[Congressional Record Volume 144, Number 67 (Friday, May 22, 1998)]
[Extensions of Remarks]
[Pages E978-E979]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




STARK RELEASES MEMO FROM MEDICARE ACTUARIES, SHOWS WE CAN SAVE MEDICARE 
                        WITHOUT RADICAL SURGERY

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                          Friday, May 22, 1998

  Mr. STARK. Mr. Speaker, in response to a number of questions I 
submitted last fall, I have received the following memo from the Office 
of the Chief Actuary of the Medicare agency.***STRPGFIT***
  I asked what effect various options for spending restraints or 
increased revenues would have on the long-term outlook for the Medicare 
Trust Fund. The Actuary's memo makes it clear that we can solve 
Medicare's long-term problems without radical change.
  A lot of politicians and editorial writers cry that the sky is 
falling because of the coming retirement of the Baby Boom generation. 
The Actuaries show that with a variety of reasonable changes, Medicare 
will be there for our children and grandchildren.
  The memo shows that with reasonable controls on hospitals and doctor 
inflation and very small tax changes, we can easily solve Medicare's 
financial problems between now and 2022, and solve more than half the 
1998--2072 problem. For example, a three year freeze on hospital 
payment inflation would cut the short-term problem in half and the 75 
year budget shortfall by one-quarter. A freeze is doable, because the 
Medicare Payment Advisory Committee (MedPAC) reports that at current 
rates, in 2003 hospital Medicare payment profits are likely to be about 
15%--far more than we should be paying.
  As another alternative, if we donated half the tobacco settlement to 
the Medicare Trust Fund and saved the next decade's budget surpluses 
for Medicare, we would keep the Hospital Trust Fund solvent way past 
2020.
  We don't need tax increases. If we just save the pending surpluses 
for Medicare, instead of dribbling them away, we can solve Medicare's 
problems over the next twenty years.
  A proposal to hold Hospital Trust Fund spending to the growth in the 
Medicare population plus the per capita growth in Gross Domestic 
Product, would solve half the long-term financial problems of the Trust 
Fund. Holding health inflation to this level will be tough, unless 
private sector health inflation is held to similar levels--but we 
should try. The fat and waste in the health care system is 
extraordinary, and we should make this our goal.
  The Office of Actuary estimates also show that the Stark-Moynihan 
Medicare Early Access bill (HR 3470, 3471) allowing people to buy into 
Medicare as early as age 55 would be revenue neutral over the next 25 
years and then actually improve the Trust Fund because of the bill's 
anti-fraud provisions.
  People who want to abolish Medicare and privatize all government 
programs are trying to scare Americans into believing Medicare can't be 
saved. Take a look at these budget estimates: these are reasonable 
changes that we can and should make. With additional savings we should 
even be able to improve the existing program to provide a 
pharmaceutical benefit.

                                     ***STRPGFIT***Memorandum,

                                                     May 15, 1998.
     From: Sol Mussey, Director, Medicare and Medicaid Cost 
         Estimates Group, Office of the Actuary, HCFA
     Subject: Estimated Long-Range Financial Impact of Selected HI 
         Proposals
       The attached table provides estimates for several proposals 
     designed to help reduce the Hospital Insurance (HI) program's 
     long-range actuarial deficit. The attached table provides the 
     25-year, 50-year, and 75-year impacts on the actuarial 
     balance, together with the resulting balances themselves.
       The attached is based on the 1998 Trustees Report, 
     intermediate assumptions, and consequently include the 
     effects of the Balanced Budget Act of 1997. Each line of the 
     table represents the actuarial balances under current law 
     modified for that particular proposed only. No request was 
     made at this time for any combination of proposals. In 
     practice, the financial impact of a legislative package made 
     up of several of these proposals would not necessarily equal 
     the sum of the individual impacts, due to potential 
     interactions among provisions.
       The estimates shown for the age 62 buy-in proposal are 
     based on the proposal in the President's 1999 Budget. Since 
     the proposal in the short run is to be financed by other 
     savings proposals in the budget, we included the effects of 
     these other proposals. Hence, the 25-year effect on the 
     actuarial balance is zero. However, the buy-in proposal 
     becomes self-financing after about 20 years and the savings 
     from the other proposals in the budget are assumed to 
     continue. Therefore, there is some positive effect on the 
     actuarial balance for the 50- and 75-year projection periods. 
     The center of excellence proposal is also included in the 
     President's 1999 Budget.
       As is always the case with long-range financial estimates, 
     the impacts shown for the attached proposals are subject to 
     considerable uncertainty. Actual future effects could differ 
     substantially from these estimates.

                                              Sol Mussey, ASA,

                                   Director, Medicare and Medicaid
                                             Cost Estimates Group.



                                             ESTIMATED LONG-RANGE FINANCIAL IMPACTS OF SELECTED HI PROPOSALS
                                                     (Expressed as a percent of HI taxable payroll)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Change in actuarial balance \1\                   Actuarial balance of HI trust fund
                                                   -----------------------------------------------------------------------------------------------------
                                                      25-yr period     50-yr period     75-yr period     25-yr period     50-yr period     75-yr period
                                                      (1998-2022)      (1998-2047)      (1998-2072)      (1998-2022)      (1998-2047)      (1998-2072)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current law.......................................  ...............  ...............  ...............            -0.73            -1.61            -2.10
Proposal:
    Hold HI growth to increase in enrollment +GOP/             0.31             0.77             1.06            -0.42            -0.84            -1.04
     capita.......................................
    Reinstitute and expand Center of Excellence                0.00             0.00             0.00            -0.73            -1.61            -2.10
     programs eff. 1/1/00 \2\.....................
    Hospital PPS freeze 2000-2002.................             0.35             0.48             0.55            -0.38            -1.13            -1.55
    Buy-in at 62..................................             0.00             0.01             0.01            -0.73            -1.60            -2.09
    Increase HI tax rate to 3.2% from 2.9%........             0.25             0.28             0.28            -0.48            -1.33            -1.82
    Donate half tobacco settlement to HI fund \3\.             0.10             0.10             0.10            -0.63            -1.51           -2.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Positive figures represent an improvement in the actuarial balance, reflecting either a reduction in expenditures or an increase in revenues.    \2\
  Included in the President's 1999 Budget.    \3\ We used 10-year estimates provided by the Joint Committee on Taxation and extrapolated them in the
  long-range.
Note: Estimates are based on the intermediate set of assumptions from the 1998 Trustees Report.    Office of the Actuary, Health Care Financing
  Administration, 15-May-98.



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