[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
                 MEDPAC'S JUNE 2010 REPORT TO CONGRESS: 

                    ALIGNING INCENTIVES IN MEDICARE
=======================================================================


                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 23, 2010

                               __________

                           Serial No. 111-139


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



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                    COMMITTEE ON ENERGY AND COMMERCE

                 HENRY A. WAXMAN, California, Chairman
JOHN D. DINGELL, Michigan            JOE BARTON, Texas
  Chairman Emeritus                    Ranking Member
EDWARD J. MARKEY, Massachusetts      RALPH M. HALL, Texas
RICK BOUCHER, Virginia               FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey       CLIFF STEARNS, Florida
BART GORDON, Tennessee               NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois              ED WHITFIELD, Kentucky
ANNA G. ESHOO, California            JOHN SHIMKUS, Illinois
BART STUPAK, Michigan                JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York             ROY BLUNT, Missouri
GENE GREEN, Texas                    STEVE BUYER, Indiana
DIANA DeGETTE, Colorado              GEORGE RADANOVICH, California
  Vice Chairman                      JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California               MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania       GREG WALDEN, Oregon
JANE HARMAN, California              LEE TERRY, Nebraska
TOM ALLEN, Maine                     MIKE ROGERS, Michigan
JANICE D. SCHAKOWSKY, Illinois       SUE WILKINS MYRICK, North Carolina
CHARLES A. GONZALEZ, Texas           JOHN SULLIVAN, Oklahoma
JAY INSLEE, Washington               TIM MURPHY, Pennsylvania
TAMMY BALDWIN, Wisconsin             MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas                  MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York          PHIL GINGREY, Georgia
JIM MATHESON, Utah                   STEVE SCALISE, Louisiana
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA M. CHRISTENSEN, Virgin 
    Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE L. BRALEY, Iowa
PETER WELCH, Vermont
                         Subcommittee on Health

                FRANK PALLONE, Jr., New Jersey, Chairman
JOHN D. DINGELL, Michigan            NATHAN DEAL, Georgia,
BART GORDON, Tennessee                   Ranking Member
ANNA G. ESHOO, California            RALPH M. HALL, Texas
ELIOT L. ENGEL, New York             BARBARA CUBIN, Wyoming
GENE GREEN, Texas                    JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado              STEVE BUYER, Indiana
LOIS CAPPS, California               JOSEPH R. PITTS, Pennsylvania
JANICE D. SCHAKOWSKY, Illinois       MARY BONO MACK, California
TAMMY BALDWIN, Wisconsin             MIKE FERGUSON, New Jersey
MIKE ROSS, Arkansas                  MIKE ROGERS, Michigan
ANTHONY D. WEINER, New York          SUE WILKINS MYRICK, North Carolina
JIM MATHESON, Utah                   JOHN SULLIVAN, Oklahoma
JANE HARMAN, California              TIM MURPHY, Pennsylvania
CHARLES A. GONZALEZ, Texas           MICHAEL C. BURGESS, Texas
JOHN BARROW, Georgia
DONNA M. CHRISTENSEN, Virgin 
    Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
BETTY SUTTON, Ohio
BRUCE L. BRALEY, Iowa


                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     1
Hon. John Shimkus, a Representative in Congress from the State of 
  Illinois, opening statement....................................     3
Hon. Kathy Castor, a Representative in Congress from the State of 
  Florida, opening statement.....................................     5
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................     6
    Prepared statement...........................................     8
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................    13
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................    14
Hon. Phil Gingrey, a Representative in Congress from the State of 
  Georgia, opening statement.....................................    14
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................    16
    Prepared statement...........................................    18
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................    24
Hon. Donna M. Christensen, a Representative in Congress from the 
  Virgin Islands, opening statement..............................    25
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................    25
Hon. Tim Murphy, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................    27
Hon. Janice D. Schakowsky, a Representative in Congress from the 
  State of Illinois, opening statement...........................    28

                               Witnesses

Glenn Hackbarth, J.D., Chairman, Medicare Payment and Advisory 
  Commission.....................................................    29
    Prepared statement...........................................    33
    Answers to submitted questions...............................    74


 MEDPAC'S JUNE 2010 REPORT TO CONGRESS: ALIGNING INCENTIVES IN MEDICARE

                              ----------                              


                        WEDNESDAY, JUNE 23, 2010

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 2:04 p.m. , in 
Room 2123, Rayburn House Office Building, Hon. Frank Pallone, 
Jr., [chairman of the subcommittee] presiding.
    Present: Representatives Pallone, Dingell, Eshoo, Engel, 
Green, Schakowsky, Baldwin, Weiner, Barrow, Christensen, 
Castor, Space, Sutton, Waxman (ex officio), Shimkus, Whitfield, 
Myrick, Murphy of Pennsylvania, Burgess, Blackburn, Gingrey and 
Barton (ex officio).
    Staff Present: Phil Barnett, Staff Director; Karen Nelson, 
Deputy Committee Staff Director for Health; Katie Campbell, 
Professional Staff Member; Stephen Cha, Professional Staff 
Member; Tim Gronniger, Professional Staff Member; Virgil 
Miller, Professional Staff Member; Anne Morris, Professional 
Staff Member; Allison Corr, Special Assistant; Karen Lightfoot, 
Communications Director, Senior Policy Advisor; Elizabeth 
Letter, Special Assistant; Lindsay Vidal, Special Assistant; 
Mitchell Smiley, Special Assistant; Emily Gibbons, Professional 
Staff Member; Clay Alspach, Minority Counsel, Health; Marie 
Fishpaw, Minority Professional Staff, Health; Sean Hayes, 
Minority Counsel; and Ryan Long, Minority Chief Counsel, 
Health.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. The subcommittee hearing will come to order. 
Today the Health Subcommittee is meeting to hear about the 
Medicare Payment Advisory Commission's, or MedPAC, June 2010 
report on aligning incentives in Medicare. And let me begin by 
welcoming to the subcommittee Mr. Glenn Hackbarth, who 
currently serves as Chairman of the Commission and will be our 
only witness testifying before us today. So thank you for being 
here.
    I am going to recognize myself for an opening statement 
initially. Every year MedPAC is required under the law to issue 
two reports and advise Congress on issues affecting the 
Medicare program. I believe that the report we are discussing 
today holds particular significance because it is the first 
report issued by MedPAC since passage of the new health reform 
law.
    I think that is significant for a couple of reasons. First, 
the contents of this report demonstrate the need for some of 
the policies that were included in the new health reform law, 
including provisions that will improve the quality of care and 
strengthen the financial sustainability of Medicare.
    Take, for example, the first chapter of this year's report, 
which examines opportunities to enhance Medicare's ability to 
innovate. The report notes that the Secretary of Health and 
Human Services and the Administrator of the Centers for 
Medicare & Medicaid Services need greater flexibility to 
implement innovative payment, coverage and delivery system 
reform policies in Medicare. As the Commission's report 
currently points out, as part of the Patient Protection and 
Affordable Care Act, Congress authorized the creation of a 
Center for Medicare and Medicaid Innovation within CMS. In 
addition, the new health reform law improves the flexibility 
that HHS and CMS have over Medicare by--and I will give you 
some examples first--simplifying the demonstration approval and 
implementation process within CMS; second, authorizing new 
funding for CMS to carry out important new demonstrations that 
will improve quality and lower health care costs; and third, 
creating a new process by which the Secretary of HHS can expand 
successful demonstrations without further congressional 
approval.
    Now, on that last note, while I agree the agency needs 
further flexibility to test new models and improve Medicare's 
health delivery system, I am not in favor of giving carte 
blanche to the Secretary of HHS or the CMS Administrator. I 
believe that this committee and the members who serve on it 
carry out an important oversight and regulatory role, and I am 
not eager to hand over all of our responsibilities to 
effectively manage this program to our friends at HHS.
    This year's report also talks about the need for better 
care coordination, especially among some of Medicare's most 
vulnerable patients, such as those that are dually eligible for 
both Medicare and Medicaid. The new health reform law also 
makes inroads in this area with the inclusion of new team-based 
and integrated care models for delivery of health care services 
such as accountable care organizations, medical homes and 
bundled payments.
    It is clear to me that there is a lot of correlation 
between some of the recommendations made in this month's report 
and some of the initiatives that were included in the new 
health reform. But the Commission's new report also seeks to 
examine other opportunities for the Congress to improve the 
Medicare program. For example, the Commission takes a fresh 
look at the way Medicare funds graduate medical education in 
the country and makes recommendations on how to improve it. The 
Commission also looks at the growth of payments for in-office 
ancillary services, an issue that they have examined in the 
past. However this year, instead of simply looking at how 
physician behavior is adding to the growth of these services, 
MedPAC also looks at the role beneficiaries play in driving up 
the volume of these services.
    I am also anxious to hear about MedPAC's research and 
recommendations in these areas, but also think that we need to 
proceed carefully. I have concerns and questions that need to 
be answered. For example, what would be the impact of your 
recommendations with regard to teaching hospitals that rely 
heavily on these funds? Can hospitals that operate on very slim 
margins or in the red like those in my State, will they 
continue to operate and provide the same level of services if 
they begin to lose GME funding?
    I also worry about imposing new cost-sharing requirements 
on beneficiaries as part of a new value-based insurance design 
and the impact that might have on beneficiaries who might 
forego important treatment rather than pay a cost-sharing 
requirement. Also, in terms of value-based insurance designs, 
who decides what services are high-value, what services are 
low-value? These are important questions and I look forward to 
hearing the answers in today's hearing.
    And finally, let me note that it would be inappropriate for 
the subcommittee to hold a hearing on Medicare payments and 
incentives without addressing the elephant in the room, which 
is the annual payment cut that doctors face. This year, as 
everyone knows, physicians participating in Medicare face a 21 
percent cut. We have been able to prevent this cut from taking 
place thus far through a series of temporary delays.
    As you know, before the Memorial Day recess, the House 
passed a bill that would provide another temporary reprieve to 
physicians by delaying that cut from being imposed and 
replacing the modest increase to the end of 2011. Our 
colleagues in the Senate have advocated for a shorter-term 
pared-down package--nothing new--and we have been unable to 
find agreement up to this point. So we all realize the need for 
swift action.
    I don't have to tell you how many doctors come to my 
office--not so much here, but in New Jersey--complaining about 
the fact that they would like to see a permanent fix, which 
obviously we have also voted on in the House, but we can't get 
passed in the Senate. So the Democrats and the Republicans in 
both Houses as well as the physician community need to work 
together to develop a permanent fix. We simply can't continue 
to kick the can down the road.
    I know I feel like I am talking to the choir here because 
the members on this committee are not, for the most part, the 
bad guys on this one. But we have to mention it.
    So I want to recognize Mr. Shimkus.

  OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Shimkus. Thank you, Mr. Chairman. And thank you for 
joining us.
    We all know that MedPAC is critical in advising us as we 
make legislative decisions to alter Medicare. We must find ways 
to reform entitlements, including Medicare, to make them 
sustainable into the future. By 2020, almost 93 cents of every 
dollar of Federal revenue will be spent on entitlements and net 
interest costs. By 2030, net interest payments on our Federal 
debt will exceed 8 percent. This will make interest payments 
the largest single expenditure in the Federal Government and 
leave little room for all other spending.
    Change is necessary, but we should do what we can to avoid 
unintended consequences. MedPAC's June report raises concerns 
over rapid growth on ancillary services in physician offices. 
The report provides options to address growth in diagnostic 
imaging, radiation therapy and physical therapy in physician 
offices. These are very different services, and an option 
appropriate for one of these services may not be for the 
others. We must use caution to not paint all ancillary services 
with the same broad brush.
    I am pleased to report it covers the graduate medical 
education system. I hear from hospitals already in my district 
all the time over the unmet need of residency slots and from 
the physician community on wanting more flexibility to train in 
settings outside the hospital. While I believe we must examine 
these GME issues, I am hesitant in removing 3.5 billion in 
funds hospitals rely on through their indirect medical 
education payments. I look forward to hearing more from MedPAC 
on working to strike a balance.
    As we seek MedPAC's guidance for Medicare, what does the 
health reform law do to sustain quality and access to care? As 
Chairman Pallone mentioned, the new law does nothing to address 
the 21 percent cut. He didn't mention that. He did address the 
concern about the cut to our doctors now taking as a turnaway 
from Medicare patients. In Illinois, 18 percent of all doctors 
are now restricting the number of Medicare patients in their 
practice. That story just broke yesterday.
    The law does, however, cut $500 billion from Medicare, 
billions of dollars in cuts that would not enhance the ability 
of the government to pay for future Medicare benefits, 
according to CBO. Medicare D premiums will rise for all of the 
nearly 28 million participants. Again, this is from the 
nonpartisan CBO. Half of seniors enrolled in Medicare Advantage 
will lose their plans, and all seniors will have access to care 
in hospitals jeopardized with the law, causing 15 percent of 
party hospitals to become unprofitable within 10 years, a 
figure CMS' own actuaries say may lead some to terminate their 
participation in Medicare entirely. And this is only some of 
the effects on Medicare.
    Yesterday the President remarked the new law will cut 
costs, make coverage more affordable. Last month the CBO said 
the price tag is actually higher, with an additional 115 
billion in discretionary spending. And before then CMS and the 
country will spend 310 billion more under the new law than we 
would have without it.
    As for affordability, CBO concluded self-employed small 
business workers, early retirees and millions of other 
Americans who buy their own health insurance plans will pay on 
average $2,100 a year more. Again, yesterday we heard the 
President using the bully pulpit to tout the benefits to small 
businesses and the relief it would provide. But only 12 percent 
of businesses would see any relief at all, with even fewer 
eligible for the full tax credit. To get that full tax credit, 
you can only have 10 or fewer employees making an average of 
$25,000 or less. The message to employers is clear: Don't hire, 
and don't pay your current employees more.
    Finally, the Majority continues to claim the high-risk 
pools provide immediate access to insurance to those uninsured 
because of preexisting conditions. Now, the high-risk pools are 
set to go on line in July, and CBO tells us the number of 
people who may be eligible for this program is in the millions, 
yet enrollment will be around 200,000 people. And in Illinois, 
they will miss the deadline altogether and might start 
enrolling people in its pool mid to late August. For those in 
current high-risk pools in Illinois, they will pay higher 
premiums than those in the Federal one. Illinois will receive 
196 million to set up the pool. That would cover only about 
5,000 people between now and 2014; 5,000 people among its 2.5 
million people in Illinois living with chronic conditions.
    I warned as recently as last week that the 5 billion would 
not be enough to fill this need, and now those warnings are 
proving true. The Illinois insurance commissioner said this 
week demand will almost certainly outstrip funding, and 
eligibility will probably be limited at first to people with a 
fairly narrow list of health conditions. So the high-risk pool 
is going to pick and choose.
    Not enough money, not meeting deadlines and limiting the 
enrollees. Can we honestly say to Americans we are providing 
immediate access to affordable insurance for those with 
preexisting conditions? If all these experts' analyses are 
true, shouldn't the committee hold hearings and take immediate 
action and address these problems? And if the claims are 
inaccurate, should we not clear the air? Republicans have asked 
for multiple hearings on the law, and wait as the deadline 
passes and promises to the American people are broken.
    And I yield back my time. Thank you, Mr. Chairman.
    Mr. Pallone. Thank you, Mr. Shimkus.
    The gentlewoman from Florida, Ms. Castor.

  OPENING STATEMENT OF HON. KATHY CASTOR, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Ms. Castor. Thank you very much, Mr. Chairman, for 
convening this hearing today.
    And welcome, Mr. Hackbarth.
    This hearing is vital to all of our parents and 
grandparents that rely on Medicare for their health care. It is 
also vital to all of our families as Medicare often sets the 
course for health care and health care delivery in America. So 
I am very encouraged by MedPAC's recommendations to continue to 
focus on the quality of care and increasing value of our health 
care delivery system.
    I am also encouraged by MedPAC's concept of creating 
Medicare payment incentives as we improve quality. Chairman 
Hackbarth, you have mentioned in your testimony patients do not 
always receive the recommended care for their health 
conditions, and they may receive care that is not clinically 
appropriate, and this must continue to be our focus.
    I have introduced legislation, the Eliminating Disparities 
in Breast Cancer Treatment Act, which speaks to some of the 
same strategies that is tying Medicare payments to quality care 
and rewarding efficiency and quality, And this will help to see 
that patients receive higher-quality care based upon the 
recommended quality standards.
    And I am interested in hearing from MedPAC on incentives in 
the Medicare fee for services, a payment system that may be at 
the root of our primary care shortages if indeed the current 
payment system, which, according to MedPAC, rewards volume and 
favors certain specialties which may be more lucrative simply 
because of higher volume of individual procedures offered as 
compared to primary care--this is something we have got to 
continue to address beyond what we have already done in the 
health reform area.
    I am also very concerned where we stand on graduate medical 
education, and you see where we start puts my home State in 
Florida--we are in such a deep hole, I am very concerned if we 
go full speed ahead on reform, Florida is going to continue to 
be left behind. You see, we are the fourth largest State in the 
country, very dynamic State with strong medical schools, and we 
are 44th in the number of medical residencies. So that means 
that the folks I represent may not be getting the care that 
they need because oftentimes those doctors in training, they 
will go and take their residency in another State, and they 
don't come back. So I want to get into that discussion with you 
today.
    We also have an aging physician population, one-quarter 
over the age of 65 in my State. So you can see we have a 
looming crisis on our hands.
    So I look forward to hearing from you on all of these 
issues as we continue to ensure that health care reform works 
for all American families.
    Mr. Pallone. Thank you, Ms. Castor.
    Ranking member, Mr. Barton.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Thank you, Mr. Chairman.
    I want to thank Mr. Hackbarth for testifying before the 
committee today. MedPAC provides a valuable service to 
Congress. We always appreciate the candid and detailed analysis 
of the Medicare program that they give.
    I am pleased to see that MedPAC has addressed graduate 
medical education and has recommended ways to encourage 
teaching programs that emphasize nonhospital care and care 
coordination, focus on the delivery of efficient, quality care.
    Just recently we learned that a number of doctors are now 
refusing to take new Medicare patients because government 
reimbursement rates are so low. It is simply too costly for 
those doctors to take new patients. We are hearing this at a 
time when baby boomers are increasingly entering the program. 
Meanwhile, the Majority has failed to fix Medicare's 
sustainable growth rate, or SGR, resulting in a 21 percent cut 
in payments to doctors. Thus it is imperative that we listen to 
MedPAC's advice on how to produce professionals with the skills 
to practice in the Medicare system now more than ever.
    The recommendations in this report only scratch the surface 
of what must be done not only in Medicare, but our entire 
health care system. We are only a few months into the 
implementation of the new health care law pushed through 
recently on a purely partisan vote. We already see strong 
evidence that the new law is not solving our health care 
problems; rather, it is increasing costs and crippling health 
care.
    I think it is a fair observation that the evidence is 
mounting on how and when President Obama's new law will make 
health care worse for many Americans. Internal documents 
requested by the Majority show that companies across the 
country are engaged in a serious discussion about dropping 
health care coverage for their employees. It looks like the 
increased costs and disincentives of the law are simply more 
than many employers can afford in the middle of a recession.
    Finally, we also understand something all too well now that 
President Obama would not admit when his health care bill was 
up for debate. It will strangle Medicare. The chief actuary of 
Medicare now reports that the health care law just passed cuts 
approximately $575 billion from Medicare over the next 10 
years.
    Mr. Chairman, I think it is a good thing that you have 
called this hearing. I look forward to our witness and then 
asking questions. Thank you.
    Mr. Pallone. Thank you, Mr. Barton.
    [The prepared statement of Mr. Barton follows:]
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    Mr. Pallone. Next is chairman emeritus Mr. Dingell.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Dingell. Thank you, Mr. Chairman. I commend you for the 
hearing.
    Established in 1997, the Medicare Payment Advisory 
Commission has provided invaluable advice to the Congress 
concerning the Medicare program. Through their biannual 
reports, they have consistently advocated for a more efficient 
Medicare program that ensures beneficiary access to high-
quality care, pays health care providers and health plans 
fairly, and spends Federal tax dollars properly.
    It is important to note that many of the recommendations 
included in the recent MedPAC reports, including many 
recommendations in the current report, were included in the 
landmark health care reform legislation passed by the Congress 
and signed by President Obama earlier this year. These 
regulations include providing a payment bonus to physicians who 
practice primary care, reducing payments to hospitals with high 
preventable readmission rates, and testing the feasibility of a 
bundled payment for an episode of care. This is a testimony to 
the efforts of the sponsors of that bill and the administration 
to do all we can to make the Medicare program and, indirectly, 
private insurance a smarter, more efficient deliverer and payer 
for high-quality health care.
    In addition to the work accomplished by the new health 
reform law, MedPAC has provided a number of additional 
recommendations to consider on ways to improve the ability of 
the Center for Medicare and Medicaid Services to innovate, 
ensure the health care workforce is adequately trained, and to 
assist Medicare beneficiaries in making better decisions about 
the course of their health care treatment.
    I look forward to Mr. Hackbarth's testimony. I look forward 
to spending more time exploring the goals and the impact, both 
direct and indirect, to the recommendations included in the 
June report, and I hope that this subcommittee and committee 
will do so alike.
    Finally, I am very interested in exploring MedPAC's future 
relationship with the new, independent Payment Advisory Board 
created by the new health reform law. This legislation 
envisions some interaction between the two. It is my hope that 
will occur, but that it will occur in a beneficial way. 
However, we must think very carefully about how the two 
entities coexist beyond the specifics of the legislation, and 
this committee must again direct its attention to that.
    So thank you very much, Mr. Chairman. I yield back 2 
minutes and 10 seconds.
    Mr. Pallone. Thank you, Chairman Dingell.
    Next we will go to the gentleman from Kentucky Mr. 
Whitfield.
    Mr. Whitfield. Thank you, Mr. Chairman. I am going to waive 
my opening statement.
    Mr. Pallone. And next is the gentlewoman from California, 
Ms. Eshoo.

 OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Eshoo. Thank you, Mr. Chairman, for holding this 
hearing on MedPAC's latest report to Congress, and our thanks 
to Mr. Hackbarth and the members of MedPAC for your work on the 
report and for being here to testify today.
    I just can't help but say something before I make the rest 
of my remarks. My friend from Illinois keeps hacking away at 
the national health care plan which we passed in talking about 
the cuts to Medicare. I think that we need to get the record 
set straight. There are--or were insurers in the country that 
were receiving up to 135 percent more in payments than others. 
So while it is called Medicare Advantage for some of my 
constituents, it was clearly Medicare Disadvantage for other 
constituents. Now, all of those moneys that went into the 
overpayments for those insurers are being plowed back into 
Medicare. So I think we need to keep--we all have our 
opinions----
    Mr. Shimkus. Would the gentlelady yield?
    Ms. Eshoo. No. I am not going to yield. No. It is my time. 
But to just try and shape--to pretend that something is a fact 
when it is not----
    Mr. Shimkus. Is the gentlelady questioning my----
    Ms. Eshoo. No, no, no.
    Mr. Green [continuing]. Out of order.
    Ms. Eshoo. Anyway, getting back to our hearing today, I am 
very pleased that a significant portion of your report, Mr. 
Hackbarth, focuses on the signals that Medicare sends to 
medical students through the GME financing, the graduate 
medical financing. From the point of view of hospitals, though, 
not all residencies are created equal. And I think that this is 
something that--and Medicare largely funds them as if they 
were.
    I think that we have had a long struggle with the problem 
that medical students are choosing to subspecialize rather than 
choose family care or primary care, which is one of the things 
that we, I think, addressed in the health care legislation, and 
Medicare-supported residency slots, I think, should aim to 
create the correct proportion of specialists and not just the 
current proportions. And I think this is a discussion we have 
to continue to have, especially in view of the millions of 
Americans soon to be insured.
    So I look forward to your testimony, and I thank you for 
your work. And I thank the chairman for calling this important 
hearing.
    Mr. Pallone. Thank you, Ms. Eshoo.
    Next is the gentleman from Georgia, Mr. Gingrey.

  OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF GEORGIA

    Mr. Gingrey. Thank you, Mr. Chairman.
    Mr. Chairman, our Medicare program is facing a dark future 
made worse by President Obama's health reform law that this 
Congress passed back in March. As Chairman Hackbarth will 
outline in his testimony, the Medicare Hospital Trust Fund's 
expenses exceeded its income in 2008, meaning that its current 
trajectory is unsustainable. This path, if left unaddressed, 
could rob future generations of quality Medicare benefits.
    Over the last 18 months, Democrats in Congress cut $500 
billion from the Medicare program in order to help pay for 
President Obama's health care bill. And by the way, the 
gentlelady from California Ms. Eshoo says that that $500 
billion cut of Medicare, much of which comes from Medicare 
Advantage, was plowed right back into the Medicare program. 
Nothing could be further from the truth. In fact, I have an 
amendment when the bill was marked up in the House, H.R. 3200, 
that would have affected that, but it was rejected by the 
Democratic Majority. The Majority said the $500 billion came 
from ending waste, fraud and abuse. CMS actuary Robert Foster 
countered that argument by stating that the cuts would result 
in 9.4 million seniors losing their current Medicare benefits 
primarily in the Medicare Advantage program and paying higher 
out-of-pocket costs for their health care. Make no mistake, 
seniors' costs will go up because of Obama care.
    Congress could have used that money to cap out-of-pocket 
expenses or help offset doubles under Medicare in order to 
truly lower health care costs for lower-income seniors with 
chronic illnesses, but the Democratic Majority could have put 
those funds back into the Medicare Trust Fund so that seniors 
don't wake up one day soon and find their health care program 
bankrupt. Speaker Pelosi could have taken that 500 billion and 
permanently addressed the physician payment crisis under 
Medicare that is currently threatening our seniors' access to 
quality care.
    If cutting $500 billion from a Medicare program that is 
going broke does not worry seniors enough, the President is now 
pushing Dr. Donald Berwick for the post of CMS Administrator. 
He is a self-described proponent of rationing health care from 
sick Americans. A New York Times piece that ran just yesterday 
quotes Dr. Berwick as, quote, ``in love with the British health 
care system,'' unquote, and stating that, quote, ``the national 
health system is not just a national treasure, it is a global 
treasure,'' unquote. This is the same British system that 
routinely makes coverage decisions based on cost and life 
expectancy. This is the same British system that denied 
coverage for the breast cancer drug Herceptin because it was 
not deemed cost-effective. It took a protest march by thousands 
of women in the streets of London to change that decision. 
Simply put, our seniors' health care program cannot afford Dr. 
Berwick.
    Mr. Hackbarth, with these thoughts in mind, I look forward 
to your testimony today. You and your staff have served this 
Congress well, offering technical advice and insight into ways 
that we might restructure our Medicare program so that seniors' 
health care and needs and taxpayer interests are indeed 
safeguarded.
    Particularly I am interested in your thoughts on how we 
might overhaul our current system of reimbursing physicians 
under Medicare, the sustainable growth rate, and how properly 
aligning incentives in the program might encourage a greater 
efficiency and collaboration.
    With that, Mr. Chairman, I yield back, and I thank you for 
your patience.
    Mr. Pallone. Thank you.
    Next is our chairman, Mr. Waxman.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you, Chairman Pallone, for calling this 
hearing.
    We are going to hear from a representative of MedPAC, which 
is an organization set up to advise the Congress about the 
Medicare program, and they have done an excellent job over the 
years. In fact, many of their recommendations were incorporated 
into the recently passed comprehensive health insurance bill. 
That bill is going to extend health insurance coverage to 50--
to 30 million Americans. It is going to hold down costs, and it 
is going to benefit the Medicare beneficiaries.
    You wouldn't believe it by the propaganda line we have 
gotten from the Republican side of the aisle. They were against 
working on a bipartisan basis with us. They complained about 
the bill before it was enacted; they have complained about the 
bill since it has been enacted, and it is not even implemented.
    But some things are going to be implemented. For example, 
we heard about the high-risk pools being a failure. The high-
risk pools are a temporary way to cover people with preexisting 
medical conditions who cannot buy insurance at all. Well, this 
will give them a chance to buy insurance until the insurance 
system is implemented where they can no longer be discriminated 
against, something the Republicans would not support.
    They have complained that this is going to do a disservice 
to Medicare. Well, the truth of the matter is that the Medicare 
Trust Fund is going to be extended for many, many years. The 
Medicare Trust Fund will be extended for 12 years, to 2029.
    They have talked about some of the cuts in Medicare, but 
those cuts are wasteful expenditures to insurance companies 
that are telling Medicare beneficiaries that they should have 
more money for their overhead. We said, no, the money ought to 
go for health care services, and this was one of the 
recommendations of MedPAC, not to have these so-called Medicare 
Advantage plans get overly compensated.
    But not only are we saving money in the expenditures of 
Medicare, we are also going to be closing the doughnut hole so 
seniors will not find themselves going broke having to pay 100 
percent of the full cost for their prescription drugs, 
something the Republicans provided for when they adopted their 
original Part D Medicare legislation. We will close the 
doughnut hole.
    We will provide preventive services without costs to the 
seniors. They won't have to come in with copayments. We 
extended the life of the Medicare Trust Fund.
    You would think we ended Medicare. You would have thought 
we were putting the American people on the British system, to 
hear my colleague from Georgia a minute ago talking about the 
result of the health care bill.
    The hearing we are having today is not the first hearing we 
have had on the whole health care system. The Congress of the 
United States, in fact the House, held 79 bipartisan hearings 
and markups on health insurance reform over the past 2 years. 
We had hearings. We got full input from everybody, people who 
had different points of view, those that were in favor and 
those who were against. And out of those hearings, we worked on 
legislation, but we had to do it on a partisan basis, because 
like every bill that we have considered in the last year and a 
half, the Republicans have decided to vote no. They voted no on 
the stimulus bill. They voted no on the energy bill. They voted 
no on the health bill. They voted no on the financial reform 
bill. They are the party of no. And now when we are trying to 
learn more about what we need to do to keep Medicare the 
program it is as a way to provide health care services for our 
seniors and our disabled people, they want to complain, not 
talk about how we can work together.
    MedPAC is giving us a report. That is the reason for this 
hearing. Their report is always useful. They have suggested 
that there are ways we should deal with graduate medical 
education to try to get physician services based more on 
quality and not on quantity. They are recommending what we 
should do with people who are both Medicare and Medicaid--the 
dually eligibles. They have given us a lot of good, substantive 
things to look at and to work on, and I am pleased with what 
they have done in the past, that has been part of the health 
care bill that is now law. And I am looking forward to the 
testimony and about further things we need to do to strengthen 
the Medicare program.
    But let no one be fooled. What we are seeing is a lot of 
propaganda from our Republican colleagues, and it is the same 
thing we have heard at every hearing over and over again, that 
you are going to have rationed care, you are not going to have 
care, that everybody is going to drop the care, and meanwhile 
they wouldn't even eliminate the barrier for people to buy 
insurance because of preexisting medical conditions.
    I am glad the health care bill passed, and the American 
people will welcome it as it goes into effect.
    Yield back.
    Mr. Pallone. Thank you.
    [The prepared statement of Mr. Waxman follows:]
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    Mr. Pallone. Next is the gentlewoman from Tennessee, Mrs. 
Blackburn.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Mrs. Blackburn. Thank you, Mr. Chairman.
    Mr. Hackbarth, we are pleased that you are here. As you can 
see, we are going to have a very robust discussion today. I 
know you are looking forward to it.
    And I think we all agree that there are some improvements 
that are needed in the current delivery system. But I will have 
to tell you, there is a lot of concern out there that Obamacare 
is going to be detrimental to Medicare, and that it has the 
potential not only to cripple the Nation's health going 
forward, but also to cripple and compromise those health care 
delivery systems.
    And most recently we have had concerns expressed from 
physicians, and I know you are hearing this, too, about being 
able to meet the cost of their practices while they are facing 
reductions even to the point of phasing out of programs like 
Medicare Advantage. And yesterday there was a USA Today 
article, and I am sure you probably saw this. There was a quote 
in there, the number of doctors refusing new Medicare patients 
because of low government payment rates is setting a new high. 
And this is of concern to us. The AMA has even reported that 31 
percent of primary care physicians are no longer accepting new 
Medicare patients. We are hearing quite a bit about this, and 
what we hear is that this 21 percent reduction in the SGR is 
forcing more doctors to make those reductions and dropping 
patients, and seniors are very concerned about this.
    Now, I think that they are speaking up in expressing 
concerns, and one of the reasons we want to hear from you is 
because my colleague across the aisle just said we are the 
party of no. I would change that to--for him. We are the party 
of K-N-O-W, know, and what we have worked diligently to do is 
make certain that seniors have the information in front of 
them, whether it is about their Medicare Advantage and their 
concerns of that program being phased out, or whether it is 
about the current Medicare coverage that they have. And they 
continue to come to us and say, we thought we were going to be 
able to keep the benefits and the programs that we have, but we 
don't see how this is going to work. And what we are hearing 
from insurers is that changes are coming towards us, and when 
you see numbers like 136 billion being cut out of Medicare 
Advantage over the next 10 years, this is of concern.
    I will also highlight that we have to remember that our 
seniors, today's seniors, have prepaid their access to 
Medicare, and we need to be mindful of that. We need to be 
respectful of that, and we welcome your insight and look 
forward to the hearing.
    I yield back.
    Mr. Pallone. Thank you, Mrs. Blackburn.
    Next for an opening statement is the gentlewoman from the 
Virgin Islands, Mrs. Christensen.

       OPENING STATEMENT OF HON. DONNA M. CHRISTENSEN, A 
       REPRESENTATIVE IN CONGRESS FROM THE VIRGIN ISLANDS

    Mrs. Christensen. Thank you, Mr. Chairman. And thank you 
and Ranking Member Shimkus for holding this hearing.
    And thank you, Dr. Hackbarth, for joining us this afternoon 
to report on the Commission's June 2010 report to Congress.
    The Medicare program has been in many ways an indispensable 
asset to the American elderly and disabled, and I welcome every 
opportunity to review and discuss aspects of the program that 
can be improved to increase the efficiency and quality of 
health care given to these populations.
    Approximately 20 percent of the enrollees served through 
Medicare are racial and ethnic minorities, and roughly half of 
all beneficiaries are within 200 percent of the Federal poverty 
line. This is significant because these are the very 
beneficiaries who are extremely vulnerable, who suffer most 
detrimentally from health care inequities within the current 
health care system.
    Although Medicare provides health care access to millions 
of Americans who otherwise would go without coverage, the fact 
remains that prior to enrollment in Medicare, most were either 
uninsured or grossly underinsured, two scenarios that we know 
have deleterious health impacts. This means often by the time 
they enroll in Medicare, many of the health issues that may 
have been--might have been addressed relatively easy with 
access to care have now been compounded and exacerbated by a 
lack of care or poor care when it was available.
    Because of this, it was especially interesting to me to 
read the recommendations of the Commission, particularly as it 
pertained to focusing more on a payment method that encourages 
quality over quantity service, and promoting more participation 
from both patient and provider in the decisionmaking process, 
and in attracting a more racially and ethnically, 
geographically and socioeconomically diverse health care 
workforce.
    I am interested also in hearing more about how MedPAC 
suggests addressing the numerous health disparities that have 
been documented within the Nation's Medicare population.
    And so, again, I thank you for today's hearing, and I look 
forward to a very informative and thought-provoking discussion.
    Thank you, Mr. Chair. I yield back.
    Mr. Pallone. Thank you, Mrs. Christensen.
    Next for an opening statement, the gentleman from Texas, 
Mr. Burgess.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. Thank you, Mr. Chairman.
    And a couple of reasons why today's hearing is notable. 
Once again we have a chance to hear from our good friend Mr. 
Hackbarth, who is no stranger to this committee. Time for us to 
dig down deep and take a look at whether Medicare does a good 
job of shepherding the enormous resources available to the 
program to provide health coverage for millions of older 
Americans. That is the larger and the grander goal.
    But today is also notable because doctors across the 
country who participate in the Medicare system are receiving 21 
percent less for the services they performed last month for 
taking care of all of our Nation's sickest and most needy 
patients. Congress has broken the contract that we have with 
the Nation's seniors and the Nation's physicians by allowing 
this dramatic cut to take place.
    Let me point out I have voted for some very bad policy in 
the past, very bad policy that had at its base stopping those 
cuts from occurring. Unfortunately, we have not had--in all the 
hearings that were referenced by Chairman Waxman, we have not 
had since 2006 a hearing on the sustainable growth rate 
formula, and I think it is time we do that.
    I have a bill, 3693. I would like to see that get a full 
and fair hearing. Since this committee will not hold a hearing 
next month, I will be holding a forum by myself to talk about 
this very issue.
    And then what is worse is we have the Speaker, astonishing 
in her cruelty, holding up a bill. OK, the bill is delinquent, 
maybe criminally so; it is insufficient, perhaps scandalously 
so; but still it is a reprieve for the Nation's seniors and 
doctors, but the Speaker won't let it come to the floor because 
it doesn't comport with everything that she wants. I voted for 
very bad policy in the past just to prevent these problems from 
happening to our seniors and doctors. The Speaker should do the 
same thing.
    Very few Members of Congress, outside the physician 
Members, have any appreciation for what this delay and our 
inaction does to physician practices. When you have a small 
physician practice, even with as small a population as 15 
percent Medicare, and you don't get paid for 3 weeks, that is a 
big deal. This decision will lead businesses to closing and 
patients losing their doctor.
    We have got price controls in this country. Most of us 
don't admit that in health care, but we do. Every private 
insurance company in the country pegs to what we do in 
Medicare. That is why it is so critically important that we get 
off our duff and do the right thing.
    We talk about the fact that people aren't going into the 
specialties that we want them to go into. We have 
administrative pricing. We are driving people, driving people 
into the specialties that we now decry and keeping them out of 
the specialties we wish they would go into. But we are doing it 
by our administrative pricing.
    What about quality over quantity? When the only lever you 
pull is to rachet down reimbursement rates, the only lever the 
doctor has to pull is to increase the number of hours they work 
or work a little harder, spend a little bit less time with each 
patient. The only way they can pay their overhead--and let me 
remind members of this committee that doctors who would see 
patients in the Medicare program have not had any increase in 
their reimbursement since the year 2000.
    Now, I know we need a long-term strategy, and I have not 
always agreed with MedPAC's findings on the sheer amount of 
money and layer upon layer of bureaucracy that defines our 
current program. But that in and of itself calls out for a 
dramatic rethinking of the program. As a committee we do need 
to have a bipartisan dialogue. Unfortunately, Mr. Waxman has 
left, but I would remind him that I met with him early in 2009 
to talk about was there a possibility to work in a bipartisan 
fashion on this health care bill. I have met with the 
transition team in November of 2008 to ask that very same 
question. I got no response as an answer. What did we get? We 
got a bill thrown over the transom on July 15th, and then we 
were brought to committee and told to mark it up.
    Mr. Pallone. Dr. Burgess----
    Mr. Burgess. I had 50 amendments on that--I had my own 
table for amendments, and yet you say that the Republicans 
refused to participate.
    Mr. Pallone. All right.
    Mr. Burgess. Where do you get this stuff? Do you just make 
it up?
    Mr. Pallone. You got it. You are over a minute, Dr. 
Burgess.
    Mr. Burgess. I thank the chairman for his indulgence. I 
look forward to the hearing we are going to have on the SGR 
formula in short order, and we might also bring----
    Mr. Pallone. I am going to have to rule you out of order.
    Mr. Burgess [continuing]. And talk about the administrative 
function----
    Mr. Pallone. You are a minute over. I recognize Mr. Barrow.
    Mr. Barrow. I thank the chair. In the interest of time, I 
will waive an opening.
    Mr. Pallone. No, he is not yielding to you.
    Mr. Murphy of Pennsylvania.

   OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Murphy of Pennsylvania. Thank you, Mr. Chairman.
    It is good to have you here today, sir. I am looking 
forward to a number of things. I am looking forward to reading 
this book. I am going to draw the committee's attention to 
something very important in the executive summary where you say 
Medicare oftentimes lacks the authority to deal with some 
prospective payment systems that would improve payment 
accuracy. Similarly, a change in law is also necessary for 
Medicare to implement policies that pay providers based on 
their quality. Medicare needs authority to make such changes in 
its current payment system.
    A while ago, when our new President took office, I sent 
letters to his staff and other folks asking that Congress and 
the White House put together a blue ribbon panel to really 
review Medicare, which was designed in 1965 and designed really 
from the bottom up. What would Medicare look like if we 
designed it now in 2010? Back when it was designed, as you 
know, some of the most advanced instruments hospitals had was 
an X-ray machine on wheels. We obviously have come a long way 
since then. And back then it worked then, with the limited 
things we had with medications and other treatments, to pay a 
fee-for-service system. Now we have a substantial amount of 
research which says that quality is important, and that care 
management is important, and those things can indeed save 
money.
    When we look at some of the things that happen now in 
Medicare, and it will be interesting to hear your comments on 
this, it looks like many of the things require an act of 
Congress to change it. For example, we are still in a system 
that doesn't pay for someone in the nurse's office to 
coordinate care even though that call to a diabetic is far 
cheaper than amputating a diabetic's legs. Stroke victims 
oftentimes can save money if you have a teleconference video, 
but that depends on where that hospital is, rural versus 
suburban, even if both are an equal distance in time by 
ambulance to the base hospital. Home infusion therapies are 
still limited even though some of those save time and reduce 
the risk for infection.
    There are also things that have to do with how we even 
order wheelchairs and canes, and deal with wage indexes that on 
the east side of Harrisburg in Pennsylvania may get paid one 
way and the west side of Harrisburg in Pennsylvania may get 
paid a rate that is so much lower, the doctors can't handle it.
    It is of concern, and I am pleased you are addressing this 
issue that we cannot expect to prop up a system of Medicare 
that is struggling financially just with saying we are not 
going to pay. I believe the analogy we all understand is if 
someone comes to work on our home, and we can have two 
estimates, one will say it is going to cost you this much to 
fix your roof, and another guy will say, I am just going to 
charge you for each item I put up there and my hourly rate. We 
all know which one is going to cost a lot more. In each case we 
are just looking to have the roof fixed.
    I hope that you can let us know, if not in today's hearing, 
in the future. It is extremely important to this committee and 
to me that we have got to revise this system of Medicare and 
make it up to date and give Medicare the flexibility to 
redesign itself as we have more breakthrough information in how 
we can best administer medicine. Putting it on the backs of 
physicians and saying we are not going to pay you isn't going 
to work.
    Thank you so much. I yield back.
    Mr. Pallone. Thank you, Mr. Murphy.
    The gentleman from Texas, Mr. Green.
    Mr. Green. Thank you, Mr. Chairman.
    I would like to waive opening statement, but also remind my 
Republican colleagues the health care bill that came out of the 
House had a permanent fix of the SGR. In lockstep, my 
Republican colleagues voted against it.
    Mr. Burgess. Will the gentleman yield?
    Mr. Pallone. I think the gentleman actually waived his--
well, not waived--didn't use his time, but somehow managed to 
get a statement in as well. So I don't know.
    Anyway, let us move on to Ms. Schakowsky, who is 
recognized.

       OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

    Ms. Schakowsky. Thank you, Mr. Chairman, for this 
opportunity to discuss MedPAC's June 2010 report to Congress.
    I want to thank Mr. Hackbarth for appearing before the 
committee, and thank the staff at MedPAC for their work putting 
this together.
    Today's hearing is about improving the access to and 
effectiveness of Medicare. This Congress has implemented 
historic reforms to our broken health care system that takes 
gigantic steps forward to improve access and quality in health 
care for millions of Americans. We have extended the Medicare 
Trust Fund by an additional 12 years so that we can keep our 
promise to older Americans and disabled Americans. We have done 
what MedPAC has recommended that we do for years, which is to 
cut excess payments to private insurance companies for Medicare 
Advantage. We have eliminated cost sharing for preventive care 
in the Medicare program, and we are getting rid of the 
Republican-created doughnut hole. Moreover, health reform will 
reduce the national deficit by more than $100 billion in the 
first decade, $1 trillion in the decade after that.
    Your testimony discusses the highly unpredictable and 
highly variable cost of Medicare cost sharing. It is a point I 
fear many miss. According to AARP, people on Medicare spend an 
average of 30 percent of their income on out-of-pocket health 
care costs, including premiums for supplemental coverage. As 
cochair of the seniors' task force, I often hear from 
constituents who pay hundreds of dollars a month for their 
Medicare. In 2010, it is $110.50 for most Part B premiums. The 
Kaiser Family Foundation reports that Part D premiums or 
prescription drug plans have jumped by 50 percent since 2006. 
And MedPAC's March report shows substantial increases in cost-
sharing requirements for both brand name and generics in 2010.
    Finally, the NAIC statistics from a recent MedPAC report 
show that Medigap coverage costs--policyholders pay 2,000 to 
$3,000 a year. Medigap policies are expensive, but they can 
protect against highly variable and unpredictable out-of-pocket 
expenses that you reference in your testimony. It is critical 
to note that Medigap policies aren't being used by people 
trying to shirk their health care responsibilities. They are 
being used by Americans who are a bit too rich for Medicaid, 
but don't have the savings to pay for potentially devastating, 
uncertain medical expenses.
    I look forward to hearing your testimony today, and I yield 
back the balance of my time.
    Mr. Pallone. Thank you.
    The gentleman from Ohio, Mr. Space.
    Mr. Space. I will waive my opening, Mr. Chairman.
    Mr. Pallone. The gentleman waives.
    I think that concludes our opening statements. So we will 
go now to our witness. First of all, let me welcome you again. 
I know you have been here before, and we always enjoy your 
insight. We have limited you to 5 minutes. I hope that is OK. 
If you need more, you can use it because you are the only 
witness. And if you would proceed. Thank you.

STATEMENT OF GLENN HACKBARTH, J.D., CHAIRMAN, MEDICARE PAYMENT 
                    AND ADVISORY COMMISSION

    Mr. Hackbarth. Thank you, Chairman Pallone, Ranking Member 
Shimkus and other distinguished members of the subcommittee. I 
welcome this chance to talk about our June 2010 report to 
Congress.
    Let me begin by briefly reminding you about exactly who we 
are and how we do our work. MedPAC is a nonpartisan advisory 
group. We have 17 members. The process for appointing the 
members is run by GAO. The Commission that produced the June 
report had six physicians and one registered nurse on the 
Commission. In addition, we had five Commissioners that had 
executive-level experience in running health care delivery 
organizations. Another five had had experience in running 
private health plans. And some Commissioners have more than one 
of these credentials in their background.
    As Chairman of MedPAC, I believe we can best serve the 
interests of Congress by wherever possible finding a consensus 
point of view among these diverse perspectives included on 
MedPAC. Usually we succeed in doing that, and just to 
illustrate that point we have published two reports to Congress 
this year, March and June. In total there are 26 
recommendations in those 2 reports, which represents roughly 
400 individual votes by MedPAC Commissioners. On this 400 
individual votes were zero no votes and 3 abstentions. So we 
are able to take a diverse group of people, diverse group of 
experiences in health care, and find common ground on how to 
improve the Medicare program.
    Our examination of any given issue usually spans multiple 
public meetings. We have eight public meetings a year and often 
will take up a complex topic, have discussions that explore the 
available information, ask our staff for additional analysis, 
then we begin the discussion of options. At each point of the 
process, we reach out to parties in the outside world that 
would be affected by the recommendations who have expertise to 
bring to bear and make sure we have the benefit of that 
information. So it can be a rather lengthy process to getting 
to final recommendations, but we believe that approach allows 
us to provide the best possible advice to the Congress.
    To provide a little bit of context for our discussion of 
the June report, I thought it would be useful for me to 
highlight some of the areas where MedPAC has made 
recommendations in the past and where there is a strong 
consensus among Commissioners. First and perhaps foremost is 
that Medicare simply cannot go on as it is. The rate of growth 
and expenditures eventually will become unacceptable, and so we 
need to look in every way possible to find ways to slow the 
rate of growth in Medicare expenditures while preserving or 
hopefully improving quality and access to care.
    To slow growth and increase value for Medicare 
beneficiaries, we will have to act in a broad front; there is 
no single thing that we can do. Among the recommendations that 
we have made in the past are there needs to be consistent 
pressure applied to the unit prices for individual services, 
whether they be for physician services, hospital services, home 
health agency services, whatever the provider type.
    We need to look for ways to change the relative values of 
payment. Some of the Members earlier mentioned primary care 
physicians versus subspecialty physicians. We need to look at 
opportunities to change those relative values in a way that 
signals which sort of care Medicare beneficiaries need more of 
and reward the provision of that care.
    Third, we need to look at reforming payment methods, using 
new payment methods, whether that is paying for quality or 
bundling services around hospital admissions, medical home. 
Those are several examples of what we consider to be payment 
reform.
    Fourth, there is a broad consensus within the Commission 
that we need a robust and value-focused Medicare Advantage 
program, because private plans have the ability potentially to 
do things that traditional Medicare finds difficult.
    And finally, and most relevant for our June 2010 report, we 
think it is important for Medicare to begin the process of 
reforming its contributions to graduate medical education. And, 
Mr. Chairman, I would like to close with just a few comments 
about graduate medical education.
    I have a slide here that briefly summarizes our 
recommendations. In the interest of time, I am not going to go 
through all of the points in the slide. I would like to focus 
instead on the context for our recommendations.
    MedPAC Commissioners believe that our system of graduate 
medical education is in many respects the envy of the world. 
The system produces thousands of superbly skilled physicians 
each year, physicians who are trained to apply the latest 
technology, latest technique to aid Medicare patients and other 
patients in need. On the other hand, there is a broad consensus 
within the Commission that the current GME system is not 
consistently producing the physicians we need to reorient our 
health care system toward a higher level of performance.
    Mr. Pallone. Mr. Hackbarth, I cannot read that. I must be 
getting old. Is that in the book somewhere?
    Mr. Hackbarth. Yes, it is. Actually, I will have somebody 
behind me find the page, and I will tell you what the page is.
    Page 103 in the red book, the June----
    Mr. Pallone. Thank you.
    Mr. Hackbarth. So another element of the consensus within 
MedPAC is that the GME system is not consistently producing the 
physicians we need to move towards a higher-value health care 
system, and I would emphasize that is not just our judgment, 
that is the judgment of many other people that we consulted 
with, including many people within the graduate medical 
education system itself.
    Broadly speaking, we find two types of deficits in the GME 
system. One is in the mix of physicians being produced by the 
system. That includes the specialty mix, the number of primary 
care physicians relative to subspecialty physicians and the 
like. But it also includes the racial, ethnic and geographical 
diversity of the physicians we train.
    The other area of deficit is in the content of training. 
While physicians are very well trained in advanced technology 
and techniques, we are concerned, as are many others, that 
there are important areas that are not as well focused upon, 
including evidence-based medicine, cost awareness, team-based 
care, care coordination, shared decision making with patients 
and the like.
    It is important to emphasize that as MedPAC sees it, the 
GME system does not bear full responsibility for these 
deficits. For example, in the area of specialty mix, Medicare 
payment policies and those of private insurers strongly 
influence the choices that physicians in training make. They 
also influence the sort of training programs that teaching 
institutions decide to engage in.
    Moreover, I would add that the GME system deserves credit 
for its efforts to reform the content of training. For roughly 
the last decade, ACGME, the accrediting body for graduate 
medical education has been engaged in what they refer to as an 
outcomes project which is designed to refocus training on new 
skills that physicians need to produce high value health care. 
We believe that that movement is largely in the right 
direction, but we think that the pace needs to be accelerated. 
And we propose to do that by making a portion of Medicare 
funding contingent on the development of and adherence to new 
standards of performance for graduate medical education.
    And we urge that all of the relevant voices be included in 
developing those standards not just people involved in academic 
medicine but also representatives of patients, purchasers and 
high-performing delivery systems.
    Thank you, Mr. Chairman. Those are my opening remarks. I 
look forward to your questions.
    [The prepared statement of Mr. Hackbarth follows:]
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    Mr. Pallone. Thank you, and we are going to have questions, 
obviously, and I will start with my questions.
    I want to focus on the GMEs. I am concerned about the fact 
that we are apparently suggesting taking some of the existing 
funding and redirecting it based on the standards of 
performance, and I am worried about placing further financial 
strain on safety net hospitals, some of which I represent. Many 
of them already called me about this proposal.
    And also I am not really sure now, again I haven't read the 
report in all its detail, but you know, what is the 
significance of this empirically justified amount? In other 
words, what you are saying is, if it is above the empirically 
justified amount, then that is the money that would be 
redirected.
    Mr. Hackbarth. Yes.
    Mr. Pallone. What is that criteria, empirically justified 
amount?
    Mr. Hackbarth. OK. Medicare pays roughly $9.5 billion for 
graduate medical education each year, and it basically is 
broken into three relatively equal parts. The first is what we 
refer to as the direct medical education payments. Those 
dollars pay for resident salaries, faculty salaries, direct 
expenses of that sort. The other two pieces are paid with the 
indirect medical education adjustment.
    Teaching hospitals receive a percentage add on to each 
payment they get for a Medicare admission based on a formula 
that includes the resident-to-bed ratio. When Congress enacted 
that adjustment back in 1983, it asked for an analysis of how 
much costs increased to hospital due to teaching activity. And 
that amount was calculated.
    Congress basically doubled that amount. So we refer to the 
actual increased cost--increased cost in hospital care is the 
empirical amount and then the additional doubling of it as the 
extra IME.
    Mr. Pallone. You see the problem that I have is, you know, 
one could argue that all of this is very artificial and that we 
should have a totally different method of financing graduate 
medical education. We could have a series of hearings on that, 
and maybe we should. But the problem is the reality. The 
reality is that these hospitals are depending on this money, 
and it may be somewhat of an artificial formula, but at this 
time, if you are just going to say, OK, we are going to take 
some of the money away, I just think, I am concerned that this 
is not the right time to do that. We can argue about how this 
formula was set up. But right now, at this time, given the 
recession, given all the things that we face out there, why 
does the commission feel that this is a wise step right now?
    Mr. Hackbarth. Well, we are, I would like to emphasize that 
we are not saying, take the money away.
    Mr. Pallone. But isn't that, in effect, what will be 
happening?
    Mr. Hackbarth. What we are saying is, establish 
accountability for the use of the funds. Let's make sure that--
--
    Mr. Pallone. But my point, Doctor, is that, you know, we 
get to the point where the way we have gotten to this formula 
now, you can argue how we got there or not, but you have to be 
concerned, or at least I think I do and I think many of my 
colleagues, about the consequences of it. And I am just 
concerned that--I want you to be innovative and come up with 
new ideas, and many of your ideas we have incorporated in the 
health care reform. I am not suggesting otherwise. It just 
seems right now if the consequence of this is that money is 
taken away from some of these hospitals that are barely, that 
are in the red, have you taken that into account?
    Mr. Hackbarth. We have. And what we have proposed is that 
the new standards would take effect 3 years from now so there 
would be a 3-year period to develop the standards that would 
guide the new payment policy and to give the institutions an 
opportunity to prepare to adhere to those standards.
    Mr. Pallone. I think I am going to stop because I have 
additional questions. I am sure my other colleagues are going 
to delve into this GME thing more.
    Let me just ask about the diagnostic tests. In your report, 
you explore the suggestion that reducing payment rates for 
diagnostic tests performed under the in-office ancillary 
exemption would help to slow growth for these services.
    But I wanted to ask you, beyond the 2006 and 2008 data you 
examined, to what extent did you take into account the cuts 
that have occurred in the recent past, for instance the impact 
of the Deficit Reduction Act, the reductions in payments due to 
January 1, 2010, changes in the physician fee schedule?
    The concern I have is the rates for these services, 
particularly advanced imaging, have declined significantly in 
recent years. And so, again, I am again hearing from them about 
how this is going to be a problem because of all the cuts we 
already had.
    Mr. Hackbarth. What we propose is a series of very targeted 
reductions in payment for imaging. And we have taken into 
account the effect of those. And we think that the payments 
would continue to be adequate to assure reasonable access.
    What we have right now is very rapid growth in high end 
imaging and a lot of people investing equipment, and once it is 
in the office using it at a high rate. And to us that signals 
that the payments have been quite generous in the past. And 
what we need to do is bring the payments more in line with the 
cost of that care, and then we have recommended redirect those 
funds to other higher value uses for the Medicare program.
    Mr. Pallone. OK. Thank you.
    Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman, and Mr. Hackbarth, I 
apologize for you getting involved in the health care law food 
fight, but we only get the opportunity to openly discuss this, 
and I think it does call for a hearing. That is all we are 
saying. That is our point. If they are right, let's have a 
hearing; if we are right let's have a hearing. And there are 
problems that in this law we know that need to be fixed. They 
are smaller ones, but, so we just take the opportunity, the 
limited opportunity we have to address our concerns.
    In response to the chairman, we did pass a bipartisan bill 
called the food safety bill. It passed out of here on a voice 
vote I think and passed on the floor, and we were involved in 
that and when we are asked to work together, I think we can do 
so effectively.
    The health care bill creates a $1 trillion new cost. And I 
am just going to ask on this $500 billion, $500 billion wasn't 
all the Medicare Advantage, as you know; $20 billion was 
revision to the Medicare Improvement Fund, which is to help 
doctors continue to take Medicare patients, $20 billion over 5 
years; $156 billion came from ensuring Medicare sustainability, 
revision in the Market Basket Updates, which is payments to 
hospitals; $156 billion out of 5 years on this new law; payment 
adjustments for home health, $40 billion.
    So, I would caution my colleagues that there is $135 
billion on the Medicare Advantage. That is something they did 
mention. But I would question to make sure we do a total of the 
entire $500 billion in cuts because some of it is to hospitals; 
some of it is to individuals, and that is what this law did.
    I look at the, trying to find the mission statement, and 
under the front cover says, Medicare, you are supposed to help 
us on the Medicare Advantage program, providers in the Medicare 
traditional fee-for-service, and analyze care, quality of care, 
and other issues affecting Medicare. And you do. But I think 
for macro versus micro, you have gone into a lot of the micro 
aspects, and you have done it for a long time and, again, well 
respected and been around for a long time. We are worried about 
some of the macro issues, too, and I know, because 
implementation takes time, it is tough to check the 
implications of the new law, especially in this report, but I 
think that is an important aspect to look at, especially when 
you have the, whether they like it or not, $500 billion of 
cuts, and it is not all coming from Medicare Advantage. It is 
coming from hospitals. It is coming from physicians. There are 
tax increases that are going to effect service.
    Having said that, are the people on the committee, I was 
going through the bios, are there any economists on here?
    Mr. Hackbarth. Yes, there are.
    Mr. Shimkus. And the physicians are for-profit, not-for-
profit, the hospital administrators from both for-profit 
hospitals and not-for-profits hospitals?
    Mr. Hackbarth. Currently not-for-profit.
    Mr. Shimkus. Not-for-profit. No for-profit hospitals?
    Mr. Hackbarth. No for-profit hospitals, no.
    Mr. Shimkus. Is there a reason, do we know?
    Mr. Hackbarth. Well, as I say, the GAO does the 
appointments. So we don't select our own members. And so I 
don't know the answer to that question. I wouldn't expect that 
we would never have a for-profit. We just currently don't have 
for-profit.
    Mr. Shimkus. I am a market-based capitalist, conservative. 
I believe in supply and demand. I believe individual consumers, 
given the ability to access information, will drive prices. You 
will get higher quality and lower cost. I am concerned about 
third-party payers, and institutions, in essence, try to set 
fees. When an individual consumer is given the information and 
the access probably is a better system.
    The GME issue is just one sliver of what you are doing, but 
I understand it is a very important aspect to you. We have 
hospitals that have too many GME slots. We have places in this 
country with not enough slots. And in the moving of the--I want 
more slots is what I want. Is there, in the calculation of the 
payments, is the payment, say for a GME slot in New York City, 
is the payment the same as it would be in Springfield, 
Illinois, for a teaching hospital? Or is there a cost of where 
the education is going? Is there a percentage ratio there?
    Mr. Hackbarth. Well, we have got, as I said to Chairman 
Pallone, we have got two different types of GME payments. We 
have got the direct payments for salaries and the like, and 
then we have the indirect add-on. The direct payments are set 
at a hospital specific amount. So there is a base year, based 
on the actual costs incurred for salaries and direct expenses 
in that year, and then that has been inflated by the CPI since.
    The indirect piece is a percentage add-on to whatever they 
get paid for Medicare admission. So that does reflect different 
wage indices and different costs of care.
    Mr. Shimkus. So I will end on this, and I appreciate the 
chairman's permission to just finish with the statement. We 
need more, in this environment, with doctors talking about 
leaving the profession, we need more doctors. We need more GME 
slots. And I believe in supply and demand, and the higher 
supply you have, the lower; more supply you have, the lower 
cost, but we have got to get them out. And they have got to get 
trained in educational institutions.
    Mr. Hackbarth. Chairman Pallone.
    Mr. Pallone. Yes, please respond.
    Mr. Hackbarth. May I make a brief comment about the number 
of slots? It may well be true that we need more slots, more 
physicians being trained. That is not an issue that we have 
looked specifically at. There are certainly a lot of people who 
believe that.
    What we have said, though, is that before Medicare decides 
to fund more slots, we think we would do well to step back and 
do a careful assessment of what our long-term needs are likely 
to be. We shouldn't just extrapolate from the past, but look at 
the mix of physicians and other health professionals that we 
will need for a more efficient system in the future and then 
base our decisions about GME funding on that analysis.
    Mr. Shimkus. Thank you.
    Mr. Pallone. Thank you.
    The gentlewoman from Florida, Ms. Castor.
    Ms. Castor. Thank you very much.
    And I want to stay on this topic. I think you are generally 
on the right track when it comes to the GME, to say we have got 
to look at these trends and specialization. I can't tell you 
how many young residents or med students I meet, med students 
who are gung ho; they are going into family practice or general 
practice or pediatrics. And then I see them a few years later, 
and their loans have taken the toll, and they are going to go 
into plastic surgery or some other specialization. And so I 
think it is very wise to plan ahead and begin to look at how we 
create those incentives. So I appreciate that very much.
    And the diversity mix, MedPAC has done a good job focusing 
in on kind of the lack of how the medical field oftentimes does 
not reflect our population. We need to improve that because 
that means better care, although women now are going 
gangbusters in our colleges of medicine.
    I had really hoped that MedPAC would also address this 
issue of the static nature of the cap and what that has done to 
States that have grown in population since 1996 when that cap 
was put on because it has created such a harmful dynamic in my 
State that has been a high-growth State in other areas.
    We have got three major GME-related issues. One, our 
resident-to-population ratio is in very bad shape. Two, we 
don't have nearly enough slots to account for all of our 
medical school graduates. We have nine med schools, but at 
least two-thirds of all students leave the State to practice.
    And then we have hospitals operating above their caps. They 
are struggling to pay for those additional residents and fear 
that they may not be able to keep up with those extra, the 
extra costs that those slots require.
    So, in the big picture, we can generally say that more 
slots doesn't necessarily ensure better care or overall better 
training, as asserted in your report. However, there is this 
other issue that I know we, in our health care reform law, we 
said we are going to do a workforce study. And you mentioned 
that here, and in fact, Secretary Sebelius announced new 
residency positions just this past week for primary care, so 
that is very positive.
    Could you please address, why didn't MedPAC consider the 
geographical inequities here in this report that are so 
fundamental? It is really underlying the workforce issue and 
the diversity issue.
    Can you address that and the impact of cutting the limited 
GME funds that some States already receive?
    Mr. Hackbarth. We did not make specific recommendations 
about either increasing the caps or reallocation of them.
    However, we did suggest that we needed to take steps; 
Medicare needs to take steps to increase the diversity of the 
physician workforce of the future in and make sure that we are 
bringing into medicine people who are inclined to practice in 
rural areas, practice in inner cities that may be underserved. 
Recent research shows that an important element in that 
decision where to practice is where the student comes from to 
begin with. And so there are programs in the public health 
service, authorized by this committee, that are targeted at 
trying to change the mix of physicians being trained, increase 
the diversity, we think those programs that directionally make 
a lot of sense.
    Again, on the specific issue of how many physicians 
Medicare ought to support, we didn't look at that issue 
specifically just for a matter of time and resources, but we do 
think that it needs to be guided, a decision needs to be guided 
by careful analysis of future needs, whether they be 
geographic, diversity, specialty. The beacon that we aim for is 
a high-performance delivery system. If we just doubled the 
number of physicians with the current specialty mix, we may 
well not make our problems better; we could end up making them 
worse. And so we need to think first before we increase the 
funding.
    Ms. Castor. We have got to harmonize what was in the health 
care reform law that says States that have these low resident-
to-population ratios are going to get a little bit of help. And 
I was hoping in your report you would reference that.
    I know you mentioned in the report that you weren't sure 
when the law would be finalized. But there needs to be some 
harmonization of those.
    And quickly, on the IME payments, many hospitals feel that 
redirecting the IME payments, since the needed level of IME 
funding is difficult to quantify, leaves them in a position to 
come up with dollars for indirect costs on their own, and for 
some States, that are looking at DSH payments changing over 
time and the fact that we may still be serving many folks in 
this country that show up in the ER but will not be covered in 
the health care bill; it is very troubling to see another 
challenge on the horizon.
    So if MedPAC recommends that we not make decisions about 
Medicare funding for new residency positions until an 
independent analysis of our health care workforce is conducted, 
is it premature to recommend that IME funds be redirected 
before the study is concluded?
    Mr. Pallone. I am going to have to--I am sorry, Ms. Castor, 
I have been not paying enough attention to the time. You are 
like 1 minute, 20 seconds. Why don't we send that in writing?
    Ms. Castor. Thank you, Mr. Chairman, because, you know, I 
care about that.
    Mr. Pallone. I know. I appreciate it. We will send that in 
writing.
    The next is the gentleman from Georgia, Mr. Gingrey.
    Mr. Gingrey. Thank you, Mr. Chairman.
    Mr. Hackbarth, physician reimbursements under Medicare were 
cut back 21 percent last Friday. Many physicians in my district 
have told me they will stop seeing Medicare seniors because of 
these cuts. And indeed, some in the more rural areas have said, 
well, they will just move to an urban setting where the 
Medicare case mix is not quite as high.
    Today, this mitigation, which has passed the Senate, that 
bill is being delayed by Speaker Pelosi, the bill that would 
restore these cuts, the cuts that may mean our seniors have a 
Medicare card but no physician to accept them.
    Given our current physician shortage and the access 
problems that Medicare seniors are currently encountering, do 
you believe that Speaker Pelosi's decision to allow these 21 
percent cuts to go forward will make it harder for new Medicare 
seniors, especially those in rural areas, to find a physician 
who would be willing to take them?
    Mr. Hackbarth. Well, it is obviously not my place to 
comment on Speaker Pelosi's position.
    But let me just describe our position on this.
    Each year, we do a large survey of Medicare beneficiaries 
to ask them about their access to physician services. We survey 
about 4,000 Medicare beneficiaries each summer, and we survey a 
like number, roughly 4,000, of privately insured patients that 
are just under the Medicare eligibility age, so we have a 
reference point.
    Our survey done last summer, the summer of 2009, found that 
generally Medicare beneficiaries have access as good as or even 
better than privately insured patients in the 50 to 64 age 
group.
    The area of concern within that generally good picture is 
around primary care.
    Part of the survey that we do is we ask Medicare 
beneficiaries who are looking for a new physician whether they 
have any problem in finding a new physician. That is the most 
vulnerable group.
    And what we find is roughly one quarter of Medicare 
beneficiaries say they have difficulty finding a new primary 
care physician. Again, this was 2009.
    The number for privately insured patients in 2009 was 
actually a little bit higher; a higher percentage of privately 
insured patients said they were having difficulty finding a new 
primary care physician.
    The lesson that we draw from that is the country has a 
growing problem with access to primary care. It is not unique 
to Medicare. It is a broader systemic issue. So that was 2009.
    We are in the process now of doing our 2010 survey. I don't 
know what those results will be.
    I would say, though, that the uncertainty and even anxiety 
caused by the annual, now more frequently than annual, debate 
over SGR can only be undermining the confidence of physicians 
and patients in the Medicare program. And so I don't know what 
the new survey results will be, but we are concerned that the 
repeated threat of very large cuts could impede access.
    Mr. Gingrey. Well, Chairman Hackbarth, I appreciate you 
bringing that information to the committee. That is extremely 
important. And if I understood you correctly in last year, 
2009, before ObamaCare patient protection affordable care act, 
one-fourth of Medicare patients seeking new physicians had 
difficulty finding one. And now we are in the situation where 
fully 10 million people, Medicare patients on Medicare 
Advantage, that program is being cut; I think Mr. Shimkus said 
the number was $130 billion over 10 years, so maybe 6 or 8 
million of those 10 million will lose their coverage under 
Medicare Advantage. And then you compound that problem with a 
21 percent cut. So we have put to put a Band-Aid on it now, and 
so those many physicians are going to say, I am outta here. And 
then you are going to get this deluge of new patients trying to 
find a doctor to cover them under Medicare. I just hate to 
think what your numbers are going to show when you survey those 
4,000 in June, July of 2010.
    Mr. Hackbarth. I just want to be very clear, because this 
is such an important issue, about what the 2009 survey results 
were.
    So we said that the most problematic area was Medicare 
beneficiaries looking for a new primary care physician. So that 
represents about, the number of Medicare beneficiaries seeking 
a new physician is about 6 percent, and it is one-quarter of 
that 6 percent that report experiencing a problem.
    Now we have got 45 million Medicare beneficiaries. So even 
if we are only talking 1.5 or 2 percent, we are talking 900,000 
Medicare beneficiaries. That is a lot of people and reason for 
concern. But it does represent 2 percent of the Medicare 
population.
    And it is also important to emphasize, again, that this is 
not unique to Medicare. The privately insured patients were 
also reporting problems in finding a new primary care 
physician.
    Mr. Gingrey. Thank you for your indulgence, Mr. Chairman. I 
am a minute over, and I yield back.
    Mr. Pallone. Thank you.
    The gentlewoman from California, Ms. Eshoo.
    Ms. Eshoo. That you, again, Mr. Chairman for having this 
hearing.
    Chairman Hackbarth, I have two questions. The first one has 
to do with the report's inclusion of a proposal that some of 
the graduate medical education funding provided to hospitals by 
Medicare be made contingent on practice-based learning to 
encourage medical residents to spend more time in community 
health clinic settings. Now some teaching hospitals in my 
district and elsewhere don't have the emphasis on outreach with 
ambulatory care settings right now. What does the commission 
think the impact on the current GME system will be under this 
proposal?
    And what is the commission advising the Congress relative 
to the transition in order to incorporate what you have 
discussed in the proposal?
    And my second question is, on self-referral. Experts across 
the board, of course, agree that physicians self-referral, 
where doctors refer patients for medical services in which they 
have a financial interest, is a costly drain on the Medicare 
system. I agree with that. The report goes into quite a bit of 
detail to demonstrate that self-referral under the Stark Law 
ancillary services exemption continues to grow, but noticeably 
absent from the report are any concrete recommendations about 
how to address this.
    So can you address it?
    Mr. Hackbarth. Yes.
    Ms. Eshoo. Those are my two questions. Thank you.
    Mr. Hackbarth. Thank you.
    First, on the nonhospital-based training, training in 
community practice, a few points there. First of all, that is 
particularly important for some specialties. Obviously----
    Ms. Eshoo. I am not arguing whether it is important or not, 
but since you make the recommendation about it and there are 
many that have brought up GME in their opening statements and 
some in their questions, my question was, what is the impact 
and how are you going to--what are you--what is the commission 
recommending in terms of the transition in order to accomplish 
this?
    Mr. Hackbarth. Well, the first step is to remove some of 
the barriers. In the current Medicare rules, there are rules 
about how the time of residents is counted that impede people 
from doing nonhospital training. The teaching hospitals have 
asked for those rules to be changed. A number of those changes 
were included in the affordable care act. And so that is 
something that the teaching institutions themselves have asked 
for, take down one of the barriers.
    The second step is to make sure that those opportunities 
for nonhospital training are good experiences, rich 
experiences, because that is the experience that primary care 
physicians, for example, need in particular. That is the 
environment where they will be practicing.
    And one of the reasons that young physicians in training 
don't go into primary care is they have that experience, 
ambulatory experience, and it is not a good one. It is in a 
clinic that is not well managed. They don't have time to deal 
with their patients, and so they are turned off by primary 
care. Fixing that problem, as you say, is not something that is 
going to happen overnight; finding new settings, rich settings 
for people to train in.
    So we recognize that there will be a period of time.
    Our recommendation, as I said earlier, is that the new 
standards wouldn't go into effect for 3 years. But if, on this 
particular issue, the Secretary were to decide, oh, even more 
than 3 years is required to allow ample ramp up, then we 
wouldn't object to that. But we do think we need to be moving 
in that direction.
    Ms. Eshoo. Good. And on the self referral issue? The report 
really does go into quite a bit a detail. It is really short on 
any recommendations.
    Mr. Hackbarth. We lay out I think about a half dozen 
options that might be considered.
    For example, limiting self-referral to services provided on 
the same day as the basic visit, packaging certain imaging 
services, for example, with the visit payment, subjecting some 
types of high-end expensive imaging to prior authorization. 
There are I think a half dozen different options there.
    What we have done, each of those has pros and cons. And we 
have laid them out so that now we can get people outside MedPAC 
to react to those options, help us deepen our understanding of 
their implications, and we would expect next year, with that 
additional information, we will come back and look at those six 
options or maybe some new ones.
    Ms. Eshoo. Will it take you a year for you to gather that 
information before you make the recommendation to Congress?
    Mr. Hackbarth. I don't know exactly when we will take it up 
in our fall schedule, but it will be in the fall. It wouldn't 
be next June.
    Ms. Eshoo. I see. I thought you said it would take a year 
to get them.
    Mr. Hackbarth. Next annual cycle is what I am referring to.
    Ms. Eshoo. Thank you very much for your work and your 
testimony.
    Mr. Pallone. Thank you, Ms. Eshoo.
    The gentleman from Texas, Mr. Burgess.
    Mr. Burgess. Thanks, Mr. Chairman.
    Again, Mr. Hackbarth, we are pleased to have you here. Let 
me just be sure I heard you correctly when you gave your 
statement because we heard some discussion from the dais about 
Medicare Advantage, and I thought I heard you say that we need 
a robust Medicare Advantage. And that is something I have heard 
before in some of the Commonwealth on things. We heard that 
from the head of Scott--the physician from Scott and White last 
January who also happened to be a head of the AMA who endorsed 
the health care bill but with the cuts to Medicare Advantage. 
So why the dichotomy here?
    Mr. Hackbarth. I am sorry----
    Mr. Burgess. We cut Medicare Advantage, and we said that is 
that was a good thing in the health care bill, but you are 
telling us we need Medicare Advantage.
    Mr. Hackbarth. Yes. If I could, I would like to refer back 
to something Mr. Shimkus said. I believe strongly in the market 
and market signals. And how much you pay for something 
influences the product that you get.
    I believe very strongly that having the option of enrolling 
in a private plan is a good thing for Medicare beneficiaries. 
But if we set the price too high, we get private plans that are 
not properly focused on increasing value for Medicare 
beneficiaries. We make it too easy. And the evidence that I 
would cite for that is that when the prices went way up, when 
we vastly increased the benchmarks on Medicare Advantage, we 
got a huge influx of private fee-for-service plans which added 
very little value.
    Mr. Burgess. I do have to interrupt you there because some 
of the data we have heard and we never got in this committee 
because we never have had advantage, but some of the 
information that we have gotten, again from the Commonwealth 
Fund, that are not just bastions of conservative thought, that 
Medicare Advantage did hold the promise, they did the care 
coordination, the disease management, the ancillary providers, 
the electronic medical records; all the things you want your 
care system of the future to do, they were able to provide. So 
I heard it at a roundtable dealing with the Physician Group 
Practice Demonstration Project that if you don't have Medicare 
Advantage, we can't do these things that you have asked us to 
do. And we believe we are on the right track.
    I am going to have to leave that in the interest of time 
because I have things I just have to ask you. Appendix A of 
your report suggests that in addition to the 21 percent cut 
that went into effect June 1st, there is an additional 6.1 
percent that will be shaved off physician reimbursement based 
on your calculations that will kick in January 1st. Is that 
correct? So an aggregate cut from last month of 26 percent by 
January 1st.
    Is there any way to prevent or to create the delink, you 
say that goes into effect, say there is nothing anyone can do 
to stop that, is there any way to delink private insurance 
reimbursement from what Medicare is reimbursing? Because as you 
know, many of the private contracts pay at a percentage of 
Medicare.
    Mr. Hackbarth. Well, it is often the case, as you say, Mr. 
Burgess that private insurers use the Medicare relative value 
system. But typically they will use their own conversion 
factor. So the actual price paid is not Medicare. In some 
cases, it could be higher; in some cases, it could be lower.
    Mr. Burgess. Correct. And in the interest of time, it is 
generally like 110 percent of Medicare. But you cut Medicare 
26.1 percent, Blue Cross Blue Shield, that pays 110 percent of 
Medicare, guess what? They get a big windfall for their 
stockholders, and the doctors end up holding the bag on that. I 
do think that is something I would like to see your group look 
at.
    Let me just talk about a couple of things because they are 
terribly important.
    In the health care bill that passed, we got the creation of 
the Independent Payment Advisory Board will that render the 
Sustainable Growth Rate Formula obsolete or are the physicians 
perhaps facing the specter of both the SGR and cuts in the 
Independent Payment Advisory Board?
    Mr. Hackbarth. Well, my understanding of the legislation is 
that the targets established for the Independent Payment 
Advisory Board are separate from SGR.
    Mr. Burgess. So the answer is, yes, they could be hit with 
both?
    Mr. Hackbarth. Right. And the difference, of course, is 
that the Independent Payment targets are program-wide. They are 
not just focused on physicians.
    Mr. Burgess. Right. But, again, that is one of the things 
that I think needs to be looked at with a great deal more 
scrutiny because I am getting these questions, and I have got 
to believe that doctors who are looking down the road at what 
we have done to them are going to be taking this quite 
seriously, and you may find your numbers of people who can find 
a Medicare physician actually dropping off more significantly 
beyond what you anticipated.
    The last thing, the chairman has such a quick gavel, you 
brought up on the prior authorization on imaging, why is it, 
and I hated prior authorization, I hated calling 1-800 to get a 
procedure approved, but why doesn't Medicare look at a little 
bit of that type of activity? It is always a pay and chase; you 
pay something, and then wonder if it was advisable to do so and 
then try to chase someone down. In the private world, you end 
up having to get everything preauthorized, which is a pain and 
sometimes overdone, but why not incorporate some of the lessons 
that have been learned in the private sector to hold down the 
cost in Medicare?
    Mr. Pallone. That has got to be the last question.
    Mr. Burgess. See, I told you he is quick with that gavel.
    Mr. Hackbarth. As you know, increasingly, prior 
authorization is used to for expensive imaging services. There 
are companies that specialize in that business, running those 
prior authorization programs.
    And it is an option that we will look at.
    Obviously, the concern is the intrusiveness of it, the 
hassle of it for physicians. But it is something that has some 
advantages, so I don't know where we will come down, but we 
will look at it.
    Mr. Pallone. Mrs. Christensen.
    Mrs. Christensen. Thank you, Mr. Chairman.
    And again, thank you for being here, Dr. Hackbarth.
    I had to step out when my colleague, Dr. Burgess, was 
speaking, but I just have to get this off my chest because I 
really think that MedPAC has the whole provider reimbursement 
issue backwards, and therefore, the remedies are not really 
directed as they should. And I just wondered if MedPAC has ever 
considered providers are paid so very low reimbursement that 
they just have to see more patients to be able to keep their 
lights on, pay their staff, keep their doors open, as well as 
take care of their families.
    All of the remedies are based, seem to be based, on the 
assessment that fee-for-service is the source of the problem, 
but I really think that it is the low fees. Doctors are really 
forced into a position where they have to see more patients, 
and CMS has never really paid us to sit down and talk or listen 
to our patients.
    So I just wanted to get that off my chest.
    Mr. Hackbarth. In fact, we would agree that there are some 
physicians who are paid too little and paid, being paid fee-
for-service may not even be the best method for paying a 
primary care physician.
    But on the other hand, we think that there are other 
physicians who may be paid too much.
    And so, rather than saying, oh, we think all fees should be 
cut, our view is more nuanced. We think that there is plenty of 
money in the Medicare physician payment pool in the aggregate, 
but it needs to be redistributed to support a high value care, 
more for some, less for others.
    Mrs. Christensen. And as a primary care physician, I 
appreciate the fact that primary care is going to be given more 
attention and have perhaps some higher reimbursement, but I 
don't see that that should be at the expense of the 
specialists. When you need a specialist, the situation is 
generally critical, and they have a specialized, by definition, 
service to provide.
    Mr. Hackbarth. Before I started doing this job, I was a CEO 
of a 500 physician multispecialty group practice in Boston. And 
our physicians were all paid on the salary. We were largely at 
that point a prepaid group practice. But if you looked at the 
difference between a primary care physician and a cardiologist 
or some specialist within a group like mine or you do the same 
at Kaiser Permanente today, the range is much narrower than 
existing fee-for-service. Yes, the specialists get paid more, 
but it isn't the huge gap that exists in fee-for-service 
Medicare. And so what we are suggesting is not that specialists 
not be paid appropriately for their additional training and the 
like, but we do think that that gap needs to be smaller.
    Mrs. Christensen. Thank you.
    Let me try to get one other question in, and my time is 
fast escaping.
    When CMS institutes a least-costly-alternative policy or 
code-bundling determination, providers face a financial loss 
each time they prescribe a product that is not the least costly 
product subject to the LCA policy or a product that is more 
costly than the blended reimbursement rate under a code-
bundling decision. To the extent that Congress grants CMS's 
explicit authority to institute LCA policies or expanded code-
bundling authority for drugs or biologics, what safeguards does 
MedPAC recommend including in such authorities to ensure you 
that patient access to important therapies is appropriately 
preserved?
    And what kind of clinical evidence should CMS be required 
to consider before instituting that policy or bundling 
determination?
    And what exceptions should Congress include to make sure 
that patients can get Medicare coverage for the more costly 
products when they are medically necessary?
    Mr. Hackbarth. Yes. Well, the decisions in executing least-
costly-alternative reference pricing options of that nature 
need to be informed by the best available clinical evidence. 
And the process needs to be a transparent one, whereby all 
interested parties have an opportunity to present their 
information to CMS. As we say in the report, we think in some 
areas like this, it would be good to give CMS and the Secretary 
more flexibility than they have under the current law to 
execute these policies. But that doesn't necessarily mean 
abdication by the Congress either.
    You can imagine ways that the Congress would reserve the 
right to override particular policies and the like. So we would 
like to see the needle shifted some towards more discretion but 
only based on evidence, transparency, and there could be some 
residual congressional control.
    Mrs. Christensen. I am over my time.
    Thank you.
    Mr. Pallone. Thank you.
    The gentleman from Kentucky, Mr. Whitfield, who has 8 
minutes.
    Mr. Whitfield. Thank you, Mr. Chairman.
    And Mr. Hackbarth, thanks very much for being with us 
today. We appreciate your presence.
    I am going to revisit this one issue that Dr. Burgess 
mentioned, and that is Medicare Advantage. I want to do so 
because there are 13,000 seniors on Medicare Advantage in my 
congressional district. And my understanding is that there will 
be $200 billion taken out of the Medicare Advantage program. 
And in your testimony, you talked about the need for a robust 
Medicare Advantage program. And it seems to me that taking $200 
billion away is the exact opposite thing that we would need to 
do in order to have a robust Medicare Advantage program. And I 
would just like your comments on that, and I have not had the 
opportunity to read all of this report, but what do you say 
about that in this report, if anything?
    Mr. Hackbarth. Yes. For many years now, going back to 2001, 
MedPAC had recommended reducing the Medicare Advantage rates. 
We believed that reducing them would leave, still leave ample 
resources for a well run, high-value Medicare Advantage plan to 
do very well in serving the Medicare population.
    I have been a senior executive in such a plan. I have run a 
medical group that has had a lot of Medicare. It was back then 
Medicare Plus Choice; this was pre-Medicare Advantage. But I 
know a little bit about such programs from the delivery side.
    Just increasing the rates, as was done in a series of steps 
by the Congress, does not assure a robust Medicare Advantage 
plan. In fact, in crucial ways, it undermines it by allowing 
signaling to plans you can do very well while doing very 
little. And again, the evidence that that was occurring is, as 
the rates got very, very high relative to fee-for-service 
Medicare, we had a large influx of private fee-for-service 
plans that were adding very little, if any, value to the 
Medicare program but doing very well.
    That was not in the interest of the Medicare Advantage 
program, to allow low-value performers to do very well.
    If you reduce the rates, yes, you make it more difficult in 
the first instance, but it is also the spur to finding ways to 
do things better that is needed. That is what drives markets. 
It is that spur, that pressure to find new innovative ways to 
produce a high-value product.
    That had gone out of the Medicare Advantage program due to 
overpayment.
    And so there is a lot of waste in traditional Medicare. We 
fill books each year documenting the waste in traditional 
Medicare. An innovative private plan, well managed and really 
focused, can find ways to provide Medicare benefits, plus more, 
to the Medicare population for less money than fee-for-service 
Medicare. I believe that.
    Mr. Whitfield. So it is your position that you can maintain 
a strong, viable Medicare Advantage program even though you 
take that much money out of it?
    Mr. Hackbarth. Initially, you are likely to see a reduction 
in the number of plans and a reduction in benefits, higher 
premiums, fewer enrollees.
    That is the short term. The long term, though, is that it 
will begin to change the nature of the plans that participate, 
and I believe towards a higher value, more worthwhile option 
for Medicare beneficiaries.
    Mr. Whitfield. And over the long term, would you guess that 
there would be more Medicare Advantage programs available?
    Mr. Hackbarth. More individual plans offered? Again, it is 
going to depend on what your time horizon is. The first couple 
years, I would expect that you will see fewer. The easy money 
is gone, and people will say, oh, the easy money is gone, I 
will move on to something else. But over time, I think that you 
could see those numbers start to increase again.
    Mr. Whitfield. Also, I notice, on page 3 of the report in 
chapter 1, and I told you I hadn't read it, but I read the 
first page already. But it says in this report that you 
describe the least-costly-alternative policy as one way that 
CMS can apply the results of comparative effectiveness research 
in order to help contain Medicare spending.
    And yet when we were having the debate on the health care 
reform legislation, many people, including the President, were 
stating in no uncertain terms that comparative effectiveness 
research is providing patients and doctors with the information 
they need to make the best medical decisions. And there was 
never any reference to being a mechanism for cutting costs. So 
this report basically does say that that is one of the purposes 
of it. And in your mind, is there any inconsistency there?
    Mr. Hackbarth. I won't try to represent what President 
Obama or anybody else said.
    Let me say what I believe. I believe that it is in the 
interests of patients and physicians and the broader population 
to have more information about what works. That information, as 
it is developed, can be applied in many different ways. One 
would be to inform policies like least-costly-alternative. 
Another would be to build into shared decision-making programs 
where Medicare beneficiaries and other patients can be more 
actively engaged in making choices over their own health care. 
Still another way might be to identify potential areas to 
reward through pay-for-performance programs. Still another way 
might be to inform coverage decisions. There are a lot of 
different ways to use that information.
    You add them all together, having better information is 
good for patients and good for physicians.
    Mr. Whitfield. Thank you, Mr. Chairman.
    Mr. Pallone. Thank you.
    Mr. Whitfield. Can I yield Dr. Burgess 30 seconds?
    Mr. Burgess. One follow-up question on the Medicare 
Advantage, you referenced Medicare Plus Choice. Far before my 
time here, but that kind of went away because it was 
underfunded, did it not?
    Mr. Hackbarth. The enrollment did increase. We went through 
a similar cycle----
    Mr. Burgess. The short answer to the question is yes.
    Let me ask you something else before the small amount of 
time I have goes away. Wouldn't it have been better, if we 
stipulate that you are accurate about your statements about 
Medicare Advantage and there is more money going into Medicare 
Advantage than needs to go into it and if we have these 
additional dollars of Medicare, wouldn't it have been better 
use of those funds to keep them in Medicare and deal with the 
number one problem that is going to affect access for Medicare 
patients in the future and that is offsetting the cost of 
fixing the SGR formula?
    Mr. Hackbarth. How to allocate funds is really above my pay 
grade. Those are choices for the Congress to make.
    Mr. Burgess. We have a whole book here about allocating 
funds.
    Mr. Pallone. All right. We have to move on here.
    Next is Mr. Green.
    Mr. Green. Thank you, Mr. Chairman.
    I heard there were questions earlier on graduate medical 
education. In Congress, we call it GME. Because I want to make 
a point on it. I was a sponsor of the provision in the health 
care bill that on a residency training in our FUHCs because we 
have a great example in the Houston area of the Denver Harbor 
Clinic with an agreement with the Baylor College of Medicine. 
Greater accountability in GME isn't a bad idea, though, and we 
need to debate exactly how we are going to go about doing that 
because we don't want to hurt our hospitals or our resident 
programs, but we also like to make sure those physicians, those 
medical students know they can make a good living by practicing 
in FUHCs and hopefully will grow them.
    Mr. Hackbarth, again, I want to thank you, like all the 
committee members, for your being here today and the report. 
Your testimony and the report discussed demonstration projects 
at CMS and certain hurdles that these projects face, including 
low levels of funds and constraints on CMS in conducting these 
demo projects. Can you discuss these issues? And I know many of 
us in Congress, I like having CMS conduct a demonstration 
before implementing a broad policy on everyone, simply because 
it is a test model, to see how it works and if it is 
successful. Can you just address that?
    Mr. Hackbarth. Yes. Well, as you well know, Mr. Green, the 
health reform law took a major step in terms of increasing 
funding in giving the Secretary a broader authority in doing, 
testing new ideas for Medicare. And we think that is a 
significant step in the right direction.
    In order to meet the challenges that Medicare faces, of 
slowing the rate of increasing costs while preserving or even 
increasing the quality of care, we are going to need to change 
how Medicare pays for services. And the problem that we have 
had historically is that that process for testing new ideas is 
painfully slow. From conception to completion, we are often 
talking 7, 8, 9, 10 years.
    At that rate, we will never get the job done.
    The steps taken in the affordable care act we think have 
the potential to accelerate that process somewhat. We think 
that is very important.
    I would add, however, one of my biggest concerns is that 
let's assume, as I think we all hope, that we can run some 
successful demonstrations and develop new ideas that work, 
those ideas need to then be operationalized by CMS. And I worry 
that even though we have given more funding, more funding for 
the research and demonstration, we are still chronically 
underfunding CMS operations.
    And if we continue in that pattern--we can have all the 
great ideas in the world--they won't get implemented, or it 
will get implemented poorly, and we won't be any better off 
than we are today.
    Mr. Green. That brings up the next question. You also 
mentioned that newly created Center for Medicare Innovation, 
which was authorized under the health care--health reform law. 
Mr. Whitfield and I have been working on a demonstration 
project we think that meets the criteria for a CMI demo, and 
the health reform law provides CMI with $10 billion in funding 
to carry out these new demonstration projects, which, in my 
opinion, is a sizeable amount of money. It may not be enough, 
because hopefully we will see lots of ideas that can deliver a 
more effective and even a more reasonable cost delivery of 
medicine. Yet your testimony indicates that there may not be 
enough funding four CMS to carry out all the demo projects, 
even though none have been taken up yet because, frankly, it 
has only been the law for a very short time.
    And what are the issues that may cause CMS--even though 
none of it has been taken up, this may cause issues within CMS 
with the fee-for-service models. Can you discuss your 
statements on the Center for Medicare Innovation and the CMI?
    Mr. Hackbarth. I would agree, Mr. Green. The $10 billion 
funding is substantial, a huge increase compared to what CMS 
has had historically for this activity. So I don't mean to be 
critical of that at all. I think it is a big step forward.
    I do think it is important for Congress to be sensitive to 
the complex task that CMS now faces. There are a lot of 
potential candidates for new projects, and these new projects 
are still going to take time to set up, operationalize, get 
running. And then it is going to take time to get results. So 
even with $10 billion, this isn't going to happen with the snap 
of a finger.
    And then there is, as I said a minute ago, still the issue 
of about let us assume the best case, that we have successful 
demos; we still need resources in CMS to operationalize. It is 
a good step, but we need to be realistic. We have got problems 
still to solve.
    Mr. Green. Mr. Chairman, I have other questions. I know I 
have run out of time, even without giving an opening statement. 
So if we could submit questions later and get responses back.
    My next question. In your report, you state about half of 
the imaging studies were performed the same day in the office 
visit. You state that this is a reason to reevaluate the in-
office ancillary exemption, and I assume because you feel that 
is a low number. However, this number of 50 percent seems to be 
quite--that quite a few evaluations of patients' conditions 
were helped by being able to quickly diagnose an issue by 
performing an imaging study in the office.
    And I would imagine that clinically valid reasons when a 
physician may not want a patient to--may want a patient to rest 
and then revisit if the condition doesn't improve would lead to 
an imaging study done on a different day. If half are performed 
on the same day, it would appear that we are meeting a test for 
the need for the self-referral exemption of timeliness, 
convenience and coordinated care that same-day diagnosis allows 
for. Do you feel that this is a low number, the 50 percent? Or 
is it unrealistic to expect that this would be considerably 
higher?
    Mr. Hackbarth. What we were trying to do is provide some 
data on what was one of the original reasons for having an in-
office ancillary exception to the self-referral, and that was 
to allow same-day treatment in imaging. So what we did was 
look, in fact, at whether that is the case, and what we found 
was that for some services covered under the exception, therapy 
services, it was rarely the case that they were provided the 
same day. For advanced imaging, MRIs, CT and the like, it was 
provided same day less frequently than in half the visits. And 
then for the standard imaging, standard X-ray and the like, 
that was about half the time. And so there is variability 
depending on the particular service.
    But I would emphasize that this is an area where we need to 
tread carefully. There are some legitimate rationales for 
allowing physicians to do these services, including potentially 
accelerating diagnosis and treatment, making sure that the 
patients get the needed tests and the like. In other contexts 
we sing the praises of integrated practice. So it is not so 
much the integration that is a bad thing. It is not so much the 
physician ownership that is a bad thing. It is the combination 
of physician ownership with fee for service and often mispriced 
services. It is that combination that can be toxic and lead to 
overutilization of services. So we are trying to figure out 
ways to solve the problem without throwing the baby out with 
the bathwater.
    Mr. Green. Because I understand you have an 
endocrinologist, its ability to give a bone density test 
literally in the office there, it saves the time for another 
office visit for them to go get a test somewhere else.
    Mr. Chairman, I know I have run out of time, and I would 
like to submit the remaining questions. Thank you.
    Mr. Pallone. And I will mention that any Member can submit 
questions in writing, and we will ask that you get back to us 
as soon as you can.
    The gentlewoman from Wisconsin, Ms. Baldwin.
    Ms. Baldwin. Thank you, Mr. Chairman.
    Thank you, Mr. Hackbarth, for being here.
    You spent a chapter of the report discussing shared 
decisionmaking and its implications in Medicare. And I found it 
interesting that there was no explicit discussion of shared 
decisionmaking around care provided at the end of life. And 
especially given my sense that there is a fairly profound 
amount of end-of-life care that is provided that is not 
necessarily aligned with a patient's wishes or values, I wonder 
if this omission is because you see these issues as being 
distinct. Or, in fact, could you share--could you share with us 
your thoughts on shared decisionmaking between physician and 
patients to improve care at the end of life?
    Mr. Hackbarth. What we did in the chapter is our staff went 
out and looked at some of the existing programs for shared 
decisionmaking. It wasn't the whole universe of programs where 
a representative sample--we went to a number of them. And the 
programs that we looked at, they did not tend to be focused on 
end-of-life issues; they tended to be more focused on treatment 
for breast cancer or prostate cancer or some of those examples.
    The potentially rich opportunity for shared decisionmaking 
is in what some people call preference-sensitive care, where 
the right care is not something the physician can decide, it 
depends on how the patient assesses various risks, benefits, 
different potential outcomes. So shared decisionmaking is a way 
of helping the patient express their preferences. Given that as 
the underlying logic, it would seem that it could be applied to 
end-of-life issues. But as we looked at the programs that we 
describe in the report, that was not their principal focus.
    Ms. Baldwin. In the report I commend you for spending as 
much time and energy as you did looking at models to serve 
dual-eligible beneficiaries. These are folks who suffer not 
only from debilitating health conditions, but also from a 
system that leaves them with often poorly coordinated care.
    In your report you mention special needs plans, and 
specifically you profile a successful program that we have in 
my home State of Wisconsin. Yet there is also notation that 
these programs vary significantly across the country. So I am 
wondering if it is your expectation that the new requirements 
that special needs plans establish State contracts will improve 
the quality and consistent--I have a follow-up question about 
the National Committee For Quality Assurance and their role in 
this.
    Mr. Hackbarth. Yes. A couple of years ago--I am not going 
to be able to remember the exact date--we did a chapter focused 
on SNPs, on this special needs plans, and made a series of 
recommendations there. And one was that--for the plans focused 
on the dual eligibles, that it was very important for there to 
be a contract with the State that specifies a lot of important 
operational details. And so we think that the requirement in 
the Affordable Care Act that there be contracts is a step in 
the right direction.
    Not just any old contract will do. It is important that the 
content be right, to be sufficiently detailed and the like. But 
we do think that is a step in the proper direction.
    Ms. Baldwin. Then you focus again in this chapter on the 
importance of measuring outcomes, yet I think we lack 
information both on the best quality measures and the actual 
outcome data from the plans. So I understand that the National 
Committee For Quality Assurance is developing some additional 
reporting, but whose responsibility should it be to collect and 
analyze this data? Does there need to be congressional action 
to require this, or is it already within the powers of the 
agency and part of their obligation under the law?
    Mr. Hackbarth. Let me just begin first with full 
disclosure. Until very recently, a month or 6 weeks ago, I was 
a Board member at NCQA. So I just wanted to put that in the 
record.
    Ms. Baldwin. Thank you.
    Mr. Hackbarth. In terms of who does the actual development 
of the standards and measuring of performance, typically in an 
NCQA accreditation program, they are specifying the data 
required and evaluating the performance against that data. And 
then CMS basically piggybacks on that. So I would think that is 
the way the process is working.
    Am I misunderstanding your question?
    Ms. Baldwin. I am just wondering whether there needs to be 
additional congressional authority at this point in time. Is it 
already within the powers of the agency and part of their 
obligation under law to do this analysis?
    Mr. Hackbarth. Well, rather than risk an erroneous answer, 
can I respond to that request in writing?
    Ms. Baldwin. Absolutely. And since I have already expired 
my available time, that would probably be preferred by all. So 
thank you.
    Mr. Hackbarth. Thanks.
    Mr. Pallone. Thank you.
    The gentleman from New York, Mr. Weiner.
    Mr. Weiner. Dr. Hackbarth, thank you for being here.
    I think that there is broad agreement that we need some 
kind of a model to go take a hard look at Medicare, try to 
figure out ways to save money. But when there was a proposal to 
expand MedPAC, a lot of us during the deliberation on the 
health care reform were very much against it because there is a 
general sense that there is a bias against big cities, there is 
a bias against graduate medical education. And unfortunately, 
the report--the most recent report kind of reenforces a certain 
tone deafness on some of this stuff.
    And I think that the report does some remarkable things, 
but when it talks about a 3\1/2\ billion cut to IME funding in 
the exact same document where it points out that many teaching 
hospitals have negative margins presently, and further ignores 
the idea that we are in this movement, as you have testified 
to, of trying to move away from more and more people going into 
emergency rooms and more and more people seeing primary care 
physicians, it just seems to me that it is wildly 
counterintuitive. And it is not a question, but I would be glad 
to hear your response.
    Mr. Hackbarth. First of all, I just want to be clear that 
we are not recommending a $3\1/2\ billion cut. What we are 
recommending is that at a point in the future, at least 3 years 
in the future, that teaching institutions be held accountable 
for their performance, and that money, that 3\1/2\ billion, be 
contingent on performance. The 3-year period would be used to 
engage both the teaching hospitals, people in academic 
medicine, patient representatives, purchasers, health care 
delivery organizations in the development of those standards.
    Our fondest hope is that every cent of the $3\1/2\ billion 
would be paid out, because that would mean that good standards 
have been developed, and the programs are performing well 
against those standards.
    Mr. Weiner. So on page 102, recommendation 4-1 does not 
suggest the cost savings.
    Mr. Hackbarth. Our goal--as I said, our hope would be there 
would be no reduction in Medicare expenditures. That would 
signify that the programs are achieving the job, they are being 
accountable for----
    Mr. Weiner. Right. Let me spend a moment on self-reform. 
You identified--I mean, there are various numbers in the 
report, but it is something like 104 percent overpayments, we 
think, for self-referral, and there was some consideration and 
the consideration of the health care reform bill again to 
basically ban wide swaths of the self-referral, include them 
under the START.
    You have shown in your report that an overwhelming number--
the costs go up overwhelmingly for second- and third-day 
referrals. Can you tell us, is there any reason we should still 
permit physicians who clearly are conflicted from doing 
radiology, from doing MRI, from doing these various things? I 
mean, the evidence seems--it seems so clear that it is not that 
doctors are being venal, but they have got this giant machine 
sitting in their office, they have got to make payments on it, 
it just seems like too great a temptation. Isn't there a much 
more bright-line recommendation we can make here to simply say 
just don't permit those self-referrals anymore? I mean, this is 
no longer the type of thing where maybe you say only if it has 
to be in an emergency, where someone walks in with a sprained 
ankle where you want to do an X-ray--which, by the way, as you 
know, is the reason any exemption exists in the first place. I 
think--I mean, it just seems to me that we are past points of 
dancing around this, and I think that that type of prohibition 
is in order.
    Mr. Hackbarth. As I was saying earlier, before I took this 
job, I was the CEO of a very large physician practice in 
Boston, 500 physicians, all sorts of----
    Mr. Weiner. Your career is not taking the best projectile 
so far.
    Mr. Hackbarth. We all make choices.
    We, my group, brought high-end imaging MRIs, CT, in house. 
We thought it improved our ability to effectively manage the 
care, coordinate the care, assure the quality of the imaging 
and the like.
    A lot of notions of where the health care system needs to 
go in the future is towards more integration; not having all 
these separate, independent providers, but more organized 
systems. If we want to move in that direction, we don't want to 
discourage ownership.
    The problem isn't the ownership per se; It is the 
combination of ownership with fee-for-service payment and 
mispricing of services. So there is easy profit opportunities. 
That is the toxic combination. It is not one; It is the three 
of them together. So what we are trying to do is identify 
options that allow us to preserve the good part of integration 
while doing away with the bad part.
    Mr. Weiner. I have to say in my remaining--actually my time 
has expired. Let me just say that if we are going to get--if we 
are going to get your organization to a place that we really 
see it as a tool to start to do more of these savings and 
reenforce some of the good work you are doing in the report, 
you do have this institutional sense--and Mr. Pallone talked 
about it during the debate on health care--this institutional 
sense that you don't get it when it comes to teaching 
hospitals, but more than a few Members have mentioned that.
    But I yield back the balance of my time.
    Mr. Pallone. Thank you, Mr. Weiner.
    The gentleman from Ohio, Mr. Space.
    Mr. Space. Thank you, Mr. Chairman.
    And thank you for your testimony today.
    I come from a very rural area of Ohio. It is a large 
district in southeastern Ohio, exclusively rural. The largest 
town we have is about 27,000 people. And we have historically 
suffered from an inadequacy of physician workforce, and I think 
that is something that is probably true for most rural areas 
around the country, especially those that are relatively 
indigent or poor.
    Can you talk about why this deficit is problematic in the 
context of its impact on creating a rural workforce?
    Mr. Hackbarth. Mr. Space, which deficit are you referring 
to?
    Mr. Space. The deficit pertaining to access--not just 
family physicians, but physicians generally. And we have a 
difficult time recruiting subspecialists. We have a very 
difficult time recruiting primary care physicians. And I am 
curious as to your thoughts as to how that impacts creating the 
rule on workforce.
    Mr. Hackbarth. Clearly recruiting physicians is essential 
to provide quality care, and there certainly are documented 
problems in recruiting physicians in particular to rural areas, 
but also some inner city areas as well.
    In our report, in the chapter on graduate medical 
education, we note that there are a number of programs 
authorized through this committee in the Public Health Service 
that are focused in particular on recruiting people into 
medicine that come from rural areas or inner cities or are 
drawn for certain minorities or ethnic groups. Although the 
research literature on the effect of those programs is not as 
robust as we would like to see it, that makes a lot of sense to 
us, because there is pretty good research that a physician who 
comes from a rural area is more likely to go back there.
    Mr. Space. I think you could probably add to that--and 
maybe you have research that would corroborate this--but a 
physician who trains in a rural area is more likely to stay 
there. In fact, I read that in your report.
    While we are on this subject, on page 117, figure 4-1 of 
the report, there is a graph that kind of outlines, I guess, 
third-year internal medical residents becoming subspecialists, 
or hospitalists. And it is actually quite remarkable. From 
1998, we saw a predominance of general internal medicine 
somewhere in the neighborhood of 54 percent. That has shrunk to 
a 2007 level, it looks like around 25 percent, while 
subspecialties and hospitalists have experienced a marked 
increase. I have kind of a subquestion about that phenomenon. 
And I think your report quite correctly points out that we need 
to do something about that.
    Mr. Hackbarth. We do.
    Mr. Space. It seems to me that in the end it is about 
money. It is about compensation or the lack thereof that drives 
folks into those fields. I think the same thing would apply to 
family medicine, family physicians, primary care. Short of 
increasing the compensation for, in this case, general internal 
medicine practitioners or decreasing the compensation paid 
subspecialists or hospitalists, what avenues are available for 
Congress to rectify what is a growing and increasingly large 
discrepancy for those who are training to become physicians?
    Mr. Hackbarth. Actually one of our Commissioners, Dr. Karen 
Borman, has published on this topic of why physicians choose 
various specialties. She is a program director in general 
surgery. And money is certainly one of the factors. But it 
isn't the only factor. Another important factor, in some cases 
even more important than money, is lifestyle, and do they 
envision living this job, and often that is a drawback about 
primary care. Physicians in training, they experience primary 
care while in training in an ambulatory clinic as way too many 
patients, way too few resources, and they say, this lifestyle 
is just not for me, this job is not doable.
    So we do think that increasing payments for primary care 
relative to subspecialty care is a step in the right direction, 
but it may also be necessary to change how we pay for primary 
care. And as you know, that is part of the idea behind the 
medical home. Let us in addition to paying fee for service, pay 
per patient amounts that allow a primary care physician to 
build some infrastructure, hire some staff, to make the job 
more doable. So even if that money is not take-home pay, if it 
allows them to have a more robust practice, it can make primary 
care a lot more appealing.
    And then there is the recruitment issues. Again, if you 
recruit people from rural areas into medical school and train 
them in rural areas, they are much more likely to do family 
practice in your part of Ohio than somebody who is trained in 
New York City.
    Mr. Space. Are there tools available for the medical 
schools or even at the college level where I assume some of 
this recruitment is happening that would channel people early 
to take an interest in and begin pursuing a career in primary 
care rather than waiting until they are out of medical school 
and then throwing them into the GME program where they might be 
more inclined to focus on financial issues?
    Mr. Hackbarth. There are a number of programs in the Public 
Health Service that are designed to intervene earlier in the 
decisionmaking process and recruit people into medicine from 
diverse populations, and then encourage careers in primary 
care, because they are outside of Medicare. Frankly I don't 
consider myself real expert in all of the details, but 
generally speaking, we think that sort of earlier intervention 
effort holds a lot of promise and would urge a careful 
evaluation of those programs, the PHS, to see how we can build 
on them and make them as effective as possible.
    Mr. Space. Thank you very much.
    I yield back the balance of my time.
    Mr. Pallone. Thank you.
    We have about--I don't know--7 or 8 minutes left. So we are 
going to conclude with Mr. Engel. When I say that, I mean, 
there are votes. I don't know if the Members realize we have 3 
minutes.
    Mr. Engel. Thank you. Thank you, Mr. Chairman. I won't take 
the 7 or 8 minutes.
    I just want to pile on Mr. Hackbarth because--about the 
IME, the indirect medical education. It is a major concern to 
my area, New York, New York City. And I echo everything that 
Mr. Weiner said. We are very, very concerned. There are many, 
many teaching hospitals in New York City. They have been 
devastated by cuts on the Federal and State level, whether it 
is DSH payments or in the health care bill that we passed. We 
had a whole fight over do-gooder State provisions and things 
like that, And they have just been decimated back and forth.
    And New York has 15 percent of the teaching hospitals. We 
train 15 percent of the doctors across the country. This is a 
really big thing for us. And I know you said that it wasn't a 
$3.5 billion cut per se, and that cut supposedly would fund a 
new incentive grant program under which these teaching 
hospitals would still see funding if they show they are 
furthering goals. But there are yet to be established goals by 
the Secretary of HHS, and the New York City teaching hospitals 
are very worried that they would lose up to $450 million 
annually. And that is just really untenable.
    So I really--I understand that, but--what you just said 
before about you want to make sure there is quality. Of course 
you want to make sure there is quality, but at some point you 
can't get blood from a stone. And I think that these hospitals 
are just about at that point, and they are some of the best 
hospitals in the country, and every time we look for money or 
every time we look to so-called reform something, we hit them 
again and again and again. And at some point it obviously is 
going to affect the quality of care, or what they can provide, 
or how many nurses they can hire or things like that.
    So I just want to echo what so many of my colleagues have 
said, and I really wish you would look again at that point, 
because our teaching hospitals just cannot afford even the 
whisper of cuts. It can have a very negative and debilitating 
thing that could happen to them.
    Mr. Hackbarth. Well, I certainly understand the anxiety 
about it, Mr. Engel, but, you know, that uncertainty often 
accompanies needed change. I don't think that in any sense 
whatsoever we are anti-teaching hospital, as Mr. Weiner 
suggested. The vote on this recommendation was unanimous. Two 
of the members of the Commission are deeply involved in medical 
education and graduate medical education training.
    I have referred a couple of times now to my group in 
Boston. It was Harvard Vanguard Medical Associates. Our 
principal hospitals were the Brigham Women's Hospital and 
Children's Hospital.
    I have no antipathy whatsoever towards teaching 
institutions, but we do think that the taxpayer, the health 
care system, the Medicare beneficiaries deserve some 
accountability in the use of the resources put into GME.
    Mr. Engel. But you see, I am not going to argue with that 
statement, but I question whether the way you propose to go 
about it is the best way in going about it. Obviously we need 
to train tomorrow's doctors to have the appropriate skills to 
provide care in a modern health care system, but I just think 
slashing funds to teaching hospitals with no guarantee that 
they will be recouped, I don't think that is the best way to 
prepare future physicians. I think it causes a lot of angst, 
and I think it is negative.
    And the reports that we have, I think that MedPAC reports 
that teaching hospitals now have negative Medicare margins, 
which obviously means Medicare is not covering the cost of 
caring for Medicare patients. You know, what could be the 
justification of everyone a whiff of cutting funding to 
teaching hospitals so that Medicare pays even less? It makes no 
sense to me.
    Mr. Hackbarth. I certainly do understand your perspective 
on it and take it really seriously. I do. At the same time, I 
hear from a lot of colleagues involved in academic medicine who 
believe the system needs to be reformed, believe that the 
teaching hospitals can do a better job of training physicians 
for the future, that Medicare is their last hope.
    There is too much inertia in the system. Too many people do 
real well with the status quo. They need a catalyst for change. 
They need somebody to boost the prospects for reform in medical 
education. And these are people engaged in the system and say 
we need Medicare to be the lever that moves the system off the 
dot.
    Mr. Pallone. We are out of time. We have votes. I 
apologize, but I think we only have a minute and a half before 
we finish votes on the floor. So let me thank Mr. Engel and 
thank you also.
    As you have heard, many Members want to submit written 
questions. We ask them to submit them within 10 days and then 
have you respond to them as quickly as you can.
    But thank you so much for all that you are doing.
    Without objection, the meeting of the subcommittee is 
adjourned.
    [Whereupon, at 4:31 p.m., the subcommittee was adjourned.]
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