Bob Graham

Mr. GRAHAM

Mr. GRAHAM. Mr. President, this motion relates to a provision that was included in the last hour of our consideration of the reconciliation bill. That provision purported to fund $13 billion of new spending by utilizing funds out of the Social Security trust fund. This motion states that it is not our intention to dishonor the commitment that this Congress made in 1990 not to utilize the Social Security trust fund for financing the general purposes of Government and, therefore, instructs our conferees to desist from any actions that would have that effect. I believe this amendment is acceptable to the chairman of the Budget Committee. I urge its adoption.

Mr. GRAHAM. Mr. President, I ask for the yeas and nays.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I send a motion to the desk.

Mr. GRAHAM

Mr. GRAHAM. That was adopted by the Finance Committee.

Mr. GRAHAM. In the Finance Committee, you offered an amendment which would have the effect of causing high-income Medicare beneficiaries to pay a larger percentage of the cost to the program; is that correct?

Mr. GRAHAM. What I am saying is, if we retain the provisions in the continuing resolution, it appears to mandate that we set the computers at 31.5 percent for all beneficiaries, the rationale being if we do not act now, it will be too late to adjust those computers. [[Page S 16891]] Would that not have the effect of eliminating the opportunity to do what your amendment calls for, which is to have a different percentage for high-income beneficiaries?

Mr. GRAHAM. Mr. President, would the Senator from Delaware yield for a question?

Mr. GRAHAM. Will the Senator from Wyoming yield for a question?

Mr. GRAHAM. Would this proposal of setting the percentage at 31.5 percent obviate your amendment which would have set a higher percentage for high-income Medicare beneficiaries?

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. GRAHAM. Mr. President, pursuant to a previous order, I believe I have 20 minutes during morning business.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, today I conclude a series of talks on the Medicaid Program. I began a four-part presentation last Friday by debunking the myth that the Medicaid Program has been a failure. In fact, an objective review of the accomplishments of this Federal-State partnership tells us that the Medicaid Program has been an American success story. Just a few examples: The decrease in infant mortality rate from 10.6 deaths per thousand livebirths as recently as 1985 to 8.5 in 1992, largely attributable to an expanded effort in the Medicaid Program; The improved quality of long-term care for millions of elderly citizens in a manner befitting their human dignity; The deinstitutionalization of 125,000 profoundly handicapped Americans. With that record of accomplishment established, on Tuesday of this week, I examined why Federal spending on Medicaid has increased throughout its history and why it is expected to increase in the next years. I pointed to such things as the demographic changes in America, particularly the increasing longevity which has driven up the number of persons who are in need of long-term care. I addressed the numerous programmatic expansions in Medicaid that reflected compelling policy decisions, such as the decision to reduce infant mortality. That has led to increased costs as well. Finally, I cited the erosion of private health coverage for millions of children, an issue which has become a major subject of public concern this week with the publication of a study in the Journal of the American Medical Association on that very topic, documenting the trend that as private sector insurance abandon children and their parents, the Medicaid Program picked up the slack, helping them get immunizations, checkups, and, when needed, specialty care. Mr. President, this is not to say that part of the increase in the cost of Medicaid was not attributable to abusive or wasteful practices. Yesterday, I spoke about the abuses in the Disproportionate Share Hospital Program, known as DSH. I decried how the Senate, by its vote on October 27, rewarded with millions, and in some cases billions, of dollars those very States that gamed the DSH program. What is worse, the Senate majority voted to fund these rewards by raiding the Social Security trust fund and by perverting sound budgetary practices. Mr. President, with that backdrop in place, I come to the Senate floor today with a message of hope. I bring to this Chamber a proposal that recognizes the importance of maintaining the Federal-State partnership in Medicaid and restraining costs. The Senate is not in a posture of block grants or bust. There is another way. Why should we consider an alternative? We should consider an alternative because the alleged benefits of block grants-- flexibility to the States particularly--are minimal, and the costs and loss of a Federal partner in a time of need for the most vulnerable of Americans are great. The foundation upon which the block grants have been built, that they enhance flexibility for the States, is on shaky ground--shaky ground which erodes by close examination; shaky, that is, unless you define ``flexibility'' as the freedom to raise State taxes or local property taxes, or the flexibility to pit the elderly against children as beneficiaries for the Medicaid Program. Otherwise, there is precious little flexibility the States can receive that they cannot already get under the current Medicaid program waiver. The Department of Health and Human Services has pioneered, with willing States, extraordinary demonstration projects where statutory and regulatory requirements can be waived to permit new approaches to health care. In my State of Florida, we have been in the vanguard of this waiver movement, particularly in the area of providing community- based services for older citizens and expanding the use of managed care for poor children. Before the Senate brought the Medicaid legislation to the floor, I met with Mr. Bruce Vladeck of the Health Care Financing Administration, generally known as HCFA. My question to him was: What flexibility, to allow innovation, would the block grants give States that they cannot get today through the waiver program? Here is a summary of his answer: States today can test new approaches to publicly supported health care by obtaining waivers to statutory requirements and limitations. Waivers permit States flexibility from Federal Medicaid statutory and regulatory requirements. State Medicaid demonstrations present valuable opportunities to both State and Federal policymakers to refine and test policies that improve access to the quality of care for vulnerable Medicaid populations and to more effectively manage the cost of providing that care. Mr. President, I ask unanimous consent that the full statement by Mr. Vladeck be printed in the Record following my remarks.

Mr. GRAHAM. What do the States relinquish in exchange for the marginal new flexibility that they will allegedly receive? The Federal partnership to assist them, if they experience caseload growth, will be surrendered. The Federal partnership, during times of economic hardship or recession, will be surrendered. And the Federal partnership, if there is a natural disaster--when Hurricane Andrew hit south Florida, Mr. President, our Medicaid caseload shot up by 12,000 people. Not only had their homes been blown away, their jobs had been blown away. Therefore, people who had been employed and self-supporting needed the assistance of Medicaid during that time of crisis. Under block grants, a State that is knocked down to its knees by a flood, earthquake, hurricane, would not find a helping hand from the Federal Government at the time it needed help to get back on its feet. No, Mr. President, acts of God and block grants do not mix. Mr. President, this is not a new debate. In January 1982, during his State of the Union Address, on the 26th day of that month, President Reagan recognized the issue of the States and the Federal Government's partnership in Medicaid. Did President Reagan advocate that Medicaid ought to be turned back to the States in the form of a block grant? Did he advocate that the States be left alone to deal with issues of changes in their growth, changes in economic circumstances, natural disasters? No, Mr. President, that was not the position of President Reagan. Let me quote from his State of the Union Address what President Reagan said on January 26, 1982: Starting in fiscal year 1984, the Federal Government will assume full responsibility for the cost of the rapidly growing Medicaid Program, to go along with its existing responsibility for Medicare. As part of this financially equal swap, the States will simultaneously take full responsibility for Aid for Families with Dependent Children and food stamps. Mr. President, that was the swap that President Reagan proposed on January 26, 1982. I believe the President's advice, in terms of a greater, not a lesser, Federal role in Medicaid, was wise then, and it is advice that we should seriously consider following today. If block grants are as bad as I suggest they are, is the only alternative to them business as usual? No, Mr. President. There is a way to have the best of both worlds, and to contain costs while maintaining the Federal-State partnership in Medicaid. [[Page S 16846]] The best of both worlds is the per capita cap proposal that is gaining momentum as the win-win answer to the block grants' lose-lose proposition. The per capita cap approach provides that health care and coverage could be protected, and costs can be controlled by disciplining the program with an annual limit in Federal spending per beneficiary. This approach maintains the individual guarantee to Medicaid services and creates an incentive to maintain health care coverage. Funding would follow the people in need, not some political entity. The per capita cap approach, which I presented to the Senate 2 weeks ago, saves $62 billion over the next 7 years. It enhances State flexibility, and it reduces the rate of growth in Federal Medicaid spending to a level that is sustainable for the States, the beneficiaries, and the Federal Government. The per capita cap assures that States with innovative demonstrations already underway can continue to operate their programs, and that other States wishing to innovate have the resources and ability to do so. Let me briefly outline how the per capita cap approach would work. Federal funding would be allocated to States on a per person in need basis. For example, one of those categories of per persons in need are poor children. If the cost of providing services to a poor child in California, for example, has been $1,000, then the Federal Government would continue its Federal-State matching share, which in the case of that State is 50 percent State, 50 percent Federal, and the Federal Government would continue to provide $500 per each poor child qualifying for Medicaid services in the State of California. If needs increase because the population of poor children goes up, or if they decrease because the population goes down, or if there is a natural disaster or a public health calamity and more children become eligible for coverage, the Federal partnership and the contribution of $500 per child would be guaranteed, unlike a block grant, where a fixed sum of money is allocated regardless of change in circumstances. The incentive is to reduce costs and not cut people off coverage because if you arbitrarily cut children off, you lose the Federal match. Costs are what must be controlled. If, for example, California were to spend more than $1,000 per child, then the State of California would be required to make up the difference between the actual cost and what Medicaid would cover--$500 of State and $500 of Federal funds. Again, under a per capita cap, the money follows the need and the person. As a result, during economic booms, or if health care needs decline, the Federal Government would share in the savings--also unlike a block grant which straitjackets and obligates money regardless of need. The Federal Government would make payments to each State based on the statutory Federal matching rate or the per capita rate, whichever is lower. The cap would be stated in inflation terms. Our proposal, Mr. President, is that that inflation term be stated at 1 percentage point below the projected rate of medical inflation in the Nation. Today it is projected that the medical rate of inflation for the next 7 years will average 7.1 percent per year per person. We would, therefore, propose to set the inflation rate under the per capita cap at 6.1 percent, thus producing the $62 billion in savings over the next 7 years. The cap would be cumulative and thus allow States enough flexibility to apply savings under the cap from one year to the next. Caps would be applied separately to each of the four principle categories of Medicaid beneficiaries: the elderly, the disabled, children and their mothers. This separation into four distinct groups avoids the sinister zero-sum game that is endemic to block grants, where one group's interests are pitted against another. Mr. President, on first hearing this formula, some may say it sounds very complicated. For those who have had a background in State government, it really is a clone of the way States allocate and distribute school dollars to individual school districts. In fact, with only four categories of beneficiaries to consider, it is far simpler than most per pupil school district formulas. The per capita cap idea is not a new idea. It is one which should be familiar to many of our Republican colleagues. It is a concept that was supported in health care proposals introduced within the last year by Senators Dole, Packwood, Gramm, and Chafee. Mr. President, among those merits, the Medicaid per capita cap approach permits the States to move toward managed care and other types of arrangements which save money without having to secure specific Federal waivers. That, Mr. President, is real flexibility. Another advantage of the per capita cap approach is that many other detailed rules and process-oriented requirements would be phased out. States would be held accountable to performance outcomes with respect to certain quality access measures. The Federal Government would be interested in the outcomes of State health long-term care delivery systems but would not be mandating how to achieve those outcomes. Finally, the per capita cap approach would cap and retarget future growth in the Disproportionate Share Hospital Program, referred to as DSH. My colleagues who have read about or possibly heard my remarks yesterday on the flagrant, unflinching abuse of the DSH program by some States will no doubt breathe a sigh of relief. Mr. President, the per capita cap approach I outlined today would assure 18 million children, 8 million low-income women, 6 million disabled, and 4 million elderly Americans continued coverage for hospital, physician, and nursing home care services. This approach would cut costs, not cut people. Mr. President, suppose for a moment that in 2 years oil prices fell as they did in the early and late 1970's, another economic recession were to strike a region of our country such as the southwestern States. Suppose the same phenomenon ensued with layoffs, real estate fire sales, and businesses start canceling health insurance coverage. As we know from the history of the last 15 years, suppose, further, that families ran through their savings, ran out of money to care for their elders. This may sound far-fetched, but it was not that long ago that the former Governor of Texas held a garage sale and sold personal items to generate cash during those hard times. For purposes of this discussion, we will say that the citizens of the Southwest ran out of money, so their frail elderly turned to Government for long-term care. With no help from the Federal Government in their hour of need, those States would be in a financial straitjacket under block grant. Mr. President, this is insanity, and unnecessary insanity. Under per capita caps, those same States would get help. The Federal Government's contribution would increase as the need increased. Most important, the elderly, the disabled, the children, and pregnant mothers would not pay for the economic downturn with their help if not with their lives. Mr. President, this makes sense. There is a legitimate national interest in such an outcome. The $62 billion reduction in spending amounts to a surgical cut, not the meat-ax approach that the $176 billion block grant legislation that passed the Senate 2 weeks ago represents. Further, Mr. President, the per capita cap approach would continue the Federal-State partnership in detecting fraud and punishing defrauders. Medicaid fraud, the DSH abuse and the uncontained spending amount to a cancer on our Nation's health and long-term care delivery systems. But it is treatable--not a terminal condition. In our zeal to cure this affliction, let us not kill the patient in the process; let us not kill the very Federal-State partnership that has served this Nation so well for 30 years. For the past week, Mr. President, I have attempted to spotlight the Medicaid Program, to expose the recklessness of $176 billion in block grant cuts and the raid on the Social Security to reward DSH abusers. Today, I propose another way, a way that maintains the Federal-State partnership while still containing costs. After all, Mr. President, behind those $176 billion in cuts are human beings who will pay the price for our free-lance legislating, for our don't-ask, don't-care indifference, to the casualties of these block grants. [[Page S 16847]] Mr. President, I ask unanimous consent that a column by Mr. David Broder, which appeared in the Washington Post on August 6, 1995, entitled ``Race to the Bottom?'' be printed in the Record at the conclusion of my remarks.

Mr. GRAHAM. Mr. President, we will all be able to read that in addressing the Medicaid and welfare block grant debates, Mr. Broder wrote eloquently of the fear that under block grants the States will engage in a ``race to the bottom that shreds the social safety net.'' He predicted the likeliest scenario under block grants would be as follows: ``What would happen when Federal funding is reduced and Federal standards are eliminated is that 50 legislatures would become the arena, each year, in which the welfare population would have to compete against other claimants for scarce dollars.'' Mr. President, I share this view of the future in America under block grants. You cannot have a race to the bottom without casualties along the way. Along the way in the block grant race to the bottom will be eye glasses for elderly, unfilled prescriptions that used to be covered under Medicaid. They will not survive the race to the bottom. Along the way in the race for block grants, the race to the bottom, will be families torn apart by unnecessary nursing home placements and institutionalization. Communities' care for the elderly and other Medicaid waiver services are not likely to survive the race to the bottom. Along the way in the block grant race to the bottom will be ugly legislative sessions in 50 States, legislatures where the frail elderly will be pitted against children, and the mentally retarded against the AIDS sufferer in a battle royal for block grant money. Is that what we want for America? Mr. President, there is another way. The race to the bottom has yet to begin and it need not begin. There is still time. Per capita cap legislation is our way out of the race to the bottom and is our ticket to a 21st century that maintains an American Federal- State stake in the health and welfare of its citizens. Exhibit 1 Statement of Bruce Vladeck Senator Graham. What cannot be waived under this 1115 program for either legal or administrative policy reasons? Mr. Vladeck. States can test new approaches to publicly supported health care by obtaining waivers of statutory requirements and limitations from the Secretary of the Department of Health and Human Services. Waivers permit States flexibility from the Federal Medicaid statutory and regulatory requirements that cannot be altered through the Medicaid State plan amendment process. State Medicaid demonstrations present valuable opportunities to both States and Federal policy makers to refine and test policies that improve access to, and quality of care for vulnerable Medicaid populations, and to more effectively manage the costs of providing that care. Although, section 1115 authority is very broad, certain statutory restrictions exist for State demonstrations. In addition, HHS has made a number of policy decisions that affect statutory provisions we will and will not waive for demonstration programs. statutory provisions FMAP Rates. The rate at which the Federal government matches States expenditures cannot be waived. Services for Pregnant Women and Children. The obligation to cover certain women and children described in section 1902(1) cannot be waived under section 1115 authority. Drug Rebate Provisions. Section 1902 also requires that a State provide medical assistance for covered outpatient drugs in accordance with section 1927, which also contains the drug rebate program provisions. Section 1927 excludes drugs dispensed by HMOs from the requirements of the drug rebate program. Since the drug rebate provisions are imposed on drug manufacturers, and not on the State, this provision cannot be waived through a waiver of section 1902. Only those drug rebate and best price provisions of section 1927 which apply directly to the State may be waived, not those which apply to drug manufacturers. Copayments and Other Cost Sharing. Section 1916 enables States to impose deductibles, copayments and other cost sharing requirements on Medicaid beneficiaries, but also prohibits States from requiring copayments from categorically-eligible beneficiaries who are enrolled in managed care systems. The Secretary's authority to waive this restriction is limited. These limitations make it impractical to waive section 1916 to enable states to require copayments. Copayments and other cost sharing can be imposed for managed care services, however, in the case of medically needy individually and on individuals who are newly Medicaid- eligible due to the demonstration. Spousal Impoverishment Provisions. Section 1924 prohibits the Secretary from waiving spousal impoverishment provisions for institutionalized individuals. Work Transition. Section 1925 prohibits waiving work transition provisions extending Medicaid eligibility for certain individuals who lose their eligibility for Medicaid through their loss of eligibility for Aid to Families with Dependent Children. Qualified Medicare Beneficiaries, Specified Low Income Beneficiaries, and Qualified Working Disabled Individuals. Section 1905 requires States to provide coverage to these groups of individuals regardless of an 1115 demonstration. Competitive Bidding. Procurement rules in Part 74 of the Code of Federal Regulations require States and other entities to use competitive bidding ``to the extent practical''. Because the statutory basis for these rules exists outside of Title XIX, section 1115 cannot be used to waive this requirement. policy positions Reduced Quality of Care. Programs or policies which inappropriately reduce access, benefits, or otherwise reduce quality of care for current eligibles cannot be approved. Quality Assurance. States are expected to maintain quality assurance processes (e.g., eligibility quality control, external medical review requirements, etc.). Budget Neutrality. Demonstrations must be budget neutral. That is, Federal expenditures under the demonstration may not exceed the projected level of Federal payments to the State in the absence of a demonstration. Through negotiations with the National Governors Association, HHS has agreed that States may achieve budget neutrality over the life of the project, rather than on a year by year basis. Unnecessary Utilization and Access Safeguards. Section 1902 requires safeguards against unnecessary utilization of services. The statute also protects access to care by requiring States to make adequate payments to providers. Such safeguards must be maintained. Boren Amendment. States must meet the Boren amendment's access and payment requirements in fee-for-service settings. Because these provisions do not apply to managed care settings, States do not need a waiver of the Boren amendment for managed care programs. Contract Provisions. Most existing contract requirements for comprehensive managed care plans in section 1903(m) will continue to apply to managed care demonstrations. HCFA will consider waiving the enrollment composition requirement (the ``75/25 rule'') and disenrollment on demand if the State plans to substitute a data-oriented, quality improvement system for these statutory provisions. Duration. The terms ``experiment,'' ``pilot'', and ``demonstration'' all suggest that programs authorized under section 1115 should, some point, conclude. Thus, States and health care providers potentially affected by section 1115 demonstration projects should be aware that section 1115 demonstrations are time-limited. Exhibit 2 Race to the Bottom (By David S. Broder) The Republicans in Congress are proposing a revolution in domestic policy and in the relationship between the federal government and the states. Last week, at their meeting in Burlington, Vt., the nation's governors tried but failed to agree whether the proposed changes would be a blessing or a disaster. The 30 Republicans, 19 Democrats and one independent could agree only to disagree. Now the proposition is before Congress. This month the Senate is debating several alternatives to the House-passed welfare reform. After Labor Day, the House will launch a similar debate on Medicaid. On the face of it, the fight is about money. The welfare bill was blocked for weeks in the Senate by a dispute between states like Wisconsin and Massachusetts, which have high benefits and little growth in their welfare populations, and those like Texas, which have low benefits but are experiencing rapid growth. Senate Majority Leader Bob Dole found a solution by coming up with enough money to guarantee current allocations to the first group of states while providing a bonus for the second. That will be much harder when it comes to Medicaid, the program that provides long-term care for the indigent elderly and disabled and basic medical services for other welfare families. It is by far the biggest single federal-state program today, and the Republican budget calls for $181 billion in savings from it in the next seven years. Finding a way to distribute the pain will be difficult. But money is just one of the dimensions of this struggle. Equally important is the question of minimum standards--and where they will be set. Until now the floors have been established in Washington for Medicaid and for the main welfare program, Aid to Families with Dependent Children (AFDC). The states have been the junior partners, both in designing and paying for these basic ``safety net'' programs. What the Republicans want to do is reverse that. By capping the amount of money the [[Page S 16848]] federal government would appropriate for these two programs and converting them from individual entitlements to state block grants, they would force the states, over time, to pay for a bigger share. In return, the states would be given much wider leeway, immediately, to redesign the programs to their own taste. The hope is that this will encourage experimentation that may reduce costs while actually improving outcomes for beneficiaries. The Medicaid population could benefit from moving into managed-care programs, it is argued. Welfare programs could be tailored more easily to local circumstances, helping people move off the dole and into paying work. The critics' fear is that instead of innovating, the states will engage in a ``race to the bottom'' that shreds the social safety net. In back-to-back speeches to the governors, Dole argued that the first of those results is likeliest; Clinton said he worried that the second would be the case. No one can be certain, but logic and experience suggest that the second scenario is more likely. What would happen when federal funding is reduced and federal standards are eliminated is that the 50 legislatures would become the arena, each year, in which the welfare population would have to compete against other claimants for scarce dollars. The reality is that, as Clinton said, ``the poor children's lobby is a poor match'' for other interests that pressure the legislatures. Teachers, road builders, law enforcement people, county and local governments, universities all have more clout. That was demonstrated this year in states from New York to California, where welfare benefits were trimmed to avert deeper cuts in other parts of the budget. Dole, who is shepherding the welfare bill in the Senate and who would like to challenge Clinton in next year's presidential race, cozied up to the governors by expressing his indignation at Clinton's ``race to the bottom'' charge. ``I wonder which states he thinks would participate in such a race,'' Dole said. ``Which states does he believe cannot be trusted with welfare, education and protection of their people?'' But it is not a question of trust. The political realities of the legislatures are much as Clinton described them. To ignore that reality is to court trouble--not just for the aged and the poor but for the federal system.

Mr. GRAHAM. Mr. President, I suggest the absence of a quorum.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, last Saturday, a memorial service was held for a true friend of the State of Florida, Richard Sewell. Dick passed away on October 26 of lung cancer. A native of Orlando, Dick was well known in Washington and Florida political circles. Dick moved to Washington in 1963 to become an administrative assistant to Rep. Charles E. Bennett, a senior member of the House Armed Services Committee and chairman of the first House ethics committee. In 1966, he served as staff coordinator for the ad hoc ethics committee and helped Bennett draft legislation which resulted in a permanent House Ethics Committee. Dick left Bennett's staff in 1971 to become director of public affairs for the National Association of Food Chains. In 1972, he assisted Senator Henry M. Jackson in his campaign for the Democratic Presidential nomination, serving as the campaign's executive director in Florida. In 1973, Dick became the director of Federal Government affairs for Florida Power & Light Co. He remained the utility company's chief Washington representative until his retirement due to illness, in 1994. He was active in energy, environment, and tax issues pending before Congress and Federal agencies, and was the author of numerous published articles on the subject. In 1986-87, Dick directed FPL's campaign to establish a national award to recognize quality performance by American corporations. Partly through those efforts, Congress enacted the Malcolm Baldrige National Quality Improvement Act in 1987, under which companies compete annually for the Malcolm Baldrige Award. A lifelong loyal Floridian, Dick was a former president of both the Florida State Society in Washington and the University of Florida Alumni Club. In 1979, he received the university's Distinguished Alumnus Award. Dick was a past president of the Washington Business-Government Relations Council and the Washington Representatives Research Group. He served on the board of directors of the Public Affairs Council and as a charter member of the board of governors and treasurer of the Bryce Harlow Foundation. In addition, Dick was a former president of the Burro Club, an organization of Democratic congressional aides. After graduating from public high school in Orlando, he studied journalism at the University of Florida. He received his degree in 1959. From 1957 to 1959, Dick was the sports editor of the Orlando Evening Star. After college, he joined the sports staff of the Atlanta Constitution. He later moved to Jacksonville, FL, where he opened his own public relations firm. Dick is survived by his wife, Peggy; their two children, Jane and Michael; his mother, Bertie Sewell; and his brother, Walter Sewell. He will be sorely missed.

Mr. GRAHAM

Mr. GRAHAM. These, Mr. President, are major factors that have contributed and will contribute to Medicaid growth. Today, I want to talk about the policies of the Senate which have been adopted for the future of Medicaid. Mr. President, Halloween came early this year. In the dark of night, immediately prior to the passage of the Budget Reconciliation Act on the Friday before Halloween, the Medicaid formula was written by the architects on the reconciliation package. Amazingly, the rewritten, revised Senate bill handed out treats-- treats in the form of $10.2 billion mainly to States that were the prime abusers of Medicaid disproportionate share hospital funds in recent years. The Senate is preparing to reward States that have manipulated the Medicaid system by making permanent their past misdeeds. How did the authors of this amendment pay for these treats dished out on the Friday night before Halloween? They imposed trickery on the elderly by raiding $12 billion from the Social Security trust fund. What are these Medicaid misdeeds that are about to be rewarded and made permanent? They are what is referred to in Medicaid as the disproportionate share hospital program, known as DSH. What is disproportionate share? The intent of the disproportionate share hospital payments originally enacted in 1981 is to assist hospitals that treat high volumes of Medicaid and low-income uninsured patients with special needs. Recognizing that these hospitals would have a small private insured patient base with which to recover funding for the cost of treating these uninsured, Congress intended that these disproportionate share hospitals receive payments to supplement their other Medicaid payments. In fiscal year 1989, Federal funding for Medicaid DSH payments was just $400 million. However, in coming up with their share of those funds, some States begin to see the huge potential in the use of donations and provider tax revenue as the State share of Medicaid expenditures. Provider taxes and donations allowed States to draw down Federal Medicaid funds while backing out of providing their State matching share and sometimes effectively pocketing the Federal share of money meant for disproportionate share hospitals. The original good intention, to meet the special need of hospitals, was creatively abused by States across the Nation. Abuse was so great that, between fiscal year 1989 and fiscal year 1993, Federal spending for Medicaid disproportionate share hospital payments grew, if you can believe this, from $400 million in 1989 to $14.4 billion in 1993, a 3600-percent increase. By 1993, DSH payments amounted to one-of-every-seven Medicaid dollars. According to the Kaiser Commission on the Future of Medicaid, DSH payments were roughly equal to the sum of Medicaid spending for all physician, laboratory, x ray, outpatient, and clinic services that year. In Alabama, Connecticut, Louisiana, Maine, Missouri, New Hampshire, and South Carolina, Medicaid disproportionate share hospital payments actually exceeded regular Medicaid payments for inpatient hospital services. This rapid growth, a 3,600-percent increase in just 4 years, was a major factor in the overall Medicaid growth from 1989 to 1993. I discussed that issue in more detail in my remarks delivered yesterday. The Urban Institute, in a 1994 publication, estimated that between 1990 and 1991, DSH payments accounted for 20 percent of all Medicaid spending growth. In that 1-year period, DSH payments were 20 percent. But, between 1991 and 1992, DSH payments were responsible for 51 percent of Medicaid spending growth. How did this occur? According to the Health and Human Services Inspector General Richard Kusserow, who served during the administration of President Bush, in a report dated July 25, 1991: The growing popularity of provider [tax and donation] programs, in our opinion, is due to States' awareness that a window of opportunity exists for them to alleviate their own budget programs to the expense of the Federal Government. States are fully aware that they had better take advantage of this opportunity while it exists. One State official went so far to say that ``State officials might be regarded as derelict if they did not take advantage of the Federal law.'' Incredibly, this occurred in a manner that, although named the disproportionate share hospital program, provided some heavily impacted Medicaid hospitals with little or no benefit. This and other types of scams by States were detailed by the Prospective Payment Assessment Commission in a report requested by Congress and completed on January 1, 1994. As the Commission noted, Although State Medicaid programs reported spending $20 billion more in fiscal year 1992 than in fiscal year 1990 for inpatient services in short-term hospitals, these hospitals received substantially less than a $20 billion increase in Medicaid revenue. Part of this discrepancy is attributable to situations in which state Medicaid programs allocate DSH payments to hospitals that never actually received or controlled the payment as revenue. In an April 1995 report, the General Accounting Office noted that States often churned or even laundered Federal Medicaid dollars through State hospitals. The GAO report said: State hospitals received $4.8 billion in DSH payments. However, hospital officials indicated that only a small share of the gains were actually retained and available to pay for health care services, such as uncompensated care. Instead, most of the gains were transferred back to state general revenue accounts. In sum, paper transactions without paper money. In fact, researchers at the Urban Institute concluded that: [A] high share of the funds are being diverted from direct health care to general [[Page S 16808]] state coffers. It is reasonable to ask if Medicaid is an appropriate vehicle for general revenue sharing between the Federal Government and the States. In reviewing such scams, analysts at the Health Care Financing Administration have estimated that the actual Federal share of Medicaid funds in 1993 was 64.5 percent instead of the reported 57.3 percent, primarily because of the manipulation of the DSH Program. Good news: As a result of these scams, illusory tactics, and raids on the Federal treasury, Congress enacted legislation in 1991 and again in 1993 to create State-specific ceiling limits on each State's spending for DSH payment adjustments to 12 percent of the State's total Medicaid spending for the year. That is, no State could have more than 12 percent of its total Medicaid in the category of disproportionate share hospitals. This limit, combined with other changes to the amount of money a single hospital can receive and the definition of what constitutes a provider tax, have been effective at controlling these costs. In fact, the 20 States that have 12 percent of their overall Medicaid spending in DSH payments are capped at the absolute dollars they received in 1993. For example, New Hampshire, which has over 50 percent of its entire Medicaid Program budget included in disproportionate share payments, is capped at a Federal disproportionate share payment of $196 million. As a result, according to CBO estimates, Federal Medicaid DSH payments increased slightly from $9.6 billion in 1993 to $9.8 billion in 1994. In fiscal year 1995, CBO projects that Federal DSH spending to drop to $8.5 billion, then increase by approximately half a billion dollars annually over the next 5 years. That is the good news. The Congress saw the problem. Congress acted. The actions tended to suture the hemorrhage. Now the bad news. Incredibly, Congress is prepared to reward and make permanent the raids made on the Federal treasury in the past. How was this done? This was accomplished in the dead of night on the Friday before Halloween in an amendment that trimmed the Federal reduction in Medicaid from $187 billion to $176 billion. Some of the winners and losers are well known by now. Approximately $11.2 billion in additional Medicaid dollars will be distributed to States with two Republican Senators over the next 7 years, in the Senate proposal, while States with two Democratic Senators will lose an additional $3.6 billion. That has been well reported. Less well known is the fact that States which have excessive Medicaid disproportionate share programs in the past are also the big winners. New Hampshire and Louisiana, the most renowned examples of excess, have special fixes in the Senate bill which allows those two States to not have to fully match the Federal funding they will receive over the next few years. Meanwhile, nine other States--Texas, Missouri, Connecticut, Kansas, Alabama, New Jersey, South Carolina, Tennessee, and Michigan--all which have disproportionate share programs that far exceed the national average and some that have been well documented as having schemed the Federal treasury in the past, those nine States will receive $14.8 billion in increased Medicaid funding over the next 7 years as a result of the late Friday evening deal, that currently would cap these ``high- DSH'' States' programs. The Senate Finance Committee bill would have cut off excessive disproportionate share payments above 9 percent of overall Medicaid Program costs. That was the bill that we had on the floor on that Friday before the late night raid which eliminated that constraint on the use of disproportionate share, and resulted in $14.8 billion flowing to those States that had been the primary abusers of the disproportionate share program. However, the late evening deal would allow these States to not only keep what they had in the past and make it permanent, but would also allow them to increase that money annually, based on the larger base year funding which the inclusion of their full disproportionate share amounts allowed them to have. Thus, the $14.8 billion windfall for nine high DSH States. The rest of the Nation's States--mostly low-DSH States--will lose another $3.6 billion from an amendment that added $10.2 billion to the Medicaid Program. This is a perverse Washington logic where spending is saving--where bad is good--and locking in the past is heralded as reform. But rewarding some States that had abused the disproportionate share of the hospital program was not enough bad policy for one night. The Friday night raid went on. The Senate made it worse by paying for these supplemental Medicaid allocations through mandating a 2.6 percent cost- of-living adjustment for 1996. Mr. President, I ask unanimous consent that a Washington Post editorial on this subject entitled ``Medipork'' printed on November 6 be printed in the Record at the conclusion of my remarks.

Mr. GRAHAM. Mr. President, under the Roth amendment that we adopted on that Friday night before Halloween, the money to fund the additional payments, largely to the States which had previously abused the Medicaid system, this money was found when the Government declared that the cost-of-living adjustment for 1996 would be 2.6 percent, which was lower than the 3.1 percent projected when the budget bills began moving through Congress last spring. The result of the lower cost-of-living factor, said proponents, would be lower outlays for programs tied to the Consumer Price Index such as Social Security. Mr. President, at first glance that sounds reasonable. Upon closer inspection, however, the logic fails, and it becomes clear that we have two choices. Either the funding is phony, nonexistent and, therefore, contributes to an additional deficit by spending funds without an equivalent additional source of revenue or--what I am afraid is the more likely alternative--a raid on the Social Security trust fund. In order to understand this, I want to briefly discuss how the Federal budget is scored. In March of this year, the Congress established an economic baseline. This baseline forecasts the level of Federal revenues and expenditures for the next 7 years predicated on current law and current and projected economic data. In making these economic projections, the Congressional Budget Office makes assumptions regarding a number of factors. The factors that are included in the assessment of the economic baseline include inflation, interest rates, number of qualified beneficiaries for the principal programs such as the number of beneficiaries for Social Security, the gross domestic product, revenues, and court decisions that might affect Federal policy. Those are some of the factors which are included in arriving at the economic baseline. From that baseline, the Congressional Budget Office can estimate the impact that changes in law will have on Federal revenues or expenditures. Almost 8 months have passed since the economic baseline was established. Some of the assumptions turned out to be too high; others too low. For example, inflation has been lower than expected. The gross domestic product has been slightly higher than expected. Interest rates have been higher than projected. Obviously, if the economic baseline was updated to reflect actual experience in the last 8 months, we would obtain a more accurate picture of our Federal income statement and balance sheet for the next 7 years. Mr. President, that was not what was done. Instead, we reached in and took just one economic factor--the fact that the Consumer Price Index increased only 2.6 percent and we require that legislation follow this monofactor directive. The Congressional Budget Office says it does not update its economic baseline unless it takes into account all economic and other factors--not just one. The reason? If it could pick and choose, then Congress would cherry pick the positive economic changes and ignore the negatives. The result would be a budget deficit much greater than anticipated because we had predicated [[Page S 16809]] our economic actions on unsound assumptions because the only economic changes unclaimed would be those generating higher outlays and lower revenues than expected. In fact, if on October 27 the Congressional Budget Office had taken all economic factors into account--gross domestic product, interest rate, court decisions affecting Federal obligations and inflation--the deficit in the year 2002 would have been higher than anticipated last March. We would not have had a $12 billion false figure to use to finance additional Medicaid payments. We would actually have had to find additional revenue because, taking into account all of those factors, the Congressional Budget Office would have said our deficit had grown--not diminished--since March. In other words, while the 1996 cost-of-living will be 2.6 percent rather than 3.1 percent resulting in $13 billion in lower outlays, this will be more than offset by other factors, such as higher interest rates, that increase outlays or decrease revenues. That is why some would say that the Senate's financing of the additional Medicaid funds is phony. That is why I asked Senator Domenici on the floor whether these savings were real or not. He responded, ``they are real dollars.'' And I assume that the Republicans intended that they use real money to finance their changes and to finance the additional spending through Medicaid. So assuming that these funds are not phony, where does this money come from? Let us look at the language of the Roth amendment which was adopted on that Friday night. Notwithstanding any other provision of law, in the case of any program within the jurisdiction of the Committee on Finance of the United States Senate which is adjusted for any increase in the consumer price index for all urban wage earners and clerical workers (CPI-W) for United States city average for all items, any such adjustment which takes effect during fiscal year 1996 shall be equal to 2.6 percent. Mr. President, this clearly specifies that the money comes from programs or outlays. Exactly what outlay programs are we talking about? Are we talking about the Pentagon, the Department of Defense outlays? No. Those are not under the jurisdiction of the Finance Committee. Are we talking about funding for roads and bridges? Are we talking about funding for foreign aid? No. Those programs are not under the jurisdiction of the Finance Committee. Just what outlays are within the jurisdiction of the Finance Committee? There happen to be a number of those programs. But I am afraid that I must report that the overwhelming majority of dollars in those programs--$12 billion of the $13 billion removed--is Social Security. So the only conclusion is that the Senate has taken $12 billion from the Social Security trust fund to pay for more Medicaid allocations to a selected few States--States which in large numbers had been those that had abused the Medicaid system in the past. How can that be, you ask? How can a half of 1-percent reduction in the CPI constitute a raid on the Social Security trust fund? Let us look more closely still. The Roth amendment takes into account only outlays impacted by the lower 2.6 percent cost-of-living adjustment. But there are other ramifications of the lower cost of living. For example, many workers' salaries are tied to the Consumer Price Index, and if those salaries only rise by 2.6 percent rather than the previous estimated 3.1 percent, then what happens to payroll? What happens to payroll taxes? They are both lower, and, therefore, less money will flow into the Social Security trust fund than would have flowed had the cost of living been at the earlier projected 3.1 percent. The correct question is not how will a lower cost of living impact Social Security outlays. The proper question is what is the net effect of all of the economic changes this year to the Social Security trust fund? The answer has two components: outlays, expenditures, and revenues. The Social Security outlays will be reduced by a total of $18 billion--$12 billion from the COLA reduction, the 2.6 percent, and $6 billion from other changes. But the economic data accumulated since March also will affect revenues going into the Social Security trust fund, and according to the Congressional Budget Office updating the economic baseline will result in a $62 billion decrease--decrease--in Social Security trust fund revenues over the next 7 years. Accordingly, the net effect to the Social Security trust fund of revising congressional economic estimates is not to increase the size of the trust fund but, rather, to decrease it by $44 billion. So if we want to face economic reality, the Social Security trust fund will have $44 billion less in it than our budget assumes. And while the Social Security trust fund is losing $44 billion as a result of economic changes since March, the Senate has approved diverting an additional $12 billion from the Social Security trust fund. It is difficult for me to believe that this Senate actually wants to raid the Social Security trust fund to pay for anything. Just yesterday, House Republicans were threatening to attach provisions to a limited debt ceiling extension that would have had the effect of precluding the Secretary of the Treasury from utilizing Social Security trust funds for anything other than Social Security obligations. I am afraid this sounds like selective enforcement. It is ironic that the House Republicans would be so concerned about the Social Security trust fund that they would tie Secretary of the Treasury Rubin's hands to preclude him from even borrowing from the trust fund, but at the same time the Senate Republicans seem quite willing to raid the Social Security trust fund to finance additional Medicaid allocations. We cannot have it both ways. If the reduction in the cost of living is not a real cut in spending but merely reflecting reality, then it does not represent savings and should not qualify to offset real new Medicaid spending. If, however, the reduction in the cost of living is real, then it constitutes a diversion of funds from the Social Security trust fund. Either conclusion justifies jettisoning this midnight amendment that changed the Medicaid funding formula, rewarding the States that abused the disproportionate share hospital program. Mr. President, I conclude by saying we should look instead for an alternative allocation solution, and I will present that alternative solution tomorrow and urge careful consideration of a better way to achieve our goal of fiscal responsibility and fairness. Thank you, Mr. President. Exhibit 1 [From the Washington Post, Nov. 7, 1995] Medicaid's Safety Net for Children Could Be Imperiled, Reports Warn Changes May Cut Coverage to Some if Parents Lose Private Insurance (By Spencer Rich) For years Medicaid has picked up the slack when children lost health insurance based on changes in their parents' employment situation, but that safety net could be weakened substantially by Medicaid changes moving rapidly through Congress, according to today's Journal of the American Medical Association. The result could be highly damaging to the health of children and also could eventually increase health costs per child, according to articles in the association journal. ``From 1992 to 1993 an estimated 3 million children lost private health insurance'' as people lost jobs or employers stopped providing health insurance, Paul Newacheck of the University of California and five co-authors said in one journal article. But until now, increases in Medicaid coverage, resulting from past legislation that broadened eligibility and from more people sinking into poverty and becoming eligible, ``largely offset the changes that occurred in private health insurance coverage,'' the authors said. Statistics developed by the Urban Institute for the Kaiser Commission on Medicaid support this assertion. In 1988, 66 percent of all children under age 18 had health insurance based on the employment of a family member, and 16 percent were covered by Medicaid. But in 1994, the share with employer-based insurance had dropped to 59 percent and the Medicaid percent had jumped to 26 percent. However, now that situation is about to end as Republican- sponsored Medicaid changes already approved by both chambers of Congress in different form impose a ``cap'' that would cut the growth of program spending from about 10 percent a year to 4 percent, and give states far more latitude than now in deciding whom to cover, Newacheck and his co-authors said. ``If federal spending is capped as proposed,'' they said, ``states, at a minimum, will have to reduce the scope of their existing Medicaid program'' and will be unable to keep [[Page S 16810]] picking up children who have lost employer-based coverage. Passage of the Medicaid proposals, said physician Stephen Berman in an editorial, would ``reduce the capacity of the public sector to absorb the increasing number of children losing private insurance [and] would swell the number of uninsured children.'' The impact of gaps in health insurance for children was sketched out in a third journal article, written by Michael D. Kogan of the Centers for Disease Control and Prevention and six others. The article did not address the current legislative proposals but reported on a nationally representative sample of 8,129 children whose mothers were interviewed in 1991 when the children were about 3 years old. Based on the survey, the article said, ``About one-quarter of U.S. children (22.6 percent) were without health insurance for at least one month during their first three years of life. Over half of these children had a health insurance gap of more than six months.'' About 40 percent of the children, estimated conservatively, did not receive care continuously at a single site--for example, the office of a family doctor--and breaks in insurance coverage are often the cause of sporadic medical care at this critical stage of physical development. ``Children are in particular need of primary care providers who can track developmental milestones, assure the maintenance of immunization and other health maintenance schedules, monitor abnormal conditions and serve as the first contact of care,'' wrote Kogan and his co-authors, especially in finding and treating ``emerging disabilities, chronic illnesses or birth defects'' and in providing preventive care. ``A schedule of routine primary care is much easier and usually more cost-effective when these activities are carried out in an organized manner over time with successive office visits at the same site,'' they said. Berman said, ``Having a regular source of care has been shown to reduce child expenditures by 21.7 percent compared with not having a regular source of care.'' Exhibit 2 [From the Washington Post, Nov. 6, 1995] Medipork When the current Congress set out on the path of turning the major programs for the poor into block grants, Sen. Daniel P. Moynihan (D-N.Y.) issued an interesting warning. Once Washington gives up on making policy and instead just ships off billions and billions to state governments, he said, politics will turn away from substance and instead become one big formula fight as states and regions battle over who will get the biggest pots of cash. His prediction has become fact, as a report in The Post by Judith Havermann and Helen Dewar documented last week. In the scramble to pass their budget, Republican leaders in the Senate found they had to pass around billions of extra dollars in Medicaid payments to states to buy the votes of-- pardon us, we mean secure the support of--Republican senators. It seems that many senators are worried about the impact of the Medicaid proposal on their state budgets. They should be. The pressure this budget puts on the program that serves the poor and many among the elderly and the disabled is simply too much. Facing potential rebellion, the leadership kept rejiggering the formula to please wavering senators. And given that the leadership knew it would have to find votes for its budget from Republican senators, guess what? The increases largely went to states represented by Republicans. The cuts were mostly reallocated to states with Democratic senators whose votes the leadership knew it couldn't win anyway. Thus, an analysis by Sen. Bob Graham (D-Fla.) found that states with two Democratic senators lost a net of $3.6 billion in the Medicaid reshuffling; states with two Republican senators gained $11.2 billion. Texas alone (with two Republican senators) gained about $5 billion; California (represented by two Democrats) lost $4 billion. Ginny Koops, a Senate Finance Committee aide, had it about right when she said: ``This formula will be redone again in conference and again and again. It is just incredibly difficult to come up with something that makes 5 states happy; somebody always complains.'' Ms. Koops' comment goes to the heart of what's wrong with his whole Medicaid approach: Of course many will keep complaining about the formulas of a so-called reform that dumps upon the states the responsibilities of running Medicaid and then asks them do do that job with huge cuts in the rate of expected growth in the program. Medicaid costs do need to be contained; the Republicans are right about that part. But this budget's approach to Medicaid will not only keep producing comical mathematical games; it will also cause real harm to the states and to the medical care of many among the most vulnerable Americans.

Mr. GRAHAM. Mr. President, on Friday of last week and again yesterday, I began a series of talks on the Medicaid Program. In my first discussion, I pointed out to the successes of Medicaid -- successes at reducing infant mortality by 21 percent in this Nation between 1984 and 1992. Yesterday, I discussed trends that have led to the growth in Medicaid spending. These included: demographic changes, including the fact that our population is living longer and that this greater longevity means more people are relying on Medicaid for longer periods; problematic changes that have expanded coverage to combat infant mortality among our Nation's children and to provide long-term care for our Nation's frail elderly and disabled; and the loss of private-sector health insurance, the fact that a shrinking percentage of America's children are insured through their parents' employer. This last point, Mr. President, was reaffirmed in today's Journal of the American Medical Association, which says that 3 million children lost private health insurance between 1992 and 1993. Mr. President, I ask unanimous consent that today's article in the Washington Post, entitled ``Medicaid's Safety Net for Children Could Be Imperiled,'' be printed in the Record at the conclusion of my remarks.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I ask unanimous consent I be allowed to proceed for up for 25 minutes.

Mr. GRAHAM. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, on Friday of last week, November 3, I began a series of remarks about America's Medicaid Program. I plan to continue that series throughout this week. In my opening remarks on Friday, I debunked the myth that Medicaid has been a failure. In fact, Medicaid, the Federal-State partnership for health care for poor children and their mothers, for the disabled and for the elderly, has been an American success story. The Senate should be building upon that success story, not retreating from it. Thanks to Medicaid, the Nation's infant mortality rate dropped 21 percent during the period 1984 to 1992. In 1985, the infant mortality rate in the United States was 10.6 per thousand live births. In 1992, that had dropped to 8.5. The number of babies who were alive in 1992 who would not have been alive had we continued at the 1985 rate of infant mortality--8,000. That is an American success story. Thanks to Medicaid, 18 million children have access to hospital, physician care, and to prescriptions as well as immunization and other preventive programs. Thanks to Medicaid, senior citizens can live in dignity in a nursing home when their own private resources are no longer there and there is no family member to care for them. Thanks to Medicaid, nearly 5 million low-income Americans receive help through the qualified Medicare Beneficiary Program which pays things like their part B, physician's Medicare monthly premiums, copayments, and deductibles as well as paying for prescription medication for the Medicare population, which is also medically indigent. For these qualified Medicare beneficiaries, Medicaid means the difference between a visit to the doctor's office instead of the use of the emergency room. Thanks to Medicaid, this Nation has decreased its population of severely handicapped residents living in large State institutions from 194,000 to today's less than 70,000. Today, 6 million disabled Americans are covered under Medicaid. Thanks to Medicaid, children with catastrophic health problems or other special needs get treatment and care. In Florida alone, $284 million is spent a year through Children's Medical Service, a Medicaid public-private partnership of national renown which last year served 128,000 Florida children. This Federal-State partnership, serving 37 million Americans, has been an American success story. I have strained my ears to hear the justification, the policy basis, the rationale for the $176 billion that is being cut from the projected needs of the Medicaid Program which, until $11 billion was added back at the last minute, had been a $187 billion cut. Today I wish to examine why Federal spending on Medicaid has increased. In addition, I wish to look at the basis for the projected needs of those served under Medicaid as America enters the 21st century. Why has Medicaid grown? Why is Medicaid expected to continue to grow? Such an examination will debunk yet another myth. That myth is that you can cut $176 billion from Medicaid without risking the deaths of infants or the neglect of the elderly or the unnecessary institutionalization of the disabled. Wednesday and Thursday I wish to discuss how the Senate proposes to reward bad, manipulative behavior in the Medicaid Program and how the inappropriate plan to raid Social Security will be used as a means of paying for the reward in the plan that we sent to Congress. And, finally, I wish to suggest a better alternative, an alternative of genuine reform. The key argument against Medicaid is that they say Medicaid needs to rein in spending because it is growing out of control. That is the principal argument of the critics. Let us look at the overall figures. In 1988, Medicaid cost $51.3 billion in Federal and State funds. We know the Medicaid Program is a partnership between the Federal Government and the States, each contributing to the total cost. In 1993, Medicaid costs had grown to $125.2 billion. That sounds alarming, and virtually everyone agrees we must restrain the rate of growth of Medicaid. But no one has done a very credible job of explaining the policy basis for cutting $176 billion. Today I wish to examine why Medicaid has grown. There are two main factors that drive the cost of the health care system. First, how many people are served, and, second, the cost of serving each one of those people. In the case of Medicaid, we should put the second factor, that is, the cost of providing services to individual Americans who are covered under Medicaid, in perspective. In the private sector, the growth rate and the cost per person served is estimated to be 7.1 percent per year. That is projected from the years 1996 [[Page S 16718]] through the year 2002. The source of this projection is the Congressional Budget Office. This is higher than the projected growth rate for Medicaid, says the same Congressional Budget Office, which calculates that the Medicaid annual growth rate is 7 percent. What is, therefore, causing this alarming growth in Medicaid? The rate of growth per person is commensurate with, even less than, the average of all Americans' health care cost increases, that in spite of the fact that Medicaid is serving one of the most vulnerable populations--the frail elderly, the disabled, poor children, and their mothers. There are several key factors that explain why Medicaid has grown so rapidly. First, a fundamental reason why Medicaid has grown is because Americans are living longer. This is a positive trend for America. Greater longevity means that more people are not only living longer and more qualitative lives, but it also means that more people are relying on Medicaid for longer periods. In 1970, life expectancy at birth in the United States was just over 70 years. By the year 2010, the projected life expectancy in the United States will be almost 80 years. In a period of 40 years, the average life expectancy of an American will grow from 70 to 80. The segment of our population 65 years and older is also living longer, much longer. If you had reached age 65 at the beginning of this century, you could have expected to have lived another 11 years. Those who reached 65 in 1990 could expect to live an average of an additional 17.2 years, according to the U.S. census. Millions of Americans are living longer, and a higher proportion of our population is reaching senior status. In 1900, about 40 percent of the population could expect to reach the age of 65. By 1990, 8 out of 10 Americans lived to be 65 years or older. Why is this relevant? It is relevant because Medicaid pays for half of the total nursing home care in the United States. Nationally, Medicaid pays 35 percent of all long-term care services. In Florida, 70 percent of our Medicaid spending goes to benefits for seniors and disabled. Mr. President, let me just insert one more set of statistics to underscore the fact that a principal reason why Medicaid is expanding in its expenditures is because Americans are extending their life expectancy. In 1980, 15 years ago, there were 15,000 Americans over the age of 100. By 1990, that population had nearly doubled. Today, in 1995, there are 56,000 Americans of the age of 100 or older. No one can deny this longevity trend, not Democrats, not Republicans. So when we hear claims about the growth of Medicaid, let us remember one of the fundamental reasons for that growth, thankfully, is as a people we are enjoying the benefits of longer life. In addition to the aging of our population, there is a second main reason for the growth in Medicaid spending, and that is we have asked the Medicaid system to do more. As an example, we have tackled the infant mortality rate, which was unacceptably high. In my State of Florida in 1991, at the urging of Gov. Lawton Chiles, the Florida Legislature enacted Healthy Start to improve access to prenatal and infant care. As I mentioned in my floor statement on Friday, Healthy Start is an example of a Medicaid success story. In 5 years, Florida went from being above the national average in infant mortality, with an infant mortality rate of 9.6 per thousand live births, to below the national average, at a rate of 8.1 per thousand live births, and the most recent Florida statistic shows that rate continues to fall and is now 7.6 infant deaths per thousand live births. Nationally, the infant mortality rate has declined from 10.6 per thousand live births in 1985 to 8.5 in 1992. By providing prenatal and postnatal care, we are saving lives, and we are confident that costly medical services will be prevented in later years. Mr. President, I would like to take just a moment to recall one of the giants of this institution who represented senior citizens across America, the late Hon. Claude Pepper, a Member of the U.S. Senate from 1937 to 1951 and later served a distinguished career in the U.S. House of Representatives. When I was elected Governor of Florida in 1978, Senator Pepper, then serving in the U.S. House of Representatives, made one request of me. He asked me to expand the Medicaid program in Florida to cover an optional two services: eyeglasses and artificial limbs. I am proud that one of my first acts as Governor was to sign legislation, inspired by Senator Pepper, to achieve these goals. Senator Pepper said there were too many poor seniors without vision and without limbs. So, yes, Senator Pepper, we have expanded Medicaid so frail seniors can read and walk. I challenge those who would cut $176 billion to tell us if they are ready to dismantle this legacy of Senator Claude Pepper, if they are ready to take away the eyeglasses of poor seniors, if they are ready to deny coverage of artificial limbs or return to the infant mortality rates of yesterday. There is a third reason, in addition to the aging of the population and the additional demands that we have asked of the Medicaid program, and that is that there have been expansions that we have made legislatively. There are, in addition, more and more children who used to get health coverage through their parents' jobs who have now lost their private sector insurance. Consider this trend line, Mr. President. In 1977, the Census Bureau says that the proportion of children with private health insurance coverage was 71 percent; 71 percent of American children had health insurance coverage through private coverage primarily through their parents' place of employment. By 1987, that percentage had dropped to 63 percent; by 1993, to 57 percent; and the projection for the year 2002, which happens to be the seventh year of the budget plan upon which we are currently deliberating, is that it will be 47.6 percent. Less than half of the American children will be covered by insurance at the point of their parents' employment. The cumulative result of these factors--the aging of the population, the increased expectations of Medicaid and the decline of the percentage of children covered by private insurance plans and, therefore, who are now eligible for and are being covered by Medicaid-- has contributed to the expansion of the Medicaid program. In my State of Florida, as an example, in 1970, shortly after Medicaid was available, 4.3 percent of Florida's population received Medicaid, those recipients who are eligible for Medicaid based on those who were eligible for aid to families with dependent children or supplemental security income. You had to be at one of those two classes in order to be eligible for Medicaid. The percentage of Floridians receiving Medicaid was fairly constant, in the range of 4 to 6 percent, from its inception in 1970 until the program began its expansion in the mid-1980's. By the 1993 fiscal year, 11.6 percent of Floridians were eligible for Medicaid. Today, that has grown to 12 percent, compared to the national figure of 14 percent of Americans being covered by the Medicaid Program. In sum, the percentage of Floridians eligible for Medicaid has nearly tripled since the program started a quarter of a century ago. It has tripled primarily because of the aging of the population, because of policy decisions, such as the decision to attack infant mortality, and by the dramatic decline in children covered by private insurance programs and, therefore, becoming eligible for Medicaid and receiving benefits through that program. Before I move on to my next point, I want to underscore that there are also some adverse reasons why Medicaid is growing. First, we must do a better job of suppressing fraud. Our colleague from Maine, Senator Cohen, estimates that Medicare and Medicaid suffer a combined loss of $33 billion a year due to fraud and abuse. At last week's hearing before the Senate Select Committee on Aging, the senior Senator from Maine said something that we all know is true. Senator Cohen said: ``It is appallingly easy to commit health care fraud.'' In Florida, the Florida Supreme Court has just impaneled a grand jury for a year as part of our attack on Medicaid fraud. In addition to fraud and abuse, there is another adverse reason why Medicaid is expanding. There has been abuse [[Page S 16719]] in the provision known as disproportionate share hospitals, sometimes referred to by the acronym DSH. Today, one out of seven Medicaid dollars is spent on disproportionate share hospitals. The proposal that this Senate adopted 11 days ago will make those payments virtually permanent within our Medicaid system. I will talk more about this phenomenon on Wednesday. Mr. President, having discussed some of the principal reasons why the Medicaid Program has grown dramatically over the last few years, let us now talk about the basis of projections for Medicaid. We are being asked to cut $176 billion from Medicaid's projection over the next 7 years. What is the medical rationale for the $176 billion cut? What is the policy rationale? Mr. President, I have been seeking a good answer to those questions, and until I get one, I will have to assume that there is no sound rationale for $176 billion of cuts in Medicaid. I will have to assume that there are other reasons and that those reasons are to fund huge tax breaks, which will go, disproportionately, to the wealthiest Americans. Mr. President, we are not at a loss because our experts, the Congressional Budget Office, has looked ahead. It has projected an annual rate of increase for Medicaid spending at 10.2 percent through the year 2002. How did CBO arrive at that figure? The key factors driving the CBO projections were these: About 45 percent of the CBO-projected increases over the 7-year period are due to additional caseload; 45 percent of the reason why Medicaid is supposed to grow is because it will serve an increasing number of Americans--basically, the same Americans that have led to its growth in the last 10 years, the increasingly elderly population in need of nursing home care, the number of poor children who no longer have health insurance at the point of their parent's employment, and through policy directions to attack the issue of infant mortality. Do those who want to cut $176 billion from the Medicaid dispute this projection? Do they claim that we will be serving fewer people? If so, who will we not be serving? Shall we say to that frail senior citizen with poor eyesight who needs glasses that their glasses should be taken away? Will their neighbor who needs an artificial limb be denied? Will the preschooler who needs to be immunized tell us who will not be covered so that we can pay for the tax breaks? Medicaid serves multiple clienteles. One of the most costly groups served by Medicaid is the disabled. The chronically ill cost at least seven times what it costs to provide for nondisabled children per year. It costs the Medicaid Program seven times per person to serve a disabled person than it does the poor child. CBO says the projected rate of growth in the number of disabled children to be served is expected to rise 4.1 percent a year, which is higher than the growth rate for all other Medicaid categories. The most expensive category of Medicaid service is the category that is growing the most rapidly. Do those who want to cut $176 billion for Medicaid suggest that the needs of the numbers of the disabled will not grow at this rate? If they have some basis for that, we look forward to them presenting that to us. A second reason for the projection of Medicaid increase is that some 30 percent of the projected increase in Medicaid outlays would be caused by increased costs, including national medical inflation--a factor that no individual State can control. Mr. President, one of the independent expert groups that has explored these tough questions of the future of Medicaid is the Kaiser Commission on the future of Medicaid. The Kaiser Commission issued a report in May 1995 based on Congressional Budget Office data that indicates what Medicaid will look like in the year 2002. The report assumes that States would first do the following things in order to achieve savings: They would enroll individuals in managed care plans; they would reduce provider payment rates; they would cut optional services. The States would do all of those before they would take the next step, which is to reduce enrollment in the program. Based on these assumptions--enrolling individuals in managed care, reducing provider payment rates, and cutting optional services--Kaiser has projected the changes in covered beneficiaries. Under the most optimistic scenario, States would somehow reduce growth in spending per beneficiary to the rate of overall inflation. Under another slightly less optimistic scenario, States would reduce real spending to the rate of inflation plus 1.9 percent per year per beneficiary. That number happens to be half the historical rate of growth for Medicaid. Either way, cost control would be more successful than that achieved by the private sector or by any public program, Mr. President, including the program that we have adopted for Federal employees. We are asking Medicaid, under these two scenarios, to be significantly more efficient than either the private sector or the public sector, including the judgment that we have made about our own health insurance program. Even with such a faith in State government's ability to cut health care costs, let us look at what we can expect in just one State-- California. What will the Medicaid landscape look like in the year 2002 in the largest of America's States? California is currently projected to receive $95.7 billion in Medicaid funds from the Federal Government between the years 1996 and the year 2002. The Senate reconciliation bill would limit California to $77.7 billion, which is an $18 billion reduction over that 7-year period. In the year 2002 alone, California would have been expected to have received $18 billion. The Senate bill would limit California to $13.1 billion, a $4.9 billion reduction from current projections of need in the 1 year of 2002. Now, let us make some assumptions. Assume that California holds expenditure growth to inflation--a remarkable achievement. Having done so, and having also met the other assumptions, including moving all of those potentially into managed care and reducing the rates to providers, California would have to remove 320,548 people from the expected 6\1/2\ million Medicaid beneficiaries; 320,000 people would be removed from the Medicaid rolls. Suppose California was not quite as successful, and instead of being able to hold health care costs to the rate of inflation, California was able to hold health care costs to the rate of inflation plus 1.9 percent. In that event, California would have to remove 1,065,823 of its 6\1/2\ million Medicaid beneficiaries. Are we saying that in the year 2002, assuming that California has done a better job of reducing costs than the private sector, the public sector, including the Federal Government, that we are willing to allow between a third of a million to over 1 million people to lose their health care coverage in the year 2002 in the State of California? What happens if California is not able to reduce its costs? Is the Governor of California ready to accept responsibility for allowing perhaps millions of our country's most needy people to go without health care coverage? Mr. President, my comments this morning boil down to some simple mathematics. Take the projected need in the Medicaid Program to the year 2002, which is $954 billion, and then subtract the amount of the proposed cuts, $176 billion; that amount of money that is left, $778 billion is now going to pay for $954 billion in projected needs. Mr. President, the simple math tells us that the block grants will come up short, that they do not add up, that States will not have a sufficient amount of resources in order to meet the projected needs of the frail elderly, the disabled, poor children, and their mothers. This brings me, perhaps, to the most repugnant feature of the Medicaid block grant proposal--the unmitigated cowardice of Congress for failing to admit, on the record, that these cuts will mean real suffering in the lives of real Americans. It is as if the U.S. Senate has adopted a policy of ``Don't ask, don't care.'' The fact is, Mr. President, that the designers of these massive Medicaid cuts do not want to know who is really going to have to pay for the tax breaks that this $176 billion will, in part, fund. Leave those messy details to the States. Take the high road. Take the cake and ice cream of doling out $245 billion in tax breaks. The truth is that the price for these tax breaks for the wealthy will be paid [[Page S 16720]] for in the currency of suffering, preventable illness, inadequate or unavailable care, and, yes, even the death of infants. What we saw orchestrated on the Senate floor 11 days ago was an elaborate ritual of plausible deniability. No hearings or debate on how many infants could die because of slackened prenatal care efforts. No hearings or debate on how many elderly will languish in nursing home warehouses because of deregulation and lower provider payments. Mr. President, that is precisely what happened when the 20 hours of debate ran out on a 1,500-page bill with no discussion, no accountability, no honest admission that cutting $176 billion from the projected needs of human beings that millions of Americans would suffer. In effect, the Senate sent to the States and county governments the dirty work, the painful decisions. That is what we do when we embrace the don't-ask, don't-care standard for the formulation of public policy. Mr. President, I ask unanimous consent for an additional 2 minutes.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, it is with deep sadness and great respect that I offer my profound tribute to the memory of Prime Minister Yitzhak Rabin of Israel. Mr. Rabin was a warrior, brave in battle. He was a visionary, with the courage to seek peace. This Nation and this institution will miss him and his leadership. We will mourn with Israel in its time of loss. Citizens of my State of Florida are honored that Yitzhak Rabin visited our State on many occasions. We were proud to host a man of such dignity, purpose, and resolve. And we join the world in prayer for healing as this great man was buried yesterday near the place of his birth 73 years ago. We extend our deepest sympathy to his family, but we rejoice in the life of this special man, who has earned the biblical truth, ``Blessed are the peacemakers.''

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I ask unanimous consent that my time, which is currently 20 minutes, be extended to 30 minutes as I wish to make a preliminary statement relative to Prime Minister Rabin.

Mr. GRAHAM. Thank you, Mr. President.