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Michael  Leavitt, Secretary


Washington, DC


Tuesday, April 08, 2008

Remarks as Prepared for the Medicare Trust Fund Report Press Conference

SEC. LEAVITT: Thank you.

In 2003, Congress created a law that required Medicare trustees to issue a formal warming if regular tax dollars would exceed 45 percent of the total Medicare budget for two years in a row. Last year we issued a funding warning, and we're doing so again this year. The law requests that the president propose legislation that will change the trajectory enough to bring revenues back under 45 percent. We have formally responded to the trigger with proposed legislation in February.

Let's acknowledge that American sensitivity to entitlement warnings has become numbed some by what I would refer to as a repeated cycle of alarms and inaction. Dire warnings have become a seasonal occurrence. I noted today in Washington, D.C., the cherry blossoms are out. They started to bloom today. It's part of nature's rhythm, and that's the way spring is in Washington. We see the cherry blossoms and hear Medicare warnings. The cherry blossoms go away, and nothing happens with Medicare.

The trustee report illuminates, with specificity, the decisions that policymakers, no matter what their party, will face over the course of the next several years if we continue to travel our current course.

Currently Medicare is a centrally planned, government-regulated system of price fixing. Price fixing systems depend entirely on policymakers balancing revenues and expenses, and that's just not happening. Price fixing systems like Medicare also depend on government regulators to decide who gets treated, to decide how much they get treated, to decide how much value that different procedures have.

Those tools are blunt and they're inexact. This is an inefficient system and it's contributed substantially to the dilemma that we're in currently. It needs to be changed.

A good place to start would be enacting the president's budget. I would point out that if it were enacted, it would extend the solvency of this important program by 10 years.

Further, Medicare can be a significant force in shaping the change that needs to occur. Acting on legislation that I have proposed on the president's behalf in response to this year's funding warning would lay a foundation for change in the future. It's important to acknowledge that acting on these legislative proposals does not solve the larger Medicare dilemma. But it would help.

The legislation that we've proposed offers a three-step approach to the mounting problems of Medicare. It would provide for consumers to be more involved in their decisions. It would create a Medicare system, based on value, where consumers would have better information about the quality and the cost of their care, and could be involved in the decisions on what is important and what has value.

One need look no further than our experience with Medicare's prescription drug benefit. Government organized a market, and consumers decide. As seen in this year's trustee report, it's played a major role in keeping enrollee premiums down. A month or so ago, we indicated that this year's numbers were affected in a very positive way, over the next 10 years, by more than $100 billion.

This year, the average premium for Part D is nearly 40 percent lower than it was originally projected to be in 2003. This lower premium reflects favorable trends in prescription drug costs generally, five unexpected rebates from drug manufacturers and a very rigorous competition among Part D plans. In addition, we announced earlier this year that the total cost of the program would be $117 billion less over the next 10 years than we had projected last summer.

The second title of the legislation that I've referred to implements the president's medical tort reliability agenda. This medical liability crisis has littered our courts with junk lawsuits and it contributes to what goes on in Medicare as well.

And lastly, the legislation -- the third component of the legislation reduces Medicare premiums subsidy for higher-income individuals in Part D. Enacting the proposal would save $900 million in 2003 and nearly $3.2 billion over the next five years.

Our children and our children's children cannot afford another year on autopilot. The Congress should act, should act first on the president's budget, and then we should not postpone the -- our action on the other matters as well.

Last revised: August 29, 2008