[Congressional Record Volume 143, Number 43 (Monday, April 14, 1997)]
[Senate]
[Pages S3069-S3071]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          THE MEDICARE CRISIS

  Mr. BREAUX. Mr. President, what I want to talk to the Senate this 
morning and our colleagues about is the situation that I think is most 
serious in this Congress. If we balance the budget this year and also 
come up with tax cuts, I think that this Congress will still go down as 
a failure if we do nothing to address the very serious Medicare crisis 
that is facing this country. I think that we must realize that we need 
to do more than we are attempting to do at this moment.
  There is no question that Medicare has been a wonderful program for 
the 38 million Americans that have come under the Medicare Program for 
all of these years. It has been a success story that I think is 
unparalleled in the history of government. Before Medicare was passed 
less than half of the seniors in this country had access to quality 
health care. Today 99 percent of all seniors in America have quality 
health care under the Medicare Program. The poverty rate among seniors 
has dropped largely, on the part of Medicare and Social Security, from 
about 35 percent of all seniors down to about 12 percent. The United 
States has about the ninth highest life expectancy of any nation in the 
world. That is not that great. When you look at the life expectancy of 
seniors in this country, the United States has the highest life 
expectancy of all citizens over the age of 65 largely due to the fact 
they have access to quality health care under the Medicare Program. The 
problem, however, is that Medicare is about to go broke. We have talked 
about it. Now I think more and more people are understanding that we 
must do something to address the problem.
  The first chart that I have up here really is an indication of how 
part A, which is the hospital trust fund which pays for the hospital 
services for seniors, is projected by about the year 2001 to run out of 
money. We are right here starting to run out of money in the trust 
fund. And the red line shows that, indeed, this is a very serious 
crisis that we cannot allow to continue. The President's budget extends 
the life of the fund to the year 2007. That is a short-term fix when I 
suggest we should be looking at long-term fixes.
  Part B, which is the program that pays for physician services, is not 
in the same situation, obviously, because it is supported by general 
revenues although the cost of Medicare physician services has increased 
by 53 percent over the past 5 years.
  I would like to take a look at chart No. 2 which shows the number of 
people that are working in order to pay for the Medicare beneficiaries. 
Back in 1967 there were about 4.4 workers paying for every Medicare 
beneficiary. Today we are looking at a ratio of about 3.9 workers in 
1995 right here. It is a dramatic drop down to the year 2030 when we 
are talking about only 2.2 American workers working to pay for one 
beneficiary. So while it started off in a very good ratio back in 1967 
it is dropping as more and more people become eligible for Medicare and 
fewer and fewer workers are working to pay for those services.
  The Congressional Budget Office estimates that payroll taxes would 
have to be increased 25 percent a year just to extend the trust fund 
solvency to the year 2006. I don't know of any Member of Congress that 
is recommending a 25-percent increase in the payroll taxes, or 
something that is simply not going to occur.
  Chart No. 3 shows you how much money we are spending on Medicare as a 
percentage of our overall Federal budget. In 1975 it is 5 percent, more 
than double in 1995, and with 11.3 percent of the entire Federal budget 
now being spent on Medicare. By the year 2020 the estimation is that it 
will be almost 25 percent; 24-plus percent of our total budget 
expenditures. That means when you are talking about education, roads, 
highways, infrastructure, there is not going to be a lot of money left. 
We will be spending 25 percent of everything we take in just on 
Medicare.
  Why is this happening? There are two reasons. No. 1 is the growth of 
beneficiaries. There are a lot more people on Medicare. People live 
longer. The population is aging. We are glad they are. We are glad they 
are living longer. But we have a lot more beneficiaries than we used 
to. Between now and the year 2010 the number of people on Medicare will 
grow by about 1\1/2\ percent a year. After that it is going to grow to 
almost 2.5 percent a year, which is a rate of growth that is just 
incredible and unreasonable for the cost.
  The second reason, as I point out on the chart, is the amount of 
money we are spending per beneficiary. We are spending a lot more. For 
a self-insured man who earned average wages he will receive Medicare 
benefits of over $44,000 a year in his lifetime. For these benefits he 
is only going to contribute about $13,000. He is getting about $32,000 
more than he is putting in. We are spending a lot more per beneficiary. 
In 1995, the average benefit is $80,000 in a lifetime. Their 
contribution is $30,000. So we are spending a lot more money per 
beneficiary than we used to, and it is certainly a lot more money than 
they are contributing.
  So we know what is happening. Unfortunately, what we are talking 
about so far in the President's budget and in most proposals is to 
tinker around the edges. We are talking about, ``Well, let's fix 
Medicare by cutting the amount of money we give to doctors and cutting 
the amount of money we give to hospitals.'' I suggest that that is a 
Band-Aid type of an approach which we have tried time and time again. 
When we get into these great arguments about cutting or increasing 
Medicare, truly we aren't fixing anything. We are just tinkering around 
the edges. We need some fundamental reform and change. If we continue 
to just reduce the amount we give to doctors and to the hospitals 
pretty soon doctors and hospitals are going to say, ``Wait a minute. I 
am not going to treat Medicare patients anymore. You are giving me less 
than it is costing me to provide these wonderful services that are 
important to seniors in this country. So I quit. I am out of here.'' 
You are seeing that happen around the country. Unfortunately, the 
proposals we have on the board so far this year are simply just the 
same old same old--simply reducing the amount we pay doctors and 
hospitals. I think we have to do something more fundamental than that.
  What I am suggesting is that we restructure Medicare by modeling it 
on

[[Page S3070]]

what we have as Senators, what we have as Members of Congress, and what 
9 million Federal employees have for their health care package of 
benefits. I think most people believe that if Congress wrote a plan for 
themselves it must be pretty good. They are right. It is pretty good. 
It is much better than what seniors have under the current Medicare 
plan. I am suggesting that we take the Medicare plan and give people 
who are on Medicare--the beneficiary--at least the option of having the 
same benefits that their Senator or their Congressman, or the rest of 
the Federal work force has which is the Federal employee health benefit 
plan. With our plan the Federal Government finances about 71 percent of 
the premium cost for the plan with the participants paying the other 
remaining 29 percent. We have the option of choosing a Cadillac plan 
for which we will pay a little bit more, or a less expensive plan that 
we pay a little bit less for, and the Government pays a little bit 
less. But you have the flexibility. It is sort of a combination of a 
defined contribution and benefit plan where the Federal Government says 
we want some people to offer us some option. It has to meet a minimum 
standard. And depending on which plan you pick determines how much you 
are going to have to pay for it.

  No. 1, the plan would give seniors a greater choice of health care 
plans than they currently have. It would give them better coverage than 
they currently have while at the same time curbing the growth in 
Medicare costs by creating what Medicare doesn't have, and that is real 
competition.
  The reason Medicare is increasing at twice the rate of private 
insurance is because there is no real competition among Medicare 
beneficiaries and the plan that they have. In the private sector, which 
is increasing about 4 percent or less, there is competition. They 
receive more. They pay less under Medicare. We get less and pay more.
  So I am suggesting that a plan based on the Federal employee health 
benefit plan would give more competition, more benefits, more 
information, and more choice to Medicare recipients than they have 
today. There would be more competition because the current Medicare 
system of price fixing by the Government here in Washington I think is 
a disaster. We have people in Washington that work very hard to try to 
fix prices. But it is not working. The costs are going up higher than 
the private plans and they are fixing the price. It is not working. So 
we are the only group that has lost money on managed care.
  Medicare now offers HMO's because it is under a price structure and 
price fixing. We are losing money on HMO's. Everybody else who is 
trying HMO's is saving money because there is competition. But under 
Medicare, when somebody gets in an HMO, we are still controlling the 
price. And the Government is losing money under HMO's because of price 
fixing, and everybody else is saving a substantial amount of money.
  So we have to change the way we are doing business, and to bring in 
more competition. The Federal Government OPM negotiates on behalf of 9 
million employees. And there is a lot of competition because they can 
go to the market and say, ``We are going to offer you 9 million 
workers, and we want you to bid on what health care you are going to 
provide them. And make sure it is a minimum standard, and see who 
offers the best deal.'' We have 38 million people in the system. The 
potential for negotiating a good price is astronomically increased, and 
it makes much more sense. Right now we are relying on Medicare and 
arbitrary bureaucratic price regulations and price fixing. The private 
sector, which relies on competition, more information, and more 
flexibility, is working and the prices have not gone up.
  The second thing is we would get more benefits. When we talk to 
seniors, we say that we want to change it. But we want to give you more 
benefits than you have right now because what you have is a 1965 model 
that is like a Chevrolet that has never been repaired since 1965. It 
wouldn't run very well today. But we are giving them a 1965 model. It 
was great for a long period of time. But because of the change in the 
world it is not giving the benefits that the private sector gives other 
people.
  Medicare doesn't cover most outpatient prescription drugs. For 
instance, it doesn't cover generally dental care, or have any 
catastrophic limits on catastrophic health care and out-of-pocket 
contributions as private plans do. In fact, Medicare's benefit package 
is less generous than about 85 percent of private insurance and private 
sector plans. I think a lot of seniors think that they have a great 
plan when in truth it is less generous than 85 percent of the private 
sector health insurance plans. It is not that good of a plan by any 
stretch of the imagination. The program covers only about 45 percent of 
the total annual health care bill of the elderly. That is not a 
particularly good deal by any stretch, if your health care plan is only 
covering about 45 percent of your annual out-of-pocket expenses. That 
is what Medicare currently does with our seniors.
  The plan would also give them more information. They do not get a lot 
of information under Medicare. They get a card. They say, go to your 
doctor under a fee-for-service plan, but you do not get a lot of 
information about which doctors are the best, which hospitals are the 
best, which services are the most efficient and do the best job. To the 
contrary, with the Federal plan, every year they publish a guide with 
information on benefits and premiums.
  We can improve upon that. We should have a report card for all these 
plans so they can see how many people were treated, their success 
ratio, what the failure rate is, and how the plans are working. So we 
need to give them more information than they currently have. Medicare 
currently really gives seniors zero information on the quality of the 
plans under which they operate. That is not fair to the seniors, and it 
is not helpful to the system at large.
  Then it gives them more choice. The 9 million Federal employees 
nationwide have the benefit of looking at about 388 different health 
insurance plans to see which one that they would like that fits their 
needs--388 different plans that they can take a look at and say, ``This 
one is better'' or ``this one.'' That is nationwide. Most of us in 
Washington look at two or three or four, maybe five different plans and 
say, ``This one fits my family; I will take this high option,'' or ``I 
will take the low-option or standard plan.'' It is an easy choice with 
a lot of information, and, most importantly, it has information that is 
needed to make the correct choice.
  All of these plans under Medicare simply continue to rely on the very 
inefficient Federal price fixing as opposed to how much the market is 
charging. We have bureaucrats who are trying to do a wonderful job. I 
do not criticize them. But it is impossible to do what they are 
attempting to do to make sure we have a better system.
  Mr. President and my colleagues, I will be talking more about this. 
We are still working on the details. But I suggest we need to be 
looking at, fundamentally, restructuring Medicare to make it a better 
program for the seniors than they are now getting and at a price we can 
afford. Doing nothing is not an option, because then we destroy the 
system that has taken care of the needs of seniors for over 30 years in 
this country.
  We in Congress have an obligation to fix it and to be able to help 
educate the seniors that what they have now is not a good deal, it is 
not as good as most private plans, and we can offer them more choice 
and more benefits, better information, and do it in a way that allows 
the marketplace to determine the price.
  The Office of Personnel Management looks at the top six health plans 
in the country and comes up with an average price and negotiates based 
on that average price. It is not Washington fixing prices but the 
market. When we have that large of a pool of individuals, then you can 
have the competition that is necessary to get the price down. So what 
the private sector is getting is a lot more choice, more benefits, and 
the price is increasing only at about 4 percent a year or less while 
Medicare has less of everything and the price is increasing at about 
8.6 percent a year.
  So we are going to be talking more about the details. We do not have 
all the details yet, but this is a concept that I think makes sense. My 
proposal will allow the current fee-for-service system to stay in 
place. If they wish to keep the whole system, they would

[[Page S3071]]

have the option to do that. But I guarantee you, as more and more 
people understand what this plan will offer them, I think very few will 
elect to go back to a 1965 model when they have the opportunity to 
select a 1997 model which makes sense and gives them a great many more 
benefits.
  Mr. President, I conclude my remarks by saying we will continue to 
talk about this, to help educate our colleagues about what we are 
attempting to do. Others have come up with this plan. We have had 
groups like the Progressive Policy Institute that has suggested this. 
The Brookings Institution has suggested this type of approach. The 
Heritage Foundation has suggested this type of approach. We have 
liberals, conservatives, and moderates saying we have to fundamentally 
make some changes. This is the way to go. This is the right approach. I 
agree with them. I think as we know more about it, more and more of our 
colleagues will agree with this approach as well.
  Mr. President, I yield the floor. I note the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. THOMAS. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
senior Senator from Wyoming is recognized.

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