[House Hearing, 110 Congress]
[From the U.S. Government Printing Office]




 
                      THE MEDICARE PORTIONS OF THE
                  PRESIDENT'S FISCAL YEAR 2009 BUDGET

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 14, 2008

                               __________

                           Serial No. 110-70

                               __________

         Printed for the use of the Committee on Ways and Means


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                      COMMITTEE ON WAYS AND MEANS

                 CHARLES B. RANGEL, New York, Chairman

FORTNEY PETE STARK, California       JIM MCCRERY, Louisiana
SANDER M. LEVIN, Michigan            WALLY HERGER, California
JIM MCDERMOTT, Washington            DAVE CAMP, Michigan
JOHN LEWIS, Georgia                  JIM RAMSTAD, Minnesota
RICHARD E. NEAL, Massachusetts       SAM JOHNSON, Texas
MICHAEL R. MCNULTY, New York         PHIL ENGLISH, Pennsylvania
JOHN S. TANNER, Tennessee            JERRY WELLER, Illinois
XAVIER BECERRA, California           KENNY HULSHOF, Missouri
LLOYD DOGGETT, Texas                 RON LEWIS, Kentucky
EARL POMEROY, North Dakota           KEVIN BRADY, Texas
STEPHANIE TUBBS JONES, Ohio          THOMAS M. REYNOLDS, New York
MIKE THOMPSON, California            PAUL RYAN, Wisconsin
JOHN B. LARSON, Connecticut          ERIC CANTOR, Virginia
RAHM EMANUEL, Illinois               JOHN LINDER, Georgia
EARL BLUMENAUER, Oregon              DEVIN NUNES, California
RON KIND, Wisconsin                  PAT TIBERI, Ohio
BILL PASCRELL JR., New Jersey        JON PORTER, Nevada
SHELLEY BERKLEY, Nevada
JOSEPH CROWLEY, New York
CHRIS VAN HOLLEN, Maryland
KENDRICK MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama

             Janice Mays, Chief Counsel and Staff Director

                  Brett Loper, Minority Staff Director

                                 ______

                         Subcommittee on Health

                FORTNEY PETE STARK, California, Chairman

LLOYD DOGGETT, Texas                 DAVE CAMP, Michigan
MIKE THOMPSON, California            SAM JOHNSON, Texas
RAHM EMANUEL, Illinois               JIM RAMSTAD, Minnesota
XAVIER BECERRA, California           PHIL ENGLISH, Pennsylvania
EARL POMEROY, North Dakota           KENNY HULSHOF, Missouri
STEPHANIE TUBBS JONES, Ohio
RON KIND, Wisconsin

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
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current publication process and should diminish as the process is 
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                            C O N T E N T S

                               __________

                                                                   Page

Advisory of February 12, 2008, announcing the hearing............     2

                                WITNESS

Kerry Weems, Acting Administrator, Centers for Medicare and 
  Medicaid Services, U.S. Department of Health and Human Services     5

                       SUBMISSIONS FOR THE RECORD

The Senior Citizens League, statement............................    15
American Federation of State, County and Municipal Employees 
  (AFSCME), statement............................................    16
Linda Schmidt, statement.........................................    18
Wim Kellett, statement...........................................    21


                      THE MEDICARE PORTIONS OF THE
                  PRESIDENT'S FISCAL YEAR 2009 BUDGET

                              ----------                              


                      THURSDAY, FEBRUARY 14, 2008

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                    Subcommittee on Health,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 2:15 p.m., in 
room 1100, Longworth House Office Building, Hon. Fortney Pete 
Stark (Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                         SUBCOMMITTEE ON HEALTH

                                                CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
February 12, 2008
HL-19

                Hearing on the Medicare Portions of the

                President's Fiscal Year 2009 Budget with

                     Acting CMS Administrator Weems

    House Ways and Means Health Subcommittee Chairman Pete Stark (D-CA) 
announced today that the Subcommittee on Health will hold a hearing on 
the Medicare portions of the President's fiscal year 2009 budget. The 
hearing will take place at 1:00 p.m. on Thursday, February 14, 2008, in 
the main Committee hearing room, 1100 Longworth House Office Building.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    On February 4, 2008, President George W. Bush submitted his Fiscal 
Year 2009 budget to Congress. Many of the spending and policy proposals 
related to the Centers for Medicare and Medicaid Services (CMS) in the 
Department of Health and Human Services fall under the jurisdiction of 
the Ways and Means Committee.
      
    The President's budget proposes spending cuts for Medicare over the 
next 10 years of $556 billion in legislative changes and $20 billion in 
regulatory changes. In total, the budget proposes $576 billion in cuts 
to Medicare over 10 years. Program-level funding for the administrative 
activities at CMS for 2009 would receive a slight increase, while the 
number of full-time equivalent employees (FTEs) is projected to 
decrease slightly.
      
    In announcing the hearing, Chairman Stark said, ``The proposed 
Medicare cuts exclusively target traditional fee-for-service Medicare 
providers, while protecting the overpayments to private insurance 
companies that drain Medicare solvency and raise beneficiary premiums. 
This budget again reveals the Administration's agenda to starve 
traditional Medicare and force beneficiaries and providers to rely on 
private plans. I look forward to hearing Acting Administrator Weems 
explain how these budget proposals are in the best interest of 
beneficiaries, providers and the overall strength of the program.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on the Medicare portions of the President's 
fiscal year 2009 budget.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
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February 28, 2008. Finally, please note that due to the change in House 
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encounter technical problems, please call (202) 225-1721.
      

FORMATTING REQUIREMENTS:

      
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noted above.

                                 

    Chairman STARK. We begin the hearing late. I apologize to 
Administrator Weems' staff and all of our guests who have been 
patiently waiting while we worked out a few problems on the 
floor, and I hope that we won't be disrupted a lot with votes 
and can proceed.
    Many of our Members on both sides have been involved in 
these floor proceedings and hopefully will be finding their way 
here, but we'll start out. As I had suggested to Mr. Weems that 
I had a great opening statement that blames him for all the 
ills of the Medicare, but after keeping him waiting that long, 
I think that would just not be very hospitable.
    I could just simply summarize where I think I was going and 
we'll talk later is that I have been concerned that while we 
have reduced resources for a variety of Medicare Programs, 
whether you call it slowing the growth or making cuts. It's 
indifferent to me.
    We somehow overlooked doing anything with Medicare 
Advantage where there seemed to be some universal agreement 
among the experts that were overpaying, and I was concerned 
that we missed that opportunity with which we could have 
extended the trust fund a couple of years. The trigger would 
not have come into account had we reduced the payments. But, 
other than that, we can talk about a lot of issues. Mr. Camp.
    Mr. CAMP. Thank you, Mr. Chairman.
    I also will forego a formal opening statement in light of 
the fact we've had somewhat of an unusual floor procedure, but 
I do want to say that we did hear about the long-term problems 
facing Medicare yesterday. I think that there are a number of 
challenges, we all agree.
    I look forward to working with you in the time that we have 
left to develop some ideas that would improve the financial 
outlook for Medicare, while also preserving those important 
services that are offered to seniors through those programs. 
So, with that I would just ask unanimous consent to submit my 
statement for the record.
    Chairman STARK. Without objection, the statement will 
appear in the record.
    Administrator Weems, if you would like to add anything at 
this point to the record in addition to your statement that we 
will hear from you, we will make that part of the record. Why 
don't you proceed to enlighten us?
    Mr. WEEMS. Thank you, Mr. Chairman and Congressman Camp. In 
keeping with the spirit of comity, I will forego my statement 
too, and wish you both happy Valentine's Day.
    [The prepared statement of Kerry Weems follows:]

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    Chairman STARK. Without objection, it will appear in the 
record. I would ask you to talk about the Medicare Advantage 
plans, some of the concerns that I have are, let me just run 
through a few, and maybe you could address those.
    In spite of what Medicare Advantage Plans say they 
``offer'' beneficiaries, there is very little record as to what 
they actually provide. To offer me a wall-climbing episode at 
the health club is a generous offer, but one that I would not 
be inclined to accept. We do find in the statements of some of 
the large private insurance companies where we can get the 
records that are publicly traded that their loss ratios have 
dropped.
    So, they've been spending less of their premium income on 
benefits. Also we know that some of them charge more than 
Medicare for certain copays, so that a beneficiary in certain 
plans will have a higher copay or deductible in copay than they 
would under traditional Medicare. So, there are a lot of those 
glitches in addition to what seems to be OMB, the year 
actuaries, our actuaries, all suggesting in Med-Pac that we are 
in varying amounts ``overpaying'' or paying more than we would 
pay for those services under fee-for-service. So, I guess, do 
you see some changes that we could make that would do two 
things: Save us some money and give some, say, protection if 
you will or a fairer treatment to our beneficiaries?
    Mr. WEEMS. Maybe we can talk about the premises.
    Chairman STARK. Pardon?
    Mr. WEEMS. Maybe we can talk about the premise from which 
you operate first.
    Chairman STARK. Okay.
    Mr. WEEMS. So, you know, what are the extra benefits that 
are offered to beneficiaries? We can see and track a good deal 
of them, because much of that is in reduced cost-sharing, 
buying down premiums, things like that. You know, we can tell 
you where that's happening.
    Now with respect to what you say about copayments, that has 
to do with choice. There are plans that offer a variety of 
copayments, a variety of cost-sharing schemes where you may 
choose lower cost-sharing in one place and higher in another.
    Chairman STARK. That doesn't wash. Are you sure they make 
low ball at me coming in with a bill premium or 25 bucks.
    Mr. WEEMS. Right.
    Chairman STARK. Okay, and I could bring out the litany of 
plans and suddenly I find that their hospital copay is 700 
bucks a day. Where, under Medicare, it's what--900 for the 
whole procedure--and so if you are in for 3 days, you get 
whacked with $2,100.
    Then if you combine that with the marketing problems where 
they haven't been always as up front as we think they ought to 
be or as transparent, if I thought that the beneficiaries 
understood that and made that choice, but I don't, so from that 
standpoint I think there are great sales people out there and 
they do a wonderful job marketing, but their job is to sell 
their plan. It's just like, you know, Ford forgets to tell me 
there's no spare tire. They're not misleading me, they just 
forgot to tell me.
    So, that's my concern. I would agree with you. If we could 
make it more transparent and clearer, and more easily 
understood by the beneficiaries, no quarrel. But then you get 
to the cost issue, and it is costing us money to do it. So, 
let's take that part of it.
    Mr. WEEMS. Let me just say one thing, if I can, about the 
sales, and then let's go into cost.
    I actually, as you may know, have set through several of 
the sales pitches anonymously just to see what's going on and 
to ask questions to get a better understanding. In several 
instances, I heard marketers sort of lay out plans, you know, 
for needs.
    Look, do you expect to go in the hospital? Not that that's 
a 100 percent guess, but they would lay out the benefit for the 
hospital. You know, do you see a doctor. Well, if you see a 
doctor a lot, this plan might be better. There was, I would 
say, an education moment where a beneficiary was educated about 
what their choices might be, especially with respect to cost-
sharing.
    So, you know, I present that to you from actual experience. 
With respect to cost the Congress made a decision that 
nationwide people should have access to these kinds of 
products. They are, now, and the way that the benchmark system 
works, that is the result that we have. But more beneficiaries 
have more access to more choice than they had before.
    Chairman STARK. Mr. Camp.
    Mr. CAMP. Thank you, Mr. Chairman.
    I know CMS has been working on a number of initiatives on 
price transparency and quality and we've heard a lot from 
witnesses and through other meetings that if we are going to 
have real health care reform those are two areas that we 
certainly need to have better information. I believe Secretary 
Levitt yesterday touched on those as well.
    Also in connection with the August 2006 Presidential 
Executive Order to increase transparency in the health care 
system, can you just quickly outline some of the initiatives 
CMS is working on to facilitate informed choice regarding 
treatment?
    Mr. WEEMS. Certainly. We have a number of initiatives under 
way, first of all with respect to quality, and this is 
something that the Congress has come back to us on a number of 
occasions, and that's the physician quality reporting 
initiative. It began in 2007 and, you know, this year we are 
working to implement the enhancements that we have.
    If you look at many of the places where we have contact 
with beneficiaries--that's the physician's office--in ESRD we 
have a number of quality measures and quality initiatives. In 
the inpatient hospital arena, you know, our rule that goes into 
effect this next year has us no longer paying for certain types 
of infection, certain types of procedures.
    Those are all quality based. Now, with respect to 
transparency we have made information available for the cost of 
some procedures. In this year's budget, and I would ask the 
Chairman to look especially closely at this, we are looking for 
a legislative means of making Medicare information available to 
the public in a transparent way. Right now we have conflicting 
court orders. We are seeking a resolution from the Congress so 
that we can make that information available so that people can 
use it.
    Now, we would like to make it available in a way that 
Medicare can still be the health care financing agency that we 
are and not just turn into a data production agency. So, we 
would like to be able to do it in a rational way. As people 
understand quality, as people understand price, this Committee 
might be able to consider very rational changes to a program 
where--you know, I think we could all agree that maybe if the 
beneficiary were willing to choose a high-quality, low-cost 
provider--maybe their cost-sharing changes, things like that 
that would drive the system toward quality and to reduced 
costs.
    Mr. CAMP. All right. I just follow up on another issue. You 
know, yesterday I asked a question and the secretary, the 
average of out-of-pocket costs with traditional Medicare at the 
highest levels, there is certainly a big difference between 
that and what they spent in Medicare Advantage. I mentioned a 
scenario where it was about $2,100 difference if they were in a 
coordinated care plan. So, their significant savings for the 
highest and sickest beneficiaries in the program, can you 
comment on that?
    Mr. WEEMS. Certainly. In some programs we find that 
beneficiaries will do better in these programs, and, you know, 
as you said, certainly their cost-sharing is substantially 
lower in these plans, and it is because they are getting 
coordinated care and because it is a risk plan that has 
capitated payment.
    Mr. CAMP. All right, and thank you, Mr. Chairman.
    Chairman STARK. This is going to be the shortest hearing on 
record. We have been told that this vote will conclude in about 
10 minutes and then there is going to be, I think, 7 more 5-
minute votes. There seems to be no willingness of our 
colleagues on the floor to shorten those to 2-minute votes. So, 
I don't intend to ask you to stay.
    I might suggest and if we can find the time after the 
recess, Mr. Camp, that if we could ask you to return for an 
informal session with our Subcommittee on briefings on a lot of 
these issues of things that I know many of my colleagues wanted 
to talk about, plans for competitive bidding, the Iraq 
problems. I mean, there is a host of those things that we are 
hearing about from our constituents.
    The ESRD, the nursing home things, and we just 
unfortunately don't have time. I would love to get into that 
today, but I think, if you would be agreeable and we could find 
some time after the recess. I want to note the arrival of Mr. 
Pomeroy.
    We are about to conclude, Earl, and I would be glad to let 
you enter into it, just suggesting that there are so many 
issues that we wanted to cover and won't have time that I am 
going to ask Mr. Weems if he would come back and at least meet 
with us informally so that we would have a chance to go over a 
host of the issues that I know colleagues on both sides of the 
aisle want to find out in terms of what is going to happen this 
year.
    Mr. WEEMS. It would be my privilege.
    Chairman STARK. Would you? That would be good.
    Did you have any statement, make a statement part of the 
record, Earl, or if you had a question?
    Mr. POMEROY. Mr. Chairman, thank you for giving me this 
brief opportunity. The Administrator came all the way to North 
Dakota to look at a problem that we have had. We have been 
working with him to fix the problem. I am glad that we are 
going to have a more fulsome opportunity to visit with the 
Administrator. He is not a sound bite guy; he is a program guy, 
and he knows this program inside and out.
    I believe that we could all learn from one another in a 
more generous time environment for the discussion. I really do 
appreciate the Administrator and his attention to the issues 
that we have had in North Dakota. Thank you.
    Mr. WEEMS. I learned a lot on that trip. Thank you.
    Chairman STARK. Could I just doublecheck this with you that 
we are in agreement on the Med-Pac and GAO recommendations to 
move to an ESRD bundling program without having to go through 
demonstrations?
    Mr. WEEMS. Yes, sir. We are actually prepared and we can go 
through the rationale.
    Chairman STARK. Yeah, fine. That's one of the things that I 
thought we could proceed with.
    Mr. WEEMS. Yes, sir.
    Chairman STARK. Do you have anything else you would like to 
add? You have been waiting here for a chance to inform us.
    Mr. WEEMS. Just, I'm very grateful for the opportunity to 
appear. Just my own personal thought after 25 years as a career 
civil servant: It's remarkable for me to sit here before you in 
this room.
    Chairman STARK. Well, I am afraid we have more to do than 
we are going to be able to accomplish. We aren't going to be 
able to find pay-fors under our whatever that is we saddled 
ourselves with. We have the 10 percent doc cut. We have the 
trigger. You've got the trigger mechanism set for us yet?
    Mr. WEEMS. I expect that you will hear about that soon, 
sir.
    Chairman STARK. When I am on recess? I don't have much 
time. Do you know when it is coming? Can you give me a hint?
    Mr. WEEMS. I am not in a position to give you a hint, but 
shall we say soon?
    Chairman STARK. We have that and then a host of other 
issues, some more complex. We must have had 50 or 60 hospital 
transition things, and I don't know yet how we are going to 
handle that, but I will look forward to seeing if we can 
package up those things that we could all, Mr. Camp and I and 
you, could agree to, maybe wrap those up either in a quick 
procedure, get some of that off the table. Then we can worry 
about some of the bigger, more political issues, as we go 
along. There isn't going to be much time.
    Mr. WEEMS. Well, you'll find what for----
    Chairman STARK. The conventions. After the 4th of July, I 
think we are done, quite frankly. That's sad, but we've got the 
S-chip thing, the doctors, and hopefully we can either get 
extensions or something to prevent any radical changes to 
either providers or beneficiaries. If we could get that done, 
I'd call it a good year.
    Mr. WEEMS. Hopefully you'll find us an energetic and 
helpful partner.
    Chairman STARK. Thank you very much, and I again apologize 
for our fractured schedule today.
    If there are no concluding remarks, thank you. We'll see 
you soon. The hearing is adjourned.
    [Whereupon, at 2:37 p.m., the hearing was adjourned.]
    [Submissions for the Record follow:]

                Statement of The Senior Citizens League

    On behalf of the approximately 1.2 million members of The Senior 
Citizens League (TSCL), a proud affiliate of The Retired Enlisted 
Association (TREA), thank you for the opportunity to submit a statement 
regarding the Medicare portions of the President's Fiscal Year (FY) 
2009 Budget. TSCL consists of active senior citizens, many of whom are 
low income, concerned about the protection of their Social Security, 
Medicare, and veteran or military retiree benefits.
    In 2003, legislation that overhauled Medicare included a provision 
that requires the President to propose changes to Medicare in the event 
that the entitlement was going to draw more than 45-percent of its 
funding from the government's general revenue instead of the Medicare 
trust fund. This finding occurred in 2006 and 2007, and in the 
President's proposed budget for Fiscal Year (FY) 2009, Medicare 
spending is reduced by $12.2 billion in FY 2009 and by $178 billion 
over five years. It is not clear at this time if there will be 
additional proposals.
    While TSCL fully understands the need to address the looming 
Medicare Trust Fund exhaustion, we are concerned that it may come at 
the expense of Medicare beneficiaries, many of whom are already 
financially strapped due to high premiums and an inadequate cost of 
living adjustment (COLA) to their Social Security benefits. Since 2000, 
Social Security benefits have increased 22%, and Part B premiums have 
increased 111%.
    The 2009 Budget includes several legislative proposals that the 
Administration believes could strengthen the longevity of the Medicare 
entitlement program, if signed into law. The proposals would: 
``encourage provider competition, efficiency, and high-quality care; 
rationalize payment policies; increase beneficiary responsibility for 
health care costs, improve Medicare's fiscal sustainability, and 
improve program integrity.'' \1\
---------------------------------------------------------------------------
    \1\ www.hhs.gov/budget/09budget/2009BudgetInBrief.pdf, p. 53-54.
---------------------------------------------------------------------------
Encourage Provider Competition, Efficiency, and High-Quality Care
    TSCL agrees that reform is needed when it comes to provider 
reimbursement, especially in the case of physicians providing 
outstanding care to Medicare beneficiaries. In recent years, premiums 
have been announced prior to increases in physician reimbursements, 
meaning that actual program costs are higher than originally estimated. 
Although temporary fixes have been issued, TSCL is concerned that with 
the ``trigger,'' proposals could eventually lead to a substantial jump 
in Part B premiums to offset the rising cost of quality health care.
    Last year, the Medicare Trustees estimated that Medicare Part B and 
Part D premiums, deductibles, and coinsurance costs were taking one-
third of the average Social Security benefit. Skyrocketing premiums, 
accompanied with a COLA that does not take adequately into account 
health care expenses are making it difficult for many seniors, 
especially those relying solely on their Social Security benefits, to 
get by. We should note, however, that TSCL and its members were 
pleasantly surprised with a Part B premium increase of $2.90 per month 
in 2008 for the majority of seniors.
Increase Beneficiary Responsibility
    Increasing beneficiary responsibility on the surface may sound like 
a good idea to some. TSCL is concerned about the proposal to eliminate 
the annual indexing of income thresholds for Medicare Part B premiums, 
especially if Part D becomes subject to the same income thresholds.
    We fear that halting the annual index for income related premiums 
will lead to more and more middle income seniors paying higher rates. 
Although some advocates consider it to be fair for those with higher 
incomes, we fear that low and middle-income seniors will be the ones to 
suffer and eventually end up paying higher premiums as the threshold is 
lowered to make up for future funding shortcomings. Further, it seems 
unjust to have a group of beneficiaries paying more for the same care 
and coverage. As the snowball grows, more seniors could look outside of 
Medicare plans for quality health care insurance at a lower cost.
    TSCL also questions how private entities will be able to implement 
income indexing accurately. With the involvement of private companies, 
the Internal Revenue Service, and the Social Security Administration, 
the automatic deduction of premiums from monthly benefits could become 
more costly and onerous. It seems that the only way means testing could 
work for Medicare Part D is to consider eliminating private insurance 
companies from the equation, leaving Medicare to coordinate Part D as 
it does Part B.
Improve Program Integrity
    Greater program oversight is always a welcomed proposal. As 
reported in the new 2009 Budget in Brief, the Health Care Fraud and 
Abuse Control (HCFAC) program is responsible for detecting and 
preventing health care fraud, waste, and abuse. This is accomplished 
through investigations, audits, educational activities and data 
analysis. From 1997 to 2007, HCFAC returned more than $10 billion to 
the Medicare Trust Fund. While this is impressive, we can only imagine 
how much more money could be saved and/or returned with a more 
streamlined process among the involved agencies.
    Equipping health care providers with knowledge about problems and 
ways to increase accuracy will undoubtedly save money. As reported for 
2007, improper Medicare payments have dropped to a new low of 3.9 
percent. TSCL supports strong enforcement and greater audits of claims, 
especially when considering the problems occurring with Part D plans.
    Also, it has been widely reported that the Medicare payment system 
should take a closer look at excessive payments for certain items. The 
New York Times has reported that Medicare pays much higher amounts for 
durable medical equipment than are charged to individuals buying the 
same product.\2\ According to the 2007 NYT article, ``. . . Even for a 
simple walking cane, which can be purchased online for about $11, the 
government pays $20, according to government data.'' Another example of 
overspending occurs when the government rents oxygen equipment for up 
to 36 months at a cost of more than $8,000 per individual. The article 
reports that the same equipment could be purchased from a retailer for 
``as little as $3,500.''
---------------------------------------------------------------------------
    \2\ Duhigg, C., ``Oxygen Suppliers Fight to Keep a Medicare Boom,'' 
New York Times, Nov. 30, 2007.
---------------------------------------------------------------------------
    TSCL is not suggesting that oxygen equipment not be provided for 
those in need. What we do believe is that there are more fiscally 
responsible ways to provide the same care, which in the end could save 
Medicare billions of dollars annually.
Conclusion
    Although we are pleased that the Administration has put together 
suggestions for strengthening the Medicare Trust Fund, TSCL and its 
members are concerned about what the cost to the public will be. While 
we do not have a perfect solution, there are some simple actions that 
could be taken in the meantime.
    For example, TSCL is encouraging all Members of Congress to support 
a recently introduced bill, H.R. 4338, introduced by Representative 
Timothy Walberg (MI-7). H.R. 4338, titled the Social Security and 
Medicare Lock-Box Act, would establish a procedure to safeguard the 
surpluses of the Social Security and Medicare hospital insurance trust 
funds. Thanks to Representative Stephanie Tubbs Jones (OH-11), an 
original cosponsor, this legislation had bipartisan support from the 
start. Additionally, similar legislation, S. 302, was introduced last 
year during the first session of the 110th Congress by Senator David 
Vitter (LA).
    As the Administration suggests, tougher enforcement and increased 
transparency will save Medicare billions of dollars annually. A 
significant portion of the expenditures comes from fraud and abuse that 
hurts the solvency of important entitlement programs like Medicare for 
current and even future retirees.
    Regardless of which solution Members of Congress believe is best, 
TSCL sincerely hopes that the Medicare and Social Security Trust Funds 
are protected and strengthened for future generations.

                                 
               Statement of American Federation of State,
                County and Municipal Employees (AFSCME)

    The American Federation of State, County and Municipal Employees 
(AFSCME) represents 1.4 million employees who work for Federal, State, 
and local governments, health care institutions and nonprofit agencies, 
and an additional 230,000 retiree members. AFSCME and its members are 
proud of labor's historic role in the creation of Medicare and we 
remain strong defenders of the Medicare program from those who would 
undermine its foundations.
    When President Johnson signed Medicare into law on July 30, 1965, 
he spoke of the profound promise of Medicare to our Nation and its 
citizens:

          ``No longer will older Americans be denied the healing 
        miracle of modern medicine. No longer will illness crush and 
        destroy the savings that they have so carefully put away over a 
        lifetime so that they might enjoy dignity in their later years. 
        No longer will young families see their own incomes, and their 
        own hopes, eaten away simply because they are carrying out 
        their deep moral obligations to their parents, and to their 
        uncles, and their aunts.
          And no longer will this Nation refuse the hand of justice to 
        those who have given a lifetime of service and wisdom and labor 
        to the progress of this progressive country.''

    For today's 44 million Medicare beneficiaries and our Nation, the 
need for Medicare to remain a sanctuary against financial ruin caused 
by the vicissitudes of illness and disability rings as true in 2008 as 
it did more than four decades ago.
    President Bush's fiscal year 2009 budget would undermine Medicare 
by making substantial program cuts while protecting insurance company 
profits at the expense of moderate-income beneficiaries, hospitals and 
other providers. Instead of improving the fiscal solvency of Medicare 
by reducing the extra subsidies provided to insurance companies for 
offering a private alternative to Medicare, the Administration's budget 
shields these privatized Medicare Advantage plans from direct cuts.
Damaging Cuts to Medicare
    The President's budget chops Medicare by more than $178 billion 
over the next 5 years, $556 over 10 years, and more than $10 trillion 
over the next 75 years. These extensive cuts are funded, in large part, 
by shifting roughly $6 billion of extra premium costs to moderate-
income beneficiaries, nearly $21 billion in costs to hospitals that 
treat significant populations of indigent patients, and more than $117 
billion in reduced payments to hospitals, nursing homes, home care 
agencies and other providers. Cuts at this level will have significant 
short-term and long-term negative impact on traditional Medicare which, 
for most AFSCME retirees, is the foundation of their health care 
benefits. These cuts will negatively impact retirees' health outcomes 
and quality of life by limiting access to care and by undermining the 
strength of traditional Medicare.
Shifting Costs Onto Beneficiaries and Cutting Payments to Health Care 
        Providers
    AFSCME is concerned with the President's renewed legislative 
proposals to shift added Medicare premium costs onto limited and 
moderate-income beneficiaries. All beneficiaries are already paying 
higher Part B premiums, in part to subsidize overpayments to insurance 
companies offering Medicare Advantage plans. In addition, those with 
incomes above certain levels pay a surcharge on their Part B premiums. 
The President's budget would abolish indexing the income threshold for 
the additional Part B premiums to the Consumer Price Index. The 
President's budget would also put an un-indexed surcharge on Part D 
prescription drug premiums as well. Without indexing the income 
threshold to inflation, over time more moderate- and even lower-income 
beneficiaries will be affected, in the same way that, without indexing, 
the Alternative Minimum Tax has expanded to include more moderate-
income taxpayers. When President Bush proposed the same un-indexed 
premium surcharge in his FY 2007 budget it was reported that in a few 
years the Part B premium surcharge would cover nearly one in ten 
beneficiaries.
    While the Medicare Payment Advisory Commission (MedPAC), the 
independent nonpartisan group charged with making recommendations to 
Congress on the Medicare program, has recommended some ways to adjust 
payments to providers, the President's budget ignores the magnitude and 
scope of these recommendations in an arbitrary and unbalanced manner. 
For example, contrary to MedPAC recommendations, the President would 
cut Medicare payments targeted to hospitals that serve large numbers of 
low-income individuals by 30 percent over 2 years, forcing many public 
and safety net hospitals to absorb $20.7 billion over 5 years. This 
cut, along with other proposed cuts to providers, will limit 
beneficiaries' access to care and jeopardize the health of significant 
numbers of people who are elderly, and may be frail, or have serious 
disabilities.
Subsidies to Inefficient Privatized Medicare Advantage Plans, Which 
        Threaten Medicare's Financial Solvency, Remain Untouched
    While the President proposes cuts to providers who serve 
beneficiaries, his budget shields inefficient and costly Medicare 
Advantage plans from any direct cuts to their windfall subsidies. 
MedPAC has recommended that Congress curb the billions of dollars in 
excessive payments made to private insurance companies that offer a 
private alternative to supplant--not supplement--Medicare.
    When Congress opened up Medicare to private plans, it was based on 
the claim that the private health insurance industry would be more 
efficient, provide more coordinated care for seniors and the disabled, 
and do so with less cost to the taxpayers and beneficiaries than the 
traditional Medicare program. The promises of efficiencies and lower 
costs have been illusory; Medicare now pays private Medicare Advantage 
plans more than it would cost to cover the same beneficiaries through 
the traditional Medicare program. Current estimates are that for every 
dollar spent for benefits under traditional Medicare it costs $1.17 
when a private fee-for-service plan provides the benefits. Not 
surprisingly, with that enhanced profit incentive, enrollment in 
Medicare Advantage private fee-for-service has grown at an alarmingly 
rapid rate over the past year.
    Growth in enrollment further exacerbates the strain on Medicare's 
financial health by draining the Medicare Hospital Trust Fund and 
taxpayers' resources. Over the next 10 years, these overpayments to 
insurance companies will cost an additional $150 billion. These 
overpayments shave two years off the financial solvency of the Hospital 
Trust Fund. The ballooning growth in overpayments to private plans will 
drive premiums even higher for beneficiaries, erode Medicare's 
financial solvency and ultimately force major changes in the Medicare 
program, including substantial cuts in benefits. If left unchecked, 
these overpayments will ultimately lead our Nation backwards to a time 
when seniors were one illness away from poverty and were denied 
reasonable and necessary medical care because they could not afford to 
pay doctors or hospitals.
    AFSCME is concerned that these plans, as a substitute for 
traditional Medicare, also undermine the quality and integrity of the 
Medicare program. Medicare Advantage plans may offer additional 
benefits, such as gym memberships, or hearing aids and eyeglass 
coverage, but they modify their benefits to cut corners in more 
important areas, such as limiting hospital days or charging higher 
copays for rehabilitative care than Medicare. State officials who 
forced retirees into Medicare Advantage plans acknowledged that ``we 
know that . . . retirees who use more medical care will be worse off 
under this plan.'' We are concerned that Medicare Advantage plans deny 
claims more frequently to hold down costs and the appeals process is 
more difficult under these plans than under traditional Medicare. 
Retirees must go through the company rather than Medicare's transparent 
appeals process and can be bounced between the Federal agency that 
administers Medicare and the insurance company when they seek redress. 
Medicare Advantage plans, unlike traditional Medicare, are not stable. 
These plans can and do pull out of markets, disrupting health care 
services and causing much anxiety among beneficiaries. There is a lack 
of access, quality and accountability for many of these private 
replacements for Medicare. The private fee-for-service plans are exempt 
from basic quality reporting and they limit access to care and choice 
because significant numbers of doctors and hospitals have refused to 
accept beneficiaries from these plans.
    Given these problems, Congress must act to rein in the runaway 
overpayments to these private plans. Congress must reject the 
President's budget which does nothing to curb the escalating growth of 
these privatized Medicare plans, reduce the excessive subsidies to 
these plans or improve Medicare benefits for current and future 
beneficiaries.

                                 
                       Statement of Linda Schmidt

    The mission of the Michigan Department of Human Services (MDHS) is 
to assist children, families and vulnerable adults to be safe, stable 
and self-supporting. While MDHS appreciates the State-Federal 
partnership that enables us to perform this mission, the strength of 
this partnership has eroded over the past several years, leaving an 
increasing share of the burden on our State in the midst of a severe 
economic challenge. As needs have risen in the area of income security 
and family support, the amount of Federal investment in real dollars 
toward meeting these needs continues to fall. The President's FY 2009 
budget request falls $15 billion below the amount needed just to keep 
pace with inflation nationally. Given Michigan's current economic 
outlook, a disproportionate amount of that imbalance will fall on the 
shoulders of Michigan's vulnerable children and families. In addition, 
the programs we manage in partnership with the Federal Government have 
undergone increasingly complex reforms that limit the department's 
ability to reallocate resources to meet growing demands. This testimony 
will highlight the areas that best represent my concerns with the 
proposed budget.
Temporary Assistance to Needy Families (TANF)
    Michigan's TANF block grant has not increased since it was 
established 11 years ago. The 1996 welfare reforms were predicated on 
the belief that welfare participation would never rise above 1996 
levels. Two interdependent assumptions of welfare reform are that 
workforce participation leads to self-sufficiency and that there are 
ample opportunities for families to work toward self-sufficiency if 
they are given appropriate temporary supports. In Michigan, we have 
found that traditional cash assistance caseloads have decreased, but 
that vulnerable families are finding it difficult to become entirely 
self-sufficient. Many continue to need some form of assistance, and 
workforce participation alone does not guarantee that a family will 
achieve self-sufficiency. Flexible funding to support programs that can 
address specific barriers to self-sufficiency is greatly needed.
    The President's budget request includes a change in work 
participation requirements that is very welcome. This change eliminates 
the 90% work participation requirement for two-parent families that was 
established as part of the reauthorization of the TANF program in the 
Deficit Reduction Act of 2005. However, a number of very problematic 
rules related to TANF remain in effect. States need guidance on the 
application of TANF rules and work verification plans. MDHS suggests 
that Congress prohibits penalties to States that fail to meet work 
participation under the interim TANF rules if there was not an approved 
work verification plan in place over all or most of the period of 
review. Michigan was one of the first States in the country to receive 
approval of its Work Verification Plan, but that approval was not 
received until August 6, 2007--only 7 weeks before the end of the first 
fiscal year that the plan covered. MDHS has provided comments to HHS 
regarding the potential negative impact of Deficit Reduction Act 
implementation through the rulemaking process. While some issues were 
resolved in the TANF Final Rules issued last month, MDHS still has 
three outstanding concerns in this area:

      English as a Second Language, high school completion, and 
General Equivalency Diploma courses do not count as core work 
activities. Clients without basic education and communication skills 
will find it extremely difficult to achieve and maintain self-
sufficiency despite mandatory participation in work activities.
      Substance abuse treatment, mental health treatment, 
vocational rehabilitation services and other ``barrier removal 
activities'' do not count as core activities beyond 4 consecutive 
weeks, or 6 weeks total in a year. MDHS suggests the definition of 
qualified work activities found in the PRIDE bill, which includes 
substance abuse counseling, rehabilitation treatment, work-related 
education or training, job search or job readiness, adult literacy 
programs, post-secondary education and barrier removal activities, as 
defined by the State, and allowed all of them to count as core work 
activities for up to 4 months. This flexibility would allow States to 
develop case plans that properly prepare parents for success in the 
workplace.
      A work participation plan that includes reduced hours as 
a reasonable accommodation for a person with disabilities should count 
as full participation if the person is in compliance with that plan.

Low-Income Home Energy Assistance (LIHEAP)
    Even with the help of Federal funding, the State of Michigan cannot 
ensure that vulnerable families can maintain heat and electricity in 
their homes. In FY 07, there were 10 weeks during which there were no 
State or Federal funds available for crisis assistance, regardless of 
the applicant's financial eligibility. As energy costs and economic 
pressures steadily increase across the country, the demand for crisis 
assistance funding will continue to rise. The budget proposal, however, 
significantly reduces this vital resource.
    LIHEAP funding has also not been sufficient to fully fund the Home 
Heating Credit. In FY 07, Michigan had to prorate the Home Heating 
Credit paid to eligible households to 76%. In FY 08, the credit is 
prorated to 53%. Even though the State has been able to gain some 
funding through the Low Income Energy Efficiency fund established by 
the Michigan Public Service Commission, those funds have only decreased 
the overall amount of the shortage, not eliminated it. With the 
reductions in the Home Heating Credit and the total inability, at 
times, to provide crisis assistance, it is clear that Michigan cannot 
keep up with the dramatically increasing energy costs and demands for 
assistance. A significant increase in funding is needed to bridge this 
gap.
Community Services Block Grant (CSBG) and Social Services Block Grant 
        (SSBG)
    The President's budget request for Health and Human Services once 
again proposes to eliminate the CSBG, relying on the Program Assessment 
Rating Tool (PART). This program's purpose is to provide flexible 
funding to community-based organizations to promote innovative, 
community-generated actions to reduce the incidence and severity of 
poverty. In Michigan, this results in extending the State-Federal 
partnership to reduce poverty to local communities through grants to 
Community Action Agencies, providing services to over 220,300 
vulnerable families in FY 06. The reliance on the PART to evaluate the 
effectiveness of this program provides an incomplete picture of its 
actual impact. The PART report for CSBG acknowledges that the program 
is unique, meets a specific need, and is effectively targeted. However, 
we disagree with the PART in the area of performance measures. Since 
community-based solutions are a core principle of this poverty 
reduction program, the system in place among Community Action Agency 
(CAA) partners to identify and measure results aligns with this core 
mission more appropriately than a federally imposed set of performance 
criteria. This accountability system, called Results Oriented 
Management and Accountability (ROMA), initiated by HHS, was chosen as a 
semi-finalist for the Innovations in American Government Award at 
Harvard University. MDHS appreciates the strong bipartisan support to 
fund CSBG after repeated requests to zero out this program, and we look 
forward to the resolution of this issue around performance indicators 
so that this funding uncertainty is relieved.
    Additionally, if the CSBG core funding is not there, then the 
weatherization program, having weatherized over 5,000 homes in the past 
year, would be in jeopardy as well as many other programs the CAAs 
operate. CAAs in Michigan leverage an additional $62.5 million in local 
and private funds and $12.9 million worth of volunteer support that 
benefit low-income families in their communities.
    Similarly, the issue of performance indicators erodes support for 
the Social Services Block Grant (SSBG). This program is intentionally 
flexible. In Michigan, SSBG funds support Adult Foster Care, Adult 
Protective Services, guardianship services for adults and other 
programming. The FY 2009 reduction of 30% and the FY 2010 elimination 
of this program would add to our department's existing staffing 
pressures in these areas and seriously limit services available to 
vulnerable adults. In Michigan, as elsewhere around the country, we 
expect the population in need of these services to grow in accordance 
with demographic shifts. This growth in demand and elimination of 
support for services will create severe hardships.
Child Support (Title IV-D)
    MDHS continues to support a repeal of the cuts to child support 
mandated by the Deficit Reduction Act of 2005 which prohibit States 
from using incentive funds to match Federal funds, even though these 
funds had been evaluated as effective and responsible by the Office of 
Management and Budget Program Assessment Rating Tool. These cuts result 
in $50 million less Federal funding for child support programs in 
Michigan in FY 2008. Passage of H.R. 1386 and S.B. 803 would repeal 
these cuts.
Child Care Development Block Grant and Head Start
    The Child Care Development Block Grant (CCDBG) remains level funded 
in the FY 2009 budget request. This results in an actual reduction in 
the amount and quality of child care MDHS can provide working families. 
Because of the ongoing trend of reduced support for child care, it 
would take an $874 million increase in funding to restore the program 
to 2002 levels. Continued flat funding of child care will cause 200,000 
children to lose access to child care nationwide.
    Similarly, Head Start funding is not adequate to meet even current 
participation levels, which is acknowledged in the budget request 
itself. The increase in funding proposed in the budget request will not 
cover the costs of mandated quality improvements contained in the 
recent reauthorization of this program. Head Start providers should not 
be required to meet higher educational standards without more funding. 
Finally, MDHS supports the current Federal-local partnership and the 
Policy Council/shared governance structure for local Head Start 
providers that ensure parents and other stakeholders a voice in 
improving Head Start programs.
Foster Care Funding Option
    Capping the amount of Federal support for foster care will force 
untenable choices on States. If Michigan can not rely on Federal 
support for children in care, other options will have to be considered 
including reducing payments to foster care parents, decreasing funds to 
private foster care providers or shifting funds from child protection 
to foster care, which might well result in more children in care or at 
risk. While theoretically advantageous, access to TANF contingency 
funds as proposed would not address the gaps in service capacity. 
Further, linking foster care and the needs of children in crisis to an 
additional process for drawing down Federal funds from another source 
contingent upon meeting definitions of ``severe foster care crisis'' is 
not a reasonable approach to ensuring that our most vulnerable children 
have timely access to basic services to ensure safety.
Title IV-B, Subparts 1 and 2
    The President's budget request for HHS proposed level funding for 
child welfare services (Part 1) and Promoting Safe and Stable Families 
(Part 2), continuing a trend of level funding. As with other programs 
administered by MDHS, this results in an actual decrease in our 
capacity to meet the needs of vulnerable children.
Children and Family Services Discretionary Programs
    MDHS is concerned that cuts to Child Abuse Prevention and Treatment 
Act funds would decrease our ability to meet the training and service 
needs that are essential to maintaining our child welfare system. The 
incentive program for States that meet requirements for timely 
interstate placement of foster children would benefit Michigan if it 
were reinserted in the FY 2009 budget.
Title IV-E
    The President's request proposes a $118 million decrease in funding 
for foster care based on HHS projections of decreasing foster care 
caseloads. MDHS finds this argument for reducing funding incomplete. 
Even if caseloads decline as predicted, increases in the costs of 
service provision are not fully accounted for, and would likely more 
than offset any savings due to caseload reductions. Service 
participation numbers and actual costs are both relevant to predicting 
funding needs. Without considering both factors, foster care remains in 
danger of funding levels that are severely out of alignment with the 
actual cost of service provision, leaving States to reduce services or 
try to bridge the gap by shifting funds from other programs that 
prevent foster care placement. Considerable reform in the area of 
foster care financing is necessary to ensure that States can meet the 
demand for the most basic supports for vulnerable children, and work 
toward creating stronger systems of care to shorten and prevent out-of-
home placements while ensuring child safety. MDHS cautions that these 
needed reforms must not be seen as potential savings of Federal funds. 
Child welfare is severely underfunded and cannot be a source of 
budgetary savings even with significant Federal financing reforms.

                                 
                  Statement of Wim Kellett, Wando, SC

    I respectfully would like to comment on CMS and Congress' 
continuing efforts to reduce reimbursement to the Home Medical 
equipment industry. Furthermore, while staying on the path of reducing 
reimbursement fees, Congress is not addressing CMS's lack of 
accountability with fraudulent providers. It is unfortunate that there 
are people who fraudulently bill the Medicare system, there is bad and 
good in all sectors of industry and policymaking. CMS and Congress 
repeatedly comment on the growing expenses in Wheelchairs, Home Oxygen, 
Hospital Beds and other items we provide. The simple fact is the 
population of the ``Baby Boomer'' era is coming of Medicare coverage 
age. In addition, the correlation between the need for this type of 
service and the economic impact of Chronic Disease is very relevant. It 
is an unrealistic expectation to ``REDUCE'' Medicare expenditure when 
there are so many people becoming eligible.
    Medicare is the only payor source that does NOT require a ``Prior 
Authorization'' for Power Mobility products. This is a simple step that 
would allow CMS more time to review claims, thus reducing the chances 
of a fraudulent claim. One of the largest manufacturers has severed its 
relationship with The Scooter Store. Read the writing on the wall. Do 
you see any other manufacturers ending business ties with multimillion 
dollar clients? There are some indicators pointing to the companies 
abusing the system. Do something to protect the system and those of us 
who are trying our hardest to do it right. Cutting our reimbursement is 
not the solution.
    Our total company has 945 patients being serviced with Home Oxygen. 
We employ 13 service technicians (average income of $30,000/year) and 5 
Respiratory Therapists (average income $63,000/year) to help maintain 
these patients in their homes. We employ 12 Customer Service 
Representatives (average income of $34,000/year) that answer the phone 
and help process new orders and service tickets. These employees are 
critical in helping patients stay compliant according to written 
prescriptions. When patients stay compliant, there is a lower rate of 
time in which they have to go to the hospital. Simple facts; compare 
the number of people we employ and the costs associated with that of 
the hospital. The government has access to what the diagnosis of COPD 
costs the hospital per day. Compare that to the $6.04 it cost with Home 
Oxygen with new technology portability. Where is the logic in this?
    In addition to these employees we have five more in our billing 
department. They deal with Filing claims and working denials; which is 
an entirely different accountability problem that CMS has. Simply put, 
the comparison to Cost Effective Health Care is astounding. Even more 
frustrating is the Administration continuing efforts to reduce the most 
affordable Health Care model available.
    There are some questions regarding references regarding Oxygen 
Concentrators. First, illustrative Internet Pricing. Is CMS insinuating 
that a beneficiary purchase an Oxygen Concentrator, which produces a 
``LEGEND DRUG'' over the Internet? The Oxygen Concentrator produces 
oxygen which is considered a drug and requires a prescription. The FDA 
and SC Board of Pharmacy regulate the distribution of oxygen and it 
would appear that CMS is suggesting the patients go on the Internet to 
purchase; there is significant flaw in this process. Second, the cost 
of the commodity is a small percentage of the dollars that go into 
keeping the patient happy and in their home. The labor involved in 
keeping the maintenance on the machines, assisting the patients with 
cleaning of filters and changing the disposable portions is very large. 
In a perfect world we would all agree that patients need to be 
responsible for their health care, including maintenance to some 
degree. This is not a perfect world and we are very involved. If our 
reimbursement rates are continually cut, then the government is 
impeding our ability to help the Medicare population. We need not have 
unreasonable expectations at the costs of the system. This patient 
population needs assistance and it is more cost effective to do this in 
their home. There are many of us that are trying to offer solutions. 
Congress and CMS make it very difficult for us to manage our businesses 
and fight off the frequent legislation issues that keep coming at us.
    Our industry is eager to meet and discuss the hurdles before us. 
Please act in accordance with the position you were elected to perform, 
and consult the people that will be impacted. The DME industry is not a 
large recipient of the overall Medicare expenditure, yet we are the 
most efficient at keeping people in the home.