[Senate Hearing 109-754]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-754
 
                      SECURING MEDICAID'S FUTURE:
                       SPOTLIGHT ON MANAGED CARE

=======================================================================

                               ROUNDTABLE

                               before the

                       SPECIAL COMMITTEE ON AGING
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             WASHINGTON, DC

                               __________

                           SEPTEMBER 13, 2006

                               __________

                           Serial No. 109-31

         Printed for the use of the Special Committee on Aging


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                       SPECIAL COMMITTEE ON AGING

                     GORDON SMITH, Oregon, Chairman
RICHARD SHELBY, Alabama              HERB KOHL, Wisconsin
SUSAN COLLINS, Maine                 JAMES M. JEFFORDS, Vermont
JAMES M. TALENT, Missouri            RON WYDEN, Oregon
ELIZABETH DOLE, North Carolina       BLANCHE L. LINCOLN, Arkansas
MEL MARTINEZ, Florida                EVAN BAYH, Indiana
LARRY E. CRAIG, Idaho                THOMAS R. CARPER, Delaware
RICK SANTORUM, Pennsylvania          BILL NELSON, Florida
CONRAD BURNS, Montana                HILLARY RODHAM CLINTON, New York
LAMAR ALEXANDER, Tennessee           KEN SALAZAR, Colorado
JIM DEMINT, South Carolina
                    Catherine Finley, Staff Director
               Julie Cohen, Ranking Member Staff Director

                                  (ii)

  
?

                            C O N T E N T S

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                                                                   Page
Opening Statement of Senator Gordon Smith........................     1
Opening Statement of Senator Herb Kohl...........................     2

                           Panel of Witnesses

Anthony Rodgers, director, Arizona Health Care Cost Containment 
  System, Phoenix, AZ............................................     3
Ron Pollack, executive director, Families, USA, Washington, DC...    28
Jeffrey S. Crowley, senior research scholar, Health Policy 
  Institute, Georgetown University, Washington, DC...............    37
Greg Nycz, director, Family Health Center of Marshfield, Inc., 
  Marshfield, WI, on behalf of the National Association of 
  Community Health Centers.......................................    54
David Ford, president and chief executive officer, CareOregon, 
  Portland, OR...................................................    63
Daniel J. Hilferty, president and chief executive officer, 
  AmeriHealth Mercy and Keystone Mercy Health Plans, 
  Philadelphia, PA...............................................    84

                                 (iii)

  


         SECURING MEDICAID'S FUTURE: SPOTLIGHT ON MANAGED CARE

                              ----------                              --



                     WEDNESDAY, SEPTEMBER 13, 2006

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    A Committee Roundtable was convened, pursuant to notice, at 
10:06 a.m., in room SD-562, Dirksen Senate Office Building, 
Hon. Gordon H. Smith (chairman of the committee) presiding.
    Present: Senators Smith and Kohl.

     OPENING STATEMENT OF SENATOR GORDON H. SMITH, CHAIRMAN

    The Chairman. Thank you all for coming to this, I think, 
very important discussion. Senator Kohl and I share a very 
similar position when it comes to Medicaid and understanding 
its centrality as part of our safety net to the poor, the 
disabled, the elderly, and those particularly with difficult 
cases of chronic disease. Yet, I think we both recognize that 
as it was structured in 1965, Medicaid is not sustainable. But 
notwithstanding that, we have got to preserve it.
    Senator Kohl and I, I think, voted the same way on the 
budget reduction package because my belief was that there was a 
right way and a wrong way to pursue Medicaid reform. I wasn't 
persuaded that a budgetary number was the right way to do it if 
we are going to be sincere about protecting our most vulnerable 
Americans.
    I know there are many different opinions about managed 
care, or managed anything, frankly. It tends to divide people 
along ideological lines, and yet I recognize there is a need 
for Medicaid reform. I am sure Senator Kohl will speak for 
himself, but I think everybody sees the awful arithmetic we are 
facing, and so we are looking for ideas.
    I would very much like to produce a legislative package 
which represents Medicaid reform as it ought to be done, and 
managed care is being done successfully by some companies in my 
State and certainly I think the State of Arizona represents a 
fairly remarkable model. But I have got many questions and I 
think you all have ideas that can help shine a light on this 
subject in a way that we can take the best ideas as they are 
being developed around the country and put them into a 
legislative package to incentivize States to pursue this in a 
way that we can keep the promise of Medicaid and be fiscal 
stewards of this Nation in a way that is fair to our children.
    So that is the purpose of this roundtable. Again, it is not 
a hearing in the traditional sense because I want this to be 
conversational. I want it to be just more open and I want 
everybody to feel comfortable and at home here because whatever 
your perspective is, I think we all share the common desire to 
preserve Medicaid and reform it in a way that is careful and 
thoughtful.
    So each of you will have time to make a presentation and 
Senator Kohl and I will ask questions, maybe even interrupt you 
to make sure we fully understand the points you are making and 
glean from you the ideas that are going to be so necessary to 
what we inevitably have to do, which is Medicaid reform the 
right way, not just a budgetary way. So we value your time and 
we thank you very much for your presence here today.
    With that, I will turn it over to Senator Kohl.

             OPENING STATEMENT OF SENATOR HERB KOHL

    Senator Kohl. Well, we thank you, Mr. Chairman, and along 
with you we welcome all of our distinguished participants here 
today.
    There is no question that the current trends in Medicaid 
growth and spending are not sustainable for the Federal or the 
State governments. We all agree that we need to cut costs. The 
question, of course, is how to do that without endangering the 
most vulnerable people in our society.
    We are pleased to have with us today a distinguished panel 
of experts as we explore Medicaid managed care for our high-
cost populations such as dual-eligibles, the disabled and 
people with chronic conditions. We look forward to hearing your 
recommendations to improve the care they receive through better 
coordination of services, while at the same time looking for 
ways to reduce costs.
    So we thank the Chairman and we thank all of you for being 
here, and I am sure this will be an enlightening roundtable 
experience.
    The Chairman. Thank you, Senator Kohl, and you all may 
already know each other, but let me just read an introduction. 
The most formal part of this is just going to be to read who 
you are here.
    Anthony, or Tony Rodgers, if I can call you Tony, is the 
director of the Arizona Medicaid program known as the Health 
Care Cost Containment System.
    Ron Pollack is the executive director of Families USA. He 
is a well-known Medicaid advocate, and it is probably not well 
known that he is a friend of mine. Thank you, Ron, for being 
here.
    Jeff Crowley is an expert on disability policy and senior 
research scholar at the Health Policy Institute at Georgetown 
University. Thank you, Jeff.
    David Ford is the president and CEO of CareOregon, a 
Medicaid managed care company in Oregon, and a constituent.
    Dan Hilferty is the president and CEO of AmeriHealth Mercy, 
a large multi-State Medicaid managed care company, and we thank 
you for being here as well.
    Senator Kohl. We have with us Greg Nycz, who is here from 
Wisconsin. He is the director of Health Policy for Marshfield 
Clinic, and also the director of the Family Health Center of 
Marshfield, a federally funded community health center in 
Wisconsin. Greg has been involved with the planning for and 
operation of the Family Health Center of Marshfield for over 33 
years. He has extensive experience in Medicaid managed care, 
having had primary responsibility in the initial contracting 
for Medicaid managed care in north central Wisconsin. He 
continues to serve on many State advisory groups dealing with 
Medicaid managed care contracting.
    Thank you for being here.
    The Chairman. I didn't introduce you, Greg, because you are 
his constituent. I didn't want you to feel left out here.
    So, Tony, why don't we start with you and let's see what we 
can learn from Arizona. We did have your Governor via 
teleconference recently and we appreciated her participation in 
our hearing.

  STATEMENT OF ANTHONY RODGERS, DIRECTOR, ARIZONA HEALTH CARE 
              COST CONTAINMENT SYSTEM, PHOENIX, AZ

    Mr. Rodgers. Well, thank you, Chairman Smith and Senator 
Kohl, and I appreciate the opportunity to participate in this 
roundtable, although this isn't quite a roundtable, but that is 
OK, and to have an opportunity to discuss our Medicaid managed 
care model in Arizona. It is my hope that my written testimony 
and the insights that we provide during the discussion will 
provide some direction for Congress in terms of some solutions 
for Medicaid.
    The Arizona Health Care Cost Containment System, called 
AHCCCS, for short, was established in 1982. Its principal goal 
was to provide quality of care, at the same time cost 
containment. We believe these are not mutually exclusive. Over 
the years, AHCCCS has been recognized as one of the best-run 
Medicaid programs in the United States and we have learned a 
few lessons in that time.
    I would like to first talk about financial accountability 
and cost controls--one of the areas that we have learned that, 
as the name implies, cost containment is really important in 
Medicaid. We have an underlying belief that unnecessary and 
untimely medical care, medications, emergency care and in-
patient care drives costs up in the Medicaid program.
    We have learned that the best-performing health plans have 
invested in medical management information systems and the 
capability of their organizational core competency to 
effectively managed members' care, especially the chronically 
ill or those who have high-cost medical conditions. We have 
found that about 20 to 25 percent of our members generate about 
80 percent of our medical costs. Effective case management of 
those members has a significant impact on controlling Medicaid 
costs.
    Another lesson I would like to share with you is that we 
have had a great deal of success with our drug management 
programs through our health plans. We have the highest generic 
use of any Medicaid agency and this is because our plans use 
generics first before they go to the most expensive brand, if a 
generic is available. Effective drug management is a hallmark 
of our Arizona Medicaid program. It was supported in a report 
that was done by the Lewin Group that compared Arizona Medicaid 
to other Medicaid programs, and it found that in our acute care 
program our average cost was $14.75 per prescription, compared 
to an average of $47.10 per prescription for Medicaid fee-for-
service programs. In long-term care, our average generic use 
was 76.5 percent and a prescription cost of $38.91, compared to 
29 percent in other Medicaid fee-for-service programs and $69 
per prescription in those programs.
    One of the basic tenets of the managed care program in 
Arizona is that paying capitation to managed care health plans 
that is based on a per-member, per-month reimbursement schedule 
needs to be actuarily sound. You have to realize that we 
transfer full medical risk to our health plans. To make the 
capitation work, you need two things. You need adequate 
membership and you need the ability of the plan to manage its 
medical risk, and larger memberships or assuring adequate 
membership helps them to do that.
    But you also have to realize that we don't encourage our 
health plans to capitate their provider groups. We would rather 
them pay them fee for service and set appropriate rates. In 
fact, we probably are one of the few States that is able to set 
rates at or close to the Medicare rates for our members.
    Additionally, I would like to just quickly talk about 
actuarial soundness. Actuarial soundness is an important 
principle that is, in essence, a contract between the State and 
the health plan that we are going to provide actuarily sound 
rates to them. This allows them to have stable financials, as 
well as it stabilizes our provider network.
    In terms of what happens when you have a stable provider 
network, we just have a recent study by Arizona State 
University that shows emergency room use in our Medicaid 
program was lower than the incidence of emergency room use in 
commercial plans. So, actually, our Medicaid program had lower 
emergency room use than other commercial plans in our State.
    I would like to talk a little bit about our fraud and abuse 
program. One of the other benefits of having health plans is 
that they also participate and collaborate in fraud and abuse 
detection, and this helps us really rout out and prevent fraud 
and abuse in our program.
    Then, finally, Arizona has the opportunity to make a 
quantum leap, achieving even greater program efficiency, 
patient care quality and cost transparency. Because of our 
Medicaid managed care, Arizona is well organized in its 
provider networks and its integrated medical management 
processes. That positions us to more rapidly deploy information 
technology and to exchange critical personal health information 
of our Medicaid members to our provider networks.
    I look forward, Mr. Chairman, to this dialog. I think it is 
an important dialog and I appreciate this opportunity. Thank 
you.
    The Chairman. Tony, I live in a very rural part of Oregon 
and most of my Udall cousins live in eastern Arizona, in places 
like Safford and Thatcher. I guess one of the concerns I have 
as a rural Oregonian is how capitated managed care works in 
rural communities.
    I imagine, David, you would probably admit there is not a 
lot of managed care in eastern Oregon. It is only where the 
people are. So how do we take care of rural folks in Arizona?
    Mr. Rodgers. Mr. Chairman, we have actually found that it 
stabilizes the network in the rural area because we can verify 
who the members are. Because we are shifting them from 
hospitalization and emergency room use of hospitals into the 
provider network, it actually gives primary care physicians and 
others revenues from our program because we have contracts with 
those rural health organizations, everything from our rural 
health community clinics to individual providers.
    Because we pay fee-for-service, those individual providers 
are able to sustain their practices out in those rural areas. 
So it has really worked to the benefit of our rural communities 
because without Medicaid in those communities, if there were a 
number of uninsured, those providers would not be able to stand 
in terms of financial stability.
    The Chairman. It might have taken a little longer to get to 
rural Arizona, but it is there now?
    Mr. Rodgers. Yes. Actually, we have been mandatory Medicaid 
since the inception. So from the beginning, we have had plans 
that have specialized in those rural communities and have 
learned how to work with the providers. Because we are able to 
integrate health care between the rural communities and 
sometimes the tertiary care centers, it really works to control 
costs because our goal is to give every person a primary care 
physician that is going to be their normal place that they will 
go and get care, whether that is a community clinic or whether 
that is an individual community provider. So it has worked very 
well.
    The Chairman. Can you speak a little more specifically to 
what incentives you have provided, what oversight you provide, 
you know, contract negotiations that, on the one hand, allow 
you to capitate things, but on the other hand I think the 
concern of many is corners are not cut when it comes to care, 
and particularly those with chronic disabilities, dual-
eligibles and the like?
    Mr. Rodgers. Well, I think there are three underlying 
strategies or operational processes that really help our 
process with our health plans. No. 1, we set rates that are 
actuarily sound, so we do look at utilization and we look at 
cost, and we escalate our rates or increase our rates based on 
what we are seeing in the care of members. If we have members 
at risk or high risk in a plan, there is an adjustment that is 
given to those plans.
    In addition to that, our plans over the years have 
developed sophisticated medical management programs and case 
management, and so they do a lot of prevention especially in 
long-term care. Especially with our dual eligibles, there are a 
lot of touch points that our plans have with those individual 
patients, and the reason is that they are at risk for the costs 
and they know if they do early detection, prevention and get 
the member to see their primary care physician, it reduces 
emergency room use and it reduces in-patient care.
    In addition to that, over time, it has allowed a whole 
network of home and community-based services to develop in both 
the rural as well as the urban areas because we are funding 
those services. So, over time, we have been able to elevate the 
resources the communities in those communities as well.
    The final thing is that our plans pay fee for service, and 
physicians in our communities and the other providers like fee 
for service. Capitated relationships with providers is much 
more difficult for them to manage. But by paying fee for 
service and us overseeing that they are paying correctly and 
that they are paying on time, it has made it possible for our 
provider network to be very stable. We have about 85 percent of 
the Arizona providers participating.
    The Chairman. Do you know Ron Pollack, next to you?
    Mr. Rodgers. Yes, Ron and I have met.
    The Chairman. Do you have a Ron Pollack in Arizona, 
somebody who is an advocate for care?
    Mr. Rodgers. We have a number of organizations that 
advocate for care. One of them is our children's health 
alliance or children's alliance. They do a lot of focused 
effort around children's insurance programs and they have been 
a great supporter of AHCCCS. I understand why advocates feel 
concerns about managed care. If it is done poorly, it does 
create a lot of problems. So it is important that the States 
that are getting involved know how to manage managed care, and 
if they do, it actually works better for access to providers.
    One of the problems we saw in the early days when I was in 
California--I ran a county hospital--we would often get people 
who would say I can't find a doctor who will take Medicaid. In 
managed care, all the doctors are under contract, so you know 
they are going to take Medicaid. So that has really helped our 
members quite a bit.
    The Chairman. So Arizona's version of Ron Pollack--if they 
were here, they would like what you are saying and they would 
agree with it?
    Mr. Rodgers. I believe so.
    The Chairman. Senator Kohl.
    Senator Kohl. Go ahead.
    [The prepared statement of Mr. Rodgers follows:]

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    The Chairman. Ron Pollack, take it away.

  STATEMENT OF RON POLLACK, EXECUTIVE DIRECTOR, FAMILIES USA, 
                         WASHINGTON, DC

    Mr. Pollack. Thank you, Mr. Chairman. Thank you, Senator 
Kohl. I want to thank you before I begin on two counts, one for 
conducting this roundtable or----
    The Chairman. Square table today.
    Mr. Pollack [continuing]. Or square table discussion.
    The Chairman. We will be square pegs instead of round pegs 
today.
    Mr. Pollack. I appreciate the opportunity for the give-and-
take that this affords. This is a very important issue because 
it affects as many as approximately 12 million people. They are 
the people who need health care the most, and so I deeply 
appreciate that.
    But I would be remiss not to thank you for the leadership 
you have steadfastly provided in terms of the Medicaid program 
and protecting and strengthening the program. I think next year 
is going to be a challenging year on that score and we look 
forward to working with you next year and for many years in the 
future.
    The Chairman. It will be my pleasure to work with you on 
it.
    Mr. Pollack. Thank you. I want to start off by just 
mentioning that it is important to put in perspective who this 
population is that we are talking about today. This critically 
important group constitutes less than a quarter of the Medicaid 
population and it is the population for whom Medicaid is 
literally a lifeline. They also constitute the people who 
consume two-thirds of the cost of the program.
    By the way, this is not so surprising. There is a recent 
book published that was written by Katherine Swartz at Harvard 
where she talked about the overall population in terms of 
health care, and her findings were that 10 percent of the 
American population consume 70 percent of all costs. Actually, 
the lowest 50 percent of the population that consumes the least 
consumes only 3 percent of the cost. So it is very important 
for us to have this conversation today.
    Before I go to the heart of what I want to say, I would 
like to offer two prefatory comments. The first is that the 
primary consideration as we deal with the populations who are 
dual-eligibles or eligible for SSI or SSDI is to improve 
quality of care. That clearly has to be our top consideration.
    I think it is very possible, with improved coordination of 
care, to improve quality of care. This is especially important 
because this population tends to have multiple chronic 
conditions. It is not just one condition for which they go to 
see numerous specialists, and to have care coordination is 
critically important.
    The second prefatory comment I want to make is that, if we 
improve quality of care, we might get some cost efficiencies. 
That is a far better way to go about trying to deal with 
budget-related issues applicable to Medicaid than arbitrarily 
cutting eligibility, cutting benefits, or increasing cost-
sharing. My hope is we can wed together improvements in quality 
of care and make some cost efficiencies in the process.
    Now, Mr. Chairman, you opened up this hearing by saying 
that this issue often is viewed as an ideological issue. I am 
very much with you in hoping it is not an ideological issue. I 
think we do a disservice to everybody if this is an ideological 
issue.
    The Chairman. I am not saying it should be.
    Mr. Pollack. No, no, no, I understand. That is why I am 
saying I agree with you that it should not be an ideological 
issue. It should be a practical question and we should try to 
make sure that we do something that is going to improve the 
quality of services and, hopefully in the process, improve the 
Medicaid program.
    Now, there are several key protections that already exist 
for people who are in Medicaid managed care and I will mention 
those in a moment. Then I would like to mention some key 
protections that I think are important if we extend Medicaid 
managed care to this vulnerable population.
    Under the Balanced Budget Act of 1997, there are some key 
protections that are provided to people who are in Medicaid 
managed care and they are very important and they should be 
extended to this new population as well. First, enrollees 
should have a choice of plans and they should be able to change 
plans within the first 90 days and they should be able to 
switch every year.
    The Chairman. On that point, Ron, can I ask Tony, do they 
have a choice of plans in Arizona?
    Mr. Rodgers. Yes, they do.
    Mr. Pollack. Second, with default enrollments, we should 
make sure that we protect existing provider relationships. That 
is also critically important. Third, we need to provide 
meaningful information for people so that they know what their 
choices are, their rights, the benefits, cost-sharing, and the 
grievance procedures. Finally, emergency services should be 
available without prior authorization using the prudent 
layperson rule, so that people who have an unexpected emergency 
can go to the nearest facility and get care.
    In my testimony, I suggested about a dozen different areas 
of additional protections that should be established. I just 
want to focus quickly on four; I will mention them and for time 
considerations be real brief about it. First, it is critically 
important that there be serious care coordination. What is very 
important is that there be a sufficient number of care 
coordinators available so that they realistically can serve 
this population.
    One care coordinator for 1,000, 2,000 people does not cut 
it, and we shouldn't just have care coordination when emergency 
circumstances occur. There has to be a reasonable ratio of 
staff for care coordination. There need to be reasonable 
standards for care coordination, and I think some real benefits 
can come from that and hopefully that will result in some cost 
savings and improved care.
    Second, I think it is very important to have some type of 
ombudsman services so that an individual who is dealing with 
some significant health problems can go to a trusted adviser 
who can help them understand what their choices are, what their 
rights and responsibilities are, and if there are grievances, 
can help them with those. Texas and Minnesota have experimented 
with it very successfully and I think it is very well worth 
doing.
    Third, we need to make sure there are specific quality 
measures so we make sure that this kind of managed care 
actually improves the condition of people. We need to have 
assessments about improvements in the functional status of 
enrollees, access to care coordination, preparation for care 
transitions, and access to behavioral health services that are 
very important.
    Last, you asked the question about rural parts of a State, 
like in Oregon. We need to make sure that, before we require 
and implement managed care for this population, the 
geographical areas are truly prepared to serve these people, 
that there are good primary care networks, and that specialist 
networks, and that there are no disruptions in care.
    So, in sum, I would say I think the prospects of doing 
something in managed care are very well worth pursuing. They 
have to be done carefully and we have to make sure that the end 
results improves quality of care.
    The Chairman. Ron, I want to ask which States, in your 
view, in your judgment, are doing it well sufficient that you 
would be comfortable with their models, if incentivized on a 
national basis.
    Mr. Pollack. I think there are some positive things that 
you can see in a number of States and some things you need to 
be cautious about in a number of States. No State is perfect, 
no State is doing a horrible job. So my hope is that given that 
we have had some States that have experimented with managed 
care for this population we can take the best of what States 
have done and try to emulate that. I don't think any single 
State would be the model in totality.
    The Chairman. That is very good. We will keep the dialog up 
as we try to put together a legislative package of incentives 
to States. Obviously, we have got to find ways to save money, 
but I want to state for the record I share your priority, which 
is frankly quality care, and one can't be sacrificed to the 
other.
    Mr. Pollack. It might well be, Senator, that for those 
States or those areas where managed care is being introduced 
for the first time, there is going to have to be some 
investment, because you have to invest in creating an 
infrastructure, and so there may be some short-term costs. But, 
hopefully, you will see reductions in emergency care. We will 
see more people taking generic drugs. We will hopefully make 
sure that there is coordination among the different specialists 
who are treating somebody, so that one specialist is not 
causing a problem in yet another area that they do not 
specialize in. Hopefully, we will have more home and community 
care rather than institutional care. All those things offer 
promise, but they also require investment in infrastructure.
    The Chairman. When you think of investment in 
infrastructure, one of my other committee assignments is on the 
Commerce Committee and there are just some really exciting 
things out there in terms of medical technology and 
telecommuting. I don't know if you are familiar with the 
Veterans Administration health system, but I was at Roseberg, 
OR, the other day and literally watched a physician through a 
computer and videoconferencing literally treat a man for 
everything he needed right there, and did it almost, I suppose, 
with all of the effectiveness of if the guy were in his office 
and he was doing it from hundreds of miles away.
    I don't know if that is what you have in mind or if that 
meets the standard of infrastructure you think is necessary.
    Mr. Pollack. Clearly, those kinds of things require 
investment before they can truly be implemented, and so it is 
very important not to be impatient about this. You can't just 
throw managed care into a place that is not prepared to do it, 
and so short-term, there probably are likely to be some 
additional costs. Hopefully, in the long term, it not only will 
improve quality, but also will achieve some efficiencies.
    The Chairman. Very good. Thank you so much.
    [The prepared statement of Mr. Pollack follows:]

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    The Chairman. Jeff.

   STATEMENT OF JEFFREY S. CROWLEY, SENIOR RESEARCH SCHOLAR, 
 HEALTH POLICY INSTITUTE, GEORGETOWN UNIVERSITY, WASHINGTON, DC

    Mr. Crowley. Mr. Chairman, Senator Kohl, thank you for the 
invitation to provide a disability perspective as you consider 
these issues. I also want to echo what Ron said. I know the 
range of disability and HIV groups I work with are really 
appreciative of the leadership of both of you over the last 
year and hope it that will continue as we go forward.
    From my vantage point, it appears that much of the current 
policy discussion related to managed care is really about how 
to apply managed care to have greater managed long-term care 
and how to use this to integrate acute and long-term services 
for dual-eligibles. I recognize that this creates some real 
opportunities, but I really approach this conversation with 
great trepidation.
    Today, I don't think we have proven large-scale models for 
delivering long-term services and supports in the managed care 
environment. Arizona is the only Medicaid managed long-term 
care program that operates both statewide and on a mandatory 
basis. A number of States have established managed long-term 
care programs, but they remain quite small in scale.
    Turning to integrated care for dual eligibles, I would say 
many of the same things. Large-scale and proven models for 
integrating care just simply do not exist yet. So since these 
fields are really in their infancy and seniors and people with 
disabilities are quite vulnerable, States should not be 
permitted through waivers or other initiatives to mandate 
participation in these new programs. Further, I think seniors 
and people with disabilities need to be engaged in meaningful 
partnerships in developing these new programs.
    Now, it feels like in the past we have seen that States and 
managed care organizations, or MCOs, don't really know how to 
work with beneficiary representatives or they don't really 
believe that they have the technical expertise needed to really 
provide a meaningful contribution. But when we look at 
developing workable managed long-term care programs, I think it 
is actually the beneficiaries that have expertise related to 
their own service needs or how to efficiently provide those 
services that managed care organizations simply don't have on 
their own.
    So, in short, I would say encourage States to experiment in 
these areas, but please recognize that it is really premature 
to think about mandating participation or about giving States 
more flexibility that essentially means waiving essential 
beneficiary protections.
    Now, in the context of managed acute care services, I think 
over time a number of tools have evolved to help us ensure 
accountability for what we are purchasing, and this includes a 
number of things like the development of clinical practice 
standards, adoption of consumer protection systems and the 
development of performance measures that allow us to measure 
how well MCOs are meeting their obligations. Comparable tools 
for managed long-term services do not exist at this time.
    So one thing I think the Congress could do is play an 
important role in encouraging the development of performance 
measures for long-term care. So if we are talking about moving 
to managed care and constructing a system based on contracts 
where these companies will deliver services, let's develop the 
tools to make sure we are getting what we pay for.
    The Chairman. CMS has none of that at this point?
    Mr. Crowley. No. There is a private group called the Center 
for Health Care Strategies that has begun some of this work, 
but I think we really need a larger-scale effort to do this. I 
would say performance measures for long-term services maybe are 
more difficult to develop than acute care. In the acute care 
environment, maybe it is easy to say, if you are a new enrollee 
we expect you to be screened within a specific period of time, 
or we can demonstrate how often we want you to be able to see 
your doctor. We are not really sure what we are talking about, 
and we are probably talking about less clinical measures for 
long-term care when we are talking about people that come into 
people's homes and provide personal assistance. It is just a 
very different situation.
    I would also say that much has been learned over the past 
decade about how to do managed care and how not to do managed 
care for people with disabilities, and some of things I am 
going to say might sound self-evident, but let me just run 
through what I think are some key lessons from the past.
    The first is go slowly in implementing managed care 
programs. The second is that we have to ensure that payments to 
MCOs and providers are adequate, and I would really like to 
support many of the comments that Mr. Rodgers made about the 
importance of actuarially sound payment rates. I think that is 
really a critical issue.
    We also need to ensure that States maintain an adequate 
Medicaid administrative infrastructure. I think some States 10 
years ago maybe thought that managed care was going to allow 
them to just wash their hands and turn over the headaches of 
running a Medicaid program. I think we have learned that that 
is not the case and to do managed care right we need to have 
people in Medicaid offices actually managing what the MCOs are 
doing.
    I also think an important area from a disability 
perspective is promoting disability care coordination 
organizations as a way to use managed care. There are a 
relatively small number of these programs that operate around 
the country and they coordinate publicly funded medical and 
social services and they blend attributes of both social 
services and health care organizations. These may be a way that 
States could apply the managed care tools to serve people with 
disabilities, but minimizing some of the drawbacks we have seen 
when States have tried to just serve people with disabilities 
in statewide managed care programs developed for the general 
Medicaid population.
    Then, last, I think we need to consider strengthening 
consumer protections. Among other things, this may include more 
protections to ensure access not just to qualified providers, 
but also experienced providers, requiring States to demonstrate 
their capacity before implementing managed long-term care 
programs and strengthening beneficiary appeals protections.
    So in closing, I would just like to say I am encouraged 
that the Aging Committee is considering these issues, and I 
would encourage you to look for opportunities, but also protect 
beneficiaries, and also the large Federal financial investment 
to make sure that we don't rush into new, maybe irresponsible 
or wasteful approaches to managed care that don't really help 
anybody and may promise more than they can deliver.
    So again thank you for inviting me to participate in the 
roundtable.
    The Chairman. You had a number of really important points 
that we should remember in any legislation that we are able to 
produce. If you wanted to highlight just one that you just have 
to have in any legislation going forward that encourages 
managed care, what would that be?
    Mr. Crowley. One consumer protection?
    The Chairman. Yes.
    Mr. Crowley. I guess I would say ensure that beneficiaries 
have a right to get access to the providers they need, and so 
that means a number of things. It is making sure we have the 
networks that are adequate, but there might be very specific 
cases where there might be only one qualified or experienced 
provider for an individual in their community and they could be 
outside the network. So we need structures to allow people to 
get outside the networks to get what they need. That is not 
about saying everybody needs those rights. We are talking about 
really providing a safety valve for those very specific cases.
    The Chairman. Of dual-eligibles and chronic----
    Mr. Crowley. Right, exactly.
    The Chairman. You talked about contract specificity. Do you 
think that was the result of poor training, lack of knowledge 
or just States wanting to wash their hands of Medicaid and 
their responsibility and turn it over to----
    Mr. Crowley. Yes. Some of this I said more in my written 
statement about the importance of well-written contracts, and I 
think what we have seen is that managed care is a major shift 
and when States first got into it, they were learning and they 
didn't really know what they were doing. I think over the last 
decade, we have seen that they have learned that they are 
actually purchasing a product and to get what they are paying 
for, they have got to be very specific in writing down in this 
contract what they expect. I think that has actually been a 
major sign of progress that we have seen over the last decade 
is that States have gotten much better at doing this.
    The Chairman. Tony, does that ring true to you and is that 
Arizona's experience?
    Mr. Rodgers. Mr. Chairman, absolutely. The management of 
managed care, which is the State's responsibility, does require 
core competencies of the State employees on how to look at the 
performance of a health plan. Over time, you develop your 
performance measures and your control points. The contractual 
relationship has to be monitored and when a plan is not meeting 
their contractual relationship, there has got to be sanctions.
    Some States have kind of--and I have talked to other States 
about this--a fear factor of, well, we don't want to be too 
tough. But the managed care organizations respond to this 
because each of the managed care organizations that is 
performing has invested. If you allow a managed care 
organization not to perform, you are, in essence, penalizing 
those who are performing. So that is an important role that the 
State plays and you have to have the core competency.
    I agree it does take time to build that, but the benefits 
later--you really begin to see increase in community-based 
services. You see a stable network, and then you can start to 
build on that--new quality measures, new performance 
requirements--and really do best practices. One of the major 
concerns I have is there is no comparability between States in 
terms of how they are paying into their care and whether it is 
justified. I look at what other States are paying PMPM and I 
just wonder how is that justified compared to what we are 
paying PMPM, so to speak.
    [The prepared statement of Mr. Crowley follows:]

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    The Chairman. Greg, take it away.

   STATEMENT OF GREG NYCZ, DIRECTOR, FAMILY HEALTH CENTER OF 
  MARSHFIELD, INC., MARSHFIELD, WI; ON BEHALF OF THE NATIONAL 
            ASSOCIATION OF COMMUNITY HEALTH CENTERS

    Mr. Nycz. Chairman Smith and Senator Kohl, what I hope to 
add to this conversation is the concept that managed care, does 
not always have to occur in the third-party environment. Growth 
in technology, electronic medical records and health care 
systems, provides opportunities to manage care at the provider 
point of contact level. This can be particularly important in 
some of those rural areas that you talked about.
    Last year, as a federally funded community health center, 
we served over 45,000 low-income people, all of whom were under 
200 percent of the Federal poverty level. Of those, about 6,000 
were the folks you are most interested in today, the dual-
eligibles and special needs Medicaid population.
    I would really like to state my appreciation for what you 
are trying to do in launching this initiative. I was really 
excited to hear you were pursuing a more challenging and 
potentially more rewarding path than simply just cutting 
Medicaid spending. I think this is terrific.
    I would also like to thank you for your support in 
expanding our Nation's community health centers which work as 
front-line providers to meet the health care needs of our 
Nation's most vulnerable residents. With the support of 
Congress and the President, we have had an opportunity to 
expand over the last few years and the privilege to now serve 
over 14 million of our Nation's most vulnerable citizens in 
over 5,000 center sites across this Nation.
    If we are to add value for taxpayers and also protect and 
promote health for our neighbors with limited incomes, we must 
manage their care more effectively across the continuum of 
financing systems as people move from Medicaid to uninsured and 
back to Medicaid. If we forget about them when they are 
uninsured, they come back into Medicaid with much higher costs 
and needs, and a lot of work that was done in managing their 
care in Medicaid is lost in the interim when they go through an 
episode without insurance.
    I believe that to achieve this we must pay attention to 
strengthening the primary care infrastructure and fully 
capitalizing on the value of the medical home concept, which 
was mentioned as important in the Arizona experience. By 
medical home I mean having a primary care provider who knows 
you and knows your circumstances and is your primary point of 
contact in the health care system.
    I believe part of the backlash that we experienced with 
managed care among more affluent populations stems from the 
frequent disruptions in the patient-provider trust relationship 
that occurred as competing managed care firms sought to move 
market share from one provider panel to another. So as you seek 
to make greater use of the positive aspects of managed care for 
highly vulnerable populations, greater attention should be paid 
to exploiting the synergies that are possible in linking 
medical home concepts to third-party managed care initiatives. 
Community health centers are clearly well-suited to partner 
with managed care firms for this purpose.
    I would also encourage the Committee to invest in advancing 
best practices for optimizing health and functioning among 
special needs populations. As you seek to harness the potential 
of managed care for Medicaid special needs populations, there 
will be opportunities to gain experience with point-of-care 
management, third-party management and hybrid systems using 
State Medicaid programs as natural laboratories.
    I would also ask the Committee to address of loss of State-
level purchasing power related to the privatization of Medicare 
and Medicaid in the post-Part D era. If Medicaid drug rebates 
could be extended to Medicaid managed care arrangements, an 
estimated $2 billion over 5 years could be saved. 
Alternatively, pharmaceuticals could be carved out of managed 
care arrangements and paid directly by the States.
    An example of this approach is the excellent system created 
by Wisconsin's employee trust fund which carved out pharmacy 
benefits from their managed care contracts and consolidated the 
purchasing power of employer-sponsored plans without disrupting 
care management activities because they used technology to feed 
back all the data to the HMOs as frequently as on a daily basis 
if the HMOs wanted it at that level.
    My final point, all too frequently overlooked, is that we 
must end the historic neglect of oral health in low-income 
populations. A growing body of evidence links dental disease to 
systemic health problems like cardiovascular disease, diabetes, 
prematurity low birth weight, and respiratory problems in 
institutionalized patients. I urge the Committee to address 
oral health as key to better managing the care of Medicaid 
beneficiaries, particularly those with special needs.
    Health centers have a lot to offer in efficiently managing 
the health care needs of vulnerable populations because they 
offer key services critical to improving and maintaining 
health. We define primary care to include not just medical 
services, but also services related to mental health, dental 
health and enabling services. Several studies have found that 
health centers save Medicaid 30 percent or more in annual 
spending per beneficiary due to reduced specialty care 
referrals and fewer hospital admissions, saving an estimated $3 
billion in combined Federal and State Medicaid expenditures. 
The continued expansion of health centers means medical homes 
for more people and even greater savings.
    Thank you very much for the opportunity to present today.
    The Chairman. Thank you, Greg. I really compliment you and 
all in the community health care center community. I think it 
is one of the answers to our problem, and not the total answer, 
but I am a tremendous fan of the work that you do.
    Have you seen a reluctance of managed care companies 
willing to work with community health centers?
    Mr. Nycz. In our State, no, but I know that goes on in 
other parts of the country.
    The Chairman. Does it have to do with reimbursement rates 
and stuff like that?
    Mr. Nycz. It might, but I think Congress has done a great 
deal already to try to help that situation in terms of working 
it out with wrap-around payments under Medicaid and Medicare in 
ways that don't disrupt traditional contracting arrangements 
with HMOs. But Health Centers really do have, I think, a great 
potential to team with managed care firms because we can manage 
front-line care and get preventive care and enabling services 
to people, but we can't do it all. So linking with managed care 
firms is actually a very natural thing that could be very 
helpful for the most vulnerable people.
    The Chairman. I need to understand better the point you 
were making about dental care as an indicator of some larger 
health care issues. Is that the point you were making?
    Mr. Nycz. That, and the fact that when I talk with folks in 
the disability community, one of the things they frequently 
tell me as a health center is we can help--by providing dental 
access. For instance, we have the PACE program which tries to 
get people out of institutions or living in home settings for a 
longer period of time. We are working with them and they are 
very excited about the construction of our new dental facility 
because they can't get the dental care they need for all their 
patients.
    The studies particularly for institutionalized patients 
indicate that particularly with periodontal disease, the kind 
of bacteria that inhabits the mouth doesn't stay there and it 
can migrate in the body and cause infections, pneumonia, and so 
forth, and there is a growing body of scientific evidence on 
this topic.
    So if you want to best manage care and you want to improve 
quality, we can't forget about mental health, we can't forget 
about oral health, and we can't forget that some people, 
particularly in very special needs populations, need what we 
refer to as enabling services. They need additional help in 
getting access to care and in managing that care, and health 
centers, are an important cog in the or better health care 
system that you are trying to build.
    The Chairman. I think it is important to state for the 
record that if you don't have mental health, you don't have 
health, and I really appreciate your emphasis on that. Since I 
have a brother who is a dentist, thanks for including them, 
too.
    Senator Kohl.
    Senator Kohl. Go ahead.
    The Chairman. Well, thank you very much, Greg. We 
appreciate the great model that Wisconsin is, and not just the 
Senator sitting over here, but in so many fields, but 
particularly in medicine. It is something of a trailblazer just 
like Oregon, and so we admire that very much.
    [The prepared statement of Mr. Nycz follows:]

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    The Chairman. Turning to Oregon, David Ford, thank you.

STATEMENT OF DAVID FORD, PRESIDENT AND CHIEF EXECUTIVE OFFICER, 
                    CAREOREGON, PORTLAND, OR

    Mr. Ford. Thank you, Mr. Chairman and Senator Kohl. It 
seems like there is a lot of simpatico across the issues here.
    My name is David Ford. I am the president and CEO of 
CareOregon, in Portland. I would like to focus my remarks 
pretty much on Medicaid and the SSI population, the blind, 
disabled and aged, because in a lot of states that isn't a 
covered benefit but we have been doing that in Oregon for 10 
years, as well as in Maryland and a number of other States, but 
it is not widespread.
    Because we are fully capitated and the capitation often 
doesn't keep up with medical inflation, we are driven to be 
innovative and take things and look at things in different ways 
with our benefit partners. One aspect of that is care 
management of the complex member. We are defining the complex 
member as the person that doesn't have just one disease, such 
as diabetes, they have got a heart condition, high blood 
pressure, and they may have some problems with their feet.
    These are people with four or more comorbid conditions, and 
one of the issues that was brought up previously is focusing on 
where the dollars are spent. We found that in our 100,000 
members across the state, 3 percent of the people use 30 
percent of the services. That is an area that we have intensly 
focused on. We have grants from the Center for Health Care 
Strategies to develop methodologies working with our highest 
needs members.
    Our view is if we can take people that are not well 
connected to either the medical system or the social system, 
add more services, not cut services, but add more services, we 
can actually stabilize them and manage them into a more chronic 
care state which is much more stabilized, and they use less 
services.
    Before I came to Oregon 3 years ago, I ran Medicaid HMO 
here in Medicaid in the District and Maryland. The remarkable 
thing that I found to Oregon was the different SSI use of 
hospital services in Maryland compared with Oregon. After 2 
years in Maryland, we dropped the hospital utilization rate 
from 2,300 days per 1,000 to 1,900 days per 1,000. That means 
for every 1,000 people, there were 1,900 days of 
hospitalization. In Oregon, we started with a base of 1,300 for 
the same matched population and dropped it to 1,000 days per 
thousand.
    So the question is there: Why a 900 days-per-thousand 
difference between Oregon and Maryland for that same 
population? There are some reasons for it, but the question 
when I got to Oregon was how do you go from 1,000 days per 
thousand down to 800, and the issue really became looking at a 
framework for quality.
    I think we are overlooking a lot of the work that we have 
done nationally at the Institute of Medicine. They published a 
book about 5 years ago called Crossing the Quality Chasm. In 
that, they have a number of explanations of why the health care 
system today is failing, and then recommendations, and actually 
a blueprint under that--and that is commented on in my 
amplification in the slides--about where to go.
    We don't have to go all over. The concerns about quality 
and improving quality while creating more efficient health care 
is right before us and this model. So that blueprint is 
something that as you develop your rhetoric and work with your 
staff, we would consider you looking at.
    A Johns Hopkins professor-doctor who has been doing work 
there for her whole career, Barbara Starfield, has done a lot 
of studies about when you have multiple conditions with four or 
more comorbid conditions, the complexity of care goes up and 
the cost just skyrockets. Things are out of control when we 
don't provide services.
    In the previously mentioned grant that we have received, we 
have done pilots over the last 3 years with our complex 
members. We are in the beginning of the third year. The first 
year, we set up nurse care management for our complex members 
and did a lot of care coordination. We saved about $5,000 per 
member a year on a matched study. In the second year, we saved 
$6,000 per member a year.
    One problem that we ran into with this program is a 
backdrop of this entire discussion--not enough trained medical 
professionals. To address this, we have evolved the model to a 
team-based approach where we have a social worker with a 
behavioral specialist, a nurse team leader, and two medical 
assistants helping coordinate care so that we can have a higher 
touch and broader reach. There is a huge demand for 
coordinating services, but we have got to find an economical 
way to reach out effectively.
    It is not the care that people receive that is driving the 
cost of health care; it is the care that they don't receive. 
This is counter-intuitive to the last generation of managed 
care where you put gatekeepers and road bumps between the 
patient and getting care. We are saying that is passe. We have 
got to get aggressive about knocking down barriers to services.
    The Chairman. That has saved you money?
    Mr. Ford. Hands down, no question about it.
    The Chairman. Is that generally recognized among your 
competitor----
    Mr. Ford. We have got 12 plans in Oregon, all local, and 
absolutely that is recognized. It is also the realization that 
it isn't just clinical services. A lot of services are provided 
by family members and others. So partly what we are looking at 
now is dialoguing with Intel, which has a digital care unit, 
around creating some software to integrate and create 
collaborative working systems for people who are very complex 
so that you can integrate between what the family is seeing and 
doing the care managers, the people in the community settings, 
so that the medical records, with privacy, are shared.
    We can't coordinate and articulate this care if we can't 
see it and work together, and one of the failings of our system 
is it is so fragmented. We are seeing the opportunity to 
integrate care through effective software opportunities and we 
are beginning to experiment and dialog with that, until Intel 
announced its big layoffs.
    This is not by any means a doomsday kind of scenario. The 
problem that was articulated by the Institute of Medicine in 
their book To Err Is Human is that healthcare is unsafe, it is 
fragmented, it is inefficient, it is slow, it is inequitable. 
In Crossing the Quality Chasm, they come up with a series of 
solutions that prescribe how we get safe care, how we create 
efficient care, equitable and so forth. It is up to us to 
follow through on this blueprint we have developed, and care 
will go up in quality and it is better care and it costs less 
and it is more humane from my perspective.
    The Chairman. David, how would you address the rural issue?
    Mr. Ford. I think there needs to be more collaboration. We 
are involved in that now. Understanding there are manpower 
shortages, and there are maldistributions of workforce, I think 
you can integrate specialty care through what you saw in 
Roseberg in terms of some availability of technology. I think 
that we need to invest in manpower and dedicate financial 
incentives for caregivers to go to rural regions, because they 
do get burned out.
    There are ways to integrate the system more effectively 
through capitation. I have done some work in Australia and 
Finland around the community taking responsibility for the 
care. I think we haven't put the dedicated effort like Tony was 
saying, into developing an expertise to do this. This is-- a 
means problem, as well as lack of focus to actually do the work 
to create integrated systems.
    We are not really using the words ``managed care'' as much 
anymore. We are really talking about--and I would like the 
roundtable to consider something like ``managed 
collaboration.'' Through software, through collaborative work, 
through driven people, we don't have to leave everything a 
free-for-all and, you know, here is some money and it is up to 
you to negotiate your way through this difficult high-tech 
endeavor. We have got ways to collaborate with our members to 
articulate care much more effectively.
    The Chairman. The Institute of Medicine--what is the name 
of this----
    Mr. Ford. Crossing the Quality Chasm is the book.
    The Chairman. If you had one recommendation as we try to 
develop legislation, we should go look at that book?
    Mr. Ford. I would defer to Ron, but I think that a lot of 
us here would feel like that framework has a lot of backbone 
that we can flesh out further to come up with more explicit----
    The Chairman. The provider community understands what they 
are saying and they respect it and they agree with it?
    Mr. Ford. We actually took a study delegation to Alaska to 
look at some advanced primary care reform practice that the 
Native Alaskan health services are doing in Anchorage. It was 
knock-your-socks-off exciting in terms of how they have created 
team care and services, adding behavioral health at the point 
of service for people, and it was all based on this fundamental 
framework laid out in Crossing the Quality Chasm. They have 
been working with the Institute for Health Care Improvement for 
15 years. This is not a new idea. It is just that it is not in 
the pair community very well and it is for some reason not 
incorporated as heavily into policy as it might be.
    The Chairman. Senator Kohl, do you have any questions?
    Senator Kohl. No.
    [The prepared statement of Mr. Ford follows:]

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    The Chairman. Dan.

STATEMENT OF DANIEL O. HILFERTY, PRESIDENT AND CHIEF EXECUTIVE 
  OFFICER, AMERIHEALTH MERCY AND KEYSTONE MERCY HEALTH PLANS, 
                        PHILADELPHIA, PA

    Mr. Hilferty. Good morning, Mr. Chairman and Senator Kohl. 
I appreciate being here today. I represent AmeriHealth Mercy 
Health Plan, based in Philadelphia. I also have the good 
fortune of being the Vice Chairman of the Medicaid Health Plans 
of America. MHPA is our Washington-based interest group and 
trade association, and with us today is our president, Thomas 
Johnson, who does a great job for us here on the Hill.
    On behalf of my colleagues in Philadelphia, I really 
appreciate the opportunity to be with you today. The one good 
thing, coming last in such an august group like this, is I 
found myself learning a lot, but I also found myself checking 
off a number of the things that have already been said that I 
don't want to repeat.
    The Chairman. But not everybody has said them, so go ahead.
    Mr. Hilferty. That is right. I am going to try to do it.
    First of all, I would like to, on behalf of our 
association, thank the both of you for the leadership that you 
have provided in really bringing the discussion of Medicaid to 
the forefront. The bipartisan commission has gone a long way to 
making the discussion of Medicaid policy and Medicaid reform a 
household discussion. I find that for the first time my family 
and friends actually know what I do because they are reading 
about Medicaid on a regular basis.
    Our organization and its affiliates work in 16 States. We 
managed the care in some way, shape or form for about 2 million 
Medicaid recipients. We have 23 years of experience in the 
industry and we are very proud of what we have learned. We feel 
that we really know the medical assistance population.
    We started out basically working with the TANF population 
and the SSI population. Over time, States have moved more with 
their managed care models toward the aged, blind and disabled, 
and we have had an opportunity to really learn a lot about that 
business. What I would like to do is I would like to move off 
of my prepared remarks and focus on that more expensive 
population.
    First, I would like to say I really agree with what Ron 
said about if you have a quality product, efficiencies might 
follow. I would adjust that slightly and say quality definitely 
leads to efficiency. Then I would like to focus on what David 
said about a small portion of the population eating up the 
large bulk of the dollars for care. We have found that with the 
aged, blind and disabled, those with chronic diseases, those 
with multiple chronic diseases, roughly 20 percent of our 
membership utilizes 80 percent of our costs. So you think of 
the disparity there.
    So here we are as managed care spending a lot of time 
traditionally, the traditional denying care or making sure 
people get pre-authorization. Well, what we are saying is if we 
shift focus to coordinating care across the whole population 
base, but focus on that 20 percent, not only will we provide a 
higher level of quality of care for those individuals and their 
quality of life will improve, but efficiencies will be there as 
well.
    So I would like to focus on--and I have this in here--I 
would like to focus on one of our programs. We really decided 
that if we were going to be effective, if we were going to 
survive and the State's ability and the Federal Government's 
ability to fund these programs decreases, we had to really 
shift from a gatekeeper perspective to more of a care 
coordination perspective.
    We developed a program called PerforMED, which is an 
intensive case and disease management program, and we decided 
to look at those disease states that were really costing us. We 
identified them by category, then more specifically by member, 
and we put in aggressive case management, one-on-one regular 
dialog with the member, regular interaction with not only the 
primary care physician, but the specialist community.
    David makes an excellent point. The key way to do that--and 
we talk about having real-time data in front of everybody so 
that you have got not only the managed care organization, you 
have got the provider, you have got the patient, you have got 
other organizations that interact with that member and their 
disease state. When everybody has real data, you make 
collaborative decisions, and we believe that collaborative 
decisions are usually better for the member and more efficient.
    We have a program that I focus on in my written remarks 
that I would just like to comment on and it deals with juvenile 
asthma. We are seeing in our membership in many of our States 
that asthma is increasing dramatically across the board, and 
mainly in young people. So we started a program called Healthy 
Hoops. We saw that many of these children with asthma weren't 
participating in any athletics, dance, other activities. They 
were on the sidelines.
    So we decided to put a program together where we would 
teach them basketball, but what we said was we have got to get 
the clinicians involved and we have got to get the providers 
involved. We formed a coalition. It isn't our program; it is 
the asthma coalitions in the regions in which we do it. We 
decided that we would teach them basketball, but in order for 
them to participate--it was more or less a carrot/stick thing--
their parent and/or guardian had to participate in the program 
as well. So it was part classroom and part fun and games with 
local basketball legends who taught them the game of 
basketball.
    What we found is that the parents were enthused about this 
program. They came on a regular basis. They learned about the 
children's meds, they learned about the need for nutrition, 
they learned about how to use the inhaler, what the problems 
are with the inhaler. They really got a grasp of the disease 
that they were dealing with. We felt that this put these 
children at an advantage where they could overcome some of the 
obstacles that they had. The fun of it is they have learned 
basketball. We have done it Philadelphia and we have done it in 
South Carolina. We are next doing it here in Washington, DC, 
and in Florida, in Broward County.
    What are the results? The proof is always in the pudding. 
The results for us really show what has happened. The 2004 
class--and the problem with it is each class is only about 500 
children, so you have got to really expand it to have a 
national impact. But with that class of 2004, we found there 
was a 70-percent reduction in emergency visits. That is 
significant. There was roughly a 13-percent decrease in use of 
emergency medications, which is pretty significant as well. We 
also found that once they got involved in the program, they 
were hooked on it for life.
    So what I am saying is you take all the points that we have 
made across the board and if the quality is there and you focus 
on individual high-cost disease states and set up 
comprehensive, aggressive outreach and education programs, it 
leads to a higher quality of life, improved health status and, 
finally, efficiency, which we all know has got to be a key part 
of a program.
    In closing, I would just like to say that the bipartisan 
commission--and you were talking about some program and you 
were saying, I think, only this group and a small group gets 
excited about the things that go on in Medicaid. But I was 
excited about the bipartisan commission. I really enjoyed 
hearing about the different perspectives. Well, out of the work 
of the bipartisan commission and Congress' deliberations in the 
past year, we are looking at $10 billion, roughly, in savings 
over the next 5 years in the program.
    Well, MHPA sponsored a study by the Lewin Group which 
really shows that if managed care is implemented across the 
country for Medicaid recipients, whether it is a mandate or 
incentive-based, to get States to really move toward managed 
care models, the savings are roughly about $83 billion over the 
next 10 years. So what I am saying is it is not just about the 
dollars, but if you build those programs that focus on that 20 
percent of the population--I am not saying ignore the other 80 
percent; they have needs as well--but truly focus on those 
high-cost populations and do it in a quality way where the 
State monitors, measures and is involved in the process, you 
are going to get a higher quality of life. You are going to 
have folks who--there is a certain dignity around the way they 
are receiving their care and the program is going to be far 
more efficient. I am a believer in it, I get excited about it, 
and I ask you to really consider going in that direction.
    Thank you.
    [The prepared statement of Mr. Hilferty follows:]

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    The Chairman. Thank you very much, Dan. I wonder if in this 
basketball program you have, if any of these kids are of 
sufficient talent that the owner of the Milwaukee Bucks ought 
to keep his eye on them.
    Mr. Hilferty. Well, maybe. I don't know, Senator, but I was 
going to talk to Senator Kohl. I would like to be a general 
manager someday. [Laughter.]
    The Chairman. You operate in enough States. Do you have a 
perspective on the rural question that we began with?
    Mr. Hilferty. Yes, and I would just put a different slant 
on Tony's point. I thought Tony made the key point that it is 
about having a provider network; even though the distance 
between the various providers is longer, have a provider 
network that is under a cap system that is incentivized to 
really be part of the Medicaid program.
    Then from our vantage point, much like we reach out to the 
populations that I discussed, the managed care entities have to 
have a program that overcomes the obstacles--once you have the 
provider network in place, that overcomes the obstacles to get 
people needed care. Sometimes that is transportation, sometimes 
it is the time of day that a physician or a clinic might be 
open for them to visit for care.
    I guess what I am saying is if the States focus with the 
managed care plans on setting up the network of having adequate 
funding for the clinicians and they know they are going to get 
that funding, they will be supportive of the program. Then it 
is incumbent upon the plans, with oversight by the States, to 
make sure that those members get introduced on a regular basis, 
are educated on a regular basis, and overcome the obstacles to 
access that care.
    The Chairman. Obviously, I think we have here people who 
run plans and programs that are very successful and are 
providing quality care, and also winning efficiencies and cost 
savings. But, obviously, you can't please everybody. There has 
got to be occasionally a patient who is just unhappy with an 
outcome, with a denial or whatever, and I wonder if perhaps 
Arizona can speak to that, and David and Dan. What recourse do 
your patients have if they don't like what you have done?
    Mr. Ford. There is a whole structured call-in process and a 
grievance process that we are required to provide, and there is 
a fair hearing process by the State if it were to get to that 
level. But the other thing that we do is we have data that 
allows us to look at the continuity of care. We look at bad 
outcomes and we go to the hospital and the other providers and 
work on behalf of the patients around improved care.
    But in the open system, nobody looks at that on the back 
side of that and we have committees of doctors from the 
community that look at adverse outcomes and we do remediation. 
We actually are now using this Institute of Medicine and the 
Institute of Health Care Improvements guidelines and we are 
saying this appears to be a problem with your drug 
reconciliation. Do you have a program? Here is what is going 
on. They often get back.
    We talked actually last week about is that response back 
just sort of a paper response or will we look back in 6 months 
and say you said you would do this and then we would begin 
auditing that kind of thing. We are all in favor of 
accountability. The burden of accountability is on us because 
there is no other place to get it.
    Mr. Hilferty. Senator, if you do Medicaid in one State, you 
do Medicaid in one State. I mean, each State has different ways 
of approaching it. Interestingly enough, we think as a plan 
that it is a benefit to keep a member in your plan for at least 
a year so that you can impact their health status. The flip 
side of that is some governments say, well, really, a member 
should have the right to opt out and move to another plan at 
any point.
    What I would like to suggest is there is a happy medium 
there. In the Commonwealth of Pennsylvania, the plans don't 
market. There is a benefit consultant who works with an 
incoming member and helps them decide what is the best network 
for them, what is the best plan for them, and they choose that 
plan. That has worked very well because people coming in feel 
comfortable, seem to have less complaints and are ready to 
access the care of the plan.
    On the flip side, there are folks that have the right to 
opt out of a plan and move to a competitor if they are not 
satisfied, if they exhaust all of the opportunities to really 
grieve or whatever it might be over care. So we believe that we 
can have a happy medium where we spend a lot of time up front 
educating members about what they will get from a particular 
plan and competition is good, No. 1, but No. 2, not make it so 
that a member can jump from plan to plan every month or every 3 
months or even every 6 months, but build a period of time where 
a plan can really work aggressively with that member, with that 
family to make sure they are getting the services that they 
need to get. When that happens, there seems to be less 
complaints.
    Mr. Pollack. Mr. Chairman, can I add a few things?
    The Chairman. Yes.
    Mr. Pollack. I think there are several things that are 
important. First, I think there needs to be a coordination of 
grievance systems between Medicare and Medicaid so that people 
don't fall through the cracks or have contrary systems for 
dealing with problems.
    The Chairman. There is none now?
    Mr. Pollack. It is not adequate and we need much more 
adequate coordination.
    The Chairman. Would that be done through CMS?
    Mr. Pollack. Yes.
    Second, since this is a low-income population, to the 
extent any benefits might be withdrawn, there needs to be 
continued benefits during the pendency of a grievance claim. 
This is a fundamental right. It is actually something that was, 
in a different context, ruled on by the Supreme Court in the 
1960's.
    Third, I think it is critically important to have some help 
available to people. I mentioned ombudsmen before. Some people 
call them different names, but we need some people who can be 
of assistance to an individual. Remember, when benefits are 
potentially being terminated or reduced, the person is actually 
in some significant need of health care and they themselves may 
not be in the best position to deal with the problem. So they 
need some kind of help.
    So I think those kinds of systems need to be in place, and 
then there is a matter of fundamental fairness: If there is a 
denial of certain services by a plan and you have gone through 
the internal grievance process, there needs to be, as part of 
this coordinated plan, an external system where the person 
making the decision was not involved in the original decision 
and has competence in that area of medical judgment.
    The Chairman. Did you have anything to add to that, Tony?
    Mr. Rodgers. Mr. Chairman, the process that we use starts 
with the health plan. One, they have to notify the beneficiary 
why they are denying care by sending them a letter that says 
this is a service we are not approving, et cetera. So that is 
the first place typically a beneficiary may learn about a 
denial of care, and that happens whether it is a benefit denial 
or there is a feeling that the services aren't required, et 
cetera, and that starts the process.
    The health plan is the first level that we expect the 
dialog to occur, typically with the physician and the health 
plan. If the member is still not satisfied, we review the case 
and we have a unit that does that advocacy for the member, 
validating that we agree with the health plan. But, ultimately, 
they still have the right to go to a State fair hearing, where 
there is an administrative law judge. In those cases where we 
have a policy that our plans are following that they are 
challenging, that is typically what goes to the State fair 
hearing, where they are challenging the policies of the State.
    So we do have this tiered process and what it does is it 
informs us on what the issues of our beneficiaries are. This is 
a very important part of how we actually improve our programs, 
and the best health plans are using that data to actually 
create either better networks or better understanding with 
their physicians, et cetera. We also allow the physicians to 
grieve. They can grieve a health plan, as well. So there are a 
number of ways that beneficiaries have their rights protected 
in our system.
    The Chairman. Does anyone else have a comment?
    Mr. Crowley. Just very briefly, I want to echo what Ron 
said. I think he got it right. I think it is important that 
most of what we are talking about is a sort of formal appeals 
system. For beneficiaries that often works well if they have a 
legal advocate, but we know most people don't have that. So I 
think we need to think more about ways that people can have an 
alternative without sacrificing their rights to really work 
with their doctors.
    I can't point to this as a huge success, but in the 
Medicare Modernization Act there is this new exceptions 
process. While there have been problems implementing it, one 
thing that is attractive is that it is really meant to be an 
initial first step that is less formal than a formal appeal, 
where working with your doctor you can resolve some of these 
things. Most people don't have lawyers and they are sick and so 
they don't want to deal with it, but if there is an easier way, 
we could resolve some of these without requiring five steps of 
appeals and lawyers and everything else.
    The Chairman. That may be a good model, then.
    Mr. Crowley. Potentially, or learn lessons for how to 
improve upon it.
    The Chairman. Greg, do you have a comment?
    Mr. Nycz. Well, more or less getting back to the rural 
issue, if you think about community health centers as being 
able to help work with the community to set up a clinic in a 
rural town that didn't have doctors, maybe didn't have mental 
health providers--you leverage health centers to create the 
infrastructure in that town that will help enable some of the 
managed care activities.
    I look at it as a one-two punch. Where we have workforce 
issues, community health centers have been shown to stabilize 
and or create practices. I would note that it isn't even just 
in rural areas. In some inner-city areas that have seen a mass 
exodus of private doctors, you need to go back in there and set 
up that primary care infrastructure that is central to good 
care management.
    The Chairman. Well, gentlemen, this is the first in a 
series of roundtables or square tables that I am going to do 
because I am very earnest about pursuing this as one of the 
ways to preserve Medicaid. So let me simply thank you for your 
time and your talents that you have shared with us today. We 
have taken it all down and you have certainly increased my 
understanding and I am going to do my level best to reflect 
that in creating new American law to strengthen, not weaken, 
Medicaid.
    So this not being a formal hearing, I won't adjourn it, but 
just thank you very much, and have a very good day.
    [Whereupon, at 11:30 p.m., the Roundtable was concluded.]

                                 
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