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Mr. Chairman and Members of the Committee, I appreciate the opportunity to discuss with you the growth in Medicare spending on post-acute care services and options for slowing that growth. Over the past decade, spending on post-acute care services has grown more rapidly than other major components of Medicare spending. That trend is likely to continue unless legislation is adopted to alter the way in which those services are paid for under Medicare, or the extent to which those services are covered by Medicare.

In my remarks today, I will summarize recent trends in Medicare spending on post-acute care as well as projections by the Congressional Budget Office (CBO) for the next decade. I will also discuss some issues that might be considered when designing policies to contain post-acute care spending, and briefly comment on the Administration's proposals.

My discussion focuses on policies that might, in the near term, constrain spending on services from providers in fee-for-service Medicare. Broader strategies to reduce the total cost of the program over the longer term--such as expanding the types of health plans that can participate in Medicare, changing the payment formula to allow the program to benefit from managed care efficiencies, or restructuring Medicare as a defined contribution program--are not addressed. The financing problems facing Medicare over the long term are dramatic, however, and options that focus on adjustments to fee-for-service spending would be insufficient to maintain the life of the program. CBO's recent report, Long-Term Budgetary Pressures and Policy Options, analyzes the broader issues of Medicare restructuring for the long term.

This document is available in its entirety in PDF.