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104th Congress                                            Rept. 104-119
                        HOUSE OF REPRESENTATIVES

 1st Session                                                     Part 1
_______________________________________________________________________
 
     TO REQUIRE THE TRUSTEES OF THE MEDICARE TRUST FUNDS TO REPORT 
RECOMMENDATIONS ON RESOLVING PROJECTED FINANCIAL IMBALANCE IN MEDICARE 
                              TRUST FUNDS

                                _______


                  May 15, 1995.--Ordered to be printed

_______________________________________________________________________


    Mr. Archer, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 1590]

      [Including cost estimate of the Congressional Budget Office]
    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 1590) to require the Trustees of the medicare trust 
funds to report recommendations on resolving projected 
financial imbalance in medicare trust funds, having considered 
the same, report favorably thereon without amendment and 
recommend that the bill do pass.
                                CONTENTS

                                                                   Page
  I. Introduction....................................................00
        A. Purpose and Summary...................................    00
        B. Background and Need for Legislation...................    00
        C. Legislative History...................................    00
 II. Explanation of the Bill.........................................00
III. Votes of the Committee..........................................00
 IV. Budget Effects of the Bill......................................00
        A. Committee Estimate of Budgetary Effects...............    00
        B. Statement Regarding New Budget Authority and Tax          00
            Expenditures.
        C. Cost Estimate Prepared by the Congressional Budget        00
            Office.
  V. Other Matters to be Discussed under the Rules of the House......00
        A. Committee Oversight Findings and Recommendations......    00
        B. Summary of Findings and Recommendations of the            00
            Government Operations Committee.
        C. Inflationary Impact Statement.........................    00
 VI. Letter from the Committee on Commerce...........................00
VII. Dissenting Views................................................00
                            I. INTRODUCTION

                         A. Purpose and Summary

    H.R. 1590 would require the Trustees of the medicare trust 
funds to report recommendations on resolving projected 
financial imbalance in the medicare trust funds.

                 B. Background and Need for Legislation

    Medicare is a federal health insurance program for the aged 
and certain disabled individuals. Medicare is an entitlement 
program which in FY 1995 will cover approximately 35.7 million 
people and cost an estimated $181.1 billion.
    It consists of two parts: the Hospital Insurance (part A) 
program and the Supplementary Medical Insurance (part B) 
Program. Part A provides coverage for hospital services, post 
hospital skilled nursing facilities, home health services and 
hospice care. It is financed primarily through a payroll tax 
levied on current workers and their employers which is 
deposited into the Federal Hospital Insurance (HI) Trust Fund. 
Currently, employer and employees each pay a tax of 1.45% on 
all earnings. Part B provides coverage for physicians' 
services, and other medical services. Part B is financed 
through a combination of beneficiary premiums and general 
revenues.
    On April 3, 1995, the Board of Trustees for the Federal 
Hospital Insurance Trust Fund issued a report that indicates 
under the Trustees' intermediate assumptions, the present 
financing schedule for the HI program is sufficient to ensure 
payment of benefits only over the next 7 years. The exhaustion 
period is projected to occur around the turn of the century, in 
2002 under the immediate assumptions and in 2001 if the high 
cost assumptions are realized. As a result the HI Trust Fund 
does not meet the Trustees' short-range test of financial 
solvency. The long-range financial outlook is even more 
unfavorable. Over the 75 years projection period, the HI Trust 
Fund has an actuarial balance of -3.52 percent of taxable 
payroll, using the intermediate set of assumptions. The current 
payroll tax would need to be more than doubled immediately to 
keep the HI Trust Fund solvent over the 75 year projection 
period. The Trustees concluded that the HI Trust Fund fails to 
meet the Trustees' test of long-range close actuarial balance 
by an extremely wide margin. To make the HI program solvent 
even for the next 25 year period would require an immediate 44 
percent payroll tax increase.
    The 1995 annual report of Board of Trustees for the Federal 
Supplementary Medical Insurance Trust Fund, submitted on April 
3, 1995, notes with great concern the past and projected rapid 
growth in cost of the medicare supplemental insurance program. 
The report indicates that the growth rates have been so rapid 
that the outlays of the program have increased 53 percent in 
aggregate and 40 percent per enrollee in the last 5 years and 
19 percent faster than the economy.
    The medicare trust fund reports urge Congressional action 
but provide no specific legislative recommendations designed to 
address either the fact that the HI Trust Fund will begin going 
broke in 1996 and will likely be bankrupt by the year 2002, or 
the high cost growth of the medicare part B program.

                         C. Legislative History

                             committee bill

    H.R. 1590 was introduced on May 8, 1995 by Mr. Archer of 
Texas and Mr. Thomas of California and referred to the 
Committee on Ways and Means, and, in addition, to the Committee 
on Commerce. The bill as introduced contained two provisions: 
(1) Trustees' conclusions regarding financial status of 
medicare trust funds; (2) Recommendations on resolving 
projected financial imbalance in medicare trust funds.
    The Committee on Ways and Means marked up the bill on May 
9, 1995, and ordered the bill to be favorably reported without 
amendment by a roll call vote of 20 yeas and 15 nays.

                          legislative hearing

    The Subcommittee on Health of the Committee on Ways and 
Means held a public hearing on February 23, 1995. The hearing 
focused on the medicare part A provisions in the President's 
fiscal year 1996 budget proposal and the effects of those 
provisions on the insolvency date of the HI Trust fund. The 
full Committee on Ways and Means held a public hearing on May 
2, 1995. The hearing reviewed the 1995 Annual Report of the 
Trustees of the Federal Hospital Insurance Trust Fund.

                      II. EXPLANATION OF THE BILL

                              Present Law

    Under present law, the Trustees of the Federal Hospital 
Insurance Trust Fund and the Trustees of the Federal 
Supplementary Medical Insurance Trust Fund report to Congress 
each year on the operation and status of the trust funds. The 
law does not require the Trustees to submit recommendations for 
specific program legislation to correct reported inadequacies 
in either operations or status of the medicare trust funds.
                       Explanation of Provisions

    Section 1 of the bill describes the conclusions of the 1995 
Annual Report of the Board of Trustees of the Federal Hospital 
Insurance Trust Fund and the 1995 Annual Report of the Board of 
Trustees of the Federal Supplementary Medical Insurance Trust 
Fund.
    Section 2 of the bill would require the Board of Trustees 
of the Federal Hospital Insurance Trust Fund and the Board of 
Trustees of the Federal Supplementary Medical Insurance Trust 
Fund to submit to Congress recommendations for specific program 
legislation designed solely to control medical hospital 
insurance program costs and to address the projected financial 
imbalance in the Federal Hospital Insurance Trust Fund in both 
the short-range and long-range; and to more effectively control 
medicare supplementary insurance costs. These recommendations 
would be required to be submitted no later than June 30, 1995.

                           Reasons for Change

    The Federal Hospital Insurance Trust Fund is rapidly 
approaching bankruptcy. Complete exhaustion of the fund is 
expected to occur around the turn of the century, in 2002 under 
the intermediate assumptions, and in 2001 if the high cost 
assumptions are realized. The 1995 annual report of the Board 
of Trustees of the Federal Hospital Insurance Trust Fund 
concludes that the HI Trust Fund does not meet either the 
Trustees' short-range or long-range solvency tests, the HI 
program costs are expected to far exceed revenues over the 75 
year long-range period under any set of assumptions, and that, 
as a result, the HI program is severely out of financial 
balance. The Trustees' also conclude that Congress must take 
timely action to establish long-term financial stability for 
the program.
    The 1995 report of the Trustees of the Federal 
Supplementary Medical Insurance Trust Fund indicates that 
although the SMI Trust Fund is actuarially sound the program 
has experienced unparalleled growth in recent years. The 
Trustees expressed great concern about the past and projected 
rapid growth in cost of the medicare supplemental insurance 
program. The report indicates that the growth rates have been 
so rapid that the outlays of the program have increased 53 
percent in aggregate and 40 percent per enrollee in the last 5 
years and 19 percent faster than the economy.
    The present Board of Trustees of the medicare trust funds 
are uniquely qualified to make specific legislative 
recommendations Congress solely designed to resolve the 
financial imbalance in the medicare trust funds.
    As Secretary of the Treasury, Managing Trustee Rubin 
directs and provides oversight for hundreds of financial policy 
analysts at the Department of the Treasury; many of whom have 
health care financial and economic policy expertise as well. 
Prior to his appointment as Secretary of the Treasury, 
Secretary Rubin served in the White House as Assistant to the 
President for Economic Policy where he directed the activities 
of the National Economic Council. In the Fall of 1994, while at 
the White House, Secretary Rubin was appointed to co-chair 
policy development for the President's health care reform 
initiative.
    As Secretary of Health and Human Services, Trustee Shalala 
is responsible for the medicare program and directs and 
oversees the analytical work of hundreds of health policy 
experts within the Department of Health and Human Services. 
Prior to her appointment as Secretary of Health and Human 
Services, Secretary Shalala served as Chancellor of the 
University of Wisconsin at Madison, the sixth largest 
university, and was responsible for the oversight of a 488-bed 
teaching and research hospital. Secretary Shalala was 
extensively involved in the development of the President's 
health care reform legislative initiative and is an expert in 
the development of health care policy in her own right.
    Similarly, Secretary of Labor Reich is responsible for the 
overseeing Department of Labor economists, demographers and 
other analytical experts in their activities of projecting 
labor related economic trends including those related to health 
policy. As an economist, Secretary Reich personally has the 
expertise needed to develop the recommendations required by 
these provisions. Secretary Reich also participated in the 
development of the President's health care reform initiative.
    As Commissioner of Social Security, Trustee Chater has 
responsibility for the Social Security Program. Not only does 
the Social Security Program serve nearly all the same 
beneficiaries as the medicare program but the Social Security 
Administration also keeps data on the medicare program and 
serves as the link between the medicare program and medicare 
beneficiaries at the local level. Many of the Medicare policy 
decisions that will have to be made regarding the 
recommendation to Congress required by these provisions are 
directly related to the programs the Commissioner directs. The 
Social Security Administration also has actuarial, economic, 
and demographic policy expertise needed for completing the 
required recommendations.

Effective date

    The provisions are effective upon enactment.
                      III. VOTES OF THE COMMITTEE

    In compliance with clause 2(l)(2)(B) of rule XI of the 
Rules of the House of Representatives, the following statements 
are made concerning the votes of the Committee in its 
consideration of the bill, H.R. 1590.

                       motion to report the bill

    The bill, H.R. 1590, was ordered favorably reported by a 
rollcall vote of 20 yeas and 15 nays on May 9, 1995, with a 
quorum present. The rollcall vote was as follows:
        YEAS                          NAYS
Mr. Archer                          Mr. Gibbons
Mr. Crane                           Mr. Rangel
Mr. Thomas                          Mr. Stark
Mr. Shaw                            Mr. Jacobs
Mrs. Johnson                        Mr. Ford
Mr. Houghton                        Mr. Matsui
Mr. Herger                          Ms. Kennelly
Mr. McCrery                         Mr. Coyne
Mr. Hancock                         Mr. Levin
Mr. Camp                            Mr. Cardin
Mr. Ramstad                         Mr. McDermott
Mr. Zimmer                          Mr. Kleczka
Mr. Nussle                          Mr. Lewis
Mr. Johnson                         Mr. Payne
Ms. Dunn                            Mr. Neal
Mr. Collins
Portman
English
Ensign
Christensen

                           IV. BUDGET EFFECTS

               A. Committee Estimate of Budgetary Effects

    In compliance with clause 7(a) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of this bill, H.R. 1590, 
as reported:
    The Committee agrees with the estimate prepared by CBO, 
which is included below.

    B. Statement Regarding New Budget Authority and Tax Expenditures

    In compliance with subdivision (b) of clause 2(l)(3) of 
rule XI of the Rules of the House of Representatives, the 
Committee states that the provisions of H.R. 1590 do not 
involve any new budget authority, or any increase or decrease 
in revenues or tax expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with subdivision (C) of clause 2(l)(3) of 
rule XI of the Rules of the House of Representatives, requiring 
a cost estimate prepared by the Congressional Budget Office, 
the following report prepared by CBO is provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 12, 1995.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
reviewed H.R. 1590, as ordered reported by the House Committee 
on Ways and Means on May 9, 1995. The bill requires the Board 
of Trustees of the Federal Hospital Insurance Trust Fund and 
the Board of Trustees of the Federal Supplementary Medical 
Insurance Trust Fund to submit to the Congress recommendations 
for legislation to resolve the projected financial imbalance in 
the Medicare trust funds. CBO estimates that enactment of H.R. 
1590 would not significantly affect the federal budget or the 
budgets of state and local governments.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Lisa Layman.
            Sincerely,
                                         June E. O'Neill, Director.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

          A. Committee Oversight Findings and Recommendations

    With respect to subdivision (A) of clause 2(l)(3) of rule 
XI of the Rules of the House of Representatives (relating to 
oversight findings), the Committee advises that it was as a 
result of the Committee's oversight activities concerning the 
Federal Hospital Insurance Trust Fund that the Committee 
concluded that it is appropriate to enact the provisions 
contained in the bill.

    B. Summary of Findings and Recommendations of the Committee on 
                    Government Reform and Oversight

    With respect to subdivision (D) of clause 2(l)(3) of rule 
XI of the Rules of the House of Representatives (relating to 
oversight findings), the Committee advises that no oversight 
findings or recommendations have been submitted to this 
Committee by the Committee on Government Reform and Oversight 
with respect to the provisions contained in this bill.

                    C. Inflationary Impact Statement

    In compliance with clause 2(l)(4) of rule XI of the Rules 
of the House of Representatives, the Committee states that the 
provisions of the bill are not expected to have an overall 
inflationary impact on prices and costs in the operation of the 
national economy. As is indicated above (in Part IV of this 
report), the bill is projected to be deficit neutral over 
fiscal years 1995-2000.

               VI. LETTER FROM THE COMMITTEE ON COMMERCE
                     U.S. House of Representatives,
                                     Committee on Commerce,
                                      Washington, DC, May 12, 1995.
Hon. Bill Archer,
Chairman, Committee on Ways and Means, Longworth House Office Building, 
        Washington, DC.
    Dear Chairman Archer: I am writing with respect to H.R. 
1590, legislation to require the Trustees of the Medicare trust 
funds to report recommendations on resolving the projected 
financial imbalance in the Medicare trust funds, which you and 
Congressman Thomas introduced in the House on Tuesday, May 9, 
1995. As you know, this bill was referred to both the Committee 
on Ways and Means and the Committee on Commerce.
    I understand that your Committee met on Wednesday, May 10, 
and ordered H.R. 1590 reported to the House. I further 
understand that you are anxious to schedule this bill for 
consideration by the House as quickly as possible.
    The Commerce Committee shares your concern with the need 
for swift action on this legislation. In Fiscal Year 1995, the 
Medicare entitlement program covered approximately 35.7 million 
people at an estimated cost of $181.1 billion. The report 
issued on April 3, 1995, by the Board of Trustees for the 
Medicare Hospital Insurance Fund and the Supplementary Medical 
Insurance Trust Fund urging Congress to examine the Medicare 
program because both trust funds are facing significant 
financial problems in both the short term and long term was 
disturbing, to say the least. Particularly distressing was the 
Board's estimate that the Hospital Insurance Trust Fund will be 
exhausted by the year 2002. Of equal concern were the views of 
the Chief Actuary for Medicare which indicated that not only is 
the Hospital Insurance Trust Fund financially out of balance, 
but spending growth by the Supplementary Medical Insurance 
Trust Fund is also a concern because the rate of growth is 
unsustainable.
    The Commerce Committee is deeply concerned about the future 
of the Medicare program. It is clear from the Trustees' report 
that a serious review of all aspects of the Medicare program 
must be undertaken immediately in order to find a solution to 
this crisis. It is equally clear that the time for such a 
review is now if we are to solve this problem in a fiscally 
responsible and timely manner.
    To that end, it would be extremely beneficial if the Board 
of Trustees, who have been examining the Medicare trust funds 
in great detail, were to submit their legislative 
recommendations to Congress for consideration as we undergo 
this process. I, therefore, support your legislation which 
would require the Board of Trustees of the Medicare trust funds 
to submit specific program legislation to Congress by not later 
than June 30, 1995.
    For that reason, I intend to notify the Speaker that, in 
order to expedite House passage of H.R. 1590 so as to receive 
the Trustees' recommendations in a timely manner, I will waive 
the Commerce Committee's right to mark up this legislation and 
allow the Committee to be discharged from further consideration 
of H.R. 1590, provided that such waiver does not in any way 
prejudice the Commerce Committee's jurisdictional prerogatives 
in the future with respect to this measure or any similar 
legislation.
    It is also my intention to ask the Speaker that, should 
this legislation become the subject of a House-Senate 
conference, the Commerce Committee would be afforded an equal 
number of conferees as those appointed from the Committee on 
Ways and Means with respect to H.R. 1590, and any Senate 
amendments thereto.
    In furtherance of our mutual interest on this legislation, 
I would also ask that you include this letter in the Ways and 
Means Committee report on H.R. 1590.
    I look forward to working with you in the future, both on 
this bill and on other legislation of interest to our two 
Committees.
            Sincerely,
                                   Thomas J. Bliley, Jr., Chairman.
                         VII. DISSENTING VIEWS

    H.R. 1590 is not needed, accomplishes nothing which cannot 
be accomplished without legislation, and is technically flawed 
in that it asks the wrong people to render opinions on issues 
which are not within their area of expertise.
    With H.R. 1590 the Majority is trying to find someone else 
to fulfill its responsibilities. As the majority party, the 
Republicans must propose a budget, along with the detailed 
proposals necessary to meet that budget's requirements.
    We understand and appreciate their problem. Last year we 
proposed a detailed health reform bill which laid out specific 
Medicare cuts which would have reduced Medicare spending by 
$168 billion over seven years, and improved significantly the 
status of the Hospital Insurance (Part A) Trust Fund. We did 
not ask the President for the proposals that we made, nor did 
we rely upon alarming statements about the status of Medicare's 
trust funds in order to scare the public into accepting our 
proposals.
    The Republican response to our Medicare savings proposals 
was to offer an amendment in Committee to strip all of them 
from the bill. Every Republican on the Committee voted ``aye.'' 
At the time Mr. Archer alleged that our proposals would 
``devastate their program under Medicare,'' and that ``quality 
of care and availability of care * * * [would be] the price 
that is going to have to be paid to pay for these cuts.'' Mr. 
Shaw said that our proposals would ``destroy a health care 
program in this country that we know works and that our seniors 
are depending on.''
    Their most recent effort is to focus on the insolvency of 
the Part A Trust Fund. This effort to frighten the public into 
accepting huge cuts in Medicare does not correspond with their 
past performance.
    A few facts are in order to put this issue into 
perspective. First, the Trust Fund is currently estimated to be 
insolvent during FY 2002, seven years hence. This is by no 
means the closest to insolvency which the program has been, as 
the following chart illustrates.


It is also important to point out that the insolvency status of 
the Trust Fund in 1994 was the same as it is in 1995--seven 
years of solvency remaining. No one on the Republican side 
pointed with alarm to last year's report, although insolvency 
was estimated to be just as imminent. And, as has already been 
pointed out, Republicans unanimously voted down proposals which 
would have extended the solvency of the Part A Trust Fund to 
about fifteen years.
    Ironically, the only action taken thus far relating to the 
solvency of the Part A Trust Fund is approval of the Republican 
Contract with America provision which takes money out of the 
Part A Trust Fund through a reduction in the amount of Social 
Security benefits subject to taxation. It is at best 
disingenuous to worry with great anguish about the future 
solvency of the Trust Fund when you have a proposal on the 
table which takes the Fund in exactly the wrong direction.
    In addition, the question of Trust Fund insolvency has 
nothing to do with Medicare's Supplementary Medical Insurance 
program, Part B. The report of the Part B Trustees states that 
Part B is actuarially sound. Therefore, if reductions in 
Medicare are being made solely to ``save'' the Trust Funds, 
there is not reason to cut Part B at all since Part B's Trust 
Fund doesn't need saving.
    Of course, the debate has nothing to do with ``saving'' the 
Medicare Part A Trust Fund. As the FY 1995 budget resolution 
approved by the Budget Committee makes clear, the Republicans 
are looking for huge cuts in Medicare, $283 billion over seven 
years, far beyond any amount that is needed to reasonably 
extend the solvency of the Part A Trust Fund. The resolution 
envisions large cuts in Part B which have nothing to do with 
solvency, and would impose large increases on out-of-pocket 
spending by beneficiaries. No wonder they want to get someone 
else to endorse their desire to slash this program.
    The bill is also technically flawed. The law states that it 
shall be the duty of the Trustees to ``hold the Trust Fund,'' 
``report to the Congress. * * * each year on the operation and 
status of the Trust Fund;'' ``report immediately whenever* * * 
the amount of the Fund is unduly small;'' and ``review the 
general policies followed in managing the Fund.'' The statute 
does not give the Boards of Trustees any responsibility for 
managing the Medicare program--their responsibilities are to 
manage the Trust Funds, and to report to Congress on their 
operation.
    The Trustees do not as a group have the expertise to make 
recommendations on operating the Medicare program. The 
Secretary of the Treasury is the managing trustee. Asking him 
how to manage Medicare is like asking one's banker how to run 
one's life. Nevertheless, H.R. 1590 asks the Secretary of the 
Treasury, as the managing Trustee, to make recommendations on 
how to control hospital and physician costs, matters clearly 
outside his area of expertise. And although the Secretary of 
Health and Human Services sits as a Trustee, she is joined by 
three other ex officio Trustees who may or may not have 
expertise on these highly technical matters.
    The fact is that the Trustees have done their job--they 
have reported to the Congress that action needs to be taken to 
resolve the Part A Trust Fund's long-range imbalance of 
expenditures over revenue. It is the job of the Congress to act 
on the report which the Trustees have submitted.
    If in fact the Majority was truly interested in seeking 
recommendations on controlling the growth in Medicare, then 
competent authorities such as the Prospective Payment 
Assessment Commission, the Physician Payment Review Commission, 
the General Accounting Office, the Office of Technology 
Assessment, and the Congressional Research Service should have 
been asked. All of these experts work directly for the Congress 
and would make recommendations if asked, rendering this bill 
unnecessary.
    In summary, this is a nonsensical bill, destined to be 
ignored once the real battle over Medicare is joined. If the 
Republicans wish to cut Medicare, the need to put their 
proposals on the table, as Budget Committee Chairman Kasich has 
done, and let the Committee work their will. No additional 
reports or studies are required for that to occur. This bill is 
only about public relations, and given that, we urge a ``No'' 
vote.

                                   Sam M. Gibbons.
                                   Pete Stark.
                                   Robert T. Matsui.
                                   Sander M. Levin.
                                   Charles B. Rangel.
                                   Jim McDermott.
                                   Jerry Kleczka.
                                   L.F. Payne.
                                   Richard E. Neal.
                                   William J. Coyne.
                                   Harold Ford.
                                   Barbara B. Kennelly.
                                   John Lewis.
                                   Ben Cardin.
                                
104th Congress                                            Rept. 104-119
                        HOUSE OF REPRESENTATIVES

 1st Session                                                     Part 1
_______________________________________________________________________

     TO REQUIRE THE TRUSTEES OF THE MEDICARE TRUST FUNDS TO REPORT 
RECOMMENDATIONS ON RESOLVING PROJECTED FINANCIAL IMBALANCE IN MEDICARE 
                              TRUST FUNDS

                                _______


                  May 15, 1995.--Ordered to be printed

_______________________________________________________________________


    Mr. Archer, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 1590]

      [Including cost estimate of the Congressional Budget Office]
    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 1590) to require the Trustees of the medicare trust 
funds to report recommendations on resolving projected 
financial imbalance in medicare trust funds, having considered 
the same, report favorably thereon without amendment and 
recommend that the bill do pass.
                                CONTENTS

                                                                   Page
  I. Introduction.....................................................2
        A. Purpose and Summary...................................     2
        B. Background and Need for Legislation...................     2
        C. Legislative History...................................     3
 II. Explanation of the Bill..........................................3
III. Votes of the Committee...........................................5
 IV. Budget Effects of the Bill.......................................6
        A. Committee Estimate of Budgetary Effects...............     6
        B. Statement Regarding New Budget Authority and Tax           6
            Expenditures.
        C. Cost Estimate Prepared by the Congressional Budget         6
            Office.
  V. Other Matters to be Discussed under the Rules of the House.......6
        A. Committee Oversight Findings and Recommendations......     6
        B. Summary of Findings and Recommendations of the             7
            Government Operations Committee.
        C. Inflationary Impact Statement.........................     7
 VI. Letter from the Committee on Commerce............................7
VII. Dissenting Views.................................................9
                            I. INTRODUCTION

                         A. Purpose and Summary

    H.R. 1590 would require the Trustees of the medicare trust 
funds to report recommendations on resolving projected 
financial imbalance in the medicare trust funds.

                 B. Background and Need for Legislation

    Medicare is a federal health insurance program for the aged 
and certain disabled individuals. Medicare is an entitlement 
program which in FY 1995 will cover approximately 35.7 million 
people and cost an estimated $181.1 billion.
    It consists of two parts: the Hospital Insurance (part A) 
program and the Supplementary Medical Insurance (part B) 
Program. Part A provides coverage for hospital services, post 
hospital skilled nursing facilities, home health services and 
hospice care. It is financed primarily through a payroll tax 
levied on current workers and their employers which is 
deposited into the Federal Hospital Insurance (HI) Trust Fund. 
Currently, employer and employees each pay a tax of 1.45% on 
all earnings. Part B provides coverage for physicians' 
services, and other medical services. Part B is financed 
through a combination of beneficiary premiums and general 
revenues.
    On April 3, 1995, the Board of Trustees for the Federal 
Hospital Insurance Trust Fund issued a report that indicates 
under the Trustees' intermediate assumptions, the present 
financing schedule for the HI program is sufficient to ensure 
payment of benefits only over the next 7 years. The exhaustion 
period is projected to occur around the turn of the century, in 
2002 under the immediate assumptions and in 2001 if the high 
cost assumptions are realized. As a result the HI Trust Fund 
does not meet the Trustees' short-range test of financial 
solvency. The long-range financial outlook is even more 
unfavorable. Over the 75 years projection period, the HI Trust 
Fund has an actuarial balance of -3.52 percent of taxable 
payroll, using the intermediate set of assumptions. The current 
payroll tax would need to be more than doubled immediately to 
keep the HI Trust Fund solvent over the 75 year projection 
period. The Trustees concluded that the HI Trust Fund fails to 
meet the Trustees' test of long-range close actuarial balance 
by an extremely wide margin. To make the HI program solvent 
even for the next 25 year period would require an immediate 44 
percent payroll tax increase.
    The 1995 annual report of Board of Trustees for the Federal 
Supplementary Medical Insurance Trust Fund, submitted on April 
3, 1995, notes with great concern the past and projected rapid 
growth in cost of the medicare supplemental insurance program. 
The report indicates that the growth rates have been so rapid 
that the outlays of the program have increased 53 percent in 
aggregate and 40 percent per enrollee in the last 5 years and 
19 percent faster than the economy.
    The medicare trust fund reports urge Congressional action 
but provide no specific legislative recommendations designed to 
address either the fact that the HI Trust Fund will begin going 
broke in 1996 and will likely be bankrupt by the year 2002, or 
the high cost growth of the medicare part B program.

                         C. Legislative History

                             committee bill

    H.R. 1590 was introduced on May 8, 1995 by Mr. Archer of 
Texas and Mr. Thomas of California and referred to the 
Committee on Ways and Means, and, in addition, to the Committee 
on Commerce. The bill as introduced contained two provisions: 
(1) Trustees' conclusions regarding financial status of 
medicare trust funds; (2) Recommendations on resolving 
projected financial imbalance in medicare trust funds.
    The Committee on Ways and Means marked up the bill on May 
9, 1995, and ordered the bill to be favorably reported without 
amendment by a roll call vote of 20 yeas and 15 nays.

                          legislative hearing

    The Subcommittee on Health of the Committee on Ways and 
Means held a public hearing on February 23, 1995. The hearing 
focused on the medicare part A provisions in the President's 
fiscal year 1996 budget proposal and the effects of those 
provisions on the insolvency date of the HI Trust fund. The 
full Committee on Ways and Means held a public hearing on May 
2, 1995. The hearing reviewed the 1995 Annual Report of the 
Trustees of the Federal Hospital Insurance Trust Fund.

                      II. EXPLANATION OF THE BILL

                              Present Law

    Under present law, the Trustees of the Federal Hospital 
Insurance Trust Fund and the Trustees of the Federal 
Supplementary Medical Insurance Trust Fund report to Congress 
each year on the operation and status of the trust funds. The 
law does not require the Trustees to submit recommendations for 
specific program legislation to correct reported inadequacies 
in either operations or status of the medicare trust funds.
                       Explanation of Provisions

    Section 1 of the bill describes the conclusions of the 1995 
Annual Report of the Board of Trustees of the Federal Hospital 
Insurance Trust Fund and the 1995 Annual Report of the Board of 
Trustees of the Federal Supplementary Medical Insurance Trust 
Fund.
    Section 2 of the bill would require the Board of Trustees 
of the Federal Hospital Insurance Trust Fund and the Board of 
Trustees of the Federal Supplementary Medical Insurance Trust 
Fund to submit to Congress recommendations for specific program 
legislation designed solely to control medical hospital 
insurance program costs and to address the projected financial 
imbalance in the Federal Hospital Insurance Trust Fund in both 
the short-range and long-range; and to more effectively control 
medicare supplementary insurance costs. These recommendations 
would be required to be submitted no later than June 30, 1995.

                           Reasons for Change

    The Federal Hospital Insurance Trust Fund is rapidly 
approaching bankruptcy. Complete exhaustion of the fund is 
expected to occur around the turn of the century, in 2002 under 
the intermediate assumptions, and in 2001 if the high cost 
assumptions are realized. The 1995 annual report of the Board 
of Trustees of the Federal Hospital Insurance Trust Fund 
concludes that the HI Trust Fund does not meet either the 
Trustees' short-range or long-range solvency tests, the HI 
program costs are expected to far exceed revenues over the 75 
year long-range period under any set of assumptions, and that, 
as a result, the HI program is severely out of financial 
balance. The Trustees' also conclude that Congress must take 
timely action to establish long-term financial stability for 
the program.
    The 1995 report of the Trustees of the Federal 
Supplementary Medical Insurance Trust Fund indicates that 
although the SMI Trust Fund is actuarially sound the program 
has experienced unparalleled growth in recent years. The 
Trustees expressed great concern about the past and projected 
rapid growth in cost of the medicare supplemental insurance 
program. The report indicates that the growth rates have been 
so rapid that the outlays of the program have increased 53 
percent in aggregate and 40 percent per enrollee in the last 5 
years and 19 percent faster than the economy.
    The present Board of Trustees of the medicare trust funds 
are uniquely qualified to make specific legislative 
recommendations Congress solely designed to resolve the 
financial imbalance in the medicare trust funds.
    As Secretary of the Treasury, Managing Trustee Rubin 
directs and provides oversight for hundreds of financial policy 
analysts at the Department of the Treasury; many of whom have 
health care financial and economic policy expertise as well. 
Prior to his appointment as Secretary of the Treasury, 
Secretary Rubin served in the White House as Assistant to the 
President for Economic Policy where he directed the activities 
of the National Economic Council. In the Fall of 1994, while at 
the White House, Secretary Rubin was appointed to co-chair 
policy development for the President's health care reform 
initiative.
    As Secretary of Health and Human Services, Trustee Shalala 
is responsible for the medicare program and directs and 
oversees the analytical work of hundreds of health policy 
experts within the Department of Health and Human Services. 
Prior to her appointment as Secretary of Health and Human 
Services, Secretary Shalala served as Chancellor of the 
University of Wisconsin at Madison, the sixth largest 
university, and was responsible for the oversight of a 488-bed 
teaching and research hospital. Secretary Shalala was 
extensively involved in the development of the President's 
health care reform legislative initiative and is an expert in 
the development of health care policy in her own right.
    Similarly, Secretary of Labor Reich is responsible for the 
overseeing Department of Labor economists, demographers and 
other analytical experts in their activities of projecting 
labor related economic trends including those related to health 
policy. As an economist, Secretary Reich personally has the 
expertise needed to develop the recommendations required by 
these provisions. Secretary Reich also participated in the 
development of the President's health care reform initiative.
    As Commissioner of Social Security, Trustee Chater has 
responsibility for the Social Security Program. Not only does 
the Social Security Program serve nearly all the same 
beneficiaries as the medicare program but the Social Security 
Administration also keeps data on the medicare program and 
serves as the link between the medicare program and medicare 
beneficiaries at the local level. Many of the Medicare policy 
decisions that will have to be made regarding the 
recommendation to Congress required by these provisions are 
directly related to the programs the Commissioner directs. The 
Social Security Administration also has actuarial, economic, 
and demographic policy expertise needed for completing the 
required recommendations.

Effective date

    The provisions are effective upon enactment.
                      III. VOTES OF THE COMMITTEE

    In compliance with clause 2(l)(2)(B) of rule XI of the 
Rules of the House of Representatives, the following statements 
are made concerning the votes of the Committee in its 
consideration of the bill, H.R. 1590.

                       motion to report the bill

    The bill, H.R. 1590, was ordered favorably reported by a 
rollcall vote of 20 yeas and 15 nays on May 9, 1995, with a 
quorum present. The rollcall vote was as follows:
        YEAS                          NAYS
Mr. Archer                          Mr. Gibbons
Mr. Crane                           Mr. Rangel
Mr. Thomas                          Mr. Stark
Mr. Shaw                            Mr. Jacobs
Mrs. Johnson                        Mr. Ford
Mr. Houghton                        Mr. Matsui
Mr. Herger                          Ms. Kennelly
Mr. McCrery                         Mr. Coyne
Mr. Hancock                         Mr. Levin
Mr. Camp                            Mr. Cardin
Mr. Ramstad                         Mr. McDermott
Mr. Zimmer                          Mr. Kleczka
Mr. Nussle                          Mr. Lewis
Mr. Johnson                         Mr. Payne
Ms. Dunn                            Mr. Neal
Mr. Collins
Mr. Portman
Mr. English
Mr. Ensign
Mr. Christensen

                           IV. BUDGET EFFECTS

               A. Committee Estimate of Budgetary Effects

    In compliance with clause 7(a) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of this bill, H.R. 1590, 
as reported:
    The Committee agrees with the estimate prepared by CBO, 
which is included below.

    B. Statement Regarding New Budget Authority and Tax Expenditures

    In compliance with subdivision (b) of clause 2(l)(3) of 
rule XI of the Rules of the House of Representatives, the 
Committee states that the provisions of H.R. 1590 do not 
involve any new budget authority, or any increase or decrease 
in revenues or tax expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with subdivision (C) of clause 2(l)(3) of 
rule XI of the Rules of the House of Representatives, requiring 
a cost estimate prepared by the Congressional Budget Office, 
the following report prepared by CBO is provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 12, 1995.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
reviewed H.R. 1590, as ordered reported by the House Committee 
on Ways and Means on May 9, 1995. The bill requires the Board 
of Trustees of the Federal Hospital Insurance Trust Fund and 
the Board of Trustees of the Federal Supplementary Medical 
Insurance Trust Fund to submit to the Congress recommendations 
for legislation to resolve the projected financial imbalance in 
the Medicare trust funds. CBO estimates that enactment of H.R. 
1590 would not significantly affect the federal budget or the 
budgets of state and local governments.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Lisa Layman.
            Sincerely,
                                         June E. O'Neill, Director.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

          A. Committee Oversight Findings and Recommendations

    With respect to subdivision (A) of clause 2(l)(3) of rule 
XI of the Rules of the House of Representatives (relating to 
oversight findings), the Committee advises that it was as a 
result of the Committee's oversight activities concerning the 
Federal Hospital Insurance Trust Fund that the Committee 
concluded that it is appropriate to enact the provisions 
contained in the bill.

    B. Summary of Findings and Recommendations of the Committee on 
                    Government Reform and Oversight

    With respect to subdivision (D) of clause 2(l)(3) of rule 
XI of the Rules of the House of Representatives (relating to 
oversight findings), the Committee advises that no oversight 
findings or recommendations have been submitted to this 
Committee by the Committee on Government Reform and Oversight 
with respect to the provisions contained in this bill.

                    C. Inflationary Impact Statement

    In compliance with clause 2(l)(4) of rule XI of the Rules 
of the House of Representatives, the Committee states that the 
provisions of the bill are not expected to have an overall 
inflationary impact on prices and costs in the operation of the 
national economy. As is indicated above (in Part IV of this 
report), the bill is projected to be deficit neutral over 
fiscal years 1995-2000.

               VI. LETTER FROM THE COMMITTEE ON COMMERCE
                     U.S. House of Representatives,
                                     Committee on Commerce,
                                      Washington, DC, May 12, 1995.
Hon. Bill Archer,
Chairman, Committee on Ways and Means, Longworth House Office Building, 
        Washington, DC.
    Dear Chairman Archer: I am writing with respect to H.R. 
1590, legislation to require the Trustees of the Medicare trust 
funds to report recommendations on resolving the projected 
financial imbalance in the Medicare trust funds, which you and 
Congressman Thomas introduced in the House on Tuesday, May 9, 
1995. As you know, this bill was referred to both the Committee 
on Ways and Means and the Committee on Commerce.
    I understand that your Committee met on Wednesday, May 10, 
and ordered H.R. 1590 reported to the House. I further 
understand that you are anxious to schedule this bill for 
consideration by the House as quickly as possible.
    The Commerce Committee shares your concern with the need 
for swift action on this legislation. In Fiscal Year 1995, the 
Medicare entitlement program covered approximately 35.7 million 
people at an estimated cost of $181.1 billion. The report 
issued on April 3, 1995, by the Board of Trustees for the 
Medicare Hospital Insurance Fund and the Supplementary Medical 
Insurance Trust Fund urging Congress to examine the Medicare 
program because both trust funds are facing significant 
financial problems in both the short term and long term was 
disturbing, to say the least. Particularly distressing was the 
Board's estimate that the Hospital Insurance Trust Fund will be 
exhausted by the year 2002. Of equal concern were the views of 
the Chief Actuary for Medicare which indicated that not only is 
the Hospital Insurance Trust Fund financially out of balance, 
but spending growth by the Supplementary Medical Insurance 
Trust Fund is also a concern because the rate of growth is 
unsustainable.
    The Commerce Committee is deeply concerned about the future 
of the Medicare program. It is clear from the Trustees' report 
that a serious review of all aspects of the Medicare program 
must be undertaken immediately in order to find a solution to 
this crisis. It is equally clear that the time for such a 
review is now if we are to solve this problem in a fiscally 
responsible and timely manner.
    To that end, it would be extremely beneficial if the Board 
of Trustees, who have been examining the Medicare trust funds 
in great detail, were to submit their legislative 
recommendations to Congress for consideration as we undergo 
this process. I, therefore, support your legislation which 
would require the Board of Trustees of the Medicare trust funds 
to submit specific program legislation to Congress by not later 
than June 30, 1995.
    For that reason, I intend to notify the Speaker that, in 
order to expedite House passage of H.R. 1590 so as to receive 
the Trustees' recommendations in a timely manner, I will waive 
the Commerce Committee's right to mark up this legislation and 
allow the Committee to be discharged from further consideration 
of H.R. 1590, provided that such waiver does not in any way 
prejudice the Commerce Committee's jurisdictional prerogatives 
in the future with respect to this measure or any similar 
legislation.
    It is also my intention to ask the Speaker that, should 
this legislation become the subject of a House-Senate 
conference, the Commerce Committee would be afforded an equal 
number of conferees as those appointed from the Committee on 
Ways and Means with respect to H.R. 1590, and any Senate 
amendments thereto.
    In furtherance of our mutual interest on this legislation, 
I would also ask that you include this letter in the Ways and 
Means Committee report on H.R. 1590.
    I look forward to working with you in the future, both on 
this bill and on other legislation of interest to our two 
Committees.
            Sincerely,
                                   Thomas J. Bliley, Jr., Chairman.
                         VII. DISSENTING VIEWS

    H.R. 1590 is not needed, accomplishes nothing which cannot 
be accomplished without legislation, and is technically flawed 
in that it asks the wrong people to render opinions on issues 
which are not within their area of expertise.
    With H.R. 1590 the Majority is trying to find someone else 
to fulfill its responsibilities. As the majority party, the 
Republicans must propose a budget, along with the detailed 
proposals necessary to meet that budget's requirements.
    We understand and appreciate their problem. Last year we 
proposed a detailed health reform bill which laid out specific 
Medicare cuts which would have reduced Medicare spending by 
$168 billion over seven years, and improved significantly the 
status of the Hospital Insurance (Part A) Trust Fund. We did 
not ask the President for the proposals that we made, nor did 
we rely upon alarming statements about the status of Medicare's 
trust funds in order to scare the public into accepting our 
proposals.
    The Republican response to our Medicare savings proposals 
was to offer an amendment in Committee to strip all of them 
from the bill. Every Republican on the Committee voted ``aye.'' 
At the time Mr. Archer alleged that our proposals would 
``devastate their program under Medicare,'' and that ``quality 
of care and availability of care * * * [would be] the price 
that is going to have to be paid to pay for these cuts.'' Mr. 
Shaw said that our proposals would ``destroy a health care 
program in this country that we know works and that our seniors 
are depending on.''
    Their most recent effort is to focus on the insolvency of 
the Part A Trust Fund. This effort to frighten the public into 
accepting huge cuts in Medicare does not correspond with their 
past performance.
    A few facts are in order to put this issue into 
perspective. First, the Trust Fund is currently estimated to be 
insolvent during FY 2002, seven years hence. This is by no 
means the closest to insolvency which the program has been, as 
the following chart illustrates.


It is also important to point out that the insolvency status of 
the Trust Fund in 1994 was the same as it is in 1995--seven 
years of solvency remaining. No one on the Republican side 
pointed with alarm to last year's report, although insolvency 
was estimated to be just as imminent. And, as has already been 
pointed out, Republicans unanimously voted down proposals which 
would have extended the solvency of the Part A Trust Fund to 
about fifteen years.
    Ironically, the only action taken thus far relating to the 
solvency of the Part A Trust Fund is approval of the Republican 
Contract with America provision which takes money out of the 
Part A Trust Fund through a reduction in the amount of Social 
Security benefits subject to taxation. It is at best 
disingenuous to worry with great anguish about the future 
solvency of the Trust Fund when you have a proposal on the 
table which takes the Fund in exactly the wrong direction.
    In addition, the question of Trust Fund insolvency has 
nothing to do with Medicare's Supplementary Medical Insurance 
program, Part B. The report of the Part B Trustees states that 
Part B is actuarially sound. Therefore, if reductions in 
Medicare are being made solely to ``save'' the Trust Funds, 
there is not reason to cut Part B at all since Part B's Trust 
Fund doesn't need saving.
    Of course, the debate has nothing to do with ``saving'' the 
Medicare Part A Trust Fund. As the FY 1995 budget resolution 
approved by the Budget Committee makes clear, the Republicans 
are looking for huge cuts in Medicare, $283 billion over seven 
years, far beyond any amount that is needed to reasonably 
extend the solvency of the Part A Trust Fund. The resolution 
envisions large cuts in Part B which have nothing to do with 
solvency, and would impose large increases on out-of-pocket 
spending by beneficiaries. No wonder they want to get someone 
else to endorse their desire to slash this program.
    The bill is also technically flawed. The law states that it 
shall be the duty of the Trustees to ``hold the Trust Fund,'' 
``report to the Congress. * * * each year on the operation and 
status of the Trust Fund;'' ``report immediately whenever * * * 
the amount of the Fund is unduly small;'' and ``review the 
general policies followed in managing the Fund.'' The statute 
does not give the Boards of Trustees any responsibility for 
managing the Medicare program--their responsibilities are to 
manage the Trust Funds, and to report to Congress on their 
operation.
    The Trustees do not as a group have the expertise to make 
recommendations on operating the Medicare program. The 
Secretary of the Treasury is the managing trustee. Asking him 
how to manage Medicare is like asking one's banker how to run 
one's life. Nevertheless, H.R. 1590 asks the Secretary of the 
Treasury, as the managing Trustee, to make recommendations on 
how to control hospital and physician costs, matters clearly 
outside his area of expertise. And although the Secretary of 
Health and Human Services sits as a Trustee, she is joined by 
three other ex officio Trustees who may or may not have 
expertise on these highly technical matters.
    The fact is that the Trustees have done their job--they 
have reported to the Congress that action needs to be taken to 
resolve the Part A Trust Fund's long-range imbalance of 
expenditures over revenue. It is the job of the Congress to act 
on the report which the Trustees have submitted.
    If in fact the Majority was truly interested in seeking 
recommendations on controlling the growth in Medicare, then 
competent authorities such as the Prospective Payment 
Assessment Commission, the Physician Payment Review Commission, 
the General Accounting Office, the Office of Technology 
Assessment, and the Congressional Research Service should have 
been asked. All of these experts work directly for the Congress 
and would make recommendations if asked, rendering this bill 
unnecessary.
    In summary, this is a nonsensical bill, destined to be 
ignored once the real battle over Medicare is joined. If the 
Republicans wish to cut Medicare, the need to put their 
proposals on the table, as Budget Committee Chairman Kasich has 
done, and let the Committee work their will. No additional 
reports or studies are required for that to occur. This bill is 
only about public relations, and given that, we urge a ``No'' 
vote.

                                   Sam M. Gibbons.
                                   Pete Stark.
                                   Robert T. Matsui.
                                   Sander M. Levin.
                                   Charles B. Rangel.
                                   Jim McDermott.
                                   Jerry Kleczka.
                                   L.F. Payne.
                                   Richard E. Neal.
                                   William J. Coyne.
                                   Harold Ford.
                                   Barbara B. Kennelly.
                                   John Lewis.
                                   Ben Cardin.