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Washington, DC The committee met, pursuant to notice, at 10:03 a.m., in room SH-216, Hart Senate Office Building, Hon. Herb Kohl, presiding. Present: Senators Smith, Talent, Kohl, Wyden, and Lincoln.

OPENING STATEMENT OF SENATOR HERB KOHL Senator Kohl (presiding). This hearing will come to order, and we welcome you all here today, where we will explore ways to contain growth in Medicare spending by helping seniors lead healthier lives.

As always, we thank our Chairman, Senator Gordon Smith, for working with us in a bipartisan manner to examine issues affecting seniors. It is not secret that the Federal Government will face fiscal challenges as the Baby Boomers begin to retire and become eligible for Medicare.

From the year 2000 to 2030, the number of people on Medicare will nearly double from 40 million to 78 million. In fact, in the next 25 years, Federal spending on Medicare, Medicaid, and Social Security will almost equal what we now spend on the entire Federal Government.

So we know these costs are looming and yet our nation remains woefully unprepared. Net Federal spending on Medicare was more than $300 billion in 2004. But what many people don't know is that a small share of Medicare beneficiaries account for a very large share of total Medicare spending.

Just 10 million of the 40 million Medicare beneficiaries account for 85 to 90 percent of the program's costs every year.

As we will hear today, much of this spending is for patients suffering from multiple chronic diseases. Studies show that Medicare spends 2 out of every 3 dollars on people with five or more chronic conditions, such as diabetes, emphysema, heart disease, arthritis, or osteoporosis.

These chronic conditions are largely preventable, treatable, and their onset can often be delayed through proper nutrition and exercise. At a time when our nation is growing older, it is clear that the successes we have in preventing chronic diseases will directly affect our ability to contain future growth in Medicare spending.


We need to get the word out that prevention is not something that only children and younger adults can benefit from. Seniors need to understand that it is never too late to benefit from a healthier lifestyle.

It is also important to note that this not just a challenge for the Federal Government. Rising health care costs will continue to be an issue for all American families and businesses, and so we need more prevention, nutrition, and exercise by younger generations also.

Today, we will hear from Bill Herman from Highsmith, Incorporated, a company in Fort Atkinson, WI, on their award-winning prevention programs to keep their employees healthy and their insurance costs low.

This makes sense for businesses, but also for our country, for, after all, unless we find a way to prevent and treat chronic diseases early on, Medicare will inherit even more costly problems as more people join the program.

I am pleased to have the director of the Congressional Budget Office here today to present CBO's recent report on Medicare HighCost Beneficiaries.

We also look forward to hearing from our second panel of witnesses who will discuss ways to successfully prevent and affordably treat chronic diseases.

In particular, we need to find ways to educate seniors and boomers that it is never too late to change their lifestyle and improve their health and improve Medicare's finances at the same time.

We need to make sure that seniors know about the preventive benefits that Medicare offers and why they are so important to take advantage of.

We should look for ways to use technology to give seniors and health providers more tools to take control of their health.

We know that many of the Senators on this committee share this concern for skyrocketing costs of health care, particularly Medicare. We know that we will all take away some good recommendations from today's hearing, and continue working together to stem this growing problem.

So, again, we thank everyone for their participation here today, and now turn to our Chairman, Gordon Smith, for his opening remarks.


CHAIRMAN The CHAIRMAN. Thank you, Senator Kohl, and thank you for arranging this hearing on such a vital topic. Today's hearing is, as he has stated very well on the importance of prevention in helping to slow the growth of Medicare spending. We have two excellent panels of witnesses today, and I will look forward to a productive discussion.

Over 40 million elderly and disabled Americans rely on Medicare for their health care coverage. In 2004, total Medicare spending exceeded $300 billion and is expected to grow significantly in the coming decades as the Boomer Generation approaches retirement.

With this impending challenge, we must find ways to control the growth of Medicare spending if we are to preserve this critically important part of our health care safety net for our seniors and the disabled.

It is vital that we identify where spending is the greatest under Medicare and develop comprehensive strategies in which to lower expenditures in these areas. A May 2005 Congressional Budget Office report, which this hearing will examine, may have identified one such area. According to the report, a relatively small group of high-cost Medicare beneficiaries account for a large share of the program spending.

According to CBO, only 10 million of the 40 million Medicare beneficiaries account for 90 percent of the program's cost.

Further, three-quarters of these 10 million high-cost beneficiaries suffer from multiple chronic diseases, such as diabetes, emphysema, heart disease and stroke, arthritis, and osteoporosis.

Such diseases require extensive care and often serve as the catalyst for many other conditions and ailments. Many of these chronic conditions are preventable through a regimen of proper nutrition and exercise.

Additionally, the cost of treating these conditions can be significantly reduced by the implementation of chronic disease management programs.

That is why this hearing will also examine some innovative technologies currently being used by institutional health care providers, such as the Veterans’ Administration, to monitor and manage high cost patients more efficiently. Our ability to prevent and affordable treat chronic disease is key to our ability to contain the anticipated growth in Medicare spending.

So I thank all of our witnesses for coming today to discuss this issue, and look forward to the testimonies. Thank you.

Senator KOHL. Thank you very much. Senator Smith, we also have with us the other Senator from Oregon, Ron Wyden.

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