[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
ACCOUNTABILITY AND OVERSIGHT IN THE MEDICARE ADVANTAGE PROGRAM
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH,
JOINT WITH SUBCOMMITTEE ON OVERSIGHT
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
OCTOBER 16, 2007
__________
Serial No. 110-62
__________
Printed for the use of the Committee on Ways and Means
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62-696 WASHINGTON : 2011
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COMMITTEE ON WAYS AND MEANS
CHARLES B. RANGEL, New York, Chairman
FORTNEY PETE STARK, California DAVE CAMP, Michigan
SANDER M. LEVIN, Michigan JIM RAMSTAD, Minnesota
JIM MCDERMOTT, Washington SAM JOHNSON, Texas
JOHN LEWIS, Georgia PHIL ENGLISH, Pennsylvania
RICHARD E. NEAL, Massachusetts JERRY WELLER, Illinois
MICHAEL R. McNULTY, New York KENNY HULSHOF, Missouri
JOHN S. TANNER, Tennessee RON LEWIS, Kentucky
XAVIER BECERRA, California KEVIN BRADY, Texas
LLOYD DOGGETT, Texas THOMAS M. REYNOLDS, New York
EARL POMEROY, North Dakota PAUL RYAN, Wisconsin
STEPHANIE TUBBS JONES, Ohio ERIC CANTOR, Virginia
MIKE THOMPSON, California JOHN LINDER, Georgia
JOHN B. LARSON, Connecticut DEVIN NUNES, California
RAHM EMANUEL, Illinois PAT TIBERI, Ohio
EARL BLUMENAUER, Oregon JON PORTER, Nevada
RON KIND, Wisconsin
BILL PASCRELL, Jr., New Jersey
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
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C O N T E N T S
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Page
Advisory of October 16, 2007, announcing the hearing............. 2
WITNESSES
Jeffery Steinhoff, Managing Director, Financial Management and
Assistance, U.S. Government Accountability Office.............. 7
James Cosgrove, Acting Director, Health Care, U.S. Government
Accountability Office.......................................... 23
Timothy B. Hill, Chief Financial Officer, Centers for Medicare
and Medicaid Services.......................................... 36
Paul Precht, Policy Coordinator, Medicare Rights Center.......... 77
Harry Hotchkiss, Senior Products Actuarial Director, Humana Inc,
Louisville, Kentucky........................................... 109
Cindy Polich, Senior Vice President, Secure Horizons,
UnitedHealth Group, Minneapolis, Minnesota..................... 127
Bart Asner, MD, Chief Executive Officer, Monarch Healthcare,
Irvine, California............................................. 132
SUBMISSION FOR THE RECORD
Questions for the Record......................................... 155
ACCOUNTABILITY AND OVERSIGHT IN THE MEDICARE ADVANTAGE PROGRAM
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TUESDAY, OCTOBER 16, 2007
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:07 p.m., in
Room 1100, Longworth House Office Building, the Honorable
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
October 04, 2007
HL-17
Stark and Lewis announced today that the Subcommittees will hold a
joint hearing on statutorily required audits of Medicare Advantage plan
bids, specifically focusing on the report by the Government
Accountability Office entitled ``Medicare Advantage: Required Audits of
Limited Value''
House Ways and Means Health Subcommittee Chairman Pete Stark (D-CA)
and Oversight Subcommittee Chairman John Lewis (D-GA) announced today
that the Subcommittees will hold a joint hearing on statutorily
required audits of Medicare Advantage plan bids, specifically focusing
on the report by the Government Accountability Office entitled
``Medicare Advantage: Required Audits of Limited Value'' (GAO-07-945).
The hearing will take place at 10:00 a.m. on Thursday, October 11,
2007, in 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:
In 2006, the Centers for Medicare and Medicaid Services (CMS) spent
nearly $56 billion on Medicare parts A and B benefits in the Medicare
Advantage program, which covered approximately 6.7 million (nearly 16
percent) of the 43 million Medicare enrollees.
Under the program, CMS approves private companies to offer health
plan options to Medicare enrollees. These companies are required to
submit yearly bids of the costs and benefits package of each Medicare
Advantage plan they intend to offer. CMS compares these bids to
geographic-specific benchmarks. If higher, a plan must require
enrollees to pay the difference as a premium. If lower, 75% of the
difference must be provided to enrollees as additional services or cost
savings, while 25% is retained by the Treasury. CMS pays plans based on
this formula, per enrollee, on a monthly basis, before services are
rendered.
The 1997 Balanced Budget Act (BBA) (P.L. 105-33) requires CMS to
annually audit the supporting financial records of at least one-third
of participating organizations. The BBA also requires the Government
Accountability Office (GAO) to monitor this audit activity.
In July 2007, GAO released a report on audits of the Medicare
Advantage program and found that CMS did not meet the statutory audit
requirement for the years 2001-2006. CMS selects organizations to meet
the statutory audit requirement based on the number of organizations
and not the total number of plans. GAO reported that, in 2006, CMS
audited only 13.9 percent of the participating organizations (down from
a high of 22.3 percent in 2003). GAO also found that, in 2006, only 159
(or 3.2 percent) of the total 4,920 Medicare Advantage plans were
examined.
Some audits revealed errors in the bids. CMS does not sanction or
seek to recover funds from providers that audits reveal are in
violation of the bid requirements. A CMS contractor estimated that, for
2003, bid errors cost beneficiaries a net loss of $59 million in
additional benefits, lower co-payments, or lower premiums.
``The GAO report raises serious questions about the management and
oversight of the Medicare Advantage program. Mandated audits are not
performed, and those that are performed are not used to make needed
changes, costing beneficiaries and taxpayers millions in overpayments
and lost benefits,'' said Health Subcommittee Chairman Stark. ``The
report again shows that Medicare Advantage does not live up to the
service and cost savings promises that were made at its inception. Lack
of oversight makes this bad idea even worse.''
``The integrity of the Medicare Advantage program is important to
everyone,'' said Oversight Subcommittee Chairman, John Lewis. ``GAO
reported that, based on 2003 audits, beneficiaries could have received
at least $34 million and possibly up to $59 million in additional
benefits, lower co-payments, and lower premiums. Enrollees place their
trust in their Medicare Advantage plans and I am committed to ensuring
that the Medicare Advantage program gives enrollees what they
deserve.''
FOCUS OF THE HEARING:
The hearing will examine the value and accuracy of payments to
Medicare Advantage plans, specifically focusing on the report by the
Government Accountability Office entitled ``Medicare Advantage:
Required Audits of Limited Value'' (GAO-07-945).
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Chairman STARK. I want to thank Chairman Lewis and Mr. Camp
for joining us to discuss the lack of oversight on Medicare
Advantage plans. It is the third Ways and Means hearing this
year to discuss the Medicare Advantage industry.
The focus of our hearing is the issue of private government
contractors receiving billions of dollars to administer a
government program with no oversight or control by the
administration.
The Government Accountability Office will review for us
their first oversight in six years on private Medicare plans,
whether they have been known as: Medicare Part C; Medicare Plus
Choice; Medicare Advantage. During that time, the
administration has never--or we, Congress, have never asked the
administration to report or review these programs. We spent $56
billion on these plans in 2006, and we will spend north of $75
billion this year. We have got 8 million beneficiaries
enrolled. And yet, for 6 years, nobody has thought that the
plans require any oversight.
When the plans formally asked to join Medicare in 1982, we
heard the tired refrain that private industry does everything
better and cheaper than government. So the payment was set at
95 percent of fee for service. Then, the plans came back a few
years later, and said they could do it better, but only if they
got paid as much as Medicare. Then, in 2003, they said, well,
they could provide choice, or an advantage, but only if they
got paid more than Medicare.
The Medicare Payment Advisory Commission, CMS's own
actuary, and the Congressional Budget Office, each estimate
that Medicare Advantage plans are overpaid. MedPAC estimates
that the average overpayment is 112 percent of Medicare's cost,
with plans in some areas exceeding 150 percent of Medicare's
rates.
It is no secret that many of us find this wrong, as do many
of America's taxpayers. These overpayments increase premiums
for all Medicare beneficiaries. And the so-called additional
benefits to Medicare enrollees are elusive, often designed to
weed out the less healthy, more expensive beneficiaries.
CMS's actuary estimates that the overpayments to Medicare
Advantage reduce the viability of the Medicare trust fund by 3
years. Those who wish to see Medicare Advantage continue must
accept that we demand transparency. We will hear claims today
that Medicare Advantage provides increases in benefits to
enrollees. And, at a 12 to 20 percent premium over traditional
Medicare, they ought to. But even these claims aren't
substantiated by any factual reporting or detail. Those who
sing the praises of Medicare Advantage must accept responsible
oversight.
If you think this program is helping beneficiaries and the
integrity of the Medicare system, you should be able to provide
detailed accounting of what is promised and delivered, and
explain how much is paid for these services. GAO reports that
CMS audits only a small percentage of the bids that plans
submit, even though the law requires them to audit one-third of
the plans.
What is even more disturbing is that, while they have
failed to meet the terms of the law, even the small percentage
reveals large discrepancies with millions of dollars in lost
benefits and incorrect accounting. The few audits that are
actually performed only show us what plans offer, not the
benefits that they actually deliver. In a $73 billion program,
we have no idea what benefits are being delivered. That's not
good government; it is dereliction of duty.
I hope today we can dispense with the sales pitches, and
get some facts and figures that will help us determine the
value of Medicare Advantage to anyone other than the
stockholders and the providers.
Mr. Camp could go next, then Mr. Lewis. Is that all right?
Mr. LEWIS. Yes, that is fine.
Mr. CAMP. Well, thank you, Mr. Chairman. I don't think
anyone sitting up here will argue that the Medicare program is
perfect. For example, we have learned that some Medicare
Advantage plans have engaged in misleading marketing practices,
overly aggressive sales tactics, and questionable denials. But
then I have seen that in more than a few campaigns, as well.
But, however, this is a serious issue, and we simply cannot
turn a blind eye to it. And I commend the chairman for using
our oversight authority to improve this program.
I am concerned that the GAO found that CMS is not auditing
Medicare Advantage plans, consistent with the law. Congress
enacted the audit requirements because we recognized how
important it is to review and verify the data that these plans
submit. CMS's failure to meet this requirement is unacceptable,
and I expect to hear what steps they are going to take to
address this problem.
It is also unacceptable that some plans are being paid, and
not providing the benefits they promised to Medicare
beneficiaries. I look forward to learning what CMS is doing to
ensure that Medicare Advantage plans are providing these
benefits, and whether they need any additional authority to
recoup these inappropriate payments to Medicare Advantage
plans. I am sure this congress will be more than happy to grant
them such authority, if it is needed.
However, this is far from the only area we need to be
pursuing. We are seemingly focused on the Medicare Advantage
program, which deserves our scrutiny. But it is clear that
there are bad apples sprinkled throughout Medicare. Recent
press reports have detailed shocking examples of fraud within
the fee-for-service Medicare program that have cost the
Medicare program and its beneficiaries billions of dollars.
Just one recent case involving durable medical equipment
providers in south Florida saw the Medicare fee-for-service
program bilked out of hundreds of millions of dollars for
services and equipment that were never provided. Similarly, the
GAO reported that thousands of physicians who received federal
Medicare payments failed to pay their federal taxes.
Despite the committee's clear jurisdiction in this area, we
have yet to explore ways to ensure that these abuses do not
continue, and I hope we do so. I say this to provide
suggestions for future hearings, as well as to put the issues
surrounding Medicare Advantage into perspective.
While we have heard witnesses question the Medicare
Advantage program, one such witness also agreed that the
problems he found within the Medicare Advantage program
affected only .3 percent of the Medicare Advantage enrollees in
his state. Again, putting these issues in context is important.
There is no question that Medicare Advantage payment rates
should be re-examined. The challenge is finding the balance
between trimming the fat and cutting the bone. We don't want
seniors in rural areas to lose their health coverage, nor do we
want benefits slashed.
Also, we don't want plans to reap such excessive profits
that they are unable to invest in and add supporting a massive
expansion of government-run health care--they are able to
invest and supporting a massive expansion of government-run
health care.
I look forward to working with the chairman, and I hope he
will take me up on my offer and engage in a constructive debate
to craft a reasonable Medicare package that could be signed
into law. And with that, I yield back the balance of my time.
Chairman STARK. The co-chairman.
Mr. LEWIS. Thank you, Mr. Chairman. This morning, the
oversight and health subcommittees will hold a joint hearing to
review the Medicare Advantage program. It is a pleasure to co-
chair this hearing with my good friend from California,
Chairman Stark.
Over eight million Americans rely on Medicare Advantage.
They enroll in this program because they believed that the
premiums they were paying would be fair for the benefits they
receive. But this is not always the case. Private insurance
companies make huge profits by offering these plans. The
Federal Government pays, on average, 12 to 19 percent more for
each senior in a Medicare Advantage plan than for a senior in
traditional Medicare.
This overpayment does not buy any additional benefits, or
reduce copayments. It is going directly into the pockets of the
insurance companies. The waste in the Medicare Advantage
program is shameful. The lack of CMS oversight is a disgrace.
And the treatment of beneficiaries is just unacceptable.
Current law requires CMS to audit at least one-third of the
organization participating in Medicare Advantage each year. The
GAO found that CMS has not met this goal. The audits that were
performed reveal large overpayments to Medicare Advantage
plans. For 2003, the audits showed overpayments of up to $96
million--$96 million. That is unbelievable.
What is more amazing is that CMS did nothing, absolutely
nothing, to get this money back, or to sanction these private
plans. Large overpayments, huge profits and commissions have
led to scandals in MA plans. Eleven states have reported
seniors, who thought they were signing an information form,
were suddenly enrolled in an MA plan. Fifteen states reported
mass enrollment at senior centers, nursing homes, and senior
housing.
In Georgia, insurance agents asked to visit patients alone
in their rooms, and not in the common areas. One agent switched
a mentally disabled patient to an MA plan without anyone's
knowledge.
We must protect the beneficiaries. Senior must have a
voice. If CMS will not properly oversee this program, and
provide seniors with a voice, then the Congress will. Mr.
Chairman, I yield back.
Chairman STARK. Thank you. And I think the staff is going
to pass out--unless your eyes are a lot better than mine, the
chart that we are looking at over there, the blue chart, we are
going to hand out a reprint of it, if it will help those of us
who are sight-challenged.
This morning our first panel consists of: Mr. Jeff
Steinhoff, who is the managing director of Financial Management
and Assistance at the U.S. Government Accountability Office--
GAO, as I like to call it; Mr. James Cosgrove, who is the
acting director of health care at the GAO; and Mr. Timothy B.
Hill, the chief financial officer for the Centers for Medicare
and Medicaid Services--once HCFA and now CMS.
I would like to welcome all of you here. We sort of run a
clock, but if you really get us fascinated, we may let you
scoot over a few minutes. We have your prepared testimony.
Without objection, all of it will appear in the record in its
entirety. And I would welcome you to enlighten the committee in
any manner you choose.
Mr. Steinhoff, would you like to lead off?
Mr. STEINHOFF. By all means.
STATEMENT OF JEFFERY STEINHOFF, MANAGING DIRECTOR, FINANCIAL
MANAGEMENT AND ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. STEINHOFF. Mr. Chairman, Members of the Subcommittees,
we are pleased to be here today to discuss our July 2007 report
on Medicare Advantage audits. Our work covered audits for 2001
to 2006. For 2001 to 2005, the audits covered the adjusted
community rate submissions. And beginning in 2006, shifted to
bid submissions under MMA.
The Balanced Budget Act of 1997 requires that CMS annually
audit the financial records supporting the submissions of at
least one-third of the Medicare Advantage organizations. The
law requires that GAO monitor these audits.
Now, what did we find when we most recently reviewed CMS's
audit process? The bottom line: the audit process was of
limited value. We identified three fundamental problems.
First, as shown on page four of my statement today, as well
as the sheets that were just passed out to you all, and on the
blue chart over here on the side, CMS did not come close to
meeting the one-third requirement in any of the 5 years of the
ACR audits. The highest rate was 23.6 percent for 2001.
For the 2006 bid audits, the audit rate dropped to 13.9
percent. CMS told us that it plans to perform additional
procedures for 2006. The nature of this work had not been
finalized at the time of our review. But the stated time frame
for completion was 3 years, which will limit the use of any
results.
Second, the audits were not designed to provide information
on the impact of audit findings on beneficiaries. The ACR
auditors reported findings ranging from the lack of supporting
documentation to overstating and understating certain costs,
but were not required by CMS to determine the impact on
benefits, copayments, or premiums. So you knew something was
wrong, but you didn't know really what it meant in dollar
terms, or in benefits delivered.
CMS subsequently hired a contractor to do so for the 2003
ACR audits, and ultimately, quantified the impact as $35
million. Chairman Lewis mentioned an earlier figure. the
contractor found that there were overstatements of $96 million,
as Chairman Lewis said, and understatements in other areas. And
then, CMS reviewed this, and reduced the total to a net $35
million.
Reviews of the impact of errors identified by the 2004 and
2005 audits were not completed when we finished our review. And
the work for 2005 was somewhat suspended because of the bid
audits for 2006. Similarly, the bid audits did not require a
determination of the impact of findings on beneficiaries. The
type of finding was laid out. The fact it would be material in
some way was stated. But the dollar effects were not
quantified.
Third, although information on the impact on beneficiaries
eventually became available for 2003, you had the $59 million
and the $35 million net numbers, CMS plans to close out the
2003 audits without pursuing financial recoveries, or taking
other remedial actions, and does not plan to take actions for
the other years.
CMS's position is that it has neither the legal authority
nor the contractual right to pursue recoveries based on audit
results. We view this problem as being self-imposed. Our
reading of the law is that CMS has the authority to amend its
regulations to provide that all Medicare Advantage contracts
give CMS the ability to address audit findings, including
pursuing financial recoveries and other remedial actions.
We agree that CMS's regulations and contracts did not
include such provisions for 2001 to 2006, which is why we
recommended CMS remedy the situation going forward, either
administratively, by changing its regulations--which we believe
it has the authority to do--or by seeking legislation.
In closing, when CMS falls short in meeting the statutory
audit requirement, opportunities to determine if participant
organizations have reasonably estimated the cost to provide
benefits to Medicare Advantage enrollees are lost. Inaction or
untimely audit resolution undermines the presumed effective
audit efforts.
Finally, the oversight that Congress called for when it
mandated the audit requirement 10 years ago is not being
achieved. Today's hearing provides a good starting point for
re-evaluating what the congress expects out of the audit
process, and determining how audits can be turned into a tool
that provide value and accountability--trust, but verify
through the audit process--for a program that is $60 billion
today and growing rapidly, and touches the lives of millions of
Americans each and every day.
Mr. Chairman, this completes my summary remarks. We would
be pleased to respond to any questions that you or Members of
the Subcommittees may have at this time.
[The prepared statement of Mr. Steinhoff follows:]
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Chairman STARK. Thank you. Mr. Cosgrove.
Mr. COSGROVE. Mr. Chairman, I don't have any prepared
remarks. I am available to answer any questions that you may
have.
Chairman STARK. Okay. Mr. Hill.
[The prepared statement of Mr. Cosgrove follows:]
Prepared Statement of James Cosgrove, Acting Director,
Health Care, U.S. Government Accountability Office
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STATEMENT OF TIMOTHY B. HILL, CHIEF FINANCIAL OFFICER, CENTERS
FOR MEDICARE AND MEDICAID SERVICES
Mr. HILL. Good morning, Chairmen Stark, Lewis, Ranking
Member Camp, and distinguished Members of the Committee, thank
you for inviting me here to discuss our audit efforts for the
Medicare private health care plans.
This is the second appearance I have made before this
committee to discuss how CMS meets our fiduciary obligations to
beneficiaries and to taxpayers. I remain steadfast in my
commitment to maintaining the highest level of accountability
for the agency's financial resources, and reiterate the
commitment that our acting administrator has made to you for a
transparent and robust compliance effort for all the programs
we administer, including Medicare Advantage.
I would like to use my time this morning to briefly
summarize our response to the GAO report, and discuss the steps
that we are taking to ensure the accuracy and the integrity of
the payments we make to Medicare Advantage plans, including how
we are complying with the one-third financial audit requirement
of the MMA.
As you know, the GAO study focused on ACR and bid audits of
Medicare Advantage organizations, and made five specific
recommendations. I am pleased to inform you that, as noted in
our response to the GAO, we have already begun implementing the
five recommendations.
GAO also describes our bid audit process as insufficient to
comply with the statutory requirement to conduct a financial
audit of one-third of plans each year. We agree. It is
important to note, however, that the scope of the GAO review
was limited to CMS's bid audits. In other words, the reviews we
conduct are after we sign contracts with plans, but before the
plan year is complete. The reviews are conducted to gather
information on, and assess needed changes to, the bidding
process for future years, which would lead to more complete and
accurate bids from plans.
I want to clarify for the committee that we have never
intended the bid audits to be the mechanism by which we would
comply with this important statutory requirement. Rather, they
are one piece of a larger strategy to ensure the accuracy and
integrity of payments and protect beneficiaries.
The components of our strategy include: ensuring that bids
are accurate up front, before the plan year begins, and before
we sign contracts with plans; ongoing compliance monitoring
throughout the plan year; and, a full-scale financial audit of
one-third of the plans, once the plan year ends.
The first element of our strategy begins with reviews we
conduct of bids before we sign contracts with plans. Using
contracted actuaries and accounting firms, we thoroughly review
each bid and its data and underlying assumptions before we sign
contracts with plans. This process ensures that, to the maximum
extent practicable, each contract we sign results in the
maximum benefit to beneficiaries, and accurate payments from
Medicare. To fall back on a fee-for-service concept, we focus
our efforts on paying correctly up front, rather than relying
solely on a pay-and-chase scenario.
The second element of our strategy includes ongoing
compliance audits. These audits, while not financial in nature,
occur throughout the plan year, and are designed to ensure that
plans are complying with the various beneficiary protection
requirements in our regulations. The audits are conducted
largely by CMS staff on an ongoing basis, and are supplemented
by ongoing data collection, ad hoc reporting, and complaint
tracking mechanisms, to ensure that we identify and mitigate
any compliance issues before they have an impact on our
beneficiaries.
The final element of our strategy is a full-scale financial
audit of one-third of the plans, once the plan year ends, per
the requirements of the MMA. CMS has a specific plan in place
to meet this requirement, the elements of which have been in
place since last year. We will be contracting with CPA firms to
review plan information and data regarding all elements of
payments, including validating risk scores, claim submissions,
and beneficiary out-of-pocket costs.
We are currently reviewing the results of a small audit
pilot, and will be refining our audit criteria in the coming
weeks, so that auditing firms can build on these findings as
they begin their work. We have selected, and have begun
notifying, the first 81 plans from contact year 2006 that will
be audited.
These comprehensive first-round audits will examine, in
detail, the approved components of the plan bids, as well as
data supporting payments made during the year, to ensure that
Medicare beneficiaries in the Federal Government received what
the contract specified and the plan promised. And, to the
extent that we identify overpayments or underpayments as part
of those audits, we will be recouping money from the plans.
We are on schedule to audit the first 81 plans this fall.
But, we have a way to go to reach the 165 audits that would be
required to meet the statutory one-third requirement. We have
identified funds to begin the audits from within our ongoing
operations, but do not believe we can meet the full statutory
requirement, absent enactment of the President's budget request
for 2008.
I want to emphasize that this administrative funding is a
critical component of the Medicare program, and very much
appreciate Congress support of the President's budget levels
for these important oversight activities.
In conclusion, CMS takes our auditing responsibilities
seriously, and has plans in place and in effect to meet our
statutory and fiduciary responsibilities to beneficiaries and
taxpayers. I appreciate the committee's ongoing interest in
monitoring CMS's efforts on this front, and believe that, by
working together, we can support Medicare beneficiaries, and
ensure that they can maintain access to the Medicare plans that
meet their individualized health care needs.
This concludes my opening remarks, and I would be happy to
answer any questions that you may have. Thank you.
[The prepared statement of Mr. Hill follows:]
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Chairman STARK. Well, I want to thank the witnesses. I am
just going to ask, Mr. Steinhoff, if--I guess all my colleagues
have a copy, or can see the chart. Can you just briefly explain
to us what----
Mr. STEINHOFF. Okay. By all means.
Chairman STARK.--what the chart was designed to----
Mr. STEINHOFF. It is really to show the degree of audit
coverage here. And we have gone through, for each of the 6
years, 5 years of ACR audits, 1 year of bid audits, and
determined the percentage of the organizations--and by
organizations, we mean contracts--that were audited.
As you can see, the percentage of audits has declined. We
will caveat that 2006 was not, in fact, complete. These were
the bid audits. And Mr. Hill mentioned the other component,
which was not really in place when we were performing our work.
As you can see, the percentage of contracts audited has
stayed around 20 percent for several years, then dropped down
to 18.6 percent for 2005. And, as of today, for 2006, it rests
at 13.9 percent. I will say that, in contract year 2000, which
we covered in our 2001 report, CMS did meet the 33 percent
requirement. But the bulk of those audits were done by the
inspector general. The inspector general did 53 of 80 audits.
So CMS did, in fact, meet the requirements then, and it has
gone down since.
If you go to the second chart, it gives you an idea of what
this means, in terms of plans. Maybe I have jumped ahead here
on this, if you all haven't got that chart. But when we're
speaking about auditing, and we're speaking about auditing
contracts typically, contracts have multiple plans, ranging
from 1 plan to 170 plans on 1 contract. The average is about
eight plans per contract.
So, for the 2006 bid audits, which are at the bottom of
that chart, there were 4,920 plans. If you look at the previous
chart, there were 80 organizations audited. Of those 80
organizations, they had almost 1,200 plans, and CMS audited 159
of those plans, giving you an audit rate of 3.2 percent of the
plans.
Now, CMS is measured based on organizations. But just to be
clear what the magnitude of the auditing is, CMS audited
roughly 3.2 percent of the plans, so far, for 2006. And you
will see for the other years, it declined each year, from 22
percent of the plans in 2001, down to 5.3 percent of the plans
in 2005.
Mr. Hill mentioned the resource issue. If you go back to
the first chart--hope I am not going too fast on this--you will
see that audit resources are not high, and that, in fact, they
went down for 2006. So you've got a program that was
dramatically growing, more beneficiaries, more cost, less being
spent on the audits, and you're talking about audit costs in
the range of $3 million per year for a program that is now $60
billion to $70 billion.
So, that is, in a nutshell, what we found. CMS didn't meet
the audit requirement in any year. And, depending on how you
slice and dice it, the audit rate for plans was about 3.2
percent, to date, for 2006.
Chairman STARK. Thank you. You mentioned--and I'm just
going to run through a couple of items here, Mr. Steinhoff--you
mentioned that you performed audits, or that--I am sorry, that
the inspector general has performed audits, the HHS inspector
general has performed some audits, of additional MA payments.
And the--you might, in response, let us know what the
inspector general found, and whether or not the inspector
general should be involved in this auditing process, and
whether, if they found money owing, there was any effort to
recover it. That is one issue.
There has been some difference of opinion between you and
CMS as to whether there is legal authority to seek financial
recoveries. You believe it does. You might want to comment on
whatever----
Mr. STEINHOFF. Okay----
Chairman STARK. Well, let me finish. Any statutory changes
that you think might be made that will clarify this matter, if
it is needed, I think we would all be interested in your
opinion as to not only what might be wrong, but what we might
do to correct this in the future.
And you might also--for those of us for whom audit is
something that ends up at the end of a corporate annual report,
or what we have to do for the IRS if we don't do our tax
returns right--I think these audits are somewhat different than
the financial audit that many of us--you might enlighten the
committee a little bit as to what is in the audit.
So, that is a broad range of topics. If you could briefly
address those, I think it would be helpful to the members.
Mr. STEINHOFF. Okay. Let me start, Mr. Chairman, with your
first question. And I think you are referring to the Benefit
Improvement Protection Act audits. There were 6 such audits
done of the 2001 payments. This is where the organizations were
entitled to receive additional funds.
The IG covered six different plans, amounting to $88
million in additional payments, and questioned $29 million of
the $88 million. Basically, their findings zeroed in on what
they thought was a lack of documentation that the capitation
payment increase was justified, or that additional direct
medical care had been provided. No action was taken to recover
any amounts. The IG did recommend that amounts be paid back to
CMS by the carriers. One of the companies audited is here
today, Humana. They were one of the six. Humana of Texas was
audited.
The audited $14.4 million of additional payments to Humana
under that Act, and the IG questioned $10.5 million of those
amounts. But as we found for any audit where a number was tied
back to the audit, CMS did not act to recover or require
anything to be done.
Getting to your second question on statutory changes, I
believe that we and CMS are at a stalemate here. We believe
that there is nothing in the law that precludes them----
Chairman STARK. We have been in a stalemate with them for
years.
Mr. STEINHOFF. Well, we believe there is nothing in the law
that precludes CMS from placing in their regulations, and then
in their contracts, provisions that would say, ``This is what
we are going to do if we find something wrong.''
They believe they don't have the authority to do it. So,
when you get in that position, I think it is probably best for
it to be resolved by the congress through a specific provision
that would say yes or no. I have noted that the IG, when does
the work to identify the impact of a problem, it does call on
either the plan to return the money, or CMS to collect
something. And that's the same position that GAO is taking.
You're doing an audit, you're finding something. This isn't
just an academic exercise to help the company prepare a better
bid later on. There has to be more to it.
But I think it would be very important to really resolve
this and I think, this hearing is perhaps a good starting point
for beginning a dialogue on exactly what the congress wishes to
get out of this.
With regard to your third question, for the ACR audits--
those were the ones for 2001 to 2005--CMS had CPA firms apply
agreed-upon procedures. This is a complex academic--American
Institute of CPA's jargon and Government Auditing Standards
terminology, but these audits were done under what are called
the attestation standards. They are not a financial audit, but
they are a professional audit under professional standards.
What the auditor is doing is auditing what you have asked
them to audit, and nothing more. So the auditors were asked to
find whether there were any problems in the preparation of the
bids. They were not asked to make a determination for 2001
through 2004 or 2006, as to what is the dollar impact of what
they found. So, they are agreed-upon procedures.
For 2006, CMS shifted to the bid audits. And Mr. Hill makes
the point that CMS has plans for additional at some time in the
future. But, to date, what CMS has done what they call bid
audits. And those bid audits are actually actuarial reviews.
There is a lot of in-depth requirements that are placed on the
organizations in preparing bids. It looks like there is quite a
bit of rigor.
I am not an actuary myself, but Medicare Advantage
Organizations have got to really provide a lot of information
to CMS. CMS makes a bid review, which is a desk-type review,
and for 13.9 percent of the contracts, and they made an
actuarial review. These are not audits in the same sense as you
know audits, and everyone knows audits from financial auditing.
But there was some rigor to them, and they are an actuarial
study. I hope that answers all your points.
Chairman STARK. Thank you. And I would just briefly ask Mr.
Hill--and I apologize to my colleagues, but perhaps this will
set the stage for future questions--do you agree, Mr. Hill,
that, in whatever manner we do it, either you all do it at CMS
by regulation, or we write into the legislation that you do it,
that it would be a good thing for CMS to recover funds that
somebody determines were paid in error?
Mr. HILL. It is more than a good thing, sir. It is the
thing that we need to do to fulfill our fiduciary obligations.
And I would just note for a moment, just to--I am not quite
sure we are at stalemate, I am not sure that is the word I
would use.
Chairman STARK. Okay.
Mr. HILL. I think the issue here is where do we begin to
take that money back. And the issue is, do you take it back on
a bid review during the middle of a plan year, or do you do it
once--a full-scale financial audit at the end of the year, when
all the records are settled, and you could do a full review, as
you said, of the benefits that have been delivered, and the
records that we have gotten from the plans, do you take it back
then?
I think it is our contention that it is best to take it at
the end of the audit, than in the midst of the plan year, when
there would probably be an impact on beneficiaries.
Chairman STARK. The other question that I would direct
you--and at least my interest, I do not know about my
colleagues--but in all of the--if we cut through a good bit of
the plans' sales pitches and the audit actuarial language, we
are supposed to believe that paying some amount in excess of
fee-for-service rates to these plans results in additional
benefits to the members of the plans, to the beneficiaries.
Many cases, there are lower premiums. That is easy to
figure. I mean, if I am paying $30 a month for Part B, or 40 or
90, and somebody offers to give it to me for 10, I have saved
some money. I think I can understand that. The problem is, we
find that many of the plans, they kick up the copays
subsequently, so that the first cost may not be the last.
But we have been unable, whether you know or not, to
determine with any accuracy how much--first of all, what
benefits are actually provided by these plans. They tell us
what benefits are offered, but they don't tell us whether any
of the beneficiaries actually take up their offer. I mean, you
know, they may be offering Viagra to every member, but if
people don't line up to get the pills, it doesn't cost the plan
anything.
So, it would seem to me that it would help us--and perhaps
even you--to know what each plan actually spends, relative to
the amount over 100 percent we are paying, and whether these
benefits were used or not used.
That all seems to be hidden, or buried under the idea that
it is proprietary and secret. And--but basically, we have not
been able to find out. I don't even know if you can find out. I
hope so.
But do you think that it would be reasonable for us to have
that information in some detail with each plan, so that we know
what actual extra benefits, other than the standard Medicare
health benefits, are being offered and used, and how much the
plans are paying for them, so we have some idea whether we are
paying the plans appropriate amounts?
Mr. HILL. I----
Chairman STARK. Does that trouble CMS in any way?
Mr. HILL. I think the issue here is not so much
understanding what plans are providing to beneficiaries. The
question is reasonable, sort of taken on its face.
From my perspective, not getting into a discussion of
whether or not we should be paying plans what we are paying,
and how are they using their benefits, the one thing I can tell
you--we can say, and we will be able to say with some
definitiveness--is, to the extent that a plan has told a
beneficiary, ``These are the services that I offer, and this is
the benefit that you are getting for the premium that you
pay,'' at the conclusion of these audits we are going to be
able to say if the plan has provided those benefits, or if they
have not.
Now, that, I do not believe, gets to your question of, you
know, that marginal percentage above the fee-for-service
payments, how does that work, and I think that is another level
of sophistication to the analysis that the audits will tell
you. So, an audit, yes, will be able to say, ``Did they deliver
what they said they would deliver?''
The other issue, just to keep in mind, is, to the extent
that during the year, if there is a beneficiary who says, you
know, ``I have signed up for this plan, and it is offering a
copay of $5, and they are charging me $10,'' that is an action
we would take during the year. I mean, if a beneficiary were to
call up, say, ``They are charging me the wrong premium, they
are charging the wrong copay,'' that is a compliance action we
would take immediately.
Chairman STARK. I want to talk about getting in touch with
that compliance----
Mr. HILL. I understand. There is more coming----
Chairman STARK. Well, I have overstayed my welcome here,
and I would like to give Mr. Camp a chance to get into this.
Thank you both.
Mr. CAMP. Well, thank you very much, Mr. Chairman.
Obviously, Mr. Hill, with the GAO's report that CMS has failed
to meet this one-third requirement--and your testimony confirms
that--I guess what I would like to try to understand is why CMS
has failed to meet the statutory requirement.
And, from what I understand of your testimony, you do not
believe you have the legal authority to recoup funds once
determined. Is that correct?
Mr. HILL. No. Well, sort of correct. I think the area of
disagreement here between us and the GAO is when we do an audit
of a bid during the middle of a plan year--so we have looked at
the bid, we have already signed a contract, and we have looked
at the bid, and we find that some underlying assumption there,
either it accretes to the benefit of the government, or
accretes to the benefit of a plan, should be somehow--make that
adjustment, either pay more money to the plan, or take money
back from the plan in the midst of the plan year.
Mr. CAMP. Well, I am not interested. I know the timing
issue. Let us assume this is done at the end of the year.
Mr. HILL. We have no----
Mr. CAMP. What authority do you need, or resources do you
need, to comply with this statutory requirement?
Mr. HILL. In terms of recouping the money, I do not believe
we need additional authority. We believe that the statute is
fairly clear, in terms of the requirement for the audits, and
the fact that we can recoup money, to the extent that the
audits show there is an issue.
With respect to actually carrying out the audits, to do--
you know, to spend the money--and I respect the GAO's analysis
here--the one-third financial audits that we are going to
undertake as part of MA and MAPD post-MMA are quite more
expensive than what we have done in the ACR side. And the
President's budget has made a request for the last 2 years
above our amounts, and it is quite substantial, but it is one I
know that Congress is----
Mr. CAMP. So you are telling us the type of bid review
required is more complex than what was required under previous
law.
Mr. HILL. Oh, absolutely. The one-third financial audits
are much more----
Mr. CAMP. And tell me how the resources have grown as that
complexity has increased, and, in fact, as it looks as though
the number of organizations offering Medicare advantage plans
has increased.
Mr. HILL. Right. I mean, and I think it is a fair
assessment that, to do the ACR audits that we conducted, in the
limited capacity that we did them, was a $3 million to $5
million exercise.
When we are talking about auditing one-third of the MA and
MAPD plans, we are talking about a $30 million exercise to get
into the level of detail that we need to get into to validate
risk scores, to validate the claims data that we are getting
into, to look at all the information that the plan has
provided. It is a much higher level of rigor that we need to
do.
Mr. CAMP. Have the number of auditors grown at your
disposal, or are these bid out?
Mr. HILL. It is bid out.
Mr. CAMP. And has that ability--obviously, with the
resources remaining fairly constant over the last 5 years, that
ability to increase the number of auditors has not been there.
Mr. HILL. Right. I mean, we have found money within our
base to be able to fund the things that we have funded to date.
But we recognized, sort of on a going forward basis, we are
going to need more resources.
Mr. CAMP. Now, the $34 million from 2003 has not been
recouped. It is unclear to me why that has not been recouped.
Because you say that there is really no problem there.
Mr. HILL. Well, again, this gets to the issue of--and this
is complicated enough that it gives me headaches sometimes--
prior to the MMA, when we are looking at the ACR audits----
Mr. CAMP. Yes.
Mr. HILL [continuing]. And the audits of the adjusted
rates, and how the plans told us they were going to spend the
money on the extra benefits, on those issues, for the ACR
audits, we do not believe we have the authority to go back and
recoup that money. This is why there has been no action taken
on plans in the $34 million that is there. We do believe,
however----
Mr. CAMP. So you feel you need statutory authority from
Congress to go back and recoup the money, pre-MMA?
Mr. HILL. If it was Congress's intention for us to do that,
we would need----
Mr. CAMP. Okay. But post-MMA, you feel you have the legal
authority to conduct the bid reviews, if you have the resources
to do it, and recoup those funds?
Mr. HILL. Correct.
Mr. CAMP. All right. Thank you. And it is your sense that,
because the complexity of the audit process has increased, that
you need more resources in order to adequately perform your
statutory obligations?
Mr. HILL. Yes, sir.
Mr. CAMP. All right. Thank you. Thank you, Mr. Chairman.
Chairman STARK. I was not being facetious when I suggested
to the ranking member that, if you collected this money,
perhaps you could use it to hire additional resources, or
charge the plans a fee to audit them. That would be----
Mr. CAMP. I think there are requirements as to where the
recouped money goes.
Mr. HILL. The money goes back to the Medicare trust fund,
sir.
Chairman STARK. Well, it comes out of there----
Mr. HILL. I understand.
Mr. CAMP. That could be a statutory change, also.
Chairman STARK. Sure. Chairman Lewis.
Mr. LEWIS. Thank you, Mr. Chairman. Mr. Cosgrove, in 2003,
is it correct that CMS estimated that there were $96 million in
overpayments to the organization? Is that correct?
Mr. COSGROVE. Yes it is, Mr. Chairman.
Mr. LEWIS. Could you tell Members of the Committee, is
there similar data for other years?
Mr. COSGROVE. No. When we conducted this review, it was in
terms of a comprehensive look at 1 year. That was what CMS had
completed.
Mr. LEWIS. Well, should CMS be required to provide
information, this data, for each year? What is the position of
GAO? Should that information be forthcoming?
Mr. COSGROVE. Yes, it should be part of the audits. When we
issued our report in 2001, we recommended that CMS require the
auditors to quantify what the impact would be on beneficiaries
and the program. And, at that time, CMS said that it would do
so. In fact, CMS did not, for several years, amend the
instructions for the auditors, to require them to do that kind
of quantification. It was for 2003 that CMS hired a separate
contractor to go back and look at all the individual auditing
reports. And at that time, the contractor came up with that
amount of money for 2003.
Mr. LEWIS. Do you think it should be the responsibility of
CMS, or should there be an attempt to recover some of this $96
million?
Mr. COSGROVE. Certainly the auditors identified
overstatements, that CMS should have tried to recover. So, yes.
Mr. LEWIS. Mr. Hill, how does CMS decide which law it will
or will not comply with?
Mr. HILL. Sir, we make every effort to comply with every
law.
Mr. LEWIS. Do you think you have complied with the law?
Mr. HILL. I mean, I do not think there is any way I can say
to you that we have complied with the one-third audit
requirement from 2001 to 2005.
Mr. LEWIS. Mr. Hill, let me ask you. Has CMS ever
sanctioned a plan in the Medicare Advantage program?
Mr. HILL. Yes----
Mr. LEWIS [continuing]. For a payment issue or improper
bid? Have you ever sanctioned one organization, just one?
Mr. HILL. For an improper bid?
Mr. LEWIS. Improper bid, or overpayment. For a payment
issue.
Mr. HILL. Not for a payment issue, no.
Mr. LEWIS. What about an improper bid?
Mr. HILL. Well, the sanctions that we have imposed, whether
they be some monetary penalties, or suspending enrollment, or
up to termination, have been largely due to larger scale
contract violations, either not delivering the services that
they said they were going to deliver, or denying access to
beneficiaries, or being insolvent, marketing violations such as
the private fee-for-service issues that we have talked about
here before.
But specifically to a payment issue, I think it would be
hard to articulate just a payment issue.
Mr. LEWIS. Well, just so we are clear, just over three
percent of the plans are audited. Audits are not completed
until a year after they are conducted. CMS apparently does not
even look at the audits that are conducted. And not one
sanction action or any other penalty has ever been issued for
an improper bid.
Can you honestly say that you think these audits serve as a
deterrent? Or look like an invitation for big trouble, real
trouble?
Mr. HILL. I understand your question, sir. And, based on
the numbers that are up there from the GAO, I can appreciate
your frustration.
I think the issue for me is to be able to articulate for
2006, for this plan year, post-MMA, now that the MMA is in full
operation, that the audit and the oversight activities that we
have ongoing encompass more than just the bid reviews that are
articulated here by the GAO.
So, my answer to your question is, yes, I do think that the
infrastructure that we have put in place, from the bid reviews
to the one-third audits, to the ongoing compliance reviews we
do with plans, do put in place a deterrent effect, if you will,
for plans, to be sure that they are bidding appropriately.
Mr. LEWIS. Who is protecting the beneficiaries?
Mr. HILL. We are, sir. We are trying.
Mr. LEWIS. Do you have an agency? Do you have a person? Do
you have an office within CMS that is protecting and looking
out for the beneficiaries?
Mr. HILL. There are a couple of ways to answer that. I
mean, there are two ways to answer that question. The first,
and the most direct, is the MMA required us to have--and we do
have--a Medicare beneficiary ombudsman, if you will----
Mr. LEWIS. What is the size of that office?
Mr. HILL. I have those facts, I don't have them at my
fingertips----
Mr. LEWIS. What is the personnel make-up? What is the
budget?
Mr. HILL. I can get you that information for the record----
Mr. LEWIS. You are telling me you don't know the staff
make-up of that office?
Mr. HILL. I don't have----
Mr. LEWIS. The budget for that office? Can someone at GAO
tell me?
Mr. STEINHOFF. No.
Mr. LEWIS. It is my understanding that the staff is about
34 people, and to represent 43 million disabled people, senior
citizens. Only 34 people? That is nonsense. And the budget is
only, what, $1.6 million? You should be able to do better, much
better.
Mr. HILL. If I might, Congressman, the second part of that
equation is not just the ombudsman office, but the ongoing
compliance and oversight activity that is taking place by the
plan managers in the regions, by the separate program integrity
contractors that we have contracted with to oversee these
plans, the----
Mr. LEWIS. Are you telling us that you have enough
resources to look out for our seniors, to look out for the
people that are taking part in this program?
Mr. HILL. I believe that we have enough resources to watch
out for the seniors in this program.
Mr. LEWIS. Thank you, Mr. Chairman.
Chairman STARK. Mr. Becerra.
Mr. BECERRA. Thank you, Mr. Chairman. Thank you for your
testimony today.
Mr. Hill, I am not sure if there is any other way to put it
but to say that CMS should be embarrassed by what we are
hearing today. I do not know if any senior who is trying to
figure out whether to make a payment for a copay, or figure out
how to take care of a premium payment for his or her Medicare
benefits to which he or she contributed years worth of taxpayer
dollars while they were working, could sit and watch this and
say, ``I am struggling to figure out how to pay for that
prescription drug or for that next doctor visit, and here I
hear that CMS has failed to collect millions upon millions of
dollars that were overpaid,'' for which they received nothing.
I hope that you are sufficiently impressed by the questions
and the concern expressed by members on this panel, that the
next time we have a chance to talk with CMS, that we will see
some significant change.
You have mentioned that you need more resources. Is your
2008 budget request going to reflect that need for more
resources to do the auditing oversight responsibilities that
CMS has?
Mr. HILL. It absolutely does, and both the House and Senate
appropriations committees have considered that request. And, to
the extent they go through and get enacted, we should be okay.
Mr. BECERRA. With regard to the statutory authority that
you possess, according to CMS's opinion, to collect monies
for--in the particular case of pre-MMA overpayments, that is
pre-2003 overpayments, are you proposing to the administration
that it seek, through this Congress, the authority to go after
any overpayments prior to 2003?
Mr. HILL. No, sir, we are not.
Mr. BECERRA. Are you planning to ask the Congress----
Mr. HILL. I am not aware that we are. We can go back and
consider that. But from----
Mr. BECERRA. Would you support this Congress giving you the
authority to go after overpayments dating before 2003?
Mr. HILL. I think it is something we would need to talk
about, because, quite frankly, some of those plans are no
longer in the program.
Mr. BECERRA. For those that are?
Mr. HILL. Right.
Mr. BECERRA. Do you support it?
Mr. HILL. I need to defer, sir. I would need to go back
and----
Mr. BECERRA. Is there a reason why you wouldn't want to
support a repayment of taxpayer dollars that went to plans that
did not provide a service?
Mr. HILL. If it is true that plans have not provided
services that they said they were going to provide, we would
absolutely want to go back and recoup that money.
Mr. BECERRA. So, you would support having the authority
given to you by Congress to go ahead and review pre-2003 plans
that may have--may have--overcharged?
Mr. HILL. To the extent that they have delivered benefits--
or not delivered benefits they said they were, absolutely.
Mr. BECERRA. So you would----
Mr. HILL. I don't mean to be----
Mr. BECERRA [continuing]. Support having the authority to
do pre-2003 audits? Yes or no?
Mr. HILL. I would--I don't know that I can make that
commitment, sir.
Mr. BECERRA. Okay. That is why I think you should be
sufficiently embarrassed. Because if you can't tell the
American taxpayers, American seniors, that you believe that the
government should have the authority to recoup monies that were
overpaid, it is----
Mr. HILL. I think that is the issue, that there is the
notion of whether or not it is a strict overpayment.
Mr. BECERRA. Well, wait a minute. If you don't request the
authority to audit and recoup, how can you ever get the money
back? If you don't ask us to give you the authority to go after
that money, you are telling the taxpayers, ``It is okay,''
that, ``We know that we overpaid using your taxpayer dollars,
but we don't want to go after it.''
Mr. HILL. I can appreciate what you are saying, sir. I
just--there is some disagreement as to whether or not the
nature of those audits, and what they found, that they
represented any true overpayment.
Mr. BECERRA. And I understand that point. I don't want to
be overzealous in my questions. I do understand that point. But
my question is very simple. It is a very innocent question.
Mr. HILL. Well, let me answer it very simply, and sort of--
you know, I am the CFO for the agency, I am not the program
manager for Medicare Advantage, I don't sign those contracts.
I will tell you, as the CFO, to the extent that there is an
overpayment, I want to go back and collect that overpayment.
Mr. BECERRA. That is fair. And I think many of us can
interpret that as saying that we should give you the authority,
then, to go after anything that was overpaid back before 2003.
Now, let me ask this. Going forward, is there any reason
why we should hear you say that--CMS say--that it does not have
the authority, statutory authority, to do a full audit, and any
subsequent actions to recoup overpaid dollars?
Mr. HILL. No, sir. I believe we have that authority.
Mr. BECERRA. Okay. Mr. Steinhoff, at one point you seemed
to have heartburn at one of Mr. Hill's responses. I think it
had to do with the 2003--pre-2003--overpayments. And maybe it
was on something else.
Let me ask this. Do you believe that you are--and I will
end with this, Mr. Chairman, because I know my time has
expired--do you believe that you are receiving the cooperation
from CMS that you need in order to be able to conduct
sufficient oversight of CMS, and also then to make the
appropriate recommendations to CMS on how to proceed, in making
sure we are preserving taxpayer dollars?
Mr. STEINHOFF. Yes. In looking at this particular issue,
let me go back to our first review of this program, which
covered 2000.
At that time, we were told by CMS that it planned, as part
of the audit process, to quantify the effect of any audit
findings. And we recommended that it do exactly that. In our
view, the intent of quantifying the impact was to do something
with the result.
CMS did not act, did nothing for 2001, 2002, 2003, 2004, or
2005 to ever change its regulations, to ever change its
contracts. Went back for 2003, and did some work, but didn't
take any action, other than telling the organizations that were
audited, ``We found these problems.'' Didn't do anything with
the six audits by the IG, and showed no intention, during our
review, of ever doing anything with the results.
I would agree fully with Mr. Hill, in his earlier response
to you, when he said, ``If we find an overpayment, based on
benefits delivered or costs not incurred, we will go back and
recoup it.'' Well, if you look at the audits done between 2001
and 2005, none of those audits were directed at determining
whether there was an over payment. They were directed at
looking at a bid, or a proposal. And when they found problems
with the proposal. They did not know whether or not the actual
results were better or worse than the proposal.
So, you have to, one, design the audit in a proper manner
to get a result, and to, in fact, hold the plans accountable to
the American taxpayer. And then, two, have a very clear set of
actions to go back and follow up. And that is really, I think,
the differences that we and CMS have had all along.
Mr. BECERRA. Thank you. Thank you, Mr. Chairman. I yield
back the time.
I do want to make the point, Mr. Chairman, that this is a--
we hope to be able to do oversight over all of Medicare, not
just Medicare Advantage; Medicare fee-for-service as well. This
is not an attack on one type of plan or another. It is to
preserve Medicare for seniors who are on Medicare. Thank you,
Mr. Chairman.
Chairman STARK. My distinguished friend from Texas, would
you like to inquire?
Mr. JOHNSON. Thank you, Mr. Chairman. I appreciate that.
I am wondering. It is my understanding that the GAO report
found that Medicare Advantage audits conducted in 2003 yielded
a net overpayment of roughly $35 million. Did you find any
instances where the plans were, in fact, underpaid, resulting
in enrollees receiving additional benefits they wouldn't have
otherwise received, if the bid were calculated correctly?
Mr. STEINHOFF. Yes. What the audits showed were that there
were overstatements and understatements. The $35 million number
that was computed by CMS was made up of $64 million of
overstatements, and $29 million of understatements.
If you shift to the work that was done by CMS's contractor,
who CMS had come in to review the audits, they found--and Mr.
Lewis used this number--$96 million of overcharges, $37 million
of undercharges. And this contractor was looking at, in this
case, the adjusted community rate proposal. None of this is
actual cost, getting back to Chairman Stark's initial
questions. This is based on the rate proposal.
So, there were both overcharges and undercharges, based on
the audits.
Mr. JOHNSON. So your 35 net is net out.
Mr. STEINHOFF. If a net number, yes. Correct.
Mr. JOHNSON. Okay. Do you know if those companies were ever
coming back for the----
Mr. STEINHOFF. Nothing was done to collect, or to provide
for or to require any additional benefits.
Mr. JOHNSON. Earlier this year, GAO reported 21,000 Part B
providers, many of them physicians, are collecting federal
Medicare payments while owing billions. What is CMS doing to
address that issue?
Mr. HILL. We have--after the GAO report, we have been now
working with the Department of the Treasury and Financial
Management Service, as well as the IRS, to implement the tax
levy offset program for Medicare, so that we are sharing our
data on an ongoing basis with the Treasury Department, so that,
before we make payment, or as we make payment, we are being
sure to offset payments to the extent that physicians, owe
taxes, or--physicians, or any other provider, I would say.
Also, back to the Medicare Advantage issue, those plans
already are subject to the tax offset process. So, to the
extent that Medicare Advantage, or a Part D plan has tax debt
to the IRS, those monies are recouped before we make payments.
Mr. JOHNSON. Well, you know, following up with what Mr.
Becerra was talking about, you've got from 2001 to 2005,
really, overpayments that haven't been recouped. What are you
all going to do about it?
Mr. HILL. Well, as we have discussed here, I think the
Agency's position--or I know the Agency's position--at this
point is that the audits are going to be closed out. We are
going to look at each of the individual audits, and are looking
at each of the individual audits, to be sure that, to the
extent a plan misrepresented the information that had been
provided, or was somehow trying to game us, as opposed to just
an honest error in the system, we are going to make the
appropriate referrals to the OIG, or to others, to the extent
that we want to pursue action that way.
But we are--it is not our intent, right now, to go back and
try and recoup those overpayments, because----
Mr. JOHNSON. Well, what are you going to do about this
year, then?
Mr. HILL. For 2006, for the plan year beginning the first
year of the MMA, if you will, the Medicare Advantage and Part D
programs, we have put in place a process to be sure the bids--
unlike the proposals we got in the ACRs, we are now reviewing
bids as they come in, before we sign a contract, to be sure
that they are appropriate.
And at the end of the plan year, as the GAO has indicated,
we are going to look at actually the benefits that had been
provided, the services that the plans provided, the information
that they gave us to support their risk scores and other
payments, do a full scale audit of those, and recoup
overpayments, to the extent that we find them.
Mr. JOHNSON. So, you will take care of the people who were
underpaid, and you will take care of the people who were
overpaid?
Mr. HILL. Yes, sir. It is a symmetrical----
Mr. JOHNSON. Guaranteed?
Mr. HILL. Well, that is the approach now. I--hopefully----
Mr. JOHNSON. Okay, thank you very much. Thank you, Mr.
Chairman.
Chairman STARK. Thank you, sir. Mr. Doggett.
Mr. DOGGETT. Thank you. Thank you for the audit that you
conducted. I think it is very helpful.
And, Mr. Hill, if I understand the answer that you just
gave my colleague from Texas, what is it that you're not going
to go back and recoup now, for the taxpayers?
Mr. HILL. I think that the OIG has identified an amount
that we now agree, about $34 million----
Mr. DOGGETT. We can just write that off?
Mr. HILL. We don't believe that it is a debt that is owed.
Mr. DOGGETT. You don't believe it's a debt that is owed?
Mr. HILL. That is correct.
Mr. DOGGETT. Well, in addition to the tens of millions of
dollars pointed out in this audit, the CMS attitude has been,
``We might not have authority, but we are not going to bother
asking for any authority.''
I asked back at the July hearing about the $100 million
that CMS paid to these Part D plans for retroactive coverage
for dual-eligibles who were never told that they--in a timely
way--that they had the coverage. And I have been asking for
documents about that $100 million that may well have been
wasted, in addition to all these tens of millions of dollars,
ever since.
The CMS reply was that there was a reconciliation in
August. As is usually the case, CMS isn't returning calls or e-
mails. Is the reconciliation complete?
Mr. HILL. Yes, sir.
Mr. DOGGETT. Why don't we have the answers that I have
asked for since July?
Mr. HILL. I don't know why you don't have those answers,
but I will----
Mr. DOGGETT. Well, sir, that seems to be typical of CMS.
Let me ask you, with regard to the material that I have
been provided from CMS, a big stack of materials concerning
CMS's decision-making on abusive marketing practices, if, in
your work, you ever have occasion to communicate with Abby
Block at the Center for Beneficiary Choices that administers
Medicare Advantage?
Mr. HILL. Do I? Yes, sir, I do.
Mr. DOGGETT. Do you do any of that by e-mail?
Mr. HILL. Yes.
Mr. DOGGETT. Do you have any idea why, in all of the
documents that I have been provided, there is not a single e-
mail back or forth with Abby Block, who runs the program?
Mr. HILL. No, sir. I do not.
Mr. DOGGETT. Well, would you go back and try to get me an
answer on that? Because that is another of the----
Mr. HILL. Is there a particular----
Mr. DOGGETT [continuing]. Answer questions.
Mr. HILL. We will find out.
Mr. DOGGETT. Okay. Now, much of the focus has, of course,
been with regard to marketing practices. But, as I look through
this audit, it is not only--you know, as you look through all
this audit, to me, I have a slightly different impression than
my colleague. Because I don't see just a few bad apples, I see
an entire orchard. And it is a very expensive and unproductive
one.
Every time someone gets sucked into these Medicare
Advantage programs, the taxpayer is out about $1,000 a year
that it wouldn't have to pay unless--if they were in
traditional Medicare.
But in addition to those marketing abuses, there are
outlined in here a significant number of what are called
chapter 13 abuses, where there have been corrective action
plans. And those are when a person wants in, then has a
grievance or can't get coverage, and then calls to try to get
help.
My question to you about those corrective action plans is
whether any Medicare Advantage plan has ever been sanctioned in
any of these corrective action plans for not having a
sufficient grievance and appeals process.
Mr. HILL. I can tell you that we have sanctioned plans for
multiple contract violations.
Mr. DOGGETT. Well, I am just asking about grievance and
appeal processes, since it appears, from my analysis of the
audit, that there were more corrective action plans that were
issued with regard to plans not the way they declined
grievances and didn't handle the appeal process--there were
more appeals process corrective action plans than there are
marketing abuse action plans.
Mr. HILL. Right. And I know that a significant amount of
the CMP activity, civil monetary penalty activity, we did last
year was around the annual notice of change, which is a
grievance process, but it is the notice that plans are required
to give to beneficiaries, as we transition from one plan year
to the next, outlining what the benefits are going to be or not
be.
And we did issue CMPs on a number of plans last year on
that issue.
Mr. DOGGETT. And does--do you require bids to include a
line item in the bid, demonstrating that the plan has
sufficient funds in their budget to handle appeals?
Mr. HILL. Well, their bid includes the administrative cost,
which includes the administrative cost of meeting our
regulations.
Mr. DOGGETT. Well, I understand it includes administrative
costs. But how do you determine whether they have a sufficient
amount to cover appeals?
Mr. HILL. I would need to get back to you exactly on how
they make that determination.
Mr. DOGGETT. Okay. It appears to me that these plans get
through deceptive marketing practices, in many cases at a cost
of $1,000 to the taxpayer. Once they get in, they have great
difficulty getting their grievances processed. And then I note
if a care giver wanted to look at the website that CMS has to
find out if they are getting in a good plan, great inflation at
CMS seems to be rampant.
And in Texas, at least, when I looked at it, it looked like
everybody was, you know, on the dean's list on these plans.
They all got three-star, very good, ratings, except for one. I
noticed that one Humana plan had 18 corrective action plans
pending for appeals process violations at the same time it got
a 3-star rating.
Is there ever any attempt to inform the consumer, relative
to what is happening with the corrective action plans?
Mr. HILL. Well, yes, actually. The corrective action plans,
as you know, are now posted on the web, and folks have access
to that information.
I think, with respect to the rankings--take the Humana
example for a minute--the 18 corrective actions that are on the
web for Humana may relate to Humana as an organization. And it
is the same violation, but it runs through all their contracts.
So it is not like it is 18 separate----
Mr. DOGGETT. Have you ever taken a star off one of these
all-star Medicare Advantage plans because they were doing such
a sorry job with their marketing practices and their grievance
processes, that they got one corrective action plan after
another?
Mr. HILL. Well, this is the first year we have done the
rankings the way we're doing them. But I can imagine that we
are going to be removing stars from folks. Yes, sir.
Mr. DOGGETT. Okay. Thank you.
Chairman STARK. Mr. Emanuel.
Mr. EMANUEL. I will take the time. What I would--more of a
statement, here. I mean, a lot of focus has been on the
percentage on the reports, how many reports have actually been
done, et cetera.
I know we had a hearing earlier on a lot of the state
insurance commissioners, who said they would like to have the
authority to do not only the investigations, but also the
enforcement. And one of the--you know, CMS argues that they
don't have the authority to do the proper type of--not just
investigations, but then pursue those investigations. And my
own sense here, Mr. Chairman, is that we can either have CMS do
what they're supposed to do--they do it now on the supplemental
Medicare--or give it to 50 different state commissioners, and
then we can watch what they do on the oversight of these plans.
But somebody has to be a police on the beat who is
overlooking these plans. And if it was up to me, I don't think
the insurance companies would want to see this happen, but I
would be more than willing to become a convert to the new sense
of federalism here, and let 50 state insurance commissioners
all of a sudden regulate and prosecute where they think there
has been some violations here. But somebody has to be on the
job to see, not only if--not only auditing, but then
prosecuting, if there are any violations here.
And, to anyone who wants to pick up on this, I mean, which
would you think would be more effective in overseeing this
marketplace insurance plan? Would it be 50 different state
insurance commissioners? Or would it be, in fact, CMS actually
exercising what I think they have the authority to do? Mr.
Hill?
Mr. HILL. Speaking for CMS, clearly, we believe that CMS
has the authority, the wherewithal, and the obligation to be
overseeing the plans, and their marketing practices, and how
they are dealing with beneficiaries, and believe that is in the
best interest of our beneficiaries, to have a single,
consistent set of oversight activities and corrective actions
being put in place.
Mr. EMANUEL. Well----
Mr. HILL. As opposed to having 50 different states. Now,
the states have a role here, their----
Mr. EMANUEL. Well, Mr. Hill, let me just say this. As
Abraham Lincoln once said to McClellan, ``If you aren't going
to use that army, do you mind if I borrow it for a time?''
Mr. HILL. I----
Mr. EMANUEL. And so, my question to you is, since you are
woefully short on the audits, on the prosecution side, or, in
fact, enforcing what is in the interest of the beneficiaries
there, I don't think you have been fully exercising what we
believe is in your authority and capacity.
Mr. HILL. I can appreciate the frustration that you are
exhibiting, with respect to CMS in the past. I can only tell
you, as I mentioned in my opening statement, that we are going
to use the army. As you may have heard from Kerry Weems, the
new acting administrator, that the start-up period here for
Medicare Advantage is over. We are beyond the initial phase of
getting plans in. And the focus now is on accountability,
oversight, and access for our beneficiaries.
Mr. POMEROY. Will the gentleman yield?
Mr. EMANUEL. Yes, I yield to my colleague from North
Dakota.
Mr. POMEROY. Thank you. Mr. Hill, there is no army. I
believe you testified earlier your entire staffing was 34. Is
that correct?
Mr. HILL. That is not correct, no.
Mr. POMEROY. Help me with the number. We have had different
testimony from CMS over the time. How many people do you have
all ready to go to sign with this new much-belated imperative
of CMS?
Mr. HILL. A little bit over 500 staff, sir, and a budget
of, right now, roughly $30 million, but that will grow to
roughly 120, to the extent that the Congress enacts the
President's fiscal year 2008 budget proposal.
Mr. POMEROY. You've got 500 staff people. What are they
doing today, if they are not doing this today?
Mr. HILL. I believe they are doing this today, sir.
Mr. POMEROY. They are doing this today?
Mr. EMANUEL. Mr. Chairman.
Mr. POMEROY. I yield back.
Mr. EMANUEL. No, it's okay. Mr. Chairman, I would like to
suggest, though, that if there is not a change--and not to--you
know, beyond audits, if you are not going to oversee the
marketplace correctly--and there is no numerical sense of what
is hitting a certain number.
But the leverage is here, in fact, that either CMS does its
job--and if the committee, as a whole, does not think it is,
then in six months, nine months' worth of time, we take a look
back of the performance. And if not, then we move on
legislation, as it relates to the state insurance
commissioners.
Mr. HILL. I think----
Mr. EMANUEL. There are many roads to take to enforcement.
Chairman STARK. The distinguished gentleman from North
Dakota, when he was an insurance commissioner, made that deal
with us some years back. And found that, eventually, in the
case of supplemental insurance, that is just what he had to do.
Mr. EMANUEL. I mean, they have done a good job there. And
so, the question is how you pursue that. And my colleague from
Wisconsin, I do not know if he would like to add on this.
But I would like to thank you for both holding this
hearing, and talking about it. But, Mr. Hill, we may have cut
you off from----
Mr. POMEROY. May I just have a second more?
Chairman STARK. Sure.
Mr. POMEROY. I think that this 500 representation really
does need some scrutiny. And if you have had 500 people waiting
around to do this, they should have been doing it. If they had
been doing it, we wouldn't have had the audit report that we
have got.
The reality is, you have got these people, they have got
all their jobs to do. We have heard testimony about them
loosely dispersed through the regions, no clear business plan
offered by the Agency, in terms of how they are suddenly
providing new measures of consumer protection, reflecting,
basically, what has been taking place in state insurance
departments.
I believe the chairman's suggestions that we ought to look
at--we ought to assess the failure of the Federal Government--
--
Mr. CAMP. Mr. Chairman, could we have regular order?
Mr. POMEROY.--and look at an expanded role for states that
already have the capacity to do it. I yield back.
Chairman STARK. Thank you. The time for the gentleman from
Illinois has expired.
Mr. Tiberi.
Mr. TIBERI. Thank you, Mr. Chairman and Mr. Hill. In
talking to my Medicare case worker in my office, he tells me
that most of the complaints that we get from seniors are
seniors that are in the Medicare fee-for-service program. I
know most of the focus has been on Medicare Advantage today,
and the audit, and I know some of my colleagues are skeptical
of the private sector's involvement in providing health care
benefits to beneficiaries, Medicare beneficiaries.
From your perspective at CMS, what have you seen the
benefit for those Medicare beneficiaries with this new market-
oriented benefit called Medicare Advantage? What do you see
today?
Mr. HILL. I think if you were to talk to the folks at the
Agency, and tried to understand how Medicare Advantage and Part
D has changed the landscape----
Mr. TIBERI. Right.
Mr. HILL.--you will see beneficiaries who are generally
satisfied with the coverage that they have, in terms of drug
coverage that they have now that they have not had in the past.
You are generally seeing savings, relative to what they had had
prior to BBA--prior to me, prior to the MMA.
For me, as the CFO's standpoint, the overall cost of the
program is lower than we had originally projected, which is----
Mr. TIBERI. Can you say that again?
Mr. HILL. The overall cost of the program is lower than we
had originally projected, both in terms of premiums and the
absolute outlay for Part D and MA. So that is--from my
perspective, that was a good thing, and which generally relates
to lower overall Part D costs for taxpayers, generally.
Mr. TIBERI. We all acknowledge that there is a one-third
audit requirement for the Medicare Advantage oversight. We have
gone over that today on numerous times. Is there any comparable
requirement for the regular fee-for-service program?
Mr. HILL. In terms of a requirement to look at a standard
set? The only sets of requirements that exist are on the
quality side for the state agencies who do survey and
certification who go into nursing homes, home health agencies,
other institutional settings, to be sure they are meeting our
levels of care for quality.
But on the payment side, there are no statutory
requirements for the level of payments that----
Mr. TIBERI. Is there anything that you have done,
comparably, on the audit side, on the payment side?
Mr. HILL. On the payment side, we use a performance metric
to ensure that we are paying appropriately.
As many of you know, and as I have testified before on this
committee, we are measured by a fee-for-service error rate over
time. And at one point that error rate was in double digits. We
spent a lot of time and effort over the past 4 or 5 years to
get it down, and now it is at roughly 4.5 percent, 4.4 percent,
which has, I think--you know, using a risk-based approach to
how we devote our resources to get that error rate down.
Mr. TIBERI. Well, let me just go over this again, and see
if I am missing something that I cannot quite understand.
In the September CMS--you posted a list of current
corrective action plans, CAPs, to your website.
Mr. HILL. Correct.
Mr. TIBERI. Do you believe this is a fair representation of
the Agency's Medicare Advantage oversight activities, or does
it represent just one aspect of a much broader, or larger
picture?
Mr. HILL. Oh, I think it is one aspect of a much broader
picture.
Mr. TIBERI. Can you expand on that?
Mr. HILL. It is a planned time estimate, as of that day, of
the open caps that were in place. It doesn't reflect action
that has taken place since before--corrective action plans that
had been open and closed, subsequently closed out since prior
to that date.
Nor does it represent the amount of work that is ongoing
with beneficiaries and providers and plans on a day-to-day
basis, both centrally, in our central office, as well as with
the regions, to be sure that beneficiary complaints are being
dealt with, and that plan compliance issues are being dealt
with on a daily basis.
Mr. TIBERI. Anything comparable on the fee-for-service
program?
Mr. HILL. In terms of reporting----
Mr. TIBERI. Yes.
Mr. HILL.--compliance issues? Other than the error rate, no
sir.
Mr. TIBERI. Would that be helpful, to compare apples to
apples, rather than apples to oranges, as we seem to be doing?
Mr. HILL. I--given the absolute level of providers in the
Medicare fee-for-service program--you are talking about more
than a million, versus the plan side--it would be very
difficult, other than the aggregate, you know, sort of
hospitals have these sorts of issues, physicians have these
sorts of issues, to have a comparable sort of set of metrics.
Mr. TIBERI. Final question. Assuming that you have 49
organizations representative of the Medicare Advantage program
that were part of this audit that has been talked about today.
If you take the $35 million in overpayments, divide it by the
total amount paid of the plans, you will find that the
overpayment represents .4 percent, if my math is correct here.
What would be the error rate for payments under the fee-
for-service Medicare plan?
Mr. HILL. 4.4 percent right now.
Mr. TIBERI. Say it again.
Mr. HILL. The error rate in Medicare fee-for-service is 4.4
percent.
Mr. TIBERI. So, the error rate for Medicare fee-for-service
is 4.4 percent, versus the Medicare Advantage rate for error
under your--under the GAO study, is .4 percent?
Mr. HILL. And----
Mr. TIBERI. That would be a good headline to see in
tomorrow's paper. Thank you, Mr. Hill.
Chairman STARK. I am going to ask Mr. Steinhoff to comment
on that. I think there is some--I think we have got some apples
and oranges. If----
Mr. STEINHOFF. Yes, correct. We did not project an error
rate. What our audits showed were, that CMS' audit rate for
2003 was around 22 percent. And for those audits that were
done, they were done of the adjusted community rate proposal.
This is the proposal, not what actually happened. This is what
was actually paid.
So, you had less than 100 percent coverage, and you had a
net of $35 million per CMS. You did not have, though, a review
of every payment that is being made. So, I don't think it is
even apples and oranges, I think it is more like apples and
something else.
Chairman STARK. I would say, to CMS's credit, the 4
percent, or 4.5 percent----
Mr. STEINHOFF. Yes.
Chairman STARK.--used to be 14, I believe.
Mr. STEINHOFF. That is right.
Chairman STARK. And, in those days, it was half--and I
don't know whether it still is--half was theft, fraud, and half
was just mistakes, you know, processing 80 million pieces of
paper a day, there are just mistakes.
But I think, if that is correct, I think that CMS is
entitled to a real round of applause, because they have cut
that error rate by at least two-thirds that I have known over
the past 15 years, and that is--I don't mean to diminish that,
that is a hell of a record. But I just wanted to add that.
I thank the gentleman. You have completed your inquiry,
sir? All right. Mr. Kind?
Mr. KIND. Thank you, Mr. Chairman. I want to thank you and
Mr. Lewis for offering this hearing today, and also to our
witnesses for your testimony.
And as someone who reviewed the GAO report, and has been
sitting here listening to the testimony so far this morning, I
will guarantee you there wouldn't be a taxpayer in America that
wouldn't be horrified by what is taking place with this
program. And I also guarantee that most of the seniors in MA
plans today would be shocked and dismayed with the lack of
oversight.
This--it really strikes you as the Blackwater of health
care in this country today. You know, no oversight, no
accountability, no consequences. And, just as the
administration was quick to privatize our security needs in
Iraq, in this experiment to try to privatize the Medicare
program, this is the type of oversight that we are getting. And
it is just clearly not acceptable.
Mr. Steinhoff, let me ask you. In preparing your report,
and the investigation that the GAO did, is the lack of the
audits being accomplished, not meeting the one-third
requirement, due to a lack of will within CMS, or a lack of
resources?
Mr. STEINHOFF. When one steps back and looks at the audit
rate, when one looks at the fact that CMS didn't really have
any program in place to even determine what the audit rate was,
when one looks at the fact that CMS did not require the auditor
to determine the impact, when one looks at the fact that CMS
never looked at what actually happened, what benefits were
delivered, what costs were incurred, it looked like CMS was
going through just a minimal compliance effort. There wasn't
much value to it, wasn't much coming out of it. And one could
really question CMS's will to really aggressively pursue this.
Mr. KIND. Well, you hear of 35 people in CMS that's in
charge of the audit department here, which just smacks as
severely insufficient. And then, not only do we have a lack of
the audits being conducted, but even a lack of the quality
information that we need in order to make policy decisions
based on the audits aren't even getting accomplished.
So, my question again, Mr. Steinhoff, to you, is what do we
need to do to try to fix this? I mean, do we have to do a
separate line item with specific instructions to CMS with
specific resources? Because it is my understanding right now
that the audit budget comes out of the overall administrative
fund at CMS, and there is no specific line item from the
appropriate bill that goes to CMS.
Do we need to look at that? Do we need to explore the
possibility of user fees to help pay for the audits, to ramp up
the army that we need here to conduct and to meet these
requirements that----
Mr. STEINHOFF. Okay. I think certainly people should sit
down with a clean sheet. Mr. Hill outlined some plans that CMS
has, going forward, following the MMA. And--going forward, he
said they CMS is going to do X, Y, and Z. I think that is, at
least, a starting point.
If one looks back at the 1997 law, there was a provision
requiring audits. It mentioned looking at the financial books.
It mentioned one-third audits coverage annually. But there
wasn't much, other than that, in the law. There was no clear
legislative history, no clear committee report on it, and no
real clear commitment or understanding on CMS's part as to what
it was, in fact, to be.
So, I think, stepping back, taking a hard look at whether
or not this new plan that Mr. Hill has mentioned today will, in
fact, get us where we want to be. And, again, this plan was
emerging and evolving as we were doing our work. But is this
truly a post-audit? Is this truly going back and determining,
did we get what we were paying for? Did our beneficiaries get a
fair break? Were providers offering services but they weren't
being used? What were the profit margins, et cetera, et cetera.
Mr. KIND. Well, Mr. Steinhoff, on that point, let me ask
you. Does CMS right now have the authority or the discretion to
look into executive compensation with these MA providers in the
course of the audit, and report back to us what is taking
place?
Mr. STEINHOFF. I don't know of any limits they have, as to
what they can and can't look at. And certainly that is
something CMS can explore. But I know of no legal limits--I
will caveat I am not a lawyer, but I know of no legal limits.
But the time is really here today to rethink Medicare
Advantage oversight, as I was kind of hopeful, as Mr. Hill laid
out the future, that while perhaps the last 6 or 7 years will
be a very expensive lesson learned, that the lack of oversight
during that period will be rectified, going forward.
But there is going to have to be a real change in culture
here. And whether it is a $35 million oversight program as Mr.
Hill mentioned, or much more expensive, you are talking about
$60 billion, $70 billion being spent annually on the Medicare
Advantage Program, a lot of money, a lot of complexity, a lot
of plans, over 4,000 plans. And you are going to have to have a
very good strategy, and a strategy that is enforced, a strategy
with metrics, and a strategy that you can hold CMS accountable
for meeting.
Mr. KIND. Mr. Hill, may I quickly ask you? Are you familiar
with Humana's second quarter profit report that came out in
August of this year?
Mr. HILL. I am not.
Mr. KIND. It is the second largest provider of MA, $217
million profit, doubling their profit. The analysts on Wall
Street said Humana reported its strongest quarterly result in
recent memory on the back of stronger-than-expected performance
in the government segment. In line with the company's recently
updated forecasts, and indicative of continued strong Medicare
performance, how can you not look at that profit in the last--
in the second quarter of this year, and not view it as a huge
profit at taxpayer expense?
Mr. HILL. I----
Mr. KIND. Because it appears to be directly related with
the MA compensation.
Mr. HILL. There is no evidence that Humana is making profit
at the expense of taxpayers--based on what they have told us,
and what they have told us in their bid, and what we are paying
them. If what we are paying them is leading them to make money
in the market, I think that is the purpose of the program, is
for private plans to come in and deliver the program.
Mr. KIND. Thank you, Mr. Chairman.
Mr. LEWIS. [Presiding] Thank you. Mr. Pascrell is
recognized.
Mr. PASCRELL. My good friend from Wisconsin, whatever the
market can bear. Because it is very, very interesting that
the--while reporting huge profits, the outgoing CEO of United,
he had a $400 million bonus. I feel sorry for the guy. And he
had a total retirement package worth a reported $1.5 billion.
You know, I am outraged. And I know you could care less,
but I am still outraged. And I am outraged about these windfall
profits, because they go back to the debates of 2003, when we
discussed the Medicare Modernization Act, plan D, which is now
pretty famous.
And to hear what I am hearing today, hard working Americans
are facing increased premiums and decreased quality of care, I
am disappointed by the unwillingness to provide any
accountability or oversight to ensure our tax dollars--and I
know we're talking about civil situations, we're not talking
about criminal. Are we? Are we, Mr. Hill? We are not talking
about criminal actions, we are talking about civil actions.
Some of these are pretty close, though. The difference between
one and the other, many times, is very questionable.
It means that private insurance companies are free to
determine a substantial portion of the services that are
covered by Medicare. There is 43 million people on Medicare, 7
million of those people are in the Medicare Advantage. This is
a big deal. This is pretty significant, as to what is
happening.
And if you read the last issue of AARP Magazine, which I
get because of obvious reasons, very clear about a couple of
examples they give in that magazine. Bobby Boxer, a retired
construction worker, he was very content with the regular
Medicare. But--he was content, but last December a sales woman
comes to his house and sells him a plan of Medicare, a Medicare
HMO, when he thought he was buying a medigap policy. She lied.
All MA plans are obliged to cover emergency care, as you well
know. But what happened was he wound up with a bill of $16,000.
Now, CMS is telling him, ``Don't worry about that, we will get
you back into regular Medicare.''
This is baloney. This is not the way to deal with what is
going on with these people, day in and day out. You confuse the
senior community enough, and darn it, you better stop. You
better end it right now. You confuse them. With all of these
plans, how could they make sense of what is going on? How can
they make sense?
I want to ask you a question, Mr. Hill, if I may. According
to the GAO's assessment of the statutes, that CMS had the
authority to pursue financial recoveries. But its rights under
contracts for 2001 to 2005 are limited, because it is
implementing regulations that are not required, that each
contract include provisions to inform organizations about the
audits and about the steps that CMS would take to address--
identify deficiencies, including the pursuit of financial
recoveries, which many have asked about.
Why would your agency write regulations for the MA
contracts that did not include the recovery authority? Why
would you do that?
Mr. HILL. I cannot speak to the ACR process that was in
place from 2001 to 2005, and why those requirements are not in
there, or why the Agency chose not to pursue that.
I can speak to the MAPD and the Part D plans that are in
place now, post-MMA, and can tell you and assure you that it is
very clear for the plans that, to the extent that we find
overpayments on an audit, we have the authority to go back and
recoup those funds.
Mr. PASCRELL. Now, the National Association of Insurance
Commissioners, when they were asked what can be done, they
advocate a stronger role for the states. The states play a
stronger role in the Medicaid program. In many of the states,
the attorney general's office oversees it. You administer the
MA program. You administer it. Am I correct in saying that?
When we talk about administering the program, that means very
specific things.
So, the states would have more authority and oversight of
the MA marketing, especially in the regulation of agents and
brokers, which is a state law issue in the first place. The
language in the CHAMP bill, which the President said we should
not vote on, because it would throw seniors off of Medicare--
that is what he said, I know what he said--CMS had argued that
state laws are pre-empted by this Medicare Modernization Act.
That is what you said.
On September 28, 2007, an Alabama district court judge held
that the state could sue for Medicare Advantage marketing
abuses in state court under state insurance law. What is your
reaction to that, Mr. Hill?
Mr. HILL. I am not familiar with the lawsuit, and I would
like to take a look at it before I offer----
Mr. PASCRELL. Well, what do you think about the idea of
states assuming a greater responsibility in going after the
very abuses and deficiencies that you have heard questions
about from this panel?
Mr. HILL. I don't think that we disagree that the states
are our partner here. They are on the ground. The state
insurance----
Mr. PASCRELL. Well, what do you mean by being a partner,
Mr. Hill?
Mr. HILL. I think this is--they have their regulatory
authority for brokers and----
Mr. PASCRELL. So you feel they have the ability, then, to
pursue these civil complaints?
Mr. HILL. No, sir. I think they are our partners in this,
and we work with them closely. We have entered----
Mr. PASCRELL. So you have no problems with this?
Mr. HILL. With?
Mr. PASCRELL. You have no problems with the states
pursuing, as Alabama has?
Mr. HILL. As I said, I would need to take a look at that
suit, to know exactly what it is they have pursued.
Mr. PASCRELL. Thank you, Mr. Chairman.
Chairman STARK. [Presiding] Thank you.
Mr. Nunes.
Mr. NUNES. No.
Chairman STARK. No? Mr. Hulshof.
Mr. HULSHOF. Thank you, Mr. Chairman. Let me try to put
things in perspective. I do this at my own peril, Mr. Chairman.
At a previous hearing in front of the full committee on income
and equality, I pointed out that the 4.6 percent national
unemployment rate was considered by most mainstream economists
to be full employment, and my friend from California, a
gentleman from Los Angeles, took me to task and chided me that
every American deserves a job. I guess 0.0 percent unemployment
is our goal.
But let me put things in perspective. The fact is that
there are many on the majority side who have shown disdain for
Medicare Advantage. I am not saying that is the genesis of this
hearing, but I think that needs to be spoken.
The gentleman from Texas says that seniors have been
``sucked in''--his words--to the Medicare Advantage program. I
would like to quote specifically what the chairman of the
oversight subcommittee has said, and I agree with him, where he
says in his written statement, ``Over 8 million Americans rely
on Medicare Advantage, and there are 15,000 of those 9th
congressional district of Missouri.''
I am a small business owner. I pay Medicare taxes for the
workers I hire. Every employer and every employee alike, every
taxpayer in America deserves the comfort, or knowledge, or
confidence that they are getting the bang for the buck, whether
they are on Medicare Advantage, or whether they are helping
fund the program.
So, with that in mind, at the end of Mr. Tiberi's
questioning--I want to go back to that, because I think that
has been glossed over to some degree. Now, I acknowledge, Mr.
Steinhoff, that you take issue with the assumptions that Mr.
Hill made regarding this error rate. So I take that as a given.
My most famous constituent, Mark Twain, once said that there
are lies, there are damn lies, and then there are statistics.
So allow me, then, to talk about statistics.
Mr. Hill, let me flesh out a little further what Mr. Tiberi
inquired of you. Because I think he asked, trying to put this
in perspective again, there were audits of 49 organizations,
which is about a 22 percent of those participating
organizations, is that right, Mr. Hill?
Mr. HILL. That is correct.
Mr. HULSHOF. And as I also understand--again, I took this
figure from Mr. Tiberi--in 2003, we spent--we taxpayers spent
roughly $36,800,000,000 on Medicare Advantage. Is that number
correct?
Mr. HILL. That is roughly correct.
Mr. HULSHOF. And we have learned, through this hearing, a
net overpayment of about $35 million in overpayments?
Mr. HILL. That is correct.
Mr. HULSHOF. And that is a net, because, in addition to
overpayments, there are also underpayments. Is that true?
Mr. HILL. That is correct.
Mr. HULSHOF. So, in other words, again, making sure that
every taxpayer gets what they are entitled to--so, in other
words, some on Medicare Advantage plans were getting benefits
that they weren't paying for. Is that a fair assessment?
Mr. HILL. It would be implied, yes, sir.
Mr. HULSHOF. So, you calculated that, given all of that,
the amount of money going to Medicare Advantage--and if we were
to extrapolate those participating organizations, the error
rate is what, for Medicare Advantage?
Mr. HILL. I think that is--I think, as Mr. Steinhoff
indicated, we did not extrapolate that $35 million. I think if
you did the math, the $35 million as a proportion of the total
Medicare Advantage payments, it is a tiny fraction, a very tiny
fraction. But it is not the extrapolated error rate for
Medicare Advantage.
Mr. HULSHOF. Mr. Tiberi--and again, I know him to be a
knowledgeable, reputable man--a .4 percent error rate, which
again, I--every dollar should be legitimately spent or
collected. So that--in my mind, again, I accept Mr. Tiberi's
math--99.6 percent correct, .4 percent incorrect, as opposed to
you have calculated the fee-for-service error rate, and that is
significantly higher. True?
Mr. HILL. Correct. It is 4.4 percent.
Mr. HULSHOF. So, I acknowledge this is useful, I think. You
know, I know the righteous indignation by some, talking about
profits and whatever, I mean, that is great political speech.
But I think, as far as making sure that the taxpayer gets
the bang for their buck--and I hope, Mr. Chairman--I am not
privileged to serve on the oversight subcommittee, but I hope
that there is equal righteous indignation or aggressiveness
looking at other areas of the Tax Code. For instance, the 25 to
30 percent error and fraud rate on the income supplement
program called the earned income tax credit. I think every
dollar that we allocate should be a dollar well spent. And I
appreciate you having this hearing.
Mr. PASCRELL. Mr. Chairman, can I have a moment to speak
out of turn for one minute? For 30 seconds?
Chairman STARK. Sure.
Mr. PASCRELL. Thank you. Chairman, I listened very
carefully to my good friend, economics 101. This whole program
is so efficient that is has been paid for by deficit financing.
Thank you Mr. Chairman.
Chairman STARK. Okay, I----
Mr. PASCRELL. They have not paid for this program.
Chairman STARK. I was just--I suppose, as one of the two
here who had asked for these hearings, I stipulate to my good
friend that I happen to think that Medicare Advantage plans
offer good medical care. Half of the residents--not half of the
insured, but half of the people--who live in my district belong
to one plan alone, Kaiser Permanente, and they are probably as
good as any managed care plan in the country, and I happen to
think that managed care is perhaps a better way for all of us
to receive our medical care.
But the issue before us, the basic issue, is that we are
overpaying by--according to MedPAC. And CBO and OMB all agree
that we are overpaying these plans by about $40 billion over 5
years. That is the issue. Now, out of that $40 billion in
overpayment, we can argue about what kind of inefficiencies
there are, and how we collect that money.
But the basic problem is that, as compared to fee-for-
service, which has no control over utilization, so you may
actually find that we're actually paying more in fee-for-
service than to say we are paying anywhere from 12 to 40
percent more is the issue.
Now, if we could somehow find out how to fairly pay the
Medicare Advantage plans and recoup a good bit of that $40
billion, we would have a double win. We would have perhaps more
efficient delivery of medical care, and we would save $40
billion for the taxpayers. And that, I think, would be an
objective that we could all be proud to work toward on this
committee.
So, I--the gentleman is right, we may be picking at small
nits here, but let us not forget there is a big chunk of change
out there that we have to distribute. Ms. Tubbs Jones is next.
Ms. JONES. Mr. Chairman, I thank you for holding the
hearing. You know, today is Tuesday. And in two days, we are
going to be voting to override the President's veto. And it is
just hard for me to believe that we are arguing over $35
million to cover health care for children. And I keep trying to
read this correctly to figure out how many dollars we are
concerned about here, with CMS.
I am interested, Mr. Hill. What did you do before you came
to CMS?
Mr. HILL. I worked at the Office of Management and Budget.
Ms. JONES. And what did you do there?
Mr. HILL. I worked on the Medicare----
Ms. JONES. I am asking for your curriculum vitae, so you
aren't concerned about the question. I am just wondering what
your skill set is.
Mr. HILL. I was a budget examiner, working on Medicare and
Medicaid issues.
Ms. JONES. And how long did you do that?
Mr. HILL. I was there for about 4 years.
Ms. JONES. Four?
Mr. HILL. Yes.
Ms. JONES. And what did you do before that?
Mr. HILL. Before that, I was a legislative analyst at the
then-HCFA.
Ms. JONES. At what?
Mr. HILL. HCFA. What was then--I was a legislative analyst
at the Centers for Medicare & Medicaid Services before I was at
OMB.
Ms. JONES. In your responses, you said you have no idea
what happened between 2001 and 2005 on the contract for
Medicare Advantage, but you know what has happened since 2005,
because you have been in charge. Is that a fair statement?
Mr. HILL. I think that is a fair statement, yes.
Ms. JONES. But when you looked at 2001 and 2005, did you
say to anybody, ``Let's look at the contract, we're having a
problem here, we need to go back and reassess them''?
Mr. HILL. I can only tell you, ma'am, that there were some
full and frank conversations between me and our Office of
General Counsel about what we could or could not do with those
overpayments from----
Ms. JONES. And the good lawyers that you have in the office
of general counsel, didn't they have some idea that--I am sure,
if they were great lawyers, and I am confident that they were--
there had to be some provision in these contracts for them to
address some of the issues that you raise.
Mr. HILL. Right. And the provisions in the contracts that
allow us to address those issues are, to the extent there was
misrepresentation by the plans. So, some of the plans on that
$35 million disagreement----
Ms. JONES. Say that number again.
Mr. HILL. $35 million.
Ms. JONES. Okay, go ahead.
Mr. HILL. Disagreement--were misrepresenting what they told
us. And that is what led to that discrepancy. Then we have
authority under the statute to either pursue a civil monetary
penalty, or to pursue a referral to the Office of the Inspector
General.
Ms. JONES. So, now that you have received this GAO study
that says something about why audit, or whatever----
Mr. HILL. Right.
Ms. JONES. What are you doing to make some changes?
Mr. HILL. I can tell you that, for 2006, we are not going
to ignore the one-third audit requirement, as laid out in the
MMA. We have put in place what I characterize as a sort of
three-prong strategy here.
We make sure that, before we sign contracts with plans--as
you know, they bid, we spend the summer looking at bids, and
then we sign contracts in the fall. Before we sign those
contracts, we look very clearly--in detail--at these bids, to
be sure they accurately reflect the benefits and the
assumptions that need to go into making a reasonable bid. To
the extent that they don't, we ask plans to make changes, yes,
ma'am.
Ms. JONES. So, consistent with your oath, as an employee of
the U.S. government, and a representative of the people of
America, you are saying that we made a commitment that we won't
be in a position, on the contracts that you negotiate that we
are in today?
Mr. HILL. That is correct.
Ms. JONES. Mr. Steinhoff, how are you, sir?
Mr. STEINHOFF. Real fine.
Ms. JONES. How long have you been in your job?
Mr. STEINHOFF. I have been with the Government
Accountability Office since 1973, my current job probably for
the last 8 or 9 years.
Ms. JONES. So, when you make or issue a report like you
have issued with regard to Medicare Advantage to CMS, I mean,
here we are, 2007. Your report speaks to--what years did this
last report cover?
Mr. STEINHOFF. We are talking about 2001 through 2006, as
of the end of the May/June 2007 time frame.
Ms. JONES. Let me ask you this. The report for 2001--okay,
I am an official in the government, you are my auditor.
Mr. STEINHOFF. Yes.
Ms. JONES. Something happened bad in 2001. How soon do I
know after that, that I made mistakes in my conduct?
Mr. STEINHOFF. Actually, you would have expected that CMS
itself would have had the rate of audit, and the selection of
audit, and the results of audit every year.
GAO----
Ms. JONES. Hold on a minute. I would have expected. They do
not?
Mr. STEINHOFF. You would have expected that they would have
had that information.
Ms. JONES. My question is, do they?
Mr. STEINHOFF. They did not have that kind of information.
Ms. JONES. 2001?
Mr. STEINHOFF. They didn't have--it.
Ms. JONES. 2002?
Mr. STEINHOFF. They didn't have it.
Ms. JONES. 2003?
Mr. STEINHOFF. They didn't have it.
Ms. JONES. 2004?
Mr. STEINHOFF. They didn't have it.
Ms. JONES. 2005?
Mr. STEINHOFF. They didn't have it.
Ms. JONES. 2006? Come on.
Mr. STEINHOFF. 2006 was----
Ms. JONES. You are joking me, right?
Mr. STEINHOFF. 2006 was not completed yet. But no, they
didn't have it.
Ms. JONES. I am out of time.
Chairman STARK. Mr. McDermott.
Mr. MCDERMOTT. Thank you, Mr. Chairman. I want to commend
you on having this hearing. And I think, particularly when you
read the article in the October 7th New York Times by Robert
Pear, you realize that there are some audit problems.
But I think that one of the things that is troublesome to
me is that there is a growing concern that the Medicare
administration contracting, the macro form, in Section 911 of
the Part D bill, is being implemented in a way that is setting
up Medicare for failure.
And I think that the chairman and members should be looking
to the future of what it is going to do when you take 49
contractors across the country and reduce it to 15, and put
those contracts out purely on the basis of cost. Because you
are going to have everybody talking about cutting offices.
Now, I had the--when you ride from Seattle on the airplane,
you have a long time. And sometimes you have a seat mate who
actually has something that is important to learn about. I sat
next to a medical administrator for one of the national
contracting organizations and talked to him about what is
happening.
And right now when a doctor has billing, and you have
auditing and you are doing--and you have what are called LDCs,
local determinations, where you help the doctor try and figure
out how to put his information in correctly, you try and pick
up everything in advance. What is being set in place is a way
to destroy Medicare fee-for-service because there is going to
be a great reduction in the LDCs. The doctors won't get any
help at the front end.
So everything will be paid, and then the contracts go out
to the folks who are sitting there doing the payment safeguard,
and recovery audit contractors will be going out into doctors'
offices saying, ah-hah. We have got a fraud here.
Now, if you don't help people up front and then you hit
them at the back end, it is going to set the place for a
hearing in this room where people are going to come in and say,
see all the fraud in the doctors. It will have been created by
the way we set it up.
I came to Congress in 1989 when we were going through the
savings & loan crisis. We said to the savings & loan, you can
lend the money anywhere you want. You can lend swimming pools
or golf courses or whatever. And the second thing they did was
they cut down the number of auditors so that many of those
savings & loans never had anybody coming in and saying, hey,
let's look at your portfolio. Let's see what you are actually
doing here, and stop it up front. We waited until the whole
thing collapsed, and then we had hearings in the banking
committee on endless days. We sat and listened to one folly
after another that could have been prevented if we had decent
auditing.
Now, I see us in this effort. We are going to put together
North Dakota, South Dakota, Nebraska, Kansas, Arizona, New
Mexico, and Wyoming, I think are all in one. And it is going to
have one office. One office for six or seven states.
Now, how is a doctor going to get any information
whatsoever under that kind of system? And it is supposed to be
reform. It is going from 46--each state has their own now. So
we are going to cram them all together. Alaska, Washington,
Idaho, and Oregon will all be one office. Right? California and
Nevada will be one office. Now, you tell me how any doctor
practicing is going to have any chance whatsoever to get any
help up front.
And I think I would like to hear your ideas because those
regulations are being written right now, and they are being put
in place, and they are letting the contracts. I would like to
hear you talk about what you think will happen in three or four
or 5 years in this regard.
Mr. HILL. Right. I mean, I have to tell you, if I had heard
sort of this laid out as the way the medical director or
whoever it was you were sitting next to on the plane had
described it, I too would be concerned. But I think it is safe
to say that it is not quite as advertised.
So yes. For example, for the five states that you
mentioned, there will be one contract and one entity that will
be responsible for processing those claims. But it is also the
case that contractor has to have an office and a medical
director in every state. And that contract has to make its
local coverage decisions based on what is going on in any
individual state or geographic area to account for the
variations that we see from region-to-region in the way that
medicine is practiced differently.
And so the intent here isn't to sort of nationalize the way
we process claims and nationalize where physicians or home
health agencies or DME suppliers have to go to get the
information. It is more for us to get economies of scale on the
back end for the people who stuff the envelopes and the people
who process the claims or answer the phones for more routine
issues.
We would be shooting ourselves in the foot and being penny
wise and pound foolish to not maintain that education and
communication up front because, quite frankly, as we talked
about the Medicare error rate earlier, the way we got that rate
down was by communicating very aggressively with the providers
who provide services.
Mr. MCDERMOTT. It is your testimony today that there will
not be a reduction in the educational effort for physicians in
this country who are in fee-for-service medicine taking care of
Medicare patients?
Mr. HILL. Absolutely. That is my testimony.
Mr. MCDERMOTT. That is your testimony?
Mr. HILL. Yes, sir.
Mr. MCDERMOTT. Well, we will mark it down and we will see
because I intend to be here a couple years from now when this
whole thing begins to play out. Because my belief is if you are
rushing through payment, you are going to ultimately wind up
catching people in the net down there that are not necessarily
fraudulent physicians.
Mr. HILL. Right.
Mr. MCDERMOTT. I think that is what makes doctors the most
angry, is when they can't figure out the system, and then
somebody comes in and treats them like they are a fraudulent
doc. That isn't fair. And I think we ought to look at it up
front. You say it is not going to happen. I hope you are--maybe
you won't even be in the office. That will be the problem. I
won't be able to find you. But we will bring up your quote.
Mr. HILL. If I can get out of this hearing, I think I may--
--
Mr. MCDERMOTT. Thank you, Mr. Chairman.
Chairman STARK. Well, you will be happy to learn we are
winding up. I just wanted to ask Mr. Steinhoff, finally,
regarding the $29 million that wasn't returned to Medicare, was
any of that--maybe you can summarize whether that came and
whether any of that is owed to us from United and Humana, and
maybe in the next panel I can help you collect some of that,
Mr. Hill.
Mr. STEINHOFF. With respect to the $29 million that the IG
found on the six audits of the supplemental payments, 10.5
million of that related to Humana. They audited 14.4 million of
costs reimbursed to Humana, and questioned 10.5 of that.
Chairman STARK. And with United?
Mr. STEINHOFF. I don't believe they were one of the six,
but I would have to check on that for you. But I do not believe
they were one of the six.
Chairman STARK. Well, Mr. Camp, do you have any further
inquiry? If not, I want to--Mr. Chairman?
Chairman LEWIS. No, sir.
Mr. CAMP. I just have one quick question.
Chairman STARK. Please.
Mr. CAMP. We heard some comments about salaries. But does
CMS have the authority to review the salaries of hospital
administrators, for example, with the result to Medicare
payments?
Mr. HILL. No, sir.
Mr. CAMP. All right. And many of them have fairly
significant salaries as well. So it is not just managers of
Medicare Advantage plans.
Thank you, Mr. Chairman.
Chairman STARK. Thank you. And I want to thank the panel,
all of the staff from GAO, and Mr. Hill's staff, who have been
sitting there trembling all morning for fear he would make a
mistake. And see, he didn't, so your worries were in vain.
Thank you all for being here. And we will proceed with our next
panel.
And I will introduce them as they make their way to the
witness table: Mr. Paul Precht, the Policy Coordinator of the
Medicare Rights Center; Mr. Harry Hotchkiss, who is the Senior
Products Actuarial Director of Humana of Louisville, Kentucky;
Ms. Cindy Polich, the Senior Vice President of Secure Horizons,
UnitedHealth Group of Minneapolis, Minnesota; Dr. Bart Asner,
the Chief Executive Officer of Monarch Healthcare of Irvine,
California.
I want to welcome the panel. My guess is in the next 15
minutes or so, they will call a series of votes. Perhaps we can
get through the summation of your testimony, and then we will
recess. We are not sure yet how many votes there will be, but I
suspect it will be about at least a half an hour.
And so I will ask Mr. Precht to summarize, as with the
previous witnesses. Your prepared testimony will appear in the
record in its entirety. If you would like to summarize it any
way you are comfortable. And we will start with Mr. Precht.
STATEMENT OF PAUL PRECHT, POLICY COORDINATOR, MEDICARE RIGHTS
CENTER
Mr. PRECHT. Chairman Stark, Ranking Member Camp, members of
the health and oversight subcommittees, thank you for this
opportunity to testify. I am Paul Precht, Deputy Policy
Director for the Medicare Rights Center.
For the past 2 years, the staff and volunteer counselors at
the Medicare Rights Center have been preoccupied with two types
of cases: helping victims of deceptive, fraudulent, and abusive
marketing by private Medicare plans; and helping people
enrolled in those plans obtain coverage for their medical care
and prescription drugs.
The subject of today's hearings, the oversight of private
Medicare Advantage plans by the Centers for Medicare and
Medicaid Services, goes to the heart of this work. In short,
the laxer CMS's oversight of these MA plans is, the more
problems we see. The looser the rules CMS sets for MA and drug
plans, the harder it is for our clients to get the medical care
they need.
Earlier today, GAO reported how CMS had failed to conduct
the audits of MA plans mandated by law, and when it did audit
plans, failed to recoup subsidies that the audits showed should
have funded additional benefits for plan members. In my
testimony, I would like to touch on three different aspects of
CMS's oversight of MA plans: CMS's review of plan benefit
packages, CMS's review of the plan appeals and grievance
procedures, and CMS oversight and enforcement of marketing
guidelines.
MA plans and private fee-for-service plans in particular
are being marketed as low cost alternatives to supplemental
insurance, yet they often fail to provide the protection
against catastrophic medical expenses that people receive under
any of the standard supplemental Medigap plans. Individuals who
enroll in Medicare Advantage plans cannot purchase supplemental
coverage to cover the gaps in the benefits like they can under
original Medicare.
Health insurance that works when you are healthy but cuts
out when you are sick is not what Medicare has offered for over
40 years. In my written testimony, I describe how a client of
ours from Long Island was hit with $3,000 in copays from her
Medicare Advantage plan for the treatment of ovarian cancer
after she had been told before enrolling that all of the costs
associated with her chemotherapy would be covered.
Unfortunately, our review of the benefit packages offered
by MA plans shows that coverage of chemotherapy is one of a
number of areas where plan coverage is often inadequate. Plans
charge more for chemotherapy and other Part B drugs than the 20
percent coinsurance charged under original Medicare.
More commonly, plans carve out chemotherapy and the other
Part B drugs from the annual caps they place on enrollees' out-
of-pocket spending, if they have a cap at all. Some plans do
both, charge more for chemotherapy and carve this service out
of their out-of-pocket cap. In our view, these practices are
unacceptable. They discriminate against people with cancer and
other illnesses that require treatment with high cost drugs
administered by their doctor.
CMS has the authority to prohibit such plan designs as
discriminatory. Such plans continue to be approved by CMS,
however, because the agency takes an overly restrictive view of
its legal authority to prohibit discriminatory benefit
packages. In 2004, MedPAC recommended that CMS exercise its
full authority to reject plans that have benefit designs and
cost-sharing structures that discriminate on the basis of
health status. Still, CMS has not acted.
The Medicare Rights Center has a small team of lawyers and
counselors who help people appeal when their private Medicare
plan denies coverage for a drug or medical procedure they need.
Often people come to us after they were stonewalled by their
plan.
We know now, from a review of CMS audits of plan appeals
and grievance procedures, that a failure to abide by the
timelines, notice requirements, and procedures for appeals
seems to be the rule, not the exception, among MA and drug
plans. A full 94 percent of the plans audited failed to meet
CMS requirements on handling appeals and grievances,
requirements that are fundamental to ensuring that plan members
know their appeal rights and can pursue them effectively.
For the benefits offered by MA plans to become real for
people with Medicare, plan enrollees must actually be allowed
to fill the prescriptions and obtain the medical services that
they need. I began this testimony by recounting how one of our
clients was charged high copayments for chemotherapy. The other
aspect of the story, the false promise she received from plan
representatives that her chemo would be covered, illustrates
the deception that is too often used in the marketing of MA
plans.
There are many much more egregious examples. Agents go door
to door, pretending they are from Medicare. Agents threaten
people under that pretense that they will lose their Medicare
or Medicaid coverage if they do not sign up. Agents
fraudulently obtain signatures for plan enrollment by having
people sign up to receive more information, or for a raffle.
A CMS official recently told a conference of health plans
that the reports of deceptive and fraudulent marketing were not
abating, but were growing in intensity and volume. We know from
the corrective action plans released by CMS that such marketing
misconduct is widespread in large part because the Medicare
advantage plans do not have the systems in place to prevent it.
For example, audits consistently find that agents are
inadequately trained and supervised and are not properly
licensed.
Faced with the absence of these basic safeguards, CMS's
response is to insist, at some future date listed in the
corrective action plan, that the company actually do what is
already required of it. The pattern is clear, whether it
concerns marketing violations, denial of appeal rights, or the
inflated bids discovered upon audit: The response by CMS is not
to punish the plans for misbehavior, not to recover for
taxpayers the money we have paid for services not delivered,
but to wag their finger at the plans.
When oversight is lax and enforcement is absent, enrollees
in Medicare Advantage plans are shortchanged on their benefits
and their access to care is compromised. We applaud this
committee for holding this hearing and urge you to do what you
can to ensure that CMS makes all Medicare private plans play by
the rules.
Thank you again for this opportunity.
[The prepared statement of Mr. Precht follows:]
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Chairman STARK. Thank you.
Mr. Hotchkiss.
STATEMENT OF HARRY HOTCHKISS, SENIOR PRODUCTS ACTUARIAL
DIRECTOR, HUMANA INC., LOUISVILLE, KENTUCKY
Mr. HOTCHKISS. Chairman Stark, Chairman Lewis,
Representative Camp, and distinguished Members of the
Subcommittees, thank you for inviting me to testify about
Humana's Medicare Advantage or MA bid process. As an actuarial
director for senior products for Humana, my responsibility is
limited to working on the team that develops and submits bids
and responds to CMS MA bid audits.
Humana has served Medicare beneficiaries for many years. We
currently offer prescription drug and MA plans in all states.
Today I will discuss Humana's compliance with the regulatory
requirements for bid submission following the enactment of the
Medicare Modernization Act. My written testimony also describes
how this worked prior to MMA.
The MMA changed the way plans develop and submit bids and
how they determine the value of the premium and benefit
structure for their MA plans. Humana has detailed structures
and controls in place to meet bidding, process, and audit
requirements.
The MMA changed the timing and submission rules for premium
and benefit filings. CMS's 45-day notice of rates comes out in
mid-February, and the final rate book containing the benchmarks
comes out the first Monday in April. CMS issues bid
instructions soon after, and bids are due the first Monday in
June.
As you can see from this chart off to my right, we begin
our bid and pricing modeling in January. The bids represent
Humana's expected average cost for the Medicare-covered
benefits for each plan. The expected average costs for
Medicare-covered benefits are then compared to the CMS MA
benchmark. If the plan's bid is below the benchmark, the plan
must use 75 percent of the savings to increase members'
benefits, decrease members' premiums, or cost-sharing. The
remaining 25 percent of savings is returned to the federal
treasury.
Bids are completed by the first week of May and are peer-
reviewed by a team of internal qualified actuaries. Revisions
are made, and bids are then processed through an internal audit
program that checks for outliers based on preestablished
parameters.
CMS uses a similar process. Each outlier is reviewed, and
adjustments are made where necessary. We then develop the
actual documentation required by CMS, including 2-year look-
back claim cost forms. We upload this information to CMS's
system by the filing deadline. We then correct any
discrepancies identified by CMS in their validation tests. By
mid-June, we submit actuarial bid certifications.
For the next 45 days, CMS's audit firms conduct a thorough
review of all bids and benefit packages. When issues arise, we
generally respond within 48 hours. The auditors sign off on our
bids. In mid-August, CMS releases the final PDP and RPPO
benchmarks. We reconcile these final benchmarks with our
earlier expected benchmarks and resubmit affected bids. In
early September, CMS approves our bids.
CMS's auditors then evaluate the reasonableness and
consistency of our assumptions with applicable actuarial
standards of practice and CMS's instructions for completing the
bid forms. Auditors conduct a desk audit, followed by a one-
week onsite visit. We then respond to an initial draft of their
findings and/or observations. Auditors then issue a final
agree/disagree letter, to which we provide a final response.
For contract year 2006, CMS audited two contracts,
resulting in no material findings. For contract year 2007, CMS
audited two contracts, yielding one finding and two
observations. We inadvertently used a rate development factor
for provider expenses that didn't reflect all provider
reimbursement structures for the plans. This resulted in
beneficiaries in the two affected plans receiving a slightly
better benefit. For 2008, we improved our methodologies based
on this finding.
As you evaluate improving this process, we respectfully
suggest that final audit reports be issued in March of the
contract year in order to impact the following year's bids.
Humana has mechanisms and controls in place to internally and
externally audit our processes to comply with statutory,
regulatory, and contractual MA program requirements.
My written testimony also describes actions related to
other areas of the MA program, including corrective action
plans and site audits. I am part of the bid and audit team, and
our processes are vigorous in all areas.
We take seriously the trust that the government has placed
in us to offer coverage to Medicare beneficiaries and
understand the vulnerability of this population. We seek to
cure any issues brought to our attention, whether by external
or internal sources. Thank you.
[The prepared statement of Mr. Hotchkiss follows:]
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Chairman STARK. Thank you.
Ms. Polich.
STATEMENT OF CINDY POLICH, SENIOR VICE PRESIDENT, SECURE
HORIZONS, UNITEDHEALTH GROUP, MINNEAPOLIS, MINNESOTA
Ms. POLICH. Thank you, Mr. Chairman, and thank you to the
committees for giving me an opportunity to testify today. I am
Cindy Polich, Senior Vice President of Secure Horizons, which
is a part of UnitedHealth Group, and I help lead the company's
efforts in the areas of geriatric health and long-term care.
I have spent the last three decades working in the field of
managed care and aging, am co-author of a book called
``Managing Health Care for the Elderly,'' which has been used
as a college textbook, and I have done extensive research and
teaching in gerontology and health care.
At UnitedHealth Group, we take our role as partner with the
Federal Government very seriously. We are committed to working
with Congress and regulators to make sure that CMS has the
information it needs to provide timely, impartial, and
effective oversight.
Our participation in the Medicare program is fundamental to
UnitedHealth Group's mission: to support the health and well-
being of individuals, families, and communities. We are proud
to serve the 1.3 million members who have chosen our Medicare
Advantage plans. These plans provide integrated benefits,
enhanced coverage, lower out-of-pocket costs, and coordinated
care.
Medicare Advantage plans are a health care success story
for millions of Americans. Fully 90 percent of Medicare
Advantage beneficiaries say they are satisfied with their
coverage. We also know that over the past 4 years, the pace of
change in the Medicare program has created a steep learning
curve for insurers, for regulators, and for beneficiaries
alike. However, we believe that the new bidding and oversight
provisions that recently took effect should greatly improve the
ability of CMS to audit and monitor plans effectively.
The recent GAO report focused largely on CMS auditing of
the old adjusted community rate process, a process that no
longer exists. The new bid process that went into effect in
2006 is a significant improvement. While the old process was
based on the costs and assumptions for a plan's commercial
business, the new bid process is focused specifically on
Medicare. It is more in line with the way the business is
actually managed, which means that CMS will now have more
relevant processes and data to audit. Also new in 2006 was a
requirement for actuarial certification of bids before they are
submitted to CMS. This provides a higher level of rigor in bid
development.
CMS also has an important role in operational oversight. We
take a diligent and aggressive approach to implementing any
action plan that is requested by and developed with the agency.
Often we find that issues raised by CMS already have been
identified through our own internal audit process, and work to
implement improvements is already well under way.
UnitedHealth Group is also a strong supporter of rigorous
oversight of the sales and distribution of Medicare Advantage
products, particularly private fee-for-service plans. That is
why we backed CMS and the industry this summer in accelerating
adoption of marketing guidelines that had been planned for
2008.
Medicare Advantage was created in part to give Medicare
beneficiaries additional health coverage choices because all of
us understand that a one-size-fits-all approach cannot possibly
meet the needs, the individual needs, of every Medicare
beneficiary.
Medicare Advantage plans provide benefits that do go beyond
original Medicare and Medicare supplement. These benefits can
include integrated prescription drug coverage at no additional
cost, preventive and wellness services, vision and hearing
benefits, and caregiver support.
Moreover, Medicare Advantage plans can cover all of a
person's health care needs in one integrated benefit package.
This means more than just convenience. It means better health.
Medicare Advantage plans encourage members to access primary
and preventive care, which reduces acute episodes and
hospitalization, providing better outcomes at lower costs.
An integrated benefit plan reduces fragmentation that can
occur when a patient has multiple chronic conditions and
multiple health care providers. This integration allows for
better coordination and attention to individual needs across
the continuum of care.
Medicare Advantage plan sponsors have pioneered care and
disease management programs to support managers with serious
chronic conditions and who are nearing end of life. Besides
providing great value to the individuals who need them, these
programs are also critical to the long-term financial health of
Medicare, since 20 percent of beneficiaries with five or more
chronic conditions consume more than two-thirds of Medicare
spending.
At UnitedHealth Group, we believe that smart and effective
government regulation is good for beneficiaries, and we firmly
believe that what is good for beneficiaries will be good for
our company as well. We are committed to continuing to work in
cooperation and in a collaborative manner with CMS and all
Members of Congress to further this goal.
Thank you.
[The prepared statement of Ms. Polich follows:]
Statement of Cindy Polich, Senior Vice President,
Secure Horizons, UnitedHealth Group, Minneapolis, Minnesota
Good morning, Chairman Stark, Chairman Lewis, Representative Camp,
Representative Ramstad, and other distinguished members of the
Subcommittees on Health and Oversight. I am Cindy Polich, Senior Vice
President, Secure Horizons, which is a UnitedHealth Group business unit
dedicated to serving the needs of Medicare beneficiaries.
I have spent the past three decades working in the fields of
gerontology and managed care. I am co-author of a book called Managing
Healthcare for the Elderly, which has been used as a college textbook,
and have done extensive research and teaching in gerontology and aging.
At UnitedHealth Group, I have helped lead the company's efforts in the
areas of geriatric health and long-term care, including work with
PacifiCare, UnitedHealthcare, and in the 1990s with the Evercare
nursing home demonstration project, which became one of the models for
Special Needs Plans in the Medicare Modernization Act of 2003 (MMA).
My personal focus and commitment on improving health care for
elderly Americans is one of the reasons that I came to work at
UnitedHealth Group. UnitedHealth Group has long been committed to
meeting the health care needs of older Americans. In fact, we serve one
out of every five Medicare beneficiaries through Part D, Medicare
Advantage, Special Needs and Medicare Supplement Plans. We offer such a
comprehensive range of Medicare products and services because we
believe fundamentally in enabling beneficiaries to make choices based
on their individual healthcare needs and preferences. We are proud to
serve 1.3 million Medicare Advantage members in over 1,500 counties
nationwide.
For more than 20 years, private Medicare plans have been a health
coverage option for beneficiaries. Today, more than eight million
Americans have chosen this option through a variety of Medicare
Advantage plans offered nationally.\1\ When asked why they chose
Medicare Advantage, members tell us they value the integrated benefits,
enhanced coverage, lower out-of-pocket costs and coordinated care.
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\1\ Kaiser Family Foundation, June 2007 fact sheet, http://
www.kff.org/medicare/upload/2052-10.pdf.
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The overwhelming majority of beneficiaries are satisfied with their
Medicare Advantage plan. According to a survey conducted earlier this
year for America's Health Insurance Plans, 90 percent of Medicare
Advantage beneficiaries expressed satisfaction with their coverage, an
increase over the 84 percent who were satisfied in a similar 2003
survey. For millions of Americans, Medicare Advantage plans are a
health care success story.
Our participation in the Medicare program is fundamental to
UnitedHealth Group's core mission: to support the health and well-being
of individuals, families, and communities. And we know that our role in
caring for seniors and the disabled brings with it heightened
responsibility. With that in mind, I appreciate the opportunity to
testify today and offer perspective about Medicare Advantage and the
important role it plays in our health care system.
Let me state at the outset that as one of the nation's largest
providers of Medicare Advantage plans, UnitedHealth Group and its
Secure Horizons business unit support the need for the Centers for
Medicare & Medicaid Services (CMS) to gather, through audits and other
means, the information it needs to provide timely, impartial and
effective oversight of these programs.
We take our role as a partner with the federal government very
seriously, and want to continue to work with the Congress, CMS and
other key stakeholders to address issues in a constructive way. We take
very seriously the important role of Congress, and these Subcommittees,
as stewards of the Medicare program.
The Real Advantages of Medicare Advantage
Medicare Advantage (as well as its predecessors, including Medicare
+ Choice) was created, in part, to give Medicare beneficiaries
additional health coverage choices. Because health care requirements
and preferences vary greatly and are very personal, a ``one-size-fits-
all'' approach cannot possibly meet the individual needs of every
Medicare beneficiary.
Medicare Advantage members expect their plans to provide them with
more value than they could receive from Original Medicare and at a
lower cost than they would pay for a Medicare Supplement plan. Medicare
Advantage plans accomplish this by providing:
Integrated Benefits and Care Coordination: Medicare
Advantage plans are often the most cost-effective and convenient way
for Medicare beneficiaries to cover all their healthcare needs in one
integrated benefit package--rather than, for example, enrolling
separately in a Part D plan, purchasing a Medicare Supplement policy,
calling multiple phone numbers for service, and managing the entire
process themselves.
But convenience and seamless customer experience is only a small
part of the value of an integrated benefit plan. A comprehensive and
integrated benefit plan reduces the fragmentation that can occur when a
patient is treated by a number of physicians and other health care
providers, and allows us to manage across the continuum of care. This
care coordination is critically important for Medicare beneficiaries,
especially those with multiple chronic conditions.
Medicare Advantage plans offer a range of programs and services to
help beneficiaries navigate the fragmented health care system, and
ensure they receive the care most appropriate to their health
condition. Medicare Advantage plan sponsors have pioneered programs
that focus on pro-active clinical support for members with serious
chronic diseases, such as diabetes, congestive heart failure or chronic
obstructive pulmonary disease. Offerings vary by plan, but can include
care management, disease management and enhanced preventive and
screening programs. These programs are particularly valuable to members
with multiple chronic conditions and those nearing the end of life.
These programs are critical to the future financial health of the
Medicare program, since the 20 percent of Medicare beneficiaries with
five or more chronic conditions consume more than two-thirds of
Medicare spending.\2\
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\2\ ``Chronic Conditions: Making the Case for Ongoing Care,''
Partnership for Solutions, 2004.
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The Medicare Advantage program also includes Special Needs Plans,
which provide coordinated care and benefits that are uniquely
appropriate and tailored to people with complex health care needs and
chronic illnesses.
For example, when one of our Rhode Island members was
hospitalized for serious health problems including hypoglycemia,
coupled with Type 2 Diabetes, her physician recommended that she move
to a nursing home or assisted living facility after discharge, since
she could not take care of herself. But instead she enrolled in one of
our Special Needs Medicare Advantage plans. A Care Manager came to her
house, did an assessment and worked with her physician, social workers
and home- and community-based service providers to develop a care plan
that would allow her to live at home. Today, our member--who just over
a year ago could not leave the apartment without assistance--lives in
an independent living apartment complex for the elderly. She is thirty
pounds lighter and goes out for walks every day.
Enhanced Coverage and Reduced Out-of-Pocket Costs:
Medicare Advantage members tell us that what they value most from their
plan are the extra benefits, lower costs and catastrophic protection
provided by Medicare Advantage. Medicare Advantage plans provide
benefits that go beyond Original Medicare and Medicare Supplement,
including in many cases: integrated prescription drug coverage at no
additional cost, which in some cases includes coverage in the gap;
preventive/wellness services; vision and hearing benefits; and
caregiver support, to name a few. Obtaining comparable coverage from
Medicare Supplement and Part D plans could cost hundreds of dollars
more per month.
Moreover, Medicare Advantage plans have designed benefit structures
that not only appeal to beneficiaries, but encourage them to access
primary and preventive care. This is very important when managing
chronic illness, as it reduces the probability of an acute episode,
lowers the incidence of hospitalizations, and improves the overall cost
and quality outcome for beneficiaries.
Medicare Advantage makes a real difference in the lives
of real people. For example, when a 78-year-old Secure Horizons member
from Fort Worth suffered a heart attack and kidney failure, he had a
quadruple bypass and months of rehabilitative therapy. The total bill
was $1.3 million--but with his Secure Horizons Medicare Advantage plan,
he paid only $2,300 in out-of-pocket costs for the year.
Regulatory Oversight
Over the past four years, the rapid pace of change in the Medicare
program has created a steep learning curve for insurers, regulators and
consumers alike. After all, the Medicare Advantage program in its
current form was approved in 2003--just four years ago--and implemented
less than 22 months ago.
New bidding and oversight provisions implemented with contract year
2006 should greatly improve the ability of CMS to audit plans
effectively going forward. Two improvements that should have a
materially positive impact include replacing the Adjusted Community
Rate (ACR) proposal process with a new bid process, and requiring
actuarial certification.
In prior years, the rules governing the ACR proposal process
required Medicare Advantage organizations to estimate the cost of
providing benefits based on trend data related to how much they would
charge commercial customers to provide the same benefit package. The
projected Medicare costs were then adjusted to reflect expanded
variations in trend or other factors. The recent GAO report focused
primarily on CMS auditing of this old ACR process--which no longer
exists.
The new bid process is a significant improvement, because it
recognizes that the Medicare business and the commercial business are
not the same. The new bid process focuses on actual costs, trends, and
projections for providing coverage for the expected mix of Medicare
beneficiaries served by the plan. The shift away from the commercial
standard means that the rate-setting process now more accurately
reflects the requirements for serving Medicare beneficiaries and is
more in line with the way the business is actually managed. This means
CMS will be evaluating more relevant data and information.
Also new in 2006 was the requirement that Medicare Advantage bids
be actuarially certified before submission to CMS. This provides a
higher level of rigor to bid development and ensures that the bids meet
standards of actuarial practice.
Finally, additional oversight provisions were implemented in 2006.
Bids receive multiple levels of review: from outside auditors hired by
CMS and the CMS Office of the Actuary before bids are approved, through
post-contract-year audits; and from the CMS two-year ``look-back''
process.
We support CMS in its continuing efforts to improve the Medicare
program and its process of regulatory oversight. We are committed to
doing our part to improve all areas of our Medicare Advantage programs.
The GAO has made a number of recommendations for improving the
contracting and auditing process of Medicare Advantage programs. CMS
has concurred with the GAO's recommendations and UnitedHealth Group
strongly supports this position.
As a further area of consideration, we recommend that as the
financial audit process evolves that it focus on a company's
methodology for developing Medicare Advantage bids across the range of
plans the company offers. Ultimately, this might allow for a refinement
of the current standard--which emphasizes the number of audits
conducted--freeing up resources to focus more on the underlying
approaches a company uses to create its bids and the consistency with
which these approaches are applied.
In addition to its financial oversight, CMS has an important role
in the operational oversight of the Medicare Advantage program.
With respect to our action plans, we take a diligent and aggressive
approach to implementation, including conducting our own internal
reviews and checks to ensure that issues are resolved quickly and
thoroughly. And, often, in areas that CMS highlights for further
improvement, we have already engaged in activity, reflecting the work
of our internal quality audits.
Beneficiaries indicate they are highly satisfied with our
offerings, and we are committed to continuous improvement.
Conclusion
For millions of elderly Americans, Medicare Advantage plans provide
not only needed flexibility, but also a wide range of benefits for
meeting their unique health care needs. Smart and effective regulation
is good for consumers, and we firmly believe that what's good for
consumers will be good for our company as well. We are committed to
continue working in a cooperative and collaborative manner with CMS and
all members of Congress to further this goal.
Thank you, Mr. Chairman and other distinguished members of the
Subcommittees on Health and Oversight, for the opportunity to speak
today on behalf of UnitedHealth Group.