The Future of Medicare -- An Examination of IPAB

Statement

Today Maryland Congressman Chris Van Hollen, Ranking Member of the House Budget Committee, made opening remarks at the House Budget Committee hearing, "The Future of Medicare: An Examination of the Independent Payment Advisory Board." Below are his remarks as delivered.

"Thank you Mr. Chairman. I want to join Chairman Ryan in welcoming you, Madame Secretary, to the panel and to the other witnesses we are going to hear from later. And I want to commend you on two initiatives you've recently undertaken to help implement the Affordable Care Act. One is the Rules Guidelines you have recently released to govern the exchanges, which will open the door to millions more Americans being able to get affordable health care in the United States of America. The other, that received less attention, is your recently announced initiative to improve the coordination or care for individuals who are on both Medicaid and Medicare, called the dual eligibles.

"It was you who pointed out using some of the innovative approaches in the Affordable Care Act, we can both improve the quality of care and save money through some of the changes you are proposing there. Those are important parts of the Affordable Care Act that together with others will help strengthen health care protections for the American people, including provisions that have already taken effect, including making sure insurance companies can no longer discriminate against kids with asthma, diabetes, or other preexisting conditions by denying them coverage, including making sure that young people up to the age of 26 can stay on their parents' health care plans, including providing tax credits to hundreds of thousands of small businesses who can now afford to provide coverage to their patients. And including beginning and ultimately closing the prescription drug donut hole in Medicare that many seniors find themselves trapped in. Those are some of the important improvements that have been made.

"So I believe that the fundamental question, the fundamental underlying question of today's hearing is What is the best way to strengthen our health care system, and specifically, how do we keep the promise of Medicare and meet the challenges of Medicare as the chairman has said? One approach is to build upon the very important reforms that were enacted in the Affordable Care Act. The Medicare trustees have found that those measures will indeed reduce the per capita cost for Medicare beneficiaries going forward, the increase in per capita cost; that it will help bend the curve and that it will in fact extend the solvency of Medicare. We need to build upon those approaches. As we have heard in testimony before this committee from Dr. Rivlin and others, the Affordable Care Act opens all sorts of new avenues to try and modernize the structure of Medicare, which we need to do. We need to change the incentive structure so that it rewards the quality of care, the value of care, over the volume of care and the quantity of care. And Mr. Chairman, we agree that significant changes need to be made to modernize the system in that way.

"The Independent Payment Advisory Board is simply one tool in the toolbox for getting it done. It creates a backstop, or a failsafe provision to ensure the continued solvency of Medicare if, and only if, the Congress chooses not to act to take other measures to build upon the kind of changes we saw in the Affordable Care Act. And by the way, the IPAB is specifically, specifically prohibited by law from changing Medicare benefits. That prerogative is reserved to the Congress. Moreover, the latest CBO projections indicate that the rates of growth in spending for beneficiary are below the target rates of growth for fiscal years 2015 and 2021 set forth in the Affordable Care Act and therefore CBO projects that under current law, the IPAB mechanism will not affect Medicare spending during the 2011 to 2021 period.

"So, building on that approach is one way. What's the other approach? The other approach is the path set forward in the Republican budget, a plan that will end the Medicare guarantee and will force Medicare beneficiaries into the private insurance market. That plan is a double whammy, a double whammy for the Medicare beneficiaries for the following reasons.

"First, the Congressional Budget Office has determined that that plan will actually drive up overall health care costs. It changes the allocation, the burden, but it drives up overall health care costs. Why? Because providing that care in the private market is more expensive, and in fact if you look at the history of per capita growth rates in the private market, compared to per capita growth rates in Medicare, Medicare is actually outperformed the private market. And therefore you're saying to those seniors, "We're going to toss you into the private insurance market, where you're going to face higher premiums and costs.' Why is it a double whammy? Because as you do that, you dramatically reduce the support for Medicare beneficiaries from the federal government, dramatically. As CBO has pointed out, by the year 2030, you essentially flip the burden from where it is today. Today, the Medicare beneficiary, on average, picks up about 30 percent of the cost and the Medicare program picks up about 70 percent. By the year 2030 under the Republican plan, it's the reverse, because of the rising costs of care and the diminishing support from Medicare. Double whammy.

"And I want to just really wrap up with this point because we've heard it said that what the Republican plan offers Medicare beneficiaries is really the same as what members of Congress get. The reason that is simply untrue is because members of Congress, by law, have a certain percentage of their health care premiums supported by the federal government, by the tax payer. In fact, under what's called the Fair Share Formula, that ranges from 72 to 75 percent on average, the share that's picked up by the federal government. Under the Republican plan, future of Medicare, we're going to be asking essentially Medicare beneficiaries to pick up themselves that cost and the federal government will pick up only the remainder. So essentially, the flip of the deal that members of Congress give themselves. That's unfair.

"We have to make choices. We have said many times in this committee that to govern is to choose. We have lots of members on our side who are not wild about every aspect of IPAB, even in its backstop role. But I think we're united and I believe ultimately the American people united that that is a better approach, we have to fix the kinks as we go along, than the idea of ending the Medicare guarantee and throwing that decision not to experts who are confirmed by the United States Senate as a backstop, but the people on the frontline will be the insurance industry. Under the Republican plan it's the insurance industry that fixes the benefits, frankly actually in consultation with what you guys say federal bureaucrats and they will set the premiums and they will choose, not the patients, at the end of the day. So, that is the choice. Mr. Chairman, thank you for holding this hearing, and I look forward to the testimony."

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