U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

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69–011 2008

110th Congress, 2d Session – – – – – – – – – – – – – House Document 110–96 

PROPOSED LEGISLATION: MEDICARE FUNDING 

WARNING RESPONSE ACT OF 2008 

COMMUNICATION 

FROM

THE SECRETARY, THE DEPARTMENT OF 

HEALTH AND HUMAN SERVICES 

TRANSMITTING

A DRAFT OF PROPOSED LEGISLATION ENTITLED THE ‘‘MEDICARE 

FUNDING WARNING RESPONSE ACT OF 2008’’ 

FEBRUARY 21, 2008.—Referred jointly to the Committees on Energy and 

Commerce, Ways and Means, and the Judiciary and ordered to be printed 


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THE SECRETARY OF HEALTH

AND HUMAN SERVICES, 

Washington, DC, February 15, 2008. 

Hon. NANCY PELOSI, 

Speaker of the House of Representatives, 

Washington, DC. 

DEAR SPEAKER PELOSI: Under the Medicare Prescription Drug, 

Improvement, and Modernization Act (Public Law 108–173), a 

Medicare funding warning is triggered whenever the Trustees determine, for two consecutive years, that more than 45 percent of 

total Medicare spending will be derived from general revenues 

within the current or following six years. In April 2007, the Trustees issued the first such warning. The President has assigned me 

the task of submitting proposed legislation to respond to this Medicare funding warning, and I am accordingly submitting the enclosed bill. 

The Medicare program is on an unsustainable path, driven by 

two principal factors: projected growth in its per-capita costs, and 

increases in the beneficiary population as a result of population 

aging. Excess cost growth will not be brought under control until 

there is comprehensive reform changing Medicare’s underlying 

structure. The funding warning is merely one near-term signal illuminating a small piece of a much larger problem. That problem is 

an unsustainable design in which government controls too many 

aspects of health care. In traditional fee-for-service Medicare, the 

government decides what treatments are provided and what the 

price should be. Until this system is modernized to offer greater 

choice and price accountability to individual consumers, the program’s finances will remain on a path to insolvency. 

In the meantime, we urge the Congress to pass the Medicare savings submitted with the President’s fiscal year 2009 Budget. Enactment of these savings would improve Medicare’s long-term outlook—reducing the 75-year unfunded obligation by nearly onethird. It would also respond to the 2007 funding warning and 

maintain quality of care in a fiscally responsible way. 

The enclosed proposal that I am submitting in response to the 

funding warning takes a three-step approach to strengthening 

Medicare. In developing these proposed reforms, we have been 

guided by the highly successful experience of the Part D program, 

which made a prescription drug benefit available to 44 million 

beneficiaries. By empowering individual consumers, projected Part 

D costs have decreased by $244 billion relative to original estimates for the 2004–2013 time period. Market-based principles 

must be further applied to Medicare to allow it to operate more efficiently, as it must for the long-term. 

Title I of our proposal provides the Secretary of Health and 

Human Services the authority and responsibility to introduce prinVerDate Aug 31 2005 00:39 Feb 22, 2008 Jkt 069011 PO 00000 Frm 00003 Fmt 6601 Sfmt 6601 E:\HR\OC\HD096.XXX HD096

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ciples of value-based health care in the Medicare program, consistent with the President’s Executive Order 13410 of August 22, 

2006. This title directs the Secretary to develop and implement proposals that reduce Medicare spending by increasing provider efficiency and encouraging beneficiaries to be wise health-care consumers. The specific elements included in the legislation are: • Improved health information technology, including electronic medical records; • Transparency of pricing information; • Transparency of quality information; and • Incentives for providers to deliver, and beneficiaries to 

choose, high-quality, low-cost health care. 

Title II of the proposed legislation would implement the President’s medical liability reform agenda. To address the rising cost 

of health care, we must have a rational medical liability system. 

Our courts are littered with junk lawsuits. The current medical liability system encourages defensive medicine, which raises the 

costs of Medicare, Medicaid, Veterans Affairs, and other Federal 

health-care programs by an estimated $28 billion per year (and national health care costs by $60–$100 billion). The medical liability 

crisis has resulted in 1,500 counties in the United States that do 

not have an obstetrician-gynecologist. This legislation would take 

the first steps to addressing this growing crisis. 

Finally, Title III of the proposed legislation would provide for income-relating the Part D premium. This provision was contained in 

the President’s most recent two Budgets and would save over $900 million in 2013 and nearly $3.2 billion over five years. 

This legislative package, particularly if enacted in concert with 

the President’s Budget, would take the first step of responding to 

the funding warning in the Trustees’ 2007 report. Perhaps more 

importantly, it would begin to address the long-term challenge and 

lay the foundation for the comprehensive Medicare reforms that 

are necessary to strengthen and improve the program for future 

generations. Accordingly, we urge the Congress to promptly pass 

the proposed legislation. 

The Office of Management and Budget advises that the transmittal of this legislation is in accord with the President’s program. 

Sincerely, 

MICHAEL O. LEAVITT. 

Enclosure. 


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