[Congressional Record Volume 144, Number 2 (Wednesday, January 28, 1998)]
[Extensions of Remarks]
[Page E39]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                                MEDICARE

                                 ______
                                 

                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                      Wednesday, January 28, 1998

  Mr. HAMILTON. Mr. Speaker, I would like to insert my Washington 
Report for Wednesday, December 24, 1997 into the Congressional Record.

                        New Choices in Medicare

       Hoosiers will be hearing a lot about the reform of the 
     Medicare system in the days ahead. Increasing costs and 
     forecasts of a significant growth in the number of baby 
     boomer retirees will require fundamental reform of the 
     program. Medicare now serves over 38 million older and 
     disabled Americans, while consuming nearly $1 out of every $9 
     in the federal budget. Medicare is a $200 billion program and 
     it will undoubtedly get much bigger as the pool of retirees 
     swells early in the next century.
       In 1997 Congress made the most significant reforms to the 
     program since its creation over 30 years ago. Until now the 
     Medicare program has been largely insulated from the shift in 
     American health care from fee-for-service toward managed 
     care. Medicare beneficiaries have traditionally selected 
     their own doctors, visited them as often as they wanted, and 
     had the government pay much of the bill. The new reforms will 
     give beneficiaries more options, while pushing the system 
     toward a managed care approach which aims to save money and 
     improve overall efficiency.


                            Medicare+Choice

       The new Medicare+Choice program is the centerpiece of the 
     1997 reforms. Starting late next year, Medicare beneficiaries 
     will have the opportunity to decide each year whether to stay 
     in the traditional fee-for-service government plan or switch 
     to one of five private plans. Where the beneficiary selects 
     the private option, Medicare will make a fixed payment to the 
     chosen plan. Enrollees will receive the basic bundle of 
     Medicare benefits, including access to emergency care, though 
     the delivery and cost of these services would vary with each 
     plan. Up until 2002 enrollees have the option of switching 
     between plans at any time, but after that date the 
     opportunities to switch plans will be more limited.
       Medicare+Choice aims to contain costs in Medicare by 
     injecting private competition into the system and encouraging 
     more beneficiaries to enroll in managed care plans. These 
     plans, while limiting the choice of doctors, tend to offer a 
     wider array of benefits, including prescription drug 
     benefits. One option under the Medicare+Choice program, for 
     example, is the popular HMO plan. Already nearly 15% of 
     beneficiaries use the HMO plan, which allows patients to 
     choose from a network of doctors and receive approved 
     benefits, usually at lower cost. Two other options involve a 
     more limited managed care approach, and a fourth option 
     provides for a private fee-for-service plan, under which 
     doctors can charge up to 15% more than the insurer's fee 
     schedule.
       The fifth option is the medical savings account (MSA) plan, 
     which combines features of a savings account and private 
     health insurance. Medicare will pay into the account the 
     difference between the Medicare monthly payment and the 
     monthly premium for a high deductible plan. Contributions to 
     the account as well as any earned interest will be exempt 
     from taxes. The beneficiary will be able to make tax exempt 
     withdrawals from the account as long as the money is used to 
     pay for unreimbursed medical expenses, long-term insurance, 
     and related expenses. The MSA is a pilot program which will 
     be limited in 390,000 enrollees, starting in 1999.


                          Unanswered Questions

       My guess is that most beneficiaries will, at least 
     initially, elect to stay in the traditional fee-for-service 
     Medicare plan. They like the unlimited choice of doctors and 
     ability to pay no more than the government prescribed fee. 
     Over time, however, the other options, which may offer more 
     benefits at a lower cost, will probably attract many people. 
     The key question is what these changes will mean to the 
     overall quality of care for older Americans.
       Medicare has been a program offering equal access to health 
     care for older and disabled persons, rich and poor alike. 
     Some have suggested that the new program will create a multi-
     tiered system of health care for older Americans, where 
     wealthy beneficiaries opt for fee-for-service, healthy 
     individuals shift into managed care plans, and sicker and 
     more expensive beneficiaries stay in the traditional fee-for-
     service plan. If that happens, the private providers could 
     end up making money, while the Medicare program saves very 
     little or even loses money. There is also concern that 
     creating a multi-tiered system of delivery will eventually 
     undermine public support for the program.
       Other questions have been raised about the new program. 
     Some, for example, wonder how doctors will respond to 
     Medicare+Choice. Many physicians have expressed concerns 
     about the fee limits in the current program, and may opt to 
     target their practices at patients who pay the higher fees. 
     Still others ask whether the quality of care will be the same 
     under all the options and whether some options, particularly 
     the managed care options, will impose undue limits on when 
     and where people can receive care. Finally, there are 
     questions about whether older Americans will have enough 
     information to make informed choices. In November 1998 the 
     federal government will send all beneficiaries an 
     informational pamphlet describing their new Medicare+Choice 
     options. This pamphlet will outline the new health plans that 
     are available in and around the beneficiary's community.


                               Conclusion

       All of these changes carry high stakes for Hoosiers. Under 
     current projections, the part of the Medicare Trust Fund 
     which funds insurance for hospital care is expected to become 
     insolvent in 2010, as baby boomers retire and enroll in the 
     program. The 1997 law, therefore, is an interim strategy. It 
     will save $115 billion over the next five years, but it does 
     not address the long-term challenges to the program. Congress 
     has established a National Bipartisan Commission on the 
     Future of Medicare to recommend further changes to Medicare.
       Medicare is one of the great success stories of this 
     country. It has provided essential health services for 
     millions of our elderly and disabled citizens, and improved 
     the overall quality of life in this country. If, however, 
     future generations are also to benefit from Medicare, the 
     program must undergo reform. I believe that Americans, in 
     large part, realize this. They want to improve Medicare.
       Medicare+Choice is one step toward achieving that goal. The 
     ability to shop for insurance plans could encourage greater 
     efficiency and restrain ever-increasing costs for health 
     care. Health care in America has been largely transformed by 
     the HMO-based managed care plan, and Medicare is likely to 
     move in that direction as well. The challenge in Medicare is 
     to make these changes without diminishing access to quality 
     and affordable health care.

     

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