, Executive Vice President of The
Congressman Dan Miller of Florida is one of the stars among
conservative legislators here in Washington. He is in his second
term now, and he epitomizes a principled politician. It's a good
way to highlight our session here today at the Physicians
The Congressman had no previous political experience before he
won in 1992. He came up here as a businessman and a college
professor. Now he serves on the House Appropriations Committee and
the House Budget Committee, which puts him in two good positions to
do something about the huge federal budget deficit and federal
spending. He represents the thirteenth district of Florida, which
is the southwestern part of Florida. Most important, he serves on
the Speaker's task force on Medicare reform, working with his
fellow Congressmen on this key issue.
Also joining us is Grace-Marie Arnett, the President of Arnett
& Co., a consulting firm here in Washington, D.C. Grace-Marie,
who specializes in health care policy, is also a senior associate
with the Domestic Policy Issue Program at the Center for Strategic
and International Studies. She is also a founding member of the
Consensus Group of Washington health policy experts who advance
ideas on a market-based approach to health care reform. Because of
her long-standing interest in tax policy, Grace-Marie Arnett was
asked to serve as executive director of the National Commission on
Economic Growth and Tax Reform, recently formed by Senate leader
Robert Dole and House Speaker Newt Gingrich and chaired by Jack
Kemp. The 14-member commission expects to issue its recommendation
in December 1995.
And finally, joining us today is John Liu, Health Policy Analyst
of The Heritage Foundation. John is a native of California and
before coming to Heritage in 1994 served as Legislative Counsel to
Congressman Cliff Stearns (R-FL), where he helped to draft the
Consumer Choice Health Security Act, the legislative embodiment of
The Heritage Foundation's consumer choice health care reform
proposal, sponsored by Congressman Stearns and Senator Don Nickles
of Oklahoma and 24 other Senate cosponsors. John holds a bachelor
degree in political science from the University of California at
San Diego and a Juris Doctor degree from the Tulane University
School of Law in New Orleans, Louisiana.
Congressman Miller, please give us your thoughts, and thank you
again for joining us.
The Urgent Need to Reform Medicare
Representative Dan Miller:
Thank you for having me here. My district in Florida has more
seniors than any district in the United States: Sarasota, Sun City,
Port Charlotte, Venice. It's a great area to represent.
Medicare is really the biggest issue we face this year. It is
the biggest issue because of the enormous fiscal pressures if we
don't address it. There is one overriding fact: Medicare is going
bankrupt. We have no choice. For health care reasons, it has to be
addressed. From a political standpoint, they say this is the third
rail of politics: It will kill you politically. It is a very
difficult issue, but we have to do it. Let me share with you some
of my thoughts and some of my observations on what we can expect in
this process over the next several months.
Our House leadership -- Speaker Newt Gingrich and Majority
Leader Dick Armey of Texas, in particular -- are very aware of the
need politically to convince the American people of the critical
importance of this issue. The focus right now is to make the
American people aware that we have a big problem. As I said,
Medicare is going bankrupt. We know that. Everybody here, I think,
already knows of the Medicare trustees' report authored by HHS
Secretary Shalala, Labor Secretary Reich, and Treasury Secretary
Rubin. The trustees tell us that there is no question: Medicare is
going bankrupt in the year 2002. We need to make the American
people aware of that massive shortfall and of its implications.
The Climate of Opinion
We are making progress. We just got some polling information on
this topic, and it is interesting. Two months ago we did a poll,
and nobody knew Medicare was a problem. But the polls that were
just released yesterday by Linda DiVall say that there is a big
change. Before, nobody would believe there was a problem with
Medicare. Now when you ask them if there is a problem, 63 percent
of the American people believe there is. In fact, 34 percent of the
American people now realize there is a problem without the pollster
even mentioning it to them. So we have made, I think, tremendous
strides in raising the awareness of the American people. You cannot
go to the solution until there is an awareness of the problem.
We are also making progress in explaining what we are trying to
do. We are not cutting Medicare spending. Whenever you hear Speaker
Gingrich talking, that it's going bankrupt, he notes that we are
going to spend more money on Medicare. What we are doing is
reducing the growth of spending on Medicare.
We are starting to get that message out, too. Two weeks ago, Tom
Brokaw and NBC News came to my district, where we held a town hall
meeting. When Brokaw introduced this segment on the national news,
he said, "Republicans want to reduce the growth in spending." The
following week, ABC News did something on the same topic, and Peter
Jennings introduced a segment about different Members of Congress
and about how they are handling Medicare. Jennings introduced it by
saying, "Republicans want to reduce the growth in spending on
Medicare." Sunday night, I was watching the NBC News and they even
showed a segment with President Clinton, who said, during his talk
with Speaker Gingrich, that Republicans want to reduce the growth
of spending on Medicare.
So we are making great progress. Now we are starting to say,
"We're not cutting Medicare; we're slowing the growth of spending."
These are the numbers: We are going from $4,800 a person to $6,400
a person (see Chart 1). That is not as much as future spending
projections would be if we did nothing. Medicare is going bankrupt,
but it is a very important program, and we must preserve it; we
must save it; we must strengthen it. In doing so, we will still be
spending $1,600 more per Medicare beneficiary.
Our next task is to explain to everybody why Medicare is going
bankrupt. Much of the problem is in the design. Medicare today is
designed to increase spending on health care rather than control
it. Members of Congress have always tried to ratchet down on the
providers; go back and look at projected savings in past budget
reconciliation bills. In drafting those bills, Members of Congress
said, "We're going to save $50 billion," but they ended up saving
very little. The desired savings never did materialize.
Next year, in 1996, the amount of money going into the Medicare
trust fund, which is Part A, is going to be less than the money
that is going out, for the first time. The Medicare Part A trust
fund is paid for, through payroll taxes, by employers and
employees. Next year is the first time they will have had a
negative figure for the year (see Chart 2). The Medicare trust fund
right now has about $130 billion in surplus; in the year 2002, it
crosses the line to zero. So it is very easy to see what happens to
the fund. It is not just hypothetical; these are real numbers (see
Taxes and Premiums
There are ways to strengthen Medicare, but what if we don't? If
we do nothing about reforming Medicare, the most likely choices are
to raise taxes on working families or to increase premiums
dramatically for seniors. There is no escape. You would have to
raise the payroll tax over $1,700 for somebody who makes $40,000 a
year or raise the Medicare premiums on senior citizens by 300
percent -- and neither of those options, in my view, can be sold to
the American people. You cannot raise premiums on senior citizens
by 300 percent, and you just cannot raise payroll taxes by 100
percent. We have to come up with a new solution.
Private Sector Experience
Look at the experience of the private sector. Costs in Medicare
are now going up 10.5 percent; the private sector's costs are going
up 4.4 percent (see Chart 4). CEOs of large corporations have been
telling us about the areas where health care costs are having a
negative growth rate. At a House Budget Committee meeting, we had a
presentation by IBM, Texas Instruments, and Eastman Kodak. They are
all having a negative growth in their cost of health care, while we
are having double digit increases in Medicare. So there is a lot to
learn from the private sector. We can do a lot better in Medicare
than we are doing today.
Some, both in and out of Congress, are not only afraid of this
issue, but also think that we can just put it off. They are wrong.
We have to address the problem expeditiously. The reason:
Medicare's financial crisis is severe today and will only worsen
tomorrow as the American population gets older (see Chart 5).
One of the technical issues that we have is scoring savings for
private sector-style market efficiencies. Everybody here in
Washington knows what budget scoring is. The Congressional Budget
Office (CBO) estimates the cost of a policy; depending on how the
policy is designed, it can be scored by CBO for savings. The
question is, what is or is not a scorable saving? President Clinton
had the same problem two years ago with his health care reform
There are other cases -- for example, medical malpractice. We
all agree that malpractice reform will save money, but the
Congressional Budget Office says, "We don't know how much it would
save, so you don't get any credit for passing malpractice reform."
The same issue arises with managed care: HMOs do not necessarily
save money. As we know, the Mathematica study came out and said you
may even end up losing money on managed care. But should we simply
let the CBO scoring drive our policy? That is an issue we have
discussed, and it makes it difficult.
Medical Savings Accounts
I like the medical savings account option (MSA) in a reformed
Medicare system. It is probably going to be one of the options
available. The problem, critics say, with medical savings accounts
is adverse selection; that is, the healthier people will want
medical savings accounts and will desert conventional insurance.
What this means is that in designing a medical savings account, we
have to make sure that adverse selection is minimized.
Remember that some critics say the very same thing about HMOs.
The fear is that younger and healthier people will enroll in HMOs
and desert traditional insurance, again causing a severe adverse
selection problem. But, again, it depends on how you design the
system. This problem is not overwhelming the Federal Employees
Health Benefits Program (FEHBP), where we have a series of consumer
choices. I can go to HMOs, PPOs, or fee-for-service. Our idea is to
give people choices like that. I think that the MSA may also be one
of our options; we are moving in that direction.
Keeping Traditional Medicare
Should we treat new enrollees differently than older enrollees?
I think, when you take 85-year-olds, it is much harder to change
their health care behavior patterns than it is for 65-year-olds. We
have said that we're going to maintain the traditional Medicare
program. Some people are afraid of HMOs. New people entering the
Medicare system should be treated differently than those over a
certain age. Their life experiences are different. This is another
practical item to be resolved.
Getting away from all the technical issues, I think it is very
important to make it possible for elderly people to buy
prescription drugs either by choosing an HMO or another managed
care provider or through some other innovative option, including a
new fee-for-service option.
Again and again, we see that the most important single concern
among senior citizens is the cost and availability of
prescriptions. Their second concern, after prescriptions, is
long-term care. When we talk about a general strategy in health
care policy, we should be sensitive to this issue of long-term care
and provide greater incentives for people buying long-term care. It
is part of our larger health care reform strategy.
Finally, we should encourage states or private contractors, not
the HMOs, to bring solid information to seniors. This addresses a
lingering insecurity that seniors feel about making choices.
One of our House Budget Committee proposals was to provide that
kind of information. As a federal employee or retiree, you can go
to a bookstore today and buy a book that explains all the different
options we now have. That is perhaps still a little complicated.
Federal workers and retirees like their system, but I think we can
do it in a better, more simplified way. Under Medicare today, there
are some choices, under Medigap, of supplemental insurance. If you
want a Volkswagen or if you want a Rolls Royce, it's your choice.
You pay for what you get. So choice is not utterly foreign to
None of this is going to be easy. There are a whole series of
challenges. Medicare is a very complex system. You have Medicare
Part A and Medicare Part B and supplemental insurance, as well as a
host of big private contractors and supervisory roles played by the
Health Care Financing Administration, issuing thousands of pages of
guidelines. It is a paperwork monster, but it was designed in
It is time to get Medicare ready for the 21st century. It has to
be addressed by the House Ways and Means Committee and the House
Commerce Committee. It has to go to the House and Senate floors. We
want it to be resolved by the time we pass the federal budget. We
have made a commitment: We will come up with a way to reduce the
growth in spending to save Medicare and balance the federal budget.
It is not only a promise; it is our duty.
The Changing Political Debate
Grace-Marie Arnett: It is
a pleasure to be here with you at the Heritage Foundation's
Physicians Council meeting.
It was a pleasure to join you in hearing the presentation last
night by Senator Bill Frist, a heart transplant surgeon and
colleague of yours, who has demonstrated the power of one person's
commitment to change. As all of you know, Dr. Frist decided to run
for the United States Senate last year and won a huge upset victory
You also make tremendous contributions to your profession, both
by your work, day in and day out, treating patients and by your
added involvement in the policy process through the Physicians
Council. By being part of this organization and by getting the word
out about the central importance of the physician-patient
relationship, you make a crucial contribution to health policy.
I want to make a few preliminary comments as a transition into
my remarks about the politics of health care reform. Dr. David
Brown, Chairman of the Heritage Physicians Council, mentioned my
work with the Consensus Group.1 We have done a great deal of work
on market-oriented health care reform, advancing ideas that will
help to restore the physician-patient relationship. But making any
changes in the health care system is like turning a great
battleship. It is so huge, it can only be done by degrees. If you
try to spin a battleship too quickly you put the ship at great
risk. You must instead set a clear course and begin to make those
first few-degree turns carefully.
The current employment-based system offers security to tens of
millions of people. But it also has serious flaws -- leaving tens
of millions of people without coverage and driving up the costs of
health insurance and medical services. Yet it must not be changed
too quickly, as we learned too well during the health care reform
Many of the changes advocated by earlier speakers, including Bob
Moffit of The Heritage Foundation and Kevin Vigilante of Brown
University, are important steps in moving the system in the right
direction -- changes like giving individual Americans vouchers and
tax credits for the purchase of health insurance. These changes
would begin to give individual Americans more control over their
health care spending choices as a transition to a more individually
based health insurance system. Certainly, many employers will
continue to offer health insurance as part of their employee
compensation packages. If a person's employment-based plan offers
the best option, they could choose that plan. But if their labor
union, their professional association, or their school district
offers them a better deal, they could choose that, instead.
Personal choice is key.
Now, I would like to talk about the politics not only of general
health care reform, but also of Medicare. And I want to share with
you what I believe is driving the debate. But before I do, my basic
conviction, and my absolute, solid sense of the medical profession,
is that you will prevail. The Bible's Book of Sirach (also
known as Ecclesiasticus), Chapter 38, says: "Hold the
physician in honor, for he is essential to you, and God it was who
established his profession." I believe this Biblical passage shows
that ultimately the independence and integrity of the medical
profession will be preserved.
The medical profession, as Dr. Brown said, cannot function
without physicians. Nurses, physicians' assistants, and other
medical professionals may gain more authority to do specific
procedures. And that can be good in terms of economic efficiency.
But medical care must be coordinated with the physician's
These last few years have been traumatic for your profession.
You have been "rolled" politically. But this can't last. The
medical profession cannot move forward without physicians. But
every single physician must ask himself or herself where he or she
can make the most difference. And being part of this organization
is a very, very good start.
The Battle Over Medicare
Let us look at the terrain and the environment of this round of
the battle over health care reform. If the rhetoric over Medicare
spending were to be stripped away, it is clear that the health care
issue is once again being used as a battleground for a major
political clash over money and power. The debate over funding
health care for the elderly is a debate over control of billions of
tax dollars. It also represents a pivotal battle over the direction
of federal programs.
Medicare is in serious trouble. The Medicare trustees, including
the Clinton Administration's Treasury and Health and Human Services
secretaries, have warned that the program will go bankrupt in seven
years unless major changes are made. Either taxes will have to be
raised further or the program must be restructured. Raising taxes
is the old way of doing business in Washington; updating the
program to inject more market efficiency is the new way. It is a
Liberals have tried to entwine Medicare with the balanced budget
agreement and tax cuts, but Medicare is a separate program with
separate problems that must be addressed directly.
In this latest incarnation of the health care reform debate, the
voters are as alienated as they were last time, confused by the
tactics and distortions. During the last phase of the health care
debate over the Clinton bill in 1993 and 1994, the public was
turned off by talk of health alliances, vast new bureaucracies, and
fines, penalties, and jail terms to enforce the plan. None of this
connected with them -- well, it connected with them; it scared
them. But they didn't believe that the changes were going to help
them in any meaningful way. And they were right.
This time, the debates on health care have little to do with the
health care system again, and everything to do with money and
power. In 1993 and 1994, health care reform was to have been the
vehicle for Congress and the executive branch to gain a lock on
political power by providing health care that's always there for
the middle class. The middle class didn't bite; in fact, they bit
Solid Information is Key
The American people had every reason to be afraid of the Clinton
Administration's Health Security Act. I don't think anybody did
more to give the American people the details of what was in that
bill than The Heritage Foundation, particularly Bob Moffit. There
were probably, at one point, maybe seven people in this city that
had read the whole 1,342 pages, and Bob was one of them.
Bob Moffit did a line-by-line analysis, not only of what was in
the bill, but what its implications were for the health care
system. And he completed his analysis in just a few weeks. The
background paper began circulating in policy circles, and people
who were not going take the time to read the bill read Bob Moffit's
analysis.2 It was a very important contribution to the debate.
Soon after the bill was released, several of us who had read the
bill, including Bob, gathered around a table and began exchanging
revelations: "My goodness, did you see what was on page 342?" one
said. "Oh, no, but did you see page 946?" another answered. We were
all aghast at the sweep and intrusiveness of this piece of
The more the American people learned about the details of the
bill, the more scared they got. And they learned about it because
of that bedrock work by the health policy community.
During the debate, the things that were most politically charged
came percolating to the surface: employer mandates, alliances,
regulations, fines, penalties, jail terms. Then people started to
say, "Wait a minute. This is un-American." This change in popular
opinion begins with the kind of detailed analysis that think tanks
like The Heritage Foundation do.
The American people got so frightened by what they saw that they
said, "We don't want anything to do with that bill, and we don't
want anything to do with anybody that cooked up that bill." So they
threw many of the liberals in Congress who supported the bill out
Fear is a very effective political motivator, and now fear is
being used to unnecessarily scare seniors in the Medicare debate.
To quote House Majority Leader Dick Armey of Texas, "The Democratic
Party once stood firm on the conviction that Americans have nothing
to fear but fear itself. Now the liberals stand firm on the
conviction that they have nothing to offer but fear itself."
There have been some very telling quotes in the health care
reform debate. Consider the insights of Judith Feder, Deputy
Assistant Secretary for Health Policy at the Department of Health
and Human Services. In defending the Clinton plan, Judith Feder
said, in a quote on the front page of The New York Times on
December 5, 1993, "What we're trying to do is replace the
ineffective, inefficient bureaucracy of the unfettered
At a conference in Chicago a couple of weeks ago, Ms. Feder
said, "We're going to do to them what they did to us." So flags are
up. Liberals in Congress are now clearly trying to convince
Americans that conservatives are gutting Medicare to pay for tax
cuts for the wealthy. This is wrong.
Interests are Special
Many special interests are lining up to keep Medicare spending
at its current unsustainable level. Medicare spending cannot
continue to rise at 10 percent a year without bankrupting the
program. The Medicare trustees themselves have acknowledged this.
President Clinton has acknowledged this. But for every dollar the
federal government spends, there are at least two constituencies:
the person who gets the services that are provided and the person
who gets the money who provided those services. Every dollar that
is saved by making the program more efficient is a dollar that will
not be spent. There are a number of groups with a short-term view
that want to keep spending federal tax dollars at the current rate,
despite the consequences for the long-term solvency of the Medicare
program and the future benefits of seniors and seniors-to-be.
And they could win. Medicare is highly subject to political
pressure. It illustrates the key reason why government involvement
in the health sector is a bad thing: Decisions are based upon
politics, not economics, innovation, or efficiency. Short-term
political expediency often prevails over long-term solvency.
So now we have the special interests who, last time, lined up to
fight government-run health care at all costs this time lining up
to save government-run health care -- in the form of Medicare -- at
all costs. Washington politics is nothing if not paradoxical. These
special-interest groups are a grass-roots army, and they are arming
to fight as Congress tries to restructure and save Medicare.
Anybody who looks at Medicare's numbers knows that something has
to change. Unless Congress is successful in getting to the root of
the issue and rethinking the way the program is structured,
Medicare's future will continue to be in jeopardy.
Politics and Taxes
Let's turn now, for a moment, to the debate over tax cuts. In
1980, Ronald Reagan swept into the White House and brought a
Republican Senate with him on the promise to revive the American
economy with across-the-board cuts in income-tax rates. And the
largest peacetime expansion in this nation's history ensued. There
are a lot of debates about why that happened. There is almost no
debate that an extra dollar in the pocket of an American citizen is
a better way for that money to be spent than an extra dollar spent
by the federal government.
President Reagan did what he said he was elected to do: cut
taxes. In 1990, President Bush said, "Read my lips: No new taxes."
And then he broke his pledge. Pollsters who look for underlying
trends say that President Bush's soaring popularity after the Gulf
War was really only superficial; underneath, the popular anger at
him for breaking his pledge over tax cuts never really went away,
and he was defeated in 1992.
In 1992, President Clinton ran on a promise: middle-class tax
cuts. Not only has he not delivered on a tax cut, but he won, by
one vote, the largest tax increase in history in 1993. And he was
proposing yet another tax increase through his health care bill.
Look what happened in 1994: The voters threw out dozens of
legislators who supported these policies.
Get the message? If conservatives haven't learned the lesson
that voters mean business when they talk about tax cuts, the
liberals certainly have. They've learned that if they can stop
conservatives from cutting taxes, they have a shot at regaining
Liberals know they can't win the debate, an open debate, over
raising taxes. They know they can't win an open debate over whether
or not we should have a balanced budget. Medicare is the liberals'
logical battleground, because it obscures what we're really talking
about and there is a tremendous, electrifying charge of politics
and seniors being frightened about losing their benefits.
In 1996, liberals may not have a better idea about what they
want to do if they're elected. But they certainly will try to use
the politics of Medicare to stop conservatives from fulfilling
Medicare is the battleground. It affects all of you on a very
immediate basis, because it affects your ability to get fairly
compensated for the services that you provide. That's not what this
debate is about. In a more efficient market, you will get fairly
compensated and likely will be unshackled from the huge burden of
paperwork that Medicare demands.
Nor is this debate about seniors getting less health care. The
market could easily take care of giving seniors a benefit that's
worth $4,800 today and $6,400 in seven years and give them the
same, if not better, health care more efficiently. But Members of
Congress may not have a chance to do that if conservatives get
thrown out because the Medicare debate blows up in their face.
I urge you to continue to participate in the debate, to continue
to stay informed about the real issues that are being decided, and
to help in the effort to put both the Medicare program and the
whole federal budget on a more sound footing.
Influencing the Policy Process
John C. Liu: I'd like to
follow up on Senator Bill Frist's comments last night,
supplementing what Grace-Marie just said on the politics of health
care reform. Congress is the key actor, and we should be clear
about what we expect in this Congress, short-term and long-term. As
physicians and members of the Heritage Physicians Council, you can
be instrumental in playing a key role in the policy debate.
Bob Moffit and I attended town hall meetings across the country
last year at which different Senators and Congressmen supported our
position on where this health care reform should go: consumer
choice and competition.
Congress unfortunately does not have the stomach to tackle
comprehensive health care reform. This is partly because last
year's debate was so grueling, the bills so detailed, and the
legislative analysis so time-consuming that Members of Congress,
with so much else on their agenda, fashioning budget and tax policy
in particular, simply don't have the time in the remainder of this
session to deal with the intricacies and complexities of
comprehensive health care reform.
But the problems remain. You still have a growing uninsured
population in this country, mostly middle-class and
lower-middle-class and low-income individuals working hard and
struggling to put food on the table. At the same time, too many
Americans have no practical access to health insurance, because
current federal policy, through the tax code, has penalized them,
making it significantly less affordable. If their employer, maybe a
small business, cannot afford to give them health insurance, even a
very scaled-down policy, they are in serious trouble.
This same population that is uninsured is currently providing a
subsidy to a growing population that is already getting health
insurance. Through the tax code, through the HI payroll tax, they
are subsidizing, and helping subsidize, the health care of our
growing Medicare population, those 65 and over. And that tax burden
is getting heavier. That is another reason why we must have
Medicare reform this year. The Speaker of the House, the Senators
on the Finance Committee, and others have wisely decided to tackle
this issue of Medicare reform this year.
It will be tough, but it must be done. As the Medicare trustees
have stated, if nothing is done now, this system is not going to be
around by the year 2002. That's only seven years away.
Senator Frist told you last night to go back home and talk to
your physician colleagues. As physicians, your views and opinions
on health care issues are respected. Friends of mine who are
doctors, and in their training and their residencies, are very
impressed when they hear a sound idea from a colleague. When
doctors hear a politician tell them something, a red flag goes up.
But when a colleague offers an educated opinion or shares insights
into what's going on, they tend to pay more attention. After all,
you are the professionals providing health care to the American
Visit your Congressman or state legislator back in the
districts. It's perhaps more inconvenient to come to Washington,
D.C., and meet your Senator or Congressman, but go back home. Call
the scheduling office back in the district. Find out when your
Congressman will be home in the district office, and be sure to
schedule an appointment. Even fifteen minutes of their time, as
Senator Frist mentioned, is valuable. You do not need to travel to
Talk to your specialty organizations. As a colleague of mine
last year said, unfortunately, organized medicine seemed "brain
dead" when it came to health care reform. Even some of your
specialty groups, unfortunately, have had only one obsession:
wanting to be a player at the table. That is not necessary. Groups
in Washington, D.C., as you learned during last year's health care
debate, do not always represent your philosophy. They often hire
former staffers from the Hill who articulate official Washington's
point of view. Because Congress has been dominated by liberals for
the past forty years, far too many professional organizations have
hired top liberal staffers from Capitol Hill to run their
Washington offices, allegedly representing your interests back
home. As you know, however, that is often not the case.
There is no magic solution to influencing public policy. Write
to professional organizations' newsletters and make your opinions
known; write to your colleagues; go back and visit your alma mater
if you can. Try the front door. Several of my friends have visited
their med schools back in California and New York and have had
maybe an hour's worth of time with their former dean. An even
better idea: You should spend perhaps an hour or so lecturing
future med students on the direction of health care policy and its
impact on medical practice.
This Congress, in its first four months, already has achieved
more in health care policy than the last Congress achieved in two
years. A positive provision passed through the House under the
Contract with America is that the self-employed now have access to
a 25 percent tax deduction for their health insurance. And that has
already been signed into law. Federal savings accounts are going to
be introduced this afternoon. Congressman Bill Archer of Texas, the
chairman of the House Ways and Means Committee, will be introducing
an MSA bill.
Congressman Bill Thomas of California, the Health Subcommittee
chairman, has introduced an insurance bill which takes care of
pre-existing conditions and allows individuals who change jobs, and
who have been insured, to retain that coverage and not be penalized
if they wish to switch insurers. Portability is still a major goal
of health care reform, and work along this line is underway in the
Again, this is in the first four months of the new Congress.
Incremental changes are likely: not as broad or sweeping as the
government-run Clinton plan or as the free-market Heritage
Foundation plan, but we will see advances in the right direction.
Unfortunately, a lot of these measures are being advanced simply in
the context of the present flawed system: a tax policy which
penalizes individuals for choosing their provider or their health
plan outside of the employer's health plan.
So there's a lot more to be done.
Medicare, as Grace-Marie Arnett mentioned, will be the
battleground for this Congress. I was at a conference not too long
ago with Congressman Pete Stark, the former chairman of the Health
Subcommittee of Ways and Means, a prominent liberal from my home
state of California who proudly says that, as the chairman of the
House Health Subcommittee, he was privileged to serve as "the CEO,"
along with eleven members, the "board of directors," of the
Medicare program. This is a health insurance company, he said, that
provides health care to 38 million Americans.
That's a neat way of putting it. But apparently the shareholders
didn't like their CEO and board of directors, voted them out, and
installed a new CEO and board of directors for Medicare. This new
board, I'm pleased to report, has embraced the idea that a free
market is the best mechanism for controlling costs when it is
allowed to work, and it should work for America's senior
Congressman Dan Miller has been working on a draft proposal to
present to the House of Representatives. He and several other
members of the House Commerce Committee and the House Ways and
Means Committee, which have jurisdiction over Medicare reform, will
be working on this proposal.
Medicare is in deep financial trouble. But Pete Stark and
Congressman Sam Gibbons of Florida, responding to the Trustees'
Report, a very nonpartisan report which comes out every year, say,
in effect, "It's nothing to get hysterical about. We've been
reading these predictions for the past several years, and they're
always talking about insolvency. It's nothing to get hysterical
And I would agree. Let's not get hysterical about it. But let's
get concerned about it, because this 30-year-old system was
designed to insure the health of those who were elderly and truly
needy. While it would be bad form to get hysterical, it is high
time to get serious.
Medicare can't control costs, except through price controls and
shifting costs to the private sector. We've seen the federal
government slowly take tighter control of doctors and hospitals and
implement more reams of rules and regulations. I don't need to go
into the RBRVs, the DRGs, or the PPS. You know better than I do
about the impact of these complex systems of fee schedules and
price controls. They don't work.3 But unless something is done now,
we should be very concerned, not just for our future, but for our
parents' future, because this is a system that is designed to
insure that we get quality health care in our golden years. And, as
a nation, we are getting older.
Liberal special-interest groups have been very vocal already,
talking about Draconian cuts. And they know how to play the game.
They've placed ads in the Washington Post and New York
Times about what this Congress is going to do, or might do. We
are being asked to write our Congressmen to make sure that
Grandmother isn't going to get cut off from health care.
While that is a good short-term scare tactic, the awful negative
numbers in Medicare will force a public reckoning. Working
Americans could be faced with huge taxes, including additional
payroll taxes of 3.5 percent or even 3.9 percent.4 In my opinion,
when the American people come to realize this, liberals in Congress
will have lost credibility on this whole issue.
Think back to the Medicare catastrophic debate in 1988. Liberals
lost credibility. They lobbied to add benefit after benefit after
benefit to what was, back then, a very lean Medicare catastrophic
package. If it had passed as Bob Moffit's colleagues in the Reagan
Administration had designed it, it would have been affordable. And
it would have been workable.
Unfortunately, special interests and liberals in Congress saw it
as a great opportunity to lump on more benefits. And Congress back
then was not well-known for saying "No." So they added benefit
after benefit, the cost soared, and the bill collapsed, to be
repealed only a year later.5
Nevertheless, as far as politics is concerned, Medicare reform
is going to be tough. The media like to call any reform proposals
Draconian cuts, for example. Heritage has put forward a major
Medicare reform proposal that we just finished within the past
twenty-four hours. We have drafted a defined contribution proposal
that a lot of members on Capitol Hill have shown an interest in
A Model for Reform
Basically, the Heritage Foundation proposal will allow seniors
to apply a defined government contribution towards the health care
plan of their choice, just as congressional and federal retirees do
today in the popular Federal Employees Health Benefits Program
(FEHBP). They can stay in current Medicare, if that's what they
want to do. This is a good political measure. Obviously, no Member
of Congress wants to go home and say, "I'm taking away your
Medicare." A lot of folks have grown accustomed to it, and anyway,
we don't want to take it away.
But for Americans about to retire, or those who perhaps are not
happy with the current Medicare system, we are now offering
choices. Heritage has prepared a paper detailing the specifics of
this Medicare proposal.6 We hope that this concept will go far in
defining the debate. From our conversations with the Speaker's
office, the Majority Leader's office, and other members of the
committees of jurisdiction, this basic concept of using the FEHBP
as a model for Medicare reform is being very well received.
Indeed, one of the Medicare proposals of the House Budget
Committee, unveiled at a conference not too long ago in Virginia,
was inspired by the Heritage Foundation model. Another one is a
variation of this, offered by Senator Judd Gregg of New Hampshire.
It's still a consumer choice proposal, but he has a stronger
emphasis on managed care.
Of special interest to physicians is that the American Medical
Association has gone on record as supporting a Medicare voucher.
Heritage has been working with the AMA, outlining common ground
between their voucher proposal and our Medicare reform
This is a national debate that we can win. This Congress has
promised the American people it would hold back spending, cut back
government, and give more choices and freedom to individuals. The
average American is not stupid. He can make his own decisions. If
active and retired Congressmen and Senators can choose their own
health plan from among a variety of options, why can't their
constituents? If it's good enough for Ted Kennedy, if it's good
enough for Al Gore, then it's good enough for the rest of us.