund within 
Medicare, a special pool of cash fueled by reimbursement withholds from 
overpaid HMO's, to appropriately compensate plans that demonstrate they 
are serving sicker, more costly beneficiaries.
  Seventh, reform our Medicare supplemental insurance laws--the Medigap 
regulations--to guarantee that every Medicare beneficiary can enroll in 
a Medigap program at any time. I believe this change is crucial to 
encouraging more seniors to try HMO's, knowing that if they decide they 
must return to fee-for-service medicine they will be able to get back 
into Medigap coverage.
  About a dozen States, including my home State of Oregon, already 
require guaranteed-issue. The Medigap market has not been destroyed in 
those States. There must be a universal Federal standard protecting 
beneficiaries.
  Eighth, ensure better treatment and more appropriate treatment for 
Medicare beneficiaries by capturing the service and efficiency offered 
by telecommunications technology.
  An important aspect of this is expanding the terms and conditions 
under which Medicare will pay for services via the fiber-optic 
lifeline, and working with both the Federal Government and the States 
to knock down anticompetitive licensure practices and restrictions that 
hamper the ability of physicians and other practitioners to practice 
via this new technology.
  I can tell my colleagues that Oregon, like much of the west, is 
looking hard at telemedicine as a way of getting better quality 
medicine to folks who live way out in the country; and there are lots 
of places falling under that definition, west of the Mississippi.
  Medicare needs to help in that effort, not build walls against 21st-
century medicine.
  Ninth, Medicare must unleash the quality and efficiency promised by a 
rapidly growing cadre of alternative health care providers.
  The program can save money and deliver to beneficiaries better, more 
targeted services by identifying and incorporating appropriate 
assignments for nurse practitioners, PA's, druggists, chiropractors, 
and other licensed professionals within the health care network.
  Mr. President, these nine items are not the whole solution to 
modernizing Medicare. But I do believe that together, they represent an 
appropriate jumping off position for real Medicare reform that can be 
accomplished in this Congress.
  I know colleagues from both sides of the aisle will be talking about 
their own ideas in the weeks and months to come. I urge them, I urge 
all of us, to move these issues through the congressional process 
beginning this year rather than expect a bipartisan commission to cure 
Medicare's problems for us.
  Mr. President, tomorrow, I will go on to talk about other fundamental 
principles of Medicare reform.
  I yield the floor.
  Mr. CONRAD addressed the Chair.
  The PRESIDING OFFICER. The Senator from North Dakota is recognized.

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