[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
THE PRESIDENT'S FISCAL YEAR 2009 BUDGET
=======================================================================
HEARING
before the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 13, 2008
__________
Serial No. 110-69
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
CHARLES B. RANGEL, New York, Chairman
FORTNEY PETE STARK, California JIM MCCRERY, Louisiana
SANDER M. LEVIN, Michigan WALLY HERGER, California
JIM MCDERMOTT, Washington DAVE CAMP, Michigan
JOHN LEWIS, Georgia JIM RAMSTAD, Minnesota
RICHARD E. NEAL, Massachusetts SAM JOHNSON, Texas
MICHAEL R. MCNULTY, New York PHIL ENGLISH, Pennsylvania
JOHN S. TANNER, Tennessee JERRY WELLER, Illinois
XAVIER BECERRA, California KENNY C. HULSHOF, Missouri
LLOYD DOGGETT, Texas RON LEWIS, Kentucky
EARL POMEROY, North Dakota KEVIN BRADY, Texas
STEPHANIE TUBBS JONES, Ohio THOMAS M. REYNOLDS, New York
MIKE THOMPSON, California PAUL RYAN, Wisconsin
JOHN B. LARSON, Connecticut ERIC CANTOR, Virginia
RAHM EMANUEL, Illinois JOHN LINDER, Georgia
EARL BLUMENAUER, Oregon DEVIN NUNES, California
RON KIND, Wisconsin PAT TIBERI, Ohio
BILL PASCRELL, JR., New Jersey JON PORTER, Nevada
SHELLEY BERKLEY, Nevada
JOSEPH CROWLEY, New York
CHRIS VAN HOLLEN, Maryland
KENDRICK MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama
Janice Mays, Chief Counsel and Staff Director
Brett Loper, Minority Staff Director
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C O N T E N T S
__________
Page
Advisory of February 6, 2008, announcing the hearing............. 2
WITNESS
The Honorable Michael O. Leavitt, Secretary of Health and Human
Services, U.S. Department of Health and Human Services......... 7
SUBMISSIONS FOR THE RECORD
Puerto Rico Hospital Association, Statement...................... 55
The Senior Citizens League, Statement............................ 55
THE PRESIDENT'S FISCAL YEAR 2009 BUDGET
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WEDNESDAY, FEBRUARY 13, 2008
U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC.
The Committee met, pursuant to notice, at 2:03 p.m., in
room 1100, Longworth House Office Building, Hon. Charles B.
Rangel (Chairman of the Committee), presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
February 06, 2008
FC-20
Chairman Rangel Announces a Hearing on the
President's Fiscal Year 2009 Budget for the
U.S. Department of Health and Human Services
House Ways and Means Committee Chairman Charles B. Rangel today
announced the Committee will hold a hearing on President Bush's budget
proposals for fiscal year 2009 for the U.S. Department of Health and
Human Services. The hearing will take place on Wednesday, February 13,
2008, in the main Committee hearing room, 1100 Longworth House Office
Building, beginning at 2:00 p.m.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be limited to the invited witness, the
Honorable Michael Leavitt, Secretary, U.S. Department of Health and
Human Services. However, any individual or organization not scheduled
for an oral appearance may submit a written statement for consideration
by the Committee and for inclusion in the printed record of the
hearing.
FOCUS OF THE HEARING:
On February 4, 2008, President George W. Bush submitted his fiscal
year 2009 budget to Congress. The budget will detail his tax, spending
and policy proposals for the coming year, including his proposed budget
for the Department of Health and Human Services. Many of the
Department's programs--such as Medicare, efforts to assist those who
lack health insurance, and Temporary Assistance for Needy Families and
other income security efforts--are within the Committee's jurisdiction.
In announcing the hearing, Chairman Rangel said, ``The President's
budget calls for unprecedented deep cuts to traditional Medicare. We
should be working together to strengthen Medicare for future
generations, not undermining it,'' Chairman Rangel said in announcing
this hearing. ``Among the various proposed reductions in funding for
low-income programs, President Bush's budget calls for the complete
elimination of the Social Services Block Grant in 2010. Furthermore,
this budget changes the tax code in ways that would erode health
security and raise taxes for millions of American families. I hope
Secretary Leavitt is willing to have an honest conversation about how
best Congress and the Administration can work together to protect
taxpayer interests and help all individuals and families get the social
services and health care they need.''
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Mr. STARK. We will commence our hearing on President Bush's
fiscal 2009 budget. We are honored to have the Honorable
Michael O. Leavitt, the Secretary of Health and Human Services
for the U.S. Department of Health Human Services, to present to
us today.
Mr. Secretary, Chairman Rangel is at the White House for
the signing of the economic stimulus legislation. It is my
honor to welcome you to the Committee. Having read your
testimony, I don't know where to start.
Rarely have I seen an official document filled with so much
misleading rhetoric and so few thoughtful suggestions. It is
nothing short of disingenuous to claim concern about Medicare's
future after what this Administration has done to the program.
The unfunded obligations that you cite were driven
substantially higher by excessive corporate welfare provided to
the insurance companies through both Medicare Advantage and
Part D. While bashing the government, whom you and I are paid
to work for, you say essentially that Medicare is a bad system
and needs to be changed.
You decry price-setting, but offer no better way to control
costs and ensure coverage. You suggest we rely on the private
sector, but conveniently fail to point out that that system
costs taxpayers far more than traditional Medicare, and we have
no data to know what we are buying. The private sector, at
least in Medicare, is neither transparent nor efficient.
You assert that government is making coverage decisions,
but that is not quite true. In Medicare, physicians tend to
drive medical care, and the program itself has relatively few
coverage restrictions. Regardless, any of us who went through
the Patients Bill of Rights debate can tell you that on the
rare occasions when Medicare does make decisions, they are
considerably more transparent and generous to patients than the
arbitrary decisions too often made by private plans, whose
priorities are profits and not patients.
Your budget takes a meat ax to a program that, together
with Social Security, has substantially improved the health and
financial security of American retirees. I predict it will be
rejected by both parties.
Before I turn to Dr. McDermott, there is one thing on which
we agree. With respect to Medicare, you wrote, ``We need a
change in philosophy, not just a change in the budget.'' I
couldn't agree more.
Fortunately, we have only a few months left of this
Administration, and then there will be a change. We need a
President who is committed to protecting and improving, not
dismantling, Medicare. That will be the real change from
President Bush's desire to privatize a program that only exists
because the private sector wouldn't take care of senior
citizens in the first place.
Dr. McDermott, do you have an opening statement?
Dr. MCDERMOTT. Thank you, Mr. Chairman.
Secretary Leavitt, we had the pleasure of having the
Secretary of the Treasury up here the other day, and I said
that it reminded me of when Colin Powell went up to the United
Nations General Assembly to sell the war. It is a heavy task
that you have. I couldn't help thinking, as I read over this
document, that Yogi Berra was right when he said, deja vu all
over again.
We have seen this budget before a number of times, and you
have been asked, among a growing list of people, to come up
here and try and defend, I think, what is indefensible. It is
because of your prior background that it is particularly
troublesome to have you up here.
We have heard it before, but let me focus on one particular
plan, and that is the plan to completely eliminate the social
services block grant. Now, maybe younger Members don't
understand how this works. But when Republicans get in charge,
they always want to lump things together into block grants
because it would be more efficient, and it will force
efficiencies, and all this kind of stuff.
What they are really doing is lumping them together so they
can chop them off little by little by little until they are
gone. This budget that you put in front of us is a perfect
example of why the social services block grant was a bad idea
when it was put forward in the first place, because it funds
today welfare services for 2.8 million abused and neglected
children. It funds child care for 4\1/2\ million American
children of working parents. It provides services to 1.3
million Americans with disabilities.
Now, to wipe that out is to simply drill a hole in the
bottom of the lifeboat of an awful lot of people in this
society. You knew it when you were governor because when you
were Governor Leavitt in Utah, you once said, in your own
words, ``Vital human services for our most vulnerable citizens
are provided by the social services block grant.''
Now, you were right back then. That is why it is hard to
have you up here today completely doing a reversal for the
President. I understand you are sent up here to do this, and I
really--I respect your doing it. But it has got to feel a
little uneasy doing it because you know.
The President wants the Congress to eliminate a program,
but is really hiding it under the shell of the old rhetoric
that we have heard again and again, your claim that we really
aren't--in the documents--you really aren't cutting services to
millions of children or seniors and families because other
programs can do the job.
Now, really? Where are they getting the extra money for
these programs? I don't see any programs that got any extra
money, practically speaking, in the President's budget. Poverty
is rising in the country, and the country may be headed into a
recession, and all this budget says to our nation's most
vulnerable families is, tough luck.
The social services block grant, in my view, is a lifeboat,
and it is nothing more than that. You are out really to drill a
hole in the bottom of it, leaving those folks at the greatest
risk possible with states in recession, struggling to some way
to come up with the money to fill the hole that you drill in
the bottom of the boat with this kind of thing.
The National Governors Conference ought to be up here all
over this place, whether they are Republicans or Democrats.
Their ability to deal with child care and abused kids and all
these things will take a serious shot from this kind of a
budget.
It is really not compassionate conservatism. We heard that
eight years ago. But there is very little evidence that I can
see that this is anything but mean-spirited conservatism.
Fortunately for the people, I guess, Congress will shortly
dump this in the waste bin. We go through this process of
listening to you, and we will write our own improved version
and fix some of the problems.
I yield back the balance of my time, Mr. Chairman.
Mr. STARK. Mr. Camp, would you add your kind comments to
welcome----
Mr. CAMP. Well, thank you. I think they will be kinder than
the ones we have heard so far.
Thank you, Mr. Chairman, and welcome, Secretary Leavitt. I
want to commend you and thank you for your service to this
country, and also to commend you for your efforts to draw
public attention to the looming crisis facing the Medicare
program.
Medicare costs continue to soar, and the premiums
beneficiaries pay for Part B have more than doubled since the
year 2000. Doctors face impending payment cuts that are likely
to drive many of them away from treating Medicare
beneficiaries, and the hospital insurance trust fund will be
exhausted in just 11 years.
Given these many challenges, I would have preferred the
Administration propose fundamental reforms that are needed to
preserve Medicare. The 183 billion in payment reductions
proposed by the President may help to alleviate the short-term
financing issues, but I am concerned that they may not do
enough to secure the long-term stability of this important
program.
The President's proposals continue to rely on the same
pricing system that has helped create many of the fundamental
challenges now facing Medicare. Even if Congress were to
immediately enact all of the President's Medicare proposals, we
would still have payment systems that underpay many providers,
create perverse incentives to provide more and not better care,
and distort the entire health care marketplace, as you and I
have discussed in numerous meetings over the past year.
I think with this final budget, bolder ideas about how to
transfer Medicare could have been put forward. I will say also
that the Majority should not have wasted a full year of
inaction on this pressing issue. We did not hold a single full
Committee hearing on Medicare or Social Security, for that
matter, both of which we addressed in the last Congress. So, we
are wasting valuable time on this important issue.
This should have been an opportunity to discuss proposals
like premium support for all Medicare beneficiaries, tying
hospital payments to the value they provide, and providing more
effective care to high cost Medicare beneficiaries. They are
less than 20 percent of the Medicare population, but account
for up to 80 percent of Medicare's total spending.
I hope, Mr. Secretary, that we can work with you in the
time that we have left together to develop these ideas in
anticipation of the looming national debate about health care.
Mr. Chairman, I trust that you would be eager to join us in
that effort.
I also want to thank the Secretary for his continuing
efforts to encourage debate on how to expand private health
insurance coverage, including the tax reform proposal that
would insure up to 8 million more Americans. Our current health
insurance system subsidizes employer-provided insurance and
discriminates against workers solely upon the basis of where
they work. Given the mobility in today's job market, not losing
insurance just because you change jobs would be an improvement
for all Americans.
I believe that any reforms we enact need to give
individuals more control over their health care choices. We
have seen in the new Medicare drug benefit, where beneficiaries
have the right to choose among competing plans, Part D plans
have been able to slow the rate of drug cost increases, and the
costs of the program are now 40 percent below their original
estimates, as you point out in your testimony.
The current health care system mandates that we take what
we get, whether we need it or want it. Personal choices in the
health care marketplace can lead to better consumer decisions
regarding preventive care and help to reduce the rapid growth
in national spending on health care.
Thank you, Mr. Chairman, and I yield back the balance of my
time.
Mr. STARK. I would like now to recognize the gentleman from
Illinois, the Ranking Member of the Income Security and Family
Support Subcommittee.
Mr. WELLER. Thank you, Mr. Chairman. Mr. Secretary,
welcome. Good to have you before the Committee, and appreciate
the time you are giving us today.
I note the President's budget involving Income Security
Subcommittee programs recognizes the fact that simply spending
more money on welfare and related programs is not the same as
actually solving problems. So, this budget proposes ways for
states to use current funds more flexibly to prevent problems
like child abuse from occurring rather than simply treating the
consequences of such abuse after it happens.
That follows the successful model of the 1996 welfare
reforms, which increased work and earnings while at the same
time reducing poverty and welfare dependence. These are
precisely the sort of positive reforms this Committee should be
reviewing because they promise better services and support for
American families in need.
This hearing also provides an opportunity to review
progress implementing welfare provisions in the Deficit
Reduction Act of 2005, which extended and strengthened the pro-
work policies included in the 1996 welfare reform law. As
recent HHS data shows, welfare dependence is falling faster in
the wake of that legislation, which is what Congress intended,
to help more parents go to work and to support themselves.
So, Mr. Secretary, we welcome you before this Committee. We
look forward to reviewing these and other important issues.
Mr. Chairman, I yield back the balance of my time.
Mr. STARK. Figure out these buttons here. Thank you, Mr.
Weller.
Mr. Secretary, I am sure now in whatever manner you would
like--we have your written testimony. It will appear in the
record in its entirety. I am sure that in your verbal
testimony, you are going to redeem yourself marvelously. Please
proceed.
STATEMENT OF THE HONORABLE MICHAEL O. LEAVITT, SECRETARY OF
HEALTH AND HUMAN SERVICES, U.S. DEPARTMENT OF HEALTH AND HUMAN
SERVICES
Secretary LEAVITT. Thank you, Mr. Chairman. May I thank you
for that cheery greeting, and also recognize that though we
have different philosophies, I have always enjoyed our
interactions. I have great respect for your intellect and your
experience and the sense of public service that you bring.
I am here today to represent the President's budget. You
will shortly begin to lay your hand to budget-writing, and I
recognize that some of the decisions we have made may be
different than the ones that you have. My job today is simply
to do my best to describe why the President made the decisions
that he has made.
I do desire to start with Medicare. It makes up 56 percent
of the budget that I am representing today. It is also a very
important program, and I do want to be clear with you and the
American people that I care deeply about this. I care enough
about it that I hope that your budget will be viewed as a clear
warning. Medicare on its current course is not sustainable, and
it is such an important part of the lives of so many of our
citizens.
In 2007, the Medicare trustees' reported that the Hospital
Insurance Trust Fund will be exhausted by 2019--that is 11
years from now--and that Medicare represents now a $34.2
trillion unfunded liability in our obligation for the Federal
budget over the next 75 years.
I view this to be a very serious problem. I want to
acknowledge the fact that American sensitivity to entitlement
warnings has become somewhat numbed by what is a repeated cycle
of alarms and inaction. Those types of warnings have become an
almost seasonal occurrence, like the cherry blossoms blooming
every April. It is part of life's natural rhythm now. We hear
the warnings, but we don't actually stop to think about what
they mean or how important they are.
This budget, however, warns, I hope, in a different way. It
illuminates with specificity the very difficult decisions that
policymakers, no matter what party they are in, will face if we
don't begin to reform and to change our philosophy. We can keep
our national commitment, and must keep the national commitment
we have to those who are beneficiaries of this program. But we
do need to begin changing the way we manage the program.
Currently, Medicare's fee-for-service program, as you
pointed out, is a centrally planned, government regulated
system. I would characterize it as a price-setting system.
Price-setting systems allow regulators to decide the
priorities. Government decides in many cases the treatments
that are provided and how much will be paid. We make decisions,
a few thousand of them at CMS, that have a great impact on
individual decisions in the medical life of many patients,
millions.
Government tries to determine the value of those decisions
based on procedures. It is a system that I think does not
produce the right outcomes. Price-setting systems inevitably
subsidize the wrong things. We overprice other things. A well-
informed consumer, allowed to make decisions through an
efficient, transparent market, in my judgment would make
decisions that are more precise, and they would make decisions
that are more wise.
One need look no further than the experience we have had
with Medicare's prescription drug benefit, where government
organized a market and then let consumers decide what drug
plans work best for them. We are now entering the third year of
that program. We see enrollment continuing to rise. We see
beneficiaries highly satisfied. We see costs of beneficiaries
and taxpayers consistently lower than originally projected.
Just last week, we announced that compared to the original
Medicare Modernization Act of 2009 (MMA) projections, that
Medicare's cost on the benefit will be reduced by $243.7
billion over the next 10 years. Beneficiaries have also saved.
The most recent estimate shows that beneficiaries will pay, for
a standard Part D coverage, at about $25. That is nearly 40
percent lower than we originally projected back in 2003.
There are lots of factors that led to lower costs. But
competition has clearly been a big part of that. The plans have
achieved greater efficiency than they expected. The retail
prices have been negotiated better, manufacturers' rebates, et
cetera. The program is working.
Now, I want to be clear that we prepared this budget with
three major things in mind. One was long-term sustainability of
Medicare because we do view it as so important. The second is
affordability of premiums for beneficiaries. The third was to
balance the budget.
Now, my time is up, and I don't want to go beyond that. You
have my formal statement. I will get a chance, I am sure, to
comment on various parts of it. But Mr. Chairman, I do want to
reflect on the fact that I care greatly about Medicare, and I
want it to be around for every generation subsequent to this
one. I look forward to a conversation as to how we can best
accomplish that.
As you know, a person who is 54 years of age today in 11
years may not have the same stability that one does today. In
October we are going to start selling bonds at the Treasury
Department--to fund this deficit. We need to focus on it.
My time is up, and I will now look to your questions.
[The prepared statement of Secretary Leavitt follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. STARK. Thank you. We can come back to a lot of the
subjects that you have touched on. I suspect our principal
difference--I happen to think that we are the only country in
the world that doesn't set prices for the delivery of medical
care. We are the highest cost, and only clock out at about 17th
or 18th in outcomes, so that we don't have much to brag about
there.
I just don't think that people shop or are able to shop for
medical care the way they would shop for a Chevrolet or a
Toyota or a new pair of shoes. There are those who think they
can, but my guess is that that is beyond the competency of most
pedestrians, and particularly beyond the competency of those
who are in pain or in agony and need emergency care. They are
in no position to shop. So, I tend to discount that.
But the private plans, as I am sure you are aware, the
Medicare Advantage plans, cost the government a lot more than
traditional Medicare. Do you know how much more, on average?
Secretary LEAVITT. I am aware that there are rates in
certain areas--it varies by area--that are higher.
Mr. STARK. Thirteen to 20 percent higher. We have heard
that the private plans will eventually cost less than the fee-
for-service and yield savings. Why didn't you take advantage of
these projected savings from Medicare Advantage in your budget?
Secretary LEAVITT. I can only reflect the fact that the
actuaries were not prepared to score it, like they are not
prepared to score a lot of things that I believe will
ultimately occur in a market-driven system.
Mr. STARK. The chief actuary testified, didn't he,
actually, before our Committee that there are never any savings
under Medicare Advantage under the current law, and really no
efficiencies in the system? Isn't that the situation?
Secretary LEAVITT. I believe there are changes that we can
make to Medicare Advantage that would in fact hasten that. One
example would be beginning to change the breadth of the
competitive band. Right now it is county-by-county, and I don't
think that is a good system. We ought to change it to where we
have broader ranges of competition, and if we do----
Mr. STARK. Be glad to see what the actuaries have to say
about that.
Secretary LEAVITT. I think it would be clear.
Mr. STARK. When you testified before the Senate Finance
Committee, you stated that the plans cannot be subsidized
indefinitely, and the subsidy was established so that a
nationwide system could be developed. I think that is your
testimony.
Any idea what kind of a timeframe you see on that, that we
could end the subsidy for the Medicare Advantage plans?
Secretary LEAVITT. Well, the actuaries--not the actuaries
on the policy. I would like to see immediate changes made on
the range of competition that we have so we can open up like we
did Part D. I am confident that if we were to change the system
from focusing on a county-by-county basis and allow even for
the bidding of those costs to be done on a state-by-state
basis, that we would begin to see substantially more rigorous
competition, and we would begin to see prices fall. I believe
they would ultimately fall in the fairly near term below the
level of other regular Medicare fee-for-service.
Mr. STARK. Well, we look forward to any plans that you
might put forward that the actuaries or others would suggest to
us would save plans. My feeling is, and I really don't meant to
lay this dead cat at your doorstep because I am not sure it was
your idea, but I have said often and I don't know as I would
get much disagreement, whether it starts back from Newt
Gingrich or Ronald Reagan or wherever, that my feeling is that
in privatizing, like encouraging people into Medicare
Advantage, we could then pay a flat annual fee and get rid of
our entitlement responsibilities and turn Medicare--I think
this is the Republican plan--into a voucher program.
Then each senior would get a couple of thousand bucks, and
they would go shop for whatever is in the market, which I think
would end up putting us back into the pre-1965 era where there
wouldn't be much available to them, although I am sure that
your philosophy would be that, no, there would be a lot of
plans open to them.
I don't want to put that to the test. You haven't convinced
me yet. But would you agree with me that it is the
Administration's long-range intent to try and, if privatize
isn't the right word, do away with the entitlement features of
Medicare?
Secretary LEAVITT. I think we would like to see Medicare
Advantage look a lot more like Part D does. In Part D, we used
the government to organize an efficient market, and we
obviously made it available to every Medicare recipient. We
gave people a choice. They could choose the plan that fits them
best, and as I pointed out, we have not only seen dramatic
reductions in the cost, we have seen people happy with it and
we have seen enrollment go up. There is a----
Mr. STARK. Don't you think we could get those costs even
down lower if we allowed you to negotiate prices?
Secretary LEAVITT. I don't believe government is an
efficient--as good a negotiator of prices on an apples-to-
apples basis. I don't.
Mr. STARK. Mr. Secretary, I think you would have PhRMA
quaking in their boots if we were going to let you go out and
negotiate with their clients. I have a great--boy, oh boy. I
would want to bet on the side of how far you would reduce those
prices.
I think Mr. Camp would agree. He is a hell of a negotiator,
isn't he? I will let Mr. Camp go after him now. Thank you, Mr.
Secretary.
Mr. CAMP. Well, thank you. Thank you, Mr. Chairman. You
know, this discussion on Medicare Advantage, there was a study
released last month by the Kaiser Family Foundation that found
Medicare beneficiaries with the highest annual out-of-pocket
costs in traditional Medicare could save thousands of dollars
each year if they enrolled in Medicare Advantage.
For example, the study said that the sickest beneficiaries
spend at least $6,353 in traditional Medicare, but those same
beneficiaries would have spent only $2,160 in a coordinated
care Medicare Advantage plan, for a savings of nearly $4,200.
So, there are advantages, certainly, that we are seeing
recorded in private sector studies that may not be reflected in
actuaries.
But my question is: Since the majority has voted to cut 160
billion from Medicare Advantage, what would have happened to
the 9 million beneficiaries currently enrolled in those plans
if those efforts had succeeded?
Secretary LEAVITT. Well, you make the point, and a good
one, that people like this. They like it a lot because they get
better benefits. They have an opportunity to choose a
physician. They don't have as difficult a time getting a
physician. It is having a terrific impact among particularly
low income and minority communities. People like Medicare
Advantage and would be, I think, upset if it were to be removed
from them.
I do want to make clear that I believe there are things we
could do to enhance the competitiveness of Medicare Advantage,
and we ought to because it is such an important part of the
future of Medicare.
Mr. CAMP. I appreciate those Committees. I said as well in
my opening statement that I think we need to look at the
successes of programs like Part D and try to find a way to
inject a similar structure into traditional Medicare.
You had mentioned a range of competition. Are there any
other thoughts or details you wanted to mention about this type
of reform?
Secretary LEAVITT. Well, I do want to make clear that when
government negotiates, what government does is it begins to
control the choices that consumers or patients make. If the
government were negotiating the drug prices, for example, you
would also have to give the Secretary the control of the
formulary. I would have to make a decision on what drugs people
could take.
I think consumers make better choices on what drugs they
are going to take between them and their doctor than they do
the Secretary of Health deciding and limiting their choices.
So, there is a very clear give and take, and I believe
consumers make better decisions than government.
Mr. CAMP. I know you have also been working on ways to make
health care more accessible through the establishment of a new
standard deduction, but also through your Affordable Choices.
Can you describe for the Committee how the current tax system
discriminates against workers without employer coverage?
Secretary LEAVITT. I think this is uniformly accepted by
Republicans and Democrats, that the current code is blatantly
discriminatory between those who buy insurance through their
employer and those who buy outside the system. If a person
outside the employment system were buying insurance through an
employer-sponsored plan, they have to pay their taxes before
they pay their insurance. It means that the biggest subsidy we
give any person in America in the tax code is denied them.
As I work with states, who are working feverishly to try to
give access to their citizens, this is the one problem they
can't solve. If we could solve this for them by equalizing and
taking the inequity out, there would be many states who would
rapidly begin to assure that their markets were organized in a
way that consumers could choose from low-cost plans that are
available to them. If they can't afford it, then we could help
them further. That is what the Affordable Choices would be.
Mr. CAMP. Wouldn't those choices among low cost plans
provide more help to lower income workers?
Secretary LEAVITT. It would provide not only more help, it
would give them more choices. They would be able to make
decisions for themselves. We would be able to meet what I
believe is our national goal, which is every American having
insurance.
Mr. CAMP. How many currently uninsured would receive
coverage under a proposal like the President's, which we have
been discussing?
Secretary LEAVITT. Various estimates range, based on
exactly how the law was written, but there are estimates that
would have as many as 20 million people able to buy insurance
who are currently not buying insurance.
Mr. CAMP. All right. Thank you, Mr. Secretary. Thank you,
Mr. Chairman.
Mr. STARK. If I could just use up the last 30 seconds of
your time.
We had this discussion last time, but I am sure you are
both aware that under this deduction, automatic deduction of
$7,500, which I gather is the same plan we had last year, that
lower income workers would lose about 30 percent of their
Social Security benefits as a result of their salaries being
lowered by the deduction.
There was some talk with Secretary Paulson about fixing
that, but I think it is important to notice that in addition to
what else this might do, it would cut the Social Security
benefits of the lower income workers.
The other comment that I wanted to add is that of the 34
trillion, which is a good calculation for dynamic scoring, but
if we just did not cut the inheritance tax, we could cut half
of that.
In other words, if you take the inheritance tax that is due
to be eliminated--hopefully not--if it is not eliminated, we
would pick up about 15 trillion in 75 years. If we did away
with the whole Bush tax cut, we would have 100 trillion extra
money in 75 years that would more than three times cover the
unfunded obligations that you are talking about in Medicare.
Secretary LEAVITT. Well, raising taxes is always an option.
It is not one we support, but it is always an option.
Mr. STARK. Just postponing the cut for 75 years.
Mr. Levin, would you like to inquire?
Mr. LEVIN. Welcome, Mr. Secretary.
As I read the budget, there is an assumption that Social
Security would be changed to provide for private accounts. Is
that correct?
Secretary LEAVITT. Actually, that is not part of the budget
I am presenting today. Social Security is not in my portfolio.
Mr. LEVIN. So, you are not sure about that?
Secretary LEAVITT. Well, it is not part of what I am
proposing today in this budget.
Mr. LEVIN. Is the Administration proposing it?
Secretary LEAVITT. Well, you would have to speak with those
who have responsibility for it. I am not here to defend that
proposal or to support it either way.
Mr. LEVIN. You know, under the tenure of this
Administration, the poverty rate among children has gone up. In
real dollar terms, NIH funding has been going down, in real
dollar terms. I think that is part of the appalling feel of
your testimony.
Dr. McDermott, Mr. McDermott, also talks about your
suggestion to eliminate the social services block grant. I
don't know what you replace it with. We are talking about
kids--child welfare services, day care. I just find this
appalling.
Let me ask you: You talk about basic philosophy, and you
repeated it. Consumers make better decisions than government.
On page 2, you say, ``If consumers were allowed to make these
decisions through an efficient and transparent market, their
decisions would be far more precise and wise.''
What that essentially says is that over time, you would
suggest the replacement of the present Medicare structure. Is
that correct?
Secretary LEAVITT. What I would propose is that we find
ways to improve the management of the system. I believe one way
to do that would be to provide consumers with information about
the cost and quality of their care, and that if they have that
information, they will make very good choices. Because
consumers want high quality and they want low costs.
Mr. LEVIN. Okay. But----
Secretary LEAVITT. One way to do that would be through
Medicare Advantage.
Mr. LEVIN. So, essentially, your hope is that overt I mean,
the present Medicare structure, the basic structure, would be
replaced with private insurance?
Secretary LEAVITT. No. I think Medicare is a very important
part of the social fabric of our country. I believe it would be
better if Part A and B worked more like Part D.
Mr. LEVIN. That is private insurance.
Secretary LEAVITT. No. It is a government program.
Mr. LEVIN. Yes. But it is through----
Secretary LEAVITT [continuing]. That was organized by
government to give people an opportunity----
Mr. LEVIN. It is a private insurance program.
Secretary LEAVITT. It is a program that is provided by
private insurance companies, but it is a government-funded
program and it is a government-provided program.
Mr. LEVIN. It is government-funded, but it is operated by
private insurance. So, you essentially would replace the
present system.
Secretary LEAVITT. I would like consumers to have the
choice of being able to have a Medicare Advantage-like program.
Mr. LEVIN. Let me just say to you, I think one of the most
mistaken statements that can be made is to talk about health
care across the board and, ``If consumers were allowed to make
these decisions through an efficient and transparent market,
their decisions would be far more precise and wise.''
Because you talk about 20 percent using 80 percent of the
resources. These are people who have serious illnesses, by and
large. Essentially, you are sitting here and telling people
with the serious illnesses that consume most of these dollars
for senior citizens that the decisions would be better made by
them, that they would be far more precise and wise.
All I can suggest to you is that you go out into the
countryside you have, and go back and try that. My hope is that
this budget, this health budget, will be put up for a vote on
the floor of the House, and everybody have to vote yes or no on
what has been proposed by you and the President.
I am going to make that recommendation, and see where
people are with these massive changes, with these massive cuts,
and let you defend----
Mr. CAMP. Would the gentleman yield?
Mr. LEVIN. Yes.
Mr. CAMP. I would be glad to put that up as long as it was
also tie-barred with a vote to repeat Medicare Part D. We will
see where the votes comes down on that as well.
Mr. LEVIN. No, no. I don't want tie-bar----
Mr. CAMP. What the Secretary is saying----
Mr. LEVIN. I will take back my time. Mr. Camp, we will
decide what is tied to what because we are going to want you to
vote yes or no on what has been proposed by this Administration
and the Secretary, whom we respect personally, has come here to
defend.
It will be interesting to see how many of you will vote for
these changes. I hope that day will come. The reason I finish
with this is I think it will help project this issue even
further into a reasonable, responsible dialogue in the 2008
election.
Secretary LEAVITT. Mr. Chairman, could I respond?
Mr. STARK. Go right ahead, Mr. Secretary.
Secretary LEAVITT. Thank you. I would like to reflect the
fact that at least I believe we could agree--I would hope we
could agree--that the trajectory right now that Medicare is on
is a dangerous one financially, and that we have to solve this
problem for future generations--and we may have differences of
opinion on how to do that. But I hope we could agree that this
problem needs to be resolved.
I take no pleasure in being able to be the one who, in the
context of a budget, makes decisions on what is basically a
spreadsheet pro forma as to how I would rank the things that
are the most important or least important. Some person with
this system will ultimately have to make those decisions.
Mr. LEVIN. Let me just say, I agree with you something has
to be done. Your medicine is worse than the illness. I agree
there is a problem.
Secretary LEAVITT. Well, I think there is a better
solution, and the solution would be to begin to change the
system, where people have access to information about the cost
and the quality of----
Mr. LEVIN. I am all in favor of information.
Secretary LEAVITT. I think we could agree on----
Mr. LEVIN. Not destruction of the program.
Mr. STARK. Mr. Herger, would you like to inquire?
Mr. HERGER. Yes. Thank you very much, Mr. Chairman.
Mr. Secretary, I want to thank you for coming before us,
for being courageous, for recognizing a program that has
incredible challenges to it, and being willing to go out beyond
just a government control, which means well. But wherever we
have total government control in any program any place in the
world, well-meaning people, we just don't get the results. We
get shortages. We get a lack of the care. We just don't get the
results that we deserve here in this country and that people
deserve any place.
I hear a number of concerns from my friends on the other
side of the aisle that the Administration's budget would hurt
Medicare. My fear is what will happen to Medicare if we don't
take action soon to slow its growth? As you have mentioned, the
unfunded liabilities of the Medicare program are estimated at
$34.2 trillion. Now, that is a huge number, and it comes out to
over $110,000 for every man, woman, and child in America.
I am concerned that if we continue to ignore this problem,
it won't be long before Medicare disappears altogether. I am
grateful that the Administration is responding to this crisis,
and yet even this far-reaching budget proposal eliminates only
one-third of Medicare's total unfunded liabilities.
Mr. Secretary, in your judgment, what needs to be done to
get Medicare back on a solid financial footing?
Secretary LEAVITT. Well, thank you. I will answer your
question. I would like to make the point that the reductions in
growth that we are proposing will allow Medicare to continue to
grow at 5 percent a year. Currently, it is growing at roughly
7.2 percent. So, we are simply slowing the rate of growth. We
are not cutting anything. We are slowing the rate of growth.
Now, I know Washington-speak. Everybody wants to argue about
that as a cut. But the reality is, 5 percent a year over the
next 5 years, more will be spent.
My view is that anyone, whether it is Mike Leavitt, George
Bush, or any person who has to solve this problem, will
ultimately have to do one of three things. They will either
have to make hard cuts, or they will have to raise taxes, or
they will have to find a way to begin allowing the system to be
managed in a different way.
I believe the best way to manage it is to give people
information about the cost and the quality of their services,
and then let them choose. Let them make choices, not
necessarily between care and no care, but choices between who
provides the best quality at the best price.
Now, to do that, we are going to have to change not just
Medicare but our health care system. It will require us to do,
in my judgment, four things.
Electronic medical records need to be pervasive in our
system to drive more efficiency. We have got to have better
quality measures so our people know whether what they are
getting is quality or not. We need to have price measures so
that people know the price and they know the quality, and they
are able to take the cost and the quality and make judgments.
We know, from Part D, that if you give people good information
and give them a choice, they will make choices that will drive
quality up and the costs down.
So, this is not about leaving Medicare. It is about finding
ways to improve Medicare so it is sustainable. A person who is
54 years of age today, when they turn 65, won't have a Medicare
trust fund they can call on. We are this year selling bonds
that are in the trust fund of Medicare Part A, and by the time
we get 11 years out, they are gone and we will no longer be
able to do that.
We are going to have to do one of two things: employ one of
the tax-increasing methods that the Chairman has referred to;
or we could do it with payroll tax, the way it is currently
done; or we have got to change the system in a very thoughtful
way. I believe now is the time to do that. I do not support the
idea that we simply do this with tax increases.
Mr. HERGER. Well, thank you. Mr. Chairman, I don't, either.
I don't believe--I mean, at the rate we are going, we could
not--at the rate this program is going, we could not raise our
taxes enough in the long-term to be able to pay for all these
entitlements that we have. We have to make the system work
better and more efficiently. I want to commend you and the
Administration for having the courage to move forward to
attempt to do that. Thank you.
Secretary LEAVITT. Thank you.
Mr. STARK. Dr. McDermott, would you like to inquire?
Dr. MCDERMOTT. Mr. Chairman, thank you. Listening to Mr.
Herger, I am very, very, very depressed. He has said that it is
just not possible to solve this. I don't know, maybe the Finns
and the Swedes and the Norwegians and the Germans and the
Italians and the Dutch are smarter than we are.
Mr. STARK. The Irish?
Dr. MCDERMOTT. I guess that is what he was really saying.
Americans--even the Irish have a national health plan. We can't
fund ours. Somehow, they do. I guess they must be magicians, or
else Americans, in Mr. Herger's view, are without the
creativity and the ability to design a system that would work.
I find that very depressing. But I was reading my
testimony--or your testimony and my questioning of you last
year. My God, it is deja vu all over again. I said almost the
same things last year. But last year, your answers were that
the governors--that the problem was--because I said, well, you
said, I was writing that when I was Chairman of the governors
association.
I had that conversation with the governors, and I pointed
out to them that there are categorical grants that every year
they are using. It is not the most efficient way to deal with
the states. You said, well, but they were in much better
financial shape than when I wrote the letter. So, from the time
you were governor to the time you got to be Secretary, things
went uphill. So, you said, make some cuts.
Where are you today? How are the states doing today?
Secretary LEAVITT. Well, none of us are doing as well as we
were two years ago, and we need----
Dr. MCDERMOTT. So, you cut the budget. You say----
Secretary LEAVITT. I had to----
Dr. MCDERMOTT [continuing]. States are in terrible shape in
taking care of abused kids and child care and handicap, and you
say, they are in worse shape but we are going to cut the money
from the Federal Government. That is your answer to the states'
problems.
Secretary LEAVITT. My answer is, we need to balance the
budget by 2012, and we have to make hard choices. Within those
are a number of programs that we can't----
Dr. MCDERMOTT. You think we could close one of the 800
bases that the military has? We have the largest military
budget in the history of the world. We have more spent on
military than the whole rest of the world combined. All we do
is keep cutting the social programs.
The abused kids, they don't count. The kids--we want the
mothers to work and we want child care and we want the schools
to perform well, but we don't want to have decent child care.
We don't want to pay for it. We are going to cut all that.
You are saying to the mayors and to the governors and the
county executives all through this country: We don't care about
the kids. We are going to keep piling it up over here, and as
long as it is national security or the defense budget, it is a
sacred cow. We can't touch it.
Secretary LEAVITT. I am sure you appreciate I don't have
any defense depots in my budget. However, I do have a
responsibility to bear my share of balancing the budget by
2012.
Dr. MCDERMOTT. You mean what the President----
Secretary LEAVITT. So, I had to go through and make
decisions based on a whole series of what I think are
redeemable, good programs to say, here are the ones that I
think should be the highest priorities. That is what I have
done. You may see it differently.
Dr. MCDERMOTT. But you are a good soldier. In that sense,
you are a good soldier. The President says, Sergeant Leavitt,
go out there and take that hill. You say, yes, sir. Here you
are up on this hill. You are taking the hill.
Now, when you tell me that you are just slowing the
growth--it is increasing 5 percent--but you are cutting a third
of a trillion dollars out of the budget, the actuaries say that
that money is for growing population and inflation. So, you are
saying to them, look, cooks in my unit. We have one bag of rice
here for food. I know that they have given us 100 more troops
to eat. But you guys are going to have to eat that one bag of
rice because I don't have the money to get you a second bag.
That is the solution of this Administration. It is the old
story everybody knows from the fair about the guy who bought
the horse. Feed it a bucket of oats, it will do fine. So, they
fed it a bucket of oats. Well, the farmer said, gee, maybe I
could get away with two-thirds of a bucket. So, the horse still
pulled the wagon, so he fed it two-thirds. Then one day he fed
it a third of the bucket. One day the horse died.
The problem with what you are proposing with cutting a
third of a trillion dollars out of Medicare is you are trying
to get the horse to die. You are trying to starve it to death.
It is very clear what this Administration's plan has been from
the start.
I yield back the balance of my time.
Mr. STARK. The distinguished gentleman from Texas, Mr.
Johnson, like to inquire?
Mr. JOHNSON. Please. Thank you, sir.
I hate to hear all this talk of socialism and trying to be
like some other countries that we know about. I will tell you,
it doesn't work in those other countries. You guys ought to
know that.
The President achieved some savings in his budget by tying
beneficiaries' premiums----
Mr. PASCRELL. Mr. Chairman? Mr. Chairman, excuse me. I take
exception to being--my comrades up here--I hope you don't take
exception to the word ``comrade''--being called socialists, Mr.
Chairman.
Mr. STARK. Well, some of us----
Mr. LEVIN. I think that is absolutely out of order.
Mr. STARK. There are some of us who may get pretty close to
that. So, let's not go down that road right now.
[Laughter.]
Mr. Johnson and I have come to an agreement on this. I am
sure Sam will bail me out as we go along. Thank you.
Secretary LEAVITT. That is one of the most rewarding
expressions of candor I have ever heard, Mr. Chairman.
Mr. JOHNSON. No. He and I do agree on a lot of things,
believe it or not.
As I was saying, the President achieved some savings in his
budget by tying beneficiaries' premiums for the Part D benefit
to the beneficiary's ability to pay the premium. I agree that
people like Ross Perot and Warren Buffett probably don't need
the same help from the government to pay their health care
bills as low income seniors.
I think maybe we ought to do away with the requirement to
require people to enroll in Medicare just because they are 65
years old. Why hasn't the Administration allowed seniors the
choice to opt out of Medicare Part A? Wouldn't that be a way to
save some money?
Secretary LEAVITT. I don't know the answer to that. I think
there is a general view that Medicare is a commitment we have
made to seniors. The issue that we are talking about here is:
What is the American system? Someone is going to have to make
hard decisions. Should it be the government, should it be
insurance companies, or should it be consumers who are armed
with good information about cost and quality?
This is not a criticism I have simply of Medicare. This is
a criticism I have about our system generally. In fact, I think
you could argue in many ways we don't have a system. What we
have is a large sector that needs a better sense of
organization. The best organization would be giving consumers
access to information about cost and quality, and allowing them
to make decisions in an organized market.
With respect to Medicare and that decision, I don't know
the answer to that.
Mr. JOHNSON. You are going to be made to get on Medicare
when you get to be 65. Are you going to like it? I will tell
you, I don't.
Secretary LEAVITT. I just had a birthday, and I am getting
close.
Mr. JOHNSON. I would like to know if the Administration is
prepared to send to Congress a proposal that addresses all
these larger problems within the Medicare program. You probably
realize that there was a 45 percent budget trigger. Are you
going to send us something that takes that into consideration?
Secretary LEAVITT. Yes, Mr. Johnson. As you point out, the
Medicare Modernization Act requires the trustees, of which I am
one, to give notice if the budget is 45 percent or more from
general revenue. We have met that trigger twice, the warning
has been provided, and the Administration will be responding to
that warning within the time limit allowed. We will be
providing a proposal.
Mr. JOHNSON. Is that going to happen pretty quickly?
Secretary LEAVITT. We have until the 21st of February, and
I have it on good authority we will do it before then.
Mr. JOHNSON. Well, you are on the board. You ought to be
pretty good authority.
Secretary LEAVITT. Well, I think I am the authority on this
one.
Mr. JOHNSON. I want to thank you for pushing the lessons of
Part D. I think you are correct, totally correct, in that
viewpoint. It distresses me that our nation can't stay on a
businesslike proposal for Medicare, just like it does for a lot
of other things. I thank you for your comments and thank you
for being here today.
I yield back the balance of my time.
Mr. STARK. The gentleman from Georgia, Mr. Lewis, would you
like to inquire?
Mr. LEWIS OF GEORGIA. Thank you very much, Mr. Chairman.
Welcome, Mr. Secretary.
Mr. Secretary, let me just ask you a question first off. In
your discussion and your meetings with the President and the
OMB director, did you ever raise any question against some of
these unbelievable cuts?
Secretary LEAVITT. You know, Congressman, there are lots
of----
Mr. LEWIS OF GEORGIA. You are free to----
Secretary LEAVITT. There are lots of areas that I proposed
more than what is reflected in this budget. But that is the way
budgets are developed. We all come back with the things that we
would both need, aspire for, and hope for. Then we whittle it
down from there. This is the budget that the President----
Mr. LEWIS OF GEORGIA. Mr. Secretary, I must tell you, I
shouldn't be surprised but I am surprised that the Medicare
budget will destroy the Medicare program. $556 billion in
Medicare cuts will destroy Medicare. We wouldn't know Medicare.
Are you telling me that you didn't argue against cutting
Medicare by $556 billion?
Secretary LEAVITT. Well, let me again reflect the fact that
Medicare will continue to grow at more than 5 percent over the
course of the next 5 years.
Mr. LEWIS OF GEORGIA. You are cutting hospitals. You are
cutting the most vulnerable section of our society. Some of
these hospitals are going to be forced to close. What is going
to happen to the sick, the poor, the disabled, the most
vulnerable people in our society? Are they going to fend for
themselves? Are you suggesting that we should just end Medicare
and just give everybody a check?
That is what you were suggesting that may take place, Mr.
Stark. Is that the road we want to go down?
Secretary LEAVITT. Clearly not.
Mr. LEWIS OF GEORGIA. Are we in the boat together? Are we
all in the same boat?
Secretary LEAVITT. We are. We have a commitment that we
have to meet.
Mr. LEWIS OF GEORGIA. Well, shouldn't we look out for each
other?
Secretary LEAVITT. Absolutely.
Mr. LEWIS OF GEORGIA. Well, I don't think this budget is a
reflection of that.
Secretary LEAVITT. Well, this budget is a reflection of a
concern we also ought to share, and that is that in 11 years,
it goes broke. We have to do something to fix it.
Mr. LEWIS OF GEORGIA. Are you trying to end Medicare?
Secretary LEAVITT. No. I want it to survive----
Mr. LEWIS OF GEORGIA. Is this the goal? Is this the plan?
Is this part of the timetable, that this Administration wants
to end Medicare as we know it?
Secretary LEAVITT. Well, the same question could be asked
about those who refuse to do anything to change it. Because we
are going to run out of money, Mr. Lewis, in 11 years, and if
we don't start now to begin to reshape the system in a way that
it can be sustainable, the accusations that you render would
become, by their nature, true. We want that not to happen. We
want this to be sustainable----
Mr. LEWIS OF GEORGIA. My colleague----
Secretary LEAVITT [continuing]. Available to help people
who are poor.
Mr. LEWIS OF GEORGIA. Mr. Secretary, my colleague here, Dr.
McDermott, is a learned scholar. He is a doctor. He knows all
about the area of medicine. He is suggesting maybe we should
consider closing some of our bases. We don't cut the defense
budget.
Someone who is in charge of these programs, you don't tell
me that you cannot stand up and argue with the President, argue
with Mr. Nussle, and say, this is not the road we should go
down?
Secretary LEAVITT. I advocate forcefully the views that I
have in the budget process. The President and Mr. Nussle
obviously make decisions that begin to make allocations. Once
those allocations are made, then we do our best to shape the
budget in a way that will provide the best and maximum amount
of good.
I believe Medicare is a very important part of the social
fabric of this country. I believe that we have made a
commitment that if a person is elderly, if they are disabled,
if they are poor, or if they are in some other way in need, we
need to help them. We need to make certain that those programs
are sustainable over a lengthy period of time.
Right now this program is not. I might add, neither is
Medicaid. Unless we change it, we will have difficult problems.
The solutions will be so harsh, I worry that people won't fix
it. I want to fix it now while we can.
There is a point in the life of every problem when it is
big enough you can see it and small enough you can still solve
it. We are getting darn close to the point that this one is
unsolvable. We need to act now.
Mr. LEWIS OF GEORGIA. Mr. Secretary, I must tell you that I
am deeply troubled, and I fear for the American people, for our
sick, the disabled, our children today. I think we can do
better. I think this budget is not a budget of compassion. I
think it is mean-spirited.
Thank you. Thank you, Mr. Chairman.
Mr. STARK. Mr. Weller, would you like to inquire, sir?
Mr. WELLER. Thank you, Mr. Chairman.
Mr. Secretary, I always enjoy listening to my good friends
on the other side of the aisle. My good friend Mr. McDermott
made reference to increases in child care funding. I would note
for a historical fact that in the 2005 Deficit Reduction Act,
which went into effect in 2006, that it contained the last ever
increase in child care funding.
In fact, we had a vote on increasing child care funding by
$1 billion, and unfortunately, I noted, even though it went
into effect, it was passed on a party line vote. Mr. McDermott
and his Democratic colleagues on the other side of the aisle
voted against, the last time we ever had a vote on the floor,
to increase funding for child care. I just want to note that
for the record.
You know, in 1996 the welfare reform legislation--which was
passed by a Republican Congress and signed into law by a
Democratic President; it is lauded for an act of
bipartisanship--proved a tremendous amount of success. I would
note that it was 12 years ago that that was passed, and of
course, the impending doom of the Medicare trust fund is 11
years. Right? So, that is actually a shorter period of time.
So, it shows we do need to act to find ways to do a better job
with the resources we have available.
That is the point I would like to focus on, Mr. Secretary.
As welfare reform showed, you don't show compassion by how much
money you spend. It is how well you spend those dollars to get
the results that help people.
I am interested, Mr. Secretary, if you can outline for us
how the President's budget spends the resources we have in a
smarter way, more efficiently, helping the people who need
help. If you can walk us through those initiatives, Mr.
Secretary.
Secretary LEAVITT. Well, you mentioned child welfare. The
flexibility that would be provided under the child welfare
option that we have in the President's budget would improve
child protective services. It would allow the states to receive
their Federal foster care funds in a fixed and flexible stream
instead of waiting to receive the funds only after they have
removed a child from the family.
Under the option, states would receive these funds to spend
on child welfare activities as they choose. We would encourage
them to invest these dollars in evidence-based proven
prevention activities. That is one example.
Mr. WELLER. Why is prevention important when it comes to
child care?
Secretary LEAVITT. Well, it is the same as health care. If
we spend all of our time treating the patient after they are
sick, it is very expensive and there is a lot of human
suffering. If we prevent, there is less cost and we avoid a lot
of human suffering and long-term costs. I think all of us know
that preventing is the answer and not just picking up after it
has occurred.
Mr. WELLER. What I see as one of the problems we have often
in Washington is there is a Washington knows best attitude,
telling states how they should administer programs. This
budget, I know, from what I have seen, really emphasizes
flexibility.
You have been a governor. Can you explain, from the
perspective of having been a governor, how flexibility can
actually help us make sure those dollars are spent in a better,
more effective way in helping people?
Secretary LEAVITT. Well, I think two programs, one you
spoke of, welfare reform, when we went to the TANF system. We
gave states essentially a set of expectations and allowed them
to design programs that would in fact solve the problem. They
have, and it has dramatically reduced the amount we spend, the
number of people on it, and people view it as a milestone in
the delivery of human services.
I think another is Part D Medicare, where the states
weren't involved in that, but we provided flexibility.
Another good example with the states is the SCHIP program.
Many of the states have managed their SCHIP program in a way
that has provided for dramatically more children to be on the
program than if they just used the regular Medicaid system that
is prescribed or would be prescribed by the Federal Government.
Mr. WELLER. Well, thank you, Mr. Secretary. I see I have
run out of time.
Thank you, Mr. Chairman, for the opportunity to question.
Mr. STARK. Any time, Mr. Weller.
Mr. Becerra, would you like to inquire?
Mr. BECERRA. Thank you, Mr. Chairman. Mr. Secretary, thank
you very much for being with us. Good to see you again.
Let me try to focus my questions a bit. I would like to
chat with you a bit about the cuts and how they seem to be
focused in certain areas. First, it seems that you--well, first
let me ask: You signed off on this budget before it got to the
White House for clearance with the Office of Management and
Budget for submittal to Congress?
Secretary LEAVITT. We go through a budget process where my
various operating divisions submit budgets to me. Acting with
guidance from the White House, we develop our recommendations.
They go down to the White House. They make suggestions and
decisions. We then go back and appeal.
Mr. BECERRA. So, this Medicare budget within the
President's overall budget, you concur with?
Secretary LEAVITT. I concur clearly that we have to do
something to solve this problem.
Mr. BECERRA. No, Mr. Secretary. My question is----
Secretary LEAVITT. Now, let me finish. Let me finish.
Mr. BECERRA. This budget that has been presented--well, let
me be more specific. Do you agree with all of the different
cuts to Medicare that are in this Bush budget that is presented
to Congress?
Secretary LEAVITT. First, there are no cuts. There is a
reduction in the growth rate. We will see Medicare grow by 5
percent.
Mr. BECERRA. So, let's call it reduction in the growth
rate. Do you agree with all the cuts to the growth rate in
Medicare that are in this budget?
Secretary LEAVITT. If you are asking if I believe that
there is a better way to do this, I do. But it is not available
to us in the government price-setting world we live in.
Mr. BECERRA. Now, Mr. Secretary, I understand all that and
I don't--what I am trying to do is get as specific as I can. I
understand that there are qualifications to anything. Forgive
me if I try to have you be as specific as possible.
I am trying to identify whether there are any--I call them
cuts; you may call them a reduction in growth rate--but if
there are any cuts that you disagree with in this budget.
Secretary LEAVITT. This is the President's budget. I am
here to defend his budget. Are there those that I would have
done slightly different? Of course. But he is the President,
and----
Mr. BECERRA. Are there any that you can identify for us?
Secretary LEAVITT. Well, I am here to defend the
President's budget, and I feel good about defending it. I will
tell you, and I want to reemphasize----
Mr. BECERRA. Now, Mr. Secretary, let me move on.
Secretary LEAVITT [continuing]. This is a blunt instrument.
There is no way you can do this with precision in the system we
have. That is the problem I have with the system. When I said
to Mr. Stark, I would like to see the system change, I would
like to see a system that isn't--where we don't create a budget
with such blunt instruments. Somebody someday is going to have
to deal with this.
Mr. BECERRA. Fair enough.
Secretary LEAVITT. You may not like mine, but someday
somebody is going to have to make these decisions.
Mr. BECERRA. That is fair enough. I appreciate what you are
trying to point out, is that we do have an issue that must be
addressed that is a long-term issue that, if we don't address
sooner than later, becomes very big later on down the line. I
don't think anyone disagrees with you there.
It is just that a number of us believe that this budget
doesn't do anything to improve the situation by making a lot of
seniors face some pretty devastating cuts. You may call them
reductions in growth rate, but to a senior who has to pay more
this year for that medication that may be lifesaving than he or
she did last year, not getting an increase in that Medicare
payment for that physician prescribing that medication or for
the medicine itself amounts to a cut, which that person now has
to come out of pocket to pay or somehow has to figure out what
to do, either that or not get the medicine.
So, what we may call here as technocrats a reduction in the
growth rate is, to most living and breathing human beings who
receive Medicare benefits, a cut.
With regard to hospitals, it seems like this budget--and I
will say this budget; I won't say you, Mr. Secretary--this
budget punishes hospitals more than any other provider of
medical services to our senior population. In particular, I am
shocked at the level of precision of the hit that goes to
children's hospitals, in this case, children's hospitals
through the graduate medical education payment that they get.
I know in California we have about 25, 27 children's
hospitals. I know that there are several throughout the nation,
tens of children's hospitals, who do yeoman's work. Many times
these families don't have the money that it takes to provide
the lifesaving services that they receive for their children.
In many cases, the children have miraculous recoveries.
But the millions of dollars that you take out of the hides
of these children's hospitals, I don't see where they make it
up. You don't provide anywhere in the budget where they would
make it up. I hope you will take a look at that.
Also what disturbs me is the teaching hospitals. The
hospitals that are willing to educate the next generation of
medical leaders are going to get hit dramatically in this
budget. You almost force them to go away from teaching and into
more of a profit-making mode by just taking patients through a
mill process.
Because they can't make money when they are trying to
educate the next class of doctors and providers if they are not
getting reimbursed for that, and we know that most of these
teaching hospitals actually provide health care to a lot of
poor and indigent--I mean, indigent and minority populations.
So, since my time is expired, I will leave it at this and
say, Mr. Secretary, I hope that you will counsel the White
House and really urge upon them that we reexamine some of these
proposals for reductions in growth because I think those
reductions in growth are going to devastate, through their
cuts, a lot of very dignified seniors who thought they had
worked a long time for their Medicare benefits, and now find
that the government is leaving them behind.
So, I thank you for your time.
Secretary LEAVITT. Congressman, can I just respond that I
acknowledge that there are a number of places here where you
might make decisions that are different than what the
Administration has. However, whoever it is that ultimately has
to deal with this problem will have to make similar decisions.
What I am here to argue is that the time for us to just
argue about what price-setting measure we are going to use or
not use, how much we are going to increase this or that, is not
as good a system as we could create if we began to modernize
health care as well as Medicare and give information to people
where they can make decisions that will allow the invisible
hand of the consumer to begin to drive priorities.
It will ultimately get to it. I fully acknowledge how
difficult many of these things are. It is the reason I said I
hope this is a very clear warning that somebody has to make
these decisions. Right now we are not making them.
Mr. STARK. Mr. Brady, would you like to inquire?
Mr. BRADY. Thank you, Mr. Chairman.
Mr. Secretary, two questions, one about Medicare fraud, the
second about IVIG. It seems like every week we open up the
newspaper and see some major fraud case--medical devices,
scooters, physicians who don't exist, patients who weren't
treated, and on and on.
Do you have any estimates or studies that quantify just how
much we lose to Medicare fraud each year?
Secretary LEAVITT. Studies have been made, and those are
available. I would be happy to provide them to you
independently. I don't have them on the top of my head. I will
tell you this: I have personally been involved in operations we
have had to find and to remedy this.
One of the big disappointments to me of the 2008 budget,
frankly, was the $300-some-odd million that was in the budget
for anti-fraud was taken out. We get a 13 to 15 times return on
those dollars. I hope that the current budget will not make
that mistake. This is money that we need in order to keep
people from defrauding seniors.
Mr. BRADY. So, Congress--are you saying Congress cut the
funding for anti-fraud?
Secretary LEAVITT. It was in the budget and then was
removed at the last minute for reasons I don't fully
understand. But it has hurt our capacity to stop fraud.
Mr. BRADY. Well that doesn't make sense because it seems
like the fraud is significant. They are just ripping off our
seniors when they do that. We don't have enough money to go
around----
Secretary LEAVITT. Every dollar we put into this, we get 13
to 15 back, and it gives the system more integrity. We need to
focus more money on this.
Mr. BRADY. I hope this Committee leads the way in providing
you the resources you need.
Second question. I raised this last year. We have talked to
your office and agency frequently about this. The issue of IVIG
deals with the treatment for those without an immune system in
their bodies. The reductions we have had here in the past year
have made it almost impossible for these patients.
There are not a lot of them, 10,000 or so, if I recall, who
now are being almost forced to go into the hospital to receive
treatment, which for someone without an immune system, the
worst place in the world to be is a hospital setting.
I know that we have introduced legislation and worked with
your office to treat this, much like Medicare has treated the
hemophilia clotting factor, where you recognize it as a unique
biologic product that requires a modified Part B reimbursement
policy.
Mr. Secretary, would you and your colleagues at CMS be
willing to work with me and other Members of this Committee to
finally address the issues surrounding IVIG? I understand the
need to try to get the best bang for our buck. But this
actually, I think, is an awfully bad move. I don't want to see
it be made even worse going forward.
Secretary LEAVITT. The answer is yes. I am aware of the
problem. In fact, we have recently developed an inter-agency
workgroup to be able to work with FDA and CMS and others. So,
the answer is yes.
But could I point out that this is a great example of the
difference between Part B and Part D? We don't have this
dilemma in Part D because consumers and doctors are making
decisions about this. We have it in Part B because we are
having to have a government price-setting decision. There are
differences of opinion that are going to be playing out here.
We will work this problem out, but it is a very good
example. We don't have this kind of dispute in Part D. We do in
Part B.
Mr. BRADY. Well, I will take you up on your offer because
just for these people, it has been very frustrating. There has
been good bipartisan support on this Committee to modify the
reimbursement. We have worked with the Senate on it. There
seems to be agreement that the cost of it is very small, but
the importance to those patients is huge.
So, I would like to see--and the sooner the better,
obviously, for all of them. So, thank you, Mr. Secretary.
Secretary LEAVITT. Thank you, Mr. Brady.
Mr. BRADY. I yield back, Chairman.
Mr. STARK. I just wanted to respond again to my good friend
from Texas that I would like to join with him to help and see
whether we could get some kind of a solution to it. It is very
expensive. Individual doses are $5-, $6,000. But for people who
need it, it is very important.
Mr. BRADY. Thank you, Chairman.
Mr. STARK. I would be glad to work with you.
Mr. BRADY. The good news is I think we just got a recent
score on the modification, and it is very small. But thank you.
Mr. STARK. Mr. Doggett, would you like to inquire?
Mr. DOGGETT. Thank you, Mr. Chairman. Thank you, Mr.
Secretary.
Mr. Secretary, as you are most familiar, this Committee and
the House approved significant improvements to Medicare last
year in the CHAMP Act which were paid for by reducing by $50
billion over 5 years the subsidy to private insurance carriers
in the so-called Medicare Advantage program.
You and the Administration opposed paying for it in that
manner, and when the Senate, considering our legislation,
proposed an amount to come out of the private insurance company
subsidy that was less than that $50 billion, the Administration
threatened to veto it if there was a substantial amount taken
from the private insurance company subsidy.
Does that remain the position of the Administration today?
Secretary LEAVITT. The Administration is a big supporter of
Medicare Advantage. I have indicated earlier that I personally
believe that there are things we can do to improve its----
Mr. DOGGETT. Yes, sir. I am going to ask you about that.
All I need to know now is: Your position hasn't changed, has
it?
Secretary LEAVITT. We believe Medicare Advantage is an
important component of Medicare, that people like it, and we
are not----
Mr. DOGGETT. You don't want money taken from it in order to
improve traditional Medicare?
Secretary LEAVITT. We believe that it is an important part
and needs to continue. We believe that it is important that it
is nationwide, and that the system that was established was
done so to make----
Mr. DOGGETT. I will accept that as a yes. You are aware
also that as you discussed with Chairman Stark, that the
subsidy amounts to about a thousand dollars per beneficiary
this year, according to everybody who has looked at it. It is a
significant subsidy for each beneficiary, more expensive than
under traditional Medicare to be in the Medicare Advantage
program. Right? That is not----
Secretary LEAVITT. I am sure that we would agree that 80
percent of those go to the beneficiary.
Mr. DOGGETT. That is not a new subsidy. In fact, as I look
back through the proceedings of this Committee going all the
way back to 2004, when my colleague Max Sandlin from Texas
asked the actuary if there was any verifiable savings to be had
at any point in these plans, and he said no.
That hasn't changed through 2004, 2005, 2006, 2007, 2008.
We are up through this ideological experiment of relying on
privatizing Medicare. It costs us a thousand dollars a
beneficiary, per person, last year. Neither you nor anyone in
this Administration can point to any objective, verifiable
savings that have come from that.
Secretary LEAVITT. I earlier today pointed out the fact
that I believe if we were to expand the bands of competition,
we would----
Mr. DOGGETT. All right. I want to talk to you about that.
But the answer is no. You can't show us any verifiable savings.
You think that maybe if you change the plan, you could get
those savings. Right?
Secretary LEAVITT. I think it is an important part.
Medicare Advantage is an important part. People like it. We
need to expand it because it in fact gives people choices.
Mr. DOGGETT. So, I will take your non-answer as an
indication you have no savings. You think the plan should be
changed. Where is your legislation to change the plan?
Secretary LEAVITT. I believe it is very clear that the----
Mr. DOGGETT. I am sorry. Where is it? Do you have it with
you today?
Secretary LEAVITT. I do not.
Mr. DOGGETT. Which one of the Republican Members of this
Committee has authored legislation to change Medicare
Advantage?
Secretary LEAVITT. Mr. Doggett, I am not sure I----
Mr. DOGGETT. In the fashion that you recommend?
Secretary LEAVITT. Well, we are having a discussion today
about the philosophy, not the specific legislation.
Mr. DOGGETT. Well, we are having a discussion after 8
years, almost, of this Administration in which we have
subsidized and had an incredible amount of waste in subsidizing
private insurance, an ideological experiment. We have no
verification that it saves the taxpayer a dime.
You tell us, well, maybe we can't prove it saved anything,
but I got an idea that if we change it a little this way or a
little that way, we could start having the savings that make up
for these billions of dollars that have been wasted. Neither
you nor anyone in the Administration or any of our colleagues
on the Republican side has that legislation after 7 or 8 years.
So, I don't find it very substantive.
Let me ask you about another example of the waste that this
Administration has tolerated. You have been boasting if we
would just be a little bit more like Part D, things would be
wonderful. Well, I refer you to the Inspector General's report
from your Department about how Part D has worked.
They point out that Medicare only overpaid the Part D
private insurance companies $4.4 billion for the year 2006.
That is a little bit of change, $4.4 billion, and that it took
Medicare under its procedures 9 months to even figure it out.
Is that an example of what you think is a good treatment of
the taxpayers' money in managing Part D with these private
insurance carriers?
Secretary LEAVITT. Both of those procedures were
contemplated in the law and were done in accordance with what
we expected----
Mr. DOGGETT. According to the law that you recommended and
that this Republican Congress before us approved over our
objection in the middle of the night. Yes, sir, it is.
Secretary LEAVITT. A law that----
Mr. DOGGETT. As a result of that, we get private insurance
companies getting $4.4 billion, and 9 months before Medicare
even figures it out. How much interest have you gotten back
from them on that $4.4 billion that they got for 9 months, plus
whatever time it took you after you figured it out to get it
back?
Secretary LEAVITT. Congressman, this is a program that 86
percent of the people who have it like it. This is a program
that 40 percent----
Mr. DOGGETT. It is a program that the taxpayers----
Secretary LEAVITT. Excuse me. This is a program----
Mr. DOGGETT. $4.4 billion. Not a penny of interest have you
gotten back from it.
I asked last June and again in October--we have submitted
it in writing; we have asked it orally--to tell us what
happened to the $100 million that you wasted in paying private
insurance companies for retroactive coverage for low income
beneficiaries that they were never told about until too late to
take any advantage of it.
I still don't have an answer. The Subcommittee doesn't have
an answer to its written questions. Do you think before you
come to testify before the Budget Committee this week or next,
when I get a chance to ask you about this again, that you could
please bring us those answers that have been due since last
summer?
Secretary LEAVITT. That seems like it would be a smart
thing to do.
Mr. DOGGETT. Thank you.
Mr. STARK. Mr. Pomeroy, would you like to inquire?
Mr. POMEROY. Mr. Secretary, I want to ask you not just
about the budget; I want to ask you about some rules that have
been promulgated by HHS. I know it is a budget hearing, but we
don't get you up here often, so it is a chance to do that.
The rule I want to ask you about was proposed on August 31,
2007. It would exclude from Medicaid or SCHIP matching grants
any payments under state plans that use school personnel to
help enroll children that might be eligible for either SCHIP or
Medicaid.
I just want to talk conceptually with you about this. I
don't know if you mean to be mean-spirited or if this is kind
of just inadvertent, an inadvertent consequence of a badly
conceived rule. First let's see whether we have some values
agreements.
I believe that you would believe that enrollment of those
eligible, enrollment of children eligible for Medicaid coverage
or SCHIP coverage, is a positive feature as states work these
programs. Is that correct?
Secretary LEAVITT. They clearly are.
Mr. POMEROY. Clearly. I believe that you would think that
the school was a pretty good place to do that. There was a
specific report, in fact, put out in 2000, the last
Administration: HHS, U.S. Department of Agriculture, and the
Department of Education, that pointed out that schools are
where the children are and represent the ``single best link''
for identifying and enrolling eligible low income children in
health coverage.
Do you agree that the schools are a very good place to
identify and enroll children?
Secretary LEAVITT. Clearly they manifest themselves, and
that that is one of the sources.
Mr. POMEROY. You know, the success of these programs is
evident in your hometown, Salt Lake City, or the town you
previously lived in. I don't know if that is where you were
born and raised or not. But the Granite School District there,
just as an example, reaches out to children to identify and
assist those who qualify for Medicaid or SCHIP. They have got
two full-time and two part-time people involved in this, and
each year they submit about a thousand apps for Medicaid, and
about 77 percent are enrolled, which is a very favorable
enrollment rate.
Now, under your plan, you would eliminate funding for those
school personnel working through the Granite School District.
Now, what would be the rationale for taking a step like that?
Secretary LEAVITT. The dilemma we have faced with Medicaid
in many ways is that lots of places don't get the budget they
need for many purposes. I am not specifically aware of what you
are referencing. But I can tell you what we are eliminating,
and it is the non-medical--I mean, there are school districts,
Congressman, that buy school buses with Medicaid dollars.
Mr. POMEROY. I mean, I think that is appalling. That has
got nothing to do with enrolling people in Medicaid or SCHIP.
Secretary LEAVITT. Well, that's right. That is what we are
trying to----
Mr. POMEROY. The Department, without objection from this
Committee, put forward a rule in 2003 to address that.
Secretary LEAVITT. Our effort in dealing with these
targeted case management rules is to be able to assure that we
are paying for medically necessary things and eliminating what
we believe to be misuses. There is nothing mean about this. We
are looking to find a way to preserve the dollars----
Mr. POMEROY. Maybe you don't have this information. I
actually would appreciate it, if you don't have it, get me
information. If the 2003 rule fell short of preventing abuses,
where did it fall short? Because what you have now done is
something quite different.
You have prohibited any Federal funds to be used on school
personnel. You do allow Federal funds to be used for contract
personnel. So, let's say Halliburton today is in the business
of some kind of school outreach activity. I don't know whether
they do this or not. But you would happily pay the Halliburton-
type contractor, but not the school district, including, for
example, the Granite School District personnel who have been so
successful in Salt Lake City in getting poor children enrolled
for the coverage they need.
So, I believe this has been an extremely ill-advised thing
the Department has advanced. Congress has put a moratorium on
it as they reauthorized SCHIP. But it is only a temporary one,
and it to me would appear to be something the Department
continues to move forward.
Secretary LEAVITT. Congressman, I want you to know--I am
not able to respond to the granularity of what you are talking
about. But I do have some knowledge of both what happens on the
ground and what we are trying to accomplish.
There is a robust industry of consultants who will use
every possible means of being able to find ambiguities in the
law and to parse them so that various entities that are not
medical providers, that are not part of the medical system, can
tap into Medicaid funding. It distracts from our original
mission and purpose. I would be happy to respond with more
specific information.
Mr. POMEROY. I would respond to you that there are also
special education teachers that are dealing with children in
schools today with developmental disabilities, some of them
medically related. Some of those children are from families
that don't have coverage, and they can't get access to doctors
because their families can't afford it.
You would prevent this school teacher from bringing this
family----
Secretary LEAVITT. No. I would not prevent that school
teacher. What I would prevent them from doing is paying for the
teacher.
Mr. POMEROY. You would prevent any compensation to that
school district for----
Secretary LEAVITT. No.
Mr. POMEROY. Yes, you would. Yes, you absolutely would.
Secretary LEAVITT. We are not doing that. No, we are not.
Congressman----
Mr. POMEROY. You would prevent the payment to that school
district for any assistance in helping that special education
teacher get the epileptic child that needs the medication that
they can't afford because the family doesn't have coverage--you
would prevent that by rule.
Secretary LEAVITT. Congressman, you are pointing your
finger at me and ascribing motives that are simply not true.
Mr. POMEROY. Well, and I don't care about your motive.
Secretary LEAVITT. No. Let me----
Mr. POMEROY. It is the fact, Mr. Secretary.
Secretary LEAVITT. It is not the fact.
Mr. POMEROY. Read your August 31, 2007 rule. This drives us
to distraction. You are not a bad man. I have enjoyed knowing
you over the years. But the evil effect of impacting a school
district like Granite District in Salt Lake City from helping
kids that get coverage that need it, to me that is just an evil
impact.
Secretary LEAVITT. Do you find it----
Mr. POMEROY. I don't know if it is intended. I don't know
what. But I do know that it is extremely bad policy, and this
Administration should be ashamed of it. They wrote it, and they
would have
had it impacted today except for the action of Congress in stopp
ing it.
Secretary LEAVITT. Our time is up. But I will simply say
that our purpose is to do nothing but to use wisely the money
we have, and that there are districts that abuse the privilege
in a way that I don't believe you would feel good about,
either.
Mr. STARK. Mr. Ryan. Would you like to inquire?
Mr. RYAN. Thank you, comrade.
[Laughter.]
Mr. Secretary, good to have you here with us again. I had
some questions on the trigger and transparency. But I have just
been enjoying this conversation.
I just look at the fact that the Medicare Part D bill, law,
is coming in about 40 percent under estimates. It is about 40
percent less expensive than we projected it to be. When is the
last time Congress passed a program that came in 40 percent
under budget? It is because of competition.
You take a look at the Medicaid program, which is not a
competitive program, and you have got stories in the Wall
Street Journal just a couple days ago where you have one
company overcharging Medicaid by $650 million. So, to suggest
that only government-run programs that have government
monopolies are saving all this money, it just doesn't jive with
the facts.
So, I think there is another side of the story from what we
have been hearing here, and that choice and competition in the
hands of the consumer and among providers actually is proving
to work.
Let me ask you two questions, first trigger, then
transparency. Give us your assessment on the Medicare 45
percent trigger. When and if do you expect the Administration
to respond, and do you care to comment on some suggestions that
we might act on in order to conform with the trigger law?
Secretary LEAVITT. First of all, we believe that responding
to that trigger is an important discipline that should be
followed not only by this Administration but future
Administrations. This is a serious problem, and it needs to be
responded to.
Second, we will respond, and we will respond within the
timeframe allotted in the law, which is 15 days after the
President has submitted his budget.
Third, you will see a series of proposals that will, in
fact, not just deal with reducing the growth rate in a scorable
way, but will also begin to focus on ways we can change the
system, not just of Medicare but of health care: basic things
dealing with electronic medical records and the efficiencies
that can come from that; basic things like measuring quality so
that people know what they are getting and have an idea of
whether it is good or not; and third, things like cost, so they
can actually see the cost and the quality; and providing
incentives, not just for consumers but also for the payors and
for the plans and for everyone, so that they have a motivation
to drive quality up and cost down.
Again, we believe fundamentally that consumers, armed with
information, make better decisions than the government makes
for them. I think there is a long history to demonstrate that
that is true. Part D is just one good example.
Mr. RYAN. So, it sounds like we are on the same page. I
hope we do systematic changes that, as responding to the
trigger, we do it in such a way that it actually helps the
long-term sustainability of Medicare, that it is not simply a
price control plan like we did in 1997, where Congress ends up
giving all of it back. I hope we do things that are actually
systematic, structural, and put us on the right glide path
toward making Medicare more sustainable and enhancing its long-
term solvency.
Transparency: Give us your take on where the next stage of
the transparency movement is. I can just tell you, in
Milwaukee, for example, the price of a bypass surgery ranges
from $47,000 to $120,000. The price of an MRI in Milwaukee
ranges from $600 to $5,000. The price of rotator cuff surgery,
$4,700 to about $15,000. You know, on and on and on. About a
300 percent price disparity among all different kinds of
payors, just in the metro Milwaukee market. No one knows this.
It took us a couple years just to get that information.
What is the best way to proceed forward in a lasting way to
have real transparency, and therefore real competition, based
on price and quality?
Secretary LEAVITT. Congressman, I have laid out what I
believe are the four cornerstones of such a system.
Mr. RYAN. I apologize if you are repeating yourself. I have
been in and out of this hearing.
Secretary LEAVITT. Well, it needs to be repeated many
times. Electronic medical records. Quality measures that people
can agree upon that are developed by the medical community.
Price grouping so that people know what they are paying for.
Then motivations and incentives so that people have a reason to
care what the costs are and have information about the quality.
Given that kind of information, as we have seen in every
other part of our economy, including health care, given that
kind of information, people make those decisions. Today
Medicare makes a series of decisions, a couple thousand of
them, that make those decisions for everyone.
We don't always make the right decision. Oftentimes we are
subsidizing pieces of the health care system that we ought not
to. Sometimes we are underpaying things that ought to be
encouraged. We are not always able to find those. The market
will.
Mr. RYAN. So, where prices are visible----
Ms. SCHWARTZ. Excuse me. Would Mr. Ryan yield? I appreciate
very much the dialogue that you are having. But isn't it
correct that you actually cut the funding for comparative
effectiveness research, when in fact we have agreed that that
would be helpful; that you did not include an e-prescribing
proposal, which many of us in a bipartisan way actually want to
see done?
Mr. RYAN. The quick answer is I have one more follow-up.
Ms. SCHWARTZ. Because I think you might agree on that, and
it would be great to see it actually included in the budget.
Secretary LEAVITT. No. I am a big supporter of e-
prescribing. It is time to do it. It is time to say it has to
be done.
Ms. SCHWARTZ. Well, maybe we can get that done.
Mr. RYAN. All right. Well, I see my time is expired.
Ms. SCHWARTZ. But it would have been good to have it be in
the budget to start with.
Secretary LEAVITT. I would have liked to have had it done
in the SGR fix. I would like to see it happen in June. So, you
can't do it soon enough for me.
Ms. SCHWARTZ. Sorry.
Mr. RYAN. That is all right. No problem.
Ms. SCHWARTZ. But I thought if we had a moment of
bipartisan agreement, let's see if we can't make it happen. It
is not in the budget now. Thank you.
Mr. RYAN. I yield my time on a bipartisan basis.
Mr. STARK. I am going to recognize Mr. Pascrell and Ms.
Berkley, who were here ahead. But I am going to ask if you
would--we have got 15 minutes till five votes. With the folks
that are here, I hope that we could finish up.
Mr. PASCRELL. Mr. Chairman?
Mr. STARK. We have got 12 minutes. I recognize the
distinguished gentleman from New Jersey for 3 minutes.
Mr. PASCRELL. Three minutes? Mr. Secretary, thank you for
your service. Twenty-five states are about to declare deficits
in their budgeting. There will be more coming down the line. I
want to remind you of a statement that you made in 1999, when
you were the governor of Utah. You sent a letter to the
Congress of the United States, and this is what you said in
that letter.
``Reductions in the funding for social services block
grants will result in cuts to vital human services for our most
vulnerable citizens.'' This President, in his proposal, is
nothing more--is cutting more than $1.7 billion annually in the
services that are most needed.
If you were in a governor's position, which you were, and
you did a very good job when you were the governor of Utah, you
would have a different attitude in supporting this budget
before us.
I want to get into a very specific area which affects New
Jersey particularly, and that is the area of teaching
hospitals. I think that this borders on criminal. The proposal
before us will damage our ability to train a generation of new
doctors at a time when the nation is facing a shortage of
doctors. This is exactly the opposite direction which we need
to move.
In fact, today I, along with my colleague and fellow
Committee Member Congressman Ron Lewis, introduced legislation
that will bring equity to a deficient Medicare compensation
formula for direct graduate medical education currently used to
reimburse teaching hospitals.
More than 600 American hospitals are being reimbursed by
Medicare at an inadequate level for their work in training
America's doctors of tomorrow. These costs bear little if any
relationship to the actual costs of operating the training
program in the 21st century. I was going to give you anecdotal
evidence; I think you know the evidence.
In New Jersey alone, our teaching hospitals have lost close
to $7 million. When you combine a broken DGME payment system
with the draconian indirect medical education cuts that you are
proposing contained in this budget, I am extremely concerned
that these unsustainable losses will threaten the future of
this nation's health care infrastructure.
Under these circumstances, at a time when we need more
doctors, not less, how are teaching hospitals to fulfill their
mission, Mr. Secretary?
Secretary LEAVITT. First let me acknowledge the 1999
letter. I have had it read to me enough times now, I could
probably quote it.
But I would like to acknowledge that there is one
fundamental difference between 1999 and now. We had a balanced
Federal budget then. We don't now. Obviously, a lot of
circumstances are different.
Mr. PASCRELL. I am very aware we had a balanced budget
then.
Secretary LEAVITT. I am sure you are.
Mr. PASCRELL. Yes. Very aware.
Secretary LEAVITT. I just point out the difference.
With respect to the teaching hospitals, I know and you know
how vital it is to have vital teaching hospitals. I will tell
you I think the system of the way we finance it is
``skiwampus.'' It ought to be spread over a much greater part.
The Federal Government does a substantial part of it. We ought
to spread the base.
Mr. PASCRELL. But there is nothing in this proposal, in
this budget, that addresses that issue. You have had 300
hospitals close in the last decade.
Mr. STARK. We will get to that, Mr. Pascrell.
Now we are going to get to Ms. Berkley, who is going to be
recognized for 3 minutes.
Ms. BERKLEY. Thank you very much for coming. I wish we had
a little more time. I know that you have family that lives in
my congressional district.
Secretary LEAVITT. I do, yes.
Ms. BERKLEY. I met with them very recently. So, let me tell
you about the community that they are living in right now. I am
going to restrict my comments to SCHIP, Medicare, and Medicaid.
We have a serious health care crisis in the state of Nevada. I
think this budget is going to exacerbate the problem. Let me
tell you why.
I have got the fastest growing senior population in the
United States. I have got doctors that are calling me, not in a
threatening way, but telling me that they will keep the
Medicare patients that they have, but they can no longer accept
new ones. Right now they are losing money.
If what is in this budget, with the fee schedule, the
physicians fee schedule--if we don't restore the money, they
are going to take a considerable hit. Short of me going to
medical school and learning how to treat my senior citizens,
there is not going to be any health care for them. That is
going to be disastrous. That is number one.
Number two, SCHIP. There are 70,000 kids that are eligible
for SCHIP under the current regulations and income levels. We
only can service, with the money we get now, 29,000. Without
increasing the SCHIP program, I have got approximately 40,000,
41,000 kids that are eligible as we speak that aren't getting
the health care that they should be getting from us, from this
incredibly wealthy country.
Third, Medicaid. Medicaid is in crisis in the state of
Nevada. With serious budget shortfalls on the state level, the
fact that we are moving to a 50 percent rather than a 52
percent match with Federal dollars is going to have devastating
consequences to the poor people in my state that rely on
Medicaid for health care.
What can you do to help me to care for the people that I
represent? Yes, we are going to need to make some long-term
changes to Medicare so it will continue. But I am also talking
uninsured. A third of the people that I represent are
uninsured.
I have got SCHIP issues, with 40,000 eligible kids not
getting it. Medicaid is in crisis because there is no money now
and there is going to be less later if this budget goes
through. Medicare, I have got seniors that are dying for a lack
of health care because I have got a doctor shortage.
So, what do I do? What do you do to help me do my job?
Secretary LEAVITT. In the 17 seconds we have left, let me
just deal with SCHIP. You have probably seen in the President's
budget that he has proposed just under $20 billion. That would
fund those who are eligible for SCHIP and all those that the
states have indicated to us they expect to be needed. So, that
is one thing.
Ms. BERKLEY. Excuse me one minute. Let me tell you, I spoke
to our administrator of SCHIP, not of my party, who told me she
is capping at 30,000. We have 70,000 kids that are eligible
right now. She is going to cap it. We have got 29; she is
capping at 30. I have got 40,000 kids that aren't going to get
health care.
Secretary LEAVITT. I am guessing if the President's budget
passed, she would change that view.
Mr. STARK. We have just a few minutes. I wanted to
recognize Mr. Nunes for a unanimous consent request, to be
followed by Mr. Porter, who I will recognize for 3 minutes.
Mr. NUNES. Thank you, Mr. Chair. Due to the time
constraints, I have a statement that I would like to submit for
the record.
Mr. STARK. Without objection, it will be included in the
record and sent to the Secretary.
Mr. NUNES. Thank you.
[The prepared statement of Mr. Nunes follows:]
[The statement was not received in time for publication.]
Mr. STARK. Mr. Porter, you have 3 minutes to conclude our
hearing.
Mr. PORTER. Thank you.
Mr. STARK. I will thank you now. We are going to go off for
a vote. At the conclusion of Mr. Porter's inquiry, Mr.
Secretary----
Secretary LEAVITT. Thank you for being here.
Mr. STARK [continuing]. Our thanks to you for your patience
and courtesies. We will be seeing more of you over the next few
months.
Secretary LEAVITT. Thank you.
Mr. STARK. Mr. Porter.
Mr. PORTER. Thank you, Mr. Chairman. I appreciate the
opportunity. Mr. Secretary, I will be very brief.
There was a plan just a few months back that would have cut
benefits to 9 million beneficiaries in Medicare under the
Medicare Advantage program. It was a $160 billion cut. Forty
thousand seniors in my district would have lost or reduced
their benefits, I believe, in the largest cut in Medicare
benefits in the history of the country.
Again, that was a few months ago. I realize that we are
fortunate in Nevada that the plan did not pass because it would
have impacted over 100,000 seniors in Nevada. What would the 9
million beneficiaries in Medicare have done had the Democrats'
plan of cutting $160 billion from Medicare--what would they
have done, these 9 million beneficiaries?
Secretary LEAVITT. Well, those 9 million made a change to
Medicare Advantage because it was better for them, and in most
cases they got better benefits. They could find a doctor more
easily. There were particular areas where there were low income
populations as well as minority communities that just love
Medicare Advantage.
Mr. PORTER. Mr. Secretary, I had hundreds of calls from
seniors, dozens of letters from seniors, that had trouble
paying their bills, meeting their rent, putting food on their
table. This Congress considered cutting off their benefits. I
personally think it is appalling.
But I know we are here today to talk about a future budget.
But looking back, that would have had a major impact on Nevada
families. I appreciate what you are doing. Thank you.
Secretary LEAVITT. Thank you.
Mr. STARK. Thank you all for your patience and your
courtesy and your cooperation. Thank you, Mr. Secretary.
Secretary LEAVITT. Thank you.
Mr. STARK. The hearing is adjourned.
[Whereupon, at 3:49 p.m., the hearing was adjourned.]
[Questions for the Record follow:]
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[Responses to Questions for the Record follow:]
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[Submissions for the Record follow:]
Statement of Puerto Rico Hospital Association
Today, we want to respectfully express our concerns with the
President's fiscal year 2009 budget proposal. We feel the proposed
legislation lacks sound solutions to the problems and challenges we are
facing. Further, we have serious concerns with the impact this proposed
budget will have on the quality of health care services provided by
hospitals, not just in Puerto Rico, but in the U.S. mainland. It is
very difficult to envision how this proposal will put us in a better
position to discharge our responsibility to provide the quality health
care needed by individuals and families.
The Puerto Rico Hospital Association (PRHA) is a private not-for-
profit association representing over 90 percent of all private and
public hospitals in Puerto Rico as well as other institutions or
entities interested in the field of health. PRHA was founded in 1942
with the purpose and mission of maintaining excellent health care
standards in our industry for the benefit of our community.
Our organization has actively lobbied the U.S. Congress for the
past two decades, highlighting the Island's unequal treatment in major
Federal health care entitlement programs such as Medicare, Medicaid and
SCHIP. This severe lack of funding impacts the Island's health care
industry as a whole. Puerto Rico loses anywhere from 1.5 to 2 billion
in health care funds every year because of the Island's discriminatory
treatment in these vital programs.
Specifically, under the PPS, hospitals in Puerto Rico are
reimbursed under a special formula consisting of 75% of the national
share and 25% of the local rate share (compared to the 100% national
average for hospitals located in the 50 states). This unequal treatment
to hospitals on the Island has been maintained despite the fact that
the U.S. citizens of Puerto Rico pay the same Medicare payroll taxes
and deductibles as their fellow citizens in the 50 states. Also, Puerto
Rico hospitals are required to comply with the same Medicare standards
of participation as hospitals on the mainland.
Furthermore, hospitals in the 50 states receive reimbursement
adjustments under the Medicare Disproportionate Share (DSH) program for
providing essential health care to a disproportionately large number of
low-income patients. Because the U.S. citizens of Puerto Rico are not
entitled to SSI benefits, current Federal law results in the inaccurate
conclusion that hospitals on the Island do not treat any low-income
Medicare beneficiaries. As a matter of fact, nearly 50% of Medicare
beneficiaries in Puerto Rico are Medicaid eligible--compared with only
12% in the 50 states.
It is quite unfortunate that the President's budget fails to
address any of the aforementioned discrepancies, which are forcing
thousands of senior citizens on the Island to move to the U.S. mainland
in search of better quality and more accessible health care. It is our
sincere hope that we can all work together as a nation to craft
legislation that will benefit the country as a whole without leaving
the 4 million U.S. citizens of Puerto Rico out of the equation.
Statement of The Senior Citizens League
On behalf of the approximately 1.2 million members of The Senior
Citizens League (TSCL), a proud affiliate of The Retired Enlisted
Association (TREA), thank you for the opportunity to submit a statement
regarding the President's Fiscal Year (FY) 2009 Budget for the U.S.
Department of Health and Human Services (HHS). TSCL consists of active
senior citizens, many of whom are low income, concerned about the
protection of their Social Security, Medicare, and veteran or military
retiree benefits.
In 2003, legislation that overhauled Medicare included a provision
that requires the President to propose changes to Medicare in the event
that the entitlement was going to draw more than 45 percent of its
funding from the government's general revenue instead of the Medicare
Trust Fund. This finding occurred in 2006 and 2007, and in the
President's proposed budget for fiscal year (FY) 2009, Medicare
spending is reduced by $12.2 billion in FY 2009 and by $178 billion
over five years. It is not clear at this time if there will be
additional proposals.
While TSCL fully understands the need to address the looming
Medicare Trust Fund exhaustion, we are concerned that it may come at
the expense of Medicare beneficiaries, many of whom are already
financially strapped due to high premiums and an inadequate cost of
living adjustment (COLA) to their Social Security benefits. Since 2000,
Social Security benefits have increased 22%, and Part B premiums have
increased 111%.
The 2009 Budget includes several legislative proposals that the
Administration believes could strengthen the longevity of the Medicare
entitlement program, if signed into law. The proposals would:
``encourage provider competition, efficiency, and high-quality care;
rationalize payment policies; increase beneficiary responsibility for
health care costs, improve Medicare's fiscal sustainability, and
improve program integrity.'' \1\
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\1\ www.hhs.gov/budget/09budget/2009BudgetInBrief.pdf, p. 53-54.
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Encourage Provider Competition, Efficiency, and High-Quality Care
TSCL agrees that reform is needed when it comes to provider
reimbursement, especially in the case of physicians providing
outstanding care to Medicare beneficiaries. In recent years, premiums
have been announced prior to increases in physician reimbursements,
meaning that actual program costs are higher than originally estimated.
Although temporary fixes have been issued, TSCL is concerned that with
the ``trigger,'' proposals could eventually lead to a substantial jump
in Part B premiums to offset the rising cost of quality health care.
Last year, the Medicare Trustees estimated that Medicare Part B and
Part D premiums, deductibles, and coinsurance costs were taking one-
third of the average Social Security benefit. Skyrocketing premiums,
accompanied with a COLA that does not take adequately into account
health care expenses are making it difficult for many seniors,
especially those relying solely on their Social Security benefits, to
get by. We should note, however, that TSCL and its members were
pleasantly surprised with a Part B premium increase of $2.90 per month
in 2008 for the majority of seniors.
Increase Beneficiary Responsibility
Increasing beneficiary responsibility on the surface may sound like
a good idea to some. TSCL is concerned about the proposal to eliminate
the annual indexing of income thresholds for Medicare Part B premiums,
especially if Part D becomes subject to the same income thresholds.
We fear that halting the annual index for income related premiums
will lead to more and more middle-income seniors paying higher rates.
Although some advocates consider it to be fair for those with higher
incomes, we fear that low- and middle-income seniors will be the ones
to suffer and eventually end up paying higher premiums as the threshold
is lowered to make up for future funding shortcomings. Further, it
seems unjust to have a group of beneficiaries paying more for the same
care and coverage. As the snowball grows, more seniors could look
outside of Medicare plans for quality health care insurance at a lower
cost.
TSCL also questions how private entities will be able to implement
income indexing accurately. With the involvement of private companies,
the Internal Revenue Service, and the Social Security Administration,
the automatic deduction of premiums from monthly benefits could become
more costly and onerous. It seems that the only way means testing could
work for Medicare Part D is to consider eliminating private insurance
companies from the equation, leaving Medicare to coordinate Part D as
it does Part B.
Improve Program Integrity
Greater program oversight is always a welcomed proposal. As
reported in the new 2009 Budget in Brief, the Health Care Fraud and
Abuse Control (HCFAC) program is responsible for detecting and
preventing health care fraud, waste, and abuse. This is accomplished
through investigations, audits, educational activities and data
analysis. From 1997 to 2007, HCFAC returned more than $10 billion to
the Medicare Trust Fund. While this is impressive, we can only imagine
how much more money could be saved and/or returned with a more
streamlined process among the involved agencies.
Equipping health care providers with knowledge about problems and
ways to increase accuracy will undoubtedly save money. As reported for
2007, improper Medicare payments have dropped to a new low of 3.9
percent. TSCL supports strong enforcement and greater audits of claims,
especially when considering the problems occurring with Part D plans.
Also, it has been widely reported that the Medicare payment system
should take a closer look at excessive payments for certain items. The
New York Times has reported that Medicare pays much higher amounts for
durable medical equipment than are charged to individuals buying the
same product.\2\ According to the 2007 NYT article, ``. . . Even for a
simple walking cane, which can be purchased online for about $11, the
government pays $20, according to government data.'' Another example of
overspending occurs when the government rents oxygen equipment for up
to 36 months at a cost of more than $8,000 per individual. The article
reports that the same equipment could be purchased from a retailer for
``as little as $3,500.''
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\2\ Duhigg, C., ``Oxygen Suppliers Fight to Keep a Medicare Boom,''
New York Times, Nov. 30, 2007.
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TSCL is not suggesting that oxygen equipment not be provided for
those in need. What we do believe is that there are more fiscally
responsible ways to provide the same care, which in the end could save
Medicare billions of dollars annually.
Conclusion
Although we are pleased that the Administration has put together
suggestions for strengthening the Medicare Trust Fund, TSCL and its
members are concerned about what the cost to the public will be. While
we do not have a perfect solution, there are some simple actions that
could be taken in the meantime.
For example, TSCL is encouraging all Members of Congress to support
a recently introduced bill, H.R. 4338, introduced by Rep. Timothy
Walberg (MI-7). H.R. 4338, titled the Social Security and Medicare
Lock-Box Act, would establish a procedure to safeguard the surpluses of
the Social Security and Medicare hospital insurance trust funds. Thanks
to Rep. Stephanie Tubbs Jones (OH-11), an original co-sponsor, this
legislation had bi-partisan support from the start. Additionally,
similar legislation, S. 302, was introduced last year during the first
session of the 110th Congress by Senator David Vitter (LA).
As the Administration suggests, tougher enforcement and increased
transparency will save Medicare billions of dollars annually. A
significant portion of the expenditures comes from fraud and abuse that
hurts the solvency of important entitlement programs like Medicare for
current and even future retirees.
Regardless of which solution Members of Congress believe is best,
TSCL sincerely hopes that the Medicare and Social Security Trust Funds
are protected and strengthened for future generations.