Hearing of the House Ways and Means Committee-Board of Trutees 2004 Annual Reports
Federal News Service March 24, 2004 Wednesday
Copyright 2004 The Federal News Service, Inc.
Federal News Service
March 24, 2004 Wednesday
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;
PANEL II:
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.
BODY:
REP. WILLIAM M. THOMAS (R-CA): Good afternoon. Today, we welcome Treasury Secretary John Snow, the managing trustee, to discuss the 2004 annual reports of the Board of Trustees of Social Security and the Medicare Trust Fund. In every Congress, since Republicans became the majority in 1995, the Ways and Means Committee has reviewed the trustees' findings on the financial future of our most significant entitlement programs. These reports are essential reminders to policy makers of the challenges we face as the baby boom generation retires and as Americans live longer, healthier lives.
This year's report provides us with the first glance at the impact of the Medicare Modernization Act on the program's future finances and reminds us, since both of these entitlement programs are tied to wages and salary, how much the short-term fluctuations follow the economy. With passage of the new law, Medicare will cover prescription drugs, the cornerstone of modern medicine, and provide other preventive and wellness services as well. That is why Congress intentionally included crucial reforms to balance the increased costs of these new benefits and to ultimately improve the solvency of Medicare, if competition is allowed to occur. These efforts did not go as far as some of us would have liked and, as today's report shows, there is still more work ahead to maintain solvency.
Turning now to the reports before us, the Hospital Insurance Trust Fund is moving toward insolvency sooner than expected. To consider a complete picture of all Medicare financing now, it's useful to look at Medicare expenditures as a percentage of gross domestic product, which are expected to grow rapidly from the 3.4 percent in 2003 to 7.7 percent in 2035 and ultimately, once again, projecting out where no one believes any numbers but 13.8 percent by 2078. It is the trend that is alarming not any specific set of figures at any particular projected point in time.
Clearly, without further cost saving reforms, Medicare will consume an ever increasing share of our nation's resources. Social Security faces similar challenges as the trust fund outlays exceed income, beginning in 2018 with trust fund insolvency coming in 2042. As with Medicare, Congress must consider thoughtful solutions to ensure Social Security's viability for future generations.
Our second panel will focus on the details behind these broad brush strokes. I will be pleased to welcome Douglas Holtz-Eakin, director of the Congressional Budget Office, and Richard Foster, chief actuary at the Centers for Medicare and Medicaid Services, including Stephen Goss, chief actuary at the Social Security Administration. Of late, there has been particular interest in the differing cost estimates generated by the Congressional Budget Office and the Center for Medicare and Medicaid Services on the new Medicare law.
Our goal, of course, is to have our witnesses help explain the nature of their differing assumptions and the therefore resulting different estimates. All of us know no one has the right answer and time will likely show that both of the estimates are wrong. The goal is to examine the assumptions which produce the numbers and determine if the assumptions underlying the numbers are reasonable and appropriate on a comparative basis.
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REP. BECERRA: Thank you, Mr. Chairman. And thank you to all the witnesses for your testimony, especially the candor with which you've given us that testimony, we appreciate that very much.
Mr. Foster, let me see if I can ask you to clarify a few things as we go forward in this discussion about the estimates and the process that went forward in the passage of the Medicare bill. You mentioned that you had conversations with folks at CMS, including Mr. Scully, about your projections and you mentioned as well that at one point you had a conversation with an attorney at CMS who advised you that Mr. Scully did have the authority to keep you from disclosing some of that information to Congress. Do you recall the name of that attorney you spoke to?
MR. FOSTER: Yes, sir. That was our at the time acting deputy administrator Leslie Norwalk.
REP. BECERRA: What was that name?
MR. FOSTER: Leslie Norwalk.
REP. BECERRA: And the gist of that directive was that Mr. Scully had the authority legally to preclude you from disclosing that information. Did she give you which law she or Mr. Scully referenced to say that the authority existed for them to prevent you from disclosing that information?
MR. FOSTER: She might have, although I don't think so, I don't remember for sure. This hinged more on the question of constitutional separation of powers.
REP. BECERRA: Okay. And I know it's a while ago, perhaps, that you were told this by the attorney. Can you give us-can you paraphrase as best you can or can you tell us again what it was she told you that indicated that the law gave Mr. Scully that authority to keep you from disclosing that information?
MR. FOSTER: The general argument was that separate branches of government, obviously a congressional executive branch, the congressional branch has its own score keeper, CBO of course.
REP. BECERRA: So it seems it may have related to the separation of powers?
MR. FOSTER: Yes, sir.
REP. BECERRA: Okay. You mentioned in your earlier remarks that others in the administration, I don't know if you said requested or received your estimate for the cost of the Medicare bill. Did you say requested or received?
MR. FOSTER: I probably said both at one time or another.
REP. BECERRA: Okay. Do you recall who requested that information from the White House?
MR. FOSTER: We had requests for the overall package cost estimate both from Mr. Scully and from Mr. Badger.
REP. BECERRA: Mr. Badger?
MR. FOSTER: In the White House.
REP. BECERRA: In the White House. Anyone else at the White House?
MR. FOSTER: I don't believe so.
REP. BECERRA: And I believe you testified that Mr. Badger did receive that information?
MR. FOSTER: Early on when we had only rough estimates for a package cost back in June, I know that information was sent to both Mr. Scully and Mr. Badger.
REP. BECERRA: Okay. Anyone else at the administration that you can think of that to your knowledge, received the information about the cost of the Medicare bill, your projected cost of the Medicare bill?
MR. FOSTER: Well again, early on as I think I mentioned before, Mr. Capretta at the OMB and Ms. Young at HHS --
REP. BECERRA: What was the name at OMB?
MR. FOSTER: Jim Capretta.
REP. BECERRA: Jim Capretta, thank you.
MR. FOSTER: Later on in the process when we were closer to having a final estimate for the conference agreement, I had a conversation with Mr. Scully telling him the rough magnitude of the estimate.
REP. BECERRA: Was this before the bill had passed Congress?
MR. FOSTER: It was about two to three weeks before the final vote.
REP. BECERRA: Okay.
MR. FOSTER: But I don't know if he passed that on to anyone else.
REP. BECERRA: Okay. Is it still you intention to remain chief actuary at CMS?
MR. FOSTER: Well, I've had more second thoughts lately, I suppose. But, yes, we have many initiatives underway that I'd like to see them through.
REP. BECERRA: And I know that this has probably been a very challenging time for you over the last several months, major legislation, a lot of duties have been asked of you as well as the other individuals who are here with monumental programs that are critical to the American public, so we appreciate what you've done. And so the next question I ask, and I ask you just give me your own personal opinion. Do you believe you've performed professionally in your capacity as chief actuary at CMS?
MR. FOSTER: You're talking about last summer when all this came up or in general?
REP. BECERRA: At any time that you have been chief actuary. At all times do you believe you've performed professionally as the chief actuary for CMS?
MR. FOSTER: I believe I have and I'm aware that last summer was a difficult call and I'll think about that one for a long time to come.
REP. BECERRA: Okay. I thank you for the candor. There's an article-thank you, Mr. Chairman, I appreciate that. There's an article in today's Hill newspaper that is titled "Bush Takes Offensive on Foster," by Mr. Bob Cusack. And it states, I'll just read it and ask a quick question since my time has expired and the chairman is being gracious. It starts off, "Rattled at the controversy over Medicare scoring shows no sign of waning. The Bush administration has shifted strategies and now is going after the actuary at the center of what some have called Scoregate." It goes on to mention that at one point Tom Scully-there are at least reports that Tom Scully may have threatened to fire you if you disclose this information. Can I ask one quick question here and that is, do you feel threatened in your job at this stage?
MR. FOSTER: No, sir.
REP. BECERRA: Thank you very much.
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