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FUTURE OF MEDICARE

COMMISSION MEETING

Washington, DC

Tuesday, January 26, 1999

MEMBERS OF COMMISSION

SENATOR JOHN BREAUX, Statutory Chairman

REPRESENTATIVE BILL THOMAS, Administrative Chairman

STUART H. ALTMAN, Ph.D.
SENATOR J. ROBERT KERREY
REPRESENTATIVE MICHAEL BILIRAKIS
REPRESENTATIVE JIM McDERMOTT
COLLEEN CONWAY-WELCH, Ph.D.
SENATOR JOHN D. ROCKEFELLER, IV
REPRESENTATIVE JOHN D. DINGELL
DEBORAH STEELMAN
SENATOR WILLIAM H. FRIST
LAURA D=ANDREA TYSON, Ph.D.
ILLENE GORDON
BRUCE VLADECK, Ph.D.
SENATOR PHIL GRAMM
ANTHONY L. WATSON
SAMUEL H. HOWARD

BOBBY JINDAL, Executive Director

THE NATIONAL BIPARTISAN

COMMISSION ON THE

FUTURE OF MEDICARE

Transcript of

Tuesday, January 26, 1999

Commission Meeting

The Commission met at 9:12 a.m., House Cannon Building, Caucus Room, room 345, Senator Breaux presiding.

Present: Senator John Breaux, Representative Bill Thomas, Stuart Altman, Representative Michael Bilirakis, Colleen Conway-Welch, Representative John Dingell, Senator Bill Frist, Illene Gordon, Senator Phil Gramm, Senator Bob Kerrey, Representative James McDermott, Debbie Steelman, Laura Tyson, Bruce Vladeck, Anthony Watson, and Bobby Jindal.

Senator BREAUX [presiding]. The committee will please come to order, the National Bipartisan Commission on Medicare. This is indeed a very important meeting that we are going to have this morning.

I would also point out the obvious, that it is a difficult time for so many of our members to be here because of other things that are ongoing and were ongoing late into the night last night over on the Senate side; but, be that as it may, we’ll push forward with this very important meeting.

There are a number of very important committee hearings, I know, on the Senate side which will necessarily mean that some of our Senate colleagues are going to be involved in a hearing of the Finance Committee on trade, a very important Agriculture emergency meeting as well, plus we go back into session in the trial at, I think, 12 noon today, plus caucuses that are ongoing.

So having said that, we are going to encourage our members to be here as much as they possibly can.

This morning, I want to present an outline which is my product, which is a collection of the ideas and views that I have been able to receive and understand over the last many, many months and many, many meetings.

This is not a Democratic proposal, it’s not a Republican proposal. It’s my offer as the chairman to get us started in talking more about specifics and less about the concept of what we need to do.

My staff early on said that a successful draft would have something in it that everyone could find some fault with.

I would suggest, if that is the standard, this is a very successful mark. [Laughter.]

I remember quite well back when we were debating the President’s health care legislation, there were a number of comments particularly by Members of Congress--some Democrats and Republicans--that what they wanted was a health care system for the average American that was as good and as efficient as the health care system that their Senator or that their Congressman had.

Those were good suggestions then. I think they are good suggestions today, and in that sense, the model that I have laid out for consideration by all of our Commission members is based on the Federal Employees Health Benefits Plan, which in fact is the system that I have and that every Senator and every Member of Congress and about 10 million Federal employees have.

This is not the end, with this presentation. Rather, I think it’s probably the beginning of the end.

This document that we have before us is open for suggestions, it’s open for criticism. I would hope that we would be able to have suggestions that make it better, that make it work, and that’s the purpose of where we start today.

The document, as I have said, is based on the Federal Employees Health Benefits Plan. There are other ways--there are other ways--to construct a premium support plan other than the one that I have suggested today.

There could be plans that deal with the specificity of the core benefits differently from what I have suggested, and I want to hear those suggestions.

I have indicated that there are several areas in our draft that need more work than we presently have.

I would like to try, after today’s meeting, to try and get a summary of the questions and the points that are made, and then at the next meeting to try and see if we can’t incorporate some of those suggestions in the premium support model.

I want to set up a process to do that. It could very well be that we’re going to need more additional meetings as we try to reach our March 1 deadline.

I have had questions about, ‘‘Why do you want to change the entire system? Why not just tinker around the edges with the current system?’’

I think that there are benefits by going to a premium support model in terms of efficiency, effectiveness, and ability to deliver better health care to Medicare beneficiaries, that make it worth our while to move toward this approach.

I have drawn heavily from Bob Reischauer’s suggestions on a premium support model in putting this package together.

The thing that has impressed me the most about the current system is that it is not that good, in the sense that it only covers about half of the cost of health care for Medicare beneficiaries.

That is less than most private plans. It is less than most city plans for their employees. That is less coverage than most state employees have. It is less coverage than most Federal employees have.

In fact, the numbers tell us that about 47 percent of the health care costs--the total health care costs for Medicare beneficiaries under this current program--has to be paid for by a process other than Medicare.

It comes out of their pocket, it comes out of Medigap insurance, it comes out of Medicaid, it comes out of their family.

Medicare doesn’t cover it. That is a system that we can improve on. We can make it better, and I would hope that this suggestion moves us in that direction.

My goal is to try and take the efficiency impact, the ideas of the efficiency of the premium support system, and try and put it into a model that makes the system better and makes it more efficient than we have today.

The system that I am putting out on the table today has not been scored yet. We have requested our staff, and our staff has made some recommendations and given us some numbers on the scoring.

We have requested Rick Foster, the HCFA actuary, to also give us a score on this proposal, and we are waiting on that score, and it will be presented just as soon as we get it.

I note that Chairman Greenspan, I guess, Congressman Thomas, before your committee just this past week, reinforced the notion and the concept that a premium support model would be better able to adapt to the changing health care delivery system for the 21st century.

He cited the difficulty involved in forecasting which, we all know, what will happen with technology and what the actual real-dollar burden of the Medicare system is going to be.

He agreed that it would be desirable to create a self-corrective mechanism within Medicare to deal with the market forces. I think that suggestion is a good one.

I would like to see if my cochair has a comment before I explain--I will do it as briefly as I can--the premium support model that I have presented to you, and then we’ll get into questions and answers.

Mr. Thomas, do you have comments?

Mr. THOMAS. I thank you very much, Mr. Chairman.

It is true that Chairman Greenspan appeared before the Ways and Means Committee, and as you’ll recall, he appeared before this Commission--April 20 I believe it was of last year--and he has not appreciably changed his position.

He agreed with us that a fundamental change in the model to allow it to be somewhat more responsive to the marketplace is an appropriate approach.

I know the chairman is busy. We’re all becoming busy, because the congressional session is getting under way and our demands will increase, notwithstanding the trial.

We need to remember that the progress that we made in November, December, and January was primarily because the Capitol was dark at that time, and any attempt to extend the time would simply get us deeper into a congressional session and that will eat up our time.

So I know we have today, perhaps one or two more sessions, and that’s why I’m extremely pleased that the chairman was willing to provide a conceptual structure for our discussion.

If we can agree on the concept, then we can work on the specifics, or the particulars of a premium support system, not necessarily ‘‘the premium support system’’ but a premium support system model. I just want to underscore how pleased I am that you were willing to do this.

Now obviously I have a number of concerns with the plan as I’m sure some of our other colleagues might have, as well. But that does not diminish the fact that you were willing to provide us with a basic conceptual approach under which we could argue various aspects of how a premium support system is supposed to work.

If we can agree that this is the concept that we are going forward with, then I am very interested in beginning the examination of the details and an examination of options to those details, if we are not in agreement with the chairman’s initial offer.

I want to thank you once again.

Senator BREAUX. Any other opening comments? I know there are going to be a lot of comments after I submit it, and I’ll wait.

Does anyone else feel they need to say something before I----

Senator GRAMM. Go ahead and present it.

Senator BREAUX. Let me go ahead and do that, and then I’ll start to take questions and answers after this.

The premium support model that I am laying out for everybody’s consideration envisions, No. 1, a Medicare board, a national Medicare board that would have broad authority to ensure financial and quality standards.

The board would protect against adverse selection. The board would be charged with approving the benefit package, something I think is very important, to negotiate premiums, to compute payments to plans and to provide information to the beneficiaries.

The board, if you wanted to compare it to something, would be best compared to the similar role that the Office of Personnel Management, OPM, has when they negotiate on behalf of the civilian Federal employees, the Health Benefits Plans that I, as a Congressman and all of our colleagues and the rest of the Federal employees have.

So the Medicare board would operate in a fashion similar to the Office of Personnel Management in their negotiating for the Federal Employees Health Benefits Plan.

It would ensure, for example, that the plans do not structure a benefit package that’s only geared to track healthy beneficiaries.

For instance, one that would only offer maybe 10 home health care visits and a health club membership which would obviously attract only healthy beneficiaries.

While there are a lot of questions that could be asked about the organization of the board, the size of the board, how it’s appointed, and the details of the board, this is not addressed in this chart right here.

This is a statement in support of a Medicare board which would negotiate on behalf of the Nation’s Medicare beneficiaries to get the best possible set of benefits at the best possible price, and ensure that nobody tries to scam the system.

They would be the authority that, in fact, is in control to ensure quality standards, to negotiate the premiums, to approve the benefit package, to safeguard against adverse selection, and to provide information to the beneficiaries.

The example on the board obviously is just three private plans that would be submitted. There would probably be hundreds.

This is just the example of three plus the HCFA-administered fee-for-service plan, which intends--and we’ll get to this in a moment--to be a new and improved HCFA drawing on the selections of Dr. Vladeck as to how we can make HCFA better off than it is now, to give them the tools to perform better than they have now.

That would be one plan that would be submitted to the board along with the other premium plans from the private sector, that would go through the board.

The board would look at these plans annually to make sure they’re doing what they are supposed to do, and also determining what the premium support system would be.

The benefit package here--and I know there’s a lot of questions from my Democratic colleagues about, ‘‘OK, what benefit package are we going to give to the Medicare beneficiaries?’’

The benefit package that is described in my draft is a defined core set of benefits, benefit categories that are administered in a way that would avoid adverse selection and allow beneficiaries to make clear choices about what plan is better for them.

The package I have here is modeled after the Federal Employees Health Benefits Plan. The plans must offer standard core benefit categories that are currently offered in Medicare, as currently offered in Medicare. I mean, the difference is it doesn’t spell out how many days in a hospital, how many days for a home health visit.

The main categories that are currently offered in Medicare are inpatient hospital care. It would be here as well.

Doctors’ services, it would be part of this.

The other medical and health services are skilled nursing facility care, home health care, hospice care, and specified preventative services, among others.

A core defined set of benefits must at least include the same package offered by HCFA’s fee-for-service plan, and the benefits offered by all plans must be approved by the Medicare board.

It’s not something that just could be submitted and they would walk away from it, it would only be offered to beneficiaries after it has been reviewed, looked at, dissected, and ultimately approved by the Medicare board to ensure that the plans do not blur distinctions and benefit variations or plans that fuel adverse selections.

Those plans would be intended not to be approved if they did that. Now, some may argue that there should be more specificity, that we should spell out exactly how many days in a hospital, how many home visits that are needed.

I think, personally, that if we’re going to get competition, it has to be competition on price and services, but it has to meet a minimum benefit standard. This is what this attempts to do with the use of the Medicare board.

I only have a couple of more to go through.

Let’s look at the second: Calculating Medicare premiums. I have included, for illustrative purposes only, an example of how the premiums would be calculated under a national bidding system.

Let me emphasize that the numbers behind me are just as an example to help guide us through the process of looking at what we are talking about.

The chart 2, private plans and the fee-for-service plan administered by HCFA would submit their premiums to the Medicare board.

The Medicare board would look at those premiums and then calculate the national weighted average on what those premiums happen to be on a national weighted average basis. It would be based on the previous year’s enrollment in all of these plans.

Now in this example, since it would be the beginning and the first year, the national average would be the same as the current government-run fee-for-service plan which is approximately $5,700 per beneficiary as what the government pays.

So in the first example we start with what the government is now approximately paying. Again, this is an example, but I think it’s a close proximity.

This average was calculated, assuming that 80 percent of the beneficiaries would remain in the government fee-for-service plan, and we have seen estimates that that is about what it would be to begin with, that 80 percent of the people would say: Look, I’m going to stay in the current fee-for-service plan. It’s new; it’s improved. I’m going to stay where I am.

So we assume that about 80 percent would go into the current fee-for-service plan which would be new and improved, and that 5 percent would enroll in each of one of these plans ‘‘A’’ through ‘‘D.’’

That’s the example I’m using, that you would have 20 percent in the premium support private plans, 80 percent would remain in the fee-for-service plan. In reality, you all know it, you’d have a lot more than four plans being bid. You’d have, probably, literally hundreds of plans being bid.

The second step is that the Medicare board would create a national formula schedule that is based on this national weighted average and the beneficiary would enroll in their various plans.

For the purpose of illustration, we have based a formula on the current share of the Medicare cost paid by the beneficiaries. We have had evidence that under the current law the Medicare beneficiary pays 25 percent of their premium for part B. After you combine part A and part B, the beneficiary’s current total share of their Medicare cost is approximately 12 percent.

Now that’s direct costs. That’s not copayments, and it’s not coinsurance. It’s just part B premiums.

If you add that into the total mix, the Medicare beneficiary pays about 12 percent today. That doesn’t include all the extra payments that they’re paying as well.

Mr. DINGELL. Mr. Chairman----

Senator BREAUX. Excuse me.

Mr. DINGELL. Let me ask. Is that 12 percent of the total or is that 12 percent of part B, which is----

Senator BREAUX. It’s 12 percent of the total. It’s 25 percent of part B, but if you combine part A and part B, it’s about 12 percent with the government paying the difference of that.

So if you’re following this example, Medicare--the 12 percent that I have back here would be the equivalent of the total current Medicare spending also when the balanced budget agreement’s changes are taken into account.

So that’s the changes from BBA as well as what they are currently paying. The total is about 12 percent, this for a plan which comes in at the national weighted average. In this example, the national average would just happen to be the government fee-for-service plan at $5,700.

So if the enrollee’s share is 12 percent, 12 percent of the $5,700 would be, they would be paying $708.

Do you want to put the second chart up? I wish I had two--oh, it’s up here. So if you’re talking about 12 percent and the national weighted average of all the plans that are submitted come in at $5,700 like it does in this example, the enrollee premium would be 12 percent, or $708.

If the person picks a plan that is above the national weighted average, then they would pay the difference in that plan.

If you take the $6,000 plan as an example, the government would pay 12 percent of the $5,700, the beneficiary would pay the difference which is about, would be about 17 percent.

Bear in mind that we have the information before the Commission that the average Medicare beneficiary is paying a little over $2,000 a year out of pocket for his total medical care beneficiaries.

Now the idea would be hopefully that these plans would be able to present more coverage than we currently have.

Let me finish going through the charts, and we’ll get to the questions. I know all these things are controversial.

The amount actually paid by the enrollee or the beneficiary would also be determined based on their income. We are income-relating how much the beneficiary would pay as well.

Chart 4, which is up there now, chart 4 in this example, the beneficiaries who currently qualify as a QMB or as a SLMB--the programs we help for the poor people--would pay no premiums, would pay no premiums for the plans up to the cost of the government-run fee-for-service plan in this case, which would be the $5,700.

High-income beneficiaries--how do we pay for the low-income people not having to pay any premiums? We charge more for the high-income beneficiaries. We charge more for the high-income beneficiaries because they would pay 25 percent of the premium.

It’s currently estimated the Commission has received information, currently estimated, that of the people who are currently eligible for QMB’s and SLMB’s, only about 50 percent are actually enrolled in the program under the QMB program, and only about 20 percent of those eligible for SLMB’s are actually enrolled.

Hopefully, we’d be able to bring a lot more of the low-income people into the program when they would not have to pay any premiums.

Obviously, I’d like to see the savings generated by income-relating to premiums for the high-income citizens to subsidize the premiums for the low-income beneficiaries to get them adequate and good health care coverage, which they now currently do not have.

Where do you put high-income beneficiaries? I’ve suggested at approximately 500 percent of poverty, which is about $50,000 a year for a couple, and $40,000 a year for singles.

My own State of Louisiana, for working people, the average income is about $26,000 a year for working people. So what we have suggested is that high-income means testing would start at about 500 percent of the poverty level, which is about $50,000 a year for Medicare beneficiaries as a couple.

Moving right along: Modernizing the Medicare fee-for-services. There is not a chart on this, right?

One of the things that we talked about was that you have to modernize the current fee-for-service Medicare. That is still a 1965 model.

If Medicare is going to serve the needs of health care in the 21st century, they can’t do it as they are currently structured.

So obviously the premium support model that we are proposing--I am proposing--has the new premium support with the private plans to come in and bid, but it maintains a Medicare fee-for-service, not the same Medicare fee-for-service as it was in the past.

Dr. Vladeck gave us a number of suggestions of how we could improve current Medicare fee-for-service. These are incorporated in my suggestions.

For instance, my premium support approach would create a new and improved HCFA by giving it powers that it has long sought including competitive bidding, which they really don’t have; negotiated pricing authority, which they desperately need; selective contracting, which would be helpful; and preferred provider arrangements, which I think would improve the system.

These are ideas that are incorporated. There may be more than are needed that would make the current fee-for-service a more efficient and more productive program.

Medigap reform: Medigap reform, I think, many people on the Commission if not almost everybody, said that we need to address Medigap first-dollar coverage; that it did encourage and bring about in some cases, overutilization compared to people who did not have Medigap insurance; that we need to address how we should approach Medigap reform.

We’ve had some ideas. My proposal today does not have a specific recommendation on what to do with Medigap reform other than to say that I think there is a consensus that we need to reform it and make some changes in it.

Another thing is the eligibility age. My recommendation is that we have a gradual increase in eligibility age for Medicare beneficiaries tied to what Congress has already determined as appropriate and proper and fair with the Social Security system for 40 million American seniors; that we bring about that increase not tomorrow, not next year, not in 10 years, but over the next 26 years.

The full-age category would meet up with Social Security completely by the year 2025, giving people a sufficient amount to make the plans, to know what’s going to happen in the year 2025, or 2026 for their Medicare eligibility.

We have a recommendation on graduate medical education. I want to turn to Bill Frist--who’s done a lot of work in that area--just to briefly describe what you have in this.

I’ve adopted your recommendations, and why don’t you say what you did with them.

Senator FRIST. Thank you, and I’ve had the opportunity to talk to a number of you, and we wanted to get on paper at least a start as to what we’ve been able to put together, something that is a bit of a compromise but addresses the overall issues.

On graduate medical education, we’re talking about a $6 billion or $7 billion program a year. It educates about 100,000 residents. The principal findings that we had, if you really boiled it down to several points, are as follows:

That the education of graduate medical personnel--that’s residents and interns after medical school--is a public good that justifies having a broad-based, sustained, assured funding base for the future.

Currently, it is paid for out of the Medicare Program, and the real fundamental question that arises is why does a $20,000 a year secretary subsidize heart surgeons’ training over time.

Well we addressed that question and said that it does make sense because it is a public good. The problem is that it’s paid for by a payroll tax which is a fairly narrow-based tax, and there was a feeling that we ought to broaden that beyond a regressive fundamental tax, the payroll tax.

It costs about $75,000 to $80,000 a year to educate a resident. You break it down into DME and IME which are direct medical education and indirect medical education.

The proposal is to take the direct medical education which is the salary part of it, and that’s about a third of that $80,000 a year, and we use the words ‘‘carve it out,’’ and that always scares a lot of people, but separate it out, not say whether you eliminate the entitlement, whether you take it out of mandatory spending, or you take it out of discretionary spending, but you move it outside of the narrow payroll tax to what in essence is general Treasury revenues.

That’s the proposal itself. There is no recommendation made in terms of how that is to be allocated. We’re addressing the Medicare component.

I will stop with that, because I think that’s the fundamental essence.

Senator BREAUX. I mean, particularly what Bill is suggesting is the fact that he would recommend taking the direct medical education costs out of the Medicare Program.

What we are suggesting is that it could be funded through a direct appropriation by Congress. It could be a mandatory appropriation. It could be a mandatory appropriation, which would be an entitlement for that purpose; or it could be discretionary, which obviously we’d have to argue and debate about.

But the indirect medical education, this recommendation says for now, keep it within the Medicare system, and a disproportionate share, the recommendation I take it, is basically we need to revisit it but you don’t recommend taking it out of the Medicare Program.

Senator FRIST. The DSH proposal which we’ve addressed, the disproportionate share, hospital payments which we’ve discussed many different ways, there’s not a specific recommendation made.

People had talked about taking DSH and putting it in the discretionary appropriated accounts. That is not in the Breaux proposal right now.

It says that we do need to revisit the whole DSH element. It should be carved out so there’s something that we can look at and manage over time.

A number of people have raised the discussion of how much is it appropriate. It is a subsidy. It is maintained. No recommendation is made specifically.

Senator BREAUX. I’ll conclude with this. Here are some of the obvious questions that I’ve heard from members who have had this for a couple of days now and had a chance to look at it.

No. 1 is a question of whether you do a national weighted average or do you do a regional. Do you allow plans in HCFA to do something regionally and locally, as opposed to a national weighted average.

I propose a national bidding system. The idea of a regional bidding system is also on the table obviously.

The benefits package: Obviously that’s a very important discussion that we need to have.

My suggestion is that we have a core set of benefit package like we have in the current Medicare system, but it’s not so specific that it tells them how many days and hours and what we charge for everything, but that covers everything that they currently cover with a Medicare board approving the plan, from a sufficiency standpoint, and the fact that it is not being short circuited or scammed.

But that is a wide open discussion about what type of benefits package, how we want to describe that benefits package. I realize it’s very important.

Another question is should that core package include prescription drugs? I will tell everyone that personally I think it should.

We are working on some suggestions. I think Congressman Dingell has submitted a drug benefit package that is certainly trying to be scored right now.

Obviously, we all know it’s very expensive. I mean, I don’t know of anybody who doesn’t want it. It’s a question of whether we can put it into a package and pay for it and still restore the solvency to the Medicare system as we know it.

At what level should the government set our initial contribution? This suggestion is 12-percent payment by the beneficiary, and 78-percent payment by--88 percent, let me get my math right--88 percent by the government and 12 percent by the beneficiary. I think that’s fairly appropriate.

Then obviously the question on eligibility age: Do we phase it in? How fast do we do it?

There are probably a bunch of other questions. So, if there are no objections to my plan, I move the adoption of--no. [Laughter.]

I almost got away with it.

Now I want to hear from you. You’ve heard from me. Questions?

Phil Gramm.

Senator GRAMM. Well, Mr. Chairman, first of all I would like to say that it’s always easy to criticize, but I want to congratulate you for presenting a comprehensive proposal that gives us an opportunity to make dramatic changes in Medicare.

Some people have said that the President’s proposal to inject new money into Medicare makes our work unnecessary and puts us in a position where we don’t have to make any hard choices.

I would like to remind people that, if you took every reform proposal that we have ever discussed, and adopted every one of them in their purest form, we would not close the cost gap in Medicare over the next 75 years.

And if you took every penny the President proposed to put into Medicare and you actually put every penny of it in Medicare, it would not come as close to filling up the funding gap than if we had adopted in its purest form every proposal we have talked about.

So the reality is the President’s proposal of new money has no impact on our work, because we were not going to fill up the funding gap anyway, and the money he would put into the system will not fill it up either.

I think the premium support model is a critical ingredient in any proposal to make Medicare a modern system.

It is a system that we know works. If I hear anything from my constituents, it is they want the kind of health care system Federal employees have.

I don’t know why they think it is so good, but I guess my beaming health is the reason, and I think the chairman’s proposal allows us to do it.

Additionally, and most importantly for me, the only way we are going to be able to afford to have Medicare money go to pay for part or all of my mother’s pharmaceutical expenses, is by adopting an efficient system whereby she can take our premium support payment and choose a provider that will pay all or part of her pharmaceutical needs.

Finally, just a couple of comments. I am from a state that has a lot of small towns. It has a lot of rural areas, and there are going to be many places in my state where there will not be a lot of options available.

So, basically, my concern is, if we give HCFA these massive new powers that are being discussed, while superficially it sounds like a good idea, in many areas in my state, in small towns where you have huge populations of older people, HCFA is the only major, dominant health care buyer in that market.

What they are going to do, in addition to driving health care providers out of rural areas, is to push medical costs onto people that have private health insurance.

So I think we have got to look very closely at the powers we are giving HCFA. Quite frankly, HCFA has every incentive to see premium support not work. They like running this system.

One of the reasons I like premium support is, I see, over time, the regulatory burden of HCFA getting smaller as we substitute competition.

Finally, let me say we are going to refine this plan. I think we need to be a little bit bolder on disproportionate share and GME.

But I think that if we don’t do anything else today, we ought to make it clear that the cornerstone of our reform effort is going to be premium support.

I think it is an idea that we have to build on. There is a lot of work to be done, as Stuart has said on many occasions, and others have.

We have to determine the details of how it’s going to work. I very much agree with that.

But I think that in order to move on to the details, we need to make the decision that this is the direction that we want to go in, and I strongly support that, and I thank you, Mr. Chairman.

Senator BREAUX. I would only comment to Senator Gramm that I guess in smaller towns--and I’m from certainly a small town in Louisiana, that you may not have as much competition in the private offerings, but you would always have the fee-for-service, the current fee-for-service, which would hopefully be new and improved.

I understand your concerns about that, but for those who are from small towns, like Senator Lott represents in Mississippi, you would always have a fee-for-service ingredient.

Dr. Tyson, comments on anything, questions?

Ms. TYSON. Yes.

I want to talk a little bit about the issue of a benefits package in a premium support model. I want to start with one general observation:

Senator Breaux began his comments with the issue of comparability. That is, one of the things we should be doing here is trying to develop a Medicare system which, over time, is as good, as efficient, as adequate, and, I would say, as comparable to private health insurance; that is, what Americans get before they retire.

And I take that as a general goal. And when I take that as a general goal, I think the Commission faces both the financing issues of traditional Medicare and the restructuring issues that the premium support model begins to address.

So, comparability is very important for me.

Now, from comparability, that leads me directly to the issue of what should be in the core benefits package.

The premium support model, from an economic point of view, is interesting because economists believe--and this can be debated--but economists believe that if there’s competition among plans and among providers, and if individuals have a choice, there will be greater efficiencies, both in the provision--on the provider side, and in the selection by the consumers.

However, it’s important in thinking about this competition to realize that the competition should be on cost and quality; it should not be on risk selection and benefits.

That is, what you’re trying to get at is, for a given set of benefits which are well specified, who are the lowest cost, highest quality providers?

You’re not trying to get at competition among providers on benefits packages that are different. Then they’re competing not on cost or quality.

In fact, I could offer a very expensive, high-benefits package in a very inefficient way under a model which allowed some plans to offer very attractive supplemental benefits that the government paid for, and have the fee-for-service offer a much more restricted set of benefits.

So, I really think it’s very important, if we’re going to get the competitive benefits of premium support, which is the key reason why economists have come up with this model, to have a very precisely defined set of benefits.

Then the competition will be on cost and quality.

Having said that, when I combined those two points, comparability with the private sector, and the need for real competition around core benefits, I’m led directly to the issue of prescription drug coverage.

It seems to me we know what’s happening in medicine, we know it’s going to happen even more dramatically and rapidly going forward. The percentage of spending on medicine for prescription drugs is increasing rapidly.

And with genetic revolutions and pharmaceutical revolutions continuing apace, that is only going to become more and more important.

So both before we retire as Americans, and after we retire as Americans, our health insurance packages have to include some prescription drug coverage for reasons for comparability.

For reasons of risk selection, they have to include some prescription drug coverage, otherwise you’re going to get people when they need prescription drug coverage, if only certain packages offer it, having to be forced to move into those packages, and you’ll get the sicker population in those packages.

So, for all of those reasons, I think it is critical that if we’re going to go forward with premium support, we go forward with it with a defined benefits package which is better than current fee-for-service Medicare, and which includes prescription drug coverage.

Now, let me get to the question of revenues, because I want to get that question. Obviously, to argue that we need to include some prescription drug coverage, raises the issue of revenues.

I first of all would agree with something Senator Gramm said, which is the financing problem of Medicare is substantial, and the things that we have looked at suggest that it is a problem which we’re not going to solve over a 75-year period with any recommendation of this Commission.

I take that as a given; it’s just not going to happen.

One thing that suggests how big the financing problem we face is, is that even if Medicare per capita cost growth were constrained to general inflation in every year, even if we took per capita Medicare cost growth and we constrained it by inflation, which has never happened for either private health care or Medicare, and which would require that Medicare grew at half--half of the projected cost of private health care spending, we could only extend the trust fund to 2016.

That’s how serious our problem is. It’s a huge problem.

Now, I then would say that’s why I think, contrary to Senator Gramm, that what the President has proposed is so critically important.

The President has made the work of this Commission more likely to come to a possible outcome because he has put some financing on the table.

That is, let’s not fool ourselves that the financing can solve the problem over 75 years, but it’s real money. And it’s real money that I think Americans would like to dedicate to health care spending.

Now, having said that, let me say that experts such as Reischauer and Henry Aaron, the people who really in some ways are the grandfathers of this idea of premium support, have said over and over and over again that any realistic estimates of the costs savings from premium support leave a financing problem.

I think that if this Commission came out with some fancy numbers which said, we have solved the Medicare problem by premium support, we would be just playing around with fancy numbers.

think what we should do, therefore, is say we have some real revenues on the table now, some real financing from the President; let’s use some of that to get ourselves a prescription drug benefit which will make the competition around premium support real, which will allow us to get the real efficiencies from premium support, and then I think that’s the way the Commission can make a real contribution.

Senator BREAUX. Good suggestions.

Stuart Altman?

Mr. ALTMAN. Well, first, let me support Laura. I just think that--on all three counts.

But let me focus first--Mr. Chairman, I do, too, want to put myself in support. I think you’ve pushed us forward tremendously, and I think that’s very helpful.

But my friend here, Senator Gramm, when I look at what I’m hoping that in a premium support system would work, and that is a level playing field, and while Bruce and I had a little difference of opinion about how much control I think HCFA should have in a world where they are a monopoly, I don’t understand how you can possibly not give them the flexibility, once we move to this system.

I mean, you really are then tying their hands behind their backs.

I just want to play out a different scenario. If you prevent Medicare as we know it--and I’m going to call it classic Medicare--in the new world from becoming more efficient, operating more like an insurance, and suppose it wasn’t 80 percent of the population that was in the Medicare, but it was 60 percent?

And then you force that system to be more expensive because you prevented it from becoming more flexible. You then would require the people who are in it, including the constituents you’re talking about, to pay more, simply by the fact that you’re making them less efficient.

Senator BREAUX. Stuart, can you yield on that? I have a whole bunch of things I said.

Mr. ALTMAN. I’m not against you. I’m concerned about not allowing what’s in your plan.

Senator BREAUX. I don’t want to do that.

Mr. ALTMAN. I know you do. [Laughter.]

You and I are on the same side. I’m concerned about Senator Gramm.

I would hope that as we move forward--and we’ve talked about a level playing field. A level playing field needs to be level on all grounds. It needs to be level on the benefits.

I can’t understand how we can say we’re going to require prescription drugs to be in other plans, but not on the Medicare side, and I don’t understand why we can’t allow Medicare to be as flexible and as efficient.

Now, in areas where it’s a monopoly, we can prevent that problem. So I would hope that as we move forward----

Mr. THOMAS. Stuart?

Mr. ALTMAN. What?

Mr. THOMAS. To say that we can prevent that problem and then move on, I think----

Mr. ALTMAN. Just a minute. Are you going to go out of business? Is the Congress going to stop functioning?

You’re going to allow Medicare, which is, after all, even if it’s a separate board, to go and force areas that you’re talking about to not get good quality care?

What are they going to do that’s so bad? You’re not going out of business. I think the way the chairman has laid it out makes all kinds of sense.

So, all I’m asking for is, as we talk about a level playing field, level it on both sides, and give HCFA the ability to be an efficient system, and make sure that the benefits are the same, including prescription drugs.

Senator BREAUX. OK, I’ve got Debbie, and then I’ve got Senator Kerrey.

Ms. STEELMAN. We’re talking money and we’re talking benefits. Can you tell me whether the premiums in your chart, Senator Breaux, include drugs or not?

Senator BREAUX. Sorry? Does it include drugs in this example?

Ms. STEELMAN. Right.

Senator BREAUX. It does not.

Ms. STEELMAN. It does not include drugs in this example. So to include drugs in that example, let’s just be generous here and say it would add $1,500 to the cost of the plan, maybe $1,000, whatever. It’s going to add $1,000.

OK, we don’t have that.

Senator BREAUX. Move that microphone a little.

Ms. STEELMAN. It would add $1,000 to the cost of the plan.

Now, as I understand our current budget situation, we don’t have $1,000.

So, are you planning on pegging the beneficiary premium at 12 percent, which means the taxpayer pays the thousand bucks, or are you planning on pegging the beneficiary premium somewhere below that so that the burden is placed either more evenly on taxpayers, working-age taxpayers and beneficiaries, or on the taxpayer?

Senator BREAUX. Well, you’ve correctly outlined the two choices on which we have not yet made a decision. I mean, we’ve got to bear it in mind that if we include a prescription drug plan, which a lot of people think is the right thing to do--and I do, too--we have to figure out who is going to pay for it.

Ms. STEELMAN. OK, so in the current world, we do have an awful lot of drug coverage. A recent Health Affairs article suggests that about 65 percent of people--I think it’s more than that, because that’s 1995 data--but at least 65 percent of people already have drug coverage.

Senator BREAUX. Medicare beneficiaries.

Ms. STEELMAN. Sixty-five percent of Medicare beneficiaries already have drug coverage. It’s being paid for either by workers through their employers’ wages, or by workers through their individually purchased Medigap, or by the state through Medicaid, or by any other number of wraparounds.

So you’re going to take those dollars and transfer them into tax dollars so that you can add that benefit to this premium? Are you going to do an employer mandate? Are you going to do an individual mandate? Are you going to do taxes?

Senator BREAUX. It’s an option.

Ms. STEELMAN. So we already have a private sector option that people are buying. Why isn’t our priority making sure that people who do not have access to that wraparound coverage, have access to it?

Why are we interested in buying out that base, which I think is a gross misprioritization of this Commission, to ensure that low-income people have access to pharmaceutical coverage and a complete benefit package, which I am totally in support of?

So, if we’re talking the same benefits, if we’re talking about a level playing field, Stuart, we have to talk about the same benefits and the same money.

You can’t just assume a lot of money, which I think is the gist of the last two comments.

Mr. ALTMAN. Yes, but you can assume some money.

Senator BREAUX. You know, bear in mind and I will just make the point that I made before. I mean, the average, out-of-pocket spending for a Medicare beneficiary today is a little over $2,000. That’s what they’re using it for.

I have Senator Kerrey and Colleen.

Senator KERREY. First of all, Mr. Chairman, I appreciate both your laying this proposal out for us, as well as your earlier presentation, your public presentation that you made of it.

What’s happened is, premium support, I think, could be an enormous improvement in the way that Medicare currently operates. It’s modernizing the Medicare Program and making it a program that I think works better for the beneficiaries themselves.

I appreciate that very much. I think we’ve got to go out there with it, otherwise what will happen is, the critics will merely point out the potential defects and the permission granted will be withdrawn before the proposal even has a chance to be able to walk on its own.

Second, let me say that with respect to what Laura Tyson just said about the President’s proposal, I don’t think he made it easier; I think that in many ways he made it harder.

He did not say to the American people, here are the tough choices that you have to make. He basically said that the economy is going to grow and create a surplus over the next 15 years of $4.7 trillion, and I’m going to take 15 percent in some unspecified way to pay for prescription benefits which will probably cost $1.2 trillion, not $600 billion.

Other than that, he made it easier. He made it harder, in my judgment, because he left the impression that there’s no tough choices; that it’s fairly easy. We just take the economic growth and solve the problem.

One of the things I hope we have in this is that regardless of how they come out, which is that we present the American people a full accounting of how Medicare is paid for, so that all beneficiaries understand who is paying the bills; that it’s coming from a payroll tax, that it’s coming from an income tax; that there are sources of revenue that have to be considered when you’re considering what you’re asking for, whether it’s a prescription benefit or anything else.

I think there needs to be a full accounting of how these subsidies are flowing, otherwise it’s very difficult for policymakers to get permission to do hopefully the right thing, whether it’s solving a short-term problem or a long-term financing problem.

I favor--so that the record shows it--a competitive environment. I would prefer HCFA be allowed to compete, but only in an environment where market competitors have a level playing field as well.

I think some kind of governance that allows both sides to compete is desirable.

Last, Mr. Chairman, I think that just for public consumption, it might be better for us in trying to persuade people that premium support can be beneficial, to follow the current enrollment problems that we have with QMB and SLMB under the existing fee-for-service program.

My understanding is that it can be Urban Institute and from Families USA that there was a story in the Times the last 4 or 5 days that said 40 percent of eligible Medicare beneficiaries under QMB and SLMB are not getting signed up.

The article left the impression that it’s mostly because they have to go to state welfare offices to sign up for the subsidy. It is my intuition that it may be that premium support will help us increase that enrollment.

I think we need to follow the QMB/SLMB program and make sure we design this premium support so that that becomes the objective. I think if we can show people that it will work best for lower income beneficiaries who are currently struggling under the fee-for-service system, to get the QMB/SLMB subsidy. It may be that this is the best way, both to work out the mechanical problems and sell the American people that premium support will make things better.

Senator BREAUX. I have Ms. Gordon and Dr. Vladeck.

> Ms. Gordon, you had a question?

Ms. GORDON. Yes, thank you, thank you Mr. Chairman.

Let me say this, that I do support the premium support system. I do not support one that would give HCFA more power. That’s one of our problems right now; they have too much power.

So I certainly couldn’t support one that gave them more than what they already have. From early onset, I have been an advocate of drugs for senior citizens, but under our fee-for-service we certainly cannot afford that.

But under the premium support system, I think that this could be worked out, and I do support that very firmly. Thank you.

Senator BREAUX. And to add on as a cosponsor, Dr. Vladeck?

Mr. VLADECK. Thank you, Mr. Chairman. I’m not going to comment on the premium support concept, because I’m no longer able, sort of cognitively, to deal with argument that has all the theory on one side, and all the facts on the other. [Laughter.]

But I want to make some observations about the issue of eligibility age and the issue of protection of low-income beneficiaries.

The rhetoric--and I fear, Mr. Chairman, that you, yourself, fell into it today--has been repeatedly saying that we need to conform Medicare eligibility to what’s going to happen in Social Security under the 1983 amendments.

But there is another part to what happens to Social Security under the 1983 amendments, and that is that people will still be eligible to take a reduced benefit at age 62, even when the eligibility for the full benefit is moved back to age 67.

There has been rhetoric here, and there’s language in your proposal about protecting people who would otherwise be uninsured.

As a practical matter, the only way for someone who is 65 or 66 years old at the moment to get health insurance if they don’t have Medicare, or who is 63 or 64 now, to get health insurance if they don’t have Medicare, is through employment or through a spouse’s employment.

Under current law, workers between the ages of 65 and 70 who are entitled to employer benefits, receive employer benefits; they don’t receive Medicare as their primary health insurance.

So, it makes no logical sense to me to suggest that you can postpone the eligibility age, move it back to 67, and not have a very expensive and cumbersome and complex way to address the problem of all the people who are going to lose insurance in the process.

It is important that we keep more people working after age 65; that we have incentives for them to continue working after age 65.

The best way to do that would be to maintain current law and permit--and to adopt the change of eliminating the earnings test on Social Security benefits, and then we would continue the fact that 65-year-olds and older are the part of the population with the highest proportion of insurance.

On the subject of low-income beneficiaries, I just want to suggest that there was something slightly misleading in your chart, Mr. Chairman, which suggests that upper income beneficiaries would pay more, and, in exchange, low-income beneficiaries would get QMB and SLMB, which would cover their benefits.

QMB and SLMB covers their benefits now. There is no increase in the entitlement or benefit for low-income persons under your proposal.

I believe that you’re right, that moving to something more like a premium support model would help to address some of the enrollment problems we’ve had with QMB and SLMB, if you presume that private plans are going to seek to aggressively target their marketing to the lower income beneficiaries, which is another instance, I think, of the theory and the empirical evidence running contrary to one another.

But there is a more fundamental problem here, and that is, when we talk about the low-income beneficiaries, we tend to fall into the trap of equating that with beneficiaries whose income is below the poverty level.

I would remind the members of the Commission that while there are an increasing number of affluent retired persons, and while we should expect those who are really affluent to pay a higher share of the costs of the program, and there are other ways to do that, the average Medicare beneficiary, the average Medicare beneficiary has an income of $14,000 or slightly under $15,000 a year.

Now, that doesn’t meet our criteria as we’ve had these conversations, of low income, but it doesn’t meet my criteria of being comfortably middle income, either.

And to the extent that we do not do something to reduce the out-of-pocket liabilities of folks in the range, in the income range between $10,000 and $20,000, which is over the poverty level and is where the largest single group of beneficiaries are concentrated, then we will not have addressed the most basic problems of the Medicare Program.

Senator BREAUX. Any comments on what my recommendation is on the fee-for-service?

Mr. VLADECK. Well, I think some of those recommendations are very sound. I have real questions about the ability of a board, either to recreate what is now the existing regulatory structure within HCFA or is able to enforce all this behavior on plans.

One of the reasons the comparison between OPM staffing and HCFA staffing is misleading is OPM, like most private insurance, piggybacks on HCFA’s provider certification and similar activities for maintenance of quality standards and so forth.

So either you have to transfer all of that to a board, or it goes away, in which case the ability to really enforce some of the quality and market behavior standards is eliminated.

So I don’t know. I don’t have any problems with saying a board ought to be doing the negotiating; HCFA ought to have more powers to run the traditional or classic fee-for-service program more aggressively.

But where you put some of the regulatory responsibilities and some of the other things, I have some very significant questions about, just from sort of a public administration point of view.

Senator BREAUX. I have Colleen Conway-Welch, and then I have Dr. Frist.

Ms. CONWAY-WELCH. One of the unfortunate results of the President’s speech was the fact that there are some older folks in this country who honestly think the problem is solved, and that they will have drug benefits. They don’t understand the complexity of the process.

I think that’s very sad. I am a nurse. I hear these stories very, very frequently.

I want some kind of prescription benefit, but I don’t see how we can pay for it, or even begin to think about paying for it until we go to a premium support model.

I am also very concerned about the fact that whatever the number, 60-70 percent of people have some drug benefits now, of tampering with that system to the extent that public dollars replace those private dollars.

I think we have to be very careful as we’re going forward.

The other point that Dr. Vladeck made about--and I think I’m quoting him somewhat correctly--of the issue of needing the regulatory process to enforce quality, I simply haven’t seen that work.

I think that choice and competition are more influential on assuring that we have a quality system than the regulatory system out of HCFA.

I would also be very much in support of a very much slimmed down HCFA.

Senator BREAUX. Thank you. Dr. Frist?

Senator FRIST. Thank you, Mr. Chairman. I, too, want to congratulate you on putting in one document, a lot of the thoughts and the ideas that have been put forth.

I have a whole lot of questions about the details, as we all do, but I think it’s a wonderful start.

The President, the other night, I’m not sure if he complicated matters, made them easier, made them harder. I wish he had said at the same time that he’s throwing more money at this challenge, that he said it is important really to modernize the program.

On the one hand, it’s harder because it looks like you can just buy your way out of these problems, and if the American people think that, it’s a real disservice.

I think it’s very important on this Commission to make it very clear that the problems that we have identified are real problems, and just another $700 billion does not solve those problems in any way.

I think that if we do that, that he may have made it easier, because it allows us to focus on what is really needed, and that’s quality care; that we really are taking care of individuals with disabilities and our seniors with a better quality of care, which we don’t really talk very much about because we’re focused so much on the numbers.

To modernize the system really needs to be the goal.

I think the premium support model should be the real basis, as I said. It has a lot of details to it that we need to address, but if you look at things like the standardized package of core benefits, it has great potential in leveling the playing field for these various plans.

In addition, your proposal allows enough flexibility that people really don’t have today, the flexibility to address issues like mental health and long-term care, and post-transplantation where individual plans really can begin to tailor answers to some of the fundamental problems that we’re just beginning to see today, which we know are out there, which are going to come at us with increasing frequency, as this demographic shift occurs.

So that added flexibility is built into your proposal, the premium support, along with that standardized core benefits package.

The cost sharing, I think that the fact that you’ve modernized it with single deductibles and copayments, at least in principle, is a real advantage as we go forward.

The administrative simplicity of pulling A and B together again is very appealing as we go forward. The possibility for competition based on price and quality, as well as benefits--I would say we shouldn’t put the benefit competition aside because I see that as being one of the real advantages.

By adding some benefits on, some people may feel it will work very well, that it stresses continuity of care, especially in the long-term care as we go forward.

I guess if we look at some of the specifics, the Medicare board on your chart, which you put at the top, and moves HCFA over really to oversee fee-for-service, in some ways it’s reassuring to me.

I think the real fear is that if we want a real level playing field where competition is really very much a part of this, I think we absolutely have to give HCFA not necessarily more power, but the flexibility to compete, and that means some management tools.

We’re modernizing. We’re improving. I think that’s what, at least, I would like to see.

On the other hand, I can tell you, the more I talk and travel and listen to people, people are very dissatisfied with HCFA today: The lack of responsiveness, the huge bureaucracy that’s built up, the lack of attention that can be paid to demonstration projects, of new technologies coming in. It is so huge, so big, so inflexible, that we really don’t any longer I think want it at the top overseeing all of this choice, and you don’t have it there.

But I think if we can accomplish modernizing it, giving it some management tools where it can compete in an appropriate way under a Medicare board, that is a goal that we can all support, I hope.

The Medicare board, though, is given a huge amount of power, and I would like to see staff develop a little bit more on what that board is going to do in terms of regulations, in terms of setting standards, in terms of how much of a role in going into the core benefits, who is going to be on that board.

Is it going to be 12 people, political appointees?

I know these are details that, after we agree to the concept we can work on, but I think it’s very important as we go forward to begin that process as we go.

I think it has huge potential, because we can have a 1999 board where HCFA, in my mind, is sort of a 30-year colossal unchangeable entity that’s there.

But I think right now all of us need to give that thought as to how much power, how that board will regulate, how that board will make sure that playing field is level so a competitive system will work.

Senator BREAUX. Thank you. I would respond just briefly to the comment about the President’s proposition.

I mean, when I listened to it, I heard him say: Look, here is some more money for the Medicare Program, and I would hope that the Medicare Commission would make additional structural recommendations on how we can improve the system and that here’s this money that may help you make recommendations that will be more effective and more efficient and you can maybe do some things that you wouldn’t be able to do if you had to consider revenues.

I mean, that’s how I heard it. I mean, whether the surplus is going to be there in 3 years from now, I mean, who knows? I mean, it may disappear completely, and then where would we be?

But I heard it as: Here’s some money to help you, what you’re trying to do, but the Medicare Commission is going to have to come up with some recommendations to restructure this program.

Congressman McDermott?

I’m trying to get everybody who hasn’t been heard yet.

Congressman McDermott?

Mr. MCDERMOTT. Thank you, Mr. Chairman. I know that you have put a lot of work into this, and I want to commend you for your efforts.

I think that it is a proposal that we ought to look very carefully at the details, because I think sometimes the details are what really are troublesome.

If you would put chart No. 2 back up there, I want to ask a question or two about that, because you’ve extended, it seems to me, premium support to both part A and part B.

[Chart shown.]

Mr. MCDERMOTT. If you look at that, the fee-for-service one down there at the bottom, it now would be $708 in 1999.

Now, presently under part B, senior citizens pay $4,550, which is $546 a year. That means they go from $45 to $59. That’s a $13 increase. That’s a 30-percent increase in the premium that they’re going to pay--and they don’t get a single new benefit as far as I can tell, because there’s no guarantee that there would be drug coverage in the fee-for-service plan.

So they’re going to get a 30-percent increase in their premium right off the top with nothing for it.

That wouldn’t trouble me quite as much, except I see a staff memo around here that says, ‘‘Fee-for-service drug benefit is bad medicine.’’ It says the cost is exorbitant. It can’t be paid for. It talks about the 65 percent of the people who have benefits.

Now what people don’t see is that those 65 percent do not have adequate benefits in many situations. They have inadequate benefits, and we’re not even willing to cover them to make the fee-for-service plan competitive with the other plans.

If you don’t give as an entitlement, as a part of the fee-for-service system, a drug benefit, there is no way that any plan will ever be competitive with what the private sector is doing, because that is a cost that people have to pay and if there is no help in the fee-for-service guaranteed, then it puts them back into buying a Medigap policy, and we are not sure how we want to do that.

My question is: Where in this plan do you expect to actually write into law that they don’t have to pay more than 12 percent of the cost?

Because if you don’t, you are simply shifting cost as you have already done here with a 30-percent increase in the premium and no added benefits? And I figure that the next year the Congress is in trouble, they’ll raise it up again, unless it is guaranteed that it can be no more than 12 percent.

That is really where I worry about the fact that it is sort of like a shell game at the county fair where we move the walnut shells around, and nobody knows where the pea is.

Suddenly, people wind up saying: ‘‘Well, gee, I paid a lot more money, but I didn’t get any more benefits.’’

The biggest cost to them of that $2,500 out of pocket is pharmaceuticals. So if we don’t answer that problem, I have a lot of trouble with moving to a premium support model.

Senator BREAUX. I appreciate that. Let me give you just a couple of general comments.

No. 1, again, people are paying about $2,000 out of pocket for their health care coverage today over and above what they’re paying in their premiums under the current system.

Second, the premiums are going to go up. Part B is going to go up. It might be 40-something dollars today. Next year, it’s going to probably be more.

The hope is that by designing a premium support system, that the benefits that will be in those systems will be competitive, that there will be better benefits, more generous benefits, and that we can peg the 12-percent cost of that.

And depending on the national weighted average, the 12 percent could be more or less than $708 depending on what the bids come in, and as a result of negotiations, what those actual dollar amounts would be.

The third and final point, and I want to get Mike to make a comment on this, is that what we’re also trying to do is to protect low-income people in a much better fashion than we’re doing that now by trying to means test it for high-income individuals, and then to have no premiums, zero premiums, for the lower income people, both SLMB’s and QMB’s.

That is not now being done.

Mike, can you follow up on that? Do you need to add anything, I guess.

Mr. O’GRADY. I think you pretty much covered it. Along the lines of the 12 percent is the idea of allowing for the full implementation of the BBA, the shift of home health over to part B and where that will be. It’s not the idea--it’s to hold harmless at what BBA has already done.

So where would it be up in the $700 range? That would probably be more like $2,003, $2,004 when the BBA changes kind of settle in. So it’s not with the idea of saying that right off the bat this is going to be a shift over.

Mr. MCDERMOTT. So you’re not trying to tell the people that they’re going to get any more with this 30-percent increase in the premium? Well they are just now catching the bill for what they did in----

Mr. O’GRADY. The BBA already. I mean, those are BBA actions that are going on, and what you’re saying now is that--and along the lines of what percentage it would be--that again would now be a function of what the beneficiary chose between different plans.

There is this assumption where you see the 17 percent that higher income people might choose a more comprehensive plan.

Mr. MCDERMOTT. See, my problem with that is that there is no competition in large parts of my state.

All the managed-care operations pulled out of the rural areas. If you live in Seattle, you’re in ‘‘fat city’’ because you’ve got a variety of things.

But if you live out in Kittitas County, you’re out of luck. And so you’re going to be stuck with the fee-for-service plan that has no drug benefits and simply is now catching the costs that we passed on to them.

I mean, people have got to understand they’re going to get hit with costs and get nothing more for it. That’s really what I think needs to come out in this kind of a hearing.

Senator BREAUX. Well I disagree with you that they won’t get much more. I think they will.

Congressman Dingell?

Mr. DINGELL. Mr. Chairman, thank you.

First of all, I want to express to you my continuing affection and respect. As you know, we’ve been friends since the days when both you and I were very young Members of this body.

I am--and I commend you for the proposal which you’ve laid before us--but I find myself very much troubled about the difficulties we have in understanding what it is that we’re really debating.

I’d like to know what the costs and the benefits are going to be of the different components of this.

I’d like to know how the senior citizens and the recipients and the beneficiaries are going to come out.

I know we are all interested in having a drug benefit component, but there is an article which showed up on the front page of the New York Times yesterday.

It says patients across the country are facing steep increases in out-of-pocket charges for prescription drugs, reversing the recent trend toward more liberal coverage.

Standard copayments are often doubling for drugs that patients have been using for years, but even bigger increases of 300 percent or more occurring for some of the remedies that are not on insurers’ lists of approved drugs.

It goes on to define how drug costs are going to skyrocket in the times coming, and I think anybody in this room who has had a prescription filled lately will understand that that’s true, particularly if you’re using some of the newer drugs.

I’ve heard a lot of people talk about how the wonderful efficiencies of the private sector are working, and that seems to be accepted as gospel by a lot of us who are sitting here today. But I note that a lot of them are going out of business. A lot of them are dropping coverage.

A lot of them are getting ready to raise costs to recipients. A lot of them are merging. It just may be that there’s a lot of illusion and perhaps a fair amount of blue smoke and mirrors here, to try and sell us on something that may, in fact, not be so.

I have been sitting here a long time, and I’ve always kind of had the curiosity about what are the costs of what we’re doing?

What are the benefits?

How are we going to insert these prescription pharmaceutical benefits that we’re talking about, and I think we all agree are highly desirable, into the plan?

How are we going to address the problem that we confront with regard to those matters, and also with regard to the very basic matter that we all are aware of but talk about occasionally, but without any real appreciation--that is, of saving the system.

The President has suggested that we put money from the general fund into it, the mechanism of using some of the surplus.

But I hear people talking about how the private sector is being efficient, and they’re going to provide us with some wonderful mechanism that nobody here has explained to me and I don’t quite understand, to save money, to get this whole thing going.

I think until we have addressed the overall questions about how we’re going to afford what it is we’re proposing to do, and how we’re going to finance what it is we’re going to do, and achieve some understanding of what our mission here is--is our mission to enrich the program? Is our mission to save money? Is our mission to come up with a better program that offers more benefits? How do all of these conflicting responsibilities and others that we confront mesh, given our concerns and what appears to be our charge that at some point, we have to address the simple fact that the system is going to run out of money?

Having said all of these things, we still have a basic responsibility to address the needs of the current recipients and the future recipients.

I would remind you all of something that happened to us a few years back, when in a great burst of enthusiasm we passed the long-term care and the proposal that we put into Social Security.

My good friend, Danny Rostenkowski, got chased down the road. They jumped on his car, and it was a very difficult time for a lot of politicians.

I think we repealed that, and it was under rather bad pretenses. It was really the wrong thing to do, but the people wanted it, so we got rid of it.

But I’d remind you that the political component out there with regard to what we are going to do is going to be very real.

If you don’t put together something that the seniors are going to want, and if you don’t put together something that the people are going to find desirable, and if you don’t address the basic problems of cost, we’ve got some real difficulties.

So I would urge, Mr. Chairman, with all respect and great affection, that we address these questions here, and don’t try to assume and try to tell me that the private sector is going to come up with some wonderful efficiencies that are going to resolve all of these problems, because they ain’t.

We’re going to wind up with a great deal of surprise on our faces, a lot of lost time, and perhaps some great opportunities that have gone out the window.

Senator BREAUX. I appreciate the Congressman’s statements. I think that’s one of the things that we’re trying to do, is to blend the best features of the private sector market with the best features of a government-run program.

That’s why this draft that I have allows seniors to stay in a new and improved fee-for-service, if that is the best program for them.

If a premium support can offer them other plans at a better price with more benefits and better benefits, they should be able to move into that option, depending on which one is the best.

Congressman Thomas?

Mr. THOMAS. Thank you very much, Mr. Chairman.

I appreciate your, one, offer to lay a position on the table, and then; two, the ongoing civility of the discussion, notwithstanding the very strong feelings that I think are generated about a very important area that requires, in my opinion, a major re-think.

The effort put in to produce the changes in 1997 were extremely difficult, but I think they are a useful backdrop in discussing where we need to go.

If you look at the various groups that we’re dealing with, obviously we have the beneficiaries, we have the taxpayers who are sometimes the beneficiaries, and the providers.

What we really did in the changes in 1997 was to go back to the providers and continue to reduce the payments to the providers and shift a major portion of what had been carried by the part A payroll tax fund over to the general fund.

The basic funding structure was no longer 50 percent part A and 50 percent part B, but now 60 percent part B for the general fund and 40 percent part A.

That’s basically reflected in the shift from a 90/10 split, which was the case prior to 1997, to the current argument of an 88/12 percent.

So I would tell the gentleman from Washington that this isn’t charging them more for the same program; it is simply a reflection of the current law structure, more into the general fund.

And that’s reflected on what is currently the part B premium.

As a matter of fact, if you leave current law in place, by the time you get out to 2025, because of the growth in what’s currently covered by part A, and what is now covered by part B, in large part because of home health care and its growing in the chronic, long-term payment increases, that under current law, the split would move from the current 60/40 to more like a 70/30 general fund/HI tax fund.

What the President proposed was to simply increase the percentage from the general fund by these surplus dollars, not necessarily guaranteed, based upon the performance of the economy, to create more like an 80-percent general fund/20-percent payroll tax shift.

That’s where I have some concerns with his suggestion.

Under a premium support model, if you buy it as a concept, there are a number of ways that we can deal with providing drugs for seniors. One of the suggestions has been to modify, modernize, change the Medigap supplemental insurance.

People are already paying for it, and add drugs across the board to that. That would increase the price of that. People would be paying more out-of-pocket, less in a coherent structured payment than they are now with the mismatch of supplemental insurance, out-of-pocket, and perhaps a mix of employers’ dollars.

We would need then to deal with those who currently are not able to pay for their Medigap insurance, and not just the low end who, with the QMB’s get their premium and their out-of-pockets paid for or the SLMB’s who just get their premium paid for, but we would need to address, as I’ve said repeatedly, those people who are not now recognized as a categorical low income and therefore some government benefit, but who are having a difficult time because they can’t meet the current payments for the supplementals, and that we need to deal with that issue.

I think it makes some sense to deal with some transfer. Somehow it’s not a problem when you deal with income to create a progressive redistribution of income under the income tax, but that somehow it doesn’t make sense under this program.

I think that old argument about it becoming a welfare program if people pay more or differential payment has got to be a key point that we examine.

I also have a difficult time arguing that somehow the current structure of receiving health benefits is locked in forever over time.

A provision of the Tax Code to provide writeoffs for employers, therefore creating an employer-based health care system, is not inherent in nature.

And it hasn’t been in the system for all that long a time since World War II. If we would begin addressing this fatal flaw of the maldistribution of health care benefits in the Tax Code, and reward individuals with the credit instead of employers, the argument about the fact that ‘‘since you aren’t employed, you don’t have health care’’ would dissolve immediately.

But under the premium support you can either do the Medigap change, or, as Bob Reischauer has said, instead of two different systems with their complications with perhaps the differing benefits creating some risk adjustment problems, you simply capture those private dollars, whether they be out-of-pocket for supplemental Medigap, or employer dollars flowing to the individual, or just pure cash out-of-pocket, which is occurring more and more now for more and more costs.

Capture those as part of a larger premium model and use not just the government dollars but the private dollars in a single enhanced overall premium.

Both of those could work under a premium support model.

What the President basically said, in my opinion, was, ignore the 65 percent of those who currently have some kind of drug benefit, either from supplemental or from their employer, and drive those private dollars out of the market and substitute tax dollars.

Now, I tell the gentleman from Michigan, one of the first things I did on the Ways and Means Committee was sit through that catastrophic vote, both in subcommittee, in which I voted no, on the full committee, in which I voted no, and on the floor, in which I voted no.

I voted no for what I thought was a fairly fundamental basic reason. People who are already paying for it don’t want their taxes raised to pay for the same thing.

And that is exactly what we would be doing to at least 65 percent. However imperfect their current drug package is, if we were to simply say we want to take taxpayers’ dollars, notwithstanding the 80/20 split in the general fund that would occur--and Senator Kerrey’s concerns about that growing piece of the governmental pie--drive out the private dollars, substitute them with taxpayer dollars, and I think you’re going to get very much similar reaction as we got on the catastrophic.

I think you’ve got to take those current dollars, be smart about how you utilize them in an overall structure, and be more concerned about how we get drugs to that 35 percent who currently don’t have them.

Those are either the low-income people who can’t afford it, the people who have fallen through the cracks, or people at the top end who are basically so well off they’re functioning as self-insured anyway.

We’ve got to capture that 65 percent, be clever about how those dollars already spent in the private sector are blended into our new program, so we don’t simply drive those out and replace them with taxpayer dollars.

If we can do that under a premium support model, then I do think we have some dollars that we can direct to those people who are near poor, who are currently not able to get the broad-based health care structure that they need, including drugs.

That, I think, should be our discussion, not how to dump taxpayer dollars in and force out private dollars, or you’re going to have seniors on your hood, just like Rosti did in Chicago.

That is the key to, I think, our creating a package which maximizes the benefits, but also blends as best we’re able, the current world with the world we want tomorrow.

Senator BREAUX. Dr. Tyson?

Ms. TYSON. I have a couple of things. First of all, I want to say that I think the value of what you did by putting this proposal, I think is a conversation--it is a conversation where people are trying to move the ball forward by identifying where they agree and where they disagree very clearly.

Let me go play off of directly what Mr. Thomas said. On the issue of drugs, I agree with you that, ideally, what we want to do--and we have in the proposal here, but maybe we’ll get one--would be to find a way to mobilize all of the dollars that are currently in the system that are not being efficiently or equitably used, for drug coverage.

So, I really do come from the Reischauer era and perspective that the ideal world would be a world in which you had the dollars that people are paying through Medigap, essentially coming into an overall health care premium support for the elderly which included drug benefits and included them with those dollars being moved in through that.

So, I agree with that.

Let me say that--then let me agree with Congressman Dingell here, because I think the next thing we need to move the conversation forward is some numbers.

I firmly believe that if we do a realistic evaluation of all of the Medicare modernizers that Bruce has proposed, if we do a realistic evaluation of all of the savings we would get from extending certain provisions of the Balanced Budget amendment which are not duplicative of the modernization proposals for Medicare, and if we score, realistically, the savings from premium support, with or without drug coverage--and I think we should score them both--I think we will be able to educate ourselves and the American people--and the President already knows this--and many people in this room already know this, but we can educate ourselves once and for all that Medicare with premium support and all of those adjustments faces a financing problem.

And that is why the President’s willingness to put the surplus on the table to address this is so important. In fact, we are not by anything we have discussed here, all of which I think I could put together in a way which might improve Medicare, fee-for-service and premium support, we are not going to solve the 75-year financing problem.

We’re probably not going to solve the financing problem through 2030. And I don’t think we can have these discussions anymore without those numbers in front of us.

The assertions here are not backed up by any numbers. At the end of the day, I personally would feel that if the Commission recommends a premium support model, a modernized fee-for-service structure, a sensible way to handle drug coverage, and we make substantial progress as well on the financing problem, but we don’t solve it, we will have made a tremendous contribution to the American people.

But we really have to get those numbers in front of us.

Senator BREAUX. Well, those numbers are being requested from HCFA. Actually, we will try to get them out.

I want to talk some more with you, but not right now, on the benefits package. My thoughts on the benefits package is that we shouldn’t have to spell out every detail, how many hours you can be in a hospital, how many days you can see a doctor or how many prescriptions you can have filled, but just to identify the areas that we’re going to cover, and then have the plans compete on which one will be the most generous.

Ms. TYSON. On the issue of benefits, the key issue here, I think, which for me is a major issue in terms of whether I can ultimately support a move to premium support, is how we handle the prescription drug issue.

I’m open to various ways of handling it, but to not handle it, to me, is not to take a serious restructuring step. Therefore, I just want to put that on the table.

Two little--they’re not minor, but they’re important things in terms of scoring as well, it seems to me, so we get these numbers.

The proposal to change the eligibility age gradually, it is my understanding that the amount of savings that comes from that is actually quite small. If it is quite small, then I think we really sort of have to take the do-no-harm position on this proposal.

We know that if we change the eligibility age, we will get an increase in the number of uninsured Americans. We know that the number of uninsured Americans is already a public policy problem.

Well, if we’re not going to save much money from changing the eligibility age, and we’re going to make a current bad public policy problem even worse, then I just can’t see it. I don’t see what we’re getting for the change.

Senator BREAUX. It’s not a lot of money in the short term, but it’s big bucks in the long term.

Ms. TYSON. I think we should see numbers about that, and also numbers about--projections about the number of Americans who would lose insurance as a consequence. We’ve got to weigh those two things, one against the other.

Then, finally, on the national versus regional bidding, you have in your proposal a number of times stated, geographic adjusters. I think that it’s very important to understand what you mean by that.

We have to take as a given right now, that Medicare spending in the fee-for-service program varies by as much as 3:1 across the country.

Now, we know that some of that is differences in cost of living and differences in the underlying cost of providing medical care, but we also know that there is a whole lot of that that may be just differences in utilization or practice patterns or whatever.

I don’t see how we can start out with a national bidding program, particularly where there are regions such as those Congressman McDermott mentioned where there are no--there is only one program, so what would be the national bid--I don’t see how we can start out with a national bid approach when we have such major differences among regions.

I think we would be much better off----

Senator BREAUX. Give me some suggestions, not right now, but on how we’d do it regionally.

Ms. TYSON. But I think that that’s something we really need to think about.

Senator BREAUX. Colleen Conway-Welch?

Ms. CONWAY-WELCH. I have just two questions, just to follow up on Senator Frist, relative to the structure of----

Senator BREAUX. Can you speak up a little bit?

Ms. CONWAY-WELCH. To follow up on Senator Frist’s request regarding the structure of the Medicare board, also requesting some ideas and information on the reduction of HCFA, specifically how would that affect it, and what numbers might be placed with that as well?

The other thing--and this is a question for Laura, and I am seeking information on this piece--but is it necessary that HCFA fee-for-service--I mean, the Medicare fee-for-service through HCFA would be the national plan, or is it possible that a national plan through FEHBP, of some kind of Blue Cross/Blue Shield something or other could be the national plan? I’m confused on that.

Ms. TYSON. I think all I meant was that if in a national bidding process, you’d have--you basically would ask for a price that different plans would bid to provide the core benefit package, including, you’d get an estimate, which I assume you’d get by averaging the regional prices of fee-for-service in Medicare for the average national Medicare fee-for-service price, and then you’d average all of those things.

But then, having averaged them all to get a national figure, you’d have to turn around and de-average them by geographic adjusters. So I’m not sure why one doesn’t just start with the actual regional or local areas where you have--you believe competition is more likely to work at that level anyway. You’re better able to understand it.

Senator BREAUX. OK, Dr. Vladeck, and then Congressman Bilirakis.

Mr. VLADECK. Mr. Chairman, I have two questions. I said I wasn’t going to get--about premium support, but I’m confused about a couple things.

They get to very sort of basic questions. Perhaps if we could clarify them, at least we could clarify the discussion somewhat.

The first has to do with, frankly, my confusion about what you said about benefits. On the one hand you said that everything that’s currently in the Medicare package would have to be part of the core package, and I certainly am in agreement with Laura that prescription drug benefit has to be part of it, too.

But then you say you wouldn’t want to, in great specificity, you know, not spelling out how many hours of this or days of that. Well, I would suggest to you that the reason we have so much specificity is because a guaranteed benefit is meaningless in the absence of such specificity.

Over 33 years of the evolution of the Medicare Program, we have had to evolve a whole set of detailed rules and principles because if you don’t, then to say that you’re guaranteed access to physician care or to say that you’re guaranteed access to diagnostic radiology services, or even inpatient hospital care, becomes meaningless.

We don’t want to guarantee inpatient hospital care for nonmedically necessary services.

Senator BREAUX. Let me respond to that point first.

The idea is that we would have the same categories of coverage as the current Medicare fee-for-service, and that includes inpatient hospital care, doctor services, other medical and health services, the skilled nursing facilities, the home health, the hospice services, the specified preventative services.

But just like we as Federal employees and U.S. Senators and Members of Congress, those are the categories that the Federal plan provides for us. Some will be a little more generous, some will be a little less generous.

All of them will be at an acceptable level that is guaranteed by the Office of Personnel Management. Plans that do not meet a minimum efficiency standard are not allowed to bid.

But once we know the categories, some will be more generous. None will be accepted for even participating if they don’t meet a minimum category. That’s why the Medicare board is there, so the Medicare board can look at these plans and say here’s what we want you to cover, and if you don’t come close then you can’t participate.

You have a good plan, you have a good plan, some are different. I just don’t think we can continue to micromanage health care in the 21st century and keep up with medical technology that changes every day.

So, the Medicare board would be the thing that makes sure that the plans cover the things that should be covered in an efficient and acceptable manner.

Mr. VLADECK. Without getting into a long debate at this moment, Senator, I would just suggest to you that much of the work of the Congress last year, much of the work of many State legislatures and of every State insurance department is now preoccupied by the entire question of how you protect consumers in a competitive health care market when an HMO or a private plan or a public plan decides it’s not going to cover a certain procedure, or it’s going to treat a certain procedure as experimental.

Senator BREAUX. Bruce, I will tell you that I, as a Member of Congress, am sick and tired of having to tell people--tell HCFA how many colonoscopies they can do. I don’t know. Medical science knows that more than I know and any other Member of Congress.

Mr. VLADECK. I would just suggest, Senator, that somebody has to make a decision about that, and if you carry out the logic of that--and this is related in my second question which is maybe an easier one.

I’m still misunderstanding your example a little bit, or having trouble understanding your example a little bit. Do I understand it to say that the bidding structure you have designed, over time, might create a circumstance in which in order to get the fee-for-service plan, the classic plan, the standard plan, whatever it was, a beneficiary might have to pay a premium equivalent to more than 12 percent of the cost of that plan?

Senator BREAUX. Yes.

Mr. VLADECK. Then I think if you take the benefits--and here we are talking about premium support--I think if we take the position you’ve just explained on benefits, which I understand, and the position you’ve just explained on premium support, then we have to recognize what it is we are doing.

At the moment, under law in the United States of America, if you work in covered payroll employment for 40 or more quarters, you are entitled by law to a very specified set of benefits when you retire, provided that you pay a premium equal to 25 percent of the cost of certain of those benefits.

That is an entitlement which this proposal takes away. You are disentitling a generation of American workers, and I think that’s a very fundamental issue.

Let me suggest----

Senator BREAUX. OK, let’s get an answer to that, because I don’t agree.

Mr. THOMAS. If you took today’s world, instead of an 88/12 percent, it would be 90/10. If you take the current taxpayer value of part A, and take part B and combine the two total amounts, and take what is the 25 percent----

Mr. VLADECK. I agree that 12 is the right number.

Mr. THOMAS. Can I finish? That you pay for part B, the overall separation would be a 90/10.

If you continue that with the way in which the BBA 1997 current law payment structure is, it will be an 88/12 in the next several years.

The fault would be that these people we’re trying to be overly honest and show you where tomorrow we’re going to be under current law, instead of today. It would otherwise be a 90/10. That is what the payment is today.

Mr. VLADECK. I agree with you entirely, Bill. That’s not my concern.

We said that under current law, under current law, the entitlement is to specified benefits at a premium cost equivalent to 12 percent of the combined benefit package.

I don’t disagree with that one iota. I fear that the way this premium support plan has been defined, that the entitlement neither to the benefit package, nor to the share that is paid by the government as opposed to by the beneficiary, is maintained. I am afraid they both go out the window.

Now, people may decide that that’s what they want to do, but I think we need to recognize that that is what we are, in fact, doing.

Senator BREAUX. Well, the government contribution grows over time under this proposal, Bruce. It will grow over time depending on what the national weighted average would be of the premiums that are----

Mr. VLADECK. Depending on the way the market evolves, Mr. Chairman, we are saying that what is now a statutory guarantee that has been in place for 30 years becomes in the future, an artifact of the way the market that we say we can’t predict, and technology we can’t predict drives the system.

You may or may not have this entitlement 30 years from now, depending on what the market does. I think that’s a pretty profound change in the way we think about the Medicare Program.

Mr. THOMAS. Another way of saying it was, the original Medicare agreement between the beneficiary and the government was a 50/50 split, which was eroded down to a less than 25/75 split, and that we are faced with absolute bankruptcy of the system unless we infuse enormous amounts of general fund dollars into the package and attempt to guarantee now with general funds that not even the President was willing to push on the payroll tax.

So now we’re exposing the general fund to this continued hemorrhaging which has brought us to the current position. That’s why some of us think fundamental reform is absolutely necessary in a fair and equitable structure.

Mr. VLADECK. If you say that we can’t afford as a society to maintain this entitlement, then say it. But that’s what this proposal does.

Senator BREAUX. I disagree strongly.

Mr. THOMAS. At least you need enough specificity to come to that conclusion when you don’t think there’s enough specificity in it to do anything else.

Senator BREAUX. Let’s not argue, let’s get some discussion. Debbie had a response.

Ms. STEELMAN. I think the statement, regardless of your interpretation of the chairman’s proposal, I think the statement that this Commission is about the business of eliminating the entitlement for seniors is not only wrong, I think it’s inflammatory and purposeful for the disruption of this group.

I think that we have a moral purpose here. We’ve been appointed as representatives of people who think very differently.

You and I think very differently, but I do not believe that the public or this Commission is advantaged by a discussion as to what is at stake is the entitlement.

What is at stake is whether or not a future generation of benefits and a future generation of taxpayers will have a chance of not only keeping what we have today, but improving it.

I think when we started out this Commission, everybody around the table did say we’re here because we’re scared about solvency; we’re here because we’re scared about the inadequacy of the benefit package; we’re here because as a group of whatever we are, 17 people appointed by both leaders of both parties and the President and everything else, maybe have enough good faith around the table to try to work through this set of issues.

I hope that the discussion can go to that level, because I am in great sympathy with what Mr. Dingell said.

I mean, for somebody who was not born the first time national health insurance was discussed, it is a great honor for me to sit here with somebody who put aside fact and took advantage of theory to create the Medicare Program.

We’re going to have to have a leap of faith here; there is no question. But can we create enough faith together to do it?

Now, I don’t think this chairman’s mark has all the answers. I don’t have all the answers. You don’t have all the answers.

But I don’t want to throw around epithets like we’re killing the entitlement to kill this Commission. I think that’s wrong.

Senator BREAUX. Congressman Bilirakis.

Mr. BILIRAKIS. Thank you, Mr. Chairman.

I frankly endorse the statements made by Deborah.

Mr. Chairman, before we started the meeting, I made the comment to you that this is a very important Commission meeting. Frankly, I think it’s the most significant of any that we’ve had.

We only have a month to go. We’re virtually into February, and we’ve got to get on track.

It sounds to me, based on what we’ve been hearing today, that we all seem to be agreeable, or virtually all of us, anyhow, on a premium support track.

Now, the devil is in the details, and there are disagreements on some of the details, a lot of the things that Bruce and others have brought up.

But all that has to get worked out, and we’re going to have to do it in the next 30 or so days, otherwise we’re just going to slip our deadline. But at least it sounds like we’re on a track.

When we first started talking about premium support, I was a little concerned that maybe the complexities of trying to determine programs, what plan might be best for certain individuals, would be a concern.

I represent one of the most elderly districts in the country, and many of them are 85-plus, and that’s the fastest growing demographic area.

But the point is that fee-for-service will be available. I’m not a great big fan of HCFA’s, but at the same time, if government fee-for-service is going to be a part of this, possibly we’re going to have to give HCFA more flexibility, maybe not to the extent that you, Bruce, propose, but more flexibility so it can, in fact, be competitive.

You know, we’ve talked about prescription drug benefits, and I’m on record, and I repeat that I’m supportive of it.

We talked earlier about the Veterans’ Administration is able to purchase drugs for less than other areas, and I think there’s a lot of flexibility there.

Laura mentioned all of the drug dollars from every source, such as Medigap, so I really think that if we’re open-minded, we can probably handle that area.

One of the things we haven’t talked about is long-term care. Again, it’s another benefit, and I don’t know if you can tack it on when we’re, in fact, trying to save the program.

But it is something that we have not talked about at all, and I think that it’s something that we’re going to have to address because the elderly are getting even older, and many problems exist.

But I’m supportive of the premium support system. I’ve had many constituents who have approached me over the years who have said to me that you have a good plan, and I think that our plan should be as good as yours. And that’s exactly what we’re talking about here.

I think frankly this has been a good meeting and very constructive, and I’m glad to see we’re on that path.

Senator BREAUX. Thank you, Congressman.

Stuart Altman?

Mr. ALTMAN. Yes.

First let me indicate that in a recent issue of Health, it had a number of extremely good articles, important articles, for this Commission.

First, I’d like to acknowledge the best-written piece I’ve ever seen in Health Affairs by Bruce Vladeck.

I think that, Bruce, you laid out in a very cogent way the complexities of our Medicare Program.

But let me--I’d like to put on the record something. We talk a lot about the regressivity of the payroll tax.

Well, as it turns out, given the changes in the, the latest set of changes in Medicare payment in terms of what people have to pay at the higher wage level, the Medicare payroll tax is no more regressive than the regular income tax.

So that I think we need to forget about that part, that it’s not a tax and concerned about it.

Second, is that for at least for the population that we’re talking about--those who were born after 1945--the current expenditure and income suggests that they’re going in balance if the growth rates are immoderate, so that we’re no longer at a situation as we look into the future, that the people who are paying in will get a lot more than they’re paying in, based on income. So, I just want to put these in the record.

Now with that said, some small things before I get to the big issue that’s really dividing us.

That is, that I have talked a lot about the idea that Medicare is riven full of cross-subsidies. And they were purposely designed by different Congresses so as to bring about public goods of the need for the Medicare Program and our health care system.

Quite frankly, I think it is terribly unfair just to single out one of them, namely, the direct medical education and say that’s the only one we’re going to change.

I think we need a thorough, systematic review. Now I happen to favor--I want to make it very clear--favor a number of the cross-subsidies in the Medicare Program, but if we’re going to take them out, we’ve got to take them all out, and we’ve got to do that systematically.

I see no value in pulling one of them which is a very valuable benefit, this idea of paying for our future generation of physicians--I can see the argument against it, by the way, but I think that you can make the same argument for about 50 different aspects, and until we look at that, I think we ought to put them all into a special analysis category and not single that one out.

Now let me focus on the one that’s really breaking us apart, which is prescription drugs and the benefit package.

I understand where you’re coming from, Deborah, and I totally agree with you. I know you’re of good will, and I know you really believe in this program.

I think what Laura is trying to say, and which I would like to support, is we need badly to figure out a way to include prescription drug benefits in the basic core system, including the classic Medicare, in a way that doesn’t take a lot of money that you now say is being paid for by others. I understand what you’re saying.

Now as I look into the future, where are the big dollars coming from? It is coming from the employer-supported plans.

Those plans have already fallen 20 percent in the last 4 years. Every indication is that if we look out into the year 2020, 2030, we’re going to be down to 15 percent, maybe.

We should not include in there the Medigap, because that’s being paid for by private individuals now, most of whom are on the high-income side, who are going to be asked to pay more.

If we did a systematic analysis and looked at who is getting those drug benefits, you’re going to find they are disproportionately at the high-income side, and I propose that we ask them to pay in the public system. Forget about Medicaid, which is on the other side.

What I’m trying to say is: We can design a plan--maybe it should be voluntary with a 50/50 premium amount. It shouldn’t be open-ended, which means that it covers everything. It doesn’t even have to be run directly by government.

Can’t the government put it out for bids with a prescription benefit manufacturer group that now is being used by the managed-care plans?

But if we don’t include prescription drugs in classic, you so tilt the system away from a balance that I can’t support it.

Then we get to the point that Bruce indirectly raised, and I support, and that is we need to guarantee to the American people a core benefit. We’ve got to do that.

Now that doesn’t mean that these other plans can’t provide more and that they can’t provide it in--the drug benefit can be more extensive. They can provide--we’re going to have coinsurance. They can fill in on that coinsurance.

So if we don’t say and simplify it in those ways--then we can move forward.

And, yes, I support the premium support. I think it doesn’t structurally change it, but we need to simplify this in those two ways: Cover prescription drugs in a way that minimizes the public money replacing private, but recognize that over time, that’s going to get less and less; and second, do put together a core benefits that we commit to the American people.

Senator BREAUX. OK. I think you spelled out pretty clearly some of the real problems we have. Congressman Dingell, I have you on the list.

Mr. DINGELL. Thank you, Mr. Chairman. I think we’re having some pretty useful discussions here. We’re getting a little sharp, but I had expected when you have a useful discussion about matters of great concern, that there will be a certain sharpness and a certain edge to the discussions and that doesn’t much trouble me.

I still want to define where we are and what it is we’re trying to do.

I am not clear whether your plan is an essentially, a defined benefit plan. I’m not sure what it is that we’re going to modify or what it is that is going to be involved in dealing not only with what goes into the plan now, but how it changes over time.

I will be very uncomfortable if we watch Medicare be converted into a defined payment plan, because that’s totally inconsistent with the history of it, and it’s totally inconsistent with the needs of those who have the least.

I have real troubles about the prospect of converting Medicare into something which eliminates the entitlement aspects and moves it from essentially that kind of program into something which we might better define as kind of a welfare program as opposed to an entitlement system.

That worries me greatly, because when that happens Medicare becomes another Medicaid, and all of a sudden, the essential public support that’s needed for it begins to erode, and very sharply.

I still feel very strongly, Mr. Chairman, that if the analytical work of this Commission is to go forward well, we have absolutely no choice but to begin to focus on what the costs and the benefits are to be, and to have them in a fairly well-defined form so we can understand not only what we’re talking about today in terms of what we’re going to offer people or charge people or how we’re going to finance it, but how these very matters are going to be conducted over the long term, because I view that as being very, very important.

Now I favor--and I want to reiterate very strongly--the idea that we had better have the drug benefit here, but I want to be sure that it’s a drug benefit that means something and it’s something that is passable in the Congress and acceptable to the public.

If we don’t do that, we are going to have some big troubles.

So I think that we probably don’t have the information that we need to tell us about costs and benefits, but I hope that between now and some future time soon we will be able to get that so that our discussion can be better focused on where it really is we’re going, so that all of us can understand what we’re doing.

Your idea is a good one insofar as I have seen, and I’m in one of the government plans, and I happen to think that it’s a very fine plan.

But I’m not sure that we have addressed all of the peripheral problems that would be different for the rural parts of the country as mentioned by Senator Gramm, or people who might fall out because all of a sudden they are very costly kinds of people to insure, or any of the other problems that exist.

So, I thank you, Mr. Chairman.

Senator BREAUX. I want to move toward wrapping this up.

Bruce?

Mr. VLADECK. Mr. Chairman, I just want to make one very quick point, not--and respond to the personal attack.

I can support a premium support that I think is consistent with maintenance of entitlement, and there are two requirements in order to do that: One is that the existing benefit package be available. It’s really two interrelated requirements; that the existing benefit package continue to be available at the relative share of contribution of the government and the beneficiary that now exists.

I don’t believe that the plan you proposed, Mr. Chairman, provides that. I think it’s relatively easy to fix.

I do think, however, that, that will then raise another question which I think we’re not going to talk about today but which I would just note, which is, all the rhetoric notwithstanding, we have in effect chosen to move away from our initial discussions and entirely punt on the issues of long-term solvency of this program.

I think in that regard we ought to at least be treating the President’s proposal with more respect, because it’s about $650 billion more to strengthen the long-term financial health of the program than anything else that we’ve talked about at this Commission to this point.

Even though that’s only a fraction of the 75-year deficit or the 100-year deficit or the 1,000-year deficit, it’s $650 billion better than we’ve got at the moment and I think that deserves some serious consideration.

Senator BREAUX. OK, Colleen, and then----

Ms. CONWAY-WELCH. Thank you, Mr. Chairman.

Just to expand a bit on that, Bruce. the idea that if we don’t solve this in some fairly dramatic and creative ways, that by the year 2030 this will be approximately 30 percent of the budget, it is not a matter of, ‘‘killing entitlement;’’ from my perspective it is a matter of replacing, for example, the core benefit package of guaranteeing that at some level--and I have a question about that--that we will guarantee the government involvement in premium support that we’re guaranteeing low-income health, and that we’re guaranteeing a fee-for-service option, if some of the seniors still want it, and it will be available on a national basis.

The issue then is that it begins to look a lot more like, as we’ve all said, the plans that the Members of Congress have.

I mean, I have a hard time seeing that as potentially taking away an entitlement. Maybe I’m having a problem with semantics, but the other piece that I did want to ask also is the concept of having--of micromanaging the health care pieces of number of hospital days, number of this, number of that, you know, number of prescription or whatever.

I think that’s a real dangerous place to go, and I understand, in the Federal Employees Health Benefits Plan, that for example, if your kids are growing up and they need braces for 3 or 4 years, that you can go out of one plan that doesn’t offer braces and into another plan that does, and that that’s part of the competition in choice piece.

Am I misunderstanding that or is that----

Mr. VLADECK. Can I respond, Colleen? Let me take an example that’s relevant, that’s been empirical in the last couple of years.

The question is: Does the benefit package in the Federal Employees Health Benefits Program require that a women who needs a radical mastectomy be entitled to an overnight stay in the hospital?

Well we had to write an Executive order to clarify that, because----

Ms. CONWAY-WELCH. But that’s absurd.

Mr. VLADECK [continuing]. In the administration of real--the issue there is and I believe an Executive order says, that the attending physician should make that decision, not the insurer.

But the fact is, in the real world of administering real insurance programs, whether they’re Medicare or private plans or FEHBP plans, somebody makes the decision whether we cover a transplant or we don’t, whether a patient who has a maxilla-facial problem, whether it’s cosmetic or function, someone is making that decision.

The fact is, today, in Medicare’s coverage pattern, the person making that decision is far more likely to be the patient’s personal physician than is the case in most current private health insurance plans, including those in FEHBP.

But somebody is going to make those decisions, and we have to have some structure or mechanism to protect consumers.

Now I don’t think----

Ms. CONWAY-WELCH. But I expect we would with the Medicare----

Mr. VLADECK. I don’t know what it is in this proposal. That’s my problem.

Senator BREAUX. Dr. Tyson?

Ms. TYSON. Can I just say that--all I want to say is I think we really do need to flesh out what the Medicare board would be, because it is the case--I don’t like the idea that--Senator Breaux said he didn’t want to have to be the decisionmaker on how many procedures an American should undergo--I personally don’t like the idea that the Congress determines whether or not I have to stay in the hospital 1 night or 2 nights. I think that is ridiculous.

But I do think that we have begged the question so far by not describing in a little more detail who would appoint the Medicare board, how long would their term of office be, would there be some representation broken down in terms of providers, consumers, and insurers?

Senator BREAUX. I thought this Commission could just be the Medicare board.

Ms. TYSON. Just a Medicare--pardon?

Ms. CONWAY-WELCH. It will just be us, right? [Laughter.]

Ms. TYSON. But in this particular case, I had not really focused on this issue. I had not focused on this issue until I heard this conversation.

This is critically important because I do think we have to say more to the American people about how we would imagine this to have oversight.

Just try to clear up this manic issue. I don’t want to put words into your mouth, Bruce.

Let me see if I can make sure--a concern that Bruce would have about this going forward is that there are plans that are bidding, including fee-for-service, OK?

And the government is going to pay 12 percent of some average, whether it’s a regional or a national, but it’s going to pay.

If the fee-for-service package over this time horizon grows faster in price than the rest of them, sooner or later, 12 percent of the average bid is not going to be equal to 12 percent of the fee-for-service premium; it’s going to be less than that.

You’re going to be stuck, if you’re in fee-for-service, paying more than 12 percent. That’s the issue, and it’s all about what you believe will happen to the cost of Medicare fee-for-service versus the other plans as you go forward.

Senator BREAUX. Bill Thomas?

Mr. THOMAS. Laura, I would just tell you that I do think if we accept the premium support model as something we’re going to go forward with, and that someone’s vote is dependent upon exactly who is on the board and what they do, how they do it, and when they do it, you’re going to be disappointed when it moves to the legislative arena and the votes are going to be deciding what they want.

So, I agree with you, but we need to talk about goals, direction. It sounded like you wanted specificity that you’re going to be disappointed in if you give it to the sausage makers.

Ms. TYSON. I think goals is the direction. Why it is so important to get it right, is what we need to establish.

Mr. THOMAS. Goals and the direction, I think are critical.

Where did Bruce go?

Ms. TYSON. He left.

Mr. THOMAS. I guess my biggest problem is his argument that we ought to look at the President’s plan as serious because it deals with solvency.

Well, what he’s really saying and what the President said in his State of the Union was take my money, general fund, which is now surplus, which may or may not be there, and we can make Medicare solvent until 2020.

Well, what he’s really saying is the way you define solvency is the part A trust fund. And that if you don’t bankrupt the part A trust fund until 2020, you, ``have solvency in Medicare.’’

I thought most of us were more sophisticated than that. It’s not just the solvency of the part A because, frankly, you can make the part A fund solvent forever if you continue to transfer functions that were paid for under the payroll tax out of part A and over to part B.

If you put 100 percent of the Medicare costs under the general fund, you’ve solved solvency forever.

I think it’s a bit of sophistry to say we can take this money and help on the solvency. I thought from the very beginning that we were sophisticated enough that it was the total societal costs, what seniors were getting vis-a-vis the rest of the health care market, and to what extent can we, as best we’re able, craft a plan that provides them a modicum of appropriate health care and create a mechanism where Congress isn’t in there every so often legislating body-part legislation, and that it is a system which is self-corrective in which, over time, Congress would be putting more money in, but it would be a public debate as to how much it was to maintain the structure instead of the current arrangement.

That’s what I thought we were talking about doing.

If what we’re talking about doing is dumping surplus to claim that we have now solved the problem of Medicare to 2020, which is what the President said we were doing by simply buying down the share of Medicare paid for by the part A trust fund, that is, in fact, political card games that should not be seriously considered.

Senator BREAUX. Mr. McDermott and Debbie and then Laura.

Mr. MCDERMOTT. Mr. Chairman, I think that one of the fascinating things about this whole process of 10 months is that we have never seriously dealt with the President’s original proposal of reducing the age to 62 and letting people buy in at an actuarial equivalency.

We want to move it up to 67, and we say we’ll figure out what that is and we’ll let people buy in from 65 to 67. I don’t understand why we have never been able to get staff to even look seriously at that other proposal.

But I have seen the same mechanism used over and over again. Let’s put a board out there and let them take the heat while we legislators will kind of slide around and so we’ve got somebody to blame for what happens.

I take a little umbrage at anybody saying that we’re being demagogic talking about the entitlement question. Some of us have stayed away from the word, voucher, and tried to use the euphemism we’ve been using here.

But I think that one of the issues you have is that I’ve sat in the Ways and Means Committee and argued about whether or not we’re going to raise the part B premium $1 and what kind of political impact will it have and all the ramifications, and could we get $1.25, can we get away with that, or do we really need $2, and we argue endlessly about issues like that, because they are required by law.

And if you don’t have those kinds of entitlements and you say, well, we’re going to give to this board, the ability to decide what the benefit package is, and what the premium is going to be, then it gives us plausible deniability.

All 535 of us can go around saying, we didn’t do it; the board did it, and we’re really sorry, but, you know, what could we do? The board did it.

And I personally don’t think that’s where I want to be, and I don’t know that anybody who is in this body wants to ultimately be in the position of trying to fend off whatever changes go on in this system on the basis of 9 people appointed for 6-year terms by Bill Clinton who will run over into the next President, or whatever.

We can construct it to be a marvelous foil for us to hide behind. But I think we have to be up front about that, that that’s what the board is really all about; that we don’t like the political process, and I hear you say with real passion, you don’t want to decide how many colonoscopies.

I think most Members of Congress feel a little bit uneasy playing doctor. Frist and I may be a little less uncomfortable with that, but we’re all uncomfortable with doing that on a piece-by-piece basis.

But if we’re going to set this board up there----

Mr. THOMAS. We could determine who gets them. [Laughter.]

Mr. MCDERMOTT. A little humor never hurt anything, right? [Laughter.]

But the seriousness of this is that if we’re going to give that kind of power to a board, then we have to see in some detail, how that’s going to be done, and is it an irrevocable thing that just automatically goes out to the people, so that we don’t have to come around and mess with it?

We will mess with it; as sure as I’m sitting here, the Congress will mess with it.

We have already passed home health care amendments, and will in this Congress coming up, do something more about what we did about home health care in the last Congress.

We put in risk adjustment, and now the industry is jumping up and down and saying please, please, oh, no, please, no risk adjustment.

So in this Congress, we will undo some of that risk adjustment. We’ll stretch it out from--oh, no, Bill? Is that a commitment? We’re going to force the industry to take it?

I mean, it will be a big battle in here, and the AAPCC rate that has taken away managed care from 500,000 people in this country, I believe we will fiddle with that in this Congress.

The second coming has occurred and the bad guys will all be left here, or the good ones--I don’t know exactly how it works--[laughter]--but this Congress has got three major issues that we put into place, and now we’re going to fiddle with them.

We’re going to have a board sitting somewhere, meeting quarterly, to decide what benefits people get, and what the average benefit is going to cost, and we’re going to not fiddle with it?

Senator BREAUX. I don’t want to belabor this because I want to wind this up now, but the Federal Employees Health Benefits Plan, it’s in statute, what the contribution is. It’s a 72-percent contribution for the government for the Federal employees.

This envisions--the suggestion that I have here is that it’s an 88/12 percent, in statute. Then we’ll have someone to manage the program which will be the board.

That’s a statutory agreement. That’s a contract with the American people, and that’s an entitlement. It’s still an entitlement under my suggestion.

I’ve suggested it as a more generous entitlement than the Federal Employees Health Benefits Plan. But you also bring in some competition so people can offer more and better deals.

Let me get Debbie, and then I’m going to make an announcement about the next meeting.

Ms. STEELMAN. I have one substance comment, and one process question.

Substantively, I’ve heard an awful lot of discussion today about HCFA, both pro and con. HCFA’s perfect, or HCFA’s terrible. HCFA’s the only way to guarantee an entitlement, HCFA’s the only way not to.

The question, it seems to me, is secondary to the one the Commission should be asking, which is, what is the public good to be obtained, and what is the Federal Government’s best role in that?

The public good to be obtained, it seems to me, is equitable financing and solid benefits and predictable benefits, a predictable financing, and all the things I think could be done in a premium support system if properly structured.

So, I would like the question to focus on what’s the best public role, what’s the best Federal role? And not necessarily sort of our historical experience with HCFA.

We are involved in an act of creation. So what role is it that HCFA could play best? What does the Federal Government need to do to set up a tension between the public and private sectors that yields a good, and not the negatives that, you, Mr. McDermott, have described in the State of Washington.

That’s a negative relationship between the public and the private sector. We have the opportunity here to make a positive one.

So, I’d like that discussion to occur, which gets to a process question.

It seems to me that something that several of us have said in the past is that a lot of these discussions are only solvable through really technical discussions, really in the weed sort of stuff.

What is the process we’re going to use at the Commission to have that level of discussion? While I don’t know that they would necessarily end up in the final recommendations--maybe they would; maybe they wouldn’t--but I do know that to get the good will necessary to get to a big set of recommendations, you have to work through those questions that are in the weeds.

And what are we going to do to force ourselves to commit the time or the analytics or the techniques, whatever it takes to have that discussion?

Senator BREAUX. Do you have a suggestion on the process before I talk about the next meeting? Are you suggesting breaking up into smaller groups on this, or what are you suggesting, the full Commission?

Ms. STEELMAN. I actually would have suggested breaking up into smaller groups, except for the experience of this Commission. [Laughter.]

Mr. THOMAS. Been there, done that?

Ms. STEELMAN. Unfortunately, I think you all have to go through this together; we all have to go through this together, weeds and all.

I would love an offsite meeting, in Annapolis or someplace where your phones aren’t ringing and you’re not having to go do something, and really work through this.

Senator BREAUX. The meetings obviously have to be public meetings, and if I keep moving them, I won’t be able to find out where the meeting is. I don’t want to do that.

Let me suggest the following: Today was the first day where we really attempted to talk relative specifics. Obviously, it has generated a lot of concern. It has generated a lot of suggestions and some criticism.

I think that’s all part of the process. But the effort is to try and move us closer and closer to some way to get a necessary majority to report a recommendation out.

It is my intent to address a number of the questions that were raised today, and the question of drugs is obviously one of them; what type of a package, and where does it belong?

Does it belong both in Medicare fee-for-service or only as a option in the premium support? That needs to get more detail and some numbers on what it would cost. We’ll have that for the next meeting.

The type of benefit package: I mean, I’ve described a benefit package in my suggestion which is a core benefit package, the same as currently is in Medicare, but not with the detailed specifics of what you have to have in each case, but a Medicare board would determine the adequacy of the overall plan that is submitted, and one that is inadequate would not be allowed even to submit a bid.

Others who are adequate would have varying degrees of what the benefit package provides. Some will have more days of hospital, some will have less; all of them will be above the minimum as determined by the board. We mean more discussion on that, though; it’s an open question.

The regional versus national bidding, I mean, there has been a legitimate question raised. This suggestion is national bidding to come up with a weighted average. We need to determine what we do with regional versus national.

How the government contribution is set: My vision is that it would start at 12 percent; that’s an entitlement. That would be set statutorily by the Congress. That is more generous than it is currently for the Federal Employees Health Benefits Plan.

And that amount would rise as health care costs rise. But we’d had the benefit of competition in order to keep those prices down.

But if we have it at 12 percent, that necessarily means there would be a greater contribution by the government if the costs are greater; 88 percent of a larger amount would be a larger amount, very obviously.

Solvency, obviously our charge is to come up with a solvent program. If we just add benefits, that’s easy to do, but then do we solve the solvency problem?

I happen to think that the President’s recommendation of putting more money into the program does not solve it, but it makes it easier for us to solve it. But it doesn’t solve it unless we change the way it’s delivered.

So we’re recommending and I’m recommending a change in the whole fundamental way of delivering it, and revenues that would be added to it would make that system hopefully more efficient and more beneficial to the beneficiaries.

So our next meeting will be February 9. That’s a Tuesday. And it will be scheduled here in Washington.

I will stay in communication with all of you because now is really where we have to start making a deal that is a good deal for the people.

John Dingell?

Mr. DINGELL. Thank you, Mr. Chairman.

Senator BREAUX. Microphone, please, John.

Mr. DINGELL. With great respect and affection, Mr. Chairman, can we have----

Senator BREAUX. He always says that right before he nails you. [Laughter.]

Mr. DINGELL [continuing]. Can we have--can we begin to get some costs? Without that I think our discussion is going to be about the same as it has been this morning.

Senator BREAUX. We have a request in to the HCFA actuary to score exactly what I presented today. Hopefully that will be available by the next time.

We also have our Commission members----

Mr. THOMAS. Mr. Chairman?

Senator BREAUX. Mr. Thomas?

Mr. THOMAS. The difficulty is, we can generate----

Senator BREAUX. Order in the audience, please. We’re not finished yet, please.

Mr. THOMAS. We generate numbers but there is a degree of concern about the currency of those numbers. So we have utilized HCFA actuaries.

Now, they were very busy getting the President’s budget.

Mr. DINGELL. I don’t have any trouble with that.

Mr. THOMAS. But we’ve got to move in in a timeframe of 4 weeks. Sometimes their turnaround, given what they have to do, is outside that window.

So, we’ve got to create a structure which gives us those numbers that is a general understanding of how we get them.

If we’re going to scrub every set of numbers through the most skeptical person of the Commission’s requirements, we’ll never get them.

Mr. DINGELL. I do not quarrel with that statement.

I just would observe that we have here before us a smorgasbord. I think we ought to not only have the costs of these things, but we ought to have some bits and pieces so we can start addressing this matter like we would with Lincoln Logs or Erector Set or something like that, to try and figure out what it is we’re going to construct and what it is we’re going to have.

Ms. TYSON. I just have to say that I know that what we asked them to score before did not include drugs. I really think that given the pivotal nature of that issue in at least my position and Stuart’s position and maybe a few other positions around, it’s really going to be important to have, I would say, two models presented to us.

One is premium support and fee-for-service without drugs; and one is premium support and fee-for-service with drugs. Otherwise, I think it’s going to be very hard to move the discussion forward.

Senator BREAUX. We’re getting something from Congressman Dingell on a proposed drug package, and maybe we can get them to score that.

Ms. TYSON. We need to have them in comparable, the numbers they’ve done.

Senator BREAUX. As soon as we get it, we’ll send it over to the Commission.

OK, we will--let’s keep talking, even people who don’t like what we’re proposing, let’s keeping talking about it. We’re getting closer.

Next meeting is February 9.

[Whereupon, at 11:30 a.m., the Commission meeting was adjourned, to be reconvened on February 9, 1999.]

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