Floor Statement of U.S. Senator Chuck Grassley regarding Medicare and Medicaid

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Mr. President, today, America faces no greater threat to its growth and prosperity than our uncontrolled national debt.  Currently, the country’s debt exceeds $16 trillion.  We are passing this amount of money on to our children and grandchildren to pay off.  It is simply far too large a burden to be placing on them. 

As we move forward, it is clear that we must discuss spending.   I know that President Obama is hyper focused on increasing taxes as part of a deficit reduction proposal.   However, if we are serious about reducing our debt, we must talk about spending.  Not sometime next year.  Not only after we talk about taxes.   We must talk about our spending now.  We need to have a thoughtful conversation that focuses on where our federal spending most calls for control and containment.

I’d like to begin by drawing your attention to this chart.

Mr. President, this chart from the Congressional Budget Office details non-interest spending as a percentage of GDP.  We already know the significant role health care spending plays in our budget.

Over the next decade, the federal government will spend over $7 trillion on Medicare and $4.5 trillion on Medicaid.  Together these two programs account for one quarter of the entire federal government’s spending throughout the next ten years.

But look closely at the even longer term projections of our spending.  According to the Congressional Budget Office, the middle graph--- Social Security, as a percentage of GDP, will remain relatively stable over the next 25 years.  Non-interest spending, the bottom graph, as a percentage of GDP will also remain relatively stable over the same period.  Now, look at the top graph.  Over the next 25 years, spending on health care entitlements will basically double as a percentage of GDP.

Mr. President, unless we take a serious look at health care spending, we aren’t genuinely acting to reduce our country’s debt.  Twenty-five years is not a lot of time.  We need to be talking about health care spending now.  Not sometime next year.   Not just once we’ve discussed taxes. 

In Washington, we can get all wrapped over semantic terms.  Do we need Medicare and Medicaid reform?  Should we call it restructuring?  Reorganization?  Improving and strengthening?

Mr. President, to me, the terms are irrelevant and the conclusion is undeniable.  We must gain control of health care spending.

As we move forward in debt talks, I know a lot of attention will be devoted to taxes and revenue.  Those conversations are important and should conclude with tax policy that fosters economic growth.  But conversations about the health care entitlements should not be postponed or relegated to second tier status.  And they certainly should not be confined to cost-reduction exercises that ignore the fundamental cost drivers.

I have read reports of the savings in Medicare and Medicaid that President Obama has proposed.  In my mind, they do little more than take cash out of the system without making fundamental changes necessary to bend the growth curve.

Let’s take a look at a few of those in the President’s 2013 budget.  There’s increasing income-relating of Medicare premiums.  That one takes more money from rich seniors.  There is increasing co-pays for home health.  That will increase costs for all seniors.  There’s getting bigger rebates from drug companies, even if it harms Part D.  That one takes money from drug companies.  There is cutting provider taxes in Medicaid.  That one will take money from states at a time when the Administration is encouraging them to expand Medicaid to cover childless adults.

As an aside, I notice that The Washington Post had a banner editorial last Friday supporting a reduction in Medicaid provider taxes.  I wish that The Post had been so helpful in 2006 when the Bush Administration made a similar proposal.

There is also something called a ‘blended rate’ for state reimbursement under Medicaid.

That breaks the promise to pay for 100 percent of the costs of those made eligible under Obamacare.

Mr. President, these proposals will certainly reduce the federal outlay in Medicare and Medicaid.  However, these proposals will not solve the larger problem of health care spending growth.  Instead, we should also focus on where our spending really is.

    Mr. President, I am fully aware that there is significant opposition from Democrats to Republican ideas like premium support for Medicare and block grants for Medicaid.  I’m not here promoting either of those ideas.  But opposition to those ideas should not allow Democrats to walk away from the issue.  We must address the growth of health care entitlements.   Mr. President, I believe our Medicare and Medicaid spending problems can be explained in three straightforward charts.

This is the first one.

Here we look at the federal Medicare and federal and state Medicaid spending divided into three groups.  On the left is spending by the federal government for people who are eligible only for Medicare.  On the right is federal and state spending for people only eligible for Medicaid.  In the middle is federal and state spending for people eligible for both Medicare and Medicaid, also known as dual eligibles or duals.  This middle group, the duals, accounts for just over 10 percent of the entire Medicare and Medicaid population.  However, there is more spending on duals than on the Medicare-only beneficiaries or the Medicaid-only beneficiaries.

Mr. President, when we talk about the need to find ways to control spending on duals, it is for good reason.  We must find ways to realign the disparate incentives of the federally-run Medicare program and the state-run Medicaid programs.  However, focusing on solutions exclusive to duals misses the fullness of the problem.  For one, the duals are not a homogeneous population.  While most people consider people on Medicare to be typically elderly, fully 38 percent of the duals are non-elderly.


Also, while many of the duals are clearly high-cost, there are a large number of duals who utilize very few services.  So while improvements to the care model that we use for duals are necessary, they are far from sufficient in reducing the totality of the growth driving health care costs.

Consider this next chart, Mr. President.

In this chart, we see the most expensive individuals in the Medicare program.  This is a population who has two to three chronic conditions and functional impairments.  Among the most expensive Medicare beneficiaries, more than half, 57 percent, qualify only for Medicare.  Providing better coordinated care and reducing costs for high-cost beneficiaries is critical for the future of Medicare and Medicaid.  I have strong reservations about splitting these two groups based solely on individuals’ income.

Proposals that give the states greater control of acute care services for the 43 percent who are duals, essentially, divide two similarly situated, expensive individuals between one federal model and 50 state’s models based solely on their income.   Mr. President, that makes no sense to me.

A Medicare-only beneficiary may exhaust income and assets and become dually eligible.  The separation between the two populations is arbitrary and artificial.  Whatever we do to find a better model to coordinate care and reduce costs for high-cost beneficiaries, it needs to address all beneficiaries, not just duals.  To find rational solutions to our health care spending, we must first accurately target the populations who incur the most significant expenditures.  This includes individuals who are not only the duals but also those Medicare-only seniors with multiple chronic conditions and functional impairments.

Finally Mr. President, I’d like to draw attention to this chart.

This final chart details spending on long-term services and supports in 2010.  Two years ago, a total of $208 billion – eight percent of all U.S. personal health care spending – was spent on long-term services and supports.  Among this spending, Medicaid, the single largest payer of such services, picked up 62.2 percent of the cost, while the private market paid for just over a third of it.  With 80 million baby boomers entering retirement age, and seven out of every 10 seniors needing long-term care at a certain point in their lives, the demand for those services will only increase and further drive health care spending if we don’t take action.

We must find ways to increase private spending and decrease public spending on long-term services and supports.  If we are going to argue that we are reducing the growth of health care costs, we must actually do it.  Mr. President, in closing, we have an opportunity before us.  We can either make real changes to our health care entitlements that will impact the growth curve for years to come, or we can simply take cash out of the system and call it reform.

We have to be willing to re-examine the effectiveness of our current overall Medicare and Medicaid structure.  We should not be afraid to ask tough questions.  Should Medicare and Medicaid be structured in a way that provides benefits to individuals in the most efficient and effective way possible? 

Are Medicare and Medicaid, in fact, structured in a way that guarantees we will spend federal and state dollars inefficiently or ineffectively?

When you look at the spending on duals, the spending on high-cost beneficiaries and the spending on long-term supports and services--- I believe the answer to both questions is “yes.”  Medicare and Medicaid proposals must address these three areas.  President Obama hasn’t come to the table yet.  I know there are people telling us we shouldn’t talk about health care entitlements now.  We don’t have a choice.  Look at the numbers.  Look at the spending.  We only make the problem worse by putting it off.  We can save federal dollars by extracting more from beneficiaries, providers and states, but that won’t bend the long-term growth curve.  We have to talk about solutions to actually lower the growth curve now.

Mr. President, we are $16 trillion in debt.  One of every four dollars we will spend in this next decade will be on Medicare and Medicaid.  We will see health care entitlements double as a percentage of GDP in the next 25 years.  If we want Medicare and Medicaid to not only survive but also thrive for the next generation, we need to be willing to ask fundamental questions and seek solutions that can affect the growth curve.  I sincerely hope we are willing to look for solutions that can make a real difference.