[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE 2013 MEDICARE TRUSTEES REPORT
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JUNE 20, 2013
__________
Serial No. 113-HL05
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
DAVE CAMP, Michigan, Chairman
SAM JOHNSON, Texas SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin JIM MCDERMOTT, Washington
DEVIN NUNES, California JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois MIKE THOMPSON, California
JIM GERLACH, Pennsylvania JOHN B. LARSON, Connecticut
TOM PRICE, Georgia EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida RON KIND, Wisconsin
ADRIAN SMITH, Nebraska BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota DANNY DAVIS, Illinois
KENNY MARCHANT, Texas LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio
Jennifer M. Safavian, Staff Director and General Counsel
Janice Mays, Minority Chief Counsel
______
SUBCOMMITTEE ON HEALTH
KEVIN BRADY, Texas, Chairman
SAM JOHNSON, Texas JIM MCDERMOTT, Washington
PAUL RYAN, Wisconsin MIKE THOMPSON, California
DEVIN NUNES, California RON KIND, Wisconsin
PETER J. ROSKAM, Illinois EARL BLUMENAUER, Oregon
JIM GERLACH, Pennsylvania BILL PASCRELL, JR., New Jersey
TOM PRICE, Georgia
VERN BUCHANAN, Florida
ADRIAN SMITH, Nebraska
C O N T E N T S
__________
Page
Advisory of June 20, 2013 announcing the hearing................. 2
WITNESSES
Charles P. Blahous, Ph.D., Public Trustee, Social Security and
Medicare Boards of Trustees.................................... 7
Robert D. Reischauer, Ph.D., Public Trustee, Social Security and
Medicare Boards of Trustees.................................... 20
SUBMISSIONS FOR THE RECORD
AAA, statement................................................... 39
MRC, statement................................................... 47
National Center for Policy Analysis, statement................... 51
NCPSSM, submission............................................... 54
THE 2013 MEDICARE TRUSTEES REPORT
----------
THURSDAY, JUNE 20, 2013
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The Subcommittee met, pursuant to call, at 9:30 a.m., in
Room 1100, Longworth House Office Building, Hon. Kevin Brady
[Chairman of the Subcommittee] presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON HEALTH
CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
Thursday, June 13, 2013
No. HL-05
Chairman Brady Announces Hearing on
the 2013 Medicare Trustees Report
House Ways and Means Health Subcommittee Chairman Kevin Brady (R-
TX) today announced that the Subcommittee on Health will hold a hearing
on the recently released 2013 Annual Report of the Boards of Trustees
of the Federal Hospital Insurance and Federal Supplementary Medical
Insurance Trust Funds. This hearing will allow the Subcommittee to
focus specifically on the Medicare program's financial status and
changes from the trustees previous reports. The Subcommittee will hear
testimony from Medicare's two Public Trustees. The hearing will take
place on Thursday, June 20, 2013, in 1100 Longworth House Office
Building, beginning at 9:30 a.m.
In view of the limited time available to hear from witnesses, oral
testimony at this hearing will be from invited witnesses only. 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.
BACKGROUND:
The Social Security Act requires the Board of Trustees for the
Medicare program to report annually to the Congress on the current and
projected financial condition of the Medicare Hospital Insurance (HI)
and the Supplementary Medical Insurance (SMI) Trust Funds. The
trustees, who are designated in statute, are the Secretary of the
Treasury, the Secretary of Health and Human Services, the Secretary of
Labor, the Administrator of the Centers for Medicare and Medicaid
Services (CMS), and the Commissioner of Social Security. Additionally,
the statute requires that there be two Public Trustees, from different
political parties, who are appointed
by the President and confirmed by the Senate for 4-year terms. The CMS
Office of
the Actuary is responsible for preparing the report. The 2013 report
was released
on May 31, 2013, and can be found at https://www.cms.gov/
ReportsTrustFunds/downloads/tr2013.pdf. The Medicare actuaries
subsequently released an alternative scenario memorandum, based on what
actions they expect Congress to take (such as preventing cuts to
Medicare physician payment rates, overriding productivity adjustments
to Part A providers, and eliminating the Independent Payment Advisory
Board) to ``present an alternative scenario to help illustrate and
quantify the potential magnitude of the cost understatement under
current law.'' That memo can
be found at http: // www . cms . gov / ReportsTrustFunds / Downloads /
2011TRAlternative Scenario.pdf.
Ensuring the financial viability of Social Security and Medicare is
one of Congress' most important responsibilities. The annual release of
the trustees' reports provides Congress with a valuable update on the
programs' fiscal status and important information with respect to
projections of future expenditures.
The Medicare trustees again issued a ``Medicare funding warning''
stating that the more than 45 percent of Medicare outlays in FY2013
will be comprised of general revenues. Additionally, the trustees
report the Medicare Hospital Insurance (HI) Trust Fund is expected to
go bankrupt by 2026, 2 years later than the 2012 estimate. However,
under the high-cost assumptions, the HI Trust Fund is expected to go
bankrupt by 2019.
The trustees state that the HI Trust Fund is not adequately
financed through 2014 as its ``expenditures have exceeded income each
year since 2008'' and will run a ``deficit amounting to $23.8 billion
in 2012.'' The trustees project Medicare spending to grow from 3.6
percent of Gross Domestic Product (GDP) in 2012 to 6.5 percent of GDP
in 2087.
Under the alternative scenario, the trustees estimate that Medicare
spending would increase to 9.8 percent of GDP in 2087. The trustees
state that growth of this magnitude would ``substantially increase the
strain on Nation's workers, the economy, Medicare beneficiaries, and
the Federal budget.
In announcing the hearing, Chairman Brady stated, ``The conclusions
of the Medicare trustees are deeply troubling and should serve as a
call to action for those who want to save Medicare. While Medicare's
Hospital Insurance Trust Fund has been given a brief 2 year reprieve
before going bankrupt, that doesn't mean Congress has two more years to
act. The simple truth is that Medicare remains in deep financial
trouble and the time to act is now. It is critical that the American
people, the President and Congress understand just how dire Medicare's
finances are.''
FOCUS OF THE HEARING:
The hearing will focus on Medicare's financial situation as
detailed by the 2013 Medicare trustees report.
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
``Hearings.'' 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,
submit all requested information. ATTACH your submission as a Word
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by the close of business on Friday, July 5, 2013. 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 or (202) 225-3625.
FORMATTING REQUIREMENTS:
The Committee relies on electronic submissions for printing the
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call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four
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Note: All Committee advisories and news releases are available on
the World Wide Web at http://www.waysandmeans.house.gov/.
Chairman BRADY. The Subcommittee will come to order. We are
meeting today to hear from the public members from the Board of
Trustees, the Federal Hospital Insurance and Federal
Supplementary Medical Insurance Trust Funds on their 2013
report analysis regarding the current dire status of the
Medicare program. It is important to understand the financial
health and viability of the Medicare program if we are to
ensure that the program is solvent and available to our
immediate seniors as well as future generations of Americans.
Author George R.R. Martin wrote, ``most men would rather
deny a hard truth than face it.'' I worry that when it comes to
Medicare that is true for too many in Washington today. If
Medicare is just fine, as some claim, then why the Medicare
trustees issue and Medicare funding warning for the seventh
straight year? If there is no problem that needs action now,
then why have the assets in the Trust Fund shrunk by 15 percent
from the projections made just 5 years ago? And if sincere
concerns about Medicare's financial condition are summarily
dismissed as alarmist rhetoric by some Members of Congress,
then why can't Medicare pay its medical bills for seniors in
just 13 short years?
Today no Member of Congress can honestly look a 52-year-old
American in the eye and assure them that Medicare will be there
for them when they retire because the trustees report has just
confirmed that. That is not just fine. For those who continue
to stick their head in the sand, where hope is the denial of
reality and who shirk from their responsibility to act to save
Medicare now, here is yet another wakeup call. The 2013
trustees report continues to make it abundantly clear that
Medicare's financial future is in trouble. Americans all over
the country and across generations are paying into a program
that we as a Congress cannot promise they will receive benefits
for. But if we simply face reality and come together we can act
now, this year, to take the first real steps to make sure our
citizens receive the medical care they deserve and have paid
into when they need it the most.
If you somehow think a couple of years of reduced
healthcare spending within a recession solves the problem, do
the math. The number of people in Medicare doubled over the
last 35 years and is going to double in size again. And no one
credible has proven that reduced healthcare spending will last.
Even the Medicare trustees didn't attempt to make that claim.
And they are not alone, the independent actuaries at the
Centers for Medicare and Medicaid Services again published what
they call an alternative scenario. In their full scenario they
assume that Congress will prevent, schedule cuts in physician
providers payments, and repeal the heavy-handed independent
advisory board causing Medicare spending as a percentage of our
economy to skyrocket. The trustees report and the alternative
scenario reinforce the need for prompt attention to Medicare's
severe financial problem.
As we will hear from our witnesses today, we should
continue to push, now is the time to act as the sooner we make
changes the better the program structure, the less dramatic
these changes will have to be. My hope is that this hearing
will help my colleagues on both sides of the aisle continue to
understand the extent of the financial problem that pushes us
to work toward a bipartisan commonsense solution. We can't wish
this problem away. Medicare is going broke too quickly, and no
amount of positioning for political gain is going to change
that fact. The Medicare Board of Trustees urged us as Congress
to take prompt legislative action and recognize the projection
in this year's report continues to demonstrate the need for
timely and effective action to address Medicare's remaining
financial challenges.
So if the trustees don't view the two added years of
solvency as a significant reprieve, then why should Congress or
the White House? Our witnesses here today will further explain
to us the extent of Medicare's financial difficulties as we
work to deliver on this promise. Medicare is important, it is
in trouble, common sense dictates that we act now.
Before I recognize Ranking Member McDermott for the
purposes of an opening statement I ask unanimous consent that
all Members' written statements be included in the record.
Without objection so ordered. I now recognize Ranking Member
McDermott for his opening statement.
Mr. MCDERMOTT. Thank you very much, Mr. Chairman. I want to
welcome Dr. Reischauer. It seems like you have been a permanent
fixture around here doing something ever since I came 25 years
ago. So it is good to see you here today as one of the public
witnesses. And Dr. Blahous, thank you for your service as being
willing to sit on a commission like this. I believe it has been
a couple of years since we have seen you before the Committee,
and I look forward to hearing your thoughts today about what is
going on.
As in the past, as you listened to my colleague Mr. Brady,
this hearing has usually been a hearing where there has been
continual harping on Medicare's supposed dire finances and
scaring the public into believing that Medicare is going
bankrupt and it won't be there for you when you get to a
certain age. Every generation has been subjected to that since
I've been in Congress; it is not going to be here by the year
X.
When I looked outside this morning as I got up, I can
assure you the sky's not falling. The latest trustees report
projects two initial years of solvency to 2026, and that is
pretty healthy by historical standards. Additionally the
Affordable Care Act is improving conditions across the Medicare
program. Projected Medicare spending is down from where it was
headed before the passage of ACA. Before ACA we were projecting
spending would reach 11.4 percent of GDP in 2082. I don't know
who can believe we know anything about 2082, but people sit
around and make those kind of projections. This year that
number is down to 6.5 percent in 2087, so that is almost a 50
percent cut.
The long-term 75-year deficit has also improved, dropping
from 3.88 percent in 2099 to 1.11 percent in 2013, that is a 72
percent decline. So you are seeing that things in fact in the
long term seem to be getting better. Now if you believe those
predictions the guys who want them believe them I guess. I am
one of those a little dubious about who will know what will
happen in 75 years. But the ACA is also resulting in
historically low healthcare spending rates. Per capita Medicare
spending rate was only .4 percent in 2012, that is less than
one-half of 1 percent, and national expenditures grew only 3.9
percent in 2011, the third straight year of slower growth. But
these rates are expected to remain low through the decade, it
is not just a one-time occurrence. These are the result of the
initiatives within the ACA and the initiatives it has catalyzed
throughout the country. Providers and insurers have gotten the
message loud and clear they need to transform into high-value,
efficient providers if they want to compete in the healthcare
system of tomorrow.
While all of this good news won't keep my Republican
colleagues from playing Chicken Little, I would like to remind
them that repealing the ACA, they tried it 37 times, their
singular goal for the last 3 years, would actually put the
program on a worse financial footing. The latest estimates of
the actuaries say that repeal would shorten solvency by 8
years. It would also increase beneficiary costs and eliminate
benefit improvements such as free preventive care and closure
of the Part D donut hole.
So rather than using this year's trustees record to invoke
panic and fear, rather let's use it to justify shifting costs
or justifying costs on to beneficiaries and undermining the
program in the name of solvency, I challenge my colleagues to
think bigger. Let's figure out how to ensure Medicare is an
efficient program that provides a quality benefit to those who
rely on it. While I support improvements to the Medicare
program, no program designed in 1964 could possibly be adequate
for today. There's just no way you can do that. And I reject
calls to slash the program to save it, it wasn't made too big
at the beginning. Let's give the ACA and the civil liberty
system reforms the chance to work. After all the sky isn't
going to fall anywhere tomorrow either. And I think that the
Committee has to look at what you present to us and decide how
we actually implement the efficiency that is in the ACA because
it will affect Medicare as it affects everything. The delivery
of health care and the way we pay for it is going to change
over the next few years. It is changing in part by the fact
that we have actually put ACA in motion. That made people start
to think about it.
I yield back the balance of my time.
Chairman BRADY. Today we will hear from two witnesses,
Charles Blahous and Robert Reischauer, both Public Trustees on
Social Security Medicare Boards of Trustees. Thank you both for
being here today. I look forward to your testimony. You both
will be recognized for 5 minutes for the purposes of providing
your oral remarks.
Mr. Blahous, we will begin with you.
STATEMENT OF CHARLES P. BLAHOUS, PH.D., PUBLIC TRUSTEE, SOCIAL
SECURITY AND MEDICARE BOARDS OF TRUSTEES
Mr. BLAHOUS. Thank you, Mr. Chairman, Mr. Ranking Member,
all the Members of the Subcommittee. It is as always a great
honor to appear before you today to discuss the findings of the
Medicare trustees report. By mutual agreement with my fellow
Public Trustee Dr. Reischauer I am going to present in my oral
remarks the primary financial projections of the Medicare
trustees report and leave it to his testimony to discuss some
of the recent evolution of longer-term outlook.
The first point I would make in my oral remarks is simply
that Medicare finances are very complex, the program has two
Trust Funds and they are financed in different ways. Each year
there is naturally a high degree of public and press attention
in our projections for the date of depletion of the Hospital
Insurance Trust Fund, and that is very important to the data
and it is appropriate there be such attention, but that is just
one piece of a larger mosaic of Medicare program finances.
Medicare also has a Supplementary Medical Insurance Trust
Fund which actually has larger expenditures, and that is
constructed so that it can never go insolvent by design. It is
basically given whatever general revenues it needs out of the
general fund in order to maintain benefit payments. So when we
have financing strains on that side of Medicare they are not
manifested in the data's trust fund depletion but they are
manifested in the form of rising enrollee premiums and rising
pressure on the general budget. And in fact we are showing such
rising pressure. Under our current projections--well, in 2013
we are expecting about $594 billion in total Medicare
expenditures. That is about 3.6 percent of our Gross Domestic
Product. We are projecting going forward that Medicare costs
will rise substantially faster than our economic output to the
point where in the 2030s, by mid 2035 we are expecting total
program costs to be about 5.6 percent of GDP. Thereafter we are
expecting continued increases relative to our economic output
but moderating a little bit to hit about 6.5 percent of GDP by
2087.
Now the primary driver of this cost growth of course is
demographics. We have a lot of baby boomers coming onto the
benefit rolls. Healthcare cost inflation also plays an
important role and is a relatively more important factor later
in the evaluation period, although in the near term the
demographics are the larger one.
Under our current projections as has been noted we are
projecting that the Hospital Insurance Trust Fund will be
depleted in 2026, that is 2 years later than we projected in
last year's report. My colleague Dr. Reischauer will explain
some of the reasons for recent changes in the outlook. Here in
my remarks, I will just note that Medicare finances are really
very much on a knife's edge over the next several years. We are
starting this year with less than 1 year's worth of benefit
payments in the Hospital Insurance Trust Fund and so our 2026
projection depends to a great degree on whether annual tax
income and outgoing benefit expenditures will be almost exactly
balanced over the next several years. If our projections are
off a little bit and our long-term projections are subject to
great uncertainty, that 2026 date could move a few years in
either direction.
The last point I will make, Mr. Chairman, is simply that
for various reasons total costs are likely to be higher in
practice than what we are showing in the report. The most
obvious of these is simply the sustainable growth rate formula
for physician payments. We are obliged to project what happens
under literal current law and under literal current law there
will be a 25 percent reduction in physician payments at the
beginning the next year. Historically Congress has tended to
override these. If we assume that that pattern continues, then
costs will be higher than we are currently projecting, by our
estimates a little bit more than 10 percent higher over the
long term.
Now there are some who argue that costs will be higher than
our current projections for other reasons and those are rooted
in some of the technicals of how we make our projections. I
will try to explain these without getting too far into the
weeds. But basically our projections for Medicare cost growth
are very highly dependent on our projections for healthcare
costs growth in the broader economy which determines the input
costs that providers report to Medicare. What we do in our
long-term projections is we assume a certain level of
deceleration in national healthcare cost growth. The reason we
assume that has to do with the historical elasticity of medical
cost growth as a function of price growth. I think the layman's
way of understanding it is that as health care takes up a
larger and larger share of our economy and absorbs more of each
of our pocketbooks the pressure in the direction of further
increases is lessened a bit. If that weren't the case then
ultimately we would get to the point where our economy would
serve nothing other than health care. So we assume a certain
level deceleration going forward in national healthcare
expenditures. So when you overlay on top of that the ambitious
cost constraints of current law in some areas we actually have
projections that have per capita expenditures in Medicare more
rapid than GDP growth in the near term, but actually less than
GDP growth in the long term. And so there are some people that
look at our projections and say, we don't think that is
plausible, we don't think lawmakers would permit expenditures
in Medicare to be less than a per capita basis and per capita
GDP growth. We as trustees have to be agnostic about that. We
can't predict the future actions of lawmakers, but what we do
say is we show the main projections in the current law and we
also provide some alternative scenarios in which it is assumed
that some of these provisions are overridden.
In conclusion, Mr. Chairman--I know I am out of time--
Medicare is a complex program in which finance strains have
consequences that include projected depletion of the Trust Fund
and raising pressure on the general budget. We are showing
costs raising markedly over the next couple of decades,
primarily due to demographics, costs are likely to be at least
as high as we currently project if the historical pattern of
SGR overrides continues. In our report we say that under our
current projections legislation will be needed to prevent
financing shortfall in the Hospital Insurance Trust Fund and to
address rising budgetary pressures arising from Medicare SMI.
The sooner such legislation is enacted the more likely you can
produce substantial long-term savings with less potential
disruption for beneficiaries.
Thank you.
[The prepared statement of Mr. Blahous follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman BRADY. Thank you.
Mr. Reischauer.
STATEMENT OF ROBERT D. REISCHAUER, PH.D., PUBLIC TRUSTEE,
SOCIAL SECURITY AND MEDICARE BOARDS OF TRUSTEES
Mr. REISCHAUER. Chairman Brady, Ranking Member McDermott
and other Members of the Subcommittee, I appreciate the
opportunity to appear before you today. My colleague Dr.
Blahous has already covered the trustees' latest projections
and the basic operations of Medicare. And I am going to stray a
bit in part in response to the op-ed that was in last week's
Washington Post about the credibility of Medicare's long-term
projections.
What I was going to talk about is the implications of the
slowdown in overall healthcare spending will have or could have
on the Medicare program's future financial situation. As you
know, both Medicare per beneficiary spending and private sector
per capita spending has slowed considerably over the last few
years. The latest trustees report projects that the year in
which the HI Trust Fund will be depleted has been pushed out 2
years from 2024 to 2026. This is good news, but does it suggest
that the cost curve has been bent in a sustainable way and we
can relax? Even though I count myself among those who think
that much of the spending slowdown is structural in nature, I
believe that the fundamental financial challenge facing
Medicare and the need for further costs restraint and reform
remain largely unchanged from where they were a year or two
ago.
The slowdown in per capita in national spending has been
going on in bits and starts for a better part of a decade.
Probably the biggest single factor explaining the slowdown is
the economic weakness of the past 5 years. This weakness has
reduced the ability of many workers and their families to
afford health care. What is less recognized is that it has also
had an effect on Medicare beneficiaries who experienced sharp
declines in the value of their IRAs and 401(k)s and reduced
interest income from their CDs and bonds. In addition they went
2 years without a Social Security COLA.
The fact that relatively few major new technologies and
blockbuster drugs have been introduced in the past few years is
a second factor that has contributed to the slowdown. Policy
changes, both at the Federal and the State level, also can take
some credit for the spending slowdown and the final factor is
the sea change that has taken place in the attitudes and focus
of leaders in the healthcare sector. In contrast to the past
there is now widespread appreciation among these leaders that
health care cannot be provided without concern for its costs
and the efficiency with which it is delivered. As a result of
this attitudinal shift hospitals, physician groups, insurers
and employers have initiated innumerable projects designed to
moderate cost growth and some have helped to dampen overall
spending.
Whether the spending slowdown will continue is an open
question. While there are reasons to be cautiously optimistic
there are also reasons for concern. Prime among those reasons
of course is the possibility that breakthroughs in genomic
science, nanotechnology, stem cell research and other cutting-
edge technologies could lead to an explosion of new and
expensive interventions.
The increased market power that providers may gain when
they consolidate to provide integrated high-quality care as it
is envisioned under health reform is also a threat, potential
threat to the continuation of the spending slow down.
Some might ask whether the future pace of growth of overall
healthcare spending has much relevance for Medicare, because
Medicare has administered, not market-based praises and does
not negotiate with providers when it sets other cost-related
program parameters. Notwithstanding these differences, Medicare
cannot set its own course with respect to future growth
independent of what is happening in the rest of the healthcare
marketplace. This has been illustrated clearly by the
appropriate reluctance lawmakers have shown towards adhering to
the sustainable growth rate formula. As you know, the
projections in our report assume that the physician fee
schedule will be reduced by 24.7 percent at the start of 2014.
The report notes, however, that it is a virtual certainty that
this reduction will be overridden. This judgment is based on
experience since 2003 and an appreciation of the disruptive
consequences that a sudden sharp reduction would have on
Medicare payment rates leaving them far below those of other
payers. In short, what happens in the private marketplace does
constrain what Medicare can do to slow spending.
For several years the trustees reports have expressed
caution with respect to the long run sustainability of the
major cost reduction measures required by the Affordable Care
Act. The most important of these are the productivity related
reductions in annual payment rate updates for Medicare
providers and the IPAB. While the trustees believe that these
measures or alternative ones of similar impact can be sustained
over the long run, they judge that this will occur only if the
overall healthcare sector transitions to significantly more
efficient models of care delivery. Such a transition will not
happen unless private payers as well as Medicare continue to
pursue cost-saving innovations aggressively and providers
respond to the incentives to moderate growth. In short
Medicare's ability to moderate growth over the long run depends
critically on the private sector's success and its efforts to
slow spending and vice versa.
Thank you.
[The prepared statement of Mr. Reischauer follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman BRADY. Thank you, Mr. Reischauer.
Mr. Blahous, you and six other trustees predicted in 13
years Medicare will only be able to pay 87 percent of its
benefits going forward. How can a cut that severe or a
shortfall that severe--what impact does it have on Medicare and
its ability to provide medical assistance to seniors?
Mr. BLAHOUS. Well, that shortfall is in the Hospital
Insurance Trust Fund, and if it were allowed to simply play out
without action the amount of benefits we could pay would be 87
percent of what is currently scheduled. Under law that side of
Medicare cannot make payments in excess of the balance of its
Trust Funds. So basically under most interpretations of the law
Medicare would simply have to wait until there was incoming
revenues before it could send out payments. This would mean in
many instances denial or delay of care but certainly a
reduction in the aggregate amount of the amount of care seniors
receive of 13 percent in that year.
Chairman BRADY. You say in your testimony that you project
likely higher cost growth rates going forward, so in effect we
ought not count on the low growth rates of the last 2 years.
And you make the point that our finances ``are on a knife's
edge.'' The seven trustees said we need--Congress needs to take
prompt, timely and legislative action. So is that prompt and
timely meaning in some time in the next 10 years, sometime in
the next 5 years? Do we need to act sooner than that to address
these issues?
Mr. BLAHOUS. Well, certainly the sooner there is action I
think the more prudent it would be, for a number of reasons.
One is the sooner you act the more people you can involve in
the solution. You can involve more cohorts of taxpayers, you
can have a gentler impact if there's going to be an impact on
beneficiaries, you can spread it out over a longer period of
time. The other point I'd make is that you have to remember the
main factors driving the cost, one of them is demographics. It
is hard to just change on a dime with respect to demographics.
If we are going to change anything about eligibility ages or
eligibility criteria you are going to want to phase that in.
Chairman BRADY. A lot more people are coming into the
program. Are higher costs over the long term continuing to
drive the financial problems?
Mr. BLAHOUS. That is right.
Chairman BRADY. What is your recommendation to us? How soon
should we act to address this? You have been there, you know
the issues, and you know the challenges. How much longer do we
delay taking some meaningful steps?
Mr. BLAHOUS. And the difficulty of this of course is
lawmakers always have to make a judgment as to what is the
right environment or the best time to act from a number of
perspectives. I can just tell you strictly from numerical
perspective the earlier you act, the better. The more immediate
action, the better.
Chairman BRADY. Now, this session preferably.
Mr. BLAHOUS. From a purely technical substantive
perspective, yes.
Chairman BRADY. Thank you. Mr. Reischauer, your testimony
sounds like everything is just fine in Medicare. Is your
thinking don't worry, be happy, it will all work out?
Mr. REISCHAUER. Well, I mean I think I said early in my
oral remarks as well as my written remarks that although I am
optimistic about the spending slowdown, I think that we still
face a very significant problem. And like my colleague I think
the sooner we adopt measures to address the long-term
situation, the better. I am not one who spends sleepless nights
worrying about 2087, but looking out at the next two decades
there is cause for concern. And like Dr. Blahous, I believe the
sooner decisions are made, the more gradually they can be
implemented, and the more political viability they will have.
Chairman BRADY. Is your thinking too rather than waiting 5
years or 10 years, would your recommendation as far as taking
some meaningful steps to Congress be to do this session, to
start those solutions or at least the steps of them now rather
than continuing to delay?
Mr. REISCHAUER. We have adopted a lot of changes. We are
going to learn a lot from the demonstration and pilot programs
and from the implementation of various cost reducing measures
in the Affordable Care Act. And I think in a few years we will
be in a much better position to adopt in a sense the next
generation of changes, informed by what we learn about how well
some of these demonstrations are doing.
Chairman BRADY. I didn't--you spent a lot of time in your
testimony talking about the benefits of the Affordable Care
Act. I didn't see that. What section of the trustees report was
that in?
Mr. REISCHAUER. It wasn't. I said I was going to stray a
bit from the trustees report because----
Chairman BRADY. So it is your personal view, just looking
ahead on these issues?
Mr. REISCHAUER. Yes. And it comes from the belief that the
success of the efforts to hold down Medicare costs depends
critically on what is happening in the rest of our health
economy that Medicare can't go off----
Chairman BRADY. Sure. No, no, I heard your testimony loud
and clear.
Final point, is it accurate that the Trust Fund--hospital
Part A Trust Fund this year started out only having enough to
cover 81 percent of liabilities; is that accurate, in your
trustees report?
Mr. REISCHAUER. The Trust Fund's assets amounted to 81
percent of 2013's expected expenditures. If there were no money
coming into the Trust Fund that is----
Chairman BRADY. Is that expected to get better or to
decline?
Mr. REISCHAUER. It is expected to decline.
Chairman BRADY. Get worse.
Mr. REISCHAUER. Over the next 13 years, yes.
Chairman BRADY. Mr. McDermott.
Mr. MCDERMOTT. Since these hearings are basically
educational for the public let me try and get clear in people's
minds, when you are talking about a deficit, you are talking
about a deficit in Part A, that is what you are talking about?
And Part B, that is doctors and other incidental laboratory and
so forth, will be paid in full. And Part D will be paid in
full. So those two programs are not what we are worried about
here. We are worrying about the hospital is at 87 percent and
there is going to be 87 percent of the value in whatever it is,
20, or whatever, out there.
If we do nothing, you are saying if we do nothing but what
is here in the law. But in fact we have done, we put in place
the ACA. So we now are putting in cost control mechanisms in
the ACA that are affecting this or seem to be affecting it. I
look at the Medical Advantage program and see that it is
dropping and that there is really encouraging news that the
bids are coming in lower on Medicare Advantage, which suggests
to me that the ACA is already having an effect. Is that a fair
estimate to either one of you, Dr. Reischauer or Dr. Blahous?
Mr. REISCHAUER. The trustees report says that the initial
estimates of the impact of the Affordable Care Act on Medicare
Advantage plans were probably a bit high--a bit low in terms of
reductions and that behavior of these plans and the changes in
the benchmarks that have occurred over the last 3 years have
led the actuaries to believe that the savings will be larger in
Medicare Advantage than they thought in 2010, and we have also
seen an increase in the numbers of folks signing up for
Medicare Advantage, higher than was predicted at the time the
Affordable Care Act was enacted.
Mr. MCDERMOTT. The initial Medicare Advantage introduction
was a little bit rocky, as I remember it.
Mr. REISCHAUER. Well, I mean let's start with recalling
that Medicare Advantage in a sense cost the government more
money than fee for service.
Mr. MCDERMOTT. Because----
Mr. REISCHAUER. Because we were overpaying these plans
relative to the cost that the individuals who participated in
the plans would have paid had they been in fee-for-service
medicine. And so the Affordable Care Act took a number of steps
to try and reduce that situation and those have been quite
successful.
Mr. MCDERMOTT. So to sum that up, what you have just said
is that the Congress took actions that have reduced costs
already. And it looks like there is no reason to believe that
that won't continue out into the future if people, more people
get into managed care and Medicare Advantage and the bids keep
coming down we will save money in the future?
Mr. REISCHAUER. Well, but to take this to the next step,
the bids really have to come down well below what the costs
would be in fee for service, which means that these plans have
to become ever more efficient, which I think they are on the
way to doing. But to go back to my original testimony, these
are plans that by and large are run by companies that also run
managed care plans in the commercial market. And so this is all
one big ball of wax here and we want to keep pushing on all
aspects of it.
Mr. MCDERMOTT. It seems to me that what you are really
saying is that some of the things that are being put in place
and have been put in place both in the ACA and in Medicare
Advantage in the past are you can't expect them to go in and
instantly have a major change, that it is like trying to take a
super tanker and turn it on a dime, it takes 20 miles to bend
it 4 degrees in its direction and that is really what we are
doing here with a big program. Is that your view, that we are
getting the benefits from the ACA?
Mr. REISCHAUER. We are I think. And I think--I hope we
would get more, and I think you are right on the money when you
say this is a big, complex sector of our economy and needs time
to evolve to change, to move in the right direction and that is
why the Chairman's suggestion that making decisions sooner
rather than later, giving instructions on what direction to go
is very timely.
Mr. MCDERMOTT. I would be glad to help with the cost
control. Thank you.
I yield back the balance of my time.
Chairman BRADY. I am going to recognize Mr. Johnson for
questioning. We have a vote series of 15, I know Members want
to take a look at those before we begin and we are going to
recess until 5 minutes after the vote series concludes. We will
reconvene at that point. Mr. Johnson.
Mr. JOHNSON. Mr. Blahous, the trustees report estimates
that the Medicare Hospital Insurance Trust Fund is projected to
spend more money paying claims this year than it will collect
from the payroll tax; is that correct?
Mr. BLAHOUS. That is correct.
Mr. JOHNSON. How long has this been the case?
Mr. BLAHOUS. 2008 was when expenditures began to exceed tax
income.
Mr. JOHNSON. Okay. Are you aware of any program that is
financially sustainable if it spends more money than it has or
is this a recipe for bankruptcy?
Mr. BLAHOUS. Obviously we can't continue on that path
forever. In our current projections over the next decade we are
projecting almost an exact symmetry between income and outgo,
and there actually is a brief blip later in this decade when we
are projecting tax incomes for 1 year exceed expenditures, but
then after that the lines pull apart and expenditures exceed
income on a permanent basis and that is what leads to depletion
of that Trust Fund.
Mr. JOHNSON. Well, I don't know how you come up with that
decision.
Mr. Blahous, in your testimony you say that current
Medicare cost growth projection shows there will be increased
pressure on the general Federal budget highlighting the
increase in general revenues that will be needed to prop up the
SMI Trust Fund. What does this mean for Federal finances as a
whole and won't this further pressure the Federal budget never
to pay down our debt?
Mr. BLAHOUS. The answer is yes, it does mean much increased
pressure on the general budget. And there are only three
outcomes. One is you have to have higher taxes, one is you have
to have higher indebtedness or you have to have reduced
expenditures elsewhere in the Federal budget.
Mr. JOHNSON. Okay. And which of those do you favor?
Mr. BLAHOUS. Well, I mean this is my personal view. I am
not excited about the idea of steadily rising taxes or steadily
rising debt, but I am also not excited about seeing the rest of
the budget squeezed either. So I think we have to do something
to get the rising cost of Medicare under control.
Mr. JOHNSON. Maybe you could pay for the whole cost out of
your salary, what do you think?
Mr. BLAHOUS. I would not want to do that.
Mr. JOHNSON. Mr. Reischauer, in your testimony you say
policies included in the Affordable Care Act, ObamaCare, will
reduce costs and create more efficiencies in the system. You
specifically mention cost conscience insurance products that
will be offered within the exchanges but many States have also
released numbers showing that premiums will be increasing 10
percent, some 20 to 50 percent, and some as much as 150
percent.
Your assumption doesn't sound right to me. How does this
help us control costs in Medicare, which is facing the problems
right now?
Mr. REISCHAUER. Well, first of all those numbers that you
suggested I don't think account for the differences in
generosity between the plans that are being offered now and the
plans that will be offered in the exchange because there are
minimum benefit requirements for plans offered in the exchange.
But what I really am referring to is the situation that we will
have once the exchange starts, which is the individual consumer
having a choice of which plan he or she decides to sign up for.
And as you know, there will be plans at different levels of
generosity. And we might find that very significant fractions
of the American public are quite comfortable with plans that
are not as generous as those that we see offered in the usual
employer/employee situation and that will change and start a
competition that heretofore really hasn't existed both because
fewer employers offer a range of plans, and those that do
usually make their contributions to those different flavors of
plans such that true market responses by their employees are
not exhibited.
Mr. JOHNSON. Well, my impression is people don't want to
spend more money on health care than they already are and that
is what I am afraid is going to happen. Thank you.
Mr. REISCHAUER. No, I think you are right, I agree with
that.
Mr. JOHNSON. Thank you for your testimony.
Chairman BRADY. We have a vote series of 15 votes, but each
of them are 2 minutes long. So we will--this Subcommittee will
reconvene promptly 5 minutes after the last vote series. So
grab a cup of coffee but be back here ready to work.
[Recess.]
Chairman BRADY. The Subcommittee will reconvene.
Thank you for being patient during the vote series. We have
another one coming up, but I would like to recognize Mr.
Pascrell for 5 minutes.
Mr. PASCRELL. Thank you, Chairman Brady. Dr. Reischauer, do
you think that Medicare can hit the spending projections in the
trustees report under current law? Do you think that we will
hit those spending projections that you mentioned?
Mr. REISCHAUER. Well, one aspect of current law is the
assumption that the SGR will be implemented and that physician
payment rates will go down by almost 25 percent, and in that
respect I don't think we will hit the projections, and I think
the impact that that has on Medicare's overall spending is
about 2 percent, but abstracting from that, you know, I think
it is perfectly plausible that over the course of the next 10
and 20 years that we will hit the projected numbers that are in
the report. But as I said in my testimony, this presumes that
there will be a significant transformation of our delivery
system, not just the delivery system from Medicare's
perspective, but from the private sector as well, but I think
that we are on our way to that in large measure because of the
pressure that the Congress has been exerting on healthcare
providers.
Mr. PASCRELL. Well, correct me if I am wrong on this, that
the alternative scenario projects spending at 9.8 percent of
GDP compared to a projection of 11.4 percent prior to
healthcare reform. Is that accurate?
Mr. REISCHAUER. Yes, that is. I mean, if you look at the--
--
Mr. PASCRELL. That is pretty important, isn't it?
Mr. REISCHAUER. If you look at the 2009 report, the 75-year
projections were considerably more pessimistic than either the
current law projections in the 2013 report or the alternative
scenario contained in that report. Some of that is, of course,
the Affordable Care Act, but that is taken out by the
alternative scenario, and some of it is the different
projections of the economy and inflation, and, you know, some
of it is the slowdown in spending that we have experienced, so
there are a lot of factors that are going on, but your basic
observation is correct.
Mr. PASCRELL. You would agree with that?
Mr. REISCHAUER. Yes.
Mr. PASCRELL. Now, we have slowed down the rising cost of
drugs, yes or no?
Mr. REISCHAUER. We have----
Mr. PASCRELL. Prescription drugs.
Mr. REISCHAUER [continuing]. Slowed down prescription drug
costs in large measure because there has been a very
substantial shift from branded drugs to generic drugs, much
more than experts had predicted a few years ago, in part
because of the pressures that PBMs have exerted through the
Medicare Part D program.
Mr. PASCRELL. Now, the projects that we are into right now
in terms of Medicare and health care, for that matter, the rest
of health care are designed to moderate costs.
Mr. REISCHAUER. Uh-huh.
Mr. PASCRELL. If we don't touch that, we cannot catch up,
we cannot raise enough money to do so. If we continue to go on
the past process, we are out of business. But let me add this:
I don't want to be morbid about it, but there is really, as I
see it, and correct me, please, there is no real hope of a real
reduction of the costs of health care, and indeed Medicare,
unless folks take control of their health choices and learn to
read their bills.
I have looked at the reports from both sides of the aisle.
Neither of the sides of the aisle are stressing those choices,
and I would say both sides of our aisle are going in the wrong
direction and that the major emphasis, if I had a chance to
finish the question, Mr. Chairman, and maybe just a short
answer if it is possible?
Chairman BRADY. If I could--I want to give plenty of time--
--
Mr. PASCRELL. I mean, we have got 45 minutes.
Chairman BRADY. Mr. Pascrell, I will probably ask the
witnesses to respond.
Mr. PASCRELL. Okay. But the point I was concluding the
question is this: If we can't raise enough money to do the
things that we want to do, then we need to deal with the person
who seeks care, whether he is in control of his health. You
can't pass a bill to say you are in control of your health,
this is what you will do, but that is the side that we are not
discussing. We are not emphasizing this, and I fear, Mr.
Chairman, with all your good intentions and the great
intentions of our Ranking Member, that we are not going to deal
with this cost and deal with the lowering of that cost unless
we deal with those two things, the bill that you get and taking
control of your own health. That is not in the books here. I
don't know why we are not discussing it. Thank you.
Chairman BRADY. Thank you, Mr. Pascrell.
Dr. Price.
Mr. PRICE. Thank you, Mr. Chairman, and I appreciate Mr.
Pascrell's observation. I would just call his attention to a
bill H.R. 2300 that we have introduced that actually responds
to those things, and I will be glad to sit down and chat with
you about them.
I want to thank our witnesses and the expertise that you
bring and the contributions that you have made to trying to
move us in the right direction. Dr. Blahous, I am struck by
your testimony and much of the graphics within your testimony.
We hear some of our friends on the other side sound relatively
sanguine about the situation, that it is not a big deal, that
we don't have to worry about it too much, but you cite that the
demographics are driving the challenge. We have 10,000 folks
reaching retirement age every single day and will continue to
do that until we get the 78 million folks of my generation, the
boomers, through this process, and that is a huge, huge
economic challenge. My sense is that things aren't as rosy as
some would like them, like us to believe they are, and in fact
they may not even be as rosy as the trustees report. Would you
care to comment on that?
Mr. BLAHOUS. Sure. I think with respect to the observation
that costs may be higher than we are currently projecting, I
would return to Dr. Reischauer's point, we are assuming in our
projections an almost 25 percent reduction in physician
payments early next year. Historically there is very little
basis for assuming that is going to happen, so if you assume
that those payment reductions continue to be overridden, costs
would be at least to that extent higher than we are currently
projecting.
Beyond that, I think an important part of the message I
would offer is that we still have work to do to sustain the
finances of Medicare. There has been an awful lot written and
said about the recent slowdown in healthcare cost growth, and
obviously we are very hopeful that that will continue, and we
are hopeful that it will render the aggressive cost containment
mechanisms in current law more plausible over the long run, but
I think it would go too far to assume that things are going to
turn out significantly better than we are currently projecting.
Mr. PRICE. And likely not as good?
Mr. BLAHOUS. And probably not as much, not as good because
we are basically assuming that is going to work, assuming it is
going to work.
Mr. PRICE. Let me turn to the issue of cost control that
has been stipulated by the ACA for Medicare, which is through
the Independent Payment Advisory Board. Something that many of
us oppose vehemently because we believe it removes those
choices for patients and families and doctors for the kind of
care that they desire.
The projections right now are that the Independent Payment
Advisory Board, IPAB, will come into play when they have to
make a decision about reducing services or reducing
compensation, reimbursement to physicians in 4 or 5 years. What
is the interplay between that and the projection that the
trustees have made already?
Mr. BLAHOUS. It is a little tricky. Basically the IPAB
comes into play whenever total Medicare expenditures exceed a
target rate of growth, basically GDP plus 1 percent.
Mr. PRICE. Right.
Mr. BLAHOUS. Now, that renders it a little difficult to run
out some of our sort of illustrative alternative scenarios
because, for example, if you assume that the cost containment
provisions in the Affordable Care Act are overridden, then
unless the IPAB is also overridden, IPAB would basically just
have to come in to fill in the gap. They would have to provide
the savings that those cost containment mechanisms did not
provide, so there is a strong interplay between the two. That
is why in our illustrative alternative scenario we show the
consequences of those cost containment provisions being
overridden and the assumption that IPAB's recommendations are
overridden. It is not because we are making a policy
recommendation or prediction, it is just that you can't really
show the effects of one unless you assume the other is turned
off because the IPAB would basically just come in to fill the
gap if those cost containment mechanisms were overridden.
Mr. PRICE. And if the SGR reduction doesn't occur, which
virtually all of us believe it ought not, and that we,
Congress, will act, does the IPAB come into play from
decreasing reimbursement to physicians sooner or later?
Mr. BLAHOUS. I think the short answer is I am not certain,
but I will tell you what I think the answer is. I think the
answer is that the main interplay is with the so-called
productivity adjustments in the Affordable Care Act, and the
reason I believe that is that the SGR override that we are
assuming, basically most of that effect is in early 2014. We
are assuming 25 percent higher physician payments in 2014,
whereas the years that we are projecting IPAB coming into play
based on the targets they have to hit, those are more in the
outyears, it is subsequent to 2018.
Mr. PRICE. But they could be much sooner?
Mr. BLAHOUS. It could be sooner, but I think a bigger
factor is whether the other cost containment provisions of the
ACA are overridden, and I am looking to my co-trustee to
correct me if he thinks I have that wrong, but I think that is
the case.
Mr. PRICE. Thank you. Thank you, Mr. Chairman.
Chairman BRADY. Thank you very much. Mr. Smith, for the
final questions.
Mr. SMITH. Thank you, Mr. Chairman, and thank you to our
witnesses for being here today and sharing your insight and
expertise. Dr. Reischauer, in your testimony you suggest
spending on health care may actually decrease in the future in
part because of the creation of IPAB, and what part of IPAB is
it that you think can lead to that? I know many folks are
concerned that it is a form of rationing of care.
Mr. REISCHAUER. First of all, I don't believe that spending
will decline. I think the rate of spending will continue at a
relatively slow rate increase, so I am not here predicting
nirvana, so to speak.
Mr. SMITH. Okay.
Mr. REISCHAUER. You know, the IPAB effect is a relatively
modest one in our projections. As Dr. Blahous mentioned, the
significant impact comes from the productivity adjustment in
the payment updates for most types of providers. You know, the
IPAB, if it is created and if it is put into effect, as you
know, will be charged with bringing up suggestions that don't
necessarily have to be a cut in physician payments or other
payments, it can be some other things as well, to bring
spending down below a threshold, and if Congress disagrees with
those measures, it can enact a substitute way of damping down
the growth of costs, but some of the materials that we have
suggest that looking out over the next 20 or 30 years, the IPAB
is really a relatively minor part of the story of holding down
cost growth.
Mr. SMITH. Would you say it is minor but important? The
reason--a little bit of context.
Mr. REISCHAUER. I think its importance really comes--I
mean, if I were making a prediction, its importance would not
come from its actions so much as its threat of actions. I mean,
it focuses the minds of policymakers that, hey, we have to do
some more, you know. We have done a modest amount so far, but
we have to do some more or else, you know, this is, could be
viewed in a way as something like sequestration, you know, it
is nobody's first or tenth, you know, idea of what a good
solution to the problem is, so let's, as legislators, come up
with an alternative.
Mr. SMITH. Okay. So just to follow up, Dr. Blahous, if
creating the IPAB perhaps is considered by many to be good
policy--I have my concerns--why is its elimination assumed,
then, in the supplemental report?
Mr. BLAHOUS. Basically it pertains to--what we are trying
to show in the illustrative alternative scenario, we are
basically trying to acquaint lawmakers with the potential
expenditures that could arise if certain cost containment
mechanisms of current law are turned off, and IPAB is very
important in that demonstration because if you left IPAB to
continue to operate and if Congress came in and overrode those
cost containment mechanisms in current law, then under other
aspects of current law, IPAB would come in and just have more
savings to facilitate. So in order to show the magnitude of the
additional expenditures, if you assume certain elements of
current law are overridden, you also have to assume that IPAB
is basically overridden as well because otherwise IPAB would
just come in and fill in the gap for that savings. Is that
clear?
Mr. SMITH. Somewhat. But my fear is perhaps that SGR will
just be replaced by IPAB, you know, under a little different
acronym. Is that conceivable?
Mr. BLAHOUS. Well, I would say, I think there are different
levels of skepticism within the trustees process as to which
elements of current law are likely to be sustained. I think the
trustees as a body, based on history, are very, very skeptical
that anything approaching the SGR is going to happen because
historically we have overridden that. I think with respect to
something like IPAB, with respect to other cost containment
provisions in current law, I think you have a greater diversity
of views and greater agnosticism. You certainly have some
players in that process who think it is possible that they
could be sustained, you have others who are more skeptical. We
had a technical panel look at this over the last couple of
years, and they basically came back with a recommendation that
in our illustrative alternative scenario we assume that these
cost containment mechanisms operate in full up through 2020,
and then are partially phased out from 2020 to 2034. Again, it
is not a prediction, it is not a policy recommendation, but
basically that reflects an alternative assumption that
basically these cost containment mechanisms will be overridden
to the extent that would be necessary under our methodology,
which people can argue with, but under our methodology to
prevent a growing wedge between Medicare reimbursement rates
and private sector ones, but there is a great diversity of
views on that, especially since we haven't seen whether these
are going to be effective yet.
Mr. SMITH. Thank you, Mr. Chairman.
Chairman BRADY. I want to thank both witnesses for your
testimony today. Clearly, I hope we heed your warning to act
sooner rather than later to take the meaningful steps to save
and extend the life of Medicare.
As a reminder, any Member may submit questions for 14 days
for the record. I would ask the witnesses to respond in a
timely manner, as I know you will. With that, the Subcommittee
is adjourned.
[Whereupon, at 11:45 a.m., the Subcommittee was adjourned.]
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