>> the 2018 medicare's trustees thert warns that entitlement program is projected to be insolvent in 2026. the chief actuary outlined the report and projections during remarks. this is about an hour and 45 minutes. >> good morning. i want to welcome everyone to today's discussion of the 2018 medicare trustees' report. the trustees' report was issued yesterday, and we're honored to have paul spitalnic, the chief actuary for medicare, to cut through the complications and

explain what -- what we all actually already know, which is that medicare is in serious financial trouble in the long term and increasing the long term is getting closer year by year. this year's report, in many ways, echos most of the reports that i remember reading over the last few decades. the message is -- has always been the same, which is that, at some point, the program is going to face huge financial challenges unless policy-makers take action, and unless the health sector finds ways to deliver appropriate care more efficiently to patients. that, of course, that latter part is important not just for the medicare program, it's important for the healthcare sector so i think the trustees'

report does reflect an awful lot about what's good and what's not so good about what's happening in the health sector in general. interestingly, the trustees who are, in fact, policy-makers say that taking action sooner rather than later will allow for more policy options and will give the system and the public more time to adjust to necessary changes. i'm not sure that's a message that every trustees' report has had, but it's certainly absolutely true, and would i hope that the policy-makers who made that statement would consider that over the next few years. the report and -- i would especially highlight an accompanying analysis of an illustrative scenario and i think illustrative in my mind means somewhat more realistic in terms of the assumptions that are made.

the -- both the report and the accompanying analysis bring into focus the dangers of what i call short-term policy-making. these are policies that congress adopts that produce savings in the near term but may not be sustainable over the longer term. in particular, the illustrative scenario points out that there are or addresses two particular policies that are problematic. in the first case, it has to do with physician payments. a legislation was passed several years ago to replace what was called the sustainable growth rate which threatened potentially 20%, 25% payment reductions, payment rate reductions to physicians through

the medicare program. replace that -- that threat with a new system, and the -- but the new system isn't exactly a bed of financial roses for most physicians. indeed, as the illustrative scenario report says, the kinds of payment updates, think of them as inflationary increases, we're talking about numbers that generally are below 1% a year. it's unreasonable to think that general inflation will be as low as 1% a year in the future, and, of course, we -- we all generally accept that healthcare inflation rises faster than general inflation so we're talking about a -- a policy that was put into place that looked good from a cbo scoring

perspective, but over the longer term it seems highly unlikely from a political circumstance now. this is not something that the trustees or actuaries are saying but from a political standpoint, it seems unlikely to me that politicians will be able to keep that kind of a schedule, even though it's in law. they will change it. they will buckle under the obvious and probably reasonable pressure coming from the physician community that they really can't live with such modest increases given their likely costs of operation rising much more quickly. the second -- the second policy, again, a short-term policy created by the affordable care act is something called

productivity adjustments, and basically the idea sounds good only superficially. the idea is that the health sector should find ways to become more productive. that part is correct. no question about that, but to generate scorable savings for the affordable care act, obviously you have to have some kind of a formula. kind of a formula. and essentially, the formula ties payments to productivity improvements in the general economy. and as is supplementary report points out, economy wide productivity generally has been measured to grow faster, much faster, than health care productivity. health sector productivity. now there's some measurement issues, but the numbers are kind of interesting. this year, economy wide productivity is estimated to increase about 1.1% a year over the long-term. in contrast, hospital productivity has increased by .4% a year.

and i guess the projection is essentially zero. over the long-term. and similarly, other services. at least measured productivity. this is a very difficult issue. but measured productivity. it simply isn't rising nearly as rapidly as economy wide productivity. yet payments are going to be reduced because of that factor. now, the issue is less a measurement issue than it is a feasibility issue. is it possible for the health sector to find efficiencies that will satisfy this requirement and then secondarily, will we be

able to detect it even if they do? i have my doubts and the first and second. these are serious problems. not confined to medicare program. and it's something that policymakers and health sector need to deal with in a serious way quickly. one other point that i found quite interesting numerically is the power of demographics. the trustees point out that in essence, that the baby boom generation has a lot of leverage in the medicare program. now as a baby boomer, well, i don't know how i feel about that. but it's a very large generation. obviously the boomers have been reaching age 65 for a few years now. and this massive demographic wave will enter the program, leave the labor market, enter the medicare program over the next 15 years. to me, an interesting statistic is that the trustees project

that total medicare costs will grow from 3.7% in 2017 to 5.8% of gdp by 2038 then increase gradually there after to about 6.2% of gdp by 2092. there may be other factor, but i see demography in there in a big way. and again, that is a sign of b -- of trouble. that's a sign of oncoming fiscal distress. it is the freight train coming at us. maybe not at 90 miles per hour, but fast enough and faster than policymakers tend to react. and faster than i think we often see in the health sector reacting to real changes in their circumstances. so a really serious problem. any way, with that, very positive note, let me introduce the panel.

and i sort of already introduced paul. chief actuary for the centers for medicare and medicaid services. he has joined us, how many years has it been? >> fifth year. >> fifth year. so, but we're not allowing you to take the fifth. okay, that was, i can't help it. okay. then the next speaker will be bob moffat, a senior fellow at the heritage foundation and long time expert. spent many years working on the medicare program and various aspects. spent a lot of time as hhs in the '80s. next speaker, steve lieberman. steve is a nonresident fellow with the usc brookings schaffer initiative for health policy.

in addition to that, steve runs consulting firm. before that, he was senior official at various important places. cbo. omb and bunch of other places in between. and then finally, steve zucker man who is a senior fellow and vice president for health policy at the urban institute and steve promises to mix things up a little bit. so we're counting on good conversation. with that, if you could take it away please. >> thanks, joe. i'm going to walk through some slides this morning to provide an overview of the medicare report that was released yesterday. i am the chief actuary at cms and it is my privilege to represent the 90 or so professionals at the office of the actuary that support the board of trustees and evaluateing the financial status of the medicare programs.

so what i'm going to do is walk through a current snapshot and evolution of the program. going to walk you through the formal evaluation of the status of the programs that were inclooded in the trustee's reports that were released yesterday. we'll take a broader perspective in the changes of expenditure patterns. some of the panel members might expand on in their discussion as joe mentioned earlier, this is my fifth year as chief actuary. representing the cms in our role here. so being that it's a number deviseable by five, i thought it was important to take a step back and reflect that important milestone and take a look to see how how the financial status of the program has changed. back and reflect that important it's a short period of time, but

there are significant changes that go through, that are reflected each and every year and so just take a little bit of a step back and see how those, see how the programs have changed and the fairly recent past. i'd like to start with this slide because one of the important responsible of the tree's reports is to reflect the financial condition of the programs. that projection looks out 75 years. this slide to me highlights how challenging that prospect is. we do our best. the best economic assumptions to doing so. but if you were to stand in 1977 and try to look just 40 years

into the future, the likelihood that you would be able to project that pie certainly how that pie is distributed, maybe you can get close on the total benefit. prz has evolved over a 40-year period. just to kind of take a step back, you can see that you know, 1977, the program was predominantly an inpatient program. it covered hospitalizations. as health care has evolved, in patient spending has deteriorated and been replaced by many other services. the greatest piece of this pie are payment to managed care organizations and obviously, managed care organizations cover in patient services and so if you were going to distribute their costs across the different categories, they would like differently. but in terms of where the medicare dollars go, the distributions have changed significantly.

the one thing i'm sure of in the future, it will change again in ways that we are uncertain of today so while these are the best forecasts that we can make sitting here today, and they should be useful for the policymakers to rely on and base their policy development on, one thing i am certain of is that the program, 1040, certainly 75 years from now, will evolve in ways that we can thot imagine can not imagine today. this is what the program is. medicare is comprised of two trust funds. they are financed very differently. they provide different benefits. and they cover somewhat different populations. the hi trust funds, which is the

one that is commonly discussed as going broke at some point in the future. it is financed via payroll taxes. it provides coverage for inpatient hospital care, for skilled nursing. and some other services. but this is the one where there's the effectively the advanced funding. or the ability to build up trust fund assets. it's financed by 1.45% of taxable payroll, so employees and employers each contribute this 1.45%. in addition, high income earners contribute an additional .9%. in addition, finally, there are additional revenues that are deposited into the trust fund from a taxation of certain oasdi benefits, social security benefits. turning to the s and i of supplementary, that covers part b and part d.

part b provides basically none. the medical services are not provided under hi, so it provides physician service, outpatient services. health, diagnostic labs and the like. part d provides prescription drug benefits to beneficiaryies that choose to participate. the financing of these programs are very different than the hi trust funds. these are financed predominantly through general revenues and beneficiary premiums. these financing rates are set on an annual basis and so being that these rates are set on an annual bases, not the notion of a trust fund and balance. they are effectively annually set to be in financial balance. there's not the same concerns of having adequate reserves. being they're so different, it's important to evaluate their

financial conditions very differently. i'll walk you through that in a moment. we'll start with 2017 experience. so how did the projections of what would actually occur in 2017 compare to what was projected last year? on the income side, you could see there was for hi, there was significantly lower amount of payroll taxes that were collected. this was predominantly through some of the assumptions that our colleagues in the office of is chief actuary at social security being these programs are both financed on the taxable payroll. our colleagues in the office of chief actuary are the ones that project the payroll tax. payroll rates. payroll taxes and the amounts of

revenue that come into the various trust funds and as i understand, there are some significant revisions in how bureau of economic analysis evaluated some taxable pay relative to gdp in prior years, so the amount of actual payroll taxes collected in 2017 was significantly lower than what was projected in last year's report. you'll see this coming through in some of the projections. a lot of what the story is in terms of the changes with respect to the hi trust fund from last year to this year is really a revenue story. so i'll get into that more as we move forward. on the expenditure side, if you look at all the expenditures for the hi, smii, part b, part d, you could see the expenditures were very close to what was projected.

based on what we now estimate would happen in 2017. it was within .4%, up to .8% of what was projected. effectively 2017 was a good year to be projection actuary. so that sets the foundation for how the programs are evaluated moving forward. this is the broader picture of in terms of how the programs are financed. you can see that starting from the bottom, the tax on, the payroll taxes is the most stable and predictable. and fairly significant portion of the overall financing, you could see that that tax on social security benefits is a growing portion of the financing as you would move into the long run. and that's because some of the

thresholds are not indexed at -- they're looking at the larger pieces up top. so that's the hi funding. together with the premiums. and the general revenue, which was predominantly the smi funding. that is a growing share. the general revenue, the fact that general revenues is a large and growing share, a provision in the law that requires to the extent that general revenues exceeded 45% of total financing. that there is a medicare, there's a finding of excess general revenues. and to consecutive findings -- two consecutive findings means there's a medicare funding warning, which sounds scary. that medicare funding is triggered this year, so there is a medicare funding warning in response to the 2018 report. all that means is that the president in next year's budget submission is to submit to congress within 15 days of that budget submission proposals that

will address that situation. and if you look at the top piece of the funding is this deficit. and deficit is that there is insufficient assets within part a, the hi trust fund and therefore, there's an act of the shortfall that is currently not funded on and not know how that will be funded. we'll talk about that as well. so when we evaluate the status as mentioned earlier, the fact that the programs are financed differently, means there needs to be a different evaluation of the trust funds. for hi are the assets plus projected income adequate to finance and participated income costs. on the smi side, the fact that the part b and part d accounts

are financed, the determination of the financing rates are done on an annual bases. they're automatically on in financial balance. there's no long-term solvency issues, but the fact these are funded through general revenue transfers largely and through beneficiary premium rates means there's a large and growing burdens on both the federal treasury, so where our tax dollars go as well as from the beneficiary perspective, larger and growing share of retirement income is devoted to these programs. so this tends to be be the slide and information that gets the most attention from these reports. you can see that this is the ratio of the balance of the funds so it looks at the balance that's in the in the trust fund at the beginning of the year as of ratio to the amount of

expenditures for that year. the short range test is that this ratio should be over 100%. as you can see, we've been under that level for a number of years now. as importantly, you can see this ratio goes down to zero. it is expected that the trust fund would be depleted in 2026 this year. and that is three years earlier than last year. as i alluded to earlier, this is predominantly a revenue story. the fact as i mentioned earlier, payroll taxes, the amount of revenue coming into the trust funds were lower in 2017. that also feeds into some future projections in that there are these lower ratios of payroll to gdp in the near future. as a result, there's less income coming into the trust funds and therefore, the depletion date is

shortened by about two years. in addition, mentioned that there is the taxation on social security benefits that is another part of the income stream into the trust fund. the tax cuts and jobs act of 2017 decreased individual tax rates and as a result, there is somewhat less income coming into the trust funds over the next roughly seven or so years. making the trust fund depletion a year earlier. on the expenditure side looking at the next 10 years or so when the in evaluating of the some factorse,

increase and some decrease expenditures over the next ten years. those roughly offset the some factors relateded to the in increase in expenditured are things like higher medicare advantage payments. projected medicare payments. there are the, as part of the repeal of the individual mandate, there's expected to be higher uninsured and as a result, there's going to be higher care payments to hospitals. through the hi program. on the other side, there is a slowdown in the expected growth

in in patient utilization trends. which does off set most of those increases. oh. i think i walked through that. so predominantly lower income, i think i hit all that. slightly higher expenditures. got all that. and on the factors leading to, taking a step back, not just look at the depletion date, there's this notion of the 75-year balance. this looks at the present value of future income. this is all equated and put on to taxable payroll. denominator, so it's the fact that taxable payroll comes down in most years does not have an effect on the income rate. it could certainly have an effect on the cost rate. the fact we're projecting lower revenues in the future means

that both the amount of income coming in is lower as well as the taxable payroll base is lower. so those those two things roughly off set. not much of an effect on the income side. on the cost side, there's an increase there. that's largely a revenue story. so we are getting less income so effectively, that denominator is a little lower. there are in the longer range, there are some more pressures on expenditures and that's attributable to the independent payment advisory board was going to restrain some future cost growth and repeal of that does have some upward pressure on the cost rate. here's a full picture of how the long range picture changes, so

we had a deficit of .64% last year. it's now .82%. the different pieces presented here. the fact we're taking out 2017 , putting in 2092. it just means that we are shifting the period with a more high cost year. so just shifting the period has an effect. you can see that the largest effect is this basest estimate. the largest is the revenue effect. so the fact payroll taxes are lower in the projection period, that's roughly .13. does explain the vast majority of the changes here. the other base estimate, we had

slightly higher for 2017, so we that into the projections that has somewhat higher pressure there. the private, there are some higher medicare advantage payments in this year's projection. that's put in there.

that's the big picture in walks through how the h.i. balance has changed from last year. this is the picture of the cost rate to the income rate. you can see again so we, the cost rates are the amount that's paid is the same as the cost rate up until 2026 when the trust fund becomes depleted, the amount of revenue coming into the trust fund will still provide for a significant amount of benefits to be able to be paid. when the trust fund goes broke, it doesn't shut down and there's no ability provide any services at this point. in 2026 amount of income coming into would be able to pay 91% of the benefits that are projected and you can see that that share of future income, that's coming into the program, changes over time in 2042, drops down to 78%.

in 2092, it's up to 85%. the important part here is the shortfall is not all of medicare. or all of h.i. shuts down. it's that there's this gap between what's coming in and what needs to be paid out. so you could imagine many different ways that this could be addressed. you can either increase the income rates by that deficit so that the .82% or alternatively, you can actually reduce projected costs by 17% and you would put the program in financial bounds. you could see how these things changed from last year. and a little bit surprising as i mentioned before, when you change the taxable payroll, you have less income coming in, but

you're changing the denominator by which we measure this on, so there's not much of a change on the current income rate and the rate has increased somewhat. again largely because of the payroll tax that the taxable payroll change. but also because some of the expenditures are projected to be higher. as joe alluded to, there's a projection. this is that basically, to demonstrate that long range costs could be higher if certain costs reduction measures prove problematic. the one that's most applicable for h.i. are the productivities joe alluded to. he did a very nice job summarizes that we think in the long range. economy wide productivity would increase that roughly 1.1% where as we think health care productivity historically could .4% annually.

that gap of .7% is not very big in any particular year. but when you look out over 75 years, .7% each and every year add up to a lot. we'll show that in a minute. on the physician side, i know we haven't talked about physicians yet, but the alternative also addresses the fact that price updates for physician in every year in the future is specified. even if you were to take the higher amount of the .75% per year off of those participating in alternative payment models, that's still well below what we think general inflation is. it's much lower than what we think physician cost increase every year. so where as we don't have an sgr problem like we had a few years ago, where there would be a one-year 25% cut, these are

again one, 1.5% cuts each and every year. and we look out over several years, those add up fairly quickly. and so the alternative just presents a scenario to demonstrate what the potential understatement is. and so the way it does that, the productivity transfers from instead of economy wide productivity to productivity we assume could be sustain bable sustainablele -- within the health sector and the physicians update a transition to the economic index, which is a fair measure of what we think is a fair measure of what office would be. and here you can see that previous slide, if you were to have a trend to put online for what the cost rate would be. you could see the .75 adds up to a lot over a number of years.

turning to smi part b, there's not a huge story here. we are very close to the projections. the report is close to what they were in last week's report. slight upward pressure mostly due to the medicare advantage. the issue i mentioned earlier, as well as some legislation. things like caps have somewhat upward pressure on the short range part b costs. and long range. part d, there's more activity here. you can see here, the projections from 2018 are much lower than they were in the short range. for the prescription drug program than what was projected last year. this is largely due to more rebates coming into the program. that basically part d plans

reviewing are negotiating more rebates from manufacturers. as well as a decline, it's not something we usually see in any health program. a decrease in expenditures for a major source of expenditures. a decline in the spending for hepatitis c drugs. that was a significant cost driver. similarly, there's been a slow down in some diabetes drugs that has contributed to this slowdown in the short range. looking at the clang from last year to this year, you can see this year's report very close in the current year's expenditures. you can see these a little bit up. d is a little bit down. in the longer range, b is still

down, largely because of the issues that i mentioned earlier. and again, that's where we have the ipab effect in there as well as some of the upward pressures i mentioned in short range that does carry forward into the long range. and so looking at the full picture, we are at 3.7% of gdp. this is total medicare expenditures. in 2017, we are at 3.7%. looking out at the end of the projection period, it jumps up to 6.2% under current law. and importantly, the alternative. so would grow to 8.9% under current law. excuse me, under the alternative. even if there wasn't the

alternative as being problematic, under the current law, the 6.2% is still growth compare today where we are today. going to walk through these very quickly. this is looking at over the last several years of history and years into the future to see, it's kind of the smaller subset of the changes in the program that i started with. you can see the programs change even over a short period of time. this is the share of different services into the part a program. the share that was attributable to in patient spending has decreased fairly rapidly in a relatively short period of time. 77%, drops down to -- and there has been a number of years of

reduced inpatient spending within the part a program. that's controlled with the in patient spending. it's projected to continue in the future. then on the topside, you can see some of the other programs are just making up more of a share. that's really, this is really more of an in patient story than anything else. looking at part b, you could see that the physician payments have been declining over time as share of part b. but the story here is that it's more a, a by-product of out patient becoming a more significant portion of the part b benefit and is really a flip side of the in patient story. so the fact that more services that might have been previously been done in in patient and now outpatient is having different effects across the medicare program. the last one looking at the change of the benefit structure,

of the distribution of benefits over time, this one is pretty dramatic. the part d benefit started out for a number of years was a broad-based benefit. that's most of the benefit was going to a direct subsidy, which means that basically, everyone that was part of the program was getting a benefit from. to the extent that the distribution has shifted into where most of the benefit is now catastrophic in nature, a larger share of the part d benefit paft -- payments are going towards -- the effects of this have not been fully played out yet. we will see what happens in terms of how this program is. this is a byproduct of high-cost drugs being used by a small

number of beneficiaries. it has shifted away the part d benefit. because again this is my fifth year here so divisible by five. that is important for some reason. how have the projections changed over time? and starting with the taxable payroll, really, that news is the biggest story this year. you can see that from 2013 through the end of this period, the amount of taxable payroll that's being produced was projected. this is mostly due to the less ambitious recovery than what was anticipated. it's been going strong, but has not shown up as strong as was projected. certainly not as strong in terms

of wage growth. and when you translate that into h.i. income growth, there's a pretty direct relationship between those two. so you can see that the amount of income coming into the h.i. trust fund over the next several years certainly from where it was protected in 2013 is lower than what it was otherwise. at the same time, the amount of spending in the program was also lower than anticipated. it was a number of years of historic low growth in inpatients. and other expenditures across the program. and so this has led to reductions in expenditure growth. so what's the best way for an actuary to be involved? -- to be wrong? wrong on the income and expenditures because that gets you to roughly the same place as we started. so five years ago, the depletion

date was 2026 and we're still in 2026. there are lots of reasons. more than just the general shorthand and it's probably unfair to take that shorthand, but i'll take it. looking at the other programs, there's less dramatics happening in the part b and part b, projections are relatively close. the shocking part of this is that it is relatively close. in this time in 2013, we had the sgr program expecting to have a significant cut for physician payments. replaced that with a different program. but all of the same, the projections have not materially changed in the last five years. on part d, you could see that a that the trends, if you look back, if you just stop at say 2016 and say, oh, we seem to be accelerating at a much faster rate. that was really part of the hepatitis c expansion.

and the fact that we have now slowed down some significantly on the hepatitis c and the fact there's this push towards generic utilization and slow down in some of the lower costs. while we were still seeing high trends and high costs, the fact that a vast majority of drug uses in the generic space has really controlled the overall drug costs. the last slide i have is, i took on fair credit earlier. here is a place where we missed it. we looked at, this was in 2013. a projection of private health plan enrollment. we assumed that the payment

reductions to benchmarks that were being implemented as part of the affordable care act would significantly temper the acceleration of medicare advantage enrollment. and that has not pulled out. there's a very wide gap between what we were projecting just five years ago into what we are currently projecting. there's a fair number of policy approaches that were adopted that kind of helps push some of that up. and the ability for any plans to we'll say accurately code or exuberantly code. it has contributed to the ability for plan to not lose as originallye as we into the beta. but just the attractiveness of the program continues to be strong. and i think some of the panel members might follow up on that

conversation. i think that's my slide. come back to you. thank you very much. this is the trustees report, this is not paul's report and so in particular, five years ago the trustees at the time has -- had considerable influence. they don't necessarily think the exception. they have considerable influence over the assumptions that are made. that the vast majority of the short-range assumptions are developed in the office of the actuary. there is a good dialogue around some of those assumptions. they are set by the office of the actuary on most exclusively.

the american pressure, but we are less receptive to the pressure. >> very good. i feel much better about that. >> thank you for the invitation. this was a wonderful event. thank you for the presentation. the medicare trustee's report is is a treasure trove of great policy makers, policy analysts and the general public. we are going to have a lot of issues to talk about in the time that is left to us. i would be remiss if i did not mention to process issues. i think they are important. number one is the timing of this report. by law, the medicare trust fund report is supposed be presented to congress on april 1. this is a statutory requirement, it is not a good idea or an administrative guideline. this is what is supposed to be done.

late, whethery republican or democratic administration and that is a problem. the problem is that either the thatg of the report means the team does not have enough time to do all of the work and the work is in our midst. -- is an enormous. nevertheless, we need to have congress have to start to look into this. my own suggestion would be that perhaps we have the trustee's report at the end of the fiscal year, than the president and his team can start to look at what can be done. the findings of the report into the budget submission that takes place in february of the following year. that is just a suggestion. the second process issue is that this report this year assigned by trump administration officials. this is a problem.

the fact is we do not have two public trustees. when the bipartisan national commission on social security reform issued its report, they remarked that adding two individuals from outside the executive branch would be good public policy and help to instill confidence and the integrity of the trust fund. so we really mean folks outside of the trump administration. outside of any administration to contribute to their assessment of the medicare program. the current situation is simply not good public policy. that means that the president and senate should really get on this. we can't leave this to go for another year. report,ards to the 2018 paul's overview was comprehensive.

my comment on this is that, i don't think we're seeing here anything that would be a huge surprise. the trustees determined that the trust fund would become insolvent in 2026, three years earlier than last year. and that it doesn't meet the short-term or the long-term standards of financial adequacy. well, in fact the trustees have been saying that for years. and i don't think there's any surprise here. by the way, the congressional budget office said a couple of years ago, 2026 was the year that there would be insolvency in the trust fund. this has been going on from year to year. in the media, there's an unfortunate tendency to focus on the hi trust fund. without looking at the bigger picture. i think there's been an unwarranted obsession on this in the media. politicians and pundits use the term, scary language.

medicare is going bankrupt or the trust fund is going bruft -- bankrupt. that is not a realistic depiction of what is happening. is not a realistic depiction of the financial dynamics of the system. the hi trust fund has not gone bankrupt in the last half-century and i can't imagine will go bankrupt in the next half-century. , i think it is an important point, is that medicare has serious financial challenges. it is better to address them sooner rather than later. congress is going to have to come to grips with this. it is not something that is going to go away. historically, congress has addressed this by raising payroll classes --/-- payroll taxes. since 1966, we've raised the payroll taxes about ten times. the other option is to resort to payment reductions basically. in medicare, part a.

my concern about all of this, i cannot imagine that after the scheduled payment reductions that are already baked into current law by the affordable care act, my understanding, it is about 800 billion over the next 10 years, how congress can continue to do this. if you look at the trustees appendix, the language is pretty stark. paul alluded to it. it says, by 2040, simulations suggest that happened hospitals, roughly two thirds of skilled nursing facilities, and only -- over 80% of home health agencies would have total negative faculty margins, raising the possibility of access and quality of care issues for medicare beneficiaries. medicare spending is expanding again. the solvency of the trust fund is only one aspect of this.

spending istion in eating up larger and larger chunks of the gross domestic product. between now and 2042, it will jump, medicare will go from whether you are talking about the alternative scenario or the , trusteesss in areas have outlined for us, we are looking at accusing -- a huge expansion of spending. it will go from well over $700 billion to $1.4 trillion. drivere is the biggest of health care spending. unchanged, remains federal spending led by medicare will grow larger than any other federal spending category.

today, federal spending amounts to 20% of all noninterest help spending. -- health spending. we mentioned the impact on debt. the medicare payment advisory commission makes a point with their reliance on general tax dollars in federal deficit spending, medicare and other federal health programs are going to have a substantial effect on the debt. that all sounds rough and suggests congress and the president have to get serious about this. but there is very good news here. if we are careful and deliberate, as the medicare payment advisory commission tells us, future debt is very sensitive to even the slightest changes in medicare and medicaid per capita spending. we can make modest changes that have a big impact as long as we

do that. the problem is if we don't do that, we are going to be faced with serious problems down the road. middle-class entitlements are drowning out other budget priorities. that's our biggest challenge. medicare is probably the biggest fiscal and managerial challenge. this is going to be tough, because metal -- middle-class american -- entitlements are the most popular. nine out of 10 people say they love medicare. the surveys also show most americans have not got a real clue about how medicare is finance, what it covers, what it does not cover, and what the projections are. that is why we have these trustees reports. the unfunded obligations are getting bigger and bigger.

theirre actuary released unfunded obligations over a 70 year. -- 70 year period. the benefits are not paid for. the current scenario you are talking about $37.7 trillion. under the alternative scenario, you are talking about $47.3 trillion. no matter how you cut it, young folks are going to have a good bills to pay -- have big bills to pay. i would simply say this. public education is really critical. people have understand what the real trade-offs are. people love lot of the program, but they are not clear in their own minds what this will actually mean. the impact of the current trend of taxpayers and beneficiaries

alike. the trustees have given us a resource for further deliberation. i know what i would like to do. my preferences would be to simple five program, combine medicare part a and part b, make wealthier retirees pay more for their benefits and perhaps phaseout the taxpayer subsidies for the wealthiest retirees. raise the age of eligibility. that would have a very good effect over the long-term. most importantly, changed economic incentives -- change the economics of incentives. take the defined contribution approach and expand it under current spending.

i think that is where we have to go. the need for reform is as great as ever. thisare trustees have set should be addressed urgently, not later on. by members of congress and the administration working together. that would be a good idea. the medicare trustees have done their job. is time for congress and the white house to do their job. i will make an ironclad prediction that in 2018, nothing will happen. [laughter] >> thank you for the opportunity. >> more spirited, but equally depressing. ai foruld like to thank organizing this and joe for

inviting me to participate. i would like to thank the extraordinary hard work he and his colleagues do. from my time at cbo i know how hard it is. in my 10 minutes i'm going to try to make a couple of brief comments about the baseline, paul and bob will try not to say things that have already been set. -- said. the summary of the situation is, same as last year, just worse. when i first got into the budget business, i spent years at omb and its predecessor. next year'sthink budget will be? same as last year, except worse. it seems to be a recurring theme.

why would like to do is try to widen the lens and talk about baselines. the bad news headline is insolvency date for the trust but is three years faster, not much change in part b and part d. the good news is those trust funds don't go insolvent. the bad news is we are on the brink of insolvency. as joe and bob and paul have all echoed, there are consequences to degrees of freedom to come up with policy decisions to align revenue and costs. point, it isp joe's

well-known baby boomers are retiring 10,000 per day every day of the year. that is a staggering. reported wently have a trillion dollar deficit as far as the eye can see. as a share of gdp it is around five percentage points, which is close to unprecedented levels, certainly for an ongoing basis. we really are in uncharted territory. where debt as a share of gdp will exceed 100%. we are projected to go instead higher than we were at the end of world war ii. that has a staggering implications. if the smi trust fund can't go aoke, what is relying on its general fund which is in serious deficit. could put two more points of gloom and soon to keep the theme care costel -- health

growth has been low by historical standards. it could easily accelerate. sensitivityave the of excess cost growth is enormously important. it's fair to say the trustees report is probably optimistic. part of that is what goes on forever. the question is, when does it stop? that the point is threats are we are going to have demands for higher discretionary spending, extending tax cuts, it either of those have deleterious for the budget. we are highly sensitive to rising interest rates and the whenrical question is, will the positive business cycle

and after nine years? when will we have a recession? with that, let me try to touch on four points. the first, paul has already highlighted on part d. the major compositional change. at the start of the program in 2006, 20 6% of spending was projected to be for catastrophic. it is now projected to be 73%. every 10of prescriptions covered by part d are generic, which has been a norm us. the growth of -- which has been enormous. that trend is continuing and maybe excel rating. -- accelerating.

act hadrdable care pharmaceutical manufacturers paying a quarter. that has now shifted. health plans are picking up 70% of the cost -- sorry, pharma companies. health plans are now down from 25 to 5%. it would surprise me greatly at the amount of rebates they collect on that spending don't exceed their 5% liability. the has interesting implications for how the program involves. , the fda point is -- i willnnounced give you my take away.

it is not going to do anything about the high cost of drugs. let me mention a couple challenges. mentioned medpac. medpac reports that on the medicare lien of inpatient business, the hospitals are losing -- and there is obviously distribution -- they are losing almost 10%. 9.6% is the negative margin. that has interesting applications if one wants to expand the number of people covered under medicare. we have heard a lot about the question about the , the productivity cuts and their applications. those are important things. i won't spend any time on them under than two -- other than to underscore my agreement. medicare has a significant service differential issue which

has the effects of driving independent positions in hospitals as well as other issues driving consolidation. we heard about the issues of macro and whether the limited service, whether that is definable. one can seriously question the viability. the big question is, will alternative payments with apm's actually work? will they work for providers and medicare as well as your beneficiaries? if i can just summarize, what are the challenges for medicare, it's, what does the future look like? is that this brave new world where we have this miraculous emergence of alternative payment methods and value-based payment? or does it look like the status

quo where what we are doing is very much a service where we are rewarding volume? i want to briefly touch on something i think steve will spend a fair amount of time on. he and his colleagues have written an excellent report i would recommend to everybody that talks about ways to expand medicare. i want to make two quick points. that onll-known average, medicaid rates are below medicare rates for hospitals. and i will stay with hospitals, keep this simple. commercial rates are well above medicare. just to illustrate the effects of redistribution, winners and losers, if we expand the number of people covered by -- whose payment rates are dictated by medicare, imagine the empty

hospitals, each of which has 35% of their patients are medicare, but the remaining 65%, they are mirror image opposites. -- versus 50% medicaid and 15% commercial? if we were to move everybody to pay medicare, make it very simplified, clearly the hospital that had a heavy commercial presence would lose a lot of revenue. the hospital that had a heavy medicaid presence would lose -- would gain a lot of revenue. is second point i would make what in cbo speak we call political economy. the more people are being paid in medicare rates, the greater the incentives are for special interests to affect those rates.

will become even more intense as we expand medicare. i look forward to steve's discussion. i'm going to conclude by talking about medicare advantage, which a poll showed, we are quickly over -- currently over 421 million enrollees. that is almost 36% of all beneficiaries in 2018. the trustees project that will increase the 29 million at the end of 10 years. that is almost 39% of beneficiaries. again showing why it's important to read the footnotes in the report. i would recommend that everybody , paul'sook at page 254 elegant statement of actuarial opinion. the second paragraph is a very chilling picture of the viability of current law.

-- it is very politely saying there is fire out there and you had better be prepared. if you look at the footnote, it turns out we are at 39.2% of those beneficiaries who have full medicare. beneficiaries who have part a and part b. enrolled, nottly 36%. details matter. i think paul for being very clear about this. i will stop by saying that joe and the colleagues and i have a paper that was published in may, may 10, links to a paper at brookings where there is a lot on waysail and analysis to reform medicare advantage and

to make the ratesetting process .ook like part the -- part d adoptedate that if we the part d bidding structure and we standardized plans propose to medicaree restrict damage organizations to three offerings, two of which would be absolutely standard, the third of which would be -- would theit innovation, we think behavioral economics literature suggests that would go far to improving consumer choice and making it easier for people to make smart decisions. our estimate is on a steady basis, that will save $10 billion. i look forward to your discussion. >> thank you, and thank you for inviting me to this session.

as joe knew when he called me up, i am not someone who scours the trustees report every year. this is a unique opportunity for me. i'm going to direct my comments less to the medicare trustees report and as you have heard, toward the idea my colleagues and i have put forward that -- theon some of the growth in medicare advantage. the one thing i'm going to start by saying is that i think paul explains something that was confusing to me when i read the the movingt a lot of up of the depletion date of the health insurance -- the hospital insurance trust fund moving up three years. relating to payroll taxes. that seems confusing, but it seems like there is a greater rest edition that the recovery

-- recognition the recovery was not as robust as people thought. the other thing i found interesting is that when you look at the lower taxes on social security benefits, some -- that hasmay be occurred in hospital spending -- steve talked about issues of hospitals being able to get facility fees for outpatient services, the potential impact of eliminating the aca mandate on leading to more uninsured , the medicared advantage system and payment models that are used in the risk adjustments, it is almost at the margin government inflicted damage to the hospital insurance trust fund. i think that is something to keep in mind. it was takenime, out of the game.

if there was anything that was going to put brakes on payments, that's not there now. the reality is history tells us action has always been taken whether it is higher payroll payments,uce provider to keep the hospital insurance trust fund solvent. i have no doubt that's going to continue to happen. i think it's important and i think it's been alluded to that when people talk about access issues, to keep in mind that medicare is part of a broader health care system. generally speaking, medicare has done a better job of controlling spending for beneficiaries then private health insurers. you have to really take a breath -- take a broad look at this and not just stay focused on the medicare program per se. i am going to say more about medicare advantage. clearly medicare advantage in recent years has been thriving.

the affordable care act reduced payments for -- to medicare advantage plans and the expectation was enrollment would go down because plans did not have the opportunity to provide extra benefits. cbo, the actuaries, everyone was wrong. since payments were cut in the affordable care act, medicare advantage enrollment has grown dramatically. now a third of the program. even though congress and the administration may not be taking efforts to really reform the medicare program, beneficiaries are doing that. why? probably because a lot of areas of the country, medicare advantage plans are being overpaid. abouthave been issues risk adjustments in medicare advantage, leading to higher payments.

there is quality bonuses in the program that may or may not be tied to research suggesting those higher quality plans actually are better for beneficiaries. i think there is a lot of issues around medicare advantage payments that needs reconsideration. one aspect of medicare advantage that i think is very important to recognize is that private planes can come into the program and successfully compete with traditional medicare because those private plans are using the prices that traditional medicare sets. they are using reddick -- regulated prices. they are not paying like commercial payers, 190% of cost hospitals for care. prices forator physicians, for other services, that medicare advantage plans can draw on, allows them to compete with traditional

medicare. my colleagues and i thought that, well, there may be something there. i understand as a steve pointed to that there is some risk medicare prices getting used broadly in the health care system and providers saying, wait a minute, we can live with medicare prices, but charge commercial plans much higher rates. if more people get medicare prices. i think that's probably one of the reasons that medicare for about,lot of people talk maybe more of a nonstarter. it could be a very big shock to the system. aboutwere thinking medicare advantage and the affordable care act's, we could see strengths and weaknesses to both programs.

you could see the success of the affordable care act, clearly, since the coverage went into effect in 2014. access to coverage has really increased. the nongroup market has increased risk sharing. you are not getting this underwriting. you have not seen as some people were concerned about, employer coverage. no significant decline in employment. jobs have not been lost. spending growth has been restrained in the overall system. the affordable care act was not as successful as it could be. one problem with the design is that the supreme court allowed the medicaid expansion, which was the foundation of the affordable care act to become an option for states. now it is hard to count given all the maneuvering around, but about 17 or 18

states have not expanded medicaid. marketplace enrollment has been low in some areas. premiums have been high. and rising. premiums have definitely been an issue in medicare -- in the affordable care act marketplaces. there has been discretion in the obama administration on how the law was implemented and that discretion is carrying through into the trump administration as to how much support there is for outreach, enrollment assistance, and maybe it is time, and this is where we are coming at it with this paper, there may be a time to be thinking about something broader than just fixing the affordable care act. linda, john and i have presented what we are calling, because we could not think of a better name

, the healthy america program. we are happy to have this program have another name if anyone would like. it is a copperheads of reform that -- comprehensive reform that would get us closer to universal coverage. increase cost containment while limiting the disruption of medicare for all. and not lead to huge increases in government spending. we built on aspects of medicare advantage and the affordable care act marketplaces. one of the things we did which i think for some people seems a little bit controversial is we would integrate medicaid. we would bring medicaid acute-care and chip into the nongroup market. beneficiariesid and people who currently are purchasing in the nongroup market would be choosing from

the same set of plans. we would not do anything to the employer market. even though i understand all the problems with the tax exclusion of employer contributions to premiums. we would leave that aside, untouched. we would leave medicare as it is also. it needs reforms. the medicare costs sharing structure can be modified. we did not touch that. we are not touching the v.a.. is to develop a medicare advantage style marketplace with a public plan that would be just like traditional medicare, but also have private insurer options as you have in medicare advantage. we would cap medicare provider payment rates within the marketplace at medicare rates.

both inside and out of networks, that's all that could be -- that's all providers could receive. we would improve premium and cost-sharing assistance. now there is a big concern about, if you are not eligible for tax subsidies, you are exposed to these really high premiums. we would just go right of the income distribution. as far as you want. no one would have to pay more than 8.5% of their income toward premiums. we would keep the individual mandate. maybe restructure it. so instead of having a tax penalty, we would probably have it more, some of the expansion standard deduction would be at risk if you remained uninsured. you could then -- if you became insured, recover that the next year.

arere not calling it individual mandate, but i recognize the fact it is an individual mandate in 141 you know, we think this approach is less aggressive and then single-payer and more political the feasible. we would have a very large marketplace. the program. 69 million would be form of medicaid, 16 million newly insured. there would be some people coming from esi. we would allow people, even if they have what's considered an affordable offer under the affordable care act, to move into the marketplace, there would not be a fire wall, and continuing the non-group coverage. we wouldn't get to universal

coverage, still have about 18 million people uninsured, 8 million of those would be undocumented immigrants who would not be eligible for the program. financing, we would continue state maintenance effort. we think federal costs would increase by about 98 billion. employers would save some money. households would save some money. and yes, the expansion of medicare rates, providers might lose a little bit. relative to the marketplace, the current marketplace rates, but that would be offset by increases in payment rates for all the medicaid people that would be going into the new plans. so i will stop there with, you know, maybe a bright news building off the medicare program. that's

extremely depressing, steve. >> yeah, a little more politically feasible for some administration that is not currently in place. it's the kind of thing that politicians do all the time. they sellthe sizzle, but there is no steak. in particular, the think report and especially the alternative scenario illustrates the problem. if you can't make the current system work, the current set of price controls work, then throwing another 100 million people into the system, it's not a little nick. it's a big nick. now, the question really boils kind of like waging and price controls for physicians. that's what we're talking about. a lot of their business comes from medicare beneficiaries. not surprisingly. medicare beneficiaries are at the age where they need more services.

and so really this kind of a proposal, which i agree with you to some extent that it's more thought out politically than, you know, most of the other medicare for all ideas, but nonetheless, you're talking about a very politically important, economically important, and in terms of health care, extremely important group of providers who basically would have to take a gigantic hit. now, what's the -- the question always is, what's the right price? what should we be paying people for? i don't know what the answer to that is. i think thomas and kleinus couldn't answer that one either. but the fact is, you have to start from where you are. and where we are is a very different world than the world that i think you're suggesting. ok, i'd just make one comment

about provider payment. i think that providers would like to tell you, or like to convince payers, that the way they are structured, in terms of their costs, their expenses, are something that -- something that's immutable. and we know that's not immutable. providers can adapt to different payment rates and, in fact, do. and this is something that -- there was a comment before about some ofthe productivity incentives, you know, are not really likely to bereflecting the productivity gains that are possible. but i thinkthat these productivity incentives i always see as sort of a nice way of saying, we're putting pressure on providers to change the way they do business. and that's in a sense what the medicare payment cuts are . certainly going back, and i have to admit, i remember when in-patient perspective payment came into place, it was the only perspective payment system,

providers changed radically. they moved more care to out-patient services, reduced length of stay. so i think that the idea that the system can't change -- i mean, we know that whenpeople look at comparisons between u.s. health care spending and international -- and spending in other countries, that the high prices in the u.s. system are at the heart of the high spending we're having. we're not willing to take that on. we're not going to solve the spending problem. no, there is. but it's a very, very rare moment. you know, you mentioned one of the great distortions of the existing health care system, which is the federal tax treatment of health insurance.

and i've always felt, you know, that if ryan hart and henry aaron and stewart butler and jim cap reta, and all those guys could actually get together and agree to take that on, that we would actually be far ahead of where we are now. i remember talking with rhine hart who made thecomment that the heritage proposal to establish a national tax credit system was in fact the most progressive agenda ever offered, you know, during that period of time, in the early 90's. the thing is, is that, you know, the power of, you know, organized opposition to this kind of a change, has created, i think, an awful lot of problems to the point where we ended up with the affordable care act largely because people who lost their jobs, changed jobs, did not have health insurance. they had to buy the health insurance with after-tax dollars

on an individual market that was, in fact, not functioning. as you know, from the economic literature, if you buy health insurance without tax relief on an individual market basis, you can pay anywhere between 25 and 50% more for the same package of benefits that you would have gotten at the place of work. i i believe that sometime, at some place, somewhere -- sounds like "west side story" -- there's a place for us. that we'll actually arrive at some kind of an agreement. i don't see that happening now, and i certainly don't see the trump administration adopting anything even close to what imagining. >> we don't see a vote on the horizon.

thein't this illustrated complexity of health care. i mean, joe, your observation about an incomes policy, steve, i don't know what the current estimate is, but myguess is more than 70% of health care spending essentially isincomes, labor. and so, if you're cutting provider revenue, you're cutting people's wages. i'm reminded of what a partner of mine when i was running health care in of all places arizona. started -- a family practice doc doc who had started, and said, in fee for service revenue centers, in capitation, they're cost centers. that explains a lot of behaviors. i think we all agree that economic incentives matter. joe, your point about how do you get the price right is extremely important. i think steve and his colleagues deserve enormous credit for a very carefully thought out

proposal. it requires a whole lot of incremental improvements towards a second best as anoptimistic statement, and just to conclude, i remember running health care in san diego in the mid '90s, which had the distinction of either the lowest or second lowest capitation rates in california. and the market had changed very dramatically in five years, from being predominantly fee for service, topredominantly capitated. and i had a group of family practice docs that i managed and they were unhappy with their capitation. physicians are very practical problem solvers. and most of them want to be at the head of the class. every friday afternoon, the head of that group came into my claim shop and reviewed every single referral of a service that went outside of his group. and i won't say they stinted on care, but they scared the hell out of my medical director and

me. we haveto be careful what we wish for. and i think steve, as you acknowledge, the good news from a budgetary perspective is medicare rates are a lot lower than commercial rates, and also a lot higher than medicaid rates. how you get that roughly offsetting, or a savings, is an interesting question. you and your colleagues have done impressive work on that. but this is a very tough issue, and it comes back to, be careful what you wish for, because if you don't have the price right, very clever people figure out how to, as with medicare advantage, game the system to their advantage. many of the changes that could be considered, you know, areno doubt -- and this is one -- you know, we all understand in this room that health care is complicated. and if you talk about ideas such as defined contribution, let's say going in the direction of premium support in medicare, the

issues around risk adjustment that plague medicare advantage, will be even more important in that kind of a situation. because then traditional medicare would end up being risk adjusted. if you talk about raising the age of eligibility for medicare, then you have to think about, what is the implications of that, assuming the aca stays in place for the aca marketplaces. so there's a lot of domino effects here that happen. yeah, >> look, we did a lot of price regulation, you know, beginning in the 1980s, you mentioned the perspective payment system, when we adopted that, that was designed, if i recalldirectly, and joe, you were there in the reagan administration, when we did that in the reagan administration, the idea was to introduce some kind of market discipline into hospital pricing. and all the good intentions were there, to restrain, you know,the growth of these prices. you'll

you'll recall that the carter administration was talking about hospital cost containment, basically a comprehensive price control system for hospitals throughout the country, didn't go anywhere. but the point is,when we did that, one of the first big effects of that was amassive shift from in-patient to out-patient. they pressed down the balloon and then we found ourselves with an explosion of out-patient costs, and it was not surprising that throughout the rest of the 1980s, the actuaries at cms and the reagan administration conservatives were basically sweating blood over the question of what we're going to do about the explosion in part b costs, and we ended up, of course, creating this resource-based relative value scale that looks like it was imported out of east germany. we imposed that on the system in 1989. and now a lot of folks are looking back at that and saying, you know, really the bloom has faded on that rose. and we're back to and we're back to this idea of trying to redo physician paymentagain, and

now we have something that looks like it's collapsing, which is the medicare payment program that was enacted by congress in 2015 to the point where the proposal, medicare payment commission saying we should get rid of it. so this whole idea that we're going to set the right price seems to me to be the problem. i don't think, frankly, that we can all design the right price for all of these complex procedures, especially 8,000 procedures for physicians. there is, of course, the market. we haven't had a market in a long time in health care. we may not get one. from my point of view, we ought to do everything we can to intensive competition and create a market, also to establish some kind of a level playing field, which we do not have in the current health care system. my comment would be, i take a different lesson from the creation of the effective payment slsystem, which was,

what motivated it, anything but teffra. --if i can >> quickly. people wanted to avoid the cost reports. the only reason i'm mentioning that, out of the crisis, out of the shortfall in h.i. funding and so on, that may become an impetus for action. >> well, let me make a point that's a little less -- requires a little less knowledge of ancient history, which is that the kinds of policies that the generic medicare for all people talk about, and that steve's analysis addresses, rely on kind of the average price level. they don't worry about the distribution. it's a point that bob is making

as well, with regard to physician payment. i think no one can disagree that moving unnecessary admissionsout of the hospital and having people go to the proper site of service, at the proper level of care, is a good thing. so having a shift from a to b, in the abstract, is a good idea. how you do that is the problem. and i don't think that any of these general kinds of proposals have addressed that at all. at the same token, the trustees report also has that same character. it's avery aggregate kind of an explanation. pardon me. so you're not going to find the policy solutions there. you're only going to find the scary thing that you already knew 20 years ago, that's not a bad thing, but there's a lot more

work to do in policy. so with that, can we have a question from the audience? peter first. wait for the microphone and please identify yourself. hi, >> health economist and recently retired from the american nurses association. when i was working for the nurses association and making projections about the effects of the affordable care act, i had an argument that two to three million people would age into medicare for the rest of the century. and i was challenged on that by henry aaron. so i talked to former colleagues who were with the actuaries office. i got the projected age in numbers. my numbers were too low.

we already are at three million people aging in per year. and actually, we're not at 10,000 a day. that doesn't happen until 2019. but for the boomer generation, the average is 10,000 aday. what happens, and the reason that there's a projected slowdown in the rate of growth of the aged population, is that the boomers are going to die. and the deaths will catch up and overtake the agings towards middle of the century. and because of the increase in deaths, the actuaries, i believe, have that figured in. but i don't think anyone has really contemplated what having more than double the number of deaths per year in this country, by 2088, will affect hospital operations, the market for funerals, that sort of thing. in the 2020s, because of the increase in deaths and assuming

that one-third of deaths occur in hospitals, which is the historical average, the number of people dying in american hospitals per year is going to go back to more than a million per year. hasn't been that high since 1982. the hospital finances, i suspect, aregoing to be affected because all of these people will be in their last year of life. they will -- many of them -- be in hospitals. my recollection is that it used to be 46% of hospital revenues came from cms. it could go to 60 or more. i i suspect that will have an effect on them. so for doom and gloom, the average age of themedicare population, when we get to 2026, is still less than 80, but the increase in deaths will accelerate after 2026. and i think it's going to stir

up things, whether, you know, the trust fund is in balance or not. more broadly, what you're saying certainly true. i detect some investment advice of purchasing funeral homes, but you say that the nature of the health care system will have to change. it is not just the there will bodies,enough at it it probably is in good way to deliver health care now. >> they may be --

>> let me make another observation. i think we'll have to worry about the explosion of the hospital costs. health care is complicated and different things can happen. general dissatisfaction in the united states with end of life care. if you look at the survey research i have and you ask people what would you, for you, what would you prefer? and people say, well, i would like to die at home. i would like to be sure that i'm comfortable, that i'm family's around, and i will have the opportunity to die at home, like our grandparents did routinely. instead, overwhelmingly, people are dying in hospitals, often times in icu units and so on. there is, in medicare, the hospice benefit, and the hospice benefit is a wonderful thing. i forget exactly what the number

is, but it's a large number of people are starting to take advantage of that. the good news is that more people are starting to die at home. and i think that as far as public policy is concerned, one thing that we certainly can do in medicare is to encourage perhaps a new benefit, a palative care benefit, not necessarily hospice, butpail yative care, that would empower people to take advantage of the services in medicare part a and b. the problem is it's fragmented care. it's very disjointed. but if we created such a benefit, we would have the opportunity to develop different care delivery for these people being who are the massive number of baby boomers who are going to be very disappointed to find out that they too are going to die.

we could probably actually reduce costs toward the end of life. >> right. a critical thing. adding a benefit is not the shift. unless there is a now, 25% of the costs -- >> we've run out of time. we have to stop now because the viewers outside of the room. join me in thanking this panel for an interesting discussion. [coughing] at the fiscal solvency of the entitlement system continues in the morning.

later, the foreign affairs committee looks at u.s. business and invest in's abroad and the future of trade between north and south america. on the house floor, work continues on a spending bill for bill on spending that was for appropriating. >> this week marks the anniversary of the assassination of robert kennedy. being amongjoying the people, the fiscal contact,

,efusing police protection saying that the people wanted to touch him and not hurt him. watch the report from 1968. himhey decided to transfer to good samaritan hospital where the facility was better. mrs. kennedy was with him from one hospital to the other. identifiedect is now and was grabbed by the kennedy ballroomed through the and the hotel. some officers had to protect him from the crowd. there were several who were close to hysteria and there was concern for the safety of the sus deked.