[00:00] Bryan Hyde: Welcome to the Health Policy Podcast. I'm Bryan Hyde. I'm joined today by Robert E. Moffitt, PhD. He is a senior research fellow for the Grover M. Herman Center for the Federal Budget at the Heritage Foundation. And Dr. Moffitt, wonderful to have you on the program. [00:16] Robert E. Moffit, PhD: It's great to be with you, yes. [00:18] Bryan Hyde: Would you mind just taking a moment to just kind of give us an idea about who you are and what you do? And then we have a very relevant and timely topic to explore. [00:27] Robert E. Moffit, PhD: Yes. I am the senior research fellow at the Heritage Foundation. I specialize in health policy. My heaviest concentration, however, is on Medicare and Medicare Advantage, Medicare payment, physician payment, and so on. I have been at Heritage now for close to 35 years. I came out of the Reagan administration. During the Reagan administration, I was the Principal Deputy Assistant Secretary for Legislation at the Department of Health and Human Services. My job at that point was to deal directly with the leadership, the congressional leadership on Capitol Hill. We had some great men, as you know, back in those days. Tip O'Neill was Speaker of the House. George Mitchell from Maine was the Senate Majority Leader. Robert Dole. But anyway, I used to deal primarily with the House Ways and Means Committee, which has jurisdiction over the Medicare program, and also the Senate Finance Committee. So I worked at Herodotus— I worked at, uh, in the Reagan administration for about 4 years, again heavily concentrated on health policy in that job because that was the biggest item facing us at that time, as it is today. And before that, I was a Assistant Director for Congressional Relations at the United States Office of Personnel Management, which is the agency that administers the federal laws, rules, and regulations that govern federal civil service. It is also, by the way, Brian, that's an important point, it is also the agency that administers the rather popular and successful Federal Employee Health Benefits Program, which is the largest group health insurance program in the world. It is a system of competing of the Office of Personnel Management, and it covers about 8 million federal employees and retirees and their families. So that was my background. It's been very heavily concentrated on health policy. Um, so from the Reagan administration on to Heritage, I basically had a continuity. I have testified frequently before congressional committees. Particularly Senate Finance, House Ways and Means, the Senate Aging Committee, primarily in this area. So that's my background, basically. [02:58] Bryan Hyde: Safe to say you understand the inner workings of, you know, how Congress handles particularly Medicare and Medicaid. And I'm looking at an article of yours published on The Federalist, "Ending Fraud Is Great, But It's Not Enough to Fix Medicare Insolvency." And I have to say, my first reaction is, you know, I was so excited, you know, when the DOJ program was unveiled last year, and I was a little disheartened at the amount of fraud that was uncovered. But let's talk a little bit about Medicare and Medicaid and give us some perspective. When we talk about, you know, the amount of federal spending that's going on, how much of that spending can be accounted for just in those two programs? [03:40] Robert E. Moffit, PhD: Oh, Well, I mean, with Medicare and Medicaid together today, we are spending about $2 trillion on both of those programs. That's federal spending. At the state level, of course, Medicaid is also being financed, you know, at the state level. So you're talking about an enormous expenditure by the federal government on the two largest of the government's healthcare programs. Programs. They're both very, very different programs, as you know. Medicaid is basically a program focused on the poorest and the most vulnerable among us, people who are disabled, young women and children who oftentimes are very, very poor, and recently with the Affordable Care Act, a subset of adults is covered under that program based on their eligibility because of their income, their low income. Medicare, on the other hand, is enormous. It's now— oh gosh, it's about 69 million people. And within the next 20 years, it's going to go well over 80 million. And with that, with Medicare, we're spending $1.1 trillion today on Medicare alone. Uh, within the next 10 years, uh, we will be spending up to about $2.4 trillion. So it's going to be more than double, uh, the spending. Uh, the challenge that we're faced with is we're— how, how is it that we are going to basically provide high-quality healthcare for a very large, large and growing number of older Americans and at the same time maintain some kind of economic stability for younger Americans because the tax burdens are going to absolutely zoom into the stratosphere over time. That's not my opinion. That is the view of almost every economist in the city. This is not a liberal or a conservative point of view. We all know, all of us, all the adults in the room know that we are faced with an enormous budget issue, an enormous debt issue, and the deficits and debt, one of the big contributors of deficits and debt are federal entitlements. And of the federal entitlements, Medicare is the most challenging because it's not just simply a matter like Social Security of money. It's, you know, money going from one account to another. It is also the provision of high-quality healthcare in a rapidly changing medical environment. And what I mean by that is, as you know, Brian, you can't pick up the newspaper any day of the week without reading about some kind of a breakthrough by biomedical researchers into the human condition. That is to say, you know, some genetic development or some breakthrough in medication or whatever, but also advanced medical technologies. They are— they are becoming— they are remarkable. And the problem is for us, and I'm talking about myself because I'm in this age category, is that the per capita cost of providing care to every single Medicare beneficiary is going up, not simply because of the fact that they're old. Of course, the older spent— spending on older people is much higher than it is on people younger. But the point is, it's also the fact that the cost of delivering care on a per capita basis is also very significantly increasing because of the advancing medical technology that we have access to. You know, it's remarkable. Now, this is a good thing. I mean, God knows how many of us— I mean, how many people in your listening audience would not be alive today if it were not for breakthrough medications, especially in areas like cardiology, right? Or medical technologies or advanced diagnostic technologies, which have basically done away with, you know, something that sounds today positively medieval, like exploratory surgery, right? I mean, it used to be the way people found out what was going on inside of you. [08:31] Bryan Hyde: Mm-hmm. Right. [08:32] Robert E. Moffit, PhD: Because the X-rays were not good enough. So I mean, when you have an MRI or a PET scan or a CAT scan, but that technology also is advancing at level, you're starting to see advances in that area. So what the point is, all this is good, but it's profoundly expensive. And it also means that we are going to have bigger deficits Those deficits contribute year by year to larger and larger unfunded liabilities in the Medicare program. The most recent number was, I think I quoted it, it was something like 60— The unfunded liabilities, in other words, what that means, I hope I don't go too fast here, but the unfunded liabilities of the Medicare program, the way it is calculated by the Medicare trustees is the dollar amount of benefits that we have already promised in current law to senior citizens over the next 75 years. Well, that comes down to $60 trillion. [09:46] Bryan Hyde: Wow. [09:46] Robert E. Moffit, PhD: And what that means is that for today, uh, that is $179,000 $1,000 for each person living and breathing in the United States. And in the article that you referenced, I said what this really means is that for Gen Z, the kids in their 20s, they're going to get hit by a fiscal freight train. And that's the way it is. I mean, it's, you know, you can't repeal the laws of gravity. This is what we are faced with. And it's going to be a big, big hit. Mm-hmm. Big challenge. [10:22] Bryan Hyde: Talk to me a little bit about what ties Congress's hands when it comes to managing this kind of spending. I know you mentioned the entitlement spending, but these are promises. This is not part of the budgetary discussion, right? I mean, these are things that it's like, nope, this money has to be paid no matter what because it's promised. [10:42] Robert E. Moffit, PhD: Well, that's right. Basically, in the authorizing legislation for Medicare in particular, and Social Security, and another— a number of other entitlements. It is what is called mandatory spending. What that means is the Congress authorized the automatic payment for benefits under the system without going through the normal appropriations process. So we don't have a debate each year on how much, you know, whether we're going to spend $1.1 or $1.2 trillion dollars on Medicare. That's not— that debate doesn't happen. The appropriations process has nothing to do with that. So this is kind of like— we would say it's kind of off-budget spending in a way. Well, let me put it this way. That's probably not the best way to describe it. It is something that is not subject to the annual appropriations process of the House and Senate. It's automatic spending. It's built in. To the federal budget. So it's a given, and that's the way Congress set it up. Now, Congress doesn't have to do that. I'm not recommending that they change that, and that's my own view. I mean, but the reality is, is that if you take Medicare and Medicaid and Social Security and the interest on the debt, which by the way now is another trillion dollars, All of this is not subject to congressional determinations. [12:14] Bryan Hyde: Wow. [12:14] Robert E. Moffit, PhD: This is all automatic spending. We basically pay the bills automatically under current law. And you're— the question you asked is, why do not members of Congress address these things normally the way they address other kinds of appropriations? One is, is that they basically decided a long time ago that this spending was going to be authorized as automatic spending. And that's very convenient. The second thing is, and this is not a pleasant point, but the second thing about this is that in this area, I— and I know so much about this because I've experienced it— and the belly of the beast. This issue stimulates profound fear among members of the House and Senate because it's big, it's complex. They're very, very— it's an area of public policy where the law of unintended consequences can go berserk. You think you're doing a good thing and it has an unintended consequence that is damaging in some way. And this is an area of public policy where if you make the wrong decision in an amendment or a change in a provision of a law, people can get physically hurt. So this is— this is one thing. The second thing is, It's easy to demagogue. I mean, I got to— I mean, I very rarely agree with the editorial board of The Washington Post, but God bless them for publishing, you know, more than one editorial on the issue that they have labeled meta-scare, which is this tactic of scaring senior citizens to death because somebody wants to make some kind of innovative change in the financing or the delivery of medical care under the Medicare reform system, Medicare program. And it's easy to demagogue. My— I have this sharp recollection of the 2012 election where they had a character that there was a political advertisement where there was a character of a young man in a dark blue suit pushing an elderly lady in a wheelchair and pushing her off a cliff. And the young man was supposed to be Paul Ryan— Mm-hmm. —who was the young Speaker of the House. And the argument was, you know, basically, this is the kind of thing that Paul Ryan would do to elderly people if he got his way. On making Medicare reform changes. That's a problem. I mean, this is a— it's easy to demagogue too, because again, you're talking about a population where most of them are not wealthy. They're wealthier than they've ever been before, but they're not wealthy. They're not working. Financially, they're on fixed incomes. And they're insecure and they get very nervous if somebody, even if that person wants to do, even if some member of the Senate or the House wants to do something that is very positive for them, they're very, very hesitant to endorse whatever it is. And it's easy to demagogue. I will, I'll tell you a little story, Bryan. I don't wanna waste too much time here on this, I remember back in 1986, I was working in congressional relations for President Reagan. And back in 1986, President Reagan proposed the addition of a prescription drug program. Oh, pardon me, no, it wasn't the prescription drug program, sorry. It was the addition of a catastrophic benefit to people in traditional Medicare. The argument that President Reagan made was that in traditional Medicare— in fact, this is true to this very day— that if you sign up for traditional Medicare Part A and Part B, you have got very, very good coverage, but there is no cap on— in the government program, there is no cap on your out-of-pocket expenses. So if you get sick and it costs $100,000, $200,000, $300,000 or more, you're vulnerable. So you have to buy separate coverage. You have to buy some kind of a private supplemental coverage plan in the private sector, pay another whole premium to protect yourself against the devastation, the financial devastation of catastrophic illness. Well, Brian, President Reagan proposed that in 1986. It is a big deficiency in the current Medicare program. To this day, we do not have a catastrophic benefit in traditional Medicare. Reagan thought this was insane and felt that, you know, this denied senior citizens peace of mind at a time when they should have it in their retirement. Well, anyway, he proposed a catastrophic benefit, uh, and the story is, uh, when they went to the House and the Senate, the Democrats decided to take the opportunity to take the catastrophic bill and load it up with a whole bunch of other provisions, including a prescription drug benefit, which would add to the cost of the program. And it became so top-heavy that the Congressional Budget Office, within a year of it passing the House and Senate, the Congressional Budget Office reported to the Congress that it was not financially sustainable. And Congress ended up repealing the Medicare Catastrophic Act. [18:52] Bryan Hyde: Mm-hmm. [18:53] Robert E. Moffit, PhD: So this is a classic example of an unintended consequence. I'm sure the Democrats, I mean, I was dealing with them. I'm sure they felt that they were doing the right thing, but they just simply could not help themselves. They wanted to spend more and more and add more and more benefits. And what became, you know, the very specific targeted catastrophic benefit that the president proposed had become a Christmas tree, and it basically fell of its own fiscal weight. It became so heavy it could not sustain itself. And Congress had to repeal it because senior citizens were also being faced with costs that they never anticipated when the Democrats added all those benefits. So, you know, that's kind of a chapter in this long history of why Congress has a hard time dealing with Medicare. [19:49] Bryan Hyde: We're only, we're down to just a couple of minutes left in our segment here, but no, I just, I have to ask you, I mean, you've painted the picture very well. The problem is real. It's, you know, our hands are tied isn't gonna be an excuse that will last forever. How can both parties fix the broken incentives? How can they slow the growth of, of these costs? [20:13] Robert E. Moffit, PhD: Well, there has to come, you know, I was going to say there has to be a come-to-Jesus moment, uh, among the leadership of the House and Senate. And I'll be honest with you, I mean, the environment right now is actually very, very difficult because of the hostility, the polarization. We have a poisonous polarization in our country today that we did not have during the Reagan years when Ronald Reagan and Tip O'Neill basically got together to save Social Security. People forget that. Big Social Security reform took place back in the 1980s because Tip O'Neill, a great Speaker of the House, the leader of the Democrats in Congress, and Ronald Reagan struck an agreement to make changes to keep Social Security solvent for an up— A long time. Up till now, basically. We've gotta do it again. This is going to require something that is vitally, it's really critical. And that is, it's going to require some people who are leaders in the House and Senate who put the country above their party and who believe in statesmanship, meaning that they're going to legislate for the next generation, not just the next electoral season, and come to agree to come together and have a bipartisan set of very targeted solutions that will slow the growth of Medicare spending. In my view, they have to make the financing of the Medicare program far more efficient than it is today. And at the same time improve the delivery of care by reducing the god-awful paperwork rules, the tens of thousands of pages of rules and regulations and guidelines that we impose on doctors, hospitals, health agencies, home health agencies, hospice organizations, you name it, uh, doctors and nurses and various medical professionals. So much of— there is so much waste in the system that we could cure, in my view, by injecting some very, very stiff doses of free market principles of consumer choice and competition that would reduce the power of the middlemen in this system. [22:47] Bryan Hyde: I appreciate your explanations today. Again, we're talking with Robert E. Moffitt, PhD. He's a senior research fellow for the Grover M. Herman Center for the Federal Budget at the Heritage Foundation. Thank you once again for joining us on the Health Policy Podcast. [23:01] Robert E. Moffit, PhD: Thank you very much, Brian, for having me. It's a pleasure.