Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Scholar Source Context
Document identity
localId
52874687
label
Medicare
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
52874687
sourceUrl
contentType
document
title
Medicare
citationUrl
collections
Records of the Office of the Press Secretary (Clinton Administration)
Mike McCurry's Files
largeImageUrl
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
52874687
levelOfDescription
fileUnit
otherTitles
42-t-7432019-20110586F-009-017-2017
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
mediaId
8b7d6770323698f4
ocrText
FOIA Number: 2011-0586-F
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the William J. Clinton
Presidential Library Staff.
Collection/Record Group:
Clinton Presidential Records
Subgroup/Office of Origin:
Press Secretary
Series/Staff Member:
Mike McCurry
Subseries:
OA/ID Number:
11102
FolderID:
Folder Title:
Medicare
Stack:
Row:
Section:
Shelf:
Position:
S
94
3
10
1
THE WHITE HOUSE
WASHINGTON
FOR: MIKE McCurry
From: CHRIS Jenning,
IMPORTANT Medicare
Guestim that may
come up. Rease
call w/ questions
MEDICARE SAVINGS IN THE MIDSESSION REVIEW
Q:
In 1995, the President vetoed the Conference Agreement in part because of CBO-
scored Medicare cuts of $270 billion over 7 years. This year, the President's budget
includes Medicare changes estimated by the Administration to total the exact same
$270 billion over 7 years. Doesn't this mean that the President signed onto the very
same level of savings that he said would wreak havoc on the Medicare program in
the 1996 campaign?
A:
Not at all. The 1995 bill contained a range of policies and a level of cuts that the
President thought were wrong then and wrong now for Medicare and for older
Americans.
The savings are much smaller than the budget that the President vetoed.
An apples-to-apples comparison shows that CBO scores $200 billion over 7 years for the
budget that the President signed into law. CBO scored the budget that he vetoed at $270
billion in savings -- 35 percent more than what he signed into law this year.
Second, the Administration has consistently produced savings estimates 20 to 30 percent
higher than CBO for the exact same Medicare policies. Had the Administration scored
the Republican proposal, it would likely have been well over $300 billion over seven
years.
Third, the Republican budget that the President vetoed had combined Medicare and
Medicaid reductions of over $430 billion over 7 years, according to CBO. The combined
savings from these two program in this year's budget is about $220 billion over 7 years --
almost half of the vetoed bill's reductions.
There are major differences between the bill that the President signed and the one
he vetoed.
The vetoed bill would have raised the Part B premium to 31.5% of costs immediately.
The vetoed bill allowed doctors to "balance bill" far above Medicare approved rates
without any consumer protections.
The vetoed bill had an open-ended MSA that threatened to allow massive numbers of
healthier and wealthier beneficiaries to leave Medicare.
And, moreover, the vetoed 1995 bill combined this provision with a proposal to block-
grant Medicaid and eliminate the guarantee of health care for millions of children and
older Americans.
4.25.97
MEDICARE TRUST FUND TALKING POINTS
April 23, 1997
THE UPCOMING MEDICARE REPORT WILL NO DOUBT CONFIRM WHAT THE
PRESIDENT HAS CONSISTENTLY STATED -- THAT REPUBLICANS AND
DEMOCRATS SHOULD COME TOGETHER AND ENACT MEDICARE REFORM
THIS YEAR.
WE WELCOME CONCERNS ABOUT THE TRUST FUND. PRESIDENT CLINTON
HAS BEEN ACTING TO ADDRESS THE PROBLEM SINCE HE TOOK OFFICE.
The President's 1993 Economic Plan extended the life of the Trust Fund by three years.
In 1994, the reforms included in the Health Security Act would have strengthened the
Trust Fund by five years.
In 1995 and 1996, the President proposed a Medicare plan that would have extended the
life of the Trust Fund for at least a decade.
THIS YEAR THE PRESIDENT'S BALANCED BUDGET GUARANTEES THE LIFE
OF THE TRUST FUND FOR A DECADE.
HCFA's Chief Actuary confirms that the President's Medicare proposals would extend
the life of the Trust Fund by at least ten years.
IS
ACTION IS NEEDED -- REPUBLICANS AND DEMOCRATS SHOULD USE THIS
OPPORTUNITY TO COME TOGETHER IN A BIPARTISAN MANNER TO ADDRESS
THE NEED FOR REAL MEDICARE REFORM.
The need for responsible intervention to improve the Trust Fund is real. The
President has a proposal that addresses this need in a responsible way, without imposing
devastating provider cuts, increasing beneficiary costs, or enacting structural changes that
devastate the program and the people it serves.
This report should not be used irresponsibly. The upcoming Trust Fund report should
not be used to recklessly frighten the 38 million Medicare beneficiaries and their families
into thinking that their benefits are in imminent danger. They simply are not.
We have time to act this year. Over $120 billion remains in the Trust Fund (as of
March 1997). While incoming revenues are somewhat less than outgoing payments, the
current balance in the Trust Fund means that there is no danger that claims will not be
paid.
IT IS TIME TO PUT PARTISAN DIFFERENCES ASIDE AND AGREE ON MEDICARE
REFORMS THAT WILL EXTEND THE LIFE OF THE TRUST FUND AND
STRENGTHEN THE MEDICARE PROGRAM.
MA
MEMORANDUM
April 24, 1997
TO: Distribution List
FR: Chris Jennings
RE: Updated Medicare Trust Fund Talking Points
Attached are the updated Medicare Trust Fund talking points that were revised after the report
was released. I have also attached a letter from HCFA's Chief Actuary confirming that the life of
the Trust Fund would be extended until "2008 under the [President's] Budget proposals."
We hope you find this information useful. Please call me at x6-5560 if you have any questions.
MEDICARE TRUST FUND TALKING POINTS
April 24, 1997
THE MEDICARE TRUSTEES REPORT CONFIRMS WHAT THE PRESIDENT HAS
CONSISTENTLY STATED -- THAT REPUBLICANS AND DEMOCRATS SHOULD
COME TOGETHER AND ENACT MEDICARE REFORM THIS YEAR.
The 1997 Trustees Report estimates that the Medicare Trust Fund will remain solvent
until 2001.
WE WELCOME CONCERNS ABOUT THE TRUST FUND. PRESIDENT CLINTON
HAS BEEN ACTING TO ADDRESS THE PROBLEM SINCE HE TOOK OFFICE.
The President's 1993 Economic Plan extended the life of the Trust Fund by three years.
In 1994, the reforms included in the Health Security Act would have strengthened the
Trust Fund by five years.
In 1995 and 1996, the President proposed Medicare reforms in the context of his balanced
budget that would have extended the life of the Trust Fund for at least a decade.
THIS YEAR THE PRESIDENT'S BALANCED BUDGET GUARANTEES THE LIFE
OF THE TRUST FUND AT LEAST A DECADE.
An April 24, 1997 letter from HCFA's Chief Actuary confirms that the life of the Trust
Fund would be extended until "2008 under the [President's] Budget proposals."
ACTION IS NEEDED -- REPUBLICANS AND DEMOCRATS SHOULD USE THIS
OPPORTUNITY TO COME TOGETHER IN A BIPARTISAN MANNER TO ADDRESS
THE NEED FOR REAL MEDICARE REFORM.
The need for responsible intervention to improve the Trust Fund is real. The
President has a proposal that addresses this need in a responsible way, without imposing
devastating provider cuts, increasing beneficiary costs, or enacting structural changes that
devastate the program and the people it serves.
This report should not be used irresponsibly. The upcoming Trust Fund report should
not be used to recklessly frighten the 38 million Medicare beneficiaries and their families
into thinking that their benefits are in imminent danger. They simply are not.
We have time to act this year. Over $120 billion remains in the Trust Fund (as of
March 1997). While incoming revenues are somewhat less than outgoing payments, the
current balance in the Trust Fund means that there is no danger that claims will not be
paid.
IT IS TIME TO PUT PARTISAN DIFFERENCES ASIDE AND AGREE ON MEDICARE
REFORMS THAT WILL EXTEND THE LIFE OF THE TRUST FUND AND
STRENGTHEN THE MEDICARE PROGRAM.
APR-24-1997 16:17
OCPHTULIGH
2020900100
P.01
Health Care
DEPARTMENT OF HEALTH & HUMAN SERVICES
Financing Administration
Memorandum
Date
April 24, 1997
From
Chief Actuary, HCFA
Subject
Estimated Year of Exhaustion for the HI Trust Fund under the Medicare Legislative
Proposals in the President's 1998 Budget, Based on 1997 Trustees Report Assumptions
To
Administrator, HCFA
This memorandum responds to your request for the estimated year of exhaustion for the
Hospital Insurance trust fund under the Medicare legislative proposals developed for the
President's 1998 Budget. Based on the intermediate set of assumptions in the 1997 Trustees
Report, we estimate that the assets of the HI trust fund would be depleted in calendar year
2008 under the Budget proposals.
In the absence of corrective legislation, trust fund depletion would occur in calendar year 2001
based on the intermediate assumptions. Thus, the Budget proposals would postpone the year
of exhaustion by about 7 years.
The financial operations of the HI trust fund will depend heavily on future economic and
demographic trends. For this reason, the estimated year of depletion under the Budget
proposals is very sensitive to the underlying assumptions. In particular, under adverse
conditions such as those assumed by the Trustees in their "high cost" assumptions, asset
depletion could occur significantly earlier than the intermediate estimate. Conversely,
favorable trends would delay the year of exhaustion. The intermediate assumptions represent a
reasonable basis for planning.
The estimated year of exhaustion is only one of a number of measures and tests used to
evaluate the financial status of the HI trust fund. If you would like additional information on
the estimated impact of the Medicare proposals in the President's 1998 Budget, we would be
happy to provide it.
Richard S. Foster, F.S.A.
TOTAL P.02
TOTAL P.01
4.4.97
GUIDANCE ON IRS ACTION RELATING TO H.I. (MEDICARE) TAX
APRIL 4, 1997
*
As I understand it, this is a technical issue that's been around for a long time, but nobody
cared that much about it before 1991. Before 1991, the 2.9% H.I. tax, the Medicare
portion of the payroll tax, applied only to the first $60,000 or so of wages, just like the
FICA portion of the tax. In 1991, the cap was raised to $125,000.
And in 1993, one of the steps we took to help shore up the Medicare Trust Fund was to
make that portion of the payroll tax apply to the full amount of wages.
As a result technical issues that had been hanging around, involving what partnership
income is subject to the tax, suddenly got more interesting because they involved more
money.
*
I would recommend that you talk to Treasury about the technical issues, but the basic
question here is when partnership income is subject to the H.I. payroll tax. They want to
ensure that all taxpayers are being taxed on a level playing field. But some feel that
this proposal raises concerns for some businesses, so it needs to be examined carefully.
*
As I understand it, this proposal has a way to go before it's final. The comment period
still has two more weeks to run, and a public hearing is planned for May 21.
*
But I'm told that some of the comment Treasury has received is favorable. For example,
the New York State Bar says that "the current proposals represent a major step toward
rationalizing and simplifying the rules in this area."
*
Nevertheless, there are some who disagree, and we would encourage everybody to get
their comments in, pro and con, so Treasury can make the appropriate judgment.
Q:
It appears that Speaker Gingrich doesn't want to give Treasury the chance to do that.
He's threatening to enact legislation to prevent them from taxing partnership income in
this way. What would the Administration's position be on such legislation?
A:
Well, obviously, Congress has the authority to pass legislation. But Treasury hasn't even
made a final decision as to whether it's proposed rule ought to be implemented. So it's a
little premature to say what our position is on legislation that hasn't been written about a
rule that hasn't even been finalized.
TOIV
Based on information from Treasury
Press Guidance
February 28, 1997
When will the President name the Advisory Commission on Health Care?
The President announced plans to create an Advisory Commission on Consumer
Protection and Quality in the Health Care Industry. While it has taken longer than any of us
expected, we are currently going through final clearances on the individuals who will serve on
this important panel and we expect to be able to announce the membership shortly. (Within the
next month)
Per 2/19 guidance from Chris Jennings
New York Graduate Medical Education Waiver
February 21, 1997
Background: This morning's NY Times reports that the Health Care Financing Administration,
led by Bruce Vladeck, has agreed to a demonstration project in New York that will save money
for the Medicare system by giving financial incentives to NY hospitals which agree to train fewer
specialists.
Currently, the Medicare program pays teaching hospitals training subsidies for each resident they
employ -- this has led in some cases to hospitals increasing resident slots often in unneeded
specialties -- in order to get the training subsidy money. This has been a particular problem in
New York state, which trains more residents than any other state. This demonstration project is
an attempt to reduce the number of residents trained, thus reducing the training subsidies and
saving the Medicare system money. The financial incentives given back to the hospitals for
reducing the number of residents trained will represent a part of the overall savings from reducing
the original training subsidies.
FYI -- Hospital executives across the nation have endorsed the idea in general, but hospitals in
other states are complaining that NY got a sweetheart deal and that they too should be
compensated for training fewer doctors.
Q&A
Q:
Isn't this favoritism for New York?, How will paying subsidies save money?
A:
No. New York has had significant increases in the number of specialists training. There is
a broad-based consensus in the teaching community and elsewhere that we need to find
ways to constrain that growth. This proposal simply provides incentives for New York's
teaching facilities to work collaboratively with us in reducing the number of these slots. It
also has the added benefit of actually achieving savings for the Medicare program. This
will allow the hospitals in New York which are reducing slots to share in the savings that
all taxpayers are getting.
New York got this project because the state trains more residents than any other state and
they came to us first with the idea. If other states have demonstration proposals that meet
the criteria of HHS' demonstration authority, the Administration is more than willing to
review those proposals. It must be noted, however, that HHS does not have the authority
to expand the demonstration nationwide. That would require a statutory change.
Q:
Some in Congress have criticized the Administration for not consulting with them.
A:
The administration consulted fully with Congress and in fact partly modified the
demonstration to reflect recommendations made by the Ways and Means committee.
Q:
Bruce Vladeck used to work for NYC. Why didn't he recuse himself from this matter?
A:
There are many checks and balances on this demonstration project to ensure that it
receives objective and ongoing evaluation. There was no reason for Dr. Vladeck not to be
involved. (Refer to HHS).
KMcKiernan per Chris Jennings, 6-5560
TALKING POINTS ON MEDICARE SETTLEMENT
FEBRUARY 25, 1997
*
The President has made it clear that we will not tolerate fraud and abuse, and the joint
Justice/HHS probe illustrates that.
*
This is the fourth in a series of investigations of laboratories that have overbilled Medicare
and other Federal programs.
*
The settlement of $325 million brings to over $800 million the total settlements based on
these investigations.
*
We worked with the Congress on a bipartisan basis last year to give the departments more
power to conduct fraud investigations, and we have provisions in our current balanced
budget proposal to achieve further savings from enforcement against fraud and abuse.
*
This enforcement not only reduces health care costs but also helps reduce the deficit
because of the collections from those who commit fraud.
TOIV
Conversation with Jennings
MEDICARE COMMISSION
FEBRUARY 13, 1997
*
The President believes it is essential that we focus in the next several months on achieving
a balanced budget and enacting Medicare changes that protect the Trust Fund into the
middle of the next decade. The President's budget would ensure that the Trust Fund
remains solvent through 2007, according to the professional career actuaries at the Health
Care Financing Administration.
*
The President believes that once we accomplish these goals, we need to move on to
addressing the long-term financing issues of both Medicare and Social Security. And the
President looks forward to working with Senators Roth and Moynihan and others on these
issues.
*
We need to do so in a bipartisan way, and the Medicare Trustees have also recommended
that we engage in a bipartisan process as well. Certainly, a commission is one option for a
bipartisan approach.
*
We want to be sure, however, that do not let a discussion of how we address the long-
term issues inadvertently distract us from the work of achieving an agreement on a
balanced budget and addressing the short-term financing challenge confronting the
Medicare program.
TOIV
Jennings
01/22/97 WED 13:58 FAX 2026905673
DHHS/ASPA
002
Health Care
MMC
DEPARTMENT OF HEALTH & HUMAN SERVICES
Financing Administration
MEG
BT
Date
January 21, 1997
Briefick
Memorandum
1/24/97
From
Chief Actuary, HCFA
Subject
Estimated Year of Exhaustion for the HI Trust Fund under the Medicare Legislative
Proposals in the President's 1998 Budget
To
Administrator, HCFA
This memorandum responds to your request for the estimated year of exhausion for the
Hospital Insurance trust fund under the Medicare legislative proposals developed for the
President's 1998 Budget. Based on the intermediate set of assumptions in the 1996 Trustees
Report, we estimate that the assets of the HI trust fund would be depleted early in calendar
year 2007 under the Budget proposals.
In the absence of corrective legislation. trust fund depletion would occur early in calendar year
2001 based on the intermediate assumptions. Thus, the Budget proposals would postpone the
year of exhaustion by about 6 years.
The financial operations of the HI trust fund will depend heavily on future economic and
demographic trends. For this reason, the estimated year of depletion under the Budget
proposals is very sensitive to the underlying assumptions. In particular. under adverse
conditions such as those assumed by the Trustees in their "high cost" assumptions, asset
depletion could occur significantly earlier than the intermediate estimate. Conversely,
favorable trends would delay the year of exhaustion. The intermediate assumptions represent a
reasonable basis for planning.
The estimated year of exhaustion is only one of a number of measures and tests used to
evaluate the financial status of the HI trust fund. If you would like additional information on
the estimated impact of the Medicare proposals in the President's 1998 Budget, we would be
happy to provide it.
Richds.
Richard S. Foster, F.S.A.
01/24/97
FRI
11:58
FAX
001
Brandenburg/Justice
202/616-2777
January 24, 1997
McCurry Talking Points: CHRISTIAN SCIENCE MEDICARE/MEDICAID LAWSUIT
Main Points to Stress
In a suit filed against the federal government last year, longstanding Medicaid and
Medicare exemptions that fund non-medical treatments in Christian Science
Institutions were struck down by a District Court as unconstitutional. (Medicaid and
Medicare typically pay only for medical services.)
As the government's legal counsel, the Justice Department today notified the Appeals
Court that the Department can not defend these special provisions, because the
Constitution bars laws that favor a particular religious denomination or that delegate
decision-making authority over federal programs to a religious institution.
While the Christian Scientist Church defends the law on appeal, HHS will continue to
provide reimbursement for Christian Science services unless a court prohibits it. The
Justice Department has also offered to assist Congress in drafting legislation that
would address the needs of Christian Scientists and meet the Constitution's standards.
The Clinton Administration is committed to religious freedom, and worked hard to
enact the Religious Freedom Restoration Act (RFRA). But to defend these special
exemptions would undermine's RFRA's philosophy of not favoring one religious
denomination over another.
Questions and Answers
Q:
Why did the Justice Department decide not to defend the Christian Science
provisions in Medicare and Medicaid?
A:
There was simply no way under the Constitution to defend this provision. Though
Medicaid and Medicare typically pay only for hospital and other medical services,
there is an exception in the law providing special funding for nursing services that do
not include medical treatment in institutions operated or certified solely by the
Christian Scientist church. The Constitution's Establishment Clause, as interpreted by
the Supreme Court, bars any statute that gives a preference to any particular religious
denomination or that delegates decision-making authority over federal programs to a
religious institution. Therefore, the Department has concluded that it cannot make
any reasonable argument in defense of these special Medicare and Medicaid
provisions.
1
002
Q:
What is the impact of your decision on Christian Scientists -- are they going to
be denied coverage?
A:
The Church is continuing to defend the law on appeal. During that time, HHS
will continue to provide reimbursement for Christian Science services, unless a
court prohibits it. We have offered to assist Congress in drafting a legislation
amendment that would address the needs of Christian Scientists and meet the
Constitution's standards.
Q:
This exemption was passed in the original Medicare statute in 1965. Why attack it
now?
A:
Since HHS is a defendant, we are required to decide whether the law can be
defended. It was challenged for the first time last year in a Minnesota District Court,
by a private child advocacy organization. That Court in August struck down the
statute. The deadline to file before the 8th Circuit Court is today, and the Justice
Department is filing a request for a 30-day extension and a notice that it will not
defend those statutes.
Q:
What are the specific problems with the provisions?
A:
The provisions expressly call for special reimbursement exclusively for
Christian Science nursing services received in Christian Science sanatoria that
are operated or certified by the Christian Science Church headquarters in
Boston, Massachusetts.
As such, the provisions conflict with the fundamental rule that one religious
denomination cannot be officially preferred over another.
Second, the delegation of sanitoria certification authority to the Christian
Science Church conflicts with the principle that government cannot cede to
official religious hierarchies the power to determine the allocation of
government benefits.
Third, to characterize the provisions as accommodating religion would open to
challenge most, if not all, state, local, and federal benefit programs nationwide
to any group or individual that is unable, for religious reasons, to accept the
benefits offered.
Q:
Did the President approve this decision?
A:
He was informed in advance of the proposed decision.
2
01/24/97
FRI 11:59 FAX
4003
Ö:
How does the Department's decision square with the President's strong support
of the Religious Freedom Restoration Act?
A:
One of the factors that led us to decline to defend the Christian Science is that
we concluded that a defense actually would undermine RFRA. Indeed, to
defend the provisions as permissible accommodations arguably would require
us to claim that they are compelled by RFRA. But in defending RFRA, we
say that it is a permissible accommodation of religion because it is sect-
neutral, and we distinguish it from laws that explicitly favor specific religions.
3
TALKING POINTS ON HUNT INTERVIEW
JANUARY 23, 1997
UPPER INCOME MEDICARE PREMIUMS/SOCIAL SECURITY RETIREMENT AGE
*
Again, the President essentially said what he has said in the past. He has not
opposed means-testing of Medicare premiums on principle. Indeed, there is already means-testing
in current law, since Medicaid pays the premiums for low-income recipients. And there was a
means-testing proposal in the President's health care reform plan.
*
However, he has consistently said that higher premiums were not necessary for us
to take the first step we need with regard to Medicare, protecting the Trust Fund through the
middle of the next decade.
*
The President does believe that this and a host of other proposals will need to be
considered when we take on, in a bipartisan way, the long-term problem of securing the Medicare
Trust Fund well into the future.
*
On the subject of raising the Social Security retirement age, the President has said
in the past that this is an issue that will need to be considered under whatever bipartisan process
he and the Congress settle on for addressing the long-term challenge facing the Social Security
system. He did not endorse it in the interview, nor has he in the past. All he did was talk a little
bit about the advantages and disadvantages.
TOIV
M.A.
MEMORANDUM
January 23, 1997
TO: Distribution
FR:
Chris Jennings and Nancy-Ann Min
RE:
Comparison of Medicare Proposals
Attached is a chart which compares the President's latest Medicare proposal to his 1996
proposal and the 1996 Republican proposal. The chart shows that the President has put forth a
Medicare plan that meets the Republicans halfway, demonstrating his commitment to working in
a bipartisan process to pass real Medicare reform.
The additional savings come from a range of policy changes, but the most notable
increase in savings comes from managed care and home health care. We hope you find this
information helpful. Please feel free to call 6-5560 with any questions or concerns.
THE PRESIDENT'S LATEST MEDICARE PROPOSAL
DEMONSTRATES HIS COMMITMENT TO REAL REFORM AND
MEETS THE REPUBLICANS HALFWAY.
Republican
President's
President's
1996
Current
1996
Proposal¹
Proposal²
Proposal³
6-YEAR
$158 Billion
$138 Billion
$116 Billion
1 1996 Proposal (April 1996 baseline). Six-year period is FY 1997-FY 2002. (Medicare savings stream as reported in the Senate Budget Resolution
Report, 5/13/96).
2
HCFA Actuaries' Estimates. Six-year period is FY 1998-FY 2003. The additional savings come from a range of policy changes, but
the most notable increase in savings comes from managed care and home health care.
3 1996 Proposal (April 1996 baseline). Six-year period is FY 1997-FY2002. ("CBO's Estimates of the President's Budgetary Proposals" in "The
Economic & Budget Outlook: FY 1997-2002").
01/22/97 WED 13:58 FAX 2026905673
DHHS/ASPA
002
Health Care
MMC
DEPARTMENT OF HEALTH & HUMAN SERVICES
Financing Administration
ME6
BT
Memorandum
Date
January 21, 1997
From
Chief Actuary, HCFA
Estimated Year of Exhaustion for the HI Trust Fund under the Medicare Legislative
Subject
Proposals in the President's 1998 Budget
To
Administrator, HCFA
This memorandum responds to your request for the estimated year of exhaustion for the
Hospital Insurance trust fund under the Medicare legislative proposals developed for the
President's 1998 Budget. Based on the intermediate set of assumptions in the 1996 Trustees
Report, we estimate that the assets of the HI trust fund would be depleted early in calendar
year 2007 under the Budget proposals.
In the absence of corrective legislation. trust fund depletion would occur early in calendar year
2001 based on the intermediate assumptions. Thus, the Budget proposals would postpone the
year of exhaustion by about 6 years.
The financial operations of the HI trust fund will depend heavily on future economic and
demographic trends. For this reason, the estimated year of depletion under the Budget
proposals is very sensitive to the underlying assumptions. In particular. under adverse
conditions such as those assumed by the Trustees in their "high cost" assumptions, asset
depletion could occur significantly earlier than the intermediate estimate. Conversely,
favorable trends would delay the year of exhaustion. The intermediate assumptions represent a
reasonable basis for planning.
The estimated year of exhaustion is only one of a number of measures and tests used to
evaluate the financial status of the HI trust fund. If you would like additional information on
the estimated impact of the Medicare proposals in the President's 1998 Budget, we would be
happy to provide it.
RichdS.
Richard S. Foster, F.S.A.
1/13/97
HMO PAYMENT CUTS
Q.
The managed care industry says that cuts to their payments, such as
those reported in the Post yesterday, would be devastating and would
force them to cut benefits to beneficiaries. Are you cutting HMO
payment rates and, if so, aren't you concerned about their impact on
beneficiaries?
A.
I cannot comment on any specific proposals in the budget. However,
I will say this:
(1) Clearly all providers and insurers who contract with Medicare are going
to contribute savings necessary to strengthen the Medicare Trust Fund.
(2) As for HMOs, recent respected studies* have confirmed previous
findings that Medicare is overpaying HMOs. In fact, on a national basis, the
Medicare Trust Fund is actually losing money on every beneficiary who
enrolls in a Medicare HMO.
(3) And while per person payments to Medicare managed care plans have
grown by 16 percent over the past two years, private sector payments to these
plans has been virtually flat.
(4) All parties -- inside and outside the industry -- recognize that we must
have a better reimbursement system. The question is how best and when we
can do this.
*
Including Congress' own Physician Payment Review Commission (PPRC), the
Mathematica Policy Research Study AND the Health Care Financing Administration
Analysis, published in the HCFA Review (Summer 1996).
Updated: 1/13/97, 10:00 am
01/13/97
13:05
OMB AD HP
003
FOR INTERAL Use
MEDICARE and MANAGED CARE
Current Base Proposal. Our current base proposal includes a proposal to decrease
Medicare reimbursement to managed care plans from its current 95 percent of fee-for-
service rates to 90 percent. Since every independent study we have seen over the last
three years suggests we are overpaying these plans by at least this much, this proposal
is more than defensible. In fact, the actuaries at HCFA (and the estimators at CBO)
now score Medicare costs for every beneficiary opting for Mcdicare managed care.
Benefit of the HMO Proposal. The reduction in reimbursement to HMOs does not
start until 2000, but still achieves about $10 billion in savings over $ years, (If we
started the cuts earlier, HCFA tells me that our overall cuts in HMO payments we
have other proposals too -- would be too deep.) This proposal has the added benefit
that it allows us to reduce the overall hospital cut. It also contributes to our ability to
pay for the Alzheimer's respite bencfit to start in 1998, as well as some other modest
beneficiary benefit improvements. If we go for this proposal, WC will can say that we
are giving the industry three years to prepare for it.
Potential Problem with this Proposal. Clearly, however, as the Pear article from
today illustrated, the managed care industry is ready to charge that such a reduction
will force them to reduce the type of additional benefits (like prescription drug
coverage, etc.) that they are now using to attract beneficiaries into managed care.
They will undoubtedly cast our proposal as a benefit cut to millions of beneficiaries.
The head of their industry trade group - Karen Ignagni - called mc Friday evening to
make clear this would be the case.
Department Response to HMO Criticism. It is true that our overcompensation of
managed care plans allows many plans to reinvest their overpayments in addtional
benefits. It is also true that it enables them to earn significant profits. The
Department (Bruce Vladeck in particular) believes that the reduction we are proposing,
which they say is on the modest end of what their studies now say is defensible (85-
90%), will still be sufficient for most of these plans to continue to provide additional
benefits. Having said this, they do recognize that this will be the HMO industry
response to our proposal.
Question. Do we need to raise this up to higher levels before we lock this propsal in?
Some in the Administration, like Larry Summers, have suggested that we may want to
consider being overly generous for the short-term to get beneficiaries into managed
care. I personally have mixed feelings on this one, but I believe the delay in the
implementation of the cut and our likely characterization of it as a transition policy to
a better reimbursement system should be a sufficient defense. However, I strongly
believe that the principals should be aware of where another attack is likely to come
from.
1/6/97
DRAFT Final
TALKING POINTS ON NY TIMES MEDICARE PREMIUM STORY
(General: We do not comment on any element of the budget before it is released by the
President.)
PREMIUM INCREASES. It is no secret that the President reviews every Medicare 2/3rds
option with a sensitivity to how proposals will affect beneficiaries. Recent Census
older
Bureau data reveals that fully two-thirds of older Americans have incomes less than $25,000. americans
Moreover, the Urban Institute has recently estimated that the elderly already spend over one- incomes
fifth of their out-of-pocket income on health care.
less Man
$25K.
INTEGRITY OF PRESIDENT'S HOME HEALTH CARE AND BALANCED BUDGET
PROPOSALS. The President's clear and overriding goal is to balance the Federal budget by
2002 extend the life of the Medicare Trust Fund until the middle of the next decade, and to
protect our values. His upcoming budget proposal will achieve all of these goals. The home
health policy mentioned in the NY Times is also consistent with these goals. It is good
policy, has received bipartisan support, and makes it possible to strengthen the Trust Fund
without indirectly harming beneficiaries through excessive hospital, doctor and other provider
cuts. While the policy reallocates a portion of Trust Fund expenditures into general revenues,
it does SO in the context of plan that strengthens Medicare and eliminates the deficit.
GOOD POLICY. The home health provision. is good policy because it focuses on
one of the most.costly services in Medicare; home health services in excess of 100
visits - the most rapidly increasing part of the benefit - have no place in Part A
side (the Hospital Insurance Trust Fund) of the program. In combination with the
Administration's proposal to establish a new prospective payment system for home
health care, the proposal would constrain the growth and utilization of this benefit.
BIPARTISAN SUPPORT. The home health policy mentioned in article has been
supported by Republicans and Democrats, and is not new. Reallocating the portion
of home health care expenditures that are associated with more chronic care was a
proposal included in our last budget. It was also included in the House-passed budget
in 1995 -- a proposal that virtually every Republican House Member voted for --
including Ways and Means Chairman Archer and his Health Subcommittee Chairman,
Bill Thomas. In fact, a similar allocation of expenditures was the law of the land
prior to 1980.
PROTECTS AGAINST EXCESSIVE CUTS. The absence of the home health
policy would necessitate excessive Medicare cuts that would threaten quality
health care for millions of beneficiaries. In addition to desire to focus attention on
home health care, we advocated the home health proposal last year was because it
enabled us to strengthen the Trust Fund without excessive cuts in hospital, physician,
nursing home and other important provider payments.
DRAFT
Q&As ON NY TIMES' MEDICARE PREMIUM STORY
Final
Q.
Isn't this home health care transfer just a gimmick that simply shifts dollars
around and pushes out the needed tough medicine that Medicare requires?
A.
No it is not. The home health policy mentioned in article has been supported by
Republicans and Democrats, and is not new. Reallocating the portion of home health.
care expenditures that are associated with more chronic care was a proposal included
in our last budget. It was also included in the House-passed budget in 1995 - a
proposal that virtually every Republican House Member voted for - including Ways
and Means Chairman Archer and his Health Subcommittee Chairman, Bill Thomas. In
fact, a similar allocation of expenditures was the law of the land prior to 1980.
Q.
Regardless of past positions on this issue, Republicans now clearly oppose it on
the grounds that it is a gimmick and is flawed policy. How can you defend it?
A.
The home health provision is good policy because it focuses on one of the most costly
services in Medicare; home health services in excess of 100 visits --- the most rapidly
increasing part of the benefit -- have no place in Part A side (the Hospital Insurance
Trust Fund) of the program. In combination with the Administration's proposal to
establish a new prospective payment system for home health care, the proposal would
constrain the growth and utilization of this benefit. Such an intervention is long
overdue.
Q.
Even if it is defensible policy, if it is included in this year's budget, shouldn't it be
included in the Part B premium - like every other service in the Part B side of
the program?
A.
I cannot comment on this year's budget before it is released. However, the President
is clearly concerned about any proposal's impact on beneficiaries. Recent Census
Bureau data reveals that fully two-thirds of older Americans have incomes less than
$25,000. Moreover, the Urban Institute has recently estimated that the elderly already
spend over one-fifth of their out-of-pocket income on health care.
Q.
Doesn't this policy simply add to the deficit, which would require even greater
contributions from taxpayers to support the program?
A.
While the policy reallocates a portion of Trust Fund expenditures into general
revenues, it does SO in the context of plan that strengthens Medicare and eliminates the
deficit. His last budget did just that and his next budget will do the same.
Clinton and G.O.P. Are Unlikely
To Seek Medicare Premium Rise
AI
By ROBERT PEAR
WASHINGTON, Jan. 4 - Adminis-
Continued From Page I
tration officials say that President
Clinton has made a significant deci-
sion about budget strategy for 1997:
ilar change last year, Republicans
he will not propose any increase in
said it was not a serious proposal.
costs for Medicare be neficiaries, but
After the November election, they
will try to cut bac* payments to
told him that they wanted a good-
hospitals, doctors and others who
faith gesture on the budget, and that
provide health care to the elderly.
a repeat of his earlier recommenda-
Congressional Republicans said
tions would not do the trick.
that they too were unlikely to seek
In an interview this week, Repre-
any increase in premiums or other
sentative Bill Archer, the Texas Re-
charges for beneficiaries because, in
publican who oversees Medicare as
last year's elections, they were pum-
chairman of the Ways and Means
meled by Democrats for having sup-
Committee, said: "We're looking for
ported such proposals.
a signal from the President as to how
But another battle is looming this
real his budget will be. I want to work
year over Mr. Clinton's proposal to
with him on a bipartisan basis, but
solve some of Medicare's most con-
this proposal on home health care is
spicuous financial problems by shift-
a shell game, an artificial solution. It
ing the cost of home health care from
may help the trust fund, but creates
one account to another. The home
enormous problems in the general
health benefit is the fastest growing
Treasury and for future genera-
component of Medicare.
tions.
Mr. Clinton plans to send his budg-
Among the experts who met re-
et to Congress early next month. If
cently with Franklin D. Raines, the
there is no change in current law, the
budget director for the Clinton Ad-
Medicare trust fund that pays hospi-
ministration, were Charles L.
Times
tal bills will, by his estimate, run out
Schultze, chairman of the Council of
of money in 2001. That is 10 years
Economic Advisers under President
before the first baby boomers reach
Jimmy Carter: two former directors
65, the age of eligibility for Medicare.
of the Congressional Budget Office,
A bipartisan group of experts sum-
Rudolph G. Penner and Robert D.
moned to the White House recently to
Reischauer, and Dan L. Crippen, a
advise the President's budget direc-
White House aide under President
tor, Franklin D. Raines, said Mr.
Ronald Reagan.
Clinton's home health care proposal
Mr. Schultze said the home health
- one of his main proposals to keep
care proposal was "accounting she-
the trust fund afloat - was little
nanigans," and added: "It doesn't
more than a bookkeeping gimmick.
save the Government any money. It
doesn't save any money for the Medi-
Sunday, January 5,
Under Mr. Clinton's proposal,
care program. It just shifts costs out
most of the cost of home health care
of the hospital trust fund." Mr.
for the elderly or disabled would be
Reischauer and Mr. Penner called it
shifted from the Hospital Insurance
a "gimmick."
Trust Fund to a separate Medicare
White House officials say that be-
account with unlimited access to
cause many users of home health
general revenue.
services have not been hospitalized
Medicare spending on home health
recently, there is no reason for the
services has exploded in recent
Hospital Insurance Trust Fund to
years, exceeding $18 billion and ac-
pay for those services. Increasingly,
counting for nearly 10 percent of
they say, Medicare's home health
Medicare benefit payments in 1996.
benefit is used by homebound people
Mr. Clinton wants to exclude these
who have chronic illnesses or need
costs from the computation of Medi-
long-term care for other reasons.
care premiums, so beneficiaries
Medicare finances health care for
would not have to absorb the cost.
38 million people who are elderly or
When Mr. Clinton suggested a sim-
disabled. Its costs grew 10 percent a
year in the last decade, reaching $191
Continued on Page 14, Column 4
billion in 1996.
Many Republicans and health poli-
cy experts say Medicare beneficia-
ries should pay more for their care,
through premiums, deductibles or
co-insurance, because such pay-
ments would generate revenue and
curb the unnecessary use of services.
2
Chris Jennings, a White House
aide who coordinates health policy
for President Clinton, summarized
the conventional wisdom: "In the
eyes of a lot of people, we are not real
men unless we hit beneficiaries with
significant increases in out-of-pocket
costs." But Administration officials
data show that fewer than 7 percent
note that the elderly already spend
of the elderly have household in-
21 percent of their family income, on
comes above $75,000 a year.
average, for health care.
President Clinton, like many Re-
Medicare was a central issue in
publicans, wants to encourage the
the Presidential election, as Mr. Cltn-
use of health maintenance organiza-
ton and Vice President Al Gore as-
tions, in the hope that they will save
serted that the Republicans' budget
money for Medicare. Nearly five mil-
plan could force hundreds of hospi-
lion Medicare beneficiaries are in
tals to close. Now Mr. Clinton must
H.M.O.'s, and enrollment is growing
explain why his plan to balance the
by more than 80,000 a month.
budget will not have similar effects.
But a summary of the President's
Bruce C. Vladeck, who heads the
budget proposal says that the use of
Federal Health Care Financing Ad-
H.M.O.'s "does not reduce Medicare
ministration, which runs Medicare,
costs" today because the Govern-
defended the decision to seek sub-
ment's method of calculating pay-
ments is flawed. Medicare officials
said they believed that their pay-
Savings will be
ments to H.M.O.'s were 5 percent to
percent too high, and they want Con-
sought from health-
gress to correct the formula to elimi-
nate such overpayments.
care providers.
H.M.O.'s give comprehensive care
for a fixed monthly premium. For
each Medicare beneficiary in an
H.M.O., the Government pays rough-
stantial savings from health care
ly 95 percent of the average cost for a
providers. Medicare, he said, has
patient in the traditional Medicare
been less aggressive than private
program. But Federal officials said
Insurers in demanding discounts.
that Medicare patients in H.M.O.'s
"There are now many markets for
tended to be healthier than the aver-
many services in which Medicare is
age beneficiary and therefore had
paying more than the most effective
lower medical expenses.
private purchasers." Mr. Vladeck
H.M.O. executives disagree. They
said. "That is very hard to defend or
say that many of their elderly mem-
justify."
bers have chronic illnesses. And,
Richard J. Pollack, executive vice
they say, if the Government cuts
president of the American Hospital
Medicare payments to H.M.O.'s, it
Association, said that "it was pretty
will reduce their ability to offer pre-
clear from last year's election cam-
scription drug coverage and other
paign that most, If not all, of the
benefits that attract new members.
savings in Medicare" would come
from hospitals, doctors, nursing
homes and suppliers of medical
equipment. The savings sought by
Congress and the President are so
large, he said, that hospitals and
doctors may face "real cuts, not just
a reduction in the rate of increase,"
in their Medicare payments.
Mr. Pollack said that such cuts
were inevitable as long as Congress
focused on Medicare's immediate
fiscal problems rather than on the
long-term changes needed to finance
the program for the baby boom gen-
eration. The hospital association es-
pouses the idea of "shared responsi-
bility," meaning that beneficiaries,
espectally those with higher in-
comes, should pay more, he said.
Some lawmakers have suggested
that the Government increase Medi-
The New Times
Sunday, January 5, 1997
care premiums for beneficiaries
with incomes above a certain level,
2
like $75,000 a year. But Marilyn
Moon, an economist at the Urban
Institute who is a public trustee of
the Medicare trust fund, said that
such proposals would not raise much
2
revenue because they would affect
relatively few people. Census Bureau
medicare
1-10-97
MEDICARE HOME HEALTH CARE TRANSFER
Q.
Isn't this home health care transfer just a gimmick that simply shifts dollars
around and pushes out the needed tough medicine that Medicare requires?
A.
No it is not. The home health policy mentioned in article has been supported by
Republicans and Democrats, and is not new. Reallocating the portion of home health
care expenditures that are associated with more chronic care was a proposal included
in our last budget. It was also included in the House-passed budget in 1995 - a
proposal that virtually every Republican House Member voted for - including Ways
and Means Chairman Archer and his Health Subcommittee Chairman, Bill Thomas. In
fact, a similar allocation of expenditures was the law of the land prior to 1980.
Q.
Regardless of past positions on this issue, Republicans now clearly oppose it on
the grounds that it is a gimmick and is flawed policy. How can you defend it?
A.
The home health provision is good policy because it focuses on one of the most costly
services in Medicare; home health services in excess of 100 visits -- the most rapidly
increasing part of the benefit - have no place in Part A side (the Hospital Insurance
Trust Fund) of the program. In combination with the Administration's proposal to
establish a new prospective payment system for home health care, the proposal would
constrain the growth and utilization of this benefit. Such an intervention is long
overdue.
Q.
Even if it is defensible policy, if it is included in this year's budget, shouldn't it be
included in the Part B premium - like every other service in the Part B side of
the program?
A.
I cannot comment on this year's budget before it is released. However, the President
is clearly concerned about any proposal's impact on beneficiaries. Recent Census
Bureau data reveals that fully two-thirds of older Americans have incomes less than
$25,000. Moreover, the Urban Institute has recently estimated that the elderly already
spend over one-fifth of their out-of-pocket income on health care.
Q.
Doesn't this policy simply add to the deficit, which would require even greater
contributions from taxpayers to support the program?
A.
While the policy reallocates a portion of Trust Fund expenditures into general
revenues, it does so in the context of plan that strengthens Medicare and eliminates the
deficit. His last budget did just that and his next budget will do the same.
medicare care
1-8-97
MEMORANDUM
TO:
Interested Parties
January 8, 1997
FR: Chris J.
RE:
Medicare Q&As and Breast Cancer Patient Protection Act
Attached is a one-page set of Q&As that was prepared for Erskine today. They were drafted
(and cleared by Gene) to help respond to likely questions that will emerge from continuing
leaks/speculation about our Medicare proposal.
As you will note, we are avoiding any discussion about specific provisions/numbers that will
be in the budget. However, we are attempting to provide filler language to deal with
Democrats' concerns about the aggregate number and a defense of the home health care
proposal, based on our position on this issue in last year's proposal.
In addition, I am enclosing a stop-gap answer for "Drive-By-Deliveries" Part II legislation -- a
bill aimed at preventing women who have undergone mastecomies from being prematurely
being released. We are reviewing the legislation now to see if it has any budgetary impact
before taking any final position.
Please call if you have any questions (6-5560).
MEDICARE QUESTIONS
Q.
Will your budget have in excess of $124 billion over 6 years?
A.
I will not go into specifics about particular Medicare savings numbers. Those figures
are for the President to present. The savings number will not be exactly the same as
last year's proposal. However, I can assure you that the proposal will be very
consistent with the approach, policy, and values that were included in our last
balanced budget proposal.
Q.
Can you tell us whether the $100 billion in savings over 5 year number reported
today is accurate? Have you ruled out a high income premium increase?
A.
Once again, I will not go into specifics about numbers or policy. I will tell you that
our entire Medicare proposal will meet four basic principals: First, it will extend the
life of the Medicare Trust Fund until the middle of the next decade. Second, it will
protect and be consistent with our fundamental commitment to the Medicare program
and its beneficiaries. Third, whatever Medicare savings number we send up will be
based on real, scorable reductions to the program. And fourth, as our proposal
strengthens the Trust Fund, it will also make policy defensible contributions to balance
the budget by 2002.
Q.
Is the home health care transfer gimmick going to be in the budget? How can
you possible defend it?
A.
As you know, we -- and the Republicans in the House - advocated for this proposal
in recent budget proposals. Without commenting on our future proposal, I will say
that the home health care initiative we proposed last year was good, defensible policy
that focused on the portion of this benefit that is out-of-control - home health services
in excess of 100 visits. Payment for more than 100 visits should not be in Part A of
the program, which is the part of Medicare that pays for acute -- not long-term --
services. In fact prior to 1980, that is how Medicare allocated the payment for these
services. Finally, our home care proposal last year included a brand new prospective
payment system for home health services, as well as a fraud and abuse component,
which would reduce excess utilization and achieve scorable savings for the program.
Q.
If you did this proposal again, would you include the new expenditures in the
Part B side of the program in the calculation of the premium?
A.
Neither the Republicans nor the Administration included this in the premium
calculation previously. We were and always will be concerned about program changes
that increase costs for beneficiaries. Having said this, I won't comment beyond this.
BREAST CANCER PATIENT PROTECTION ACT OF 1997
Q.
Do you support the breast cancer patient protection act of 1997 introduced by
Representative DeLauro?
A.
We are extremely concerned about reports that some women who have received
mastectomies may be prematurely discharged from the hospital. The President and his
Administration has a long track record of challenging health plans to be accountable
for coverage of medically appropriate services. We are reviewing the legislation
introduced by Representatives DeLauro, Dingell, and Roukema. We look forward to
working with Congress on this matter.