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Herger Opening Statement: Hearing on Premium Support

April 27, 2012

We are meeting today to examine proposals to reform Medicare through Premium Support and the bipartisan support for such proposals.

First, I think we should make it abundantly clear, that despite what some on the other side might say, Republicans support the Medicare program.  The program serves a critical function in our society, ensuring that America’s seniors and people with disabilities have health care coverage.  

Unfortunately, the program faces significant financial challenges and is slated to go bankrupt in 2024.  We cannot keep tweaking here and tweaking there, hoping to kick the can down the road for a year or two.  As the Medicare Trustees again stated in their annual report, Congress must act sooner rather than later to reform the program to ensure its viability.  

The Medicare program is in dire need of reform and improvement so that it meets the health care needs of its beneficiaries in the 21st Century.

The traditional Medicare benefit was created in 1965 and it really hasn’t been reformed since, despite the fact that the delivery of health care and the private insurance market have changed dramatically.  

The Medicare Fee-For-Service benefit design, with its array of confusing coinsurance and deductible levels, and its siloed delivery system, has not kept pace with the rest of health care.  Can you imagine buying your hospital insurance from one insurance company, your doctor’s office insurance from another insurance company, your prescription drug insurance from yet another company, and catastrophic spending protections from a fourth company?  That’s exactly what many of Medicare beneficiaries do today.  This outdated design breeds confusion, waste, and even fraud.

Medicare’s antiquated design also inhibits care coordination, incentivizes overuse, and has led to financial challenges throughout Medicare’s history.

So what is to be done?

Simply hoping to make the Medicare program solvent by cutting payments to providers is unrealistic.  The Chief Medicare Actuary has warned that the cuts already enacted as part of the Democrats’ health law will drive Medicare payments below Medicaid levels, which could result in “severe problems with beneficiary access to care.”  Further drastic provider cuts may make Medicare appear solvent on paper, but it would do so at the expense of the millions of seniors and people with disabilities who depend on the program.

Instead, we should examine reforms that will protect and improve the Medicare program, and Premium Support is one way to do that.  Since the term “Premium Support” was coined by Henry Aaron, one of our witnesses here today, and Robert Reischauer, both Democrats, it has received bipartisan support.

Moving to a Premium Support model was advanced by the National Bipartisan Commission on the Future of Medicare, which was co-chaired by Democrat Senator Breaux, another witness here today.  

Writing in support of the proposal, Senator Breaux and former Ways and Means Chairman Bill Thomas stated that they believed Medicare “can be more secure only by focusing the government’s powers on ensuring comprehensive coverage at an affordable price rather than continuing the inefficiency, inequity, and inadequacy of the current Medicare program.”

Premium Support was also a key component of the recommendations from the Bipartisan Policy Center’s Task Force on Debt Reduction co-chaired by Senator Pete Domenici and former CBO Director and Clinton Administration OMB Director Alice Rivlin, who is also testifying today.

It is in this vein that the 2013 House Budget includes a Premium Support proposal.  We have drawn upon the ideas that our witnesses have proposed over the past two decades and put forward a plan to protect Medicare for future generations.  

There certainly will be different opinions about how a Premium Support proposal should work.  That is a healthy discussion.  However, simply hiding our head in the sand is not.  

House Republicans have made it abundantly clear that we will not simply watch Medicare become insolvent.  My friends on the other side may not like our proposal to protect the Medicare program, but where is yours?  Relying on $14 billion in savings from so-called “delivery reforms” in the health care law is not going to save the program.  They’re already built into the Medicare Trustees’ estimates that predict Medicare’s demise in just over ten years.

There is some time before Medicare faces the dire shortfalls that will jeopardize access to care.  However, we would be wise to heed the charge given to us by the Medicare Trustees and begin to work together now to place the Medicare program on solid financial ground.

It is my hope that today’s hearing will be the beginning of this effort.