In a speech on the Senate floor today, Finance Committee Chairman Orrin Hatch (R-Utah) marked the 50th anniversary of Medicare and Medicaid and outlined the need for the Administration to work with Congress to implement concrete, structural reforms to the programs to help guarantee their solvency for future generations.
“Between Medicare and Medicaid, we’ll spend more than $12 trillion over the next decade, with precious few improvements to show for it,” Hatch said. “I don’t think I’d be going too far out on a limb to suggest that reforms to Medicare are absolutely necessary if we’re going to preserve the program for future generations.”
Hatch praised congressional passage of bipartisan legislation he co-authored, the Medicare Access and CHIP Reauthorization Act of 2015, which repealed and replaced the Medicare Sustainable Growth Rate (SGR) formula and reaffirmed his commitment to implementing similar positive reforms.
“Now, repealing SGR was, in and of itself, a significant improvement to the Medicare program. But, there are other Medicare reforms in the law as well. These include a limitation on so-called Medigap first-dollar coverage and more robust means testing for Medicare Parts B and D,”Hatch said. “I stand ready and willing to work with any of my colleagues – from either party or from either chamber – to address the coming entitlement crisis before it’s too late. I invite all of my colleagues to come forward so that we can work together to find solutions to these massive problems.”
Recognizing the fiscal challenges facing Medicare and Medicaid, Hatch has long fought to fix the nation’s broken entitlement programs to guarantee their long-term solvency for generations to come. He has put forward five common-sense, bipartisan Medicare reforms as means of both shoring up Medicare for seniors and for bringing down the nation’s debt.
The complete speech, as prepared for delivery, is below:
Mr. President, as you may have heard, today marks the 50th anniversary of both Medicare and Medicaid. While the last half century has seen a pretty robust debate about the merits of these program, today there is no question that they provide significant and vital elements to our nation’s safety net.
This week, many are celebrating the lives that have been saved and improved by Medicare and Medicaid over the last 50 years. While this is appropriate, I hope that we will also take the time to look at how these programs will function over the next 50 years.
Let’s start with Medicare.
Medicare is, quite simply, a massive program designed to provide care to our nation’s seniors. Currently, it covers more than 50 million beneficiaries, roughly one-sixth of the current U.S. population, and processes more than a billion claims a year.
Last week, the Medicare Board of Trustees issued its report for 2015, which once again detailed the fiscal challenges facing the Medicare program.
For example, in 2014 alone, we spent roughly $613 billion on Medicare expenditures. That is roughly 14 percent of the federal budget and 3.5 percent of our gross domestic product for a single health care program. And, in coming years, those numbers are only going to go up as more baby boomers retire and become Medicare beneficiaries.
Over the next ten years, the trustees project that the number of Medicare beneficiaries will expand by 30 percent. We’ll spend roughly $7 trillion on the program as it expands and, by the end of that ten-year period, we will be spending more on Medicare than on our entire national defense.
Over the next 25 years, spending on the program, as a percentage of GDP, will grow by 60 percent and, by 2040, about one out of every five dollars spent by the federal government will go to Medicare.
As spending on the program expands, so does its unfunded liabilities.
Using the Centers for Medicare and Medicaid Services most realistic projections, Medicare Part A, by itself, faces long-term unfunded liabilities of nearly $8 trillion. The story is even worse with Medicare Parts B and D, which, unlike Part A, do not have a dedicated revenue stream. Medicare’s Trustees estimate $24.8 trillion in additional taxes will need to be collected over the next 75 years to pay for Medicare Part B and Part D services.
When you look at the entire Medicare program over the next 75 years – once again using CMS’s most accurate projections – you’re looking at $37 trillion of spending in excess of dedicated revenues.
Those numbers are astronomical, Mr. President. They are really too large to even comprehend. So, rather than talk about the numbers in broad terms, let’s talk about what they mean for seniors and beneficiaries.
As I mentioned, Medicare Part A, which includes the Hospital Insurance, or HI, program, has a dedicated funding stream – it is paid for by a 2.9 percent payroll tax split between employers and workers. And, under Obamacare, that rate went up by an additional 0.9 percent on wages over $200,000 for single tax filers and $250,000 for married couples.
Due in large part to the financial downturn, Part A ran a deficit – meaning that expenditures for the program exceeded income from the tax – every year between 2008 and 2014. Last year, that deficit reached $8.1 billion.
Because of the economic recovery and the increased tax rates, Part A is projected to generate surpluses between 2015 and 2023. However, after that, deficits are projected to return and, by 2030, the Part A trust fund will officially be bankrupt and the Medicare program will be unable to pay full benefits to seniors.
Let me say that again: In 15 years, Medicare Part A will be bankrupt.
All of this, of course, assumes that current law remains unchanged and Congress is unable to reform the program. I don’t think I’d be going too far out on a limb to suggest that reforms to Medicare are absolutely necessary if we’re going to preserve the program for future generations. Furthermore, I don’t think it would be outlandish to suggest that Congress should begin working on such reforms immediately to avoid future cliffs, standoffs, and the usual accompanying political brinksmanship.
And, I’m not the only one saying that.
The Medicare Trustees themselves said in last week’s report that “Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation. Such legislation should be enacted sooner rather than later to minimize the impact on beneficiaries, providers, and taxpayers."
These are not the words of fiscal hawks in a Republican Congress, Mr. Presidents. The Medicare Board of Trustees is comprised of six members, four of whom are high-ranking officials in the Obama Administration, including: Treasury Secretary Jack Lew, Labor Secretary Thomas Perez, Health and Human Services Secretary Sylvia Burwell, and Acting Social Security Commissioner Carolyn Colvin.
All of these officials signed onto a report recommending “further legislation” to reform Medicare and suggesting that it happen “sooner rather than later.”
Let’s keep in mind that we’re only talking about Medicare here. I haven’t said anything yet about Medicaid, our other health care entitlement program, which also faces enormous fiscal challenges.
Currently, Medicaid covers more than 70 million patients and that number is growing thanks to the expansions mandated under the so-called Affordable Care Act. Since the passage of Obamacare, more than a dozen states have chosen to expand their Medicaid programs and enrollments have surged well beyond initial projections. This has a number of people worried about added costs and additional strains on state budgets, particularly when the federal share of the expanded program is set to scale back in two years.
Already – without the expansion under Obamacare – Medicaid took up nearly one quarter of all state budgets. That’s right: Nearly one out of every four dollars spent at the state level goes to Medicaid, and that number is only going to get bigger. In recent years, combined federal and state Medicaid spending has come in around $450 billion a year. By 2020, that number is projected to expand to around $800 billion a year or more.
And, with all of this expansion – that increased fiscal burden and instability – we’re not seeing improvements in care provided by the program.
Put simply, Medicaid is probably the worst health insurance in the country and the President’s health care law did nothing to improve the quality of care provided by the program. Fewer and fewer doctors accept Medicaid because it pays them so little. And, the program’s reimbursement formulas for prescription drugs limit beneficiaries’ access to a number of important medications.
Ultimately, Mr. President, we’re going to be spending more and more on Medicaid in the coming years – and, as a result, expanding our debts and deficits – without providing better care for beneficiaries.
Between Medicare and Medicaid, we’ll spend more than $12 trillion over the next decade, with precious few improvements to show for it.
Former CBO Director Doug Elmendorf referred to these two programs as “our fundamental fiscal challenge,” and, if you look at the numbers and the dramatic expansion projected in the coming years, he was right.
And, keep in mind, we still have Social Security, which faces nearly $11 billion in unfunded liabilities over the long-term as well as the exhaustion of one of its trust funds – the Disability Trust Fund – by the end of next year and complete exhaustion by 2034.
Separately, these three major entitlement programs present unique challenges that have to be addressed in order to preserve them – and our nation’s safety net – for future generations. Combined, they threaten to swallow up our government and take our economy down with it.
Once again, these aren’t doomsday scenarios, Mr. President. No one seriously disputes the fact that, absent real and lasting reforms, our entitlement programs present real threats to our fiscal wellbeing. The disputes typically arise when we begin talking about the specifics of reform.
Some would just as soon use the looming entitlement crisis as a political weapon to scare current and near-future beneficiaries into believing that the other side wants to take their benefits away. Others support the idea of entitlement reform in principle, but are too afraid to sign onto any specific proposals out of fear that it will be used against them in the next election cycle.
This dynamic has resulted in a long-standing stalemate where the possibility of real reform has, for years now, seemed remote. However, recently, we’ve seen signs that it may, in fact, be possible to overcome this stalemate.
Earlier this year, Congress passed the Medicare Access and CHIP Reauthorization Act of 2015, a bipartisan bill that, among other things, repealed and replaced the Medicare Sustainable Growth Rate, or SGR, formula. Now, repealing SGR was, in and of itself, a significant improvement to the Medicare program. But, there are other Medicare reforms in the law as well. These include a limitation on so-called Medigap first-dollar coverage and more robust means testing for Medicare Parts B and D.
These aren’t fundamental Medicare reforms and they won’t move the program from its massive projected deficits into future solvency. But, keep in mind, Mr. President, that, for years, the idea of bipartisan Medicare reform seemed like a pipe dream. Yet, with passage of the SGR bill, we were able to take a meaningful first step toward this all important goal.
Of course, a first step is only a first step if it precedes additional steps. And, that’s what we need now, Mr. President. Congress must take additional steps to improve these programs and preserve them for our children and grandchildren.
As the chairman of the committee with jurisdiction over these programs, I have been actively engaged in the effort to reform our entitlement programs.
In 2013, when I was still the Ranking Member, I put forward five separate proposals to reform Medicare and Medicaid. All of them were serious, common-sense ideas that had received bipartisan support in the recent past. I shared these ideas at every opportunity. I put out documents and fact sheets and gave numerous speeches here on the floor. I even passed them along directly to President Obama, though I didn’t ever get a response from him.
Two of those ideas were, at least partially, included in the legislation we passed to repeal SGR. The other three ideas, as far as I’m concerned, are still on the table.
I’ve also teamed up with leaders in the House to call on the disability community and other stakeholders to help us come up with ideas to address the impending exhaustion of the Social Security Disability Trust Fund. And, I’ve introduced legislation to improve the administration and the fiscal integrity of the Disability Insurance Program.
In other words, Mr. President, I stand ready and willing to work with any of my colleagues – from either party or from either chamber – to address the coming entitlement crisis before it’s too late. I have put my own ideas on the table, but I don’t think the debate should be limited to my ideas. I invite all of my colleagues to come forward so that we can work together to find solutions to these massive problems.
I know that when I think about these problems, my thoughts turn to my 23 grandchildren and 14 great-grandchildren who will suffer from any promises we fail to keep and will pay the price of any mistakes we fail to correct. On this landmark anniversary of the Medicare program, I urge my colleagues to also consider future generations of Americans and the costs and burdens we’ll pass along to them if we fail in this endeavor.