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1991 ADVISORY COUNCJLo_n /I SOCIAL ASECURITY Commitment to C hange: Foundations for Reform December 1991 Washington, DC TIMN 0023078

Commitment to Change: Foundation for Reform A Report of the Advisory Council on Social Security December 1991 washingcoo, DC TIMN 0023079

MEMBERSHIP OF THE 1991 ADVISORY COUNCIL ON SOCIAL SECURITY Chanr Deborah Steelman, Esq. Attomy-et-Law Members G. Lawrence Atkins, Ph.D. Director of Employee Benefit Policy Winthrop, Stimson, Putnam & Roberts The Honorable James R. Jones Chaimnan and Chief Executive Officer American Stock Exr.tange Robert M. Ball Former Commissioner of Social Security Philip Briggs Vice Cbairman of the Board Metropolitan Life Insurance Company Lonnie R. Bristow, M.D. AMA Board of Trustees Theodore Cooper, M.D. Chairmaa and Chief Executive Officer The UPjohn Company Professor John T. Dunlop Harvard University Karen Ignagni Director Department of Employee Benefits AFL-CIO John Meagher Parmer LeBoeuf, Lamb, Leiby & McRae Paul H. O'Neill' Chairman and Chief Executive , Officer Alcoa Arthur L Singletan Consultant on Govesnment John J. Sweeney Internationai President Service Employees Intc.rnational Union Donald C. Wegmiller President & Chief Executive Officer Health One Caporatian ' Resigned, replaced by John Meagher. u TIMN 0023080

ADVISORY COUNCIL ON SOCIAL SECURITY Ch- Diw.h fa..s Df.ww .1- (.ii.. D.DS C.d ~ ~«..e...m.~ w. u..+,.. so.,., t..... ao.A 4.rt .N. 4Y Fas"- - dSmYhv+. ft&.wv t'ae p-d tle Is.d .Nms'..o- t.f. l.s..m Ca^f (w.e L Yr... ALD. •1fAl~ dT- lLMw. C.np. M.D. a.- .,r o.a E- aF- r.V~ C.-. lAa- 1a. T. Di.f7 H.... u.,.a,.. ~c... a.,,. a..r.. ewt .nao Tl. M~..N.,.... L J.a 6-rrQr,f 01i +.rra ya~f F +u.~. rwH a... w.....r ck~ s-«. Cu .. .,~. ..Ls.- ... ca..,~.. ~.+. i s..e.. s.,.... ~.e ~....e.r c~ DerY C M'e~w4. he.k. a C7- Famane 01Fav ww. ow r ~ DEC 19 199 The Honorable Louis W. Sullivan Secretary of Health and Human Services Washington, D.C. 20201 Dear Mr. Secretary: As required by Section 706 of the Social Security Act, I herewith enclose for transmittal to the Congress and to the Boards of Trustees of the Federal old Age and Survivors Insurance, Disability Insurance, Hospital Insurance and Supplementary Medical Insurance Trust Funds the reports of the Advisory Council on Social Security which was appointed in July 1989. As directed by its Charter, the Council's major findings and recommendations concern a broad and thorough assessment of the factors that bear most importantly on the financial security of American families today and through the year 2020. when addressing the Council'at our first meeting, you urged us to address the current urgent questions of our health care system. You also urged us to assess the ability of current law to meet the challenges of the future and to pose and explore the larger questions the nation must face as it prepares for the largest generation of retirees our country has yet experienced, the Baby Boomers. On behalf of the entire Council, I would like to extend our thanks to you for the opportunity to address issues of this magnitude and importance to our families and to our children. Additionally, we extend our thanks to Messrs. Stan Ross and David Walker, the Public Trustees of the Federal Old Age and Survivors Insurance, Disability Insurance, Hospital Insurance and Supplementary Medical Insurance Trust Funds for their continuous and important support for our immense task. Sincerely, Deborah-Steelman Chair Hobert H. Hnw4h.ey 8.iid'ms. 2001edepeadeoc Are.. S.W.. Am 63i-G. Wa.hinge4 D.C 20201. (202) 24f-0217. Fm~(202) s7S-02S1 TIMN 0023081

THE SECRETARY OF NEALTMANp NIPMAN SERVICES wwf'..«GTOw. G.c. ieae~ DEC I 9 1991 The Honorable Dan Quayle President of the Senate Washington, D.C. 20510 Dear Mr. President: The provisions of Section 706 of the Social Security Act require the appointment of an Advisory Council on Social Security every four years. I appointed the members of the 1989 Advisory Council and charged them with the review of a broad and thorough assessment of the factors that bear most importantly on the financial security of American families today and through the year 2020. Specifically, the Council was asked to assess the ability of the current Social Security, Medicare and Medicaid programs to meet today's challenges and to pose and explore the larger questions the nation must face as it prepares for the largest generation of retirees our country has yet experienced. To fulfill this charge, the Council undertook a virtually unprecedented review of social security policy, health care policy, savings and investment issues „ pension policy, and numerous issues relating to the need to build our nation's economic capacity to provide for the social needs of an increasingly older and more diversified population. Chaired by Deborah Steelman, the members of the Advisory Council, all from the private sector, have worked diligently over the last two and one-half years in a sincere effort to address the issues presented in their reports. These reports address the full range of the Council's charter. Their recommendations are based on the finding that the best way to ease the burden of paying for future retirement benefits,is to increase the productive capacity of the economy. In July of 1990, the Council issued recommendations on Social Security, which were forwarded to you at that time. Their full and final reports were transmitted to me this morning, including their final recommendations on health. Here, the Council's recommendations address four fundamental concerns: the need to improve access to health care for millions of Americans; the need to significantly reduce the rate of growth in health care costs and increase the rate of growth in the general economyt the need TIMN 0023082

Page 2 - The Honorable Dan Quayle to significantly reform many of the basic institutions involved in the delivery and financing of health care; and the need to fully involve the American people in the development of the American health care system of the 21st Century, without whose support even the grandest plans come to naught. The Council found that health care is an issue of extreme and immediate importance to the financial security of all American families for two overwhelming reasons: the inequities in our current health care finance and delivery systems: and the unacceptable rate of growth in health care costs. Their review of these significant and unsustainable weaknesses, coupled with their review of long-range economic forecasts and months of public hearings and other outreach, lead the Council to conclude that the sustained financial security of American families rests in substantial degree upon the extent to which we reform our approach to the consumption, delivery, and financing of health care in the United States. These recommendations should be added to the many proposals already under discussion as we seek health care reform. No one feels more deeply than I the imperative for reform and I believe this report provides a common sense basis from which to debate and act. I look forward to working closely with you to this end. Sincerely, Louis W. Sullivan, M.D. TIMN 0023083

TNE SECRETARV Oi MEAITM ANO MuM1AN SER VICES ~a\yw~w.TpM,O.C. )CtE1 The Honorable Thomas S. Foley The Speaker of the House of Representatives washington, D.C. 20515 Dear Mr. Speaker: The provisions of Section 706 of the Social Security Act require the appointment of an Advisory Council on Social Security every four years. I appointed the members of the 1989 Advisory Council and charged them with the review of a broad and thorough assessment of the factors that bear most importantly on the financial security of American families today and through the year 2020. Specifically, the Council was asked to assess the ability of the current Social Security, Medicare and Medicaid programs to meet today's challenges and to pose and explore the larger questions the nation must face as it prepares for the largest generation of retirees our country has yet experienced. To fulfill this charge, the Council undertook a virtually unprecedented review of social security policy, health care policy, savings and investment issues, pension policy, and numerous issues relating to the need to build our nation's economic capacity to provide for the social needs of an increasingly older and more diversified population. Chaired by Deborah Steelman, the members of the Advisory Council, all from the private sector, have worked diligently over the last two and one-half years in a sincere effort to address the issues presented in their reports. These reports address the full range of the Council's charter. Their recommendations are based on the finding that the best way to ease the burden of paying for future retirement benefits is to increase the productive capacity of the economy. In July of 1990, the Council issued recommendations on Social Security, which were forwarded to you at that time. Their full and final reports were transmitted to me this morning, including their final recommendations on health. Here, the Council's recommendations address four fundamental concerns: the need to improve access to health care for millions of Americans; the need to significantly reduce the rate of growth in health care costs and increase the rate of growth in the general economy; the need TIMN 0023084

Page 2 - The Honorable Thomas S. Foley to significantly reform many of the basic institutions involved in the delivery and financing of health care; and the need to fully involve the American people in the development of the American health care system of the 21st Century, without whose support even the grandest plans come to naught. The Council found that health care is an issue of extreme and immediate importance to the financial security of all American families for two overwhelming reasons: the inequities in our current health care finance and delivery systems; and the unacceptable rate of growth in health care costs. Their review of these significant and unsustainable weaknesses, coupled with their review of long-range economic forecasts and months of public hearings and other outreach, lead the Council to conclude that the sustained financial security of American families rests in substantial degree upon the extent to which we reform our approach to the consumption, delivery, and financing of health care in the United States. These recommendations should be added to the many proposals already under discussion as we seek health care reform. No one feels more deeply than I the imperative for reform and I believe this report provides a common sense basis from which to debate and act. I look forward to working closely with you to this end. Sincerely, Louis W. Sullivan, M.D.

STAFF OF THE 1991 ADVISORY COUNCIL ON SOCIAL SECURITY Ann D. LaBelle, D.D.S. Execurive Director Barbara Cooper Adele Eley Robert Lagoyda Arta Mahboubi Susan V. McNally Brigitta M. Mullican Olga Nelson Mary Sue Olcou Teddi Pensi.nger Virginia Reno Nancy Row Michael D. J. Zambonato TIMN 0023086

PREFACE On behalf of the 1991 Advisory Council on Social Security, I would Ue to extend our profound gratitude for the hard work, long hours, and great talent of the Council staff. To Ann LaBelle, our Executive Director, Barbara Cooper, Adele IIey, Robert Lagoyda, Arta Mahboubi, Susan V. McNally, Brigitta M Mullican. Olga Nelson, Mary Sue Olcott, Teddi Pensinger, Virginia Reno, Nancy Row, and Michael D. J. Zambonato (who kept us laughing when we most needed it!), and to our miracle typists and assisrants, please accept our most heartfelt thanks. When we began this work two and one-half years ago, few of us realized the body of scholarly research, issue analysis, and public input that would come to form the basis of our work. 'ibe Council's staff assembled a team of economists and actuaries to help us umderstand the futuit; the staff produced 15 public hearings providing us with some of the most valuable insights we received and wrote draft after draft to reconcile our varied comments. Tbe American people art indeed fortunate to have in their service people of such intellect, dedication, and common sense. We would also like to thank four immensely capable volunteers, Patricia Knight, Mary Ross, David Cooper, and Elizabeth Hadley, who, in addition to their full-time work for their agencies, volunteered their time to the Council to make this work one of extraordinary value. In addition, we extend thanks to several individuals outside the government whose services added depth and weight to our reports: Louis P. Garrison and his staff, Donald I3itsch. David KeaneIl. Donald Muse, Jack Meyer, and Sean Sullivan. a TIMN 0023081