Medicare Forum

Sponsored by the Galen Institute, The Heritage Foundation, and the American Enterprise Institute
April 29, 2008
Newseum, Washington, D.C.

Featuring an address by HHS Secretary Michael Leavitt
Introduction by former Senator John Breaux
And a distinguished panel of Medicare experts

HHS Secretary Michael Leavitt gave a visionary but chilling speech about the looming threat that Medicare presents to taxpayers, to our economy, and to other government responsibilities during a major forum we co-sponsored in Washington on Tuesday with the American Enterprise Institute and The Heritage Foundation.

Nearly 250 people attended the forum held at the Newseum, Washington’s newest and most modern museum devoted to interactive media exhibits. The conference room atop the Newseum had a panoramic view of the Mall, with the Capitol as the backdrop for Sec. Leavitt’s speech. It was a majestic setting for a visionary speech and an impassioned panel discussion about a powerfully important topic.

Sec. Leavitt titled his speech "Drifting to Disaster" and used a vivid example of whitewater canoeing to give the audience a sense of the danger ahead:

The river is “the growing obligation our nation has to pay for the health care of our senior and disabled citizens. Medicare’s liabilities have grown from a mere trickle 40 years ago,” he told the audience, into Class 5 Rapids today. “As new streamlets merge, it is becoming a raging torrent — more demanding and dangerous with each successive day.”

Sec. Leavitt worked on his speech until 2 a.m. the morning of our forum, personally crafting the speech, reflecting the weight of responsibility and even panic he said he feels as a Medicare Trustee.

“This is serious business involving trillions of dollars and the lives of hundreds of millions of people,” he said.

He used a chilling example of Argentina, which was a world economic power at the turn of the last century, “wealthier even than the United States,” he said. But, “Over the next fifty years, successive governments constructed, and then expanded, an ever-generous system of social benefits, nationalized industries, and created a vast and bloated public administration,” he said.

Argentina failed to invest in innovation and in its key industries and, as a result, “the world economy began to change while Argentina's didn't. Its productivity suffered. But the country kept on spending, content and confident it was better-off than its neighbors,” he warned. Eventually, “Creditors told Argentina, ‘no more, unless you fix your entitlements.’”

“It seems inconceivable that the United States of America, the strongest economic power in human history, the land of the free and the home of the brave, could ever be in a situation like the one Argentina faced a decade ago.

“But, is it?

“Is it really difficult to imagine world credit markets saying to the United States of America — as the world did to Argentina: ‘Given your lack of action in dealing with your deficit and the entitlements causing the problem, we are beginning to lack confidence in you?’”

“I hope I have made clear to you, just how alarmed I am and how alarmed we should all be. There is serious danger here.”

His recommendations:

• Separate the commitment from the pain: Build trigger points into legislation so that members of Congress aren’t voting on specific measures “but rather laying contingent plans if things go beyond a predetermined point,” such as Medicare exceeding a certain percentage of Gross Domestic Product.

• Pick the right moment: “…during windows of time when control of political power is sufficiently uncertain that both major parties feel at risk” and when a larger consensus involving both parties is possible.

• Modernize budget scoring conventions: “Many of the tools Congress will need to reform Medicare will involve significant behavioral changes and require investments that traditional scoring conventions would count solely as expenditures.”

He envisions a Medicare system that would have three characteristics:

• First, value of care would replace volume of care as Medicare’s best-rewarded virtue.

• Second, Medicare parts A and B would operate like Part D.

• Third, each generation would carry its share of the load.

These are only highlights of the speech, which was extremely well received by the audience, including many veterans of health reform and experts in Medicare.

Bob Moffit of The Heritage Foundation, a co-host of the conference, introduced former Sen. John Breaux of Louisiana, who Bob described accurately as a statesman who rises above partisan politics and puts the national interest first. Sen. Breaux worked heroically as chair of the National Bipartisan Commission on the Future of Medicare to seize the moment in 1999 when real reform might have been possible, but White House politics prevailed and that moment was lost.

Sen. Breaux introduced Sec. Leavitt, who talked about the incredible burden we are putting on future generations, just as Sen. Breaux was waiting for word from the hospital that his son’s wife was delivering his newest grandchild.

Our outstanding panel rose to the task in offering their own visionary “Solutions for Sustainability.” I cannot do them justice, but here are a few highlights:

• Former CBO Director Alice Rivlin of Brookings: “We are actually rushing, not drifting, toward disaster…and there will come a point when the rest of the world will no longer lend us money. Entitlement spending is on auto pilot, but Congress must be forced to take a long-term view of the threat and implement triggers that require explicit decisions” to address the problem.

• Stuart Butler of Heritage: “Sen. Breaux’s new grandchild will enter the world with a $175,000 entitlement spending obligation on day one…And Medicare threatens to squeeze out everything else that the left and the right want government to do…People say you have to fix the health care system before you fix Medicare, but that is like saying that we have to have world peace before tackling the latest crime wave…We must move away gradually from social-insurance-for-all and toward real insurance, or we will never get out of this hole.”

• Former Medicare Administrator Gail Wilensky of Project HOPE: “Medicare must pay smarter for care…We need to know what works for whom and under what circumstances and turn this information into more useful clinical protocols, especially for chronic conditions where spending is high and variation is great. Better information needs to come from many sources. And we must change financial incentives with bundled payments, paying for episodes of care, not incidents of illness.”

• Robert Berenson of the Urban Institute: I agree we must focus on value rather than volume…but we need to deal with spending first and not change the fundamental benefits or commitment of Medicare.” In fact, he said, “we should expand the basic Medicare benefit by adding a catastrophic benefit so that people don’t have an incentive to over-insure by buying Medigap coverage that further insulates them from costs.”

• Tom Miller of AEI, a co-host and panel moderator: “The problem is not a shortage of good ideas, but a public that doesn’t want to deal with this problem.” He said that triggers are a good idea, “but they won’t be pulled.” Rather, he said we must focus on value. “We must tear down the silos in Medicare and begin paying for value.”

Resources

Medicare Forum Webcast

Medicare Forum Agenda

Medicare: Drifting to Disaster
An address by HHS Secretary Michael Leavitt

The Facts: Medicare Advantage
by Grace-Marie Turner

Taking Back Our Fiscal Future
by Stuart M. Butler, Ph.D., Alice M. Rivlin, Ph.D., et al.

Medicare's Bad News: Is Anyone Listening?
by Joseph Antos

Event Photos