Transcript: Super Committee Co-Chair Rep. Jeb Hensarling’s Q&A on previous debt proposals

Joint Select Committee on Deficit Reduction Hearing: Overview of Previous Debt Proposals on Nov. 1, 2011

Transcript of Committee Co-Chair Rep. Jeb Hensarling’s (R-TX) Question and Answer Session: 

Rep. Jeb Hensarling (R-TX), Co-Chair of the Joint Select Committee on Deficit Reduction. IMAGE SOURCE: DeficitReduction.gov

Rep. Jeb Hensarling (R-TX): 

“I believe one of the things I’ve heard from all of the panelists – and I’ve certainly heard the revenue message and we will go back to that. But I think I heard -particularly you – Sen. Domenici say that the number one challenge that we have with respect to our debt is health care. Is that correct? And I think, Mr. Bowles, I heard you say something similarly. Is there a consensus among the panel that the number one challenge we face in our structural debt crisis is health care? No one’s diverting from that? Dr. Rivlin, I’ve got a question then for you… Yes, Sen. Domenici?”

Former Sen. Pete Domenici (R-NM): 

“Mr. Chairman, I just wanted to ask if they would put up the chart. It’s very explicit on this – you cannot miss it.”

Rep. Jeb Hensarling: 

“If you have a number for me, I’d be glad to have the staff put it up… I bet you somebody enterprising will be able to find that…’Wake up folks, it’s health care.’ That appears to be how you’ve titled your slide, if the staff can pull that one up please.”

Sen. Pete Domenici: 

Bipartisan Policy Center's chart on comparing Medicare, Social Security, discretionary, and mandatory spending projections. IMAGE SOURCE: DeficitReduction.gov

“These various governmental functions versus GDP. And look which one – that blue line up there – that’s health care. Look at this. The lines underneath – those are big ticket items that people think. Look at what’s happening to health care. I’m going to give you a word. If we do not produce a plan that would permit CBO to say that the [health care] line has been bent, if that isn’t in the plan then you have not caused in a major way a reform of health care. Because if that line keeps going that way, you have solved nothing. So it must start to bend some place…”

Rep. Jeb Hensarling: 

“You’re not speaking of simply slowing the rate of growth. You’re talking about a plan that actually bends the cost curve.”

Sen. Pete Domenici: 

“That’s correct and that’s what we do.”

Rep. Jeb Hensarling: 

“Dr. Rivlin, having the honor and actually pleasure of serving with you and Sen. Simpson and Mr. Bowles on President Obama’s Fiscal Responsibility Commission, I was somewhat familiar with your plan with House Budget Committee Chairman Paul Ryan [R-WI] on Medicare premium support system. You now have – what I believe – you’ve called a ‘defined support system.’ And as I was listening to your testimony, it includes an aspect of maintaining some facet of the current fee-for-service aspect Medicare. But could you tell me why this form of defined support system is critical to saving us from the national debt crisis and how does it differ from your earlier premium support plan with Chairman Ryan?”

Dr. Alice Rivlin:

“I think it differs in several respects. The most important one is the one you noted – that it preserves traditional Medicare for anyone who wants it, and I think that’s important. It’s important to seniors, and it’s important to have – and you should forgive the expression – a public option. But in addition to traditional Medicare, it sets up Medicare exchanges where seniors would choose among an array of plans that provided at least the same benefits as Medicare and competed with each other and with traditional Medicare to produce them in the most cost-effective way. We believe that that would control the cost, that the cost would go up much less rapidly, and that would be part of bending the curve, as the Senator says. We have, however, a fail-safe mechanism in there. If the competition does not result in bending the curve enough, we would say ‘defined support’ – the federal contribution – would not go up faster than the GDP growth plus 1%. And if it did, then there would be additional premiums for those choosing the more expensive plans, but those premiums would not apply to low-income people. That’s the plan in a nut-shell.”

Rep. Jeb Hensarling: 

“Thank you. Question for you, Mr. Bowles and and Sen. Simpson. And again, it was both an honor and a pleasure to serve on your commission. I again want to say that you’ve contributed mightily to the nation’s consciousness, and I hope that whatever success that this Joint Select Committee achieves part of it will certainly be on your shoulders and your previous good work.

“Let me ask this question having served alongside you all. There was much great work that was done on the commission. One of my personal reservations was that the commission did not adopt the Rivlin-Ryan premium support plan. I thought the work particularly in Social Security – if I have time I want to go back – to how, what you’d do on a 75-year solvency? But on Medicare, which is really a larger long-term challenge, we seemed on the commission to apply much smaller short-term reforms. You did put the 1% plus GDP cap – if I recall right – on the total health care spending with a trigger of expedited procedures – if I recall right – to go to both bodies to fix the problem, but it wasn’t a hard trigger. So two questions: Do you believe in the ‘defined support’ system policy that was just articulated by Sen. Domenici and Dr. Rivlin? And if you do, why didn’t we adopt something like that in Simpson-Bowles? I’d assume either one, you didn’t like the policy or two, you didn’t have the votes. Or maybe there’s a third option.”

Erskine Bowles: 

“Probably both. What we tried to do was to look at it on a realistic basis. If you look at the cost of Medicare and Medicaid alone, today it’s about 6% of GDP and it’s growing like a weed. That does exclude what it takes to do the $267 billion to do the Doc Fix or the over $76 billion to repeal the CLASS [Community Living Assistance Services and Support] Act. So it really is a big portion of our costs. It is, as again what was said earlier, it is also I believe our biggest challenge from a fiscal viewpoint. As we looked at the Affordable Health Care Act, which was recently passed, it was the contention of the Democrats on our commission that the cuts that were made to Medicare and the Affordable Health Care Act along with the pilot programs that were set up would reduce the rate of growth of health care to GDP plus 1[%].”

Rep. Jeb Hensarling: 

“If I could interrupt, most of these cuts are on the provider’s side, right?”

Erskine Bowles: 

“That’s correct. We didn’t think that would happen. We didn’t those cuts were enough. So we did about $500 billion of additional cuts over and above that with the hope that those cuts would slow the rate of growth of health care to GDP plus 1[%]. But assuming that that didn’t happen, to us there was no choice but to get the rate of growth of health care to that level. We said there were certain options that would have to be considered at that point in time. Those options did include a premium support plan, it did include a robust public option, it did include even a single or all-payer plan.”

Rep. Jeb Hensarling:

“I see my time is about to run out here. Let me quickly cover two other subjects.

“With the respect to both of your plans on raising revenue, I do know that as part of that marginal rates are brought down in both plans, is that correct? The witnesses are saying yes.

“I have less than a minute remaining in my time. Also, I was looking for certain common elements of your plans, one of which is global chained CPI throughout the entirety of government programs. In the very short time that we have left, maybe I could get a 30-second answer out of each of you on why you thought that’s a critical part of the solution. Sen. Domenici? Okay, Dr. Rivlin, a brief answer on chained CPI?”

Dr. Alice Rivlin: 

“Yes, it’s a technical change that economists have for quite a while decided it was a better way – more accurate way – of measuring the cost of living for this purpose. It would affect all government programs, including the tax code.”

Rep. Jeb Hensarling: 

“So COLA [Cost of Living Adjustments] will still be there. It simply would rise at a different rate.”

Dr. Alice Rivlin: 

“Oh, absolutely. It’s just a technical change in how you calculate the COLA and the index that is used for other programs with COLAs, including the tax code which indexes the bracket.”

Rep. Jeb Hensarling: 

“Sen. Simpson, I’m technically out of time but can I get a quick answer on chained CPI?”

Former Sen. Alan Simpson (R-WY): 

“Everything we looked at. People looked at it. It’s better, although there are suggestions for something else CPI but that’s experimental. This one looks like everyone would adopt it, and if we get it adopted government-wide, it would save billions.”

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