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REMARKS BY:    DONNA E. SHALALA, SECRETARY OF HEALTH AND HUMAN    
                          SERVICES
PLACE:         Senate Democratic Hearings on Medicare
DATE:          October 5, 1995

I'd like to begin today with a story.

Back in the 19th century, Mark Twain's wife decided to try to stop her husband from his notorious habit of swearing.

For a couple days she cursed up a storm, just to make him hear how he sounded.

Finally he told his wife, "You've got the words right ... but the melody is all wrong."

Well, when it comes to Medicare, the GOP Senate has the words right -- they talk lots about "saving" Medicare and "increasing" choice for beneficiaries -- but the melody is off note and out of tune.

In fact, it's bad enough to make dogs howl.

Because when you cut through the rhetoric their spin-doctors told them to use and really look at the details of their proposals, what you see is a cold-hearted plan to make seniors pay a lot more for health care while giving them a lot less.

Make no mistake, their plan takes the "care" out of Medicare.

Their plan turns Medicare into a piggy bank to pay for a $245 billion tax cut for the wealthy.

And their plan abandons this country's commitment to fund our historic guarantee of health care to older Americans.

And they're doing all this under a veil of secrecy, a smoke and mirror strategy premised on the cynical notion, "If you can't convince 'em, confuse 'em."

I like our strategy better: "Sunlight is the best disinfectant."

We have to focus a bright light on every hidden detail in the GOP plan -- to make sure the American people realize that their plan is a disaster waiting to happen.

Under their plan, seniors will get fleeced.

They'll give up a lot, and get nothing in return.

They'll pay more and get less.

I came here today to talk about five ways this will happen -- five changes the GOP is proposing that ultimately amount to a shell game that will leave many seniors with empty pockets and the feeling of being ripped off.

First, take the GOP Senate's plan to cap Medicare spending at a level that will be impossible to reach without ruining the program and causing great harm to seniors.

Make no mistake, this "cap" is really a "cut."

By setting into law insufficient and inflexible dollar amounts available for Medicare, they dramatically cut the resources we will need tomorrow to provide the services we guarantee today.

They are saying, that in the year 2002, no matter what the health needs of our seniors are. No matter how much it actually costs to provide health services to seniors.

We will only have a fixed amount of money and that amount is far too low.

These caps are as arbitrary as a bolt of lightning: they have nothing to do with the future cost of health care -- and everything to do with their fat tax cut for the rich.

Second, there's their radical new mechanism for implementing these cuts, which -- with no apparent irony -- they call the "BELT."

Here's how it works: If we don't hit the very low Medicare cap, the BELT requires huge reductions in payments to health providers in the current fee-for-service plan.

That means that all the doctors, hospitals, and other caregivers who serve patients in Medicare fee-for-service will have their fees cut arbitrarily.

Seniors may find it increasingly difficult to find a doctor who accepts fee-for-service patients under Medicare.

This is a stealth plan for restricting seniors' choice -- and that's not right.

The subject of choice brings me to the third damaging change the GOP has proposed.

In the guise of giving seniors a greater selection of health plans, the Senate Republican bill sets up a voucher program called Medicare Choice.

In theory, this program would allow seniors to leave Medicare fee-for-service and purchase other coverage options among plans that would compete for their business.

In reality, because of their draconian Medicare budget cuts, the voucher will fail to keep up with the rate of health care inflation -- leaving seniors with an incredible shrinking voucher.

And in reality, the Republicans propose to allow Medicare Choice plans to charge seniors additional, higher premiums which means they'll have to spend more and more out of their own pockets to get the same -- or fewer -- benefits they have right now.

This would leave seniors with less -- not more -- choice.

And then there's the fourth hidden detail of their plan, which has to do with a complex subject know as balance billing.

Balance billing is the amount a provider charges to a patient above and beyond the amount covered by Medicare.

For example, right now, in Medicare fee-for-service, doctors are allowed to "balance bill" -- or charge -- patients no more than 15 percent above Medicare's payment levels.

And in Medicare's current contracts with health plans, doctors have to accept the health plans' payments as payments in full.

This ensures that seniors aren't priced out of the health care market -- that they can always purchase the Medicare-covered health services they need.

But last week, the GOP members of the Senate Finance Committee struck down an amendment that would have protected beneficiaries against excessive balanced billing charges in their new Medicare Choice plans.

Let me explain what this means.

Suppose your grandmother joins a Medicare Choice plan and sees her doctor for a procedure that the plan reimburses at $100.

Under the Senate GOP plan, there may be no limit to what she could be charged by her doctor within that Medicare Choice plan.

She could find herself unable to pay for the very services she can afford right now.

This is another hidden tax on the elderly and disabled -- an abandonment of our current commitment to protect them against excess charges.

And make no mistake, this scenario is very likely to occur.

The GOP Medicare cap means that Medicare Choice plans will be underpayed -- and they will likely pass on these cuts to doctors who may then pass them on to seniors who have nowhere to pass them -- so they pay.

So what you're seeing here is an extraordinary shift:

As a result of these changes, patients could be enticed to go into Medicare Choice plans and give up their doctors -- and then, once in those plans, they could pay more and get less.

That is counter to every ideal that our Medicare program was built upon.

And that brings me to the fifth element of their plan, Medical Savings Accounts.

MSAs are an untested gamble -- for seniors and for Medicare.

They will attract the healthiest and wealthiest beneficiaries.

It's no wonder that the Congressional Budget Office has estimated that MSAs will cost Medicare more than $2 billion dollars.

In fact, it breaks down to about $1,000 per person per year in the MSA.

Meanwhile, poorer, sicker seniors will remain in traditional fee-for-service Medicare, driving up the cost of that part of the program, and triggering deeper "BELT" cuts.

It makes no sense to spend more for the healthy and less for the sick -- but that's exactly what they propose to do.

These five changes -- these five fatal flaws -- amount to five steps backward in our national commitment to protect our seniors.

In conclusion, Mr. Chairman, I believe the Republican proposals for Medicare add up to a prescription for disaster: arbitrary spending caps, an underfunded voucher program, untested MSAs, and an unfair lack of financial protections for our seniors.

The bottom line is older Americans would pay more and get less.

That's what I call all pain and no gain.

It's not an approach we should take -- and it's not one we have to take.

America deserves better. And we can do better.

Thank you. I would be happy to answer any questions.