Medicare provisions in the President's budget : hearing before the Subcommittee on Health of the Committee on Ways and Means, House of Representatives, One Hundred Fourth Congress, first session, February 23, 1995

164 Pages·1996·10.5 MB·English

by  United States. Congress. House. Committee on Ways and Means. Subcommittee on Health

MEDICARE PROVISIONS IN THE PRESIDENT'S
BUDGET
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTH CONGRESS
FIRST SESSION
FEBRUARY 23, 1995
Serial 104-31
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
90-502CC WASHINGTON : 1996
ForsalebytheU.S.GovernmentPrintingOffice
SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402
ISBN 0-16-052389-3
COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois SAM M. GIBBONS, Florida
BILL THOMAS, California CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ANDYJACOBS, Jr., Indiana
JIM BUNNING, Kentucky HAROLD E. FORD, Tennessee
AMO HOUGHTON, New York ROBERT T. MATSUI, California
WALLY HERGER, California BARBARA B. KENNELLY, Connecticut
JIM McCRERY, Louisiana WILLIAM J. COYNE, Pennsylvania
MEL HANCOCK, Missouri SANDER M. LEVIN, Michigan
DAVE CAMP, Michigan BENJAMIN L. CARDIN, Maryland
JIM RAMSTAD, Minnesota JIM MCDERMOTT, Washington
DICK ZIMMER, New Jersey GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa JOHN LEWIS, GeoT^a
SAM JOHNSON, Texas L.F. PAYNE, Virginia
JENNIFER DUNN, Washington RICHARD E. NEAL. Massachusetts
MAC COLLINS. Geor^a
ROB PORTMAN, Ohio
PHILIP S. ENGLISH, Pennsylvania
JOHN ENSIGN, Nevada
JON CHRISTENSEN, Nebraska
PHILLIP D. MOSELEY, ChiefofStaff
Janice Mays, Minority ChiefCounsel
Subcommittee on Health
BILL THOMAS, California, Chairman
NANCY L. JOHNSON, Connecticut FORTNEY PETE STARK, California
JIM McCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
JOHN ENSIGN, Nevada JIM MCDERMOTT, Washington
JON CHRISTENSEN, Nebraska GERALD D. KLECZKA, Wisconsin
PHILIP M. CRANE, Illinois JOHN LEWIS, Georgia
AMO HOUGHTON, New York
SAM JOHNSON, Texas
(II)
CONTENTS
Page
Advisory ofFebruary 16, 1995, announcingthe hearing 2
WITNESSES
U.S. General Accounting Office, Sarah F. Jaggar, Director, Health Financing
and Policy Issues, Health, Education, and Human Services Division; accom-
panied by Frank Pasquier, Assistant Director, and Craig Winslow, Office
ofthe General Counsel 94
Federation ofAmerican Health Systems, ThomasA. Scully 6
King, RolandE. "Guy,"Washington, D.C 58
Myers, RobertJ., SilverSpring, Md 52
National Taxpayers Union Foundation, Paul S. Hewitt 87
Seniors Coalition, Jay Hopkins, onbehalfofJake Hansen 74
Steelman, Deborah, Washington, D.C 16
Third Millennium, HeatherLamm 79
SUBMISSIONS FOR THE RECORD
National Association ofMedicare Dependent Hospitals, John Forsman, state-
ment and attachments 105
,
National Association ofPortable X-Ray Providers, Jeffi-ey Burgess, statement
and attachment 112
National Taxpayers Union Foundation, Neil Howe, statement and attach-
ments 119
Parker, GeraldS., Old Greenwich, Conn., statement 159
(III)

I
I
MEDICARE PROVISIONS IN THE PRESIDENTS
BUDGET
THURSDAY, FEBRUARY 23, 1995
House of Representati\^s,
COMmTTEE ON WaYS AND IVIEANS,
Subcommittee on Health,
Washington, D.C.
The subcommittee met, pursuant to notice, at 9:33 a.m., in room
1100, Longworth House Office Building, Hon. Bill Thomas (chair-
man ofthe subcommittee) presiding.
[The advisory announcing the hearing follows:]
(1)
ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEEON HEALTH
FORIMMEDIATERELEASE CONTACT:[phone]
February 16, 1995
No. HL-4
THOMAS ANNOUNCES HEARINGSON
MEDICARE PROVISIONS INTHE PRESIDENT'S BUDGET
CongressmanBillThomas(R-CA), ChairmanoftheSubcommitteeonHealthofthe
Committeeon Waysand Means,todayannouncedthattheSubcommitteewillholdahearing
on MedicareprovisionscontainedinthePresident'sfiscalyear 1996budgetproposal. The
hearingwilltakeplaceonThursday,February23, 1995,inthemain Committeehearing
room, 1100 Longworth HouseOfficeBuilding,beginningat9:30a.m.
Inviewofthelimitedtimeavailabletohearwitnesses,oraltestimonyatthishearing
willbeheard frominvitedwitnessesonly. Invitedwitnessesincluderepresentativesfromthe
Administration,budgetexpertsandactuaries,aswellasotherinterestedparties. However,
anyindividualororganizationnotscheduledforanoralappearancemaysubmitawritten
statementforconsiderationbytheCommitteeandforinclusionintheprintedrecordofthe
hearing.
BACKGROUND
;
MedicarePartApaysforinpatienthospitalcare,certain inpatientcarefurnishedin
skillednursingfacilities,homehealthcareandhospicecare. Lastyear,thePresident
submittedanambitioushealthcareplanwhichincludedsignificantsavingsintheMedicare
program. Thisyear,thePresident'sbudgetdoesnotcontainproposalsonMedicare-related
budgetissues. Inaddition, thebudgetdoesnotaddressapressingproblemfacingthe
Medicareprogram,thependinginsolvencyoftheMedicarePartAtrustfund. Accordingto
theDepartmentofHealthandHumanServicessummaryofthePresident'sbudget,thefiscal
year 1996budgetforMedicarebenefitsanticipatestheenactmentoflegislationtoextend
certaincurrentlawpoliciesthatwillotherwiseexpire. Thesummarystates: "Thesearenot
newMedicarecuts;rather,thesearepoliciesthatarecurrentlypartoftheMedicareprogram."
ThishearingwillreviewtheMedicareprovisionsincludedinthePresident'sFiscal Year 1996
budget.
Inannouncingthehearing,Thomassaid: "TheAdministrationhaschosentoignorethe
factthatthePartAtrustfundstartsspendingmoremoneythanittakesinduring 1996and
willbecomeinsolventin2001. ThisSubcommitteewillattempttodeterminethe
Administration'srationalebehindthelimitedprovisionsincludedinthePresident'sbudgetin
thefaceofthispendingcrisisforthebeneficiariesandtaxpayers."
FOCUSOFTHEHEARING;
ThishearingwillfocusontheMedicareproposalsincludedinthePresident'sfiscal
year1996budgetandtheirimpactonthePartAtrustfund.
DETAILSFORSUBMISSIONOFWRITTENCOMMENTS:
Anypersonororganizationwishingtosubmitawrittenstatementfortheprinted
recordofthehearingshouldsubmitatleastsix(6)copiesoftheirstatement,withtheir
addressanddateofhearingnoted,bythecloseofbusiness,Friday,March10, 1995, to
PhillipD.Moseley,ChiefofStaff,CommitteeonWaysandMeans,U.S.Houseof
Representatives, 1102LongworthHouseOxficeBuilding,Washington,D.C. 20515. Ifthose
filingwrittenstatementswishtohavetheirstatementsdistributedtothepressandinterested
publicatthehearing,theymaydeliver200additionalcopiesforthispurposetothe
SubcommitteeonHealthoffice,room 1136LongworthHouseOfficeBuilding,atleastone
hourbeforethehearingbegins.
3
FORMATTINGREQUIREMENTS
;
EachitalemeDtpresentedforpilntlDgu>(beCommlOeebyawitness,anywrittenstatementoreiblbltsubmittedfortbeprintedrecord
oranywrittencommentsInresponsetoareqnestforwrittencommentsmostconformtotbeguidelineslistedbelow. Anystatementor
exblbitnotIncompUaocewltbthese{uldellneswillnotbeprinted,butwillbemaintainedIntbeCommitteefilesforreviewandusebythe
Committee.
1. AUstatementsandanyaccompanyingexhibitsforprintingmostbetypedInsinglespaceonlegalsizepaperandmaynot
exceedatotalof10pages,Includingaaachments.
2. CopiesofwholedopninentssubmittedasexhibitmaterialwUInotbeacceptedforprinting. Instead,exhibitmaterialsbouldbe
referencedandquotedorparapbrasel AUexhibitmaterialnotmeetingthesespeclflcadonswillbemaintainedintheCommitteefilesfor
reviewandusebytheCommittee.
3. Awitnessappearingatapublichearing,orsubmittingastatementtortherecordofapublichearing,orsubmittingwritten
commentsinresponsetoapublishedrequesttorcommentsbytheCommittee,mustincludeonhisstatementorsubmissionalistofall
clients,persons,ororganizatlansonwhosebehalfthewitnessappears.
1 Asupplementalsheetmustaccompanyeachstatementlistingthename,fulladdress,atelephonenumberwherethewitness
orthedesignatedrepresentativemaybereachedandatopicaloutlineorsummaryofthecommentsandrecommendationsInthefull
statement TblssupplementalsheetwUlnotbeIncludedIntheprintedrecord.
Tbeaboverestrictionsandlimitationsapplyonlytomaterialbeingsubmittedtorprinting. Sutementaandexhibitsorsupplementary
materialsubmittedsolelyfordistributiontotheMembers,tbepressandtbepublicduringtbecourseofapublicbearingmaybesubmittedIn
otherforms.
Note: AllCommitteeadvisoriesandnewsreleasesarenowavailableovertheInternetat
G0PHER.H0USE.GOV,under'HOUSECOMMITTEEINFORMATION'.
4
Chairman Thomas. Good morning. Today's subcommittee hear-
ing will focus on the Medicare provisions contained within the
President's budget. We will examine the issues that were included
in his budget and those which may have been omitted.
The President's budget includes three Medicare policies. First, it
permanently sets part B premiums at 25 percent of program cost.
Second, it maintains the freeze on home health and skilled nursing
facility payments. The final pohcy extends Medicare secondary
payer provisions, which expire in 1998.
Today, the subcommittee will discuss the part B premium and
the Medicare secondary payer. The areas of home health and
skilled nursing facility payment policies were covered in an earlier
hearing.
It is important to note that the administration, in recommending
these policy extensions, stressed that these proposals are "not new
Medicare cuts." The President chose to take a hands-off, leave-
it-as-it-is approach to Medicare. The President chose not to recog-
nize, much less plan for, the deteriorating financial condition ofthe
Medicare part A trust fund.
According to the most recent Medicare trustees report, as early
as 1996, the part A trust fund will begin to pay out more for medi-
cal care than it receives from revenue. Furthermore, the trustees
report that the trust fund will not only lack funds to cover its obli-
gations for the Medicare beneficiaries by 2001, but it will be com-
pletely exhausted sometime later that year.
Now, some may scoff and say, this is not a crisis. They will cite
the possibility that the trustees report, due April 1995, will predict
that the bankruptcy of the trust fund will occur a year or so later
than 2001 because of the recent decrease in the growth of medical
costs. They may try to trivialize the issue by pointing to the experi-
ence of the last 15 years, where predictions of bankruptcy for the
trust fund, they say, were premature.
I think the subcommittee, through testimony today, will learn,
however, that the past is not prelude in this instance. Increases in
taxes, reductions in the growth of Medicare payment to hospitals,
and generally good economic conditions did prevent insolvency in
the 1990s. But more than piecemeal fixes are needed now. Rising
medical costs and the aging of the baby boomers is catching up
with the trust fund. When the fund finally goes bust, it will be in
the red by almost $50 billion in the first year alone.
It is unfortunate the President chose not to provide leadership on
this issue. The year 1996 marks the start ofthe spend-down ofthe
trust fund. This action sends off warning signals that this sub-
committee will not ignore. If we don't act decisively, if we continue
to mortgage the future, our children will be forced to bear a heavy
burden. We must summon the courage to act, gentlemen, and pro-
tect the futures of our children, as well as ensure that promises
made to the elderly are, in fact, kept.
The gentleman from California, Mr. Stark.
Mr. Stark. I hardly know what to say. Facing this list of right-
wing lunacy that qualifies as a witness list, I am not sure whether
to be amused or cry at the thought that these folks would talk to
us about keeping the trust fund solvent.
5
We are supposed to focus on Medicare provisions in the Presi-
dent's budget, and if the experience of our hearing on February 10
is evidence, we will hear from the majority criticizing the President
for not proposing more cuts and, as the chairman has done, point-
ing with alarm to the crisis in the part A trust fund.
Let us deal with the second issue first. The insolvency of the
trust fund is a serious problem and we must pay attention to it,
but the last people who have any right to say anything about it are
my colleagues on the Republican side. As I have pointed out repeat-
edly, the Republicans are the only ones who have on the table a
proposal which takes money out of the part A trust fund, through
a reduction in the amount ofSocial Security benefits subject to tax-
ation. Some $15 billion would be removed from the trust fund over
5 years, $48.2 billion over 10 years.
It is very disingenuous to complain that the President's proposal
doesn't do enough when you have a proposal on the table that
takes you in the wrong direction.
The other reason my Republican colleagues' newfound concern
about the trust fund is ironic is that the last year they had the
chance to help us enact the largest Medicare savings proposal ever
proposed, it included, in the Ways and Means Committee reported
version of health reform, that which would have done more than
any proposal to improve the long-range fiscal health of the trust
fund.
Nevertheless, during the full committee markup, the Republicans
offered an amendment to remove all of the Medicare savings out
of the proposal, and every Republican member voted for this spe-
cific proposal.
So I hope, Mr. Chairman, if I report to you that your newfound
concern sounds a little phony to this side of the aisle, that we have
good reason to be rather skeptical.
The last point is that we have been here before. As you men-
tioned, I am going to mention it, that the trustees in 1977 reported
that the fund would become insolvent in 1987. By rny calculation,
that was about 8 years ago. By the time President Carter left of-
fice, the insolvency date was extended to 1994. Today, the insol-
vency date is 2001. I understand the next trustees' report will push
the insolvency date out a few years further, not through anything
we have done.
DRG
So years of reform in Medicare, through the creation of the
system for hospitals, through the resource-based relative value sys-
tem for physicians, has kept the trust fund solvent far longer than
expected. In maintaining the program solvency, there were abso-
lutely no magic bullets. It has been hard work, something the Re-
publicans don't seem to know much about.
We have been successful in strengthening the Medicare program
and have done so without merely shifting costs to beneficiaries.
Democrats have done this for one reason. We made a contract, a
contract with Americans, not a contract with people who contribute
to Newt Gingrich's GOPAC, not a contract with the big insurance
companies who put their hired guns on Republican staffs and who
buy out elected officials to bring big profits to for-profit hospitals
and insurance companies while withholding needed care to the poor
and to the seniors. Over the past 30 years, we have maintained a
6
commitment to the American people and we plan to keep that com-
mitment.
I would offer a word of caution, and that is, don't rely on quick
fixes. You can send the beneficiaries a check. You can call it a
medicheck or anything else, but that would not be in the long-term
interests of the seniors nor of average Americans in this country.
I look forward to listening to a witness list that is probably
picked by the CATO Institute and other right-wing think tanks. I
must say, it appears to be me to be a waste of time, but I will lis-
ten.
Chairman Thomas. I thank the gentleman for his comments.
Perhaps the record should show that we asked the Director of the
Office of Management and Budget if she would appear before this
subcommittee of the Ways and Means Committee and her answer
was, basically, she doesn't "do" subcommittees. We asked; she did
not come. We asked the AARP if they would like to testify. They
declined to testify.
I would tell the gentleman, in terms ofbragging about his efforts
in terms of health care reform last year, that a jury-rigged plan to
try to salvage the President's ill-conceived proposal passed this
committee. I don't recall voting for it on the floor when you con-
trolled the Rules Committee, the floor, and both houses.
So when you talk about honesty and sincerity, let us examine
who was asked and who didn't come to appear before this particu-
lar subcommittee.
The first panel consists of two individuals who formerly were in
the operation of the Office of Management and Budget and, frank-
ly, I believe, have extremely impressive credentials. Deborah
Steelman is the former Director, Human Resources, Veterans and
Labor, Office ofManagement and Budget, and she chaired the 1991
Advisory Council on Social Security. Tom Scully is the former Dep-
uty Assistant to the President for Domestic Policy and former Asso-
ciate Director ofthe Office ofManagement and Budget.
We are very pleased to have both ofyou in front of us. Any writ-
ten testimony that you might have will be made a part of the
record, without objection. You may proceed as you see fit.
Mr. Scully, why don't you begin?
STATEMENT OF THOMAS A. SCULLY, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, FEDERATION OF AMERICAN HEALTH
SYSTEMS; AND FORMER DEPUTY ASSISTANT TO THE
PRESIDENT FOR DOMESTIC POLICY AND FORMER
ASSOCIATE DIRECTOR, OFFICE OF MANAGEMENT AND
BUDGET
Mr. Scully. Thank you, Mr. Chairman, and members ofthe sub-
committee for having us here today.
Obviously, I think, as my testimony states in the beginning, I am
in a little bit of a strange position. I spent a lot of time working
with many ofyou on both sides of the aisle over the years, propos-
ing four different budgets that President Bush sent up, many of
which proposed just about every way to take money out of Medi-
care that anybody can imagine.
I have gone from the position ofbeing on the slash proposing side
to working for the hospitals now, in which, obviously, we are usu-