April 1997

Mr.Chairman and Distinguished Members of the Committee:

I am pleased to appear before you today to discuss the Medicare program. Tonight I will show how the 1988 Budget Proposal for the Department of Health of Human Services deals with today's Medicare issues in an aggressive and efffective fashion. The 1988 Budget Proposal deals head-on with the tough issue of Part A's solvency,and extends it for the next ten years. My Department can modernize and reform Medicare,and at the same time,accomplish this while not jeopardizing the quality access to beneficiaries.

The Department of Health and Human Services is playing a leading role in our Administration's plan to put our Federal budget in the black. The Medicare and Medicaid programs, which are run through my department, are being modernized in order to accomplish this goal.There is no greater challenge--bi-partisan challenge--than preserving our Medicare and Medicaid lifelines by modernizing, reforming and strengthening them. Not many of us would drive across country in a 32 year old car. Likewise, we cannot move into the 21st century with a health insurance system

that has not been overhauled since 1965. That is why to preserve the promise behind Medicare,we must modernize it.

Duke University researchers have released a report that dramatically documents a chronic disability rate drop in the U.S.population. This chronic disability rate in our population has dropped 15% from 1982 to 1994.Everyone is aware that Americans are living longer lives, but this report shows people are know spending their senior years reasonably fit and active,until late in life. The report says that the age of 85 is now considered late in life, whereas it was the age of 65 in the past. Our senior population's health has (and still is) changing. People

are no longer spending their their entire senior years disabled.It makes sense to reflect these changes in the Medicare program. These changes in our beneficiaries health may eventually allow the DHHS to concentrate more on preventative care like mammograms and prostate screenings. This could inturn save lives,a benefit we can all appreciate.

The modernizing process has begun successfully. My department's budget proposal, if approved,includes essential elements that Medicare needs to get it's fiscal long term health back.Proposals from President Clinton, if approved, are also essential to the short and long term solvency of the Medicare program.

At the forefront of the solvency issue is the fraud and abuse of Medicare programs. Two years ago, we launched Operation Restore Trust. Still in it's infancy, this program has been a grand success, and has the potential to be even more effective. Originally, the program began in five states, and recently added six more. We propose implementing it next year in all fifty states. For every dollar we invested in Operation Restore Trust in it's first two years, ten dollars came back to the Medicare program from discovered fraud. Working with the FBI,Operation Restore Trust is now able to identify individuals from the drug trade who attempt to diversify into the health care industry. With Operation Restore Trust in all fifty states, we could be confident that they will not simply conduct business in a state more condusive to their illegal activities.

Implementing this program in all fifty states is simply good public policy. This act is essential to modernizing Medicare, and in solving the longer term solvency issues. If Operation Restore Trust were implemented in all fifty states next year, the estimated fraud savings would be three billion dollars over the next seven years. The 1:10 dollar return ratio of this program is solid testimony to the need to expand and implement nationwide. Put simply, it makes good business sense, and it absolutely needs to be represented in any legislation regarding Medicare.

In order to maximize Operation Restore Trust's strengths, President Clinton's proposals to further it's power are also an essential part of modernizing and financing Medicare. The

President has proposed to bar convicted felons from participating as providers, or suppliers,to Medicare. At this moment, only those individuals will felonies against health care are barred. To eliminate the problem of fraudulent individuals who move their practice from one state that they have been disciplined in, to a state where they have a clean record, the President's proposal

includes implementing a program to track fraudulent individuals by requiring them to register their

Social Security number with Medicare administration.

Other items from the DHHS budget proposal that will ease Medicare's financial situation

include lowered payments to managed care providers and competitive bidding.

Managed care participants in Medicare have increased 108% since 1993. Managed care

now accounts for 13% of the Medicare program. Steps have already been enacted to protect beneficiaries. A ban on "gag clauses" has been enacted, and limits are in place on financial incentives to physicians that are based on recommended treatment options given to beneficiaries. Federal rules have been waived for states, in order to expand availability and choices to beneficiaries.

In order to financially manage the awesome rate of beneficiaries enrolled in managed care, the DHHS budget proposal will reduce payments to managed care providers by 46 billion over 6 years. This financial savings is obviously of great importance to the effort to balance the federal budget.

The competitive bidding for laboratory services and durable medical equipment proposal is self-explanatory, and better rates for the federal government would be expected from this.

The DHHS budget proposal also includes provisions to cut payments to hospitals, skilled

nursing facilities, and physicians. These payment cuts will account for 65 billion over the

next six years.

Structure reform of Medicare is also proposed in our DHHS budget proposal. These

reforms are vital to bringing this program into the 21st century.

The issue of solvency for Medicare must be immediately addressed. The DHHS budget

proposal extends solvency for ten years. The proposals within the budget are all vital to

making this a reality. Although, the additional anti-fraud proposals from President Clinton

are equally essential to the solvency issue. These reforms will not only extend solvency,

but will play a large role in balancing the federal budget.

In closing, I want to again acknowledge that these goals can be accomplished without

imposing new financial burdens on older Americans and people with disabilities. Thus

preserving the promise of health security that the Medicare program was founded on.