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THE NATIONAL BIPARTISAN COMMISSION ON

THE

FUTURE OF MEDICARE

TRANSCRIPT OF

COMMISSION MEETING

Washington, DC

Tuesday, March 16, 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

Commission Meeting

The Commission met at 5:20 p.m., Longworth House Office Building, room 1100, 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, Sam Howard, Senator Bob Kerrey, Representative James McDermott, Senator John Rockefeller, Debbie Steelman, Laura D’Andrea Tyson, Bruce Vladeck, Anthony Watson, and Bobby Jindal.

Senator BREAUX [presiding]. Would the National Bipartisan Commission on the Future of Medicare please come to order.

I want to start off by thanking all of our Commission members who are here.

We have a full Commission contingent which will be here for what I expect to be our final and concluding meeting of this Commission.

And I thank, No. 1, all of the Commission members for being here today, but also for participating and making very valuable contributions to this process throughout the entire year that we have had the opportunity to meet as Commission members.

Let me just make a quick statement about the procedures.

I intend to make an opening statement and, following that, to recognize my colleague, Congressman Bill Thomas, to present the proposal before the Commission.

Then, in turn, I will recognize I think in alphabetical order, I think is what we’re attempting to do, members for comments that they have on the proposal, and any comments, pro and con, that they might have about the proposal that has been submitted to the Commission members as of yesterday.

And then following that discussion, it would be my hope that we would be able to proceed to a record vote on the question of reporting the Commission’s recommendations.

And with that, let me make my comments and ask everyone to be prepared to make theirs, as well.

We will be voting today on the final product that reflects the contributions of many members of this Commission, including my cochair, Congressman Bill Thomas.

The latest version of the premium support model, which was distributed yesterday, builds and improves upon the proposal I put forward at our meeting in late January.

There were several questions about the implications of my original proposal, particularly with respect to the level of savings that it would achieve, and also how it would affect the beneficiaries.

As to the first point, at our last meeting, we reviewed the cost analysis prepared by the Congressional Budget Office, by the Commission staff, and by the HCFA actuary, all three analysts confirming that this premium support proposal would indeed save money and begin to restore the solvency to the program.

But even the most optimistic assumptions about premium support suggest that reform alone does not solve the entire problem. Clearly, more revenue would be needed.

The issue of revenue insolvency was one of the most difficult issues that this Commission had to face.

As I’ve said before, I think putting surplus dollars into the part A trust fund doesn’t fix Medicare’s underlying problem.

I’ve likened it to putting in more gas in an old car that still would run like an old car and doesn’t have any of the features of a new car.

In fact, I share the concerned expressed by the GAO comptroller last week in testimony before the Senate Finance Committee that giving the part A trust fund an infusion of Treasury securities could in fact undercut the incentives to engage in meaningful and fundamental reform.

We cannot ignore the need to fundamentally reform Medicare and we need to do it sooner rather than later.

If we thought it was difficult to address reform 2 years ago, during the Balanced Budget Amendment, imagine how much harder it’s going to be to wait until the year 2008 or 2009 when the baby boom generation is on the verge of retiring.

And at that time, they will represent nearly 25 percent of our population. Extending the life of the part A trust fund by transferring Treasury securities from one column to another column, without doing anything to fix the underlying problems, give people the impression that we don’t need to do anything else to Medicare because part A is solvent to the year 2020.

That is simply not true. We do need to restructure Medicare and I certainly will continue to make the case long after our Commission ends our work.

I support combining parts A and B of the trust fund into a single Medicare trust fund, and developing a new definition of solvency.

As this proposal suggests, a new definition of solvency looks at what we spend on Medicare in terms of general revenues, payroll taxes, and beneficiary premiums.

The reforms contemplated by this proposal, even if general revenue contributions were limited to 40 percent of program outlays, without congressional authorization, we would not reach that trigger until at least the year 2005.

And with a limit of 40 percent general revenue, solvency under the old definition would be extended to the year 2013 or 2017 under CBO’s new baseline.

As I’ve said many times before, Medicare is also woefully inadequate in that it only covers 53 percent of a senior’s health care costs, and seniors spend approximately $2,000 plus out-of-pocket on the average every year to pay for things that Medicare does not cover.

Even though Medicare is inadequate in many respects, it is also going broke. The reason I have long supported the premium support concept is that I believe it offers the best hope of giving our nation’s seniors the best health care delivery system.

All beneficiaries would have quicker access to new technology and delivery systems, and they wouldn’t have to wait years for Congress to pass long overdue preventative benefits packages as we did in 1997, years after these preventative benefits were included in most all private plans.

The market would bring these innovations to the beneficiaries much more quickly.

This exercise has never been just about saving money, it has been about how to improve Medicare for the beneficiaries, how to preserve it as an entitlement, how to guarantee a set of defined benefits and how to give the 1965 Medicare Program the update and upgrade that it so desperately needs.

If this had been just about saving money, we wouldn’t be recommending spending $61 billion over the next 10 years to provide a drug benefit and additional cost-sharing assistance to the 3.6 million low-income beneficiaries.

For the first time, we would extend coverage to all beneficiaries for drug coverage under 135 percent of poverty for the first time, about $11,000 income per individual who is on Medicare.

If every beneficiary eligible for this benefit actually enrolled, this provision would provide a drug benefit to 6 million beneficiaries.

I know there are some who wanted to spend more money on prescription drug benefits. I believe that if we had been able to reach a super, super majority on the Commission, this agreement could have included some kind of subsidy for the prescription drug benefit program under the traditional fee-for-service plan.

But I think that we could spend another month or another 6 months debating that particular issue and probably wouldn’t be any closer to reaching an agreement on that issue than we are today.

The discussion of the drug subsidy will be left to legislative debate, and I look forward, as I know many members do, on working on Medicare reform in the appropriate and proper legislative forums of the House and the Senate.

I am pleased, however, that this proposal would give all beneficiaries access to a prescription drug benefit for the very first time.

Throughout this process there’s also been legitimate questions about how beneficiaries would be affected by any particular given proposal.

According to the Commission staff analysis, beneficiary premiums will decline by somewhere between 15 and 25 percent on average under the premium support model.

This proposal would also guarantee that seniors who live in an area where the fee-for-service is the only option would continue to pay 12 percent of the national average regardless of whether fee-for-service exceeds the national average.

This ensures that beneficiaries in areas of the country with only the government-run fee-for-service option would not face premium increases above what would happen under current law.

I know there will always be questions about premium support because no one can say definitively what the precise implications will be, and there is always fear of the unknown.

But what we do know is that under the current law, the beneficiaries part B premiums will double by the year 2008.

And we do know that the current program doesn’t cover half of the beneficiaries’ health care needs.

And we do know that seniors spend an average of over $2,000 out-of-pocket on health care now every year.

And we do know that Medicare will be bankrupt by the year 2008.

That is what we know right now today.

I believe that a majority of this Commission supports the concept of a premium support alternative because it offers us the best chance of giving seniors a better program than we do know they will get under the current program.

Under the premium support concept, we do know that seniors will have access to a drug benefit for the first time.

We do know that market-based competition can and will produce savings.

We do know that seniors will be guaranteed a defined set of benefits under law.

We do know that low-income seniors will have a drug benefit paid for by the Federal Government for the very first time.

It’s unfortunate that so much of the time, I think, has been dealt with what this proposal does not do as opposed to what the proposal does do.

It is certainly not a voucher program.

It is not a defined-contribution program.

And it certainly is not an end to the Medicare Program as an entitlement to the beneficiaries.

I have been very optimistic throughout the process. I would acknowledge that the document is not likely to receive the super, super majority that it needs to constitute a recommendation to the President and to the Congress.

But I am very proud of what this Commission has accomplished, and I believe that this final product that is before us, while not a formal recommendation of the Commission, represents not just good policy, but also good politics as well.

I know I can tell my father and I can tell my mother-in-law, who are Medicare beneficiaries, that we did, and I tried to do my best over the past year, and that my commitment to fixing this program has not diminished, even if we are not able to receive the requisite 11 votes.

I’m going to, as I’m sure all members of this Commission, continue to work on this issue as long as they possibly can to do the right thing.

I’m also pleased because I think that this Commission has moved the debate forward in a very significant fashion.

Our work over the past year underscores the need to fundamentally reform the system and to move away from what I have called the ‘‘SOS approach’’ of reforming Medicare which is the same old same old that I’ve so often talked about.

It’s not a question of whether we have fundamental reform of this system, it is now only a question of when it occurs.

I, for myself as an individual, fully intend to try and convince Members of Congress to take this document that hopefully a majority of the Commission could recommend, put it into legislative form, which the Legislative Counsel is already in the process of drafting, introduce it into legislation, and to get early and quick hearings in the Senate Finance Committee, certainly on the Senate side, and hope so in the House side as well, and move forward as quickly as possible.

Larry O’Brien once said that there are no final victories in this business. I will also add that there are no final defeats.

And what we have today is not, in my opinion, a defeat but the beginning of a process that will lead to true, serious reform of a system which is so important.

I would like to commend my cochair, Bill Thomas, for all the work that he has done over the past year. I’ve grown to respect and admire his intelligence and dedication to this program, and his desire to see it reformed in a fashion that serves all Americans.

Final comment. I was pleased to see that the President, this afternoon, in a press conference, announced a couple of things which I thought were significant.

No. 1, he commended the Commission for making a constructive contribution toward addressing the challenge with our recommendation.

He also said that he fully intended to make a policy recommendation on reform to this Congress.

And third, he said that he intended to do it this year.

I think all of those comments are right on target. I applaud him for them, and I look forward to receiving their recommendations.

With that, I’ll recognize Congressman Thomas.

Mr. THOMAS. Thank you, Mr. Chairman.

I also want to indicate that it’s been a pleasure working with you over this last year, and as a matter of fact, all of the members of the Commission.

One of the things that has occurred, I think, is that although you’ve always indicated that there were a number of experts around the table of the Commission, which is true, we can always learn something we didn’t know.

And over the year, I think, we’ve all gotten a better understanding of a very, very complex program that needs to be fixed in a number of different ways.

I believe we have reached a point where, although it may appear to some to be a partisan stoppage, I do not believe that’s the case.

I think it’s reasonable and fair to have reasonable people disagree in the direction that an important program like this might take.

You mentioned the President’s statements this afternoon at 4 o’clock--it did concern me that at 4 o’clock, 1 hour prior to the convening of the Commission, he announced there was no consensus.

And I had read in the paper that he was allowing the individuals to make up their own mind. My assumption is he had been communicated to as to what their mind was, and he can do the same math that we’ve been able to do.

Let me briefly go through the proposal.

I believe everyone has a copy and all I want to do is underscore the points and show you where they are in the document that Senator Breaux’s opening remarks referred to.

And in addition, while I go through it, attempt to respond very briefly to some of the comments that the Commissioners were kind enough to put in writing so that I could react to them, as we go through the document, and especially the President’s repeated statement of his disappointment that the Commission did not adopt his 15-percent surplus transfer to the part A trust fund.

The recommendation is in three parts. In trying to set up an understanding of what the Commission was proposing, we thought it most appropriate to start with tomorrow, the design of a premium support system.

The first section does that. It would not go into effect until 2003 because, as you might imagine, it would take some time, even if it were passed this year, to put this structure in place.

This is the recommendation that has the endorsement of hundreds of different groups, of most of the prominent analysts indicating that one of the solutions is to go to the marketplace.

I find it somewhat ironic that in Social Security, the way we were going to get additional money into the pot was to go to the marketplace.

They’re also discussing different ways of going to the marketplace and there seemed to be near unanimous understanding that one of the ways you could get savings in Medicare is ironically to go to the same place, the marketplace.

And what was proposed was a Medicare board which would operate under a government charter, and you see in the first section, the powers of the board and how it would work.

As you go through that section, you are able then to understand that there would be a new model in which the Medicare board interacted with both private plans and a government fee-for-service plan, if it chose to participate in the premium support world.

We agreed that cost-containment measures would be necessary. There are a number of points in this resolution that indicates clearly additional revenues are necessary, both in terms of cost containment and new moneys.

On page 3, the benefits package is discussed in the premium support world, and it clearly is a defined benefit package. It is an extended benefit package, and it would consist of no less than what’s currently in the law and it could certainly contain more.

The key new feature would be the ability to offer prescription drugs in an integrated way in the premium support model. That’s in the middle on page 3.

It talks about most people’s health plans, you are familiar with a standard option and high option. This would provide prescription drugs under a high option, both in the private plans and in the government fee-for-service plan.

The chairman mentioned about this outreach to low-income seniors. This is mentioned in the premium support model, but this would not be until 2003.

In the second section, there is a description about an immediate move toward supporting low-income Americans, defined as about $10,000 for individuals and less than $14,000 for a couple, or more familiarly described for those of you around you, all of Senator Rockefeller’s constituents in West Virginia.

On page 4, you’ve got a clear understanding of the way in which the formula would work.

Most importantly, as the chairman indicated, where there is not competition, a guarantee that the premium would not be greater than the 12 percent of the fee-for-service plan, but also a guarantee that if folks wanted to keep the 12 percent, it in fact would not be anticompetitive.

On page 5, we talk about today’s Medicare and the changes that we believe need to be made immediately.

The chairman made reference to $60 billion over 10 years. That is directed toward the more than 3 million low-income seniors that would have a prescription drug program paid for by Federal tax dollars and, in addition, those areas not under current law in terms of the relationship between states and the Federal Government on cost-sharing, would in fact be picked up by the Federal Government as well.

We also urged the National Association of Insurance Commissioners to provide us with, as soon as possible, a revised Medigap Program.

All of the evidence that we heard indicated that it made little sense to have a supplemental insurance program that only until you got to the high end of 10 offerings, be able to cover prescription drugs.

We would propose that prescription drugs be available in all of the programs.

And then the other aspects of that wraparound insurance could be added after you add the drugs.

The chairman mentioned combining A and B. I think if we had one vote on this Commission that would be unanimous, it might be--well, we probably couldn’t do that either, but we’d come close. [Laughter.]

We’d come close in terms of the fact that it just doesn’t make a lot of sense, especially in the way health care is currently delivered and will be delivered in the future to maintain the fiction of a separate A and B fund.

The eligibility age question was one that we discussed. It is very difficult to walk away from $600 billion saved over today to the year 2030.

It’s also not proper to walk away from our obligations for many near seniors who’ll become seniors, and because of the type of work they’re engaged in, probably would not be able to wait physically an additional 2 years.

I want to spend just a minute looking at this point. We said if someone wanted to provide their own funds and buy into the 65 program, notwithstanding we’re trying to match this age structure with Social Security, they could have a nonsubsidized buy-in.

But more importantly, for those seniors who would otherwise have been eligible at 65, when the age begins to move toward 67, remember it doesn’t do that for a full 28 years.

It isn’t appropriate to simply say, sir, you missed it by a month or six months or a year or a year and a half.

We propose that Congress examine, based upon in all probability an activities-of-daily-living-needs test. That in fact if people qualify from a needs basis, they ought to be able to move into Medicare prior to whatever the eligibility age is at that time.

Disabled would not be the criteria, it would be one that Congress would develop.

And then the third section which, for many of us, is really one that will allow for far more useful debate in the Congress in the future, if it were adopted, and that is looking at the question of financing insolvency in a new, we think more realistic way.

On page 6 in the third paragraph, I want to underscore that we believe that Medicare will require additional resources.

But we then referred to Alan Greenspan’s testimony at the beginning of this Commission at which we in fact engaged in discussions over the very points that he was making about what tomorrow would look like, especially technology, how difficult it is to determine what savings or what costs would be added by something as difficult to predict as technology.

And we examined the President’s offer of the HI trust fund and we relied heavily on professionals to advise us on that.

Both the Congressional Budget Office and the General Accounting Office have analyzed it.

Based upon the quotes of these professionals, notwithstanding the President’s comments today, the concern was that it didn’t fundamentally address the structural changes that are necessary, nor did it provide the financial mechanism that really did anything significant.

And I’ve go some quotes here, but I will only ask that we put them in the record. I will not read them, but it pretty well establishes that there would be a misperception if anyone thought that it was meaningful in terms of reforming the Medicare Program.

What we did in fact was analyze why we used solvency on the part A trust fund in the first place, and decided that it was largely borrowed from the Social Security use of the term, having been in effect for a much longer period of time, and that the OASDI trust fund doesn’t really follow the same pattern for funding that Medicare does.

Indeed, Medicare relies on two other sources of funding, not just the payroll tax fund--the general fund and the premiums paid by beneficiaries--and that those amounts have changed over time.

And in 1997, a shift of a program, Home Health Care, from the part A funding to the part B funding, extended the life of Medicare between 7 and 10 years.

And that the President’s proposal, if it did anything, was to utilize an argument that the part A trust fund would be solvent until 2020; didn’t change the bottom line, didn’t provide additional moneys, but it did make the program solvent to 2020.

And that perhaps using the solvency of the part A trust fund was not the best measure from a societal point of view, for the Medicare Program.

What this proposal suggests is that perhaps exposure of the general fund would be a better measure of programmatic solvency.

And that a number was selected which would place this programmatic solvency out in the future but not so far away that it wouldn’t require a congressional reexamination of the funding sources, the funding sources being the payroll tax, the general fund, and the premiums paid by beneficiaries.

So there would be a public debate out in the future. When? Perhaps 2017, perhaps 2020, based upon the new CBO baselines.

But the debate would be, do we want to increase the share of the general fund? Do we want to reexamine the payroll tax?

Do we want to reexamine the premiums that beneficiaries are to pay?

That is, we believe, a beneficial discussion that ought to take place, and that the programmatic solvency test of 40 percent of the general fund would bring that about.

That discussion, we think, is a more meaningful analysis of the appropriate funding structure of Medicare.

The last item, all of us are concerned about this point, but in looking at an acute care program like Medicare, although all of us want to address the question of the need of long-term care, the acute care structure of Medicare is not the most appropriate structure.

As a matter of fact, the discussion over Social Security and some of the long-term pension and funding requirements is probably a better vehicle. But we’re urging that a study be done to focus on how we can meet very real needs today and growing needs tomorrow in the area of long-term care.

And that, Mr. Chairman, is the proposal, and with that, I would lay it before the Commission.

Senator BREAUX. Thank you, Congressman Thomas.

Now I would recognize Dr. Stuart Altman.

Mr. ALTMAN. Mr. Chairman, thank you very much. I guess since the first grade, I’ve either gone first since my name started with ‘‘A’’ or size places, so I always wind up going first. [Laughter.]

And I’m mindful of the fact that we have some very shy people at the end of the alphabet, Bruce Vladeck and Tony Watson, so I’ll try not to use all of my time for arguments.

Before I make any comments, though, I just want to say thank you to both Senator Breaux and to Congressman Thomas. I can honestly say that the level of cordiality and respect that they’ve afforded me, I really appreciate.

I don’t know what I’m going to do with my time, and I guess my students are going to get to see me again.

But I want to thank you. You’ve been very gracious and I’ve learned a lot from both of you.

As I read through the proposal again this morning, I realize how much work the staff put in, and how really helpful I think this document is going to be.

Senator BREAUX. How is your arm?

Mr. ALTMAN. It was getting heavy lugging things around.

And so I really appreciate everything that has been done.

Let me say at the first, Mr. Chairman, that I share your views completely that we need to think about restructuring and restructuring now, and we cannot just talk about adding new money to the Medicare Program.

While I don’t think Medicare is broken, and I think Medicare has been a wonderful program over its existence, it needs to be spiffed up and changed for the 21st century.

So while I have no condemnation of the program or the people who run it. I support you completely that we need to think about restructuring.

I also support you that this restructuring should go on now. The longer we wait, the more serious the problems we confront, and if we can deal with it today, I would feel that we’ve made a major accomplishment.

But when all gets said and done, I come to a different conclusion about the need for more money to run the program and we need it sooner rather than later.

We are going to have a doubling of the beneficiary population over the next 30-something years. Medical care, under any set of projection assumptions, will grow faster than our GDP or our wages or any other measure we come up with, regardless of what we do.

And if Medicare is going to continue to be the program that it has been for our seniors and for our health system, it’s going to need more money.

To fund the expected growth in the beneficiaries and inflation out of the existing revenue stream, I think, is impossible.

And while reform can help us, and I surely want to see reform, it isn’t close to being enough. And here I want to say first that I share the need to change the solvency definitions.

I think it’s long overdue that we need to combine A and B. You’re not going to get a negative vote from me. If we do that, having a solvency test on the part A trust fund makes no sense.

I also believe we need fiscal constraints built into the system to prevent us from just spending too easily. So I share that.

I’m not comfortable, however, with the 40-percent figure, nor am I comfortable with the kinds of projections that would have us move out 4 or 5 years. I think they are very conditional upon assumptions about the kind of savings we’re going to have from the premium support system.

And while I know the staff worked hard to come up with their best estimates, I think it’s fair to say that there is a lot of disagreement around this town and around the country with respect to those estimates.

Suppose we were wrong? Suppose we’re off? Suppose there are no significant savings?

That means that the only safeguard we have to extending the program all falls against general revenues, because that would be the add-on, except that we’re going to run into that 40-percent cap almost immediately.

As I read the numbers, 40 percent hits us very fast. It isn’t a very high cap.

So while I would support a cap, I think a 40-percent number is much too low, and I would look for the need for more revenues. Now, where are we going to get more revenues?

Well, unfortunately, there are only a limited number of options available. One is to take it away from other programs within the general revenue funds. I find that is difficult to deal with.

We’re not going to take it away from interest on the debt. It’s unlikely that we’re going to take it away from the Defense Department.

Then you wind up with discretionary programs, which, by the way, we’ve added to with the need to fund direct medical education.

And so I can’t see us just saying, well, we’re going to fund it from general revenues, unless what we’re talking about is adding to the national debt, and I would find it hard to believe sort of giving and taking away.

Now, with respect to the President’s plan: I have looked at that plan, I have analyzed that plan.

And, quite frankly, sir, I do think that there is value in that plan. No, it does not, in and of itself, restructure the Medicare Program. I would not substitute the 15 percent for restructuring.

I think one needs to think of them in tandem, not as an alternative to each other. If it was only just to add money to the existing program, I think that would be a big mistake.

But I do believe it can and should be looked at constructively. I realize it’s difficult to do that in this political climate, but I do believe it should be looked at constructively in the climate of restructuring.

I fear that if we don’t do that, we will spend that money in other ways--a tax cut, new social programs, added battleships, or whatever.

And then we’re still going to have the same Medicare Program expenses to pay but against a smaller funding base. So for people telling me there’s no new money here, while in a technical sense, that’s correct, it does add new money to the Medicare Program, and if the alternative is to spend it on new programs or on a tax cut, I favor Medicare.

Well, you don’t like that plan? Then let’s debate another plan. I’m not wedded to that plan, but, unfortunately, I don’t think we had adequate time to discuss that.

I realize there were a lot of complexities in other areas. Maybe I was looking for a job in this Commission to take me through the year 2020, but I personally believe that we didn’t have time to discuss that issue in any depth.

As a matter of fact, we didn’t have time to discuss it at all until the very end.

So, I hope, Senator Breaux, as you move forward in the legislative arena, the country will have time to have that debate.

Let me turn to prescription drugs. I think I’ve said this ad nauseam to this group, but I cannot in any stretch of my imagination believe that as we go forward into the 21st century, prescription drug coverage should not be available under Medicare for everybody.

I recognize that your proposal has made some progress in covering prescription drugs and I commend the drafters for that; (1) covering people up to 135 percent of poverty; (2) making it available in both the HCFA plan and in all other plans, making Medigap reform.

Meaningful changes have been made in this plan, and I appreciate that, but I don’t think it goes far enough. I think if we just expect a premium to be paid, many of our seniors that are far from wealthy but are not under 135 percent of poverty are going to find they can’t afford it, and they’re going to do what they do today; they’re not going to buy it, and they’re going to sort of try to take a pill once a week, rather than once a day, which their doctor ordered.

We need to provide a meaningful drug benefit in Medicare, and, yes, that’s going to require some amount of government support in order to make it affordable to more than the poorest.

Maybe we could have found a number, and I know people on all sides were of good will, but in the plan that came before me this morning, there was nothing there, so I really have problems.

I don’t want to spend much more time. But, I have problems with raising the age to the extent that it’s going to lead to increasing the uninsured. I appreciate the fact that you have a buy-in here, and that gives me some reassurance. I would have liked to have seen some more support for people that can’t get insurance.

You know, you could be above ADL’s and find yourself with no insurance, and this can be a very expensive option.

Then, finally, I know people are going to accuse me of a regional bias, but I wasn’t born in Boston. I’m actually fairly new to Boston, but I will tell you this, I have become very impressed with the quality of medical care in Boston, and the fact that 97 percent--it seems like--of American future physicians are trained there or pass through there at one point in time. At least I have that feeling, and, of course, it’s not true. Just kidding. [Laughter.]

That leads me to be very concerned about the regional mechanism for allocating funds. As I read the plans, while the fee-for-service plan will be fairly flat across the country--and I’m pleased to see that it would help communities that don’t have any options--if you land up in the high-cost areas, what’s going to happen is that the cost of the plans other than fee-for-service are going to grow because they’re going to have to buy into more expensive health care which is being generated by our teaching hospitals, and, therefore, they’re going to have to pay those rates, and, therefore, their rates are going to be higher.

I would ask the staff and others that to the extent that you’ve helped out the rural areas and low income, you may want to think hard about doing the same for us poor, but trodden, high-cost areas that could benefit from these alternative plans.

Well, I won’t go on anymore. I thank you again. This is a tremendous start to a debate.

As I said, I would have liked to have been part of it for the next 5 years under the Commission, but I appreciate the fact that it’s time for us to close.

Thank you very much.

Senator BREAUX. Thank you very much, Dr. Altman.

I think you laid it out very clearly, I think, in your points of contention.

With the first three speakers violating the rule that I’m trying to encourage of brevity, myself included, I would encourage all of our speakers to try and be as brief as you can, but make sure you have the time to say what you need to say.

I think that Dr. Altman certainly outlined his concerns, and I don’t know that we have to--I’ve outlined why I think it’s good. I don’t think we need to be repetitious.

Take the time you need, but let’s try to speed it along as much as we can.

Congressman Michael Bilirakis.

Mr. BILIRAKIS. Thank you, Mr. Chairman. I will be brief.

Mr. Chairman, the President has already announced a failure on the part of the Commission to reach the needed 11-vote consensus. We haven’t voted yet, but the President has predetermined the result, and I think that should tell all of us something.

This proposal is far from perfect, but it does contain an omnibus of so many items, some of which I don’t like.

But it does what we’ve been pledged to do, I think, and that is to save Medicare for many, many years by reforming the system.

It achieves a goal that every Commissioner has stated, general support for providing beneficiaries with affordable choices.

It provides prescription drug benefits for the very poorest of our elderly. I’m not satisfied. I’ve already made comments to the effect that I’m very supportive of a prescription benefit for fee-for-service.

I’m not satisfied that it’s enough, but it’s a lot better than what beneficiaries have today.

It adds the very important elements of responsibility and accountability on the part of the beneficiaries, elements which our many witnesses, other research and our readings have recommended.

I still have hope, Mr. Chairman. It may be false hope, but I still have hope that politics will be set aside--and that’s what it is, in my opinion, politics--and that all of us will be responsible enough to at least place a mark or basic structure on the table which can then be amended, if necessary, remolded if necessary, so that we can do what we pledged to do when we were appointed to this Commission.

Thank you, Mr. Chairman.

Senator BREAUX. Thank you, Congressman.

Colleen Conway-Welch?

Ms. CONWAY-WELCH. Thank you. From a nurse’s perspective, I realize that the Medicare system is really fractured, and that there are many inadequacies in it.

After working very hard, I really thought that the 17 of us were tantalizingly close to figuring out how we were going to make this thing happen.

I believe the document that we created, much of it, was done in a very bipartisan way, and that it really does provide the structure for future legislation.

I am very disappointed, however, that we were not able to achieve our desired outcomes. However, I learned a lot about the idea of a premium support model as a key for Medicare restructuring.

The model is based on the fact that the private sector is better able to adapt quickly, and to incorporate newer innovations into medical practice and health care delivery than a government model.

Premium support also could have been fully implemented by 2003, and at that time, we really could have had a level playing field between private health plans and government, all of whom would have been able to offer some level of prescription drug benefit.

If someone wanted to buy a higher option plan, then they could pay the difference, but the core benefit package would have protected those seniors with low income. They are the ones I am most concerned about.

The premium support model also would have looked a lot like the Federal Employees Health Benefits Program which all Federal employees have.

It means that the plan is managed by the government, but not micromanaged. It also covers a choice of health plan options. I think choice is critical to the final document.

And it ensures flexibility to adapt to change.

In closing, I was a late-comer to the Commission. I had a very steep learning curve. I would like to thank the staff, as well as my fellow Commissioners for putting up with some probably stunning questions from time to time.

I have learned that words in Washington don’t always mean what words outside of Washington mean, but I have learned a lot. I’ve enjoyed the give-and-take of exchanging concerns and thoughts with my fellow Commissioners.

But the bottom line is that the document that we have created does lay the groundwork for this much-needed reform. However, we still have a 1960’s program that is trying desperately to pretend that it serves seniors in 1999, and, in fact, it doesn't.

So, now it rests with Congress and the administration to take up the ball. And I wish you Godspeed.

Senator BREAUX. Congressman John Dingell.

Mr. DINGELL. Mr. Chairman, could I begin by asking what are the plans of the Chair with regard to filing of reports on this Commission, and whether there will be reports filed by the individual Commissioners or by Commissioners, collectively, either in a set of majority views or in minority views? How will we address that?

Senator BREAUX. If the Commission obtains a super-super majority of 11 votes, it would be a Commission report which would be submitted to the Congress and to the President. In the absence of a super-super majority of 11 votes, there would be no product to report to the President, and no product to report to the Congress, and, therefore, no report accompanying the no-report document.

Mr. DINGELL. Very well, thank you, Mr. Chairman.

Mr. Chairman, I want to begin by commending you and Mr. Thomas and my colleagues here amongst the Commissioners, and to say that you, Mr. Chairman, have conducted this matter with rare dignity and grace, and I think we all owe you a thanks.

I want to also express my commendations and congratulations to my colleagues. This has been a difficult question, and a difficult period, and a difficult issue, and I believe that we have conducted the affairs of this Commission in a dignified and gracious manner, and I believe that it does credit to all of my colleagues who are Commissioners. I salute them and congratulate them for the work which they have done. They deserve the thanks and gratitude of our colleagues.

I also would like to express my apologies to Mr. McDermott. I did not realize that this was a black tie affair. [Laughter.]

Senator BREAUX. The question is whether it’s a funeral or a wedding. [Laughter.]

Mr. DINGELL. Well, I asked him for a table by the window, and tried to slip him five bucks, but he wasn’t----[laughter].

Senator BREAUX. I tried that, and it didn’t get me 11 votes. [Laughter.]

Mr. DINGELL. Mr. Chairman, the Commission has labored mightily for this period of time, and I believe that the Commission has worked hard.

I do not believe that we have a failure on our hands. We have not been able to agree. Nor do I believe that Medicare is a failure. It is one of the great triumphs and successes.

If you ask any audience of senior citizens whether they like Medicare or not, they will tell you it’s the greatest thing since sliced bread and Social Security.

Having said that, the exercise through which we have forged, has revealed two basically different views as to what Medicare should become in the 21st century.

One side are colleagues who desperately and sincerely want Medicare to continue as a guarantee of health care for the elderly and disabled. On the other side, there are a number of my colleagues who, with equal sincerity, believe that Medicare is now too generous for the level of support that is available to it, and that there is need, therefore, to practice certain curtailments.

Mr. Chairman, I want to reiterate my appreciation of your labors and tell you how much I appreciate the gracious way in which you’ve conducted the business of this Commission.

I want to also recognize certain hard facts, and I want to point out that I don’t think that this has been politics any more than any exercise that we engage in in our national debates. They’re all politics, and thank God for it, because that’s the exercise of free men and women in doing their business in their government.

First of all, I’d like to observe that the proposal that I understand will be before us is not acceptable to me. And I want to lay out a little bit of reason as to why I feel this way.

First of all, we have not seen a single reliable and independent analysis that suggests that in any way it will assure the long-term solvency of Medicare. I believe it will carry us to 2013, but I would note that in 2030, the number of Medicare recipients will go from something like 38 million to something like 78 million.

So if you’re concerned about the situation we confront now, I urge you to look at the impending situation in 2030 as a real exercise in terror.

I would note that the proposals that we have before us lay significant increases in costs of deductibles, copayments, and cost-sharing on seniors. I would note that there is no subsidy that I can find for drug benefit for most of the beneficiaries.

I would also note that the program is not going to have its solvency extended past 2013, or perhaps 2017, which is only a 3-year extension.

That is not a cure for long-term solvency. I note also, Mr. Chairman, that no significant improvement in benefits for persons will take place for those who are enrolled in the fee-for-service program.

As a matter of fact, I note that there will be an almost certainty that there will be a transfer of revenues from fee-for-service to the premium support program.

Some have also pointed out in our meetings that it is necessary to complete this matter in time for the end of March so that it can be included in the budget.

Our charge, I would note for all present, was that we should come forward with something which will address the long-term problems of Medicare. That is not done here.

There is also, I would note, no real appreciation that has been submitted to us of any cost savings or any benefits that would be achieved in an economic sense by moving to the premium support system. Indeed, that is left as one very large question mark.

I would note also that the proposal does not consider now in the proposal itself, or in the proceedings to this time, the President’s proposal to use 15 percent of the budget surplus to make the financial security of the system extend to 2020, a period later than that which is before us here.

In no way does this then address the problem of the significant growth that will take place after the expiration of this program in terms of demand, need, and eligible recipients.

Now, Mr. Chairman, we don’t know whether this proposal for premium support is going to save or cost money. We don’t know what benefits it will provide. We don’t know how it will affect the nearly 40 million seniors and disabled who are dependent upon Medicare for their only health option.

Unfortunately, the proposal before us--and I know there are some differences in view on this--in my view, constitutes simply a universal guarantee to a government voucher for private insurance.

I believe we must credibly address the challenges facing Medicare, but I do not believe that I need to disregard either Medicare’s founding principles or my own--I would note that I sat in the chair and my dad was one of the authors of the system--in order to accomplish that purpose.

I conclude, Mr. Chairman, by expressing to you my high respect and high regard, and the great affection in which I hold you, and my great regret that from where I’m sitting at this particular time, it appears that the Commission will not have failed, but will simply be able to report that we have been unable to come to a resolution of the charges before us.

Thank you, Mr. Chairman.

Senator BREAUX. Thank you, Congressman Dingell.

Next, we’ll hear from Senator Bill Frist.

Senator FRIST. Thank you, Mr. Chairman.

Mr. Chairman, I approach the Commission at the outset, in part as a physician, and in part as a U.S. Senator, and by the physician I mean that the real objective, although solvency and the discipline surrounding solvency is what drives us to the table, ultimately, it is how well we as a nation can assure the health care and security of health care for our senior citizens and individuals with disabilities.

I think that we can leave tonight and believe that we made a real step forward because of the leadership of Senator Breaux and Representative Thomas. I think we have made a major step forward.

I think that by introducing the concept of premium support, which I think is solid, and which I think if we voted just on that, that we would probably have the super-majority vote.

We’ve introduced a concept which I think is inevitable. As we learn more about the delivery of health care, it is almost certain that we’re going to develop more integrated systems over time, both in the insurance mechanism and in the networks of the delivery of care.

It’s going to progress beyond the way my dad practiced medicine for 30 years, straight fee-for-service, by himself in private practice. And, thank goodness, it is. It means that we can capture technologies and the things that we’ve learned from the past and deliver care, a higher quality of care in the future.

Ultimately, that’s going to be premium support of some sort. It’s going to be an array of plans. Every plan can’t offer everything, but plans can cater in some shape or form to individual needs, and that expanded choice, where you do have a world of limited resources, is where we’re going to end up. It might be 20 years from now, it might be 10 years from now.

Because of the solvency issue, I think it’s going to be in the next few years. That is my own feeling, and I think premium support, for the first time, gives us that structure, building on a model that we’re somewhat comfortable with, the model that those of us in Congress get our insurance through.

It’s not a perfect model. It’s one we’ve learned from in the past, one that we can take advantage of, looking at those lessons of the past as we go forward.

I think the fact that we are going to have some bipartisanship here again is very important, especially as we look at the next step. I’m thinking in terms of the U.S. Senate, because I think that bipartisanship takes it beyond the reasons this Commission was set up initially, and that was that Medicare was politicized, it was on TV and it was an issue for presidential elections.

I think the element of bipartisanship is very, very important, and it will hopefully make a real statement to people as we go forward, that it has to be a nonpartisan effort.

A concept which I think we have achieved also is the importance of simplification, the merger of parts A and B, the fact that we need a single deductible instead of having these confusing deductibles in part A and part B.

The proposal regarding support for low-income individuals is a very important statement that we’ve made, that for the most part, everybody recognizes as a nation we must do more in terms of taking care, providing care, more secure care, for those people who just simply, for whatever reason, cannot afford it.

By setting this 135-percent line, saying that we have real obligations to do a lot better than we have in the past, improving the QMB, SLMB programs, and providing a very direct subsidy for prescription drug coverage to that population, I think is a great advance.

I wouldn’t have predicted it 8 or 9 months ago, so I think that’s a really important statement.

The issue of solvency disturbs me a lot because it is what brought us to the table in terms of the discipline, the fact that you have a trust fund A and a trust fund B.

Part B is sort of a draw on the Treasury, so you can’t define solvency; part A has this discrete funding source of payroll taxes, so you can define solvency, yet we all know, those of us in Washington, you can be taking money out from A and dumping it in B and it makes you feel real good, like we did with home health care, or you can do what the President is doing now, taking money from the equivalent of B and dumping it in A and making everybody feel good.

That disturbs me the most. We’ve all had discussions about it. The President today in his statement made that issue No. 1--that was a great disappointment.

Again, that’s a little more to me of shell games that we had with home health care last year, and it confuses the issue. Again and again, it comes back to that it does absolutely nothing to the basic obligations of delivering health care to individuals.

Again, you have to close your eyes and say you’re treating individuals, either the obligations of treating individuals, or the income, that cash drawer that’s coming in to pay for it. It does absolutely nothing.

When we have testimony by three Cabinet officials, David Walker from the General Accounting Office, in the Finance Committee today, basically says it as clear as one possibly can. We hear it again and again and again.

His words today, ‘‘The President’s proposal to strengthen the HI program is more perceived than real. Specifically, while the HI trust fund will appear to have more resources as a result of the President’s proposal, in reality, nothing about the program has really changed.’’

And he continues, ‘‘At a minimum, the President’s proposal is likely to create a public misperception that something meaningful is being done to reform the Medicare Program.’’

That is probably the most disappointing thing to me, because up until the time the President put that out a couple of months ago, I thought we would come up with a super-majority vote, or an agreement or a consensus. But once that was put on the table, people started talking big picture of, well, we’re going to be OK. It extends it for a few more years. We can relax. It takes the discipline off.

Or you hear people say, well, that’s better than spending for tax cuts. Well, that’s not what this Commission is all about. It’s not the tax cuts, it’s not the political issue, it’s not running for President. It’s about health care of seniors.

That disturbs me, and that is, to me, the biggest failing of the Commission, in spite of all the great advances.

Last, because there are a number of issues that I feel good about and plan on voting for this today, don’t agree with everything in it, but think the premium support, the simplification, the introduction of a responsibility for prescription drugs, recognizing we can’t just throw money at it and cure the problem, is very positive.

But we’ve got to act now. I’m very hopeful that those of us who have legislative responsibility now can take this as the very next step, even though it’s not perfect, recognizing we can’t solve everything; that we’re going to continue the entitlement nature of it.

It may well take some more funding overall, and the fact that we define solvency as 40 percent, you don’t cut it off there. If you go back and read the text--I do want to mention this, because this solvency issue is tough because if you don’t have a part A and a part B trust fund anymore to have something that can go bankrupt, you have to have a new definition of solvency.

That’s important because you need that discipline of some sort to go back and look. You don’t say you’re going to stop at 40 percent. This is an entitlement, and it has the implication that at 40 percent, all funding out of the general Treasury will stop.

It may or it may not. What happens when you hit 40 percent is the following, from the document: In any year in which the general fund contributions are projected to exceed 40 percent of annual total Medicare Program outlays, the trustees would be required to notify Congress that the Medicare Program is in danger of becoming programmatically--that’s the key word--insolvent.

The trustees report should provide for necessary and important public debate leading to potential adjustments to the payroll tax and/or beneficiary premium, as well as any adjustment to the general fund devoted to Medicare.

That’s a very important concept, because I don’t want anybody to believe that you’re only going to put 40 percent in. The point is, you bring it back at a time in the future when we’re going to see how premium support works or doesn’t work, and address it through our legislative process.

Let’s act now. I look forward to continuing to work on this proposal from a legislative standpoint.

Senator BREAUX. Thank you, Senator; well said.

Ms. Illene Gordon?

Ms. GORDON. Thank you, Senator. Certainly this has been a privilege and a tremendous opportunity for me to serve on this Commission. Let me take this opportunity to say to you two chairmen that I certainly applaud you and have respected your leadership very much.

I am a staff assistant to Senator Trent Lott, and I have the privilege of working every day with Medicare recipients. I see their problems, not only the beneficiaries, but also the providers.

I have been able to bring some of these problems to the table, and we have talked about them. I come from a state who, like many of you around this table probably, that we do not have a Medicare HMO in the state.

So, the premium support system would give us a choice. These people that have HMO’s do have a choice, but in Mississippi, we do not have one.

But we would have it under the premium support system, and I certainly support that system. I was so happy to see in the proposal, due support.

Like Senator Frist said, you know, it’s really tough to follow somebody that speaks so eloquently as he does, that I do support the combination of A and B.

You know, the deductible on part A is like $768. That’s a lot of money for elderly people and disabled people to come up with, and the combination of that is certainly, certainly a good thing to do.

And prescription drugs is another thing that we’ve talked about. I’m happy to see that we have been able to address that situation.

You know, down in Mississippi, we say that we plant the seed, we water it, we cultivate it, and then we harvest it. I feel like that we have planted the seed and that it will be watered and taken care of and it will be harvested.

Thank you so much for this opportunity.

Senator BREAUX. Thank you Ms. Gordon, well said.

Senator Phil Gramm.

Senator GRAMM. Well, Mr. Chairman, first of all, let me thank you and let me thank Bill Thomas. If there are any heroes in this whole process--and there are not many--John Breaux and Bill Thomas are two heroes.

I want to thank both of you for the great job you have done on this Commission. I believe we were very close to an agreement. I thought we were going to be successful.

I guess, like everybody else here, I am disappointed that we didn’t get the 11 votes to send a formal report to Congress. But I don’t regret the time that I have spent on this Commission.

Medicare is a very important program, 39 million Americans depend on it, and it was worthy of our best effort. In fact, it was worthy of better effort than it got from this process, in my opinion.

Today is a second big disappointment on my part with the President on major, mega-issues. As you know, John, and as Bob knows, all three of us have been involved both in Social Security and Medicare.

The President spent a year studying Social Security’s problems. We had a big conference down at the White House. Bob, you had sense enough not to waste your time going. [Laughter.]

John and I went. We had this wonderful meeting with the President where he spent 3 hours and ended up agreeing with everybody there.

But the bottom line was, by the end of January, the President had come out with a totally meaningless Social Security proposal that would double-count IOU’s in a filing cabinet at the Social Security Administration, and did absolutely nothing after all that effort to deal with Social Security’s fundamental problems.

That, for me, was a profound disappointment, because we had an opportunity to literally change the history of the country.

We are here today with a second major disappointment in the same year, in the same season of the year, only in this case, it’s Medicare. I remember when we started this Commission, the President’s first contribution was to ask us to consider expanding Medicare to the non-elderly.

I think it is very important to note that certainly in this report, no mention is made of that proposal whatsoever.

And then, second, when the Commission was on the very verge of coming up with a consensus, it seemed to me, the President came out with the idea that as we reduce public debt, to simply give an IOU for 15 percent of it to Medicare. But this has absolutely no impact on Medicare because the IOU is from the Treasury, and the Treasury has to raise taxes or cut benefits or increase its debt that it owes to the public in order to pay a penny of that IOU.

So it was an absolutely meaningless gesture, but it had the terrible effect of creating this impression that somehow this gave us all kinds of money that we could do something with, even though the President, in his budget, which extends for 10 years, provides not one penny more on Medicare benefits, and, in fact, cuts Medicare spending.

So, this is a disappointment, and I guess I sort of harken back to one of the most famous advertising slogans of our era, and paraphrase it and say, the Presidency is a terrible thing to waste.

We have a President who had an opportunity to change American history on Social Security, and he didn’t have the courage to do it. He had an opportunity to change American history on Medicare under your leadership Mr. Chairman on a bipartisan basis, and he didn’t have the courage to do it. So, I’m disappointed.

Now, what good has come out of this process? I think a lot of good has come out of it.

First, we have a bipartisan consensus of 10 of 17 members that we ought to do something. Three of the members of the consensus are on the Finance Committee, and I believe we can pass this proposal or something very close to it in the Finance Committee and in the Senate.

I think it’s also important to note that with all the criticism about what we did, Medicare is dramatically improved in this proposal. We directly provide pharmaceuticals to 3 million Americans at a cost of $61 billion, which is not peanuts, even in Washington, DC. That’s over a 10-year period.

Additionally, by setting up a premium support system for the first time we give middle income Americans access to pharmaceutical coverage by their ability to go into this system.

Now, I know there are people who say, well, we could just write a check for $40 billion a year and give people more pharmaceutical coverage, and give it to everybody. But that forgets the fact that this proposal does not save any money over the first 5 years.

At first we spend every penny we save in terms of the drug benefits, but over the 10 years as our reforms set in, we do start to gain control of costs, and we do end up saving $100 billion, which is a considerable amount of money.

So I think it’s simply up to those of us who are in Congress who care strongly about this to move ahead. I don’t have any idea what the President is going to propose, but I do know what we have proposed.

I know we have done it on a bipartisan basis. I intend to be very supportive of it. And I believe that we might yet pass it.

Now, obviously, the hill wasn’t that flat; it was fairly steep, even if we had had the 11 votes, and even if we could have gone forward. And I think you would be deceiving yourself and the public to say that it’s not steeper now, given that we are not even going to have a formal proposal.

But that does not mean it’s impossible, and I want to again thank you, Mr. Chairman, and commit to you to work with you to try to make this happen. We are going to do premium support. It’s the only way to deal with this problem.

We are going to move forward on this proposal eventually. The problem is, if we wait, we will have to do a lot of things the proposal doesn’t have in it, such as big time cuts in benefits and increases in the payroll tax.

So, all we are buying by waiting to act until we have another President or until we have another Congress, is that every year we wait, the cost of fixing Medicare is going to get bigger and bigger, the cuts in benefits are going to get larger, the tax increases are going to get more substantial, and that’s why we should do it now.

I again thank you for your effort.

Senator BREAUX. Thank you, Senator Gramm.

Next, we’ll hear from Mr. Sam Howard. Sam?

Mr. HOWARD. Thank you very much, Senator. I joined this Commission as probably one of the most frank believers in the free enterprise system in health care, and I remain that.

I’m going to ask that the--would you allow me to put some remarks that I have written on this subject into the record? The subject of those remarks are freedom, free enterprise, and the future of the health care system.

But let me speak about the proposal.

I think this is a major step toward introducing competition and free enterprise in the health care system. It has the three components that I think are essential and that I came here to try to see if we couldn’t get: Premium support, an independent board, and a premium system that’s market-based.

All of those are in this proposal, and as long as I get the framework of the house, you all can structure the rooms any way you like, because the free enterprise system will tend to take care of itself over time.

But I think we have achieved a lot here, and I’m excited about the fact that we have 10 votes--or at least I think we have--for this proposal. I think if enacted into law, it will bring more choice to the elderly, it provides some flexibility in the benefit structure that can evolve over time as this country changes.

Beneficiaries, I think, are going to be happier with it than they are with the current system.

I think the providers are going to be much more pleased to operate under this system than the current system of price fixing which changes everything about every 5 to 7 years, and sends turmoil through the financial markets in health care for about 24 months before it gets straight again.

I think all of these things are possible in terms of benefits with this system.

I also believe fervently that this system will save more than currently scored. It’s my faith in the free enterprise system that gives me that belief, and I just believe it’s going to be more, and I believe that the doubting Thomases will see that probably in about 5 to 6 years, and I hope I can come back and maybe sit down and talk with them.

Let me thank you very much for your chairing of this Commission and allowing me to serve. It’s been a pleasure meeting both of you, Senator Breaux, and the Honorable Bill Thomas.

I’d also like to thank, actually, Speaker Newt Gingrich, for the opportunity. He asked me for no commitments; he just asked me what I thought, and I told him of my belief in the free enterprise system, and I was appointed. It took about 15 minutes of an interview, so I thank him for the opportunity.

Let me thank the staff. I enjoyed working with you, Bobby, Jeff, all of you have been very, very helpful to me, and I’m going to go back to Tennessee.

Senator BREAUX. Thank you very much, Sam. I appreciate your comments.

Senator Bob Kerrey.

Senator KERREY. Thank you very much, Mr. Chairman.

As the others have done, I’m going to thank you and compliment both you and Congressman Thomas. I have been very impressed, both by your knowledge of the subject matter, and your willingness to listen to all of our opinions, and to accommodate our concerns. I’m very grateful for your leadership on this very important issue, and regret that it’s likely that we’re not going to get 11 votes.

I don’t know who wrote the damn legislation that required that, but that’s most unfortunate. Was it Bill Thomas who wrote it? [Laughter.]

Mr. THOMAS. That’s a fight I lost, Senator.

Senator KERREY. It reminds me of a statement that Ed Zorinsky, who was the Senator prior to my being elected, used to say. Ed said that Washington, DC, is the only town in America where you can walk around the block and not end up in the place where you began. [Laughter.]

Unfortunately, that’s the sense that I’ve got with this effort.

I wish we could get 11 votes, and hope that we still can, and it would be very interesting to see us take up amendments, and see where the votes would fall on various amendments dealing with a variety of concerns that I have and other people have on this Commission. I regret that very much.

I look forward to this being converted into legislation, I look forward to it coming to the Finance Committee where I suspect, Phil, you’re right, that we will mark it up with the majority and send it to the floor of the Senate and keep this issue in play.

I think it does represent substantial reform, and much-needed reform.

Let me say that my view is that both Social Security and Medicare have to be seen as two sides of the same coin, that they’re basically safety net programs. One provides retirement income, the other provides assistance in the area of health care, once you meet an eligibility test of age.

And both of these programs need reform. Bill mentioned Social Security reform. In some ways, Social Security is considerably easier, because all you’re dealing with is trying to either provide income or, in my case, trying to provide wealth as well as income at the moment that you become eligible and you satisfy that test of age.

It’s an easier concept to work on, whereas health care is much different. In my view, what’s needed for a safety net--if Congress is going to maintain free and open trade policies and the right education policies, and market-based policies that Sam was talking about, then we’re going to need a safety net that says if you’re an American or legal resident, you’re eligible.

I mean, I’m very troubled by high quality American workers that are making $7, $8, $9 an hour who are subsidizing me, subsidizing Medicare beneficiaries, Medicaid beneficiaries, and every single government employee, but they don’t have enough money left over to buy health insurance.

Every single study that I have looked at says if you’ve got health insurance, you’re likely to be healthier. So, I know that that’s not the charge of this Commission, but I wanted to say it up front.

I think one of the reasons we have difficulty getting permission to go into that, in addition to the political fear of change, which is always there--anytime you propose something that’s different, you’re always going to find yourself subject to somebody saying, but did you consider this horrible thing that could happen?

You can take any small detail of this proposal and describe a horrible situation that might occur, and, of course, we all understand if there are problems, Congress can make adjustments. If there’s some terrible thing that happens, we’ll adjust it, as Sam said, if we get the structure right.

But there’s a second reason that I would say, and that is the unwillingness to restrain the program, the unwillingness to say that one of the problems with fiscal solvency, one way of describing it is, we do have this big baby boom generation of 77 million Americans. And they have a claim right now under current law for both Social Security and Medicare that we can’t afford.

It’s too large. We have to reduce the size of the claim in some fashion.

I note with great concern, the President’s listed four things that he does not like about our proposal. He wants his 15-percent solution, and that doesn’t provide any additional cash to Medicare. That just gives the baby boom generation a nearly $700 billion claim on income taxes, both individual and corporate income taxes to pay hospital bills.

That’s all it does. It doesn’t provide any restraint at all. It says to the baby boom generation, we’re going to give you a larger claim than you currently have.

This is essentially the President saying I support a $700 billion increase in individual income taxes, in corporate income taxes.

Second, the President objects to increasing the eligibility age. This is the one that I say pains me the most, because if you look at the details, for gosh sakes, in 2003 we increase it by 2 months and 2 more months every year until way out there in 2008 when I become eligible, I have to wait till I’m 66.

Then we don’t do anything at all for another 9 years, and then by 2022, when the life expectancy is probably going to be over 80, if science doesn’t make some spectacular breakthrough and double our age, for god’s sakes.

I mean, they’re out there right now working with worms and mice and who knows, maybe on me next. I mean, it is a very modest change.

But if you look at the President’s language, he says increasing Medicare’s eligibility age without a policy to protect against large increases in the number of the uninsured, I mean, I’ve got to say that that does not describe this proposal.

It’s exactly what I was saying earlier. Well, you can find yourself accused of doing something terrible when, in fact, you haven’t done it.

So, I mean, one of the sadnesses that I have when I consider that $7, $8, $9 an hour person out there who is working like mad, very often working beyond 40 hours, both mom and dad out there working, they don’t have health insurance.

One of the things I have to say to them is that we’re not likely to be able anytime soon to provide you with the protection of health insurance is that we can’t demonstrate the will to restrain the cost of this program out in the future.

So, I hope--Mr. Chairman, and Representative Thomas, again, I appreciate very much your leadership. I’ve enjoyed working with everybody on this Commission. There hasn’t been a person on this Commission at some time that hasn’t said something that I didn’t know.

As a consequence, I appreciate your giving me a free public education here, and I hope that that education leads to a markup in the Finance Committee. I hope it leads to final passage in the Senate, and I hope it leads to action eventually in the House as well, and a change which I think is very much needed to make this very important program even better than it already is.

Senator BREAUX. Thank you very much, Senator Kerrey.

Next is Congressman Jim McDermott.

Mr. MCDERMOTT. Well, thank you, Mr. Chairman.

I think we’ve probably said enough times nice things about the chairman and how much fun it’s been to work with--move on. [Laughter.]

Ms. STEELMAN. The man wants to get to a party.

Mr. MCDERMOTT. I think that as I sit here and think about this proposal, and it’s not one that I will support but I think that you have to look at where Medicare came from.

After the Second World War, the free enterprise system had 20 years to figure out how to give protection to senior citizens. It didn’t work.

And Medicare came because there were over half the senior citizens in this country did not have any kind of health insurance in their senior years.

That’s where this program came from.

Now today we have 45 million people without health insurance, another million are added every year, and the free enterprise system obviously is geared to make money.

There’s nothing wrong with that. But one should not expect them to take on the sickest and most disabled part of our population and expect them to do that out of the goodness of their heart or anything else.

If they can’t make money, they’re not going to do it. They demonstrated that for us this year when HMO’s, under the Choice plan, went out in various parts of the country and enrolled people and then dumped 440,000 people out of their programs.

So what my concern about this program is not the Choice business, not the Federal Employees Health Benefits look-alike or whatever this is, it’s the 10 percent of the senior citizens on whom we spend 70 percent of the money.

Now a social insurance program or an insurance program is designed to deal with something that overwhelms you.

If it’s a little thing, you can pay it out of your pocket or maybe you can pay it off over a few months or whatever, but if you’re one of the 10 percent of seniors who gets clobbered, you want an adequate system that has protections in it.

And so my fear and my concern about this handing everybody a voucher, and this is really nothing more than a voucher system, is to say, go out and find the best you can and make up the difference with what’s in your pocket, and buy the best you can.

And I know that a lot of seniors in that situation are not going to be taken care of.

Now I applaud your efforts in terms of how you protect the people down at the bottom. At least there’s some words in here.

I don’t know of people who are automatically going to be enrolled in QMB and SLMB. I don’t know what happens to somebody above 135 percent of poverty if they need medication.

I guess if you get up $1 over that, you don’t get any help, you don’t get into Medicare, and 135 percent of poverty’s not very much.

So it’s in these details of trying to figure out what happens to real people when they get hit that I find the difficulties here.

And if I--it was Gorbachev, I think, who said that there was no problem in solving the problem between the Americans and the Russians about nuclear war. Nobody wanted to blow anybody up, but the devil was always in the details.

And it really is in those details.

Now there’s one other thing that I think--Senator Gramm left, and I’m sorry he left, because he said, this is the only way to deal with this.

Well, that simply is, I like senatorial hyperbole. That is not true. There are other ways to deal with this.

And the President gave us some piece of it. I hear some people want to be political about that but I think he made a step with 15 percent.

But what is really missing is any attempt to really look at the fee-for-service system and how to modernize it and make it work.

Because for many people in this country, that’s all there’s going to be. So that’s the program they are going to have to be in, and we have not updated over the course of the years.

Now everybody compares this to a 1965 Chevy. I’ll talk about B-52 bombers. We got B-52 bombers that are flying today that have been flying for 30 or 40 years, and they’re going to fly for another 30 because they are upgraded all the time. They replace things, they change them.

And what we’ve done with Medicare is we’re still trying to drive that 1965 Chevy, but we’ve never given HCFA the ability to do the kinds of things to cut out the waste and the fraud and the abuse and go out in the buying mechanisms that really need to be done.

And I’m not sure the political will is in this place to do that, to give them that ability. I think there are certainly some people who’ll say that’s what we’re going to do, but it hasn’t happened.

I mean, those of us who are in the Congress know everybody who runs in and wants to protect some little group when HCFA goes after them to do some trimming or some tightening, and suddenly there’s an uproar, and well, we can’t reduce the fees here.

We are going to see, in this session, people make a run on home health care. I mean, the Balanced Budget Amendment of 1997 seemed like a good idea at the time, but now everybody’s finding out what really bites, and people are, there are all kinds of bills around to lift the lid on the home health care.

So my concern is, and I don’t think there’s anybody at this table who thinks that Medicare can continue in its present form.

I don’t think there’s anybody that’s out of touch with what’s happening.

But the question is, how do you protect those most vulnerable in the system. If you’ve got a lot of money, if you’ve got all kinds of--if you’ve got a good pension system and you’ve got a little extra dough in your pocket, it doesn’t make as much difference as it does if you’re one of the 5 or 6 million widows in this country who are living on less than $8,000.

And if the program doesn’t protect them fully, then it will be a failure as a program, because other people will be able to buy extra and get away.

And until I see that kind of protection for those people, the ones who are the sickest, what I envision happening with this program is that you will wind up with Medicare fee-for-service containing all the sick and the disabled, the oldest, the most costly, and others will take the more profitable people off the top, understandably. But we have to be concerned about those people who can’t protect themselves.

Senator BREAUX. Thank you.

Senator Jay Rockefeller.

Senator ROCKEFELLER. Thank you, Mr. Chairman.

I want to thank both you and Bill Thomas for your work on this.

I’m not going to support the product, but that’s not because I don’t respect the work that you’ve both done.

And in some ways, I think your own sincerity, and John Breaux’s, in trying to make this thing work, has in a sense symbolized part of the problem.

I think you really wanted it to work, I think you wanted to be able to bring people together, and I think it’s symbolized in some ways by the exchange that Bill Thomas and I have had over Commission meetings about who gets covered in West Virginia.

I get fairly fierce when it comes to seniors in West Virginia, because they don’t have a lot of money, and I tend not to want to take any chances with them.

That does not mean that I’m not willing to experiment, I’m not willing to be bold, I’m not willing to do things that are different than the past.

And I understand, as Jim McDermott just said, anybody who thinks that Medicare can continue on as it is, isn’t in touch with reality.

On the other hand, I share, as a former VISTA worker, a passionate insistence, moral insistence, which is uncompromisable except as I understand that the situation gets better for the particularly poor, because I think it is a fair kind of measurement, particularly in a program like Medicare.

You can’t make that statement about all of society and all of programs and all of what government or private enterprise does or doesn’t do, but I guess my point is that we got this proposal about the 12-percent calculation, I guess it was 4 o’clock yesterday afternoon, and I think, one of the worries that I have is I think it arose out of the fact that we’re hitting pretty close to home several weeks ago with the thought that premiums for fee-for-service beneficiaries could increase between 10, 19, 21 percent, whatever it might be.

And then I think this proposal came back, how do you calculate that 12 percent?

How is it offset by increases in home health services and other types of things?

It’s very hard for me to take chances. There cannot be a margin of error for the people that I represent.

You’ve heard me say that, and you will hear me continue to say that because I believe it so strongly.

I have to say that I am absolutely amazed at the way GME has come out, graduate medical education, the way we do our training of physicians in this country, which involves not only our academic health centers, but the Veterans’ hospitals, which I work very close with.

And the idea of somehow leaving that up to an appropriations process is something which is very, very hard for me to understand as to be consistent with offering the best of health care, not only for seniors, but for all Americans.

I also want to say that the plan has changed a good deal. And I think that has been in good faith, as particularly, you, John Breaux, have reached out to try to bring people in.

It also has created on the part of some of us that worry about will this stick, will this remain, is this for the purpose of bringing through a majority vote or whatever, and I have to say that my colleagues, Bob Kerrey and Phil Gramm and John Breaux, and myself were on the Finance Committee.

And one of the things that is very much on my mind is that you’re quite right, that a plan like this probably will pass. But I think this is the high water mark. I think this is the most kind of generous that we will see.

I think as it settles back in the process of the Ways and Means Committee and the Finance Committee, and then the Senate and the House back and forth, that a lot of these adjustments which have been made upward to try and reach out to a number of us who have particularly endangered constituencies will disappear.

And that’s a genuine concern on my part. That’s not to accuse. That’s simply to say that it’s something that I worry about in this Commission, the effort to get to 11 votes.

Let me end with this, that I think this process has been a very good one.

As Bob Kerrey says, there’s been an awful lot that’s been said that’s been instructive to me. I’ve felt from the very beginning that it was not entirely likely that this Commission would in fact come up with the solution, but it was very important that the Commission take it on so that we could educate not only ourselves, but our colleagues, and through extension the American people on the difficulties of Medicare as well as the very different points of view that are honestly brought forward to Medicare.

Sam Howard’s belief in the market system. Jim McDermott’s concerned that it was the market system that really caused the creation of Medicare because 50 percent of seniors didn’t receive insurance from that.

They are both extremely honest views, and also represent splits within the American people.

So I think the process has been useful. It’s not a proposal which I can support, but I say that with respect to both the chairman and the vice chairman and to all the members that I’ve had the privilege of serving over this past year with.

Senator BREAUX. Thank you very much, Senator Rockefeller.

Deborah Steelman?

Ms. STEELMAN. When we were appointed to this job, many people said this was an impossible task. How on earth could we improve the benefits at the same time we’re trying to reduce the growth rate, and thereby reduce the tax burden on future generations. How can this be done?

And I would like to thank both you, Senator Breaux, and Congressman Thomas, for not approaching this as an impossible task, but for approaching this as the unavoidable task that it is.

It is a task that I believe the Breaux-Thomas proposal meets very well and very responsibly. It’s not often I get the chance to quote one of our nation’s great poets, but I believe her words are apt.

Emily Dickinson once wrote: ‘‘Some say a word is dead when it is said; I say it just begins to live that day.’’ And this proposal’s life starts today, and that’s very exciting. The reason I think it’s very exciting is because when my generation enters retirement, I become eligible for Social Security in 2026, under current law, Medicare in 2024, we will have a plan that allows us a choice of secure and comprehensive benefits. We’ll have that because of what you’ve done today.

Those benefits will be much more secure than the benefits available under today’s program. Why do I say that? In today’s program, you can get about a hundred plus home health care visits in one state and maybe 30, if you’re lucky, in another. In today’s program, if you are really, really sick, and you have to go to a hospital, you have to pay $768 at just the time you face the worst costs of an illness. And there’s no help for anybody who earns less than $10,000 to defray that cost. And they cannot afford Medigap. What we have done here is do what government should do; take the most responsible position and competing and tough choices and put it forward to the American people and say, let’s talk about this.

Now in terms of offering comprehensive coverage, we do something that today’s system doesn’t allow us to do. We say to people, we want you to have drug coverage. We’re worried about the cost of it. We believe that an awful lot of people are already buying this product, are already buying drug coverage out of their own pocket. And how do we make sure that, as we try to make drug coverage more accessible to everybody, that we don’t hurt the people who already have it, and that we don’t put all of those liabilities on the taxpayers of the future which is the people we're already worried about, the reason this Commission was appointed.

We do it by saying, let’s make it a lot cheaper. I mean, under today’s Medigap plan, it costs between $1,800 and $2,400 to get drug coverage. That’s too expensive. Why wouldn’t we put it in the plan, so there’s a comprehensive plan, the drug benefit’s going to cost maybe $600 or $700. If we reform Medigap, maybe we can have a drug-only policy or a Medigap policy that has drugs that cost $600, $700, $800, where we make it more affordable. And then say to people who earn less than $10,000 a year, we know even that’s too much for you to buy. We want to help. That’s society’s obligation to you. This, to me, is the way you approach unavoidable tasks, by making the best choices you can and putting them to the American people.

I’m also very pleased that this proposal gives people the choice of plans that are priced in the marketplace. As Lynn Nichols said, in one of our early hearings, it is very difficult to get 10,000 prices right in each of 3,000 counties. That’s very difficult. And as a result of that, we have fraud and waste that every senior sees every day, as providers try to worry, how do I make sure I can get the money, how do I make sure I do this. We have a program that does not deliver what we owe taxpayers; responsibly delivered, comprehensive benefits. We need to focus the power of government on what it does well, overseeing plans, regulating an entity that says, OK, providers, you’re out there in the marketplace, you have to convince beneficiaries that you’re the plan to go with. Beneficiaries are far better policemen than government will ever be, as Vice President Gore knows. I think the other very important thing we do here, by moving to a premium support system, is we offer the opportunity to lower the growth rate of this program by at least a percentage point and perhaps more.

Why is that so important? Obviously, I care very much about my children who will be the taxpayers when I retire. My children will be 26 when I retire; they’ll be in their first job out of college, they will not have had a lifetime to build up assets. They will be trying to buy their own health care. And I don’t want them to have to fund as much a proportion of my health care as they would under current law. So there’ll be a lot fewer of them to pay my benefits under current law. So I want to make a fair tax burden for them. But I want, obviously I believe my generation is going to have to pay more in premiums and I want those premiums to be as low as they possibly can be. Now how do I ensure that? By making sure the growth rate of this program is as low as it can possibly be. That’s the only way I can guarantee beneficiaries pay a lower premium. That’s why I care about lowering the growth rate of this program. I also think one of the very powerful statements that has been made by this approach, by this Breaux-Thomas proposal, is the notion that the public should have an accountability measure that is real. The programmatic solvency test is one of the most important things we have done here, because it doesn’t allow us to play shell games with anybody anymore. The part A solvency trust fund is shattered as a test of the fiscal integrity of this program. We have shattered it. So let’s have a test that brings the public into the debate and says, OK, we’re going to spend more on this program. How should we fund that spending increase? Should it be payroll taxes, should it be general revenue, should it be beneficiary premiums, should it be cuts on providers or on health plans? Let’s have that debate in a real way. This gives us the opportunity to do that.

I have been honored to serve on this Commission and I have tried to do it with the deep sense of gratitude to the generation of my parents, the generation of people who created this program, who believe in it, as I do, who believe it’s essential going forward. It is one of the great monuments of this century to have accomplished this. I hope that this century will end with the responsibility that we have, the deep sense of responsibility that we have to generations that come behind us, and I think we can only do that by truly modernizing this program in a way that treats it as an unavoidable set of problems. I think, for my generation, it’s clearly time to lead, and I think this is a great step, this proposal is a truly, truly great step in making that leadership come about. And I thank you very much for it.

Senator BREAUX. Thank you, Ms. Steelman.

Next, we’ll hear from Dr. Laura Tyson.

Ms. TYSON. Thank you very much.

Well, as you can see from the speeches of the group so far, it was a lot of fun to be on this Commission. We have a lot of smart people and they are very articulate.

I want to thank Senator Breaux and thank Congressman Thomas and thank all the staff.

Actually, I guess I should mention Bobby, since we’ve had a lot of staff people mentioned and Bobby hasn’t been mentioned yet. The staff has been absolutely wonderful.

I want to say that a lot of what Deborah just said I can absolutely agree with. And I guess, what I would say is I believe, if we had more time and if we did not have a super majority rule, we would actually be able to find a number of points of common ground.

I, for one, and this is not common to all of the presidential appointees, and it’s not common to all the people in this room on the Commission, but, I, for one, believe we do need to restructure Medicare and we need to do it sooner rather than later.

I think the restructuring consists of two parts. One part, which has been discussed a lot here today, is competition through premium support.

Another part is HCFA modernization, which we haven’t talked a lot about here today, but frankly we did talk a lot about in the Commission. And I think things like competitive bidding and sophisticated disease management techniques and all the rest of it are things that we should do.

But I do support the premium support idea as a way to introduce competition.

The concerns I have with this proposal I guess are really threefold.

No. 1, I accept the notion that premium support is an idea that will enhance efficiency, but there’s no one in my profession that I know of who would support the notion that the efficiency gains are adequate to deal with the financial needs of the program.

So we can, one can say more competition is better for efficiency and show that through anecdotes, show that through economic theory, show that however you want to show it, but you cannot show large enough savings to deal with some of the financing problems.

I also want to say in this regard that I think that the estimate that the Commission staff used to judge the efficiency effects, the 1� percentage points a year, is a very ambitious and sort of outlier estimate.

Most estimates I have seen of this would suggest that the efficiency gains are smaller.

Now does that mean we shouldn’t do it?

No. I think efficiency gains are worthwhile no matter what.

But the problems, therefore, I have with this are not with will this enhance efficiency. I happen to think it would.

But the actual issue of the adequacy of the program, because it’s not just efficiency of Medicare, it’s adequacy of Medicare, and the financing of the program.

Now on adequacy, I’ve made it clear throughout our discussions that my test here is how prescription drugs are handled.

And I mentioned, last time that we met, that my reason for insisting that we handle this in a way which addresses the issue, not just of the bottom 135 percent in terms of income, but really the average elderly American, is because of the efficiency issue.

Either you get people able to make efficient health care choices through drug coverages or they will make inefficient choices.

The Medigap system we have is notoriously inefficient. The inability of individuals to choose a pharmaceutical as a health care treatment, and instead having to go to a more expensive covered health care treatment in a hospital is something that we should be addressing.

This proposal doesn’t go far enough. So while it takes some important steps in the right direction, I really wanted to go further in terms of the inadequacy of the drug benefit for efficiency reasons.

You could do it for equity reasons as well, but I would argue for efficiency reasons.

On financing, I actually think the proposed new approach of measuring solvency is a reasonable first attempt, but I want to distinguish solvency from financing.

These are not the same thing. I would put it this way. It is the case that if Medicare grew at the same rate as the economy over the next several years, something that’s unprecedented for either Medicare or for any private health care plan you can imagine, that we would still have a solvency problem, we’d still have a financing problem by 2020.

So I am concerned that this proposal, just ducks it. It basically says we’re not going to address where the money’s coming from. We’ll come up with the kind of measure which says, this will show us to have a monetary problem, but we will not say now, as a Commission, either through amendments or through different points of view, which is one thing that I proposed, various ways to solve that financing problem.

So ultimately although I really am in favor of the premium support concept and I think it will be efficiency enhancing, I can’t support this particular proposal because of my concerns about adequacy and financing.

I think if we had more time, we might be able to come to an agreement on this.

And finally, I really want to emphasize, I know many people may not believe it, that my position on this particular document is based on policy considerations, not political considerations.

You’ll notice I did not mention one point in my comment, up to this point, is the President’s proposal on the surplus dedicated to Medicare.

I happen to support that proposal. I was not involved in the policy process that went into making that proposal. I heard it when the rest of the American people heard of it, in the State of the Union Address.

I think it’s a good proposal, I think it’s a real proposal, and we could go through complicated budgetary accounting rules and I would try to convince you that it’s a real proposal.

But I think like Stuart, if that’s not the proposal we’re going to embrace, then let’s come up with some alternative proposals, but let’s not say we’re going to leave it to the future to solve what we know is a very serious financing problem.

That seems to be ducking a real responsibility.

So it’s not politics. I have policy concerns about this. I think we ran out of time. I’m happy to continue the process in any way I can.

My only conditions to Congressman Thomas and Senator Breaux about continuing is could we occasionally meet in California where, despite what Stuart said, there are some doctors who are trained.

Thank you very much. [Laughter.]

Senator BREAUX. Thank you very much, Laura.

Dr. Bruce Vladeck, Bruce?

Mr. VLADECK. Thank you, Mr. Chairman.

Senator Breaux, Mr. Thomas, I’m really very sad that we find ourselves where we are today.

As you know, I was appointed to this Commission very shortly after we completed work on the Balanced Budget Act, a process in which it was my privilege to work with many of those who became my fellow Commissioners, in the spirit of cooperation and mutual respect to produce legislation that I believe was a major step forward in the history of the Medicare Program.

I didn’t agree with every provision of the BBA. Mr. Thomas didn’t agree with every provision of the BBA, Senator Breaux didn’t agree, but we accepted some of the things we didn’t like as a fair price for our having achieved bipartisan agreement.

And I hoped, when we started out with this Commission, that some of that spirit would carry over to our work.

I also, to be blunt about it, looked forward at the time to being able to participate in the deliberations of this Commission as a private citizen and as a free agent, since my understanding with those who appointed me was that I was entirely free to form my own opinions and speak my own mind.

I hoped that with open discussion, high quality staff work, and an adequate supply of good will, we would be able to work together to produce some creative and innovative solutions to the very, very real problems that are faced by Medicare and its beneficiaries.

But I must say that the great expectations with which I began this process soon gave way to considerable frustration.

I think Commissioners’ suggestions about agenda items or staff analyses they wanted to see pursued were responded to selectively. Some concerns were not even allowable for public discussion. Totally nonsensical and erroneous statements not only went unchallenged but began to be repeated as gospel, and the leadership of the Commission apparently decided some months ago that some of us were not likely to be part of a ‘‘super-super’’ majority and largely left us out of the process in a substantive way thereafter.

I am grateful to the many members of the press who called me over the last several months to bring me up to date with what was going on with the Commission process. [Laughter.]

More importantly, putting the process issues aside because they’re not of great consequence in the long run, I think we are now confronted with a proposal that is not only unacceptable to me as policy but that is also internally inconsistent, grounded in superficial and erroneous analysis, and supported by bogus numbers.

Even if this proposal were to command 11 votes today, it would not survive careful scrutiny or analysis when aired for extensive public review.

As some of my colleagues have noted, this proposal does nothing to ensure the long-term solvency of Medicare, the most important task given to this Commission. It addresses the problem by redefining it--and I don’t even think that redefinition works.

But more substantively, the fact is that you can’t finance benefits for twice as many people by any kind of savings you can realistically expect to achieve, and that the ratio of expenditures in part A to part B moves away from the kind of flexibility and integration of care and systems that so much of the rest of the rhetoric surrounding this proposal is about.

I do not believe, over and above the savings from extending the provisions of the Balanced Budget Act, that this proposal would even save a very substantial amount of money. And I would emphasize that the HCFA actuaries’ scoring of the premium support component of the earlier version of this proposal is consistent with that position. But it would clearly increase costs to Medicare beneficiaries in many urban communities, not only including Stuart’s, but mine, and in some rural communities in a way that wouldn’t redound to the benefit of the Federal Treasury or to the solvency of the program, but only to private firms.

I think this proposal really does nothing to make prescription drug coverage more available or more affordable to the vast majority of Medicare beneficiaries, and in fact does more to protect the interests of the pharmaceutical manufacturers than a moderate income senior.

A voluntary, nonsubsidized prescription benefit, we know from extensive experience over the last 30 years, is unworkable, is overwhelmed by adverse selection, and it’s bad policy.

Indeed, I find nothing in this proposal which I believe effectively protects the average Medicare beneficiary, and I believe in the aggregate this proposal reduces many of the protections beneficiaries now have.

My own analysis, again for example to the extent I’ve had the opportunity to do it, of the chairman’s proposal would actually result in a reduction in the extent of benefits available to many Medicare beneficiaries who are now enrolled in HMO’s.

As I read the description of the premium support proposal as outlined in this version, the cost savings claimed for this and an expansion of benefits that are talked about in the rhetoric are just mutually inconsistent.

Even what I’ve described elsewhere as the ‘‘Premium Support Fairy’’ can’t ensure improved benefits and reduced costs simultaneously.

And to me, perhaps most distressingly, this proposal, I really believe, actually increases the number of uninsured Americans at a time when the number of uninsured in our society is already a national disgrace.

I know there has been a lot of talk in recent weeks about political pressures ostensibly brought to bear on members of the Commission to either support or oppose the various pieces of this. I can’t comment on this firsthand since, as I noted before, not only has no one seemed to have sought my vote, they haven’t even sought my substantive input for many months.

So I think I can be entirely sincere and accurate in saying that whatever the consideration behind any particular Commissioner’s vote, I think this proposal fails on its own merits.

It fails on its own merits on the issue of solvency, or even significantly improving Medicare’s financial prospects. It fails to improve the benefits or financial protections available for current or future Medicare beneficiaries, and leaves the average beneficiary worse off.

It even fails to contribute in any substantive way to the process of better understanding Medicare’s problems or to finding a way to fix them.

So while I don’t really understand the reasons how we got to this point in the way we have, I am really extremely sad that this is apparently where we end up.

I think the American people with whom this Commission was so reluctant to engage in a process of real discussion deserved better from us than that, and I am sorry to have been part of a process that couldn’t do any better.

Thank you.

Senator GRAMM. Is that a no vote? [Laughter.]

Senator BREAUX. And now last, but certainly not least----

Mr. VLADECK. I have to make up my own mind on that, Phil. [Laughter.]

Senator GRAMM. I wasn’t sure, listening to you. [Laughter.]

Senator BREAUX. Our last speaker, but certainly not least, is Mr. Tony Watson.

Tony?

Mr. WATSON. Mr. Chairman, Mr. Thomas, I spent 33 years in the front lines of health care. All the way from family health centers in Harlem, East Harlem, South Bronx, to public hospitals, in Harlem Hospital, Lincoln Hospital, to a firm philosophical dedication to treating Medicaid to, for whatever reason, a refusal ever to pull out of treating Medicare.

I join with my other members in that I cannot support this proposal that has been placed before the Commission.

As I stated at the outset of our deliberations, a society will be judged by the quality of its consideration and concern for its elders. In my mind, this means that in our efforts to assure the long-term stability of Medicare we must first make sure we do no harm.

I am sorry to say that I do not believe the plan as proposed meets that standard.

I have stated publicly on a number of occasions that I am opposed to raising the Medicare eligibility age from 65 to 67. We know this idea saves very little money because the young elderly use few services. Yet this idea may be discriminatory to minority populations who have lower than average life expectancy.

It also may discriminate against workers in physically demanding occupations who simply cannot work as long as white-collar office workers.

Moreover, this proposal will increase the number of uninsured in this country at a time when the uninsured population is already expanding.

I am very concerned that this proposal does not do enough to ensure that all Medicare beneficiaries have access to an affordable prescription drug benefit. To me, this is a major flaw.

I am particularly troubled by the lack of any consideration of new financing for Medicare. Some people seem to think that you can wave a magic wand called reform and Medicare will somehow magically be made solvent.

Nothing could be further from the truth. New moneys are needed to keep Medicare solvent regardless of what proposal or reform is adopted. The President made one such proposal to provide new funding for Medicare.

I am sad to say that the Commission never even considered it.

When I was appointed to this Commission I was very hopeful that we would lay our differences aside and work together to make recommendations to strengthen Medicare and to assure its financial solvency, while doing no harm to elders.

Unfortunately, I do not believe we have accomplished that goal. So, regretfully, I must vote against this proposal. But I would be remiss in saying that it has been an honor to work with Senator Breaux and to Bill Thomas, whom I have developed a great deal of respect despite him being a Republican [laughter] and have even come to like him. [Laughter.]

Mr. THOMAS. Don’t blow my cover, Tony. [Laughter.]

Mr. WATSON. I also would like to say to the American people that are listening that it is true I have learned a great lesson here in Washington. It has more fertilizer here than all 50 states combined. [Laughter.]

Thank you.

Senator BREAUX. Thank you, Tony, and thank all of the members of the Commission for their candid comments and their observations about the proposition that is now before the members.

I want to move to the next item, which would be a vote on the proposal. But before I put the question on that vote, I would like to recognize Congressman Thomas to introduce and thank the committee staff. I know that all of us deeply appreciate the work of our personal staffs that have been involved. That goes without saying, but it’s important that we say it, but also to the professional staff who have operated under obviously difficult and trying circumstances with such an evenly divided Commission. But I think that the work they did was very dedicated and very sincere, and I personally appreciate very much what they have done.

I would like to ask Bill Thomas, if he would, to recognize them before we vote.

Bill?

Mr. THOMAS. Thank you, Mr. Chairman.

I think everyone realizes that the volume of work necessary on a Commission such as this in which a number of requests come in and materials have to be produced and somebody has to produce them, somebody has to prepare them.

It has been a joy working with this staff which was pulled together from a number of different sources. If the Commission would allow me, I would at least like the people who did an enormous amount of work to get the kind of recognition in this group that they deserve.

One of the anchors at the Commission who held down basically the executive secretary position of trying to pull everything together for everyone else is Julie Hasler, and I want her to stand up so we know who she is.

Julie, stand up. [Applause.]

If you will hold your applause until the end, we can get through this list a lot faster.

I see in the back Rusty Jabour. This is his first long-term stay away from Baton Rouge. He has been the press secretary, and he basically came with the Executive Director--and I’ll save Bobby till last--but Rusty has been critical in getting information out to the press, and we appreciate it.

Anne Mutti is not here. She decided to get married. She took as honest our March 1 departing date and planned a marriage, and she is now on her honeymoon.

She just thought we were going to live up to what we said.

We borrowed a number of people from other very important agencies who had expertise that we couldn’t afford to buy, so we borrowed.

One of them is Mike O’Grady, MedPAC detailee. He was absolutely essential to putting the package together.

Another one is Jeff Lemieux, who is at CBO. Again, absolutely essential in crunching the numbers.

Tom Dowdal--is he here? GAO detailee.

Is Chris Peterson here, an intern that----

Senator BREAUX. In the back.

Mr. THOMAS. There he is in the back, who has kept everybody informed by his moving around and providing information to people.

Jenny Hansen. She’s decided she likes it here and is going to stick around.

Cindy Chen, in the very back, who has been another anchor.

John Hoff, who is a health lawyer, who--and the health lawyer aspect is important because as we were talking about what we wanted to do, he was one of the anchors in talking about reality and what you can and cannot do in the real world, and we appreciate his contribution.

And then I saved for last someone who came here very young and is leaving a little bit older. [Laughter.]

One of my jobs was to try to find somebody to become the Executive Director of this operation that would meet both the criteria of Chairman Breaux and myself, and I was at least intelligent enough to look around Louisiana to find somebody, and lo and behold I found someone who a number of people recommended to me based upon the work he had already done in his frighteningly short lifetime. [Laughter.]

In dealing with this issue in the State of Louisiana, and he was kind enough to disrupt what was an ongoing very promising career to come here, pull us together, help us stay focused, and structure us, and that is Bobby Jindal, and I want to thank him personally for the commitment he’s made which I know was very difficult with his family and children down in Louisiana.

With that, Mr. Chairman. [Applause.]

Senator BREAUX. I would also--thank you, Bill Thomas--I would also mention actuaries. I know the HCFA actuaries were very involved and very helpful in addition to trying to provide numbers for us to consider. And CBO, as well. We thank them, as well.

The question now before the committee is on the reporting of the document entitled the Breaux-Thomas document, which is now before the committee.

I would ask all those in favor, please signify by saying aye----

Mr. THOMAS. Mr. Chairman, could we just go to a rollcall?

Senator BREAUX. All those in favor of taking this by rollcall vote, please raise their hand to so indicate.

[A show of hands.]

Senator BREAUX. Without objection, the roll will be called on reporting this recommendation to the Congress and to the President. It takes 11 votes minimum to make this report to the Congress and to the President, and the clerk will please call the roll.

Ms. HASLER. Mr. Altman?

Mr. ALTMAN. No.

Ms. HASLER. Mr. Altman votes no.

Mr. Bilirakis?

Mr. BILIRAKIS. Aye.

Ms. HASLER. Mr. Bilirakis votes aye.

Ms. Conway-Welch?

Ms. CONWAY-WELCH. Aye.

Ms. HASLER. Ms. Conway-Welch votes aye.

Mr. Dingell.

Mr. DINGELL. Votes no.

Ms. HASLER. Mr. Dingell votes no.

Senator Frist?

Senator FRIST. Aye.

Ms. HASLER. Senator Frist votes aye.

Ms. Gordon?

Ms. GORDON. Aye.

Ms. HASLER. Ms. Gordon votes aye.

Senator Gramm?

Senator GRAMM. Aye.

Ms. HASLER. Senator Gramm votes aye.

Mr. Howard?

Mr. HOWARD. Aye.

Ms. HASLER. Mr. Howard votes aye.

Senator Kerrey?

Senator KERREY. Aye.

Ms. HASLER. Senator Kerrey votes aye.

Mr. McDermott?

Mr. MCDERMOTT. No.

Ms. HASLER. Mr. McDermott votes no.

Senator Rockefeller?

Senator ROCKEFELLER. No.

Ms. HASLER. Senator Rockefeller votes no.

Ms. Steelman?

Ms. STEELMAN. Aye.

Ms. HASLER. Ms. Steelman votes aye.

Ms. Tyson?

Ms. TYSON. No.

Ms. HASLER. Ms. Tyson votes no.

Mr. Vladeck?

Mr. VLADECK. No.

Ms. HASLER. Mr. Vladeck votes no.

Mr. Watson?

Mr. WATSON. I approve it. [Laughter.]

Ms. HASLER. Again?

Mr. WATSON. No. [Laughter.]

Ms. HASLER. Mr. Watson votes no.

Mr. Thomas?

Mr. THOMAS. Aye.

Ms. HASLER. Mr. Thomas votes aye.

Senator Breaux?

Senator BREAUX. Votes aye.

Ms. HASLER. Senator Breaux votes aye.

Senator BREAUX. The clerk will please report or announce the vote.

Ms. HASLER. Mr. Chairman: 10 ayes, 7 nays.

Senator BREAUX. An insufficient number of members voting aye necessary to report the document to the Congress and to the President, the motion fails.

That will conclude the work of the National Bipartisan Commission on Medicare.

Mr. THOMAS. Very sad.

Senator BREAUX. I deeply thank all of the Commission members for their input.

[Whereupon, at 7:25 p.m., March 16, 1999, the meeting of the Bipartisan Commission on the Future of Medicare was adjourned.]

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