[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
MEDICAID REFORM: THE NATIONAL GOVERNORS ASSOCIATION'S BIPARTISAN
ROADMAP
=======================================================================
HEARING
before the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
JUNE 15, 2005
__________
Serial No. 109-22
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
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__________
COMMITTEE ON ENERGY AND COMMERCE
JOE BARTON, Texas, Chairman
RALPH M. HALL, Texas JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida Ranking Member
Vice Chairman HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia BART GORDON, Tennessee
BARBARA CUBIN, Wyoming BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
HEATHER WILSON, New Mexico BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING, ALBERT R. WYNN, Maryland
Mississippi, Vice Chairman GENE GREEN, Texas
VITO FOSSELLA, New York TED STRICKLAND, Ohio
ROY BLUNT, Missouri DIANA DeGETTE, Colorado
STEVE BUYER, Indiana LOIS CAPPS, California
GEORGE RADANOVICH, California MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania JIM DAVIS, Florida
MARY BONO, California JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon HILDA L. SOLIS, California
LEE TERRY, Nebraska CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey JAY INSLEE, Washington
MIKE ROGERS, Michigan TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee
Bud Albright, Staff Director
David Cavicke, Deputy Staff Director and General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
(ii)
C O N T E N T S
__________
Page
Testimony of:
Huckabee, Hon. Mike, Governor, State of Arkansas; and Hon.
Mark Warner, Governor, State of Virginia................... 21
Material submitted for the record by:
Acevedo-Vila, Hon. Anibal, Governor, Commonwealth of Pueto
Rico, prepared statement of................................ 74
Barton, Hon. Joe, letter dated July 5, 2005, to Gov. Mark R.
Warner, enclosing questions from committee members, and
responses to same.......................................... 78
Kennelly, Barbara, President, National Committee to Preserve
Social Security and Medicare, prepared statement of........ 76
(iii)
MEDICAID REFORM: THE NATIONAL GOVERNORS ASSOCIATION'S BIPARTISAN
ROADMAP
----------
WEDNESDAY, JUNE 15, 2005
House of Representatives,
Committee on Energy and Commerce,
Washington, DC.
The committee met, pursuant to notice, at 11:07 a.m., in
room 2123 of the Rayburn House Office Building, Hon. Joe Barton
(chairman) presiding.
Members present: Representatives Barton, Bilirakis, Upton,
Stearns, Gillmor, Deal, Whitfield, Norwood, Cubin, Shimkus,
Wilson, Shadegg, Pickering, Buyer, Radanovich, Bass, Bono,
Walden, Ferguson, Rogers, Otter, Myrick, Murphy, Burgess,
Blackburn, Dingell, Waxman, Markey, Brown, Rush, Eshoo, Stupak,
Engel, Wynn, Green, Strickland, DeGette, Capps, Allen, Davis,
Schakowsky, Solis, Baldwin, and Ross.
Also present: Representative Gingrey.
Staff present: Chuck Clapton, chief health counsel; David
Rosenfeld, majority counsel; Jeanne Haggerty, majority
professional staff; Brandon Clark, health policy coordinator;
Eugenia Edwards, legislative clerk; Bridgett Taylor, minority
professional staff; Amy Hall, minority professional staff; and
Turney Hall, research assistant.
Chairman Barton. The committee will come to order. Our
witnesses today, Governor Warner and Governor Huckabee, are
testifying in the other body and are going to be joining us
shortly. So in the interim we are going to begin our opening
statements. And, according to the rule we adopted at the
beginning of this Congress, since this is a full committee
hearing and we have two Governors, Mr. Dingell and I will each
be recognized for 5 minutes to give our opening statements.
Then, every other member who wishes to be recognized will be
recognized for 1 minute to give their statement. And hopefully,
by the time that happens, the Governors will be here and then
we will go to their testimony and then our usual 5 minutes of
questions per member, alternating between the minority and the
majority. Any questions about that, anybody?
Mr. Dingell. No questions, Mr. Chairman.
Chairman Barton. Okay. So the Chair would recognize himself
for an opening statement.
Good morning. Even though our two Governors, Governor
Warner and Governor Huckabee are not here yet, we do want to
appreciate their agreeing to testify before us on this
important hearing. We understand that there is the making of a
bipartisan agreement amongst the Governors about what might be
done to reform Medicaid. Under the aegis of the National
Governors Association, today's witnesses have played a central
role in bringing both Republican and Democrat Governors
together to develop and support these innovative concepts for
Medicaid reform. The Governors are before us today because
Medicaid is in crisis. We have reached a point where there are
just not enough taxes or taxpayer money to keep Medicaid going
as we know it today.
Most States now spend more on Medicaid than they do on
schools or anything else for that matter. Analysts predict in
as few as 20 years, Medicaid will consume between 80 to 100
percent of all State budget dollars. That is an amazing
statement. Without reform, Medicaid eventually will bankrupt
every State in the Nation. The only alternative is the eventual
collapse of the Medicaid program.
Here is a thought that comes from somebody that I probably
wouldn't agree with too much. He is John Adams Hurson, a
Maryland State legislator who is president of the National
Conference of State Legislatures. Let me read to you what Mr.
Hurson says. ``I am a Democrat, a liberal Democrat, but we
can't sustain the current Medicaid program. It is fiscal
madness. It doesn't guarantee good care, and it is a budget-
buster. We need to install a greater sense of personal
responsibility so that people understand that this care is not
free.'' I couldn't agree more.
The proposals that we will hear about this morning reflect
the bipartisan views of the Nation's Governors. Governors know
their State's programs and beneficiaries, what they can afford
and what levels of benefits and services are most appropriate
for those most vulnerable in their State populations. Governors
have to struggle every day with Medicaid financing and service
delivery. Governors also see the flaws in the current program.
They seem to understand how many middle-class seniors hide
their assets through creative accounting techniques so that
they can get Medicaid to pay for nursing home care. They see
how Medicaid pays too much for some prescription drugs. They
also know how Medicaid's co-payment policies with rates that
are frozen at 1983 levels, discourage beneficiaries from taking
responsibility for their own healthcare decisions.
This knowledge has helped to shape many of our Governors'
reform proposals. This will not stop critics from challenging
these reforms, and that is the purpose of today's hearing, to
hear their reforms and then have a review of them. Some will
say that any change to the system they love will hurt the poor.
Critics conveniently ignore the fact that the system is already
changing as States try to avoid ruin. Between 2002 and 2005 all
States reduced provider rates and implemented drug cost
controls. Thirty-eight States have reduced eligibility, and 34
States have reduced benefits. This year hundreds of thousands
of beneficiaries will lose Medicaid eligibility or face reduced
benefits in States like Tennessee, Missouri, and Mississippi.
I think that it is time to do something because doing
nothing hurts Medicaid patients every day. I, personally, would
like to reform and save Medicaid. The Federal budget does need
some help. The State budgets desperately need help. Medicaid
beneficiaries need help. I applaud our Governors and generally
support the reforms that they are bringing before us. Medicaid
is clearly in need of reform.
This committee is tasked by Congress in the budget
resolution to reduce the growth of Federal spending. It is my
job as chairman to try to help the committee come up with a
bipartisan agreement that will do the very best that we can to
meet that target. And as I said, I hope that we can do it in a
bipartisan fashion.
Just as important, though, is the importance of simply
saving Medicaid. The exercise that we discuss today is about
much more than reconciliation; it is also about preserving the
healthcare safety net that protects the Nation's poor. If we
cannot make Medicaid more affordable to States and to the
Federal Government, we will have to put the beneficiaries who
depend on the program at grave risk.
I look forward to today's hearing. It is an important
hearing. I might also say that this isn't the only hearing that
we are going to do. This is the first of many hearings that we
are going to have this summer as we move toward a Medicaid
reform package in the fall.
[The prepared statement of Hon. Joe Barton follows:]
Prepared Statement of Hon. Joe Barton, Chairman, Committee on Energy
and Commerce
Good Morning. Let me begin by thanking Governors Warner and
Huckabee, for appearing before the Committee today. We appreciate their
willingness to testify about a new bipartisan agreement to reform
Medicaid that has recently been developed by the National Governors
Association. Today's witnesses played a central role in bringing
Republican and Democratic governors together to develop and support
these innovative concepts for Medicaid reform.
The Governors are here today because Medicaid is in crisis. We have
reached a point where there just are not enough taxes or taxpayers to
keep Medicaid going. States now spend more on Medicaid than they do on
schools, or anything else, for that matter. Analysts predict that in as
few as 20 years, Medicaid will consume 80 to 100 percent of all state
dollars. Without reform, Medicaid eventually will bankrupt every state
in the nation. The only alternative is the eventual collapse of the
Medicaid program.
Here's a thought that comes from someone I probably wouldn't agree
with much. He's John Adams Hurson, a Maryland state legislator who is
president of the National Conference of State Legislatures. Let me read
you what Mr. Hurson says: ''I am a Democrat, a liberal Democrat, but we
can't sustain the current Medicaid program. It's fiscal madness. It
doesn't guarantee good care, and it's a budget buster. We need to
instill a greater sense of personal responsibility so people understand
that this care is not free.'' I couldn't agree more.
The proposals we will hear about this morning reflect the
bipartisan views of the nation's Governors. Governors know their
state's programs and beneficiaries, what they can afford and what
levels of benefits and services are most appropriate for these
vulnerable populations. Governors must struggle every day with Medicaid
financing and service-delivery.
Governors also see the flaws in the current program. They seem to
understand how many middle class seniors hide their assets through
creative accounting techniques so they can get Medicaid to pay for
nursing home care. They see how Medicaid pays too much for some
prescription drugs. They also know how Medicaid's co-payment policies,
with rates still frozen at their 1983 levels, discourage beneficiaries
from taking responsibility for their health care decisions.
This knowledge helped shape many of the Governors' reform
proposals. This will not stop critics from challenging these reforms.
Some will say that any change to the system they love will hurt the
poor. The critics conveniently ignore the fact that the system is
already changing as states try to avoid ruin. Between 2002 and 2005,
all states reduced provider rates and implemented drug cost controls;
38 states reduced eligibility; and 34 states reduced benefits. This
year, hundreds of thousands of beneficiaries will lose Medicaid
eligibility or face reduced benefits in states like Tennessee,
Missouri, and Mississippi.
We must do something because doing nothing hurts Medicaid patients
every day. I want to save Medicaid. The Federal budget needs our help.
The State budgets need our help. Medicaid beneficiaries need our help.
I applaud the Governors and generally support the reforms they are
bringing us. Medicaid is clearly in need of reform.
This Committee is tasked by Congress, in the budget resolution, to
reduce the growth of Federal spending. We're going to do our best to
meet that target, and I hope we can do it in a bipartisan matter. Just
as important, though, is the importance of simply saving Medicaid. The
exercise we discuss today is about much more than reconciliation--it is
also about preserving the healthcare safety net that protects the
nation's poor. If we cannot make Medicaid more affordable to States and
the Federal government, we will have put the beneficiaries who depend
on the program at grave risk.There are serious challenges facing
Medicaid today and the program is clearly at a crossroads. We need to
look for innovative, bipartisan solutions for the problems facing
Medicaid in order to strengthen and improve the program. Medicaid
beneficiaries deserve nothing less. So do America's taxpayers.
Chairman Barton. With that, I would----
Mr. Rush. Mr. Chairman? Mr. Chairman? Down at this end.
Chairman Barton. Mr. Rush.
Mr. Rush. Mr. Chairman, I would like just to speak out of
order just for a moment. Since the last time the full committee
has met we have had a death among our family. The chief of
staff for Congressman Towns passed suddenly last week, and I
would just ask that you would join me in a moment of prayer for
her and her family and for our family because she was a fixture
around this committee and around all of us. Brenda was loved by
everybody. Brenda Pillors.
Chairman Barton. I am honored to do that, and I think Mr.
Dingell was going to speak to that too in his opening
statement. But would we all just have a moment of silence, and
those that believe in prayer, a moment of prayer. Amen. With
that I would recognize the distinguished ranking member, Mr.
Dingell.
Mr. Dingell. Mr. Chairman, I thank you for the recognition,
and I thank you also for holding this hearing on a very
important, a very valuable question. I ask that I also be
permitted to insert into the record a brief comment about
Brenda Pillors, who was much loved on this side of the aisle
and in the committee generally. She was chief of staff to our
good friend, Mr. Towns, and she was quite a force for good
within the Congress. She will be missed.
Chairman Barton. Without objection.
Mr. Dingell. Thank you, Mr. Chairman. As I said, Mr.
Chairman, I thank you for this hearing. It is a very important
question, and I welcome Governors Warner and Huckabee to us and
thank them for their testimony today. We are interested in
hearing about their Working Groups Preliminary Proposal to
change Medicaid and how these changes will help them and other
Governors with regard to fiscal problems. We have heard for a
number of months the concerns of the States regarding their
budgets and how much of each budget is consumed by Medicaid.
These appear to be very legitimate concerns. I want the
Governors to know that I am sympathetic to the financial bite
that they face, but that we do need to have a perspective on
one very important question; and that is how do we fix their
problem within the broader healthcare system and yet take care
of those for whom the Medicaid program is designed to be
helpful?
Congress has tried to eliminate the problems or at least to
alleviate this situation many times, including a major victory
in June 2003 when we were able to provide the States with $10
billion to assist them through the economic downturn by
temporarily boosting the Federal Medicaid funding. But now we
are going in the opposite direction. Congress is looking to cut
$10 billion from the Federal budget, keeping in mind that
cutting $10 billion in Federal funding for these programs
equals a $17.5 billion cut overall to Medicaid recipients
because of the shared State-Federal financing of the program.
That is a significant number.
The National Governors Association has come out strongly
against the cost shift by the Federal Government that would
place a still-greater financial burden on the States. This is a
very legitimate concern. I wholeheartedly agree with the
Governors and would support giving the States $10 billion
rather than taking it away. I believe that to be a more
justifiable course. But we must also take care not to cost-
shift the burden from the States to the backs of the poor and
those who have the least capacity to address the problems that
would occasion. Unfortunately, I am afraid that much of the NGA
proposal will do just that: shift cost to the poorest and to
the most vulnerable citizens who depend on this program and who
have no hope of help elsewhere.
It appears that in the name of personal responsibility, the
NGA proposal will make it much more difficult for children and
pregnant woman to get needed services. Do we really need to set
policies that will make it more difficult for a child diagnosed
with diabetes to get insulin? Or to care of the problems of a
pregnant woman who is desperate, alone, and destitute? In the
end, we as a Nation will pay the financial and social costs of
any complications that would result from such children being so
treating.
The proposed cost-sharing increases and the benefit changes
will result in many going with no services at all. I understand
the NGA proposal would eliminate the Medicaid requirement that
low-income children who are screened and diagnosed with health
problems get the treatment they need. That would be a little
bit like a case I saw when I went to a hospital and they told
me, Dingell, there is good news here; women are going to be
able to be tested for breast cancer. I said that is wonderful.
Yes, they said, but there is a real problem; they are not going
to be able to get the treatment because that is not in the
program. The cost-sharing increases and benefit changes will
probably, then, result in no services for many at all. I
understand the concerns of the Governor, but we must inquire
why are we turning our backs on people who have the greatest
need?
Equally troubling is the proposal to take away from senior
citizens, individuals with disabilities, pregnant woman, and
children the ability to enforce their rights to promised
benefits, which serves as a backstop to guarantee that they get
the services they need. We should not kid ourselves. As I
learned in the good Jesuit teachers' philosophy, rights without
a remedy are no rights at all.
I understand this is a preliminary agreement between a
group of Governors, which meant concessions were no doubt made
on both sides. I am, however, curious; how many senior, how
many people with disabilities, how many pregnant woman, how
many children were included in these negotiations? And what was
done about the concerns that they expressed if they were heard?
And where will these folks be when the leadership in this House
decides that those health services will get cut while doling
out tax cuts to the most fortunate amongst us. It is a sad day
when the budget of the United States, as submitted by the
Republican leadership, will require folks like the witnesses
before us today to figure out how to hurt the people the least,
rather than to help them the most.
Before I yield back, Mr. Chairman, I would like your
attention because I have a question that the minority would
very much like to ask you and our good friends on the majority
side. I want to express the concern of the members on this side
that we are not hearing today from those who would be most hurt
by these proposals. I note that our colleagues in the other
body are hearing today from experts on the perspectives of
beneficiaries of providers. My question to you, Mr. Chairman,
is will the committee be holding full and adequate hearings to
obtain the testimony from beneficiaries and providers on those
proposals before we go forward with $10 billion in cuts to
those who are going to get the cuts?
Chairman Barton. The gentleman yield?
Mr. Dingell. I yield to my good friend, of course.
Chairman Barton. Today's witnesses are the Governors, but
we are going to have a number of hearings. We always do. We
will work with you and other interested members to make sure
that we have a broad range of witnesses so that the issue is
fully vetted before we move to a legislative solution.
Mr. Dingell. That comment does you great credit, Mr.
Chairman, and I thank you. I understand you to be telling me
that we will then be hearing from representatives of the----
Chairman Barton. We will----
Mr. Dingell. [continuing] children, representatives of
pregnant women, and others who are going to be affected by----
Chairman Barton. I think we have established comity and
trust, not just on this issue, but on all the issues. I am not
aware that we have had a problem this year on any specific
issue on short-changing the witness list. But this is an
important issue, and as you pointed in your opening statement,
there are many, many important principles in play here, and
this committee will not move legislatively without creating a
full record where all interested parties are a part of.
Mr. Dingell. Mr. Chairman, if I may continue on my time,
your record as chairman has been one of fairness and decency,
and I want to express my appreciation to you for that. I have
great hopes that we will see those superb tendencies at play
here and that we will be able to get a record that will enable
us to look at the concerns of everybody who is going to be
affected by these matters. And with those remarks, Mr.
Chairman, with great respect, I thank you.
Chairman Barton. The last thing, Mr. Dingell, before we
yield to Mr. Deal, as you know, because the reconciliation
process, we will have a timetable to legislate sometime most
probably in September. So we will do our fact-finding hearings
this month and in July. There might be one final generic
hearing in early September, but we would move to a legislative
markup sometime in September.
Mr. Dingell. Thank you, Mr. Chairman.
Chairman Barton. Okay. The distinguished subcommittee
chairman, Mr. Deal of Georgia, is recognized for 1 minute.
Mr. Deal. Thank you, Mr. Chairman. First of all, I want to
thank the National Governors Association and the two Governors
that we will hear from in just a few minutes, but also the
staffs of that organization and the staffs of the individual
Governors who have worked very hard on coming up with a
bipartisan solution to this issue of Medicaid reform. And I
also want to thank the staffs here on our committee who have
been working in conjunction with them.
There are two things that I think need to be said about
this. First of all is that this is, as we will hear from the
Governors, a policy-driven debate. Certainly, finances play a
part. At the Governors' level it is now consuming, for their
part of Medicaid, more than they are spending on elementary and
secondary education and continues to grow. This year it is
costing a cumulative $300 billion, and is projected over the
next 10 years to be $4.5 trillion in cost. But policy is what
we will hear from the Governors in terms of policy changes, the
kind of changes that I think all of us acknowledge need to be
addressed.
I want to thank them for doing this on a bipartisan basis.
I think the fact that they have done that is a challenge to us
to deal with this issue likewise, on a bipartisan basis. Thank
you, Mr. Chairman.
Chairman Barton. Thank the gentleman. The Chair would
recognize Mr. Brown, the ranking member of the Health
Subcommittee, for 1 minute.
Mr. Brown. Thank you, Mr. Chairman. I first ask unanimous
consent to enter into the record statements from the consortium
of America's dental providers, as well as the National
Association of Community Health Centers.
Chairman Barton. Without objection, so ordered.
[The material follows:]
June 14, 2005
The Honorable Nathan Deal
Chairman
Energy and Commerce Subcommittee on Health
United States House of Representatives
Washington, DC 20515
Dear Mr. Chairman: We write as organizations committed to equitable
access to dental care with a broad range of experience in directly
providing care and in working to ensure that dental care is available
to Medicaid beneficiaries. To that end, we have attached these
principles for dental Medicaid reform to assist you as you work to
improve efficiencies in Medicaid.
As the Surgeon General highlighted in his 2000 report, Oral Health
In America, oral health is an essential component of overall health.
The report further states that dental disease is the single most
chronic condition among children in America. Dental disease has also
been linked in recent studies to other diseases such as cardiovascular
disease and pre-term, low birth-weight babies.
Failure to treat dental problems can have serious human
consequences and impose economic burdens on our health care system as
people seek care in more expensive circumstances. Routine primary
dental care saves money: When primary dental services are unavailable,
families will often wait and seek care for their loved ones in hospital
emergency rooms--where they may receive a temporary pain fix that masks
the worsening problem or emergency care that can cost as much as 10
times more than regular care in a dental office.
Lack of access to dental care has affected our national military
readiness, with the Department of Defense reporting that 4 in 10
recruits have dental problems severe enough to preclude their immediate
deployment.--
While Medicaid is a major source of oral health care, enrollment in
Medicaid does not ensure receipt of oral health care services. Less
than one percent of state Medicaid budgets are allocated to preventive
oral health care. Only 7 states provide adult Medicaid dental benefits
and only 20% of Medicaid-eligible children receive any type of dental
care. A 2000 survey of state Medicaid program administrators found that
95% of respondents reported an access problem for lower-income children
in need of dental care. Dental costs for children who receive
preventive dental services early in life are 50% lower than costs for
children who receive care after years of neglect.
Despite these problems, Medicaid has been innovative and has been a
successful laboratory in some states for dental programs and policies
that increase access to dental care for low-income and vulnerable
populations. We stand ready to work with Congress in providing those
best practice models as you seek to improve the Medicaid dental
program.
Millions of low-income children and adults postpone needed dental
care until health emergencies result from uncovered and untreated
dental care. Your committee has the means for correcting the bias in
Medicaid that favors expensive treatment in emergency rooms. We look
forward to working with you and your committee in improving
efficiencies in Medicaid by assuring regular access to routine and
preventive oral health care.
Sincerely,
Academy of General Dentistry; Alliance of the American
Dental Association; American Academy of Oral &
Maxillofacial Pathology; American Academy of Pediatric
Dentistry; American Academy of Periodontology; American
Association of Dental Editors; American Association for
Dental Research; American Association of Oral and
Maxillofacial Surgeons; American Association of Public
Health Dentistry; American Association of Women Dentists;
American Dental Association; American Dental Education
Association; American Dental Hygienists' Association;
American Student Dental Association; Association of State
and Territorial Dental Directors; Children's Dental Health
Project; Dental Trade Alliance; The Hispanic Dental
Association; and the Pierre Fauchard Academy.
(Note: A complete list of organizations that are supporting the
statement of dental Medicaid reform principles will be forthcoming as
other groups continue to sign on.)
Attachment
Dental Medicaid Reform Core Principles & Policies
Given that Medicaid beneficiaries are more likely to access care
than similarly situated uninsured; Given that the dental services
children and adults receive in Medicaid are cost-effective; Given that
dental disease is the single most common chronic disease of children;
Given that parents consistently cite dental as the number one unmet
health need of their children; Given that poor oral health can affect a
child's ability to learn and an adult's ability to obtain a job due to
appearance; Given that untreated oral disease complicates medical
conditions like diabetes and heart disease and may be associated with
pre-term low-birth weight babies; Given that oral disease can
jeopardize the health of Medicaid-eligible elderly and the disabled,
affecting the health and well being of those living in nursing homes;
Given that preventive and routine dental services save overall health
care dollars by avoiding costly visits to the emergency room, the
dental community agrees to the following principles and recommended
policies:
Preserve the Federal Guarantee of Medicaid Coverage, Services and
Consumer Protections
Maintain a federal requirement for dental services for EPSDT
Medicaid-eligible children 1, and extend medically
necessary coverage to adults.
---------------------------------------------------------------------------
\1\ See CMS Guide to Children's Dental Care in Medicaid. October
2004. http://www.cms.hhs.gov/oralhealth/. The Guide was developed for
the use of state Medicaid agencies, dental and other health care
providers, and national, state and local policy makers involved in
organizing and managing oral health care for children under Medicaid's
Early and Periodic Screening, Diagnostic and Treatment (EPSDT) service.
---------------------------------------------------------------------------
Ensure that preventive dental benefits are excluded from cost-sharing
requirements.
Preserve the Federal Financing Role in Medicaid
Maintain the current federal-state financing arrangement within
Medicaid and reject proposals to establish caps on payments to
states.
Update the federal matching formula to address changes in state
economics, and provide an enhanced match for dental services to
ensure a state is able to adequately cover these services for
Medicaid populations.
Allow for flexibility within states without diminishing the existing
federal-state partnership, which includes federal requirements
and/or incentives to enhance program effectiveness.
Assure and Maintain Access to Care Through Adequate Provider
Participation
Provide incentives to states to adopt Medicaid models that mirror
programs dental providers work with in the private sector,
improve access for beneficiaries and facilitate providers'
active participation in the Medicaid program.
Ensure that dental providers receive fair and market-based
compensation for services provided and that compensation is not
decreased by cost-sharing requirements.
Consider utilizing the private market to provide additional dental
coverage options to higher-income Medicaid beneficiaries or
populations not currently covered by the Medicaid program
(e.g., optional dental health savings accounts), and ensure
that any private insurance models offered to Medicaid
beneficiaries provide comprehensive dental benefits.
Maintain equal access provision in federal law to ensure that
beneficiaries within Medicaid have access to dental services in
the same way as beneficiaries in the private
sector.2
---------------------------------------------------------------------------
\2\ See Healthy People 2010--Oral Health Goals and Objectives.
http://www.healthypeople.gov/document/html/volume2/21oral.htm.
---------------------------------------------------------------------------
Support dental targeted case management programs that utilize
Medicaid funds to capitalize on disease management.
Use the Medicaid Waiver Process to Foster Improvements and Innovation,
Not to Eliminate Federal Protections or Reduce Benefits
Ensure that medical necessity criteria does not restrict or eliminate
coverage for oral health/dental care that meets professional
standards and is clinically appropriate, as determined by a
dentist.
Improve the Integrity of Medicaid
Eliminate fraud and abuse within the program and ensure necessary
oversight to determine adequate access to care is provided to
beneficiaries.
Ensure that the financing of the Medicaid program is sound and
responds to market demands and state economic needs.
Recognize the Interdependence of Medicaid and the Public Health System
Facilitate public-private partnerships that improve access for
individuals who access oral health care through a safety-net
provider. Such a partnership may result in private contracts
between safety-net clinics and dental providers and academic
dental institution clinics.
Facilitate the establishment of school-linked programs.
Encourage programs that value prevention and disease management (to
reduce disease burden), are science and evidence-based and
invest in strategies with strong potential for long-term
savings through preventive care.
Mr. Brown. Thank you, Mr. Chairman. I have concerns about
NGA's proposal, as Mr. Dingell does, but at least they didn't
set up a kangaroo court Medicaid commission that puts life-
saving insurance on trial as if Medicaid is an evildoer. The
NGA would cut costs in two ways: by reducing the price of
healthcare and by reducing access to it. There is evidence that
healthcare prices can come down with no ill effects. Drug
makers earn three times the profit of other Fortune 500
industries. Drug prices, for instance, can come down.
There is not evidence that we can reduce Medicaid access
without doing harm. Medicaid enrollees can't afford private
health insurance or higher-cost sharing. RAND's Health
Insurance Experiment found that low-income Americans forsake
essential care when cost-sharing is increased. Kaiser Family
Foundation found that Medicaid beneficiaries already spend more
of their income on healthcare than the rest of us do. Medicaid
only covers medically necessary care. States can use prior
authorization in case management to make sure of it. It is a
myth that Medicaid enrollees receive more care than their
counterparts in privately insured plans. They don't.
Medicaid is expensive because our demographics are
shifting, because private insurance is eroding and----
Chairman Barton. The gentleman----
Mr. Brown. [continuing] because healthcare----
Chairman Barton. The gentleman needs to sum up.
Mr. Brown. I will. Thank you, Mr. Chairman. Let's not
pretend that taking healthcare services away from vulnerable
Americans is an ethical way to reduce a budget or to cover more
people.
Chairman Barton. Thank the gentleman. The gentleman from
Florida, Mr. Bilirakis, is recognized.
Mr. Bilirakis. Thank you, Mr. Chairman. I have a brief
written statement to be made a part of the record and waive an
oral statement.
Chairman Barton. The gentleman yields back. The
distinguished gentleman from California, Mr. Waxman.
Mr. Waxman. Thank you, Mr. Chairman. First of all, this
hearing is prompted by a budget reconciliation, and I want to
point out that budgets are moral documents. They reflect the
values of our Nation, the priorities of our people, who wins
and who loses. And I think we are required all of us to ask on
a bipartisan basis what happens to the poor and the most
vulnerable, especially the Nation's poorest children.
Today we are going to hear from the Governors. They have a
very real perspective about the Medicaid program because so
much of the costs of this program are dumped on them, rather
than absorbed by the Federal Government. I think we ought to
make sure that the changes we make in the name of reform are
simply not shifting cost to others, particularly those least
able to bear them. We should be sure that we are not putting
barriers in the way of participation in Medicaid by the very
people we are trying to reach and not to make changes that add
to the numbers of uninsured in this country, rather than reduce
the numbers of uninsured in this Nation.
We have a budget that I think is immoral. It gives tax
breaks to billionaires, and yet calls for billions of dollars
to be cut out of the program for the very poorest for their
healthcare. Let us not go along with the priorities of that
budget. Let us do what is necessary to make a healthcare
program for the poor in this Nation really work.
Chairman Barton. We thank the gentleman. Does the
distinguished Subcommittee Chairman of Telecommunications, Mr.
Upton, wish to make an opening statement?
Mr. Upton. Waive.
Chairman Barton. Waive. Does Mr. Stearns wish to make an
opening statement?
Mr. Stearns. Yes, I do.
Chairman Barton. Mr. Stearns is recognized.
Mr. Stearns. Thank you. Thank you, Mr. Chairman. I think we
can have a bipartisan discussion on this. I think all of us
remember the same type of thing was in play with welfare, and
we were able to come together, both the House and the Senate
and, finally, the President.
No one said it better than the Tennessee Governor, Phil
Bredesen, who delivered the National Democratic address last
Saturday when he said, ``No. 1, everybody pays something,''--
talking about his Medicaid plan and its reform--``imagine
shopping at a store where nothing has a price tag and you never
get a bill. All of us know you spend a lot more than you do
now. But this is exactly how Medicaid works today. Until there
is a little economic tension, until everyone has a little skin
in the game, the system will continue to be inefficient.'' And
I commend him for his statement, and I think that is
appropriate for all of us to realize, that we need to reform
Medicaid and make the people who are involved to also
participate. Thank you, Mr. Chairman.
Chairman Barton. And we thank the gentleman. Mr. Markey of
Massachusetts.
Mr. Markey. Thank you. The Republicans want to cut taxes
$106 billion in this year's budget. That is why we are here--
the $106 billion tax cut. This is proportionately skewed toward
the wealthiest. And so the price that has to be paid is,
amongst other things, $10 billion cut out of Medicaid to pay
for the tax breaks for the wealthiest. One-third of all babies
born in the United States today are on Medicaid. One-third of
all babies. Two-thirds of all people in nursing homes are on
Medicaid. Doesn't it make sense for the Republicans first to
figure out what are our obligations to those babies and those
seniors; then what is left over is a tax cut? But no. They
decide that first they give the tax breaks to the wealthiest in
the country clubs who have benefited the most, and then let us
figure out how much we cut those babies and how much we cut
Grandma in the nursing home. And that is what we are doing here
today.
This is not about reform, ladies and gentleman. This is
about the Republicans paying for the tax break this year that
they want to give to the wealthiest and taking the money away
from those most in need in our society.
Chairman Barton. Does Mr. Gillmor wish to make an opening
statement?
Mr. Gillmor. Thank you, Mr. Chairman. I have a statement I
would like to enter into the record. But let me just make one
brief comment on the really and detrimental effect growing
Medicaid costs are having in Ohio. Despite efforts at cost
containment, budget strategies, Medicaid expenditures in Ohio
are increasing at twice the rate of State revenues. They now
amount to more than $10 billion. And to put that in
perspective, that is 40 percent of the entire budget of Ohio,
and it is the reason that you are having cuts in schools and in
other areas of State government. And in fact that number is
larger than Ohio's entire State budget in 1987. So I think it
makes the case that there is reform needed. And I yield back.
[The prepared statement of Hon. Paul Gillmor follows:]
Prepared Statement of Hon. Paul E. Gillmor, a Representative in
Congress from the State of Ohio
Thank you, Mr. Chairman for holding this important hearing.
Furthermore, I welcome Governors Huckabee and Warner, and applaud the
National Governors Association's initiative in bringing a bipartisan
Medicaid reform roadmap before us for public consumption.
With a generation of baby boomers growing older, life expectancy on
the rise, a shrinking labor force, and smaller family units, the demand
for long-term care is likely to increase, producing an even further
strain on our nation's Medicaid program. Absent future demographic
realities, there no question that Medicaid is in dire need of
transformation now.
Today, it is safe to say that a majority of states are experiencing
skyrocketing Medicaid costs coupled with declining revenues. In my home
state of Ohio, despite recognizing the reality of a broken system and
enacting a number aggressive cost containment and budget strategies,
Medicaid expenditures are increasing at twice the rate of growth of
state revenues, amounting to a total $10.5 billion. This figure
represents over 40% of the state's general revenue fund spending and is
larger than Ohio's entire state budget in 1987.
In response, the Ohio Commission to Reform Medicaid was formulated
in December 2003, and earlier this January, they released their
recommendations. As we speak, the Ohio state legislature is hard at
work, making great strides to adopt the Commission's recommendations in
an effort to again, root out Medicaid inefficiencies and stunt its
growth.
With the evolution of Medicaid over the years, reform ideas have
come and passed, or simply been swept under the rug. We must take hold
of today's circumstances and remain committed with our governors to
transforming our system into one of personal responsibility, quality,
and efficiency, for our citizens that need it the most.
I look forward to the governors' testimony, again thank the
Chairman, and yield back the remainder of my time.
Chairman Barton. Gentleman from Chicago, Mr. Rush, wish to
make an opening statement?
Mr. Rush. Thank you, Mr. Chairman. Mr. Chairman, just as I
did at the last Medicaid hearing back in April, I really must
voice my disappointment with the premise of this hearing. I
simply don't believe that Medicaid is in any need of reform,
not when there are far more egregious examples of programs and
policies that are in need of reform, and at the same time that
don't disproportionately impact our most vulnerable
populations.
It has been rather telling that this Congress's zeal for
reform is always reserved for matters that affect poor and
working people and never for the waste and abuse generated by
the most privileged ranks of our society. Having said that,
this committee is burdened with the unfortunate task of coming
up with $10 billion in savings in the Medicaid program.
And given this reality, I want to emphasize that it is my
ardent position that absolutely none of the $10 billion in
savings should come from Medicaid beneficiaries themselves. If
we are going to squeeze savings out of the program, then the
burden should fall entirely on those parties and those
interests that are best able to absorb these costs. Medicaid
beneficiaries are some of the most vulnerable and needy
populations in our country and thus, by definition, they are
the least----
Chairman Barton. The gentleman needs to----
Mr. Rush. [continuing] able to bear the costs of these so-
called Medicaid reforms. And I yield back the balance of my
time.
Chairman Barton. We thank the gentleman. Does Mr. Shimkus
wish to make an opening statement?
Mr. Shimkus. I will pass.
Chairman Barton. Does Mrs. Wilson wish to make an opening
statement?
Ms. Wilson. Yes, Mr. Chairman. Thank you, Mr. Chairman, and
thank you for holding this hearing. Over the last 4 years,
every State in the Nation has cut eligibility, benefits, or
payment rates--or all three--in Medicaid. And in general, the
Federal Government has done very little to help the States with
those difficult decisions. Yet the Governors have continued to
get the beans to the barbecue. They have got to balance their
budget, provide services, make tough decisions. And we have
seen plenty of examples of where our failure to help them has
cost them dearly.
Medicaid is set up to pay claims. It is not set up to
improve anyone's health, and it is ripe for reform. It is now
the largest healthcare program in the country, and it is one of
the most complicated programs that we have in the Federal
Government.
I appreciate the Governors being here today, and I also
appreciate their efforts to develop bipartisan ideas to improve
the health status of those who depend upon Medicaid, because
that is what this debate is about. And the health status of
people who are eligible for Medicaid is much lower than it is
for the population as a whole. We should start asking why and
start taking action to fix it. And I yield the balance of my
time.
Chairman Barton. We have one of our Governors here.
Governor, welcome. We are in the process of opening statements,
so we are going to continue that. And at the end of our opening
statements, hopefully, Governor Warner will be here and we will
be able to hear from you. The gentlelady from California, Mrs.
Eshoo.
Ms. Eshoo. Thank you, Mr. Chairman, and good morning to
everyone. On the issue of Medicaid, my entire public service
has been--and previous to my service in the Congress was to
strengthen it, to find ways to be smart in order to save
dollars, afford people access to a much higher level of quality
of care. In the county that I worked in we achieved that. We
are still doing that. It became a model for the Nation.
Now, here in the halls of the Congress, I think that this
whole debate really needs to be placed in the context of both a
moral audit of our budget and our priorities, as well as a
values audit. We are going to talk about all the things that
need to be done in order to come up with this $10 billion. Let
me remind my colleagues--and this is not left, right, or
center; it is a fact of our budget--we are spending a half a
billion dollars a day in Iraq as we walk up and down the halls
in the Congress. This is being driven by over a trillion
dollars in tax cuts----
Chairman Barton. The gentlelady needs to----
Ms. Eshoo. [continuing] where there has been room made--I
am not going to stay for the rest of it, Mr. Chairman, because
I am not going to support the $10 billion cut. And the reason I
am saying it is because we have, I believe, a moral deficit. If
we are for----
Chairman Barton. The gentlelady is 30 seconds over her
time.
Ms. Eshoo. If we are for correcting this and looking for
smart ways to take care of people, I will be a part of it. But
I think there is a real moral deficit in the Congress and in
the budget, and I think it is an outrage.
Chairman Barton. Okay. Does the gentleman from Georgia, Mr.
Norwood, wish to make an opening statement?
Mr. Norwood. Thank you, Mr. Chairman. I will waive my
opening statement.
Chairman Barton. Okay, the gentleman from New Jersey.
Mr. Ferguson. I do, Mr. Chairman.
Chairman Barton. The gentleman is recognized.
Mr. Ferguson. Mr. Chairman, thank you for holding this
hearing, and I will continue the committee's work toward
reforming Medicaid. It has been said many times in this
committee and elsewhere, Medicaid is broken, it is hemorrhaging
money, it is simply unsustainable in its current form, and,
quite frankly, it is not serving those it was designed to serve
in the first place.
Governor Mark Warner said this past April, ``Medicaid at 53
million Americans is going to bankrupt all of the States, and
indirectly, then, lead to further deficit problems at the
Federal level and over the next decade.'' Our Governors
recognize, Governor Warner recognizes that Medicaid is broken.
It needs to be fixed. I look forward to their recommendations
and their insights into what we can do to help make this
program more efficient and more effective.
Over the next 10 years Medicaid is slated to cost $4.5
trillion. It is already surpassing elementary and secondary
education in most State budgets. And I will say, Mr. Chairman,
that the problems that we face in Medicaid and the needs that
we have to reform Medicaid have little to do with tax cuts;
they have little to do with tax relief. It has everything to do
with the fact that it is a government program that is simply
not serving those it is meant to serve. And those one-third of
babies born today who are on Medicaid, the two-thirds of those
in nursing homes today who are on Medicaid, it is simply not
serving their needs. That is why this program----
Chairman Barton. Gentleman's----
Mr. Ferguson. [continuing] needs to be reformed.
Chairman Barton. [continuing] time has expired.
The gentleman from Michigan, Mr. Stupak.
Mr. Stupak. Thank you, Mr. Chairman. I ask that my whole
statement be made a part of the record.
Chairman Barton. Without objection.
Mr. Stupak. I just think the highlight in my State of
Michigan, Medicaid accounts for 25 percent of the State's
budget. The trouble in Michigan is an economy that is
struggling to cope with a wave of manufacturing jobs being
shipped overseas. Under Governor Jennifer Granholm growth in
Medicaid spending has been held at a mere 1.5 percent per year,
even though the Medicaid rolls have grown by 30 percent. That
is evidence to me that Medicaid is flexible, and that Governor
Granholm has done a great job of meeting this challenge.
The proposal we are going to hear today from the Governors
calls for more flexibility in setting premiums, co-pays, and
benefits offered. I think we need to look very carefully at the
consequences of these options. When Oregon increased its
premiums, its rolls dropped by 50 percent. That is an alarming
statistic. With an aging population and a weak economy, this is
not the time to cut the safety net out from a population in
need. So I hope we look very carefully at these proposals
today. And with that, I will yield back my remaining 4 seconds.
Chairman Barton. We thank the gentleman from Michigan.
Gentlelady from California, Mrs. Bono, wish to make an opening
statement?
Ms. Bono. Thank you, Mr. Chairman. I will waive.
Chairman Barton. Does the gentleman from Oregon wish to
make an opening statement?
Mr. Walden. Thank you, Mr. Chairman, I do.
Chairman Barton. Gentleman is recognized.
Mr. Walden. When I served in the Oregon legislature, I
worked closely for a number of sessions on the creation of the
Oregon Health Plan, an effort to expand Medicaid coverage to
those who didn't have it by providing more preventive care and
reaching out and trying to get the most use of the money so we
could cover the most people. When we talk about this being a
moral decision, I think it is.
And, Mr. Chairman, your Oversight and Investigation
Subcommittee has held numerous hearings on Medicaid issues, and
clearly, there are areas that require our involvement to reform
Medicaid. In some cases we found, for example, that Medicaid
paid up to $5,336 for a drug that only costs a pharmacy $88 to
acquire. That is a waste of $5,200 on one drug. Now, that is
probably the worst example we found, but overall, we found that
pharmacies' acquisition cost for generic drugs would be an
average of nearly 66 percent below the average wholesale price.
So, Mr. Chairman, I think there is room here, especially when
Medicaid is still paying for drugs like Viagra for convicted
sex offenders, to improve both the moral and fiscal standing of
Medicaid. With that I return the balance of my time and ask
that my full statement be entered into the record.
Chairman Barton. Without objection, so ordered.
Does Mr. Engel wish to make an opening statement?
Mr. Engel. Yes, thank you, Mr. Chairman. Slashing funding
to Medicaid is not a viable solution to greater budgetary
problems. Just 2 years ago we gave States an additional $10
billion and desperately needed FMAP funding. And this year we
have been instructed in Energy and Commerce to cut Medicaid by
$10 billion at a time when our citizens need it most. Medicaid
was intended to be elastic to respond to our changing
populations in time of need. Parts of the NGA proposal worry me
because it advocates raising premiums, deductibles, and co-
payments, which could clearly make healthcare services
unaffordable and out of reach for the Medicaid program's low-
income population.
NGA calls it personal responsibility. But what about the
low-income mother trying to care for her family by stretching
her budget to cover housing, electricity, food, clothing, and
now, increased cost-sharing and co-payments for medical care. I
can assure you, these mothers are as familiar with personality
responsibility and strapped budgets as any Governor in our
Nation. I want to add my voice to those who say that the fact
of the matter that tax cuts are a priority for this Congress
and this Administration makes all the other funding
unavailable. And the root of the problem with Medicaid are the
tax cuts, as is the root of the problem--all the other programs
that we don't have enough money to adequately fund. So I thank
you, Mr. Chairman. I look forward to hearing our witnesses.
Chairman Barton. We thank the gentleman. The gentleman from
Idaho wish to make an opening statement? Gentleman from
California, Mr. Radanovich, wish to make an opening statement?
Mr. Radanovich. Thanks, Mr. Chairman. I waive.
Chairman Barton. The gentleman from Texas, Dr. Burgess.
Mr. Burgess. Mr. Chairman, in the interest of time, I will
submit my statement for the record.
Chairman Barton. All right. The gentlelady from North
Carolina, Ms. Myrick.
Ms. Myrick. No, I waive my time.
Chairman Barton. Gentleman from Pennsylvania, Mr. Murphy.
Mr. Murphy. Mr. Chairman, I will submit my whole statement
for the record, but briefly, I just want to add that----
Chairman Barton. The gentleman is recognized.
Mr. Murphy. Thank you, sir. That with regard to this
discussion, I am pleased that you are holding this hearing and
the Governors are testifying, particularly because we need to
change this discussion from who is paying to what we are paying
for. What is incredible in America, our dirty little secret, is
the amount of money we waste. And this has nothing to do with
compassion. If we really want to talk about compassion, let us
talk about what we waste. Every year in America from medical
errors, every day in America, the number of deaths that occur
is equivalent to a 747 flight going down. That is how bad it
is. And a lot of these things are things Medicaid continues to
pay for. If we have real compassion for our citizens, which we
do, and I applaud the Governors for taking lead on it, let us
stop the errors that are wasting money, that are causing
deaths, that are causing more hospitalizations and more harm,
and let us get down to the business of showing real compassion
and fixing this for America. Thank you, Mr. Chairman.
Chairman Barton. Okay. Gentleman from Maryland, Mr. Wynn,
wish to make an opening statement?
Mr. Wynn. Thank you, Mr. Chairman. I will waive at this
time.
Chairman Barton. Gentleman from Texas, Mr. Green.
Mr. Green. Thank you, Mr. Chairman, and I appreciate your
holding the hearing on Medicaid reform and, again, having the
Governors here, because Governors certainly have a large stake
in Medicaid reform and deserve a seat at the table. Without a
voice today are the folks who undeniably have the single
largest stake in the Medicaid reform, and they are the
beneficiaries. The beneficiary who would be most affected by
the National Governors Association roadmap, particularly its
benefit-targeting and cost-sharing proposals.
Medicaid was designed to provide healthcare to the most
vulnerable populations that cannot afford healthcare, and
frankly, do not have the means to share this cost. Faced with
limited means and the cost-sharing requirements proposed by the
NGA, Medicaid beneficiaries will likely avoid seeking necessary
healthcare. The result would be poorer health outcomes,
increased ER utilization, and increased uncompensated care that
would drive up health costs for all Americans.
In my State of Texas, the cost of treating the uninsured
has caused the family insurance premiums to increase by $1,500
in 2005. And make no mistake, Medicaid is the health insurer of
last resort in our country, and if the NGA's Proposal takes
away that safety net, then that population will go to our
emergency rooms and continue to have uncompensated care. Mr.
Chairman, I would like to have my full statement placed in the
record.
Chairman Barton. Without objection, so ordered.
Gentleman from Ohio, Mr. Strickland.
Mr. Strickland. Mr. Chairman, Medicaid serves over 50
million low-income individuals per year, and that number
continues to increase but at no fault of Medicaid, which
actually provides services more cost-effectively than the
private sector. The burden on Medicaid is increasing because
people are losing their jobs, and therefore, their employer-
sponsored health insurance. The burden on Medicaid is
increasing because our population is getting older, and the
elderly need long-term care. It would be an injustice not to
put the Medicaid debate into a meaningful context.
We are searching for $10 billion of savings in a program
that serves the poorest, and spending one-half billion dollars
a day in Iraq with no end in sight. We should search our hearts
as we make these decisions. We sit here with salaries of more
than $150,000 a year. We have healthcare subsidized by the
American taxpayer, and we are taking healthcare from the most
vulnerable among us. It is a moral issue. Jesus said, ``As
often as you have done it unto the least of these, you have
done it unto me.'' I yield back.
Chairman Barton. The gentleman's time has expired. The
Gentlelady from California, Mrs. Capps.
Ms. Capps. Thank you, Mr. Chairman, and welcome, Mr.
Governor. Today we will hear proposals to change Medicaid. The
advocates of these proposals will describe them as ways to
improve Medicaid and expand its benefits. I heard this from the
Budget Committee Chairman as well. Ultimately, the goal is to
reduce costs. Reducing costs is a laudable goal, but only so
long as it does not hurt the beneficiaries of the program.
There are only two significant ways to cut costs in Medicaid:
one is to kick people out of the program; the other is to
eliminate covered benefits, which are already limited to
services medically necessary. Medicaid beneficiaries are 28
million poor children, 16 million poor working parents, 6
million elderly and dying and disabled. They can't afford to
pay more for healthcare. That is why they are on Medicaid.
These approaches will add to the ranks of the uninsured. It
will increase the amount of uncompensated care. Both are going
to cost us a lot more in the long run. I yield back.
Chairman Barton. Gentleman from Mississippi wish to make an
opening statement? Okay. Gentleman from Maine, Mr. Allen.
Mr. Allen. Thank you, Mr. Chairman. I note that page one of
the report of the Governors recognizes that the Medicaid
program is extremely cost-effective compared to private sector
healthcare. We are at an historic crossroads. Just 2 years ago
Congress approved a $10 billion FMAP increase. Now, we are
facing a $10 billion cut to Medicaid, even as the number of
uninsured in our country has risen to 45 million. Cutting
Medicaid would have a devastating impact on the most vulnerable
in our society. It will unravel an already fraying health
safety net jeopardizing support for providers like hospitals,
clinics, doctors, and health plans that serve low-income
people. With Medicaid funding half the Nation's nursing home
care, cutting or block granting the program would jeopardize
the quality of care provided to seniors and people with
disabilities in the Nation's nursing homes. Maine will lose $76
million over 5 years if this $10 billion cut takes place. We
need a better plan, and I hope you can help. Thank you.
Chairman Barton. The gentlelady from Illinois, Ms.
Schakowsky.
Ms. Schakowsky. Let us at least be honest today. This is
not about money and it is not about reform. It is about
priorities. And in this richest Nation in the history of the
world, poor people, the most vulnerable people, are clearly not
a priority for the Republican majority. We are not forced to
make these cuts. We are doing it at the same time as we are
giving billions of dollars in tax breaks to the wealthiest. In
fact a trillion dollars in tax breaks to the 52,000 richest
families in this country by eliminating the inheritance tax,
while we are asking more of those who are already paying more
out of their income for healthcare than we who are sitting
right here. That is the reform--that we are going to ask these
most vulnerable of Americans to pay more for healthcare than
they do already. If we want to talk about reform, let us talk
about provider abuse, or let us talk about waste. But what we
are really talking about today in large part is taking money
out of the pockets of persons with disabilities, low-income
children, and pregnant women. This is wrong. I think we should
start over and come up with a real plan for reform for Medicaid
that provides our poor people what they need. Thank you.
Chairman Barton. We thank the gentlelady. Does the
distinguished whip of the committee, Mr. Shadegg, wish to make
an opening statement?
Mr. Shadegg. I waive.
Chairman Barton. The gentlelady from California, Ms. Solis.
Ms. Solis. Thank you, Mr. Chairman, yes. I would like to
commend you for having this hearing this afternoon, but I am
also disturbed, because as you know, Medicaid provides
healthcare coverage for over 50 million individuals currently.
And 24 million of those are children. In fact one in three
Latino children receives healthcare through Medicaid.
While plenty of Americans live without health insurance,
programs like Medicaid are often the only means and only source
of protection for families and children. Medicaid is so vital
for many Americans and especially Latinos, fastest growing
population, 9 million Latinos receiving healthcare through
Medicaid.
We have all heard from our States about their cutbacks that
they are proposing in their budgets. The impacts will be
devastating on Medicaid, especially in the State of California.
And at a time when States are seeing rising rates of Medicaid
enrollment for children, we are proposing here to cut back. I
think that is the wrong, wrong solution, and we need to come
back at the table, organize, and make sure that we are more
inclusive, and that we realistically allow for States like
California that have been able to meet unmet needs in a way
that is very innovative, that we should really look at that and
use that perhaps as a model. Yield back the balance of my time.
Chairman Barton. The gentlelady yields back the balance of
time. Chair comments that her outfit is the most photogenic yet
on the monitor. That pink looks very good on television. I
wouldn't recommend it. Does the gentlelady from Tennessee wish
to make an opening statement?
Ms. Blackburn. Thank you, Mr. Chairman. Yes, I do, and I
want to thank you for holding this important hearing. I also
want to thank you for inviting my neighbors from Virginia and
Arkansas, who are well aware of the many issues surrounding
Tennessee. It is a decade-long Medicaid transformation, which
is an expanded delivery system known at TennCare. And we have
heard some about it this morning. And as you know, Tennessee is
in the process of reducing our TennCare rolls by over 323,000
individuals. This program is based on unattainable
expectations, poor cost estimates, and it has proven to be too
much for our State's budget to bear. It is now over one-third
of our State's $26 billion budget. As I speak, the TennCare
Bureau is mailing letters to enrollees throughout Tennessee
notifying them of the dis-enrollment process. Having come from
the State Senate in Tennessee to this position, I have all too
familiar a working knowledge of the program.
I thank the chairman for addressing the issue before States
are forced to take some of the same steps as Tennessee. I also
appreciate the work of the Budget Committee and the resulting
Budget Reconciliation Agreement that has brought the issue to
the forefront. Without addressing needed reforms, the future of
Medicaid is ominous. As Governor Warner mentioned earlier this
year, and I quote him, ``What is happening in Tennessee is a
precursor to what is going to happen in every State in the
country. It is just a matter of when.''
Chairman Barton. The gentlelady's time has expired.
Ms. Blackburn. Thank you, Mr. Chairman.
Chairman Barton. The gentlelady from Wisconsin, Ms.
Baldwin.
Ms. Baldwin. Thank you, Mr. Chairman. I welcome today's
opportunity to talk about Medicaid. And against the backdrop of
continuous and repeated criticisms of the program, some of
which are unfounded, I think it is important that we take a
moment to focus on what Medicaid actually is. Medicaid is a
last resort that prevents millions of Americans from joining
the ranks of the uninsured. It is a safety net.
I also think it is important for us to remember that
Medicaid truly serves a very low-income population. The current
Federal poverty level for a family of four is $19,350 a year.
This is not a population that has additional resources to be
able to afford increased co-payments or other cost-sharing
mechanisms. I can imagine nothing worse than having to decide
between the health of your sick child or food for your family.
Last, thank you, Mr. Chairman, for your earlier commitment
to holding additional hearings on this topic that include the
perspective of the beneficiaries.
Chairman Barton. Does the gentleman from Michigan, Mr.
Rogers, wish to make an opening statement? Okay. We are going
to recognize Mr. Ross and give him additional time if he wishes
to formally introduce his Governor to the committee.
Mr. Ross. Thank you, Mr. Chairman. I would like to take
this opportunity to thank the National Governors Association,
the chairman-elect of the National Governors Association,
Governor Mike Huckabee, from my own home State of Arkansas for
being here with us today. Some people know this, some don't,
but actually, not only are we from the same State, we are from
the same hometown of Hope, Arkansas, both graduates of----
Chairman Barton. Is everybody from Arkansas----
Mr. Ross. [continuing] Hope High School.
Chairman Barton. [continuing] from Hope, Arkansas.
Mr. Ross. Well, there is about 10,000 of us, Mr. Chairman.
Both graduates of Hope High School, although he graduated a few
years before I did. We both worked at the same radio station
growing up, and all I can figure out is while I was drinking
from the water fountain by the library, he was drinking from
the water fountain on the south side of the building because I
am a ``D'' and he is an ``R'', but we do get along quite well,
and I welcome him to the committee here today. When he finishes
this term as Governor, he will be the longest-serving Governor
at the current time in the Nation. And I had the privilege to
get to know him when he was our lieutenant Governor and
presided over the State Senate where I served for 10 years.
I would like to take this opportunity not only to welcome
Governor Huckabee here today but to point out to this committee
that Medicaid program is absolutely crucial to our home State
of Arkansas. Recent numbers show that there are 717,000
Medicaid cases in our State. And, Mr. Chairman, to put that in
perspective, that is one in five people in Arkansas that
receive Medicaid. Over half the children in Arkansas are on
Medicaid or have received Medicaid services in the last year,
and close to 80 percent of Arkansas nursing home residents are
paid for by Medicaid. I believe it is crucial that any changes
or reforms to this program do not come at the expense of the
necessary benefits that these individuals currently rely on.
Any changes, any changes whatsoever that have the potential to
shift these beneficiaries out of the program will only add to
the number of uninsured and result in increased illnesses and
higher healthcare cost.
And with that, Mr. Chairman, I want to thank you for giving
me the opportunity today to introduce my Governor from my
hometown of Hope, Arkansas, Governor Mike Huckabee.
Chairman Barton. We see no other member who is a member of
the committee present. The Chair is going to conclude the
opening statements. The Chair would recognize Dr. Gingrey of
Georgia who is not a member of the committee, but has asked to
sit in and observe the hearing. He is not going to be allowed
to ask questions, but we are appreciative of his presence.
We do want to welcome both of our Governors. We have
Governor Huckabee of the great State of Arkansas and Governor
Warner of the great State of Virginia. We are going to
recognize Governor Huckabee first since he was here first, and
then Governor Warner.
I will say about Hope, Arkansas--I had a car break down in
Hope, Arkansas on Bill Clinton Drive. I kid you not. And I went
to the convenience store, and the lady that ran the convenience
store took me to the auto parts store to pick up the part for
the car and watched me try to fix it for 15 minutes and told me
to get out of the way and she would fix it for me. And she did.
And I told her that I was a Republican, and she said she didn't
care. It was obvious that I didn't know what to do with my
hands and she could make it happen. That is a true story on
Bill Clinton Drive in Hope, Arkansas.
Now, Governor Huckabee, we do recognize you, sir. We are
going to recognize you for such time as you may consume, which
we hope will be less than 10 minutes. We are going to set the
clock for 10 minutes. After we hear your testimony, we will
recognize Governor Warner; then we will start the questions. We
understand that you, Governor Huckabee, have to leave by 12:45.
So welcome to the Energy and Commerce Committee. Your statement
is in the record in its entirety, and we recognize you to
comment on it. You have to push the little button to turn the
microphone on. No, it is right on your microphone there.
Governor Huckabee. There we go.
Chairman Barton. All right.
STATEMENTS OF HON. MIKE HUCKABEE, GOVERNOR, STATE OF ARKANSAS;
AND HON. MARK WARNER, GOVERNOR, STATE OF VIRGINIA
Governor Huckabee. Maybe I need that lady that fixed your
car to come turn this microphone on, Mr. Chairman. Mr.
Chairman, thank you very much. And let me say a word of thanks
to my friend, Congressman Ross from Arkansas. He and I do get
along quite well, and it is a pleasure to work with him on
issues there. From some of the comments it seems like Governor
Warner and I and Congressman Ross and I get along a lot better
than some of you guys do. Let me just say that.
But we are here today to present some proposals from some
of the National Governors Association that really do represent
not an ending point, but a beginning point, for how we can
improve the quality of healthcare to the neediest citizens. We
are not here to see if we can make it more difficult for people
to get healthcare. We are not here to see if we can cut people
off the rolls. We are not here to see if we can hurt people.
Let me assure you, the last thing on earth any Governor wants
to do is to hurt the people he has been elected to serve.
My wife and I participated in an activity for over two,
almost 3 years where every single month we would go into the
home and have dinner with a family who was on Medicaid. Why did
we do that? Because we wanted to sit down and actually see and
talk to them and ask them what problems do you have with the
program? How would you fix it? How could you improve it? It was
one of the most enriching experiences of our lives. The truth
is, as a kid growing up, I wasn't many dollars away from being
a person who would have been on Medicaid. The only reason I
wasn't is because my parents were too proud to have accepted
it. They would have wanted to pay something in in order to
access it.
Medicaid program is a great program. We are not here to
criticize it. We are here to improve it. The fact is, it is a
40-year-old program. Next month will mark its 40th anniversary.
For 40 years it has been a safety net, but a lot has changed in
40 years. 40 years ago the No. 1 song on the Billboard charts
was the Beatles song ``Help'', probably a good anthem for today
because that is why we are here, help. The top three television
programs in America were ``I Love Lucy'', ``Hazel'', and
``Bewitched''. The average family income was $5,900. A loaf of
bread cost 21 cents. A gallon of gas cost 24 cents. A new
Chevrolet cost $2,350.
A lot has changed. Today, we are trying to run an MP3
health program on a 45 RPM standard. And we need to make some
changes. We are here to present to you some changes that have
come as a result of meticulous, tedious, and often very
delicate work of 50 Governors, in particular, some 10 Governors
who have worked very diligently on a taskforce, both
Republicans and Democrats. What is remarkable about our
proposals is that these discussions are not simply the
consensus or even the work of a majority; they are the work of
the unanimous consent of both Democrat and Republican Governors
representing the full ideological spectrum, but all of whom
share this common conviction: while we all want to continue
helping the people of our States, we all recognize that the
program, as it is currently designed, as it is currently
administered, is unsustainable. We simply are asking for the
opportunity to improve it, to reform it, to make it better.
There are 43 million Americans who don't have any coverage
whatsoever. They are off the cliff. We want to make sure that
with some reforms that we are presenting today, that it might
be possible to better utilize the resources that you have and
that we have so that rather than see how many people we can
uncover, we can find creative ways to cover actually more
people.
My colleague, Governor Warner, who has been an outstanding
leader not only of the National Governors Association, but also
of this effort, will be addressing some of the larger, broad-
based concerns in a moment. But let me mention seven specific
areas that I am going to touch upon ever so briefly that we are
going to ask you to give us the opportunity to administrate.
Now, I would like to remind you that a few years ago there
was a real concern when Governors brought welfare reform
proposals to Congress. The attitude was this will be a race to
the bottom. It will be a disaster if we give Governors that
flexibility. Although people will be poorer than they have ever
been, they will be just ruined. But the proof is that after
having implemented those flexibilities in the very kind of
programs we are asking you to give us with Medicaid reform,
more people are at work and fewer are on welfare, and we have
actually improved a system that was a hopeless nightmare for so
many, many Americans. We ask you to give us that same
consideration, recognizing that there are clear divides here in
Congress.
But let me say emphatically we are not divided among the
Governors. This is not simply a proposal that has strong
majority presence among Governors and tepid acceptance on the
part of the minority. This has unanimous support and strong
support of all the Governors of all the States. That has not
been an easy task to get us to that same place, and in part
because Medicaid is not a program; it is 50 separate programs.
And if there is one important message to get across to everyone
across America is that it is not a one-size-fits-all. Every
State plan is unique and different to that particular State.
Even the reimbursements rates vary from State to State. And the
components of what we consider to be the optional programs
vary. That is why the reforms are delicate and difficult to
come to. But these we have presented.
First, changing the prescription drug aspect by making the
program more transparent and insuring that whatever reforms we
have are not at the expense of the local pharmacist, who, in
many cases, is the only point of service health provider in
rural communities. All stakeholders in the prescription drug
pharmacy issue should have a stake in helping to reform it,
including the pharmaceutical companies, as well as the
pharmacist and the State government. But the system is
hopelessly and irreparably broken because it is non-transparent
and is a system of gaining in the pricing structure that makes
it impossible to appropriately administer. Give us the tools
that any CEO managing a healthcare program would ask for, to
better price those prescription drugs. That is what we ask for.
We don't ask for you to give us the ability to cut people off,
but to manage the resources so that people are getting the
drugs they need at a price that makes sense.
Second, changes in the asset policy. There is a growing
concern that many people are able, particularly those with
great wealth because they can hire the best accountants and
attorneys to shift their assets, to spin down and divest
themselves so that they can become Medicaid eligible for long-
term care. There needs to be reforms in that.
A third thing, modifying Medicaid's cost-sharing rules. I
realize this is a sticky wicket for many. But let me assure you
that many of our States have some serious evidence-based
background in having some co-payment based on some services. We
were able to actually reduce the number of uninsured children
by more than 39 percent and lead the Nation, as a State of
Arkansas, by expanding coverage to children but by having a
very modest co-pay. We are not asking for families to have an
undue burden. The burden would not exceed more than 5 percent
of family income. What we have found--and, again, we have an 8-
year record to base it on--is that families welcome the
opportunity to be able to have some stake in the game and a
sense of pride. And in addition to that, more importantly, we
have been able to contain some of the unusual utilization when
people go needlessly to the emergency room instead of waiting
the next day to the clinic like I have to do on my State health
plan.
The fourth is creating a benefit package flexibility. This
simply allows States to perform targeted services in a more
effective way.
The next proposal deals with developing comprehensive
waiver reform. Waivers are complicated, they are often
convoluted, they sometimes mean that rather than to expand
services or to operate more efficiently, we spend months if not
years trying to get permission to do something that would make,
frankly, your budget easier, but more importantly, would
provide care to people who have nothing right now.
A very important area is judicial reform. And, frankly,
this is foundation and fundamental to virtually everything else
we are going to ask for. Right now, if we make reforms in our
State plan, chances are we are going to get sued. We will go to
Federal court, and two things will happen: the first thing is,
the Department of Health and Human Services will abandon us and
leave us to our own, not even so much as filing a Friend of the
Court Brief; and the second thing that happens, we lose the
lawsuit. We need some opportunity to deal with both the consent
decree issue for States, as well as being able to make sure
that if the Federal Government gives us permission and
authority to do something, they at least will stick with us
when we are sued over having done what they agreed to support.
And then to make some reforms in the way that the
commonwealths and territories are created. Our colleagues who
govern the territories are at an extraordinary disadvantage
when it comes to the Medicaid program, and some of them are
paying now as much as 80 percent of the cost, more than any of
us as States, are paying. And while this is not a huge
budgetary issue, it is a critical reform issue that needs to be
addressed for the most vulnerable citizens of that State.
Mr. Chairman, we welcome your questions and the opportunity
to engage in the debate with you today and the discussion, but
we certainly come primarily with a sense of anticipation,
excitement, and real hope that you will hear from those of us
who administer these programs in our States and knowing that it
is not our intention to see if we can hurt people. It is our
intention to see what we can do to help people that we do care
for. Thank you.
Chairman Barton. Thank you, Governor Huckabee. Before we
recognize Governor Warner, we have a distinguished visitor with
us today. Congressman Brown's daughter is with us from
Brooklyn. She is a graduate of Swarthmore College; she is a
union organizer; she speaks fluent Spanish; she is here today
to help her father in some discussions with some Central
American dignitaries. If Emily would stand up and let us
recognize her. We are always glad to have talent on the dais,
even when it is----
Mr. Brown. Especially when it exceeds out.
Chairman Barton. [continuing] behind us. We want to
recognize you, Governor Warner. We appreciate the strong work
you have done on this issue. You, I believe, headed the
taskforce of the Governors on this and have spent quite a bit
of time on it. Congressman Boucher is not here to formally
welcome you to committee, but I know that he speaks very highly
of you. And were he here, he would tell you what a great job
you have been doing as Governor of Virginia. So we also
recognize you for such time as you may consume. We have set the
clock at 10 minutes.
STATEMENT OF HON. MARK WARNER
Governor Warner. Thank you, Mr. Chairman, and I will try
not to take that full 10 minutes so that we can get into the
question discussion. Let me also apologize for being a bit
late. Your colleagues on the Senate side kept me a little bit
longer with some questions. We have been doing this tag-team
effort today. And let me start by thanking my colleague and
partner in this effort, Mike Huckabee, although, after hearing
Mr. Ross' comments, is it actually the case if you are from
Hope as well and Mike Huckabee--is every Arkansas elected
official from Hope, Arkansas----
Chairman Barton. That was what I asked before you got here.
Governor Warner. But Mike Huckabee has been a great
partner, and I want to reinforce what he has already said. This
has been a long process to get to this document. We have had,
literally, over 35 Governors and/or their Medicaid directors
actively engaged in putting this document together. And none of
the other Governors--while some of the others haven't fully
participated--no one has opted out. So we truly do have a
bipartisan proposal before you. It is a proposal that we all
recognize is geared at making not only Medicaid more efficient,
but also making sure that those Americans, both on Medicaid and
equally important, those 45 million Americans without
healthcare and those Americans on the edge who still have some
form of health insurance that may be on the verge of being
dropped onto the Medicaid rolls have a more efficient system.
Now, let me just again--Mike mentioned what he and Janet
have done. Let me just put a little bit of my very briefly
personal background. Before I became Governor, long before I
was even involved in politics, one of the things I am proudest
of, I started a healthcare foundation in Virginia back in 1992
when there were a million Virginians without healthcare,
public/private initiative. We have helped 600,000 Virginians
get healthcare. Great success story. Problem is, 2005, 13 years
later, we still have a million Virginians without healthcare.
So grappling with this issue is something that is terribly
important.
Well, one of the things that I have been proudest of is
during my tenure as Governor, we have taken our State, which
had one of the worst records of signing up children for
children's health insurance and aggressive changed the way we
enlisted kids. We have actually even lowered the co-pays and
eliminated in some case on this initiative. And now, we are up
to 97 percent of our eligible kids being signed up and have
recognized by Kaiser as--during the budget trough as one of the
most effective States.
But even with those actions I want to echo what my
colleague has already said; Medicaid as it is currently
structured is not sustainable over the long haul, and we must
find ways to improve the program. In Virginia in 1990 the
Commonwealth was spending $1 billion on Medicaid expenditures.
Into this budget cycle we are going to be spending $5 million.
Now, I wouldn't mind that fivefold increase if we had actually
substantially improved coverage or improved the quality of
care. But too many times, unfortunately, we have not improved
coverage or substantially increased payments to providers or
expanded services. So we believe, as Governors--and let me give
you a couple starting points since--when we started on the
Senate side I started with the broad overview.
First, we believe this debate should be policy-driven and
not budget-driven. And that has been the bipartisan consensus
of the Governors. We strongly continue to appose caps or a
block granting of this program. This is a Federal-State
partnership that should continue. But we do recognize that we
are going to need some additional efficiencies, that we are
going to need some additional flexibility. Governor Huckabee
went through some of the specific items.
Again, in terms of framing the problem very briefly,
Medicaid expenditures now--and we went back and forth with some
of your Senate colleagues on this--combined State and Federal
Medicaid expenditures in aggregate outpace education
expenditures, K-12. In some States, I believe Missouri,
Tennessee, we are looking at 30, 33 percent of total State
expenditures being driven on Medicaid. We in Virginia are down
still about 15 percent because we are a very, very low
reimbursement State. But we can see the increase lines.
And why is this happening? Well, we have seen, obviously,
that Medicaid is increasingly serving a number of low-income,
frail seniors, people with mental and physical disabilities.
And this population, while it is only about 25 percent of our
total caseload, drives about 70 percent of the costs.
Dual eligibles, one of those cost shifts that has kind of
taken place over years, now make up about 42 percent of total
Medicaid spending. We have seen increase in caseloads, and we
are proud of the fact that we have upgraded our SCHIP program
and what Mike has done with his program covering kids in
Arkansas. But we are also seeing a series of other cost shifts
going. We are seeing increasing numbers of employers decide to
no longer provide health insurance, and in some cases, actually
encouraging their workers to go on Medicaid rolls.
And in terms of long-term care, as Governor Huckabee
mentioned, we cannot continue to be--with the baby-booming
generation heading toward retirement--Medicaid cannot continue
to be the single-largest by a manyfold factor provider of long-
term healthcare insurance for, in some cases, two-thirds of our
senior population.
So what we have laid out for you today is kind of a dual
approach. And this is a starting point, let me make clear, not
the ending point. Medicaid reform cannot be done in isolation
as if it is some island inside the healthcare system. We have
to look at this in an overall context. But at least in the
short-term, not only in terms of some of the efficiency or
reforms we are talking about, but we also think they need to be
coupled with certain areas of reinvestment and certain other
areas where we can prevent increasing populations from falling
upon the Medicaid rolls. And let share with you some of those
in fact non-Medicaid-related goals.
First--and I know folks on both sides of the aisle talk
about this repeatedly, but it is my hope, as somebody who has
spent 20 years in the technology industry, that we can move
from talk to action, that we can finally bring the power of
information technology to our healthcare system. It is
remarkable in 2005 that we still don't have electronic medical
records, that we have not used the efficiencies that IT have
brought to every other sector of our economy, to the, what, 14,
15 percent of our economy that is made up in healthcare.
Second, we are open to looking at what we hope would be
Federal tax credits for employers and employees, particularly
on the employer side for small business, to create at least
some modified benefit package that can be available on the
private insurance side so that folks on that margin that either
fall in the uninsured category or are about to fall in the
uninsured category can have some form of private health
insurance that they can purchase. And we think we ought to be
looking at stretching a little bit on purchasing pools and
other tools to get the aggregate numbers we will need to
provide health insurance for these individuals who otherwise,
through no fault of their own, may fall upon the Medicaid
rolls.
And third, we must change the whole framework on the long-
term care debate. And part of that means changing the mindset
of young folks when they start thinking about buying health
insurance or life insurance, that they also purchase long-term
care insurance. We would, again--I know that there is proposals
on the House side, there are proposals on the Senate side to
look at tax credits for incentives to purchase long-term care
insurance. We support those.
We are also looking at other tools so that we can both with
carrots and sticks look at this asset transfer issue in a
broader context. At least in Virginia, we don't know how much
of this, in an abuse way, is going on. But we do know it is
kind of an all-or-nothing situation where too many middle-class
adults are finding ways to perhaps dispose of Mom and Dad's
assets before they go into a nursing home so they can be
eligible for Medicaid. We have got to think about it in a
different way. One of the things we are putting forward, for
example, is the notion of reversed mortgages, reversed
mortgages with an ability to keep at least some equity in your
home that could be passed on to your heirs and perhaps use some
of that other equity that has been built up to actually provide
in-home care or other non-nursing home type care.
These are all tools that we think we need to move forward
on outside of the kind of four walls of Medicaid if we are
going to at least take a step toward making sure that this
reform effort is really not budget-driven simply, but is
actually policy-driven and driven at the goal of improving the
quality of healthcare for our most vulnerable citizens. Thank
you, Mr. Chairman.
[The prepared statement of Hon. Mike Huckabee and Hon. Mark
Warner follows:]
Prepared Statement of Governor Mark R. Warner, Chairman and Governor
Mike Huckabee, Vice Chairman, National Governors Association
Mr. Chairman and distinguished members of the Energy and Commerce
Committee. Thank you for requesting that we testify today on ways to
address the significant challenges confronting the Medicaid Program.
Today we are releasing a preliminary policy paper that outlines the
recommendations of the National Governors Association for Medicaid
Reform. The recommendations represent work by eleven governors on a
Medicaid Working Group with additional input by most governors,
including their Medicaid Directors. These recommendations are
preliminary in that we will continue the working group over the next
year so that we can complete our work and provide Congress and the
administration with further clarifications of our policy as well as our
further recommendations. We also look forward to working with the
Medicaid Commission and have offered Secretary Leavitt the NGA Center
for Best Practices to assist him in the Commission's work.
It is also important for us to stress the fact that we see today's
release of policy recommendations as the beginning, not the end, of the
process. We hope that both your committee and your staff will be
willing to work closely with NGA and the working group governors as you
develop policies to make the nation's public health insurance programs
more efficient, accountable, and responsive. Given that this working
group will continue, it will be able to not only provide you with more
detail on our recommendations, but also comment on alternative
approaches you wish to discuss.
THE PROBLEM
It is difficult to overstate the impact of Medicaid on state
budgets. It now represents about 22 percent of the average state budget
and is a larger percentage than all elementary and secondary education.
If you add health care spending for state employees and other programs,
state health care spending totals about one-third of all spending, and
is equal to spending on all education--elementary, secondary and
higher.
The problems of Medicaid are three fold. First is that the Medicaid
program is increasingly serving populations with very serious and
expensive health care needs. Low-income frail seniors, people with HIV/
AIDS, ventilator-dependent children, and other individuals with serious
mental and physical disabilities represent only about 25 percent of the
Medicaid population, but account for more than 70 percent of Medicaid's
budget. The average cost of providing health care to seniors and people
with disabilities is more than six times the cost of providing care to
pregnant women and children. Medicaid provides expensive chronic care
and long-term care services that are largely unavailable anywhere else
in the health care system. Meanwhile, those who are dually eligible for
both the Medicare and the Medicaid Program account for 42 percent of
total Medicaid spending. Demographic trends suggest that these cost
pressures will continue to increase.
Second, the caseload has increased 40 percent over the last five
years. While much of this growth has been in the relatively healthy
populations of pregnant women, children, and families--an influx of 15
million beneficiaries in a five year period presents a fundamental
challenge to states.
The caseload has been rising as the percentage of people under age
65 covered by employer-sponsored health care is falling dramatically.
At first this was due to declines in U.S. economy, but it has continued
as the economy recovered because fewer of the new jobs being created
offer health insurance. Small businesses in particular are finding it
increasingly more difficult to afford health insurance for their
employees. Families that are losing coverage are concentrated among
low-income individuals primarily below 200 percent of poverty.
The population of seniors and people with disabilities, who already
account for 70 percent of Medicaid's $330 billion annual budget, will
grow considerably over the next 20 years. Specifically, the over age 65
population will grow 64 percent, by 2020 and the over age 85 population
will grow 3.1 percent per year over the next two decades. The
Congressional Budget Office estimates that over the next ten years,
growth in the elderly and disabled populations will comprise
practically all of the Medicaid caseload growth.
However, since Medicaid is the primary safety net, unless something
is done, the case load will continue to grow in the high single digit
rate and perhaps even higher over the next two decades as increasing
costs shift individuals from private coverage to Medicaid, or to the
growing ranks of the uninsured.
The third problem is that the consumer price index for health care
has been increasing 2 to 3 times the average price index. Medicaid,
like all insurers, has been faced with these rising costs. It is the
combination of these problems--caseload growth and health inflation--
that makes Medicaid unsustainable in the short-run let alone the long-
run.
THE VISION
The policies that are outlined in our paper do not represent
comprehensive health care reform. Medicaid, however, is inextricably
linked to the rest of our health care system and its payers.
Consequently, the scope of our paper is wider than the existing
Medicaid program as it focuses both on populations that may become
Medicaid eligible as well as some underlying cost drivers in the
overall health care system. In terms of Medicaid itself, this paper
offers important short-term reforms that will help modernize,
streamline, and strengthen this vital program.
The recommendations to make Medicaid more efficient and effective
were not developed to generate any particular budget saving number.
Instead, they were developed as effective policies that would maintain
or even increase health outcomes while potentially saving money for
both the states and the federal government.
The non-Medicaid recommendations had three goals. First, to
increase quality and health outcomes by applying modern technology and
accountability to our health care system. Second, to develop
alternative, more effective policy tools that would assist individuals
and employers to obtain and maintain private health insurance as
opposed to having these individuals become Medicaid eligible. Third, to
improve financing and delivery of long-term care by developing
incentives for quality private long-term care insurance products,
community-based care, innovative chronic care management, and
alternative financing approaches. Specific health care policies are
organized around four objectives:
1. Reforming Medicaid
2. Enhancing quality and containing costs in the overall health care
system
3. Strengthening employer-based and other forms of private health care
coverage
4. Slowing the growth of Medicaid long-term care
REFORMING MEDICAID
The paper outlines several areas of reform which gives states
additional flexibility to streamline their programs.
1. Prescription Drug Improvements. The current system is flawed and
must be replaced. A number of policy changes must be enacted that will
help decrease costs and improve quality and efficiency of care. The
goal of reducing both state and federal expenditures will require
policy changes that impact all segments of the pharmaceutical
marketplace, including (but not limited to) increased rebates from
manufacturers, reforms to the Average Wholesale Price (AWP), policies
that increase the use and benefit of more affordable generic drugs, and
tiered, enforceable co-pays for beneficiaries. States must have
additional tools to properly manage this complicated and critical
benefit.
2. Asset Policy. While Medicaid remains a vital source of long-term
care coverage for many individuals who cannot receive that care
elsewhere, there is growing concern that many individuals are utilizing
Medicaid estate planners or other means in order to shelter or transfer
assets and therefore qualify for Medicaid funded long-term care
services. Medicaid reform must include changes that increase the
penalties for inappropriate transfers, restrict the types of assets
that can be transferred, and encourage reverse mortgages, as well as
other policies that encourage individuals and their families to self-
finance care rather than rely on Medicaid.
3. Cost Sharing. Medicaid's cost-sharing rules, which have not been
updated since 1982, prevent states from utilizing market forces and
personal responsibility to improve health care delivery. These
provisions should be modified to make Medicaid look more like the State
Children's Health Insurance Program (SCHIP), where states have broad
discretion to establish (where appropriate) enforceable premiums,
deductibles, or co-pays. As in SCHIP, there should be financial
protections to ensure that beneficiaries would not be required to pay
more than 5 percent of total household income (no matter how many
family members are enrolled in Medicaid) as a critical balance to this
proposal. For higher-income households (for example, those above 150
percent of the federal poverty level), a 7.5 percent cap should be
applied.
4. Benefit Package Flexibility. Medicaid's populations are very
diverse, ranging from relatively healthy families and children to the
frail elderly, to individuals with serious physical and developmental
disabilities. The types of services and supports needed by these
populations are quite different, yet the Medicaid benefits package
remains ``one-size-fits-all.'' Many states have found that the
flexibility built into the SCHIP program allows for greater
efficiencies without compromising quality of care. Extension of this
flexibility to services for appropriate Medicaid populations would
allow states to provide more targeted services while managing the
program in a way that prevents sweeping cuts in the future.
5. Comprehensive Waiver Reforms. Waiving various portions of the
federal Medicaid statute has become the norm--rather than the
exception--for states. Reforms are needed to increase efficiency and
reduce costs, increase the ease with which states obtain current
waivers, expand the ability to seek new types of changes, and change
the federal statute to eliminate the need for many waivers altogether.
6. Judicial Reforms. The right of states to locally manage the
optional Medicaid categories is clearly defined in both policy and law,
and the federal government should remove legal barriers that impede
this fundamental management tool. Also, U.S. Department of Health and
Human Services officials should have to stand by states when one of
their waivers is questioned in the judicial system and should work with
states to define for the judiciary system that any state has a
fundamental right to make basic operating decisions about optional
categories of the program.
7. Commonwealths and Territories. The federal Medicaid partnership
with U.S. commonwealths and territories has become increasingly
unbalanced over a period of years, to the extent that some of the
jurisdictions are financing over 80 percent of their Medicaid costs,
and many of the Medicaid expansions such as transitional medical
assistance are not available. The imbalance affects quality of care
issues and creates increased financial stress. Medicaid reform needs to
include a review of the current relationship and the development of a
pathway that moves to a rebalancing of this partnership.
enhancing quality and reducing costs of the overall health care system
We must increase the efficiency, productivity and quality of the
entire health care system and believe that states are able to tailor
solutions unique to their cultures, institutions and health care
markets, but large enough to experiment with system wide reform.
Accordingly, Congress should establish a National Health Care
Innovations Program to support the implementation of 10 to 15 state-
led, large-scale demonstrations in health care reform over a three- to
five-year period. States would serve as the lead entity for these
demonstrations, but they would have to partner with the private sector.
Some of these demonstrations would be for statewide provider networks
while others would be for networks in major metropolitan areas. Using
information technology to control costs and raise quality would be a
core objective of these demonstrations. The financing of these
demonstrations should not come at the expense of Medicaid funding.
strengthening employer based and other forms of health care coverage
Governors recommend a federal refundable health care tax credit for
individuals as well as an employer tax credit for small employers.
There is also a recommendation for the federal government to fund state
alliances or purchasing pools which in combination with individual tax
credits and the utilization of the S-CHIP benefit package for
additional populations should also help create more competition in the
health care marketplace. Finally, there is a recommendation to develop
a catastrophic care/reinsurance model to address unsustainable ``legacy
costs.''
SLOWING THE GROWTH OF MEDICAID LONG-TERM CARE
The paper includes a number of recommendations on assisting
individuals in the purchase of long-term care insurance through the use
of federal tax deductions and credits as well as by enacting long-term
care partnership legislation. Finally, there are recommendations to
address home- and community-based care and chronic care management.
STATE CONTRIBUTION TO THE MEDICARE DRUG BENEFIT
While Medicare beneficiaries have some guarantees, that on January
1, 2006 the Medicare program will begin in providing them with a drug
benefit, states do not have the same guarantee that the fiscal burden
will be lifted.
In some states, contrary to clear congressional intent, the phased
down state contribution (clawback) provision will actually cause states
to spend more in Medicaid. In addition to their mandatory clawback
payment, some states will also face increased costs from the
administrative burdens of the new law.
Mr. Chairman, let me again thank you for the opportunity to appear
before you. The nation's Governors look forward to working with you
closely to begin the process of reforming the Medicaid program. As
currently structured it is unsustainable.
______
Medicaid Reform
A PRELIMINARY REPORT FROM THE NATIONAL GOVERNORS ASSOCIATION
JUNE 15, 2005
Medicaid is the nation's largest health care program, providing
health and long term care services to 53 million low-income pregnant
women, children, individuals with disabilities and seniors. It is a
vital health care safety net and provides important services to those
who can get care from no other source. Medicaid coverage has also
played a critical role in reducing the number of the uninsured,
currently estimated at 45 million nationwide.
Medicaid spending, however, has increased dramatically over the
last five years driven by a 40 percent increase in caseload and a 4.5
percent per year increase in the health care price index, strengthening
the impetus for reform. Comprehensive Medicaid reform must focus both
on reforming Medicaid and on slowing both the number of low-income
individuals and elderly becoming eligible for Medicaid. Medicaid will
always have an important role as the health care safety net, but other
forms of health care coverage must be strengthened to ensure Medicaid's
financial sustainability. Enhancing the quality of care and containing
costs are also critically important. Governors believe that Medicaid
reform must be driven by good public policy and not by the federal
budget process.
The Vision
The policies that are outlined in this paper do not represent
comprehensive health care reform. However, the scope is wider than the
existing Medicaid program as it focuses both on populations that may
become Medicaid eligible, as well as some of the underlying cost
drivers in the overall health care system. In this sense it can be
viewed as Medicaid plus health care reform. The various policies that
are recommended are linked by a number of themes that underline this
reform package. First, there are a number of incentives and penalties
for individuals to take more responsibility for their health care.
Second, moving to a more flexible benefit package for non elderly, non
disabled Medicaid populations as well as for individuals who gain
access through the individual health care tax credit will reduce costs
while increasing total access. Third, the creation of state purchasing
pools, that would use the combined leverage of public programs
(offering a common S-CHIP-type benefit package) and individuals using
the health care tax credit should strengthen the ability of small
purchasers to gain more competitive rates in the health care
marketplace. Fourth, technology and other state innovations are focused
on reducing the long-run costs. Fifth, there are a number of policies
designed to reduce reliance on Medicaid coverage. Finally, the paper
includes a number of potential short-run policy changes as well as
long-run structural changes that will improve the US health care
system.
Specific health care policies are organized around these five
objectives:
1. Reforming Medicaid
2. Enhancing Quality and Reducing Costs in the Overall Health Care
System
3. Strengthening Employer-Based and Other Forms of Private Health Care
Coverage
4. Slowing the Growth of Medicaid Long-Term Care
5. State Contribution to the Medicare Drug Benefit
1. Reforming Medicaid
Medicaid now covers 53 million Americans and the program is
expected to spend a total of $329 billion in combined state and federal
funds in 2005. While the Medicaid program is extremely cost effective
compared to private sector health care, the existing program structure
is inflexible and the benefits are not necessarily consistent with the
needs of the various populations. This paper focuses on both short-run
flexibilities that could help states realize incremental savings and a
major restructuring that would be necessary to make the program
sustainable over the long-run.
Long Term Restructuring
Although Medicaid is the largest health care program in the nation,
generalizations about the program are difficult to make, because it
operates so differently in each of the states and territories. In
addition, Medicaid is even more complicated than 56 different programs,
because within each state, Medicaid plays a number of very distinct
roles while serving a number of very distinct populations.
Medicaid essentially has three major functions:
It provides comprehensive primary and acute care coverage for
everyone who is eligible for the program (low income children,
parents, seniors, and people with disabilities);
Some Medicaid beneficiaries also qualify for comprehensive long term
care services, depending on their needs; and
Medicaid also helps finance services for people with chronic and
disabling conditions such as HIV/AIDS, severe mental illness,
and MR/DD. Each of these populations relies on Medicaid for
support that they cannot receive elsewhere, and Medicaid
restructuring must consider their unique needs and
circumstances.
Although Medicaid does serve these three major roles, it also
serves other functions such as a source of funding for uncompensated
care in hospitals, and as a supplement to Medicare for low-income
beneficiaries for whom it pays cost sharing and wraps around for
various services in addition to long-term care.
Medicaid is serving many roles in the health care system. All of
these roles could be improved upon by a greater focus on wellness and
health promotion as opposed to simply ``sick-care'' treatment. These
goals can be achieved by relying more heavily on care management and
coordination.
For low-income, but relatively healthy individuals who rely on
Medicaid as a health insurance product, Medicaid should be
transformed into a more mainstreamed, S-CHIP type program that
could be coordinated with state and federal tax credits.
For individuals with disabilities who have no other recourse than to
rely on Medicaid, reforms should encourage more consumer choice
and benefit packages that improve the quality of their care
where possible, but not jeopardize their stability of care.
A new national dialogue is needed to confront the issues of an aging
population and the potential sources of funding for end-of-life
care. The easiest solution may be to incorporate long-term care
services into Medicare, but an alternative approach could be to
link long-term care funding to Social Security, or broader
pension reforms or other changes to solidify the link between
personal responsibility and end-of-life care.
What is clear is that Medicaid can no longer be the financing
mechanism for the nation's long-term care costs and other costs for the
dual eligibles. Approximately six million Americans are dually eligible
for full Medicare and Medicaid benefits, and another one million
receive financial assistance to cover out-of-pocket costs, such as co-
payments and deductibles. These individuals represent a small portion
of Medicaid's 53 million person caseload, and despite the fact that
they are fully insured by Medicare, they still consume 42 percent of
all Medicaid expenditures. Compared to other Medicare beneficiaries,
dual eligibles are sicker, poorer, more likely to have chronic health
conditions, and at higher risk for institutional care.
The details of this restructuring, however, are beyond the scope of
this paper. The nation's Governors will continue to work on this issue
and will be providing further detail.
Short-Run Flexibilities
A. Prescription Drug Improvements--States and the federal
government have long suspected that Medicaid overpays for prescription
drugs. The President's budget proposes to set federal ceilings on the
prices that states pay for prescription drugs. The proposal would
change the current system, whereby states purchase drugs based on the
Average Wholesale Price (AWP). States have long been concerned that
manufacturers have been inflating this number and that Medicaid has
therefore been overpaying for drugs for many years. The President's
proposal would establish a new price target for states, the Average
Sales Price (ASP) that would be defined by law, subject to Federal
audit, and lower than AWP. States would be allowed to reimburse
pharmacies no more than ASP plus six percent (to account for dispensing
fees and other costs) for all generic and brand name drugs.
Governors believe that the burden of reducing Medicaid expenditures
for prescription drugs will require a multi-prong approach and should
include savings proposals that affect both drug manufacturers and
retail pharmacists, as well as increase state utilization management
tools that decrease inappropriate prescribing and utilization. It is
critical that states maintain and enhance their ability to negotiate
the best possible prices with the industry.
There may be benefits of using ASP or other calculations as a
reference price, because increased transparency of drug costs can serve
to decrease total costs, especially if there is more flexibility with
respect to dispensing fees (they should not be tied to a percentage of
the cost of the drug dispensed, for example.)
This proposal should be modified in several ways:
Increasing the minimum rebates that states collect on brand name and
generic prescription drugs to ensure lower total costs that
would not solely impact pharmacists nor create disincentives to
provide generic drugs where appropriate. Medicaid's ``Best
Price'' provision should not be eliminated in exchange for
this;
Requiring that ``authorized generics'' be included in the Medicaid
rebate calculations. An authorized generic is a brand product
in different packaging that some manufacturers distribute
through a subsidiary or third party at the same time that a
true generic is launched by a generic manufacturer. This
product is essentially a brand product at a cheaper price, but
it violates the Hatch-Waxman 180 day exclusivity protection for
generic manufacturers, and because CMS does not include these
products in the Medicaid rebate calculations, it results in
hundreds of millions of dollars in lost revenue for state
Medicaid programs.;
Forcing discounts on the front end of drug purchases rather than
waiting an average of six months (not including dispute time)
to receive rebates;
Using closed formularies to drive beneficiary utilization and
decrease costs similar to those that will be used by Medicare
Part D plans;
Giving states additional tools such as tiered co-pay structures to
encourage greater utilization of generic drugs;
Enacting stronger sanctions (including criminal penalties) for
companies and individuals that fail to accurately report ASP
(or whatever new methodology is adopted);
Allowing states to join multi-state purchasing pools and to combine
Medicaid with other state-funded health care programs to
improve leverage; and
Allowing managed care organizations to access Medicaid rebates
directly for the Medicaid populations that they serve.
B. Asset Policy--
Asset Transfers. There is concern that many individuals are
utilizing Medicaid estate planners in order to shelter assets and
therefore qualify for Medicaid funded long term care services. Examples
of such estate planning approaches include:
Sheltering assets in trusts, annuities and other financial
instruments that are then deemed as ``not available to the
Medicaid beneficiary;''
Converting ``countable assets'' under the law into ``exempt assets'';
and
Transferring assets through joint bank accounts or other means to
close relatives.
Under current law, when an individual applying for Medicaid has
transferred assets within the three year ``look-back'' period, the
amount of those transfers are used to calculate a period of
ineligibility for Medicaid. This period of ineligibility is determined
by dividing the total amount of the assets transferred by the average
monthly cost of nursing home care in a given service area. For example,
if an asset worth $40,000 is transferred during the look-back period
and the average costs of nursing home care is $5,000 per month, then
the individual would be subject to an eight-month waiting period to
receive Medicaid eligibility. This period of ineligibility, however,
begins on the date of the actual transfer of the asset, and by the time
the person actually applies for Medicaid, that period has often
expired.
The President's budget proposes to change the rules regarding
penalties for individuals who transfer assets in order to become
eligible for Medicaid long term care. The proposal would begin that
penalty period on the date that the individual enters the nursing home
or becomes eligible for Medicaid, whichever is later.
This approach should be encouraged and a number of other similar
approaches should be explored around assets transfers to prevent estate
planners from simply moving to alternate schemes. Other approaches to
address inappropriate transfers could include:
Increasing the look-back period from three years to five years (or
longer);
Limiting the amount and types of funds that can be sheltered in an
annuity, trust or promissory note
In all cases, these changes should be federal requirements,
although there should be ability to ``opt-out'' of the federal
guidelines if the state can prove that existing policies would meet the
intent of the law. Furthermore, there should be some resource
threshold, e.g., $50,000 and indexed in future years, below which
assets transfers would be exempted, as well as policies in place to
protect individuals with dementia or others at risk of being exploited.
While this approach should provide some savings by preventing
inappropriate transfers, state officials will need many more tools in
order to fully address the growing long-term care crisis in the
Medicaid program. Many of these other approaches are addressed in the
long-term care section below.
Reverse Mortgages. This is another tool that could help prevent
individuals with considerable assets from depending upon Medicaid.
According to the U.S. Census Bureau, 81 percent of seniors own their
homes and 73 percent own them free and clear. This represents $1.9
trillion in untapped home equity that is currently exempted from
Medicaid's eligibility calculations. According to the National Council
on Aging, 48 percent of America's 13.2 million households age 62 and
older could get $72,128 on average from reverse mortgages, and ``in
total, an estimated $953 billion could be available from reverse
mortgages for immediate long term care needs and to promote aging in
place.''
This proposal would create an incentive and a new allowance for
individuals to pursue reverse mortgages in order to pay for long-term
care services (in addition to private long term care insurance, which
is currently allowed). Any person who obtained a reverse mortgage under
this proposal would be able to shelter $50,000 (or some other
appropriate amount that would be indexed to inflation) in equity from
their house without incurring penalties. Other incentives to encourage
reverse mortgages should be contemplated. Broader use of reverse
mortgages would be both an effective way to reserve Medicaid funding
for those who have truly exhausted all of their other means, and a way
to provide more consumer-directed options for seniors to choose from in
developing their own long-term plan of care. The number of individuals
currently on Medicaid who own their own homes is relatively small and
this proposal would not likely affect them, so immediate savings would
be limited. However, the major impact of this proposal would come from
restraining the future growth of the program and in fostering a greater
sense of personal responsibility with respect to end of life financial
planning.
Other similar approaches could include requiring some form of
family contribution to the costs of long-term care. Similar methods of
``deeming'' family income are utilized by states in their child support
systems and might not be difficult to implement for Medicaid. In any
case, provisions should be made to allow individuals to pass along some
portion of their assets/resources to family members without incurring
penalties. This would allow the balancing of both the needs of an
ownership society with the responsibility of family to provide for the
care of their loved ones.
C. Cost Sharing--Current law prohibits co-payments for some
populations; for some services like family planning and emergency care;
restricts co-pays, where allowed, to a maximum of $3; and ultimately
treats cost sharing as unenforceable if the beneficiary cannot or will
not pay. These rules, which have not been updated since 1982, prevent
Medicaid from utilizing market forces and personal responsibility to
improve health care delivery.
A new vision for cost-sharing should make Medicaid look more like
S-CHIP, where states have broad discretion to establish any form of
premium, deductible, or co-pay for all populations, for all services,
and could make them enforceable. As in S-CHIP, financial protections to
ensure that beneficiaries would not be required to pay more than 5% of
total family income (no matter how many family members are in Medicaid)
are a critical balance to this proposal. For higher-income households
(for example, those above 150% FPL) a 7.5% cap could be applied, as
under the current HIFA waivers.
States would have broad latitude to waive these types of cost-
sharing for any populations or services that it determines would be
negatively impacted by such policies. The purpose of increased cost
sharing is not to restrict access to necessary medical care, but to
allow individuals to contribute to the costs of their own health care
as much as possible. These new policies would be monitored and
evaluated heavily and if the evidence shows that increased cost-sharing
harms appropriate access, the policies should be revised.
D. Benefits Package Flexibility--The Medicaid program is viewed as
the health care program for the poor, but it neither serves all poor
people, nor are all of the beneficiaries below the federal poverty
level. Medicaid's populations are very diverse, ranging from relatively
healthy families and children to the frail elderly, to individuals with
serious physical and developmental disabilities. The types of services
and supports needed by these populations are quite different, yet the
Medicaid benefits package remains ``one-size-fits-all.''
Many states have found that the flexibility built into the SCHIP
program allows for greater efficiencies without compromising quality of
care. Extension of this flexibility to services for appropriate
Medicaid populations would allow states to provide more targeted
services while managing the program in a way that prevents sweeping
cuts in the future.
Medicaid reform should include the ability to offer a different
level of benefits, using S-CHIP as a model, to certain Medicaid
beneficiaries, such as those for whom Medicaid serves as a traditional
health insurance program. This discussion extends beyond the
traditional distinction between ``mandatory'' and ``optional''
populations, which are arbitrary distinctions when it comes to the need
for health care services. This would include an improved ability to set
benefit limits and cost sharing amounts, do employer buy-in programs,
eliminate retroactive eligibility periods, and establish different
benefit packages for different populations or in different parts of the
state. Medicaid can be improved by focusing more on improving health
outcomes rather than adhering to a sometimes-arbitrary list of benefits
mandates (that are often the result of effective lobbying by provider
interest groups).
Many relatively healthy kids and families are technically
mandatory, and many of the optional populations, such as the Medically
Needy, are among the frailest in the program. Reform must therefore
acknowledge that there are people served by Medicaid that need a
comprehensive package of benefits. For more medically fragile
populations, changes in the benefit package should be made to encourage
more chronic care management and other services that can improve health
outcomes and reduce costs.
E. Comprehensive Waiver Reforms--Waiving various portions of the
federal Medicaid statute has become the norm, rather than the exception
for states. HHS officials routinely describe that they consider
thousands of state waivers every year. Yet, despite all this action,
states must still jump through significant hoops in order to make
relatively minor changes to their Medicaid programs, and often, major
changes are simply outside the scope of the current waiver authority.
Reforms are needed to increase the ease with which states get current
waivers, expand the ability to seek new types of changes, and change
the federal statute to eliminate the need for many waivers altogether.
The most commonly waived portions of the Medicaid statute are those
requiring that beneficiaries have ``freedom of choice'' of provider,
and that services be comparable, statewide, and consistent with respect
to amount, duration, and scope.
The federal statute should change to reflect these commonly waived
and antiquated provisions by allowing states to innovate in
these areas through the state plan amendment process.
Similarly, 1915(b), 1915(c) and PACE waivers should be administered
through the state plan process, not waivers. It is critical in
this scenario that these waivers retain the basic protections
of the waiver, such as the ability to control costs and
utilization common to the 1915(c) waivers. The state plan
amendment process should include check boxes for typical waived
items so that States could continue to target these services on
the issues of comparability, statewideness, and amount,
duration, and scope. States would realize cost savings because
services would be implemented sooner and States would reduce
administrative costs associated with waiver development, cost
effectiveness/budget neutrality, reporting, and the waiver
amendment/renewal process.
In addition, streamlining the waiver process for all states that
choose to pursue larger reforms and innovative programs would
be a helpful improvement.
Allowing states to easily receive approval to try an approach already
tested successfully in other states would be one improvement.
Automatically converting a waiver to a state plan after the first
renewal would be another, as would a consistent 5 year
approval/renewal period.
Many promising innovations in Medicare/Medicaid integration or care
coordination are never implemented because of outdated notions
of siloed budget neutrality requirements. The requirement for
budget neutrality should be waivable at state option and the
statute should also allow for states to consider savings to the
Medicare and other federal programs when considering the impact
of Medicaid changes.
States that wish to make substantial improvements to their Medicaid
programs may find that some portions of the statute are not
waivable at all. States should be allowed to apply for
``superwaivers'' that envision much broader changes than can be
achieved under the current 1115 waiver structure. Such waivers
should allow states to develop effective programs that meet the
unique needs of their citizens.
The State of Arizona has operated its Medicaid program, the Arizona
Health Care Cost Containment System (AHCCCS), through a Section 1115
waiver, since the inception of Arizona's participation in Medicaid in
1982. There are many lessons to be learned to reduce costs from
Arizona's experience. All Medicaid eligible persons are enrolled into
managed care plans that AHCCCS contracts with using competitive bidding
to maximize market forces. Market forces drive quality while holding
down costs. Several states have demonstrated success with this model,
and others should look to it to contain costs.
F. Judicial Reforms--The right of states to locally manage the
optional Medicaid categories is clearly defined in both policy and law,
and the federal government should remove legal barriers that impede
this fundamental management tool. To that end, Congress and HHS should
authorize states to rightfully make basic operating decisions about
optional categories of the program.
Federal judicial actions have sometimes become a means by which the
judicial branch makes decisions about Medicaid programs that should be
left in the hands of state elected officials and competent program
managers. If the management of the Medicaid program is being handled in
a manner that is consistent with legislative and congressional intent,
the court system should not become involved.
These court actions sometimes conflict with the policy positions of
state and local officials and go beyond addressing the specific problem
that was the basis of the initial lawsuit. These court actions fit into
two broad categories:
Consent decree cases
Court decisions based on a specific case that have an adverse affect
on the state Medicaid program as a whole
These court decisions can remain in place for decades and
institutionalize the policies of elected officials who have long since
left office. For example: Arkansas cannot make any change in fees paid
to physicians without going back to court to remain in compliance with
a consent decree entered into between the state and the Arkansas
Medical Society in 1993. These court actions also create an environment
where state time and resources that could be spent on the greater good
of the whole program go toward reducing the impact of the specific
court decision.
Federal reforms are needed to constrain the broad ability of
judicial decrees in Medicaid cases that clearly impede state innovation
and reform. In a time of shrinking resources and growing demand it is
not realistic to ask states to manage these complex programs with court
decrees overriding sound management decisions.
These court decisions and the subsequent legal actions that follow,
increase administrative costs and divert valuable resources that could
be far better spent on services to clients.
G. Commonwealths and Territories--The federal Medicaid partnership
with U.S. commonwealths and territories has become increasingly
unbalanced over a period of years, to the extent that some of the
jurisdictions are financing over 80 percent of their Medicaid costs,
and many of the Medicaid expansions such as transitional medical
assistance are not available. The imbalance affects quality of care
issues and creates increased financial stress. Medicaid reform needs to
include a review of the current relationship and the development of a
pathway that moves to a rebalancing of this partnership.
2. Enhancing Quality and Controlling Costs in the Overall Health Care
System
America's current health care system is ripe for improvement and
states are ready to take the lead in helping drive change. States are
small enough to tailor solutions unique to their cultures, institutions
and health care markets, but large enough to experiment with systemwide
reform. States can also partner effectively with health care providers,
insurers, and purchasers to lead large scale pilot projects.
We must increase the efficiency, productivity, and quality of our
entire health care system, which will increase the opportunities for
reasonable coverage expansions. Like welfare reform a decade ago,
states can play a lead role in driving this transformation through
demonstration projects in partnership with the private sector.
Accordingly, Congress should establish a National Health Care
Innovations Program to support the implementation of 10 to 15 state-led
large-scale demonstrations in health care reform over a 3-to-5-year
period. Using information technology to control costs and raise quality
would be a core objective of these demonstrations. States would serve
as the lead entity for these demonstrations, but they would have to
partner with the private sector. Some of these would be for statewide
provider networks while others would be for networks in major
metropolitan areas. They would focus on:
deploying information and communications technology, including
interoperable electronic health records (EHRs) accessible to
all participating providers and patients, to improve services;
improving quality of care, including disease prevention and
management, through establishment of evidence-based practices,
measuring outcomes, and pay-for-performance programs;
using innovative strategies to cover many of the Americans who
currently lack health benefits;
empowering consumer choice through price transparency, quality
reporting, and financial incentives; or
reducing malpractice incidents and improving adjudication of
malpractice claims.
Each demonstration project would be selected through competition
and encouraged to demonstrate multiple innovations. All projects would
need to emphasize the goal of increasing cost-effectiveness and, to the
extent possible, improving health care quality.
For a more comprehensive discussion on this issue, see the NGA
white paper on health care reform demonstration programs.
The financing of any of these solutions should not come at the
expense of Medicaid funding.
3. Strengthening Employer-Based and Other Forms of Private Health Care
Coverage
Between 2001 and 2003, the proportion of Americans under the age of
65 covered by employer-sponsored health care dropped from 67 percent to
63 percent. While some of this reduction could be cyclical due to the
economic downturn, many argue that the increase is more structural, as
the U.S. economy is becoming more service and small business oriented
and more competitive in the ever more global marketplace. Several
policies could assist in reducing the number of individuals losing
health care coverage. The financing of any of these solutions should
not come at the expense of Medicaid funding.
A. Individual Health Care Tax Credit--A refundable tax credit could
be developed that would be available to all low-income individuals
below some income threshold, e.g., $3,000 for a family of four with
incomes below $25,000, which is phased-out at income levels of $60,000.
This credit would be a premium subsidy that could be paid directly to a
health care plan by the U.S. Department of the Treasury. Unlike the
trade assistance program that targets unemployed workers, eligible
workers that could receive tax credits could have their employers
deduct payments from wages and send them directly to the U.S. Treasury
who would combine those funds with the tax credit, confirm eligibility,
and forward the payment directly to the health plans.
To increase the use of the tax credit, the federal government could
also mandate presumptive eligibility so that individuals would have to
opt out as opposed to opting into the system. It is critical that this
subsidy be set at the appropriate level. If it is too low, there will
be few individuals who could use it; and if it is too high, then it
would be an incentive for businesses to stop providing employer-paid
health care. It is also critical that the level have the appropriate
relationship with any credit for small employers. The credit would be
available for all individuals who meet the income criteria and are not
participating in an employer-paid or public program. Individuals who
qualify for both Medicaid and the tax credit would be able to choose
between the two. States should also be allowed to enhance the tax
credit. One option would be to allow states to use disproportionate
share funds for the enhancement.
Because this is a refundable tax credit it is reflected in the
federal budget as an outlay as opposed to a reduction in revenues. This
opens up the potential option for the states to apply for a waiver that
would allow the funds to come directly to the states based on a plan
that would maximize health care access. For example, the Michigan Third
Share program, which has equal amounts paid by employers, employee, and
government, could utilize these funds for the government share. Such a
waiver option would allow individual states to tailor the funds to
their unique labor force and health care marketplace. Such a tax credit
also equalizes tax treatment of all individuals with regard to health
care. This tax credit can also be designed to allow individuals to buy
into the S-CHIP benefit or to otherwise require that the credit only be
viable when used to purchase some basic, threshold benefit, as defined
by the state. It is difficult to determine how many individuals would
use a tax credit of this nature.
B. Employer Tax Credit--A new employer tax credit would be
developed for small firms, i.e., up to 100 workers. The employer tax
credit would be about $200 per individual or the amount necessary to
make the federal contribution necessary to enact this policy the same
as that necessary to enact the individual tax credit. The policy
rationale is to equalize the tax treatment between the individual tax
credit and the employer-based tax credit. Unlike the Administration's
proposal, it would not be restricted to employer contributions to
Health Savings Accounts. The employer tax credit would be restricted to
only workers below a given wage rate. The amount of the credit, the
targeting, and the relationship to the individual tax credit are key in
order to support the employer-based system, as opposed to providing
incentives for employers to reduce coverage. Also, the state should be
able to designate the minimum benefit package to be eligible for the
tax credit. This credit would be reflected as a reduction in revenues
to the federal government.
C. State Purchasing Pools--The federal government would make grants
to states to create state purchasing pools. In the past, states have
experimented with purchasing pools, but most have failed because they
were never large enough to avoid risk-selection and ended up becoming
high risk pools that were subsidized. Specifically, there was a
financial incentive for healthy individuals to obtain their insurance
outside the pool. Currently, the Federal Employees Health Benefit
Program (FEHBP) and the small firm purchasing alliance in California
(now called Pac Advantage) are existing purchasing pools. Permitting
states to develop an SCHIP benefit package for their non-disabled, non-
elderly Medicaid population, and including the same benefit package for
the individual health care tax credit, should allow them to create a
large enough pool (mostly in metropolitan areas) to negotiate effective
rates.
To avoid adverse risk, states should be allowed to mandate that
both populations be part of the purchasing pool. States will need the
discretions to design their purchasing pools. This will include health
plan qualifications, underwriting, rating rules, and enrollment rules.
The pool could be the mechanism for Medicaid women and children, SCHIP,
state employees, COBRA options, and the tax credit as well as any
private firm, particularly small business that purchases health care in
the state. This could have the added benefit of stabilizing the
individual and small group market. Such a large pool could also
maximize consumer choice. The President's budget includes this
proposal.
D. Catastrophic Care/Reinsurance Model to Address Unsustainable
``Legacy Costs''--Numerous employers in the U.S. have been consistent,
reliable partners with their employees on health insurance coverage,
yet their ability to continue providing this coverage to retirees
(``legacy costs'''), current employees, and their families--amidst
rising national health care costs--is becoming a distinct competitive
disadvantage. Catastrophic care, chronic diseases, and serious
illnesses contribute significantly to the overall cost of health care
and should be addressed. While more attention and resources must be
focused on wellness and disease management programs as well as best
practices to ensure quality care, some bold options that offer uniquely
American solutions for our American legacy cost challenges are needed.
The following are two concepts to consider--one that is employer pools
and another that is insurance pools. A hybrid could also be considered.
One option is to create a reinsurance pool whereby employers and
other payers would be reimbursed by the federal government for part of
the cost of catastrophic medical bills of their employees. To be
involved in this program, employers could be required to provide health
care coverage equivalent to a benchmark plan to all of their employees
and/or provide preventive and disease management programs to better
manage care and improve quality and care.
Another option to explore more fully is a national ``Healthy Mae,''
as Senator Frist refers to it. The senator believes that a ``Healthy
Mae'' model, fashioned after Fannie Mae, would help insurers more
broadly share risk, reduce administrative costs, and create a vibrant
secondary market for health insurance just as the U.S. has done for
home mortgages. Potentially a publicly-chartered private insurer,
``Healthy Mae'' could help create a big secondary market for health
insurance and would reduce the financial burden on employers when their
workers' medical bills rise above a certain threshold. ``Healthy Mae''
would be designed to give buyers access to a more stable insurance
market--which presumably would feature lower rates that could keep more
people covered.
4. Slowing the Growth of Medicaid Long-Term Care
Medicaid has quietly over the years become the nation's largest
payer of long-term care services, funding approximately 50 percent of
all long-term care spending and nearly two-thirds of all nursing home
residents. With the anticipated demographic changes, the potential
liability for future long-term care costs can only grow. While Medicaid
reforms over the past twenty years have focused on improving the long-
term care benefit (eliminating the institutional bias, encouraging
consumer-directed care, etc), new efforts need to focus on how to
encourage personal responsibility and discourage the reliance on
Medicaid financed long-term care. Ultimately, a new national dialogue
is needed to confront the issues of an aging population and the
potential sources of funding for end-of-life care.
The following two policies could help slow the growth of elderly
enrollment in Medicaid.
A. Tax Credits and Deductions for Long-Term Care Insurance--
Currently, about 28 states provide deductions or tax credits for long-
term care insurance. The federal government currently allows tax
deductions for the purchase of insurance, but only if the premium
amounts exceed 7.5 percent of an individual's adjusted gross income.
Only 11 percent of the population age 65 and older and 8 percent of
those between ages 55 and 64 have a long-term care policy in effect.
The potential impact of deductions and tax credits is very
different, since they impact quite different income groups. The
deduction is more effective in stimulating the purchase of long-term
care insurance since it is more valuable to younger, higher-income
individuals in higher tax brackets. Because these individuals may allow
policies to lapse and because they are less likely to enroll in
Medicaid, they do not provide the maximum possible relief to Medicaid
per lost dollar in federal tax revenues. On the other hand, tax credits
can be better targeted to lower-income individuals who have a higher
probability of becoming Medicaid eligible. This will lead to more
relief in Medicaid spending. A December 31, 2001 report by ABT
Associates indicated that Medicaid saves $1.16 and $2.67 respectively
in 2025 and 2050 for every dollar lost due to federal tax credits. Tax
deductions do not break even. A combination of a significant tax
credits, e.g., $2,000, and a small deduction, e.g., $200, might be the
most effective in lowering Medicaid costs. States, through their
capacity as regulators of insurance, set minimum standards and other
guidelines for any such policy that could be obtained through the tax
credit.
The Treasury should also develop some mechanism so that individuals
can receive the credit when they pay the premium to avoid the long
delay between payment and reimbursement via annual tax submissions. Tax
credits are particularly effective to the federal government as well as
states due to the potential Medicaid savings. Because this credit
focuses on the very expensive population in long-term care, potential
Medicaid savings are significant. The federal government may also want
to mandate that all firms who provide 401(k) and other pensions provide
an option to convert a portion of an annuity into long-term care
insurance. This tax credit would be reflected as a revenue reduction in
the federal budget. As of 1998, there were $9.5 trillion in qualified
retirement plans, some portion of which could ultimately be used for
long term care financing.
B. Long Term Care Partnerships--Four states (California,
Connecticut, Indiana, and New York) have been operating promising
partnerships between Medicaid and the long-term care insurance
industry. Although their approaches differ, the basic concept is that
individuals who purchase private insurance and exhaust its coverage
would be allowed to access Medicaid and still protect some of their
assets. There are two basic approaches that the four states utilize--
the dollar-for-dollar model and the total asset protection model. In
the dollar-for-dollar model, beneficiaries are able to keep personal
assets equal to the benefits paid by the private policy. In the total
asset model, all assets are protected after a threshold for years of
coverage has been crossed, typically three or four years. In both
cases, Medicaid becomes the payer when the partnership policy benefits
are exhausted. States are projected to realize savings because Medicaid
becomes the payer of last resort, not the first.
Federal law prohibits the expansion of these partnerships beyond
those four states, but 17 states have passed enabling legislation
allowing them to begin such a program should the federal prohibition be
repealed, and several others are currently exploring that option. While
long-term care partnerships do not promise a silver bullet for
Medicaid's long-term care crisis, they can be a key part of the
solution, and therefore all states should be allowed to participate.
In addition to tax treatment and other incentives for the purchase
of long term care insurance, there are ways to improve the delivery of
long term care services for individuals who remain covered by Medicaid.
Those include both increasing the focus on home and community-based
alternatives to institutional care as well as strengthening the chronic
care management components of both Medicare and Medicaid.
C. Improving Access to Home and Community-Based Care. The long-term
care policies advocated by NGA should also include reforms to the
Medicaid program that produce better health outcomes for beneficiaries
and result in greater efficiencies for both the federal government and
states. Such reforms should give states more tools to encourage home
and community-based care and could include the elimination of the
requirement for a waiver for home and community based care as discussed
in the section on waiver reforms and in the current NGA policy on Long
Term Care (HHS-28).
D. Improving Chronic Care Management. The long-term care policies
advocated for by the Governors should include reforms that encourage
better care for the chronically ill populations in Medicaid. Although
this is a small population, they demand a large portion of the
available resources. States should be rewarded for program improvements
that produce savings for both Medicaid and Medicare, particularly
through improved chronic care management, by sharing savings evenly
with states in the form of enhanced FMAP on a year-to-year basis.
States should have the authority to provide financial incentives for
care management methods that save money and improve outcomes outside of
the targeted case management benefit.
5. State Contribution to the Medicare Drug Benefit
The Medicare Prescription Drug, Improvement and Modernization Act
of 2003 (MMA) was designed to deliver a federal pharmacy benefit to
Medicare beneficiaries. It was also designed to ease state Medicaid
programs of their responsibility for providing pharmacy benefits to
those eligible for both the Medicare and Medicaid programs--the dual
eligibles.
While Medicare beneficiaries have some guarantees that on January
1, 2006, the Medicare program will begin providing them with a drug
benefit, states do not have the same guarantee that their fiscal burden
will be lifted. In some states, contrary to clear congressional intent,
the Phased-Down State Contribution (clawback) provision will actually
cause states to spend more in Medicaid in fact, a handful of states are
projecting that they will never see any financial relief in
prescription drug costs from the MMA than they would have in the
absence of the law. In addition to their monthly clawback payments,
states will also face increased costs from the administrative burdens
of the new law. While state Medicaid programs operate with
administrative costs far below those of private insurers, states have
been forced to trim their program overhead even further in order to
protect scarce resources for the care that their beneficiaries need.
Tracking, calculating, and reporting clawback payments, as well as the
other duties that resulted from the MMA, present substantial new
administrative tasks [as well as potential costs] for Medicaid
programs.
Integrating Medicaid's coverage with the drug coverage provided by
the separate prescription drug providers will be a difficult
undertaking for states. The clawback provisions should not be a further
financial burden on states as they work to focus on the coordination of
care that is central to the spirit of the Medicare Modernization Act.
Chairman Barton. We thank you, Governor. The Chair is going
to recognize himself for the first 5 minutes of questions.
Because we have so many members here, which is a good thing,
the Chair is going to be fairly strict about the 5-minute rule.
Just so that we make sure we understand the main points, I
would like either Governor Huckabee or Governor Warner to
summarize the main, principal recommendations of your report,
just, you know, one, two, three, four, five. Either one of you.
Governor Huckabee. Mr. Chairman, the first one is dealing
with the prescription drug improvements primarily to make the
system more transparent. The current system is based on an idea
of average wholesale price. It really is built on acquisition
cost plus a dispensing fee; then, there is a rebate that is
given back to the States, which States negotiate. The whole
issue of an average wholesale price is a complete misnomer. It
is neither average nor wholesale. It is a complete fabrication.
No one knows what the real drug costs are, and there is no real
capacity or authority of the States to negotiate best price.
Our State attempted to that, got sued, and lost. That is one of
the issues----
Chairman Barton. I hate to stop a Governor in mid-sentence,
but my time is limited. So your first recommendation is just to
change the drug pricing system----
Governor Huckabee. Yes.
Chairman Barton. [continuing] do you have a specific
recommendation or just that it needs to be changed?
Governor Huckabee. Well, no, sir, it is in the full context
of what we have given in the 13-page document that----
Governor Warner. Let me just add on this very briefly on
the drug pricing issue, and it is obviously enormously complex.
We feel that some of the initial proposals, particularly that
came from the Administration, disproportionately put the issue
of the savings coming out of the hides mostly of local
pharmacists. We think it ought to be--if there are going to be
savings it ought to be borne by not only the pharmacists in
terms of the dispensing fee, but it also ought to be dealt with
a little bit by Pharma.
We ought to also look at stronger policies to incent
generic use. We ought to look as well, for example, one of the
things the Governors are concerned about, and well, this backs
into the Medicare drug benefit, and I know that folks don't
want to revisit that, but we have States like Virginia that,
through our use of a preferred drug list, have negotiated, for
example, $35 million worth of savings. We have negotiated a
better price than we are going to be able to have under the new
drug benefit. And with the ``clawback'' provision, we are going
to not get those benefits.
Chairman Barton. Right. Well, I agree with that. In fact I
have asked that the Pharmacy Association to come up with a
drug-pricing plan that they are supposed to give to me in the
next 2 weeks. So No. 1 is drug pricing. What is your second
general recommendation?
Governor Huckabee. Let me skip down to the issue of
judicial reform because without it, none of these others
probably will work anyway because we will be tied up in court
trying to get them dealt with. We would ask that Congress and
the Health and Human Services authorize the States statutorily
to make some basic operating decisions about components of the
program. We need that authority in statutory law because right
now, every time we try to make any type of changes, whether it
is done through an 11.15 waiver or whatever, we end up getting
sued. We are in a protracted court battle, we lose, and what
could have been a modest cost can become an extraordinary cost.
We are looking for assistance in that and also a reform to the
idea of consent decrees, which sometimes can last as long as 20
years and four Governors and administrations down the road.
Chairman Barton. Okay.
Governor Warner. We are looking as well--I mean, we raised
the issue, for example, on asset transfer both looking at
tightening rules on asset transfers in terms of look-backs, for
example, but also balancing that with an approach on reversible
mortgages that would allow some equity being passed on and tax
incentives, tax credits to look at the purchase of long-term
care. We see those as a coupling, for example.
Chairman Barton. Okay.
Governor Huckabee. We would mention the cost-sharing rules.
Once again, it is not in order to deny benefits to people, but
so that people could be empowered and have some sense of
personal responsibility in the benefits that they receive.
Again, a limitation with a capitation on how much they would
actually have to spend.
Chairman Barton. So cost-sharing means some sort of an
increased co-pay?
Governor Huckabee. Right.
Chairman Barton. Okay. That is four. Are those the main
ones?
Governor Warner. No, I think we have also looked at a
modified benefit package. Now, again, we recognize that if
inappropriately implemented, this could--particularly for
mandatory populations--cause enormous concern. But what we have
seen with--I think the benefit, for example, of some of the
SCHIP programs, if we can find a modified benefit package that
could be applied in a quasi-Medicaid role, particularly to some
folks who are on the verge of falling onto Medicaid, we could
substantially move the ball forward. But we need some
flexibility there.
Chairman Barton. Okay. My time is about to expire, so I
have got one final question. What sort of mechanism do you want
to establish with this committee as we move toward legislating
on this in September? How do we communicate with the Governors?
Through you two or is a there a taskforce or----
Governor Warner. We have a taskforce, Mr. Chairman. We
would ask that you communicate through us and then our staff
who has worked very diligently. We have not only NGA staff, but
a whole group of Medicaid directors who will be happy to work
with your and your staff. Again, what we are, as--particularly,
the Medicaid directors, these are the folks on the frontline
have to implement whatever policy change you bring about. They
are critically important to this process, and I think it would
be a great value to you as you put together your legislation.
Chairman Barton. And my final question, does the National
Governors Association support Federal legislation this year on
Medicaid?
Governor Huckabee. Yes, sir.
Governor Warner. We recognize that at least in terms of the
budget reconciliation, you have gotten numbers out there,
although some of your Senate colleagues were indicating that
they thought that not all of those dollars needed to
necessarily come from the Medicaid program----
Chairman Barton. I am not asking a specific number, but
Governor Huckabee said you do. Governor Warner----
Governor Huckabee. We look forward--we recognize we are
going to have to see some changes in the Medicaid program----
Chairman Barton. I take that as a yes?
Governor Huckabee. Yes, sir.
Chairman Barton. Okay. Mr. Brown.
Mr. Brown. Thank you, Mr. Chairman. Governor Huckabee,
thank you. Governor Warner, thank you for joining us. Governor
Warner, when you became Governor of Virginia, you took over an
SCHIP program that simply wasn't working very well. Virginia
had at that point premiums of $15 per child up to $45 per
family per month on SCHIP recipients. Those premiums seemed to,
from your later actions--it was believed those premiums cost
thousands of kids to lose coverage. When you took office you
eliminated the premiums; you referenced earlier that was one of
your proudest accomplishments since more children were covered.
So I think this--in my mind it shows two things; one, that
cost-sharing, even on relatively higher-income people in SCHIP
quickly cause people to fall into the ranks of the uninsured;
and second, because of the changes you made on the other end if
you will, simplifying eligibility, reducing co-pays, you were
successful in getting a lot more needy children in the program.
I think you recognized that cost-sharing by your actions could
be a barrier to participation. Given that experience, I wonder
why you are now lending your support to a policy of cost-
sharing for children even below the poverty level. This is the
group we most want to reach. This is also the group that costs
the States the least to cover than any other. I don't think
anyone blames children because they don't cost much typically--
blames children for the budget problems of Medicaid. Explain to
me why, in light of your experience and your policy changes and
your success in Virginia, explain to me why you are supporting
this policy.
Governor Warner. Let me try to explain that. First of all,
we found a program that was clearly not working in Virginia. We
made not only the changes in terms of co-pays, but I think more
important, the changes in terms of co-pays were some of the
regulatory changes we made in terms of the administrative
burden that a family had to go through in terms of signing up
for our famous program, our SCHIP program, or our Medicaid
circumstance. It was not a problem of co-pays, I don't think,
driving people away; it was a problem of we had such
administrative hurdles to get folks signed up in the first
place, we thought they needed to be signed up. We have done
that; 97 percent of the kids have signed up.
I think looking at the co-pay issue, for example, the fact
that on certain Medicaid populations we are looking at $1 to $3
maximum co-pay that hasn't changed since the early 1980's. I
believe even a Congressional study has seen that moving those
slightly up to the $3 to $5 range or in that parameter makes
some sense. I am open to that. I am also open to some modified
co-payment scale if there is, for example, a misallocation, a
mis-utilization of how people access the healthcare system. You
know, I have seen the different studies out there. I can tell
you in Virginia I am not sure we know how much misuse of, for
example, the emergency room is. We have made some changes
there. For example, we don't reimburse if folks go into the
emergency room and the hospital determines it is not an
emergency room warranted visit. We only reimburse them at a
doctor office level as opposed to an ER visit. These kind of
tools, which I think help diminish any potential misuse of the
system are terribly important.
I also think the notion of some minimal increase in co-pay,
particularly in that $1 to $3 range that has been not changed,
to my understanding, since the early 1980's bears
consideration.
Mr. Brown. So why did you eliminate the $15 up to $45 per
family----
Governor Warner. What we eliminated at the front end was we
wanted to make it as easy as possible for children in Virginia
to sign up for our SCHIP program, and we were very successful
with doing that.
Mr. Brown. I appreciate the other things you did, but now
you are saying that that premium you eliminated, and now you
are saying well, maybe that premium wasn't a particular
barrier----
Governor Warner. Well, I would say that most of our finding
was that the premiums were not potentially as much of a
barrier, and I am not saying I am ready to re-implement those
premiums. I am saying that when you have got, for example, in
some procedures a $1 to a $3 level maximum co-pay that hasn't
changed since the early 1980's that some moderate readjustment
of that ought to be on the table. Yes, sir, I do.
Mr. Brown. I think that we all agree about some of the
administrative burdens on families and we need to help States
eliminate such burdens, but report after report after report
shows that cost-sharing does in fact deter enrollment. Oregon
implemented a plan of $6 to $20 cost-sharing, the premium
significantly less than Virginia, more than the $1 to $3, and
nearly 50,000 people lost coverage. I mean I admire what you
have done in Virginia and how you have made that program work
better. I just think that that kind of premium that some people
in this committee suggest can in fact deter children from
enrolling.
Governor Warner. But you are taking one subset of a host of
programs that are underneath the umbrella of Medicaid. From
this Governor's standpoint, I would like to have the
flexibility to look at some areas where we could look at
potential increase in co-payments. I am also very anxious to
look at other areas where in terms of inappropriate utilization
of the healthcare system, there could be a higher co-pay if you
inappropriately utilize. Now, again, I think--and you may have
better studies than I, but I spend an awful lot of time on
this--you know, there is a lot of smoke around what level of
inappropriate utilization goes on in our healthcare system. I
don't know. I would like to find out. But if it is out there, I
would like to squeeze it out of the system so, again, those
dollars can be redirected to expanding coverage for those folks
who really need it.
Mr. Brown. One more comment, Mr. Chairman, if I could. I
did choose one subset, as you say, Governor, but the subset is
maybe the single least expensive part of Medicaid. And I would
like perhaps both of you to submit to us which cases you think
we should have premiums and what they should be. I don't
believe--if your report could be a little more specific, your
recommendations. Thank you very much. Thanks.
Mr. Deal [presiding]. Governor Warner, welcome. You didn't
get to hear some of the opening comments, and perhaps we can
debunk some of the comments that some of my colleagues on your
side of the aisle----
Governor Warner. I can take the recording home and listen
to it----
Mr. Deal. Okay. One of those is that you are picking on the
most vulnerable. We have heard some of that in the response to
Mr. Brown's questions about co-pays. But has the experience
been that in waivers that have been granted to States that you
have in fact been able to expand coverage rather than subject
those who are the most vulnerable to any kind of criticism or
elimination from participation? Would you comment on that?
Governor Huckabee. Mr. Chairman, I would be happy to. It is
exactly the waivers that have given us the ability to put a
safety net under people who didn't have it. That is one of the
concerns that as Governors we have about Medicaid. It provides
extraordinary coverage for a few, but it provides nothing for
many. And if we had the flexibility to put that net under more
people rather than to put an extraordinary net, maybe more net
than is even needed under some, then that would be a great
improvement on the system. That is exactly what we did in our
State. When I became Governor one of the most impassions pleas
I heard early on was all the uninsured kids. We created a
program called KIDS FIRST. Congressman Ross helped us do that
as a member of the State legislature. When we did that what we
found was with small co-pays--we didn't even have a premium,
just very minimal co-pays--but it added over the years some
280,000 kids into insured coverage who had nothing before.
Their benefit package matched that of what State employees had.
And it has made a dramatic difference. And here is what we
found: people utilized the services that they needed, but they
didn't over-utilize. They were responsible with it, and they
appreciated it. And it saved the lives of a lot of children and
it has made it possible so that a single mom's greatest
nightmare was not that her son was going to break his arm on
the playground and she wouldn't have the ability to make the
rent payment next month because that safety net was there.
We are not asking for the ability to hurt people. We are
asking for the capacity to make it so that this program, a good
program, can be run more efficiently in the same way that any
person administrating a benefits package would hope to do.
Governor Warner. Mr. Chairman, let me just add again, since
we are staying on the children's program, what we found in
Virginia was with the wavier, we were suddenly able to no
longer have this administrative nightmare of two doors. If you
didn't go through the right--if you had one level of
eligibility, you went through the Medicaid door; if you had
another level of eligibility, you went the SCHIP door. And what
we were finding are these families don't remain fluid. Some
months they may be qualifying for Medicaid; some months they
may be qualifying for our SCHIP program. They were, in effect,
being thrown off the rolls because we didn't have the
administrative flexibility to make sure there was only one
door. Now, in my mind that was a huge mistake. And the fact
that we have now--Kaiser Foundation is recognized as having one
of the highest sign-up rates of any State in the country
because we have had some of that administrative flexibility. I
think kids are better served.
Mr. Deal. As my time is expiring as well, let me just tell
you how much I appreciate the work that your association has
done and your staff has done. There has been, in opening
comments, the intimation at least that the reason we are here
today is driven by the Federal budget numbers. Am I not correct
that the Governors Association undertook what has now led to
your recommendations far before we ever knew what the budget
numbers at the Federal level were going to be? And would you
briefly outline for us when this all started and the degree of
participation that you have had from the various Governors in
this effort?
Governor Huckabee. Congressman, I have been Governor since
July 1996, and I can tell you Medicaid discussion has been on
the table every time two or more of us get together. Over the
past year we have become very focused on it to a degree of
actually creating the taskforce long before the Federal budget
numbers ever came about. What we did hope for, frankly, was
that we would have policy first, then budget numbers. Frankly,
we wanted to establish that there would be the social agenda,
what it was we were trying to accomplish. Then, look at the
program that would best accomplish it, and then, see what it
would cost. The fact that we are being driven more by budget is
not our decision necessarily, but we bring you not so much the
numbers; that is, we feel, something Congress has to grapple
with. We are bringing you ideas that we believe will improve
the system. CBL will have to score the numbers and determine
exactly what it is, although we think that there are
efficiencies--I am not going to use the word savings; I think
that is the wrong word--efficiencies to be had by better
expenditures of monies. But the fact is, under the current
system this program is unsustainable for the State level. We
can't print money like you do, and that is why we come with a
sense of real crisis with the Medicaid program.
Governor Warner. And I would simply add to what Governor
Huckabee has said we have also laid before you ideas of
reinvestment. That is why this is a policy-driven document and
not--and we have been very clear from the outset. We started
last fall with the working group that this was going to be
policy-driven. It was the message we continued to try to bring
up to you; it should not be budget-driven. We have looked at
ways where yes, we may be able to find some savings, but also
ways where we think there needs to be reinvestment, or the
problem is going to be worse in the coming years.
Mr. Deal. I commend you and the efforts of your group. I
think what you have done is historic. I now recognize Mr.
Waxman for questions.
Mr. Waxman. Thank you, Mr. Chairman. Governor Warner, I
have read some of your past statements where you have spoken
out eloquently about the responsibility of the Federal
Government to bear the State, Federal responsibilities for
making sure that all Americans have access to healthcare. And I
am puzzled by why your reform proposal that the Governors
Association is bringing forward to us today is so timid in
suggesting that the Federal Government has a responsibility to
do more. You have said nothing about picking up the cost of
dual eligibles. You have not suggested adjustments in the
matching rate to help counteract the effect on the Medicaid
rolls and State budgets with unemployment increases. You
haven't asked that we eliminate the 2-year waiting period
before Medicaid covers the disabled. You have a very timid
statement about the clawback problem in the drug benefit. You
haven't noted the problems resulting from the decline in the
matching rate. So you are ready to ask for co-payments from
poor children, yet you are not willing to come here and say
that the Federal Government ought to stand together with the
States to meet more of its obligation.
Governor Warner. Well, Congressman----
Mr. Waxman. Can you explain that to me?
Governor Warner. Well, I would be happy to. First of all, I
would be happy to share with you--and we will have staff do
that later today--the position that NGA has maintained over the
years on dual eligibles. We think this is one of the cost
shifts that has taken place, never was legislated----
Mr. Waxman. Is that part of the proposal for the National
Governors----
Governor Warner. We continue to----
Mr. Waxman. [continuing] Association on Medicaid?
Governor Warner. We have never revoked or moved away from
our proposal that the question of dual eligibles needs to be on
the table, that it is what is driving--as my statistics
earlier--40 percent of our cost are related to dual eligibles,
something that broke the Federal-State compact that was with--
--
Mr. Waxman. Governor Huckabee, is it your understanding
also----
Governor Warner. Let me just go ahead and finish the two
other points that you asked us to address.
Mr. Waxman. Please do, but I have a limited time and some I
would ask----
Governor Warner. One----
Mr. Waxman. [continuing] that I have 5 minutes to do in----
Governor Warner. All right.
Mr. Waxman. [continuing] put the time in.
Governor Warner. If there was an issue on FMAP, we were
appreciative of the effort a couple years back, but if you want
to reopen that, that would be, again, welcome. And the
question----
Mr. Waxman. Governor, I am going to have to interrupt you--
--
Governor Warner. Is it a question of the clock----
Mr. Waxman. No, I am going to interrupt you because it is
my time. I am looking at a proposal of the National Governors
Association that was submitted to us. I don't see these in this
proposal. If they are long-standing proposals by the National
Governors Association, then we ought to take that into
consideration as well. And I am pleased to hear, and I gather,
Governor Huckabee, you stand with him in saying that those are
also proposals that you would back for us to take advantage of?
Governor Huckabee. Absolutely. Those are long-standing
proposals, Congressman. I think that what we would want to
emphasize today, these are the proposals that have the
unanimous consent of all the Governors. There are a lot of
things that individual Governors would strongly urge, but this
is a group of proposals that has bipartisan, unanimous----
Mr. Waxman. Right.
Governor Huckabee. [continuing] support, and that is why we
are presenting these. Not everything needs to be done, but at
least----
Mr. Waxman. Some of the others may not have unanimous
support?
Governor Huckabee. No, I think they have the complete
support of the NGA, it is just that----
Mr. Waxman. Governor Warner----
Governor Huckabee. [continuing] they are not new.
Mr. Waxman. Excuse me. Governor Warner, you have shelled
out for us an ideal for healthcare that the States can buy a
package that is less than a comprehensive package of insurance
in order to make ends meet. In one State we know that the
Governor proposed that the outpatient care be covered, but not
the inpatient care. States would be allowed to do that. You
suggested that tax credits ought to be available so parts of
insurance coverage could be available to other people as well.
Is your vision of the future for healthcare in this county that
people go out and buy policies to cover just a few of things
that might be needed, but not to be protected from the overall
healthcare costs of hospitalization or whatever the future may
need? First question. Second question, you said this is not a
policy-driven proposal. Why aren't the Governors saying to us
if you can reduce the cost for prescription drugs, you ought to
be able to reinvest that money back into Medicaid? Instead, the
proposal we have is if you can reduce and we can reduce with
you the cost of the Medicaid program either in prescription
drugs or narrowing the benefits or making the elderly have to
pay more, get reverse mortgage, et cetera, we are putting that
money back into the Federal Treasury. $10 billion is what our
goal is so that we can put it back into the Treasury to pay for
other priorities like tax cuts for billionaires. It is hard for
me to believe that this isn't budget-driven when we don't
really provide for the money that is saved to be reinvested in
the program. So I would like you to address those----
Governor Warner. Well, first----
Mr. Waxman. [continuing] two questions.
Governor Warner. [continuing] of all, I would say that we
actually have put in very strongly this is a policy-driven--I
think you got it reversed--this is a policy-driven document,
not a budget-driven document, No. 1----
Mr. Waxman. No, I beg to differ. I think you have got it
reversed, Governor.
Governor Warner. Well, this is not the format of the
Nation's Governors in terms of laying this out. No. 2, we have
also put in place incentives that we think need to be in place
to insure that people don't fall onto the Medicaid rolls. No.
3, whether it is long-term care insurance, whether it is other
tax credits to provide some level of a private sector product
that can be purchased. No. 3, I come back to your initial
question, Congressman Waxman. I want to make sure that every
Virginian and every American has the best healthcare possible.
What I am looking at right now in a State of 7.4 million people
after a fivefold increase in Medicaid spending, after a
healthcare foundation that has done more--that I am proud to
have started--done more to take care of the needs of the
uninsured than any healthcare foundation I have seen around the
country. I am looking 10 years later still at a million
Virginians without healthcare.
Chairman Barton. Gentleman----
Governor Warner. One of the things we have got to grapple
with is how folks don't--as Governor Huckabee said--fall off
that cliff into no coverage at all. And we think----
Chairman Barton. The gentleman's time----
Governor Warner. [continuing] we have laid out some----
Chairman Barton. [continuing] has expired. I understand the
frustration because we all want to ask a lot more questions and
we will--I assume, Governors, that you will take questions in
writing for the record? Because I am sure a lot of members--5
minutes is very insufficient. The Chair is going to recognize
out of order Mr. Norwood of Georgia for one question to Mr.
Huckabee because I understand that Mr. Huckabee has to leave
and Mr. Norwood had a specific question for Governor Huckabee.
Mr. Norwood. Well, it is really a point of clarification.
My question is basically if we were to write the National
Governors Association, who do we write and whose point of view
do we get back? Do we get back Governor Huckabee's? Do we get
back the National Governors Association point of view? Because
if you are speaking with one voice, you have a very powerful
voice in my opinion. But if I am going to get today one answer
from Governor Huckabee and a different answer from Governor
Warner, then I get confused a little bit. And I am not going to
be able to ask Governor Huckabee questions, so are you unified
in your position on Medicaid and can we expect an answer back
from the National Governors Association? Because I am going to
send you a bunch of questions because I won't get to ask them.
Governor Huckabee. Congressman, I think that is what we
bring to the table today is complete unity among the Governors,
Democrat, Republican, north, south, east, west, male, female.
It is an unusual situation that we have worked hard to achieve.
And if you talk to the National Governors Association, you are
going to get a very strong, unified voice. That is why we are
limiting our discussion to the things upon which we agree, not
to the things for which we could not yet find agreement, but we
are still working toward it. There are many issues yet that we
want to resolve. We have not gotten there. But we have gotten
this far. And these are the issues that we can come to you with
and say that from the left and from the right, Governors across
America have not only accepted, but agreed upon and endorse and
support and ask for your partnership in making them happen.
Mr. Norwood. Mr. Chairman, I thank you for that. I can tell
you I will be very supportive if you are unified, and I think
this committee will be too.
Chairman Barton. Governor Huckabee, do you have to leave
now or can you stay a little bit longer.
Governor Huckabee. Congressman--Mr. Chairman, I am afraid I
do have to leave. I am----
Chairman Barton. Congressman is fine. I am a Congressman.
Governor Huckabee. But I do have to preside with another
NGA meeting this afternoon, but you are in good hands, and he
speaks with the voice of unity and authority for the National
Governors Association.
Chairman Barton. We appreciate your attendance and we look
forward to working with you.
Governor Huckabee. Thank you, Congressman.
Chairman Barton. Chair would now recognize Mr. Bilirakis of
Florida for questions.
Mr. Bilirakis. Thank you, Mr. Chairman. I think we are
all--or most of us in any case are grateful to these people for
all their hard work over a period of months and years. Governor
Warner, we are agreed, I suppose, that Medicaid's original
mission or their current mission is to provide basic healthcare
to those who can least afford it. Isn't that correct?
Governor Warner. Yes, sir.
Mr. Bilirakis. Okay. In the written testimony--and you have
said it so many times here; I am not sure how many people were
listening--that your recommendations make Medicaid more
efficient and effective, were not developed to generate any
particular budget-saving number. You said they were policy-
driven as against budget-driven, that this all started long
before we started with this budget reconciliation. It is
unfortunate, to be perfectly honest with you, I know we had a
taskforce here on this committee working on discussing Medicaid
reforms and meetings and that sort of thing in the last
Congress. We didn't have budget reconciliation or $10 billion
or anything of that nature that was budget-driven. And people
on this committee refuse to believe that, what are you going to
do? But you said that instead they were developed to maintain
or even increase health outcomes while potentially saving money
through efficiencies for the States and the Federal Government.
So the bottom line is that we don't change the original
mission, which is providing basic healthcare to those who can
least afford it. But as a result of efficiencies and some
flexibility and some of the things that you have requested that
we make that plus. By plus meaning you have indicated increase
health outcomes, possibly add additional people to the rolls.
Is that correct?
Governor Warner. What we are talking about is if we can
find savings, if we can make this system more efficient, that
if we can end up, again, through some of the tools we have
used, for example, incentives on long-term care, find ways to
have folks not fall or wait later in life until they fall on
the rolls of Medicaid, that improves the health outcome of that
individual and our country at all and obviously our States in
terms of serving the people that need it.
Mr. Bilirakis. And in addition to the efficiencies and
whatnot, you hope to reach that same result by focusing more
on--using the words of your report--wellness and health
promotion, as opposed to simply sick care treatment. Isn't that
correct?
Governor Warner. That falls clearly into the category of
overall healthcare reform, which has to be----
Mr. Bilirakis. Yes.
Governor Warner. [continuing] we have laid out first steps
here, but getting into preventive care and wellness care,
absolutely critical. It has not been the direct focus of this
piece.
Mr. Bilirakis. Your executive committee consists of nine
Governors. I believe----
Governor Warner. Eleven Governors were participating in the
working group; over 35 Governors have either themselves been
involved or their Medicaid director has been involved. The
other roughly 15 Governors, there has not been a single
Governor that has said hold on here; I am opting out of this.
So you do have back to Congressman Norwood's position. And
there has been back and forth. You have the Nation's Governors
coming before you with ideas that they have reached consensus
on.
Mr. Bilirakis. So all of these Governors, Republicans and
Democrats basically agree on this concept and reaching the
result that I have already indicated, which is basically hold
the line to the basic mission originally and add to it through
wellness and possibly treating additional beneficiaries and
that sort of thing. Now, would that breakdown have been how
close in terms of Republicans versus Democrats?
Governor Warner. Well, sir, the thing is Medicaid is not a
single program. There are 50 separate Medicaid programs.
Mr. Bilirakis. Yes.
Governor Warner. They vary dramatically. What you find
mostly where the disagreement would come along would not be
based on Republican versus Democrat; it would be based on what
level of reimbursement levels you were able to provide within
your respective States.
Mr. Bilirakis. Yes. Up here, as you have already heard, it
is----
Governor Warner. We may be the last----
Mr. Bilirakis. [continuing] Republican versus Democrat.
Governor Warner. [continuing] bipartisan game in town.
Mr. Bilirakis. Yes, amen to that. Well, I just find it hard
to understand why, you know, everybody here doesn't sort of
agree that you have tried awfully hard to do this on a policy-
driven, non-partisan type of a basis without hurting current
beneficiaries and with the idea of adding additional ones and
additional health outcomes, as well as, of course, wellness
preventative care. It amazes me, but that is the way life is up
here unfortunately. Thank you very much, Governor Warner, for
all your hard work. Thank you, Mr. Chairman.
Chairman Barton. Thank the gentleman. The gentleman from
Massachusetts, Mr. Markey, is recognized for 5 minutes.
Mr. Markey. Thank you, Mr. Chairman, very much. Welcome,
Governor.
Governor Warner. Thank you.
Mr. Markey. Mr. Governor, we have 34 million Americans who
live in poverty in America. 14 million children live in poverty
in America. 13 million Americans live in abject poverty. That
is half of the poverty rate. In other words, rather than
$19,000, it is $9,500. Abject poverty. So under this proposal
the Governors will have the ability to raise the fees for these
poorest people. Now, I don't know what the incentive would be
to raise the fees for the poorest people other than to pay for
the tax cuts that the Republicans want for the wealthiest
people in our society. In other words, the tax break for them
comes from a tax increase, a fee increase for those people
living in abject poverty, $9,500 a year for a family of four
and for the 13 or 14 million children who live in poverty in
our country. So that is a budget decision. Because it doesn't
seem to make any sense to me that you would want to raise the
fees on the people--the children living in poverty. They
already are the worst-treated citizens in our country. So isn't
it really a budget-driven decision that you are making since
you would never want to increase the fees for those people. And
it is really not a policy decision because there really is no
policy justification for increasing the fees for the poorest
people.
Governor Warner. Let me first of all say that, you know, in
Virginia we actually--and some of you actually may have read
about it--we put together a bipartisan coalition a year ago to
deal with our tax code, to deal straight up with paying for
what Virginians wanted in terms of level of service.
Mr. Markey. Has Governor Huckabee done that too?
Governor Warner. Governor Huckabee has done it as well.
Many Governors in both parties have stepped up and dealt with
their States' finances.
Mr. Markey. So, again----
Governor Warner. Let me----
Mr. Markey. [continuing] let me just say have you all
agreed that you are not going to raise the fees for the
poorest----
Governor Warner. Congressman, what we have said is--matter
of fact, Congressman Brown raised the point earlier--when we in
Virginia tried to actually expand our children's health
initiative, we actually cut back on co-payments so we could
expand the program along with some of the administrative
changes we have made. But to somehow say that the co-payment
issue that in some areas has not moved from $1 to $3 since the
early 1980's should somehow remain sacrosanct forever,
respectively, I disagree. I think we need to look at that tool.
We need to look----
Mr. Markey. But you do--again, Governor, you do understand
that the only reason you would have to consider it is that the
Republicans are going to cut----
Governor Warner. Actually----
Mr. Markey. [continuing] $10 billion, and it is actually
going to be more than that as the years go on, that this is
just this year's installment on that because of the huge tax
breaks for the wealthy. So in other words, if I can ask you
this, would you, rather than have the tax break and rather than
being here talking about your policy recommendations in the
context of their tax break that requires this $10 billion cut,
would you prefer there be no cuts in Medicaid from the Federal
Government and they reduce the tax break by the $10 billion
that is being required to be cut out of Medicaid? Would you
prefer not to have that tax break?
Governor Warner. Congressman, we would prefer not to see
substantial cuts in Medicaid. That has been----
Mr. Markey. No, but will you----
Governor Warner. Let me----
Mr. Markey. No, I understand, but it is important for us
from the Governors' perspectives----
Governor Warner. And I would like to give you that
Governors' perspective, and the Governors' perspective is we
want to minimize the cuts in Medicaid. What we also----
Mr. Markey. But there is no need for cuts in Medicaid if--
--
Governor Warner. Sir, let me just say that we spend for
every dollar, at least in Virginia, you put forward, we match
it dollar for dollar. Now, if you are going to suddenly say we
are going to take and pay 100 cents on the dollar in terms of
all Medicaid costs, have at it. But in Virginia we have seen
our State Medicaid costs go from $1 billion to $5 billion in
the last 15 years. I make the choice because we don't have the
luxury of not balancing a budget. Our numbers have to add up at
the end of the year, and we have to make----
Mr. Markey. No, but I----
Governor Warner. [continuing] decisions each year, and
Medicaid is the largest single increase in our----
Mr. Markey. But do you think, Governor, that we should be
talking about increasing Federal aid for Medicaid from a
Federal level rather than decreasing Federal aid for Medicaid
to you to minimize these difficult choices that you have to
make to actually increase the fees for the children in abject
poverty. That is the decision you are being forced to make, and
you are making it----
Governor Warner. No, what we are making is the statement--
you are saying that----
Mr. Markey. I am asking whether or not you would want--do
you want Congress not to give the tax break that requires the
cuts in Medicaid that forces even more difficult decisions upon
you and the other Governors? Do you oppose those tax breaks?
Governor Warner. No, we put forward the position that said
we would oppose--we were not looking, clearly, at any Medicaid
cuts. You came up with a $10 billion number. Our hope is that
you will find some ways to spread that out amongst other
programs or other areas. But we also, irrespective--let me make
clear, though--irrespective of your current budget debate,
Medicaid, as it is currently structured, is not sustainable
over the long haul.
Mr. Markey. Well, let me----
Chairman Barton. The gentleman----
Governor Warner. From a State's standpoint----
Mr. Markey. You have----
Chairman Barton. The gentleman's time has expired. I know
it is frustrating, but it has expired. We now go to Mr. Upton
for 5 minutes.
Mr. Upton. Thank you. Thank you, Mr. Chairman. I applaud
you and Chairman Deal for hosting this hearing. And, Governor
Warner, I want to say thank you, as well, for your fine work
with the Governors Association.
I know that our delegation sat down with our Governor a
couple months ago, I guess, and we pledged to work in a
bipartisan basis with Governor Granholm to try and make sense
out of program that clearly today is not working. And you all
made the very distinct point that doing nothing is not an
option because it is simply not sustainable. And the
demographics show that. The increase in the ages above 64 years
old, and, again, for those growing over 80 years old, those
percentages, the increase that are demanding Medicaid services,
it clearly is not working today.
And I also thought that the Tennessee Governor's statement
on Saturday as part of the response to the President's radio
address was pretty much right on message. And he talked about
the work that he has been a part of with regard to the
Governors' plan that you all presented to us this morning. And
I would agree strongly with the judicial reforms that you
talked about. I might just ask my chairman does that mean we
have to get the Judiciary Committee involved in our process as
part of reconciliation, Mr. Barton, and do we have to get the
Judiciary Committee to be involved, or can we just steal their
turf and do it on our own?
Chairman Barton. Well, we will try to steal their turf----
Mr. Upton. All right----
Chairman Barton. [continuing] on our own but----
Mr. Upton. [continuing] that is good to me----
Chairman Barton. But if they need to be involved, they will
be.
Mr. Upton. The question that I have for you, Governor
Warner, what else can we do to create better personal
responsibility for those demanding Medicaid? You talked a
little bit about a small increase in the co-pay, something that
has not gone up in more than 20 years. Are there some
incentives that we can do to decrease smoking, better diet
plans, a number of things that we might want to think about for
preventative healthcare that you all took a look at as part of
your report?
Governor Warner. Absolutely. All of those are tools that we
have to use. I mean I have got communities in Virginia where 20
percent of the kids in junior high are obese and Type II
diabetes candidates. It is a ticking time bomb. I had Medicaid
expenditures of $400 million a year that are directly related
to even non-alcohol and drug, but other lifestyle-related
disease, Type II diabetes, hypertension. There has got to be a
preventative aspect of this, and we have started somewhat, but
we need to do more, and I think that is probably the case in
every State.
Mr. Upton. You know, one of the things as it relates to
Michigan, last year is an example--this is in my opening
statement I submitted for the record--Michigan's Medicaid
program financed 40,000 births, 40 percent of the total number
of births in the State. Is that about right for Virginia as
well?
Governor Warner. We are about that number, and one of the
things we did recently--and, again, this is the kind of
investment we think that needs to be part of--investment to
save over the long haul--we recently, in this past year,
expanded the quality of care to our prenatal care and actually
raised to I believe 175 percent of the poverty level covering
expectant mothers.
Mr. Upton. You talked a little bit in your statement about
expanding purchasing pools. We have had an issue in the
Congress here the last couple of years to do that for small
businesses called AHP, Associated Health Plans, and it is my
understanding that we are likely going to have that legislation
up on the House floor perhaps as early again as next month. Is
that something that you all took a look at?
Governor Warner. We did not take a look at AHPs
specifically. I am not going to weigh in on those. I do think
we all know that the lack of success sometimes that takes place
with the purchasing pools is the adverse selection that takes
place as younger firms or folks with younger employees opt out,
and you have got to find ways to incent and even potentially
mandate the ability to get the numbers together so that you can
drive your insurance cost down.
Mr. Upton. Our Governor shared her frustration with our
delegation with a lack of the asset forfeiture items that a
number of Governors have. Should we penalize those States that
don't have a workable plan in that regard?
Governor Warner. Are you talking about asset transfer here
in terms of----
Mr. Upton. Right.
Governor Warner. [continuing] seniors? What we have tried
to put together--and it is trying to strike a balance here--
because I don't think any of--I can only speak for Virginia--I
am not sure any of us know how much of inappropriate asset
transfer is going on. But what we do have is a system, whether
we like it or not, I believe, that encourages people to gain
the system with it. Again----
Mr. Upton. Let----
Governor Warner. [continuing] let me just finish. And what
we have tried to say here is while there needs to be perhaps
stricter look-backs and other tools, we have to couple that
with other incentives to purchase long-term care insurance,
allows people to maintain some equity to their house to pass
on, the reverse mortgage ideas and others. We need a series of
both incentives and, yes, penalties to make sure that we are
fair about dealing with folks as they go into long-term care
situations.
Mr. Upton. Thank you. My time is expired.
Chairman Barton. Gentleman from Illinois, Mr. Rush, is
recognized.
Mr. Rush. Thank you, Mr. Chairman. Governor, thank you so
much for your questions. I am going to ask you a series of
questions, and hopefully, you will be able to answer them all.
And I am going to ask them in their entirety before you answer.
I would appreciate it if you would concur with me.
I want to ask you more about the asset transfers that will
restrict access to nursing home care. And I understand that
research indicates that even before the 1993 Omnibus
Reconciliation Act extended the look-back for transfers of
assets to trust to 60 months, the establishment of trusts by
people who could have used them to avoid Medicaid spend-down
was extremely rare. Indeed, most trusts are established by the
wealthy, and I think you will agree, to avoid paying taxes. And
my first question is can you tell me why it is okay for wealthy
people to give their entire estate to their children when they
die while somehow it becomes a problem that people who need
nursing home care, most of whom have very little wealth, can't
keep anything? It seems to me that the Medicaid spend-down may
possibly be the last estate tax left standing. In your
testimony you stated that Medicaid reform could include changes
that restrict the types of assets that are being transferred
and increase penalties for inappropriate transfers. Can you be
more specific and outline to this committee which assets that
are being transferred that need more restrictions? And then
also, as I understand it, older people can shift from being
healthy to needing long-term care in a very short period of
time following a stroke or fall, for example. And I know that
many grandparents want to help their children and their
grandchildren with purchasing their first home or getting a
college education and the like. Do Governors support a policy
that will go after grandparents who, without any awareness that
a nursing home was in their future, pay for part of their
children's college education? Do the Governors support a policy
that would allow the State to go after a grandchild in college?
Or do Governors support a policy that will allow the State to
go after parents struggling to save for their own retirement if
their own mother or father needed nursing home care but was
unable to pay? So could you answer those questions?
Governor Warner. I would be happy to, sir. First of all,
what we are looking at is trying to ensure that seniors have a
better quality of long-term care. We are looking at, in terms
of the issue of wealthy versus non-wealthy, I think if there is
misuse or inappropriate use of the system, it obviously needs
to be applied fairly, equally. But I come back to the basic
point, what I believe we have right now is a system that
basically is all or nothing.
Mr. Rush. Governor, is there a profile of someone who is
abusing the system? Is there a profile that currently exists
now? Who abuses the system?
Governor Warner. Congressman, what I am concerned about is
the fact of how I deal in a State where increasing numbers of
seniors don't have virtually any options. Their only option is
to spend all the way down before they go into a nursing home
facility, or in some cases if they have the right counsel, can
figure out a way to have any financial responsibility. We are
trying to strike a balance here. And I believe that not trying
to strike a balance, to simply continue to allow what seems to
be a mini-growth industry in itself of ways to--and I think it
is disproportionately used actually by more wealthy
individuals, candidly, because they have the more sophisticated
legal counsel and accountants and others who allow this to
happen. In the long run, again, continues to diminish the
resources we have available at the Federal level or the State
level to provide the kind of quality long-term care that we
need.
Now, asset transfer alone isn't going to solve the problem.
It has got to be coupled, as I said, with significant
incentives to encourage people to purchase long-term care
insurance. I mean we have a problem that is not going to go
away with the baby-boomer generation heading toward retirement.
In my State 65 percent of the people in nursing homes, they are
on Medicaid. With a trajectory of a cost increase that is not
going to diminish, we have to find a way to grapple with this
issue.
Chairman Barton. The gentleman's----
Mr. Rush. I can understand your problem, and I understand
your point, but I just don't see where they are going to be
able to afford it, even long-term----
Governor Warner. Well, that is why we are saying that if
you can find a way so that folks--particularly in terms of
their house--can preserve a piece of that equity so they don't
have to totally dispose of it. And what the right number is, I
am not sure. But there ought to be some way to preserve that so
you can absolutely find that way to pass on some--you have
worked all your life, and your largest asset is your house and
you want to pass something on to your kids, you ought to be
able to have that. But what we have got right now is, in
effect, an all or nothing.
Chairman Barton. The gentleman's time has expired. The
gentlelady from New Mexico, Mrs. Wilson.
Ms. Wilson. Thank you, Mr. Chairman. And, Governor, thank
you for being here and thank you for your leadership on this
issue. I think it is a tremendous contribution to the body of
work that has been done on Medicaid.
My colleague from Massachusetts who was here briefly before
talked about budgets for Medicaid. And I think we need to be
clear about this. Over the next 5 years under the Federal
budget we are going to increase Medicaid spending by $215
billion. That is a 7.1 percent annual increase over the next 5
years. We have got Tennessee dis-enrolling 300,000 people on
Medicaid, the Governor of Alabama having real declines in
Medicaid spending this next year, every State in the Nation
struggling to meet the needs of their people because, as you
mentioned and Governor Huckabee did as well, you don't print
the money. Can Virginia sustain a 7.1 percent annualized growth
rate in Medicaid?
Governor Warner. That is, again, one of the reasons why we
have said we have got to deal with this issue now. It is going
to get exponentially worse over the next decade with the aging
population, with increasing populations who are at a young age
now. For example, just the obesity-related issue on Type II
diabetes, we have got to get a handle on it. Now, that does not
mean--and what I find somewhat frustrating is this--it is all
or nothing, or somehow it is all about cuts or it is all about
somehow being against the people who are in need. What we have
tried to strike is a good faith effort to find ways to make the
system more sustainable over the long haul, reinvest in areas
where we can hopefully have folks not fall upon the Medicaid
rolls over the long-term, either through long-term care
insurance, through purchasing of some level of healthcare
insurance in a modified benefit package. Because, again, your
basic question is in most States it is much more than a 7
percent increase. You can't sustain it.
Ms. Wilson. Thank you. And I really appreciate your focus
on letting policy drive the budget here. I know you have got to
come up with a budget that balances. But one of the things that
frustrates me about Medicaid is that we don't look at whether
it improves anybody's health. And it wasn't set up to improve
anybody's health. It was set up to pay the bills. And I wonder
if in Virginia you have looked at or whether the NGA has looked
at what is the health status of people who depend upon
Medicaid, and how does that compare to folks who have private
health plans, or, more broadly, the population?
Governor Warner. Well, we have started to look at how we
can better manage toward healthier outcomes. I mean we have
some preventative care programs we have put in place. You know,
arguably, some folks who we move to, you know--HMO-modeled
Medicaid in some areas as well that at least arguably are
making the case that they are managing toward a better health
outcome. I think you also have to recognize, though, that to
take a Medicaid population that by definition is
disproportionately poor and has other chronic problems that may
not--you know, to compare that apples to apples with a middle-
class population that is buying traditional health insurance
and a large corporate structure, that is not a fair comparison.
Ms. Wilson. No, and I don't think it is either, but I think
we do need to look at the apples to apples comparison, because
I am not sure it is there. And in particular, with respect to
that and the efforts you are making on trying to shift toward
prevention and the management of chronic disease and getting a
hold on obesity and so forth, are you awarded at all from the
Federal Government in terms of reimbursement rates or anything
for improving----
Governor Warner. No, we don't----
Ms. Wilson. [continuing] the health----
Governor Warner. [continuing] have an incentive system that
encourages good behavior on the basis of the States.
Ms. Wilson. So from your State's Medicaid director, there
is no help at all from the Federal Government if you show
results?
Governor Warner. To my knowledge, and I am glad I am here,
we have no incentive reimbursement level that encourages the
States to take on these initiatives. And, again, let us be
candid with each other. Part of the problem is we are going to
have to have a willingness and a dedication from you guys on
the Congressional side and us on the Governors' side to make
long-term investments in this type of preventive care. You
cannot turn on the preventive care program day one and see
results in 6 months. And when you have got the very real
choices that we have to make about what level of care in terms
of just dealing with the acute population, it is a balancing
act. My hope would be, we would be able to move toward that
preventive chronic disease management, these kind of
investments, but we are going to need to kind of lock arms on
this and be willing to acknowledge that the results are not
going to happen overnight.
Ms. Wilson. Governor, thank you, and I look forward to
continuing to work with you.
Chairman Barton. We expect a series of votes in the next 15
to 20 minutes. We are going to get as many questions in, as
many members in, and we will come back. What is your schedule?
Governor Warner. I actually am going to use the same excuse
that Mike Huckabee used a few moments ago. You know, in about
another 15 or 20 minutes I am going to need to move on. I have
got another session up here on the Hill.
Chairman Barton. We have about an hour's worth of
questions. Any way we could.
Governor Warner. Let us compromise at a half-hour.
Chairman Barton. All right. Mr. Stupak.
Mr. Stupak. Thank you. And, Governor, thank you for being
here. The issue really isn't--as Ms. Wilson indicated, we are
putting more money into Medicaid--we are putting enough money
in to meet the needs of the clientele we are trying to serve.
So even though we may be putting more money in the next couple
years, it is not meeting the needs we see. In my State of
Michigan we see a 30 percent increase, and yet Jennifer
Granholm has been able to keep our increase cost for Medicaid
at 1.5 percent. So we do have to get smarter on the way we do
that. On top of not meeting the needs, we are also expected to
come up with $14.7 billion over the next 5 years. That is what
we have been instructed by the Budget Committee to make $14.7
billion cuts over the next 5 years. So my concern, and I am
sure you weren't here for my opening, but I highlight a point
in Michigan--in fact yesterday, the Michigan legislature did a
couple of things. It goes to flexibility and I want to ask you
a little bit about it. The State Senate voted to make some
Medicaid patients pay a $5-per-month premium. The budget also
calls for a $10 co-pay for brand name drugs where there is a
generic equivalent and a $25 co-pay for non-emergency room
visits. The House bill would eliminate 43,000 people on
Medicaid recipients in Michigan including all 19- and 20-year-
olds and relatives who raise family members--Medicaid eligible
children. It sounds like there is a lot of flexibility in the
Medicaid program already, but I am hearing the Governors saying
we need more flexibility. In what way?
Governor Warner. In terms of--and I can't speak to the
Michigan-specific situation; perhaps you have already gone
through the waiver process to grant you that flexibility--but I
can assure you that to----
Mr. Stupak. So that is unusual amongst the States?
Governor Warner. To get an answer out of CMS on a timely
basis to get a waiver through continues to be an issue.
Mr. Stupak. So you want to move the waiver----
Governor Warner. We want----
Mr. Stupak. [continuing] provision quicker.
Governor Warner. [continuing] to look at the waiver
situation on a quicker basis, we want to encourage greater use
of generics, we want to look, as I indicated, on the whole drug
pricing issue in a much more aggressive way than has been done
so far. I didn't get a chance to, but I would like to retake
issue with one of your colleague's earlier comments. We very
specifically raise the unfairness of the Federal Medicare drug
benefit that actually penalizes States----
Mr. Stupak. Correct.
Governor Warner. [continuing] on the clawback who have,
subsequent to 2003, done a better job of negotiating drug
prices than the Federal Government. That doesn't make any
sense.
Mr. Stupak. I was going to ask you that. That was one of my
questions. Your proposal mentioned the clawback provisions of
the Medicare Modernization Act that requires States to begin
making payments to the Federal Government in 2006 in exchange
for Medicare-covering prescription drugs for dual eligibles. So
what is the true cost of a clawback to a State like yours?
Governor Warner. It varies by State. With the loss of our
renegotiated prices that we received from our PDL with the
administrative costs that are being put upon the system where
there is no transition help put in, we see it pretty much as a
negative, at least in the short run. And I think, again, it
will vary by State. Some States will do all right; some States
will not. But it seems strange that an issue that is supposed
to help in the long haul deal with pharma costs actually
increasing the costs in many cases.
Mr. Stupak. Sure. Can some of these problems with the
clawback--I mean Michigan is one that really kept their rates
really low for prescription drugs. Is there anything we can do
other than Congressional action that could relieve you from
that clawback provisions in there?
Governor Warner. We have heard talk that there may be some
ability to invest some in the administrative transition. We
have seen--the short answer is I don't know. My hope would be
that those States who have negotiated a better price over the
last 2 years, if you move the cut time from 2003 up to 2005----
Mr. Stupak. Sure.
Governor Warner. [continuing] that would at least allow us
to implement the deals that we have negotiated. Again, I have
spent----
Mr. Stupak. Right, because you----
Governor Warner. [continuing] 3 years in----
Mr. Stupak. [continuing] have been penalized----
Governor Warner. [continuing] government; I have spent 20
years in business. If I have got a good deal that I have
already cut, it seems a shame to take that deal away from us.
Mr. Stupak. Absolutely. You did a good deal and you are
being penalized underneath a Medicare bill. Let me ask you
about--and I want to get into this a little bit--the cost-
sharing proposal. There has been a lot of talk--in fact
Governor Huckabee mentioned about when the program started cost
was only this much and gas was 24 cents and things like that,
but the cost that is being paid here by the recipients, it is 5
percent of the service, and the service certainly has gone up.
I mean with the service in 1982, that is the provision we use,
1982. You say they haven't gone up since then. But certainly,
the cost of hospitalization from 1982 is different from 2005,
so those costs have also gone up for the recipients.
So if the Governors' proposal is a cost-sharing--would
allow greater cost-sharing similar to what we have in CHIPS, I
am concerned if the proposal for Medicaid is being similar to
what is allowed in CHIPS, in reality your proposal appears to
be much more onerous than the CHIPS requirements. Because
children below 100 percent, of course, are not in CHIPS, and
you said earlier there are more people below the poverty line.
And for those in CHIPS with income between 100 and 150 percent
of the poverty line, cost-sharing is limited to nominal
amounts. So it appears to me that if you retain all of these
protections from SCHIP, for example, would impoverish seniors--
because you were just talking about that with Mr. Rush--in
nursing homes. Would they be exempted from these new cost-
sharing requirements?
Governor Warner. What we are saying is----
Chairman Barton. This is the gentleman's last question, and
then we are going to go to Mr. Norwood.
Governor Warner. [continuing] and, again, the issue here,
remember Medicaid populations vary in our State----
Mr. Stupak. Sure.
Governor Warner. [continuing] we are very, very strict in
terms of our eligibility requirements. Other States are
Medicaid eligible up to 300 percent of poverty. We are saying
that there ought to be some flexibility there. Now, you ought
to have the caps, particularly for those 100 percent and below
no more than 5 percent of their total income. There needs to
be--what I have looked at, again, are some of these $1 to $3
levels. You alone have--or Congress or one of the Congressional
entities has done their own study. If you simply bump those
from $3 to $5, there are some savings. Do I think you are going
to find enormous savings here? No. If we can simply partially
dispel the notion that there is gross over-utilization, I think
by having slightly higher co-pays, that is a step in the right
direction as well.
Mr. Stupak. Okay.
Governor Warner. We don't know at this point. There are
lots of studies on both sides. But I don't think you are going
to see a lot of Governors go out, particularly in some of our
most meaty populations, those 100 or 150 percent and below in
poverty and suddenly put in SCHIP-type $15 or $25 co-pays.
Mr. Stupak. Well, I just want to say----
Chairman Barton. All right----
Mr. Stupak. [continuing] like----
Chairman Barton. [continuing] all right.
Mr. Stupak. [continuing] Oregon, 50 percent increase drop
and people dropped out once they raised the premiums----
Chairman Barton. The gentleman's time has expired. We are
going to go to----
Mr. Stupak. Thank you, Mr. Chairman.
Chairman Barton. [continuing] Mr. Norwood. We are going to
give him 4 minutes because he did get to ask a question of
Governor Huckabee.
Mr. Norwood. I also passed over my opening statement too.
Chairman Barton. Well, a lot of other people did. Four
minutes.
Mr. Norwood. Governor, thank you sincerely for your work
you are doing. It is a pleasure to see adults at work trying to
solve a policy problem rather than getting it so political. And
I hope this committee can do the same thing.
I have two questions so I will try to get them both
answered if I can. I was wondering what the NGA proposes to do
in respect to taking people off Medicaid that really shouldn't
be there? Specifically, I refer to illegal aliens, but I also
refer to the millionaires that were on the program who have
done away with all their assets perhaps legally, perhaps not.
This would restore the program to, I think, its original
design, to serve as a safety net for people, citizens in this
country who are most vulnerable. I know that you had problems
in your State of Virginia. We have had problems in our State of
Georgia. The strain of illegal aliens on your public
infrastructure, as well as your criminal justice system.
Now, I am concerned that we don't know the resources that
we are expending on this particular segment of the population.
We have limited resources, obviously, and we have no idea of
the level of Medicaid dollars being used to benefit illegal
aliens at the State level. Or do you have an idea in your State
what it is costing you?
Governor Warner. Well, sir, we already have a policy to not
provide Medicaid benefits to undocumented persons, and the
legislature moved forward on that, even broadened that this
year. In terms of the question, again, Congressman Rush is not
here, one of the things that I don't think we know is--
Congressman Rush asked for that giving the prototype of someone
who is misusing the asset transfer; well, I don't know if the
millionaires out there are doing that. But if they are out
there doing that when I am seeing poor seniors not being able
to get the kind of long-term care they need, we ought to put a
stop to that. And what we are simply saying is that has to be
on the table as we look at this. And, again, I keep coming back
to it is not an either/or. It is yes, looking at asset
transfers, but coupling that with incentives to purchase long-
term care insurance, an ability to recognize that folks,
particularly modern-income folks ought to be able to pass on
some assets to their kids, and trying to do this in a more
ration process than we have done so far.
Mr. Norwood. Well, you can go through nursing homes and
figure this thing out just a little bit. And I don't know about
your State. It is illegal to put illegal aliens on Medicaid,
but you got to ask the question, I hope you are doing that in
Virginia?
Governor Warner. We are doing that.
Mr. Norwood. We are not doing that real well in some
places. Now, one last question. How would the Governors'
proposals work to give us some comfort or some assurance that
core benefits, those preventive care benefits--and I admit
dental is one of them that is important to me--they have a huge
impact on health and well-being, and basically, many times are
cost-effective. How do we assure ourselves that we won't--or
does your program keep from eliminating those because of the
budgetary crisis?
Governor Warner. Congressman, those are the issues we face
every day because it oftentimes does not break down to
eliminating the benefit. It turns into a situation where the
reimbursement level may be so low that the provider decides to
opt out. That was an issue that we ran into recently in
Virginia where we were losing so many of our OB-GYN's in rural
communities. So, again, I would love to paint all this as black
and white, but what we are trying to say is we want to put in
place a system that encourages preventive care, we want to find
efficiencies, but at the same time, we have got to recognize
that right now, with the increasing populations, a lot of it
driven by long-term care costs, we are not able to do all the
preventive activities because we have got to deal so much with
just dealing with acute care.
Chairman Barton. Gentleman's time has expired. The
gentleman from Florida, Mr. Davis, 5 minutes.
Mr. Davis. Governor, good to see you again. I certainly
applaud your leadership on this issue, in particular, on
education issues, and you certainly aren't afraid to stick your
head out of the foxhole here because you get shot at when you
do.
I think what is going to advance this conversation is going
to be a more specific understanding as to how this newly gained
discretion could be used, or in the minds of some people,
abused. I would like to ask you about a specific example that
is taking place in my home State of Florida. I understand it
may be taking place in your State and others. And it is a
limitation on the ability of physicians to prescribe
psychotropic drugs to people with mental health issues. Florida
has adopted a policy, which is being described as a ``fail-
first'' policy where a physician has to prescribe the least
costly alternative, and only if and when that fails can the
physician then move on to something that may be more medically
appropriate. I would like to ask you if this is something that
you are aware of? Is it happening in Virginia or something
similar to it? Is it taking place in the other States besides
my State?
Governor Warner. I am vaguely familiar with what is
happening in Florida, and I know kind of pushing the edge of
the envelope on a series of Medicaid-related issues in Florida.
And this is an area above my pay grade in terms of the
technical definition of which drugs are in or out. But when we
dealt with out PDL list, we did not include these drugs on our
PDL list, and we have left that flexibility with the docs.
Mr. Davis. Are there any other States----
Governor Warner. And I am not sure if there are any other
States. We could try to find out and get back to you on that.
Mr. Davis. Would you care to express an observation or
opinion as to the merits of the type of approach I have
described where the physician is forced to prescribe something
least costly and it has to fail before something that might be
more medically appropriate could be prescribed?
Governor Warner. Well, we chose not to go that route in
Virginia based on our Medicaid folks, my Health and Human
Services secretary, and working with the drug industry. So we
chose not to pursue that and that is the way we are going to
stay in Virginia. But let me say there may--because a case was
made the medical necessity and the differentiation between
drugs in this category, psychiatric drugs were so important
that you couldn't substitute. On the other hand, there are
areas where we can----
Mr. Davis. Right.
Governor Warner. [continuing] increase generic use. There
are other areas, and I mean not to leave--just so that I make
sure that I can at least get shot at by everybody in the whole
universe, you know, we also have got to look at generics as
well as we see drugs rotate off of the brand name list, now, we
have got to be careful the drugs don't move from a $1 down to
80 cents and suddenly they get called generic and we haven't
really realized the full benefits. I mean----
Mr. Davis. Right.
Governor Warner. [continuing] Canada, for example, has been
very out there on defining generics. Everybody has got to come
to the table on this issue on drug pricing.
Mr. Davis. I agree with you generally. I want to cite you
this specific example, which, obviously, you are not prepared
to defend today--as an example of what is some of the concern
here. It is not clear to me how many State could defend taking
such a position of ``fail-first'' for psychotropic drugs. As
Florida and many States have worked very hard to
deinstitutionalize our mental health patients and try to keep
them healthy, as well as the entire community healthy, and this
type of Medicaid approach has been adopted.
I would also like to ask you in what little time I have
left if there has been any discussions you have been involved
in or the NGA has been involved in in terms of how much benefit
there is to be achieved in further nursing home diversion, more
emphasis in terms of Medicaid coverage of home healthcare,
adult daycare, alternatives to institutional settings that
might not only improve the quality of life for our seniors and
disabled, but actually be a more cost-effective use of
Medicaid.
Governor Warner. I sure have--actually with Governor
Kempthorne on a commission that is chaired by former Senator
Kerry and former Speaker Gingrich looking at this issue. And I
can just give you my personal view, and I think I speak for
most Governors is we strongly urge at looking at these
alternatives. Matter of fact, one of the things we have
included in our plan is incentives to encourage more home-based
care, more adult daycare, alternatives to nursing home care.
And honestly, having sat down with some of the folks in the
nursing home industry, I think they would not be opposed to
that appropriate continuum of care if, again, we match it with
the type of approach that we make the mindset in this country
that when you buy life insurance, health insurance, you also
got to go ahead and buy long-term care insurance.
Mr. Davis. Right. Has there been any discussion----
Chairman Barton. Let this be the last question.
Mr. Davis. [continuing] about the States collectively
engaging in regional compacts to pool their purchasing power to
negotiate discounts in the pharmaceutical industry, and are
there Federal obstacles to your doing so? And if you don't have
time to fully answer that, I would certainly like to hear the
answer----
Governor Warner. Well, the short answer is yes, there are
obstacles, particularly driven by the fact that we can't even
get the benefits that we have already negotiated with the new
Medicare direct benefit coming along. And then second, in terms
of purchasing pools, we think they ought to be expanded, but
you have got to have some ability to manage the adverse
selection where the younger employees or the firms with the
younger employees opt out.
Chairman Barton. The gentleman's time has expired. The
gentleman from Michigan, Mr. Rogers.
Mr. Rogers. Thank you, Mr. Chairman. Thank you, Governor.
Thanks for taking a little extra time today. And as you can see
by the tone of the questions, it is going to be a difficult
decision for all of us to get there, and we appreciate your
leadership. To have all the Governors come together and say we
need more flexibility in a system that has 1,500 waivers, I
mean this is a system that has not worked well for the States.
And to have the courage to stand up and say give us the
flexibility that we need and we will put a product out there
that takes care of the disabled, that takes care of the needy
elderly, that takes care of the needy populations in America is
pretty exciting. And it is going to take that kind of
leadership to get, I think, through this committee. And your
help in that is going to be very, very important.
I want to talk about a couple of things. HSA is a great
example. That is an innovation that is working in the
marketplace. We have seen about 40 percent of the over a
million people who have signed up for these things never had
access to healthcare before. Pretty powerful thing. You have
called, in the NGA's recommendation, a national Healthcare
Innovations Program where you would go out in 10 to 15 large
demonstration projects. Can you just talk a little bit about
how you envision--what the kind of things you would like to see
that tackle?
Governor Warner. Well, let me give you my particular bias
as somebody who spent 20 years in the technology industry
before I transferred to this interesting business. The fact
that we don't have the power of IT in the largest sector of our
economy, that we have not used information technology to bring
any kind of efficiency should be an embarrassment to all of us.
The fact that we don't have electronic medical records and that
we have not--to bring a true electronic medical record to the
table on a State or regional basis, we have got to have
resources, but also some ability to change the behavior folks
that--whether it is providers and others, whether they have got
legacy systems or the fact that they just don't want to change
how they operate, we have got to change. And that will require
not only the State, that will require the Feds; that will
require hospitals, insurers, Pharma, local doc providers to
come to the table. We need to move past talking about this,
which we have been talking about for 10 years and actually
start making it happen.
Now, there are some demonstration projects; there have
been--I can point to a system in Central Virginia, our VCU
Health System has gone a long way, but it is still a closed
system. We have got to make it on a much broader basis. That
would be a prime example.
I think purchasing pools is another example where we are
going to have to let some folks, a la welfare reform, try
things. I know there will be some consternation about mandatory
purchasing pools where if you try to include various groups
inside, you can't opt out. So that we can get the aggregate
numbers we need to try to be able to purchase the level of
healthcare that is provided from both the--you know, and you
might be combining Medicaid populations with currently
privately covered populations. But we ought to try that. Again,
from both sides where we have been so far is we can't be afraid
to shake this system up because, again, I come back to some of
the questions I have heard from some of the members. There is
no Governor--because we are the first folks people turn to if
there is a healthcare--there is no Governor that doesn't want
to increase the quality of healthcare for the most vulnerable
of our citizens.
Mr. Rogers. So----
Governor Warner. But we have to be able to recognize that
even if we defer this debate for a year or two, it is not going
away, and let us go ahead and sit down together and try to work
through it.
Mr. Rogers. And that is a very good point. You are not
going to let those people fall through the cracks. You are
going to do everything that you can, and I believe you. And the
Governors came out and said they are going to establish
enforceable premiums, deductibles, and co-pays. You are not
doing that to exclude people from the system, are you? Do you
want to have a co-pay that excludes somebody from participating
or are you trying to say that people need to participate in the
healthcare delivery system in America? We need to apply
consumerism so that everybody is invested in the solution. That
is the way I understood----
Governor Warner. We need to understand that there is a
sense of personal responsibility, but we also have to recognize
there are many people on Medicaid who are so poor that they
have extraordinarily limited resources. And that is why,
again----
Mr. Rogers. But if we gave the----
Governor Warner. [continuing] I am taking the notion----
Mr. Rogers. [continuing] State the flexibility, you could
make that determination of what that ought to look like. But in
some cases you would recommend that somebody should pay a co-
payment, even if it is a nominal fee. Is that correct? That is
the way I understand this----
Governor Warner. That is what we are looking at, but
recognizing that there needs to be some caps, because there
are--I think there is also going to be--let me be clear here.
One of the things I think this would move toward, I think it
would dispel the notion that this is somehow to save your
Medicaid; this is not. There will be some perhaps marginal
savings here. And if we can do that and dispel the notion a
little bit that there is great abuse going on, let us have at
it.
Chairman Barton. The gentleman's time----
Governor Warner. But----
Chairman Barton. [continuing] has expired.
Governor Warner. [continuing] it is not a silver bullet.
Chairman Barton. The gentleman's time has expired. The
distinguished ranking member of the full committee, Mr. Dingell
of Michigan, is recognized for 5 minutes.
Mr. Dingell. Mr. Chairman, I thank you for your courtesy.
Welcome, Governor. I am pleased that you are here with us.
Governor, a series of questions. You noted that the Governors
11 in number and others had an input. Were representatives of
children's groups included in the development of the proposal?
Governor Warner. Congressman, we worked with our Governors,
we worked with our Medicaid directors----
Mr. Dingell. Yes, but Governor, with all respect, time is
very limited. Were representatives of the children's groups
included in the development of----
Governor Warner. No, that is why this was the National
Governors Proposal.
Mr. Dingell. Now, were representatives of the disability
community or seniors groups included in the development of the
proposal?
Governor Warner. Well, I guess what I would take some issue
with is saying that somehow Governors and/or Medicaid----
Mr. Dingell. Governor, this----
Governor Warner. Can I answer your question?
Mr. Dingell. [continuing] is a search for fact, and I am
just asking a yes or no. And I say so with all respect, but I
have 4 minutes remaining and----
Governor Warner. Right. The----
Mr. Dingell. [continuing] I have a lot of questions----
Governor Warner. [continuing] answer is this is the
National Governors--the people who were involved in this
proposal were the National Governors----
Mr. Dingell. Okay.
Governor Warner. [continuing] Nation's Governors, their
Medicaid directors, and their health----
Mr. Dingell. So, then, I assume the answer is no?
Governor Warner. I have said who was----
Mr. Dingell. Okay.
Governor Warner. [continuing] involved.
Mr. Dingell. Now, were representatives of the physicians
groups, nursing groups, hospital groups, representatives of
nursing homes included in the development of the program?
Governor Warner. The Nation's Governors, the Medicaid
directors, and their health advisors were involved in this.
Mr. Dingell. And so you are having to tell me again that
the answer is no?
Governor Warner. No.
Mr. Dingell. Now, I have some other questions here,
Governor. And, again, I apologize for being so brusque because
I have great respect for you, but I have got to get certain
questions and the answers in the 3 minutes and 22 seconds
remaining. Your proposal has been called tiered benefits. And
then it has had other names applied to it. I want to know if
this proposal will provide beneficiaries with the flexibility
in a way which is intended to save the States money, or is it
intended to accomplish other purposes?
Governor Warner. No, what we are geared at is recognizing
that we have to meet, at least in my State, 50 cents of every
dollar that is spent in Medicaid to make sure that we can yes,
save resources, but also our proposal is to encourage
reinvestment in areas such as Federal tax credits for long-term
care, for purchasing of health insurance for those folks so
they won't fall onto the Medicaid rolls.
Mr. Dingell. Now, the Medicaid law requires that payments
must be made only for medically necessary treatments. The only
way I can figure that you would save money, then, is by taking
away benefits who currently need and are using them. Am I
incorrect in that assumption?
Governor Warner. Well, no, what I think there remains a
question, and I can tell you how we addressed it in Virginia.
Is there inappropriate use? If you have a, you know, the
classically cited example of the head cold that shows up at the
emergency room four times in the same month. I don't think that
happens enormous amounts of time, but if it does happen, I need
a tool to make sure that we prevent that from happening----
Mr. Dingell. Now, I assume----
Governor Warner. [continuing] and don't reimburse----
Mr. Dingell. [continuing] that you have----
Governor Warner. [continuing] our hospitals at the----
Mr. Dingell. I assume that under existing law you may
address that problem, may you not?
Governor Warner. We may----
Mr. Dingell. Is there anything----
Governor Warner. [continuing] address it----
Mr. Dingell. [continuing] inhibiting you----
Governor Warner. We may address it, but if there was a way
that allowed us a differential co-pay on the fourth visit to
the emergency room, that is a tool I would like to see.
Mr. Dingell. Under existing law you have the capacity to
address fraud, waste, abuse, misuse of the system by
beneficiaries, do you not?
Governor Warner. I don't believe we have all the tools that
would make this system----
Mr. Dingell. I am going to----
Governor Warner. [continuing] the best possible----
Mr. Dingell. [continuing] submit a letter to you, Governor,
because the points you are making are very good and I want to
find out about that particular question. Does the NGA proposal
allow States to cut nursing home benefits to people with
incomes below $7,000 a year?
Governor Warner. That is not our intent. That is not my
intent.
Mr. Dingell. Does the NGA proposal allow States to cut
medically necessary services needed by children and families
whose income is under $12,000 a year?
Governor Warner. That is not our intent. That is not my
intent.
Mr. Dingell. Okay----
Governor Warner. Matter of fact, we have taken--let me just
again--you missed the earlier part of my presentation. And
matter of fact, Virginia has dramatically expanded its children
health program and been recognized by Kaiser as one of the most
successful in the country.
Mr. Dingell. Governor, don't take my comments as being
critical or hostile. They are simply a quest for facts. Does
the NGA proposal allow States to cut pregnancy-related services
to pregnant woman?
Governor Warner. In Virginia we actually expanded that
coverage this year.
Mr. Dingell. I would note that in Virginia, a Medicaid
beneficiary living in Alexandria, Virginia, with two children
can only have $384 a month in income to still qualify for the
program. In Arkansas, a person with two children on welfare,
TANF, would have no more than $204 a month in income to still
qualify. Is there any way you can----
Chairman Barton. This will have to be the gentleman's----
Mr. Dingell. [continuing] at those levels, Governor?
Chairman Barton. This will be the gentleman's last
question.
Mr. Dingell. I thank you, Mr. Chairman. Governor, you have
my apologies if I have offended you.
Governor Warner. I just wanted to try to give factual
answers to your questions.
Chairman Barton. Do you want to answer his last question?
Governor Warner. No, in both of those cases, again, earlier
we cited the fact that in Virginia what we did, particularly
for expansion of our SCHIP program was we cut back on any co-
payments so we could expand our program.
Chairman Barton. Gentleman from Oregon, Mr. Walden.
Mr. Walden. Thank you very much, Mr. Chairman. Governor,
thank you and thank you to your colleague who has had to leave
for excellent work in this effort. I want to follow up on the
issue of co-pays that my colleague from Michigan raised. We
wrestled with this when I was in the Oregon legislature and we
were implementing the Oregon Health Plan and talked about the
idea of co-pays. And one of the issues that came up was a
concern about collectability of them. Have you all looked at
that? Because even----
Governor Warner. Yes.
Mr. Walden. [continuing] if it is $2 or $3, we were hearing
testimony that said docs, others are going to end up eating it
because they are just not----
Governor Warner. Right.
Mr. Walden. [continuing] going to get paid. Do you have a
mechanism you are kicking around?
Governor Warner. We are still trying to sort through that
because it was and is an issue.
Mr. Walden. Okay. All right. We also heard testimony in
those days, and this was quite a while back, that co-pays might
help in the sense of trying in some way to get people to
actually keep their appointments. Some of the medical community
found that some Medicaid patients would make appointments and
not keep them at a higher rate than others. Have you found that
to be the case?
Governor Warner. That has been our experience as well.
Mr. Walden. And are you looking from----
Governor Warner. But whether the co-pay----
Mr. Walden. Yes, I don't know if----
Governor Warner. [continuing] system has changed that
behavior in keeping appointments, I can't speak to that. I
don't know.
Mr. Walden. Is your----
Governor Warner. But it is one of the things we ought to
find out.
Mr. Walden. Well, that is what I wondered. Is your
taskforce looking at that as an issue that the----
Governor Warner. We have not at the gubernatorial level. I
think the Medicaid directors have discussed this. But at the
gubernatorial level we haven't drilled down to that level.
Mr. Walden. Okay, because that was an issue we kept hearing
about too, and, you know, I am one of them who says just
because a law has been on the books 40 years doesn't make it
untouchable. We should use the latest in technology; we should
think outside the box and say how do we make this the best
possible system given the budget constraints we are given?
One of the other issues that comes up is the Federal law
EMTALA that requires emergency rooms, hospitals----
Governor Warner. Right.
Mr. Walden. [continuing] you go in there, you get care. And
there has been some talk, some ideas kicked around about giving
some relief there to say if you are not truly an emergency
case, the ER room should have the ability to refer you, then,
perhaps to a public clinic or elsewhere. Have you all looked at
the implications of that law and policy?
Governor Warner. You are asking me not only to stick my
head out but get it chopped off three different ways but----
Mr. Walden. That is why it is so nice you are there and I--
--
Governor Warner. No, we have not looked at that
specifically, but let me tell you what we have done. We have
said that if a hospital provides, as they should, provides that
care and it was an inappropriate use, for example, of the ER,
that we will only reimburse at a doctor visit rate rather than
an ER visit rate. And so we have incented--and, again, this is
something that a lot of States haven't done yet. The hospitals
are trying to put in place now, you know----
Mr. Walden. But can that----
Governor Warner. [continuing] a better screening process so
the person still gets care----
Mr. Walden. Right.
Governor Warner. [continuing] but we have shifted some of
the burden over to the hospitals to try to----
Mr. Walden. Well, that is why I wondered----
Governor Warner. [continuing] push them toward the clinic
as opposed to the ER.
Mr. Walden. And help me on this one. Do they have the
authority under Federal law to make that move----
Governor Warner. No, I don't----
Mr. Walden. [continuing] to push that----
Governor Warner. One, I don't know the answer. Two, I
think----
Mr. Walden. Okay.
Governor Warner. [continuing] they do not. But three, what
we have simply used is our----
Mr. Walden. Well, yes, you just push the cost onto----
Governor Warner. Right.
Mr. Walden. [continuing] them, but as a bigger picture is
that a law. Okay. One we probably should take a look at. I
don't know whether it is you or Governor Huckabee talked about
the issue we have looked at in the Oversight and Investigations
Subcommittee on AWP versus ASP, average wholesale----
Governor Warner. Right, right.
Mr. Walden. [continuing] price versus average sales price.
We have found some extraordinary disparities, and really what
appears to be, and I am sure there are those that can educate
me on a different manner, but perverse incentive when a drug
goes generic to actually keep the price high to maintain market
share. Have you found that?
Governor Warner. I can't speak to that specifically, but I
am concerned about this notion of as drugs fall into that
generic category that the fact that they are sometimes--they
have kept prices artificially high, which is not fair or right.
We are starting to look at other countries, what Canada has
done and others, about trying to----
Mr. Walden. You might want to go----
Governor Warner. [continuing] better to find generics.
Mr. Walden. I know you have lots of time and nothing to
read, but you might want to get the transcripts from some of
our hearings on this issue. It was pretty phenomenal, people
testifying under oath what happens in that system.
Governor Warner. Mr. Chairman, I will listen to everybody's
opening comments first on that transcript before I----
Chairman Barton. Yes, sir.
Governor Warner. [continuing] listen to that.
Mr. Walden. Yes, cut right to the witnesses, believe me.
The final issue, given your experience in community healthcare,
I am curious about--we have held some oversight hearings on the
expansion of the federally qualified healthcare facilities. I
have seen them firsthand in my district, incredible work they
are doing. Do you see this community health center concept as a
reliever and an effective and affordable reliever that may
actually hold down cost of Medicaid?
Governor Warner. I think it is one of the tools. We have
got I think 41 community healthcare centers. We also have the
largest number of free clinics of any State in the country.
And, again, one of the things that goes back to why I am
pushing part of this process and pushing reforms that some may
say, you know, oh, my gosh, you know, how are you willing to
even consider these? Because I see the 1 million Virginians who
don't have anything who access healthcare on an episodic basis
through free clinics who have no permanent medical home at all,
and they are the ones who are really getting stuck by our
system and, you know, to again say that, you know, we are not
willing to at least look at how we can fix Medicaid. And
somehow we are going to put off the greater problem, the 45
million plus Americans who don't have any healthcare coverage
at all for another day just isn't fair or right. And we can----
Chairman Barton. Gentleman's time has----
Governor Warner. [continuing] do this at the same time
expand some level of are, that is in the best interest of
this----
Chairman Barton. Gentleman's time has expired. The
Gentlelady from California, Ms. Capps.
Governor Warner. I am going to have to make this the last--
--
Chairman Barton. Well, if you could do one more on each
side, Ms. Capps and the long-suffering Dr. Burgess. Do two
more? They both have been here the whole time.
Ms. Capps. Thank you, Mr. Chairman. Thank you, Mr.
Governor, for your testimony. I listened very carefully to it.
And there is an elephant in this room, no partisan pun
intended, which you referenced with respect to pharmaceutical
costs, but exploding costs of healthcare are the bottom line
across the board everywhere. For example, the growth in the
cost of premiums for private insurance programs has risen 12
percent per year, twice as fast as the growth of increased
costs for Medicaid as one example. And I hope there is a chart
that is going to be lifted up so that you can see it.
[Chart]
Ms. Capps. There is a version for you.
Governor Warner. With my eyes, that is about a perfect
range----
Ms. Capps. Is that a good range for you? I would like to
focus on with your time as a percentage of income, Medicaid
beneficiaries out-of-pocket medical expenses, as you can see,
are substantially larger than those with private insurance.
And, for example, in 2002 poor adult Medicaid beneficiaries'
incomes under $797 a month spent 2.4 percent o their incomes on
medical expenses. Privately insured adults with incomes over
twice the poverty levels, incomes more than $1,595 a month
spent less than 1 percent. And this proposal about co-pays and
increasing the out-of-pocket costs for Medicaid beneficiaries
could be categorized as nothing more than a tax on the poor for
being sick or trying to stay healthy. Many of those Medicaid
beneficiaries have extending circumstances that make it tougher
for them to stay healthy, labor work, repetitive motion, and
those with disabilities, it goes on and on. It seems to me that
what we are considering is increasing taxes on those who can
least afford it when they are sick. And this is, you know,
something that you are proposing. I want to ask, given that the
poor are already paying much more out of pocket for their care
on average than affluent families, you know, how will they
manage to do this? They don't get a discount at the tax pump,
low-income families don't get a discount when they buy school
clothes for their kids or a discount at the grocery store or a
discount on their rent. And we have seen difficulty this year
with gasoline prices, heating, fuel costs, housing costs, how
can we expect that they are going to be able to pay?
And my real topic that I want you to address in addition to
those concerns of mine, we have, as part of our crisis, an
exploding number of people without health insurance as people
become unemployed, as more and more employers are eliminating
health insurance because they can't afford it, small businesses
and others. Now, you are making the case and your association
that your desire for flexibility is to keep more people
insured. I would like to hear how you propose to do that.
Governor Warner. Great. Well, first of all, you know,
someone who has, you know, spent enormous amounts of time
trying to make sure--going back to our Children's Health
Initiative--that we----
Ms. Capps. Yes.
Governor Warner. [continuing] sign up more kids, I have
seen these studies. I have seen other studies as well that have
the opposite result. I do know this on just kind of a baseline;
Congress set as a co-pay level $1 to $3 in the early 1980's. I
think some being willing to give some flexibility to have some
marginal increase to that, $3 to $5, $3 to $6 is what I believe
your own study looked at. I am willing to have that on the
table. Let me assure you, we have, unfortunately, many parts in
Virginia still where folks are struggling every day to get by.
But what I also feel very strongly about is that what you were
asking me to when I have to match 50 cents on every dollar and
I have got make--you know, again, I come back to my point I
made earlier--I have got to make a budget balance----
Ms. Capps. All right.
Governor Warner. [continuing] and another editorial
comment, we have dealt with taxes in a way to make sure that--
--
Ms. Capps. Yes.
Governor Warner. [continuing] we can pay our bills----
Ms. Capps. Let me ask you one more----
Governor Warner. No, please----
Ms. Capps. [continuing] question.
Governor Warner. [continuing] let me finish here. And I
feel that same level of concern for somebody who makes $50 over
the Medicaid eligibility line who has nothing.
Ms. Capps. I so much----
Governor Warner. And that is----
Ms. Capps. [continuing] agree----
Governor Warner. [continuing] exactly why I am saying, you
know, I have changed on this. It may not be a perfect on the
employer/employee tax credit to at least have them purchase
some level of a----
Ms. Capps. I hear you.
Governor Warner. [continuing] modified benefit package that
may look like an SCHIP package. I think it----
Chairman Barton. I want to----
Governor Warner. [continuing] makes sense----
Ms. Capps. I----
Governor Warner. [continuing] when we try----
Chairman Barton. The gentlelady's time has expired and we
still have five members that haven't asked questions. And the
Governor is only going to let one more go. I am going to ask
Dr. Burgess--I am going to recognize him, but I would hope that
he would at least allow Mr. Engel to ask one question, because
Mr. Engel was here at the gavel and has waited the whole time,
and it is not probably going to have a chance to have his own
time. So I am going to recognize--okay, the gentleman yields
his first 2\1/2\ minutes to Mr. Engel. Two and a half minutes.
Mr. Engel. Thank you. I will speak very fast. Welcome,
Governor. It is nice seeing you hear rather than on a plane.
And I have been listening to your testimony, and no wonder
people think you are a rising star. I just want to quickly say
that the Medicaid discussion, there is no denying that
budgetary numbers are playing a major role, and I think what
you have heard from many of us, particularly on this side of
the aisle is that we feel the priorities are misdirected in
this Congress, that if we didn't have these huge tax cuts for
wealthy people there would be more money to share for the
Medicaid program with the States.
I would like to just say two things and then ask you to
comment in some--and I thank my colleague, Mr. Burgess, for
yielding to me. What bothers me is there are a million people
living with HIV/AIDS. New York is one of the epicenters of that
unfortunately. If we are going to say that under current
Medicaid standards the beneficiary could be charged up to $3
per prescription, in the case of an individual that might be
taking multiple drugs might be $45 a month, it really would
impact very, very negatively on these people. I am wondering if
you could talk about that.
And also, Governor Huckabee had mentioned the changing of
the ability to have redress in the courts, and that bothers me
because if you take a State like California, the State wasn't
screening kids for lead poisoning and people went to court and
changed that. The AIDS epidemic, Missouri refused to provide
coverage for AIDS drugs; they went to court and lost. If you
take that away, I am afraid that we are going to have a lot of
problems. So if you can comment to anything I have said, I
would appreciate it.
Governor Warner. I appreciate your comments and very
briefly, at some level you have to hope and expect the
Governors are going to bear some level of responsibility and
not, you know, put someone who has AIDS and be able to have
them so restrict their drugs they can't get the therapy they
need. There has to be, again, some balance here. I think that
most Governors have not, you know, when we have been granted
flexibility in the past have not abused it. There are
exceptions, but I think for the most part they will do the
right thing.
I think in terms of--we have tried to draw very, very
narrowly the question on judicial reform. And I understand your
concern. There was a number of us that were concerned on some
of the consent decree.
Chairman Barton. Dr. Burgess----
Mr. Engel. Thank you.
Chairman Barton. [continuing] last 3 minutes.
Mr. Burgess. Governor, thank you very much for being with
us today. It has really been a fascinating discussion that we
have had. Quickly, what have you done in Virginia to keep
employers from dropping out of the private insurance when you
have expanded coverage in your SCHIP and your Medicaid program?
You said you brought 95 percent of children into the fold, and
we have a problem back in Texas with some employers dropping
out of the insurance coverage when that happens.
Governor Warner. Well, again, we have relatively low
eligibility standards again, so that it is not--we are serving
children that we think desperately need it. I think you raise a
bigger question, which is if you are going to provide some
incentive, and what we propose, for example, a tax credit that
might go toward small businesses or might even go toward
employees to be able to purchase some form of private health
insurance, how do we not turn that into an incentive for
employers to drop coverage? And if you asked me 2 years ago I
would have said, and that is the reason why I don't support
that tax credit approach. What I am saying 2 years later with
what I see of this taking place anyway, with what I see with
increasing caseloads, with what I see with these increasing
costs, we have got to try to find a way to sort through to not
tip the balance so the people actually no longer provide the
health insurance. But for those who are on the edge, there
ought to be an employer contribution, but somehow craft
something to try at least in the middle. That is not a very
good answer, not very articulate, but I hope you know what I
am----
Mr. Burgess. I do, and in fact at the risk of
oversimplifying, I see three populations on the Medicaid
system, the truly medically destitute, medically frail who are
going to need the big----
Governor Warner. Full boat.
Mr. Burgess. [continuing] safety net that Mr. Huckabee was
talking about. And then you have got, of course, the long-term
care issue that does have to be dealt with. And in between you
have got the patients that I used to see in my medical
practice, basically pregnant moms who need help paying for
insurance. And they don't need the same kind of safety net that
the medically frail and indigent need. So I certainly welcome
your concept, whether we call it vouchers, premium support, or
tax credits, I am absolutely in favor of that, and I would like
to see us be able to expand that and offer the whole panoply,
HMO, PPO, EPO, HSAs, whatever, to that segment of the
population and let them choose what best fits their needs.
Finally, in the last few seconds I have, I couldn't help
but think as I watched both of you up here, we are seeing a
preview of the debates of 2008, and I hope you do remember that
you are the last bipartisan game in town, and we will keep the
tone as great as we have seen it this morning. It was truly
something to watch, both of you together. Thank you.
Governor Warner. Thank you.
Chairman Barton. We have five pending votes on the floor.
We are going to adjourn the hearing. Unfortunately, Mr. Ross
and Ms. Myrick and Mr. Shimkus aren't going to be able to ask
verbal questions, but they will be given the opportunity on the
written record.
We want to thank you, Governor. We will be working with
your taskforce and the Governors Association. This committee is
a bipartisan committee, and we intend to report a bipartisan
Medicaid reconciliation package sometime this fall. This
hearing is adjourned.
Governor Warner. Thank you, Mr. Chairman.
[Whereupon, at 2 p.m., the committee was adjourned.]
[Additional material submitted for the record follows:]
Prepared Statement of Governor Anibal Acevedo-Vila, Commonwealth of
Puerto Rico
Medicaid Reform: The National Governors Association's Bipartisan
Roadmap
The federal Medicaid partnership with U.S. commonwealths and
territories has become increasingly unbalanced over a period of
years . . . The imbalance affects quality of care issues and
creates increased financial stress. Medicaid reform needs to
include a review of the current relationship and the
development of a pathway that moves to a rebalancing of this
partnership.
National Governor's Association
Policy Position
EC-16. Medicaid Reform Policy
The National Governors Association Policy Position EC-16 recognizes
the imbalance that has developed over a period of years in regard to
the Federal Medicaid partnership, the Commonwealth of Puerto Rico and
the U.S. territories.
I would like to take this opportunity to add my support to the NGA
policy and to put forward interim steps that begin to address this
imbalance.
In 1968, three years after the start of the Medicaid program,
Congress established a $20 million limit on the level of federal
Medicaid that would be available to the Commonwealth of Puerto Rico. At
that time Federal Medicaid costs, nationally, totaled $1.1 billion. The
Commonwealth matching assistance percentage (FMAP) continued at the 50
percent level; however, the Federal cap meant that there was no
reimbursement for expenses to Puerto Rico once the Commonwealth
expended $40 million. From time to time, Congress has raised the cap,
but has never reviewed the cap in terms of healthcare or fiscal policy.
Currently, the Commonwealth of Puerto Rico's effective FMAP rate
approximates 18 percent. If the 1968 cap had been authorized to grow at
the same rate as Medicaid grew nationally, Federal support for Medicaid
in Puerto Rico would now approximate $1.7 billion, as opposed to the
current Federal support of $219 million. In the states, federal
Medicaid support approximates $330 per month per participant as
compared to federal support in Puerto Rico of about $20 per month per
participant. If Puerto Rico's 1968 Medicaid cap had increased as the
Medicaid program increased, nationally, the average monthly Federal
contribution would be about $173 per participant, still a fraction of
average Federal support.
These are the challenges the Commonwealth's healthcare community
confronts while operating in an economy where the cost of living is no
less than many metropolitan areas in the states, and all of the Federal
regulatory requirements governing healthcare facilities and providers
are the same in Puerto Rico as they are in the states.
As Congress moves forward with its review of Medicaid, I would urge
that the Committees consider adhering to four principles in terms of
addressing Medicaid in Puerto Rico:
1. It is in the interest of both the Federal Government and the
Commonwealth that the existing healthcare gap between the
Island and the states does not grow any greater, and that
measures need to be taken to narrow this gap.
2. Federally mandated expenses resulting from Federal consent decrees
and U.S. Justice Department enforcement actions should be
reimbursed outside of the cap.
3. Critical healthcare needs, particularly for children, persons with
disabilities and the frail elderly, need to be considered as
strategic healthcare investments, with the Federal contribution
coming outside of the cap.
4. The Federal investment in Puerto Rico's healthcare must be
safeguarded and efforts and initiatives, particularly in
technology, that can safeguard the Federal investment and make
the healthcare system more productive should be encouraged and
supported.
In addressing the first principle of not allowing the healthcare
gap between the Island and the states to grow any further, I believe
that there are three actions which the Committee can take this year
that would be meaningful in starting to address the current imbalance:
1. Family Opportunity Act (FOA) (HR1443, S183). The FOA, as
drafted, effectively precludes Puerto Rico from participating, as the
cap on Medicaid reimbursement will prevent any Federal participation.
If Congress enacts FOA this year, it is essential that Puerto Rico be
permitted to participate in this program and the New Freedoms
Initiatives must be placed outside of the cap, so that families and
children with disabilities in Puerto Rico are not left behind.
2. Transitional Medical Assistance (TMA). The Congress requires
Puerto Rico to meet all of the same work standards of the Temporary
Assistance to Needy Families (TANF), but the Commonwealth is not
authorized to participate in TMA. TMA is recognized as one of the most
critical elements in the success of moving families from welfare to
work. When Congress reauthorizes TANF and TMA, it is essential that
Puerto Rico be authorized to participate in and receive reimbursements
for TMA so that it is in a stronger position to meet its TANF
obligations.
3. Adjustment Factor. From 1998 to 2003, Federal support for
Medicaid increased nationally 65 percent while Federal support for
Medicaid in Puerto Rico increased 30 percent. The disparity in the
growth rate is an issue that must be addressed this year, because each
year that it is delayed, there is increasing pressures on the
Commonwealth's healthcare system and fiscal strength. I urge the
Committee to amend the provisions related to the annual adjustment for
the Puerto Rico's Medicaid cap so that the adjustment is no less than
the percentage increase in the national Medicaid program. This can be
an important step in addressing the overall healthcare gap. It will
also be consistent with actions Congress took in regard to the Medicare
Modernization Act where the annual adjustment to the Commonwealth's
block grant is based upon the annual growth of Medicare Part D.
These three steps start to lay the foundation to address the
current imbalance. By including Puerto Rico in the two authorizations
and adopting an adjustment policy that reflects changes in the program
nationally, Congress will put into practice the principle of not
permitting the imbalance of the Commonwealth/Federal Medicaid
partnership.
I urge the Committee to consider these proposals as you move
forward with budget reconciliation and I am certainly available to work
with the Committee to find solutions which start to realign the current
imbalance of the Commonwealth Medicaid partnership with the Federal
government.
When Congress considers long term comprehensive Medicaid reform, I
urge the Committee to examine the issues I raised previously,
including:
1. Impact of Consent Decrees. The Commonwealth is under two consent
decrees initiated by the US Justice Department requiring the
expenditure of funds that are eligible for Medicaid reimbursement, but
not eligible for a Federal match in Puerto Rico. My fellow Governors
are concerned about the impact of the consent decrees since they are
required to pay between 20 and 50 percent of their costs (Federal
Medicaid financing the balance). I am particularly concerned as the
Commonwealth is not authorized to receive any additional reimbursements
for eligible Medicaid costs resulting from the enforcement action of
the U.S. Justice Department, and is required to absorb 100 percent of
the costs.
2. Critical Needs. Critical healthcare needs, particularly for
children, persons with disabilities and the frail elderly must be
assessed with consideration given to possible support for strategic
healthcare needs investments and should be viewed in the context of
Medicaid reform to insure that these vulnerable populations are
adequately served. One simple way to begin to take care of these
critical needs and to begin to narrow the existing gap would be a new
policy that would place the Federal contribution of Medicaid coverage
outside of the existing cap for every child born after a date certain.
This way, we begin to take care of our children first, and we tackle
the existing gap in a slow, but steady fashion.
3. Safeguards and Technology. The Federal investment in Puerto
Rico's healthcare must be safeguarded. Efforts and initiatives needed
to protect that investment and make it more productive should be
encouraged and supported. While technology development has been
encouraged in the states with as much as 90 percent reimbursements for
improvements, the Commonwealth has not been authorized to receive
similar support. The President's initiative on ``interoperable health
information technology infrastructure'' is an opportunity to make great
strides in the quality and productivity of the Commonwealth's
healthcare system, that can pay dividends to both the Federal
government and Puerto Rico, provided the Commonwealth is authorized to
access Medicaid funding for the development of these systems, in a
manner similar to the states.
As Congress moves forward with comprehensive Medicaid reform, I
encourage the Committee to follow the guidance of the NGA policy where
it recommends that Medicaid reform ``needs to include a review of the
current relationship and the development of a pathway that moves to a
rebalancing of this partnership.'' The cap established in 1968 is
grounded in neither healthcare nor economic policy. The result is an
effective FMAP for Puerto Rico of approximately 18 percent, a rate that
could not be sustained in any jurisdiction.
The Commonwealth of Puerto Rico has a long history and strong
commitment to providing comprehensive healthcare in its communities,
and that commitment is not going to change. However, meeting that goal
and fulfilling the Federal statutory requirements such as Early and
Periodic Screening, Diagnosis and Treatment (ESPDT), and Health
Insurance Portability and Protection Act (HIPPA), Federal Court rulings
such as Olmstead and Cedar Rapids, and meeting the Federal regulatory
requirements of Health Resources and Services Administration and the
Center for Medicare and Medicaid Services without a more balanced
Federal partnership creates inordinate financial pressure that has an
impact on the type of healthcare provided.
As the Committee moves forward with budget reconciliation I would
urge establishment of the principle that the current Commonwealth/
Federal Medicaid partnership should not develop any further imbalance,
and that this goal can be accomplished by enacting the three proposals
I have outlined. Secondly, in terms of comprehensive long term Medicaid
reform I urge the Committee to examine the current Commonwealth/Federal
Medicaid partnership with the objective of establishing a more balanced
partnership, particularly in light of the healthcare needs, consent
decrees and opportunities for technological advances.
Working together, sharing ideas, examining the effects of current
policy, I believe that we can establish a pathway to rebalancing the
Commonwealth/Federal partnership, a pathway that makes economic sense
for both the Federal government and the Commonwealth.
______
Prepared Statement of Barbara Kennelly, President National Committee to
Preserve Social Security and Medicare
Mr. Chairman and Members of the Committee: Chairman Barton, Ranking
Member Dingell, and members of the Committee, I appreciate your
leadership in holding this hearing on the future of Medicaid--a program
of vital interest to our nation's seniors.
Over the next few months, Congress will be considering a number of
changes to Medicaid, likely involving substantial cuts to the program.
On behalf of the 4.6 million members and supporters of the National
Committee to Preserve Social Security and Medicare, I strongly urge you
to oppose cuts to the Medicaid program.
For the past forty years, the Medicaid program has played a crucial
role in our country's health care system by providing public health
insurance for low-income Americans. The program protects those that are
among the most medically and economically vulnerable--children, adults,
disabled individuals, and seniors--who do not have access to or cannot
afford private health insurance. According to the Congressional Budget
Office, in 2005 Medicaid will provide health coverage to 58.5 million
people (including 5.4 million senior citizens and 9.2 million disabled
individuals) 1.
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\1\ Congressional Budget Office. ``Fact Sheet for CBO's March 2005
Baseline: Medicaid and the State Children's Health Insurance Program''.
Washington, D.C.: March 2005.
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Older Americans benefit from an array of important services
provided by Medicaid, such as: hospitalization, physician services,
long-term care, prescription drugs, clinic services, prosthetic
devices, hearings aids, and dental care. While seniors represent only 9
percent of Medicaid's enrollees, they receive over a quarter of
Medicaid's expenditures. Seniors receive a larger share of Medicaid's
expenditures because they require more frequent and expensive medical
attention. The Kaiser Family Foundation estimates that in 2003 the
Medicaid program spent almost $13,000 per senior.2
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\2\ Kaiser Commission on Medicaid and the Uninsured. ``The Medicaid
Program at a Glance.'' The Henry J. Kaiser Family Foundation.
Washington, D.C.: January 2005.
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Senior citizens also benefit from Medicaid because of its leading
role in our nation's long-term care system. The program's spending
accounts for 43% of our nation's total spending on long-term care. For
example, Medicaid provides vital financing for nursing homes, which
rely on the program for about half of their total funding. Further,
nearly 60 percent of all nursing home residents receive Medicaid. The
fiscal year 2006 budget resolution passed by Congress targets the
Medicaid program for billions of dollars in reconciled cuts over the
next five years. The National Committee strongly opposes any cuts or
funding caps to the Medicaid program. Cutting the program or imposing
caps on federal payments to the states would disproportionately hurt
seniors by ending coverage for millions of beneficiaries and/or
shifting rising health care costs on to state governments that are
already struggling to meet the needs of an aging population.
It is impossible to make meaningful reforms to the Medicaid program
without examining the flaws in our nation's health care system. The
growth in Medicaid spending is symptomatic of the larger problems with
health care, such as: growing health care costs, skyrocketing prices of
prescription drugs, declining employer-sponsored health care coverage,
and the increasing number of the uninsured. Despite these daunting
facts, Medicaid's overall growth rate is significantly lower than that
of private health insurance premiums (6.9 percent for Medicaid versus
12.6 percent for private insurance premiums) 3.
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\3\ These figures refer to the average growth rate per enrollee for
acute care from FY2000-2003. For additional information, see John
Holahan and Arunabh's article ``Understanding The Recent Growth In
Medicaid Spending, 2000-2003'' from the January 26, 2005 edition of
Health Affairs.
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About twenty-two percent of National Committee member households
have incomes below $15,000 per year and many are eligible for Medicaid
benefits. Our members know that the program's financing structure has
proven highly successful in responding to difficult economic times
because it guarantees coverage to all those who are eligible.
Therefore, we believe it is essential to preserve the current structure
of the Medicaid program.
Thank you for giving me this opportunity to discuss Medicaid and to
share the National Committee's views on the program before this
Committee. As always, I look forward to working with you on the host of
issues impacting America's seniors.
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