[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
THE ADMINISTRATION'S REGULATORY ACTIONS ON MEDICAID: THE EFFECTS ON
PATIENTS, DOCTORS, HOSPITALS, AND STATES
=======================================================================
HEARING
before the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
NOVEMBER 1, 2007
__________
Serial No. 110-91
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
http://www.house.gov/reform
COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
HENRY A. WAXMAN, California, Chairman
TOM LANTOS, California TOM DAVIS, Virginia
EDOLPHUS TOWNS, New York DAN BURTON, Indiana
PAUL E. KANJORSKI, Pennsylvania CHRISTOPHER SHAYS, Connecticut
CAROLYN B. MALONEY, New York JOHN M. McHUGH, New York
ELIJAH E. CUMMINGS, Maryland JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio MARK E. SOUDER, Indiana
DANNY K. DAVIS, Illinois TODD RUSSELL PLATTS, Pennsylvania
JOHN F. TIERNEY, Massachusetts CHRIS CANNON, Utah
WM. LACY CLAY, Missouri JOHN J. DUNCAN, Jr., Tennessee
DIANE E. WATSON, California MICHAEL R. TURNER, Ohio
STEPHEN F. LYNCH, Massachusetts DARRELL E. ISSA, California
BRIAN HIGGINS, New York KENNY MARCHANT, Texas
JOHN A. YARMUTH, Kentucky LYNN A. WESTMORELAND, Georgia
BRUCE L. BRALEY, Iowa PATRICK T. McHENRY, North Carolina
ELEANOR HOLMES NORTON, District of VIRGINIA FOXX, North Carolina
Columbia BRIAN P. BILBRAY, California
BETTY McCOLLUM, Minnesota BILL SALI, Idaho
JIM COOPER, Tennessee JIM JORDAN, Ohio
CHRIS VAN HOLLEN, Maryland
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
JOHN P. SARBANES, Maryland
PETER WELCH, Vermont
Phil Schiliro, Chief of Staff
Phil Barnett, Staff Director
Earley Green, Chief Clerk
David Marin, Minority Staff Director
C O N T E N T S
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Page
Hearing held on November 1, 2007................................. 1
Statement of:
Parrella, David, director, Medical Care Administration,
Department of Social Services, State of Connecticut,
Hartford, CT, and Chair, Executive Committee, National
Association of State Medicaid Directors (on behalf of the
National Association of State Medicaid Directors); Barbara
Miller (on behalf of National Council for Community
Behavioral Healthcare); Twila Costigan, program manager,
Adoption and Family Support Program, Intermountain, Helena,
MT (on behalf of the Child Welfare League of America);
Denise Herrmann, Saint Paul Public Schools, Saint Paul, MN
(on behalf of the National Association of School Nurses);
Alan Aviles, president, New York City Health and Hospitals
Corp. (on behalf of the National Association of Public
Hospitals); Sheldon Retchin, vice president for health
sciences and CEO of health system, Virginia Commonwealth
University, Richmond, VA (on behalf of the American
Association of Medical Colleges); Angela Gardner, attending
emergency physician, University of Texas Medical Branch,
Galveston, TX, and vice president, American College of
Emergency Physicians (on behalf of the American College of
Emergency Physicians); and Marjorie Kanof, Managing
Director, Health Care, Government Accountability Office.... 19
Aviles, Alan............................................. 53
Costigan, Twila.......................................... 35
Gardner, Angela.......................................... 151
Herrmann, Denise......................................... 46
Kanof, Marjorie.......................................... 159
Miller, Barbara.......................................... 29
Parrella, David.......................................... 19
Retchin, Sheldon......................................... 136
Smith, Dennis, Director, Center on Medicaid and State
Operations, Centers for Medicare and Medicaid Services,
Department of Health and Human Services.................... 195
Letters, statements, etc., submitted for the record by:
Aviles, Alan, president, New York City Health and Hospitals
Corp. (on behalf of the National Association of Public
Hospitals), prepared statement of.......................... 55
Braley, Hon. Bruce L., a Representative in Congress from the
State of Iowa, prepared statement of....................... 242
Costigan, Twila, program manager, Adoption and Family Support
Program, Intermountain, Helena, MT (on behalf of the Child
Welfare League of America), prepared statement of.......... 37
Davis, Hon. Danny K., a Representative in Congress from the
State of Illinois, prepared statement of................... 232
Davis, Hon. Tom, a Representative in Congress from the State
of Virginia, prepared statement of......................... 15
Gardner, Angela, attending emergency physician, University of
Texas Medical Branch, Galveston, TX, and vice president,
American College of Emergency Physicians (on behalf of the
American College of Emergency Physicians):
Letter dated December 12, 2007........................... 181
Prepared statement of.................................... 153
Herrmann, Denise, Saint Paul Public Schools, Saint Paul, MN
(on behalf of the National Association of School Nurses),
prepared statement of...................................... 48
Kanof, Marjorie, Managing Director, Health Care, Government
Accountability Office, prepared statement of............... 161
Miller, Barbara, (on behalf of National Council for Community
Behavioral Healthcare), prepared statement of.............. 31
Parrella, David, director, Medical Care Administration,
Department of Social Services, State of Connecticut,
Hartford, CT, and Chair, Executive Committee, National
Association of State Medicaid Directors (on behalf of the
National Association of State Medicaid Directors), prepared
statement of............................................... 23
Retchin, Sheldon, vice president for health sciences and CEO
of health system, Virginia Commonwealth University,
Richmond, VA (on behalf of the American Association of
Medical Colleges), prepared statement of................... 139
Smith, Dennis, Director, Center on Medicaid and State
Operations, Centers for Medicare and Medicaid Services,
Department of Health and Human Services, prepared statement
of......................................................... 198
Towns, Hon. Edolphus, a Representative in Congress from the
State of New York, prepared statement of................... 229
Watson, Hon. Diane E., a Representative in Congress from the
State of California, prepared statement of................. 238
Waxman, Chairman Henry A., a Representative in Congress from
the State of California, prepared statement of............. 4
THE ADMINISTRATION'S REGULATORY ACTIONS ON MEDICAID: THE EFFECTS ON
PATIENTS, DOCTORS, HOSPITALS, AND STATES
----------
THURSDAY, NOVEMBER 1, 2007
House of Representatives,
Committee on Oversight and Government Reform,
Washington, DC.
The committee met, pursuant to notice, at 10:05 a.m. in
room 2157, Rayburn House Office Building, Hon. Henry A. Waxman
(chairman of the committee) presiding.
Present: Representatives Waxman, Towns, Cummings, Kucinich,
Davis of Illinois, Watson, Higgins, Braley, Cooper, Van Hollen,
Hodes, Murphy, Sarbanes, Welch, Davis of Virginia, Shays, Mica,
Platts, Foxx, Sali, and Jordan.
Also present: Representative Engel.
Staff present: Phil Barnett, staff director and chief
counsel; Kristin Amerling, general counsel; Karen Nelson,
health policy director; Karen Lightfoot, communications
director and senior policy advisor; Andy Schneider, chief
health counsel; Teresa Coufal, deputy clerk; Caren Auchman and
Ella Hoffman, press assistants; Kerry Gutknecht and Bret
Schothorst, staff assistants; Art Kellerman, fellow; Tim
Westmoreland, consultant; Jennifer Safavian, minority chief
counsel for oversight and investigations; Kristina Husar,
minority counsel; Patrick Lyden, minority parliamentarian and
members services coordinator; and Benjamin Chance, minority
clerk.
Chairman Waxman. The meeting of the committee will please
come to order.
Throughout this year our committee has held a series of
hearings on making Government work again. We have focused on
programs or agencies that once were effective but are now
broken or dysfunctional. Today's hearing examines one of our
Government's most important agencies, the Centers for Medicare
and Medicaid Services at the Department of Health and Human
Services. Called CMS for short, the agency is responsible for
administering the country's two largest health insurance
programs, Medicare and Medicaid, which cover nearly 100 million
Americans at a cost of over $600 billion. As the largest single
purchaser of health care in the country, CMS has enormous power
to do good or do harm.
Medicaid is funded jointly by the Federal Government and
the States. It covers more than 60 million low-income
Americans. Medicaid is the largest insurer of infants and
children in the United States, covering more than 28 million
kids. It is also the largest insurer of people with
disabilities, covering almost 10 million people. Medicaid is
the single largest source of funding for our Nation's public
teaching hospitals, children's hospitals, and community health
centers and public clinics--programs that benefit not only the
poor, but everyone in their communities.
Unfortunately, little notice has been paid to a series of
Medicaid regulations proposed by the administration over the
last 10 months, but these proposals would have enormous
impacts. They are, in my opinion, a thinly disguised assault on
the health care safety net. If implemented, they would cause
major disruptions to State Medicaid programs and the people and
institutions that depend on them.
In total, the proposals would shift at least $11 billion in
cost to State and local governments, the largest Medicaid
regulatory cost shift in memory. Since these are Federal
matching funds, the real cuts in programs at the local level
could be at least twice this amount. This could force States to
make a difficult choice: either raise taxes or cut vital
services.
This morning our committee will examine six rules the Bush
administration has proposed. Three of these proposed rules
target some of our Nation's most vulnerable citizens by cutting
funding and services to disabled children, disabled adults, and
elementary school children. The other three would cut billions
of dollars in Federal funding from some of our Nation's most
vital health care institutions: teaching hospitals, safety net
providers, and public hospitals that support trauma centers,
burn units, and other vital but unprofitable programs that
benefit everyone in the community, insured and uninsured,
alike.
What is almost as troubling as the impact of these rules is
the manner in which they are being pursued. Some of these
proposals have been proposed in the past, but when they were
proposed, 300 Members of the House and 55 Members of the Senate
signed letters to Secretary Leavitt opposing the efforts.
Undeterred, CMS pressed ahead and proposed these
regulations. During the 90 day comment period on the proposed
rule, CMS received more than 400 negative comments. The
bipartisan National Governors Association, bipartisan National
Council of State Legislatures, bipartisan National Association
of Counties, numerous State and county governments, and a large
number of hospital organizations, professional associations,
and consumer groups all raised concerns. Not one person wrote
in support of the rule.
In response, Congress imposed a 1-year moratorium on CMS'
authority to implement the rule. Despite all this, CMS is still
moving ahead.
This rule that I am referring to is just one example. All
of the proposed regulations are made up out of whole cloth by
CMS. They are reinterpreting laws, some of which have not been
changed in 40 years. These changes, in my opinion, are not
anchored in statute. They do not have the support of the
Congress, and they deserve no deference from the courts.
These actions and the subsequent issuance of five more
proposals that shift an additional $7 billion in costs to the
States bring us to today's hearing. The first panel will
describe the effects of these rules on individual Americans,
their community providers, and the States. Dennis Smith, the
official at CMS who wrote these regulations, will join us on
the second panel.
I think that we need to look at what is happening very,
very carefully at CMS, and I hope that they will look very
carefully at the hearing record today, because, let's be clear,
these regulations are not about program integrity. If they were
refining guidance and improving accountability, that would be
one thing; but since they are prohibiting services that have
been successful for decades in order to cut funding that
Congress has specifically preserved, this is not a careful
surgery on Medicaid; this is a reckless amputation.
I hope CMS will listen carefully to what our witnesses and
the members of the committee have to say about their proposals,
and I hope they will go back to the drawing board. If there
truly are fiscal integrity concerns that need to be addressed
through new rules, this committee would work with CMS to
accomplish that goal. There is no other committee that has been
as active in trying to make sure that we have integrity in our
fiscal management than this committee has been.
I look forward to the witnesses, and I hope that this
hearing will have an impact.
I ask unanimous consent that my complete opening statement
be part of the record in its entirety. Without objection, that
will be the order.
[The prepared statement of Chairman Henry A. Waxman
follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Waxman. Mr. Davis.
Mr. Davis of Virginia. Thank you. Mr. Chairman, I want to
thank the chairman for holding today's hearing to review six
proposed Medicaid regulations.
I hope these hearings will examine the justification of the
proposed changes and their potential impacts not only on the
individual beneficiaries, but on the financial sovereignty of
the program, as a whole. Preserving the integrity of Medicaid
is of great importance to this committee, and most importantly
to millions that it serves.
Medicaid is one of the fastest-growing parts of the Federal
budget. It is one of the fastest-growing parts of State
budgets, as well. But it is also the safety net provider within
the health system offering care to our most vulnerable
citizens.
In 2006 over 63 million individuals relied on Medicaid
program, including children, pregnant women, individuals with
disabilities, and the elderly. Given the important role
Medicaid plays in the health care system, Congress, States, and
the Centers for Medicare and Medicaid Services, CMS, need to be
vigilant stewards of Medicaid's financial resources.
Medicaid surpassed Medicare in 2002 to become the largest
Government health care program. In 2005 the cost of providing
this care exceeded $300 billion, and it is projected to double
in a decade. Such rapid growth strains Federal and State
budgets. Fraud and abuse, along with questionable financial
arrangements, can contribute to this growth and possibly
jeopardize legitimate Medicaid services.
Medicaid is jointly financed by State and Federal
Governments. The Federal share of funding is between 50 and 77
percent. While Federal participation is necessary and
appropriate, this financing arrangement can incentivize States
and providers to shift the cost of non-Medicaid services to the
Medicaid program in order to obtain additional Federal funds.
While this is an understandable motivation, especially in
light of the pressures on State budgets, it does put additional
strain on the Medicaid program and it should be evaluated.
For these reasons and others, the GAO has placed Medicaid
on its high-risk list. The GAO found that inadequate fiscal
oversight has led to increased and unnecessary Federal
spending. Specifically, GAO has pointed to schemes that
leverage Federal funds improperly, and inappropriate billing of
providers serving program beneficiaries as factors in this
designation.
For this reason, I am pleased that Dr. Marjorie Kanof, the
Managing Director of Health Care at GAO, is here to speak to
these overriding risk factors and fraud and abuse concerns
within the Medicaid system.
In the last year, CMS has issued a number of proposed
Medicaid regulations. My opening statement doesn't afford me
sufficient time to comment on all six. I look forward to an
informative discussion that will hopefully lead to a more clear
understanding of the genesis of these regulations and their
impact on Medicaid beneficiaries, States, and providers.
I do understand that some of these regulations were, in
part, prompted by CMS' concern about the diversion or
inappropriate use of Medicaid funds that may not have violated
the letter of the law or regulations but are inconsistent with
the spirit of the program. For example, as detailed in the
proposed rehabilitative services regulation, Medicaid funds
have been used to pay for services in wilderness camps in which
juveniles are involuntarily confined. It would seem such
programs are primarily within the domain of the Justice System
and would be provided by the State, regardless of the
juvenile's Medicaid eligibility. As such, juvenile detention
wilderness camps may be better funded as part of State justice
system as opposed to Medicaid health services.
As with any effort to improve fiscal integrity of the
Medicaid program and address potentially inappropriate uses of
scarce Medicare sources, a delicate balance must be achieved to
ensure that legitimate needs and services of beneficiaries are
not, in fact, harmed.
I anticipate that a good portion of today's hearing will
focus on whether or not CMS has struck the right balance in
these proposed regulations, and I look forward to witnesses'
feedback on this.
With that in mind, I want to thank today's witnesses for
participating in this hearing, and I want to thank the chairman
for calling it.
[The prepared statement of Hon. Tom Davis follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Waxman. Thank you, Mr. Davis.
Without objection, since we have eight members on the first
panel, I would like to proceed without any further opening
statements.
Let me ask unanimous consent that Congressman Elliott
Engel, who is not a member of our committee, may wish to join
us, and I would ask unanimous consent he be permitted to
participate in this hearing.
Mr. Davis of Virginia. No objection.
Chairman Waxman. That will be the order.
Now we are going to receive testimony from the witnesses on
our first panel.
Mr. David Parrella is the director of Medical Care
Administration for the Connecticut Department of Social
Services. He is testifying on behalf of the National
Association of State Medicaid Directors.
Ms. Barbara Miller is a resident of Rockville, MD. Ms.
Miller is a former Medicaid beneficiary who benefited from
rehabilitation services, and she is testifying on behalf of the
National Council for Community Behavioral Health Care.
Ms. Twila Costigan is program manager for the Adoption and
Family Support Program at Intermountain in Helena, MT.
Intermountain is a nonprofit organization that provides
services to children under severe emotional distress. She is
testifying on behalf of the Child Welfare League of America.
Ms. Denise Herrmann is a school nurse with St. Paul public
schools in St. Paul, MN. She regularly works with the Medicaid
children in the St. Paul school system. She is testifying on
behalf of the National Association of School Nurses.
Mr. Alan Aviles is president of the New York City Health
and Hospitals Corp. He is testifying on behalf of the National
Association of Public Hospitals.
Dr. Sheldon Retchin is vice president for health services
at the Virginia Commonwealth University Medical College in
Richmond, VA. He is testifying on behalf of the American
Association of Medical Colleges.
Dr. Angela Gardner is a practicing emergency physician at
the University of Texas Medical Branch in Galveston, TX, and
she is testifying on behalf of the American College of
Emergency Physicians.
Last but not least, Dr. Marjorie Kanof is Managing Director
of Health Care for the Government Accountability Office in
Washington, DC. She is testifying on behalf of the GAO.
I welcome all of you. You are, of course, testifying from
your own personal knowledge and experiences, as well as on
behalf of other organizations who share your point of view. We
thank all of you for being here.
It has been the practice of this committee that all
witnesses that testify before us are asked to be put under
oath, and so I would like to ask each if you if you will to
please rise and raise your right hands.
[Witnesses sworn.]
Chairman Waxman. The record will indicate that each of the
witnesses answered in the affirmative.
We have prepared statements from you, and those statements
will be made part of the record in their entirety. What we
would like to ask each of you to do is to limit the oral
presentation to no more than 5 minutes. You will have a clock
in the center. It will be green. When there is 1 minute left,
it will turn yellow. And then when the 5-minutes are up, it
will turn red. We would like you at that point to conclude your
testimony.
I know you have a lot to say, and it is difficult to say in
such a short period of time, but it is the only way we can hear
from everybody and get questions and answers. But the whole
statement will be in the record expressing all of your views,
which is what I did in my opening statement, because I have a
lot of strong views on this subject which I had in the opening
statement, and I want it to be in the record.
Mr. Parrella.
STATEMENTS OF DAVID PARRELLA, DIRECTOR, MEDICAL CARE
ADMINISTRATION, DEPARTMENT OF SOCIAL SERVICES, STATE OF
CONNECTICUT, HARTFORD, CT, AND CHAIR, EXECUTIVE COMMITTEE,
NATIONAL ASSOCIATION OF STATE MEDICAID DIRECTORS (ON BEHALF OF
THE NATIONAL ASSOCIATION OF STATE MEDICAID DIRECTORS); BARBARA
MILLER (ON BEHALF OF NATIONAL COUNCIL FOR COMMUNITY BEHAVIORAL
HEALTHCARE); TWILA COSTIGAN, PROGRAM MANAGER, ADOPTION AND
FAMILY SUPPORT PROGRAM, INTERMOUNTAIN, HELENA, MT (ON BEHALF OF
THE CHILD WELFARE LEAGUE OF AMERICA); DENISE HERRMANN, SAINT
PAUL PUBLIC SCHOOLS, SAINT PAUL, MN (ON BEHALF OF THE NATIONAL
ASSOCIATION OF SCHOOL NURSES); ALAN AVILES, PRESIDENT, NEW YORK
CITY HEALTH AND HOSPITALS CORP. (ON BEHALF OF THE NATIONAL
ASSOCIATION OF PUBLIC HOSPITALS); SHELDON RETCHIN, VICE
PRESIDENT FOR HEALTH SCIENCES AND CEO OF HEALTH SYSTEM,
VIRGINIA COMMONWEALTH UNIVERSITY, RICHMOND, VA (ON BEHALF OF
THE AMERICAN ASSOCIATION OF MEDICAL COLLEGES); ANGELA GARDNER,
ATTENDING EMERGENCY PHYSICIAN, UNIVERSITY OF TEXAS MEDICAL
BRANCH, GALVESTON, TX, AND VICE PRESIDENT, AMERICAN COLLEGE OF
EMERGENCY PHYSICIANS (ON BEHALF OF THE AMERICAN COLLEGE OF
EMERGENCY PHYSICIANS); AND MARJORIE KANOF, MANAGING DIRECTOR,
HEALTH CARE, GOVERNMENT ACCOUNTABILITY OFFICE
STATEMENT OF DAVID PARRELLA
Mr. Parrella. Thank you, Chairman Waxman. Good morning
Congressman Davis, members of the committee. My name is David
Parrella. For the past 10 years I have had the privilege of
serving as Connecticut's director of Medical Care
Administration. I am currently the chairman of the National
Association of State Medicaid Directors, an affiliate of the
American Public Human Services Association.
Thank you for the opportunity to speak briefly with you
today about the recent spate of regulations promulgated by my
colleagues at the Federal Centers for Medicare and Medicaid
Services, known as CMS.
Let me be clear that, regardless of our differences on
these issues, I do regard Dennis Smith and his staff at CMS as
colleagues, and I share their commitment to be good custodians
of the public dollars that we spend on health care.
Let me begin by summarizing the broad mission of the
Medicaid program, which is a State and Federal partnership to
provide health care to the neediest and most vulnerable
populations in our country.
Medicaid currently provides comprehensive coverage to over
63 million Americans. It is the single largest payer for the
long-term care costs that are perhaps the greatest economic
challenge that we face in health care as members of my own
generation approach retirement.
But Medicaid is more than a long-term care program. It is
generally the largest health care program, if not the largest
program, period, in most State budgets. It provides support and
services for millions of Americans with a wide range of
disabilities that enables them to live independent lives in the
community. It is the single largest payer of mental health
services, the largest purchaser in the Nation of
pharmaceuticals, and the source of health insurance coverage
for most of the Nation's working poor.
As you debate the future of the State children's health
insurance program, please remember that Medicaid is the largest
source of care for children in low-income families and is the
largest payer in most States for maternity and prenatal care.
Across this immense landscape of health care delivery that
is literally from cradle to grave, Medicaid programs have been
encouraged, and in many cases mandated, by Congress to work in
partnership with other State and Federal programs that touch
upon the same populations. Teaching hospitals and substance
abuse programs, programs for children with special education
requirements and developmental delays, programs for children in
the child welfare system, residential placements for people
with developmental disabilities, community-based services for
persons with mental illness and HIV, child immunization
programs and outreach programs to schools to reach DDN-entitled
children. All these programs have benefited from collaboration
with Medicaid programs around the country as a source of
Federal matching funds to help States meet the mandates placed
upon them by Federal laws regarding the early and periodic
screening, diagnosis, and treatment program--known as EPSDT--
IDEA, the Americans with Disabilities Act, etc.
We have done so economically. National budget figures show
a very low rate of growth of 2.9 percent in the Medicaid
program in fiscal year 2007. Providers will tell you that the
rates that we pay for health care services are far from
exorbitant. Furthermore, we manage the program in an indirect
cost rate that would be the envy of any CEO in the private
market.
So, despite the occasional messiness that ensues in a
program of this size, we are not a runaway train on spending.
Yet, in recent months, we have experienced a stealthy release
of regulation after regulation seeking to reduce the scope and
breadth of the Medicaid program. We have seen regulations that
would limit facilities that could be reimbursed as public
facilities, that would eliminate payment for graduate medical
education, regulations that would impose burdensome new
accounting measures on the funding for community-based
services, and limit the ability to partner with the schools,
where millions of Medicaid-eligible children can be enrolled
and served.
CMS is seeking to place new limits on how States are able
to raise their required State's share for the Federal match,
and perhaps most disturbingly, CMS is attempting to redefine
what services can be covered under Medicaid as part of the
rehabilitation State plan option, likely the single greatest
vehicle for creativity and the design of programs for persons
with life-long needs.
Now, CMS officials will tell you that they do not seek to
harm the Medicaid program, and I am sure they are sincere in
this belief. Their rationale is based largely on a two-part
premise that allowing Federal matching funds under Medicaid for
these purposes is inevitably too tempting for the States and
will lead them to create arcane schemes to draw down excess
Federal revenues for services that were traditionally a State
responsibility.
Let me say here, as someone who has worked in Medicaid for
the past 20 years, that they have a legitimate concern
regarding program integrity, especially when times are tight in
State budgets. But the other part of the premise is simply
wrong. They maintain that the elimination of $20 billion in
Federal Medicaid funding for Medicaid administration activities
in schools or rehabilitation services for children with
developmental delays or graduate medical education is
appropriate because these activities were never intended to be
part of Medicaid, despite decades of approved State plan
amendments across the Nation.
CMS' argument continues that ``If States want to fund these
activities, they can simply appropriate more money. Special
education is purely the responsibility of the Education
Department. Services for persons with mental illness should be
under the purview of SAMHSA, and disease prevention under
Public Health, and medical education is limited to funds
appropriated in the budgets of the State teaching hospitals.''
However, there is no new appropriation on the horizon to
replace Medicaid funding for these services through Federal IDA
legislation or elsewhere, and Medicaid is simply reduced in the
scope of its activities.
It is surprising that this philosophy should come at a time
when most experts in the field would say that the Nation's
health care system is in a state of crisis. The emergency rooms
of our teaching hospitals are bursting at the seams as they try
to provide both emergency and non-emergency care to 47 million
Americans who have no health insurance.
A greater awareness of autism and spectrum disorders and
mental illness among very young children has placed a strain on
the entire mental health system. Persons with disabilities are
struggling to find more creative alternatives to live
independent and productive lives. A retrenchment by Medicaid
will only make these struggles more difficult for millions of
Americans at a time when no comprehensive reform of the health
care system is even on the horizon.
We are apparently unable to agree on what income levels
should qualify a child to receive assistance with health care
under S-CHIP, much less comprehensive health reform.
As Chair of the National Association of State Medicaid
Directors, I applaud your efforts to review some of the changes
that CMS officials have placed. I further appeal to you to
continue your efforts to expand the moratoriums that you have
already placed on some of these regulatory initiatives. It is
the belief outstanding of the National Association of State
Medicaid Directors that these issues need to be part of a
broader debate on the future of health care here in these
chambers. On many of these issues you did debate them during
the discussion that led to the Deficit Reduction Act and chose
not to act.
Please do not allow CMS to further limit the ability of the
States to derive their share of Medicaid from taxes imposed on
medical providers.
Please do not allow CMS to eliminate the option for States
to use Medicaid funding to pay for graduate medical education.
Please do not permit CMS officials to jeopardize the future
of children with developmental disabilities by subjecting the
services they receive to an artificial distinction between
having lost their cognitive abilities or never having had them
at all.
Please do not force persons with disabilities back into
institutional settings because States cannot match cost report
standards for the community-based services they receive to a
Medicare institutional standard.
Please do not cutoff information gathered by school
personnel from helping States to determine eligibility for
their programs.
Please do not dictate to States what facilities can be
designated units of government for reimbursement purposes.
And Please do not take hospital reimbursement back to the
future by mandating retro cost-based methodologies.
[The prepared statement of Mr. Parrella follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Waxman. Thank you, Mr. Parrella. I gave you a
little extra time.
Mr. Parrella. Sorry, Mr. Chairman.
Chairman Waxman. I appreciate that testimony on behalf of
all the States that are running the program actually at the
State level, which is, of course, a Federal and State program.
Thank you very much.
Ms. Miller, we would like to hear from you.
STATEMENT OF BARBARA MILLER
Ms. Miller. Chairman Waxman and distinguished members of
the committee, thank you for the opportunity to testify this
morning on behalf of the National Council for Community
Behavioral Health Care. My name is Barbara Miller.
Today I am on the road to recovery from a serious mental
illness. I am a program assistant at the Hearing Loss
Association of America. Before starting that job, I did a lot
of volunteer work for senior citizens and people with physical
disabilities. I am also deaconess in the Word of Hope
Fellowship Church. At the church I volunteer as assistant
director of the youth department. There is a teenage girl in my
apartment building who needs a steady, sensible adult
influence, and I am trying to provide that to her as a mentor.
But my future didn't always look so bright. I was first
diagnosed with bipolar disorder in the early 1970's. I lived in
the Springfield State Hospital in Sykesville, MD, for 2\1/2\
years. Chairman Waxman, it was a terrible experience. The
doctors there struggled to give me a proper diagnosis, and I
have to tell you the truth: it was like living in a warehouse.
That is what happened to most people with serious mental
illnesses in the 1960's and the 1970's: they were warehoused in
State mental hospitals.
However, with the help of treatment, rehabilitation, and
housing provided by Threshold Services in Montgomery County,
MD, I got where I am today.
When I first started participating in rehabilitation
services in 1990, I received Assertive Community Treatment at a
house where I lived with several other people. Staff would come
out regularly to check on me, measure progress on my treatment
plan, and see how I was responding to medications. They always
provided training about living with mental illness to the
pastor and his wife who ran the house.
Some time ago, I moved to the Halpine Apartments. It was a
huge step for me because it was the first time I had lived on
you own for many, many years.
Threshold Services provided counseling to me during the
transition and offered groups where people could support each
other and not become isolated.
Threshold Services runs a residential rehabilitation
program and offsite psychiatric rehabilitation teams which
serve a combined total of 250 people. These rehabilitation
programs are important because they prepare people with serious
and persistent mental disorders to go back to work and cope
with life in the community. Threshold also helps 40 people
choose, get, and keep jobs where they work side by side with
non-disabled individuals through their supportive employment
initiative, in partnership with St. Luke's House. This is
tremendously impressive, because the nationwide unemployment
rate among people with severe mental illnesses exceeds 80
percent.
Finally, Threshold has a psycho-educational day program
that aims to develop community living skills and improve
interpersonal relationships.
With the help of treatment, rehabilitation, and housing
provided by Threshold services, I got from where I was to where
I am, and now Threshold services helps me maintain my success.
So now I give back as a member of the board of directors. God
and the members of my church are with me all the way. It takes
a lot of faith in God to persevere. Now I give back as a
deaconess and assistant youth director in the church.
I was supported by public assistance; now I give back by
working and paying taxes.
Mr. Chairman, I am told by the National Council that almost
every service that you have heard me describe during this
testimony--assertive community treatment, psychiatric
rehabilitation, and psycho-educational day programs--are in
jeopardy because of a new rehabilitation option rule. In
addition to medication and therapy, it is worth noting that
these rehabilitation services permit people like me to live in
the community and make a contribution to the community. If the
Federal Government withdraws financing from them, many more
people with serious mental disorders will end up in emergency
rooms, inpatient hospitals, nursing homes, or in the prison
system.
I want to conclude this testimony with a simple plea:
please don't send people with mental illnesses back to places
like Springfield State Hospital. We have fought too hard and we
have come too far to go back now.
[The prepared statement of Ms. Miller follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Waxman. Thank you very much, Ms. Miller, for that
testimony.
Ms. Costigan.
STATEMENT OF TWILA COSTIGAN
Ms. Costigan. Good morning, Mr. Chairman, members of the
committee. My name is Twila Costigan. I live in Helena, MT, and
I just want to make it clear that we do have plumbing in
Montana. Even though we live way out there in the west, we do
have it.
I am here on behalf of the Child Welfare League of America,
the Montana Children's Initiative--which is a group of
providers across the State of Montana--and Intermountain
Children's Home.
Intermountain Children's Home is a magical place where we
seek to restore hope to children and their families. We deal
only with children with serious emotional disturbance.
I am going to talk to you a little bit about how kids get
to be SED, or seriously emotionally disturbed. I want to talk
to you about two kids. One's name is Johnny, the other's name
is Susie.
Johnny is a young infant. As we all know, the first 3 years
is when your brain is going crazy up there wiring, making you
who you are going to be, giving you the skills that you will
need to be successful in the community.
Johnny lays in his crib and he cries because he needs his
diaper changed, because he is hungry, because he is just not
comfortable with where his mom is, or his caregiver is.
Somebody comes to Johnny. Somebody picks Johnny up, and
somebody looks at Johnny and says, you are beautiful. You are
my son. You belong. I love you.
I want to talk about Susie next. Susie cries because she is
hungry or she needs her diaper changed or she's just not
comfortable with where people are. She doesn't feel safe. For
Susie, people don't come often enough. People don't pick her up
and look in her eyes and talk to her and tell her that she is
beautiful and that she is loved and that she belongs. Susie
will probably some day be a seriously emotionally disturbed
child, removed from her birth home, in the custody of the
State, placed in foster care homes, maybe more than one. The
average placement is three.
For Susie and for Johnny and for each and every one of us,
we are born with a drive to have relationships with other
people. It is what we are here for.
After a while, kids like Susie quit crying. Nobody is
taking care of them, and they are not going to let anybody into
their world. These are the kids who are most severely
disfigured by adults in their life. Susie is driven to attach,
to connect with this other human being. For our seriously
emotionally disturbed kids, most of the time that adult that
they are driven to attach to is the one who provides the trauma
that leads to the serious emotional disturbance.
In Montana we have a continuum of care. We provide services
in the home, in the birth home, to try to keep kids in the
home, which is always the best option. We have short-term
foster care. Some of those kids are placed in adoptive care.
The seriously emotionally disturbed children are a very small
percentage of the kids who are in foster care. Most of those
kids either go back to their birth home--about 77 percent in
Montana--or a relative, or they are returned to their other
parent. A small percentage of them are adopted.
For our program, the rehabilitative services allow us to
help these kids to bring hope into their lives, to provide in-
home services, to help their parents learn how to deal with
them. Our continuum of care is the preservation in the
beginning, in the birth home, foster care, therapeutic foster
care, therapeutic group home care, residential treatment. The
rehab services are a huge piece of the funding of therapeutic
foster care and therapeutic group homes.
It is really important for these kids to have some hope,
and so I ask you, as you deliberate, as you think about this,
think about Susie, who cried and cried and cried and nobody
came to help her. Keep the rehab services intact and allow
places like Intermountain and other wonderful places across the
Nation to provide hope to these children who are our most
vulnerable citizens and dependent on us as adults.
Thank you.
[The prepared statement of Ms. Costigan follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Waxman. Thank you very much, Ms. Costigan.
Ms. Herrmann.
STATEMENT OF DENISE HERRMANN
Ms. Herrmann. Mr. Chairman, Mr. Davis, and members of the
committee, my name is Denise Herrmann and I am a school nurse
from St. Paul, MN. I am privileged to be here today
representing the National Association of School Nurses on this
critical issue of Medicaid funding regulations.
I commend the committee for bringing attention to the fact
that the Centers for Medicare and Medicaid Services have been
issuing proposed rules that, if finalized, will negatively
impact the lives of school children and the practice of school
nursing.
Through my testimony I hope I can explain how school nurses
are involved with Medicaid administrative claiming in the areas
of eligibility, enrollment, and referrals, and perhaps the best
way to do this is to tell you the stories of school nurses,
children, and families from across the United States.
Healthy children learn better. School nurses are doing
everything they can within Medicaid regulations to enroll
eligible children and make appropriate medical referrals. How
do we work with Medicaid eligibility? Parents routinely ask
school nurses, Where do I go to begin this process of applying
for Medicaid? How do I know my child's eligible? How do I
enroll?
Our school nurses located in Chairman Waxman's District
tell us that in this past month 18 families have gotten medical
assistance through the case management and case work of school
nurses. This is an appropriate use of Medicaid claiming
dollars. They are helping children access much-needed medical
and dental care and are keeping them out of expensive and time-
consuming emergency health care facilities.
Regarding enrollment, here is a scenario that happens
regularly in my district. I call a mother and I say, your child
is in my office. This is the second time today. Their asthma is
out of control. They are coughing. They are wheezing, and their
emergency medication doesn't seem to be working.
I ask the mother, are they taking their regular controller
medication that prevents asthma attacks? No. We stopped a month
ago. We lost our health insurance and it costs $120 to get that
medication this month. I was hoping he would get by without.
And can you keep him in school, because I can't afford to miss
work to come and get him.
I remind her that her son was hospitalized a year ago
because he hadn't been on his controller medications and I make
a promise then to help her find health care for her child and
get in one of the State programs.
Health needs and problems are not something children leave
at home. They come to school for 6 to 8 hours a day with their
health needs and their problems. Parents feel comfortable and
they trust the school nurse. It is the school nurse who is
often the child's first and only access into that health care
system. If society doesn't want our children to be left behind,
then we need to be there to help them to be healthy, stay in
school, and achieve academic success.
Here is a typical referral example for a little girl I will
call Amanda. She is a second grader and has type I diabetes and
she needs insulin injections four to six times a day and has to
test her blood sugar six to eight times. After being gone 6
months, she came back to our school district without any health
insurance. Her diabetes is out of control. The mom had no
supplies to test her blood sugar, and only enough insulin to
last a week, and no money to buy any more.
It was the school nurse who managed Amanda's care and
worked closely with a local clinic to obtain insulin supplies,
insulin samples, syringes, test strips so that diabetes could
be brought under control. These actions prevented Amanda from
being hospitalized over the next 5 months until she was
eventually covered by Medicaid.
Members of this committee, I know you must have to deal
with lots of tedious and faceless numbers and regulations
regarding this issue. I want to put one more face on this. True
story, a little girl I will call Ann. Her dad came to enroll
her in our school district and she had a heart condition, and
the nurse began the paperwork to get her enrolled in Medicaid,
but in the meantime had to find a cardiologist who would see
her and give her the medication she needed. Members, it is very
hard to find a cardiologist who will take care of a kid without
health insurance.
I am happy to report that Ann is healthy and doing well
today, but without the school nurse's persistence and
intervention this family would have had to pursue much more
expensive health care, such as a hospitalization or an
emergency room visit for a condition that was treated by
outpatient care.
In addition, the process for this successful outcome would
not have happened if the proposed rule to eliminate Medicaid
administrative claiming by schools was in place.
From these examples, I hope you will understand why our
association is in disagreement with the CMS position that
school-based administrative activities performed by school
nurses fail to meet the statutory test of being necessary for
the proper and efficient administration of a State plan.
According to the Kaiser Commission, children represent half
of all Medicaid enrollees, but only account for 17 percent of
total program spending. Therefore, children are by no means
draining the fund.
On behalf of the National Association of School Nurses, I
implore this committee to do whatever they can to let CMS know
the harm that would occur by changing certain Medicaid
regulations for administration claiming. It is painfully
obvious to school nurses, as we work in these public systems,
that by eliminating the Federal financial participation for
school-based administrative claiming, the health needs of
innocent children will go unmet and preventable consequences
will be long-lasting for families and society.
Thank you. I appreciate this opportunity to testify.
[The prepared statement of Ms. Herrmann follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Waxman. Thank you very much for your testimony.
Mr. Van Hollen, I know you tried to get here in time to
hear Ms. Miller's testimony. Do you want to say anything at
this time?
Mr. Van Hollen. Thank you, Mr. Chairman. I apologize for
being late. I had a prior commitment, but I did also want to
welcome my constituent, Barbara Miller. Thank you for your
testimony. I had a chance to read your testimony, and I am so
pleased you could be here to tell your story as we make these
important decisions.
I also want to thank Threshold Services for all that they
do in our community. I see Craig Nowel, the executive director,
and I want to welcome him and thank them for all the
rehabilitation services they provided and allow people like you
to be able to tell your story here today. Thank you for all
that you have done to share with us today.
Chairman Waxman. Thank you, Mr. Van Hollen.
Mr. Aviles.
STATEMENT OF ALAN AVILES
Mr. Aviles. Good morning, Mr. Chairman and members of the
committee. I am Alan Aviles, president of HHC, the New York
City Health and Hospitals Corp. I am pleased to have this
opportunity to testify this morning on behalf of NAPH, the
National Association of Public Hospitals and Health Systems.
NAPH is deeply concerned about the severe adverse impact of
all of the regulations you are reviewing today. I will focus my
attention this morning primarily on the Medicaid cost limit
regulation, which is subject to a congressionally adapted 1
year moratorium until May 2008. If that regulation is permitted
to go into effect, it has the potential to devastate essential
safety net hospitals and health systems in many parts of the
country.
In addition to the Medicaid cost limit regulation, HHC and
other NAPH members will be severely impacted by the proposed
CMS rule affecting graduate medical education and a proposed
Medicaid outpatient payment regulation that CMS recently
published.
Let me begin by briefly describing my own organization. HHC
is the largest municipal health care system in the country. We
provide health care to 1.3 million New Yorkers every year.
Nearly 400,000 have no health insurance. We operate 11 acute
care hospitals, 4 skilled nursing facilities, 6 large
diagnostic and treatment centers, more than 80 community health
centers, and a home health program.
More than 60 percent of our budget comes from Medicaid.
HHC's facilities provide nearly 20 percent of all general
hospital discharges and 40 percent of all inpatient and
hospital-based outpatient mental health services in New York
City. One-third of New York City's emergency room visits occur
in HHC hospitals, and we provide 5 million outpatient visits
every year.
My submitted written testimony describes the situation of
other NAPH member hospitals nationally and also details
billions of dollars in potential Medicaid cuts facing those
hospitals as a result of these regulations.
Let me briefly touch upon the potential impact of those
cuts on the vulnerable patient populations and communities we
serve.
While it is not always possible to predict with precision
which services will be reduced or eliminated, I can give you a
few examples of decisions that might be required if public
hospitals are faced with Medicaid cuts of this magnitude.
We believe the impact in New York of the reduced costs and
limit regulations would be upwards of $200 million per year.
Faced with cuts of that magnitude, we would have to dismantle
significant components of our ambulatory care system and scale
down our emergency departments. These Medicaid funds help to
support our extensive primary care network that prioritizes
prevention, early detection of disease, and engagement of
patients in the management of their chronic conditions.
These funds also support the provision of prescription
medications to hundreds of thousands of low-income New Yorkers,
and the operations of our eleven public hospital's emergency
departments and six trauma centers rely heavily on Medicaid
funding.
In California Dr. Bruce Chernoff, CEO of the Los Angeles
County Department of Health Services has said, ``It is the
equivalent to shutting down all the outpatient clinics we own
and operate, as well as those we contract with in the
community.''
Gene Marie O'Connell, San Francisco General Hospital CEO
and Chair of NAPH, states, ``San Francisco General Hospital is
just holding its head above water with the current rates. The
impact from the Medicaid cost limit rule means the loss of $24
million, and from the GME rule an additional $5 million. If
these rules become reality, we would need to close three
nursing units, or 90 beds out of 550 beds, which would have a
dire impact on services to the residents of San Francisco.''
In Colorado, Dr. Patricia Gabow, Denver Health CEO and
medical director, states, ``We need Congress to stop these
rules. The impact of this rule on Denver health would be
devastating. We might as well turn over the keys. We would no
longer be able to serve as the major safety net system for
Denver and Colorado and the region. The health of the entire
community will be compromised through the impact on our trauma
system, our disaster preparedness, and public health.''
Mr. Chairman, my submitted written testimony includes
numerous other examples from around the country. For this
reason, it is imperative that Congress act now to stop these
rules and to reaffirm your role in setting Medicaid policy for
this country. We believe that CMS ignored Congress and violated
Federal law by moving forward to implement several of these
Medicaid regulations. We need the Congress to move quickly by
the end of this calendar year to prohibit CMS from implementing
the Medicaid cost limit, GME, and Medicaid outpatient
regulations.
We strongly urge the members of this committee to support
and co-sponsor H.R. 3533, a bill introduced by New York
Congressman Elliott Engel and Sue Myrick, which had 133 co-
sponsors as of this past Monday.
Once again, I thank you for granting me the opportunity to
speak with you this morning on behalf of NAPH. I would be happy
to answer any questions you may have.
[The prepared statement of Mr. Aviles follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Waxman. Thank you very much, Mr. Aviles.
Mr. Towns.
Mr. Towns. Let me just say, first off, thank you so much
for being here. He heads the largest public hospital system in
the United States. Of course, I am delighted for you to come
and share with us your views and we hope to be able to talk
further as we move forward into the question and answer period.
I want to thank you so much for taking time from your busy
schedule to come to share with us today.
Thank you, Mr. Chairman. I yield back.
Chairman Waxman. Thank you, Mr. Towns. Thank you very much,
Mr. Aviles.
Dr. Retchin.
STATEMENT OF SHELDON RETCHIN
Dr. Retchin. Thank you, Chairman Waxman, Mr. Davis, members
of the committee. I am Sheldon Retchin. I am vice president for
Health Sciences at Virginia Commonwealth University and CEO of
the VCU Health System in Richmond, VA. I am here to testify
before the committee about the detrimental impact of the
proposed CMS rule to eliminate Federal matching payments for
graduate medical education [GME], under the Medicaid program.
I am also here on behalf of the Association of American
Medical Colleges and I want to put a face to the devastating
consequences these cuts would have on the Nation's teaching
hospitals.
The VCU Health System is really two health systems. On the
one hand it is a tertiary care center and is the region's only
level one trauma center, and one of only two burn centers in
the entire Commonwealth of Virginia. We perform solid organ
transplants and attract referrals from not only across the
Commonwealth, but all up and down the Mid-Atlantic region.
On the other hand, we are also a primary provider of
hospital and intensive services and primary care services for
inner-city Richmond. Let me tell you why.
Over the past three decades, there has been a migration of
approximately 750 hospital beds from the city of Richmond to
the surrounding suburbs. These beds were not replaced and, in
fact, led to the closure of four major hospitals in the city of
Richmond, three of which relocated into more affluent suburbs.
So today the VCU Health System is the last remaining health
system with a major hospital in the inner city, downtown
Richmond.
So what happens is we take care of the inner city of
Richmond, and during the past year we had 8,400 hospital
discharges covered by Medicaid, 26 percent of all hospital
inpatient work. Medicaid beneficiaries crowd our emergency
rooms, they overwhelm our clinics. We had 65,000 outpatient
Medicaid visits this past year. And that is not the whole
story. In addition to the Medicaid population, the VCU provides
a significant amount of care for low-income but income too high
to be eligible for Medicaid. These are indigent patients.
So, taken together, Medicaid and indigent care represent
about 45 percent of all the care our teaching hospital
provides. So this devotion to care for the disadvantaged in our
region is unrivaled.
Now, we do this judiciously. We are very careful stewards
of these precious resources, and, not only that, we are
innovators. So we contract with primary care physicians in the
community to decompress the emergency room, and we contract
with those inner-city community physicians, about 30 different
practices, with funds that are not even Medicaid. That is
because we want to be judicious, and we are doing this and
putting band-aids as much as we can on the solution.
Believe me, this is a safety net, not a safety hammock.
CMS suggests that the Medicaid program should not make
payments toward the cost of graduate medical education. The
timing of this proposal is especially perplexing. As you all
know, the Nation faces a looming physician shortage in
conjunction with the rise in the health care demands that are
being placed on it by baby boomers. This rule would undo a
history of support that stretches back more than two decades.
During this time, CMS has long recognized graduate medical
education as a legitimate and authorized Medicaid expenditure,
has consistently approved State plans for this expenditure, and
has always matched Medicaid GME payments along the way.
In 2005, 47 States and the District of Columbia made and
provided GME payments under the Medicaid program. In Virginia
this past year we received $6.7 million in direct GME Medicaid
costs.
I assure you, Virginia's Medicaid funding for GME is a
Federal-State partnership split 50/50, so you have to ask why
so many States like Virginia are making this commitment to
graduate medical education that are now proposed for Federal
reduction. That is because sustenance of the physician work
force is at least as important, if not more so, for Medicaid
beneficiaries than it is for Medicare.
While adequate access is vulnerable for beneficiaries of
both programs, I can assure you that physician Medicaid
participation in most States is even more sensitive than
Medicare to the work force supply.
Over the past 20 years, despite modest health care reforms,
unfortunately we have made little progress reducing the total
number of our citizens who remain uninsured. That certainly has
had its consequences in downtown Richmond. Employer-based
coverage has eroded during the past 7 years, as we all know,
and most of the uninsured and Medicaid beneficiaries are hard-
working Americans who are either self-employed or employed by
businesses, small businesses who cannot afford health care
coverage for their employees.
With all due respect, I feel like we are walking up a down
escalator. These cuts will merely unravel the safety net yet
further and make health reform and expanded coverage that much
harder to accomplish in the horizon ahead.
With 47 million Americans uninsured and another 40 million
Americans on Medicaid or under-insured, the safety net is
stretched tight, and the teaching hospitals are holding the
corners.
I thank you for the opportunity to testify today. The
teaching hospital community greatly appreciated the 1-year
moratorium preventing regulatory action on this rule until May
2008, and we contend that this moratorium may have already been
violated. We are also very grateful to Representatives Engel
and Myrick and over 133 bipartisan co-sponsors for advocating
in support of the Public and Teaching Hospital Preservation Act
to extend the moratorium for an additional year.
My fellow teaching hospital and medical school leaders and
the Association of American Medical Colleges look forward to
working closely with you on these issues which are of such
importance to the health and well-being of all Americans.
Thank you.
[The prepared statement of Dr. Retchin follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Waxman. Thank you very much, Dr. Retchin.
Dr. Gardner.
STATEMENT OF ANGELA GARDNER
Dr. Gardner. Thank you, Mr. Chairman and members of the
committee. My name is Dr. Angela Gardner. I am an assistant
professor at the University of Texas Medical Branch in
Galveston. I have been providing emergency care to Texans for
more than 20 years. I am also vice president of the Board of
Directors for the American College of Emergency Physicians
[ACEP]. We represent 25,000 emergency physicians in 53 chapters
across the Nation.
I would like to thank you for allowing me to testify today
on behalf of ACEP to discuss the impact on vulnerable
populations and safety net hospitals if CMS is allowed to
reduce Medicaid payments to States by approximately $5 billion,
as it has proposed to do in the regulatory process. Today I
would like to share with you several important factors that
make the care received in the emergency department unique and
how the proposed Medicaid cuts will further erode access to
life-saving emergency medical care in Texas and the rest of the
Nation.
Actually, I would like to tell you a story.
I worked in the emergency department on Tuesday night, and
on my arrival all 48 of my beds were full. We had 22 patients
in the hallway. We had 14 patients in the waiting room. We had
three ambulances unloading and two helicopters waiting to land.
That is a normal day. And, as I hear from Dr. Retchin and Mr.
Aviles, that is a normal day in New York and Denver and San
Francisco, as well.
When I arrived, 25 percent of my beds were taken up by
patients who were waiting on a bed inside the hospital, four of
those on respirators waiting on ICU beds. This is a normal
Tuesday night.
At midnight I got a patient who arrived to me comatose from
the back seat of his mother's car. He had been driven 250 miles
to my emergency department to get our care. I will call this
man Norman to preserve his privacy.
Norman had been having headaches for about a month. On the
third week, when his right hand wouldn't work any more and he
started vomiting, his mother said, you have to go to the
hospital. They went to the emergency department at their local
hospital, where he was diagnosed with a brain tumor on the left
side of his brain.
They don't have a neurosurgeon at this hospital--and this
is a regular-sized city--so they called UTMB for a transfer. We
accepted the patient to neurosurgical service.
Unfortunately, we didn't have a bed. The process is he has
been put on a list to get a bed when one becomes available.
After waiting 8 days for his bed in the hospital there in
his home town, Norman, in pain and vomiting and unable to move
out of that bed, begged his parents to take him home to die,
and they did.
He went home to die, and when he became comatose his mother
loaded him in the back seat and brought him to me. I put him on
a ventilator. I gave him drugs. I got him a neurosurgeon. What
I could not get him was a bed.
If you will excuse me, this is emotional. I left the
hospital Wednesday morning. I do not know if Norman died, but I
believe that he will die in that trauma bay. He will never see
the inside of a hospital. He will have his neurosurgeon, but he
will not have a bed.
As you sit here and absorb the impact of the story, I would
like to let you know something. Norman is not indigent. Norman
is a working man with health insurance. The problem with the
cuts that Medicaid wants to make, the cuts to Medicaid that are
being proposed, is that it affects not only the indigent but
everyone out there. This could happen to you, it could happen
to someone that you love.
Of our children in Texas, 32 percent are on Medicaid.
Another 18 percent of them are uninsured. That is 50 percent of
our children who are under-insured or lacking access to health
care. I can't see that any cut in that program is going to help
anyone.
More to the point, we don't have beds, and we don't have
beds in the same way that New York doesn't, in the same way
that other colleges in Virginia don't. Cutting our programs is
not going to give us beds. It is not going to help people like
Norman, whose main need is a neurosurgeon and a bed.
I would like to wrap up today by thanking you for allowing
me to be here, by tolerating my emotion for my patients, and by
asking you: please, don't cut funding to our valuable public
hospitals.
[The prepared statement of Dr. Gardner follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Waxman. Thank you very much, Dr. Gardner.
Dr. Kanof.
STATEMENT OF MARJORIE KANOF
Dr. Kanof. Mr. Chairman, Mr. Davis, and members of the
committee, I am also pleased to be here with you today as you
explore recent regulatory actions of CMS related to the
Medicaid program and the potential impacts of these actions on
patients, providers, and States. I think we have heard several
examples of this this morning.
Medicaid fulfills a crucial role in providing health
coverage for a variety of vulnerable populations, but ensuring
the program's long-term sustainability is critically important.
Starting in the early 1990's and as recently as 2004, we
and others identified inappropriate Medicaid financing
arrangements in some States. These arrangements often involved
supplemental payments made to government providers that were
separate from and in addition to those made at a State's
typical Medicaid payment rates.
In March 2007, we reported on a CMS initiative that was
started in 2003 to end these inappropriate arrangements. My
remarks today will focus on Medicaid financing arrangements
involving supplemental payments to government providers. I will
discuss our findings on these financial arrangements, including
their implications for the fiscal integrity of the Medicaid
program and on CMS' initiative begun in 2003 to end these.
In summary, for more than a decade we and others have
reported on financing arrangements that inappropriately
increased Federal Medicaid matching payments. In these
arrangements, States received Federal matching funds by paying
certain government providers, such as county-owned or-operated
nursing homes, amounts that greatly exceeded Medicaid rates. In
reality, the large payments were often temporary, since States
could require the government providers to return all or most of
the money back to the States.
States could use these Federal matching funds received in
making these payments, which essentially made a round trip from
the State to the provider and back to the State, at their own
discretion. Such financing arrangements have significant fiscal
implications for the Federal Government and the States. The
exact amount of additional Federal Medicaid funds generated
through these arrangements is unknown, but it is estimated that
it was billions of dollars.
Despite congressional and CMS action taken to limit such
arrangements, we have found, even in recent years, that
improved Federal oversight was still needed.
Because they effectively increased the Federal Medicaid
share above what is established by law, these arrangements
threaten the fiscal integrity of Medicaid's Federal and State
partnership. They shift costs inappropriately from the State to
the Federal Government and take funding intended for covered
Medicare costs from providers who do not under these
arrangements retain the full payment.
The consequences of this arrangement are illustrated in one
State's arrangement in 2004 which increased Federal
expenditures without a commensurate increase in State spending.
The State made a $41 million supplemental payment to a local
government hospital. Under its Medicaid matching formula, the
State paid $10.5 million, CMS paid $30.5 million as the Federal
share of a supplemental payment. After receiving the
supplemental payment, however, in a very short time the
hospital transferred back to the State approximately $39
million of the $41 million payment, retaining just $2 million.
This March we reported on CMS' initiative to more closely
review State financing arrangements through their State plan
amendment process. From August 2003, to August 2006, 29 States
ended one or more arrangements for financing supplemental
payments because providers were not retaining the Medicaid
payment for which States had received Federal matching funds.
We found CMS' action to be consistent with Medicaid payment
principles that payment for services is consistent with
efficiency and economy. We also found, however, that the
initiative lacked transparency, and that CMS had not issued any
written guidance about the specific approval standards.
When we contacted 29 States, only 8 reported receiving any
written guidance or clarification from CMS. State officials
told us it was not always clear what financing arrangements
were allowed and why arrangements were approved or not
approved. This lack of transparency raised questions about the
consistency with which States had been treated in ending their
financial arrangements.
We recommended that CMS issue guidance about allowable
financial arrangements.
In conclusion, as the Nation's health care safety net, the
Medicaid program is of critical importance to beneficiaries and
providers. The Federal Government and States have a
responsibility to administer the program in a manner that
ensures expenditures benefit those low-income people for whom
benefits were intended.
Congress and CMS have taken important steps to improve the
financial management of Medicaid, yet more can be done to
ensure the accountability and fiscal integrity of the Medicaid
program.
Mr. Chairman, this concludes my statement. I will be happy
to answer questions.
[The prepared statement of Dr. Kanof follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Waxman. Thank you very much. I want to thank all
of the witnesses for your presentation. You have given us
excellent, excellent information to think about as we look at
this issue.
We are now going to proceed to questions by the members of
the committee in 5 minute intervals. I will start with myself.
Dr. Kanof, as you know, one of the proposed rules issued by
CMS would limit Medicaid payments to public hospitals to the
direct cost of serving each Medicaid beneficiary. No payment
would be allowed for the indirect cost that might be part of
running the hospital, say, for example, the losses that the
hospital might incur for emergency rooms, burn units, or trauma
care. Has the GAO supported a policy of Medicaid payment for
direct costs, alone?
Dr. Kanof. No. In fact, we have, though, supported a
recommendation made to Congress in both 1994 and repeated in
2004 that costs should be limited to cost, but have never
defined what is in that cost, what is direct or what is
indirect.
Chairman Waxman. In 1994, though, you said Congress should
enact legislation.
Dr. Kanof. We did, and, in fact, we did that because in
comments that we received from HCFA at that time they indicated
that they could not do this without congressional legislation,
and, in fact, in 2005 the President's budget proposal actually
requested legislation for this.
Chairman Waxman. So would it be inaccurate for CMS to imply
that GAO supports the proposed cost rule?
Dr. Kanof. I think you have an interesting question you are
asking me. GAO definitely recommends cost, but GAO has not
commented what should be in that cost.
Chairman Waxman. You recommend legislation. I know that you
also know a great deal about the Medicare program. Does
Medicare include direct and indirect costs within its payment
system?
Dr. Kanof. Yes. That is sort of a fundamental of how
Medicare pays its providers.
Chairman Waxman. Thank you. It has been one of the
fundamental ways Medicaid has paid its providers, as well.
Dr. Gardner, last week southern California suffered from a
terrible disaster with devastating fires, and during this
calendar year we have seen other problems such as the recent
bridge collapse in Minneapolis. Communities relied on public
teaching hospitals to provide critical emergency, trauma, and
burn care. In the major cities of our country public hospitals
provide nearly half of all level one trauma services and two-
thirds of burn care beds. Are you concerned that the rules
proposed by CMS will damage our communities' ability to manage
the next natural disaster or public health emergency?
Dr. Gardner. Absolutely. I cannot be more clear that we
have no surge capacity. As demonstrated in Los Angeles and in
the counties surrounding San Diego, dealing with a catastrophe
is a problem for them. They have seen the closure of six
hospitals with emergency departments in the last several years.
Had this catastrophe been worse, they would not have been able
to deal with those patients. And there is nowhere else for them
to go.
Chairman Waxman. Well, one out of five hospitalized
patients received care in a public hospital, one out of four
babies is born in a public hospital, and one out of five ER
patients receive care at a public hospital. Given this volume
of services, will other hospitals be able to fill the void if
public hospitals are forced to close beds or curtail services
due to the CMS regulations?
Dr. Gardner. No, sir. The private hospitals are in much the
same shape as the public hospitals. There is no bed capacity.
There aren't nurses. There aren't specialists. There isn't room
anywhere for any overflow of the system. There will be nowhere
for these patients to go.
Chairman Waxman. We all know public and teaching hospitals
operate emergency rooms, trauma centers, burn units, and
sophisticated ICUs, but these hospitals also manage large
outpatient clinics that keep community members healthy and out
of the hospital. Today in our major cities over one-third of
patients who need outpatient care receive it at a public
hospital clinic. If CMS implements the proposed rules and
public hospitals are forced to curtail these outpatient
services or close these clinics, what options will these
patients have to receive care?
Dr. Gardner. Well, sir, as you know, regulations require
that the emergency department stabilize and see any patients
who present to our doorways, and my presumption is that those
patients will show up in the emergency department and we will
see them.
And if I could just take 2 seconds to dispel a common myth,
there is a myth out there that our emergency departments are
overrun by patients who don't need to be seen in the emergency
department, but our recent research shows that 70 percent of
the people who come to see us need to be seen within 2 hours,
and 15.3 percent of those need to be seen within 15 minutes. So
we will be adding clinic patients to an already overburdened
system.
Chairman Waxman. Thank you.
Mr. Aviles. Mr. Chairman, I would just add, as well, that
this highlights the extent to which this can be viewed as penny
wise and pound foolish. To the extent that you strip out----
Chairman Waxman. I thank you for that, but I have one last
question. You can see the red light, so my time is going to be
up if I don't ask my last question of Ms. Herrmann.
The President says he wants to make sure that the low-
income children are covered under Medicaid and S-CHIP. Now,
Medicaid, of course, covers the poorest of the poor children.
What would happen if you had the school nursing program made
ineligible for treating some of these Medicaid patients?
Ms. Herrmann. Thank you for your question. We see every day
I would rather be a poor child because I am going to get
Medicaid. If I am a little bit poor but not poor enough for
Medicaid and I have diabetes, I have asthma, I have a broken
arm, I have a bad respiratory virus, those children are not
going to get seen. They are going to be delayed in treatment.
What happens is that then----
Chairman Waxman. Well, they won't even be in Medicaid,
because you would enroll them in Medicaid.
Ms. Herrmann. No. That is right.
Chairman Waxman. If they are not in Medicaid and they have
asthma, you can't even give them the services that they need.
Ms. Herrmann. Exactly.
Chairman Waxman. Thank you very much.
Ms. Herrmann. Exactly.
Chairman Waxman. I don't want to exceed the time. That red
light is staring at me. But thank you very much for your
answer. Maybe there will be further questions.
Mr. Davis.
Mr. Davis of Virginia. We will have some time later, but I
want to get through this panel. Thank all of you for coming. I
have to start with Dr. Retchin. He is from my State and he has
been here before, and we very much appreciate your being here.
Your written testimony quotes the proposed rule in which
the CMS points out that the Federal Government does not know or
track which States are making GME payments, the amounts States
are spending, or the total number of hospitals receiving such
payments. Given that, what is the answer? Should it be paid
through Medicaid? Should it be better tracked and overseen from
us?
Dr. Retchin. Well, I think it is an excellent question. I
am all for a better monitoring system, a better tracking
system. I think CMS first has to realize these are legitimate
costs. I mean, I think in part it could be obfuscation that if
we can't track it then we can't pay it. That is illogical to
me. In this case I think it is incredibly important for CMS to
recognize the historical tradition of the payment itself, track
it legitimately, and continue the payment for GME.
Mr. Davis of Virginia. What part of GME payments or what
part of--if you didn't have that coming, you are an urban
hospital, you have a lot of people who can't pay that are
presenting themselves at the door.
Dr. Retchin. Well, if you combine the direct and the
indirect, it is a substantial portion. I would venture to say
it could be as much as 10 percent of our total revenues.
The direct payment for graduate medical education is a
substantial portion of our direct payments for graduate medical
education. The other portion is only Medicare.
Mr. Davis of Virginia. And the same would apply to New
York, I am sure.
I want to get to Dr. Kanof for a couple of minutes.
How does the inappropriate maximization of Federal Medicaid
reimbursement impact the financial integrity of the program?
Does this have implications for Medicaid beneficiaries? Are we
merely moving costs from the Federal to the State? I mean, what
is your overview of that?
Dr. Kanof. Well, in fact, what we have found and what we
have reported is that the supplemental payments can undermine
the fiscal integrity of the Medicaid Federal-State partnership,
and we have looked at this and summarized it in three ways.
They clearly, effectively increase, as I spoke about the
Federal matching rate established under statute. They allow
States to use Federal Medicaid funds for non-Medicaid purposes.
And they enable States to make payments to government providers
that significantly exceed their costs.
While we have not specifically looked at the impact that
this would have on Medicaid beneficiaries, a natural extension
would be that if there are funds that are in the Medicaid
program that are going to the States and then being returned to
the States and not used for Medicaid, this would, in fact, harm
a beneficiary.
In fact, the HHS IG found that, in fact, there were
Medicaid funds that were going to an institution. The
institution had returned these funds to the State, and then the
State Department of Health and Human Service actually put the
provider in jeopardy for not providing quality care to the
beneficiaries.
Mr. Davis of Virginia. Let me followup on my earlier
question. Is the GAO aware of any examples of concerns
regarding Medicaid payments for school-based administration
that may speak to the need for greater accountability or
oversight in that area?
Dr. Kanof. We have not examined this issue in great detail.
Two years ago we looked at contingency fee payments, and in
Georgia we found that, in fact, there were funds that have been
directed to the State for State programs and they had
specifically gone back into the State and not been used for
education purposes. In reviewing that, we determined that there
needed to be better guidance to ensure accountability of these
funds.
Mr. Davis of Virginia. Dr. Gardner, as it relates to
uncompensated care, will government-operated facilities still
have access to the dish payments which are meant to address
caring for the uninsured?
Dr. Gardner. I am not sure that I am adequately prepared to
answer that question at this time. I can get back to you.
Mr. Davis of Virginia. If you would try to get back to us,
just for the record, that would be helpful to us.
Dr. Gardner. All right.
[The information referred to follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Davis of Virginia. Mr. Aviles, some of the quotes in
your written testimony speak to a very broad list of services
that hospitals would purportedly have to discontinue under the
proposed cost limit rule. I understand that you are challenging
the CMS' estimate of the impact of the rule. For argument's
purposes, if the impact was twice as large as CMS estimates, it
still would be less than 1 percent change in Federal Medicaid
spending. Can you talk to the magnitude of this change from
your perspective?
Mr. Aviles. It may be 1 percent in the aggregate,
Congressman, but, in fact, NAPH members constitute 2 percent of
the hospitals in this country, and we cover 25 percent of the
uncompensated care. These regulations are directed at the
public hospitals in the country, and therefore the impact is
concentrated there.
As I mentioned in my testimony, just for us the impact
would be about 4 percent of our budget on the cost limit
regulation alone. All three regulations together aggregate to
closer to 9 percent of our budget, or in the range of $400 to
$500 million.
Others of our members in California, for example, the
estimates are in excess of $500 million, in Florida in excess
of $900 million, and in Tennessee and North Carolina and
Georgia it is a combined impact of $800 million on an annual
basis for the cost limit regulation, alone. That necessarily
would devastate our ability to deliver services.
Mr. Davis of Virginia. Thank you.
Chairman Waxman. Thank you, Mr. Davis.
We are being called to the House floor for a series of
three votes. We are going to take a recess and come back at 10
minutes to 12:00--I think that would be a good prediction of
time--to complete the questions for this panel.
Thank you.
We stand in recess.
[Recess.]
Chairman Waxman. The hearing of the committee will please
come back to order.
Mr. Cummings.
Mr. Cummings. Thank you very much, Mr. Chairman.
First of all I want to thank all of our witnesses for your
testimony. I thank you for bringing and presenting a face for
the people who are affected by these proposals.
I also want to say to Ms. Miller, I want to thank you for
your testimony. As a fellow Marylander, I am very, very, very
proud of you. Thank you so very much for taking your story and
bringing it to us. I really appreciate that, too.
Dr. Gardner, please do not ever apologize for your passion.
We are talking about the lives of human beings. We are talking
about life and death situations.
To all of you, I thank you for your passion.
It seems, Mr. Chairman, that we are currently engaged in a
very public debate over the future of S-CHIP, which covers 6
million children and potentially will cover 4 million more. But
today, after listening to this testimony, I am concerned that,
while we wrangle over that program in the press, CMS has
launched a systematic attack on Medicaid which serves 60
million people, 28 million of them children, behind our backs
and in their suites.
Your testimonies highlight how vitally important it is that
we shed a light on these ill-advised proposed regulations. Left
to their own devices, it appears that CMS will leave our most
vulnerable citizens--that is, the poor, the sick, the disabled,
and the elderly--far, far behind, if not left out completely.
Mr. Chairman, that is not the American way. As I listened
to some of this testimony, I must tell you that if I closed my
eyes I had to wonder whether or not we were still in America.
America has gained its moral authority by the way it treats
its people, not by military might. It may have been backed up
by military might, but the way we treat every single American.
This is not a matter of fiscal responsibility. I have concluded
it is a matter of moral irresponsibility.
Are we so morally bankrupt that we are willing to
shortchange life and death services?
That leads me to you, Mr. Parrella. I want to thank you for
your testimony. You testified that you worked in Medicaid for
the past 20 years. In your experience, is there any precedent
for what CMS is doing with the six proposals we are discussing
today? Has the Federal Medicaid agency ever proposed a set of
Federal rules that would shift $11 billion in costs from the
Federal Government to the States?
Mr. Parrella. Thank you for that question, Mr. Cummings.
I am not aware of a regulatory initiative that would have
an impact of this magnitude that we have experienced.
Mr. Cummings. And I take it from your testimony that the
State Medicaid directors, the managers like you who actually
run the program on a day to day basis, I guess you all oppose
each of these six CMS proposals we are discussing today. And is
that opposition bipartisan?
Mr. Parrella. Our organization----
Mr. Cummings. First of all, are you opposed?
Mr. Parrella. I am, sir.
Mr. Cummings. All right. And is that the view of your
organization?
Mr. Parrella. It is, sir.
Mr. Cummings. It is a bipartisan organization?
Mr. Parrella. It is, sir.
Mr. Cummings. Do you all have opportunities to express your
concerns to the folk who sit in the suites making these
decisions affecting people's lives on a day to day basis?
Mr. Parrella. We do.
Mr. Cummings. And how do you do that? How do you go about
doing that?
Mr. Parrella. CMS is very good about meeting with us on at
least a quarterly basis. We have direct access to Mr. Smith. In
terms of the regulations that are issued, we provide written
comments.
Mr. Cummings. I always find these hearings fascinating
because we hear your stories and, having been here 11 years,
the fascinating part is we will hear the story from CMS in a
few minutes. They will probably say--well, Mr. Smith has
already said in his written testimony, ``These rules will
provide for greater stability in the Medicaid program and
equity among States.'' Do you agree with that statement?
Mr. Parrella. I do not. I am sympathetic to the task that
Mr. Smith and CMS have in that it is their responsibility to
maintain program integrity, and part of program integrity is to
hold the States accountable for the State share that they
provide for Medicaid. So to the extent that these regulations
were an attempt to correct any practices historically which
have shifted inappropriately responsibility to the Federal
Government from the States, I understand and support what Mr.
Smith is doing. However, I think what these regulations do is
they go far beyond that in terms of the impact that they are
having on the kind of public providers and recipients who are
here who benefit from these programs. I think that is the
reason why we are in opposition.
Mr. Cummings. I see my time is up. Thank you, Mr. Chairman.
Chairman Waxman. Thank you, Mr. Cummings.
Mr. Davis.
Mr. Davis of Illinois. Thank you very much, Mr. Chairman. I
want to thank you for holding this hearing. As a matter of
fact, I represent a District that has more than 25 hospitals, 4
medical schools, 30 community health centers. As a matter of
fact, we are, indeed, a health mecca, and so you can imagine
that these proposed rules frighten me to death. As a matter of
fact, every time I think about them I shake in my boots in
terms of the devastating impact that they could have, because
we also care for people from not only in our State but we care
for many people from all over the country and, indeed, from all
over the world. So I thank all of you for your testimony.
Let me just ask you, Mr. Aviles, the Senate Finance
Committee recently confirmed Mr. Kerry Weems as the CMS
administrator, and in response to questions submitted by the
committee as it considered its nomination he made the following
statement. He said, ``I appreciate that Medicaid is a vitally
important program that serves very vulnerable populations. I am
concerned that the perception that this Medicaid rule is
intended to harm public providers. In fact, I understand it to
protect public providers. Governmentally operated health care
providers are assured the opportunity to receive full cost
reimbursement for serving Medicaid-eligible individuals instead
of being pressured to return some payment to the State.''
It sounds like Administrator Weems believes that CMS is
doing safety net hospitals like those in New York and like the
three that I represent in my District in Chicago a favor by
proposing these rules. Do you agree?
Mr. Aviles. Absolutely not, Congressman. As I have
mentioned before, the cumulative impact on these regulations is
a massive cut in funding to our public hospitals across the
country.
The argument that it does us a favor by limiting our
reimbursement to actual cost really turns a blind eye to the
role that public hospitals play across the country. Those costs
that we incur include the cost of running our trauma services,
include the cost of running those burn beds.
As you have heard, our members in communities across this
country on average provide 50 percent of the trauma services,
provide two-thirds of the burn beds.
If you are in Miami and you need trauma services, the only
place you are going to get those trauma services is in a public
hospital. If you are in Los Angeles, CA, or Columbus, OH, the
only place you are going to get specialized burn bed treatment
is in a public hospital.
So those costs need to be borne, and historically have been
borne through supplemental Medicaid payments that recognize
that is an essential part of the mission and role of public
hospitals in this country.
Mr. Davis of Illinois. Well, on the next panel the CMS
witness, Mr. Smith, will argue that his proposed rules will not
have a negative impact on providers and that if the rules were
to negatively affect providers--he said, ``It would be due to
decisions made by State and/or local governments, not by CMS.''
If CMS implements this rule, and Federal Medicaid payments
are no longer available to public hospitals for costs not
directly attributable to Medicaid patients, will the State of
New York and the city of New York pick up the financial slack
and cover the difference on their own? And what about other
States and localities?
Mr. Aviles. With all due respect, that statement is a lot
like saying that if we eliminated the Federal share of Medicaid
entirely the States could pick up the slack and therefore there
would not necessarily be a negative impact.
We are talking about a massive de-funding of public
hospitals. As I have mentioned, in New York City, alone, the
combined effect of these rules would be in the neighborhood of
$400 to $450 million. It is inconceivable that we could
continue to run the public hospital system we currently have in
our city with that type of defunding. Quite frankly, neither
New York state or other States around the country have the
wherewithal to make up that massive amount of defunding.
Mr. Davis of Illinois. My time is about to run out. Let me
ask you, If the States and local governments can't pick it up,
do you think that the private sector hospitals and health
systems would now be able to pick up the slack?
Mr. Aviles. Absolutely not. We know that in many areas of
the country the emergency departments are absolutely crowded.
Many hospitals, certainly in the northeast and elsewhere,
struggle just to stay above water. We are talking about a
public hospital system that provides 1.7 million hospital
discharges each year and close to 30 million outpatient visits.
The private sector simply could not make that up, does not have
the excess capacity to do that.
Mr. Davis of Illinois. Thank you very much, and thank you,
Mr. Chairman.
Chairman Waxman. Thank you very much, Mr. Davis.
Mr. Towns.
Mr. Towns. Thank you very much, Mr. Chairman.
Let me begin by first thanking all of you for your
testimony and for the many examples that you were able to give
to highlight the fact that we are moving in the wrong
direction.
Let me ask, did any of you comment on the rules? Did any of
you comment on the rule?
[Panel members nodding affirmatively.]
Mr. Towns. You did? All of you?
[Panel members nodding affirmatively.]
Mr. Towns. You know, in looking at the situation, it seems
to be not a single person supported this rule, so I am
wondering now if comments make a difference. If nobody
supported it and, of course, here we are. Of course, you
expressed your concerns, which I hear you. I am hoping that the
agency will also hear you, as well.
Let me ask you, Dr. Aviles, what would this do to the
graduate medical education programs that we have in our
hospitals?
Mr. Aviles. This would be extraordinarily destabilizing to
the graduate medical education across the country. There is a
very close inter-weaving of graduate medical education and
public hospitals. Of NAPH members, 85 percent are teaching
hospitals. In New York City, HHC has nearly 2,400 residents
being trained on any day of the week. So this is a central
component of the infrastructure for academic medicine, and the
training of physicians in our country. With projected physician
shortages going into the future as the Baby Boom generation
requires more services, and as we look around the country and
see physician shortages even now, it is a very dangerous
proposition, indeed.
Mr. Towns. There is legislation being put forth by my
colleague from New York, Elliott Engel. I would like to move
down the line and ask you, in terms of your views, whether you
support it or not, basically yes or no, starting with you, Ms.
Miller, and coming all the way down the line, the Elliott Engel
legislation. Are you familiar with it?
Mr. Parrella. I am not, sir.
Mr. Towns. You are not familiar with it? OK.
Mr. Parrella. Is it a moratorium legislation?
Mr. Towns. Yes. Let's go right down the line.
Mr. Parrella. Extend the moratorium. We would be in favor
of that, sir.
Mr. Towns. You would be in favor. OK. Right down the line.
Ms. Miller. Yes.
Mr. Towns. Yes. Yes or no, basically.
Ms. Costigan. Yes.
Ms. Herrmann. Yes.
Mr. Aviles. Yes.
Dr. Retchin. Yes.
Dr. Gardner. Yes.
Dr. Kanof. I am not in a position to offer an opinion.
Mr. Towns. OK. All right. So that is neither yes nor no.
OK. I got it.
Let me just say to you, do you think that legislation would
really help the delaying it a year rather than dealing with it
now?
Mr. Parrella. Yes, it would help. This legislation would
help us.
Mr. Aviles. It would help. We obviously would welcome a
more permanent solution that would not require us to come back
yet again, but certainly, given the alternatives, we would
welcome a further moratorium.
Mr. Towns. Do any others have any comments as to what this
would do to your facility if these cuts go forward, as to what
it would do to your facility in terms of if we do not rectify
this?
Ms. Costigan. We run an adoption program at Intermountain
in Helena and Great Falls, MT. If this rehab rule stays the way
it is, we would potentially lose that program. We have served
over 100 SED kids, and we have found permanent homes for many
of them, and we have kept them in permanent homes. We have a 73
percent success rate. The program would be gone.
Mr. Towns. Thank you.
Ms. Herrmann. The Medicaid administrative claiming dollars
that come back to school districts and programs, once that is
gone the program is gone. That is it. Everything will be. So
school nursing positions, social worker positions, preventive
care--all of those kinds of things would be gone and we
wouldn't be able to enroll or help kids with eligibility.
Mr. Aviles. These funds help to subsidize the extraordinary
cost of running six trauma centers in New York City, as well as
our high-level neonatal intensive care units. All of those
types of services would absolutely be endangered by this level
of cuts.
Dr. Retchin. The cuts as they stand in the proposed rules
taken together would be absolutely devastating for our teaching
hospital.
A few years back we were actually on the cover of the Wall
Street Journal because a cancer patient from a distant part of
the State could not receive chemotherapy where he was, and he
traveled about 150 miles to MCB hospitals where he got
chemotherapy and treatment for his cancer and actually went
into remission and survived. Those are the kind of programs at
a cancer center like that we would have to reconsider. These
would be devastating in terms of the consequences.
Dr. Gardner. If I am allowed, I will have a short, two-part
answer. One is that Texas is 51st already in administration of
Medicaid, and we have 50 percent of our children and 30 percent
of our adults who are also uninsured. We have research that
says that over 20 percent of the adults and 25 percent of the
children reported that they needed to see a doctor in the past
2 years and could not do so. This will certainly not improve
that.
Mr. Towns. Thank you very much, Mr. Chairman. You have been
very generous with the time. Thank you. I appreciate it.
Chairman Waxman. Thank you, Mr. Towns.
Ms. Watson.
Ms. Watson. I really want to thank the Chair for holding
this hearing. I think this is one of the more important issues
that we have brought out to the public, and I want the public
to listen closely.
If all the new regulations were to be implemented, Federal
Medicaid funds to States would be cut over $11 billion over the
next 5 years. This loss in funding would be detrimental to the
program and its recipients and would cause States to roll back
valuable services that poor and low-income families would need
and otherwise would not be able to afford.
I represent the State of California. We are the first State
in the Union to be a majority of minorities. We get a lot of
people coming from over the Pacific Ocean, southeast Asia, over
the border, and so on, with tremendous health needs. Where do
they go? They go to emergency.
We just lost one of our public hospitals because the
funding was cut back, Martin Luther King down in Watts. I think
all of you are aware of that. I heard someone on the panel
mention the dish hospitals. Let me tell you, in the same area
there is St. Francis, a Catholic hospital. They can't take
another patient. The dish hospitals are under-funded.
We are going to see more cases of people dying in the
emergency room. We don't have an emergency room at King
Hospital, as many of you know.
I am a teacher, worked in the District, so I want to direct
this question to Ms. Herrmann. I believe that you have answered
most of my questions. What would happen in our schools? I think
the worst thing we do in our districts--we have 1,100 of them
in California--is cut out the daily nurse. We don't even see
the doctors.
So in his testimony, Mr. Smith for the next panel--he is
the CMS witness--will defend this proposal rule on the grounds
that there has been improper billing under the Medicaid
program--In California we have our own. It is called MediCal--
by school districts for administrative costs and transportation
services. There is no over-billing, because in a State as large
as ours, the largest one in the Union, you are going to have to
have an administration, you are going to have those costs.
I want to ask Ms. Herrmann, does your school district
improperly bill your State's Medicaid program for the cost of
your services? Or are there administrative costs? And even if
there had been abuses in other school districts, is this rule a
common-sense solution to the problem?
Ms. Herrmann. No, we do not improperly bill Medicaid, and I
can't imagine any school district would knowingly and
intentionally try to defraud the Medicaid program.
I forgot the second part of your question. I am sorry.
Ms. Watson. That is all right. I think you have answered it
all.
Ms. Herrmann. Thank you.
Ms. Watson. It was a comprehensive question. But my second
part was, Is this rule a solution?
Ms. Herrmann. No, this rule is not the solution. Children
will lose out and school districts will lose out because we
will not be able to enroll them or assist to enroll them in
Medicaid.
Ms. Watson. And I am so pleased that I still see the green
light. Mr. Chairman and Members, we are being asked again to
fund a war over in Iraq. Soon it will be $1 trillion. And we
are going to cutoff health care to the poorest and most
deserving children in our Nation? It doesn't make any sense,
and I am going to say for all of you to hear I will not cast a
vote for another penny in Iraq if this rule goes through and we
cutoff the services to our children and our schools and we
cutoff the services in our county hospitals and we close the
county hospitals by pulling back on the funds, as has happened
to us in L.A. County, the largest county in the State of
California. It doesn't make sense.
If we are talking about protecting our homeland, it is not
about the land, it is about the people on the land, and if we
can't provide those services we ought to go out of business.
Thank you, Mr. Chairman, for the time. I yield back.
Chairman Waxman. Thank you, Ms. Watson.
Mr. Higgins.
Mr. Higgins. Thank you, Mr. Chairman. I have no questions,
but more of just to thank the panel for being here. Most of the
questions I had have been asked and answered. We appreciate
very much your being here, because in making policy or
challenging this administrative policy it is fundamentally
important for us to know what the impact is going to be on the
ground, whether it is graduate medical education and the impact
to public hospitals and their ability to deliver services, be
they at hospitals or clinics throughout the communities, are
very, very important. I want to assure you that we are here to
ensure that nothing is done that is going to have a detrimental
impact relative to service delivery at a time when we should be
providing more health care, not less, particularly to those who
are most vulnerable in our community.
Your presence here and the chairman's presentation of this
hearing is fundamentally important toward shaping policy moving
forward, and I thank you for being here.
Thank you, Mr. Chairman.
Chairman Waxman. Thank you, Mr. Higgins.
Mr. Murphy.
Mr. Murphy. Thank you very much, Mr. Chairman. I would like
to especially thank Mr. Parrella for joining us today. He has
served incredibly ably as the director of Medicaid Services in
my own State of Connecticut. I got to serve 8 years on the
Public Health Committee, 4 of those years chairing it, working
together on a number of issues there.
Mr. Parrella, I wanted to give you the opportunity to
expand upon I think an important point in your testimony, which
is that much of the rationale for these rule changes seems to
be the contention from the administration that Medicaid was
never supposed to cover these services in the first place. For
someone that has only worked in this field for 10 years, even
for me that contention seems incredibly wrong-headed. Your
experience is much deeper and broader, and I would like you to
just expand a little bit on the response, for those of us, when
the administration tells us that the reason for these changes
is simply because Medicaid was never supposed to cover it in
the first place, and the corollary argument from the
administration that there is other money out there to cover the
services that they are cutting.
Mr. Parrella. Thank you, Congressman. It is a great
pleasure to refer to you as Congressman Murphy in an official
setting.
There are many examples you could find, but I think a best
example is in the schools, in particular. I think some of the
opposition comes from the sense that school business is the
business appropriately of the Department of Education, that
Medicaid should not cross that line. I think that we all know
that Medicaid does cross that line because many of the children
in schools receive services through special education.
There is a Federal mandate for special education services
through the IDEA, the Federal Act for special education. IDEA
does not come close to funding the full cost of the medical
portion of special education services that States and cities
provide. So Medicaid was actually directed by Congress in the
Medicare Catastrophic Act back in 1988 to participate in paying
for special education services that were medical in nature.
So we have had direction at various times in the past to be
intimately involved in payment for services through the
schools, so it does appear to be something of a retrenchment or
a revisiting philosophically to say that, for the purposes of
promoting program integrity, there are going to be areas like
school education, like graduate medical education where
Medicaid does not have a role.
On the graduate medical education issue, Medicaid does have
a role because we have a great vested interest in training
doctors who will continue to serve the low-income population.
So if you were to take a strict constructionist view and say
that education at large is not part of Medicaid, that argument
might hold some ground in a pure philosophical sense, but in
the real world where States are simply not going to be able to
replace the kind of funds, as Mr. Aviles said, for special
education or graduate medical education, to take Medicaid out
of the equation without some kind of supplemental Federal
program to take its place is simply not realistic.
Mr. Murphy. Thank you very much, Mr. Parrella.
Ms. Costigan, I just want to talk to you for 1 second about
foster care. One of the proposed regulations would, as I
understand it, require therapeutic foster care homes to
unbundle their services in how they bill for those services,
creating, at least at first view, a whole new level of
bureaucracy for families that are looking to take on some
pretty difficult and emotionally complex children.
What do you think the effect of that proposed regulation is
going to be on efforts of States that are already difficult, as
it is, to try to get parents to come into the therapeutic
foster home system?
Ms. Costigan. I think it will be very destructive to any
recruitment efforts. I also think that our agencies will not
have the ability to track everything by 15-minute increments,
especially when what we are talking about is giving kids back a
social life, giving them skills to be able to have a friend and
keep a friend and be a friend. I think this Medicaid rule will
eliminate the support that therapeutic foster parents need, and
if we want permanent homes for our kids, which is one of the
things that Intermountain is very interested in is permanent
homes for seriously emotionally disturbed kids, we deal with
therapeutic adoptive care, but we fall under therapeutic foster
care.
If we want these homes for these kids, we have to be
willing to support them and to help them to help the child
grow.
Mr. Murphy. Thank you very much, Ms. Costigan.
Thank you, Mr. Chairman, for holding this very important
hearing.
Chairman Waxman. Thank you very much, Mr. Murphy.
Mr. Hodes.
Mr. Hodes. Thank you, Mr. Chairman.
I thank the panel for coming today. I am a co-sponsor of
H.R. 3533, and I really appreciate the opportunity to have you
here today to highlight this critical issue.
I want to thank Mr. Cummings for his remarks, which I
associate myself with. Like Mr. Cummings, I have been gravely
concerned about what seems to be this administration's
undeclared war on children and the poor under the Orwellian
guise of a claim of fiscal responsibility. It is not what this
country is about.
I am wearing a pin which says Article I on it. The Article
I initiative is a new initiative by the Democratic Members of
the Class of 2006 to help the people in this country understand
that checks and balances are vital in our system of Government,
and this oversight hearing is one prime example of a check and
a balance in a system where the administration seems to believe
that it makes the law and not Congress.
We will not be silent on this issue.
In my home State of New Hampshire we have one large
teaching hospital, Dartmouth Hitchcock Medical Center in
Lebanon, NH, in association with Dartmouth College. It really
is the sole teaching hospital there.
I want to focus for a moment on the graduate medical
education issues. I understand that a recent report by the
Agency of Health Care Research and Quality, which is a sister
agency to CMS, found that teaching hospitals have a terrible
patient revenue margin. In fact, they are losing almost $0.10
on the dollar.
Dr. Retchin, would you simply explain why this is so. Why
do they lose money? And how do you make up the difference?
Dr. Retchin. Well, the old joke you make it up on volume
probably doesn't apply here.
The teaching hospitals are at a disadvantage from the start
all the way to the finish line because they have so many
missions, so they are asked to be the tertiary referral
centers, the cutting edge for technology and development of new
research, new therapeutics. They are asked to supply tomorrow's
work force for health care workers, not only physicians but
nurses, physical therapists, pharmacists, occupational
therapists. And then they are asked, after all of that, to be a
safety net in the partnership for taking care of the
disadvantaged.
So it should be no surprise that all of these missions
require funding, and they all require subsidization, so the
cross-funding of these is very difficult. I can tell you the
safety net care generates no margins to subsidize either
education or research, so all of these have to pay for
themselves, and some fall by the wayside. They have to give up
or compromise on one of those missions. It has to be research,
education, and, as a last resort, patient care. They can't make
it up. That is the answer.
Mr. Hodes. Dr. Retchin, CMS says that its proposed rule
eliminating Medicaid GME would ``clarify that costs and
payments associated with graduate medical education programs
are not payments for medical assistance that are reimbursable
under the Medicaid program.''
Do you agree with the CMS characterization that their
proposed rule is a ``clarification?''
Dr. Retchin. Well, after 20 years of approving the State
plans for GME payments, after more than two decades of not only
approving State payments but actually making the payments and
sharing, this has been a great Federal-State partnership. It
seems unusually convenient to come to the conclusion that this
is merely a clarification. It took a long time to clarify.
I think that everybody has skin in the game. We all have to
train the work force of tomorrow. Here you have a Federal-State
partnership, so it seems unusual, as one way to cut this, to
make it merely a technical clarification.
Mr. Hodes. Well, if the rule goes through, why can't the
States simply step in and pick up the slack? And if they can't,
what will happen if they don't? What will happen to training
the Nation's doctors? What will happen, for instance, in your
hospital on emergency care and disaster preparedness?
Dr. Retchin. All of these have to be compromised. You know,
it is sort of funny about this, because if you look at the 47
States that actually have GME payments through Medicaid, most
of those States, if not all, have balanced budget amendments.
They are the ones that have to ride out the business cycles and
yet continue year after year to make these payments and make a
commitment to funding the most disadvantaged in our society.
You would think actually it would be the Federal Government
that would actually be saying to the States, You need to make
these payments because we are concerned about the work force.
It is just odd that it is the other way around.
So the States will not be able to make this up. I hope some
of the States would continue their portion, because, like I
said, they both have skin in the game, but they won't be able
to make up the defunding of the Federal portion. Can't happen.
Mr. Hodes. Thank you.
I yield back.
Chairman Waxman. Thank you, Mr. Hodes.
Mr. Shays.
Mr. Shays. Thank you, Mr. Chairman. Again, thank you for
having this hearing.
I sometimes find, when everything is weighted one way, I
want to bring some balance, even if I may not feel as strongly
about that as I do. But in this case I am looking at
administrative changes that change not 10 percent, not 1
percent, but 9/10ths of 1 percent, so I am hard-pressed to know
how terrible things are going to happen.
We are talking about one thousand two hundred billion [sic]
dollars of money spent and $11 billion in alterations over 5
years. That is tiny times 10, so I don't want to blow this
whole hearing out of proportion.
With regard to the GAO, GAO has looked at a number of
financing arrangements with Medicaid. In your experience, how
does the joint nature of Medicaid program, joint Federal-State,
50/50, incentivize inappropriate financing arrangements?
Dr. Kanof. Well, it does it in several ways. Clearly, one
way is as was mentioned this morning, earlier today, through
the supplemental payments that can be excessively large and
then can be transferred back from a provider to the State
because there is an inter-government transfer allowed and there
is an excessive amount of money now returned to the State. It
allows this in that the payments are now not to the providers,
because they have not rendered these services for this payment,
and it creates tension in that it increases the Federal match
to the State.
Mr. Shays. In other words, what we have found in my 20
years here, and that is why we looked at this issue in 1997,
what we did in the late 1990's was, with President Clinton's
support, we balanced the Federal budget. We pretty much allowed
discretionary spending to go up 1 percent, slowed entitlements
for 1 year alone by a few percentage points--not 9/10ths of 1
percent--and we balanced the budget. That is what we did,
Democrats and Republicans.
Here we are talking about an $11 billion savings over $1.2
trillion, and it is clear--all of us know this on this side,
not there--that a smart State looks to take 100 percent of its
costs, and if it can transfer it to Medicaid it now only has 50
percent and now the Federal Government picks up the other 50
percent. That is the incentive, isn't that true?
Dr. Kanof. Without appropriate safeguards, those are the
incentives.
Mr. Shays. Absolutely. Now, I am very proud of how our
State operates. I am also proud of our State's ingenuity. Mr.
Parrella, I think that you get rewarded if you find ways to
increase programs and reduce the State's costs, and if I were
Governor I would want to make sure you did that every time. And
if I was on that side of the table I would be arguing for it
every time.
But I am not on that side of the table. Medicare is going
up $16 billion from last year to this year's budget, $17
billion next, $18 billion the year after, $19 billion the year
after, $21 billion the year after. It is not like the Federal
Government isn't invested in this program, isn't that clear?
Mr. Parrella. That is true, Congressman.
Mr. Shays. So let me ask you, to the degree that some
States use creative financing mechanisms, does that put States
who choose to follow both the letter and spirit of the law and
regulations at an unfair disadvantage by, frankly, undermining
the overall financial integrity of the Medicaid program? In
other words, if some States are using creative financing and
you are a State that is pretty much playing by the letter and
spirit of the law, doesn't that put you at a bit of a
disadvantage?
Mr. Parrella. I think the danger of creative financing, the
way it has been described, is that it can undermine the
relationship between the States and the Federal Government,
which is based on a partnership. It is. We have to have
integrity in what we represent to the Federal Government when
we want to talk to them about matching funds for programs that
we are trying to do to cover the uninsured. There has to be
some integrity behind that so that they believe that we are
really going to spend money on services that are really going
to go to providers. That is part and parcel of what we do.
I guess I would concede that if there are attempts to
recycle funds or divert funds from that purpose, it undermines
the credibility of every State.
Mr. Shays. Well, Mr. Murphy and I both served at the State
level, and when we were at the State level we thought like
State legislators and we were eager to have you get every penny
you could from the Federal Government. But I hope there is no
disrespect on my side here. Please understand, I feel my job is
to make sure it is fair for all States so that one State
doesn't gain the system, and that we have a system that we can
afford both on the State and Federal level.
I thank all our witnesses again.
Thank you, Mr. Chairman, for this hearing.
Chairman Waxman. Thank you, Mr. Shays.
Just for the record, Dr. Kanof, the GAO has recommended
both improved accountability and transparency in many of these
areas that are the subject of these proposed regulations. Has
GAO ever recommended prohibiting Medicaid payment for school
administrative services?
Dr. Kanof. Based on my own knowledge of the reports that
GAO has done, the answer to that would be no.
Chairman Waxman. How about school transportation services?
Dr. Kanof. No.
Chairman Waxman. Therapeutic foster care services?
Dr. Kanof. Not that I am aware of. No.
Chairman Waxman. Rehabilitation services?
Dr. Kanof. No.
Chairman Waxman. Indirect hospital costs?
Dr. Kanof. I don't think so.
Chairman Waxman. OK. Graduate medical education costs?
Dr. Kanof. No.
Chairman Waxman. And assertive community treatment?
Dr. Kanof. No.
Chairman Waxman. Thank you.
Let me thank all of you for your testimony.
Mr. Shays. May I ask a question in regards to the question
you asked?
Chairman Waxman. Certainly.
Mr. Shays. Have you looked at each one of these issues?
Dr. Kanof. No. And what we have looked at is indications of
more how is the State using some of these funds, but we have
not looked at these issues.
Chairman Waxman. If the gentleman would permit, these
proposed regulations would impact each of those areas. We are
not just talking about mechanisms for drawing more money. As I
understand it, these are services that would no longer be
available.
I thank you all very much for your presentation. I think
this is very, very helpful. It is a record that we are going to
be able to share with our colleagues. Thank you so much.
[Recess.]
Chairman Waxman. The committee will come back to order.
Mr. Smith, I am going to ask you to come forward.
Dennis Smith is the Director of the Center on Medicaid and
State Operations at the Centers for Medicare and Medicaid
Services, Department of Health and Human Services.
We are pleased to have you here today. As I indicated, it
is the practice of this committee that all witnesses answer
questions under oath, so please rise.
[Witness sworn.]
Chairman Waxman. Do you have a prepared statement? We would
like to recognize you for comments you might wish to make.
STATEMENT OF DENNIS SMITH, DIRECTOR, CENTER ON MEDICAID AND
STATE OPERATIONS, CENTERS FOR MEDICARE AND MEDICAID SERVICES,
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Mr. Smith. Thank you very much, Mr. Chairman. I will make
my remarks brief and try to respond really to some of the
issues that were raised from the previous panel and questions
from the Members, themselves. Hopefully we will be helpful to
help to understand the context of the rules, the impact across
the program, and really how the rules do work, because I think
that in some respects the interpretation of rules get
interpreted and reinterpreted and stretched a little further
than what the rules actually say.
I think I first also want to thank David Parrella for his
very kind remarks. We do work very closely together with the
Medicaid directors and we have a great deal of respect for
David personally and for Martha Rorety, who runs the Medicaid
Directors, and we do have a great deal of exchange. We talk a
lot about these regulations before they ever become regulations
and what is going on out there in the States.
The Medicaid program speaks through State plan amendments,
so while you work within the confines of the statute, itself,
in title 19, the States change their program, update their
program, etc., through State plan amendments. And we do learn
new things over time.
We have learned new things through the submission of State
plan amendments. I think I have done what my predecessors have
done. In the area of school-based services, for example, and
the discussion that we heard on the previous panel about the
school nurse, some of the things that she was describing would
not have been allowed under the guidance of the previous
administration. Direct services that you are doing for routine
medical care falls under the free care rule, and the rationale
that no other payer is paying for it so it should not be billed
to Medicaid. So some of the activities that she was describing
would not have been allowed under the previous administration,
as well.
The previous administration became increasingly concerned
about what is called bundling, to where schools would bundle
payments together. They came out with guidance saying no, we
are not going to recognize bundling any longer.
In terms of provider taxes, the previous administration,
again, was very concerned, took a disallowance against five
States in excess of $1 billion. In many respects, the cost
associated with Medicaid was not being shared by the State but,
in fact, being passed off onto the providers, themselves. The
previous administration stepped in and acted.
We also provided a table as an attachment to my testimony
that shows the history of deferrals and disallowances that we
have taken as a result of our financial management activities,
and I think in looking at the chart I think that we are very
much in line with our predecessors.
In terms of there was a lot of discussion about the cost
rule, in particular, and again I have talked to a lot of
groups, a lot of hospitals, and tried to explain what has been
going on in Medicaid is the States have been passing their
obligations on to providers. When we have stepped in, their
providers have benefited from that.
In California, for example, we have worked with California
in their hospital financing. Revenues to California public
hospitals went up. They went up by 12 percent, according to
their own Public Hospital Association.
Provider taxes, again, to sort of reveal what is below the
surface, when is the last time someone came in and asked to be
taxed? Provider taxes are related then to payments, because the
provider is willingly paying a tax knowing that there is going
to be a return on that through increased payments. So, again,
the financing is left to the Federal Government because the
provider is not really paying the tax. The State is not really
paying its share, but it is the Federal Government who is
funding.
I think these things really can be summed up in terms of
what we are funding and what we are for in these rules.
Is it a medically necessary service? Is it for a Medicaid
beneficiary? Is the matching requirement under the Federal-
State partnership intact? If, the answer is yes to all of
those, we pay. Federal dollars follow State dollars. They are
the ones who are determining the services. They are the ones
who are determining the reimbursement rate to providers. They
are the ones who are determining the scope of services when you
get to an issue like rehabilitative services. We are not
talking about a disagreement about is physical therapy covered
as a rehab service. Of course it is. There is no disagreement
about is speech therapy in a school covered. Of course it is.
That is not what the disagreement is about. The disagreement is
about pushing the edges of the envelopes even further to see
where an activity or a program of the State is being funded
with State-only dollars. If you can get Medicaid money out of
the Federal Government by calling it Medicaid, then you are
ahead of the game.
That is where the issues of the discussions are about when
we are talking about rehab services. We, again, learned a great
deal in our conversations as States submit State plan
amendments, on things like therapeutic foster care. There is
not a definition of therapeutic foster care in the Medicaid
statute. There are many different definitions of therapeutic
foster care when you go out and ask the States, themselves,
what do you mean by therapeutic foster care.
Again, when you are talking about that, in itself, are
these a component of services for people with mental illness?
We will pay. Is this for a mental health counselor? We pay. is
this for the prescription drugs that someone needs? Of course
we will pay.
This is about pushing the envelope to the outer boundaries
to where is therapeutic foster care a juvenile justice
wilderness camp. Then I think you do expect me to push back on
the States and say no, that is outside the bounds.
David Parrella's quote about the creativity of the States I
thought had great double meaning to it. The creativity of the
States, new things out there on the horizons. States
contemplating, talking openly about four elderly prisoners in
our penal system, in our correction system, can we somehow get
them into a nursing home and have Medicaid start picking up the
cost for them?
These are things that have been pushed to the edge, beyond
the edge, and, in our opinion, yes, beyond the edge when we ask
you what do you mean by therapy and we get the answer is we are
going to pay for small engine repair. We think that is our
obligation to be saying what are we really paying for here. Is
the Federal-State partnership intact?
Again, if the State is paying its share, if it is for a
medically necessary service, we are going to be there with you,
as we have matched and we have matched over the years.
[The prepared statement of Mr. Smith follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Waxman. Thank you, Mr. Smith. Your prepared
statement is all going to be in the record.
I want to start the questions, if I might.
Over the past 10 months, CMS has issued six proposed
Medicaid rules that would reduce Federal Medicaid payments to
States by over $11 billion. There are persistent rumors that
CMS is considering issuing more proposals that will cut Federal
Medicaid payments to States even more. Members of this
committee, the States, providers, and beneficiaries would all
be very interested in knowing whether these rumors are true, so
I want to ask you, between today and the end of this
administration does CMS plan to propose regulations that would
cut Federal Medicaid payments to States for targeted case
management services? And if so, when will these proposed rules
be published and how much do you estimate they will cut Federal
payments to the States?
Mr. Smith. We are to publish a rule on targeted case
management. This is implementing the changes made under the
Deficit Reduction Act of 2005, so we will be publishing final
rules on that. The estimated savings I think is in the
neighborhood of $4 billion.
Chairman Waxman. And these proposed rules are where?
Mr. Smith. These are under review. I believe they are in
the final stages of review. They have been with OMB, so other
agencies are looking and commenting, as well, so it is near the
end of the process.
Chairman Waxman. In the next 15 months, does CMS plan to
propose regulations that would restrict the flexibility that
States now have to use their own methods for counting income,
flexibility that enables States to give Medicaid beneficiaries
incentives to work or to recognize the unique expenses many
disabled individuals face in their efforts to remain
independent? And if so, when will these proposed rules be
published and how much do you estimate they will cut Federal
payments to the States?
Mr. Smith. Are you referring to changes in how States do
income disregards for eligibility, Mr. Waxman?
Chairman Waxman. Yes.
Mr. Smith. That is an issue that is under consideration.
The S-CHIP debate was referenced earlier, and in some respects
reflective of that, of how, in discussions about what is the
upper limit for income eligibility for Medicaid or S-CHIP,
through the use of income disregards going to actually even
higher levels than that----
Chairman Waxman. So you are looking at this area, as well,
for----
Mr. Smith. It is under consideration. Yes, Mr. Chairman.
Chairman Waxman. OK. Let me ask you this: in the next 15
months, does CMS plan to propose any other regulations that
would reduce State flexibility or reduce Federal Medicaid
payments to the States? If so, what are these proposals, when
will they be published, and how much will they cut Federal
payments to the States?
Mr. Smith. Mr. Chairman, we are in the formulation of next
year's budget. Decisions have not been made in terms of whether
any further regulations, to my knowledge, any further
regulations in Medicaid will be proposed. But, as I said, that
is the normal pass-back between agencies and OMB, and final
decisions are still generally a month away, month and a half
away.
Chairman Waxman. Well, we want to know if there are
proposals, so we would like to have you inform us of that.
Mr. Smith. Doing that prior to the release of the
President's budget is usually an issue of some sensitivity.
Chairman Waxman. The Federal Government spends about $200
billion to help the States cover over 60 million low-income
Americans. Because of the program's size, changes in Federal
Medicaid policy could have major impact on States, on counties,
on hospitals, on other providers, and, of course, on
beneficiaries, who, by definition, are the most vulnerable
among us. They have to be very, very poor to get covered under
Medicaid.
Each of the proposed rules we are discussing today would
make major changes in Federal Medicaid policy. As we heard from
the witnesses on the first panel, many of these changes could
well cause great harm. Yet, with one minor exception, each of
these proposed rules have no statutory authorization, much less
a statutory directive. Congress has made no change in the
Medicaid statute relating directly to limits on payments to
public providers for Medicaid patients since 1997. In fact, the
administration in its fiscal year 2005 and 2006 budgets
proposed such a statutory change and Congress rejected the
proposal.
Congress has made no change in the Medicaid statute
relating directly to payments to teaching hospitals for GME
since the program's enactment in 1965.
Congress has made no change in the Medicaid statute
relating directly to outpatient hospital services since 1967.
Congress has made no change in the Medicaid statute
relating directly to payments for rehabilitation services since
1989.
Congress has made no change in the Medicaid statute
relating directly to payments for school administrative and
transportation costs since 1989.
In only one instance provider taxes has Congress made a
change in the Medicaid statute in this past decade, and that
change does not support the harmful changes you propose in your
March 23rd rule.
In that red folder is a compilation of Social Security Act
in the red cover. The Medicaid statute begins at page 1677,
where there is a yellow sticker. Could you show us where in the
Medicaid Act Congress has specifically directed CMS to issue
the rules you propose that we are discussing this morning,
other than the provider tax rule?
Mr. Smith. Well, I think the Medicaid statute, itself, has
a number of provisions that instruct the agency to assure that
there is a match rate that Congress has established by statute
that is updated every year. There is a provision in the
Medicaid statute that specifically excludes payments under
Medicaid for things that are not Medicaid services. So there
are provisions in the Secretary's authority to review State
plans, to whether or not those State plans are consistent with
the efficiency and economy of Federal reimbursement. So there
are a number of provisions in the statute to give us the
authority to do what we have done.
Chairman Waxman. I just must disagree with you very
strongly. I don't see anything in the statute that allows you
to decide what is Medicaid eligible and what is not Medicaid
eligible. I see nothing that allows you to withdraw $11 billion
in Federal Medicaid funds from the States.
It looks to me like you have just decided to take matters
into your own hands. It is a blatant disregard of the
prerogative of Congress to make major changes in Federal
Medicaid policy. If you want changes, you should propose them.
If you propose them and Congress doesn't agree with them, you
don't have the ability, in my view, to just come in and propose
them by way of rulemaking. I regret sincerely that matters have
come to this point, and I strongly urge you to reconsider your
course.
Mr. Smith. Mr. Chairman, if I may, in particular, be able
to give you the exact cite, in terms of the cost rule that we
have discussed this morning and the impact on the hospitals and
the States, etc., again, through State plan amendments, which
we have the obligation to review, 1902(a)(2) specifically says
that the State match must be assured by the State, that it
requires ``Federal participation by the State equal to all of
such non-Federal share, or provide for the distribution of
funds, et cetera.''
That does tell me when a State submits a State plan
amendment to increase reimbursement for a hospital, that it is
my obligation to say I am willing to commit the Federal dollar,
but show me your State dollar. That has been the genesis of the
problems that we have been talking about in terms of recycling
where providers are being required by the State or county
government to return money that was meant to pay them for
services provided to a Medicaid recipient.
Chairman Waxman. I have to move on to other Members, but
Mr. Parrella testified that we have had an ongoing working
relationship between the Federal Government and the States, a
partnership to provide care for the poorest among us for two
decades, and some of these State plans are routine. You are
taking routine State plans and then trying to jam through
changes that Congress never intended, and I don't think you
have the authority to do it.
Mr. Davis.
Mr. Davis of Virginia. Thank you very much.
Mr. Smith, if you wait for Congress to act on this, it is
an airplane flying into the mountain. It is the fastest-growing
part of the Federal budget. It is the fastest-growing part of
State budgets. It is annual appropriations $300 billion a year.
That is more than the Defense budget. And we don't vote on it
or touch it at this point in Congress. So I think you have a
responsibility to make sure that the dollars are spent wisely,
and I don't have a comment on these six proposals that you have
made, but I think you have every right to get out there and put
them out for comment and to see where the public is, who is
going to get hurt.
It is not really a question of dollars; it is a question of
services and, as you say, making sure that the taxpayers are
getting their benefit on this.
It is a difficult job, but if you wait for Congress to act
on this there won't be any money left in the budget. This is
the single fastest growing part of the Federal budget.
The cuts that they talk about, too, we are not talking
about cutting Medicaid payments? The payments go up, don't
they, every year? This is just a cut in anticipated growth; is
that fair to say?
Mr. Smith. You are correct, Mr. Davis. This is slowing the
rate of growth. As Mr. Shays pointed out, we are talking about
$11 billion over five of which Federal spending will be over $1
trillion in that time period.
Mr. Davis of Virginia. My understanding is that the Federal
portion right now is set to go up $16 billion in 2008, $17
billion in 2009, $21 billion in 2012. That is a lot of money as
we go forward.
Health care is a complicated issue and we want to try to
make sure that everybody gets served one way or another, but
ultimately it is going to be a congressional responsibility to
try to sort that out.
I am as frustrated as you are by Congress' inability to act
or give you appropriate direction. A blank check isn't the way
to solve it.
Let me ask you this: it is projected that the cost of the
Medicaid program will double in the next 10 years. To the
degree that States are inappropriately shifting costs to the
Medicaid program because of the open-ended entitlement
structure, what pressure does this add to the Medicaid program
and its ability to fulfill its mission to provide medical
services to those that are most in need?
Mr. Smith. Well, Mr. Davis, I think, again, part of it is
overall health care and Medicaid's role in that. Clearly,
health care in itself is increasing and continues to grow. That
is part of that. Medicaid is a component of that larger system.
To some extent it causes the increase, even in the private
sector. Governor Schwarzenneger, for example, has talked about
the increased pressure on the private sector because MediCal
under-pays its providers. So there are relationships throughout
the system.
It does put greater pressure on everyone. Some changes we
have applauded and helped to lead.
Mr. Davis of Virginia. I mean, pressure is everywhere. The
providers that were here today, I think we all understand their
frustration, as well. I hear from the providers, whether it is
doctors or whether it is hospitals, in our area. Everybody is
pressured under this current system.
One thing that was noted, they talked about hospital
closing in one of the Members' District. Five hospitals were
closed in San Diego County over the last 3 years just because
of people coming across the border and presenting themselves at
the emergency room.
This is a complicated issue.
Let me ask a couple questions. For the purposes of
clarifying the impact of harmonizing Medicaid's definition of
outpatient services with that of Medicare, will those services
that are no longer considered outpatient services no longer be
reimbursed by Medicaid?
Mr. Smith. No, sir. The issue is not whether or not a
service will be paid for. Again, there are lots of services
provided in an outpatient setting. We would continue to pay for
those services.
The issue, though, again, as we saw in State plan
amendments in asking States about what they were going to
include in, what they were trying to do was basically inflate
their upper payment limit for their outpatient hospital
service. So it is not an issue whether or not you are going to
pay for a clinic service; it is how it can be used to count
toward potentially supplemental payments.
Mr. Davis of Virginia. To clarify the impact on
transportation services and Medicaid, could you try to explain
how the proposed rule affects the following: First,
transportation to school and back for non-school-aged children
to receive medical services.
Mr. Smith. For non-school-age, if they were receiving a
medical service at the school, we would pay in that respect.
Yes, sir.
Mr. Davis of Virginia. Transportation from school to a
community-based provider and back for medical services?
Mr. Smith. We would pay for that, Mr. Davis.
Mr. Davis of Virginia. OK. Coverage of medical equipment
necessary for a disabled student, like a breathing apparatus or
wheelchair, to be transported to and from the school?
Mr. Smith. In that respect, an individual is going to have
their own. A child who is on a respirator has the need for a
respirator before school, during school----
Mr. Davis of Virginia. Do you cover the equipment, though?
Mr. Smith. Yes, sir.
Mr. Davis of Virginia. Some of that equipment would be
covered by you, and that would continue to be covered?
Mr. Smith. That would already have been paid for by
Medicaid.
Mr. Davis of Virginia. Do you think that some of the
services included in therapeutic foster care, when unbundled,
will continue to be covered by Medicaid?
Mr. Smith. Again, Mr. Davis, that is the issue in terms of
when we are asking the States what are the components of what
they mean. Therapeutic foster care is kind of a catch-all term,
and different States are giving it different meanings. But in
terms of services, and particularly for individuals that are
mental health services, etc., those are all covered services.
It is the components that, as I suggested, pushing the corners
of the envelope----
Mr. Davis of Virginia. My time is up. Real quick,
conceptually what would be covered and what wouldn't be
covered? Do you have any concept of what you would be likely to
approve and what you wouldn't in an unbundled----
Mr. Smith. Again, when you are providing mental health
counseling, when you are providing intensive mental health
services, but when you are going and pushing to say therapeutic
foster care also means child care or some other type of more of
a social service, we would push back.
Chairman Waxman. Thank you, Mr. Davis.
Mr. Davis.
Mr. Davis of Illinois. Thank you very much, Mr. Chairman.
Thank you, Mr. Smith.
Mr. Smith, in recent speeches the President has repeatedly
said that the administration has a clear principle; that is,
put poor children first. Medicaid is the program that insures
the poorest children in America. Could you tell me how
prohibiting public school nurses from enrolling kids in
Medicaid is putting that principle of putting poor children
first?
Mr. Smith. Happy to respond, Mr. Davis.
One of the issues that we face is in the administration and
training side of what is being claimed. It is very difficult to
actually establish what is happening when we pay that. School-
based administration really is concentrated on only a handful
of States. Whether or not what they are doing with those funds
is widely discussed, GAO has done studies and acknowledged that
there were abuses in that setting.
Through audits we are finding Medicaid paying for capital
costs of schools because it is being hidden under
administration, and Medicaid is being billed for indirect
costs.
We obviously want every child who is eligible to be signed
up. I have had discussions with California, one of those
States. Illinois uses school-based administration. Those two
States combined account for 40 percent of all of the school
administrative costs that Medicaid is being paid for.
But if you want to sign a child up at school, which I have
suggested to California, have the social workers take their
laptop down to school on Tuesday afternoons and enroll people.
Mr. Davis of Illinois. You express a number of allegations
in your response. Could you tell me what sources of data CMS
relied on to develop this proposed rule with respect to both
school-based administrative claiming and transportation
services?
Mr. Smith. In terms of what data we have?
Mr. Davis of Illinois. Yes.
Mr. Smith. The data reporting is uneven because there are
different line items in the Medicaid service categories and in
administrative costs. There is not a school-based, per se, so
we are, to a large extent, relying on the States on how they
are reporting what they are doing. But in terms of informing
our decision, going forward our Inspector General reports, our
own financial management reviews, prior GAO reports. I know
Marjorie was here previously and wasn't aware of whether GAO
had spoken to school administration, but they did do a report
in 2000.
Mr. Davis of Illinois. Well, in this 2000 GAO report on
school-based Medicaid services, it was indicated that what was
then, of course, HCFA was providing confusing and inconsistent
guidance across regions and had failed to prevent improper
practices and claims in some States. I guess my question
becomes: what activities has CMS engaged in to improve such
oversight of school-based administrative claiming in response
to this GAO report.
Mr. Smith. Again, the way States typically talk to us is
through their State plan amendments. As State plan amendments
come in to us, we discuss those with the States, what is being
covered, what is not.
We did release a school-based administration claiming guide
in 2003 to clarify, for example, on the match rate on skilled
medical personnel.
We have States out there claiming without State plan
amendments. We have States out there claiming, saying that the
non-Federal share is being paid for with certified public
expenditures. We ask where are the certified public
expenditures to show that, in fact, the cost has been incurred
in the first place, that there was a non-Federal share. Quite
frankly, States are often in difficulty producing such
documentation.
So we have been increasingly uncomfortable that this is an
area that Medicaid is being appropriately making payments,
whether or not there is sufficient accountability. That is my
concern, that there is not.
Mr. Davis of Illinois. So you can trust the Medicaid
employees but not the school employees?
Mr. Smith. Mr. Davis, I think that there are a number of
examples to where schools and the Medicaid agency, even at the
State level, don't see eye to eye.
Mr. Davis of Illinois. Thank you very much.
Thank you, Mr. Chairman.
Chairman Waxman. Thank you, Mr. Davis.
Mr. Murphy.
Mr. Murphy. Thank you very much, Mr. Chairman.
I guess I want to talk about what is happening in the real
world out there, which is that you simply can't take a look at
the cuts that are being made in Medicaid and make statements
such as the one that you have made, or at least that the agency
has made, that special education funds should be taken care of
by the Education Department or that services for people with
mental illness should be the purview of SAMHSA and disease
prevention should be in public health without figuring out that
the Federal funds flowing to those programs are receiving the
same, if not worse, cuts than you are seeing under the ones
proposed by these regulations.
It would be one thing if the cuts you were proposing now
were being made up in increased or even stable funding in burn
grant funding, juvenile justice funding, in IDEA funding, in
maternal and child health block grant funding. But the fact is
that at the same time that these regulations are being
proposed, the very Federal funds that might assist States in
trying to find other avenues of funding have been cut, as well,
even with more Draconian cuts.
So I guess the question is this: when you are taking a look
at these cuts and making claims that these services should be
picked up by other State programs, is there any effort to take
a look at the other Federal programs that fund those services?
And is there any recognition of the fact that those funds
coming from the Federal Government that could potentially
supplement States in order to make up for your cuts are
experiencing even more drastic cuts? I mean, is there any view
toward that big a picture?
Mr. Smith. Thank you, Mr. Murphy. Again, in terms of
service, Medicaid services that Medicaid covers that is a
medically necessary service, again, we are saying yes to bill
Medicaid for that individual and we will pay for it.
Oftentimes, as I said, we are being stretched beyond that.
I think, to some extent, again, because there are
differences among States and local agencies where these
services, programs vary across the country, what we often find
it is it started at the local or State level and there is--
again, if you have a successful program that you believe is
working, that is effective, that is helpful in that
individual's life, you support that program.
Medicaid usually comes later, because then they are saying
now we have this program but we are paying for it with our own
dollars, but if we call it Medicaid--and, Mr. Murphy, there are
agencies, there are companies out there, that is their
business, for helping States to maximize Federal revenue and
helping States to say call it Medicaid. Now what was 100
percent State or local funded, we can now cut it in half
because we have called it Medicaid.
Mr. Murphy. With all due respect, sir, I don't think that
is what is happening, at least in Connecticut and many other
States, that there are these rampant abuses happening of things
just being called Medicaid. There are, in Connecticut's case,
legitimate rehabilitative services that were covered fully with
State dollars for years and now there is a choice being made to
take advantage of what has, for a very long time, been an
available Medicaid match.
I guess you continue to provide testimony this afternoon
regarding all these abuses. The solution then seems to be to
cut out eligibility of those services rather than to spend some
effort and finances and resources to root out the abuses that
are happening and make sure that we do not reimburse for those.
So it is a little hard to understand why we aren't here
talking about ratcheting up the ability of CMS to root out
abuse and fraudulent billing, rather than simply saying it is
too hard to figure out whether these administrative costs are
really being used for signing up kids or whether they are being
used to build walls, and so we are just not going to cover it
any more. Why don't we spend more time actually finding out who
is abusing the system and allow those who are doing it right to
still gain the benefit of the Medicaid match.
Mr. Smith. Yes, sir. And we are trying to do both. I mean,
we certainly want, through management reviews, through OIG
audits, want to get the abusing also, but it is also everybody
does want to know what the rules are and make sure all the
rules apply to everyone. If in region one the Federal
Government shouldn't be saying yes that is a rehabilitative
service in region one, but in region nine it is not. That
shouldn't happen, and that is, again, part of the rationale for
rulemaking in the first place, to make certain everybody does
have the same understanding.
Mr. Murphy. And I think that this committee and this
Congress would look forward to engaging in a process by which
we standardize some of those understandings rather than using
the non-standardization as an excuse to simply cutoff funding.
The last thing I will say, Mr. Chairman, is that I do think
that there needs to be a little bit more real-world experience
put into these rules, whether it is the reality of what these
new foster care guidelines will mean for families that are now
going to have to maintain very detailed and complicated billing
standards, whether it is the statement that you made that you
should settle this question for California by simply sending a
social worker down with a laptop. Well, in my State we don't
have enough money to give laptops to all of our social workers,
and the fact that they have more and more to do means that they
have less and less time to go down to the school.
The reality on the ground is that these school districts,
these social service departments are stretched so thin, these
parents who are taking on these very complex children with very
complex illnesses are stretched so thin, both emotionally and
logistically, that this is going to be very, very hard to
implement, and I think very, very hard to understand for people
that have less and less resources to do it with.
I yield back the balance of my time.
Chairman Waxman. Thank you, Mr. Murphy.
Mr. Shays.
Mr. Shays. Thank you. Again, Mr. Chairman, thank you for
having this hearing.
The sky isn't falling in. We are talking about $11 billion
savings in the increase over 5 years. We will spend a grand
total in the next 5 years of $1,258 billion, and it would be
$11 billion more if you didn't make these savings. So there is
a part of me that wants to know why you aren't doing a better
job of getting savings, not to blame you for finding 9/10ths of
1 percent in a budget.
There is no undeclared war on the part of the Bush
administration. I voted for the health care bill, CHIPs bill
for young people, but the President had legitimate arguments.
He said it shouldn't go to illegal aliens, he said it shouldn't
go to adults, and he said we should be trying to get those
children who are the poorest of the poor that are still part of
the program. So I think the President's position, while it is
not one that I voted for because I want to expand the program,
is not one that says we are declaring war against kids.
Let me ask you, with regard to inter-government transfers,
can you speak to what challenges the inter-governmental
transfers involving public, non-governmental hospitals raises
for CMS, both from a fiscal integrity of the Medicaid program
point of view and from conducting oversight of the use of
Medicaid funds?
Mr. Smith. Yes, Mr. Shays.
Again, let me hasten to say there is an inter-governmental
transfer recognized in the Medicaid statute that is
permissible. What it means by that is the State can share its
cost with local government. That is perfectly fine. We are not
challenging that. But what has been termed inter-governmental
transfer, we have generally been referring to it as recycling.
With a provider in 1903, I believe, Congress put a limitation
that says non-governmental entities cannot pay the State's
share. I am simplifying it, but basically the taxes and
donations provision.
What was happening with non-governmental entities were
payments were being made and then payments were being returned.
We are looking at that as recycling, because we are saying what
should we match. If the bill was presented to us for $100, that
a service was provided for $100 and in a 50/50 State like
Connecticut State paid $50, we paid $50, but we find out on the
back end that the hospital or the nursing home returned, after
they got paid, returned $25 back to the county or the State
government.
Mr. Shays. So in essence the Federal Government was paying
more of the cost than 50 percent?
Mr. Smith. Correct.
Mr. Shays. Let me ask you another question. With regard to
rehabilitation services, school transportation, school
administrative costs, hospital outpatient services, and
graduate medical education, the chairman said, if I heard him
correctly, that these programs were going to be discontinued.
Is Medicaid eliminating these services for eligible
beneficiaries?
Mr. Smith. No, sir. Medical services that are medically
necessary will continue to be covered.
Mr. Shays. And does CMS anticipate that these changes will
result in the denial of services?
Mr. Smith. There should not be being denied services
because we clearly are saying we will pay our share for those
services.
Mr. Shays. Let me ask you another question. On the first
panel we heard from Ms. Barbara Miller about how important
Medicaid rehabilitation services were to bringing her to where
she is today. Can you speak to how, either under this proposed
rule or under other aspects of the Medicaid program, maybe
through waiver authorities, such services as psychiatric
rehabilitation will still be covered?
Mr. Smith. Yes, sir. It will take a little bit of an
explanation, if you will forgive me. Rehabilitative services in
terms of what she spoke so eloquently about, what is called
assertive community treatment--and I have stated publicly and
to all types of audiences that assertive community treatment is
a model of care and it is a model of care that we do presently
support, and we have said we are willing to support. We
recently released a State Medicaid director letter again that
is very pertinent to people with mental illness on peers of
saying that Medicaid reimbursement is available for peer
counseling.
So, again, there are models of care that we currently
support, that we believe we will continue to support under the
rehabilitative services issue.
The habilitation side to where you are getting into--it is
not rehabilitation, but habilitation, such as an adult day
center, that really belongs to the other side of the Medicaid
program of home and community-based waivers, which really is
more of a social support mechanism to pay for those things to
help people stay in the community, but they are not
rehabilitative services. They are not medical services.
So States have that option, as well, for individuals to do
adult--if you have a program for adult day program, that
belongs on over on the home and community-based services side
of the program and we would continue to support that if that is
what the State chose to do.
Mr. Shays. Thank you, Mr. Chairman.
Mr. Smith. Yes, sir.
Chairman Waxman. Thank you, Mr. Shays. We give a lot of
options to States and everybody else to come up with money that
the Federal Government won't buy. Or States also have the
option of saying no, they don't have the money.
Mr. Cooper.
Mr. Cooper. Thank you, Mr. Chairman. And thanks to all the
witnesses on both panels.
I think the only thing we all can agree on is that no one
would want Dennis Smith's job. It is a tough one.
Everybody here knows that this is not just a hearing on
whether we have illegally aggressive regulations being
promulgated. The hearing is really about the collapse of the
U.S. health care system, and this is just evidence of it.
Rather than focus on the negative, I think it is important to
recognize that we all have a responsibility in this collapse.
I was struck by the testimony on the earlier panel of Drs.
Gardner and Retchin, particularly the emergency room story, but
Congress passed the law years ago and made it an unfunded
Federal mandate. We require hospitals to see most all comers--
you can go on diversion--and we didn't pay them for it. We are
surprised that the number of ERs in America have gone down
relative to the needy population?
There are so many other aspects of this problem. We really
need hearings like this every day for years to try to get to
the bottom of it.
I am from a State that has been guilty of gaming the
Medicaid system. I am embarrassed by that. As we took our
legitimate 65 to 67 percent match, in some years we made it 92
percent. Why? Because we wanted to and we could get away with
it. That doesn't make it right.
These six regulations, I don't think nobody here is
defending them. You still have to because you work for the
administration, but it is amazing that in such a giant program
that only $11 billion of savings was found.
I am not suggesting that these are the best ways, but this
is such a fly speck of a larger problem. It is almost
embarrassing.
The Comptroller General of the United States, David Walker,
has written that we face $50 trillion in outstanding
obligations, mainly health care. Today we have no idea how to
fund those.
And not a penny of that $50 trillion is Medicaid, because
we don't even have the analytical tools to describe the hole
that we are in in Medicaid. Some analysts, like Hal Jackson of
Harvard, say that these problems are getting worse to the rate
of $3 trillion or $4 trillion a year. Of course, the President
denies that because he doesn't want the broader measure of our
deficit problems.
But that means that any reform proposal that would gain
ground on this problem would have to save more than $3 trillion
or $4 trillion a year. That is unimaginable. I don't know of
any group in this country who has come up with a reform
proposal of that scale.
Meanwhile, we are like the blind men of Hindustan. You
know, we see a portion of the problem and each complain
fiercely it looks like a snake to one, a tree trunk to another,
a wall to another, and in fact it is an elephant. And we can
get mad at each other and finger point and complain and all
that, but meanwhile we are confronted by an elephant, and I
don't see many people in Congress or outside of Congress that
are doing much about it. We need comprehensive health care
reform that looks at all aspects of the problem, because
Medicaid is one of our most important programs.
The chairman of this committee helped build this program.
Committee staff helped build this program. It is painful for
them to see it dismantled piecemeal, because piecemeal
solutions don't work for anybody--patients, doctors, lawmakers,
families.
So it is hard to get at all these issues, and I know I just
have a short period of time, but one of the unspoken issues in
this hearing is federalism. Under Medicaid we give States so
much leeway. I can't help but know the irony that there is Dr.
Retchin sitting behind you and he used to run Virginia
Medicaid. Dr. Gardner has her former Governor, now President of
the United States, from Texas, and Texas is one of the States
that has pioneered specialty hospitals that have no emergency
rooms. The national case recently of the person who was dying
in a Texas specialty hospital, had to call 9-1-1 because there
was no emergency treatment in a Texas hospital because Texas
law allows that to happen, why is that?
Now, do we need to override State flexibility? That is an
outrage. Yet, it is happening more and more across our country.
And that is not technically a U.S. responsibility. The State
did it.
Texas has more uninsured children, I think, than almost any
other State in America, 25 percent. What an embarrassment.
Texas is not a poor State, but they are not taking care of
their own kids. Is that our fault?
So there are all these problems we are not beginning to
deal with as a Nation, and I just have 5 minutes to make a
quick statement, but, for the written record, I would like from
you the policy choices that you could have made instead of
these six regs, because there have to be other better ways to
save money in the Medicaid program. We spend $2 trillion on
health care in America, yet no one wants to give up a penny of
what they are receiving, and yet we don't have the best health
care in the world. So I would just like to know, from the menu
of choices, why you all came up with this $11 billion and which
choices you rejected.
I see that my time has expired, Mr. Chairman. Thank you.
Chairman Waxman. Thank you, Mr. Cooper.
Mr. Cummings.
Mr. Cummings. Thank you very much, Mr. Chairman.
Mr. Smith, it is good to see you again.
Mr. Smith. Yes, sir.
Mr. Cummings. As you know, on October 18, 2007, President
Bush issued the Homeland Security Presidential Directive No.
21. You are familiar with that, are you not?
Mr. Smith. [No audible response.]
Mr. Cummings. Well, let me tell you what it says. You look
a bit confused. This directive is intended to establish a
national strategy for public health and medical preparedness
that will ``transform our national approach to protecting the
health of the American people against all disasters.''
Directive 21 instructs the Secretary of Health and Human
Services to undertake several critical tasks. Among these are
two of particular relevance to our hearing today. The first
deals with medical surge capacity that we have heard a bit
about during the first panel. Of course, that is the ability of
the hospitals and the public health systems to treat large
numbers of casualties in a short span of time.
The second instructs the Secretary to ``identify any legal,
regulatory, or other barriers to public health and medical
preparedness in response from Federal, State, or local
government or private sector sources that can be eliminated by
appropriate regulatory or legislative action.''
Based on what we heard from the physicians on the first
panel, it seems clear that your proposed regulations constitute
a significant legal and regulatory barrier to public health and
medical preparedness and response, and, as such, they appear to
violate the President's own directive.
How do you respond to those concerns?
Mr. Smith. Mr. Cummings, in terms of the cost regulation
that we have proposed, as I have tried to explain, our policy
says the hospital or nursing home or whomever is actually
providing the service should get paid and get to keep the money
for the service they provided. I don't see that as a conflict
with what you have just described.
Mr. Cummings. Did you hear I think it was Dr. Gardner's
testimony when she talked about----
Mr. Smith. I did, sir. Yes.
Mr. Cummings. How does that strike you that anybody sitting
in this room--we have, I guess, about 100 people in here--
anybody could get sick down there in Texas, I think it is, and
be in a position where the patient that she talked about, not
even able to get a bed. Does that bother you? I mean, when you
hear things like that, does it make you think about that when
you go to bed at night and put your family to bed? Do you say
to yourself, Boy, it is kind of hard for me to sleep thinking
that there are people in the United States, some of them my own
neighbors, who might be placed in that position?
Mr. Smith. Mr. Cummings, I have devoted most of my career
to public service. I do it precisely for people who need the
support and help of their neighbors.
Mr. Cummings. And so you sleep well at night?
Mr. Smith. Yes, sir, I do.
Mr. Cummings. I see. So you feel, as far as these
directives are concerned, when it comes to the graduates, the
graduate schools, does that concern you that we may have some
problems there? You heard the testimony about them?
Mr. Smith. Health care has many different parts to it, and
I absolutely want to make certain Medicaid does its part, but
to take on the responsibility of other functions, programs,
etc., there are lots of different choices on how to address the
graduate medical situation and the hospitals, themselves, that
participate in it.
For example, in New York, as New York was one of the
previous witnesses, New York has a $3 billion disproportionate
share hospital system. They could use that entire amount for
indigent care, but that is a choice that New York makes in the
Federal-State partnership.
Mr. Cummings. Well, I am going to conclude because I see we
are running out of time and I see that Mr. Kucinich is here,
but it seems clear that your agency's rulemaking will harm
disaster preparedness in many of our Nation's cities and
undermine Federal efforts to strengthen medical surge capacity
for pandemic flu, bioterrorism, and other public health
threats. At a time when the Congress is providing the
Department of HHS billions to enhance emergency preparedness,
your agency, in my opinion, is undermining key elements of our
Nation's preparedness infrastructure.
I have often said that when we come to positions that we
should make them better. I know that you are going to leave
here saying that you are going to probably make it better, but
I am telling you, after your tenure I think it will be worse. I
hate to say that. And I do pray for you as you sleep in peace.
Chairman Waxman. Thank you, Mr. Cummings.
Mr. Kucinich.
Mr. Kucinich. Thank you. I want to thank my colleague, Mr.
Cummings. I would ask him if he has a moment if he can stay,
because these questions relate to something you and I have
worked on together.
Mr. Smith, in May you appeared before the Domestic Policy
Subcommittee of this committee, which I am the Chair of the
subcommittee, at a hearing on the serious failures to provide
dental services to children in Medicaid in general and the
resultant death of a child in Maryland, Deamonte Driver. At the
time you said you would check on the actual services available
in Maryland. Since that time, the subcommittee did its own
research, including an audit of United Health Group's claims
records in the county where Deamonte Driver lived and died.
Here is what my subcommittee found: that Deamonte Driver
was 1 of over 10,780 Medicaid eligible children in Maryland who
are enrolled in United Health's Medicaid Managed Care
Organization and who had not seen a dentist in 4 or more
consecutive years. Only seven dentists provided 55 percent of
total service to United beneficiaries in Prince George's
County, MD. Nineteen dentists listed in United's dental network
provided zero services to eligible children in Prince George's
County, MD.
Twenty-two dentists listed by United provided services to
only one child merely a single time, and 45 dentists care for
eligible children less than 10 times in Prince George's County,
MD, and 7 dentists were unreachable by phone.
These findings are appalling, but at least one thing has
changed: United Health no longer denies the truth about the
inadequacies of their provider network in Prince George's
County, MD. On October 18th, they wrote a letter to me in which
they conceded that my subcommittee's findings were accurate.
They said, ``We concur with the majority staff's findings.''
My question for you, Mr. Smith, is, would you please tell
this committee if CMS had conducted an audit of United Health
and was aware of the specific inadequacies of United's dental
provider network prior to our subcommittee hearing?
Mr. Smith. Prior to your hearing we had not looked at the
individual records.
Mr. Kucinich. Since the hearing has CMS conducted an audit?
Mr. Smith. I spoke with counsel beforehand. I would be
happy to speak with you off the record, if that would be fine.
Mr. Kucinich. You took an oath.
Mr. Smith. I did take an oath.
Mr. Kucinich. Has CMS conducted an audit?
Mr. Smith. We are taking additional steps, Mr. Kucinich.
Mr. Kucinich. What about the findings?
Mr. Smith. The findings, sir, are not in at this point. We
have not made a final determination.
Mr. Kucinich. Will you provide this committee all documents
and findings within 2 weeks?
Mr. Smith. I don't expect it will be completed by then, Mr.
Kucinich, but when we are completed we will be happy to share
the information we have with the subcommittee, with the full
committee.
Mr. Kucinich. Will you provide them in 4 weeks?
Mr. Smith. [No audible response.]
Mr. Kucinich. Six weeks? Eight weeks? Three months? Four
months? When will you provide this committee with the
information that you claim you are trying to get that reflects
upon the death of a young man? When will you provide us with
the information?
Mr. Smith. I will furnish it as soon as it is completed. I
will furnish you all the records that we have. I am not certain
when this will be conducted. I expect it will be done before
the end of the year.
Mr. Kucinich. Mr. Chairman and Mr. Smith, Mr. Smith, we
know how bad the problem is in the State of Maryland and we
know where you were before our committee hearing. We are
wondering what a national audit would show. Has CMS undertaken
a national audit in this regard?
Mr. Smith. We are looking at other States, Mr. Kucinich.
Mr. Kucinich. Will you provide this committee all documents
and findings on those audits?
Mr. Smith. I am happy to provide what we find.
Mr. Kucinich. How many other States, sir?
Mr. Smith. We have just started another State. We are
looking at States to look beyond that in terms of where to go
after that.
Mr. Kucinich. Mr. Chairman, I ask unanimous consent to have
another minute.
Chairman Waxman. OK.
Mr. Kucinich. I would just say that our subcommittee is
going to be relentless on this, Mr. Smith. You are not going to
be able to avoid--unanimous consent, Mr. Chairman, for another
minute. My time has expired.
Chairman Waxman. I am sorry. The problem we have now is we
have a vote.
Mr. Kucinich. I just want to conclude then by saying that
you are not going to be able to avoid the scrutiny of our
subcommittee or, I am sure, of this full committee. There is a
little boy in Maryland who died. We are not going to have any
more children dying because CMS has not done effective
oversight of these people who are providing care in the name of
the Government of the United States, period.
Mr. Smith. Mr. Kucinich, if I may, Mr. Chairman, I think
the work of the subcommittee was extremely helpful and
important, and I hope that you would view us as working
together on the problem rather than seeing us as an adversary
on this issue, because I do not feel that way. I think that we
share the same interest.
Mr. Kucinich. I agree. We are going to work together.
Chairman Waxman. Mr. Engel, do you have some questions you
want to ask in the short time we have left?
Mr. Engel. Yes, thank you. Thank you, Mr. Chairman. Let me
thank you for allowing me to participate. I know there is a
vote on, so rather than ask all the questions I just want to
make a very brief statement.
I want to thank you for your leadership. Obviously, I have
also been very troubled by the recent rules proposed by CMS and
from what I consider their absolute disregard for Congress.
Major Medicaid reforms require a congressional role, and by
rushing to publish these regulations CMS, in my opinion, has
disregarded congressional opposition and attempted to usurp
Congress' role and, more importantly, CMS appears to have no
regard for our safety net providers and the low income people
whose health care would be decimated if these rules were
allowed to come to be inactive.
As you discussed today, CMS issued a proposed Medicaid
regulation that, in my opinion, threatens public hospitals'
ability to deliver vital services and stand ready in the case
of a natural disaster or public emergency. This regulation
would cut at least $4 billion in Medicaid funding to safety net
hospitals nationwide over 5 years, and CMS subsequently added
and issued an additional regulation that would force billions
of dollars in Medicaid payment reductions to teaching
hospitals, many of whom are public hospitals, which hampers the
ability of these providers to provide essential services,
including the education of the next generation of medical
professionals, despite a shortage of medical professionals.
While we have a 1-year moratorium in place until next May
on staying these regulations, if we don't act soon, States,
hospitals, and safety net providers are going to have to
prepare for the worse, which is catastrophic draft and funding.
That is why I introduced H.R. 3533, which has been mentioned
several times here today, the Public and Teaching Hospitals
Preservation Act, which I am proud to say has 143 bipartisan
co-sponsors. You, Mr. Chairman, have been instrumental.
Mr. Smith, I am just wondering if you could please submit
to me for the record. It is not possible--some of our
colleagues said it before--with the financial pressure these
institutions face, these public hospital systems, to sustain
these kinds of sweeping cuts, so I would like you to, in
writing, tell me how you expect safety net providers that
provide essential care to hundreds of thousands of patients
that walk through their doors to continue delivering this care.
It is just not possible. It is not possible.
And the second question is: the teaching hospitals in my
home State of New York currently receive $1.2 billion in
Medicaid GME, graduate medical education, payments annually. If
your proposal to eliminate Medicaid GME payments is
implemented, you will be essentially cutting medical education
payments to New York by 40 percent. We have 15 percent of the
teaching hospitals in the country, so it is simply a
devastating cut to the teaching hospitals in New York; indeed,
to the country, and hospitals across the State. So I do not
understand why the administration is pulling support away from
training America's future doctors, particularly at a time when
there was a well-documented physicians' shortage looming.
If each payer isn't expected to contribute its fair share,
who is expected to make up the difference?
I will take it in writing, but I just think these are
unconscionable.
Mr. Smith. We will be happy to respond, sir.
Chairman Waxman. Thank you, Mr. Engel.
Mr. Smith, as we conclude, your proposals would have the
impact of reducing payment to the States by $11 billion over
the next 5 years. The costs that these Federal dollars now pay
for will not magically disappear. People with mental illness
will still need rehabilitation services, school-age children
will still need health care. But under your proposed rules, the
Federal Government will no longer pay for many of these costs.
In other words, what is being proposed is a massive cost shift
from the Federal Government to the States, the largest Medicaid
regulatory cost shift in memory, and Medicaid has always been a
Federal-State partnership.
Second, these proposed rules will result in major
disruptions in the State Medicaid programs. Some of these rules
threaten key elements of our Nation's health care
infrastructure and could harm emergency preparedness. These
effects are not well understood because CMS has not done any
State by State specific analysis of the impact of its
regulation. Perhaps this is because CMS does not have the
necessary information, perhaps it is because CMS doesn't want
to know. In either case, it is very troubling.
I hope, Mr. Smith, that you or Secretary Leavitt will be
moved by what we have learned today and direct CMS to withdraw
these proposed rules. If it does not, it will be up to the
Congress to take the necessary measures to protect States,
hospitals, physicians, and Medicaid beneficiaries from these
reckless proposals.
I think you understand where we are coming from, what we
feel about this. There is a great deal of intensity. I have to
tell you, I don't recall your being elected to any office to
write the laws. We were. If you are acting improperly, we will
have to take appropriate measures to make sure the laws are
enforced, not denigrated.
Thank you for being here. Thanks to the first panel, as
well. That concludes our hearing. The meeting stands adjourned.
[Whereupon, at 2:05 p.m., the committee was adjourned.]
[The prepared statements of Hon. Edolphus Towns, Hon. Danny
K. Davis, Hon. Diane E. Watson, and Hon. Bruce L. Braley, and
additional information submitted for the hearing record
follow:]
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