changes. we really need an overview look at the tax policy. we need the administration to be engaged. i have met with secretary geithner frequently. we need the administration to turn the leaders of government to make this happen. a big part of the growth agenda is not just tax policy. it is also trade policy. when you look at the 40 trade agreements the european union has pending, we have three better five years old that we cannot get done. >> in 1986 when we have a landmark tax reform, congress was different. a lot of people who have been around washington for a long time say there is not the leadership in congress to get this done and we will have to be bipartisan for the good of the

country. are you confident congress has the capacity to do something like the 1986 tax reform? >> things change. i do not know. i can tell you we are working. we have had a lot of hearings. senate finance is having hearings every week. house ways and means has had hearings. we have had private meetings and briefings with both parties together. every day you have to get up and do your job. at some point, you may get there. people ask how to get a bill passed. you have to do your homework, build consensus, and try to move forward. it is absolutely something we need to do. there are people calling out for fundamental tax reforms. a lot is being said. the president at times says the

right things about the issue. the secretary of the treasury has. there is a lot of that coming together. when i went through the tax deal at the end of the year and there were two under provisions on the table -- 200 provisions on the table that we were trying to understand, it was clear to me it was not a workable way to have employers and individuals, and families understand what their responsibilities are. we have got to make a change. it was crystal clear to me before. it was really driven home through that experience. i feel strongly about this issue. i am working hard to try to do that. >> what is the holdup in getting the trade deals done? >> the president has said he will not send up the agreements without adjustments.

we're trying to find common ground. i tried to do something earlier on this in the congress. it will not be easy. >> what is the issue? we know that trade is good for the country as a whole. some people benefit and some get hurt. the economic justification for some kind of trade adjustment assistance is that society as a whole compensates the losers. do republicans have a problem with the principle? is the program to screwed up? what is the issue? >> the ways we compensate people who have lost jobs is disjointed. we need to get a broader view of it. the real problem is it is a very expensive program. long-term payments, 80% credit for health benefits. if you are at a restaurant that

goes out of business, you get 99 weeks. if you are in an industry that went somewhere else, you get 150 weeks. there is a fairness issue that people have concerns about. i want to see the trade agreements. the benefits are important. it will mean 250,000 jobs in the past these three. we're losing our place in the world. >> there are lots of proposals to do a different kind of adjustment. peds aboutouple of offens that. is some kind of reform on the table? >> the president has said it has to be taa. it has to be resolved before he will send up the agreements. he has to send them up before we

act on them. i hope we're close but we're not there yet. close does not really count. [laughter] i want to do it. i think the administration wants to do it. we have a new hurdle to get over. it is not insurmountable. i agree we will get it done this year. >> i have wondered what it is like to be a leader in the house this time around. you have a lot of new members. a lot of them seem to be very opinionated. many do not have much experience in government. how much of the challenge has this been for you as a member of the leadership? >> one of my local supporters said he was not sure if he was leading or being chased. [laughter] that sort of sums it up in the congress.

>> we have a microphone if somebody wants to ask a question. if not, i will keep going. allen? >> an issue has come up several times in the last 24 hours. several people have talked about in terms of competitiveness globally the importance of reforming immigration laws and the craziness of the best and brightest coming here to study and then being shipped back home. many of the company's then feel compelled to locate the facilities where the people are as opposed to hear even though they might prefer to do it here. what are the chances politically

of getting something done about that? that is an issue without very strong presidential leadership, you will not see happen or bubble up in the congress. the real issue is the need for some certainty. the real problem is those who have come here and broken the rules, what happens there. until that gets resolved and there is not some benefit for having broken the rules, it will be difficult. you do not receive some benefit for having broken the rules. maybe i did not say that in the most artful way. if i did not, i will certainly hear about it. [laughter]

even the christmas tree farmer in my district is interested in the issue. it is certainly important to businesses as well as agriculture. >> brett ferguson with bna. there has been a huge lobbying push the last several months. are you willing to say with any certainty that the repatriation bill is not going to come through your committee, that you are not going to sign of on a one time repatriation bill this year? >> i have been here long enough to say with certainty -- not to say with certainty something will happen or not. some estimate of $1 trillion is

stranded overseas. if it does not get back here, it's invested over there. it may never come back. i would like to use it in the context a fundamental tax reform. i would like to see the change so that we do not have the same problem all over again in five more years. >> if you do it as a onetime bill, you do not have the money to lubricate tax reform. >> we did repatriation a few years ago. here we are again with the same problem. i think it is important to change more than a one time. it is something i think is very important to do. >> gerry? >> i am with "the journal."

you said the economy is growing at half the rate most people thought it would be. you know this is not a good time to raise revenues and taxes it is also not a good time to cut spending, but here we are. i am wondering if you think that ought to affect the pace of spending cuts or whether you think we are learning can see in -- kensian economics does not work. >> with the de- commission, we had testimony from outside economists that studied 600 years of economic history for every country in the world. when it gets to that level, it impacts your ability to grow. they estimated about 1% came off of our economic growth. that is about 1 million jobs in the u.s., so there is a direct

line you can connect between debt and job creation. that is why it is so essential we have spending reductions. the treasury department just issued a report. our debt is reaching 100% of our economy five years than they estimated earlier. it is not just that we're there. it is the pace we have gotten trajectory is also a critical part. we have to begin to bring that back. the public debt is hampering the ability of the private economy. >> there has been talk of the tax extension. >> i do not think it is a good idea. the piecemeal tax reform policy

without a broader view is not the approach we ought to take. we need a more overarching approach to our tax policy. >> his question implies we could have contraction erie fiscal policy that might make the economy weaker. >> we have confectionary economic policy because of our debt. ary economicon ver policy because of our debt. that is what is also hurting our ability to grow. the debt has become so much a part of our economic picture. this is not the 1990's in terms of our debt to gdp ratio. they are very different prospects. >> you have like 50 cfo's here.

i believe all of them want what is good for their companies and for the united states. look would you tell people in the business community they ought to do about -- what would you tell people in the business community they ought to do that will make it more likely we will be in a better place in a year or two? >> we need a comprehensive approach to our tax code. we need some certainty. the idea that provisions expire every year or two is not acceptable. we need to have a business tax that is competitive. hopefully that will mean moving to a territorial system in their minds and they will communicate that. they have a very strong voice. it is always about jobs. how do we find a way to have the private economy grow with jobs

created? what is the best solution? getting the information to us or any member of congress is very helpful. that can clear away some of the confusion on the best approach. >> we promised the congressman he could go at 1:30. i keep my promises. thank you very much. [applause] it is good to see you. >> on monday, president obama will meet with senate majority leader harry reid and minority leader mitch mcconnell. it follows the withdrawal of eric cantor from budget talks. white house and negotiators face a august deadline for raising the debt ceiling.

next, a house ways and means subcommittee hearing where republicans and democrats disagreed about the best way to extend the life of medicare. also, remarks from the two public trustees who blamed the economy for the state of the program. you. >> thank you. now, you're recognized for five minutes. >> i appreciate the opportunity to appear before you to discuss the 2011 medicare trustees' report. i will focus my comments on changes that have occurred between the 2010 and 2011 reports and don the inherent uncertainty that -- and the inherent uncertainty around

health care costs in the public and private sector. as you know, the trustees projections of financial health change for a variety of reasons. there might be legislation that affects them. there is almost always a failure of the base year actual amounts to equal what was projected the previous year for that year. there are changes in economic and demographic assumptions, and there are continual refinement and improvements in the methodologies used by the actuaries to make the projections. the media and the public, as my colleague pointed out, look largely at the date at which the trust fund becomes exhausted to make a judgment about whether

the changes have been significant or not from one year to the next. as has been mentioned, the 2011 report projects that the medicare trust fund will be depleted in 2024, which is five years earlier than was projected in 2010. it is worth noting that is still seven years later than was projected in the 2009 report which was the last one issued before the affordable care act was enacted eight years longer than the actuaries' latest estimates for the date of depletion were before the care act was the long -- law of land. there -- that is not the case. rather small deviations of

actual and projected performance and a few small changes in assumptions about the future were enough to move the estimated date of exhaustion five years earlier. medicare expenditures have exceeded and, since 2008. last year's reports projected that as the economy recovered this would turn around and we would experience small surpluses in the trust fund in the time between 2014 and 2022. under the new projections, medicare spending is expected to exceed income for the indefinite future. a more comprehensive measure of the hi trust fund's fiscal situation is the actuarial balance, which is the difference between the program's annual

and, and cost rates averaged over a 75 year period and expressed as a fraction of taxable payroll. the actuarial balance has deteriorated from -.69 to -.79 between the 2010 and 2011 report. the primary factor responsible for this is the decline -- expenditures were higher and payroll taxes were lower in the base year, 2010, than anticipated in the previous year. let me just say a few words about the inherent uncertainty about projecting medicare's expenditures. we all realize that there is a lot of change going on in health care, both in the public and

private sector, and how that will play a out over the next several decades is uncertain, as the chairman has mentioned. the trustees' report projects expenditures and income based on current law and because current law assumes the implementation of a 29.4% reduction in physician fees schedule payments some have viewed this as a relatively optimistic scenario. the actuaries have provided an alternative, as my colleague explained. it assumes that the physician fee schedule is increased each year by the medical economic index and, also, that the

productivity reduction and payments for other providers is faced out. some have suggested this is the appropriate alternative projection. i think one can argue that, in fact, just as the trustees reports may be a little optimistic, this is a little pessimistic because over the last nine years the update in the physician fee schedule has not kept pace with the medicare economic index. at times we have seen a reduction. i think the message we leave you with is that further legislative changes have to be considered by the congress.

the sooner those are enacted, the less disruption there will be poor taxpayers, for beneficiaries, and for providers. it is essential that this is on the front burner of the congress. thank you. >> thank you very much. i think our witnesses for their testimony. before i get to my questions, i would like to welcome the newest member of the health subcommittee, mr. buchanan. he has many medicare beneficiaries in his district -- we look for to is in sight. i would like to get a few things on the record. when did the medicare trustees expect the medicare hospital insurance fund to go bankrupt? >> 2024. >> what was the bankruptcy day

in last year's report? >> it was 2029. >> in the course of one year, the medicare hi trust fund lost five years in solvency? is this something congress should be concerned about? >> i think it is definitely something that should be concerned about. as i note in my testimony, because trust fund balances or so low for several years going forward, the change in the insolvency date is quite possible. >> i can tell you that is certainly alarming to me that during the course of just one year, the medicare lost five years of solvency and is expected to go back route, as --

go bankrupt, as you stated, in 2024. it does not take a great deal of creativity to imagine a 2012 medicare trustees' report in which the hospital insurance trust fund insolvency date moves again by several years in either direction. are you suggesting it is possible that we could see a medicare bankruptcy date within the next 10 years? >> it is very possible. the trust fund ratio -- that is basically measure of the relationship of assets in the trust fund to annual expenditures -- that is expected to drop below 60 in 2015. less than half payments would be accounted for. once you're down to that level, you run the risk of trust fund depletion. that is very possible. it is all "-- also quite

possible it could go the other way. >> it is estimated the medicare hospital and trust -- insurance trust fund is expected to pay more money than it will collect viet the payroll tax. is that correct? >> yes. >> how long has this been the case? >> 2008 was the first year. >> if you expect this trend to continue? >> yes, we do. >> are you aware of any program that would be financial sustainable if it spends more money than it has, or is this a recipe for bankruptcy? >> our current projections would exhaust the trust fund because of the annual operating deficits, yes. >> i thank you. mr. stark is recognized for five minutes. >> thank you, mr. chairman. if you just help me for a

minute with a personal matter. i had a nine-year old who was to be the bat boy for the democrats ball team. i have to go home and explain to him as somebody with a ph.d., like yourself, in computational chemistry gets published in the baseball research journal. can you help me a little bit? that is a personal matter if you want to take time later? know f love to have hands n he can have chemistry and baseball. it would be greatly appreciated.

the sluggish economic recovery, a drop in revenues, and an increase in spending? both factors called by the general state of our economy -- am i close? >> you are right on the money. this is a program that is sensitive to the strength of the economy, both in direct and indirect ways. when economic growth picks up, wages of providers go up, expenditures go up as a result of that. when the economy weakens, wheat seed both induced enrollment of those -- we see it both induce a role but of those who have lost their jobs and a fall off in payroll tax revenues. >> some have suggested that we

could save a good bit of money by allowing medicare private contracting. the republicans seem to think this would allow medicare to continue. then doctors charge whatever they want on top of the medicare payment. do you have concerns about effective private contacting on access to care and quality of care? >> as a public trustee, i do not. as an analyst, it is an area that concerns me in that we -- if private contractor and were permitted and were not regulated, we could see access by individuals who are in tight

provider markets began to have some problems. -- begin to have some problems. >> the affordable care act is going to expire in 2016. the report issued today shows that the reform in the affordable care act would add eight years to the solvency. before i ask if you think that is about right, since i have been here, we have been about to go broke just about every year. the reason we do not, is that

congress acts in one way or another to protect medicare, but going back, the question of the shortened solvency date caused by the economy in general -- is there any one area that suggest to us that we might move to extend the solvency of medicare? >> there are tremendous varieties of measures that could strengthen the medicare program 's financial position and some basic decisions have to be made by the congress on the extent to which we should look to

beneficiaries, taxpayers, or providers to contribute to that effort. some of them involve changes in the current structure. others involved incentives that might -- involve incentives that might lead to a reformed delivery system. we could talk for several weeks about the pros and cons of the various alternatives. >> thank you. >> thank you. the gentleman from texas, mr. johnson, is recognized for five minutes. >> thank you, mr. chairman. good morning. the democratically controlled congress passed the health care over all that was supposed to control health care costs and extend -- i would say these

bills failed. do you think those efforts are enough -- >> will the gentleman yield? mr. johnson? >> why? i wanted to ask a question. >> go ahead. >> ask me a question? i will not yield. i want to know if those efforts are enough to solve the medicare problem or did we not get it -- or did we not get deep into it enough? >> we have a deficit in medicare, even if we assume the current law is sustainably implemented. i will cost or somewhat likely to be higher than what we share. we clearly have a remaining problem. >> notwithstanding that, the best estimates of the affordable care act are that they extended

the life of the trust fund and where the affordable care act to be repealed, the date at which the trust fund would become 24pleted would move from 20002 to 2016. >> i recognize you are phd. you consult with medical doctors? do they talk to you and tell you what their problems are? yes or no? >> we do the reports? no. >> so you are not consulting the medical community at all. doctors who played the system will ask for more than it really cost them because they know it is not going to get paid. you are probably aware of that.

that is why i asked you if you consult with the doctors themselves. it seems to me that the doctors are part of our problem. i do not know that you have really considered it clearly. we need to do more to save medicare for future generations. i would just ask both of you do you have solutions for this problem? you talk about the problem -- what are the solutions? >> again, i would be very careful to say -- as trustees, we have to be very careful not having a view. personally, i believe there are only so many levers you can pull. the things that drive problems are the growth of the beneficiary population, you have to look at the growth of per capita benefits that are paid by the federal government.

if the get a tax for cutting benefits when you do that, no matter how you do it, whether you're talking about the affordable care at or medicare, we have to cap the per-capita benefits the federal government is state -- is seen. that has to be a component of the solution. we need additional cost restraints beyond what is proposed in current law. >> do you have a comment on that? >> i would agree with my colleagues that there are a handful of areas you can't look to. -- you can look t. o. changing the number of people available for -- to qualify for the program, the payments to providers, the contribution from beneficiaries, in other words

premiums, and the contribution from the taxpayers. those are easy ones to estimate the savings that might result from them. a much harder one is to figure out what a significant change in the structure of the delivery system might do to lower the growth of cost over the long run. >> thank you both for your comments. thank you, mr. chairman. >> the gentleman from wisconsin, mr. ryan. we have a few more members -- [unintelligible] >> 5 minutes is not enough time to get into all of this. a couple of things -- it was said that we wanted to go away or something like that.

we all represent around 700,000 people. our relatives are on medicare. it is probably one of the most important programs the federal government has ever had. we want it to work and we want to save it. here is our problem -- we have 10,000 baby boomers are retiring every day with fewer workers coming into the work force to pay for it. health care costs are going up faster than inflation you are telling us the trust fund is going bankrupt in 2024. the cbo says faster than that. something has to be done. i want to ask you a couple of questions. do you both agree that you cannot say the savings in medicare is going to pay for the affordable care act and extend the solvency of medicare? you agree with that? a quick yes or no. >> i believe that. >> i assume you do, bob? >> from a unified budget

standpoint, the answer is yes. >> we have the trustees and giving us these alternative scenarios for two years, which i find pretty amazing. i wonder if more realistic assumptions -- we find out that you cannot find another government program on one hand. that is double counting. we're not saying the cbo is doing the double counting. congress is doing the governor -- doing the double counting. number two, we faced insolvency before. congress has always done something to do about it. if we keep kicking the can down the road and wait until insolvency is on the doorstep, the solutions will be that much more dire, that much more bitter, and people will be that much more affected. how many providers the u.k. will provide medicare benefits if

they are getting 66 cents on the dollar for every medicare patient they have coming through the door? if you are telling us they are going to pay 66 cents on the dollar and then 33 cents on the dollar, if we may have a medicare program, but it will not work for people on medicare if nobody takes medicare. we have to be realistic about what is it necessary to save medicare. i would just simply say that the lessons we learned from the previous medicare pinches are lessons we should take into the future. 1997 was an important budget agreement. it was a republican congress with a democratic president doing a budget agreement to extend medicare solvency, get the economy growing, produce budget surpluses, but this is the lesson we got out of that exercise -- price controls in medicare do not work. congress produced two separate bills to prevent medicare providers from dropping

medicare. what i think our friends of the other side of the aisle got out of that as evidenced by the affordable care act is not the price controls do not work, it is price controls or not politically sustainable part of it it is seeing and knowing that access is being denied to medicare beneficiaries. we should just take it out of the hands of politicians. we should take it of the hands of congress. less form an independent advisory board and have them do it the price controlling and circumvent congress. what this simply means is we are going to do hardcore price controlling which leads to rationing which will lead to medicare providers dropping medicare. that means seniors will not have access. we want to get rid of that. if we are going to extend solvency, it should go to medicare, not to other programs. we should not trade one

government program to go to another. how many tons of we heard that about social security? sector -- rationing does not work. we believe that at the end of the day there will have to be a bipartisan solution. the sooner you do it, the sooner you do not have to it that benefits for anyone about the age of 55. people who have already retired under this program, do not change their benefits. they were made promises the government should keep. if we do this soon, we can keep our promises to people who were 10 years away from retiring. it is very negotiable. it is very reasonable to debate how to fix it with a new system , birth rates, and design features. that is what the committee is trying to do do you think providers and medicare will keep -- providers will keep taking medicare if they are getting paid 66 cents to 33 cents on the

dollar? >> you have highlighted a fundamental problem that we also highlight in the report. reimbursement rates under medicare are lagging very far behind what they are in the private sector. this could lead to substantial which rolls and access to care under medicare. anddrawals ial which roll access to care under medicare. >> the same providers offer services to the elderly and disabled through medicare, low- income population through medicaid, and the working population through employer sponsored insurance or individually purchased insurance. i, for one, think that efforts to restrain medicare or

medicaid significantly are doomed to failure unless we provide incentives for dampening the growth of health care costs in the private sector as well. you cannot have these huge differentials in reimbursements. on the other hand, i would argue that the fixation we have with comparing medicare's reimbursement rates with those in the private sector are a comparison of average payments, or average cost, and most economists would argue that services provided, a good is produced as long as the provider can meet marginal cost, so we can have some differentials without destroying the market. they obviously cannot get too

large. that is what you're concerned about. >> the gentleman from california, mr. thompson, is recognized. >> is it not true that whenever a new lot results in a savings to medicare part a that those savings improve the possible insurance trust fund finances regardless if the savings are used elsewhere in the budget? >> yes, that is true. >> my friend from wisconsin raised that issue. that is out the accounting system works. that is out it has been treated in many on this budget bills in the past. >> correct. >> my friend also used the balanced budget act of 1997 which was passed under the republican controlled house as an example. that included $994 billion in

medicare savings. to the $92 billion of that was used for a tax cut. -- $292 billion of that was used for a tax cut. i guess the other guys are critics. in the sheet here that was prepared by our side's staff. reporthe trusty's starting in 1970 and running until 2011. i would like to get you to look at it and let us know if this is accurate. based on this, it has always been projected to reach insolvency at some point. as mr. stark mentioned earlier, congress has always addressed this issue by making changes. as a matter of fact, of the 40

years on this chart, 18 of those years the solvency date is less than it is today in 2011. the it is a problem because of the downturn in the economy. i would like to have someone give you this and get your analysis of its period -- analysis of it. also, the affordable care act was an attempt to put in place provisions that would improve the quality and reduce the cost of health care. everything from hospital admissions to reducing hospital remissions to expanding fraud- fighting efforts. you're just the report recognizes that. can you tell us your assessment of the delivery system reforms

in the affordable care act? >> once again, i will have to take off my chest the hat for this. >> all have to take off my trusty pet for this -- trustee hat for this. >> the cms actuary and the cbo did not provide savings for or provided quite modest savings. if all the planets come into alignment and things work out well and some of the initiatives i discussed in might prepare statements come to pass, we could see significantly more in the way of savings. on the other hand, some of them may prove to be once the

congress reconsiders or ones that do not work out as well as the cbo and cms have estimated. we are dealing with a huge uncertainty right now, but those are basic numbers or in our projections. >> i think the language in the report says that "major programs of research and development for provider payment mechanisms intended to improve the quality of health care and reduce the quality of medicare." this includes the cost and quality of health care outside of medicare as well. that is important to note. cmf did a press release on your report. they say that without the reforms in the affordable care at, the medicare trust fund would expire in five years in 2016.

the report issued today shows these reports added eight years of solvency. i would like to ask unanimous consent to submit this to the record. >> without objection. >> thank you. >> the gentleman from california, mr. nunez, is recognized for five minutes. >> thank you, mr. chairman. i would like to ask the witnesses about the question of insolvency. i do not know how long you had been trusties, but when we look back -- trustee, but when we look back in time, we always knew we had an insolvency issue. i do not think anyone disagrees with that. there has always been a need to save medicare and say social security. but when you analyze the problem today, and he knows that we are

locked into this budget by where it does not appear there is any fix in sight. what the major holdouts is are we going to deal with the and subprograms to solve the insolvency problem? i do not believe we of ever defaulted on our debt. we are getting very close to that if we do not get a agreement -- get an agreement soon. is the situation more serious and more urgent today than what it was when you looked back 10 years ago or 20 years ago? >> i think the answer to that is yes, both because the medicare problems and get is a larger fiscal problem and because as opposed to 20 years ago, the baby boomers start retiring. they are beginning to apply for medicare benefits.

and so the exhilaration of burden that we talked about is a future problem 15 years ago is now upon us. this makes some solutions more difficult because the numbers of individuals who are receiving benefits is rising rapidly. >> i have a two-part answer for you. one, we have a much more serious fiscal situation unify deficits are much larger than they previously were. secondly, we have an urgency that arises from demographics. each year that happens, we have more baby boomers going on the benefit rolls. there is a great bipartisan reluctance for people who are already dependent on the

program. >> i would like to add a third issue to differentiate myself and my colleague. that is, we have enacted major changes already in the medicare program. in some sense, the coverage is barely there. we cannot get to that covered, opening up, and say cut provider payments even more. how can we sustain the ones we've already adopted? >> there is no question -- every day of my life health care providers are coming in either to my district office or here in washington and complaining about the status of the health care system as it relates to the affordable care at, medicare, medicaid -- there is a problem throughout all these programs. would it be good policy if somehow this congress could move legislation that would take

anyone debt is 55-years of age or older and keep them on traditional medicare? with that be a good goal for this congress to protect in? -- part take -- partake in? >> anybody that is over 55, keep them in medicare? >> if we could accomplish that? -- if we could accomplish that. >> i think it is good policy to hold people who are near retirement or near retirement harmless as possible for future changes. having said that, it is getting harder and harder to hold on to people who are older than 55. five or 10 years from now if you ask us the same question, i would say i do not thing you'll be able to do that. >> i am believe that even older

adults can learn new tricks. -- even old dogs can learn new tricks. would you talk about letting people 55 or older stay in the system and keeping the system unchains -- quite frankly, i do not believe that is appropriate policy. i think medicare should evolve in a gradual way. we have the affordable care at innovation center. we have some centers -- we have some changes in payment mechanisms and things like that that will gradually change medicare. i think pushing those four words -- >> i think we agree that there should be gradual change. that is why mr. ryan put 455 and older in his plan.

that allows people to deal with the changes. however, where i think we disagree is where this problem seems to be bigger than but -- then you both said earlier. it appears to be worse than it was 10 or 20 years ago agreed with me to act quickly to save medicare for everyone. >> the gentleman from oregon is recognized for five minutes. >> thank you very much, mr. chairman. i would just pose questions to our panel not to answer now, because i have others i want to get to. if he would reflect -- i appreciate you talking about whether or not this is sustainable over time. we are going to take 79 million americans and freeze them in medicare as it is now. although, my friend from wisconsin, takes the reviled savings from the affordable care act and tells them -- assumes

them in try to make his plan, but we will be having a situation where there is a huge population that will grow smaller over time, but millions of people 30 years from now -- and ever sickert, a smaller population -- when my friend asked it to be scored, assumed the general fund would pick up the gap. i would appreciate it if you two might reflect and may be shared with the committee what the impact will be overtime? >> will the gentleman -- and >> i would like to be able to lock in what this means. we had not been able to get a good figure in terms of what that extra cost would be for an older, sicker population. although declining, it will

still be millions of people. i do take modest exception to my statement that it would be rationing and price control. i think he knows the recommendation are just that and that they will come to congress enacted be voted up or down. i think it is good that we have that mechanism. we have seen political failure on both sides of the aisle on things like base closings and repeated failure with medicare. we are already seeing some people try to walk back the ability. i have heard my republican friends decry the fact that providers right now are not getting enough money. yet, we cannot afford what we are giving them and they do not want a control mechanism. i am wondering, is there any

reason why with the help to stiffen the spine of congress that we could not minute the best practices that are going on right now with medicare -- we could not make the best practices that are going wrong on -- are going on right now with medicare. is there any inherent reason we cannot make that behavior? -- mimic that behavior? >> it is certainly a goal that we strive to achieve, but it is very difficult to figure out how to get from here to there -- how to get from miami to wisconsin. >> some people have figured it out, had they not? we are not all miami. we are not all texas. >> and we do not really know how

to convince miami to mimic the behavior is of wisconsin, minnesota, some of the more parsimonious practice pattern states. >> that are more effective -- >> in many cases or more effective. >> i think we do know what works. i think there is bipartisan agreement, at least there has been until recent years, of some of the experiments in the affordable care act -- dealing with unnecessary hospital remissions, being able to have more attention to primary care, dealing with waste, fraud, and abuse. there is a litany of bipartisan actions that can be taken to squeeze far more out of the existing medicare system, but

people have not been incentive to do it. congress and both parties have all old -- have wobbled. i think we are setting our sights too low. i think we ought to be accelerating the reforms we talked about. yes, there is a little discipline. i do not think that is control, but we are not going to open the spigot and pay people for procedure after procedure after procedure, which is why doctors are getting more money even though the reimbursement rates are more parsimonious. i think we ought to be more optimistic about this. i think there is a bipartisan consensus about how it could be done once we get out of this world we are in right now. >> the gentleman's time is expired. the gentleman from washington, mr. rogers, is recognized for five minutes. >> thank you, mr. chairman.

i agree with mr. blumenauer. we must find a bipartisan solution to this. we need to be more optimistic. there have been some comments that have been made that sort of puzzle me a little bit. the question was asked earlier, why are we even paying attention to this issue? i think it is obvious from your testimony there are some major things you are expressing to all of us this morning. some may be watching c-span and do not have a life. medicare is going bankrupt. you both agree with that. it is exhilarating, true? >> yes. >> medicare's dire financial status is drastically understated. would you agree with that? >> yes. >> i would say it is very likely

to be significantly understated. >> i am a share of that. -- unsure of that. if we do not take full advantage of the initiatives in the affordable care at, if we do not encourage all the innovation that is going on in the private sector and the non-profit sector -- >> it was not understated just a year ago. >> excuse me? >> it was not understated just a year ago. here we are today and we are accelerating the -- is that a yes? >> i am not sure what your question is. this report has warnings. >> it is a celebrated. is that not true? >> if yes. >> do expect that to continue?

you are not short? ok. -- you are not sure? ok. massive tax increases? is that for the scenario? we must do something now. would you both agree with that? >> i would say that on the hi side, the application would be greater general revenue requirements. >> ok. thank you. the thing i guess that is confusing to a lot of americans who see this health care bill that is out there and has been passed and implemented to some degree or another -- there is a $600 billion tax in this bill.

$600 billion worth of taxes for people to pay for this. how can we get the economy going while continuing to attack small businesses? $523 million in cuts to medicare. no wonder people are expecting higher premiums and fewer benefits in medicare. i wanted to ask a specific question regarding the alternative scenario. it states that overall medicare spending is expected to grow to 10.3% of gdp -- that is a 10.3% over the trust the's report. growth of this magnitude of banks everybody. could you elaborate on what this may look like related to these important areas and other priorities like medical research and education? >> i agree that the main

projection is a best case scenario. this would be pessimistic scenario. the reality is probably somewhere in the middle. if you take that with the scenario, and that is an unprecedented fiscal strain for the federal government. to% of gdp for one program alone is twice as much that any program has ever absorber. it would be over half of the size of the entire federal government with respect to gdp. to have over half of our historic norms would be an unprecedented strain. >> public comment on this is all but for those numbers would be realized, this nation will have to address its deficit and debt problem. in my view, medicare will be one

contributor to a solution. those numbers or hurt it. -- are horrific, but long before we face them, we have to make more fundamental changes in our revenues and expenditures across the board. >> the gentleman's time has expired. the gentleman from new jersey is recognized. >> thank you, mr. chairman. what is the logical -- we learned in logic 101 -- it may not be true. our premises determine those things. i want to enter into the record, mr. chairman, the s&p indices

concerning health care, health care costs, and bring to your attention, mr. chairman, that in 2010 medicare claim costs associated with hospital and professional services were patients were covered under medicare increased at a more modest 3.2% rate, much lower than the private sector. i would like to ask to begin with what do you think attributed to the slowdown, to the more moderate pace of increase in medicare as well as the private sector going down, too, but not to the degree of medicare. why do you think that happens? but the view?

either of you? >> my response to that would be that one factor is certainly the turndown in the economy, which has left some seniors and others with less income to pay their co insurance, their co- payments, and so on. it is conceivable that some even had to drop their committee -- drop their medigap policies. cmf and the providers have begun to pay for overuse of services. many practitioners are working anew at their practice patterns. >> which is a major target of the health care act? >> it is a major change in attitude and behavior.

it is going on throughout society. it is a good development. >> i would generally agree with that. certainly the overall state of the economy played a role. i would be candid in saying i do not know the answer. short-term fluctuations in the cost levels are very difficult to predict and to explain after the fact. my level of uncertainty as to what rigidity that is very high. >> it is too early to tell if the health care at has had an effect on the cost we are trying to reduce. we'll never have a medicare program that is able to keep up with inflation and the rising cost of health care until we control in some way, shape, or

form under a capitalistic system the rise of health care costs. we need to do something about that. we are trying to do something about that. one-third of the entire health care at dealt with medicare and medicaid and how we could save money in the process. much of it was not scored in the final analysis. in the report of 1997 brought about some very interesting things -- the beginning of medicare advantage, the beginning of the process to start to privatize the system. now, we pay 12% more to these private plans. seniors are going to pay much

more if we move to privatize the whole process under the guise of trying to straighten out medicare. look, all of these reports from 1970, as the gentleman from california pointed out before, now talk about the dire position in which medicare is in. everyone of those reports said the world is coming to an end as far as medicare is concerned. that did not happen. as for my friend from wisconsin, this is what a bank account is all about. you take the money out of the account as you need it. you do not take it all out. it is very analogous to the funds in a bank account. when money is deposited, the money is used for other purposes until they are withdrawn. what is so different about what we do in terms of how we are calculating savings in the

future? we need to take a look, mr. chairman, that not only the logic of what we say, but if there is any resemblance to the truth. this is not reality. >> the jim demint's time is expired. the gentleman from georgia is recognized for five minutes. >> i think our witnesses for helping us understand what are the financial operations of medicare. not the clinical side. as a physician, we are talking about money, we are not talking about quality of health care where those kinds of things a person of 40 patients across the country. our friends on the other side of the aisle and a penchant for mischaracterizing our positive solution, i think. i love to touch on a couple of things mr. starts mentioned. he said our proposal was the voucher plan for medicare.

you understand that our program is not a voucher program? it is a premium support program? >> the difference between premium support and vouchers has been explained by some as the payment not relating to the cost of the underlying enterprise. that is a distinction that i -- >> you supported the premium support program in the mid-90s. you would not have called it a voucher program, would you? in fact, you did not call it a voucher program at that time. you called a premium support program. mr. stark's also said are positive solution ends guaranteed benefits for seniors. that is not true. you know that. we save medicare for future generations. in our proposal it stipulates the program must be guaranteed.

is that not true? >> to the extent that those details -- >> it is a guarantee program. that is correct. mr. starrs also talked about private project in -- talk about private contract think in the programs. with that not cause access problems? if not regulated, it might have access problems. are you aware of any proposal that would put in place private contracting with that regulation? >> i think this is a matter of degree as where as existence. i am not. >> would in fact increase access for medicare for seniors in this country? is that not possible?

>> it is possible, but not probable, i would say. >> i would beg to differ with you. there are individuals to understand the huge challenges with access right now the seniors have had at one of the ways to solve it you identified in your list of solutions. it is something that allows for increasing access. i want to touch of the medicare trigger. this is the sixth year in a row that trustees have said that the excess general revenue for medicare funding -- when that trigger occurs, is it not the obligation of the president to propose to congress a solution to fix that problem? is that correct? >> if yes. >> have you seen any solution at this administration has offered?

>> no. >> no. i think congress has waived the requirement. >> under the democrat control, they said do not worry about that. is that what they did? >> if yes. >> yes. i want to touch on this whole issue of medicare changing. you said there are significant changes to medicare through the reform bill democrats put through. what has already been adopted in medicare as we know it -- would you agree with that statement? >> it transforms the program as all legislation -- >> medicare as we know right now does not exist under the democrat's plan already. is that correct? >> the question is what are

referring to as medicare. >> medicare as we know it right now. >> it is and unmanaged care program. it exist after the affordable care act as it did before the affordable care act. >> the program right now has been changed significantly. would you agree with that statement? >> there have been significant changes -- >> medicare as we know it has already changed. my time has expired but i look forward to submitting for the questions for the panel. >> the gentleman from new york, mr. randall, is recognized for five minutes. >> thank you mr. chairman for calling this meeting. i think it is helpful just to clear the air. we have objectives experts to have reputations to protect long

after the elections are over whatever decisions we make that are going to cause any dissatisfaction with our constituents is much easier when the parties are talking together. they may not be happy nearly as an increase if the parties themselves have taken a different position. the fact that so many republicans got elected attacking so-called "obamacare " for some democrats to get reelected. -- forced democrats to get reelected. the facts are not as important as appears to me. so. i just cannot believe that a nation that those so much to our

asian population can spend trillions of dollars rebuilding the economy of afghanistan and iraq. this means we have to have reform. it may be painful. as long as we find each other, this is something you do not want to make. someone has this. as relates to medicare insolvency, do you believe that the affordable care act goes in the direction of dillon with this in itself? >> the affordable care act extended through the direction. >> does it constantly request the preeti view what changes

have to be made from the congress and the end of fenestration import it to protect the solvency? do you believe that we are not dealing with the problem at all and that we need a dramatically different approach? i do not have a problem changing it if it is bipartisan. i believe that an old dog can use new tricks. i believe that. if they say this is moving in the right direction, that is not going to happen. if that happens at all, it is after the election. my question to you is that the affordable act bill allows us to deal with solvency if certain

changes are made. do you believe that we just handed and out there? we know that this country has the ability to work together to deal with that problem. >> there are three things that come to mind. the primary engine under the affordable care act is these annual adjustments in the reimbursement rates. in the last one before, the engine was powerful enough to account for basically the overall current course of cost projection over the long term. this is a little more reliant upon the advisory board. in order to hit the savings target, the productivity

adjustments himself -- >> i am going to get the answer. my time is so restricted. i want to understand the premium report system more clearly. let me ask you about it. this anyone contradicted that he has a piece of the health insurance? it is to make a profit. that is their job. if you are trying to make a project, the selection of people to be insured are based on the risk involved. if a person is more vulnerable when they are older, are they less inclined to get benefits

without higher costs? no. this guarantees that you get something. you can only get what you are able to afford to get. is that true? >> that is true. the fact is that we are making major adjustments in putting the entire ability for people to get health care. it is in the hands of people that do not want you as a client. i got a voucher. i got support. you cannot guarantee that i have enough to get it for my children. right? >> the time has expired. at witness can respond in a letter -- our witness can respond in a letter. the gentleman from florida is

recognized for five minutes. >> thank you for holding such an important hearing. really afford to working with you and the rest of the members of the said committee. i also like to thank our witnesses for being here today. wanted go over one point. the medics wear -- the medicare trustee would be insolvent. my district was in florida. it is a big issue all over the country. it is much bigger. one thing i do not believe is taking into account the reduction. when we project this out and

look down the road, a lot of them will have to go out of business. we have another 30% cut that we are looking at. it does not take any impact in terms of the viability long- term. wouldn't you agree that these have been going to replace that would drive the insolvency date? we are looking at a problem a lot bigger. >> the solvency issue relates to the hospital insurance fund. this is part b. that is not affected by solvency issues. the way this is constructed and

is that it can never go exhausted. revenues are automatically given to the trust fund to make of the difference between projected costs and premium payments. >> it did affect the exhaustion of the trust fund. >> i have been here in the toe over four years. we have a 7 1/3 twice a year. i do not know how anyone runs any business to allow these medical practices and have to look at a 30% cut every year. i do not know how this is part to the overall medical community. >> i think the principle affects of the override would be in the overall cost. under our projection, we see

this cost. if you assume the override them, we are at 3% of gdp. it is a substantial cost if you assume the reductions are overwritten. >> they found that malpractice costs -- we could save as much as $55 billion a year. do you think we should have malpractice reform? >> certainly, everything we can do to hold the arm this will make this better. if we can produce that level of savings, this would improve the financial al look. >> is this something you have personally looked at as a

trustee? i can tell you about the sense of medicine. do you feel they need to to make sure they are covered? is this something you have looked at in terms of legal reform? >> not so much because of the jesse process. it deals of the congressional budget office. generally, we do not tend to evaluate alternative policies with currently law. it would certainly draw heavily from the input of every one protect the panels. >> to you have any thoughts on legal tort reform and the impact it would have and your own

personal opinion? >> this is something. i have a neurosurgeon. he said the malpractice is $200,000 a year. they are practicing a lot of defensive medicine. i need an area we can make a big change in. what are your thoughts? >> there are a number of studies tried to estimate the impact of malpractice reform. by and large they come out saying that this is not a huge contributor to the rapid growth of costs. reform is certainly would be a significant contributor to lowering the gross by reducing

the onetime level shift. i would align myself with his comments. >> >> authority think our witnesses for your update. >> what strikes me -- i want to thank our witnesses for your update. what strikes me is the report dating back to 1970. what gems out is how much is really does check economic performance. and how this influences the ultimate insolvency. is this is something that is consistent? there are also a number of insurance. does it have a direct impact? >> that is an important

contributor. congress has enacted significant legislative changes that have prolonged the life of the trust fund. >> i am looking at the late 90's. we had a. of robust economic growth. there is showing -- they had a year of robust economic growth. we have had a drop off of a number of years insolvency. be greater safety for that type

of practice system. this eludes me. the 37 states have already enacted the reform including the state of wisconsin. unless those 13 states that have not taken action is driving all this additional costs, i do not see it. study showed that the utilization practice of doctors in states that have this is a little different. is that what you found it? >> i have not done any independent analysis. i have not come to that conclusion. >> a lot of this is already built into the affordable care act. we need to continue to move in here. we are expecting better outcomes. these are highly integrated. they are capable of producing

some of the base results. a lot of what is in the act is driving that type of delivery system reforms to a more efficient and better outcome based system at a better price. the fact that studies have shown over and over that a large part of the health care dollars is going to customs procedures and things that are not working some range as high as $800 billion a year. they are going to various procedures and tasks. they are not getting a good thing for the buck. the ultimate verdict in how successful we are is changing the way we pay for health care. it is opposed to the volume base payments that occur in medicare. would you agree with that? >> i would. there are things that are on track right now.

i know this was brought up for criticism today. or is the work at the institute of medicine is doing in changing the fee-for-service system into a fee for value system. what happens in medicare will drive the health insurance market and how they reimburse with health care expenses. the concern i have with the plan that was just passed is if they would do away with all these reforms and create a voucher plan that ends medicare budget out addressing the systemic problem have been the health care system, the rising costs and what we can do to been that cost curve. if we are moving forward, we are recording the quality outcome is. it is important. it will give us the long-term sustainability. would you deal with that? >> i am not sure what they have

gone. i should be considering these issues. i think the affordable care at -- >> they do acknowledge some of those. it has the potential to move in the direction of providing better care at a reduced cost. as a former head, you realize that they are going to get a score. you all seem to come from missouri. he had to see how it gets scored. a lot of this means the reform. >> this is right. i was criticized in this very room. >> thank you for a your testimony. >> the gentleman from illinois is recognized for five minutes. >> your report shows that it

will now be bankrupt in 2024. americans will be forced to endure a massive tax hike in expenditures. can you explain what you mean by immediate? >> the way this works, of both on the social security side and on the other side is that the amount of expenditure programs they can put out there is limited by what is on the trust fund. once the trust fund runs out, the program lacks the authority to make benefit payments. there is a lot of analysis of what has been done. a fairly common one is that

payments will have to be delayed. it is by virtue of delay. >> this is the common understanding. this present moment in time, when insolvency happens, you immediately are prohibited based on the law and your understanding of the trustees from pain anything further out. your estimation is that would be a 17th term cut. is that correct? >> it varies according to year. i think specifically is about 70%. then it becomes about 25%. >> when it became insolvent, it'll be flowing in from tax receipts.

medicare would delay paying bills. hospitals would send the bill in. to wait five months. you see this of the intermediaries and other payers would be writing out the checks and transferring resources to the hospice or whatever and much delayed basis. >> that is not a hypothetical cut it is not a hypothetical delayed. it is an actual delay in payment to the point of reaching the number. is that correct? >> this is very explicit. this can only be made from the trust fund. >> there is no other flexibility. if the revenues are not there, it and insolvency is declared,

it will move forward. they do not have the authority to borrow in excess of the resources. >> and absent some change in the program, your prediction is that is where our nation will be in 2024. >> they are out there by the majority. the end of medicare. it will and in 2020 for after some change. i yield back. >> i have a report from the

actuary who says that that there is a reduction in expenditure. it is 53%. there is an increase in the payroll tax. what we have seen here proposed is something that will put things much worse.

i have watched this. it is clear to me that the decision to give doctors the right to set their own fees was a crucial error made in 1964. they wrote that they could have their usual customary fees. it set in motion a lot of what we are looking at today. you know about the other day committee. most people do not know what there is. why is there no mention of the setting that is done? we do not have a schedule by the government. we have the committee recommending to us what we

should pay. that is what we pay. how can we have control costs if we do not have the medical profession in some kind of direct negotiation with the government about what will be paid? this is a simplistic idea that never was going to be worth it. it only controls one thing. it led all the ability to raise rates by doing more of the same procedure. i see in the washington post said this week many hospitals over use double ct scans. there are a thousand examples of over use of procedures in the medical care. you give this amounts of money for doing this. then there is the dune. they had had no control whatsoever.

how do we get there. do not have the doctors at the table. >> i believe there is an advisor committee that gives as recommendations. this is the ultimate decider. what they do is look at the relative value. this might be overpaid.

many claimants are underpaid. what would happen if these changes were made. the hopewell is raised. they made this suggestion. they believe they were overpaid.

there is a robust procedure. they are being more frequently than is now the case. they have a respect to this. they can improve the reaction of payments much more. the probably save some money. >> the advisor commission has made recommendations and analyzed this issue quite frequently. >> the time has expired. they are recognized for five minutes.

>> i understand the value of the program, the importance of place in the lives of seniors. especially seniors back home in louisiana who have limited means. they depended on this for their life. i could go on and on about the quality and what we need to do to establish and strengthen a the patients/daughter relationship based on high quality of medicine. this is not the purpose. we are here to talk about financial solvency. they have discerned respect of

the county commission. we cannot double count. this is a real problem. we worked with many medicare patients. it is a huge disservice to medicare beneficiaries across this country. we have an obligation to fix this program and get it right. when i see this double counting, there is the reimbursement structure. this is legislative malpractice. this is another example of where you are going to try to keep the lid on a boiling pot of liquid. it will not be in the best interest and meaning high- quality patient care. my question is this. we know we are headed toward 2024. as we know it ends. en

if we did not correct it, it cannot be a payment mechanism. >> i would still say there would be a payment mechanism but it would not be able to pay. >> ok. before we get to that, clearly it is not a simple situation where we get to the point and it stops. there will be other points of rationing. it is a situation.

it will be after the date of insolvency. it is tiling the benefits that are laid out. providers may choose not to have as much care. they will have to wait a long time. it is a situation that up until that point, everything seems fine. >> that gives us the access problem. that is the other side of that equation. the further we go, and it seems year after year we are seeing more and more problems with access, the do not have access, delayed access is our ration. >> there are two elements of this issue. one is the sudden withdrawals of benefits.

there is another question of restraining our reimbursement rates under current law. does this have the effect of going out of business? this is sending we are wrestling with. >> the answer is clearly yes. we are seeing worsening access problems. treating a patient who came in the emergency room, we weren't able to find primary care providers. and only got worse. we have an obligation to do with this. s. see these characterization's

medicare is ending under current law. we need to take their heads out of the sand. we as the other ones to take their heads added the stand. we have to be honest with the american people. we had to be very reliable with this program and get it right. it is critically important. >> thank you. the gentle lady from tennessee is recognized for five minutes. >> i thank you for allowing me to sit on this committee. i appreciate this. i would like to discuss the draft you have on page 5. there is non interest.

medicare trust fund spending is expected to make up a rapidly increasing% of gdp. it will rise from 1.9% to 3.4% in 2025. they project that 21.3 trillion in general revenue will be needed to pay the benefits. define it attry to find this level? >> that would be an enormous expansion of fiscal pressure. it is far beyond any one.

even this understates the case. this is the best case scenario in which the payment rates are reduced by 29%. it to be significantly higher than this. >> given that information, if you are recognizing that it would have to come from the general fund. would you agree that this would impact some of the other national priorities such as education or roads or some of those areas? >> absolutely. i make it generally is probably the single greatest threat in discretionary spending. >> given that, it is not had

agreed going bankrupt. is it fair to say that it is bankrupting our federal budget? >> there is nesting go costs of our overall problems. they start taking this great advantage. we are going to have to make some decisions about what it is that you will fund are not funds. do you think that if congress enacted policies that reduce spending by $15 billion over the next 10 years will be sufficient to address the financial crisis? >> no. i agree with you. there is a growing chorus about

doing nothing and waiting for the delivery reforms from their health care to take effect. cbo estimates those policies were $14.7 billion. given that, it seems to me that we have to find more than what they recommend. would you agree with that? >> i agree with that. thank you. i yield back my time. >> with that, i would like to thank our witnesses for your testimony and insight from the report and the export -- expert testimony we heard today. it has become clear that medicare faces real and substantial challenges. we can and must meet these challenges.

they must act sooner not later. they can make further ones. i am confident we can meet the challenge that lies before us. it may seem like an insurmountable challenge. the current seniors rightly expect us to work together to work together to find a solution to preserve the medicare problem fort generations to come. as a reminder, at any member wishing to submit a question for the record will have 14 days to do so. i as classicist to respond in a timely manner. with that, and the subcommittee is adjourned. [captioning performed by national captioning institute]

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>> washington represented adam smith on "newsmakers" discusses president obama's decision to draw down troops from afghanistan. the defense spending bill that will be the first order of business after the july 4 break. "newsmakers" sunday at 10:00

a.m. and 6:00 p.m. eastern on c- span. in our series of interviews with republican presidential candidates continues tomorrow night with texas representative candidate ron paul. his years as a doctor, service and the military, and his views on congress. ""road to the white house" tomorrow night on c-span. >> c-span has launched a new, easy to navigate website for politics and the 2012 presidential race with information on the candidates, twitter feeds and facebook updates from candidates and political reporters, and links to c-span media partners in the early primary and caucus states. >> this week on "the >> this week on "the