March 10,1999


For the First Time in Medicare's History, Spending Shows No Growth

WASHINGTON -- The Senate Finance Committee met Wednesday to look at the Medicare program's spending trends, baseline changes and the Clinton/Gore Administration's FY2000 budget and surplus proposal. Chairman William V. Roth, Jr. (R-DE) delivered the following opening statement:

"We are here today to hold our first Medicare program hearing in the 106th Congress. There are many important issues developing in Medicare and I plan to explore them in the Committee during this session.

"In addition, I am following with great interest the work of the Bipartisan Commission on Medicare Reform, which is proceeding under the able leadership of Senator Breaux.

"I look forward to providing opportunities for Members to examine closely the ideas and issues being debated within the Commission, after their work is completed and formally submitted to the Congress.

"Today I would like to focus our attention on the arcane but ever-important matters of current Medicare spending trends and baselines. We are focusing principally on our five and ten year budget windows for legislative scoring purposes, and recent updates in the Medicare baseline.

"In particular, I think it is important for Members of the Finance Committee to review the dramatic changes in spending brought about by the actions we took in the Balanced Budget Act of 1997.

"The Balanced Budget Act of 1997 was the largest Medicare spending and policy change package since the inception of the program in 1965. The budgetary and policy ramifications are still not fully understood.

"For instance, I was advised recently by the Congressional Budget Office that the period of October-December 1997 was the last quarter in which there was any spending growth.

"This is unprecedented. For the first time in the 35-year history of the Medicare program, there has been a substantial period of "no-growth" in Medicare spending for health services.

"Since the number of beneficiaries continues to grow, this may even represent a real decline in spending, both in aggregate and on a per beneficiary basis.

"For instance, the monthly Treasury reports indicate that the program spent $2.1 billion less in the last calendar quarter of 1998 ($69.8 billion) than in the last calendar quarter of 1997 ($72.4 billion).

"Separately, I am increasingly concerned about the financing adequacy and stability of the Medicare+Choice program over time.

"I view this program as the "seedbed" for future program reforms needed to sustain the promise and security of Medicare benefits for the demographic surge in retirees expected beginning a relatively short twelve years from now.

"Payment stability and adequacy, as well as reasonable regulatory requirements are crucial to stimulating the entry and continued participation of private health plans in the Medicare program.

"All of these matters speak to the fact that Medicare raises budget and design complexities that exceed even those that have arisen in that other very important domestic program -- Social Security.

"Finally, I am pleased to take testimony from Jack Lew, the OMB Director, on the budgetary objectives of the President's FY2000 budget submission as it relates to Medicare, and the President's proposal to spend 15% of potential future surplus dollars on Medicare.

"I suspect it is no secret that I am concerned about any proposed across-the-board increase in general revenue spending."