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47–927 2009

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 

SANDER M. LEVIN, Michigan 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

STEPHANIE TUBBS JONES, Ohio 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

RAHM EMANUEL, Illinois 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

CHRIS VAN HOLLEN, Maryland 

KENDRICK MEEK, Florida 

ALLYSON Y. SCHWARTZ, Pennsylvania 

ARTUR DAVIS, Alabama 

JIM MCCRERY, Louisiana 

WALLY HERGER, California 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

SAM JOHNSON, Texas 

PHIL ENGLISH, Pennsylvania 

JERRY WELLER, Illinois 

KENNY C. HULSHOF, Missouri 

RON LEWIS, Kentucky 

KEVIN BRADY, Texas 

THOMAS M. REYNOLDS, New York 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

DEVIN NUNES, California 

PAT TIBERI, Ohio 

JON PORTER, Nevada 

JANICE MAYS, Chief Counsel and Staff Director 

BRETT LOPER, Minority Staff Director 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


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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 


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THE PRESIDENT’S FISCAL YEAR 2009 BUDGET 

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:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1721 

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.’’ 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘110th Congress’’ from the menu entitled, 

‘‘Committee Hearings’’ (http://waysandmeans.house.gov/Hearings.asp?congress=18). 

Select the hearing for which you would like to submit, and click on the link entitled, 

‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, email and ATTACH your submission as a Word or WordPerfect 

document to the email address provided, in compliance with the formatting requirements listed below, by close of business Thursday, February 21, 2008. Finally, 

please note that due to the change in House mail policy, the U.S. Capitol Police will 

refuse sealed-package deliveries to all House Office Buildings. For questions, or if 

you encounter technical problems, please call (202) 225–1721. 


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FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons, and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, and telephone and fax numbers of each witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

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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 restricVerDate Nov 24 2008 06:06 Apr 02, 2009 Jkt 047927 PO 00000 Frm 00007 Fmt 6633 Sfmt 6602 E:\HR\OC\47927.XXX 47927

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tions. 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 41⁄2 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 


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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 longterm 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 


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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 


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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 


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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 


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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:] 


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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 


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fairly near term below the level of other regular Medicare fee-forservice. 

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 


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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? 


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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. 


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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 


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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. 


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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 


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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. 


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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 twothirds 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—— 


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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? 


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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. 


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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 meanspirited. 

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 

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erence 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 longterm 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? 


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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. 


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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 


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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 antifraud 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. 


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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. 


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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 socalled 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. 


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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? 


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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 


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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. 


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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 stopping 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.] 


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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 


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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. 


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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. 


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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 


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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 

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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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[Submissions for the Record follow:] 


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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. 

f 

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%. 


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1www.hhs.gov/budget/09budget/2009BudgetInBrief.pdf, p. 53–54. 

2Duhigg, C., ‘‘Oxygen Suppliers Fight to Keep a Medicare Boom,’’ New York Times, Nov. 30, 

2007. 

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

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 middleincome 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 


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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.’’ 

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. 

Æ 


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