where we brought in the chief actuary and so on, i went to gene as one of the participants in that panel. he's been speaking on all the entitlements, including medicare, for a number of years now. gene? >> thank you, bob. i owe my contacts here with aei, to you as well. i've enjoyed doing it over the years. the thing i'm going to talk about a little bit is related to the first papers i did for you, i think i called it "health and nothing else" which is how the growth in health care was dominating almost all spending. you know, sometimes, the way one uses words makes a difference in how you interpret it. i'm reminded of notices in some church bulletins, for instance. one notice said please put your contribution in the collection basket along with the person you want to be remembered. another one said that the youth

will be performing hamlet in the basement tonight. please come early and watch this tragedy unfold. yet another one said eliza will sing i will not pass this way again at the last church service, much to the delight of the crowd. when i talk about health policy, i'm going to try to extend it, because i think health policy no longer is just health policy. in fact it's not even dominantly health policy. increasingly, it's, as dean i think mentioned, it's basically budget policy. budget policy for a long time has been that 500 pound gorilla sitting in the corner. it's now the 800 pound gorilla sitting in the middle of the room. there's almost nothing else we can talk about in any area of the budget without walking by that 800 pound gorilla and how it's going to take a swipe at

us. so i have a couple slides up here quickly up front to try to convince you why health policy is no longer health policy and medicare is the dominant public expen expenditu expenditure. if one counted spending on health care equal to the taxes we pay, and i've long argued that's what we should do, we should stop reporting on revenues as if they're the taxes the public owes. the taxes the public owes is equal to the spending. it's some of them are deferred taxes and some are the taxes we pay currently. right now we're spending about $12,000 a household in public policy on health care. we're having to raise revenues of about 12,000. we're borrowing 6,000 or 4,000 from china to apay for health policy. it's a huge, dominant item, and as a even thinking about it in

terms of what tax rate you really need to put on the public, just to pay for public policy now, you actually -- you can come up to rates that are something like 20% a person, monetary income, not gdp, but monetary income, because tax bases are half of gdp. if government is spending half of gdp, it's spending half of money income. it's dominating tax policy. i'll give you another example here. it's also dominating what's happening to the income distribution. we get a lot of stories about how changes in income distribution are due to basically the unequal distribution of income. there's no doubt that incomes have risen much faster at the top of the income distribution than they have at the middle and bottom. i don't want to discounts that trend. we often don't measure health policy. health care is becoming so increasingly expensive that a lot of growth in income, the

middle income families have, particularly elderly families, these tables don't study the elderly at all, they're not even put in the tables. a lot of them, we're giving a lot more in the way of health care to people, including the tax subsidies or direct subsidies we give to the elde y elderly. you look at the growth in health care as per capita health cost as a percent of median income. you can see how that's starting to dominate income distribution policy as well. and then finally, i just want to talk about growth policy. some of the numbers i've been running, this actually comes from that original continuation of the study i did a long time ago, bob, in terms of how much health care taking of per capita spending and you can see that the growth, this is how much at the margin, is the increase in health care cost, how much -- what share of that is the percent. what percent of that is the

growth in per capita growth in income. for the last decade, it's been about 40%. we're upward to an average projected going forward even after even after the recovery of another 27%, 30% through the next decade so health care is dominated where all of our growth in health care is taking place. so why does that mean you have to deal with medicare and why does joe write the paper that he did? it's because medicare is, if you want to, it's the flagship. it's the flagship for health policy. we can argue about what all the other ships are doing and how they should be coordinated but simply put, it is the flagship, and as that flagship goes, so often goes the health policy. i remember speaking to the head of an insurance company once who said often we set our prices by what we see that medicare does. we might not september the same price but you know, there are limits on how much our price will allow to be higher than medicare policy. so if all that's true, then what

do i have to add to this debate? well, if i'm right about budget policy now being this 800 pound gorilla in the middle of the room, i'm going to take a stance that basically tends to offend both my conservative friends and my liberal friends which is that i'm going to argue that budget, government health policy has to be put in a budget, and i know all the reasons why it shouldn't he be put in a budget. from the left you get the answer unless i get it in my budget, unless i get medicare for all, you can't put it in a budget because you're going to have this unequal distribution of benefits between the medicaid recipients and medicare recipients and private payers. quite honestly we've already got that in spades. that's right. that does cause certain inequity problems and from the right you get the excuse, well we can't -- we don't really like regulation, unless i can get the, either an individualized system or a premium support system, by the way i tend to support a premium

support system in the bundling that several people on this panel have done but from the right you get unless i can do that, i'm not going to put medicare in a budget. to me this is like arguing for my diet, i might think i have the right diet but no exercise. diet without exercise isn't going to work and thinking that we're ever going to get health policy under control without having the budget constraint driving people to make these decisions is absolutely silly. so yes, i recognize that means that if i put medicare in a budget and we continue it as it is now, that means more price and quantity controls, that are going to create all sorts of inequities and inefficiencies that i don't like, but if you don't put it in a budget, what happens is any reform you propose, including premium support and anything else, always gets contrasted to an open-ended budget that's growing forever and people say a-ha! compared to this open-ended budget you're going to be hurting these people. within a budget you can debate

whether you favor premium support or a price and quantity controlled system but if you compare an open-ended budget with a closed budget, you always lose the battle because the open-ended budget causes problems, and the open-ended budget now is such that health care and medicare in particular is the one part of the budget where you as an individual and the doctor or the provider you're dealing with decide what the rest of us are going to pay. that is not a budget policy that can hold up anywhere. so yes, you'll cause these inequities and these inefficiencies, as long as we have a hybrid system and as long as we have this debate over what the future of health care is going to be, those debates are not getting in. i'm going to argue even if we go to premium support you're still going to have price and quantity controls within the insurance package thaw put there, somebody is going to put toes on, ideally you try to have private payers so there's debate but insurance policies have price limits. medicare by the way does have

price limits. there is a reason why the next r drug can't charge $1 million for that drug, it's a lousy set of pricing controls. if you're going to have a pricing control system put it in place and let it operate within that brunlg budget and let that restraint force you to do the to reform you want. or else you have hthis open-endd system which will provide more than a closed end system and it will, because it's so much more money, more money to float around. i'm in a minority, my conservatives friends don't like it and my liberal friends don't like it. if you don't put a budget constraint on the system you'll never get the reforms on the table so many people say they want and joe i think very well lays out in his paper. thank you. >> thank you gene. and now, as i said before, by design we give bill thomas the last word. he's never a shrinking violet

but as you know, former chairman of the house ways and means committee, has been involved in these issues for years, and he was also a 1998, the co-chair of what was known as the bo thomas commission, the national bipartisan commission on the future of medicare, so he's been there. bill? >> thanks a lot, bob. this has been good, and i just want to say, i've been involved in every major medicare battle, except its creation in 1965, and there has been an evolution of sinking and moving forward, and i, as opposed to some others, are -- i'm fairly optimistic, based on where we are. now, when you start speaking, you're supposed to say something good about the presenter. [ laughter ] and on the basis of his presentation, what really jumped

out at me, joe, was that i want to compliment you because i've never heard anyone combine full monte and structural reform in the same sentence. i think rahm emanuel got a bad rap when he said, "don't let a crisis go to waste." that was a politician who understood policy, being honest, and that's always dangerous. i think i'm in the same boat right now. i think the crisis that we find ourselves in and all of the work that we had done earlier and dean talked about some of that, actually puts us in a pretty good position. i was adamant about trying to add prescription drugs to medicare when we had the chance, that is, republicans controlled the house and the senate and the presidency, and it was time. in fact, it was overdue in terms

of time. nobody remembers that the alternative that the democrats put up against our modest $400 billion program -- came in at 395 -- was $800 billion, and it was going to jump significantly in the next few years, and basically, what we said to ourselves was that if we're ever going to have an opportunity to try to create a market-based structure in ways that we think will actually work, one, curb price, but more importantly, two, allow an evolution in which people could get -- make choices and those choices would drive the product based upon the market concept, in a positive way. and so dean is absolutely right. the reason that prescription drugs are so important to me was it was a clean sheet of paper. i didn't have to worry about how do you do like we did with medicare plus choice, it's fee

for service but then you've got to add on some prescriptions early up front, and then you've got 80 cents on the dollar to make it work in comparison to fee for service. it couldn't work. now, of course, with medicare advantage, we had to put $1.20 in there compared to fee for service but remember, understand this, you salvage policy from politics. policy is what you have left over after you get the house and the senate to yes. you may not have noticed but at the time, the chairman and ranking member of the senate finance committee came from montana, and iowa, and they wanted magic -- managed care, magic care would be a better word for it. [ laughter ] mangled care, in their states, okay, how much does it cost?

oh my gosh, a whole lot of money. i said how much does it cost and that was what we put in so that we could actually move that whole structural change that we were advocating to the president, and get it signed. we had full intention of beginning to ratchet down -- if you can do it for $1.20, everybody can do it for $1.20. can you do it for $1.15, can you do it for $1.12, can you do it for $1.10, because the creativity in the marketplace would bring about the change. same thing with the doughnut hole. yeah, we were limited by money but i didn't want any more money, because we had the opportunity to create a structure which was basically actuarily equivalent on its basis and the various folk modifying, zero dollars added you got this, first year

everybody went for the zero dollar benefit, then all of the sudden somebody put in five bucks, additional five bucks you can get this, with an additional ten bucks you can get that, to you began to see people saying this has value, enough for me to put a couple of bucks in. we didn't tell them they had to put bucks in. the marketplace created a pot. lo and behold in three years the zero plans were all gone. they saw value in what was in it. it wasn't a government program called medigap, the first offer was you get coverage in europe. that's what it was. and it has never been valued, but people who are risk averse like a lot of seniors pumped an enormous amount of money in for that marginal benefit. had we been able to fold that in over the years, we could phave produced a much more significant product, so in the approach of rahm emanuel, i'm not looking at

what happened in the 111th congress in terms of what they did. i look at what happened in the 111th congress in what they didn't do. enormous fight over that prescription model, which did create a doughnut hole. i mean, the seniors are the greatest generation and i don't mean that in the sense of the book that was written. they are the greatest generation in terms of the recipients of an intergenerational transfer of wealth in the history of the world, and if you offer them more, guess what? they'll take more. so it was ironic in the 111th, well let's throw in 250 bucks into the doughnut hole, and then listen for it to hit the bottom of the well. what was beginning to happen was the private plans were beginning to offer private dollars to fill the doughnut hole.

if that's what you want, we'll figure it out and we'll get it for you. you let that creativity fill out a program. yes, you had to take care of the top tail. in fact, i think one of the modest offers i would suggest in terms of change is the government be the insurer of last resort on any bell-shaped curve in terms of the tail. take the tail away, 5%, 6%, 7%, you can write insurance products for the rest of it, and you monitor and make sure people get value. the second thing that wasn't taken away in the 111th, although they milked it considerably, was the medicare advantage. medicare advantage was an actuarily equivalent program, prescription drugs, actuarily equivalent, that you could put some money into if you wanted to enhance the plan. the democrats didn't blow those up, well they couldn't because they're too popular but also

importantly they came in way under budget. now, medicare advantage didn't come in under budget because they were told how much they could spend so they had to fill up the pot with stuff, which was the wrong way to do it, but again it wouldn't have gotten to the president's desk, the senate wouldn't have approved it based upon the makeup of the senate. well, no, i guess he's gone, we now have utah as the ranking member, so it's montana and utah. still a lot of space for bringing health care programs. so i'd just like to suggest some ideas that i think we can lay on the table now that we couldn't have laid on the table before what i consider the democrats' excess in the 111th congress and the health care program i think they finally wound up about, i feel very strongly is not a good one for a couple of really practical reasons that have already been mentioned. any cut that's going to come out

of somebody's hide who has the ability to exercise political leverage, excuse me, every proposed reduction in there, because they all fit that same model, won't happen. to create a review structure opposite or different than a medpack without including hospitals is crazy. look at joe's bucks. i mean it's clear that hospital services have not been the major dominant rnlg cha charger but t right up there and home health care which used to be under part "a" under president clinton was shifted to part "b"? because it was a much bigger fight to raise it, part "a" opens up the general fund. no one can be serious about a discussion of curbing health care costs especially medicare, if you don't combine "a" and

"b." now hopefully we'll move to a two-year budget model so we don't eat up 9 months, 11 months out of the year trying to create a budget and in fact in the second session of the 111th they didn't create a budget anymore. we hope that's not the ongoing pattern, but if you don't cap the amount of money available, you lose the opportunity for the creativity, if it's an actuarily equivalent structure out in the private sector. that's got fee for service. i think fee for service goes away, to a very great extent except under certain circumstances, if you can build those kinds of changes into a fundamental medicare, you got your base part "a." here's how much through a political debate we're going to put in to cover part "b." it's not an entitlement. gene talked about open-ended. it's not open-ended. any of you watched tv and see

what's happening in madison, wisconsin? well, one, it's a lesson you never create your state capital where your largest university is. [ laughter ] but secondly, just looks so much like the other pictures i'd been watching like cairo or ba hain except these were people vehemently protesting against a democratically elected popular government trying to take measures they thought were necessary. it's a little spooky. because i think in the 111th congress, the democrats missed an enormous opportunity, and frankly, president missed an enormous opportunity to focus on the employer preference or the employer extension. we came close to doing that. we tried for years to cap that. in fact, i was pleased to see

bill grattison because in 1990 -- '87? '87 we, through a bipartisan teamwork in ways and means, came within two votes of capping the employer exemption at the astronomical amount of $5,000, which was double the average health plan then available. that would have forced the discipline that -- and the creativity that we're beginning to see under the structure now. why do i think it's a good time, notwithstanding the chances that were blown? because the democrats put in a far-reaching support structure, which has a lot of flaws, and i got to stop so we can do some questions, so it's there, and so my colleagues tried repeal, and people say why did they try repeal? it's very simple. now you don't have to debate constantly why didn't you try to repeal? we tried. it's off the table.

now, let's get creative, and let me tell you, i have spent more time dealing with bureaucrats at cms and elsewhere in the administration, i apoll gil jio those of you who were there, in terms of trying to be creative, i was in a room and after one hour i couldn't take it. you know what we're trying to do back on medicare plus choice, figure out the phone number that people could call to get help on medicare. so for an hour they were up there with chalk and a blackboard trying to create an acronym that people would use to call 1-800-medicare. i finally just said why don't you put out that it's 1-800-m 1-800-medica 1-800-medicare? and they looked at me, they said that's too many letters. i said dial it. the last letter doesn't mean anything. the last number doesn't mean anything. it will go through when you get

to the "r," so why try to create an acronym that people won't understand? just tell the folk dial 1-800-medicare, you'll get us. "oh. does that work?" "yeah." so here we go with the grand political design. admit mandatory coverage. you can't really start a structure without it but admit all the folk coming on, but get serious about medicare in today's world, and i don't want to hear one peep about well, gee, if we let people put some of their own money in the pot, that will make medicare a welfare system. yeah, capital "w," capital "e," the money being put into the system, tell the docs, we've been waiting for years for you to come forward with some quality measures and you've

never really done it in the way that you should have. yes some specialties have and clearly skilled nursing facility that was invented by government payments and others have come forward with policies that allow us to begin to put quality into it, and especially with medicare advantage and medicare part "d" where you can put your money in, we can do all kinds of positive things rewarding the quality not just from an academic examination but from people voting with their dollars on which products or better and tell the docs you had your chance, but get the democrats to accept what we call balanced billing. we have actuarily equivalent in the prescription drug part. we have actuarily equivalent in the medicare advantage. let's talk about a medicare which provides for all -- and the docs have to accept it -- a

medically equivalent position for those who can't afford more than that. maybe those of you -- probably almost none of you remember the old series, "good, better, best" that good is good. if you can't afford more, good is good. put in a little more money, better, and a little more money you get best. tell your doctors to get you out a balanced billing but you have to accept that structure that the democrats had put in for that basic safety net and how can the democrats argue against that when they didn't get rid of the other things that we put in? it must be pretty good. so have the republicans, your conservative friends accept that basic package that has been significantly advantaged, and a requirement that all are under the health care, which carries

over to medicare, but let someone who wants to, and has the wherewithal to do so to take the amount of money on the actuarily equivalent medicare pack annual and add some of their own. so docs are tied in to delivering across the board, but they can get their money not from some phony rigged sgr, sustainable growth rate, that doesn't bork, and we keep paying for something that doesn't work. who -- who does that? oh, thaerpt's right, it's government. we rent it every year, and the rent is costing us more and more. by the way, that model that we used for medicare part "d," it really ought to be moved quickly into medicaid, and utilized, because a lot of states have an integrated management care for those who can't pay for it, for

themselves, and the idea was based on the fact that i noticed that seniors were getting their prescription drugs out of medicaid, and that they really got a much better program than most of the seniors who were in medicare, and so i said how come you have to be poor first and senior second to get a decent prescription drug package. why can't you be a senior first and low income, which you will be taken care of in the prescription package. one of the reasons was that my good friend henry waxman found out that, from the energy and commerce position, by putting the seniors in the medicaid package, it was a terrific political driver to move more products than the other way around. so my plea is, maybe a base

closing model, where -- and i would prefer medpac beefed up a little bit so hospitals are still in the cost containment structure, offers a suggestion to congress that they vote up or do down, some structure that forces them to make a decision and with part "b" built in and you're making those decisions at the same time in a budgetary process, you get a basic decent program that no one should feel guilty about in terms of what we offer, but you have an open-ended, not in the sense of government putting however much money needs to be eaten up by the grist mill of health care, but by people who are willing to put their money in, and i do want to put a fitch in as i end health savings accounts allow anyone to do that, with a little prudence and remember other people can put money in your health savings account as well,

and that would allow you to spend a little more money if you wanted to for some of the other programs. it may not happen until after the election. however, what's happening in wisconsin is going to happen in several other states. we've got six senators meeting right now trying to be creative. one of them said he's not coming back, kent conrad, to try to create an atmosphere of working together and come up with really tough problems. the republicans are pretty good in terms of who's there. mike crepewell from idaho, a really good guy, he doesn't publish his academic credentials in idaho when he runs but if you take a look at them, they're very impressive. coburn is a pretty good guy. tom coburn is realistic. if he gets this, he's willing to give that. you need those conservatives in the room. durbin is there from the

leadership to make sure that they know what's going on but i served with dick, and he went through that commission. he's frustrated, and i hate to say this, but it's possible that a major breakthrough may actually come from the senate. [ laughter ] and when i end on the note that our hope for a major change is placed in the united states senate, you know how desperate i am. [ laughter ] thanks a lot. >> okay, thank you very much, bill. we now, i know looking around the room we've got some very knowledgeable people here so i want to give you a chance to put your questions to the panel here, to anyone, and i'm looking at you, bill. okay. where is the microphone. yes, right here, it's in the

front, please. and please identify yourself and make your question as short as possible. >> bruce smith, brookings. i just wonder if the colleagues would address the question of i think chairman thomas got at it a little bit, what can you do, short of legislation, can the medpac actually combine the part "a" and "b," are you going to be able to do some sorts of things by being "creative" or are we going to have to go back to the legislative drawing board? >> on combining part "a" and "b" it hases to be legislative but you can create an atmosphere to make it easier if it's clear that republicans accept the changes the democrats have brought, if democrats areal to give up the belief that medicare should be as much as possible a

one-size-fits-all. since they didn't make those fundamental changes in prescription drugs and the medicare advantage that would have eliminated what i consider to be very positive force toward moving toward actuarily equivalent, if i could put my own money into the drug program and if i could put my own money in to a managed care structure, why can't i put my own money in for a mix and match, whether it's fee for service or the rest? it's almost theology with the democrats on that, but i think we're down to looking at desperate measures, and they've got to get rid of that theology and turn to the money that's available in the private sector, that right now gets given away. let me say i'd also take the part "b." we put in that more stringent structure on income, i'd basically run it up to nothing, because combining part "b" with "a" is still a very good program, maybe 10% or something but we need to get more money

out of those people who have the wherewithal and frankly would be willing to put it in. if you have a sound actuarial program that is not cookie cutter for all reasons. >> anyone else? well, i want to give -- oh, i'm sorry. miss -- where? right here, okay, sorry. >> deb williamson, intech. one thing i was thinking, about, joe, one of your slides reminded me of, i was kind of surprised no one has really commented on the fact when you look at the cbo budget lines in august for medicaid compared to march they're hugely higher. i only read the "wall street journal" so maybe "the post wags has commented on all of the sudden now you don't have to pay for it it's much larger. i don't know, it kind of surprises me. >> you're talking about medicaid

now? >> yes. >> well, i think it's strictly the difference between before health reform and after health reform. that's i think the main increase in medicaid, which is surprising. that is a change from what we've ever seen before but i think it's exclusively the legislation and the belief that everything is going to work out precisely the way the legislation says. >> it's the difference in the projection about the impact of the legislation, there's almost 20 million people. >> right, right, they're assuming that yeah, cbos are kind of caught in a conferenrne because they had to assume all the provisions would actually be implemented as you would superficially believe and because that's the way things work, but there's no reason to think, for example, that states won't be pushing very hard to push at least the 100 to 133% of

poverty people who are now supposed to be in medicaid into the exchanges where there's going to be more money, and better protection and better services. who wouldn't do that? and i think it will be hard for congress to resist, as long as they live in an unreal budget world. >> one thing, i don't know with the timing of the baseline but the other thing it could have reflected was the $110 billion plus of stimulus money through increased fmap that was provided to the states through arra, so that i think if you look at the tables, the federal share of medicaid has increased and that's a part of it and that actually is a big piece, too, as the states hold this collective debt i talked about of $175 billion and the end of june probably find there rnt isn't any more stimulus money and wisconsin and other places are dealing with the other issue of

the affordable care act having the maintenance of eligibility provision up until 2014, and what that means with no money coming in on the baseline, that may have been a piece of it. >> gene? >> i add a footnote to joe's footnote. as i look at what we've created now we have what i call a four-traunss system. medicare, medicare, the exchange and employer-provided health, the subsidy in terms of what the government does and the breakdowns between those four and who shifts over from one to the other can be enormous. i mean, the numbers in terms of people that might go to the exchange versus employer provided insurance because exchange interesting enough is so much more generous. in fact you wonder who the unions are representing because they are now the worker is now in the least subsidized part of this more universal system but in medicaid you've got the issue that joe raises with the states as you've got some parts of the system where states contribute, some parts where they don't contribute and the question they can get on the side with the

federal government's covering the cost versus the states they'll move a lot that way. another one nobody's paying attention to what happens to the near elderly now who now if they drop out of work for awhile or lower their incomes can now move to an exchange before they get on medicare which raised issues you raised, bill, or dean, i can't remember, what happens if people in one type of a plan and switch to another? the question of how people moving back and forth among the four tranches is the estimate the question you asked to me could enormously as we see the behavioral reactions. >> we've just gotten it completely backwards. the idea that the employer provided model is the ideal one forgets that you've got to go through a series of activities of daily living, going to work every day, performing in a way you get paid. it is atypical for a lot of people, and the organizations have created significant

differences in employer benefits, i.e. unions. i used to talk to the late ted kennedy, wasn't he as active on the redistribution of health distribution health benefits than employer write-offs and he just smiled and that wasn't change. had we been able to cap the employer provision, then when you go into the exchange, the amount of money you would use to match it would be a capped amount and we'd have control. the unions won that battle in the health care fight, and the exchange models the benefit you get off of the open-ended employer based system, and so they are enormously out of balance, and i don't believe the exchange can work. i think you're going to see some governors try to move state county, municipal employees on to it. the whole reason managed care was popular for awhile wasn't because you had a fairly fixed idea of your amount, just figure

2,000 a head, lock it in, clearly employers especially those who struggle to offer anything have seen what happened when they voluntarily put that assistance in for their employees and then the government dictated what they did and they couldn't get out and they had to pay. you give them a little daylight to move, they're going to move significantly. cbo says 3%, i think it could be 10%, 15%, 20%, and when you look at how munificent that benefit is and multiply is by five times the amount of people, it is a model, in my opinion, that can not work. >> let me add one more thing. it's not just the direct subsidy. they're also protected from out-much-pocket costs. >> oh, heavens, yes. >> it's an incredible deal. >> it's so incredible it can't be real. >> my name is peter, and the

staff, both republican and democrat, were under the belief that medicare plus choice, medicare advantage, i can't remember when they switched was paying too much compared to the fee for service costs. now, and i used to get beaten up by our democratic senator from the same state for being in favor of maintaining this plan. now what's happened in the intervening years old for you all to be so positive about medicare plus choice now and going forward? i don't understand what the switch is. >> it was an attempt to mimic fee for service and there was no prescription drug available. they were requiring in essence to add that. the bundling that they did with the pieces that they had could have been done for slightly more

than $1 for fee for service versus $1.05, $1.04, $1.07, for the medicare plus choice. the ma are jort then drove the payments to the medicare plus choice position to below a 1:1 equivalent with fee for service, so you were supposed to deliver managed care plus drugs for less than the fee for service price. that's someone who wants to hang on to fee for service and does not want creativity involved. medicare advantage was brought back at the same time, we now had a dedicated part d. prescription drug program that was standalone, or could be combined with a mangled care structure, and we started it, no question, at a price that i had to pay politically to be able to get that structure in place and so you can ratchet down the

amount but what you can't take away is the understanding that if you can produce an actuarily equivalent package, the juices in the private sector and in the interests of people drive the product that's presented and it drives the price down. market is what makes it work, not a government dictated managed care price for which you can perform acrobatics and still can't do it for the price. entirely different worlds. >> can i just add one thing, too? i think that what it i'm optimistic about is as chairman thomas talked about earlier, the infrastructure is still in place, i mean we've seen the costs come down but you know, we're trying to create with accountable care organizations and other things we talked about earlier, you know, this bundle payment cooperation between hospitals and positions, murray's organization does that, does that all the time, and so you know, it's to me preferable

to pay a private organization to manage that and decide what to negotiate and pay providers as opposed to the government coming in and negotiating with each individual one so i'm optimistic about the structure remaining in place. the other thing, chairman thomas alluded to but it's an important point, one of the fundamental aspects of premium support and it was in the original house bill until the senate screwed it up in part "d" was that you had to bring medicare advantage payments down to the same level as fee for service over time in order for the two parts to compete so there's a recognition of some quality between those programs, but what we have now is medicare advantage rates declining because of the affordable care act and the cuts there, but you're not going to get to premium support competition between the programs eventually, so i think that that is an important concept that even a conservative who is in favor of premium support would say that you have to equalize the payments in order to have

true competition. >> okay, with that, i want to bring this to a close and say that my summary statement is i think i heard that it's going to be difficult, but it is possible to get some political compromise on the reform of medicare. all is not lost, so with that, please join me in thanking our panel members. [ applause ] ?

>> they said that they would yield to the democratic process. >> yes. >> can we trust that the junta will, in fact, make good on their promise? they have deep economic interests in egypt and, ostensibly, an interest in protecting the statusuo