[Congressional Record Volume 143, Number 87 (Friday, June 20, 1997)]
[Senate]
[Pages S6024-S6026]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                            SAVING MEDICARE

  Mr. GRAMM. Mr. President, I come to the floor today to talk about a 
very difficult subject that for the next couple years is going to be 
very unpopular. In the long history of the country it is one of the 
most important subjects that we have ever debated--and that is trying 
to save Medicare.
  I want to talk about what we did in the Finance Committee. We 
reported a bill that will be on the floor by the middle of next week. I 
want to explain to people exactly what we did and exactly why we did 
it. I want to talk about why it is important to the future of the 
country and why it is critically important to 38 million people who 
depend on Medicare. It is something that we have to do, and it was a 
courageous action taken by the committee. However, it will be a great 
blot on the courage and leadership of this Congress if we let this 
effort, started in the Finance Committee this week, die on the floor of 
the U.S. Senate or in the Congress.
  First of all, Mr. President, let me remind people that we have a 
terrible problem in Medicare. Medicare will be insolvent in 3 years. 
There are a lot things I may do in my political career that I do not 
want to do, but there is one thing I am never going to do. I am never 
going to call up my 83-year-old mother and say, ``Well, mama, Medicare 
went broke today. It went broke today because nobody had the courage to 
do something about it. I knew it was going broke, but I didn't want to 
tell anybody because I thought somebody might criticize me for trying 
to do something about it. So I just stood by thinking, `Well, when it 
goes broke in 3 years, maybe something magical will happen, and maybe 
nobody will blame me.' '' I am never going to make that telephone call.
  I am proud to say that we took two steps in the Finance Committee 
this week that will go a long way. If we continue to show the courage 
that we showed in committee on the floor of the Senate, then I will 
never have to call my mother and tell her Medicare went broke, and she 
will never be without the benefits that she has become accustomed to 
and that she needs.

  And let me outline the two things we did.
  First of all, as my colleagues will remember, we had a crisis in 
Social Security in 1983. We set up a commission which was almost unable 
to agree on what to do about putting Social Security back in the black. 
We were on the verge halting Social Security checks. However, one of 
the reforms which arose from the process resulted from a recognition 
that Americans are healthier, and are living longer.
  So as part of that Social Security solvency package, those of us who 
were in Congress at the time swallowed hard and voted to raise the 
retirement age from 65 to 67 over a 24-year period.
  I remind my colleagues that when Social Security started, the average 
American lifespan was less than the eligibility age for Social 
Security. So the Social Security system protected people who lived 
longer than the average.
  Obviously, thank goodness, the average lifespan of Americans has 
grown dramatically since 1935. So we now have in law where beginning in 
the year 2003 through the year 2027, we are going to very gradually 
raise the retirement age from 65 to 67. That was part of a program to 
keep Social Security solvent.
  It was heavy lifting at the time. Medicare was still in the black, 
and nobody wanted to make the lifting any heavier.
  Now we are reaching a point where this phase-in for Social Security 
is going to start in the year 2003. So the Finance Committee, in what I 
believe was a courageous vote, voted to begin phasing up the 
eligibility age for Medicare in the same way as Social Security. That 
is the first significant change we made. I think there is something 
historic about that change which goes beyond it being the most dramatic 
change we have ever made in Medicare's history to keep the program 
solvent.
  The second dramatic thing about this reform is that we did not do it 
to save

[[Page S6025]]

money. We did not do it to fund tax cuts. We did not do it to balance 
the budget. We do not even count the savings that come from it in our 
budget. Every penny we save goes into the hospital insurance trust fund 
to protect benefits.
  Let me say to our colleagues who might be listening to this speech, 
with Medicare within 3 years of going broke, with Medicare within 7 
years of having a $100 billion deficit per year, with a projected 
deficit in Medicare over the next 10 years of $1.6 trillion--counting 
both part A spending and part B spending--it is an absolute certainty 
that we will ultimately conform the eligibility age for Medicare with 
the retirement age under Social Security. That is a certainty. That is 
going to happen.
  But if we wait 2 or 3 more years before doing so, we are not going to 
have time for people to plan for the future. One of the cruelest things 
we could do is to wait and delay and let a crisis occur so that we find 
ourselves forced to change the eligibility age for those who had 
planned to retire in a year or 2 or 3.
  If we make this change now, people will have several years to adjust 
to an increase in the retirement age. The changes that will occur will 
occur very slowly over the next 24 years.
  The impact of this provision on the solvency of the Medicare hospital 
insurance trust fund is dramatic. It will reduce the projected deficit 
in the Medicare trust fund by about 10 percent in and of itself, by the 
year 2025.
  The second change that we made is an equally dramatic change and 
recognizes that there are two parts to Medicare. We all pay 2.9 percent 
of our wages in payroll taxes during our working lives in order to 
qualify for coverage under the Medicare Hospital Insurance Program.
  There is a voluntary part of Medicare that nobody pays for in payroll 
taxes, but that is funded by a payment that people make in a part B 
premium.
  Mr. President, there are two types of Medicare benefits. One type is 
the trust fund that we pay for during our working lives. We pay 2.9 
percent of wages into that trust fund. That pays primarily for hospital 
care. Coverage for physician services is a separate system for which 
you do not start paying until you retire. When it was set up in 1965, 
the idea was for retirees to pay 50 percent of program costs in 
premiums, while taxpayers would pay the other 50 percent. Over the 
years that retiree payment has fallen to 25 percent of Medicare.
  Currently, there is a deductible of $100 which people have to pay 
before Medicare part B, the voluntary part of Medicare, kicks in. Under 
the second reform adopted by the Finance Committee, as income rises 
from $50,000 to $100,000 for an individual--or from 75,000 to $125,000 
as a couple--very high-income retirees--that deductible would phase up 
from $100 to an amount equal to the full taxpayer subsidy of this 
voluntary health insurance program. That would make the deductible 
about $1,700 a year for very high-income retirees.
  Now, those are the two changes we have made. As was true with the 
retirement age phasein, none of the savings that come from having a 
higher deductible for very high-income retirees goes to the deficit. 
None of it goes to fund tax cuts. None of it is even counted in the 
budget. Every penny of the savings goes to protect the trust fund.
  Now, why do we need to do this? I read in the newspaper this morning 
where one of our colleagues said it is hogwash to say we have to make 
these kind of changes to save Medicare. Well, let me explain why we are 
going to have to make some dramatic changes and we are going to have to 
make them quickly if we are going to save Medicare. The two changes 
that we made in the Finance Committee will not save Medicare by 
themselves. They are major steps forward. They are the only real 
reforms we have made since 1965.
  I am sure when we debate this next week people will say, but we have 
savings in the budget. Well, we assume we are cutting payments to 
hospitals and providers. We have done that about a dozen times. It has 
never saved any money because they find a way to get around it. Then 
our biggest savings is that we take the fastest growing part of 
Medicare, home health care, out of the trust fund and put it in general 
revenue. Then we say, well, we have helped save the trust fund. So the 
only two real permanent reforms that have a long-term impact are the 
two reforms which we are not counting as part of the budget. We do have 
another major long-term change in Medicare by giving our seniors more 
choices.
  Let me, very briefly, go through the problems in Medicare. First, 
Medicare expenses are exploding. They are growing at over twice the 
cost of medicine in the private sector. We have a program that by and 
large was designed in 1965 based on an old Blue Cross-Blue Shield 
policy that is no longer available. Medicare is a system that has 
tremendous inefficiencies and has grown faster than any other major 
program in the Federal budget. We started off paying for Medicare with 
a 0.7-percent payroll tax on the first $6,600 of income earned. We are 
now paying 2.9 percent of every $1 they earn, and still Medicare will 
be broke in 3 years. So our first problem is exploding costs.
  The second problem is a time bomb we know as the baby boomer 
generation. I want to ask people to look at this chart because this 
explains what is going to happen and why there is nothing conjectural 
about it. It is not somebody merely claiming that the sky is going to 
fall; the sky is already falling.
  Currently, in 1997, we are at the point where all the babies born in 
1932 are retiring. 1932 was not a banner year for having children in 
America. We were in the middle of a depression. The birth rate was very 
low--one of the lowest birth rates in American history. So for the next 
few years, as depression era babies retire, we are going to have 
relatively few people who are retiring. These should be great years in 
terms of solvency for Medicare. However, these are the years where 
Medicare is going broke.
  But notice what happens, beginning during the war and then 
immediately after the war we had an explosion in the birth rate in 
America. Fourteen million men came home from the war. They had defeated 
Nazism. America was the dominant power on Earth. People had new 
confidence in the future, and they made the greatest investment you can 
have in the future--they had babies, millions of them. Most Members of 
Congress were either in the sort of pre-baby-boomer generation during 
the war or they were in the generation right after the war. There was a 
huge explosion in the birth rate.
  When we created Medicare in 1965, we were looking at this huge 
avalanche of young people coming into the labor market. In 1965 we had 
about four times as many people turn 19 as we had had 2 years before. 
It looked as if this tidal wave of people would never end. Actually, 
had Congress gone down to the Census Bureau in 1965 and asked if this 
baby boom would ever end, they would have discovered that it already 
had. But when we wrote Medicare with this huge number of people coming 
to the labor market, they made a decision not to fund it. They opted 
for a pay-as-you-go system where young workers would pay into the 
system without building up trust funds to pay for the benefits. This 
baby boomer generation turned out to be a godsend for programs like 
Medicare.
  But now we come to the problem. This chart shows the projected 
increases in the population 65 and over. If you look at this chart, we 
are down here now where only 200,000 people are going to turn 65 this 
year, but within 14 years 1.6 million people will turn 65 and that 
number will not change for 20 years. We are going to go from 5.9 
workers per retiree on the day Medicare started--we are down now to 3.9 
and we are headed to 2.2--2.2 workers for every retiree in America.
  The financial impact of that is absolutely cataclysmic. If we do not 
act, the young people who are sitting down here as pages are going to 
have to pay a payroll tax three times the current level. We are going 
to have an average tax rate in America--average tax rate in America--of 
about 50 cents out of every dollar. America is not going to be America 
when you have that kind of tax burden.
  Now, this is a problem we must address. We know it is coming. We can 
fix it. We can preserve benefits. We can make the system better. But we 
are going to have to be courageous in order to do it, and we are going 
to have to make some tough decisions.
  Here is what the financial status of Medicare looks like. As you can 
see, we are in the last years of its solvency. We

[[Page S6026]]

are looking at an explosion in the cumulative deficit of Medicare 
because we guaranteed two generations of Americans medical coverage 
during retirement, and nobody ever set aside any money to pay for it. 
Now the baby boomer generation is headed into retirement, they want 
these benefits, and there is no money to pay for them. That is the 
crisis.
  Let me give an idea of how big this is. If we reform Medicare right 
now, and change the system by improving efficiency, thereby bringing 
the cost of Medicare down to the general inflation rates, even under 
the best of circumstances, to pay off this debt to baby boomers, we 
would have to borrow $2.6 trillion. If we wait 10 years, it goes up to 
$3.9 trillion. If we wait 20 years, it goes up to $6.1 trillion. Now, 
the whole debt of the country today is less than $6.1 trillion. So this 
is a crisis. This is a crisis that is happening right now.
  We have made two changes in the Finance Committee which produce 
savings that are dedicated, every penny, to strengthening the hospital 
insurance trust fund. One is raising the eligibility age for Medicare 
as we have done for the retirement age under Social Security. I can 
guarantee you that is going to have to happen sooner or later. Within 
10 years we are going to vote to do it. If we wait 10 years, we will 
have Americans who literally are on the verge of retiring who are going 
to find out they cannot retire. That is not fair, and it is not right. 
If we do it today, we will catch the political heat today but people 
will have 30 years to adjust to working 2 years longer. So it will be 
unpopular in the short run, we will be criticized for it in the short 
run, but within 10 years when people fully understand this, they are 
going to be very grateful that we did it, and it will be the right 
thing to do.
  Second, asking very high-income people in a voluntary program to pay 
more of the cost of providing that benefit is not unreasonable. Nobody 
is required to participate in part B Medicare. No one pays a penny in 
the part B Medicare during their working life. It is a voluntary 
program. I have been stunned when listening to the criticism of this 
that somehow there is something wrong with asking people who have 
income of $100,000 a year in retirement to pay a $1,700 deductible for 
the best medical care policy that money can buy. I do not think that is 
unreasonable.
  Let me tell you something. We are going to have to do it. But do we 
have to wait until our seniors are scared to death because they are not 
sure Medicare is going to be in place next month? Do we have to wait 
until the wolf is at the door, until the house is on fire, to make a 
tough decision? Can't we make the decision while there is time to 
adjust to it so that we can prevent the system from going broke? Does 
it have to go broke for us to have the courage to do something that we 
know has to be done?
  So, we are going to be debating these things next week, and we will 
have Members of the Senate standing up and saying we are breaching an 
agreement by asking people with $100,000 a year income to pay $1,700 
for a voluntary health insurance program.
  We are going to have a lot of people say the world is going to come 
to an end because we are asking people to pay more if they can to save 
a system that is critical. I am ready to debate it. I don't know if we 
can save these reforms. But we are going to be awfully embarrassed some 
day if we don't.
  I yield the floor.

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