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The Impending Fiscal Cliff

Floor Speech

Location: Washington, DC


Mr. GARAMENDI. Mr. Speaker, thank you for the opportunity. We're going to spend a good portion of this hour talking about something that is on everybody's mind, the fiscal cliff. Oh my goodness, the fiscal cliff is now just, well, 20 days away. So what are we going to do?

Some have suggested that we really have to deal with entitlements, and I'm here to agree that we can and we should deal with entitlements. Certainly, two of those issues, which I really don't think we ought to call entitlements, but they happen to be fundamental programs here in America for Americans, should be dealt with. One that some people want to put on the table really doesn't deal with the deficit at all, and that's Social Security.

So before we even get into this discussion tonight, let's just understand, for anybody that cares to take on this issue, that in dealing with the fiscal cliff, Social Security is not the problem. The deficit is not caused by Social Security. Social Security has never been and in its present form will not be part of the deficit issue. It's separate and apart. It is a special program, has its own source of revenue, has its own trust fund, and frankly, is not even running a deficit at all and has not run a deficit.

So let's put Social Security to the side and say, yes, in the years ahead, maybe even next year, but probably 3 to 4 years out, Social Security will be dealt with, as it must, because we will have to make adjustments. But that is really not the debate about the deficit, sequestration, or the fiscal cliff.

Coming back to the fiscal cliff, let's take up one of the very big programs, and I'm not talking here about the Department of Defense, which is one of the major expenditure items, but that's not the subject for tonight. Tonight the subject is Medicare and Medicaid.

The Medicare program is a big one, and it certainly is a program that is expensive. It's a program that, over the years, has grown on the average faster than inflation. But, in the last 2 years, that's not the case, and we'll discuss that in more detail later. In fact, Medicare has fallen below the general rate of health care inflation.

Let's talk about what we can do about Medicare. Instead of saying what we ought not do, we're going to start this discussion, at least my portion of it, talking about what we can do. And the President has put out several ideas that deserve the attention of the 435 Members of this House and the 100 Senators, because there are things that really can be done immediately to significantly reduce the cost of Medicare.

Just in listening to my colleagues here on the floor discuss the departure of some extraordinary Members from the Ohio delegation, I came across an article in one of the local Hill newspapers, and this article says, ``GAO hits Medicare and Medicaid wasteful spending.'' Turns out that the GAO just issued a report, came out just this week, that Medicare had, in their estimation, $28 billion in fraud and wasteful spending in the year 2011--$28 billion. And in Medicaid, some $21 billion.

Now, the President has suggested that one of the things we ought to do to reform the Medicare system and the Medicaid system is go after waste, fraud, and abuse. Well, there you have, what, 50-plus billion dollars of annual fraud, waste, and expenditure in the Medicare system. That goes a long way to solving the Medicare problem. And we ought to do that. And, in fact, a lot of that was done in the Affordable Health Care Act, and systems were put in place and they're working today.

But there's even more that can be done, according to the GAO. And if we're going to start dealing with Medicare, why don't we start right there with that issue and perhaps some $50 billion, or if you want to be a little conservative, let's just say 40 or $30 billion that we can reduce immediately.

By the way, this is going to take a few Federal employees to do that. Interestingly, in the Affordable Health Care Act there was a provision that added several thousand, a couple of thousand employees to the IRS for the specific purpose of going after Medicare and Medicaid fraud. Well, they were added, and then our Republican colleagues, in a fit of--well, just in a fit, decided that they would somehow save a lot of money by eliminating the men and women that were supposed to be hired to go after fraud.

They tried to do it. Fortunately, they were not successful.

I'm going to just name a couple of other ways in which we can reduce the cost of Medicare, and then I want to turn to my colleague from Illinois to expand on some of these issues.

Very quickly, how about drugs? Would you believe that the Federal Government has no power to negotiate the price of drugs for seniors in the Medicare program? It's true. Congress passed a law back in the 2003-2004 period that denied the Federal Government the ability to negotiate prices. We could save a pile of money right there.

There's some other things we can do--and some of this is already underway. We could penalize hospitals that have high infection rates; readmission to hospitals. Well, the Affordable Health Care Act is already doing that. And it's having an effect. We could also deal with the issues that occur with unnecessary payments. We can reform the system in the way in which payments are made so that they are more efficient and more effective. And those have been proposed by the President.

In fact, there are many, many things that can be done to significantly reduce the cost of Medicare without doing the onerous, damaging proposals that have been made by many of our colleagues on the Republican side, such as increasing the age to 67 when you could apply for Medicare--and we'll discuss that in much more detail in a few moments--and such as going after the privatization of Medicare.

Some really bad ideas are out there. And we don't need those bad ideas. What we need are some really good, solid ideas.

Let me turn to my colleague from Illinois, Jan Schakowsky. This is a woman who's been deeply involved in this issue. She was on the Simpson-Bowles Committee. That's not the formal name but that's how we know it--the Simpson-Bowles Committee. And she's focused specifically on Social Security and Medicare. She's joining us tonight with extraordinary background and information on this.

Jan, let's talk for a few minutes about your experiences and what you think we can do.


Mr. GARAMENDI. Let me just interrupt for a second. You started to discuss Social Security. I think what you meant was Medicare, which is where you have been taking the discussion. Medicare part B is means-tested--and has been since its inception.

Ms. SCHAKOWSKY. We means-test Medicare, exactly. We do.

Mr. GARAMENDI. Exactly. The amount that you pay into Medicare is higher as your income goes up.

Ms. SCHAKOWSKY. Yes. So during your working life and when you start on Medicare, you are paying more if you make $85,000 or more.

Mr. GARAMENDI. So the argument that you've got to means-test this program is, Yes. And we do.


Mr. GARAMENDI. Your points are so very, very well taken. It seems as though--you call it a trophy. The argument made by some is that we ought not raise this top tax rate, but you ought to hit the Medicare program, the beneficiaries, and make them pay more. As you've said, they're mostly middle class and poor. So what's that all about? And raising the age to 67 is really stupid. There is no other way to describe that.

I was the insurance commissioner in California for 8 years, and let me tell you, you raise that age to 67, a lot of very, very bad things are going to happen. First of all, people between 65 and 67 are not likely to get insurance at all, let alone affordable, for the reason you said. That's the population that is almost uninsurable under the present system. Even with the Affordable Health Care Act, they're going to wind up paying a huge amount of money, and you're shifting the cost to them, to their employers, and to their State and local governments. You've saved no money. In fact, you've probably increased the cost because the benefits that go to seniors in the Affordable Care Act are not available to them, such benefits as annual checkups, medical services keeping people healthy.

I'd like to come back to that in a little while, but I noticed our colleague from the great State of Texas is with us. Thank you for joining us once again to talk about something that I know you've spent your career here in Congress working on: Social Security, Medicare, and Medicaid.


Mr. GARAMENDI. I thank you for bringing this issue back. And I don't want to leave it right yet. Our colleague from Illinois started her discussion with the values, the values that we Americans possessed back in the 1960s when Medicare began. That was the value of caring for each other, particularly caring for those seniors who at that time had 50 percent in poverty, I think 70 percent without insurance, and a very bad situation.

I remember when I was a youngster, not even a teenager yet, my father took me to the county hospital. You mentioned the word poorhouse. That's what it was. And that is etched in my mind to this day, what was happening in that county hospital. It was just row after row of beds down a long ward. The cries, the sounds, and the odors were unbelievable. That was the only care available. And then Medicare came in. And we have moved to a different place, fortunately. Our values as Americans expressed in the most meaningful way, taking care of seniors, the issues of poverty, largely eliminated--no, that's not true. The issue of poverty among seniors substantially changed. We still have too much poverty. But medical services available, quality medical services that have extended the life of many.

The point you were making about not everybody is so very, very true. As you were talking, I was just thinking, I read something about this, though increasing overall life expectancy at 65 has not increased equally across the social economic status, from 1977 to 2007, life expectancy for the top half of earners increased by 5 years, but only 1 year for the bottom half of earners. So, once again, you have this disparity class, if you would. White men without a high school diploma have a life expectancy of 67.5 years as compared to 80.4 years for those with a college degree. Once again, two different societies in America.

Since 1990, life expectancy for the least educated whites has decreased--decreased--by 4 years. And now the argument is that we can increase the Medicare eligibility age to 67 because people are living longer. Hello? Who is living longer? Those who have higher incomes. Those who don't--and you said it so very well--those who work with their hands, whether they are a maid cleaning a hotel room or a farmer or a coal miner or any other task which is labor intensive, and that's physical labor intensive--by the time they get to 65, they're broken. Their body is broken. And to deny them the opportunity, I can tell you everybody I meet who is not 65 wants to live long enough to get to 65 and Medicare.

So for our Republican friends, their principal negotiator has put on the table, the Speaker of the House has put on the table let's raise the eligibility age.

Jan, you were talking about this earlier--let's go back at this--this is a fundamental dichotomy in how we value our seniors, how we value each other and how we are compassionate.


Mr. GARAMENDI. Only in a free-market system would Congress pass a law to prohibit negotiating prices, which, I think, is kind of the essence of a market system.

You raised a couple of points, and I just want to use a chart to expand on those points. The Affordable Health Care Act--ObamaCare--really significantly enhanced benefits to Medicare recipients 65 and older. They got some really important benefits. You mentioned the drug benefit, benefit part D, the doughnut hole that is being closed. That's worth, I think, some $55 billion a year to seniors. There's other things that are in the Affordable Health Care Act that have already saved vast amounts of money to the Medicare program. For example, annual wellness visits for seniors. Why is it important? Well, you find out certain things, like you've got high blood pressure. And you take a pill--we ought to be negotiating that price--but you take a pill, and suddenly you're able to reduce your blood pressure and avoid a stroke, avoid some other kind of medical incident. You may find that you're on the path towards diabetes or other kinds of long-term, very expensive illnesses. So that wellness visit becomes exceedingly important, and also some treatments are available.

Here's what's happened. Because of ObamaCare, the inflation rate in Medicare has been dramatically reduced. If you take a look at this particular chart, over the years it shows that beginning in 2005 and now in 2012, the annual increase in cost, the inflation rate in Medicare--it peaked in 2005, and then it began to come down. Here is the Affordable Health Care Act, or ObamaCare, and we have seen a decline to about 2 1/2 percent inflation, which is actually less than the general health care inflation rate in the economy. This has occurred because of multiple factors, perhaps--and it's arguable, but we think one of the major factors is the advent of ObamaCare, or the Affordable Health Care Act, and the kinds of programs that are in the Affordable Health Care Act for Medicare recipients that reduce the cost of medical services.

Ms. SCHAKOWSKY. I think it's important to point out too that the full provisions of ObamaCare haven't even rolled out yet, although these preventive services are in place. And look at what's already happened.

Mr. GARAMENDI. Exactly.

As those other services roll out, they will affect not only the Medicare portion of the health care system, but they will also affect the general population and should, because of the availability of insurance and the availability of the ability therefore get to a doctor, to get the continuation of care, should bring down the overall inflation rate for health care, which will dramatically affect Medicare, as well.

What we are on is a track that is reducing what they call ``bending the inflation curve.'' It's happening. Here's the most dramatic chart that I've seen on this issue, that we are, in fact, bending the cost curve. And perhaps even more important, senior citizens are healthier. They're healthier. They're getting better care. They're getting more care.

Ms. SCHAKOWSKY. Let me just say on that point, though, on the cost savings, that's why when the Affordable Health Care Act passed, the Congressional Budget Office estimated that it saves--people said, How are we going to afford that? How are we going to pay for that? But it actually saved a $1 trillion over 20 years in costs to the government.

Mr. GARAMENDI. That's a very good point, but let me interrupt.

They were calculating an inflation rate that continued at this level. They did not calculate a reduction in the inflation rate. And in the more recent estimates of cost savings, they're now looking at this difference here. They're looking at a lower inflation rate. This saves billions upon billions of dollars in the Medicare system. So we are seeing that.

I don't want to let a point go by that you raised, and that is, yes, all of us Democrats were whacked over the head in the elections about the $720 billion. I was, you were, and I suspect the rest of us were also. The $720 billion of savings reductions in Medicare did not come from benefits. In fact, the benefits were increased just as you said. I don't know how many times I said that over the last several months, but I'm going to say it again: it didn't come from there. It came from three areas. You said this earlier, and it bears repetition.

First of all, it came out of the pockets of the insurance companies that were providing the additional Medicare insurance coverage; secondly, it came out of fraud and abuse; and, thirdly, it came out of payments to medical providers that were not performing good services. Specifically, one of the biggest were hospitals that had high infection rates. The Affordable Health Care Act said, we are not paying for the second admission when there is an infection acquired in the hospital. This is really good news to every Medicare beneficiary because suddenly the hospital goes, Oh, you mean we are going to have to pay for the cost of a readmission because of an infection? The government's not going to pay for it any more? Maybe we ought to clean up our act. Maybe we ought to have a little bit of hygiene in this hospital.

We are now seeing a significant decline in the hospital infection rates. It's not expensive for hospitals to do, but extremely important for every individual that goes into a hospital, whether you're on Medicare or otherwise. Hospitals are now paying attention to hygiene, cleaning up, washing hands, other kinds of very simple, inexpensive things that keep people healthy and reduce the cost of Medicare and general health care.

Ms. SCHAKOWSKY. Exactly.

The real benefit of the Affordable Care Act and it's effect on Medicare and everything else is that we are making this system more efficient. The health care system in the United States of America is very inefficient. We are going to be rewarding outcomes, we are going to be rewarding value and good performance, rather than just getting--you know, a doctor sends a bill or the hospital sends a bill, Medicare sends off a check. We are going to be rewarding efficiency and good practices now in the health care system. I think that that is what everybody wants. You want better results for a lower cost. That's what we are getting.

Mr. GARAMENDI. There are some very simple things in the Affordable Health Care Act that do reduce the cost, and this is the continuity of care. This is the kind of thing you're talking about. It is the management of a debilitating illness, for example, diabetes. If diabetes is properly managed, the kinds of extraordinarily damaging and expensive things that occur to individuals are either delayed or not happening at all. So management systems are put in place that dramatically reduce the overall costs. They cost a little bit up front because people are keeping in touch with the patient. It's not necessarily a doctor. It may be a case worker keeping in touch with the patient and making sure they're taking their medications, making sure they're doing the checkups that they need on a regular basis, getting that kind of thing. How about right now?

I don't know. There are a whole bunch of people in this room--435. They're not here today, but how many have gotten their flu shots? If you want to reduce the costs of health care, get your flu shot. I think I'll go do that tomorrow.

Ms. SCHAKOWSKY. I did that. You should do it, too.

Mr. GARAMENDI. I know. I've got to do it tomorrow. I'll get my flu shot.

So these are the kinds of things that reduce costs, and the Affordable Care Act does that, not just for seniors but all the way down the board.

Go ahead. You were about to make a comment. Then I want to turn to some of the pernicious things that are being proposed to Medicare and to seniors.

Ms. SCHAKOWSKY. I just want to say that this is not about party. This is about people who know the realities of life--Democrats, Republicans, Independents and, I'm sure, some people who are identified with the Tea Party. They don't want to see this Congress cut Medicare, Medicaid, Social Security benefits, and this is overwhelming in every single poll. It's not because people are greedy; it is because they need these bedrock programs--these treasures of our American system--in order to live a decent quality of life. Americans are willing to work hard, to pay into these programs, to follow the rules--to do everything they're supposed to do. Then when they're either disabled or when they're past 65 years old or, in the case of Social Security, 67 years old, they want the fruits of their labor to be there for them. Again, continuing when they get Medicare, they pay dearly for those services. I think it's really important to remember that.

Mr. GARAMENDI. I guess, as politicians--all 435 of us--what happens when we get elected is we often read the polls. Hmm, let's see here: 67 percent of Americans are opposed to increasing the age from 65 to 67--71 percent of Democrats, 68 percent of Republicans, and 62 percent of Independents. That's pretty overwhelming.

So, just to back up to what you were saying a few moments ago about the American public, they viscerally, internally, understand how important Medicare is. It's not just for themselves. They have parents, many of whom are now 65. My mother is 92. She's a Medicare recipient, and she depends upon Medicare for her hospitalization. Fortunately, she hasn't had an incident for more than 2 years now, but when she did, Medicare was there to provide the necessary services for her, and so it is for all of us who have parents who are in the Medicare system.

We understand this, and we really want to make it quite clear that, as Democrats, we are in synchronization with the President on this issue. He has put forward specific proposals that over time will reduce the cost of Medicare without taking away the benefits, without changing the eligibility age.

However, there are proposals--and I spoke earlier about one that has been put forth by the Speaker of the House--to increase the age to 67. No, that's a nonstarter. I'm not going to go into all the actuarial issues--which I could easily do--about why that makes no sense at all for employers, who would wind up paying more. It makes no sense at all for an individual, who is going to wind up paying more. It makes no sense to the Medicaid program, which you've already talked about, and it makes no sense in saving money. The total cost to the system would actually increase. The costs would be shifted, to be sure. No, not so. I guess I will do a little actuarial work here.

Those people who are 65 to 67 years of age are more healthy than people who are 67 and above. You eliminate the healthy people from the risk pool, and guess what happens to those who are left--it's more expensive per person in that smaller risk pool. So what you want to do in all insurance programs is to increase the size of the risk pool so that the cost is shared among a larger population of people. What this proposal does is exactly the opposite. It shrinks the risk pool. It keeps in that risk pool less healthy people; it's more expensive; and those who are more healthy are outside. Yet they are now shifted on to the new exchanges that are going to be created, so the cost in the exchange is increased, and the cost for the per-person in Medicare is increased. So what's going on here? You've got to think this through. Bad idea. Bad concept.

Ms. SCHAKOWSKY. Your 92-year-old mother, when she goes into the hospital, if she didn't have--she probably does have--a supplemental insurance policy, the copayment on the first day in the hospital, which some seniors have to pay out-of-pocket, is well over $1,000. Medicare, let's remember, does not cover most vision, hearing, or dental, so seniors are still left with not only their premiums and their copayments and their deductibles but lots of things that still aren't covered by Medicare.

With the cost of health care to seniors today, this is no entitlement, which makes it sound like they're getting a freebie here. It's very, very expensive. We want to make Medicare better. We want to make it efficient and actually enhance some of those benefits.

Mr. GARAMENDI. The word ``entitlement'' is really misused for both Social Security and Medicare. Basically, the word means that, when you reach a certain age, the program is available to you. It's not a freebie. Men and women in America who work, even those who are 65 and over, continue to pay what amounts to a health care premium. It's the payroll tax. They're paying that from the first paycheck they get until the last one that they receive. Then when they're no longer working, as you so correctly stated, Medicare does not cover the total cost, so they're going to continue to pay. They're probably going to be paying for a supplemental insurance program, and they're certainly going to be paying out-of-pocket and the like.

There are a couple of other things that have been proposed, and I want to just cover those because they're very important. It has been proposed that the cost of the Medicare system can be reduced by giving every senior a voucher or--a different word but exactly the same thing--premium support, which basically says that the Medicare system, as we have known it for nearly 50 years, is terminated--gone--and that seniors who are 65--or 67 if they get their way--would be thrown into the private health insurance market. I cannot imagine a worse situation for a senior. The private health insurance market is not interested in caring for seniors.

Ms. SCHAKOWSKY. That's why we have Medicare.

Mr. GARAMENDI. They don't want those people because they get sick and they're expensive. They want Medicare, but the voucher program is the privatization of Medicare. It is nothing other than that. It's the termination of this guarantee, and seniors have to go out and negotiate on their own for a health insurance policy.

Good luck, Mom. You're 92 years old. Good luck in getting a health insurance policy from any private health insurance company. It won't happen. It won't happen.

So, with those proposals, they are wrongheaded; they are cruel; they are expensive to the individual; and they ultimately will lead to a system in which health insurance will not be available to seniors. That's a proposal that has been given life and that has actually passed the House of Representatives.

Ms. SCHAKOWSKY. It's part of the Ryan budget.

Mr. GARAMENDI. Indeed, it is. It has passed the House of Representatives twice--not once but twice.

So this is not just some idea floating in the ethereal. This is a real proposal that is sitting in the Senate. Fortunately, it's going nowhere there, but these kinds of programs are there.

The other program--and we've talked around this issue--is just a flat-out assault on the benefits. We're going to cut out drugs. We're going to cut out one or another of the benefits that are in Medicare. The package of benefits in Medicare is designed to provide a continuity of care so that something that is common is going to get covered--hospitalization, a doctor's care, and now, with the Affordable Care Act, annual visits to the doctor. It's very, very important.

Let me be clear that, as Democrats, we understand the necessity of reducing the cost of Medicare. We understand that. In fact, we have done it. The Democrats have done it. We have taken action to reduce the cost of Medicare and to simultaneously maintain the benefits and improve the benefits to seniors.

That is what we have done, and we'll continue to do it. Things I talked about at the very outset are very real. We can take additional steps. We can do more. The President has proposed it, and the Democrats stand ready today to take up those issues and pass them out of the House, give them to the Senate and say we can do more to reduce the cost of Medicare and simultaneously maintain quality care for seniors and the benefits that they have spent their lifetime paying for, paying for those benefits. We can do it. We've done it.

Ms. SCHAKOWSKY. We can do it. And I hope that everyone will stand with our President who has said that we're not going to raise the age of Medicare and that the Republicans now first have to agree that we're going to ask the wealthiest people in our country to pay a bit more, and not to begin with the least able to pay more, the poorest adults, seniors, and persons with disabilities.

Mr. GARAMENDI. Our colleague, Sheila Jackson Lee, before she left, she brought this issue up. In the House today is the tax program that would continue the tax reductions for the middle class.

Ms. SCHAKOWSKY. And for the first $250,000 for everyone.

Mr. GARAMENDI. Exactly so. All we need to do is pass that.

The other alternative, which has been proposed, is to keep the taxes low for the superwealthy and to pay for that out of the pockets of seniors. We're not going there, and we shouldn't.

JAN, thank you for sharing this evening with us. This is an important issue.

Ms. SCHAKOWSKY. Thank you.

Mr. GARAMENDI. Mr. Speaker, I yield back the balance of my time.

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