March 25,1999

Roth, Breaux and Bipartisan Group Urge Senate to Put Politics Aside to Save Medicare

WASHINGTON -- Senate Finance Committee Chairman William V. Roth, Jr. (R-DE) and Finance Committee Democrat John Breaux, Chairman of the Medicare Commission, today introduced a bipartisan amendment to the budget resolution that states that Congress should work in a bipartisan fashion to extend the solvency of the Medicare program and to ensure that benefits under the program will be available to beneficiaries in the future. Senators Frist, Kerrey, Gramm, Domenici, Nickles, Grassley, Hatch, and Thompson cosponsored the resolution. A copy of the resolution is attached. Chairman Roth delivered the following statement on the Senate floor:

"Mr. President, one of the most important bipartisan efforts we will undertake in the months ahead will be to address the challenges confronting the Medicare program -- a program whose reach and importance in the lives of Americans cannot be overstated. In years past, we have looked at the demographics, studied the statistics, and struggled with a sense of vulnerability concerning Medicare and its future.

"Our population is aging. Health care costs seem to be growing exponentially. New and necessary technologies are becoming more expensive. And the financial base of the Medicare program, provided by working Americans, is shrinking in proportion to the number of seniors who depend on it. In less than ten years, the population of Medicare beneficiaries will begin growing at a rate unseen in the program's history.

"In the past, the Medicare population has grown by about one percent a year. Beginning very soon -- that growth rate will begin to double. In just 10 years the Medicare program will be required to serve a population that is 20 percent larger than it is today -- that is 46 million seniors. And at that point, the baby boom generation will have only just begin to retire.

"Concerning the growth in the cost of health care services, Gene Steuerle of the Urban Institute recently testified before the Finance Committee that an average couple retiring now receives about $250,000 dollars in lifetime Medicare benefits. Once the baby boom generation is in full retirement, that amount will double. And as a result, we will need to dedicate a larger and larger portion of the nation's budget to pay for Medicare. Medicare is expected to consume an expanding share of the nation's economy. In 1998, Medicare spending was an estimated 2.6 percent of the gross domestic product.

"It is projected to grow to $518.5 billion -- or 3.5% of GDP -- in 2010. And by 2030, Medicare is forcast to grow to $2.2 trillion, representing 5.9 percent of the GDP.

"It's good news that people are living longer, that they are spending almost a decade more in retirement than they were when the Medicare program started. These are demographics we have worked long and hard to bring to pass, and we should celebrate them.

"However, these were -- and continue to be -- serious challenges to the Medicare Trust Fund. The balance in the Part A Hospital Insurance Trust Fund is declining. The end-of-year balance began to drop in 1995, when payments from the trust fund began to exceed income to the trust fund. The Balanced Budget Act of 1997 helped to delay the bankruptcy of the trust fund for a few years, but it will still occur in our lifetimes if something is not done now.

"Like I said, each of these represents a serious concern, Mr. President. But as of late, there appears to be a growing sense of optimism that we can take the favorable economic conditions our nation is enjoying, and with bipartisan leadership we can find long-term solutions to these pressing challenges.

"Not only is there consensus on both sides of the aisle that something must be done; but there is growing confidence that something can be done. An important component of the answer, we have come to see, rests in the potential of a strong economy and with the willingness of the American people.

"Toward meeting the challenges confronting Medicare, we must be guided by five specific criteria:

"First, our efforts, if they are to succeed, must have bipartisan support, and they will require leadership from the White House. President Clinton must articulate his strategy for securing and strengthening the Medicare program.

"Second, we must assure that the measures we adopt do not undermine the economic growth our nation needs to continue providing jobs, opportunity, and security for Americans now and in the future.

"Third, we must see that our policies are fair, that those who are being called upon to strengthen the system in the short-term have the confidence of knowing that the system will be there for them in the long-run.

"Fourth, reform efforts must be holistic in nature, taking into account the challenges we have to preserve and strengthen Social Security and to coordinate other programs that can serve the same constituency benefitted by the Medicare and Social Security programs.

"And fifth, our reform efforts must find acceptance with the American people. They must take what has been a good program and make it better -- make it better by making it financially sound and easily accessible to those who depend on it.

"I am hopeful that the President will provide the genuine leadership required to address the future of Medicare. I encourage him and his Administration to come work with us on the Finance Committee. We look forward to working with them. Certainly there are few issues as important as this one.

"It demands our immediate attention, and the best effort we have to offer. Our work must go beyond the few items he included in his budget. It must take into account the long-term needs of the program, a careful analysis of benefit expansion, such as pharmaceutical drugs, and other concerns.

"We must look at how we can best serve the Medicare program in a way that the reforms we offer will positively affect Medicaid. Too often lost in the debate over Medicare reform is the direct impact that Medicare changes will have on Medicaid. These two programs are most obviously linked through the 5.4 million low-income elderly and disabled individuals who are eligible for both. For this dually eligible population, Medicaid essentially serves as a source of wraparound benefits, providing among other important services nursing home care and prescription drugs.

"In addition, nearly 600,000 low-income Medicare Beneficiaries receive Medicaid financial support to meet Medicare's cost-sharing requirements.

"Together, these six million individuals represent 16 percent of the Medicare population, but they consume 30 percent of all Medicare spending and 35 percent of all Medicaid spending. Medicare reform proposals that would impact these low-income populations must be very carefully undertaken to avoid simply shifting costs or responsibilities from one program to the other.

"Mr. President, as we face the challenges of reforming the Medicare program, we must explore opportunities to substantially improve the health care experiences of these dually eligible populations. Currently, efforts to coordinate the services covered by the two programs are stymied by barriers to integration.

"These barriers include the need for complicated waivers, arbitrary restrictions on mingling Medicare and Medicaid dollars, and difficulties in coordinating program oversight. A reform process undertaken by this Senate presents an opportunity to better meet the needs of a very vulnerable population.

"Immediately after passage of this Budget, I will begin, as Chairman of the Committee that has jurisdiction over the Medicare and Medicaid programs, the process of developing a bipartisan, consensus proposal for real Medicare reform. In developing this plan, the Finance Committee will conduct a series of hearings to take testimony from Medicare consumers, trustees, providers, and other experts who are intricately involved with this program and who are in a position to make worthy recommendations on how to proceed with improving the Medicare program.

"We will carefully study the recommendations of the bipartisan Commission on the Future of Medicare led by Senator Breaux. Senator Breaux and the other members of the bipartisan Commission on the Future of Medicare worked very hard and committed a great deal of time during the past year to try to find a solution to the impending Medicare crisis. They deserve our appreciation for their efforts. The discussions that they had has certainly furthered the Medicare debate and will be invaluable to us as we proceed with this important work. In addition to these measures, the Committee will also take into consideration the many concerns and proposals of Senators -- on both sides of the aisle -- for improving this program which is so important for all of those we represent and are here to serve.

"Our effort to lay a solid foundation for the future of Medicare will be a major undertaking. I believe that the budget resolution we are considering now provides the necessary framework. The budget committee has set aside on-budget surplus funds of up to $100 billion that -- if needed -- can be used for Medicare reform, including perscription drug benefits. Once we have achieved a bipartisan agreement on a comprehensive Medicare plan, we may indeed find it necessary to revisit this budgetary framework -- and I expect that we would be able to obtain the necessary votes to proceed with such adjustments.

"I strongly urge my colleagues to set aside attempts to legislate Medicare reform in the budget resolution. This is not the time or place for such a complex undertaking. Instead, I urge that we work together over the next few months on a Medicare reform plan. Such a plan should provide the nation's current and future seniors the assurance of health care that is comprehensive in benefits, superior in quality and financially sustainable. This is important to them. It is important to the future. And it is something that can and will be done."