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GAO
Testimony Before the Committee on Finance, U.S. Senate Statement of David M. Walker February 24, 2000 Mr.
Chairman and Members of the Committee:
I am pleased to be here today as you discuss Medicare reform. I would
like to focus
my remarks on the two leading proposals that involve more comprehensive
reform that is, reform that addresses cost containment as well as
expanded benefits. However, before examining these proposals, I would
like to speak again about a budgetary context for understanding the proposed
reforms in light of Medicare s future sustainability and the long-range
budget
outlook. I spoke with you twice last year about this topic, and despite some
very positive,
short-term developments regarding our economy, the federal surplus,
and Medicare spending, the bigger picture remains virtually unchanged.
Long-term cost pressures facing the Medicare program are considerable.
Even before adding a prescription drug benefit, for example, projected
program spending threatens to absorb ever-increasing shares of the
nations budgetary and economic resources. It is tempting to push aside this gloomy forecast in the face of today's
sunny
budget report. In its most recent projections, the Congressional Budget
Office (CBO) shows both unified and on-budget surpluses throughout
the next 10 years. However, good news does not mean that hard
choices are a thing of the past. First, it is important to recognize that,
by their
very nature, projections are uncertain. This is especially true today
because, as CBO notes, it is too soon to tell whether recent boosts in revenue
reflect a major structural change in the economy or a more temporary
divergence from historical trends. Indeed, CBO points out that assuming
a return to historical trends and slightly faster growth in Medicare
would change the on-budget surplus to a growing deficit. This means we
should treat surplus predictions with caution. Because current projected
surpluses could prove to be fleeting, appropriate steps should be taken if
new entitlements are created that establish permanent claims on future
resources. Moreover, while the size of future surpluses could exceed or fall short
of projections,
we know that demographic and cost trends will, in the absence
of meaningful reform, drive Medicare spending to levels that will prove
unsustainable for future generations of taxpayers. Accordingly, we need to
view this period of projected prosperity as an opportunity to begin addressing
the structural imbalances in Medicare, Social Security, and other
entitlement programs before the approaching demographic tidal wave
makes the imbalances more dramatic and possible solutions much
It is in this context that we are discussing Medicare reform today. Among various proposals, the two I will focus on are the Presidents Plan to Modernize and Strengthen Medicare for the 21st Century and S. 1895, entitled the Medicare Preservation and Improvement Act of 1999, which is commonly referred to as the Breaux-Frist proposal. By including a more comprehensive reform, the intent of these proposals would be consistent with the position we have maintained from the beginning of these deliberations; namely, that the unfunded promises associated with today's program should be addressed before or concurrent with proposals to make new ones, such as adding prescription drug coverage. Such additions need to be considered as part of a broader initiative to address Medicare's current fiscal imbalance and promote the programs longer-term sustainability. In addition, a reform package should include a mechanism to monitor aggregate program costs over time and establish expenditure or funding thresholds that would trigger a call for fiscal action.As we consider key elements of these two proposals, I would ask you to keep in mind the following: these two plans reflect considerable efforts by the Administration and the Congress to wrestle with the twin problems of program adequacy and sustainability. However, unlike the game show, "Who Wants To Be A Millionaire," comprehensive reform does not come with a "final answer." Nor is it something that, once implemented, can be put on automatic pilot. Recent experience implementing changes to the current program shows that reform is a dynamic process requiring vigilance, flexibility, and endurance. We must be able to monitor the impact of reform, make changes when actual outcomes differ substantially from the expected ones, and remain steadfast when particular interests pit the primacy of their wants against the more global interest of making Medicare affordable, sustainable, and effective for current and future generations of Americans.Ordering Information The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. Orders by mail: United States General Accounting Office or visit: Room 1100 Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists. For information on how to access GAO reports on the Internet, send an e-mail message with "info" in the body to: info@www.gao.gov or visit GAO’s World Wide Web Home Page at: www.gao.gov
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