[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
H.R. 5613, THE PROTECTING THE MEDICAID SAFETY NET ACT OF 2008
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
APRIL 3, 2008
__________
Serial No. 110-104
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
JOHN D. DINGELL, Michigan, Chairman
HENRY A. WAXMAN, California JOE BARTON, Texas
EDWARD J. MARKEY, Massachusetts Ranking Member
RICK BOUCHER, Virginia RALPH M. HALL, Texas
EDOLPHUS TOWNS, New York FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey CLIFF STEARNS, Florida
BART GORDON, Tennessee NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois ED WHITFIELD, Kentucky
ANNA G. ESHOO, California BARBARA CUBIN, Wyoming
BART STUPAK, Michigan JOHN SHIMKUS, Illinois
ELIOT L. ENGEL, New York HEATHER WILSON, New Mexico
ALBERT R. WYNN, Maryland JOHN B. SHADEGG, Arizona
GENE GREEN, Texas CHARLES W. ``CHIP'' PICKERING,
DIANA DeGETTE, Colorado Mississippi
Vice Chairman VITO FOSSELLA, New York
LOIS CAPPS, California STEVE BUYER, Indiana
MIKE DOYLE, Pennsylvania GEORGE RADANOVICH, California
JANE HARMAN, California JOSEPH R. PITTS, Pennsylvania
TOM ALLEN, Maine MARY BONO, California
JAN SCHAKOWSKY, Illinois GREG WALDEN, Oregon
HILDA L. SOLIS, California LEE TERRY, Nebraska
CHARLES A. GONZALEZ, Texas MIKE FERGUSON, New Jersey
JAY INSLEE, Washington MIKE ROGERS, Michigan
TAMMY BALDWIN, Wisconsin SUE WILKINS MYRICK, North Carolina
MIKE ROSS, Arkansas JOHN SULLIVAN, Oklahoma
DARLENE HOOLEY, Oregon TIM MURPHY, Pennsylvania
ANTHONY D. WEINER, New York MICHAEL C. BURGESS, Texas
JIM MATHESON, Utah MARSHA BLACKBURN, Tennessee
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
_________________________________________________________________
Professional Staff
Dennis B. Fitzgibbons, Chief of Staff
Gregg A. Rothschild, Chief Counsel
Sharon E. Davis, Chief Clerk
David Cavicke, Minority Staff Director
(ii)
Subcommittee on Health
FRANK PALLONE, Jr., New Jersey, Chairman
HENRY A. WAXMAN, California NATHAN DEAL, Georgia,
EDOLPHUS TOWNS, New York Ranking Member
BART GORDON, Tennessee RALPH M. HALL, Texas
ANNA G. ESHOO, California BARBARA CUBIN, Wyoming
GENE GREEN, Texas HEATHER WILSON, New Mexico
Vice Chairman JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado STEVE BUYER, Indiana
LOIS CAPPS, California JOSEPH R. PITTS, Pennsylvania
TOM ALLEN, Maine MIKE FERGUSON, New Jersey
TAMMY BALDWIN, Wisconsin MIKE ROGERS, Michigan
ELIOT L. ENGEL, New York SUE WILKINS MYRICK, North Carolina
JAN SCHAKOWSKY, Illinois JOHN SULLIVAN, Oklahoma
HILDA L. SOLIS, California TIM MURPHY, Pennsylvania
MIKE ROSS, Arkansas MICHAEL C. BURGESS, Texas
DARLENE HOOLEY, Oregon MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York JOE BARTON, Texas (ex officio)
JIM MATHESON, Utah
JOHN D. DINGELL, Michigan (ex officio)
C O N T E N T S
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Page
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 1
Hon. Nathan Deal, a Representative in Congress from the State of
Georgia, opening statement..................................... 3
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, opening statement................................. 11
Hon. Sue Wilkens Myrick, a Representative in Congress from the
State of North Carolina, opening statement..................... 12
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 13
Hon. Tim Murphy, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 14
Hon. Lois Capps, a Representative in Congress from the State of
California, opening statement.................................. 15
Hon. Hilda L. Solis, a Representative in Congress from the State
of California, opening statement............................... 16
Hon. Edolphus Towns, a Representative in Congress from the State
of New York, opening statement................................. 18
Hon. Tammy Baldwin, a Representative in Congress from the State
of Wisconsin, opening statement................................ 19
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 19
Hon. Heather Wilson, a Representative in Congress from the State
of New Mexico, prepared statement.............................. 141
Witnesses
Marsha Raulerson, M.D., FAAP, Practicing Pediatrician, American
Academy of Pediatrics.......................................... 21
Prepared statement........................................... 24
Randy Mohundro, Superintendent, Deleon Independent School
District, Executive Committee Director, American Association of
School Administrators.......................................... 29
Prepared statement........................................... 32
Grace Marie Turner, President, Galen Institute................... 41
Prepared statement........................................... 43
Stuart Shapiro, M.D. Presidet and CEO, Pennsylvania Health Care
Organization................................................... 51
Prepared statement........................................... 53
James Cosgrove, Ph.D., Acting Director, Health Care Issues,
Government Accountability Office............................... 60
Prepared statement........................................... 62
James E. Buckner, Jr. CHE, Administrator......................... 81
Prepared statement........................................... 83
Joseph R. Antos, Ph.D., Wilson H. Taylor Scholar in Health, Care
and Retirement Policy, American Enterprise Institute........... 88
Prepared statement........................................... 89
Barbara Coulter Edwards, Interim Director, National Association
of State Medicaid Directors (NASMD)............................ 92
Prepared statement........................................... 93
Dennis G. Smith, Director, Center for Medicaid and State
Operations, Centers for Medicare and Medicaid Services......... 111
Prepared statement........................................... 114
Herb Conaway, Jr., M.D., State Assemblyman, Legislative District
7, State of New Jersey......................................... 126
Prepared statement........................................... 128
John G. Folkemer, Deputy Secretary, Health Care Financing,
Department of Health and Mental Hygiene........................ 133
Prepared statement........................................... 135
Submitted Material
H.R. 5613........................................................ 5
H.R. 5613, PROTECTING THE MEDICAID SAFETY NET ACT OF 2008
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THURSDAY, APRIL 3, 2008
House of Representatives,
Subcommittee on Health,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:00 a.m., in
room 2123 of the Rayburn House Office Building, Hon. Frank
Pallone (chairman) presiding.
Members present: Representatives Pallone, Waxman, Towns,
Green, DeGette, Capps, Baldwin, Solis, Dingell (ex officio),
Deal, Wilson, Pitts, Myrick, Murphy, Burgess, and Blackburn.
Staff present: Bridgett Taylor, Amy Hall, Purvee Kempf,
Jodi Seth, Brin Frazier, Lauren Bloomberg, Hasan Sarsour, Ryan
Long, Brandon Clark, and Chad Grant.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. The subcommittee hearing is called to order.
And today we are having a hearing on H.R. 5613, Protecting
the Medicaid Safety Net Act of 2008.
I will first recognize myself for an opening statement, and
say that I am very proud to be a cosponsor of this legislation
that was introduced by Chairman Dingell and Representative
Murphy in order to protect Medicaid beneficiaries from an
onslaught of harmful regulations issued by the Bush
Administration. Medicaid, as you know, has been a reliable
source of medical care, as well as specialized support and
services for our most vulnerable population. Medicaid has also
assisted millions of American children in receiving the
healthcare services necessary to allow them to grow into
productive and active members of society. Thanks to the medical
program, children have access to services such as early
screenings for medical and developmental problems, dental care,
vision services, and physical, speech and occupational therapy.
All of which enable children who formerly would have been
incapable of attending schools to participate in the public
education system and receive a good education. Now, in spite of
these successes the Bush Administration has launched an all out
attack on Medicaid, issuing a constant stream of regulations
that seeks to reduce the scope and breath of this vital
program. I believe that the goals of these regulations are
entirely at odds with the mission of the Medicaid program. And
while these regulations may provide instant gratification in
CMS's estimated cost savings of $15 billion over 5 years, in
the long run states will be forced to bear the burden of an
even larger healthcare crisis. And as the House Committee on
Government Reform and Oversight estimates, this is on the order
of nearly $50 billion over 5 years.
For example, I can't understand the logic in limiting
hospital outpatient services. The cost of rehospitalization is
exponentially more expensive than the cost of providing
preventative outpatient care. It is for this regulation the
Bush Administration would in effect force people to forego
vital preventative services and they would end up in the
hospital sicker than they were before. The regulation
pertaining to targeted case management services, particularly
infuriating to me, as it misuses congressional intent under the
guise of improving the Medicaid program. This rule goes far
beyond the authority afforded to CMS. And in my State of New
Jersey alone would result in a reduction of payments of nearly
$100 million over 5 years. More individuals would be forced to
remain in institutions without vital case management support to
assist them in tasks such as finding jobs and managing numerous
chronic diseases, and the medical complexities that are
associated with chronic conditions. This regulation will
undoubtedly lower the overall quality and quantity of service
case managers can provide.
Also, narrowing the definition of rehab services is another
obvious step backward by limited access to services necessary
to remain out of institutional living. In 2004, some 1.5
million people received rehabilitative services through
Medicaid, and it is estimated that three-fourths of these
people suffer from mental illness. Under this regulation,
states would be restricted from providing these individuals
with rehab services, leading to potentially explosive numbers
of reinstitutionalized individuals. Another harmful regulation
seeks to eliminate funding for administrative activities
performed by schools to assist children with disabilities in
accessing specialized transportation. They need to get to
school and receive specialized medical services, including
occupational therapy, physical therapy, speech and language
therapy. All of which are absolutely crucial in helping these
children become active, working members of society.
Last month the subcommittee invited five governors to talk
about their SCHIP, their State Child Health Insurance Programs.
And each of them made a point of voicing their concerns on the
damaging effects of these regulations on each of their states,
and those governors were both Republican and Democrat. In
particular, limitations to graduate medical education dollars
were of grave concern. GME funding is essential for the
operation of teaching hospitals, which not only serve many
Medicaid recipients, but which also are vital players in the
training of future professionals. By slashing billions of
dollars from state Medicaid programs, shifting costs to the
states, many of which are strapped for cash as is, these
regulations could seriously jeopardize the health care of
millions of low-income and disabled Americans. In fact, I,
along with my colleagues Mr. Dingell, Mr. King, and Mr.
Reynolds, introduced a bill to temporarily increase the FMAP
funds to states during this time of recession, so that states
may continue to offer critical services instead of being forced
to cut them as the Bush Administration is proposing.
Now, it gives me hope that we will be able to successfully
stop this attack on our Nation's safety net, as just a few days
ago all 50 governors signed a letter of support for this bill
that we have before us. I would like to thank each of our
witnesses for being here today to talk about the ways in which
these regulations will affect your communities. I look forward
to hearing stories, not just about the individuals that would
be affected by the regulations, but also any success stories
that speak to the power of the Medicaid program to keep
citizens active and productive in our society.
Mr. Pallone. And I will now recognize Mr. Deal for an
opening statement.
OPENING STATEMENT OF HON. NATHAN DEAL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF GEORGIA
Mr. Deal. Thank you, Mr. Chairman. I thank you for holding
the hearing today.
We should all concentrate our efforts, I think, today on
the bigger picture, which is to try to keep the Medicaid
program solvent and fulfilling its original obligations.
However, if Medicaid is going to be able to continue its
mission to service the poor and disabled, we must be willing to
address the financial sustainability of the current program. As
the Congressional Budget Office has stated in its most recent
budget and economic outlook, the future rates of growth for the
government's major health care programs, Medicare and Medicaid,
will be the primary determinant of the Nation's long-term
fiscal balance. Under current projections, the Medicaid program
alone will cost the federal taxpayers $3.34 trillion over the
next 10 years. Because Medicaid is a Federal-state matching
program, the states will be responsible for an additional $2.44
trillion in payments for the Medicaid program. These numbers
are alarming to me and they should be to every member of this
committee. When states and the Federal Government are already
struggling to meet their obligations under this program, it is
hard to entertain ideas of expansion or simply ignore potential
reforms.
In fact, in the last Congress, the then Democrat Governor
of the State of Virginia testified before this committee on
behalf of the National Governor's Association that unless
Congress took some drastic action that Medicaid was
unsustainable and was in a melt-down posture. That has not
changed in my opinion. Instead, we should be focusing our
efforts today on addressing the rapid fraud and abuse in
Medicaid. At a time of tight budgets we should not be taking
money away from those in need in order to pay for program
abuses. In regard to these regulations that we are looking at
today, I believe it is important for us to keep them in the
proper context.
First, they should be seen in a proper financial context.
Some supporters of the legislation have given the impression
that these regulations would represent a devastating cut to the
Medicaid program. Reducing the rate of growth of the Medicaid
program by $1.65 billion is not a cut. Medicaid is projected to
grow at a rate of well over seven percent during the next year
alone, meaning that federal spending would increase by about
$20 billion over the next year. If the Administration rule
reduces the spending increase from 20 billion to 18 billion,
the Medicaid program is still growing at an unsustainable rate
several times larger than inflation. Simply put, if these rules
were ever implemented they would only reduce federal and
Medicaid spending by less than one percent.
Secondly, these rules were crafted in response to well
documented cases of abuses in the Medicaid program. The
Department of Health and Human Services Office of the inspector
general has provided numerous examples of improper payments,
which these rules are designed to address. Of course, like any
other product produced by a Federal bureaucracy, these rules
are not perfect. And I am confident in the ability of Congress
to work cooperatively with the Administration and the states in
order to produce policies that are both more effective and
easier for states to implement that addresses these abuses.
However, this bill does not do anything to facilitate to
improve or improve Medicaid policies. To me it is irresponsible
for the Committee of jurisdiction for the Medicaid program to
simply ignore documented cases of improper payments. Instead,
we should be trying to amend these regulations to improve the
Medicaid program to the extent underfunding and other areas
like IDEA, or Medicaid reimbursement for services, have
contributed to the activities that these rules seek to address.
We should be examining those underlying problems. As the
Committee of jurisdiction it is our responsibility to fix the
Medicaid program when it fails Medicaid beneficiaries. However,
overlooking these issues until the next Administration simply
prolongs a broken system.
I look forward to the testimony of our witnesses about
substantive ways to amend these regulations while still
addressing some of the real abuses in the Medicaid program. I
hope that this committee will be able to pursue reforms which
ensure our limited resources as being spent in those most in
need, rather than simply continuing to ignore these issues
through annual moratoria.
If the object of the regulations is to keep the program
solvent, simply putting a hold on the regulations doesn't solve
the financial motivation behind them. We can all, perhaps, find
reasons to object as to the way they go about it. But if you
object to the way these regulations go about it, then you ought
to suggest to us, and we all ought to work cooperatively, to
achieve reasonable and sufficient goals in a different format.
Now, I am afraid that what I have heard thus far is simply
criticism of the existing proposed regulations, and no
suggestion as to how we can solve the underlying financial
issue that is the motivation for those regulations. Hopefully,
this hearing will provide those for us today.
Thank you.
Mr. Pallone. Thank you, Mr. Deal.
I have recognized for an opening statement----
Mr. Deal. Can I make one other request?
Mr. Pallone. Sure.
Mr. Deal. Unanimous consent request that, for the record,
we include the regulations that are the subject of this
proposed piece of legislation in the record. I think that would
be appropriate.
Mr. Pallone. Without objections so ordered.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Deal. Thank you.
Mr. Pallone. Mr. Waxman, for an opening statement. Oh, Mr.
Dingell is here. I apologize--Chairman Dingell is recognized
for an opening statement.
OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Dingell. Mr. Chairman, I thank you. Mr. Chairman, I
commend you for holding this hearing on H.R. 5613.
This is a very valuable event, and the legislation
introduced by our good friend and colleague, Mr. Murphy, and I
is, I believe, an important piece of legislation. And I want to
commend it to my colleagues as being a good piece of
legislation much in the public interest. And I want to commend
my colleague from Pennsylvania for his willingness to work in a
bipartisan fashion on this very important issue.
I would observe that yesterday the Committee had a rather
remarkable day in which we passed a very fine piece of
legislation in a very carefully thought out and bipartisan
fashion. It is my hope that we will be able to continue that
kind of undertaking as the session goes forward.
The Protecting the Medicaid Safety Net Act of 2008 is a
very simple, straightforward bill. It would place a temporary
moratorium on seven regulations recently issued by the Centers
for Medicare and Medicaid services, CMS. These regulations
would reduce or eliminate payments for services provided to
extremely vulnerable Americans and the institutions that serve
them. Children with disabilities, people with mental illnesses,
those with multiple care needs, people attempting to transition
from an institution to a community living environment, and
people with disabilities who need these critical services, such
as rehabilitation services and case management in order to
remain in their community. The regulations would also eliminate
funding for school-based outreach and enrollment, and funding
that helps safety net providers care for indigent and uninsured
patients in our communities.
In my home State of Michigan, the rehabilitation rule would
cut rehabilitation services for 15,000 children with special
needs, eliminate habilitation services for another 29,000
developmentally disabled adults and children living in the
community, and eliminate access to critical community services
and resources for 23,600 adults and 5,100 children who are in
support independent living arrangements or in group homes. The
Administration's argument for supporting these regulations does
not hold water. These regulations go well beyond any
justifiable point to curb any abuses in the system. And
instead, would shift costs to the states and prohibit support
for legitimate expenditures on behalf of Medicaid
beneficiaries. It is the Administration's thesis that the
regulations are going to curb fraud and abuse. A careful
examination of these matters will indicate that nothing of the
kind will occur, and that the regulations are totally unrelated
to that kind of a desirable goal which is not to be found, as I
have said, in the regulations. When one finally reviews how CMS
dealt with the comments submitted on regulation, it appears
that we have some more curious events to scrutinize. It appears
that there was no intention of working with the states or other
beneficiary groups to find any kind of common ground. For
example, according to CMS's own analysis, only one of the 1,000
comments submitted to CMS on the rule limiting payments to
public providers ``contained a positive comment.'' Most
remarkable statement. With respect to the rule limiting
payments for hospital outpatients there were 91 pieces of
correspondence received, containing more than 300 comments of
which only one piece of correspondence ``contained a positive
comment.'' And in the case of the rehabilitation rule, of the
1,845 comments received, ``no comments were in support of the
regulation.'' Those are quotes from the Department of HHS and
from CMS. The Protecting the Medicare Safety Net Act will delay
a permutation of these seven regulations for a year. It will
allow time to examine the regulations more thoughtfully,
carefully, and sympathetically. Something which was not done by
the Department or by CMS. And I think the public is entitled to
ask that a better job of this kind of scrutiny takes place.
I look forward very much to the testimony of our witnesses
on this legislation. It is, as we all agree, very important. I
hope the Committee will continue its vigorous efforts and will
move H.R. 5613 forward quickly and speedily to both protect
Medicaid beneficiaries and to protect the integrity of the
program. And to see to it, quite frankly, that finally CMS
begins to address its responsibilities in rulemaking and doing
so in a thoughtful and a careful way, with proper attention to
the comments and the testimony received. Thank you, Mr.
Chairman.
Mr. Pallone. Thank you, Chairman Dingell.
Next, I recognize the gentlewoman from North Carolina, Ms.
Myrick.
OPENING STATEMENT OF HON. SUE WILKENS MYRICK, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NORTH CAROLINA
Ms. Myrick. Thank you, Mr. Chairman, and thanks to all of
our witnesses who have agreed to speak with us on this topic
today. We appreciate you being here.
Like many of my colleagues, I am concerned about several
aspects of the CMS rules that we are discussing today in the
context of H.R. 5613. To that end I have co-sponsored a
different bill with Mr. Engel, which addresses a critical
regulation that concerned my constituents in North Carolina.
The rule that limits the types of entities authorized to
provide the non-Federal Medicaid chair.
While I fully support the ability of CMS to make regulatory
changes to protect the integrity of the Federal State Medicare
program, my concerns about the manner in which this provision
was implanted and its potential impact on my district lead me
to support a moratorium. This decision was made after I and
many of my colleagues expressed concerns to CMS and to OMB
about the history of the public hospital system in North
Carolina. We stressed a desire to delay the effective date to
accommodate changes that states and counties would need to make
in order to properly fund hospitals. Alternative language
proposed it would take into consideration the fact that so few
of our state's hospitals are owned by local government.
Unfortunately, no agreement was reached. We are all aware of
instances where states and other entities have gained the
Medicare system to artificially enhance the Federal match. And
we should not encourage systems that promote such activity. We
must not, however, paint with too broad a brush, and dismiss
systems that are not necessary bad actors.
I have long supported efforts to provide more funding for
fraud and abuse crackdowns. In the Deficit Reduction Act I
strongly supported the creation of the Medicaid integrity
program to provide additional funding through HHS, the office
of the inspector general to address fraud and abuse in the
Medicaid program. It is clear that tough decisions must be made
when it comes to financing systems, and their aspect of these
seven regulations that I support. CMS should not provide a
blank check to states that use their Medicaid program
improperly, or providers who bill for services that are clearly
not medical in nature. I am open to efforts that will address
some of the most problematic aspects of these CMS regulations
head-on, beyond the mere application of moratorium. Some of the
logistical problems that states face at the moment are due to
the fact that congressional moratorium means that no work can
be done with states and localities in preparation for the
impact of final regulations.
That said, I realize that we are facing a tight deadline
with several of these provisions, and it is not clear that
alternative solutions are on the horizon.
I look forward to hearing the testimony of our witnesses
this morning. And I yield back the balance of my time, Mr.
Chairman.
Mr. Pallone. Thank you.
I recognize the gentleman from California, Mr. Waxman, and
thank him for the work that he did on this issue with his
Government Reform Committee.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you very much, Mr. Chairman, for holding
this hearing. And I want to commend Chairman Dingell and
Representative Murphy for introducing the bipartisan
legislation this hearing will consider, and I am proud to be a
cosponsor.
This hearing should not be necessary. The Congress has not
directed CMS to make fundamental changes in the way Medicaid
pays public and teaching hospitals. The Congress has not
directed CMS to make fundamental changes in the scope of
services that Medicaid covers for children or adults with
disabilities or mental illness. The Congress has not directed
CMS to shift billions of dollars in costs of treating Medicaid
patients from the Federal Government to the states, the
counties, school districts, and providers. Yet, that is
precisely what CMS is trying to do by regulatory fiat.
Medicaid is a program that allows states broad flexibility
in designing and operating their own programs. As a result, it
is famous for its variation from state to state, so it was very
odd when CMS told the Oversight Committee several months ago
that it had done no state-by-state analysis of the impact of
any of these regulations, and it had no intentions of doing
such an analysis. Medicaid is by far the largest program of
Federal financial assistance in the states, dwarfing education
and highways. But CMS does not seem to want to know what the
impact of the regulations would be. Since CMS couldn't tell
us,we went to the source. The Oversight Committee asked each of
the state Medicaid directors what the impact of each of these
regulations would be on their states. The Medicaid directors
told us, among other things, that these regulations combined
would result in a loss of nearly $50 billion in Federal funds
over the next 5 years. Shifting nearly $50 billion in Medicaid
costs to the states does not sound like a good idea under any
economic circumstance. But it seems particularly misguided at a
time when many state economies are clearly in trouble because
of the credit and housing markets.
It is pretty clear that states like California, with its 16
billion--that is b, with billion, budget shortfall are not
going to make up the loss in Federal funds with their own. In
short, what we have here is an unprovoked regulatory assault on
Medicaid that is without precedent in scope or destructiveness.
I am looking forward to the testimony from the states, the
hospitals, nursing homes, physicians, school administrators who
will bear the brunt of this assault. Even though facts don't
matter to CMS, they do matter to us.
Thank you, Mr. Chairman.
Mr. Pallone. Thank you, Mr. Waxman.
The gentleman from Pennsylvania, Mr. Murphy.
OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Murphy. Thank you, Mr. Chairman, for holding this
hearing. And I thank Chairman Dingell for introducing this bill
and I am pleased to be the prime cosponsor of it.
In part, from the time that I first came to Congress, a
mission I consider most important was to reform our healthcare
system. A $2 trillion-a-year system that has $400 or $500
billion worth of inefficiency and waste and, unfortunately, the
government pays for much of that. Some 45 percent of Federal
mandatory spending is healthcare, much of that in Medicare and
Medicaid, and much of that has problems in terms of
efficiencies--or shall I say inefficiencies.
Mr. Deal pointed out that one of our concerns is waste
fraud and abuse, and that is a huge issue that we have to
address. And we need to amend these regulations to make sure we
are addressing the waste. Part of this, however, is to make
sure that while we are addressing this we do two things. One is
focus on moving forward so they do really deal with the waste
and efficiency in patient safety and patient quality. And two,
in the meantime make sure that those who are in need, the
disabled and the infirm, are not the ones bearing the burdens
of these cuts.
There are thousands of Medicaid waivers. It is a system
that I know in my career as a psychologist working with many
physicians. I am not sure any of us understand the system, let
alone people in government. Those who are providing care to
children and adults--none of us understand how this works. And
that alone, and the massive amount of paperwork needed for
waivers, is a huge waste. We need to address that.
Another very important thing is to look. We can find a
great deal of savings. I have spoken many times about the $50
billion worth of waste every year when people pick up an
infection in the hospital--the 90,000 lives. And how 70 to 80
percent of people that are using up our healthcare dollars have
chronic diseases, oftentimes very complex cases. It is
important we do not cut case management.
It is also important that Medicaid stops paying for what we
call never events. If somebody gets the wrong medication, the
wrong amputation, or the wrong therapy and they end up with
more time in the hospital, Medicaid shouldn't pay for that.
That is a waste. And I hope that as we move forward on this
hearing, and subsequently, on our markup for this bill, we
include plenty other ways we can come up with $1.65 billion of
savings. It is essential we do that. But overall, let us keep
this in mind. Those who are the recipients of Medicaid help,
many of them young children with disabilities, many of them
adults who cannot pay for their care, they should not be the
ones bearing the burden of what Congress needs to do. This is
an opportunity for both sides. We ought to work together to
come up with amendments to Medicaid to stop the waste and to
saves lives, and to save money.
I yield back.
Mr. Pallone. Thank you, Mr. Murphy.
I recognize now the gentlewoman from California, Ms. Capps,
for an opening statement.
OPENING STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Capps. Chairman Pallone, thank you for holding this
important hearing. And I thank both Committee Chairman Dingel
and Mr. Dingell, for introducing this important legislation.
I am proud to be a cosponsor of H.R. 5613, because it is
imperative that we protect the Medicaid safety net. The harmful
Bush Administration regulations will affect our ability to
properly serve the Medicaid population in the most egregious
ways. In particular, I am worried about the impact of the
regulation regarding school-based health services, because I
know about them. This will have a terribly negative effect on
the special needs students in my district and countless other
districts across the country.
As a school nurse before I came to Congress, these were the
students I dealt with. I know these regulations and how they
affect the families for whom this is so important. These
students are only able to attend school with their peers
because of critical services provided to them by their school
district. Without reimbursement for transportation and
administrative costs, school districts will have to scramble
for ways to provide children with necessary services. As the
Children's Health Initiative of Santa Barbara put it, schools
are, for many students and families, the only gateway to health
services. Furthermore, schools are an integral part of
conducting outreach in order to enroll eligible students for
Medicaid services. And it is hard to see this directive as any
other than an attempt to shut these children out.
I am also concerned about the rule concerning targeted case
management, which is so critical for individuals transitioning
from institutions to community-based care. A few months ago I
received an e-mail from the program manager of the Linkages
Care Management program of the Life Staff Foundation in San
Luis Obispo county. She wrote, ``right now we serve 125 seniors
and disabled adults with 2.75 care managers and have almost 80
people on our waiting list. There is such a huge need and our
resources are truly stretched to the max. Imagine what will
happen to those 205 people in San Luis Obispo county alone if
this rule went into effect.''
Finally, I would like to mention my deep concern for the
IGT rule. I am especially concerned of the effect of this rule
on public hospitals in California, including those at our
prestigious University of California system. So I join my
colleagues in supporting H.R. 5613 and applaud the Committee's
swift action to address all of these harmful regulations.
My grandchildren from California have joined me to spend
the weekend here. And as they arrived last evening I thought
about how important their education is to them. And what if
their needs were special, and what if they required services
like this? And here we are in the process of threatening those
very services so important to our next generation. I know there
is strong bipartisan support for a moratorium, and I look
forward to working with the members of this committee to
prevent such drastic cuts from ever going into effect.
I yield back the balance of my time, Mr. Chairman.
Mr. Pallone. Thank you, Ms. Capps.
Next, I recognize the gentleman from Pennsylvania, Mr.
Pitts, for an opening statement. You will waive.
The gentleman from Texas, Mr. Burgess.
Mr. Burgess. Thank you, Mr. Chairman.
In the interest of time I think I will submit my statement
for the record as well, but I would ask unanimous consent.
I have a copy of a letter submitted by Gene Green and
myself to Secretary Leavitt on this issue, and I would like to
submit that as part of the record.
[The information was not available at the time of
printing.]
Mr. Pallone. Without objections, so ordered.
Let me also mention that we have a number of letters of
support for H.R. 5613 from the National Governor's Association,
American Academy of Pediatrics, ARP. I am not going to go
through them all--that I would ask unanimous consent to be
submitted for the record as well. Without objections, so
ordered.
[The information was not available at the time of
printing.]
Mr. Pallone. Next, I recognize the gentlewoman from
California, Ms. Solis.
OPENING STATEMENT OF HON. HILDA L. SOLIS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Solis. Thank you, Mr. Chairman, and I thank the
witnesses that are going to be speaking to us at this
particular hearing. I want to thank also Chairman Dingell for
his leadership on this important issue.
I am proud to be a cosponsor of H.R. 5613, but I am
disappointed also that we even have to have a bill like this to
address concerns in our communities.
Medicaid, as you know, is an essential safety net for the
most vulnerable populations in American. The health of many
children, seniors, and people with disabilities relies on the
continued funding and existence of Medicaid. However, rather
than increasing coverage and funding, the Administration
continues to issue misguided policies that will result in the
overall reduction of access to care for vulnerable populations
enrolled in Medicaid, and the loss of insurance for millions. I
am extremely concerned that CMS's ill-advised rules will
drastically impact 6.7 million individuals enrolled in
California's Medicaid program known as Medi-Cal. More than
170,000 individuals in my district are currently Medi-Cal
beneficiaries. And in East Los Angeles alone, in my district,
at least one of every four persons received health coverage
through the Medi-Cal program. CMS's regulations will reverse
any progress that we have made in coverage and will prevent
these children and vulnerable populations from receiving care.
This is troublesome for communities of color. Sixty-nine
percent of Medi-Cal beneficiaries in my district alone happen
to be Latino and another 18 percent are Asian.
We have to protect Medicaid. We must also increase outreach
and enrollment efforts to ensure that we extend coverage to
every child who is eligible for these public programs. Seven in
10 uninsured Latino children are eligible for these programs,
such as Medi-Cal and Healthy Families. But sometimes language
and cultural barriers delay or block their enrollment in these
programs that they deserve to be a part of.
In Los Angeles, the Los Angeles Unified School District
will lose at least $7 million in funding for outreach and
enrollment activities and referral to Medi-Cal eligible
services. The funding for L.A. Unified School District resulted
in enrolling more than 1.4 million low-income children into
health insurance programs in 2006 alone.
We must also protect the safety net hospitals and providers
of CMS's cuts. They provide essential care to individuals who
have few options, and train our future health professionals.
The government provider cap in graduate medical education
restrictions may result in an estimated $240 million lost to
L.A. county's already struggling hospital system. And
unfortunately, with its regulations and directives, CMS is
denying the wishes of states in barring families from health
care. The Federal Government is placing further burdens on our
states, our counties, our hospitals, and our doctors.
And I look forward to addressing these issues with you, and
will yield back the balance of my time.
Mr. Pallone. Thank you.
I recognize the gentlewoman from Tennessee, Ms. Blackburn,
for an opening statement.
Ms. Blackburn. Mr. Chairman, I wanted to welcome our
guests, and I want to waive my opening and reserve my time for
questions. Thank you.
Mr. Pallone. Thank you.
Next is Mr. Towns of New York recognized for an opening
statement.
OPENING STATEMENT OF HON. EDOLPHUS TOWNS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEW YORK
Mr. Towns. Thank you very much, Mr. Chairman.
Let me begin by first thanking the witnesses for being
here. And I also want to thank Chairman Dingell and Congressman
Murphy for the legislation they put forth.
There is widespread agreement about the need to ensure that
Medicaid remains a strong and physically secure program.
Unfortunately, the regulations released by the senators for
Medicare and Medicaid under consideration do not further that
aim.
The Administration argues that these regulations are
intended to reduce fraud and abuse. It is important that states
comply and that we limit fraud and abuse with the established
rules and regulations regarding Medicaid payment. But it is
equally important that the Federal Government honor its
commitment to these states to be a trustworthy partner in
funding Medicaid services.
The regulations released by CMS do not honor the
commitment, rather they reverse long-standing Medicaid policy
at a time when the states are struggling to balance their
budgets. Seven, even--I would say even without the significant
physical burden that these regulations would impose.
New York alone estimates that it would lose $7.3 billion.
That is b as in boy, over the course of 5 years if these
regulations were allowed to stand regardless of the objectives
behind these regulations. This result in unacceptable, and
leaves not only our state governments, but many of our most
vulnerable citizens, at risk.
I strongly support the moratorium on these regulations
until it can be determined more clearly what the financial
impact of these regulations on the states would be. And until
an agreement can be reached that addresses the need to clarify
existing stature without shifting responsibility for funding
Medicaid from the Federal Government to the states.
I want you to know I look forward to reforming our health
care system, but let us do it in a positive way, and not a
negative way. You know, we have a tendency around here to just
use the word reform, and people think it is something positive.
But reform is neither positive or negative. It depends on what
we do, whether it is positive or negative. There are a lot of
terms and phrases that we use like that around here, and this
happens to be one. So I am hoping that we pause for a moment
and really, really reform this in a positive way. And I am
happy that we have many experts at the table and I am looking
forward to hearing from you and getting some information as to
what we need to do next.
Thank you so much for being here.
On that note I yield back, Mr. Chairman.
Mr. Pallone. Thank you, Mr. Towns.
Ms. Baldwin from Wisconsin recognized for an opening
statement.
OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WISCONSIN
Ms. Baldwin. Thank you, Mr. Chairman, and thank you for
holding this very important hearing this morning.
We are in the midst of a health care coverage crisis in the
United States. We all probably know the statistics by heart.
That the census bureau figures that 47 million Americans are
uninsured, and millions more are underinsured, meaning that
even though they technically have health insurance they still
face barriers to receiving the health care that they need.
This crisis of the uninsured and underinsured is
unacceptable. And I am deeply disappointed that instead of
working with Congress to address this crisis and improve the
situation, the Administration is seeking to undermine the
Medicaid program and institute regulations that, in my view,
harm Medicaid beneficiaries. Medicaid is a program of last
resorts that prevents millions of Americans from joining the
ranks of the uninsured. Medicaid is a safety net. Medicaid
provides health insurance to groups of people that private
insurance would otherwise not cover. The poor, the near poor,
people with disabilities, people with extreme medical needs.
And unfortunately, in these times of economic hardship we are
seeing more of a need for Medicaid. Now is not the time to
erode this vital program, but is the time to secure it and make
sure that Medicaid continues to provide needed care to millions
of Americans. So I am very disappointed by the Administration's
actions, and I strongly support H.R. 5613 in putting a 1-year
moratorium on these regulations.
Lastly, Mr. Chairman, I want to respond to a few comments
that I have heard from those who support these regulations, and
I think we need to be very clear on this point. We are all in
favor of fiscal integrity, and we support closing loopholes in
the Medicaid program, but cutting needed services and reducing
access to health care is simply not closing a loophole. These
regulations have very real effects on very real people who rely
on Medicaid for their health needs. And our states should not
have to bear the burden of the $50 billion that these
regulations will shift to the states. So I strongly support
H.R. 5613, and I am proud to cosponsor it. And I thank our
witnesses today for joining us to discuss this important topic.
Thank you, Mr. Chairman.
Mr. Pallone. Thank you.
I recognize our Vice Chair, Mr. Green, for an opening
statement.
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you, Mr. Chairman.
As a cosponsor to the bill, I want to thank you for having
this hearing on H.R. 5613, the Protecting the Medicaid Safety
Net Act of 2008.
Medicaid supports over 60 million people, including sick
children, seniors, and low-income families. In 2005, nearly 4
million were enrolled in Medicaid, and 65 percent of those
enrolled were children. Every day Medicaid assists the most
vulnerable members of our population.
Under the current administration, CMS has started a trend
of issuing rules that we in Congress have not agreed with.
There are seven regulations we would be discussing today that
CMS wants to makes cuts to the Federal budget funding. My home
State of Texas would be most affected by all seven cuts, but
most affected would be the payments for graduate education,
targeted case management rule, cost limits to public providers,
and coverage for rehab services.
According to the OMB, these rules issued by CMS would save
the Federal Government $15 billion over 5 years by ending so-
called waste, fraud, and abuse. However, upon further
congressional investigating it appears that these cuts reduce
funding by almost double that amount and leave the states in a
significant crisis. In January, my colleague, Mr. Waxman, and
the Committee on Oversight and Government Reform asked each
state to submit an analysis of the impact of the seven Medicaid
regulations issued by CMS over the next 5 years. According to
the information submitted by Chris Taylor, the Texas State
Medicaid director, Texas stands to lose $3.4 billion in Federal
Medicaid funds over the next 5 years. The funding being cut in
Medicaid by the Federal Government would not be replaced, and
the need for the services has not been reduced, which leaves
states in a terrible position of deciding whether they will no
longer pay for services, or adjust their budget to pay for the
services with only state funds.
In response to the Committee, Mr. Taylor goes on to say,
``In Texas, Medicaid accounts for 26 percent of the state's
total budget, provides health care for one out of three
children, pays for more than half of all births, and covers
two-thirds of all nursing home residents.''
These Medicaid funds account for more than $21 billion of
the annual state budget. It is clear that if these regulations
are not delayed, the State of Texas will be in a budget crisis
with no way to pay for these services. Even Governor Perry, who
I don't often agree with, sent a letter to House Leadership,
urging him to extend the moratorium on these Medicaid cuts, so
Texas could continue to provide health care services to low-
income citizens.
These Medicaid cuts are yet another example of the cavalier
attitude CMS has taken under this Administration. It is hard
for me to imagine anyone supporting the regulations. We need to
extend the 1-year moratorium on these seven cuts and urge the
Committee to act quickly on the piece of legislation, because
the current moratorium on these cuts ends in July.
And again, I want to thank our witnesses, and welcome our
witness from Uvalde, Texas. Obviously, I have a district in
Houston, but having a deer lease near Uvalde for many years I
would definitely like to have the hospital there if I had some
problems out there on that deer lease.
So I yield back my time.
Mr. Pallone. Thank you, Mr. Green.
I believe that concludes our opening statements by members
of the subcommittee, so we will now turn to our witnesses. And
I want to welcome the first panel. We have a large panel here
today. I thank you for all being with us.
The way we operate, we have 5-minute opening statements and
they are made part of the hearing record. And each witness may,
in the discretion of the Committee, submit additional
statements or brief or pertinent statements in writing for
inclusion in the record.
So let me go through the panel and introduce everyone. Let
us see. On my left is Ms. Marsha--or Dr. Marsha Raulerson, who
is testifying on behalf of the American Academy of Pediatrics.
And then we have Mr. Randy Mohundro, who is superintendent of
the DeLeon Independent School District in DeLeon--DeLeon or
DeLeon?
Mr. Mohundro. DeLeon.
Mr. Pallone. DeLeon, Texas. And then we have Ms. Grace-
Marie Turner, who is the president of the Galen Institute in
Alexandria, Virginia. And Dr. Stuart Shapiro, who is president
and CEO of the Pennsylvania Health Care Association. And next
to him is Mr. James Cosgrove, who is acting director for Health
Care Issues of the GAO. And then is, next to Dr. Cosgrove, is
Mr. James Buckner, who is administrator for Uvalde Memorial
Hospital in Uvalde, Texas. And then we have Mr. Joseph Antos,
who is the Wilson Taylor Scholar in Health Care and Retirement
Policy at the American Enterprise Institute. And last is Ms.
Barbara Coulter Edwards, who is interim director of the
National Association of State Medicaid Directors.
So again, welcome all of you for being here today. And we
will just go from my left to right, and start with Dr.
Raulerson, recognized for 5 minutes.
STATEMENT OF MARSHA RAULERSON, M.D., FAAP, AMERICAN ACADEMY OF
PEDIATRICS
Dr. Raulerson. Thank you very much, Mr. Chairman, and
members of the Committee. I am honored today to represent the
American Academy of Pediatrics and its 60,000 primary care
physicians, pediatricians, pediatrics sub-specialists, and
pediatric surgeons. The Academy is committed to the attainment
of optimal physical, mental, and social health and well-being
for all infants, children, adolescents, and young adults.
I am Marsha Raulerson. I am a pediatrician in private
practice in Brewton, Alabama since 1981. In the census, Brewton
was 5,498 people, but actually there is an East Brewton, so the
two towns together are over 10,000.
Mr. Pallone. Dr. Raulerson, could--sorry to interrupt.
Could you just move a little closer? Move that mic up a little
closer to you.
Dr. Raulerson. OK.
Mr. Pallone. Thank you.
Dr. Raulerson. The closest large city to me is Pensacola,
Florida. However, when I have a very sick child,the closest
children's hospital is in Mobile, Alabama, 90 miles to my west.
Brewton is located in the piney woods of Alabama, and our major
industry is in pulpwood. My practice is appropriately called
Lower Alabama Pediatrics or L.A. Seventy percent of the
children I care for receive their medical care through
Medicaid. Seventy percent. In the year 2006, for the first
time, my practice did not break even. My overhead was over 100
percent, and I had to dip into my own savings to keep my office
open. Nevertheless, I believe that I have a calling to provide
services to these children, and plan to stay there as long as I
can to be their pediatrician.
The Academy has endorsed H.R. 5613 because the neediest
children will benefit from a delay in these regulations. The
timing is very poor. We have an economic downturn, and more
costs to our state will be prohibitive. Every child, regardless
of health status, requires health insurance. Research
consistently shows that if a child has a medical home he will
get the services that he needs, including immunizations and
preventive care that will make him a healthier adult. Medicaid
is a vital component of our American health care system.
Medicaid benefits should be protected to ensure the health and
well-being of millions of children.
I want to tell you a little bit about my own office, and
put a face on what these regulations will do to my patients.
One of the things that will happen with these regulations is
that case management will not be paid for in the way that it is
now. I had a patient in my practice for over 15 years named
Cozzia. Right after she started to kindergarten, when she was
five years old, her dad was putting down a new linoleum floor
in their mobile home. The glue from the linoleum ignited their
gas stove and it blew up, and she was playing right next to it.
She sustained burns over 80 to 90 percent of her body, and
spent the next 6 months in a burn unit in Mobile. When she was
discharged, the surgeon caring for her called me and said this
little girl lives in a rural area just north of you, and we
want you to care for her. It was my privilege to care for
Cozzia until she was 20 years old.
During that time she needed many services. She had skin
grafting after skin grafting. She still has a tracheostomy that
she got after the burns. But the good news about Cozzia is she
has a great spirit, she went back to school, she graduated. And
even though she has contractures of her hands from her burns
she learned to use a computer, and she can work and she will be
a very productive and wonderful citizen for our country.
Another group of children I would like to tell you about
who would be impacted are foster children. I presently serve on
Alabama's Quality Assurance Committee for the Escambia County
Department of Human Resources. Every month we review the
management of a child in foster care. These children need
services in home care, mental health services, and after school
programs. They are at risk for long-term physical and mental
illness as a result of their disruptive lives. They may not
have their immunizations when I first see them. Never had a
vision test. They may be depressed or extremely anxious.
Anxiety in children is rampant in the foster care system,
because they are afraid someone may come in and remove them
from their home again.
I cared for two young boys in my practice who were in
foster care years ago. One of them suffered from severe
physical punishment for bedwetting, would go hungry for days,
and frequently miss school because there was no one home to get
him ready for school. In spite of this, while he and his
younger brother were in foster care, they would run away to try
to return to the abusive family. Twenty years ago we did not
have the services that this child needed. As a result, he has
grown to be an adult with a serious mental illness. The good
news is that his younger brother went to trade school, works as
a brick mason, is married, and has a child and pays taxes.
Finally, I would like to tell you about a child who is only
4 months old. Her name is Shakira. Two weeks ago she came into
our office for her EPSDT screening. That was 2 weeks ago. If
you don't know that, EPSDT is early periodic screening
diagnosis and treatment. It is a very intricate part of the
Medicaid program that you pick up things early and you treat
them. My physician's assistant, Ms. Guthrie, asked the mom, do
you have any concerns about your baby? And she said, well, her
belly sticks out funny. And then she kind of laughed, because
babies' bellies do stick out. But then when she felt her
abdomen she felt something strange, and she immediately came
down the hall and got me from another patient, and said you
have got to come here. I went in and what I found was very
worrisome. She had a mass on the right side of her abdomen
extending to the mid-line.
Mr. Pallone. Dr. Raulerson, I hate to interrupt but, you
know, we have got I think eight witnesses and----
Dr. Raulerson. Oh.
Mr. Pallone. You are about a minute over, so you have to
wrap up.
Dr. Raulerson. I am sorry. Can I tell you about two more
patients real quick?
Mr. Pallone. Quickly.
Dr. Raulerson. Anyway, this child, because she came in for
a screening, went to Children's Hospital. She has a hepato
blastoma. Saturday of this past week she started chemotherapy.
I want to tell you about--quickly about the mental health
program that I would with the----
Mr. Pallone. Very quickly, because you are almost 2 minutes
over.
Dr. Raulerson. Two hundred miles away through telemedicine
we bring psychiatric service to children in rural Alabama. But
our case manager's the most important part of our service.
And finally, Rebecca Ann was born with a tumor in her face.
It grew very rapidly. By 4 weeks of age she had to have a
tracheostomy. She could not speak for the first 2 years of her
life. She got early intervention. She learned to sign. She is
now in pre-kindergarten and speaks as well as the other
children, and she actually performed a year ahead of others,
because she got early intervention.
We are the adults. We are the ones who have to protect
these children.
[The prepared statement of Dr. Raulerson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Pallone. Thank you. Thank you very much.
Dr. Raulerson. Thank you.
Mr. Pallone. I appreciate it.
And let me just--I am going--if you start to go over I am
going to ask you to wrap up in each case from now. I hate to do
that, but we just have so many witnesses.
Next is Superintendent Mohundro.
STATEMENT OF RANDY MOHUNDRO, SUPERINTENDENT, DELEON INDEPENDENT
SCHOOL DISTRICT, EXECUTIVE COMMITTEE DIRECTOR, AMERICAN
ASSOCIATION OF SCHOOL ADMINISTRATORS
Mr. Mohundro. Mr. Chairman, thank you for allowing me to be
here today.
The job of the public schools in the United States has
historically been to provide children with an education that
would allow them to become productive members of a democratic
society by attaining basic skills and rudimentary learning.
While this basic tenet has held true from the beginnings of our
Nation's history to the middle of the 20th century, a major
change developed with the passage of Public Law, 94-142, the
Individuals with Disabilities Education Act, IDEA. This law
mandated that all of the public schools in the United States
would accept and educate all children. All children meant
accepting those children that had previously been kept at home
because no applicable public schools setting was available.
IDEA was the key that unlocked the door for those children to
enter the same public schools as those children who were
``normal.'' The difference is that schools now became
responsible for providing the special needs students the
services that they needed to become successful, including
medical services. The services provided to these students range
from speech therapy, to physical therapy, to providing on-site
skilled nursing care to enable these children to attend public
schools.
An example of the public school systems and their
acceptance of children with special needs would be a student by
the name of Eduardo. Eduardo began school as a 3 year old. He
came from a single-parent, Spanish-speaking household. He had
one younger sibling. Eduardo was born with spina bifida,
showing in a typical distribution of paralysis in his right
leg. His only method of mobility at 3 was crawling on hands and
knees. Early childhood intervention under IDEA, the program
that serves children under the age of three before they can
enter the public school systems, had plans to obtain a
wheelchair for the child, but this was never accomplished. Upon
initial evaluation by his school physical therapist, it was
discovered that Eduardo had enough muscle function in his right
hip to possibly allow ambulation with a long leg brace. The
wheelchair was ordered, along with a walker, to be used to
teach Eduardo to walk. Referrals were made to the proper
medical professionals to obtain the medical care and equipment
that Eduardo needed to have functional mobility in a school
setting. The school physical therapist has worked with Eduardo
on functional skills, consulted with school personnel regarding
his function and skill and mobility and other areas, and worked
closely with orthotists for the manufacture of the long leg
braces that Eduardo has used.
The issue today faced by schools across the country is the
possible loss of Medicaid funding that make such interventions
possible. Medicaid funding to schools comes only when schools
provide eligible services by qualified providers to those
students that are entitled to such services. These services
that many children would never be able to utilize or realize
the benefit of without the public schools.
The reason for this can include parents not knowing what to
do or where to go for the services to be assessed, parents not
being financially able to leave work to access these services
from another provider away from school, the plight of the
working poor that we now see in our country, or the distance
being too far and the services being needed so frequently that
it is cost prohibitive for parents to go to a medical provider
for the services.
Schools are appropriate providers for health care services.
We can provide them with minimal educational disruption.
Medicaid reimbursement has made it possible for school
districts to provide these services for high poverty students.
The reality of school-based services receiving Medicaid
reimbursement is that there has been an attempt over the last
several years to make the process so arduous and tedious that
schools would simply throw up their hands and give up. It is
simply not worth the hassle or effort. As a school
superintendent from a rural community, and as the fiscal agent
that works with six other small rural districts I do not have
the luxury of saying that it is not worth the effort to receive
a certain source of funding. I need every dollar that I can
find to assist the learning process of each student that is
entrusted into my care.
The common thread that has been seen over the past two to
three years is to put up so many hurdles as possible to end the
assistance that has been realized in the past for Medicaid for
those students that qualify and receive these necessary
services. Time logs, service logs, coding of services, coding
of personnel, are only the beginning of the paperwork that is
now faced by those districts that seek to be reimbursed. The
level of paperwork work has increased so substantially that
additional clerical resources are now allocated strictly to
complete the Medicaid reimbursement process. The time is
quickly approaching that the amount of paperwork and
requirements to receive the funding will prohibit schools from
seeking the funds. It is then that the covert goal of ending
the program will fully be realized. Not dying through a lack of
need or the lack of children that would benefit from the
program, but rather because the bureaucracy has succeeded in
making the process so cost-prohibitive.
The additional services that are provided to these students
are critical to their success in schools. These services are
not luxuries, but rather are educationally and medically
necessary for these students to be successful in learning their
curriculum that has been established by our state and through
the state's individual--excuse me--the students' individualized
education program. Will schools cease to provide such programs
if the funding is lost? The reality is that public schools have
sought to do the one thing that no other institution in our
country, either today or in its entire history, has sought to
do. Public schools take whoever walks through the door,
regardless of their abilities, and seek to provide the most
appropriate education as is allowed. That means that frequently
we are educating children that have suffered a traumatic brain
injury, and who are not able to neither speak, nor show any
signs of recognizing an individual, to those students that also
must have feeding tubes to exist. Currently children that look
like my 10-year-old daughter, Katelyn, and 14-year-old son,
Ben, are served in regular classrooms and are in the regular
curriculum. The system that we love would love to have all
children be a part of that system, so that they could
experience public education and the benefits that can be
experienced nowhere else.
Mr. Pallone. Mr. Mohundro, again, I am sorry, but you are
over by a minute. So if you could wrap up I would appreciate
it.
Mr. Mohundro. Yes, sir. As the Centers for Medicare and
Medicaid services has taken steps this year to eliminate
school-based administrative transportation services, I fear our
ability to provide these services. My community and my national
association, AASA, applaud the steps that are being taken by
Congress to apply a moratorium on any changes until June 30,
2008. We are even more pleased to see the introduction of H.R.
5613, the Protecting Medicaid Safety Act of 2008, introduced by
Chairman Dingell and Representative Murphy. This bill will
provide us the peace of mind and allow us to serve children in
an effective manner.
Thank you.
[The prepared statement of Mr. Mohundro follows:]
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Mr. Pallone. Thank you very much.
And I hesitate to stop you all, but we just have too many
witnesses. I don't think we have too many. I am glad we have so
many, but we have to keep it to 5 minutes.
Ms. Turner.
STATEMENT OF GRACE MARIE TURNER, PRESIDENT, GALEN INSTITUTE
Ms. Turner. Thank you, Chairman Pallone, for holding the
hearing today, and Chairman Dingell, and Ranking Member Deal
and members of the Committee for inviting me to testify today.
To introduce myself, I am Grace-Marie Turner, president of
the Galen Institute, we're a think tank focusing on free market
ideas for health reform. I also was a member of the Medicaid
Commission between 2005 and 2006, and we held numerous hearings
both in Washington and around the country to gather testimony
from experts and citizens about this program.
We heard from hundreds of witnesses about the importance of
Medicaid to the millions of people it serves. It is truly the
safety net for our health care system, and a lifeline for
people with low incomes and disabilities. It is vital to
recipients such as those that Dr. Raulerson and Mr. Mohundro
have described, as well as to tax payers that Medicaid is
sustainable. The CMS rules addressed by the legislation being
considered by the Committee today were intended to make
Medicaid--to make sure that Medicaid is spending taxpayer
dollars appropriately to protect and preserve the program. The
GAO and the Inspector General of Health and Human Services have
identified important areas where waste and even misuse of
Medicaid funds taking place. The GAO found that many states are
actually gaming the system to boost their Federal Medicaid
reimbursement, yet there is no assurance that these funds are
being used for Medicaid services. One state used the funds to
help finance education, and others for other non-Medicaid
purposes. It doesn't help and it even can harm the
beneficiaries for this kind of abuse to take place. The OIG
found that medical facilities such as nursing homes, for
example, have been forced to rebate tens of millions of dollars
of payments back to the states, compromising the quality of
care for residents.
One example, one nursing home had total operating costs
over a 3-year period of $70 million. Creative state billing
using the upper payment limit resulted in $132 million in
payments to the facility. But the nursing home was required to
rebate to the state all but $50 million. Did I say billion? I
mean million. $50 million, meaning that it operated at a $20
million loss and was seriously understaffed. It is difficult to
see how this kind of use of Medicaid is helping Medicaid
patients.
In the interest of making sure that Medicaid dollars are
paying for patient care, it makes sense to require that
providers receive and retain the total amount of Medicaid
payments that are due them. The provider tax provides similar
challenges. The Office of the Inspector General has found
numerous cases in which Medicaid claims were being filed that
did not involve patient care, or allowable rehabilitation
services. It found, for example, cases in which taxpayer--the
taxpayer was being billed for non-rehabilitative services, such
as transporting beneficiaries to grocery stores, restaurants,
or even bingo games. Unless a check is placed on these kinds of
expenditures, states could undermine Medicaid's ability to
provide needed and allowed medical services to the millions of
Medicaid recipients who often have no other alternative for
care.
The CMS rules certainly are not perfect, but rather than
block them completely, a better strategy would be for Congress
to work with the Administration, should produce policies that
address this financial abuse. The great majority of providers,
such as Dr. Raulerson, serving Medicaid patients work to
provide the best care possible, often at considerable
sacrifice, even when payment means that they are taking a
financial loss.
But when states are gaming the system, patient care is not
helped. The OIG has reported in testimony before this committee
that its goal is to make sure that Medicaid funds are used to
provide intended health care services in the intended facility
to intended beneficiaries. If there are additional services
that Congress believes are the responsibility of the Federal
Government but not allowed under current Medicaid rules, such
as graduate medical education, this should be done and could be
done through more explicit appropriation. Many of the abuses in
the Medicaid program are brooded in the way that it is financed
through the FMAP provisions.
While I don't have the time to go into that today, I do
refer to it in my written testimony. That is the kind of--these
kinds of abuses really are part of the system in which we
finance health care and finance Medicaid. And looking at the
more serious and more--the underlying ways that Medicaid is
financed giving states more authority to make sure that they
can provide the care the people need is really, I think, the
ultimate goal. And would avoid having to spend so much time
looking at specific rules, allowing states that are closer to
the patient to have more authority to make decisions about
their care. We heard that over and over in our Medicaid
Commission.
Thank you, Mr. Chairman, for the opportunity to testify.
[The prepared statement of Ms. Turner follows:]
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Mr. Pallone. Thank you, and thank you for keeping within
the time limit as well.
Dr. Shapiro.
STATEMENT OF STUART SHAPIRO, M.D., PRESIDENT AND CEO,
PENNSYLVANIA HEALTH CARE ASSOCIATION
Dr. Shapiro. Good morning, Chairman Pallone, Ranking Member
Deal, and members of the Committee.
I am Stuart Shapiro, and I am president and CEO of the
Pennsylvania Health Care Association, and I am here on behalf
of the American Health Care Association and the National Center
for Assisted Living.
We in Pennsylvania are grateful to Chairman Deal and our
own representative, Tim Murphy, for introducing this bipartisan
legislation, which we fully endorse. The quick passage of this
bill is essential, as it stops an end run by the Bush
Administration to implement seven Medicaid regulations that
would dramatically change policy and payment without
congressional input or oversight if they are allowed to go
forward.
As a physician I am deeply worried that these regulations
would cause harm to our greatest generation of Americans by
limiting access to key Medicaid programs. And that the loss of
Federal Medicaid dollars will cause further havoc in states
that already face serious budget deficits. I assure you that in
my own State of Pennsylvania, these regulations have the
ability to disrupt an already fragile system of care.
The Administration claims that its Medicaid changes would
save the Federal Government $15 billion over 5 years. But a
recent report by the House Oversight Committee puts that number
not at $15, but at nearly $50 billion over 5 years. Cost
estimates of this magnitude and this variation offer prudence
and further study. It just makes common sense to step back,
take a breath and then take the time to accurately assess what
the real impact will be on Medicaid beneficiaries.
I dare say, that our government can better afford to live
without these regulations than Americans, frail seniors, and
people with disabilities can live with these regulations and
the abrupt changes they would bring to their Medicaid-funded
long-term care system. I was raised in a do-no-harm culture.
These regulations will do harm. Let me discuss only three of
them. My written testimony is much longer.
First, the case management services regulation has the
potential to undercut the congressional intent in the Supreme
Court decision that individuals should be cared for in the
least restrictive setting. Transition planning under this bill
is cut by two-thirds of time.
Second, the regulation for cost limits on public providers
has the potential to instantly, and I mean instantly, remove
millions of dollars from fragile Medicaid systems and states
across America. Pennsylvania has over 30 county nursing homes,
which depend on IGT dollars. If these Federal dollars are
removed from the system, our state will simply not be able to
find the dollars necessary to continue to provide the level of
care for these citizens. This regulation is both hard-hearted
and short-sighted.
The third regulation I will discuss concerns the provider
assessment, which is in place in 34 states. So our state's
represented not only in Pennsylvania, but 34 other states and
by three quarters of the members of this committee. The
proposed regulation is so convoluted--and we have had lots of
lawyers looking at it--and gives CMS such unfettered
flexibility that with the snap of a finger, yes, a snap of the
finger, CMS will have the unfettered ability to pull Federal
dollars from this program in any state. Clearly not
ongressional intent.
In Pennsylvania, we depend on the almost $400 million this
assessment generates for the Commonwealth, which is helping
cushion the double whammy of cuts in Medicare and in Medicaid.
Mr. Chairman, I want to leave this committee with three
brief thoughts. First, future budget savings should not come at
the expense of quality long-term care for the poor and the
frail elderly. These individuals have paid their dues to
America. Many of them fought in World War II. They should be at
the front of the line for resources, and not shoved to the
back.
Second, in these difficult economic times, all states are
desperate for supplementary Federal Medicaid funding to meet
the needs of their most vulnerable citizens. States must retain
the latitude necessary to ensure that quality care and access
are maintained.
And finally, I encourage this committee to focus on
addressing the looming fiscal tsunami of long-term care costs
that this country is facing as 77 million baby boomers begin to
turn 65. The Dingell-Murphy legislation is the right bill at
the right time, asking the right questions. It is among our
profession's highest priorities, and we are working for passage
this year. We stand ready to work with this committee on this
issue, as well as on ways to solve the broader, long-term
financing crisis.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. Shapiro follows:]
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Mr. Green. [Presiding] Thank you.
I now recognize Dr. Cosgrove for his opening statement.
STATEMENT OF JAMES COSGROVE, PH.D., ACTING DIRECTOR, HEALTH
CARE ISSUES, GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Cosgrove. Good morning, Mr. Chairman, Ranking Member
Deal, members of the subcommittee.
I am pleased to be here today as you explore CMS's recent
Medicaid regulatory actions, and the potential effects of these
actions on beneficiaries, providers, and states.
Medicaid fulfills a crucial role in providing health
coverage for our Nation's most vulnerable populations,
therefore ensuring the program's long-term sustainability is
vitally important. Starting in the early 1990s 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 of the
state's typical payment rates.
About a year ago 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 Medicaid's fiscal integrity, and CMS's
2003 initiative to end these arrangements. These findings help
provide context for the important issues being discussed today.
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 payments by
paying certain government providers, such as county owned
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. Under these arrangements, Federal
matching funds essentially made a round trip from the state to
the provider, and back to the state. States could then use
these funds at their own discretion. The exact amount of the
additional Federal Medicaid funds generated through these
arrangements is unknown, but it is estimated that it was in the
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. By effectively increasing
the Federal Medicaid share above what is established by law,
these types of arrangements threaten the fiscal integrity of
Medicaid's Federal and state partnership. They inappropriately
shifted costs from the state to the Federal Government. And
moreover, these arrangements take funding intended to cover
Medicaid costs away from providers. The consequences of these
types of arrangements are illustrated by one state that in 2004
increased Federal expenditures without an increase in state
spending. That state made a $41 million supplemental payment to
a local government hospital. Under its Medicaid matching
formula the state paid $10.5 million, the Federal Government
paid $30.5 million of the supplemental payment. Shortly after
receiving the payment, however, the hospital transferred back
to the state approximately $39 million of the $41 million
payment, retaining just $2 million.
In March of 2007, we reported on CMS's 2003 initiative to
more closely review state financing arrangements. From August
2003 to August 2006, 29 states ended one or more supplemental
payment arrangements, because providers were not retaining the
Medicaid payment for which states had received Federal matching
funds. We found CMS's action to be consistent with Medicaid
payment principals that call for economy and efficiency.
However, we also found that CMS's initiative lacked
transparency, and that the Agency had not issued any written
guidance about the specific approval standards. When we
contacted the 29 states, only 8 reported receiving any written
guidance or clarification from CMS regarding appropriate and
inappropriate financing arrangements. 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 have been treated and 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.
The Federal Government and states have a responsibility to
administer Medicaid in a manner that ensures both that
expenditures benefit those individuals for whom benefits were
intended. And that providers are paid appropriately for the
Medicaid services they provides. Congress and CMS have taken
important steps to address the financial management of Medicaid
over the years. Yet, more can be done to ensure accountability
and the program's fiscal integrity.
Mr. Chairman, this concludes my statement. I would be happy
to answer any questions. Thank you.
[The prepared statement of Mr. Cosgrove follows:]
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Mr. Green. Mr. Buckner, welcome to the Committee.
STATEMENT OF JAMES E. BUCKNER, JR., CHE, ADMINISTRATOR, UVALDE
MEMORIAL HOSPITAL
Mr. Buckner. Thank you and good morning, Mr. Chairman.
I am Jim Buckner, administrator of Uvalde Memorial Hospital
in rural southwest Texas, on behalf of the American Hospital
Association, nearly 5,000 member hospitals. I appreciate the
opportunity to share the hospital's strong support for the
Protecting the Medicaid Safety Net Act of 2008.
More than 57 million children, poor, disabled, and elderly
people rely on Medicaid for care. At my hospital in Uvalde, 20
percent of our patients are covered by Medicaid, while 89
percent of our newborns are also covered by the program.
Thirty-eight percent of our patients who are Medicare primary
beneficiaries also have Medicaid for their supplemental
insurance. Another 11 percent of those Medicare beneficiaries
are unable to pay their deductibles and co-insurance. Nearly 50
percent of our elderly are indigent. So it is clear that
changes in the Medicaid reimbursement program will have a
direct impact on our ability to serve the people who need us.
With the ranks of the uninsured growing and the threat of
an economic recession looming, the importance of Medicaid to so
many people's lives and health is being magnified even as we
are--even as it is being jeopardized. CMS has issued seven
regulations that would weaken the government's financial
support for Medicaid. I will focus on four that directly affect
hospitals.
The cost limit rule would restrict payments to financially
strapped government-operated hospitals, narrow the definition
of public hospitals, and restrict state Medicaid financing
through intergovernmental transfers and certified public
expenditures. It would also limit reimbursement for government-
operated hospitals and restrict the ability of states to make
supplemental payments to providers through the Medicaid upper
payment limit.
Let me summarize this rule. It cuts funding for public and
safety net providers that are in stressed financial
circumstances and are most in need of adequate payments, not
cuts. The supplemental Medicaid program payments that Uvalde
Memorial Hospital has received through the Texas Rural Upper
Payment Limit program have been essential to our ability to
keep the hospital doors open. If the Medicaid cost limit rule
is implemented, Texas hospitals expect an 80 percent reduction
to the Texas Rural Upper Payment Limit program. To fill that
budget gap, my hospital would be forced to consider deferring
acquisitions of technology, especially in areas like electronic
health records, and deferring much needed renovations to our
35-year-old hospital.
Also, important services we provide to improve quality of
life to our residents could be eliminated, such as our hospice
program and diabetic outreach program. The community and the
medical staff count on our hospital to recruit primary care
physicians and specialists to our community to improve the
medical safety net. UPL program helps us make initial support
for these physicians possible. Without hospital leadership we
struggle with even keeping primary care in a medically
underserved area.
The proposed graduate medical education rule would
eliminate any Federal Medicaid support for GME. While CMS
claims that this rule is a clarification, it is in fact the
reversal of more than 40 years of agency policy and practice,
and would cut nearly $2 billion in Federal support. Again, the
rule puts safety net hospitals in financial jeopardy.
The outpatient rule also substantially departs from long-
standing Medicaid policy. The types of services that might not
be reimbursed through hospital outpatient programs under the
rule include early and periodic screening and diagnostic
treatment; dental services for children; physician emergency
department services; physica, occupational, and speech
therapies; outpatient clinical diagnostic laboratory services;
ambulance services; durable medical equipment; and outpatient
audiology services. In other words, important cost-efficient
services that millions of people rely on. Many of these
services my own hospital provides to the rural residents of
southwest Texas, and I am very concerned that this rule, if
finalized, would make it harder for my hospital to continue to
offer these services.
If I may, Mr. Chair, one last rule. The provider tax rule
would change Medicaid policy on health care-related taxes that
help states support their share of Medicaid spending. And the
AHA specifically objects to the rule's hold harmless changes
that would make it difficult for states to adopt or implement
health care-related tax programs.
Mr. Chair, we have touched on the harm that each of these
regulations will do. We certainly ask and beg your support to
enact H.R. 5613, as it is absolutely critical to the continued
support of hospitals in the safety net areas.
Thank you.
[The prepared statement of Mr. Buckner follows:]
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Mr. Green. Our next witness is Dr. Antos. Again, welcome to
the Committee, Doctor.
STATEMENT OF JOSEPH R. ANTOS, PH.D., WILSON H. TAYLOR SCHOLAR
IN HEALTH, CARE AND RETIREMENT POLICY, AMERICAN ENTERPRISE
INSTITUTE
Mr. Antos. Thank you very much, Mr. Chairman.
I am Joseph Antos. I am with the American Enterprise
Institute. Before AEI I was at the Congressional Budget Office.
I had various positions in the Department of Health and Human
Services and CMS.
Medicaid is an important part of our health system, paying
for the acute and long-term care needs of millions of low-
income and disabled persons. It is also a source of
considerable friction between the Federal Government and the
states. There is an ongoing disagreement about what the Federal
Government should pay for in Medicaid and how much it should
pay. The major reason for these disputes is unfortunately quite
clear. It has to do with the shared nature of the program.
The Federal Government pays a substantial part of the
program's cost through open-ended matching grants, but the
states operate Medicaid on a day-to-day basis. It is essential
that the Federal Government maintain and strengthen its
oversight of this $350 billion program. Numerous reports from
GAO and from the Inspector General's Office and HHS attest to
the financial and policy risks associated with the current
matching rate mechanism. However, payment rules are subject to
interpretation and local issues are difficult to resolve from
Washington. Consequently, congressional oversight of HHS
policies and regulations effecting Medicaid is essential to
help ensure that state concerns are fully aired and that
regulations are developed in an orderly process that protects
the interests of the taxpayers and Medicare beneficiaries.
H.R. 5613 would stop such a process in its tracks. It is
difficult to see how any of the objections raised against the
seven regulations in question can be resolved by prohibiting
further work on them. Whether or not Congress stops HHS's work
on the regulations, the tension between the Federal Government
and the states over Medicaid will continue unabated. There will
continue to be disputes over the appropriateness of state
actions to increase the flow of Federal funds. There will
continue to be new regulations piled on top of old that attempt
to clarify accounting procedures and program rules. Every new
regulation will open up yet another avenue of state action, and
yet another cause for dispute.
The source of this ongoing problem is not found in a single
set of regulations. The problem is the structure of Medicare
financing, which splits the costs between the Federal
Government and the states in a way that promotes Federal micro-
management. People--legislators have considered possible
alternatives to the way we now handle Federal contributions to
the Medicare program. For example, Federal block grants would
solve many of the disputes that now go on. An alternative
proposal would cap the Federal Medicaid contribution on a per
beneficiary basis without imposing an overall limit on program
spending. Under such per capita caps, the Federal Government
and the states would share the risks of higher enrollment
rates, but the states would continue to have very strong
financial incentives to manage their programs carefully.
Block grants and per capita caps are certainly not
panaceas, but they would raise the Federal focus from the
details of accounting to the broader concerns of national
policy. States would have greater flexibility to innovate and
the Federal Government would have less reason to dictate to
states what they could or could not do.
As a number of members of the Committee pointed out in
their opening statements, Medicaid is part of a coming
financial crisis for the government and for the country. It is
certainly no surprise that runaway health spending is
contributing to this crisis that is right around the corner.
Clearly the Medicaid program is part of that. It is part of the
same $2 trillion health system that we have that is rapidly
rising without--seemingly without limit. As the cost of health
care continues to explode health programs, including Medicare--
Medicaid will absorb larger shares of tax revenues, leaving
little room for new policy initiatives. I am a member of a
group of budget experts, bipartisan group of budget experts,
who have been meeting now for some time, that are concerned
about this issue. And we recently released a report that
suggests an approach that Congress should consider to put
itself back on a track to make the kinds of hard decisions that
will be necessary to meet this health spending crisis. There is
more detail on this in my written testimony. But the bottom
line here is that we are not prepared as a Nation, and Congress
is not prepared as a body, as a legislative body, to deal with
these issues without making very, very difficult decisions. The
kind of process reforms that my group recommends will certainly
not solve all the problems, but they will put us on a path to
sensible decision making.
To wrap up, a major reform to vindicate financing should be
placed on the agenda for the next administration that should
not absolve HHS in Congress in continuing to be good stewards
of taxpayer dollars. And it should not prevent HHS from taking
appropriate actions necessary to maintain the fiscal integrity
of Medicaid.
Thank you.
[The prepared statement of Mr. Antos follows:]
Statement of Joseph R. Antos, Ph.D.
Mr. Chairman and members of the Committee, it is a pleasure
to appear before you today. I am Joseph Antos, the Wilson H.
Taylor Scholar in Health Care and Retirement Policy at the
American Enterprise Institute, a Washington-based think tank. I
am also part of a bipartisan group of budget experts who
believe Congress must address the rapidly growing mismatch
between Federal spending and revenues that threatens our
ability to finance important policy priorities. In a paper
released this week, we argue that the first step toward
restoring budget responsibility is to reform the budget
decision process so that Social Security, Medicare, and
Medicaid-the major drivers of escalating deficits-are no longer
on auto-pilot.
Medicaid is an important part of our health system, paying
for the acute- and long-term care needs of millions of low-
income and disabled persons. It is also a source of
considerable friction between the Federal Government and the
states. There is ongoing disagreement about what the Federal
Government should pay for in Medicaid and how much it should
pay. Today's hearing highlights a concern that the states and
some members of Congress have over regulatory actions meant by
the U.S. Department of Health and Human Services (HHS) to
clarify payment rules and reduce spending that it deems
unnecessary.
My testimony will highlight the major reason for such
intergovernmental disputes: the use of a matching formula to
determine a variable federal subsidy rather than a fixed
amount. I will also describe the likely path of Medicaid
spending over the long term and the need for Congress to
directly consider the impact of policies beyond the budget
window for Medicaid and the other major entitlement programs.
A Governance Issue
The ongoing debate over regulatory actions proposed by HHS
to alter or clarify some of the details of its Medicaid
financing policy stems from an important matter of program
governance. How should the Medicaid program be managed to
ensure that beneficiaries receive appropriate and effective
health care while maintaining fiscal discipline? This question
naturally arises because Medicaid is a shared responsibility.
The Federal Government pays a substantial part of the program's
cost through open-ended matching grants but the states operate
Medicaid on a day-to-day basis.
It is essential that the Federal Government maintain and
strengthen its oversight of this $350 billion program. Numerous
investigations conducted by the Government Accountability
Office (GAO) and the HHS Office of Inspector General (OIG), as
well as decades of experience, demonstrate the financial and
policy risks associated with the current matching rate
mechanism. However, payment rules are subject to
interpretation, and local issues are difficult to resolve from
Washington. Consequently, congressional oversight of HHS
policies and regulations affecting Medicaid is essential to
help ensure that state concerns are fully aired, and that
regulations are developed in an orderly process that protects
the interests of the taxpayers and Medicaid beneficiaries.
H.R. 5613, Protecting the Medicaid Safety Net Act of 2008,
would stop such a process in its tracks by preventing HHS from
further developing, refining, and implementing seven proposed
or final regulations that have been advanced over the past
year. Moreover, the Act does not envision congressional action
on these regulations over the next 12 months. It is difficult
to see how any of the objections raised against these
regulations can be resolved by prohibiting further work on
them. Without some clarification, the states will remain
uncertain about the program's rules of the road.
There is a further cost of delaying the regulations that
directly affects Congress. If H.R. 5613 is enacted, federal
spending would increase by $1.65 billion over the next 2
years--not very much money relative to the size of Medicaid.
Under the pay-as-you-go rules prudently adopted in this
Congress, spending offsets will be needed. To avoid unnecessary
controversy, offsets should be identified in an open and
bipartisan manner.
Perverse Financial Incentives Breed Conflict
Whether or not Congress stops HHS's work on the seven
regulations in question, the tension between the Federal
Government and the states over Medicaid will continue unabated.
There will continue to be disputes over the appropriateness of
state actions to increase the flow of federal funds. There will
continue to be new regulations piled on top of old that attempt
to clarify accounting procedures and program rules. Every new
regulation will open up yet another avenue of state action and
another cause for dispute.
The source of this ongoing problem is not found in a single
set of regulations. The problem is the structure of Medicare
financing, which splits the costs between the Federal
Government and the states in a way that promotes federal
micromanagement.
As an alternative to the current matching formula, federal
block grants would resolve many of the disputes between the two
levels of government since many of the financial methods now in
use would no longer affect the amount of the federal payment.
There is already a tradition of negotiating an aggregate target
for state drug expenditures in Medicaid. This allows maximum
flexibility for each state to manage its program while assuring
HHS that expenditures will remain under control. However,
states are concerned that a block grant covering the entire
program might not fully account for the growth in Medicaid
enrollment in an economic downturn or for unexpected increases
in the cost of health care.
An alternative proposal would cap the federal Medicaid
contribution on a per-beneficiary basis without imposing an
overall limit on program spending. Under such ``per capita
caps'', the Federal Government and the states would share the
risk of higher enrollment rates. States would have a strong
incentive to manage their programs in a cost-effective manner
since they would be liable for per capita spending above the
capped amount.
Block grants or per capita caps are not panaceas, but they
would raise the federal focus from the details of accounting to
the broader concerns of national policy. States would have
greater flexibility to innovate, and the Federal Government
would have less reason to dictate to states what they could or
could not do.
The Coming Fiscal Crisis
We are about to meet an enormous fiscal challenge head on,
and Medicaid is a major part of that challenge. Some 80 million
baby boomers are rapidly reaching the age at which they can
draw benefits from Social Security and Medicare, and
substantial numbers are already enrolled in Medicaid. These
three entitlement programs will experience high spending growth
over the next few decades, outrunning growth in the overall
economy and threatening to crowd out other policy priorities in
federal revenue.
By far the fastest spending growth is expected in the
health programs. Not only will many more people become eligible
for Medicare and Medicaid, but average health spending per
enrollee is likely to continue its upward spiral. If present
trends continue, Medicare and Medicaid will rise from 4.1
percent of GDP in 2007 to 8.1 percent in 2030, and 12.0 percent
by 2050. 1A\1\ By that estimate, health programs will consume
an ever increasing share of federal tax revenue, which has
averaged 18 percent of GDP over the past 50 years. Moreover,
the pressure that Medicaid is already putting on state budgets
will increase enormously.
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\1\ Congressional Budget Office, The Long-Term Budget Outlook,
December 2007. The estimates include only the federal portion of
Medicaid spending.
---------------------------------------------------------------------------
What Should Congress Do?
It is no surprise to policymakers that runaway health
spending is contributing to a growing fiscal crisis. The
Medicare trustees have been warning about impending imbalances
in that program, and the states have made it clear that
Medicaid spending is becoming unsustainable for them. As the
cost of health care continues to explode, the health programs
will absorb a larger share of tax revenues, leaving little room
for new policy initiatives.
A significant part of the problem is the automatic nature
of spending in Medicare and Medicaid. Except in periods of
crisis, entitlement programs are on auto-pilot. As the
entitlements grow, there is less money available in the budget
for housing, education, energy, transportation, and the other
discretionary programs. There is no mechanism in our federal
policy process that forces policymakers to look at the broader
picture and re-establish some balance across programs competing
for scarce resources.
We need to establish the preconditions necessary to
encourage elected officials to make the hard choices that will
be needed if we hope to regain control of the budget. As a
member of a bipartisan group of budget experts who have been
working on this issue, I offer the following suggestion for
reforming the budget process. 1A\2\
---------------------------------------------------------------------------
\2\ Joseph Antos et al., Taking Back Our Fiscal Future, April 2008,
available at http://www.aei.org/publications/filter.all,pubID.27743/
pub--detail.asp.
---------------------------------------------------------------------------
The budget expert group proposes that the Congress and the
president adopt explicit, sustainable long-term budgets for
Medicare, Medicaid, and Social Security. Periodically, perhaps
every 5 years, the CBO would determine whether the programs
were remaining on the agreed upon, long-term path of outlays
and revenue. If a program was off course fiscally, the Congress
and the president would try to come to agreement about an
appropriate change in policy. If agreement was not reached, a
budget trigger would automatically reduce spending or increase
taxes (or some combination) enough to put the program back on
course.
This proposal would change the way decisions about long-
term spending commitments are made, but they would not
automatically solve the fiscal crisis that will soon be
precipitated by entitlement programs. That will still require
innovative thinking, political risk-taking, and bipartisanship.
A major reform of Medicaid financing should be placed on
the agenda for the next administration. That should not absolve
HHS and Congress from continuing to be good stewards of
taxpayer dollars, and it should not prevent HHS from taking
appropriate actions necessary to maintain the fiscal integrity
of Medicaid.
----------
Mr. Green. Ms. Edwards.
STATEMENT OF BARBARA COULTER EDWARDS, INTERIM DIRECTOR,
NATIONAL ASSOCIATION OF STATE MEDICAID DIRECTORS (NASMD)
Ms. Edwards. Mr. Chairman, Mr. Deal, thank you. And to
members of the Committee thank you so much for the opportunity
to testify this morning on behalf of State Medicaid Directors
regarding H.R. 5613.
My name is Barbara Coulter Edwards. I am the interim
director of the National Association of State Medicaid
Directors, an affiliate of the American Public Human Services
Association. NASMD represents the directors of the 50 state
Medicaid programs, plus the Medicaid programs administered by
the District of Columbia and the U.S. territories.
Medicaid in the states is a program under considerable
stress. One major source of that stress is a slowing economy.
When state economies slow, people lose jobs, state tax revenues
decline, and the demand for Medicaid services increases just
when states are least able to afford it. And because states
must balance their budgets on an annual basis, the crisis is
immediate, not something that can be put off to the future. A
compounding source of stress for states is the recent dramatic
change in Federal policy as expressed in a series of proposed
and enacted Federal Medicaid regulations. The Center for
Medicare and Medicaid Services has issued at least 15 proposed
regulations over the last 2 years, 10 in the last 6 months
alone. Eight of these regulations have been flagged by states
as causing significant harm to the ability of states to
appropriately serve the Medicaid population. This collection of
regulations impacts a broad range of Medicaid services and
activities, including reimbursement for safety net providers,
the support of the cost of medical residents who provide
substantial amounts of care to Medicaid consumers, services to
people with mental illness, the design of home and community
based long-term care waiver programs, the facilitation of
service access for adults and children with the most complex
medical, emotional, and social services needs, and the ability
of states to support school-based efforts to enroll children
into the Medicaid program.
The proposed regulations do not reduce the underlying cost
of health care. They represent a shift of billions of dollars
in Federal costs to states. The Administration has estimated
the regulations will produce $13 to $15 billion in reduced
Federal Medicaid spending over the next 5 years. States are
predicted losses as high as $50 billion. The reality is that
because most states do not have the resources to absorb these
costs, whether it is $15 billion or $50 billion, there will be
little choice but to restrict services for consumers.
H.R. 5613 would place seven of the proposed regulations
under a moratorium until March 2009. State Medicaid directors
are strongly supportive of efforts to provide a time-out on
these regulations to allow a careful consideration of the
impact of proposed policy changed on the vulnerable people
served by states. It is important to note that some of the
proposed regulations contain provisions that Congress has
rejected during debate over the DRA of 2005. In addition, many
of the regulations were issued either as interim final
regulations or with significantly shortened comment periods.
And there has been inadequate opportunity for public input on
the proposals. Perhaps as a result, these proposals appear to
have unintended consequences on good programs and will limit
legitimate services to vulnerable people.
States have heard the word ``schemes'' and ``abuse'' and
``fraud'' when we have asked why these justifications--these
regulations are justified. We have been told that the extreme
approach in some instances is the result of a firm intention to
guarantee that there are no more ``loopholes'' that may allow
states to draw more Federal matching funds than the
Administration believes is proper.
I would urge Congress to look beyond these words that are
designed to incite outrage, to consider the actual implications
of these proposed regulations. NASMD has been clear in our
interactions with CMS that we do not seek to defend
inappropriate excesses in Federal claiming. We have not asked
CMS to walk away from those issues. Rather NASMD believes that
CMS has in many instances already found strategies to
successfully identify and remediate areas of clear excess. In
recent years CMS has put in place new informal and formal
guidance on IGTs, CPEs, and school administrative claiming,
just to name a few. Congress has acted to create reforms to
targeted case management, clarifying important parameters
regarding how Medicaid interfaces with other public programs.
Congress has also authorized additional funding for CMS
auditors, both to monitor state fiscal arrangements and to
increase provider reviews. States would argue that CMS has, in
fact, already solved much, if not all, of the problems that
were of legitimate concern regarding state claiming of Federal
reimbursement.
As just one example, a school nurse who works today to help
a child with untreated medical needs enroll in the Medicaid
program is not an abuse of the system. It is a critical
component of an effective Medicaid program. But under the
school services regulations, this legitimate activity would be
prohibited from receiving Medicaid support. The fact is that
most of these regulations are not really about fiscal
integrity. They are about limiting the services that the
Federal Government will share in funding through Medicaid. And
again, they don not reduce the underlying costs of the health
care services needed by the individuals.
And NASMD urges Congress to support H.R. 5613. We need time
to find the right balance between Federal clarity and state
flexibility, between absolute assurances that Federal funds are
never overused and the imperative for states to be able to meet
the needs of the elderly, children with special health care
needs, and other persons with complex, chronic or disabling
conditions. And we should find that balance before we implement
changes that will damage critical services to vulnerable
populations.
I thank you for your interest in this issue. NASMD and its
members stand ready to work with Congress and the
Administration to resolve important challenges. And we look
forward to your questions.
[The prepared statement of Ms. Edwards follows:]
Statement of Barbara Coulter Edwards
Thank you for the opportunity to testify today on behalf of
state Medicaid directors regarding H.R. 5613. My name is
Barbara Coulter Edwards, and I am Interim Director of the
National Association of State Medicaid Directors, an affiliate
of the American Public Human Services Association. NASMD
represents the directors of the 50 state Medicaid programs,
plus the Medicaid programs administered by the District of
Columbia and the U.S. territories.
Medicaid provides comprehensive health coverage to 62
million U.S. citizens, including on average one out of every
three children in the Nation. Medicaid is the largest payer for
long-term care services and provides long term care supports in
community-based and in-home settings, as well as in nursing
homes, for millions of senior citizens, and adults and children
with disabling conditions. Medicaid is the largest insurer of
non-aged adults with disabilities, is often a source of support
for people with disabilities who can return to the work force,
and plays an increasingly important role in offering coverage
to low income working Americans, especially parents, as
coverage in the employer sector declines. Medicaid is also
relied upon to fill the holes in the Medicare program for low-
income seniors and people with disabilities: 40 percent of all
the spending in the Medicaid program is for the approximately
14 percent of the enrolled population who is already insured by
Medicare.
Medicaid in the states is a program under considerable
stress. The major source of that stress is a slowing economy.
When state economies slow, people lose jobs, state tax revenues
decline--and the demand for Medicaid services increases.
Because states must balance their budgets every fiscal year,
slowing tax revenues and increased demand for public services
often triggers efforts by states to reduce Medicaid spending.
Unfortunately, cuts to Medicaid are difficult to achieve in the
timeframe of a single fiscal year. The rate of growth in the
program is already lower on a per person basis that the
commercial marketplace, so additional cuts to reimbursement run
the risk of reducing access or quality of care. Because states
must give up the federal revenue that comes with state Medicaid
spending, it requires reducing health care spending by $2.40 to
achieve a $1.00 reduction in state spending (in a state with a
60 percent federal matching rate). In addition, because cuts in
spending on health care do not reduce the covered population's
need for health care, someone else in the system ends up
absorbing the cost of unreimbursed care, or individuals who are
denied care eventually end up in emergency rooms, often
resulting in higher cost and poorer outcomes. While states
remained engaged in implementing larger system reforms (e.g.,
developing health information technology-supported strategies
to reduce error and increase information sharing; using managed
care to improve access to appropriate services and reduce
unnecessary care; and increasing efforts to avoid fraud and
abuse), many of these changes require up-front investments that
are difficult to make in the midst of an economic downturn and
have return-on-investment cycles in excess of twelve months.
A second source of stress for states is the recent,
dramatic change in federal policy as expressed in a series of
proposed and enacted federal Medicaid regulations. The Center
for Medicare and Medicaid Services (CMS) has issued at least 15
proposed regulations over the last 2 years (10 in the last 6
months alone!). Some of the regulations provide guidance for
the implementation of major new provisions contained in the
Deficit Reduction Act of 2005 (e.g., Section 1915i, use of
benchmark benefit plans, cash and counseling, cost sharing,
etc.). Others attempt to provide clarification regarding long-
standing but perhaps inconsistently applied federal policy.
Still others, however, propose to make significant changes in
long-standing federal policy, changes that states believe will
significantly interfere with achieving the legitimate purposes
of the Medicaid program.
Eight of the 17 sets of regulations have been flagged by
states as causing potential significant harm to the ability of
states to appropriately serve the Medicaid population. This
collection of regulations impacts a broad range of Medicaid
services and activities, including reimbursement for safety net
providers; reimbursement for out-patient services in hospitals;
the support of the cost of medical residents who provide
substantial amounts of care to Medicaid consumers; services to
people with mental illness; the design of home- and community-
based waiver programs for the elderly and people with physical
and developmental disabilities; the facilitation of service
access for adults and children with the most complex medical,
emotional and social services needs; and the ability of states
to support school-based efforts to enroll needy children into
Medicaid coverage. The proposed regulations represent a shift
of billions of dollars in federal costs to states. The
Administration has estimated that the full implementation of
these regulations will produce $13 billion in reduced federal
Medicaid spending over the next 5 years; states have estimated
a considerably larger potential impact of these regulations,
predicting losses as high as $50 billion in federal Medicaid
support over the same period. Because most states do not have
the resources to absorb these costs, there will be little
choice but to restrict services for consumers.
H.R. 5613 would place seven of the proposed regulations
under a moratorium until March 2009. (The eighth regulation
regards the operation of the U.S. Health and Human Services'
Departmental Appeals Board and, while not specifically
associated with federal savings, is viewed by most states as
seriously undermining the availability of due process for
states through an administrative appeal before the federal
department.) State Medicaid directors are strongly supportive
of efforts to provide a ``time out'' on these regulations to
allow a careful consideration of the impact of proposed policy
changes on the vulnerable people served by states. Directors
also encourage a more robust public debate on the merits of
some of the proposed changes in such a critical program. It's
important to note that some of the proposed regulations contain
provisions that Congress rejected during debate over the DRA of
2005. In addition, because many of the regulations were issued
either as interim final regulations or with significantly
shortened comment periods (as few as 30 days), there has been
inadequate opportunity for public input on these proposals. As
a result, these proposals appear to have unintended
consequences on good programs and will limit legitimate
services to vulnerable people.
States have heard the words ``schemes'' and ``abuse'' and
even ``fraud'' when they've asked why these regulations are
justified. We've been told that the extreme approach in some
instances is the result of a firm intention to guarantee that
there are no more ``loopholes'' that may allow states to draw
more federal matching funds than the Administration believes is
proper. I'd like to make two points regarding this
justification.
First, I urge Congress to look beyond the words that incite
outrage to consider the actual implications of proposed
changes. NASMD has been clear in our interactions with CMS that
we do not seek to defend inappropriate excesses in federal
claiming. While Medicaid directors may sympathize with states
that have responded to very real fiscal pressures by, in part,
over-reaching in terms of the use of Medicaid funds to support
otherwise underfunded programs, directors have not asked CMS to
walk away from these issues. Rather, NASMD believes that CMS
has, in most instances, already found strategies to
successfully identify and remediate areas of clear excess. In
recent years, CMS has put in place new informal or formal
guidance on IGTs, CPEs, and school administrative claiming,
just to name a few. At the Administration's urging, Congress
has enacted reforms to targeted case management, clarifying
important parameters regarding benefit design and how Medicaid
interfaces with other public programs. Congress has authorized
additional funding for CMS auditors, both to monitor state
fiscal arrangements and to increase provider reviews. States
would argue that CMS has, in fact, already solved much if not
all of the problems that were of legitimate concern regarding
state claiming of federal reimbursement.
Second, the apparent focus of the regulations to assure
that ``no loopholes'' remain has resulted in overly-broad
changes and prohibitions that are throwing the figurative baby
out with the bath water. For example, some school
administrative claiming arrangements in the past may have
charged excessive costs to Medicaid. However, a school nurse
who works today to help a child with untreated medical needs
enroll in the Medicaid program is not an abuse of the system.
It is a critical component of an effective Medicaid program.
But under the school services regulations, this legitimate
activity would be prohibited from receiving Medicaid support.
It may be useful to clarify the definition of
rehabilitative services. However, to declare an entire group of
individuals to be ineligible for rehabilitation services
because CMS has unilaterally decided that people with
developmental disabilities cannot ever benefit from
rehabilitation appears biased and of uncertain clinical merit.
It was certainly appropriate for CMS to reflect in rule the
definition that Congress enacted to define case management as a
comprehensive service. However, CMS's decision to reverse years
of federal policy by now prohibiting the use of administrative
case management, purportedly in order to avoid any
``loophole,'' appears again to have been an over-reaction, well
beyond what Congress enacted and with no regard for the
consequences for states which have now lost an important option
for assuring the quality and effectiveness of services
delivered to high cost populations.
NASMD urges Congress to support HR 5613, giving states,
federal policy-makers, consumers and providers a period of time
to understand and prevent the unintended consequences of these
regulations, and to revisit and debate the wisdom of the
apparently intended consequences as well. We need an
opportunity to find the right balance between federal clarity
and state flexibility, between absolute assurances that federal
funds are never ``overused'' and the imperative for states to
be able to meet the needs of the elderly, children with special
health care needs, and other persons with complex, chronic or
disabling conditions. Finally, we need more realistic
timeframes for implementation of new regulations, particularly
for regulations that change existing federal policy as
reflected in years of approved state plans.
Thank you for your interest in this issue. NASMD and its
members stand ready to work with Congress and the
Administration to resolve this important set of challenges. I
look forward to your questions.
----------
Mr. Green. Thank you to each of our panelists, and that
concludes the opening statements. And the Chair will recognize
himself for 5 minutes for questions.
Now, Mr. Buckner, can you give us an idea of the population
at Uvalde Memorial Hospital and the typical patient?
Mr. Buckner. Uvalde Memorial Hospital serves a population
in five counties of about 45,000 people, in which we are the
only hospital around.
Mr. Green. And you state in your testimony that 20 percent
of your patients are covered by Medicaid, and yet 89 percent of
your newborns are covered by Medicaid. How much of your yearly
budget comes from Medicaid funding related to these proposed
cuts? What would it mean actually for your hospital?
Mr. Buckner. We are projecting on the UPL program--we take
in about a million and five from that program. Eighty percent
cut of that takes us down to about 300,000. And that, sir, is
largely the margin that we are operating on these days, is that
funding from UPL.
Mr. Green. OK. If these regulations go into place would the
Uvalde Memorial Hospital be able to serve Medicaid patients at
all, or the types of patients that you currently serve,
particular for the newborns?
Mr. Buckner. Our ability to take care of our newborns
really gets tougher because, frankly, we are looking at a
physician shortage right now. We are trying to recruit primary
care physicians who deliver, and we are struggling right now to
find those kinds of physicians. Without the extra support to
make it possible to bring those and recruit those physicians to
town that is really one of the first areas we get hit with.
Now, keeping up with the technology--we are just putting an
electronic medical record for OB area--is the things that we
are doing right now with our--if you want to call it a
surplus--a bottom line. That is what we are doing with it, is
trying to maintain better services for those folks.
Mr. Green. Does your hospital benefit from the Medicaid
Graduate Medical Education funding?
Mr. Buckner. No, sir. In Texas, GME is not funded, and we
do not--we are not a teaching hospital.
Mr. Green. OK. Where would those patients go? Would they go
to Bear County, San Antonio?
Mr. Buckner. Yes, sir.
Mr. Green. And that is the closest urban area that would
have the hospital facilities?
Mr. Buckner. The--it is an hour-and-a-half trip. And that
is for--in our town we have trouble just getting people from
the west side, which is our lower socioeconomic area, to the
east side, where the hospital and the Wal-Mart are located. So
getting 90 miles to the next nearest facility that--tertiary
facility or even--well, the nearest hospital is 40 miles away,
which is a critical access hospital. They can't take on more
patients. So what happens is we struggle with transportation
and access and, the community is three-quarters Hispanic and
there are first or second generations of immigrancy and
assimilation into American society. We have--what is amazing,
sir, is the ability that Medicaid provides to these folks. And
you would tolerate just one thing. We polled our medical--we
polled our hospital employees. They are largely the folks that
are homegrown. Many of these folks have grown up on the
Medicaid program, and are now taxpaying members of society on
the hospital's private insurance program, and are contributing
to society. And if you would bear with me, I do have one quote
from one of them that represents, really, everybody. One of our
health information clerks, Esperonza Zomerepa, says we, meaning
she and her husband, have been fortunate to count on the
Medicaid program for several years, allowing us to pursue our
educational goals. And as a result we are both employed full-
time. We are, indeed, grateful for what the Medicaid program
has allowed us to accomplish. I speak for both of us in saying
that in our case Medicaid was a hand-up, not a handout. That is
the sentiment echoed time and time again with members of my
hospital staff and others who have worked their way up from the
lower socioeconomic branches into a middle class in Uvalde.
Mr. Green. OK. Thank you. My time is expired. The Chair
will recognize our ranking member from Georgia, Congressman
Deal.
Mr. Deal. Thank you, Mr. Chairman. Let me preface my
questions by a statement that I do not in any way intend to
mean anybody by virtue of questions that I might ask, because I
appreciate the services that all of you provide and the
representatives of the groups that you represent to provide. I
think we really are all here dealing with the question of how
do we address the immediate concerns? How do we keep this
program financially solvent, both for the Federal Government
and for the states? And maybe we should have a hearing on Dr.
Antos' report about looking at other ways that might be a loss
incentive to maybe try to gain the system. Because I perceive
that many of these regulations are efforts to try to make the
system honest in the way that it works. Dr. Raulerson,
certainly I appreciate what you do. I think your service is one
of those invaluable things. And you mentioned a number of
instances where EPSDT provided the ability to find problems
early on. I think all of us are firm supporters of that
program. I know it was reaffirmed in the recent efforts under
the Deficit Reduction Act. Do you have anything in the
regulations that you think jeopardizes that program?
Dr. Raulerson. Yes. Some of the services that children get,
that I identify, they need at school. Their teachers cannot
provide those services. They need school services and the
school has to some way administrate those services.
Mr. Deal. So you are talking about a follow-up?
Dr. Raulerson. Well----
Mr. Deal. Not the initial screening?
Dr. Raulerson. The reason the overhead got so high in my
office is because we spend so much time trying to find services
for the problems that we identify. And the school is one of our
major sources. And I have to work with school nurses. I write a
plan up for each special needs child that goes to the school.
Mr. Deal. And you do that under IDEA? Which I presume
transitions to our next witness representing the school
systems. What you are saying is that IDEA, an education
program, is the program that has created these needs for the
services that you are providing, but we are expecting Medicaid
to pay for it, rather than IDEA. Is that pretty much the----
Dr. Raulerson. I think----
Mr. Deal. I am talking to Mr. Mohundro.
Dr. Raulerson. I think it costs more than they can provide,
especially now when there is an economic downturn. I don't have
enough case management services.
Mr. Deal. Yes, ma'am, I understand. I apologize for cutting
you off, but I have a limited time, and I want to go down the
list. Am I pretty much correct on that, that IDEA is not fully
funded and therefore these are costs that you have built in
because you created the program? And not every state or
community has done this school-based program have they?
Mr. Mohundro. That is correct. IDEA is not fully funded. It
has never been fully funded. And because we do have access
through Medicaid for those students that do qualify we do seek
those reimbursements.
Mr. Deal. OK.
Mr. Mohundro. And if you could fully fund IDEA that would
be great.
Mr. Deal. Yes.
Mr. Mohundro. And we probably wouldn't be in this mess.
Mr. Deal. And I think that is part of the problem is we are
asking here in this instance for Medicaid to pick up an
underfunded education initiative, IDEA. Let me keep on going
down the list very quickly. Dr. Shapiro. And I guess I really
should ask this to everybody, but then I will come back to you,
Dr. Shapiro. Do any of you really think that a state should be
able to force private non-governmental health care providers to
give back to the state part of their Medicaid payments? OK, Dr.
Shapiro, let me ask you specifically, because I understand in
the state of Pennsylvania there is some $400 million in
provider taxes that your nursing homes pay to the state.
Dr. Shapiro. Correct.
Mr. Deal. Do you get that back? Do you have an agreement to
get it back from the state?
Dr. Shapiro. Let us be very clear. Nursing homes in
Pennsylvania who service Medicaid people would go broke without
the provider assessment. It takes----
Mr. Deal. You know that is hard--let me stop you right
there. Let me stop you right there. You are saying that unless
you paid an extra tax you would go broke? That doesn't make
sense to most people.
Dr. Shapiro. The provider assessment takes dollars out of
nursing homes. It is matched by the Federal Government. It goes
entirely back to the nursing homes, 100 percent back to the
nursing homes, it pays the providers who care for the most
Medicaid----
Mr. Deal. I understand.
Dr. Shapiro. It takes the first dollars and it is a
Godsend.
Mr. Deal. And it counts as the state's portion of the
formula?
Dr. Shapiro. Now, the state puts in a lot of its own money.
Mr. Deal. Well, yes, but they count your money too don't
they?
Dr. Shapiro. Sure, they ante up some, but----
Mr. Deal. Considered, that is something in the nature of a
kickback?
Dr. Shapiro. But they get it all back.
Mr. Deal. Well, yes.
Dr. Shapiro. But you are missing, I think, the real issue,
and it goes--I spend a lot of time in Georgia. And I know----
Mr. Deal. I am surprised you went back to Pennsylvania.
Dr. Shapiro. Oh, no, Georgia is great. But the real issue
here is with many of these regulations is that the analysis of
what their sudden impact on the entire long-term care system
will be has not been done. I asked staff, who were preparing
this testimony, to give me some data. And they went to CMS, and
CMS said we just don't have that data. So you and I are both
comparable in age, and comparable I suspect in philosophy, and
we generally don't want to do any harm. And what these
regulations are doing is suddenly coming in, taking a lot of
money out of the system, and disrupting it. Maybe provider
assessment isn't the best thing. Maybe IGT isn't the best
thing, but we can't take those dollars like this out of the
system----
Mr. Deal. I understand your point in that regard, and that
is why I think Dr. Cosgrove's comment about GAO making these
recommendations--I understand some of these recommendations
date back to 1994, do they not, Dr. Cosgrove? I apologize. I am
over my time.
Mr. Cosgrove. That is correct.
Mr. Deal. OK. Thank you all. I apologize I couldn't get to
more of you.
Mr. Green. The Chair recognizes the Chair of our full
committee, Chairman Dingell.
Mr. Dingell. Mr. Chair, I thank you for your courtesy to
me, and I commend you again for the way that you are presiding
in this very important hearing. These questions are to Mr.
Mohundro and to Mr. Cosgrove, and I will proceed as fast as I
can. And I think they will all require, with regard to Dr.
Mohundro, a yes or no answer. Doctor, under the proposed CMS
regulations isn't it true that you and your colleagues who work
in the schools would no longer be paid by Medicaid to find and
enroll children who belong in the program, yes or no?
Mr. Mohundro. Yes.
Mr. Dingell. Is it also true that the schools would no
longer be paid for important activities that they do in
referring children with health care needs to the appropriate
place.
Mr. Mohundro. Yes.
Mr. Dingell. Isn't it true that GAO wrote the following
about outreach and enrollment in the schools, and I quote,
``Close to one-third of Medicaid eligible individuals are
school-age children, which makes schools an important service,
delivery and outreach point for Medicaid. Schools can undertake
administrative activities that help identify for first screen
and assist in the enrollment of Medicaid eligible children.
Outreach and identification activities help ensure that most
vulnerable children receive routine preventive health care and
ongoing primary care and treatment.''
Mr. Mohundro. Yes, sir.
Mr. Dingell. Mr.--Dr. Mohundro, if you and your school-
employed colleagues no longer provide such services, who will?
Mr. Mohundro. No one.
Mr. Dingell. Now, I note that local schools do not have the
funds to pay for the costs of enrolling eligible children in
Medicaid. So even though the schools are the most logical place
to find and enroll these children it won't happen without
Medicaid. Is that right?
Mr. Mohundro. That is correct.
Mr. Dingell. Now, Doctor, in the presentations of CMS they
are going to defend the proposed rule that we are discussing on
grounds there has been improper billing under the Medicaid
program by school districts who administer costs through
transportation service. Does your school district improperly
bill your state's Medicaid program for the cost of your
services?
Mr. Mohundro. No, sir.
Mr. Dingell. Now, just one interesting question. Is there
anything in this that you find that would--in these rules that
would do anything other than simply terminate the funding of
these programs, as opposed to addressing any problems that
might exist in reality with regard to misbehavior, waste,
fraud, and abuse?
Mr. Mohundro. No, sir. All this is going to do is we are
going to cut Medicaid funding totally out of the public school
systems.
Mr. Dingell. Now, Dr. Mohundro, my good friend and
colleague, Mr. Deal, asked you if IDEA was fully funded, and
would you need Medicaid. Could you elaborate on that question,
please?
Mr. Mohundro. Yes, sir. It is true the Federal Government
has not funded IDEA. That Congress set a goal in 1975 with its
first pass. However, this has nothing to do with whether the
Federal matching funds would be available for transportation
costs. In 1998, Congress made it clear that Medicaid programs
should provide Federal matching funds for Medicaid covered
services. They are specified in a child's IEP. We know that
Medicaid policies authorize Federal matching funds for
transportation to and from if transportation is specified in
the child's IEP for days when the child receives health care
with health services in school. While this help meets the costs
of children in special ed, the fact that IDEA is underfunded is
really irrelevant at this point.
Mr. Dingell. Now, these questions--thank you very much,
sir. These questions now to Mr. Cosgrove. And I am going to
have to do you the same regrettable discourtesy by asking for
questions that are, in fact, going to solicit a yes or no
answer. Mr. Cosgrove, as you know, H.R. 5613 would place a 1-
year moratorium on seven different regulations. With regards to
the CMS regulation prohibiting payment for graduate medical
education, has GAO done any specific work or found any specific
abuses with regard to Medicaid graduate education--of graduate
medical education payments?
Mr. Cosgrove. No, sir, not that I am aware.
Mr. Dingell. Again, Mr. Cosgrove, with respect to CMS
regulation restrictive payment for hospital outpatient
department services, has GAO done any work or found any abuses
with respect to Medicaid hospital outpatient department
payments?
Mr. Cosgrove. No.
Mr. Dingell. Mr. Cosgrove, with respect to CMS regulations
defining allowable provider taxes under Medicaid has GAO done
any work or found any abuses with respect to Medicaid provider
taxes?
Mr. Cosgrove. Not that I am aware.
Mr. Dingell. Mr. Cosgrove, with respect to CMS regulation
eliminating payment for certain Medicaid services provided by
schools in 2000, GAO wish you to report recommending CMS
clarify policies for such services. In response, CMS issued a
guide for appropriate claiming of school-based services in
2003. Has GAO issued any further recommendations?
Mr. Cosgrove. No, not on the matter.
Mr. Dingell. Again, Mr. Cosgrove, with regard to school
services, did GAO ever recommend completely eliminating
Medicaid payment for school-based transportation services?
Mr. Cosgrove. No, we did not.
Mr. Dingell. With respect to school services did GAO ever
recommend completely eliminating Medicaid payment for outreach
and enrollment activities performed by schools?
Mr. Cosgrove. No, we did not.
Mr. Dingell. With respect to rehabilitation services did
GAO ever recommend eliminating Medicaid coverage for
rehabilitation care that helps children with disabilities
maintain functional status?
Mr. Cosgrove. No, sir.
Mr. Dingell. With respect to targeted case management
services did GAO ever recommend CMS require billing in 15-
minute increments?
Mr. Cosgrove. No.
Mr. Dingell. With respect to targeted case management did
GAO ever recommend that CMS reduce the amount of time case
managers could serve people with disabilities who are trying to
transition out of an institution into the community?
Mr. Cosgrove. No, we did not.
Mr. Dingell. With--has GAO done any work evaluating the
specific regulations at issue in H.R. 5613?
Mr. Cosgrove. No, not these specific recommendations.
Mr. Dingell. So, while this is a legislative hearing on
H.R. 5613, you do not have any specific work on which to base
comments on the bill?
Mr. Cosgrove. Our work over time has called for more
guidance, but no, we do not have any specific recommendations
on these.
Mr. Dingell. One further question here, if you please. The
regulations would terminate all of the programs that are
mentioned in those regulations. Does--is that the ideal way to
address questions that might exist with regard to waste, fraud,
and abuse, or is it overkill?
Mr. Cosgrove. I think addressing waste, fraud, and abuse in
the Medicaid program is vitally important, but we----
Mr. Dingell. And we agree on that, but that is something
that has to be done with very, very specific mechanisms to
correct the abuses. Is that not so?
Mr. Cosgrove. That is correct.
Mr. Dingell. Mr. Chairman, I thank you for your courtesy,
and I thank you Dr. Mohundro and Mr. Cosgrove. I want to tell
you, Mr. Cosgrove, we very much appreciate the work that GOA
does. You are a fine group of public servants. Thank you,
gentlemen.
Mr. Cosgrove. Thank you, Mr. Dingell.
Mr. Dingell. Thank you, Mr. Chairman.
Mr. Pallone. Thank you, Chairman Dingell.
I recognize Mr. Murphy of Pennsylvania for 5 minutes.
Mr. Murphy. Thank you, Mr. Chairman. Ms. Turner, you gave
some examples of transportation misuses. People driving to
bingo games, to grocery stores, et cetera. Do you see those
issues addressed in this legislation that would affect those?
Ms. Turner. Mr. Chairman, I address this--this is an Office
of Inspector General report from the Department of Health and
Human Services. That is the kind of example of the abuses that
are possible through this program. As I said in my testimony, I
think it is really important--as you mentioned, I think it is
hard to find any one person that understands the Medicaid
program completely, and that really understands how to solve
the problems that this legislation would address. I do
believe----
Mr. Murphy. But did you see any in here?
Ms. Turner [continuing]. There needs to be a conversation.
Mr. Murphy. With regard to the--I appreciate that. Do you
see anything with regard to the segment in this legislation
which says there should be a moratorium on stopping
transportation services for children affecting that part of
which you raised the concerns about. I also think that nothing
in Medicaid is supposed to be bringing people to bingo games,
one of the examples here. But do you see that the moratorium
that this bill proposed on some of those cuts with
transportation of disabled children is even affected by what
you are describing there as an example?
Ms. Turner. Well, if states are doing this, as we know they
are from the Office of the Inspector General report, and if----
Mr. Murphy. So right now the Office of the Inspector
General brought that up, because they are not supposed to be
doing it, right?
Ms. Turner. Exactly, that we are not supposed to be doing
that. But if that is, in fact, taking place, by just stopping
the regulations and not having a continuing conversation about
how to fix that, then we aren't going to get to the solution. I
mean it is such a rule----
Mr. Murphy. OK.
Ms. Turner [continuing]. Driven program that people are
always going to look for ways around the rules, rather than
figuring out what is the incentive----
Mr. Murphy. We will have to remember that when people say
government should run health care. Here is another question. I
gave some examples about how--in fact, when we had Secretary
Leavitt here, he acknowledged that with Medicare we would
probably see hundreds of billions of dollars of savings if we
could do more to stop nosocomial infections. Is there anybody
who can comment on any things that have been done in states
that have worked on that and have led to some costs savings?
Ms. Edwards, do you know anything about it? Have any of the
Medicaid programs put this into place and have saved money with
this?
Ms. Edwards. With--Mr. Murphy, with regard to the specific
question of infections, states are actively engaged across the
country in a variety of efforts to increase the quality of the
services that are being delivered. States pick their own
strategies around that. There are states that are working on
collaboration with the Center for Health Care strategies, for
example, to put in place strategies to improve outcomes, reduce
errors. Some states are going at that strategy through health
information technology----
Mr. Murphy. What I am--let me say the reason I am getting
at this is we have to come up with $1.65 billion in savings on
this bill.
Ms. Turner. Mr. Chairman, Mr. Murphy, within the short
timeframe of this bill I think that there are--it is very
difficult to come up with quick savings in Medicaid at all, and
we could have a long conversation about why that is. But I
would suggest that a target for looking for savings
opportunities would be within chronic care populations, would
be within the duly eligible population, which drives 40 percent
of all of the spending in the Medicaid programs for people that
are already insured by Medicare. But there is very little
collaboration, in fact, even within CMS between those two
public programs in terms of finding cost savings. There are
large targets for savings in this program.
Mr. Murphy. This is where we could really use your help on
coming up with those ideas. As one of the things they
instituted in Pennsylvania was they are not going to pay for
never events. If something was amputated that shouldn't have
been, they got the wrong medication, so we are not paying. Now,
what we need to find out and we are waiting for those numbers
from Pennsylvania to see how much that saves. And I believe
that could be something we could put into effect fairly
quickly.
Ms. Turner. We are fascinated to watch Pennsylvania's
progress on that. I think it is very bold of them.
Mr. Murphy. There is also something I need your comment on
here. There is a section of this bill--I don't expect you--but
it is on page 3 where some of our wording has to do with--some
questions were raised by some folks about the demonstration
projects and other things that some feel that that language is
too broad. And might actually prohibit states from talking with
CMS with regard to coming up with some provisions of reform. I
don't ask you to comment on that now, but I hope that is
something you can look at, and other people on this panel could
look at as well. Because we want to make sure that those
discussions continue between innovations the states may have
and CMS, so we can--these issues. It would be important to do
this. I might say, Mr. Chairman, too, I have a letter here I
forgot to mention before from the secretary of--from
Pennsylvania's Dell Richmond, which describes that some of
their costs without this moratorium would be some $270 million
just in the first year alone. And if it is all right with you I
would like to submit that for the record.
Mr. Pallone. Without objection, so ordered. But the
gentleman's time is expired.[The information was not available
at the time of printing.]
Mr. Murphy. Thank you.
Mr. Pallone. Thank you, Mr. Murphy.
I recognize myself for 5 minutes. I wanted to ask Ms.
Edwards some questions. The Administration has referred to a
number of these regulations as simply clarifying policies under
Medicaid. However, as we know, if implemented they could create
significant financial distress for states and hardship for
families. Do you view the changes made in the regs as
clarifying or as basically an elimination of many of Medicaid's
safety net duties?
Ms. Edwards. Mr. Chairman, certainly there are regulations
in this large volume of regulations that are clarifying. But
the fact is, I think states believe strongly that eliminating
payments for direct medical education that has been in place
for decades is not clarification. Eliminating case management
as an administrative billing option is not a clarification.
That is change in Federal policy. So I think while there are
some regulations that are clarifying, many of these regulations
are an absolute change of long-standing Federal policy.
Mr. Pallone. OK. Now, you know that the bill would stop CMS
from implementing these rules through March of 2009. But if
Congress doesn't act to block these rules, what would happen to
many of the critical safety net rules played by Medicaid? In
other words, will states even have enough time to bring their
programs into compliance? I use an example, where will a person
with a disability who needs rehab services to stay out of a
nursing home receive those services? Will they be able to buy a
private insurance policy to cover the care? Or use the example
of the foster child with a mental illness. Would they be able
to secure the case management, the rehab, and the intervention
services needed to help get back to school? What would be the
consequences?
Ms. Edwards. Mr. Chairman, states are already in the middle
of this because the targeted case management regulations took
effect March 3. And, in fact, we have not received any written
guidance from CMS on how we are to come into compliance when we
already are not in compliance. And I think we probably have all
50 states that are finding themselves one way or another out of
compliance with those regulations. We are--some states have
stopped billing for some services, and there are not
alternative strategies in place. So services are being lost in
some states. Other states are very worried that they are--have
a financial liability if they continue to file those Federal
claims. Clearly CMS is beginning to recognize this around
targeted case management in that they are now beginning, at
least verbally, to say well, maybe we will give you a couple of
years to come into compliance on that, and on others like the
15-minute billing unit. So far they have mostly said we don't
know what to tell you. So I think the reality is whatever
regulations get put into place there have to be reasonable
implementation timelines as well. There is great concern at the
state level that if the provider changes around safety net
provider reimbursement, if some of these changes for schools
take effect, systems will be broken immediately, and there will
not be alternative strategies yet in place. It takes time. It
takes legislative action at the state level. It takes
alternative funding strategies. Those don't exist.
Mr. Pallone. What about the individuals though? You know, I
use that example of a person with a disability who needs rehab
services to stay out of a nursing home. Can they go out and buy
a private insurance policy to cover the care? I mean the
individuals that are going to be left out essentially? Do they
have----
Ms. Edwards. Mr. Chairman, the only health plan that I am
aware that you actually get into because you are sick is
Medicaid. So the fact is folks don't have alternatives or they
wouldn't be at our door in the first place. The reality is,
though, people can end up in an emergency room and they get
care. And eventually those costs get passed back to private
payers and people get on health care coverage through Medicaid
and Medicaid reaches back and pays those exorbitant costs. So
the fact is those costs don't go away. Frequently, if people
are undertreated in the right setting they are going to show up
in a more expensive setting, and we all absorb those costs
eventually.
Mr. Pallone. And we just end up paying more essentially.
Thank you. Let me ask Dr. Raulerson. I know you talked about
various services relative to Medicaid. But what about the
transportation? In other words, if a family can't get a child
there or can't find a specialist who can treat the child's
condition, Medicaid provides transportation services. You also
have the school-based services that are important. I just
wanted to--if you could, comment on the transportation and the
school-based services in the context of what you said before.
Dr. Raulerson. I would like to mention two things about
transportation. Shakira, the little baby who is 4 months old
was in Birmingham right now. She is coming home to my area
today. She has to go back next week. It is a 400 mile
roundtrip, and gas in Alabama right now costs $3.25 a gallon.
Her family just cannot afford that. In fact, we are going to
have to have someone help us figure out how to get her back and
forth to Birmingham. But I have children with special needs in
my practice who have difficulty getting to school because they
are wheelchair-bound and they have to have a special kind of
bus to get to school. And just recently the children in my area
who were handicapped, who were going to the Head Start program,
lost their transportation funds. And I have a couple of
children that now have no way to get to Head Start, because of
loss of transportation funds. So children need to get where
they need to go to get the services that they need, and
transportation is a big part of that.
Mr. Pallone. I appreciate it.
Dr. Raulerson. Can I mention one other thing? I was talking
with the pediatric urologist this week. And he said, you know,
you refer these patients and one out of five of them doesn't
get there. And I said, you know why? They don't have a car that
will go. They don't have the gas money. They can't get there,
because Mobile is 90 miles from Brewton.
Mr. Pallone. I think that is very important, because I
think a lot of times we lose sight of the transportation
access, you know, the aspect of this in terms of the funding.
Thank you. OK. My time has expired. I recognize the gentleman
from Texas, Mr. Burgess, for questions.
Mr. Burgess. Thank you, Mr. Chairman. Can I just start off
with a philosophical question, Ms. Turner? Is it still a value
to have the private sector involved in health care delivery in
this country?
Ms. Turner. I think that many people feel that that is the
case, because competition really does provide people more
options, and people do like to have choices. And it helps to
provide the same kind of efficiency that we see in other parts
of the economy. Wal-Mart's $4 prescription drug I think is a
good example.
Mr. Burgess. And even on a more basic level, Dr. Raulerson,
I too started private practice in 1981, so I feel like we have
grown up together. The whole concept of the cross-subsidization
that occurs with the Federal programs and the private sector is
one that--I mean I certainly recognized at an early age if I
was losing a little bit on every Medicare or Medicaid patient.
I saw it was going to be difficult to make it up in volume and
then you get caught in the overhead trap that you so eloquently
described. And the only mechanisms that you planned then to
deal with that are increased number of hours that you work,
which you can do up to a point, hire physician extenders, which
you apparently have done. But there does reach a point where
you just simply cannot keep up. But it also seems to me we
heard--I think it was Mr. Waxman referred to Medicaid as the
insurer of last resort. But if 80 percent of your practice is
Medicaid it doesn't sound like we--one of your problems at
least may be the balance of the patient mix. And I guess we do
have to ask ourselves what are we doing and what can we do? And
Dr. Antos alluded to this to some degree. And there has got to
be some overall structural change in health care across the
board, and you have heard a lot of it discussed here this
morning. And again, Dr. Antos talked about the dealing with the
actuarial aspects when, in fact, we need to be dealing with
policy and fundamental change in policy. Again, just my
observation after having been here for a few years. Again, I
think it was Mr. Towns who said we need reform. I don't
disagree with that, perhaps we even need transformation, but
Congress is not inherently a reformative or even
transformational body. We are transactional. We are going to
take from you and we are going to give it to you. We hope you
are not too mad at us, and still vote for us, and you surely
will vote for us, because we gave you that. And that is the way
we work up here until our feet are to the fire, and it looks
like--again, we heard the number mentioned, $350 billion. Dr.
Antos, was that your figure, $350 billion for the annual
expenditure in Medicaid? And when we were doing our hearings on
the Deficit Reduction Act in 2005, which dealt with Medicaid,
we were told the total spending was $330 billion. So there we
have gone up $20 billion while we scarcely have gone by 2
years. That is a pretty rapid rate of rise in that program, so
clearly we are going to have to do something to be able to keep
up with that. Mr. Buckner, let me ask you. Eighty-nine percent
of your newborns are covered under Medicaid. To me that doesn't
sound like a program of last resort. That sounds to me like a
government-run health care system that is not functioning that
well. Would that be a wrong observation?
Mr. Buckner. The observation that 89 percent of our
Medicaid--of our babies are covered by Medicaid is a reflection
of the socio-economic status of our region of Texas. The
distribution of poor are not uniform. They don't exist in some
areas of the state or in the country. They are in my----
Mr. Burgess. Correct, but we were demographically at how to
cover groups. So that is one of the groups that is easier to
cover. I mean, yes, they are newborns and so you know that they
are going to require something. But their cost demands are not
great. Occasionally they are very high. So it makes me wonder
about--I can't believe I am saying this, because capitation is
a concept to me as such--as a provider. But Dr. Antos, when he
described so eloquently, it was almost seductive the way he
described the per capita caps that he brought forth. Would that
be something that we could consider from a policy standpoint
that would provide you so relief if there were a--as long as
there was not a limit on the enrollment, as he correctly
outlines. I think with some of the early HMO experience with
capitation, that was where some of the difficulty occurred. But
as long as there was no upper limit on enrollment would a per
capita cap, with even a provider tax withhold a portion of that
cap for catastrophic care, on a philosophical basis is that
something--do you think he is on to something there, or has he
spent too much time in the Congressional Budget Office?
Mr. Buckner. Philosophically for a rural area I could not
support per capita. The numbers are too small to make just one
catastrophic event in a rural area. I mean if we are talking
about per capita payments to a hospital system or to a group of
physicians.
Mr. Burgess. Well, presumably you have the statewide. The
per capita would have to be administered on a state-by-state
basis. I would imagine, Dr. Antos, you don't want me to put
words in your mouth. Feel free to jump in here if it is a--but
you certainly would not be able to do it on precinct or even
county basis. It would have to be done on a state-by-state
basis.
Mr. Buckner. Sir, the devil's in the details. I couldn't
comment on that philosophical argument. We have seen lots of
philosophies promulgated and mandated upon us that have caused
rural hospitals to fail and be eliminated from their
communities.
Mr. Burgess. And I don't disagree with that. I watched that
in my own practice life. Well, let me then--since we are not
going to talk philosophy, we will just have to talk the bill in
front of us. Ms. Edwards, have you all had a copy of the bill?
I just got one this morning, so I am not being--I am not going
to be too picky. But on page three of my bill, under additional
moratorium, it says the secretary of Health and Human Services
may not, prior to April 1, 2009, impose or continue any
requirement to permit the implementation of any provision or
condition. The approval of any condition the state plan, on and
on and on. So this is fairly restrictive language that has been
written into at least the draft that I have, which would
preclude--as Dr. Antos said, we are just going--not only do we
have a moratorium, we are going to stop work on these for a
year's time. Is that your reading of your bill as well?
Ms. Edwards. Mr. Chairman, Mr. Burgess, having just sort of
looked at the----
Mr. Burgess. I appreciate the promotion. Can I sit up here?
Ms. Edwards. Oh, that was Mr. Chairman, Mr. Burgess. Sorry,
my state habits have carried over. Not being an attorney what I
would say is I think the intent as I read it was trying to
prohibit CMS from taking action to implement the policy that is
expressed in the proposed regulations. Even including through
any state one-on-one interaction with states around state plan
amendments. I guess I would point out, to be fair I would
certainly not want to see a situation where CMS felt they could
not engage in an ongoing conversation around the issues.
Because one of the things that NASMD has been encouraging from
CMS--don't always get responses, but sometimes do, is better
understanding of what problems they really believe they are
trying to solve with the regulations, so that perhaps we could
work with them on finding better solutions. So far we haven't
found the right table at which to have that conversation. But I
think it is important to point out that many states report they
already can't get state plan amendments acted on, and it has
been months for some states. Sometimes over a year on some
kinds of provisions because states have not been willing to
agree to what CMS has been requiring that they agree to before
the Federal Government will approve the regulations. So I would
simply point out it is not as though it is a well-oiled machine
today----
Mr. Burgess. I would agree with that.
Mr. Edwards [continuing]. In terms of the activity. And
states would rather see a moratorium than wrong policy put in
place.
Mr. Burgess. Well, we may need----
Mr. Pallone. The gentleman's time has expired.
Mr. Burgess. We may need to address this to the bill's
authors. I would just offer one other observation. From anyone
sitting at the table, if you were going to sit down and
construct a program to do all the things Medicaid is supposed
to do, would it look anything like Medicaid does today?
Mr. Pallone. We can't have the questions, Mr. Burgess. I
just wanted you to finish your conversation. Thank you. The
gentleman's time is expired.
I recognize the gentlewoman from Colorado, Ms. DeGette.
Ms. DeGette. Thank you so much, Mr. Chairman.
When I looked at these regulations in total, what I think
is, this was just an attempt by the Administration to do two
things. Number 1, try to save money by having these slashes in
Medicaid. And number 2, to try in some way to make Medicaid
look more like private insurance. But the Administration
realized they couldn't get policy changes through Congress, and
so they just did these regulations with the excuse that they
were just cutting some waste or some inappropriate use of the
funds. And I want to illustrate that view by talking for a
moment about one of the regulations that deeply affects my
State of Colorado. That 72 Federal Register, 29748, the
payments to public providers. The way we finance Medicaid--or
the way we finance our public hospitals in Colorado, because of
a state constitutional amendment that was passed some years
ago, is we have allowed our public hospitals to find creative
ways, and independent ways, to not be financed through the
governmental entities. And so the result of this regulation is
that Colorado--my safety net provider hospitals in Colorado
will lose over $145 million. These are not because our
providers--in fact, Denver Health is widely known as one of the
most--and I think Ms. Edwards probably knows about this--it is
widely known as one of the most innovative, cost-saving public
hospitals in the entire country. And so they are not using the
money inappropriately. They just don't have the right financing
mechanism, and as a result these cuts are going to cost them.
They are going to have to start laying off people right now.
And so my question--my first question is to Mr. Cosgrove,
because Mr. Cosgrove you discussed this exact regulation I am
talking about. And one thing you mentioned was that the GAO
recommended that CMS establish or clarify and communicate its
policy surrounding supplemental payment arrangements and other
financing agreements. Do you think that if CMS were able to do
this, or to take other similar action, rather than simply limit
payments to public providers, that inappropriate funding
mechanisms could be eliminated without having this negative
impact on states, that are really having legitimate financing
arrangements, that just happen to fall within this scope of the
law? Very briefly.
Mr. Cosgrove. Well, in 1994--I mean the context is we were
very concerned about these payments that were being recycled.
And that is what we----
Ms. DeGette. Right.
Mr. Cosgrove. To get to the heart.
Ms. DeGette. But do you think--answer my question if you
will.
Mr. Cosgrove. Well, I am trying to.
Ms. DeGette. Do you think that if they could just establish
or clarify the policies they could separate out the wheat from
the chaff? Yes or no?
Mr. Cosgrove. That would go a long way.
Ms. DeGette. Thank you. Now, I really--I am like the
Chairman. I really apologize. They just don't give us much time
to ask these questions. Because I want to ask Ms. Turner this
question. She talked about, several times, inappropriate use of
funds for other purposes and so on and so forth. With respect
to this particular regulation, do you think that in enacting
this particular regulation that you are going to do more good
than--that the Administration is going to do more good than
harm? That it is going to eliminate more fraud, waste, and
abuse, or the inappropriate programs that you stated?
Ms. Turner. You know, that is really a question of how you
engage in a conversation with the states and the Congress and
the Administration to really solve this problem.
Ms. DeGette. Well, unfortunately, Ms. Turner, the
regulation does not provide for engaging in a conversation with
the states. The regulation provides for elimination of these
funds altogether with a--it is really with a hatchet, rather
than a scalpel.
Ms. Turner. The regulation is saying that if an entity is
rebating funds to the state that it has to get those back. When
you look at examples of nursing homes that get----
Ms. DeGette. What about Colorado? What about places like
Colorado who fund their public hospitals in this way?
Ms. Turner. Well, it is just----
Ms. DeGette. Too bad?
Ms. Turner. You look and ask is that the right way to run
the Medicaid program?
Ms. DeGette. OK. But that is not what this regulation----
Ms. Turner. More explicit----
Ms. DeGette [continuing]. Does. This regulation says, no.
Ms. Turner. Well, because CMS can't pass laws. It is the
responsibility----
Ms. DeGette. Right.
Ms. Turner [continuing]. Of Congress to figure out how do
we make this----
Ms. DeGette. But they did pass it. They said, no, Denver
Health.
Ms. Turner. The CMS can't fix the underlying problem. That
is the responsibility of Congress.
Ms. DeGette. So why should they have passed the regulation
then?
Ms. Turner. Because they see abuse. They see that the money
that is----
Ms. DeGette. So just everybody out, because someone abusing
it.
Ms. Turner. It is not being spent for legal Medicaid
services. It is being rebated to the states to pay for
education and many other services that aren't legal. It----
Ms. DeGette. Well, if they----
Ms. Turner. It is a fiduciary responsibility.
Ms. DeGette. Let me just ask you this. If they can't
legislate, why are they legislating through this regulation?
Ms. Turner. They are not--they are trying to make sure that
taxpayer dollars that are appropriated for Medicaid are being
spent for legal purposes. They see this outside the legal
authority of Medicaid.
Ms. DeGette. OK. So----
Mr. Pallone. The gentlewoman's----
Ms. DeGette. Thank you.
Mr. Pallone [continuing]. A minute over. All right. Thank
you.
Let me thank this--I think we are done with our questions
from members. And I want to thank all of you for being here. I
know it was a large panel, and difficult to get through
everything, but I think you were extremely helpful. So thank
you very much. Thank you for being here.
Not let mention we have two votes on the floor. These are
the last two votes of the day. I have 10 minutes on one, a
Motion to Recommit, and then 5 minutes on final passage. We
will reconvene immediately after that second vote, which I
guess may be another 15, 20 minutes, and then we will have our
next panel. So for now the Committee is in recess until after
the votes on the floor.
[Recess.]
Mr. Pallone. This subcommittee will reconvene, and I would
ask the members of our second panel to come forward, please.
Let me introduce each of you, if I can. First, on my left
is Dennis Smith, who is director of the Center for Medicaid and
State Operations with the Centers for Medicare and Medicaid
Services. And to his right is the Honorable Herb Conaway, who
is a physician and a state assemblyman in New Jersey, and who
also happens to be the Chairman of our State Assembly Health
and Senior Services Committee. And he is testifying on behalf
of the National Conference of State Legislatures, where he also
serves as Chair of their standing committee on health. And he
has been an advocate for not only increased access for health
services, but expanding health insurance, and so many things in
my state. And I really appreciate your being with us here
today, Herb. Thank you.
Dr. Conaway. Thank you.
Mr. Pallone. And then next to Assemblyman Conaway is John
Folkemer, who is deputy secretary for Health Care Financing of
the Department of Health and Mental Hygiene. Thank you also for
being here today.
As I mentioned before, we have 5-minute opening statements
from each you. Those become part of the hearing record. Each of
you may in the discretion of the Committee submit additional
statements in writing for inclusion on the record.
And I will start by recognizing Mr. Smith for 5 minutes.
Thank you.
STATEMENT OF DENNIS G. SMITH, DIRECTOR, CENTER FOR MEDICAID AND
STATE OPERATIONS, CENTERS FOR MEDICARE AND MEDICAID SERVICES
Mr. Smith. Thank you, Mr. Chairman, and it is a pleasure to
be with the members again.
And I will have a full statement for the record. I will try
to summarize very quickly. First, the Administration strongly
opposes H.R. 5613. The legislation would thwart the efforts of
the Federal Government to apply greater fiscal accountability
in the Medicaid program. As currently drafted, H.R. 5613 would
not simply delay implementation of these regulations, but they
in fact may jeopardize policies and interpretations that pre-
date the regulations.
Generally, the intent of a moratorium is to preserve the
status quo for a period of time until new policies are in
place. However, the broad and sweeping language employed by
H.R. 5613 would not only delay these rules to accommodate
state's time tables for coming into compliance, but may be read
to reverse important progress that has already been made.
CMS believes that the rules are vital to inform policy
makers about the nature of activities in the Medicaid program
that are all too often hidden from view. When definitions of
rehabilitative services and targeted case management are so
broad that they are meaningless, when the Federal Government
cannot identify precise spending on graduate medical education
or its direct benefits to the Medicaid population, public trust
is eroded. These rules will help bring billions of dollars in
taxpayer funds out of the shadows and will provide the
accountability that is long overdue.
As CMS and others have testified, there is a long and
complicated history that is marked by states seeking to shift
funding of the Medicaid program to the Federal Government. The
package of recent regulatory activity by the Administration is
intended to address types of head-on abuses that have been well
documented by the GAO and by the Office of the Inspector
General. Our objective is to ensure that Federal Medicaid
dollars are matching actual state payments for actual Medicaid
services for actual Medicaid beneficiaries. Medicaid is already
an open-ended Federal commitment for Medicaid services to
Medicaid recipients. It should not become a limitless account
for state and local programs and agencies to draw Federal funds
for non-Medicaid purposes.
Oftentimes, these arrangements are out of view even of
policymakers at the state, local, and Federal levels. It is a--
the Medicaid program should be based on transparency and trust,
not on hidden funding arrangements that result in a don't ask,
don't tell relationship with oversight agencies. CMS is often
asked why can't we simply stop these practices through the
audit and just allow it to process, which certainly we employ.
But audits and disallowances occur on the backend of the
process. Obviously, from our perspective it would be better,
and I think it would be better for the states as well if there
were no opening for practices that are inconsistent with the
overall statutory, regulatory framework at the beginning of the
process
The rules that we have promulgated helped to eliminate
perceived ambiguities, and protect the Federal-state financing
partnership. Again, oftentimes that the states use in the audit
procedures as their defense. Well, the law was unclear, or the
regulations were unclear or ambiguous, where we believe that
clarity is really in the interest of everyone in the program.
The Federal Government in these rules--I think it is very
important and, having listened to the first panel, it is very
important to understand these rules are not reducing,
restricting, or limiting Federal commitment to pay the full
costs of providing medically necessary services to Medicaid
recipients as long as the states are contributing their full
share as well. The restrictions applying to paying units of
government apply to those payments in excess of their costs. We
would reimburse the costs. Nor are we restricting states and
their ability to share their share of the Medicaid program with
their local units of governments.
Oftentimes, again, when we hear these discussions we need
to ask when there are claims that they will lose funding. I
think it is important for policymakers to ask why they say they
will be losing. Is it really a service? Is it really a
medically necessary service for a Medicaid recipient? Is it
because they do not believe the state will share--will pay its
share of the financing, or pay adequate rates for their claims?
And was the funding arrangement merely an indirect method for
claiming Federal funds for activities that would not otherwise
be directly allowable under the Medicaid program, i.e., for
non-Medicaid services or a non-Medicaid population?
Also, on the rules, again, just to help bring these into
context, when you look at the CBO of the cost or savings,
whichever way you look at it, CBO scores the cost rule of $770
million for the remainder of 2008 and 2009. To put that into
context, Illinois hospitals themselves paid $747 million in
provider taxes in 2007. New York hospitals paid $2 billion in
provider taxes. In 2007, states collected $12 billion in
provider taxes. So for the providers to come here and say what
the impact of these regulations, this is a rather small
fraction of what the providers themselves contribute or give up
to the cost of the Medicaid program.
In reality, our rules protect providers. We do not believe
that hospitals should be taking on the responsibility of the
state.
Mr. Pallone. Mr. Smith, I just--you are a minute over. So
if you could wrap up.
Mr. Smith. Thank you, Mr. Chairman,
Mr. Pallone. Thank you.
Mr. Smith. I will leave it there and look forward to your
questions.
[The prepared statement of Mr. Smith follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Pallone. All right. Thank you very much.
Dr. Conaway.
STATEMENT OF HERB CONAWAY, JR., M.D., STATE ASSEMBLYMAN,
LEGISLATIVE DISTRICT 7, STATE OF NEW JERSEY
Dr. Conaway. Thank you, Mr. Chairman.
I am Dr. Herbert Conaway, chairman of the New Jersey State
Assembly Health and Senior Services Committee. I am testifying
on behalf of the National Conference of State Legislatures
where I serve this year as chairman of the NCSL Standing
Committee on health.
NCSL is a bipartisan organization representing the 50 state
legislatures, the legislatures of our Nation's commonwealths,
territories and possessions, the District of Columbia. I hope
that one day I will appear before you to discuss ways to expand
coverage, to improve the quality of benefits and services to
Medicaid beneficiaries, and to share best practices in the
provision of state-of-the-art care to our most vulnerable
citizens. But today I appear before you to express NCSL's
support for H.R. 5613, Protecting the Medicaid Safety Net Act
of 2008, and to congratulate you yourself, Chairman, and
sponsors Dingell and Murphy for their leadership in this issue.
The bill will delay, as you know, until March 2009 the
implementation of seven Medicaid rules whose cumulative effect
will be to severely reduce critically needed services to the
most vulnerable among us. Folks and children who are suffering
from autism, disabled individuals who are meeting the challenge
and need help to meet the challenge of their disabilities,
children and families who struggle to achieve what is
guaranteed to them in the Constitution in terms of access to
public education, and being assisted in overcoming the
difficulties that they face in achieving that education are the
people who are impacted so negatively by these rules.
Last year, NCSL strongly supported the moratoriums
pertaining to these rules and regulations. This year, our sense
of urgency has increased as the economy continues to decline.
Many states, New Jersey among them, face unprecedented
budgetary shortfalls. The impact of these rules going into
effect and taking billions of dollars out of the Medicaid
program will strike a devastating blow to states as they
struggle to maintain critical services. NCSL has been and
remains concerned about regulatory activism being exercised by
the Centers of Medicare and Medicaid Services within the U.S.
Department of Health and Human Services. By regulatory activism
we mean moving a regulatory agenda and promulgating regulations
that are not supported by legislative activity, that are not
imposed pursuant to direction from Congress, and that exceed
authority provided in legislation.
Over the past several months, significant changes in
Medicaid, law and policy have been put forth through
regulation, letters, and other administrative activities. Some
of the rules were first put forward as legislative proposals in
Congress that Congress failed to embrace. While these
provisions failed as legislation, they sit before us today as
rules ready to be implemented unless legislation is enacted to
stop them.
It is important to note that while this legislation would
delay the implementation of seven rules, there are additional
CMS rules forwarded to state health officials that are also of
concern to states. In fact, my state and others have filed suit
to stop the implementation of some of the provisions of--I
should call--the infamous August 17 letter to state health
officials that essentially changes the income eligibility
standards for the State Children's Health Insurance program and
Medicaid without so much as a respectful nod to Congress.
The other regulation would give the Secretary of the U.S.
Department of Health and Human Services broad authority to
overturn decisions of the Department's appeal board, thereby
potentially preventing states from obtaining programs to meet
the particularized needs of their respective constituencies.
NCSL regards this as a particularly problematic proposal.
Regulatory activism as exercised by CMS effectively
transfers legislative powers to the executive branch and
comprises the process by which states and other stakeholders
provide input. What results is a legislative process that is
fundamentally compromised. NCSL recommends that this be
stopped. While NCSL strongly supports H.R. 5613 and urges its
adoption, we recognize that it is a short-term solution. Unless
action is taken to address these rules in a more permanent
fashion, next year at this time we will be back asking for more
delays. We cannot continue to seek delays and spend limited
state resources to fight rules in the courts. The Medicaid
program and its beneficiaries deserve better.
States need stability in the Medicaid policy and financing,
uniform rules, consistent application of the rules, and
transparency in a policymaking process. The Federal Government
must allow states the flexibility needed to administer a cost-
effective Medicaid program. And stakeholders at all levels of
government need to have a stake in making the Federal-state
partnership work.
Finally, unless the economy vastly improves over the next
several months, states can anticipate a surge of Medicaid
enrollment that will be extremely difficult for states to
support. With this in mind we urge you to study options to
include a provision establishing emergency assistance to states
within the Medicaid statute. The provision would, upon some
triggering event such as a recession, natural disaster, active
terrorism, or public health emergency provide additional
financial assistance to states through an enhanced Federal
match or some other mechanism, the effect of which would
terminate with the resolution of the triggering event. This is
a complex but critical component to support the fiscal security
of the Medicaid program in difficult times.
NCSL looks forward to working with Congress and the
Administration to identify options and establish and implement
emergency assistance programs. NCSL supports the addition of
the emergency assistance provision and as it would help states
maintain the health care safety for the Nation's most
vulnerable citizens during extremely difficult times.
I thank you for this opportunity to share our perspectives
with you, and look forward to answering any questions you may
have.
[The prepared statement of Dr. Conaway, Jr. follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Pallone. Thank you, Assemblyman.
Mr. Folkemer.
STATEMENT OF JOHN G. FOLKEMER, DEPUTY SECRETARY, HEALTH CARE
FINANCING, DEPARTMENT OF HEALTH AND MENTAL HYGIENE
Mr. Folkemer. Thank you, Mr. Chairman, and members of the
subcommittee. I thank you for the opportunity----
Mr. Pallone. I think your--yes, put your mic up.
Mr. Folkemer. There it goes. Is that better?
Mr. Pallone. Yes.
Mr. Folkemer. OK. Thank you, Mr. Chairman, and members of
the subcommittee. I thank you for the opportunity to be able to
testify here before you today.
My name is John Folkemer. I have worked in the Maryland
Medicaid program for more than 25 years. And for the past year
I have been the Medicaid director.
Medicaid, as we all know, is truly the insurer of last
resort. In recent years there has been a significant increase
in the number of Americans who are uninsured, as employer-
sponsored health insurance has steadily eroded. States have
responded to this by covering many of these uninsured families
and individuals in their Medicaid and their State Children's
Health Insurance programs.
In Maryland in the last 10 years we have added about
200,000 individuals who have lost their health insurance and
have come to us to get their insurance coverage. And spending
for Medicaid now accounts for 20 to 25 percent of most states'
budgets. In addition, of course, as was mentioned this morning,
Medicaid insures a lot of individuals that nobody else will
insure, such as elderly people in nursing homes who have
exhausted their life savings, individuals with disabilities and
chronic conditions, and children who have special needs and
debilitating diseases.
Over the past year or so, CMS has issued an unprecedented
series of Medicaid regulations that significantly shift costs
to states and restrict services, leaving states unable to
effectively provide access to quality services for the most
vulnerable of our citizens. These regulations impose harsh cuts
in Federal matching funds under the guise of reducing fraud and
abuse. While it is true that there have been instances of
abuse--and I don't think anybody would deny that--CMS's
response of overarching regulation is excessive, inappropriate,
and harmful. Cases of fraud and abuse should be dealt with on a
state-specific basis, rather than restricting services and
cutting funds from all states.
While all seven regulations addressed in this legislation
have adverse impact on the states and their citizens, I would
like to focus on just four of them that I think are of greatest
concern to Maryland.
Number 1, case management. For Maryland, the case
management regulations are probably the most harmful of these
regulations. CMS followed the guidance of the DRA in defining
case management services in this regulation, but the resulting
interim final rule harmfully overreaches the original language
and intent in Congress in numerous ways.
Nearly 200,000 people in Maryland receive some type of
Medicaid case management services or components of those
services, and all of those programs that we have would be
affected by these regulations.
To come into compliance with the provisions of the rule
Maryland may be forced to leave many vulnerable populations
without any access to needed case management services.
Transitions from institutions to community living will be much
more difficult, resulting in individuals being forced to remain
in institutions. The quality of case management provided to
recipients could be affected as state oversight becomes more
difficult. And administrative costs for both providers and the
state will increase dramatically.
Secondly, just a word about rehabilitative services. Many
states, including Maryland, use the rehabilitative services
option as a way to allow individuals with developmental
disabilities or severe mental illness or other chronic
diseases, or special needs, to be able to live independently in
community-based settings or their own homes, avoiding costly
institutional placements. This rule would have a significant
impact on certain mental health services and programs,
specifically and particularly in Maryland. Right now we have
about 30,000 Medicaid recipients in Maryland who would be
affected by this regulation.
The third I want to mention is the governmental provider
payment rate. The rule imposes new restrictions on payments to
providers operated by units of government. While for most
states this has a very large impact on their large hospitals or
nursing homes, as you heard this morning in some of the
testimony, in Maryland we are also concerned about some of the
small public safety net providers. This rule would require
significant increases in administrative burdens for state and
local agencies. All government providers would be required to
do cost settlements of the rates each year. Small safety net
providers, especially in rural areas, who serve very vulnerable
populations may have to discontinue services or reduce the
scope and quality of their services. Because for some of these
small public clinics and services, the cost of the annual cost
settlement could be greater than their entire Medicaid
reimbursement.
Finally, a word about graduate medical education.
Historically, almost all payers have shared in the cost of
providing training of medical professionals in hospitals.
Medicare law specifically requires Medicare to recognize that.
State Medicaid programs, for the most part, have always
recognized this for over 40 years. Now, suddenly, because there
isn't any specific language in Title XIX that says states are
allowed to pay for it, CMS has come out with these regulations
prohibiting states from doing so. Providing funding for GME is
essential to help ensure an adequate number of trained medical
providers, especially as our country faces a massive physician
shortage in the next decade.
So just in conclusion, CMS maintains the eliminating $20
billion in Federal funding for the series of programs that are
affected is appropriate. Because some of these things were
intended to be paid for by Medicaid in spite of the fact that
states have been paying for these for many decades with the
approval of CMS.
It is particularly ironic 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. Emergency
rooms are bursting at the seams. Mental health and substance
abuse providers are completely strained. Persons with
disabilities are struggling to find more creative alternatives
to live independent and productive lives. And an entrenchment
by Medicaid would only make these struggles more and more
difficult for millions of Americans.
I thank you for the opportunity to testify.
The prepared statement of Mr. Folkemer follows:]
Statement of John Folkemer
Good morning Mr. Chairman and members of the Subcommittee,
and thank you for the opportunity to testify at this important
hearing. My name is John Folkemer. I have worked in Medicaid
for the State of Maryland for more than 25 years, and have been
Maryland's Medicaid Director for the past year.
The mission of the Medicaid program, which is a state and
Federal partnership, is to provide health care to the neediest
and most vulnerable populations in our country. Medicaid
currently provides comprehensive coverage to well over 50
million Americans. It is the single largest payer for the long-
term care costs that are perhaps the greatest economic and
health care challenge that we face as baby boomers approach
retirement. Medicaid 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. 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.
In recent years there has been a significant increase in
the number of Americans without health insurance, as employer-
sponsored coverage has steadily deteriorated. States have
responded by covering many of these uninsured families and
individuals in their Medicaid and State Children's Health
Insurance (SCHIP) programs. In Maryland, approximately 200,000
individuals have been added to our Medicaid and SCHIP rolls
over a 10-year period, with current enrollment at about
650,000. Spending on Medicaid and SCHIP now account for 20-25%
of most states' budgets. However, many states are again facing
huge budget shortfalls, creating incredible pressure to figure
out how to provide quality Medicaid services to ever expanding
populations while operating under increasingly tighter budget
constraints.
States have long had flexibility to structure their
Medicaid programs to best serve the needs of their
beneficiaries in a streamlined, cost-effective manner. Over the
past year, the Centers for Medicare and Medicaid Services (CMS)
has issued a series of Medicaid regulations that significantly
shift costs to states and restrict services, leaving states
unable to effectively provide access to quality services for
the most vulnerable of our citizens: low-income uninsured
children and families; the elderly; and persons with
disabilities. The series of regulations aims to restrict
states' flexibility and impose harsh cuts in Federal matching
funds under the guise of reducing fraud and abuse. While it is
true that there have been instances of abuses in claiming
Federal Medicaid matching funds, CMS's response of overarching
regulations is excessive, inappropriate, and harmful. Cases of
fraud and abuse should be dealt with on a state-specific basis,
rather than restricting services and cutting funds from all
states. The cut in Federal funds comes at a time when the need
for services continues to increase, leaving already financially
strapped states with additional cost burdens. Maryland feels
that it is critical to delay these regulations to allow for
consideration of their full impact.
Impact in Maryland
While all seven regulations addressed in this legislation
have adverse impacts on the states and their citizens, I would
like to focus on the regulations that are of greatest concern
to Maryland.
Case Management:
The case management regulations, which took effect on March
3, 2008, are probably the most harmful of these regulations.
CMS followed guidance in the Deficit Reduction Act (DRA) of
2005 to issue regulations defining case management services
more clearly in order to reduce potential abuses of such
services. The resulting interim final rule, however, harmfully
overreaches the original language and intent of Congress.
Nearly 200,000 people in Maryland receive some type of Medicaid
case management services or components of those services, and
all of these programs will be affected, potentially putting
more than $60 million in federal funds at risk for the State.
To come into compliance with the provisions of the rule,
Maryland may be forced to leave many vulnerable populations
without any access to needed case management services, or
create disruptions and confusion in how they receive them.
Recipients may have to change case managers as program
structures are changed. Transitions from institutions to
community living will be more difficult, resulting in
individuals being forced to remain in institutions. Recipients
may receive less case management if billing limits are set. The
quality of case management provided to recipients will likely
be lowered as it becomes more difficult for the State to
adequately monitor an expanded array of case managers.
Administrative costs for both providers and the State will
increase dramatically.
Maryland has long-established case management programs that
have been approved by CMS, including targeted case management,
case management provided to home and community-based services
(HCBS) waiver participants, and administrative case management.
The new rule will require restructuring of all of these
programs, causing major administrative disruptions and
significant additional costs. Medicaid can no longer reimburse
for Individualized Education Plan (IEP) services, which are
care planning and coordination activities for children aged 3
to 21 performed by schools. This will result in a $20 million
cut in funds to school systems. Programs that provide important
services to Medicaid recipients but do not meet the complete
definition of case management or all of the administrative
requirements will lose funding, resulting in cost-shifting to
states or termination of programs.
The broad interpretation CMS has taken of the rule to
include all case management provided in HCBS waivers is
inappropriate and harmful. The strict requirements of the
regulations will mean that Maryland Medicaid will lose the
ability to effectively monitor and control programs. For
example, because case management cannot be required in order to
receive other Medicaid services, the State will not be able to
ensure proper and cost-effective plans of care for waiver
participants. With any willing provider able to enroll as a
waiver case manager, the State will have little control over
quality of services provided to the most vulnerable
populations. Maryland's seven HCBS waivers serve medically
fragile adults and children, individuals with developmental
disabilities, the elderly, and autistic children.
Rehabilitative Services:
Many states use the rehabilitative services option to allow
individuals with developmental disabilities, severe mental
illness, or other special needs the ability to live
independently in community-based settings, avoiding costly
institutional placements. Although Maryland has not been able
to quantify the fiscal impact, it is clear that this rule would
have a significant impact on certain mental health services and
programs. It could also have a negative impact on reimbursement
for services provided to children in out-of-home placement.
Losses in federal funds for these services will result in the
need to implement further cost containment, which generally
results in decreases in services, or could force individuals
who could live successfully in the community to be
institutionalized. Approximately 30,650 Medicaid recipients
currently receive rehabilitative services that could be
affected.
Intergovernmental Transfer (IGT):
Medicaid programs do not function alone--it takes
collaboration with other governmental agencies and providers
such as teaching hospitals, local health departments, school
systems, public health agencies, and child welfare agencies to
provide a continuum of care to recipients. These collaborations
have been encouraged and sometimes mandated by Congress. The
rule imposes new restrictions on payments to providers operated
by units of government and clarifies that those entities
involved in the financing of the non-federal share of Medicaid
payments must be a unit of government. In addition, the rule
formalizes policies for certified public expenditures and other
reporting requirements. This rule will require significant
increases in administrative burdens for state and local
agencies. All government providers will be required to cost
settle payments on an annual basis. This mainly affects schools
and local health departments throughout Maryland. Small safety
net providers, especially in rural areas, who serve vulnerable
populations, may have to discontinue services or reduce the
scope and quality of services. For some small public community
clinics and services, the cost of an annual cost settlement may
be greater than their total Medicaid reimbursement.
Graduate Medical Education (GME):
Historically, payers have shared in the cost of providing
training of medical professionals in hospitals. Medicare law
specifically requires these costs to be recognized in
establishing reimbursement rates. State Medicaid programs have
always recognized their obligation to pay for their fair share
of these costs, a practice which has always been approved by
CMS.
Nonetheless, because there is no specific language in Title
XIX that requires states to pay their fair share of GME costs,
CMS is now prohibiting state Medicaid programs from doing so.
Providing funding for GME is essential to help ensure an
adequate number of trained medical providers, especially as our
country faces a massive physician shortage in the next decade.
Maryland Medicaid could lose about $7 million in federal
matching funds as a result of this regulation.
Conclusion
CMS maintains that the elimination of $20 billion in
federal Medicaid funding for Medicaid administrative activities
in the schools, or rehabilitation services for children with
developmental delays, or graduate medical education, or the
numerous other affected services and programs is appropriate
because these activities were never intended to be part of
Medicaid, despite decades of approved State Plan provisions
across the nation. There are no appropriations on the horizon
to replace this loss of revenue--Medicaid is simply supposed to
reduce the scope of its activities. It is particularly ironic
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 the 47 million Americans
who have no health insurance. A greater awareness of autism
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 those struggles more
difficult for millions of Americans.
Maryland, like many other states, has been forced to impose
new taxes and cost containment initiatives to deal with huge
budget deficits. During these difficult fiscal times, it is
even more critical that we continue to provide health care to
our most vulnerable populations. Implementation of CMS's
excessive and damaging regulations will only serve to reduce
such critical care. I urge Congress to enact this legislation
placing a moratorium on these regulations. CMS created the
regulations without sufficient consideration of their impact on
Medicaid beneficiaries, providers and states. I encourage an
open discussion that is focused on outcomes as well as costs,
and that is mindful of the needs of our most vulnerable
citizens.
Thank you. I would be happy to try to answer any questions.
----------
Mr. Pallone. Thank you, Mr. Folkemer.
We will have questions now from the two of us and I will
first yield to myself for 5 minutes.
I wanted to start--I wanted to ask Assemblyman Conaway--you
are well aware that the legislative process is often slow and
deliberative, and it can take states more than one legislative
session to adopt proposals or adapt to program changes
depending on the--it is important, obviously , to have a
predictable process from the Federal Government in order to
have states manage their affairs effectively. So what can you
tell me about the way that CMS has managed the process with
these seven rules that are addressed in this bill? Can states
possibly absorb all these changes and cuts at once that they
face?
Dr. Conaway. Well, we do have concerns about the way CMS
has managed this process. They have had a period where they
have invited comments from stakeholders. If you look at the
comments over the provider tax rule, there were 422 pieces of
correspondence received. Only one positive comment. Of the
hospital outpatient rule, 91 pieces of correspondence, only one
contained a positive comment. And the rehabilitation rule,
1,845 pieces of correspondence, not one in support of the
changes, and yet these changes are coming forward anyway, in
spite of a lot of advice by stakeholders that these changes are
going to cause devastating effects. In working in state
legislatures, as you very well know, the ship is not always so
easy to turn around. I work in health care. I see patients
during the week. I understand how important it is to get people
to the suite where I practice so that they can receive--we can
work together to advance their health care. I see
transportation services as very critical. If those are not
there how are they going to be provided? For case management
services, finding the resources to get--either to pay for case
managers or finding some other way to deliver or coordinate
that care. You can't just flick a switch and expect that that
service is going to remain. This--it will be very difficult for
states to comply with this in a short timeframe.
And when you consider the budgetary constraints that states
are under, the options for coming in with alternate ways to
deliver the service are very narrow indeed.
Mr. Pallone. So it is not only that there is a problem
though, Assemblyman, but with--for the states, but they really
haven't even been consulted effectively. All the comments are
saying we don't like this, and nobody's actually made any major
effort to address those comments as far as you know.
Dr. Conaway. As far as I know. It would appear certainly
from the date that I received from my staff. It certainly
appears that no one's listening even though the missives are
going forward.
Mr. Pallone. Thank you. I appreciate that.
Let me ask Mr. Folkemer--there seems to be some sentiment
that the services provided under the case management benefit or
the rehab benefit, or the school-based care is inappropriate
because those services are not what people would consider
medical. But still they are critical for Medicaid beneficiaries
if they are going to arrange for care or transport someone, or
coordinate care. While CMS and its allies may not support those
services, do you believe there is a clear and important role in
Medicaid for them? What would happen to access without those
services?
Mr. Folkemer. Mr. Chairman, I absolute agree with what you
have said. It is critically important. It is especially
important because the Medicaid population is not like the
commercial population, where all they need basically is medical
services and they can take care of themselves. As I said, many
people are on Medicaid because they are disabled, because they
are elderly, because they have special needs. So these
additional support type services are exactly what it is they
need, whether it is transportation, it is help getting
referrals to providers, help them keeping--complying with what
the providers ask them to do. There is a whole series of
support services which are absolutely necessary for these
populations.
Mr. Pallone. And then on the first panel, Ms. Turner
actually said and I quote, ``that Medicaid doesn't support the
kind of coordination that would lead to better care and more
efficient spending.'' I was a little shocked by that lack of
understanding of what Medicaid does. Isn't the role of the
targeted case management benefit, which your state is so
concerned with, exactly the kind of coordination benefit that
Ms. Turner doesn't think Medicaid provides?
Mr. Folkemer. Yes, that is exactly the kind of thing that
case management does, and some of the other support services. I
would be concerned if she is saying that she doesn't think
Medicaid does it now, and yet CMS is trying to take away what
authority we have to do it. So I think, if anything, we need
more of those services, not fewer.
Mr. Pallone. OK. Thank you. Thank you, all of you.
Mr. Deal.
Mr. Deal. Thank you. Mr. Chairman, first of all I would
like to ask unanimous consent that a letter to me dated April
the 2nd of 2008, from Dr. Michael Bond from Cleveland State
University be included in the record.
Mr. Pallone. Without objection, so ordered.
[The information was not available at the time of
printing.]
Mr. Deal. And I would also like to ask unanimous consent
that the full text of the OIG and GAO reports that were late to
the rules affected by this bill, of the list of which was
provided by CMS as an attachment to Dennis Smith's testimony,
be included for the record.
Mr. Pallone. Again, without objections, so ordered.
Mr. Deal. Thank you.
Mr. Smith, could you please tell me how the Medicaid
program integrity initiatives, including CMS's health care
fraud and abuse control programs, produce favorable results for
the taxpayers?
Mr. Smith. Yes. Mr. Deal, thank you very much. One of the
things that I think is very important is to have both front-end
review and back-end review. Front-end review on the state plans
themselves as states are developing state plan amendments to
make certain they are consistent with Federal law and
regulation, provider taxes, who is a government entity, et
cetera, is very important. We have made use of funds to support
roughly about 90 FTEs. And I am very proud to say every year
that we have made that effort, the amount of money averted in
Federal funds at risk has increased. In 2006 those FTEs helped
divert $417 million in funds at risk. In 2007 they averted $652
million in FFP at risk. And, again, that is because we are
doing a better job on the front end. We do talk to states. That
is what the FTEs do. They are in states, they talk, they go to
legislative hearings, they talk with Medicaid directors, et
cetera. So they are--what they adopt in state plan amendments
are approvable in the first place. In many respects we help
them to come into compliance, to deal with provider taxes, for
example, which is very complicated, and assist the states to
develop state plan amendments that are in compliance. On the
back-end the Deficit of Reduction Act--thanks to your
leadership, Mr. Deal--provided funding, direct-line funding,
for Medicaid integrity that was never there before. Now we have
a dedicated stream of funding to look at the fraud and the
abuse side on the back end by auditing providers. And while we
have now been through a contract period to procure the
expertise that we need to do those audits, those audits will be
occurring this year. We will start this year, and we will grow
over time to ensure integrity on the back-end, but both ends
are very important.
Mr. Deal. If this bill passes and these regs are prohibited
from going into place, does that inhibit your agency from being
able to deal with the waste, fraud and abuse?
Mr. Smith. Mr. Deal, I believe that it would. Again, I
think the broad language of it would be very problematic. It
very well may--even reviewing a state plan could put us in
court.
Mr. Deal. One of the things we have heard from states, and
heard in the first panel, is this issue of requiring a non-
governmental health care provider to pay back part of their
Medicaid money to the state. And I personally think that is a
very problematic issue. But I understand that the state of
California has tried to address this problem in a positive way.
Could you tell us what California has done and has it worked?
Mr. Smith. Yes, Mr. Deal. And, again, I agree with you.
Medicaid's a matching program, and if the state isn't putting
its share of the program you are eroding the very framework of
the Medicaid program. California--we developed a hospital
financing waiver with the State of California, I believe 2
years ago, really based on the rules that are now part of our
regulations. The result of that has increased hospital revenues
by 12 percent, which is again why we say our rules actually
protect the provider from--they should be getting the full
measure of what they provided on behalf of the Medicaid
recipient. They provided the service. They should get the
money. They should be able to keep the money, and not have to
return it on the back-end.
Mr. Deal. Because the effect is that it dilutes the states
legitimate share of participation in Medicaid, does it not?
Mr. Smith. You are precisely right.
Mr. Deal. And by doing that it shifts that burden by
increasing the Federal money to other states and taxpayers all
across the country?
Mr. Smith. If the state is not providing up its share of
the Federal dollars, then from--the rest of the states are
contributing more than what they should have.
Mr. Deal. Thank you. I apologize. I didn't get a chance to
ask you gentleman any questions.
But thank you, Mr. Chairman.
Mr. Smith, the studies from GAO and the Inspector General's
Office are rather voluminous. Is it my understanding that your
reference in your testimony includes a list of those with the
linkage to where they can be found?
Mr. Smith. That is correct, Mr. Deal.
Mr. Deal. OK. Well, Mr. Chairman, then I would modify my
initial request to simply have the reference made to the
linkages, rather than include their, I believe, 1,000 pages,
maybe.
Mr. Smith. I think we have the stack of them over here.
Mr. Deal. Yeah, we got a stack up here. I would modify that
request to include the linkage and the summaries.
Mr. Pallone. Without objections, so ordered.
And let me just ask one more thing, Mr. Smith. On March 19
Mr. Dingell, myself and Mr. Waxman sent a letter to Secretary
Leavitt requesting further information about state use of
contingent fee consultants and CMS actions to restrict this
use. The response was due March 31, but the Committee has yet
to receive a response. When can we expect that we will get a
response to that?
Mr. Smith. Mr. Chairman, I was very hopeful that you would
have had it this morning before I appeared. We had a little bit
of logistics on our end. The administrator's on travel, but we
have prepared a response and you will be getting it very
shortly.
Mr. Pallone. So can we get it in the next few days?
Mr. Smith. I believe that, yes, sir.
Mr. Pallone. All right. Thank you.
All right. That concludes our questions. And I do want to
thank all of you again for being here. And I want to remind
members that we can submit additional questions for the record
to be answered by the relevant witnesses. So you may get
additional questions from us in writing, and they should be
submitted to the Committee clerk within the next 10 days, and
then we will notify you.
But again, thank you. And particularly the Assemblyman from
my state. I appreciate your coming down here for us and
testifying. I know your time is--being a doctor and being an
assemblyman I don't know how you do it all. But God bless you
for doing that.
And without objection this meeting of the subcommittee is
adjourned.
[Whereupon, at 1:40 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Statement of Hon. Heather Wilson
Thank you, Mr. Chairman, for holding this hearing today on
H.R. 5613, the Protecting the Medicaid Safety Net Act of 2008.
H.R. 5613 would place a moratorium on seven different Medicaid
regulations through April 1, 2009.
I share the concern of many here today about these Medicaid
rules--not because they are bad policy, although clearly some
have been ill-conceived, but because they were implemented
without congressional input and approval.
One of these rules in particular would affect New Mexico
and I want to discuss that particular rule.
CMS-2258-P puts limitations on intergovernmental transfers
and certified public expenditures that states use to help pay
their share of the federal Medicaid match, and also places cost
limitations on providers operated by units of government.
These are fancy words to say 1) states can't use certain
local taxes to put up their share of the match, and 2) Medicaid
is only going to pay the cost of services and not supplemental
payments to public hospitals known as the upper payment limit
(UPL).
This rule hurts New Mexico in two ways.
We have a special program called the Sole Community
Provider program that helps hospitals in rural communities in
New Mexico with only one hospital receive funding for the care
of indigent patients.
Our Sole Community Provider program uses local property
taxes and gross receipts taxes to put up the county's share of
funds that are sent to the state and used for matching funds.
It does not include the ``recycling'' problem identified
elsewhere, that supposedly is the intent of the IGT Rule.
However, CMS has said that county indigent funds would not be
allowable for intergovernmental transfers and several
independent analysts have told us this rule would terminate
NM's Sole Community Provider Program.
This would result in loss of Federal funding of $114
million annually to rural hospitals in NM, undoubtedly
impacting patient care and quality.
I've heard from hospital administrators and county
officials from around New Mexico about what a calamitous impact
this regulation would have on the health care in their
communities.
The other part of this rule, limiting Medicaid
reimbursement for public hospitals to cost, would result in a
loss of revenue to the University of New Mexico Hospital of
about $40 million annually. This is the only Level 1 Trauma
Center in the State of New Mexico and is a main source of
emergency care for the City of Albuquerque, particularly lower-
income patients.
Because of my concern with this regulation, I have signed
on as a cosponsor of the Public and Teaching Hospital
Preservation Act, H.R. 3533, sponsored by Reps. Eliot Engel and
Sue Myrick. This bill would extend the moratorium on this rule
for one more year and is included in the bill being discussed
today, H.R. 5613. I have decided to become a cosponsor of H.R.
5613 as well, because it is the legislation being considered
and would help avoid the loss of an important funding stream
for New Mexico hospitals.
I am also concerned about some of these other regulations
including targeted case management and rehabilitative services,
and their effect on care for the developmentally disabled and
those with mental illness.
I look forward to hearing the testimony of the witnesses
here today.