Federal News Service
March 24, 2004 Wednesday
SECTION: CAPITOL HILL HEARING
HEADLINE: HEARING OF THE HOUSE WAYS AND MEANS COMMITTEE
SUBJECT: BOARD OF TRUSTEES 2004 ANNUAL REPORTS
CHAIRED BY: REPRESENTATIVE WILLIAM M. THOMAS (R-CA)
WITNESSES: PANEL I:
JOHN W. SNOW, SECRETARY, DEPARTMENT OF THE TREASURY;
RICK FOSTER, CHIEF ACTUARY, CENTERS FOR MEDICARE AND MEDICAID SERVICES;
STEPHEN C. GOSS, CHIEF ACTUARY, SOCIAL SECURITY ADMINISTRATION; DOUGLAS HOLTZ-EAKIN, PH.D., DIRECTOR, CONGRESSIONAL BUDGET OFFICE LOCATION: 1100 LONGWORTH HOUSE OFFICE BUILDING, WASHINGTON, D.C.
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REP. PAUL RYAN (R-WI): I do, thank you, Mr. Chairman.
I guess since I'm batting clean up here, there are a number of points I'd like to make. But first I want to just ask a couple of technical questions from the previous questions.
With respect to the HI Trust Fund and the acceleration of the insolvency by two years, to what extent is that attributable to HMOs and/or rural providers? Can you desegregate the amount of the acceleration and the insolvency attributed to rural providers and HMOs?
MR. FOSTER: Yes, sir. Only very roughly right now, we could do a more thorough job for you. I'd call it about 60 percent due to the higher payment rates for the Medicare Advantage plans, and roughly 40 percent for the higher payments to rural providers.
REP. RYAN: So rural providers did get a substantial increase in their payments, as well as buttressing the Medicare Advantage program?
MR. FOSTER: Yes, sir.
REP. RYAN: Okay. It was mentioned earlier from the other gentleman from Texas that the HSS estimate or the CMS estimate is the true estimate. Is your estimate the true estimate?
MR. FOSTER: If we could make true estimates, I wouldn't have to be CMS chief actuary. I'd be out there in the stock market or someplace.
REP. RYAN: Your estimates are just like somebody else's estimate, correct? It's a good educated guess, just as CBO's?
MR. FOSTER: They're all estimates. Doug may well be right, I may be wrong. It may be the other way around. It's quite possible we'll both be wrong.
REP. RYAN: Okay. It's quite probable both of you are wrong and we'll be somewhere in between for all we know.
MR. FOSTER: We hope it would be in between.
REP. RYAN: One thing that I think-you know, we've just gone through a long hearing on all of this, and I think people may be confused as to the procedures around here --
REP. THOMAS: Would the gentleman yield briefly on that point?
REP. RYAN: Sure.
REP. THOMAS: The chair recalls Dr. Holtz-Eakin indicating that what he provided at the $395 billion rate was an intermediate estimate from his shop. It could be lower or higher. The assumption that he's the floor and CMS is the ceiling is not accurate based upon the testimony provided by Dr. Holtz-Eakin, it could be lower than the 395.
And is that correct, Mr. Holtz-Eakin, based on your statements?
MR. HOLTZ-EAKIN: Yes, there's a range of uncertainty on all estimates we provide. It could be lower, it could be higher.
REP. THOMAS: Okay. So when we're looking for the true estimate, as though someone was withholding the holy grail, a statement along those lines probably is designed to draw a conclusion rather than to illuminate.
Thank you very much, Mr. Ryan, for yielding.
REP. RYAN: I thank the chair.
What I want to look at is the differences in the two estimates between CBO and CMS. And it's also very important to note that, as has been mentioned earlier, Congress is required to use CBO estimates. When we score legislation, all legislation that affects revenues and expenditures, we always have to get a score on its revenue impact or its expenditure impact for purposes of conforming with the budget resolution as driven by the Budget Committee. In each of these cases we have to use CBO.
You always have other scores out there, from OMB, from an independent agency. Nevertheless, in every single occasion Congress has to use the CBO. But in looking at the differences between the two estimates on this Medicare bill, you can basically look at the fact that CMS-and please correct me, the two gentleman, if I'm wrong-CMS assumes a 94 percent participation rate in the drug plan, and CBO assumes 87 percent, is that correct?
MR. HOLTZ-EAKIN: Correct.
REP. RYAN: With respect to the low income subsidies for low income seniors for prescription drug benefits, which the biggest out of pocket exposure is I think a $5 co-pay, CMS assumes a 75 percent participation rate in the low income subsidies and CBO assumes a 70 percent participation rate, is that correct?
MR. HOLTZ-EAKIN: A little bit lower, actually.
REP. RYAN: You're a little bit lower? That's right, two-thirds. There's a typo here. With respect to the Medicare Advantage programs, where seniors get to choose among competing plans very much like we as federal employees do with our own federal employee health benefits system. CMS assumes 32 percent of seniors will choose to enroll in either these HMOs or PPOs, and CBO assumes 13 percent. Is that correct?
MR. HOLTZ-EAKIN: Correct.
REP. RYAN: So in essence-and those are the big differences between your two estimates, what CMS is simply saying is more people are going to benefit from this new Medicare law.
Is that essentially what you're saying, Mr. Foster, that more individuals will actually choose to benefit from the new prescription drug benefit and these new choices that will be made available to them in their areas?
MR. FOSTER: Yes, sir.
REP. RYAN: So from a beneficiary standpoint, whichever of these estimates are true, we have these estimates where at the basic rate, CBO saying 87 percent of all seniors will benefit from a drug plan, whereas 66 percent of low income seniors at least will benefit, and CMS is saying even more people will benefit from this new prescription drug law.
I think it's important to point out here that what we're talking about here is the differences in how many people will be helped from this new Medicare law. Now, one thing that I think is important at the end of all of this is to look at the big numbers we're talking about. Over the next 10 years, is it not true that Medicare and Medicaid will spend about $6.9 trillion?
Is that correct, Mr. Holtz-Eakin or Mr. Foster?
MR. HOLTZ-EAKIN: Ballpark, yes.
MR. FOSTER: It's certainly the right ballpark. We could --
REP. RYAN: About $6.9 trillion. So when we're looking at a difference of an estimate of about $139 billion, what is the difference in your two estimates, over the total course of the next 10 years in the spending of Medicare and Medicaid?
MR. HOLTZ-EAKIN: We can look this up --
REP. RYAN: Two percent?
MR. HOLTZ-EAKIN: -- Baseline estimates for --
MR. FOSTER: For Medicare only, if you look at the March CBO baseline versus the president's budget, the total was actually quite close for Medicare expenditures.
REP. RYAN: Right.
MR. FOSTER: In the trustee's report, in part because of higher CPI assumptions, we have a somewhat higher level.
REP. RYAN: Okay. One more?
REP. THOMAS: One more quickly. We have a --
REP. RYAN: One more quick one. We've heard a lot of talk about the donut holes here today under this new benefit, and according to CBO analysis, a typical senior will spend less than $1,900 on prescription in 2006 and will not reach the initial coverage limit of $2,250. And one-third of the seniors will eligible for low income assistance and will have no gap in coverage, regardless of how much they spend.
Given these two points, Mr. Holtz-Eakin, what is your estimate of the number of seniors who will experience absolutely no gap in coverage or no donut hole under this new Medicare prescription drug benefit?
MR. HOLTZ-EAKIN: I don't know the number off the top of my head, I'd be happy to get it to you.
REP. RYAN: Okay. And if you could, I'd appreciate that.
REP. THOMAS: I thank the gentleman.
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