[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
MEDICARE'S FUTURE: AN EXAMINATION OF THE INDEPENDENT PAYMENT ADVISORY
BOARD
=======================================================================
HEARING
before the
COMMITTEE ON THE BUDGET
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, JULY 12, 2011
__________
Serial No. 112-12
__________
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COMMITTEE ON THE BUDGET
PAUL RYAN, Wisconsin, Chairman
SCOTT GARRETT, New Jersey CHRIS VAN HOLLEN, Maryland,
MICHAEL K. SIMPSON, Idaho Ranking Minority Member
JOHN CAMPBELL, California ALLYSON Y. SCHWARTZ, Pennsylvania
KEN CALVERT, California MARCY KAPTUR, Ohio
W. TODD AKIN, Missouri LLOYD DOGGETT, Texas
TOM COLE, Oklahoma EARL BLUMENAUER, Oregon
TOM PRICE, Georgia BETTY McCOLLUM, Minnesota
TOM McCLINTOCK, California JOHN A. YARMUTH, Kentucky
JASON CHAFFETZ, Utah BILL PASCRELL, Jr., New Jersey
MARLIN A. STUTZMAN, Indiana MICHAEL M. HONDA, California
JAMES LANKFORD, Oklahoma TIM RYAN, Ohio
DIANE BLACK, Tennessee DEBBIE WASSERMAN SCHULTZ, Florida
REID J. RIBBLE, Wisconsin GWEN MOORE, Wisconsin
BILL FLORES, Texas KATHY CASTOR, Florida
MICK MULVANEY, South Carolina HEATH SHULER, North Carolina
TIM HUELSKAMP, Kansas PAUL TONKO, New York
TODD C. YOUNG, Indiana KAREN BASS, California
JUSTIN AMASH, Michigan
TODD ROKITA, Indiana
FRANK C. GUINTA, New Hampshire
ROB WOODALL, Georgia
Professional Staff
Austin Smythe, Staff Director
Thomas S. Kahn, Minority Staff Director
C O N T E N T S
Page
Hearing held in Washington, DC, July 12, 2011.................... 1
Hon. Paul Ryan, Chairman, Committee on the Budget............ 1
Prepared statement of.................................... 3
Hon. Chris Van Hollen, ranking minority member, House
Committee on the Budget.................................... 4
Prepared statement of.................................... 6
Additional submission: Excerpt from Medicare Payment
Advisory Commission report to Congress, March 2011..... 81
Hon. Kathleen Sebelius, Secretary, U.S. Department of Health
and Human Services......................................... 7
Prepared statement of.................................... 10
Response to questions submitted for the record........... 78
Douglas Holtz-Eakin, president, American Action Forum........ 38
Prepared statement of.................................... 39
Grace-Marie Turner, president, Galen Institute............... 44
Prepared statement of.................................... 45
Judith Feder, Ph.D., professor and former dean, Georgetown
Public Policy Institute, and Urban Institute Fellow........ 52
Prepared statement of.................................... 54
Hon. Tim Huelskamp, a Representative in Congress from the
State of Kansas, questions submitted for the record........ 78
MEDICARE'S FUTURE: AN EXAMINATION OF THE
INDEPENDENT PAYMENT ADVISORY BOARD
----------
TUESDAY, JULY 12, 2011
House of Representatives,
Committee on the Budget,
Washington, DC.
The committee met, pursuant to call, at 10:05 a.m. in room
210, Cannon House Office Building, Hon. Paul Ryan [chairman of
the committee] presiding.
Present: Representatives Ryan, Akin, Price, McClintock,
Chaffetz, Stutzman, Lankford, Black, Ribble, Flores, Mulvaney,
Huelskamp, Young, Amash, Guinta, Woodall, Van Hollen, Schwartz,
Blumenauer, McCollum, Yarmuth, Pascrell, Wasserman Schultz,
Moore, Castor, Tonko, and Bass.
Chairman Ryan. The committee will come to order. We will
begin our hearing. Madam Secretary, I know how excited you are
to be here today. Thank you for coming.
I will begin with some brief opening remarks, then I will
turn it over to Mr. Van Hollen, and then we will get started.
First of all, I want to thank you, Madam Secretary, and our
other panel of witnesses for coming to today's hearing on the
future of Medicare. For years, politicians in both parties have
not been honest with the American people about Medicare. The
facts are clear. Health care costs are skyrocketing, growing at
8 percent a year. Medicare spending is on pace to double over
the next decade, exhausting its remaining funds. Ten thousand
baby boomers are retiring every day as fewer workers are left
paying into the program. Life expectancy was at 70 when
Medicare was created. Today it is 79. Nonpartisan experts,
including the Congressional Budget Office and Medicare's own
trustees, repeatedly warn of the looming insolvency of this
critical program. These aren't Democratic facts, these aren't
Republican facts. These are facts.
Rather than advancing solutions to address these facts, too
many politicians from both parties in the past, in Washington,
have offered nothing but empty promises and false attacks. We
deserve better. Our seniors deserve better. Due in large part
of this committee efforts, I believe that the debate is
shifting to better reflect Medicare's inescapable math.
President Obama was exactly right when he stated yesterday,
``If you look at the numbers, Medicare in particular will run
out of money and we will not be able to sustain that program,
no matter how much taxes go up. It is not an option for us to
just sit by and do nothing.'' I couldn't have said it better
myself.
Senator Joe Lieberman, who has worked in a bipartisan
manner to offer ideas of his own, put it well when he recently
said, ``We can only save Medicare if we change it.''
The purpose of this hearing is to examine the changes to
Medicare made by the President's health care law. Specifically,
we wish to seek to better understand the Independent Payment
Advisory Board's role in achieving the hundreds of billions of
dollars of savings called for by the President. While I imagine
we will hear about the many different expansions of government
buried in this 2,700-page law, today's hearing is simply
focused on page 1,000, section 3,403.
The Independent Payment Advisory Board, or IPAB, as we call
it, is a new executive branch agency created by the President's
new health care law. The law empowers this Board of 15
unelected officials with the authority to reduce Medicare
spending. Unless overturned by a supermajority in Congress, the
recommended cuts dictated by this Board will become law.
Bipartisan concerns have been raised with several aspects
of this Board. While the proponents claim that the
beneficiaries will be held harmless by the Board's decisions,
how can IPAB impose sharp cuts to providers without an adverse
impact on their patients? Given their unprecedented new power
over Medicare, to whom are these 15 bureaucrats accountable?
There are bipartisan concerns on this question. Democrats,
including some members of this committee, have raised concerns
with Congress turning its responsibilities over to this Board.
Seniors are also seeking clarity on the President's recent
efforts to expand this Board's power over Medicare. In an April
speech, the President called for IPAB to enforce further
restrictions in Medicare's growth rate, down to GDP plus .5
percent. The health care law is already driving Medicare's
reimbursement rates well below the artificially low Medicaid
rates. According to Medicare's chief actuary, Richard Foster,
the health care law will pay doctors less than half of what
their services cost at the end of the decade, and down to 33
percent in decades ahead. Foster warns that these cuts are
driving Medicare providers out of business and resulting in
harsh disruptions to the quality and access for seniors.
Yet the President's framework calls upon IPAB to slash
reimbursement rates even further than this. It remains
incumbent upon the administration to specify how this Board
will squeeze hundreds of billions of dollars of additional
dollars from Medicare over the next decade, as the President
has now proposed.
I want to thank Secretary Sebelius, I seriously do, for
testifying today, for coming here to address these concerns.
There is no question that we have differences on how to address
Medicare's unsustainable future. But I appreciate your
commitment to clarifying this debate for policymakers and for
the American people.
I also want to thank our second panel of distinguished
health care experts who will further discuss the merits of this
approach. We look forward to testimony from former CBO
Director, Doug Hotlz-Eakin, Grace Marie Turner of the Galen
Institute, and Dr. Judith Feder of the Urban Institute. Thank
you all of our witnesses for the contributions to this debate.
And I want to thank you all for joining this conversation.
With that, I would like to yield to the ranking member, Mr.
Van Hollen, for any opening remarks he may have.
[The prepared statement of Chairman Ryan follows:]
Prepared Statement of Prepared Statement of Hon. Paul Ryan,
Chairman, Committee on the Budget
Thank you to all for taking part in today's hearing on the future
of Medicare. For years, politicians in both political parties have not
been honest with the American people about Medicare.
The facts are clear:
Health care costs are skyrocketing, growing at 8% a year.
Medicare spending is on pace to double over the next decade, exhausting
its remaining funds.
10,000 baby boomers are retiring every day, as fewer
workers are left paying into the program.
Life expectancy was at 70 when Medicare was created, and
is at 79 today.
Nonpartisan experts--including the Congressional Budget
Office and Medicare's own trustees--repeatedly warn of the looming
insolvency of this critical program.
Rather than advancing solutions to address these facts, too many
politicians in Washington have offered nothing but empty promises and
false attacks. We deserve better.
Due in large part to this committee's efforts, I believe that the
debate is shifting to better reflect Medicare's inescapable math.
President Obama was exactly right when he stated yesterday: ``If you
look at the numbers, Medicare in particular will run out of money, and
we will not be able to sustain that program no matter how much taxes go
up. It's not an option for us to just sit by and do nothing.''
Senator Joe Lieberman, who has worked in a bipartisan manner to
offer ideas of his own, put it well when he recently stated: ``We can
only save Medicare if we change it.'' The purpose of today's hearing is
to examine the changes to Medicare made by the President's health care
law. Specifically, we will seek to better understand the Independent
Payment Advisory Board's role in achieving the hundreds of billions of
dollars of savings called for by the President. While I imagine we'll
hear about the many different expansions of government buried in the
2,700-page law, today's hearing is focused is on page 1000, Section
3403.
The Independent Payment Advisory Board--or IPAB--is a new executive
branch agency created by the President's healthcare law. The law
empowers this board of 15 unelected officials with the authority to
reduce Medicare spending. Unless overturned by a supermajority in
Congress, the recommended cuts dictated by this board will become law.
Bipartisan concerns have been raised with several aspects of this
board. While the proponents claim that beneficiaries will be held
harmless from the board's decisions, how can IPAB impose sharp cuts to
providers without any adverse impact on their patients?
Given their unprecedented new power over Medicare, to whom are
these 15 bureaucrats accountable? There are bipartisan concerns on this
question. Democrats, including members of this committee, have raised
concerns with Congress turning its responsibilities over to this board.
Seniors are also seeking clarity on the President's recent efforts
to expand this board's power over Medicare. In an April speech, the
President called for IPAB to enforce further restrictions in Medicare's
growth rate--down to GDP + 0.5%. The health-care law is already driving
Medicare's reimbursement rates well below the artificially low Medicaid
rates. According to Medicare's Chief Actuary Richard Foster, the health
care law will pay doctors less than half of what their services cost at
the end of the decade, and down to 33% in the decades ahead. Foster
warns that these cuts are driving Medicare providers out of business
and resulting in harsh disruptions in quality and access for seniors.
Yet the President's 'framework' calls upon IPAB to slash
reimbursements even further. It remains incumbent upon the
Administration to specify how this board will squeeze hundreds of
billions of additional dollars from Medicare over the next decade, as
the President has proposed.
I want to thank Secretary Sebelius for testifying today to help
address these concerns. There is no question that we have differences
on how to address Medicare's unsustainable future, but I appreciate
your commitment to clarifying this debate for policymakers and for the
American people.
I also want to thank our second panel of distinguished health care
experts who will further discuss the merits of IPAB. We look forward to
testimony from former CBO Director Doug Holtz-Eakin, Grace-Marie Turner
of the Galen Institute, and Dr. Judith Feder of the Urban Institute.
Thank you to all of our witnesses for their contributions to the
debate, and to all for joining in today's discussion. With that, I
yield to Ranking Member Van Hollen for his opening statement.
Mr. Van Hollen. Well, thank you, Mr. Chairman. I want to
join Chairman Ryan in welcoming you, Madam Secretary, to the
panel and to the other witnesses we are going to hear from
later. And I want to commend you on two initiatives you have
recently undertaken to help implement the Affordable Care Act.
One are the rules, guidelines that you recently released to
govern the exchanges, which will open the door to millions of
more Americans being able to get affordable health care in the
United States of America. The other that received less
attention is your recently announced initiative to improve the
coordination of care for individuals who are both on Medicaid
and Medicare, called the ``dual eligibles.'' And as you have
pointed out, using some of the innovative approaches in the
Affordable Care Act, we can both improve the quality of care
and save money through some of the changes you are proposing
there.
Those are important parts of the Affordable Care Act that,
together with others, will strengthen health care protections
for the American people, including provisions that have already
taken effect, including making sure that insurance companies
can no longer discriminate against kids with asthma, diabetes,
or other preexisting conditions by denying them coverage,
including making sure that young people up to the age of 26 can
stay on their parents' health care plans; including providing
tax credits to hundreds of thousands of small businesses who
can now afford to provide coverage to their patients; and
including beginning and ultimately closing the prescription
drug doughnut hole in Medicare that many seniors find
themselves trapped in.
Those are some of the important improvements that have been
made. So I believe that the fundamental question, the
fundamental underlying question of today's hearing is, what is
the best way to strengthen our health care system; and
specifically, how do we keep the promise of Medicare and meet
the challenges of Medicare, as the chairman has said?
One way, one approach, is to build upon the very important
reforms that were enacted in the Affordable Care Act. The
Medicare trustees have found that those measures will indeed
reduce the per-capita costs for Medicare beneficiaries going
forward, the increase in per-capita cost, that it will help
bend the curve, and that it will, in fact, extend the solvency
of Medicare. We need to build upon those approaches.
As we have heard in testimony before this committee, from
Dr. Rivlin and others, the Affordable Care Act opens all sorts
of new avenues to try and modernize the structure of Medicare,
which we need to do. We need to change the incentive structure
so that it rewards the quality of care, the value of care over
the volume of care and the quantity of care. And Mr. Chairman,
we agree that significant changes need to be made to modernize
the system in this way.
The Independent Payment Advisory Board is simply one tool
in the tool box for getting it done. It creates a back-stop or
a fail-safe provision to ensure the continued solvency of
Medicare if, and only if, the Congress chooses not to act, to
take other measures to build upon the kind of changes we saw in
the Affordable Care Act.
And by the way, the IPAB is specifically prohibited by law
from changing Medicare benefits. That prerogative is reserved
to the Congress. Moreover, the latest CBO projections indicate
that the rates of growth in spending per beneficiary are below
the target rates of growth for fiscal years 2015 and 2021 set
forth in the Affordable Care Act, and therefore CBO projects
that under current law, the IPAB mechanism will not affect
Medicare spending during the 2011 to 2021 period. So building
on that approach is one way.
What is the other approach? The other approach is a path
set forward in the Republican budget plan, a plan that will end
the Medicare guarantee and will force Medicare beneficiaries
into the private insurance market. That plan is a double
whammy, a double whammy for Medicare beneficiaries for the
following reasons: First, the Congressional Budget Office has
determined that that plan will actually drive up overall health
care costs. It changes the allocation of the burden, but it
drives up overall health care costs. Why? Because providing
that care in the private market is more expensive. And, in
fact, if you look at the history of per-capita growth rates in
the private market compared to per-capita growth rates in
Medicare, Medicare has actually outperformed the private
market. And therefore you are saying to those seniors, we are
going to toss you into the private insurance market where you
are going to face higher premiums and costs.
Why is it a double whammy? Because as you do that, you
dramatically reduce the support for Medicare beneficiaries from
the Federal Government. Dramatically. And as CBO has pointed
out, by the year 2030, you essentially flip the burden from
where it is today. Today the Medicare beneficiary, on average,
picks up about 30 percent of the costs and the Medicare program
picks up about 70 percent. By the year 2030, under the
Republican plan, it is the reverse, because of the rising costs
of care and the diminishing support from Medicare. Double
whammy.
And I want to just really wrap up with this point, because
we have heard it said that what the Republican plan offers
Medicare beneficiaries is really the same as what Members of
Congress get. The reason that is simply untrue is because
Members of Congress, by law, have a certain percentage of their
health care premiums supported by the Federal Government, by
the taxpayer. In fact, under what is called the Fair Share
Formula, that ranges from 72 to 75 percent, on average, the
share that is picked up by the Federal Government.
Under the Republican planned future Medicare, we are going
to be asking essentially Medicare beneficiaries to pick up
themselves that cost, and the Federal Government will pick up
only the remainder; so essentially, the flip of the deal that
Members of Congress give themselves. That is unfair.
We have to make choices. We have said many times on this
committee, to govern is to choose. We have lots of members on
our side who are not wild about every aspect of IPAB, even in
its back-stop role. But I think we are united, and I believe
ultimately the American people are united, that that is a
better approach--we have to fix the kinks as we go along--than
the idea of ending the Medicare guarantee and throwing that
decision, not to experts who are confirmed by the United States
Senate as a back-stop, but the people on the front line will be
the insurance industry. Under the Republican plan, it is the
insurance industry that fixes the benefits, frankly, actually
in consultation with, what you guys say, ``Federal
bureaucrats.'' And they will set the premiums and they will
choose; not the patients, at the end of the day.
So that is the choice. Mr. Chairman, thank you for holding
this hearing. And I look forward to the testimony.
Chairman Ryan. Thank you.
[The prepared statement of Mr. Van Hollen follows:]
Prepared Statement of Hon. Chris Van Hollen, Ranking Minority Member,
House Committee on the Budget
Thank you Mr. Chairman. I want to join Chairman Ryan in welcoming
you, Madame Secretary, to the panel and to the other witnesses we are
going to hear from later. And I want to commend you on two initiatives
you've recently undertaken to help implement the Affordable Care Act.
One is the Rules Guidelines you have recently released to govern the
exchanges, which will open the door to millions more Americans being
able to get affordable health care in the United States of America. The
other, that received less attention, is your recently announced
initiative to improve the coordination or care for individuals who are
on both Medicaid and Medicare, called the dual eligibles.
It was you who pointed out using some of the innovative approaches
in the Affordable Care Act, we can both improve the quality of care and
save money through some of the changes you are proposing there. Those
are important parts of the Affordable Care Act that together with
others will help strengthen health care protections for the American
people, including provisions that have already taken effect, including
making sure insurance companies can no longer discriminate against kids
with asthma, diabetes, or other preexisting conditions by denying them
coverage, including making sure that young people up to the age of 26
can stay on their parents' health care plans, including providing tax
credits to hundreds of thousands of small businesses who can now afford
to provide coverage to their patients. And including beginning and
ultimately closing the prescription drug donut hole in Medicare that
many seniors find themselves trapped in. Those are some of the
important improvements that have been made.
So I believe that the fundamental question, the fundamental
underlying question of today's hearing is What is the best way to
strengthen our health care system, and specifically, how do we keep the
promise of Medicare and meet the challenges of Medicare as the chairman
has said? One approach is to build upon the very important reforms that
were enacted in the Affordable Care Act. The Medicare trustees have
found that those measures will indeed reduce the per capita cost for
Medicare beneficiaries going forward, the increase in per capita cost;
that it will help bend the curve and that it will in fact extend the
solvency of Medicare. We need to build upon those approaches. As we
have heard in testimony before this committee from Dr. Rivlin and
others, the Affordable Care Act opens all sorts of new avenues to try
and modernize the structure of Medicare, which we need to do. We need
to change the incentive structure so that it rewards the quality of
care, the value of care, over the volume of care and the quantity of
care. And Mr. Chairman, we agree that significant changes need to be
made to modernize the system in that way.
The Independent Payment Advisory Board is simply one tool in the
toolbox for getting it done. It creates a backstop, or a failsafe
provision to ensure the continued solvency of Medicare if, and only if,
the Congress chooses not to act to take other measures to build upon
the kind of changes we saw in the Affordable Care Act. And by the way,
the IPAB is specifically, specifically prohibited by law from changing
Medicare benefits. That prerogative is reserved to the Congress.
Moreover, the latest CBO projections indicate that the rates of growth
in spending for beneficiary are below the target rates of growth for
fiscal years 2015 and 2021 set forth in the Affordable Care Act and
therefore CBO projects that under current law, the IPAB mechanism will
not affect Medicare spending during the 2011 to 2021 period.
So, building on that approach is one way. What's the other
approach? The other approach is the path set forward in the Republican
budget, a plan that will end the Medicare guarantee and will force
Medicare beneficiaries into the private insurance market. That plan is
a double whammy, a double whammy for the Medicare beneficiaries for the
following reasons.
First, the Congressional Budget Office has determined that that
plan will actually drive up overall health care costs. It changes the
allocation, the burden, but it drives up overall health care costs.
Why? Because providing that care in the private market is more
expensive, and in fact if you look at the history of per capita growth
rates in the private market, compared to per capita growth rates in
Medicare, Medicare is actually outperformed the private market. And
therefore you're saying to those seniors, 'We're going to toss you into
the private insurance market, where you're going to face higher
premiums and costs.' Why is it a double whammy? Because as you do that,
you dramatically reduce the support for Medicare beneficiaries from the
federal government, dramatically. As CBO has pointed out, by the year
2030, you essentially flip the burden from where it is today. Today,
the Medicare beneficiary, on average, picks up about 30 percent of the
cost and the Medicare program picks up about 70 percent. By the year
2030 under the Republican plan, it's the reverse, because of the rising
costs of care and the diminishing support from Medicare. Double whammy.
And I want to just really wrap up with this point because we've
heard it said that what the Republican plan offers Medicare
beneficiaries is really the same as what members of Congress get. The
reason that is simply untrue is because members of Congress, by law,
have a certain percentage of their health care premiums supported by
the federal government, by the tax payer. In fact, under what's called
the Fair Share Formula, that ranges from 72 to 75 percent on average,
the share that's picked up by the federal government. Under the
Republican plan, future of Medicare, we're going to be asking
essentially Medicare beneficiaries to pick up themselves that cost and
the federal government will pick up only the remainder. So essentially,
the flip of the deal that members of Congress give themselves. That's
unfair.
We have to make choices. We have said many times in this committee
that to govern is to choose. We have lots of members on our side who
are not wild about every aspect of IPAB, even in its backstop role. But
I think we're united and I believe ultimately the American people
united that that is a better approach, we have to fix the kinks as we
go along, than the idea of ending the Medicare guarantee and throwing
that decision not to experts who are confirmed by the United States
Senate as a backstop, but the people on the frontline will be the
insurance industry. Under the Republican plan it's the insurance
industry that fixes the benefits, frankly actually in consultation with
what you guys say federal bureaucrats and they will set the premiums
and they will choose, not the patients, at the end of the day. So, that
is the choice. Mr. Chairman, thank you for holding this hearing, and I
look forward to the testimony.
Chairman Ryan. Madam Secretary, the floor is yours.
STATEMENT OF KATHLEEN SEBELIUS, SECRETARY,
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
Secretary Sebelius. Thank you, Mr. Chairman. Chairman Ryan,
Ranking Member Van Hollen, members of the committee, I
appreciate you inviting me here today to discuss how the
Affordable Care Act is strengthening Medicare for seniors today
and tomorrow. My written testimony provides more detail, but I
want to quickly highlight some of the steps we are taking as
part of the health care law to fill the gaps in Medicare
coverage, to improve care and make the program more sustainable
for the future, while preserving its guarantees for seniors and
for people with disabilities.
When Medicare became law in 1965 it served as a national
promise that seniors wouldn't go broke because of a hospital
bill. In 2006 the Medicare program added coverage for
prescription drugs, which makes up a growing share of
beneficiaries' health care costs. But we know that too many
seniors still struggle to afford their medications, and that is
why the Affordable Care Act provided relief to 4 million
beneficiaries who fall, year in and year out, into the Medicare
Part D doughnut hole with, in 2010, a one-time, tax-free check
for $250. And some of the beneficiaries who have written to me
say they basically took that check and went right to the drug
store to help pay a part of their bill. And this year, because
of the Affordable Care Act, those same beneficiaries are
getting a 50 percent discount on covered name brand drugs. By
2020 that gap closes completely.
We also know that many seniors were going without the
preventive care that can help actually prevent illness before
it occurs, lowering costs and saving lives. And in some cases,
they were doing that because of expensive co-pays, and that
doesn't make a lot of sense. So beginning this year, the law
allows Medicare beneficiaries to receive recommended preventive
services like screenings for colon and breast cancer, as well
as an annual wellness visit, without paying a co-pay or
deductible. It is the right thing to do and it is the smart
thing to do because it helps us catch small health problems
before they turn into big ones.
The law is also helping to improve the quality and safety
of care for people with Medicare. Now, we know that there are
model hospitals across the country that have adopted best
practices to dramatically increase the quality of care. In
fact, for every common medical error, we have examples of
health systems that have significantly reduced, even
eliminated, them. And there is no reason why all Medicare
beneficiaries shouldn't enjoy that same high quality of care
wherever they receive it. And that is why the Affordable Care
Act provides unprecedented support to help these best practices
spread.
In March, we launched the Partnership for Patients, an
historic partnership with employers, unions, hospital leaders,
physicians, nurses, pharmacists and patients' advocates to
reduce harm and error in our Nation's hospitals. Last week we
were able to announce that more than 2,000 hospitals across the
country have already signed up and are taking steps to improve
care aimed at two very important goals: reducing preventable
readmissions and reducing hospital-acquired conditions.
Under the law, we have also established the first of its
kind Medicare/Medicaid Coordination Office that Congressman Van
Hollen referred to. The office is working with States to
improve care for beneficiaries who were enrolled in both
Medicare and Medicaid and often receive fragmented or
duplicative care as a result. And through the new Medicare and
Medicaid Innovation Center created by the law, we are testing a
wide range of additional models for increasing the quality of
care, from strategies for helping seniors manage their chronic
conditions, to new models in which hospitals and doctors who
help keep their patients healthy and out of the hospital can
share in the cost of savings they create. Together, these
reforms are dramatically strengthening Medicare today for
seniors and Americans with disabilities.
But we also have the responsibility to preserve the promise
of Medicare for future generations, and we can't do that if
costs continue to rise unchecked. Because doing care the right
way often costs less than doing it the wrong way, many of the
law's reforms are aimed at improving care and reducing Medicare
costs. For example, the Partnership for Patients alone, with
those two pretty tangible goals, will save Medicare as much as
$50 billion over the next 10 years by reducing errors that lead
to unnecessary care.
But the law doesn't stop there. It also contains important
new tools to help stamp out waste, fraud, and abuse in
Medicare. For fiscal year 2010, our anti-fraud efforts returned
a record $4 billion to taxpayers, and these tools in the
Affordable Care Act help us to build on that progress. The
Medicare trustees estimate that these reforms in the Affordable
Care Act have already extended the solvency of the trust fund
until 2024. Without these reforms the trust fund would have
been insolvent just 5 years from now.
But when it comes to Medicare's future, we can't take any
chances, and that is why the law also creates the Independent
Payment Advisory Board, or IPAB, as a back-stop, a fail-safe to
ensure Medicare remains solvent for years to come. As you know,
the IPAB is made up of 15 health experts, including doctors,
other health care professionals, employers, economists and
consumer representatives. Members are recommended by Congress,
appointed by the President, and confirmed by the Senate. And
each year, the Board is charged with recommending improvements
to Medicare. The recommendations must improve care and help
control costs.
For example, the Board can recommend additional ways for
Medicare to reduce medical errors and crack down on waste and
fraud. And contrary to what some have suggested, IPAB will not
ration care or shift costs to seniors. In fact, the Board is
specifically forbidden by law from making any recommendations
that would ration care, reduce benefits, raise premiums, or
raise cost-sharing or alter eligibility for Medicare. It leaves
all final decisions in the hands of Congress.
If Medicare spending begins to threaten the program's
future, IPAB will make recommendations to create the necessary
savings without shifting the cost of care to seniors and those
with disabilities. But it is up to Congress to decide whether
to accept the recommendations, or to come up with
recommendations of its own to put Medicare spending on a
stable, sustainable path. In other words, the IPAB
recommendations are only implemented when excessive spending
growth is not addressed and no other actions are being taken to
bring spending in line.
Now, the nonpartisan Congressional Budget Office and the
independent Medicare actuary both predict that the IPAB is
unlikely to be necessary anytime soon, thanks to the work we
are already doing to slow down rising costs. But we can't know
about the future. And that is why experts across the country,
including independent economists and the Congressional Budget
Office, believe that IPAB is a needed safeguard, and we agree.
We believe that the best way to strengthen Medicare for today
and tomorrow is to fill the gaps in coverage, to crack down on
waste and fraud, to bring down the cost of improving care. And
that is what we are working to do, given the new tools in the
health care law.
Over the last 16 months, our Department has focused on
working with Congress and our partners across the country to
implement the new law quickly and effectively. And in the
coming months I look forward to working with all of you to
continue those efforts and to make sure that Americans can take
full advantage of all that the new law has to offer.
Thank you again, Mr. Chairman. And I look forward to our
conversation.
Chairman Ryan. Thank you.
[The prepared statement of Secretary Sebelius follows:]
Prepared Statement of Hon. Kathleen Sebelius, Secretary,
U.S. Department of Health and Human Services
Chairman Ryan, Ranking Member Van Hollen, and Members of the
Committee, thank you for the opportunity to discuss our Department's
implementation of the Affordable Care Act. Millions of Americans across
the country are already benefiting from this law, including more than
100 million people currently enrolled in Medicare, Medicaid, and the
Children's Health Insurance Program (CHIP).
Over the past 16 months, we have worked closely with doctors,
nurses, other health care providers, consumer and patient advocates,
employers, Governors, State Insurance Commissioners, health plans, and
interested citizens to deliver many of the law's key benefits to the
American people, including Medicare beneficiaries. These benefits
include improving seniors' access to affordable, life-saving
medications; offering new preventive care benefits for Medicare
beneficiaries; improving care coordination for beneficiaries eligible
for both Medicare and Medicaid; and implementing new tools to fight
fraud and return money to the Medicare Trust Funds and Treasury.
I am proud to say that we have met deadlines, established strong
working partnerships, and begun laying the groundwork for reforms that
will have lasting effects in the years to come. This law means real
improvements for the care of Medicare beneficiaries now, and a stronger
and more fiscally sound Medicare program in the future.
Making Medicare sustainable is not about cutting program benefits
or shifting costs onto seniors. Sustainability for Medicare requires
fundamental changes to the way that health care is delivered--changes
that will lead to better health, better care, and lower costs. The
Affordable Care Act includes new policies and authorities that will
make critically needed delivery system reforms while preserving
Medicare's guarantees for seniors and people with disabilities.
improved value for seniors and people with disabilities
Thanks to the Affordable Care Act, Medicare beneficiaries will
enjoy better quality care, better access to care, and a more innovative
care delivery system that will help to improve outcomes and reduce
cost. People with Medicare have already experienced improved benefits
that help to keep them healthy and make prescription drugs more
affordable. The important changes called for in the Affordable Care Act
will also produce savings for taxpayers and extend the solvency of the
Medicare Trust Fund. Medicare's long-term outlook is improved as a
result of the development of new systems of health care delivery that
will improve health care outcomes and cost efficiency, and provide more
effective tools to reduce waste and fraud. These measures will also
help people with Medicare by slowing the growth of their monthly
premiums, and by keeping their copayments and deductibles lower than
they would have been under previous law.
Here are just a few examples:
Improving Medicare beneficiaries' access to life-saving
medicines: As a result of new provisions in the Affordable Care Act,
people with Medicare have already received immediate relief from the
cost of their prescription medications. Nearly 4 million beneficiaries
received a one-time, tax-free check for $250 after reaching the Part D
coverage gap, or ``donut hole,'' during 2010. In 2011, this benefit has
improved dramatically. Beneficiaries now automatically receive a 50
percent discount on covered brand-name drugs in the coverage gap. Among
beneficiaries who have reached the coverage gap, the average
beneficiary has saved $545, for total savings of more than $260 million
in the first five months this year. Further, people with Medicare Part
D will pay a smaller share of their prescription drug costs in the
coverage gap every year from now until 2020, when the coverage gap will
be closed.
Increased access to preventive care: Thanks to the
Affordable Care Act, people with Medicare now are eligible to receive
critical preventive care, like mammograms and colonoscopies, with no
coinsurance or deductible. Beneficiaries also have access to a new
annual wellness visit starting this year that provides a focus on
preventive care. As of June 10, about 5.5 million people with Medicare
have accessed one or more of these preventive measures. At the end of
June, we launched a new awareness effort--Share the News, Share the
Health--to highlight Medicare's preventive benefits and encourage more
Medicare beneficiaries to take advantage of these potentially
lifesaving services. Improving access to preventive care can improve
early detection and treatment options, potentially reducing the cost of
care and improving the health of our Medicare population in the long
run.
High quality Medicare Advantage benefits: This year, HHS
has improved its oversight and management of the Medicare Advantage
(MA) program. The results for the 2011 plan year show that these
efforts are paying off: seniors and people living with disabilities
have clearer plan choices that, on average, offer improved protections
and stable benefits at lower premiums. Contrary to predictions of
enrollment decline, 2011 MA enrollment is up six percent and average
premiums are down six percent compared to 2010, while benefit and cost-
sharing levels remain roughly the same. Access to MA remains strong, as
more than 99 percent of Medicare beneficiaries have a choice of MA
plans as an alternative to traditional Medicare. As part of the
Administration's national strategy for implementing quality improvement
in health care, CMS is also working to create new incentives for all MA
plans to improve the care they offer to Medicare beneficiaries.
Beginning in 2012, CMS will implement a demonstration that builds on
the quality bonus payments authorized in the Affordable Care Act by
providing stronger incentives for plans to improve their performance,
thereby accelerating quality improvements. These enhanced incentives
will help provide a smooth transition as MA payments are gradually
aligned more closely with costs in the Medicare fee-for-service
program.
Increased support for primary care: Thanks to the
Affordable Care Act, physicians have better incentives to provide vital
primary care services to Medicare beneficiaries. Beginning January 1,
2011, the Affordable Care Act provides for new 10 percent bonus
payments for primary care services furnished by a primary care
practitioner and for major surgical procedures furnished by a general
surgeon in a health professional shortage area. Primary care
practitioners in family medicine, internal medicine, geriatric medicine
or pediatric medicine, as well as general surgeons, nurse
practitioners, clinical nurse specialists, and physician assistants are
eligible for these new incentive payments.
Specific focus on Hospital-Acquired Conditions (HACs):
These conditions consist of complications, including infections, that
patients acquire while receiving care that is supposed to help them.
Not all HACs are preventable, but a great number can be avoided. For
example, the Centers for Disease Control and Prevention (CDC) has
estimated that each year, almost 100,000 Americans die and millions
suffer from hospital-acquired infections alone. In addition to pain,
suffering, and sometimes death, these HAC complications could add as
much as $45 billion to hospital costs paid each year by taxpayers,
insurers, and consumers.\1\ The Department of Health & Human Services'
Office of the Inspector General has reported that 44 percent of adverse
events experienced by Medicare beneficiaries in the October 2008 sample
month were preventable, and that these complications cost the Medicare
program an extra $119 million in that one month alone.\2\ We know of
hospitals in this country that, through improvements in their health
care processes, have virtually eliminated some forms of infections that
other hospitals still think are inevitable. To create incentives for
hospitals to prevent such infections and other adverse conditions, the
Affordable Care Act includes a Medicare payment reduction for hospitals
in the top quartile of all hospitals with regards to selected hospital-
acquired conditions under the inpatient prospective payment service
system beginning in fiscal year 2015. Consistent with our commitment to
transparency, information for consumers, and the Affordable Care Act,
the Secretary will publically report information regarding HACs of each
affected hospital on the Hospital Compare website. Those hospitals will
have an opportunity to review, and submit corrections for, the
information to be made public prior to the information being publically
reported.
---------------------------------------------------------------------------
\1\ The Direct Medical Costs of Healthcare-Associated Infections in
U.S. Hospitals and the Benefits of Prevention, March 2009, http://
www.cdc.gov/ncidod/dhqp/pdf/Scott--CostPaper.pdf.
\2\ Adverse Events in Hospitals: National Incidence Among Medicare
Beneficiaries, November 2010, http://oig.hhs.gov/oei/reports/oei-06-09-
00090.pdf.
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Reducing unnecessary hospital readmissions: We know that
about one in every five Medicare beneficiaries discharged from the
hospital will be re-admitted within 30 days of discharge. The Medicare
Payment Advisory Commission (MedPAC) estimates that Medicare spends $12
billion annually on potentially preventable readmissions.\3\ Proper
attention to care transitions, coordination, outreach, and patient
education and support could all prevent unnecessary readmissions and
allow at-risk patients to recover at home, where they would prefer to
be, rather than reentering the hospital with complications. The
Affordable Care Act provides for a payment adjustment for inpatient
hospital services to encourage the reduction of certain readmission
rates and also provides financial incentives for certain hospitals
partnering with community-based organizations to improve transitional
care processes. Per the Affordable Care Act, the readmission rate
information for all patients in each hospital participating in the
program will publicly available online.
---------------------------------------------------------------------------
\3\ Medicare Payment Advisory Commission (MedPAC) Report to the
Congress, June 2007. (2005 data).
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better care: a partnership with states
The Affordable Care Act is beginning to improve the way care is
delivered to Medicare beneficiaries. Too often, health care takes place
in disconnected fragments. Instead, we should make it possible for new
levels of coordination and cooperation to take place among the people
and the entities that provide health care, in order to smooth the
journeys of patients and families--especially those coping with chronic
illness--through their care over time and in different places.
For example, coordination is critically needed in providing care to
more than 9 million beneficiaries who are eligible for both Medicare
and Medicaid, also known as dual eligibles. The Affordable Care Act
established a Federal Coordinated Health Care Office, also known as the
Medicare-Medicaid Coordination Office, to improve coordination of the
care provided to these beneficiaries. This population is among the most
vulnerable and chronically ill beneficiaries: though they represent
only 15 percent of Medicaid enrollees, they account for 39 percent of
Medicaid expenditures. Similarly, they are 16 percent of Medicare
enrollees but account for 27 percent of Medicare expenditures. Dual
eligibles must navigate two separate systems: Medicare for coverage of
basic health care services, and Medicaid for coverage of long-term care
supports and services and help with Medicare premiums and cost-sharing.
The Medicare-Medicaid Coordination Office is working to better
streamline care for dual eligibles by improving alignment between the
two programs, sharing data that is critical to States' ability to
manage care for these individuals, and supporting States' innovative
approaches to coordinating care for dual eligibles. The office has been
hard at work. Some of its initiatives include:
On May 11, 2011, the Medicare-Medicaid Coordination Office
launched the Alignment Initiative, an effort to more effectively
integrate benefits under the Medicare and Medicaid programs. Better
alignment of the two programs can reduce costs by improving health
outcomes and more effectively and efficiently coordinating care.
Also on May 11, the Office announced a new process to
provide States access to Medicare data to support care coordination for
individuals enrolled in both Medicare and Medicaid. The ability to
access both sets of information on beneficiaries covered by both
programs enables States to better analyze, understand, and coordinate a
person's experience.
Partnering with the Center for Medicare and Medicaid
Innovation, the Office has awarded contracts of up to $1 million each
to 15 States to design person-centered approaches to coordinate care
across primary, acute, behavioral health and long-term supports and
services for Medicare-Medicaid enrollees.\4\ The overall goal of this
contracting opportunity is to identify delivery system and financial
models that can be rapidly tested and, upon successful demonstration,
replicated in other States.
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\4\ http://www.cms.gov/medicare-medicaid-coordination/04--
StateDemonstrationstoIntegrateCareforDualEligibleIndividuals.asp#TopOfPa
ge
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On July 8, 2011, HHS announced new opportunities for
partnering with States to improve quality and costs for Medicare-
Medicaid beneficiaries. Specifically, we announced a demonstration
program to test two new financial models designed to help States
improve quality and share in the lower costs that result from better
coordinating care for individuals enrolled in Medicare and Medicaid; a
demonstration program to help States improve the quality of care for
people in nursing homes by providing these individuals with the
treatment they need without having to unnecessarily go to a hospital;
and a technical resource center available to help them improve care for
high-need high-cost beneficiaries.
program integrity
As we move forward with new and exciting benefits and care models,
we are redoubling our efforts to minimize waste, fraud, and abuse in
Federal health care programs. This Administration has put an
unprecedented focus on reducing fraud and improper payments, and is
making progress towards that end. A greater focus on program integrity
is integral to the success of Medicare reform. In 2010, our collective
efforts returned over $4 billion in health care fraud resources to the
Medicare Trust Fund, victim programs, and others. The Affordable Care
Act offers additional front-end protections to keep those who commit
fraud out of Federal health care programs, as well as new tools for
deterring wasteful and fiscally abusive practices, promptly identifying
and addressing fraudulent payment issues, and ensuring the integrity of
our programs. Recently, CMS consolidated Medicare and Medicaid program
integrity efforts into one office, the Center for Program Integrity.
This organizational change, coupled with the new tools provided by
the Affordable Care Act, enhances CMS's ability to improve its program
integrity capabilities and jointly develop Medicare, Medicaid and CHIP
anti-fraud and abuse policies. For example, many Affordable Care Act
provisions, such as enhanced screening requirements for new providers
and suppliers, apply across the programs. In addition, oversight
controls such as authority for temporary enrollment moratoria and
authority for a temporary withhold on payment of claims for new durable
medical equipment suppliers based on risk, will allow us to better
focus our resources on addressing the areas of greatest risk and
highest dollar impact.
Further, on July 1, 2011, CMS implemented a new predictive modeling
technology developed with private industry experts to fight Medicare
fraud. Similar to the technology used by credit card companies,
predictive modeling will help identify fraudulent Medicare claims prior
to payment on a nationwide basis so we can begin to take action to stop
fraudulent claims early on. This initiative builds on the new anti-
fraud tools and resources provided by the Affordable Care Act.
Together, these tools are helping us move beyond ``pay and chase''
recovery operations to an approach that prevents fraud and abuse.
Finally, through the Health Care Fraud Prevention and Enforcement
Action Team, or ``HEAT,'' CMS has joined forces with our law-
enforcement partners at the Department of Justice and the Department of
Health and Human Services' Office of Inspector General to collaborate
and streamline our efforts to prevent, identify, and prosecute health
care fraud.
independent payment advisory board
All of this work reflects this Administration's vision for
improving the health of seniors and securing Medicare finances for the
future. By reducing the underlying costs of the health care system and
by improving the care our seniors receive, we can continue to serve
today's beneficiaries while preparing for tomorrow's.
We also know that the future of Medicare requires continued
vigilance and careful oversight, which is why we support the creation
of a backstop mechanism to ensure Medicare remains solvent for years to
come. The Independent Payment Advisory Board (IPAB) builds on the
commitment we have made to our seniors' health.
The IPAB will consist of 15 health experts, including health care
providers, patient advocates, employers, and experts in health
economics. The Affordable Care Act provides for consultation between
the President and Congressional leadership in appointing members of the
Board, and appointments are subject to the advice and consent of the
Senate. Their work will be objective and transparent.
The Board's primary responsibility will be to recommend
improvements to Medicare. Recommendations of the IPAB will focus on
ways to improve health care while lowering the growth in Medicare
spending. For example, the Board could recommend approaches that would
build on and strengthen the initiatives mentioned above, from reducing
medical errors, to strengthening prevention and improving care
coordination, or targeting waste and fraud.
At the same time, the law contains important limitations on what
the Board can recommend. The statute is very clear: the IPAB cannot
make recommendations that ration care, raise beneficiary premiums or
cost-sharing, reduce benefits, or change eligibility for Medicare. The
IPAB cannot eliminate benefits or decide what care Medicare
beneficiaries can receive. Given the long list of additional
considerations the statute imposes on the Board, we expect the Board
will focus on ways to find efficiencies in the payment systems and
align provider incentives to drive down costs without affecting our
seniors' access to the care and treatment they need. The Board's
recommendations are also just that--recommendations--unless Congress
fails to act. Congress still has the authority to make final decisions.
Starting in 2014, Medicare will have specific benchmarks for per
capita spending increases. These benchmarks will initially be set at
the average of the increases in CPI and CPI-Medical. Beginning in 2020,
the benchmark will be set at the rate of growth of GDP per capita + 1
percentage point. Given these benchmarks, the Medicare Actuary predicts
that the IPAB will be needed mainly as a backstop. Through the
Affordable Care Act and our program integrity efforts, we have already
substantially reduced the rate of growth in projected Medicare
spending. The Office of the Actuary predicts that per beneficiary
spending in the Medicare program will grow at a rate below the GDP+1
percentage point benchmark throughout the 75 year projection period.
Indeed, the Office of the Actuary predicts that over the next decade
per beneficiary Medicare spending will grow at about the same rate as
GDP per capita, including an allowance to raise future physician
payments to avoid the cuts mandated by the Sustainable Growth Rate
formula. That would be a substantially slower rate of growth in
expenditures per beneficiary, over a 10 year period, than has ever
before been seen in the Medicare program. In addition, the current
Medicare spending baseline prepared by the Congressional Budget Office
assumes that Medicare spending growth will not exceed the benchmark
amounts over the next 10 years. Of course, predictions are just that--
predictions--and predictions are not always certain. Health care
spending patterns--or the rate of growth in the benchmarks--could
change. The IPAB backstop means that if Medicare spending growth does
exceed growth in the benchmarks, the IPAB will make specific
recommendations, and Congress will then have the opportunity to take
action. If Congress rejects IPAB recommendations, they will replace
them with reforms that bring Medicare spending growth to or below the
benchmark--achieving the same savings. The Board's recommendations will
only go into effect if Congress accepts them, or if Congress fails to
act. In other words, the IPAB recommendations are only implemented when
excessive spending growth is not addressed, and other actions being
taken are insufficient to bring spending to levels at or below the
benchmark.
Experts across the country, including independent economists and
the Congressional Budget Office, believe the IPAB is a needed
safeguard. We agree, which is why the President's deficit reduction
framework strengthens the Board. This will ensure that we protect
Medicare's future without resorting to radical benefit cuts or cost-
shifting to seniors and people with disabilities.
conclusion
The accomplishments listed above are just some of the many benefits
that the Affordable Care Act has provided. The Affordable Care Act has
already had a positive impact on Medicare beneficiaries, as well as on
the millions more who now have greater options and protections in their
private health insurance. Our Department has worked hard to implement
the many new programs and authorities that the Act has provided us. We
take very seriously our responsibility to improve access, quality, and
efficiency of care for all our Medicare beneficiaries, while protecting
the long-term fiscal integrity of the Medicare program.
Chairman Ryan. As I mentioned in my opening, I quoted the
President, which I thought was pretty much head-on with his
remarks about Medicare. The trustees, your chief actuary
projects the trust fund goes bankrupt in 2024. CBO tells us it
is in 9 years.
Do you agree with the President and Medicare's chief
actuary that the status quo as we know it, the traditional fee-
for-service system is unsustainable and will soon fail to
deliver the promise of health and retirement security for
seniors that we all depend on?
Secretary Sebelius. Well, Mr. Chairman, I believe that the
fee-for-service system has incentives in all the wrong places,
so we are often paying for care that actually delivers very
poor health results. And in fact, in many cases, if people are
sicker, stay in the hospital longer, acquire more infections,
are readmitted more frequently, that hospital makes additional
money, as opposed to preventive aggressive home-based, patient-
centered care, which often is not only more desirable by the
patient and doctor, but actually lowers the cost.
So the Affordable Care Act for the first time gives
Medicare not only the tools but the direction to actually align
the incentives and, I think, the payment strategies.
Chairman Ryan. Okay. So I think on the premise of that we
would agree, which is the current system is unsustainable and
has all the wrong incentives, which is part of the reason why
it is driving it toward bankruptcy.
Secretary Sebelius. I would say that the current fee-for-
service system, yes, is unsustainable.
Chairman Ryan. So if you could bring up chart one, please.
So here is the question we have. I have got basically three
questions. And this is, it is basically, you know, how best to
solve this problem. According to your chief actuary, providers
who are reimbursed through Medicare receive about 80 percent of
what a private plan offers. And as we all know, what inevitably
happens is, if a provider loses money on a Medicare patient,
then they will overcharge the private payer to make up the
difference. And that is putting upward pressure on prices, on
health care costs. Under the health law, the Affordable Care
Act, this falls from 80 percent to 48 percent by 2022, and to
33 percent by 2050.
Hospitals suffer the same fate. This is the hospital
reimbursement rate curve under the new health care law. A 67
percent drop in prices relative to what private plans pay over
the course of the window. So we are already paying them,
providers, through Medicare, far less than they get otherwise.
In most cases we are paying less than they actually--the cost
of the care.
And so basically, I have three questions. Do you agree with
the chief actuary's findings that cutting payments to providers
does have an effect on providers? Because here is what he says.
He is saying that by the year 2050, 40 percent of hospitals,
skilled nursing facilities, and home health agencies will have
negative margins. In other words, they will go bankrupt. So
that means they will leave the business of providing Medicare
services to Medicare beneficiaries. Do you agree that cutting
payments to providers has an effect on providers in such a way?
Secretary Sebelius. Mr. Chairman, I do believe that
certainly cutting payment has an impact. What I know is that
Medicare cost trends are actually significantly, I would say,
better than the private sector, growing at about 4.9 percent,
as opposed to the private sector growth of about 7.2 percent
over the last 10 years. And I do believe that Medicare has the
opportunity to actually change the cost trends by improving the
underlying costs of delivering health care, as opposed to--I
would suggest that the House Republican plan just shifts those
costs onto seniors and those with disabilities and does not
address the underlying costs at all. I think improving care and
lowering costs makes a lot more sense than just shifting costs.
Chairman Ryan. Well, okay. So this is the hospital chart
which shows, under the Affordable Care Act, reimbursements to
hospitals goes down precipitously.
Go to chart two if you can.
That is the physician chart which shows Medicare and
Medicaid obviously goes down precipitously under what private
plans pay. So obviously, if we underpay them it is going to
save more money. The question is, if we keep underpaying them
at this pace, will they keep delivering the benefit? I mean, so
our issue here is if there are fewer providers participating in
Medicare, because their payments are going down so far below
their cost--we have 10,000 baby boomers retiring every day. Do
you not agree that if we underpay them, that they will just
stop seeing beneficiaries?
Secretary Sebelius. Mr. Chairman, I think that assumption
is that nothing changes in care. Nothing changes in the care
trajectory, that we keep paying at the same--not only rates,
but keep paying for the same kinds of services. So if you
assume that care delivery doesn't change at all, that we keep
paying for good care the same as bad care, that we don't have
any changes in underlying care, that we don't coordinate care,
that we don't have more home-based patient-based care, that we
keep the churning of one out of every five Medicare patients
going in and out of the hospital, whether or not they have seen
a health care provider or not, that trend line is probably
accurate.
I would suggest that what the Affordable Care Act does, and
what we have begun to do, I think pretty successfully in these
early days with the innovation center and the very enthusiastic
support of a lot of health care providers across the country,
is look at where the best practices are, where the hospital
systems are and the provider groups who have actually delivered
very high-quality care, well below the trend line, and capture
that; and then reach out to others to try and accelerate that
change, and use the enormous payment levers of the Medicare
system to do just that, to drive best practices.
Chairman Ryan. So we are right now looking at a law that
will pay providers 80 cents on the dollar, then 66 cents on the
dollar in this decade, going down to 33 cents on the dollar. So
you are saying that we will be able to sort of mastermind how
to pay for this care at those low rates and they will still
provide these services? This is where I don't understand this.
Ultimately, don't you believe that there is going to be a
time where if you are going to so dramatically underpay for a
service to a provider that they would provide a beneficiary,
that they will just stop providing that service? I mean isn't
that effectively rationing, in of and of itself? If you don't
pay the providers anything close to what it costs to provide
the service, won't they just stop providing the service?
Secretary Sebelius. Well, Mr. Chairman, again, I would
suggest that what is going to occur, and is occurring across
the country, is a different kind of service being provided, a
different strategy around health care services, and one that
actually suggests that doctors and hospitals, through
mechanisms like the Accountable Care Organization, actually
group together around quality-care delivery and share in the
savings that they achieve. We have heard from very enthusiastic
participants around that strategy.
So I think if you capture the status quo and say you just
drive that into the future and nothing ever changes, this is
probably an accurate chart. But I don't believe that that is
sustainable. I also don't believe, Mr. Chairman, that just
taking those cost trends, shifting the burden of costs onto
seniors and those with disabilities, which the plan that has
been passed by the House of Representatives does, addresses
this at all. It just means that more of those costs are going
to be paid by seniors and those with disabilities. It doesn't
bring more doctors. It doesn't change the underlying costs. It
doesn't deliver better care. It means that fewer and fewer
seniors out of their own pocket are going to be able to afford
the care they need.
Chairman Ryan. Can you bring up chart three?
Okay. So this chart shows you what we thought prescription
drug law was going to cost originally. Actually, the CMS
actuary estimated it was going to be about a $700 billion, 10-
year program. CBO, a $400 billion program. It came in 41
percent below those cost projections, 41 percent below the CBO
projections, which were $400 billion, versus the CMS, $700
billion projection.
And so I want to ask you basically this. Do you, if you had
to do it over again, because at the time there was a debate
between Republicans and Democrats about how to do the drug
program. The Republican view prevailed at that time, which was
to have Medicare certify private plans to offer drug benefits
to seniors and each year they get to choose among competing
plans for their benefit. And that active choice of competition,
according to your actuary, accounts for 85 percent of the cost
reductions or the savings from the projection. If you had to do
it all over again, would you scrap the Part D program the way
it is designed today and would you have gone with the original
point of view that it should just be one program run by
Medicare and not one of competing plans?
Secretary Sebelius. Mr. Chairman, I don't know that I could
answer that question. I think there were a few fatal flaws in
Part D that I certainly would go back and change. One was the
design of the program so that the seniors who got the most
prescriptions fell into a coverage gap; and, secondly, it
wasn't paid for. So one of the reasons that Medicare is
becoming less solvent is that we have a huge unfunded liability
in Part D.
Chairman Ryan. But the delivery system, would you have
stuck with multiple plans that people can choose from, or would
you have sided with the position at the time of your party that
we should not have that, we should just have a one-size-fits-
all, only Medicare provides the drug benefit.
Secretary Sebelius. As I say, I think there are some fatal
flaws that have been corrected. I do think that the drug
program is an essential benefit that many, many seniors rely
on. I can't tell you the cost estimates of one versus many. I
do think Medicare still pays for drugs at a higher price than
anyone on Earth, and as a Governor who used to run a program
where I negotiated for drug prices, I can tell you that they
are still overpaying for drugs.
Chairman Ryan. Let me ask it this way. Should seniors be
given a choice of plans to choose from to get their drug
benefit?
Secretary Sebelius. I think that is a great idea. And
seniors are given a choice of Medicare programs now with
Medicare Advantage, and many have also some fee-for-service
plans along with traditional Medicare. What we know, though, is
that Medicare Advantage, the private market strategy, is still
well above the fee-for-service strategy, and no beneficial
health results as a result.
Chairman Ryan. Okay. I don't want to keep wasting time on
this. But you agree with the idea that seniors ought to have
plans from which to choose from for their benefits; is that
correct?
Secretary Sebelius. You tell me what we are looking at and
what costs are--I mean it is impossible to----
Chairman Ryan. I have been asking you about Part D the
whole time. Should they have a choice of plans for their drug
benefit?
Secretary Sebelius. As opposed to what?
Chairman Ryan. As opposed to the other idea of not having a
choice of plans.
Secretary Sebelius. If it is 30 percent cheaper with the
negotiated rate, probably that doesn't make sense. It is a
choice. I mean, having drug benefits is critical and I would
like to get seniors the drug benefit at the best possible cost.
Chairman Ryan. Okay. Here is the point we are trying to get
at here. The health care law, the Affordable Care Act, ends the
Medicare guarantee. It ends Medicare as we know it. It takes a
half a trillion from Medicare to spend on the Affordable Care
Act. It puts a cap on Medicare. And this is the first time we
have actually capped an entitlement.
Now, nobody is arguing against capping spending around
here. The only difference is, this law empowers the IPAB with
the unilateral power to decide how to live underneath that cap.
And where we have an issue, you mentioned affordable care
organizations. There isn't a Wisconsin provider that is willing
to sign up for this. The ACOs. What our concern is, if we
invest all of the power and the funding decisions with a Board
of 15 people whose decisions go into law, don't even go through
Congress, is that the best way to save this entitlement and to
restrain spending?
We believe there is a better way, and we believe giving
seniors the choice, like we did with Part D, is a better way,
because what it does at the end of the day is it shows
providers if you want to succeed, if you want to have business,
you have got to outcompete other providers for that
beneficiary's business. So the nucleus of the program we are
trying to take is the patient, the beneficiary, not the IPAB.
And there is the big difference at the end of the day.
We really believe, because of evidence and reality, that
giving seniors more choices, more providers, doctors,
hospitals, insurance companies compete against each other for
that beneficiary's business, that works.
More importantly, you talk about what this would do to
future seniors. We think we should give more money to low-
income people, more money to sick people than to wealthy
people, in the future of Medicare. And if we do it in a way
like we are proposing, you don't have to do all of this to the
current population. You don't have to have IPAB start their
indiscriminate price controlling in 2013, you don't have to do
any of that. You don't have to affect benefits of people above
55, and we can cash flow and borrow the money to cash flow that
generation if we reform our generation, those of us under 54.
And the way in we which we think we ought to do that, more
money for the poor, more money for the sick and the middle-
income and less money for the wealthy. It is an idea that used
to have bipartisan support. It is an idea that came out of the
Clinton 1999 Bipartisan Commission to save Medicare. It is a
very good and legitimate debate to debate about growth rates
and how you grow a payment and should it be GDP or GDP minus
this or that. That is a very fair debate.
But at the end the day, where I think we have a
disagreement is we don't think we should invest all of the
power and money decisions into the hands of 15 people who
aren't even elected, versus giving seniors the ultimate
decision in controlling how their health care is to be
delivered. Because if we just simply give 15 people the ability
to unilaterally underpay providers, and we see where this is
headed, what is going to end up happening is providers are just
going to drop Medicare. I don't know what you call that, but it
is rationing under a different word. Because if you say to a
provider, we are not going to pay you anything close to what it
costs to provide that service, they are not going to provide
that service.
Secretary Sebelius. Well, Mr. Chairman, first of all, IPAB,
as you know, in the statute, doesn't come into effect unless
Congress has not taken action. So Congress is in the driver's
seat. Day one, IPAB makes recommendations if the spending
trends are on target.
Chairman Ryan. What is the threshold? It is a supermajority
vote to prevent that, though, correct?
Secretary Sebelius. Only if Congress has not preceded IPAB.
I am suggesting that if Congress is actually paying attention
to the bottom line of Medicare, IPAB is irrelevant coming up
with good strategy suggestions, and it never triggers in. That
is step one.
I also would suggest, Mr. Chairman, that, you know, when I
think about Medicare, I actually start with my dad who was in
the Congress in 1965, sat on the Energy and Commerce Committee,
helped to write the law. He turned 90 in March. And I can tell
you he is a happy beneficiary, relies on those services, but
really doesn't have the capital right now. If he were paying 51
to 70 percent of his costs, it starts at 61 to 70 percent of
his cost, that is not flexible income that he would have
available right now.
Third, I think that the notion of moving Medicare from
guaranteed benefits, which is what we have said to seniors and
those with disabilities, you will have a benefit package that
you can rely on into the future; when you get sick you will not
go bankrupt. Turning that over to private insurers and to an
unelected group of Federal employees who design the benefit
package and determine which benefits seniors will and will not
get, I am not sure keeps the promise that we made.
I am all for looking at strategies to reduce costs. And I
would suggest that we have really never done that seriously
until the Affordable Care Act. We have never had the tools and
particularly the tools to look at the underlying costs. Not
just, you know, trimming off the top of providers, but really
reengineering the delivery of health care. And most, a good
number of health care providers who I visit across the country,
say not only is it achievable, it is essential, and they are
well on their way to doing just that.
Chairman Ryan. Well, I want to be--I want to wrap it up
because I want to get to Mr. Van Hollen and the rest. I have
been on Ways and Means for 12 years, on the Health
Subcommittee. I have watched us try to reengineer Medicare over
and over and over, from Republicans to Democrats. It never ends
up working because it is kind of a fatal conceit. We sit in
Washington and we think we can figure out how to micromanage 17
percent of our economy and make this all work. And all we end
up doing is artificial price controls across the board. That
was what the 1997 budget agreement did. And we had all these
providers going out of business. So we put the money back. I
don't see how this movie isn't repeating itself.
Secretary Sebelius. Well, if Congress can't figure it out,
private insurers are going to then figure out how to----
Chairman Ryan. So we already have private insurers
delivering comprehensive Medicare benefits. They have shown
that they will do it cheaper, less than we expected. We already
have private insurers providing Medigap, providing Medicare
Advantage, providing Part D. Actually you contract out with
private insurers to do part A. And so that is something we have
already had experience with.
What we also have experience with is if we simply underpay
providers what their costs are, they stop providing. That we
have experience with as well. And so I would just simply say at
the end of the day, we have a difference of opinion on how best
to achieve this.
My mom is on Medicare. Your dad is on Medicare. They have
already organized their lives around this program as it is
currently designed. Let's leave that alone. Our point is, don't
change for that for them. IPAB does. We are saying don't do
that. But in order to cash flow this commitment that they have
already organized their lives around, which we should, you have
got to fix it for the next generation, and we just have a
difference of opinion on how best to do that.
And with that, I will yield to Mr. Van Hollen.
Mr. Van Hollen. Thank you, Mr. Chairman and Madam
Secretary, thank you for your testimony.
I want to pick up on a couple of lines of questioning that
the chairman began, especially as they relate to cost shifting,
because that is exactly what the Affordable Care Act addresses
in many ways. When you have tens of millions of Americans with
no health insurance whatsoever, and they show up at the
hospital as their primary care provider, guess who pays? Guess
who pays? Taxpayers pay. And consumers pay through cost
shifting.
Now, we have heard from the chairman about the fact that
Medicare actually gets a better deal in terms of the amount of
payment to providers, and that is reflected in part in the fact
that Medicare's per-capita growth rates have been less than in
the private sector. That is because they are able to use their
bargaining power.
What you are seeing with the Affordable Care Act are people
who have no health insurance, not a penny. That was cost
shifting going on. We were all paying in a big way. And by
creating an exchange that tens of millions of Americans can
participate in now and get their preventative health care, it
means they are not showing up in the hospital. So it is not
only good for the health of those individuals and their
families, but it is good for the pocketbooks of the rest of
America because they were paying zero to the doctors and zero
to the hospitals.
Now let's talk about another piece of cost shifting,
because, you know, obviously, if you pay the doctor zero, you
are going to shift costs. Well, if you shift costs, if you
shift costs the way the Republican plan does, you are not
saving a penny to the system. You are just moving those costs
on to seniors.
I have right here the April 5, 2011, CBO analysis of the
Republican budget plan. It says right here that under the
proposal, most beneficiaries who receive premium support
payments would pay more for their health care than if they
participated in traditional Medicare under either of CBO's
long-term scenarios. CBO estimated that in 2030 a typical 65-
year old would pay 68 percent of the benchmark under the
proposal, compared with 25 percent under the extended baseline
scenario, and 30 percent under the alternative fiscal scenario.
I would point out again to my colleagues that that is the flip
of what Members of Congress get in terms of support, so-called
premium support from all points.
Let me just if I could get through this, and I will be
happy to answer your question. So that is the exact flip. That
is cost shifting. Doesn't save a penny, and it actually reduces
the amount of support.
Now, I want, Madam Secretary, you to expand upon another
point here which, as the chairman mentioned, we already have
some private options, private insurance options within the
Medicare program. It is called Medicare Advantage. It is called
Medicare Part C. And the difference between the current system
and what the Republican budget proposes is we allow the
Medicare beneficiaries to choose whether they want to go into
Part C or whether they want to stay under traditional Medicare.
The Republican plan says no more choice. You are forced into
the private plans. Now, the chairman mentioned what he
described as the benefits of this compensation.
Madam Secretary, could you tell us what the rate that the
Medicare program was reimbursing the so-called more efficient
Medicare Advantage plans, compared to the traditional plans
before the Affordable Care Act?
Secretary Sebelius. Yes. Congressman, Medicare Advantage
plans were being paid at about 113 percent of fee-for-service.
And what the Affordable Care Act directs is that over time,
that additional payment, which amounts to about $3.30 per month
per beneficiary--not the beneficiaries who have chosen the
Medicare Advantage plan, that 25 percent--but to every
beneficiary is paying that additional amount per month every
year to keep Medicare Advantage at that artificially high
level. So over time, we are directed to reduce that overpayment
and put it more in line with Medicare fee-for-service. And we
have begun that, and, I would suggest, still have, we
anticipate, a very robust program. But the overpayment is
calculated by the Congressional Budget Office to yield about
$140 billion over the next 10 years.
Mr. Van Hollen. Right. And again, people can choose
currently to go down that road. They are not forced to go down
that road as the Republican budget plan would do. But they can
choose it. And as you pointed out, we, meaning the taxpayer and
the Medicare program, were subsidizing those plans at 114
percent of fee-for-service, meaning not only were taxpayers
paying more for individuals in that plan through Medicare, but
other Medicare beneficiaries were cross-subsidizing those
plans; is that correct?
Secretary Sebelius. That is correct. And over the period of
time, also, there has been a pretty careful analysis of were
there additional health benefits that were attributable to the
additional expenditure. And the answer is no.
Mr. Van Hollen. Right. Now, under Medicare Part C, under
Medicare Advantage, there is a wide range of ability to
experiment with co-pays and premiums and many of the tools that
we are talking about; is that not the case?
Secretary Sebelius. There is opportunity certainly to
experiment and to, you know, develop different plan strategies.
There are limitations on how much those costs can be shifted on
to beneficiaries and particularly how much the plan design
could be used to cherry-pick among healthier seniors or sicker
seniors. But given those limitations, yes, there is a lot of
opportunity for innovative care strategies by the private
market.
Mr. Van Hollen. Okay. Now, I just want to turn to Medicare
Part D, the prescription drug plans, and ask you a few
questions about that because it is the case that the
expenditures came in under projections. If you read the
Medicare actuaries, they point out two major factors there. One
was that the cost of prescription drugs in the overall market
went down because of a competition from generics. And Number
two, fewer people actually chose to enroll in Medicare Part B
than had originally been projected which, of course, would
bring down the costs. But of course, one of the features of the
prescription drug bill, Medicare Part D, when it was passed in
2005, was to deny the Medicare program the ability to negotiate
or bargain for drug prices.
The other change that was made was that for people who were
so-called ``dual eligibles,'' people who were on Medicaid and
Medicare, previously Medicare of course had not covered
prescription drugs, but the Medicaid individuals had been--we
had gotten a better rebate, meaning a better deal from the
prescription drugs companies than when those individuals also
got prescription drugs under Medicare. Can you--that is money
that is lost to the Medicare program; is it not?
In other words, reduced drug prices for the Medicare
programs represent savings that could be plowed into the
Medicare program and extend the solvency of the program; is
that not correct?
Secretary Sebelius. That is correct. And I think in most
States around the country, the negotiation of drug prices,
formularies, and rebates are something that most Governors take
seriously with the Medicaid program, and that is not a
framework that the Medicare program operates under.
Mr. Van Hollen. And if we could go to the fourth slide.
And we are going to have the Medicare actuaries here
tomorrow. But this is an interesting point that they made in
their most recent report which says the average annual increase
in Part D per-beneficiary costs are expected to be greater than
for HI, that is Part A Medicare, or SMI, Part B, for the period
of 2011 through 2020. So Part D which, as the chairman said,
has this competition feature, but where the bargaining for the
price of drugs is splintered into subgroups as opposed to being
able to get a better deal for the whole group, like we do under
the Veterans Administration, but what this chart shows is that
the Part D is actually expected to grow more per beneficiary
than Part A and B. Could you comment on that?
Secretary Sebelius. Well, Mr. Chairman, I do think that
trends in part are up because there are definitely some more
expensive but very significant new drugs on the marketplace.
And that will continue to be part of the framework. But I also
think that there are some tools that we are still missing.
I know in the chairman's home State of Wisconsin, there is
a senior care program which was negotiated, put into effect by
the Governor, and is very popular with a lot of seniors in
Wisconsin, and still operates as a stand-alone drug plan, which
can be a choice for those seniors. And the costs that Wisconsin
seniors pay for senior care is significantly below what
Wisconsin seniors can choose from in Medicare Part D. So that
we have a real-life example in the State where there is a
State-negotiated plan, side by side with the Part D multiple
choice plans, and the costs are, I would say, significantly
different.
Mr. Van Hollen. Thank you. I am going to wrap up, Mr.
Chairman, with a couple of slides. Just if we can go back one
slide.
What this shows are the projected CBO costs in 2030. And
again recognizing the fact that the Medicare program is able to
negotiate better prices and bring down the cost, Madam
Secretary, do you know what the average costs for a senior was
for health insurance in 1965 before we passed the Medicare
program?
Secretary Sebelius. The average cost per senior?
Mr. Van Hollen. The average cost for health care--the
distribution of costs born by the senior compared to the
government or other sources.
Secretary Sebelius. Well, it is my understanding that first
a number of seniors, a majority of seniors, had no health
insurance at all. And secondly, that those who had insurance or
some kind of coverage were often paying about 65 percent of
their own costs and that there was some payment for the
remainder at the time.
Mr. Van Hollen. So some had none at all, and some had to
bear the burden that we would go back to under the Republican
proposal. If we could go back one more slide.
This is the 2022 numbers. Again, it is the double whammy.
It is the fact that seniors will go into the private insurance
market and face higher costs and get less support in 2022, even
though immediately the benefit the Secretary talked about with
respect to closing the prescription drug doughnut hole goes
away.
And then if we just go to the last slide, this is the
Medicare actuary showing how the Affordable Care Act does then
prosper.
Thank you, Mr. Chairman. Thank you, Madam Secretary.
Secretary Sebelius. Congressman, one perspective on those
cost issues is if you assume that there are a number of seniors
in this country who are living on their Social Security checks,
in 2022 the average Social Security check will be a little over
$21,000, and that beneficiary, with the start of the Republican
Congressional plan, would be paying 59 percent of that Social
Security check on their health care costs. That same
beneficiary today pays about 26 percent of their Social
Security check for health care. So it is a more than doubling
what amount of their income would have to go to health care,
year one.
Chairman Ryan. I want to get to members because we are
going to start the clock. One thing we failed miserably on a
bipartisan basis is to learn how to manage the thermostat in
this room. Tell your actuary who is coming tomorrow that we are
going to work on it.
Secretary Sebelius. I thought it was a strategy.
Chairman Ryan. Mr. Price.
Mr. Price. Thank you, Mr. Chairman. And welcome, Madam
Secretary. We appreciate you joining us today.
Many of us, as you well know, and as a physician have
talked about the principles of health care being accessibility
and affordability and quality responsiveness to the system,
innovation of the system, and choices for patients. And many of
us believe that the new law actually harms every single one of
these principles.
There is also little trust between patients and folks out
there in the Federal Government as it relates to health care.
And for a variety of reasons, former Speaker Pelosi on this
specific law said we have got to pass the law so we know what
is in it. And this, the Independent Payment Advisory Board, a
denial of care opportunity for the Federal Government, is one
of the things that we now know that is in it. And it ought to
be no surprise that there is little trust out there.
I will remind you, Madam Secretary, that the original
Medicare legislation says in it--and this is still the law of
the land--quote: Nothing in this title shall be construed to
authorize any Federal officer or employee to exercise any
supervision or control over the practice of medicine or
compensation of any officer or employee of any institution,
agency, or person providing health care services.
Madam Secretary, do you think that we have violated that
portion of the previous Medicare law that is still the law of
the land?
Secretary Sebelius. Violated it by passing the Affordable
Care Act? By----
Mr. Price. No. By having the Federal Government determine
what compensation is provided to those caring for patients.
Secretary Sebelius. Congressman, I think that the Medicare
from day one determined what compensation they would pay for
services, medical services, so I guess I am not quite sure what
we are doing. I mean, perhaps you are suggesting that from the
outset, from 1966 it has been in violation.
Mr. Price. That we violate the law and hence there is
little trust on the part of patients. And this, the Independent
Payment Advisory Board, this ``denial of care Board'' can only
do that by denying payment to physicians. In a recent op-ed,
you said, quote: Seniors and taxpayers will have the security
of knowing that as skyrocketing costs jeopardize Medicare's
future, IPAB is in place to protect Medicare now and for future
generations. But in fact if we talk about the kind of
recommendations that IPAB can make, are they able to reach
different targets by raising revenue? Can the Independent
Payment Advisory Board raise revenue?
Secretary Sebelius. No.
Mr. Price. Not by law. Can the Independent Payment Advisory
Board raise beneficiary premiums?
Secretary Sebelius. Well, the IPAB as you know is
prohibited by law from cost shifting, from premium increases,
from denying benefits. I think there are a number of examples
of ways that they could have been effective at a much earlier
time. And one of them we just discussed, which is overpayment
for Medicare Advantage.
Mr. Price. But, Madam Secretary, don't you agree----
Secretary Sebelius. Which was the situation with MedPAC for
years.
Mr. Price. If I may, because I don't get the kind of time
that the chair and the ranking member do. The only way that the
Independent Payment Advisory Board are able to affect what the
physician does for the patient is to deny payment for that
provision of services; isn't that correct?
Secretary Sebelius. I don't think that is at all correct,
Congressman. I think they could look at a lot of the underlying
rising costs and recommend payment strategies that much more
closely align what doctors tell me they really want to do. So
medical homes where the patient----
Mr. Price. But they aren't able to institute any of that.
All that they can do is deny care or deny payment to the
physician.
Secretary Sebelius. I don't think that is the case,
Congressman. I fundamentally disagree. Medicare Advantage----
Mr. Price. I would urge you, Madam Secretary, then, to
simply read the section, just read the section.
Secretary Sebelius. I know it.
Mr. Price. If I may, this gets to the heart of the quality
of health care in this country. As a physician, I can tell you
that if I am told by the Federal Government that I will not be
paid for a service to a physician, what happens in my
presentation of the options to that patient as that treating
physician is that I may be coerced by the Federal Government
into not even presenting that option to the patient. So this is
as pernicious as it could be in terms of the Federal Government
getting involved in the provision of care to patients, and that
is what violates the trust that is so important between
patients and physicians, and it is why we on this side of the
aisle and some on the other side of the aisle feel so strongly,
that to have a denial of care board in place in Federal law is
simply a violation of American principles as it relates to
health care.
Secretary Sebelius. Well, Congressman, I hear what you are
saying. I would suggest that the Republican budget proposal,
which would eliminate guaranteed benefits for which there will
be----
Mr. Price. Madam Secretary, you know that is not true. You
know that is not true.
Secretary Sebelius. Congressman, I think it is----
Mr. Price. The point of the matter is that our proposal
guarantees----
Chairman Ryan. We have got to move to the next----
Mr. Price [continuing]. The provision of care for seniors.
It guarantees it.
Chairman Ryan. Let us leave it at that in the interest of
time.
Ms. Schwartz.
Ms. Schwartz. Thank you.
I would like to continue this conversation somewhat. This
is important for us to be talking about what are the really big
contrasts here, and the big contrasts when we are talking about
the future of Medicare is what we are working on, what passed
last year, which is now law, which I want to have you elaborate
on, the work of implementing the Affordable Care Act and in
strengthening Medicare and getting the best value for our
dollars, and I want you to talk about that; but before we get
there, to understand the choice that is being presented, the
contrast with the Republican plan--we used to call it the Ryan
plan, but now that all the Republicans basically voted for it
in the House, it is the Republican plan.
This is what the House of Representatives majority, the
Republicans, want to do, which is to end Medicare as we know
it, offer seniors premium support. We call it a voucher because
they can get to shop in the private marketplace, which, as you
pointed out, Madam Secretary, is more expensive and does not
have the concerns about cost because they simply can raise the
premiums, and the more they raise the premiums, the more
seniors will have to pay. Estimates are about $6,000 a year per
senior, $6,000 starting, $6,000 per senior per year, going up
to doubling that, and who knows what in the future.
The cost shift is directly to the seniors with no
protections for those seniors, no consumer protections, no
guarantees on benefits, and no offering them, I think, what the
chairman would say is options. They can choose between
expensive plans or plans that don't have all the benefits they
can afford. This is not what we want to see happen.
And in contrast, however, I want to say to my Republican
colleagues who say that there is no trust in Medicare, most
Americans and most seniors like their Medicare, and they want
to see it continue, and so do we. So what I think is
particularly interesting about what your testimony in this
hearing is the very keen focus for seniors in particular about
strengthening the benefits and getting better value for the
dollars that we spend in Medicare. We know we can do better in
delivery of care, and I love some physicians. I actually care a
lot about my husband, and my son, and my daughter-in-law and
many of the physicians and hospitals that I know, and they are
saying they know they can do better. They would like that
flexibility; they would like the tools and the innovations to
be able to do that.
In the Affordable Care Act we emphasize primary care, we
wanted to train more primary care physicians, we wanted to pay
them better under Medicare and Medicaid, we wanted to give
physicians and hospitals real flexibility in redesigning better
coordinated care for seniors in this country in order to
provide better care, improve their health and their outcomes,
and to save taxpayer dollars.
So I wanted you to give all that up, to repeal the
Accountable Care Act as the Republicans want to and replace it
with a voucher that seniors can use in the private marketplace
that has had, unfortunately, not taken these kind of innovative
actions the way they might have, but might well now do it in
cooperation with what Medicare is doing.
Can you just elaborate on particularly the cost savings,
the potential in cost savings, based on the experience that we
have already had and the good work that you are doing now in
the innovation center with accountable care organizations, with
patient-centered medical homes, with health innovation zones,
with the reduction in hospital-acquired infections and reduced
admissions? The opportunity, I understand, is really in the
hundreds of billions of dollars in savings. What a better way
to use that dollars to be able to reinvest and keep Medicare
strong.
Secretary Sebelius. Well, Congresswoman, you are absolutely
right, and I think we have just started down the path. In
addition to the innovations, and I will talk about those in
just a second, I think the new tools that Congress gave us and
directed us to use for fraud and abuse are unprecedented, and I
think that can yield also some significant dollar savings.
We have just started the predictive modeling computer
effort, and I can guarantee you it is going to be very
impressive in terms of results. But the innovation center is
just launching some of the strategies. The Partnership for
Patients we have talked about, which really is aimed at two
simple goals to start with, but many more to follow. That is
about $50 billion. That is a--according to the CBO, a
conservative estimate if we can get more people to participate,
lowering hospital infections and preventible readmissions, and
that not only helps people in the Medicare system, but anybody
who goes into the hospital. If there are fewer infections that
people get in the hospital, it is going to help private
employers, it will help people----
Ms. Schwartz. The whole point is to reduce the rate of
growth of costs across the board. We certainly will thank you.
Chairman Ryan. We would like to get in as many people as
possible.
Is Mr. Chaffetz here? No, it is Mr. Stutzman.
Mr. Stutzman. Thank you, Mr. Chairman, and thank you, Madam
Secretary, for being here today.
I want to touch on the progress of IPAB. And the health
care law provided $15 million in fiscal year 2012 to get IPAB
up and running. CMS is required to begin calculating the
savings targets in 2013. What progress have you made toward
setting up the IPAB as a functioning agency?
Secretary Sebelius. Congressman, that work has not started.
I think the President is consulting with people about possible
candidates for the IPAB Board, but there is no setting up an
agency before there is a board appointed.
Mr. Stutzman. Do you know, are there any qualifications to
be sitting on the Board?
Secretary Sebelius. Yes. The statute lays out a series of
areas of expertise which the Board should have, very similar to
what MedPAC Board members currently have, health care
providers, health economists, consumer advocates, people
experienced with health finance. I think a key difference
between the Board qualifications for IPAB and the Board
qualifications for MedPAC are no conflicts of interests. If
they are to be an appointed member of the Independent Payment
Advisory Board, it must be a full-time assignment and not be an
active user of the system or receive payment from the system.
Mr. Stutzman. So they will sit--it will be a full-time job;
is that correct?
Secretary Sebelius. That is the way the statute is.
Mr. Stutzman. Any idea what salaries would they be paid?
Secretary Sebelius. I think it is the same as--I know it is
equivalent of a Federal salary. One hundred sixty thousand
dollars? I don't know what it is--but it is a level that is a
Federal--I don't know if it is a Federal judge or--I don't
really know, I am sorry, Congressman. I can get you that
answer.
Mr. Stutzman. Okay. Could you please elaborate on the claim
that this year's House-passed budget, the Republican plan, if
fully implemented would make it so cancer patients would die
sooner? Wouldn't a lower quality of care caused by cutting
provider payments in half cause patients to die sooner?
Secretary Sebelius. Congressman, I think I was at a hearing
where I was asked what happens if someone runs out of money in
a voucher in the midst of a chemotherapy program, and I said,
frankly there aren't a lot of options. Charity care is one,
donated care is another, or they just stop taking their cancer
therapy and would end up----
Mr. Stutzman. Let me ask this----
Secretary Sebelius. That was my answer.
Mr. Stutzman. Okay. My granddad just passed away, and I
have seen how Medicare worked for him. The average couple
turning 65 today pays--paid over $109,000 into Medicare over
their lifetimes, but they will receive over $343,000 in
benefits. As a 34-year-old, and many others who are not even
close to the age of 65, will I get the same deal?
Secretary Sebelius. I think it depends on what Congress
decides to do with Medicare in the future.
Mr. Stutzman. Could I get the same deal? At the current
levels, if we would stick with the Democrat plan, if we would
stick with doing nothing, could I get the same deal?
Secretary Sebelius. Well, no one has suggested doing
nothing, Congressman. I think that the Affordable Care Act
actually took a major step for the first time ever in
entitlement reform, and gave us tools at the Centers for
Medicare and Medicaid Services to finally align payment with
high quality, lower-cost care delivery, and we are trying to
accelerate that pace.
Mr. Stutzman. But what I don't understand is what the
affordable health care plan did was addressed insurance.
Secretary Sebelius. No, that is not true. It addresses
insurance, but also the care delivery system. It addresses the
underlying system in addition to insurance.
Mr. Stutzman. So do you believe that health care costs will
start declining? Because currently they are roughly at three
times the rate of inflation.
Secretary Sebelius. Well, actually they have been on a
decline. They are right now running lower than inflation. We
think that if, indeed, the strategies are effective where you
focus more on preventive care and early intervention, where
people are actually healthier as they get to be 60 and 70, you
can dramatically improve health care costs, as well as some
care strategies which are aimed at delivering more patient-
centered care out of hospital systems, keeping people in their
homes longer, which is what patients tell me they want, and
also what a lot of providers would like to do, but right now
the alignment of the payment incentives and the care delivery
are not there.
Mr. Stutzman. I think that, you know, with these numbers,
if $109,000 covers $343,000 in benefits, Americans understand
that this is not going to be sustainable over the next----
Secretary Sebelius. Well, I would agree, and everybody
agrees with that.
Mr. Stutzman [continuing]. Decade. It is going to take some
big changes.
Secretary Sebelius. That is right.
Mr. Stutzman. Thank you. I will yield back.
Chairman Ryan. Mr. Blumenauer.
Mr. Blumenauer. Thank you, Mr. Chairman.
Madam Secretary, thank you. I would like to just briefly
touch a few things.
As I listen to my good friend, the chairman, describe
certain things, I wondered if we were talking about the same
bill, because certainly you were talking about a very different
bill than I heard him talk about.
My understanding is that you testified--and I just picked
up a copy of it again just in this section--that the provisions
here do not--are not triggered by the IPAB unless and until
Congress does not deal with escalating costs in Medicare. Is
that correct?
Secretary Sebelius. That is correct.
Mr. Blumenauer. That is the bill you are talking about?
Secretary Sebelius. That is correct.
Mr. Blumenauer. If we fail to act, don't get a spinal
implant, then they can make recommendations, and it says right
here, not rationing, not shifting, but in terms of helping, in
terms of delivery mechanisms, but those go into effect only if
Congress--and Congress has the ability to overturn those
provisions. Is that not correct?
Secretary Sebelius. That is correct.
Mr. Blumenauer. That is the bill you are reading?
Secretary Sebelius. That is the law.
Mr. Blumenauer. I listened to my good friend from Georgia
talk about what appeared to me to be sort of a fantasy land
because he was concerned that Medicare over the years has had
some provisions about Medicare reimbursement. Now, my good
friend, as a private physician dealing with private insurance,
and you have been an insurance commissioner, you are
knowledgeable about this, do physicians just willy-nilly submit
anything they want, and insurance companies just pay every
provision, every condition, every treatment?
Secretary Sebelius. No. Rates are negotiated, and benefits
are very clearly spelled out.
Mr. Blumenauer. And do insurance companies ever push back
and deny claims?
Secretary Sebelius. Regularly.
Mr. Blumenauer. They do?
Secretary Sebelius. Yes, sir.
Mr. Blumenauer. Okay. I just wanted to get that clear
because I thought that was the case.
And so what we are talking about here is just simply being
able to have the same sort of provisions that happen in the
private sector, except my friends on the Republican side would
just turn this all over to insurance companies to do the
rationing, the denial, the approval, and seniors will navigate
on their own. That is a statement; you didn't have to answer
that.
I heard you take my good friend Mr. Ryan's point here that
somehow the $373 billion cost, which represents less than what
was projected, was somehow a grand bargain for Medicare Part D,
and you started to point out something in terms of there were
other ways of doing it. Could you--I don't want you to do it
now. I don't think you should do the math in your head, but I
think it is a very serious question. Could you have some of
your certified smart people calculate for us what would have
been the cost in 2030 if we just gave our senior citizens the
same deal that the veterans get?
Secretary Sebelius. We could do that, sir.
Mr. Blumenauer. I suspect that it is probably quite a bit
less----
Secretary Sebelius. I have a lot of certified smart people.
Mr. Blumenauer [continuing]. Than the $373 billion that my
friend is so excited about. Would you think it might be less
for the veterans than what was negotiated?
Secretary Sebelius. I would think it is substantially less,
yes, sir.
Mr. Blumenauer. I think it would be good for us just to get
those numbers, because, again, I am concerned that we are
talking about a fantasy world where insurance companies don't
make decisions denying benefits, don't ration care, don't cut
people off; that somehow that the--because the prescription
Medicare drug program, unfunded, just sort of launched, did
not--was not as expensive as it first projected, that somehow
that is a triumph of free-market economics when, in fact, we
could produce much lower costs with systems that the government
has, and that we have an actual experiment about the cost-
effectiveness of this approach with Medicare Advantage.
I am old enough to remember when Medicare Advantage was
advanced in the early--because it was going to save money. It
was going to be 5 percent less, 95 percent on the dollar was
the projection, and because the system was gamed or of
inefficiencies, it has been 13 percent more expensive until
recently, because of the changes that have been put in place to
bring it under control, and all the while seniors are paying a
premium. What did you say the extra cost was a month, $3?
Secretary Sebelius. I think it is $3.30 per month per
beneficiary, and there are about 49 million beneficiaries.
Mr. Blumenauer. Thank you very much.
Thank you, Mr. Chairman.
Chairman Ryan. Mr. Ribble.
Oh, before you start, it is my understanding that the
Secretary has to go in 10 minutes, so we will get through this,
and then what we will do is we will start the Members who did
not have an opportunity yet to be at the top of the queue for
the next panel.
Mr. Ribble.
Mr. Ribble. Thank you.
Madam Secretary, thank you for being here today. I know it
is probably not the funnest thing you do in your workday.
Secretary Sebelius. It certainly is the warmest.
Mr. Ribble. Yes, it is the warmest, and it is a warm
greeting that we extend.
Secretary Sebelius. I appreciate that.
Mr. Ribble. Under the Affordable Health Care Act, I think I
understood that we can't deny care; is that correct?
Secretary Sebelius. The Independent Payment Advisory
Board----
Mr. Ribble. No, not the Independent Payment Advisory Board,
but under the Affordable Care Act, the denial of coverage is
protected by law, you cannot deny coverage; is that correct? I
get to keep my insurance company, and I get to keep my doctor,
and I can't be denied coverage and things like this?
Secretary Sebelius. Well, eventually when there is, in
2014, the health exchanges set up, you will be able to have an
ability to come into a market without preexisting health
conditions, yes, sir.
Mr. Ribble. And once I am in that market, the health
insurance cannot be denied to me if I get sick?
Secretary Sebelius. That is correct, you can't be dropped.
Mr. Ribble. Can't be dropped.
Secretary Sebelius. Rescissions are against the law.
Companies dropping a beneficiary because they made a technical
error, because they got sick, you cannot have that.
Mr. Ribble. And that is done through private insurance
companies through the exchanges?
Secretary Sebelius. That is correct.
Mr. Ribble. Okay. So kind of like the Republican plan for
seniors; private insurance companies, can't be denied coverage,
and if they get sick, they get to keep it?
Secretary Sebelius. Well, I think a huge change is that the
cost sharing is shifted to seniors and those with disabilities
under the Republican plan. There is no plan for underlying
delivery system changes, there is no fraud and abuse
protections, and I have no idea what the benefit package looks
like. Maybe there has been a discussion, but at least I have
not seen what the $8,000 voucher would purchase in the
marketplace.
Mr. Ribble. And since we can't see all that yet, it just
seems a little bit disingenuous for my colleagues on the other
side of the aisle and members in the administration to project
all these salacious claims about the plan since we haven't yet
seen it.
Secretary Sebelius. Well, we are projecting costs, and that
is not us, it is the Congressional Budget Office, which says
that a senior would be paying 61 percent of his or her costs
starting in year 1 and closer to 70 percent by year 8. That is
the Congressional Budget Office, that is a flip of where we
are.
Mr. Ribble. And the CBO shows a large high cost, don't
they?
Secretary Sebelius. Pardon me?
Mr. Ribble. And the CBO shows a relatively high cost.
Secretary Sebelius. That is based on today's costs.
Chairman Ryan. Will the gentleman yield for a moment on
that? We asked the CBO about that. They basically said that
they can't estimate choice and competition in effect, and so
they didn't bother trying. So, number one, they don't--they can
look at----
Secretary Sebelius. They can look at Medicare Part D.
Chairman Ryan. But they can't measure it.
Secretary Sebelius. They can look at the cost increases in
Medicare Part D, and they can certainly look at the cost
increases in Medicare Advantage, so we have two real-life
examples of cost.
Chairman Ryan. The point is they looked at the example in
Medicare Part D in the savings, and they did not replicate that
in their cost estimates of this plan. They just ignored it.
Mr. Ribble. Thank you for the clarification, Mr. Chairman.
Madam Secretary, during the testimony today regarding IPAB,
you said that--not only in your written testimony, but in
comments you said that they are prohibited from cost shifting,
premium shifting, payment denial, rationing care, raising
premiums, reducing benefits, changing eligibility. I think you
mentioned that they are going to be paid something for their
work, you don't really know how much, but yet you call them a
backstop. If they can't do any of these things, what are they
backstopping?
Secretary Sebelius. Well, let me give you two examples,
Congressman, about the kinds of things that, if they had been
enacted a lot sooner, I think we could have saved billions of
dollars. We have just discussed Medicare Advantage, the
overpayment which has gone on for decades, and actually the
MedPAC group, the group of advisors has recommended looking at
that strategy, lowering it to fee-for-service for years. That
has never happened.
The other thing that has recently happened, and again
Congress started down this path as long ago as 2003, is our
recent experience with competitive bidding for durable medical
equipment. It started in 2003, it got a jump start in 2008, it
was withdrawn again. This year we have implemented in one of
the Medicare sections, we are saving 32 percent over the cost
we were paying last year for durable medical equipment. There
is no change in beneficiary benefits. They are getting the
services they need, but at a third of the cost.
I think those are two kinds of recommendations that don't
fall into any of the prohibited categories that could yield
billions of dollars.
Mr. Ribble. Okay, thank you very much.
Mr. Chairman, I am going to yield back to give my
colleagues more time.
Chairman Ryan. Mr. Yarmuth.
Mr. Yarmuth. Thank you, Mr. Chairman.
Secretary Sebelius, it is nice to see you again. Thank you
for your testimony.
I want to pursue this line of questioning about competition
and the effects of competition, particularly as it relates to
health care. Doesn't the ability of competition to--or the
potential for competition to reduce costs depend on a fully
informed, fully free negotiation on both sides?
Secretary Sebelius. Usually that is what a market strategy
is.
Mr. Yarmuth. And with regard to Medicare Part D, I think
certainly virtually everyone had the same experience that I
did, that my constituents for a long time were extremely
confused, and many still are confused, about what their choices
are under the prescription drug program. Is that likely,
assuming that we were to enact the Republican proposal, that
this would be an enormous problem for America's seniors to
actually be in a position to intelligently compete with the
insurance companies' approach at marketing?
Secretary Sebelius. Well, Congressman, what we have done,
at least in the last 2 years, in some of the Medicare Part D
programs, we have also done it a bit in Medicare Advantage
programs, is try to eliminate programs that actually have very
little differential, but just add more confusion to the
marketplace to do just that.
But, yes, I think it is not uncomplicated. We used to run a
senior Medicare counseling program, and many people want to
make the best choices. They often, though, in Part D would find
themselves in a program, the drug regimen would change in that
program only to find out that the drugs that they need have
actually shifted out of the program. So that is a pretty common
phenomena for seniors.
Mr. Yarmuth. And so then if you add benefits for
hospitalization, physician choice, home health care, medical
equipment, and potentially hospice, and who knows what else, it
makes it an extremely, even more complicated way for--
complicated procedure for a senior to go through, a senior and
his or her family to go through.
Secretary Sebelius. Well, I definitely think that there is
a huge ongoing effort to educate folks about what the benefits
are and how to take the best advantage of them.
You know, one of the points we haven't really touched on,
but I do want to mention, is just the additional cost of
administration. Most insurance companies, even the most
efficient ones, run at about 11 to 13 percent. Some are as high
as 25 percent. Medicare has about 2 percent or less
administrative costs. So assuming you have X amount of dollars,
a fixed contribution, whatever that fixed contribution can buy
in health benefits, less of it is going to go pay for health
services in the private market than in the public market.
Mr. Yarmuth. And granted that the Republican proposal has
not been put into legislative language that we could actually
look at, but if you consider the statements that have been made
from the other side that nobody can be turned down, that nobody
can be denied service, and nobody can be denied the choice of
the physician under the Republican plan, do those stipulations
make it much more difficult for insurance companies then to
actually lower costs?
Secretary Sebelius. Well, again, insurance companies, you
know, to my knowledge, have a network of doctors, so they do
accept some and deny some on a regular basis. They negotiate
with hospitals. Some are in, some are out. They negotiate with
drug--I mean, that is part of the strategy to put a plan
together. And then when you buy that insurance, you are buying
basically that network, that hospital system, that group of
providers. It is, I think, a different system than Medicare
currently, which says to a patient, you can choose any doctor
you want. If you don't like this doctor, you can go to a
different doctor. That is not the strategy around private
insurance.
Mr. Yarmuth. I guess what I was trying to get at, judging
from what has been said from the other side about the
Republican proposal, is it likely that they could have a
significant impact on overall cost to the system if they can't
deny care, they can't deny anyone coverage, and they can't--and
they have to provide all the services that Medicare provides?
Secretary Sebelius. Well, if you assume that insurance is
about selling a product which delivers health care, pays
providers, pays hospitals, pays doctors, you know, there are
only a limited number of ways that you can reduce costs. You
can reduce administrative costs; you can negotiate better
prices with all the payers and providers, which is reducing
costs; you can aim at better health strategies, which I think
can be effective, get a healthier population. I think often in
the private market currently that is done by cherry picking. We
take healthier people and deny sicker people, so the pool is
healthier. You make money that way. But there are a limited
number of strategies. Or you can shift costs. And I would say
that both the Medicare and Medicaid proposal that passed the
House shift costs onto seniors, those with disabilities onto
States.
Mr. Yarmuth. Thank you.
Chairman Ryan. Madam Secretary, I wish we had more time to
get into all of this. I obviously have a strong difference of
opinion of your interpretation of what we are doing, but I
don't think you like our interpretation of what you are doing.
This is an issue we are going to have to get into in much more
detail. It affects nothing more than the health care security
of our Nation's seniors. We have a strong difference of opinion
on who ought to be in charge of their health care, them or this
Board. I wish we had more time to get into it. The Members who
have not yet had the opportunity to ask will be front of the
line for the next panel. And with that, Madam Secretary, I know
it was a hot morning. Thank you for your indulgence. I
appreciate it and hope we can do this again.
Secretary Sebelius. Thank you, Mr. Chairman.
Chairman Ryan. Thank you.
Chairman Ryan. Next we will hear from our next panel. If
the panel can proceed to the dais, go ahead and take your seats
so we can get started.
Our second panel consists of former CBO Director Doug
Holtz-Eakin, Grace-Marie Turner of the Galen Institute, and
Judith Feder. Is it Feder?
Dr. Feder. It is Feder.
Chairman Ryan. Feder, thank you. It is one of the two.
Judith Feder of the Urban Institute.
Because we have votes, it looks like at about 1:20, we are
going to stick to the 5-minute rule for our panelists, so if
you could confine your opening remarks to 5 minutes, and then
we will do the questioning, as I mentioned earlier, and if
there are additional points the panelists want to interject,
they can do so during the questioning.
Let us start with you, Mr. Holtz-Eakin, and then we will
work our way from our right to left, your left to right. Thank
you, Mr. Holtz-Eakin.
STATEMENTS OF DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMERICAN ACTION
FORUM; GRACE-MARIE TURNER, PRESIDENT, GALEN INSTITUTE; AND
JUDITH FEDER, PH.D., PROFESSOR AND FORMER DEAN, GEORGETOWN
PUBLIC POLICY INSTITUTE AND URBAN INSTITUTE FELLOW
STATEMENT OF DOUGLAS HOLTZ-EAKIN
Mr. Holtz-Eakin. Thank you, Chairman Ryan, Ranking Member
Schwartz, members of the committee. It is always a good day to
be back at the Budget Committee, and you have my written
testimony. I won't belabor the points there.
There are four simple points I think ought to be made. The
first is that, to my eye, the IPAB is a policy error and one
that the Congress should reverse as quickly as possible. It is
likely to exacerbate existing reimbursement problems for
providers in the Medicare system, and as a result impede access
by Medicare beneficiaries. It is likely to stifle innovation.
The incentives are such that it will target the most innovative
and newest therapies, and the IPAB, as part of the status quo
for Medicare, is dangerous to beneficiaries, dangerous to the
Federal budget, and dangerous ultimately to our economy because
it is part and parcel of a broken social safety net system
whose spending threatens to drive debt to levels which would
harm the U.S. ability to compete and grow.
Let me expand on those only briefly, and then turn it over
to questions. The structure of the IPAB is such that it is
likely to exacerbate the reimbursement problems. The way the
statute is written, much of Medicare spending is off limits, so
the Board is likely to have to target something that looks like
less than half of the total spending, and thus disproportionate
efforts would be focused on that.
The IPAB is given 1-year targets, says you have to get
things under control in a year. There aren't many levers you
can pull from a proactive quality-of-care or value proposition
that you can do on a 1-year basis, and in the end they will
start cutting provider reimbursements. It is something we have
seen before with the SGR. It is something we will see again. We
know vividly from the Medicaid program, where reimbursements
are just a bit over half of private payers, that beneficiaries
have a great deal of difficulty getting access. That would be
the future of Medicare as well more broadly. We have seen, for
example, with past episodes in cuts to the physicians under the
Medicare program, the SGR, that fully two-thirds of practices
have contemplated as changes in their access for Medicare
beneficiaries whether they take new patients or not. So I think
that is an outlook under the status quo that is dangerous for
beneficiaries and dangerous for the American health care
system.
It is quite likely to stifle innovation. We know at some
fundamental level that innovation is at the core of the ability
of the United States to solve its pressing problems in health
care, in energy, in education, and a variety of policy areas.
Given that there will be a mandate to cut spending, the most
likely targets are those new therapies, the ones that are just
introduced in the market. They have been expensive to develop.
They have not yet reached economies of scale. These are going
to be the newest, most innovative approaches to things like
Alzheimer's and the problems that face us, and the IPAB will
have a disproportionate incentive to stifle those.
From the perspective of someone who is developing the
therapies, the IPAB is a tax on the return to these, you are
not going to get a return on your investment, and worse it is a
random tax. You don't know when it is actually going to pop up
and grab the return to your investment. So it will have
terrible incentives for the development of new medical science
in the United States and, as a result, harm the future quality
of care. And then it is part--this focus on trying to cut
provider payments and control a broken fee-for-service Medicare
system is part and parcel of the status quo that I think we
simply have to change in a fundamental way.
We know that these important social safety net programs--
Social Security, in red ink, unlikely to survive to the next
generation; Medicare, enormous buckets of red ink, $280 billion
a year in general revenue flowing in, not going to be--to
survive for the seniors in the next generation; Medicaid, the
future deserving poor will be unable to receive its services,
and in the process they are feeding the deficit problems that
this Congress has to grapple with and the Budget Committee is
so well aware of--we know ultimately that is not simply a
budgetary issue, that is an economic threat of the first order.
Erskine Bowles, co-Chairman of the President's Fiscal Reform
Commission, called it the most predictable crisis in history.
So the issues that are before us today are whether we will
take a policy approach which has led to us being on the
precipice of a disaster, or whether we will fundamentally
change the structure of the Medicare program and the social
safety net. And I would encourage this committee and the
Congress as a whole to take the latter approach and to discard
this policy error. Thank you.
[The prepared statement of Douglas Holtz-Eakin follows:]
Prepared Statement of Douglas Holtz-Eakin, President,
American Action Forum*
Chairman Ryan, Ranking Member Van Hollen and members of the
committee, thank you for the privilege of appearing today. In this
written statement, I hope to make the following points:
The Independent Payment Advisory Board (IPAB) is a
dramatic policy error that will fail to deliver meaningful reform to
the Medicare program.
The IPAB is likely to exacerbate existing reimbursement
problems that already limit access to care for Medicare beneficiaries.
The IPAB will tend to stifle U.S. led medical innovation
in the medical device, pharmaceutical, biotechnology, and mobile health
industries.
If left unaddressed, the Medicare status quo and the IPAB
will pose a danger to the fiscal health of the federal government, the
U.S. economy, and Medicare beneficiaries.
Let me discuss each in turn.
The Independent Payment Advisory Board (IPAB) is a dramatic policy
error that will fail to deliver meaningful reform to the Medicare
program.
The creation of the Independent Payment Advisory Board (IPAB) is
possibly the most dangerous aspect of the Patient Protection and
Affordable Care Act. It should be repealed immediately.
This appointed panel will be tasked with cutting Medicare spending,
but its poor design will prove ineffective in bending the cost curve,
and instead will lead to restricted patients' access and stifled
innovation. Four design elements stand-out as especially troublesome.
First, the board is prohibited from recommending changes that would
reduce payments to certain providers before 2020, especially hospitals.
Because of directives written into the law, reductions achieved by the
IPAB between 2013 and 2020 are likely to be limited primarily to
Medicare Advantage (23 percent of total Medicare Expenditures), to the
Part D prescription drug program (11 percent), and to skilled nursing
facility services (5 percent).\1\ That means that reductions will have
to come from segments that together represent less than half of overall
Medicare spending.
---------------------------------------------------------------------------
*The views expressed herein are my own and do not represent the
position of the American Action Forum. I thank Nathan Barton, Emily
Egan, Hanna Gregg, Carey Lafferty, Michael Ramlet, and Matt Thoman for
their assistance.
\1\ ``Medicare Benefit Payments, by Type of Service, 2010 and
2020,'' Medicare Chartbook, Fourth edition, The Henry J. Kaiser Family
Foundation, 2010, http://facts.kff.org/
chart.aspx?cb=58&sctn=169&ch=1799.
---------------------------------------------------------------------------
Second, IPAB's cuts have to be achieved in one-year periods there
will be an enhanced focus on reducing reimbursements at the expense of
longer-run quality improvements or preventive programs. In this way
IPAB could actually discourage rather than encourage a focus on quality
improvement.
Third, IPAB is effectively unaccountable. In practice, the law
makes it almost impossible for Congress to reject or modify IPAB's
decisions, even if those decisions override existing laws and
protections that Congress passed. It's not really an advisory body,
despite its name. The system is set up so that IPAB, rather than
Congress and HHS acting under Congress' authority, makes the policy
choices about Medicare.
All of this suggests that IPAB is a potent mechanism for
undesirable policy. The Independent Payment Advisory Board is at best a
band-aid on out-of-control Medicare spending and at its worst a threat
to physician autonomy and patient choice.
Saving Medicare from ruin requires nothing short of total and
comprehensive reform. Adding in more cuts to a broken system does not
make it any less broken. The IPAB proposals will be short-term fixes
and cuts. We need long-term thinking and long-term solutions. We need
to move the focus from merely containing costs to focus on how to get
the most value for our health care dollars.
The IPAB is likely to exacerbate existing reimbursement problems
that already limit access to care for Medicare beneficiaries
If Medicare's provider reimbursements are drastically reduced the
market will react in accord with the basic laws of economics. Providers
will have three options: to close up shop, to refuse Medicare patients,
or to shift the costs onto the other patients. None of these options
help our healthcare system operate more effectively or more
efficiently.
Today, Medicare coverage no longer guarantees access to care.
Increasingly seniors enrolled in the Medicare program face barriers to
accessing primary care physicians as well as medical and surgical
specialists. The New York Times, Bloomberg News, and Houston Chronicle
are among many newspapers reporting that doctors are opting out of
Medicare at an alarming rate. For example, the Mayo Clinic, praised by
President Obama and the IPAB's architects, will stop accepting Medicare
patients at its primary-care clinics in Arizona.
The physician access problem stems from Medicare's below-cost
reimbursement rates and the uncertainty surrounding the Medicare
sustainable growth rate (SGR) formula for physician payments. IPAB
introduces further uncertainty into physician reimbursement and is
likely to force more physicians to begin making difficult Medicare
practice decisions.
Table 3 shows the impact on physician access for Medicare enrollees
the last time a major payment reduction loomed. In response, 11.8
percent of physicians stopped accepting new Medicare patients, 29.5
percent reduced the number of appointments for new Medicare patients,
15.5 percent reduced the number of appointments for current Medicare
patients, and 1.1 percent of physicians decided to stop treating
Medicare patients altogether.\2\
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\2\ Medical Group Management Association. 2010. Sustainable Growth
Rate Study. http://www.mgma.com/WorkArea/DownloadAsset.aspx?id=39774
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Recognizing the increased payment uncertainty, physician practices
have started to reshape their practice patterns. Moving forward 67.2
percent of physician practices are considering limiting the number of
new Medicare patients, 49.5 percent are considering the option of
refusing new Medicare patients, 56.3 are contemplating whether to
reduce the number of appointments for current Medicare patients, and
27.5 percent are debating whether to cease treating all Medicare
patients.\3\
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\3\ Medical Group Management Association. 2010. Sustainable Growth
Rate Study. http://www.mgma.com/WorkArea/DownloadAsset.aspx?id=39774
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Medicare's status quo is fraying the nation's social safety net.
The IPAB will only make the net fray more quickly.
The IPAB will stifle U.S. led medical innovation in the medical
device, pharmaceutical, biotechnology, and mobile health industries.
By statute, IPAB cannot directly alter Medicare benefits. Instead,
the more likely threat to patients is that the IPAB will be forced to
limit payments for medical services. In the process, it will
effectively determine that patients should have coverage for one
particular treatment option but not another, or must pay much more for
one of the treatment options.
This is especially troubling because it may choose to
disproportionately focus on expensive new treatments. New medicines for
conditions like Alzheimer's or Parkinson's will likely have rapid cost
growth, especially early after their introduction. That will make them
targets because the IPAB is directed to focus on areas of ``excess cost
growth.'' Worse, because about one-half of spending is off limits until
after 2020, there will be a disproportionate and uneven application of
IPAB's scrutiny and payment initiatives.
U.S. medical innovation leadership is dependent on whether the
regulatory environment nurtures growth or suppresses innovation. The
Affordable Care Act substantially increases the cost of innovation and
the IPAB creates a level of uncertainty that will likely drive away
venture capital investment in start-up firms and research and
development investments from established firms.
If left unaddressed, the Medicare status quo and the IPAB will pose
a danger to the fiscal health of the federal government, the U.S.
economy, and Medicare beneficiaries.
Medicare as we know it is financially unsustainable. The reality is
that the combination of payroll taxes and premiums do not come close to
covering the outlays of the program. As shown in Table 1, in 2010
Medicare required nearly $280 billion in general revenue transfers to
meet its cash outlays of $523 billion. As program costs escalate, the
shortfalls will continue to grow and reach a projected cash-flow
deficit of over $600 billion in 2020.
These shortfalls are at the heart of past deficit and projected
future debt accumulation. As shown in Table 2, between 1996 and 2010,
cumulative Medicare cash-flow deficits totaled just over $2 trillion,
or 22 percent of the federal debt in the hands of the public. Including
the interest cost on those Medicare deficits means that the program is
responsible for 23 percent of the total debt accumulation to date.
Going forward, the situation is even worse. By 2020, the cumulative
cash-flow deficits of 6.2 trillion will constitute 35 percent of the
debt accumulation. Again, appropriately attributing the program its
share of the interest costs raises this to 37 percent.
Viewed in isolation, Medicare is a fiscal nightmare that must
change course. When combined with other budgetary stresses, it
contributes to a dangerous fiscal future for the United States.
The federal government faces enormous budgetary difficulties,
largely due to long-term pension, health, and other spending promises
coupled with recent programmatic expansions. The core, long-term issue
has been outlined in successive versions of the Congressional Budget
Office's (CBO's) Long-Term Budget Outlook.\4\ In broad terms, over the
next 30 years, the inexorable dynamics of current law will raise
federal outlays from an historic norm of about 20 percent of Gross
Domestic Product (GDP) to anywhere from 30 to 40 percent of GDP.\5\
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\4\ Congressional Budget Office. 2011. The Long-Term Budget
Outlook. Pub. No. 4277. http://cbo.gov/ftpdocs/122xx/doc12212/06-21-
Long-Term--Budget--Outlook.pdf
\5\ Congressional Budget Office. 2011. The Long-Term Budget
Outlook. Pub. No. 4277. http://cbo.gov/ftpdocs/122xx/doc12212/06-21-
Long-Term--Budget--Outlook.pdf
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This depiction of the federal budgetary future and its diagnosis
and prescription has all remained unchanged for at least a decade.
Despite this, action (in the right direction) has yet to be seen.
In the past several years, the outlook has worsened significantly.
Over the next ten years, according to the Congressional Budget
Office's (CBO's) analysis of the President's Budgetary Proposals for
Fiscal Year 2012, the deficit will never fall below $740 billion.\6\
Ten years from now, in 2021, the deficit will be nearly 5 percent of
GDP, roughly $1.15 trillion, of which over $900 billion will be devoted
to servicing debt on previous borrowing.
As a result of the spending binge, in 2021 public debt will have
more than doubled from its 2008 level to 90 percent of GDP and will
continue its upward trajectory.\7\
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\6\ Congressional Budget Office. 2011. An Analysis of the
President's Budgetary Proposals for Fiscal Year 2012. Pub. No. 4258.
http://www.cbo.gov/ftpdocs/121xx/doc12130/04-15-
AnalysisPresidentsBudget.pdf
\7\ Congressional Budget Office. 2011. An Analysis of the
President's Budgetary Proposals for Fiscal Year 2012. Pub. No. 4258.
http://www.cbo.gov/ftpdocs/121xx/doc12130/04-15-
AnalysisPresidentsBudget.pdf
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A United States fiscal crisis is now a threatening reality. It
wasn't always so, even though--as noted above--the Congressional Budget
Office has long published a pessimistic Long-Term Budget Outlook.
Despite these gloomy forecasts, nobody seemed to care. Bond markets
were quiescent. Voters were indifferent. And politicians were
positively in denial that the ``spend now, worry later'' era would ever
end.
Those days have passed. Now Greece, Portugal, Spain, Ireland, and
even Britain are under the scrutiny of skeptical financial markets. And
there are signs that the U.S. is next, as each of the major rating
agencies have publicized heightened scrutiny of the United States. What
happened?
First, the U.S. frittered away its lead time. It was widely
recognized that the crunch would only arrive when the baby boomers
began to retire. Guess what? The very first official baby boomer
already chose to retire early at age 62, and the number of retirees
will rise as the years progress. Crunch time has arrived and nothing
was done in the interim to solve the basic spending problem.
Second, the events of the financial crisis and recession used up
the federal government's cushion. In 2008, debt outstanding was only 40
percent of GDP. Already it is over 60 percent and rising rapidly.
Third, active steps continue to make the problem worse. The
Affordable Care Act ``reform'' adds two new entitlement programs for
insurance subsidies and long-term care insurance without fixing the
existing problems in Social Security, Medicare, and Medicaid.
Financial markets no longer can comfort themselves with the fact
that the United States has time and flexibility to get its fiscal act
together. Time passed, wiggle room vanished, and the only actions taken
thus far have made matters worse.
As noted above, in 2020 public debt will have more than doubled
from its 2008 level to 90 percent of GDP and will continue its upward
trajectory. Traditionally, a debt-to-GDP ratio of 90 percent or more is
associated with the risk of a sovereign debt crisis.
Perhaps even more troubling, much of this borrowing comes from
international lending sources, including sovereign lenders like China
that do not share our core values.
For Main Street America, the ``bad news'' version of the fiscal
crisis would occur when international lenders revolt over the outlook
for debt and cut off U.S. access to international credit. In an eerie
reprise of the recent financial crisis, the credit freeze would drag
down business activity and household spending. The resulting deep
recession would be exacerbated by the inability of the federal
government's automatic stabilizers--unemployment insurance, lower
taxes, etc.--to operate freely.
Worse, the crisis would arrive without the U.S. having fixed the
fundamental problems. Getting spending under control in a crisis will
be much more painful than a thoughtful, pro-active approach. In a
crisis, there will be a greater pressure to resort to damaging tax
increases. The upshot will be a threat to the ability of the United
States to bequeath to future generations a standard of living greater
than experienced at the present.
Future generations will find their freedoms diminished as well. The
ability of the United States to project its values around the globe is
fundamentally dependent upon its large, robust economy. Its diminished
state will have security repercussions, as will the need to negotiate
with less-than-friendly international lenders.
Some will argue that it is unrealistic to anticipate a cataclysmic
financial market upheaval for the United States. Perhaps so. But an
alternative future that simply skirts the major crisis would likely
entail piecemeal revenue increases and spending cuts--just enough to
keep an explosion from occurring. Under this ``good news'' version, the
debt would continue to edge northward--perhaps at times slowed by
modest and ineffectual ``reforms''--and borrowing costs in the United
States would remain elevated.
Profitable innovation and investment will flow elsewhere in the
global economy. As U.S. productivity growth suffers, wage growth
stagnates, and standards of living stall. With little economic
advancement prior to tax, and a very large tax burden from the debt,
the next generation will inherit a standard of living inferior to that
bequeathed to this one.
Thank you and I look forward to answering your questions.
Chairman Ryan. Thank you. Within 12 seconds. Great.
Ms. Grace-Marie Turner.
STATEMENT OF GRACE-MARIE TURNER
Ms. Turner. Thank you, Mr. Chairman, Mr. Van Hollen,
members of the committee.
There is no question that Medicare spending must be
constrained if we are going to have any hope of getting overall
Federal spending under control, but clearly there is a wide
diversity of opinion about the wisdom of using the Independent
Payment Advisory Board as a tool. It was designed to take
difficult decisions about Medicare payment reductions out of
the hands of consumers and legislators and delegate them to
this panel of 15 independent authorities, but the Constitution
gives the power of the purse to Congress so that elected
Representatives can be accountable to the voters in their
decisions. The IPAB would turn this principle upside down.
The unelected IPAB members will ultimately determine
spending policies that will determine whether millions of
seniors have access to the care they need. This challenges the
very principle of representative democracy and the consent of
the governed. The IPAB is at the center of a conflict between
two world views. Do we entrust doctors and patients with
decisions, or do we entrust those decisions to a government-
appointed panel of experts in Washington who will have
authority over hundreds of billions of dollars in Medicare
spending?
The government approach to holding down Medicare spending
traditionally defaults to making deeper and deeper reductions
in payment rates to providers rather than implementing reforms
that reward innovation. The legislation is true to form. And
perhaps during the question and answer we can talk a little bit
about some of the government's experiments so far in innovation
and how those have turned out.
Because of the directives written into the law, reductions
achieved by IPAB between 2013 and 2020 are likely to be limited
primarily to Medicare Advantage, and to Part D prescription
drug program, and to skilled-nursing facility services. If the
Board is forced to reduce overall Medicare spending by focusing
only on these relatively smaller segments, the cuts would have
to be very deep to achieve overall per capita spending
reductions. Because any of these moves could have major
repercussions on access to care, it would seem that seniors and
taxpayers would be much better served if these changes were to
be openly debated through the legislative process rather than
imposed by unelected officials.
Even before the IPAB cuts began, Medicare actuaries found
that large reductions in Medicare payment rates already built
into law would likely have serious implications for beneficiary
access to care, as the chairman described in his opening
remarks. The President would double down on these savings by
giving the IPAB even more authority to cut payments to achieve
his deficit-reduction goals. It is hard to justify further cuts
in Medicare provider payments.
I will skip a little bit.
Clearly repeal is the best solution to begin to get us on a
path that can move toward a 21st century health sector. Part D
shows us the way. We have a working model that shows that when
private companies compete, and, importantly, when seniors
choose, that you can get costs and spending down both for
seniors and for taxpayers. The average monthly beneficiary
premium for Part D coverage will be $30 in 2011, far below the
$53 a month forecasted originally. Eighty-four percent of Part
D enrollees are satisfied with their coverage and 95 percent
say their coverage works well.
But looking beyond IPAB and looking beyond Part D, Chairman
Ryan has proposed a comprehensive plan to modernize Medicare
that builds on the Part D model. The key is premium support,
which provides seniors with an annual subsidy to purchase a
guaranteed Medicare health plan. When it begins in 2022,
seniors would receive an age-adjusted allocation so they can
pick the health plan that meets their needs, just as 11 million
seniors already have done voluntarily through Medicare
Advantage.
Premium support allows for flexible subsidies that can be
adjusted and targeted to seniors based upon their age,
financial well-being, health status, and similar
considerations.
To survive, Medicare must be changed, and the question is
whether it will be under IPAB and the rationing built into the
President's health care law or through Chairman Ryan's plan
that provides a path to sustainability for Medicare. It is a
clear choice between this and the top-down approach that puts a
small number of independent experts in charge of decisions that
will impact tens of millions of seniors and progressively limit
their access to care.
Thank you, Mr. Chairman.
[The prepared statement of Grace-Marie Turner follows:]
Prepared Statement of Grace-Marie Turner, President, Galen Institute
There is no question that Medicare spending must be controlled if
we are to have any hope of getting overall federal spending under
control. The question is who will make the decisions. There is a wide
diversity of opinion and legitimate concern about the new Independent
Payment Advisory Board (IPAB) and the powers given in PPACA to its 15
unelected officials who are charged with containing Medicare spending.
In my testimony, I provide an overview of how the IPAB will work,
the controversy surrounding the board's powers, and an overview of some
of the ideas being discussed as alternative solutions, including
widening the baseline for the spending cuts, requiring an evaluation of
the overall impact of the payment reductions, and limiting and
redirecting IPAB's powers. I conclude that there is a better way: We
have a working model in the Medicare Part D program, in which private
companies offer prescription drug benefits to seniors and compete on
benefit design and price, and which is coming in significantly below
projected costs.
While the IPAB has unprecedented power, allocation of the
tools available to the board reveals a fundamental conflict in American
health policy: It simultaneously is given broad authority over Medicare
payment policy, but its hands are tied in what it can do to reach the
mandatory budgetary targets.
The president wants to double-down on IPAB's powers,
giving the board authority to cut payments to doctors even more deeply
than called for in the PPACA and giving it the power to ``sequester''
congressional appropriations.
The Constitution gives the power of the purse to Congress
so that elected representatives can be accountable to the voters for
their decisions. The IPAB would turn this principle upside down. The
IPAB is at the center of the conflict between two world views. Do we
entrust individuals with the decisions for their own care? Or do we
entrust those decisions to a government-appointed panel of experts in
Washington who will have authority over hundreds of billions of dollars
in Medicare spending?
Thank you for the opportunity to testify today about the
Independent Payment Advisory Board (IPAB), created by Congress as part
of the Patient Protection and Affordable Care Act (PPACA) as a means of
containing Medicare spending.
There is no question that Medicare spending must be controlled if
we are to have any hope of getting overall federal spending under
control. The question is who will make those decisions. Do we trust
doctors and patients with decisions about their own care, with new
incentives to be partners in managing their health spending? Or do we
entrust those decisions to a government-appointed panel of experts in
Washington?
The IPAB was designed to take difficult decisions about Medicare
payment reductions out of the hands of consumers and legislators and
delegate them to this panel of independent experts. The 15 experts, to
be appointed by the president and confirmed by the Senate, will have
the authority to make binding recommendations for cuts in Medicare
payments if per capita spending exceeds defined targeted rates.\1\ In
that case, the board's recommendations will be sent to Congress at the
beginning of each year for fast-track consideration.
PPACA gives the Congress a route to override the IPAB's
recommendations, but it raises the bar on the legislative processes in
a way that will make it difficult for Congress to intercede. Congress
can override or amend the board's recommendations only with a
supermajority vote in both houses, and it has a limited time period to
pass legislation with alternative cuts that would meet the same
spending targets. If Congress does not act in the required timeframe,
the secretary of Health and Human Services is required to implement
cuts to reach the targets.
Clearly, the IPAB is unprecedented in the power given to unelected
officials to direct hundreds of billions of dollars in federal
spending. The IPAB will give unelected, unaccountable government
appointees the power to make decisions about payment policy in Medicare
that will ultimately determine whether millions of seniors have access
to the care they need. This challenges the very principles of
representative democracy and consent of the governed.
a powerful board whose hands are tied
While the IPAB has unprecedented power, allocation of the tools
available to the board reveals a fundamental conflict in American
health policy: The board is simultaneously given broad authority over
Medicare payment policy, but its hands are tied in what it can do to
reach the mandatory budgetary targets.
The board cannot make recommendations to improve how Medicare
operates. The only real tool it has is to recommend that providers get
paid less or to reduce payment for specific items or services.
Basically the board will be limited to using Medicare's existing system
of price controls and making further cuts in order to reach its
targets.
The government approach to holding down Medicare spending
traditionally defaults to making deeper and deeper reductions in
payment rates to providers for medical goods and services rather than
implementing reforms which reward innovation and which could lead to
more efficient, more effective, and better-coordinated care delivery.
The legislation is true to form.
The IPAB is barred from making changes that would modernize the
program's outdated fee-for-service structure. It cannot alter
eligibility, increase taxes, or make any changes that would result in
rationing, according to the statute. The board's payment decisions,
however, will inevitably result in de facto rationing by cutting
payments and therefore access to certain benefits.
The board also is prohibited from recommending changes that would
reduce payments to certain providers before 2020, especially hospitals
(which are subject to a different set of constraints). Because of
directives written into the law, reductions achieved by the IPAB
between 2013 and 2020 are likely to be limited primarily to Medicare
Advantage (MA), to the Part D prescription drug program, and to skilled
nursing facility services. That means that reductions will have to come
from segments that together represent a fraction of overall Medicare
spending. As the accompanying charts show, skilled nursing care
represents 5% of Medicare expenditures; outpatient prescription drugs,
11%; and Medicare Advantage, 23%--a share that shrinks to 11% by the
year 2020, according to CBO data.\2\ If the board is forced to reduce
overall Medicare spending by focusing only on these relatively smaller
segments of Medicare spending, the cuts would have to be very deep to
achieve overall per capita spending reductions.
Limits in payments under Medicare Advantage and Part D are
explicitly within the scope of the IPAB's authority. According to a
Kaiser Family Foundation analysis, it would appear that the board could
set Medicare Advantage payments at or below spending in the traditional
Medicare fee for service (FFS) program, and build on provisions in
PPACA that set MA payments below FFS payments in some communities. With
respect to prescription drugs, it would appear that the IPAB could
recommend that Part D plans receive rebates from prescription drug
manufacturers in the same manner as state Medicaid programs. It is not
clear whether the board could go further--for example, whether the IPAB
could recommend lower payment amounts for prescription drugs covered
under Medicare Part B, or whether the board could establish a new
Medicare-operated Part D plan to compete with private drug plans.\3\
Because any of these moves could have major repercussions throughout
the health sector, it would seem that seniors and taxpayers would be
much better served if these changes were to be openly debated through
the legislative process rather than imposed by unelected officials.
medicare actuaries' warning
Even before the IPAB's cuts begin, steep Medicare provider payment
reductions already are on track because of 1997 legislation that
reduces payments under ``sustainable growth rate'' (SGR) formulas and
additional payment reductions called for in PPACA. The Medicare
actuary's office recently released its updated alternative scenario,\4\
reiterating its projection from last year that the ``productivity
adjustments'' could cause approximately 40 percent of providers to
become unprofitable by 2050. The actuaries also find that ``the large
reductions in Medicare payments rates to physicians would likely have
serious implications for beneficiary access to care.''
Chief Medicare Actuary Richard S. Foster said in a supplementary
report to the annual Medicare Trustees' report that under current law
Medicare is on track to pay providers less than Medicaid does, and this
would lead to ``severe problems with beneficiary access to care.'' \5\
As a result of cuts in current law, Foster says ``Medicare prices
would be considerably below the current relative level of Medicaid
prices, which have already led to access problems for Medicaid
enrollees, and far below the levels paid by private health insurance.''
It is hard to justify further cuts in Medicare provider payments
when Medicare's chief actuary says it will lead to ``severe problems
with beneficiary access to care.''
Seniors in many regions already are having difficulty finding
physicians to see them. If the spending reductions in the law today
were to take place, seniors could face long waits for appointments and
treatments, and many would be forced to wait in line in over-crowded
emergency rooms to get care, just as Medicaid patients do throughout
the country today.
opposition grows
Opposition to IPAB is taking a rare bi-partisan tone in the
otherwise politically polarized health reform debate.
U.S. Rep. Allyson Schwartz (D-PA) and at least six other Democrats
in Congress have joined Republicans in supporting legislation that
would repeal the board.\6\
In a letter to her colleagues, Rep. Schwartz expressed concerns
about turning so much power over to a board that will have little or no
accountability to seniors impacted by its decisions. ``Congress is a
representative body and must assume responsibility for legislating
sound health care policy for Medicare beneficiaries, including those
policies related to payment systems,'' she wrote. ``Abdicating this
responsibility, whether to insurance companies or an unelected
commission, would undermine our ability to represent the needs of the
seniors and disabled in our communities.''
The House Republican budget resolution for Fiscal Year 2012, under
the leadership of Chairman Ryan, would eliminate the IPAB.
Representative Phil Roe, M.D. (R-TN) introduced H.R. 452 in the 112th
Congress, the Medicare Decisions Accountability Act of 2011, and
Senator John Cornyn (R-TX) introduced S. 668, the Health Care
Bureaucrats Elimination Act, both of which would repeal the board.
Several groups, including the pharmaceutical industry, the hospital
industry, physician groups, and others, have indicated their opposition
to the IPAB.
But not all are opposed.
Maya McGuiness, head of the Committee for a Responsible Federal
Budget, says: ``Outsourcing some of the harder policy decisions is the
best chance we have'' to contain the growth of Medicare spending.
Henry J. Aaron, Ph.D., of The Brookings Institution, wrote in The
New England Journal of Medicine\7\ that: ``Among the most important
attributes of legislative statesmanship is self-abnegation--the
willingness of legislators to abstain from meddling in matters they are
poorly equipped to manage,'' he writes. ``In establishing the
Independent Payment Advisory Board (IPAB) in section 3403 of the
Affordable Care Act (ACA), Congress may once again have shown such
statesmanship.''
He acknowledges that the board is limited in the tools it has to
reduce spending and even in the sectors of the health industry where it
can cut. Aaron and others conclude that means that for this decade, all
of the spending cuts will have to come from ``private Medicare
Advantage plans, Medicare's Part D prescription-drug program, or
spending on skilled-nursing facilities, home-based health care,
dialysis, durable medical equipment, ambulance services, and services
of ambulatory surgical centers.''
Rep. Pete Stark (D-CA), a strong supporter of PPACA, is a strong
opponent of the IPAB and called the board ``an unprecedented abrogation
of congressional authority to an unelected, unaccountable body.''
The Arizona-based Goldwater Institute has filed suit to challenge
the IPAB. ``No possible reading of the Constitution supports the idea
of an unelected, standalone federal board that's untouchable by both
Congress and the courts,'' Clint Bolick, the institute's litigation
director, said.\8\
Former Sens. John Breaux and Bill Frist wrote just before PPACA was
enacted: ``[IPAB's] structure * * * raises serious constitutional and
process questions * * * For all intents and purposes, the board would
have the power to influence and rewrite nearly all aspects of
Medicare.'' \9\
Former White House Budget Director Peter Orszag said that if the
IPAB realizes its potential to push Medicare toward paying for better
quality care, as opposed to paying for more care, ``it could well turn
out to be perhaps the most important component of the new
legislation.'' \10\
doubling down on ipab
The president wants to double-down on IPAB's powers, giving the
board authority to cut payments to doctors even more deeply than called
for in the PPACA and giving it the power to ``sequester'' congressional
appropriations. It is far from clear where the constitutional authority
is for a board of appointees housed in the Executive Branch to usurp
the power of Congress by sequestering funds if Congress were to decide
to override its rulings. There would surely be additional legal
challenges should the president's sequestering recommendation make it
into law.
In his deficit-reduction speech in April of 2011, President Obama
said he wants to give new powers to IPAB appointees, proposing they be
directed to limit Medicare cost growth per beneficiary to GDP growth
per capita plus 0.5 percent beginning in 2018. The IPAB's targeted cuts
are one percent above GDP growth under PPACA beginning in that year.
The president also proposed giving the board new powers to sequester
congressionally authorized funds if Congress were to overrule the
board's decisions.
The White House says that the president's new plan will mean
Medicare payments would be lowered by $340 billion over ten years and
$480 billion by 2023 to achieve his deficit-reduction targets.
Meanwhile, the president is criticizing the House Budget plan that
would put Medicare on a sustainable path and give tomorrow's seniors a
choice of private competing plans that would provide them with access
to care.
repeal is the best solution
As documented above, there is growing bi-partisan support for
putting responsibility for Medicare payments back in the hands of
Congress where it belongs.
While there is widespread agreement that we must reduce the growth
rate of Medicare spending, opposition to the IPAB as a vehicle to
accomplish this crosses party lines. The strongest concerns involve the
power given to the board's unelected officials and the detrimental
effect that ratcheting down payments could have on innovation and in
limiting access to physicians, medicines, and other medical
services.\11\
The Congressional Budget Office has estimated the IPAB would save
$15.5 billion between 2015 and 2019.
What is needed is a plan that will achieve the goal of moderating
Medicare spending, but in a way that is not destructive to patient
access to care and to quality and innovation. A number of alternate
solutions are being discussed in the policy community to limit the
IPAB's authority or otherwise redirect its responsibilities. A few
examples:
widen the baseline
The legislation instructs the IPAB to focus primarily on a narrow
range of Medicare spending involving Parts C and D--Medicare Advantage
plans and prescription drugs, as discussed earlier. It will be
extremely difficult to reach per capita spending growth targets by
cutting payments only in these narrow categories.
IPAB could be given authority to consider overall Medicare
spending, not just restrictions on pharmaceutical reimbursement and
Medicare Advantage, in achieving its spending targets. That would mean
including the full range of Medicare spending in the baseline
calculations.
break down the silos
The board could be required to evaluate the impact of its
directives on overall spending, on access to care, and on innovation.
It also should consider the impact of its decisions on the rate of
hospitalizations, life expectancy, quality of care, and access to
innovative treatments.
demonstration projects
The IPAB could be given the authority to conduct demonstration
projects to move away from Medicare's outdated fee-for-service system
and show the value of an integrated, coordinated care model. The
Florida: A Healthy State program, involving case management of high-
risk Medicaid patients, could be replicated for Medicare patients.
Programs that facilitate adherence to treatment recommendations,
including medications, have been shown to reduce hospitalizations and
decrease overall health care costs, with the largest savings gained
from the newest medicines. It is essential to consider overall health
spending in showing the value of investments in innovative treatments
and care management. While many have high expectations for Accountable
Care Organizations, may more experiments and demonstrations should be
conducted that are not so rule-driven and micro-regulated as ACOs will
be.
medical liability reform
Congress could tie IPAB to a serious effort to reform the medical
liability system. There is considerable concern throughout the policy
community about the huge amount of money spent on defensive medicine.
One colleague suggested we first need a good baseline study so we know
how much defensive medicine is costing the country--and Medicare in
particular. If the medical liability system were reformed to reduce
these expenditures, these savings could be applied to the savings that
were projected from IPAB. This could lead to giving the IPAB a new
mission: to monitor the cost of defensive medicine and to recommend
ways to reduce unnecessary spending in Medicare.
limit ipab's powers
As reported, many in Congress are very concerned about the powers
given to IPAB and the restrictions in PPACA on Congress' own authority
to alter the board's decisions. Legislation is needed that will give
Congress more power over IPAB's recommendations, particularly in
assuring that the board does not focus on cost reductions at the
expense of patient care.
local quality control projects
Health policy analyst David Kendall of the Third Way wrote in a
recent article\12\ for DemocracyJournal.org that ``A better way to
approach cost control is local action to improve quality.'' He strongly
supports broader use of best practices employed by the Mayo Clinic and
Intermountain Health. But he acknowledges, ``It is not yet clear how to
bring such quality improvement to scale given a diverse population and
a fragmented delivery system. But edicts from Washington to improve
quality won't work. It has to come from local physician leadership with
the support of the patients, insurers, employers, and taxpayers.'' He
suggested one place to start would be for the Center for Medicare and
Medicaid Innovation to ``organize regional collaborations among public
and private payers to pay for the quality of care instead of the
quantity of care.''
long term modernization
There is agreement among many health policy experts that a premium
support model for Medicare, as proposed by Chairman Ryan, by the
National Bipartisan Commission on the Future of Medicare, and many
others, is the best way to modernize the program and achieve cost
savings in the future. This must continue to be part of any
conversation to modernize Medicare.
In any case, a serious conversation would need to begin by laying
down some predicates for cost control. What can we do now and what do
we need to start planning for the future? The goal needs to be to focus
on payment and delivery system reforms rather than payment cuts that
will lead to restricted access--the tools that current law gives to the
IPAB.
part d and the future
There is a better way. We have a working model in the popular
Medicare Part D program, in which private companies compete to offer
prescription drug benefits to seniors.
Created in 2003, Part D provides a range of choices and a subsidy
to allow seniors to select the drug plan that best suits their needs.
The plans compete on benefit design and price.
The 2011 CBO Medicare Part D baseline forecasts and actual recorded
spending show costs for Part D benefit payments have declined by 46%
for the 2004 to 2013 period compared with initial estimates of the 10-
year cost projections for those years.\13\
And Part D's competitive model is saving seniors money as well. The
average monthly beneficiary premium for Part D coverage will be $30 in
2011, far below the $53 forecast originally, and an increase of only $1
over the 2010 average premium of $29.\14\
Recent public opinion surveys show that Medicare Part D enrollees
are overwhelmingly satisfied with their Part D coverage. Eighty-four
percent of Part D enrollees are satisfied with their coverage, and 95
percent say their coverage works well. Additionally, vulnerable
beneficiaries who are dually eligible for both Medicaid and Medicare
exhibited the highest satisfaction.\15\
looking beyond ipab
Chairman Ryan has provided a comprehensive plan that builds on the
Part D model for Medicare. The key to Ryan's plan is premium support,
which provides seniors with an annual subsidy to purchase a Medicare-
approved health plan. The plan, when it begins in the year 2022, would
provide an age-adjusted payment so that seniors can pick the health
plan to meet their needs. The older they are, the bigger the payment
they would get. Premium support allows for flexible subsidies that can
be adjusted and targeted to seniors based on their age, financial well-
being, health status, and similar considerations.
Spending on Medicare and other entitlement programs must be
contained. To survive, Medicare must be changed, and the question is
whether it will be under IPAB and the rationing built into the
president's health care law, or through Chairman Ryan's plan that
enables enrollees to apply the government's contribution to guaranteed
health coverage while bringing the power of market competition to
reduce health costs.
Ryan's plan takes a bottom-up approach, cultivating individual
choice, forcing providers to compete to offer seniors the best value in
health care, and providing a path to sustainability for Medicare. The
president takes a top-down approach that puts a small number of
independent experts in charge of decisions that will impact tens of
millions of seniors and progressively limit their access to care. It is
a clear choice.
shifting the focus
The Constitution gives the power of the purse to Congress so that
elected representatives can be accountable to the voters for their
decisions. The IPAB would turn this principle upside down. The IPAB is
at the center of the conflict between two world views. Do we entrust
individuals with the decisions for their own care? Or do we entrust
those decisions to a government-appointed panel of experts in
Washington who will have authority over hundreds of billions of dollars
in Medicare spending?
There are better solutions than relying on the Independent Payment
Advisory Board.\16\
To find savings, Congress could instead focus its attentions on
providing better, more efficient care to the nearly nine million
people, representing one in five Medicare beneficiaries, who are
eligible for services through both Medicare and Medicaid--often called
``dual eligibles.'' \17\ They are the poorest and often the sickest
beneficiaries, many of whom have multiple acute illnesses and long-term
care needs.
They consume about 25 percent of Medicare's spending and nearly
half of Medicaid's--more than $250 billion in 2008. Yet 95 percent of
them are stuck in an antiquated 1960's fee-for-service payment model
and are bounced back and forth between the two programs. Many patients
get lost in a crevice between Medicare and Medicaid where no one is
overseeing their total care, leading to gaps, duplication, and poor
outcomes.
The focus should be on providing tools and solutions for these
patients to receive better-coordinated care by contracting with care
management plans, a strategy to save money and make these programs work
better for vulnerable seniors. Providing them with truly integrated
care could significantly improve their care and also help reduce health
costs by providing timely, appropriate, managed treatment.
conclusion
The more people learn about the IPAB, the more they will insist
that it be repealed and replaced with better solutions.
Health economist Alain Enthoven summed it up in a recent Wall
Street Journal commentary: \18\
The 2010 health-care reform's Independent Payment Advisory Board is
unlikely to be effective. Appointed by the president, 15 experts with
no financial ties to the health-care industry are supposed to dream up
cost-cutting ideas that would go into effect unless overridden by a
supermajority in Congress. But the reality is that most waste
identification and cutting is local. These 15 central planners are
unlikely to do as good a job as hundreds of doctors and managers in
local delivery systems working with incentives to improve value for
money for their enrolled members.
Prof. Enthoven is correct. The IPAB is not the answer, and we must
begin now with solutions that will work to make Medicare sustainable
for the future.
endnotes
\1\ David Newman and Christopher M. Davis, ``The Independent
Payment Advisory Board,'' Congressional Research Service, November 30,
2010, http://assets.opencrs.com/rpts/R41511--20101130.pdf.
\2\ ``Medicare Benefit Payments, by Type of Service, 2010 and
2020,'' Medicare Chartbook, Fourth edition, The Henry J. Kaiser Family
Foundation, 2010, http://facts.kff.org/
chart.aspx?cb=58&sctn=169&ch=1799.
\3\ Newman and Davis, ``The Independent Payment Advisory Board.''
\4\ John D. Shatto and M. Kent Clemens, ``Projected Medicare
Expenditures under an Illustrative Scenario with Alternative Payment
Updates to Medicare Providers,'' Office of the Actuary, Centers for
Medicare and Medicaid Services, U.S. Department of Health and Human
Services, May 13, 2011, http://www.cms.gov/ReportsTrustFunds/Downloads/
2011TRAlternativeScenario.pdf.
\5\ ``Statement of Actuarial Opinion,'' 2011 Annual Report of the
Boards of Trustees of the Federal Hospital Insurance and Federal
Supplementary Medical Insurance Trust Funds, The Boards of Trustees,
Federal Hospital Insurance and Federal Supplementary Medicare Insurance
Trust Funds, May 13, 2011, https://www.cms.gov/ReportsTrustFunds/
downloads/tr2011.pdf.
\6\ Representative Allyson Y. Schwartz, ``IPAB Is the Wrong Path
Toward Medicare Payment Reform,'' April 15, 2011, http://www.house.gov/
list/press/pa13--schwartz/pr--apr15--ipabletter.html.
\7\ Henry J. Aaron, Ph.D., ``The Independent Payment Advisory
Board--Congress's 'Good Deed,''' The New England Journal of Medicine,
May 11, 2011, http://healthpolicyandreform.nejm.org/?p=14433.
\8\ John Merline, ``Will Congress Kill 'Death Panel 2.0'?''
Investor's Business Daily, May 16, 2011, http://www.investors.com/
NewsAndAnalysis/Article.aspx?id=572358&utm--source=feedburner&utm--
medium=feed&utm--campaign=Feed%3A+PoliticRss+%28Politic+RSS%29.
\9\ Bill Frist and John Breaux, ``Keep Medicare in Congress's
Hands,'' Politico, March 19, 2010, http://www.politico.com/news/
stories/0310/34658.html.
\10\ David Wessel, ``A Spending Nudge, or a Fudge?'' The Wall
Street Journal, April 1, 2010, http://online.wsj.com/article/
SB10001424052702303338304575155970077562414.html.
\11\ John D. Shatto and M. Kent Clemens, ``Projected Medicare
Expenditures under an Illustrative Scenario with Alternative Payment
Updates to Medicare Providers,'' memorandum, Office of the Actuary,
Centers for Medicare and Medicaid Services, U.S. Department of Health
and Human Services, August 5, 2010, https://www.cms.gov/
ReportsTrustFunds/downloads/2010TRAlternativeScenario.pdf, p. 6.
\12\ David Kendall, ``Amend and Improve, 2016: The key to improving
health-care reform lies outside Washington,'' DemocracyJournal.org,
Winter 2011, http://www.democracyjournal.org/19/6790.php.
\13\ See CBO Medicare baselines for 2005 through 2011, available at
http://www.cbo.gov.
\14\ CMS Press Release, ``Premiums for Medicare prescription drug
plans to remain low in 2011,'' August 18, 2010; 2004 Medicare Trustees
Report, p. 164.
\15\ KRC Survey for Medicare Today, ``Seniors' Opinions About
Medicare Rx: Fifth Year Update,'' September 2010.
\16\ Grace-Marie Turner, James C. Capretta, Thomas P. Miller,
Robert E. Moffit, Why ObamaCare Is Wrong for America, New York:
Broadside Books, an imprint of HarperCollins, 2011.
\17\ Grace-Marie Turner, ``What Medicare Services to Cut, Now:
'Dual Eligibles,' Doubly Expensive,'' The New York Times: Room for
Debate, June 1, 2011, http://www.nytimes.com/roomfordebate/2011/06/01/
what-medicare-services-to-cut-starting-today/reducing-the-overlap-
between-medicare-and-medicaid.
\18\ Alain Enthoven, ``What Paul Ryan's Critics Don't Know About
Health Economics,'' The Wall Street Journal, June 3, 2011, http://
online.wsj.com/article/
SB10001424052702303657404576357750584271340.html.
Chairman Ryan. Dr. Feder.
STATEMENT OF JUDITH FEDER
Dr. Feder. Thank you, Mr. Chairman, and Ms. Schwartz, and
members of the committee. Glad to be with you today to discuss
the role of IPAB, which I believe serves as a guarantor of the
ACA, the Affordable Care Act's, investment in assuring all
Americans quality care at lower cost.
As you consider the role of IPAB, I call your attention to
the fact that Medicare is an enormously successful program,
more successful than private insurance, in pooling risk and
controlling costs. Medicare has historically achieved slower
spending growth than private insurance, and the ACA extends its
relative advantage. Action taken in the Affordable Care Act
produces an average annual growth rate of 2.8 percent per
Medicare beneficiary for the years 2010 to 2021, 3 percentage
points lower than national health care spending. National
health spending is projected to grow about 2 percentage points
faster than GDP growth per capita, and Medicare's projected
per-beneficiary spending growth will be a full percentage point
lower than per capita GDP.
Growing slower than the private sector is good, but not
good enough, since both the public and private sector are
paying too much for too many services and failing to assure
efficiently delivered quality care. That is why the Affordable
Care Act goes beyond tightening fee-for-service payments to
pursue a strategy of payment and delivery reform and creates
the IPAB to assure effective results.
The strategy includes payment reductions for overpriced or
undesirable behavior and bonuses or rewards for good behavior,
most especially through payment innovations that reward
providers for coordinated, integrated care efficiently
delivered. These reforms have the potential to transform both
Medicare and, by example and in partnership, the Nation's
health care delivery system to provide better quality care at
lower costs.
I have been kind of amazed to hear how little confidence
there is in the capacity to reform the overall system and what
these achievements of these savings cannot be assumed. That is
why the IPAB exists, to recommend ways to achieve specified
reductions in Medicare spending by changing the way Medicare
pays health care providers. In essence, IPAB serves to inform
and assure congressional action to keep Medicare spending under
control.
Now, we know that some have proposed eliminating, repealing
the IPAB, but along with about 100 health policy experts who
recently wrote congressional leaders in support of IPAB, I see
that effort as sorely misguided. As we wrote, the IPAB enables
Congress to mobilize the expertise of professionals to assemble
evidence and to assure that the Medicare program acts on the
lessons of payment and delivery innovation the Affordable Care
Act seeks to promote.
I would contrast the ACA's strategy to strengthen Medicare
with the alternative strategy not only to repeal IPAB, but also
to eliminate Medicare for future beneficiaries, replacing it
with vouchers for the purchase of private insurance, vouchers,
I would call to your attention, that are set taking into
account all of the reductions in Medicare payment that we have
heard criticized this morning. The CBO analysis shows that such
an act will not slow health care cost growth, it would increase
the cost of insurance and shift responsibility for paying most
of them onto seniors.
Given Medicare's track record relative to private insurance
in delivering benefits and controlling costs, morphing Medicare
into the private insurance market simply makes no sense. Rather
than go in that direction, what we should recognize is that
Medicare is clearly doing its part to control costs, having
reduced spending per beneficiary considerably and well below
that in the private sector. But it can only go so far, as you
have noted, on its own to promote efficiencies without
partnership with the private sector.
Health care spending growth is not fundamentally a Medicare
problem, it is a health care system problem. Effective payment
and delivery reform requires an all-payer partnership to assure
that providers actually change their behavior, that we do not
go on as we have gone, rather than looking to favor some
patients over others or to pit one payer against another.
Rather than moving to abandon IPAB which supports Medicare's
continued and improved efficiency, I urge you to modify IPAB's
current spending target to apply not just to Medicare, but to
private insurance, indeed all health care spending, and extend
its authorities to trigger recommendations for all-payer
payment reform if the target is breached. It is all payers
promoting efficiently that the Nation very much needs.
[The prepared statement of Judith Feder follows:]
Prepared Statement of Judith Feder, Ph.D., Professor and Former Dean,
Georgetown Public Policy Institute, and Urban Institute Fellow
Chairman Ryan, Ranking Member Van Hollen and members of the
committee, I appreciate the opportunity to appear before you today as
you consider the role of the Independent Payment Advisory Board
established by the Affordable Care Act (ACA). Along with its extension
of essential health insurance coverage to tens of millions of
Americans, the ACA reduces the federal deficit--in large part because
of measures the law takes to responsibly slow the growth in Medicare
and overall health spending. Establishment of the Independent Payment
Advisory Board (IPAB) is one such measure. The IPAB serves as a
guarantor of the ACA's investment in cost-containment.
Having IPAB as a backstop to sustain Medicare's financing is not
only critical to securing this vital program that makes health care
affordable for older and many disabled Americans; but also to assure
that Medicare leads the much-needed transformation of the nation's
entire health care payment system--moving from reliance on mechanisms
that reward the delivery of ever more, and ever more expensive
services, regardless of their contribution to health, to mechanisms
that reward high quality care, efficiently provided. In short, the IPAB
is part of the Affordable Care Act's commitment to assuring all
Americans quality care at lower cost.
As you consider the role of the IPAB, I urge you to consider that:
Medicare is an enormously successful program--more
successful than private insurance in pooling risk and controlling
costs.
Medicare's per capita cost growth has historically been
slower than per capita growth in private insurance. But, as a result of
measures taken in the Affordable Care Act, Medicare's relative
advantage grows dramatically in the coming decade. Its projected 2.8
percent average annual growth rate in spending per beneficiary is
projected to be a full percentage point below per capita growth in GDP
and three percentage points below growth in national health
expenditures per capita. ACA-initiated payment reforms, already under
way, have the potential to improve quality and reduce spending growth
even further. The IPAB provides a back-up to assure that these savings
and efficiencies are actually achieved.
Medicare is clearly doing its part to control health care
cost growth. But spending growth is not, fundamentally, a Medicare
problem; it's the problem of the entire health care system. Medicare
can only go so far on its own in promoting efficiencies, without
partnership with the private sector. Effective payment and delivery
reform requires an all-payer partnership to assure that providers'
actually change their behavior, rather than looking to favor some
patients over others or pit one payer against another.
What's needed, therefore, is not to abandon IPAB--and
certainly not to morph Medicare into less effective private insurance.
Rather, we should extend the expertise and authority IPAB focuses on
Medicare to apply to all payers--with a system-wide spending target
that triggers all-payer payment reform to assure Medicare beneficiaries
and all Americans the high quality, efficiently delivered care we
deserve. The importance of securing Medicare cannot be overstated. From
its inception, Medicare was designed to avoid the problems that plague
the private health insurance market. Unlike private insurers, for whom
administration, marketing and profits may absorb 15-20 percent of
health care premiums, Medicare spends only 3 percent on program
administration. While private insurers compete to enroll the healthy
and avoid the sick, Medicare pools the overwhelming majority of
beneficiaries in a single program--avoiding discrimination based on
pre-existing conditions and denials of coverage when people are sick.
And, when it comes to costs, Medicare's ability to purchase care from
hospitals, doctors and other providers on behalf of virtually all its
beneficiaries--rather than having individual beneficiaries or even
several insurers negotiate on their own--has historically kept its rate
of cost growth per beneficiary below premium growth in private
insurance.
The Affordable Care Act promotes cost containment for the future in
multiple ways, beginning by setting future payment rates to hold
hospitals and other institutional health care providers accountable for
productivity gains on a par with those achieved by every other sector
of our economy over the past several decades. The result is an average
annual per beneficiary growth rate of 2.8 percent for 2010 to 2021--3
percentage points slower than per capita national health expenditures.
A this growth rate (3.9 percent per year), national health spending
will actually exceed average annual GDP growth per capita by close to 2
percentage points. By contrast, Medicare's projected per beneficiary
spending growth will be a full percentage point below growth in per
capita GDP. With per capita cost growth slowed, for the first time in
the program's history, enrollment growth has become a major driver of
overall Medicare spending.
A slower spending increase than the private sector's, however, does
not mean that Medicare uses its dollars as efficiently and effectively
as it can--particularly as the aging of the baby boomers and expanded
enrollment become a significant driver of its overall costs. Public and
private insurers alike pay too much for too many services and fail to
assure efficiently delivered, quality care. That's why the Affordable
Care Act goes beyond tightening fee-for-service payments to pursue a
strategy of payment and delivery reform--and creates the IPAB to assure
effective results. Payment reform involves a mix of strategies to
support not just cheaper but better care:
No rewards for `bad' behavior. The ACA authorizes the
Secretary of Health and Human Services to review and alter
``misvalued'' fees, such as paying more for services than they're
worth, and to reduce payments for clearly undesirable behavior, such as
hospital-acquired infections or conditions, inappropriate hospital
readmissions, and, even more egregious, outright fraud.
Bonuses for `good' behavior. Alongside what might be
considered these ``sticks'' to change behavior, the ACA authorizes a
set of ``carrots,'' or rewards to delivery of more effective and
efficient care. At the most basic level, these rewards are extra
payments to providers for doing ``good'' things--say, meeting a set of
efficiency standards while maintaining quality care. But more
importantly, these rewards reside in alternative payment mechanisms to
replace today's fee-for-service payment system.
Payment reforms. Among the new payment systems the new
health law encourages are ``accountable care organizations'',
collaboratives of inpatient and outpatient providers who will be
rewarded for delivering quality care to a defined set of patients at
lowerthan-projected costs; ``patient-centered medical homes'' to
promote the financial and health benefits of primary care and chronic
care management; and ``bundling'' separate fees surrounding a hospital
episode into a single payment for services associated with a specific
condition, such as a hip fracture, which today would include separate
fees for diagnosis, surgery, and postoperative care.
These reforms have the potential to transform both Medicare and, by
example and in partnership, the nation's health care delivery system to
provide better quality care at lower costs. But their achievement and
implementation cannot be assumed. To assure that its savings objectives
are actually achieved, the ACA's cost containment strategy includes a
back-up enforcement mechanism--the Independent Payment Advisory Board
or IPAB. The board consists of 15 members, appointed by the President
and confirmed by the Senate, to include experts in health economics and
insurance, as well as consumer representatives.
The Board is empowered to undertake analysis on ways to promote
efficiency in both Medicare and national care spending, and to make
recommendations accordingly. But, with respect to Medicare, if spending
is projected to exceed the annual Medicare per capita cost-growth
target specified in the ACA, the IPAB is required to recommend ways to
achieve specified reductions in Medicare spending by changing payments
to health care providers, and Congress is required to fast-track
consideration of those proposals in the legislative process. Unless
Congress votes to reject the proposal (with 60 votes in the Senate) or
passes an alternative proposal that achieves similar savings, the
Secretary of Health and Human Services must implement the IPAB
recommendations. In essence, IPAB serves to inform and assure
congressional action to keep provider payment under control.
Some legislators have proposed to repeal the IPAB. But along with
about a hundred health policy experts who recently wrote congressional
leaders in support of IPAB, I see that effort as sorely misguided. As
we wrote, the IPAB enables Congress to mobilize the expertise of
professionals to assemble evidence on how payment incentives affect
care delivery and to use that evidence to suggest sensible
improvements. As an independent, expert, evidence-driven body, we
argued, the IPAB will support, not diminish, the Congress' capacity to
assure that the Medicare program acts on the lessons of the payment and
delivery innovations the Affordable Care Act seeks to promote.
Rather than support this strategy to strengthen Medicare and,
indeed, the overall health care system by promoting better care at
lower costs, opponents of the Affordable Care Act have proposed not
only to repeal IPAB but also to eliminate Medicare for future
beneficiaries--replacing it with vouchers for the purchase of private
insurance. As analysis of that proposal by the Congressional Budget
Office makes crystal clear that strategy would not slow health care
cost growth. Instead, it would increase insurance costs and shift
responsibility for paying most of them onto seniors. The cost of
private insurance is, to start with higher than the cost of Medicare,
and, as noted above is growing considerably faster. A voucher set equal
to Medicare costs in 2022, when the proposed change would begin, would
be insufficient to buy Medicare benefits in private insurance. With
this voucher, a typical 65 year old's out-of-pocket spending would be
about twice what it's projected to be under traditional Medicare--an
additional $6000 in out-of-pocket spending--in 2022. And as the gap
between Medicare costs and private premiums continues to grow--extra
out-of-pocket spending would rise to $11,000 in 2030. Given Medicare's
track record relative to private insurance in delivering benefits and
controlling costs, morphing Medicare into a private insurance market
simply makes no sense.
Rather than replace the IPAB, let alone Medicare, what does make
sense is to use the IPAB to align the private sector with the public
sector's commitment to health care payment reform and slower cost
growth. Medicare payment changes have already brought its spending per
capita well below both per capita growth in GDP and per capita private
health care costs. And its emphasis on payment and delivery reform can
achieve even more. But success in that effort depends on more than
Medicare. Medicare can only go so far on its own to promote
efficiencies, without partnership with the private sector. Effective
payment and delivery reform requires an all-payer partnership to assure
that providers actually change their behavior, rather than looking to
favor some patients or others or pit one payer against another. Rather
than moving to abandon IPAB, which supports Medicare's continued and
improved efficiency, Congress should therefore modify IPAB's current
spending target to apply not just to Medicare but to private
insurance--all health care spending, and extend its authorities to
trigger recommendations for all-payer payment reform if the target is
breached.
Health care cost growth is not, fundamentally, a Medicare problem--
though Medicare is doing its part to control it; it's a health care
system problem--and it's the private sector that needs to become a
full-fledged partner in Medicare's efforts. As you address concerns
about Medicare's future and the fiscal future of the nation, I
therefore urge you not simply to recognize IPAB's value in helping slow
Medicare cost growth, but also to take action to extend the expertise
and authority IPAB provides to move all payers in partnership toward
reforms that will deliver better quality care at lower costs. Only
payment efficiencies that apply to all payers can assure Medicare and
all Americans the affordable, quality care we deserve.
Chairman Ryan. Dr. Feder, I appreciate that very pure
statement.
Dr. Feder. Well, and I appreciate your appreciation, Mr.
Chairman.
Chairman Ryan. With that, we are starting with Mr. Flores.
Mr. Flores. Thank you, Mr. Chairman. I would like to thank
the panel for joining us today. I believe IPAB has a Federal
flaw built into it, but before we do that, I am going to try to
hit some questions quickly.
Dr. Holtz-Eakin, you started your comments talking about
the insolvency of Medicare and Medicaid. Can you give me what
your perception of those metrics is?
Mr. Holtz-Eakin. All right.
Mr. Flores. If you looked at Medicare-Medicaid as a
private-sector pension plan.
Mr. Holtz-Eakin. We know that Part A of Medicare is running
a cash flow deficit right now. Parts B, C, D were never set up
to be on their own footing, so they have always counted on what
looks to be 79 percent of general revenue. So we have something
well over $250 billion, probably close to $280 billion, flowing
in out of general revenue to keep the program alive. That is
now and it is going to get worse.
Mr. Flores. If you look at the infinite time frame.
Mr. Holtz-Eakin. It is by March.
Mr. Flores. My understanding is that Medicare is insolvent
to the tune of about $60 trillion; is that about right?
Mr. Holtz-Eakin. These are games that budgeteers play. Let
me give you the sad fact. Medicare grows so quickly that there
is no interest rate from which you can actually do a
discounting exercise that will cause it to convert, so it is
infinitely, infinitely underfunded by any sensible piece of
arithmetic. You can only get a number----
Mr. Flores. So more than $60 trillion?
Mr. Holtz-Eakin. You can only get a number if you assume a
miracle occurs somewhere in the future and health care costs
grow more slowly.
Mr. Flores. Right. We are going to get to that in just a
second.
And Medicaid is somewhere in the neighborhood of 15- to $20
trillion, right?
Mr. Holtz-Eakin. Yes.
Mr. Flores. And those numbers together are five times our
current national debt.
Mr. Holtz-Eakin. Huge.
Mr. Flores. Okay. One of my very first economics professors
taught me that the laws of economics are like the laws of
gravity. The worse you violate them, the harder the impact at
the end, and that is essentially what we are in right now. If
you look at what has been claimed to be the benefits of IPAB,
it says that we can cut costs to providers, but yet not ration
health care. So my question for Secretary Sebelius was going to
be if we cut the budget for HHS by two-thirds, would she still
continue to be able to provide the quality response to her
missionary requirements? And I would assume her answer would
have been no.
My next question to her would have been if we were to cut
the pay for the typical HHS employee by two-thirds, how many
young people would want to enter that profession? And so I will
ask whichever person on the panel wants to answer, if we cut
the pay for doctors by two-thirds, how many young people as
they are going into college are going to make the decision to
go pre-med and then to follow through all the way through their
residency program to become doctors? Anybody want to answer
that?
Mr. Holtz-Eakin. I don't know the number, but the
incentives are clear, and we have seen this movie before. We
have been through this exercise where we say to the
beneficiaries, you can have all the medical science you want at
low or no cost, and then it costs an enormous amount. So we go
to the providers and say, no, no, no, stop that, either
literally don't cover that service, or we will cut the
reimbursement.
Mr. Flores. The same thing is going to happen in the
technology area. We are going to improve Medicare through
technology.
Mr. Holtz-Eakin. And we are going to make the same mistake,
the same mistake.
Dr. Feder. May I comment?
Mr. Flores. Right. There will be less investment in the
industry because there is less money going into the industry to
go forward.
One of the things that is caused--one of the claims that is
been made by government, by Madam Secretary, was that
Medicare's costs have grown at a rate slower than that of the
private insurance market, and I can tell you firsthand as
somebody who was in business for 30 years before I came here,
the reason for that is we began to clamp down on what
government health care plans would provide, and all of those
costs shifted to the private sector. Does anybody disagree with
that?
Mr. Holtz-Eakin. No.
Dr. Feder. Yes.
Mr. Flores. I was there.
Dr. Feder. So was I.
Mr. Flores. I watched my premium increases go up every
year. What caused that in the private sector?
Dr. Feder. The private sector has been far less aggressive
than Medicare in attempting to limit health care costs.
Mr. Flores. So the government invented the HMO or the PPO?
Dr. Feder. Actually the government did invent the HMO in
the 1970s in the Reagan administration. They actually promoted
that policy, and they developed from that point, that is
correct.
Mr. Flores. Let me correct you, though. It came from the
private sector.
I don't see how we are going to make this work. We are
going to cut pay to the people that provide medical care by
two-thirds, and we are going to expect them to stay in the
business.
Dr. Feder. May I comment on that?
Mr. Flores. Sure.
Dr. Feder. As I said in my testimony, what I think is there
is an assumption that the Medicare system stays the same as it
is, that there is no way to improve productivity in the system.
The health care industry is the only sector in which we have
not seen productivity increases, and, in fact, what the--and I
see the chairman nodding. The capacity to achieve productivity
increases by delivering health care more efficiently, getting
rid of unnecessary readmissions being a primary example. It is
out there as a strategy that we all need to pursue and is being
pursued by the public. The public is leading. Private payers
are doing that as well.
Chairman Ryan. We will let that continue. I want to get to
everybody.
Mr. Pascrell.
Mr. Flores. Thank you.
Mr. Pascrell. Thank you, Mr. Chairman.
And to add to what the good doctor just said, there were
and are three promising models to cut costs and improve
quality. If you don't believe in that, then you don't believe
in the reform that was passed. One is the accountable care
organizations. You have heard those terms, you have heard the
discussions about that. Value-based purchasing programs. Very
few places have done that. Where it has been done, it has been
successful. And payment bundling, which is very, very critical,
and a lot of places don't want to do that, do they, Doctor?
So there are many sections. Section 3001 to section 3009
and section 3020 to section 3028 deal very specifically with
some things that were not scored by CBO which I believe are
going to bring a tremendous amount of--look, when it comes down
to it, Doctor, here is where we are at. Democrats want a
guarantee benefit program. The other side does not. Regardless
of how you slice it, that is what it comes down to. They are
entitled to their opinion. I say that with deep respect.
But I want to talk about rationing. Rationing. We have
heard that term. It came out the first couple of weeks when we
started to discuss health care reform. We want to ration. You
know, that is when it led to those cryptic remarks about we
want to push Aunt Tillie off the cliff so we don't have to pay
attention to her anymore.
So let us talk about rationing, Mr. Chairman. Over 50
million people in our country are uninsured. Kaiser Foundation,
I think, has given us some good figures on that. Twenty-five
million are underinsured. We see that in the letters I get,
calls I get in my congressional office. I am sure the other
guys and gals do the same thing. People cannot afford the care
that they deserve and need. They can't do it. Rationing. As you
all know, two-thirds of all personal bankruptcies are due to
health problems. Rationing.
Just because you have insurance doesn't mean you are
covered. We all know that, right? You could get diagnosed with
a disease, your doctor could prescribe a comprehensive
treatment for you, but if your insurance company says no, what
do you do? You call your Congressman. You have little power
against the insurance company, and that is what this is all
about, Doctor, don't kid yourself.
Just look at all the requests that we get. Am I correct--
let me ask you, Ms. Turner, am I correct that this kind of
rationing exists under private plans?
Ms. Turner. People are making choices and decisions all the
time about limited resources, both in their financial capacity
as well as the capacity of the market to deliver.
Mr. Pascrell. You can make a choice if you can afford it,
if you are given the ability to make that choice. Not everybody
can make the choice unless there are options in front of you,
options that you fit into, and you don't have to worry about
the person who is offering the options saying you don't
qualify, or you have this disease and we are not going to cover
you. Isn't that rationing?
Ms. Turner. We have----
Mr. Pascrell. Isn't that rationing?
Ms. Turner. We would not have a functioning market in our
health sector----
Mr. Pascrell. Mr. Chairman, is that rationing?
Ms. Turner. People should have more choices. And the market
would provide those choices.
Mr. Pascrell. Thank you.
Is that rationing, Mr. Chairman?
Chairman Ryan. Does the gentleman want to yield his time?
Mr. Pascrell. Sure.
Chairman Ryan. I think let us try to get decorum. Having
the government deny care to seniors through providers I would
count as rationing.
Mr. Pascrell. Okay. Would you agree with that, Ms. Turner?
Ms. Turner. Having the government deny care to seniors
through a payment policy would also be rationing, yes, sir.
Mr. Pascrell. How about if insurance companies deny care
and coverage to a young couple 40 years of age with three
children?
Ms. Turner. Absolutely. And we need to reform the system so
they have more choices and own that insurance.
Mr. Pascrell. Thank you.
Ms. Turner. So they can make their own choices in a
competitive marketplace.
Mr. Pascrell. Thank you. Thank you.
It is all choices, but if you have choices out there, real
choices.
I yield back, Mr. Chairman.
Chairman Ryan. Okay. I would simply say at least you can
fire your insurance company. If you only have the government
providing your benefit, you can't fire your government.
Mr. Pascrell. If you have someone else to take the place of
that insurance company, yes.
Chairman Ryan. That is why we are going to fix this
problem, we are going to fix the insurance market, we are going
to fix health care.
Mr. Pascrell. Well, the Health Care Reform Act is going to
do that, Mr. Chairman.
Chairman Ryan. We respectfully disagree.
Next we have Mr. Mulvaney.
Mr. Mulvaney. Thank you, Mr. Chairman.
As a limited government conservative, it is sort of hard to
even know where to start to look at the Health Care Act. I
heard Mrs. Sebelius in her testimony just a few minutes ago
talk about where she starts when she looks at it, and she said
she starts with her father. That got me to thinking about where
I start, which is I start with my--I have three sixth-graders,
and as I listen to the list of everything that has supposedly
happened, all these wonderful things that have happened so far.
We have had this magical $250 check go out to all of the
seniors right before the election. We had this 50 percent
discount now on name-brand drugs. We have got free annual
wellness checkups. All I could think of as she was listing
those things was who is paying for it, because it is my kids.
And that probably drives my inquiry here. And I think it is
interesting that these three sixth graders, have started to
read a little bit of Orwell. They have read Animal Farm. They
are getting ready to read 1984. And it struck me in Secretary
Sebelius' testimony she used some words that I think mean
different things to different people. She talked about the
IPAB, which you all have talked about as a back-stop or a fail-
safe. And I have no idea what that means. I think I know what
it might mean. What I think it means is that it is a committee
that is set up to do what the administration wants to do if
Congress won't do it on their own. And all of her testimony, I
think, was partially correct when it came to the IPAB. You
heard her talk about the process, about the IPAB would make
recommendations on the growth rates, but that the final
decision would go to Congress. Maybe. Not exactly true.
In fact, what she didn't say was that IPAB would make the
recommendations, and unless Congress either approved that or
came up with another way to save the same amount of money or
have the same amount of impact, those recommendations would
become law. Those recommendations would become law. In fact if
Congress, all of Congress, got together and unanimously,
Republicans and Democrats, said we don't want to do what this
Board just did, that recommendation would still become law.
She also accurately said a part of what the IPAB cannot do.
You heard Mr. Pascrell just a few minutes ago talk about the
fact that the IPAB is prevented from rationing. They are also
prevented from making recommendations to lower--to reduce
services or deny coverage or that type of thing.
But here is what they can do. They can, as Mr. Holtz-Eakin
suggested, they can recommend reductions in payment for
services. In fact, it is one of their primary tools. And this
example, while an extreme example, is entirely legal under the
law. The IPAB could come out and say, as of next year, the
reimbursement rate for a knee replacement is $1. And that is
going to save X number of dollars. And unless Congress comes up
with a different way to save that $1, then that becomes the
law. That becomes the reimbursement rate for knee replacements.
And in the event that happens, and doctors stop providing knee
replacements for a dollar, then I think there would be a
reduction of services.
It is interesting, I think to Mr. Pascrell's point, in the
bill, the law goes out of its way to make sure that a
reduction, a recommendation to reduce reimbursements, to reduce
payments, is not to be deemed rationing. So the IPAB is given
the ability to lower those payments, even though it has the
effect of rationing coverage.
And I see that Mrs. Feder is disagreeing with me. I will
tell you that we talked to CRS actually about that example and
it turns out that it is absolutely right. So here is what we
have got. We have got this Board that is in charge of
innovation, and I am getting to my question, Ms. Feder, and so
I will leave it to you. We have got this Board that is in
charge of innovation. We have got this Board that is going to
be in charge, or could easily be in charge, of up to 20 percent
of our economy.
So my question is this: Can someone please--and you get the
first chance--give me an example of where that has ever worked
in the history of mankind?
Dr. Feder. I think that we rely on independent boards which
have varied records. We rely on a Federal Reserve to manage the
banking system. We have got some ups and downs at that one of
late. We rely on an Interstate Commerce Commission. We rely on
a number of commissions.
Mr. Mulvaney. Does the Interstate Commerce Commission have
the right to make law without Congress' approval?
Dr. Feder. I don't think so, but I am thinking that if I go
to you with the Fed, the Fed makes a lot of rules for the
banking system, so let me stay there. And what I think is
important here--and I do disagree with some of the aspects--I
think that some of what you said was not quite accurate because
Congress--if everybody in Congress doesn't like the
recommendations they can reject them.
Mr. Mulvaney. Only if they come up with another alternative
that saves the amount of money.
Dr. Feder. Sixty votes in the Senate can reject it. But my
point is--could I just finish? My point is that what I believe
that the Board does for the Congress is give you a source of
expertise and tee-up the issues that need to be addressed. And
I think that Secretary Sebelius gave us examples of the kind of
things they could do, whether it is the--they could promote a
patient safety initiative, they could promote better payments,
more efficient payments. So I think that there is a tremendous
good they can do in bringing expertise to the Congress.
Chairman Ryan. Ms. Feder, you will have to leave it at
that.
Ms. Moore.
Ms. Moore. Thank you so much, Mr. Chairman. I am a little
bit interested, Mr. Holtz-Eakin, in this miracle that you were
talking about in terms of reducing the trillions of dollars in
liability that Medicare faces. And I do agree with you that
there is an unfunded liability and how you might reconcile
this. You say that you stipulate that health care costs, in
general, not just in Medicare, must grow more slowly, which is
something I have been harping on continuously. It is not just
Medicare, it is the larger health care costs that must grow.
But you say that the IPAB is dangerous, that it would stifle
innovation. And so I guess your suggestion is that we shouldn't
limit the cost in the growth of innovation; that that would
be--and you know, we do need innovation. And this, the IPAB
targets that.
And many of us allege that, yes, this huge gap between the
cost of innovation and all that will be borne by seniors; that
this trillions of dollars--if you would support, for example,
the Republican plan for Medicare--would target seniors.
So I am asking you to respond to how you see us limiting
the cost of health care and also maintaining innovation. I am a
little bit more interested in the miracle.
Mr. Holtz-Eakin. So I think fundamentally that the key
defect of Federal health programs, Medicare and Medicaid
particularly, the Affordable Care Act will be this way, is that
they don't impose any budget on those programs whatsoever. They
are open-ended draws on the taxpayer, with little incentive for
useful adoption of innovations, efficiency, and coordination of
care, or any of the things that everyone recognizes would
improve the American health care system. And so I am----
Ms. Moore. So to some extent, you are agreeing with the
Affordable Care Act reforms in terms of----
Mr. Holtz-Eakin. It doesn't do anything. There is no budget
constraint put on anything here. All it does is say again, as
we have done in the past----
Ms. Moore. But budget restraint, you are not wanting to
restrain innovation. So the restraint would come where?
Mr. Holtz-Eakin. I realize there is a vigorous debate in
both sides of this committee about the House-passed budget. But
among the things that a premium support plan would do is it
would cap the taxpayers' liability----
Ms. Moore. The taxpayers but not the patient, who are
also--they are not taxpayers anymore because they are retired.
Mr. Holtz-Eakin. That is one. We both know that
fundamentally to be successful, health care costs must grow
more slowly. You must stop the overuse of----
Ms. Moore. Okay. Thank you. I am hearing you say that these
trillions of dollars have to be paid for by folks who are no
longer taxpayers; they are retired.
Mr. Holtz-Eakin. That is not what I said. For the record.
Ms. Moore. Well, that is what it sounds like. I will ask
Dr. Feder. We heard Secretary Sebelius, we heard the actuary--
was it the CMS actuary, Mr. Chairman--say that the Affordable
Care Act reforms could generate savings. But he was skeptical
that there was the political will to execute them. I am
wondering if you think that the IPAB would be an enforcement
mechanism that might--he stipulates that we could recognize
savings if there were an enforcement mechanism.
Dr. Feder. Well thank, you Congresswoman. What I indicated
in my testimony is that I think that what the IPAB does, it
acts as a back-stop or guarantor to make sure that the
innovations that are in the Affordable Care Act, that we are--
many of them untested and under development, which may have
been what the actuary was talking about, that those actually
take place, or that the improvements in demands or
accountability for improved productivity for providers, which
may have been what he was referring to----
Ms. Moore. I am going to give you a minute so that you can
help Mr. Holtz-Eakin out, because he said that I
mischaracterized what he was saying. You know, you guys are all
experts in health care, and I am not. I was interested in the
miracle of paying for these higher health care costs without
sticking it on seniors, and so he talked about needing
innovation, and yet and not stifling innovation, but slowing
the growth of health care. How would you----
Dr. Feder. Well, I am not sure what he meant, and I am sure
Mr. Holtz-Eakin can speak for himself, as I have heard him
before do. But what I believe is that the innovation that moves
us away from a payment system that continues to reward forever
more, ever more expensive services without regard to benefits
for health needs to be replaced with an accountable system that
rewards providers for delivering quality care, actually pays
docs better.
Ms. Moore. And not death panels, right?
Dr. Feder. By no means death panels. We never have been and
are not talking about death panels.
Ms. Moore. Okay. I just want to use my last 6 seconds by
saying, I want innovation. I want new technologies available to
seniors, but I do think that there has to be some shared
payment for the system and not to pass trillions of dollars of
costs onto retired seniors.
Thank you, Mr. Chairman, for your indulgence.
Chairman Ryan. Thank you. Ms. Black.
Mrs. Black. Thank you, Mr. Chairman. And having been a
nurse for over 40 years and being in the health care system, I
think there are a lot of things that we could do to reform
health care. And we had a great chance to do that and we missed
our chance.
But let me go back to IPAB, because as an elected official
and also someone who believes in the Constitution, I believe
that this IPAB is a very, very serious breach in what Congress
should have the authority to do. So there is unprecedented
power here to an unelected Board. And I really believe that it
is misnamed because it says it is an Independent Payment
Advisory Board. But it is not just advisory. It has muscle. It
has strength.
And where I have the concern about this is, currently the
law says that the Independent Payment Advisory Board will kick
in with its recommendations looking at Medicare growth at GDP
plus 1 percent. The President has also come out and said that
he believes that we need to lower that even to a half percent.
Secretary Sebelius was here just a bit ago, and she made a
great deal of emphasis on the fact that Congress has the
ability to be able to make these recommendations before the
Board kicks in.
But let me go to why I think that is a really
misinformation piece, is that currently GDP is growing at
somewhere between 3 to 4 percent. And I think I am right on
that. Medicare is around 7 percent. And if we have got such a
low threshold of saying GDP plus 1 percent, IPAB is going to
kick in pretty quickly. And when they kick in and they give
these so-called recommendations, they are not just
recommendations. My understanding is that they are indeed going
to be law, or make changes to the way we currently operate,
unless there is a two-thirds override, which is a very, very
high standard. And we all know how difficult it is to gets two-
thirds for anything, unless it is naming a Post Office.
So I have a real problem with that, in addition to the
problem with transparency and how this Board is going to
operate behind closed doors without public opinion, public
comment, and so on. What I would like to hear from each of the
members of the panel here is, do you believe that there is a
constitutional problem with having a Board making decisions
that are going to become law without them being elected
officials?
Mr. Holtz-Eakin. I am not a constitutional lawyer, but I do
think it is at odds with conventional congressional practice
and allocation response to oversight. And I find it troubling
from that perspective alone. I am also a bit mystified by some
of the other discussion about it. So there has been the notion
that somehow it is just a bunch of the smart people who will
give ideas for payment systems reform to the Congress, and then
you guys will take care of it. There exists such a group. It is
called MedPac. I served on MedPac. It is where they send old
CBO directors to die. And if it is just a matter of advice,
this brings nothing new to the table, and thus will replicate
the failure of MedPac.
There is also the notion that it guarantees other successes
in the bill. That is not true. I mean, let us stipulate for a
moment that the Center for Innovation at CMS will actually do
something. I am skeptical, but let's suppose it really does.
There is nothing that it can think of that they can put into
rulemaking, get implemented, and actually produce results in a
year. Those are big changes in payment systems, delivery
systems. Everyone knows those are important. They aren't going
to happen in a year. So in fact, IPAB is structured to squash
any unlikely success you get out of the Center for Innovation.
So I think it is at odds with conventional practice from
its setup. I think it is internally inconsistent throughout its
claim to the Affordable Care Act, and that is why I think it is
a deep policy error.
Ms. Turner. I do think that IPAB goes further than any
legislation, any Board in my experience. And it has not only
the ability to have the force of law, but there is no
administrative or judicial review. And provisions go into
effect unless Congress reaches extremely high hurdles in
overruling it, and then, as we have discussed earlier, having
to achieve the same targets. And I think that that makes an
important point, in that the CBO has already shown it is not
going to score quality improvements as really showing
meaningful savings, especially in the 1-year time frame that
the IPAB has. And so its only tools really are going to be more
cuts in payments on the existing fee-for-service system. And we
know where that goes and we know where that leads as far as
payment rates and access to physicians.
So I think the miracle that Ms. Moore was talking about
earlier is Part D. We know that the marketplace competition
consumer power will get prices, costs, down for government
programs and that must be the way we go.
Chairman Ryan. Ms. Wasserman Schultz.
Ms. Wasserman Schultz. Thank you, Mr. Chairman. I think we
need to recap. Let's compare Medicare for seniors under the
Affordable Care Act and Medicare for seniors under the Ryan
Republican plan that passed as part of the Republican budgets.
Under the Affordable Care Act, the doughnut hole is closed
over 10 years. The actual, not magical check, Mr. Huelskamp, of
$250 that seniors received last year paid for actual groceries,
paid for--excuse me, Mulvaney. You are sitting behind Mr.
Huelskamp's nameplate. Forgive me. The actual $250 check, not
magical, pays for actual groceries, pays actual mortgage, is
actual money. So to suggest that somehow the $250 check is
mythical or magical or nonexistent is completely false.
I have stood in front of numerous town hall meetings of my
constituents, asked for a show of hands of how many seniors got
a $250 check last year, and plenty of actual hands go up.
The 50 percent cut in name-brand drugs, the gentleman
wonders how it is paid for. I will remind the gentleman that
the entire Part D prescription drug plan was never paid for by
the Republicans and added $400 billion to the deficit over 10
years, and $7 trillion to the deficit over 75 years.
So when it comes to who made sure that we reduce costs in
Medicare, who made sure that when we passed new policy that we
ensured that it was paid for, Democrats did so, and preserved
and protected and extended the life of Medicare, and
Republicans jeopardized it.
In addition, the Affordable Care Act adds preventative
screening like mammograms and colonoscopies that used to have a
co-pay before the Affordable Care Act passed and that now are
free, which means that we shift the focus in Medicare from a
sick-care system to a wellness and prevention system. And we
ensure that seniors can stay healthy and we save health care
costs down the road, because if they get screenings up front
then they are less likely to get sick down the road. A wellness
check-up, which was not something seniors were entitled to
before the Affordable Care Act, a free annual wellness check-
up, now they are entitled to that, again, being able to
preserve their health rather than having them access the health
care system for the first time once they are already sick,
which we know would increase costs.
And so let's look at the Republican plan. The Ryan
Republican plan to end Medicare as we know it gives a voucher
to seniors and leaves them to the whims of the private
insurance companies to get health insurance on their own, and
adds $6,000, actually more than $6,000, to the bill of Medicare
beneficiaries of seniors, all in the name of making sure that
we can preserve tax breaks for millionaires and billionaires.
So Dr. Feder, if I can ask you, as you know, we have had
some discussion this morning about the IPAB and what it can and
can't do. It is explicitly forbidden from recommending any
changes in premiums, any changes in benefits or eligibility or
taxes or other changes that would result in rationing. So
through those prohibitions, the IPAB can't increase Medicare or
beneficiary premiums or cost sharing at all. They can't decide
to just tell someone, tell a doctor that a knee surgery is a
dollar and that is the end of the story. So accuracy is
important.
Do you agree with the assessment that seniors could face
higher out-of-pocket costs as a result of the Republican
Medicare plan? And could you respond to my comparison of the
two approaches to how we preserve Medicare and make sure we
bring down costs and protect seniors?
Dr. Feder. Thank you, Ms. Wasserman Schultz. I do agree
with your assessment, and let me give my interpretation of how
that occurs. As I indicated, the voucher that is in the
Republican budget is set, taking all the reductions in payment
growth that we have talked about into account, that--has all
been accepted by Republicans in the House--and gives a budget,
then, gives a dollar amount for seniors to purchase private
insurance, which the Congressional Budget Office says is
already more expensive than the Medicare plan for seniors, and
will be much more expensive in 2022 when the voucher is
expected to start.
What that means is we are sending seniors on their own,
will be sending seniors, myself included, on our own to shop
for benefits without the ability of having the government
behind us to negotiate or set prices on our behalf, determine
that the benefits are what they ought to be. So it is simply a
cost shift, that according to to the Congressional Budget
Office, actually increases costs to seniors.
Ms. Wasserman Schultz. And would you say that--it sounds to
me like there is no debate over those facts, and those facts
are in evidence.
Dr. Feder. I have not seen any evidence.
Chairman Ryan. We will have to leave it at that. Mr.
McClintock.
Mr. McClintock. Well, following up on the question of
jeopardizing Medicare, Mr. Holtz-Eakin, can you tell us what
are the projections actuarially for the bankruptcy of the
Medicare system on its current course?
Mr. Holtz-Eakin. The Medicare system as a whole is bankrupt
now. I mean it simply cannot pay its bills on a cash flow or a
projected basis. So a trust fund for Part A, one tiny little
piece, is expected to be exhausted in a bit over a decade.
Mr. McClintock. So continuing down the road we are on right
now, which is basically the Democratic approach, assures the
destruction of Medicare as we have known it or have ever known
it.
Mr. Holtz-Eakin. I couldn't agree more. The status quo is
dangerous to the beneficiaries, to the budget, and to the
economy. And we have to change direction.
Mr. McClintock. One thing scaring a lot of the folks in my
district now who are on Medicare is they are beginning to feel
trapped. They are finding it harder and harder to find doctors
who will take Medicare patients. They are having to travel
farther and farther when they find those doctors. Do you have
any--that is anecdotal. What is the data on that subject?
Mr. Holtz-Eakin. Well, the latest survey data that I have
in my written testimony suggests that two-thirds of physician
practices are reviewing their treatment of Medicare
beneficiaries. And some of them will be aggressive enough as to
not take any new beneficiaries. Some are contemplating it. But
each time we go through an episode with both the sustainable
growth rate and now the Affordable Care Act promise to cut
provider payments, they react in a very sensible business
fashion. They say, we can't afford to do this. And they don't.
Mr. McClintock. So someone has turned 65. They have to give
up their insurance for Medicare. They are now trapped in the
Medicare system. They are finding it harder and harder now to
find a doctor who will treat them. What is their alternative?
What can they do if they can't find a doctor who is willing to
take the Medicare reimbursement rate, or have to travel an
exorbitant distance to find that doctor?
Mr. Holtz-Eakin. Pay out of pocket 100 percent of the cost,
which is exactly the dilemma that Ms. Wasserman Schultz was
highlighting.
Mr. McClintock. Mr. Stutzman put his finger on the subject,
I think, when he pointed to the study that an average couple
earning about $89,000, retiring at 65, will have paid into the
system about $110,000 and will take out an average of over
$350,000. I don't think you have to be a Secretary of HHS or
even a Member of Congress to know that that system is not, it
cannot be sustained.
It seems to me that there are two ways to address it and
those two ways are basically laid out in the approaches of the
parties. One of them is price controls, the other is
competition. Would you agree with that?
Mr. Holtz-Eakin. I do agree with that. I believe that my
worst day as a CBO director was when a Member of the other body
asked me what the right price for inhalation therapy was in
Alabama. And that is everything that is wrong with the Medicare
system, and this continues it.
Mr. McClintock. That would also explain why we are now
seeing a shortage of doctors. I mean we have got a lot of
experience with price controls. They date back in written
records as far as Hammurabi and they seem to produce very
consistent results. They will, in every case I have ever
studied, you know, Diocletian to Nixon, they will produce a
shortage of whatever it is that you are controlling the price
on. Do you know of any exceptions to that?
Mr. Holtz-Eakin. No.
Mr. McClintock. So we have a mechanism that we know will
create a shortage. We are already watching it create a
shortage. And we have now established an Independent Payment
Advisory Board whose principal tool to hold Medicare costs down
is to place more and more Draconian reductions into the price
controls that are already there, meaning a more and more
difficult time for people to find doctors, until you simply
can't find them.
Mr. Holtz-Eakin. As I said, that is my deep fear is that
this will accelerate what is already broken about the Medicare
system, and that is something we can't afford do do.
Mr. McClintock. How would you describe the Republican
approach to controlling these costs?
Mr. Holtz-Eakin. The approach is I think quite sensible in
that it gives a finite amount of resources to a problem; and
people, when they have a finite amount of resources, use it
efficiently. It allows the best package of insurance benefits
at the right price to be selected by the Medicare beneficiary,
thus rewarding value, which is how we have been successful in
the other 87 percent of the economy.
Mr. McClintock. So it is basic competition. Will and Ariel
Durant, in their History of Civilization, asked the question,
What makes Ford a good car? Chevrolet. The fact that there is
somebody there competing to offer better services at a lower
price.
But just in the few seconds I have left, the hit on that
that we keep hearing is, well, Medicare Advantage works that
way and it costs more. Could you address that very quickly?
Mr. Holtz-Eakin. I believe that is a very mistaken
statement. Medicare Advantage, when it is a managed plan, is
cheaper and offers a better value proposition. The fee-for-
service Medicare Advantage plans cost a lot because fee-for-
service is broken medicine, regardless of the label attached to
it.
Chairman Ryan. Thank you. Mr. Lankford.
Mr. Lankford. I want to get a chance to follow up on----
Chairman Ryan. I apologize, Mr. Lankford. It is Mr. Van
Hollen. He didn't have a chance this round.
Mr. Lankford. Glad to yield.
Mr. Van Hollen. Thank you. Thank you, Mr. Chairman. Thank
you. Let me thank all the witnesses.
And I want to just very quickly on the Medicare Part C, we
know from CBO and the facts that we had been subsidizing that
at about 114 percent of Medicare fee-for-service. But really
what I want to do is pursue the line of conversation that Mr.
McClintock raised, because you, in your testimony, suggest that
it is like really, really hard to find a doctor on Medicare. We
just heard that anecdotal evidence suggests it is harder to
find doctors. And I think we should all agree that rather than
rely on anecdotal evidence, we should just look at the real
evidence out there. And, fortunately, a nonpartisan group
called MedPac that advises the United States Congress does
exactly that survey.
And let me report to you what their most recent findings
are because I think it is very--it is informative on this
issue. They talk about how every year they conduct a patient
survey to overall access to care. And they look at the private
market and the Medicare market. And I am just quoting from
their report: Results from our 2010 survey indicate that most
beneficiaries have reliable access to physician services, with
most reporting few or no access problems. Most beneficiaries
are able to access, able to schedule timely medical
appointments and find new physicians when needed. But some
beneficiaries experience problems, particularly when they are
looking for a primary care physician. Medicare beneficiaries
reported similar or better access than privately insured
individuals aged 50 to 64. On a national level, this survey
does not find widespread physician access problems, but certain
market areas may be experiencing more access problems than
others due to factors unrelated to Medicare, or even payment
rates, such as relatively rapid population growth.
Then if you go on, it states: The Patient Protection
Affordable Care Act of 2010 contains several provisions to
enhance access to primary care, including increasing Medicare
payments for primary care services provided by primary care
practitioners.
Then if you look at the chart, the table they have, and I
just want to read what they ask. This is a survey. This isn't
anecdotal: Getting a New Physician. Among those who tried to
get an appointment with a new primary care physician or a
specialist in the past 12 months, how much of a problem was it
in finding a primary care doctor/specialist who would treat
you?
Medicare program, the answer being no problem, no problem
finding a primary care physician. In 2007, 70 percent said no
problem. In 2008, 71 percent said no problem. 2010, 79 percent
said no problem.
Let's look at the private insurance market, age 50 to 64,
all the things that people said would make it work. No problem
has declined from 82 percent say no problem in 2007, to 69
percent saying no problem. Now, 10 percent gap. In other words,
Medicare beneficiaries, according to this nonpartisan analysis,
have no problem.
Specialists--and I think it is important to get the data
out because there is anecdotal--I hear from seniors in my
district the difficulty in access. And it doesn't mean that
every single physician takes Medicare, just like not every
physician is on the plan a lot of us have; I mean, depending on
what you choose. But I can tell you, in 1965 Medicare
beneficiaries couldn't find--people, 65 and up, couldn't find
any physician willing to take them.
Access to specialists, people who reported no problem with
access to specialists, 85 percent of Medicare beneficiaries in
2007, no problem; as of 2010, 87 percent reporting no problem
with access to specialists. Again, higher than in the private
market ages 50 to 64 where 82 percent report no problem with
access to specialists.
Mr. Chairman, I would like to submit this for the record.
And I do think that this whole conversation requires data. And
you know, the notion that all of a sudden--and Mr. Holtz-Eakin,
you say in your testimony, today Medicare coverage no longer
guarantees access to care. Well, it doesn't mean that every
doctor, I agree, signs up to participate in Medicare. But the
overwhelming number of doctors do. And in private plans, there
are a whole lot of doctors who don't participate in private
plans. And I can assure you that under the House Republican
plan, when they are going to be providing a much smaller
allotment, and you are going to be leaving it to Federal
employees to establish the standard benefit plan but insurance
companies to decide what benefits they are going to provide,
you are going to have a real access problem.
And I would ask Ms. Feder if she could just comment on that
issue.
Dr. Feder. Absolutely. I was listening. I appreciated what
you were--you read my mind or we were on the same wave length
because of that MedPac evidence. But you had it first. It was
in your mind.
The issue that I have been thinking about is what is it
that you are thinking that these private health plans are going
to be able to provide people in terms of access if you give
such a limited voucher? People who can add on the extra dollars
may--the very well-off seniors may be able to get a decent
plan. But you are not giving them enough money to shop with. So
anything that you even think may exist in the current Medicare
plan is bound to exist when you have actually given seniors
fewer dollars to pay for more expensive plans.
Mr. Van Hollen. Thank you. Thank you, Mr. Chairman.
Chairman Ryan. Now it is Mr. Lankford.
Mr. Lankford. I want to be able to respond real quick to
the statement that Ms. Wasserman Schultz made earlier. And just
talking about, you know, there is nothing in this IPAB that is
going to reduce costs or reduce reimbursements or that can't
change the prices on things. And that is just not in the law.
In a meeting about 4 weeks ago that freshman legislators of
both parties had with Timothy Geithner to be able to talk about
some of the President's plan for dealing with deficit reduction
in future days, we walked through section by section of many
issues with them. One of them was dealing specifically with
health care, because at the time the President had not released
a plan for how to reduce costs in Medicare and Medicaid and
what the plan was. He had made multiple statements saying we
need to bring costs down, and we are going to work on that. So
we asked him the specifics of that.
Specifically, Timothy Geithner stated the way they we were
going to get savings over the next 10 years in Medicare and in
Medicaid is by cutting the reimbursement rate to doctors,
hospitals, and drug companies through IPAB. So if this is not
in the law, someone needs to inform the Secretary of the
Treasury that that is not how we are going to get these
millions and billions of dollars of savings, because the
President's spokesman is stepping out there and saying the way
that we are going to accomplish this is by cutting
reimbursement rates to doctors, hospitals, and drug companies
to gain cost savings for Medicare and Medicaid.
So it is very difficult for me to hear one person say that
is not in the law, and then the Secretary of the Treasury say
that is the way we are going to accomplish that.
I also have difficulty in processing through the power that
has been given to IPAB in saying, because there is medical
innovation that needs to be done with how we handle the cost
savings, we are going to give this power to this independent
group and give them the authority to be able to accomplish
this. This is a unique situation to say we have a very
difficult issue; apparently Congress is having a difficult time
cutting back the costs on this, and so we are going to empower
this group to basically create law.
Well, here is my question that I would have asked Secretary
Sebelius. GAO makes reports about how to be able to save money
in HHS. I am interested, if IPAB has the authority to be able
to make recommendations that require a supermajority from
Congress to change, to giving to GAO the capacity when they do
a risk assessment on HHS and cost savings, the authority to be
able to make cost savings suggestions about that. And I would
like to empower the inspector general of each of these agencies
to say when you find fraud, or when someone rises up on the
high-risk list, which multiple agencies are on the risk list
for GAO, I would like to just empower them the same way IPAB
has empowered them. Give them the power of law and to say
whatever recommendation you make about how to reform the
Department of Energy, the EPA, the Department of the Treasury,
whatever it may be, let's just empower the inspector generals
and the GAO, when they make recommendations, that they have
that same authority with IPAB. Mr. Holtz-Eakin, do you think
that is a good idea?
Mr. Holtz-Eakin. No.
Mr. Lankford. Why?
Mr. Holtz-Eakin. Ultimately, I believe that the Congress
has the responsibility to make these policy decisions. And
having made them, the executive branch has the responsibility
for implementing them. Congress then has to turn around around
and do the oversight. That is the standard of practice in the
United States. It has by and large been quite successful, and
it is the practice I would suggest you adhere to.
Mr. Lankford. Okay.
Ms. Feder, what do you think about that, if we go ahead and
empower the inspector general and we empower GAO to go ahead
and make recommendations, the same authority that IPAB has?
Dr. Feder. I think it is different. And what I think that
the IPAB does is, they are able to do, which is what I think
Ms. Wasserman Schultz was getting at, is to look at, to assess
what is going on in payment and make recommendations, as Doug
said, not so differently from the way MedPac does, but with
more authority to----
Mr. Lankford. Not so differently than what GAO does and a
lot of other agencies. Very similar. I mean, they look at
reports, they go through all these, they make recommendations,
they say this would be a great way to save money, hand it to
the Congress to make the decision.
Dr. Feder. I did not advocate it. I will go there. I think
that we have an issue in terms of health care cost growth that
requires this.
Mr. Lankford. Quite frankly, we have an issue with agency
growth.
Dr. Feder. Well, I will stay where I am. I think that the
Nation's health care cost growth, not Medicare's, but the
Nation's health care cost growth is a matter of dire concern.
And I think that this is a mechanism which I would argue leaves
authority in the Congress. The Congress can reject it with 60
votes in the Senate, or it can come up with alternative
mechanisms in order to achieve spending restraints. And I think
that that, at this point in time, is helpful.
Mr. Lankford. I would have to say that I don't think that
is a good idea to give that authority to GAO either, or to the
inspector generals. Neither do I think it is a good idea to
give it to IPAB, to be able to say they have some supermajority
that they can shut down and create law based on their
recommendations.
And with that, I yield back.
Chairman Ryan. Thank you. Mr. Woodall.
Mr. Woodall. Thank you, Mr. Chairman. I appreciate that.
Dr. Feder, I had a couple of questions for you. I
appreciate what you closed your testimony with, that you think
IPAB would be a wonderful thing for public and private plans
alike. And we get so many shades of gray here it is nice to
have some clarity.
Tell me about what Ms. Wasserman Schultz said before she
left the room. She said we used to have a co-pay on programs,
and now they are free. She was describing some of the changes
in the President's health care plan. As we talk about rising
costs and how to get those costs under control, when you used
to have programs that had a co-pay and now those programs are
free, what does your experience lead you to believe? Does that
lower cost because you are getting more people in the system,
or increase cost because you are having more utilization?
Dr. Feder. The question is, which services? And the co-pays
have been eliminated, as they would be also for other people in
the Affordable Care Act, and I think some of that has gone into
effect as well for preventive services. And it is based on the
premise that getting service, getting a checkup, getting
service early, actually reduces the possibilities of more
costly illness down the road. It is based on--in some cases it
does do that. In some cases it doesn't. But it is based on
evidence that is tied to the importance. The best evidence, for
example, is prenatal care, not for the Medicare population but
for the younger population. Immunizations. So it is preventive
service that this focuses on.
Mr. Woodall. Now, I look at the Federal Employee Health
Benefit Plan. I happen to have the absolute cheapest plan that
is on the menu. It is an Aetna health savings account. I have
access to any physician I want to go to. I have access to any
service that I want to utilize, and I pay absolutely nothing
out of pocket for those. It all comes out of my medical savings
account. And yet it is the cheapest program on the menu.
Why is that true? Why is it that when I am in charge of my
care, I get the cheapest plan on the menu, but when all of the
benefits are pre defined for me, it actually turns into the
most expensive plan on the menu.
Dr. Feder. I think one of the issues is who is choosing the
high-deductible plans, and so you have to look at selection and
whether healthier people who do not expect to use services may
be actually in those plans, because you do save on the
premiums. And I would hope that you have been in good health.
And I would venture to suggest that in all likelihood, so that
the population being served is a generally healthier
population. So I would have to look at that selection issue
before making a comparison.
Mr. Woodall. I am not going to quote you exactly. But as
fast as I could write it down as you were responding to a
question, you talked about how we get sent out into the
marketplace under the Republican health care plan to make
decisions without the government to set prices on our behalf.
Dr. Feder. What I said was that we are as individuals
negotiating with insurers, rather than having the government,
the public program, Medicare, as an insurer. And I think that I
would prefer to have Medicare do it for me, based on what I see
in the marketplace.
Mr. Woodall. Thinking about your vision of having IPAB
control private insurers as well, I did have to go in for a
chest CT recently, pulled up a list of providers on-line,
shopped around for prices. There was about a threefold
disparity between the one that was right next door to me, that
happened to be three times more expensive, and the one that was
about 4 miles across town that was a third of the cost. I got
in the car, I paid the $4 a gallon to go get the one that was a
third of the cost, because it was coming out of my medical
savings account.
Why does government price fixing of a price for everybody
across the board lead to a better outcome than me seeing those
prices and making that decision on my own?
Dr. Feder. Actually, let me move it just a little bit to
where the Affordable Care Act is trying to go in terms of, I
think, having an improved position over the fee-for-service,
because I think that there is a problem with paying fee-for-
service and having ever more and ever more expensive care. And
I will share with you a conservation recently with a private
insurer who would like to partner with Medicare in an
alternative approach, a medical home approach, in which it
would be physicians who would be rewarded for delivering care
more efficiently and it would be they, in conversation and
working with their patients, who would be selecting the place
that was best and most affordable, or, excuse me, most
efficient. That is not an issue here. It is the most efficient.
And I think that that is a mechanism.
And as I have said, we continue to sound--the conversation
sounds as if we are heading down a continuation of health care
system as we know it, when in fact the Affordable Care Act is
moving us and leading us and working with the private sector to
move in a different direction.
Mr. Woodall. Well, that plan that you described sounds
strikingly like the PACE program that Bob Dole championed in
the late nineties where you combined Medicare and Medicaid
together and let folks make those decisions. I thought that was
a wonderful program. I hope we will have a chance to get back
to exactly that kind of help.
Dr. Feder. I appreciate your drawing on PACE because PACE
actually turns to--serves the most vulnerable dual-eligibles,
people on Medicare and Medicaid who need long-term care, and
long-term care in particular is a major problem for people
today. And I thank you for interest in that program.
Chairman Ryan. Thank you. If you could bring up chart one,
please.
This shows a comparison of inpatient hospital services
reimbursements. Right now, Medicare is paying about 66 cents on
the dollar to providers. In the outyears it goes down to 33
cents on the dollar. That is where we are right now under
current law.
Next chart please, chart two.
Doctors. Right now, we are paying about 80 cents on the
dollar. Therefore it is a little higher and therefore the
access is not so bad. By 2030 it goes down to 40 cents on the
dollar.
The SGR, we have played with this hot potato for a long
time, and what we learned out of this experience, the 1997
budget agreement, which is really held up as a hallmark budget
agreement--Republicans working with the Democratic President to
get a budget agreement, which, by the way, cut taxes and cut
spending--what we got out of that were price controls on
Medicare and payment systems which are producing these results.
And the current Affordable Care Act finishes the job in going
in that direction.
And what we learned out of that, at least our lesson was
price controls don't work because, like we said, from
Diocletian to Nixon, when you pay less for something, you get
less of it. And so what we learned out of that was nursing
homes are going out of business. They are just dropping
Medicare. Home health agencies. The entire Medicare provider
network was fraying at the edges and they are just not going to
take--they are going out of business and stopping the provision
of Medicare services to Medicare.
So we did two laws since 1997, BBRA and VIPA, plowing the
money back to keep the Medicare system from imploding on
itself, to keep the beneficiary access going. And so it has
been said this morning that IPAB is a back-stop, it is a fail-
safe. What it is is, it is political cover for politicians not
to have to make the decisions to cut reimbursements to
providers. It is like the Base Closing Commission. We didn't
make the decision, somebody else did. And that, unfortunately,
is where this whole thing is headed. Not just in health care, I
would remind you, in other areas of law.
And so here is what we know. Ten thousand baby boomers are
retiring every single day today. And a lot less people are
following them into the workforce. For those people who had
kids in the fifties and sixties, they did a great job. They had
a lot of them. But we didn't have as much since then. So we are
having about 100 percent increase in the retirement population.
But because this is a pay-as-you-go system, current taxpayers
pay for current beneficiaries, we only have something like a 17
percent increase in the tax-paying population.
In 2000, 25 percent of Medicare was subsidized with the
general fund. We would go out and borrow money in the credit
markets to pay for 25 percent of Medicare. Today it is 51
percent. It is going up. And so the problem we have is, not
that we don't have the political will to cut costs or
reimbursement rates--we don't--but more importantly, we know if
we just do price controls we will just deny access. The program
will fall in on itself.
So the solution to this problem from our perspective is not
to delegate all these decisions to unelected bureaucrats, 15,
who just arbitrarily make these decisions, and if we don't like
them we have got to have a three-fifths, we have to have a
supermajority vote to overturn them and then replace those
price controls with other price controls within Medicare
somewhere else. The whole thing is designed to take
accountability away from politicians, meaning people's elected
representatives, and give all this power to 15 people to just
do this unilaterally.
But at the end of the day, our conclusion is this won't
work because if you are paying a doctor or a hospital, you
know, 66 to 33 cents on the dollar for the services they are
providing Medicare beneficiaries, they are just not going to
provide that service. And so I don't know what you call that,
other than rationing, by some other word.
And so what we are saying is we have seen lots of evidence
throughout history that choice and competition works. And we
have seen lots of evidence throughout history that price
controls don't. And so why do we believe in choice and
competition? Because it doesn't put 15 bureaucrats in charge.
It puts the person in charge. They get to decide.
More importantly, having been on the Ways and Means
Committee, overseeing Medicare for 12 years, you don't want a
handful of politicians, let alone a handful of bureaucrats who
aren't even elected, to play thumbs-up or thumbs-down on what
providers can and cannot get for providing services. You want
the consumer, the patient, to do that.
More to the point, what we want are the providers of
medical services to have an incentive to please us as
consumers--to have an incentive to root out waste, fraud and
abuse, as they do today, and they root out a heck of a lot more
than traditional medical fee-for-service does--to meet our
needs.
And since money is finite, and since we have an infinite
funding problem with Medicare, our point is this: People who
are already on the program, people who are about to retire, a
promise was made to them. It is an unfunded promise. It is a
promise that at the lowest estimate, it is $31 trillion in the
hole, but it is a promise that was made.
Our argument is if we get ahead of this problem now we can
keep that promise. If we start turning the curve on our fiscal
problems, prevent a debt crisis in this country so interest
rates don't spike and the 51 percent financing of Medicare from
the general fund, which is borrowed money, doesn't go up, we
can keep that promise. And so we think we should do that. And
we believe if we do that, by getting rid of IPAB, and therefore
its price controls, we can keep this promise to current
seniors.
But in order to cash-flow that promise and keep our
borrowing down, keep our interest rates down so we can afford
that promise which currently is unfunded, you have got to
change it for the next generation. And the way we should change
it for the next generation is let's recognize that there are
people in society with needs greater than others. If you are
sick, you have greater needs than a healthy person. If you are
poor, you have greater needs than a wealthy person. So let's
put our money there; $7,800 more, to begin with, for a low-
income person, and that grows every year. If you are sick, your
payments go up.
It is not a voucher. Everybody likes to say ``voucher.''
Premium support and vouchers are two distinctly different
things. A voucher is you get a check in the mail and then you
go out and buy something with that check. That is not what we
are talking about here. Just like prescription drug benefit.
Medicare pre screens a list of plans, just like they do for
Federal employees, and you choose your plan that is Medicare-
certified and regulated. And then Medicare subsidizes your
plan. More if you are poor, more if you are sick, less if you
are wealthy. Why? Because wealthy people have more money, so
they can afford more out-of-pocket costs.
But more importantly, these providers have to compete
against each other for our business. And so if a woman on
Medicare doesn't like her plan, she gets to fire that plan and
get another one next year. More importantly, that plan knows
it. If they don't make her happy, if they don't give her what
they say they would at a competitive price, she will fire them
and she will go to their competitor.
That is why Ford is better, because of Chevrolet or because
of Toyota. And that is the whole concept here. The problem we
have got is we think we can do this on the cheap. We think we
can just fix this problem if we politicians wash ourselves of
the responsibility and let some distant bureaucrat make the
decisions. I have seen it so many times where a constituent
will come and complain about what the government is doing to
them, and the elected representative says, I wish I could help
you but I can't. It is something the bureaucrats do over at the
executive branch. That is not what this country was designed to
be like. It is not democracy. It is not government by consent
of the governed, and it won't work.
And so what we are simply saying is, we don't believe that
this works. The other 80 percent of our economy functions on
choice, on competition, on price. We want to inject those
market fundamentals--transparency on price, transparency on
quality, and an economic incentive to act on those things to
fix this problem. And so we just have a very difference of
opinion.
And Mr. Holtz-Eakin, I just simply want to ask you in
closing, if we do the SGR, like we always say we will--and we
will, I have no doubt--we will stop doctors from getting cut
29.4 percent this year, and then stop it again next year,
because we are in control of it, elected representatives.
If we do that, what will be the general fund transfer to
Medicare in the future? Medicare is already being financed, 51
percent of its budget, by floating bonds and borrowing money.
If we stop those cuts--because right now Congress can, IPAB
doesn't run that right now--what will be the general fund
transfer with borrowed money going into the future?
Mr. Holtz-Eakin. Well, I mean we know that just keeping
payments level for 10 years is going to cost well over $300
billion at this point. And you know, you are raising that 51
percent, something that is probably going to be closer to 55,
60 percent. I have to do the math to give you the exact answer.
I would be happy to do that.
Chairman Ryan. So I just want to ask Ms. Feder, Dr. Feder,
you say that we ought to have IPAB for all of health care. Do
you believe that we can better sort of organize or plan the
health care system if we can put IPAB in charge of the rest of
the payment systems for the private market as well? From age 1
to age, you know, to the end of life?
Dr. Feder. What concerns me, Mr. Chairman, is that it is an
assumption that the private sector, when you do your 30 cents
on the dollar or 60 cents on the dollar, that that dollar is
somehow immutable as to what health care ought to cost. And
what we have seen in MedPac documents is that where the private
sector, along with Medicare, is actually working with providers
to slow cost growth and are adopting policies to slow cost
growth, there hospitals are not losing money on Medicare
because they have become more efficient. It is where there is
not that kind of behavior in the private sector that
essentially the private sector costs grow. They offset whatever
is constrained on the Medicare side, and providers continue to
operate as they do.
So I am glad, I think you do get me, and what I am saying
is that we need to change the incentives for the entire health
care system.
Chairman Ryan. I don't think anybody really disagrees with
that. So I think the difference here in execution is instead of
having one experiment run by the Federal Government, where we
are subject to the whims of their decisions by an unelected
bureaucracy, why don't we have more than one experiment? Why
don't we have a marketplace that is designed to compete for our
business? But, more importantly, give people power. Give people
power, especially on Medicare, that they can't be denied care
when they choose their plan. Give low-income people a lot more
money to cover all their out-of-pocket costs, and not as much
to higher-income people.
Ms. Turner, let me ask you the final round of this. Where
do you think this is going to head if we stick with the current
law? What is the world going to look like in 10 to 20 years if
we just basically freeze the law in place as it is today, as it
is coming into, what is it going to look like?
Ms. Turner. Mr. McClintock was wondering what people will
do. And I think we can look at what happens in Medicare today.
People go to emergency rooms to get routine care because they
can't find a private physician to see them. And I believe the
current MedPac statistics show that the fact that the Congress
will continue to do--has continued to do the SGR fix, has
allowed access to continue.
But the important thing is that this legislation assumes
that deep cuts down to 33 percent of current private payment go
into effect, that absolutely is going to have an impact on
patient care and patient access to care. And the choice that
the chairman has been talking about is really the way to move
to a different system. It is really not can we fix this system.
We know Congress has tried everything it can do, and now
instead of trying to fix it, we are going to put more
restrictions, more bureaucrats in charge of making decisions
about payments. And that can only lead to restrictions on
access to care, to physicians dropping out of the programs, to
people, as we see in Medicaid, as we see in Europe, in Canada,
in some provinces, a quarter of citizens can't find a GP, an
access physician to see them. They wind up having to go to
hospital emergency rooms.
That is what I worry, is that we are going to relegate
people to those kinds of access systems that are not the
promise they have been given.
Chairman Ryan. Dr. Holtz-Eakin, do you want to jump in?
Mr. Holtz-Eakin. I just simply believe that Grace Marie is
too optimistic. That answer presumes that there remains the
capacity for the rest of the U.S. budget to transfer to
Medicare and Medicaid enormous amounts of resources, and the
only fight is over how much of that goes over, and thus how
much turns into increased budget costs versus restricted
access. That is not going to be true.
We know the projections for the overall budget, and we know
that when they hit a certain point, the underlying 80 percent
of the economy from which the health care sector is now drawing
all of its money is going to collapse. And so we have a problem
that is bigger than just a genuine and serious problem with
beneficiary access to care. We have a problem that mutates past
that to being a fundamental threat to our economy. And so the
choices that will be made in the future, if we don't change
direction now, will not be the choices we make. It will be the
bankers' decisions on how this all gets run. And that is not a
future we should tolerate.
Chairman Ryan. Well, thank you very much. I appreciate the
indulgence and appreciate everybody's time. This concludes our
hearing.
[Questions submitted for the record from Mr. Huelskamp
follows:]
Questions Submitted for the Record by Hon. Tim Huelskamp, a
Representative in Congress From the State of Kansas
the honorable kathleen sebelius, secretary, health and human services
1. Has the HHS been asked to provide any estimates to the White
House on savings that could come as a result of changes to Medicare, or
other programs under your Department for the ongoing negotiations on
the debt limit?
2. The now Minority Leader Pelosi said last year that we needed to
pass the health care bill to see what is in it. One of the things we
found out was in it were waivers. On June 2, I sent a letter to you,
along with 31 other Members of Congress, requesting information
regarding waivers and adjustments for the Affordable Care Act. How many
Annual Limit Waivers are currently pending and where are the companies
located? How many State Innovation Waivers and Medical Loss Ratio
adjustments have been approved, denied, or are still pending? What
other types of waivers or adjustments to the Affordable Care Act have
been approved, denied or are pending? Why has Nancy Pelosi's district
received more waivers than any other district in the country? Can I
ever expect to see a detailed, written response? Is this the level of
transparency we could expect from IPAB?
3. Because IPAB decisions are not subject to administrative review,
does that mean that Medicare patients who may be denied care because of
an IPAB reimbursement decision in the future have no access to the
federal grievance process?
4. Because IPAB decisions are not subject to judicial review, how
could a patient denied care by an IPAB reimbursement decision bring a
medical malpractice claim against the Board?
5. Do you agree with OMB Director Peter Orzag who said that IPAB
represents the ``greatest transfer of sovereignty'' from Congress to
the Executive Branch in memory? If not, is there a Senate-confirmed
body that has equivalent power?
6. On a bi-partisan basis, experts agree that Medicare as we know
it cannot continue without massive reforms or cuts. Currently, the
administration's plan for the system is implementing IPAB on top of
$500 billion in provider cuts. What other ideas for reform, other than
restricting access to care by cutting provider payments does the
President have? At what level of payment cuts does the administration
believe enough providers will no longer accept Medicare patients to
create Canadian style waiting lists for routine care?
7. Assuming you are still HHS Secretary when IPAB submits its first
draft report to you for your review, what will your priorities and
criteria be in reviewing the report? In other words, are there specific
cuts would you prefer or expect, and what type of cuts would you
reject?
8. Can you explain how we can expect IPAB to correctly assess
reimbursement decisions for roughly 7,000 medical services provided by
physicians and what criteria will they use in making those decisions?
Secretary Sebelius' Response to Questions Submitted for the Record
the honorable todd huelskamp
1. Has the HHS been asked to provide any estimates to the White
House on savings that could come as a result of changes to Medicare, or
other programs under your Department for the ongoing negotiations on
the debt limit?
Answer: HHS is a part of the Administration and fully supports the
President's agenda, and in that role, provides proposals and technical
guidance to the White House on a variety of topics.
2. The now Minority Leader Pelosi said last year that we needed to
pass the health care bill to see what is in it. One of the things we
found out was in it were waivers. On June 2, I sent a letter to you,
along with 31 other Members of Congress, requesting information
regarding waivers and adjustments for the Affordable Care Act. How many
Annual Limit Waivers are currently pending and where are the companies
located? How many State Innovation Waivers and Medical Loss Ratio
adjustments have been approved, denied, or are still pending? What
other types of waivers or adjustments to the Affordable Care Act have
been approved, denied or are pending? Why has Nancy Pelosi's district
received more waivers than any other district in the country? Can I
ever expect to see a detailed, written response? Is this the level of
transparency we could expect from IPAB?
Answer: A written response to your June 2 letter was sent on July
13, 2011.
CMS posts all approved annual limit waiver recipients and denied
applicants on its website, at:
http://cciio.cms.gov/resources/files/
approved_applications_for_waiver.html.
While the location of each applicant is publicly available, it is
important to note that the city and state correspond only to the
address stated on the application and may not reflect the location of
the applicant's enrollees. As of the end of June 2011, a total of 1,471
one-year waivers have been granted. The number of enrollees in plans
with annual limits waivers is 3.2 million, representing only about 2
percent of all Americans who have private health insurance today.
Sixty-nine applicants were denied waivers.
Section 2718 of the Public Health Service Act, as amended by
section 1001 of the Affordable Care Act allows the Secretary to adjust
the medical loss ratio (MLR) standard for a State if it is determined
that meeting the 80% MLR standard may destabilize the individual
insurance market. CMS has implemented a fully transparent process for
the State MLR adjustment application. Each applicant submits materials
to CMS and the materials are posted to the website. Public comment is
then taken. The decision whether or not to grant an adjustment, and the
level of that adjustment, is based on the unique circumstances of each
state's market and the standards outlined in regulations and guidance.
All pending adjustments, final determinations and supporting
documentation are posted here: http://cciio.cms.gov/programs/
marketreforms/mlr/index.html. As of July 12, 2011, 12 States and one
Territory had requested MLR adjustments and CMS had issued final
determinations for three of those applications. CMS granted adjustments
for the three States for which final determinations were issued.
Finally, section 1332 of the Affordable Care Act allows States to
apply for a State Innovation Waiver for plan years beginning on or
after January 1, 2017. These State strategies would need to provide
affordable insurance coverage to at least as many residents as without
the waiver and must not increase the Federal deficit. Although these
waivers cannot take effect prior to 2017, the Affordable Care Act
requires the Secretary to publish regulations codifying this provision
well in advance of its effective date. A proposed rule was published on
March 10, 2011 with 60 day public comment. Additionally, in his Plan
for Economic Growth and Development, the President proposed that State
Innovation Waivers be made available starting in 2014, three years
earlier than under current law. To date, no State has submitted a State
Innovation Waiver request.
3. Because IPAB decisions are not subject to administrative review,
does that mean that Medicare patients who may be denied care because of
an IPAB reimbursement decision in the future have no access to the
federal grievance process?
Answer: IPAB is expressly prohibited from making proposals that
would ration health care, raise revenues or Medicare beneficiary
premiums, increase beneficiary cost sharing (including deductibles,
coinsurance, and co-payments), or otherwise restrict benefits or modify
eligibility criteria. We do not believe the statute precludes judicial
review of HHS's implementation of an IPAB recommendation that is
clearly outside the authority conferred by the statute.
This view is consistent with existing case law.1 Thus, while we
cannot offer advice on hypothetical cases, we believe such case law
could support a legal challenge to an implemented IPAB recommendation
that clearly violated one or more of the statutory restrictions set
forth above (such as a recommendation to increase beneficiary co-
payment amounts), assuming Congress were to fail to override that
recommendation. Of course, we don't have any reason to believe that
IPAB will issue recommendations exceeding its statutory authority, and
Congress could exercise its authority to preempt or override an
unlawful recommendation, making a legal challenge unnecessary.
1 See, e.g., Hanauer v. Reich, 82 F.3d 1304, 1307 (4th Cir. 1996)
(``[E]ven when the statutory language bars judicial review, courts have
recognized that an implicit and narrow exception to the bar on judicial
review exists for claims that the agency exceeded the scope of its
delegated authority or violated a clear statutory mandate.''); Griffith
v. Fed. Labor Relations Auth., 842 F.2d 487, 492 (D.C. Cir. 1988)
(``Even where Congress is understood generally to have precluded
review, the Supreme Court has found an implicit but narrow exception,
closely paralleling the historic origins of judicial review for agency
actions in excess of jurisdiction.'').
4. Because IPAB decisions are not subject to judicial review, how
could a patient denied care by an IPAB reimbursement decision bring a
medical malpractice claim against the Board?
Answer: As stated above, while we cannot offer advice on
hypothetical cases, we do not believe the statute precludes judicial
review of HHS's implementation of an IPAB recommendation that is
clearly outside the authority conferred by the statute.
5. Do you agree with OMB Director Peter Orzag who said that IPAB
represents the ``greatest transfer of sovereignty'' from Congress to
the Executive Branch in memory? If not, is there a Senate-confirmed
body that has equivalent power?
Answer: Based on new resources and authorities provided to the
Department in the Affordable Care Act, the Administration is pursuing
unprecedented efforts to protect Medicare, crack down on fraud and
abuse, improve the quality of care seniors receive, and constrain the
growth in unsustainable health care costs. However, the future of
Medicare requires continued vigilance and careful oversight, which is
why IPAB was created as a backstop mechanism to ensure Medicare remains
solvent for years to come and the IPAB, to the extent feasible, is
charged with including recommendations that improve health care while
lowering the growth in Medicare spending.
The Medicare Actuary predicts that the IPAB will serve mainly as a
backstop as he estimates per capita growth rate in Medicare at or near
the target growth rate. The IPAB backstop means that if Medicare
spending growth exceeds certain benchmarks, the IPAB will make specific
recommendations, and Congress will then have the opportunity to take
action. If Congress rejects IPAB recommendations, it will replace them
with reforms that achieve the same level of savings. The Board's
recommendations will go into effect only if Congress accepts them, or
if Congress fails to act. In other words, the IPAB recommendations are
implemented only when excessive spending growth is not addressed, and
other actions being taken are insufficient to decrease spending to
certain targeted levels. Congress fully retains all of its legislative
prerogatives to enact alternate proposals.
6. On a bi-partisan basis, experts agree that Medicare as we know
it cannot continue without massive reforms or cuts. Currently, the
administration's plan for the system is implementing IPAB on top of
$500 billion in provider cuts. What other ideas for reform, other than
restricting access to care by cutting provider payments does the
President have? At what level of payment cuts does the administration
believe enough providers will no longer accept Medicare patients to
create Canadian style waiting lists for routine care?
Answer: Many of the President's ideas to preserve and strengthen
Medicare were contained in the Affordable Care Act. The Affordable Care
Act includes new policies and authorities that reduce Medicare spending
and make important delivery system reforms, while improving Medicare
benefits for seniors and people with disabilities. These important
changes are projected to decrease Medicare spending, producing savings
for the taxpayers and prolonging the life of the Medicare Hospital
Insurance Trust Fund until 2024.
The Centers for Medicare & Medicaid Services (CMS) has already
implemented many of the savings provisions contained in the Affordable
Care Act. These provisions include plans to link hospital payments to
quality measures as part of the Hospital Value-Based Purchasing
program. Through the Partnership for Patients initiative, CMS is
bringing together the public and private sectors to reduce hospital-
acquired conditions and preventable hospital readmissions. Further, the
Affordable Care Act created the Center for Medicare and Medicaid
Innovation (the Innovation Center) to test and evaluate innovative
payment and service delivery models. The Innovation Center is pursuing
a number of new initiatives and demonstrations to achieve these goals,
including Accountable Care Organizations, bundling payments to promote
efficient and quality care, and improving primary care through the
Comprehensive Primary Care Initiative and the Federally Qualified
Health Center Advanced Primary Care Practice Demonstration. In
addition, the Affordable Care Act is building a stronger Medicare
program by providing new preventive benefits, improving access to life-
saving prescription drugs, and increasing support for primary care. CMS
is also streamlining and building a more efficient Medicare program by
decreasing fraud, waste, and abuse in our programs, implementing
competitive bidding for durable medical equipment, and improving how
Medicare pays for physicians' services.
While the Affordable Care Act represents an historic step toward
getting health care costs under control, there is still more that we
can do to realize efficiencies, cut waste, and improve Federal health
care programs. For that reason, as part of the Plan for Economic Growth
and Development, the President proposed making changes that would
further extend Medicare's solvency by encouraging high-quality,
efficient health care and addressing wasteful spending. The new
proposals would make changes to Medicare that are gradual, protect
current and middle-class beneficiaries, and strengthen Medicare
overall. These proposals would save about $224 billion over 10 years by
better aligning payments with the costs of care and improving
providers' payment incentives to provide high quality care. The
proposals also make structural changes that include reducing Federal
subsidies for high-income beneficiaries and creating financial
incentives for newly eligible beneficiaries to seek high-value health
care services to achieve an additional $24 billion in savings.
7. Assuming you are still HHS Secretary when IPAB submits its first
draft report to you for your review, what will your priorities and
criteria be in reviewing the report? In other words, are there specific
cuts would you prefer or expect, and what type of cuts would you
reject?
Answer: IPAB's statutory direction is clear: Make recommendations
to Congress that, to the extent feasible, will improve care for seniors
while lowering the growth in Medicare spending per beneficiary. IPAB is
also directed to consider several other factors, including protecting
access to necessary and evidence-based services, and also including:
care provided in rural areas; the unique needs of those dually-eligible
for Medicare and Medicaid; and the effects of its proposals on
providers with negative margins. I expect the IPAB to consider all of
these factors and will review the specific proposals to ensure they are
consistent with Congressional intent.
8. Can you explain how we can expect IPAB to correctly assess
reimbursement decisions for roughly 7,000 medical services provided by
physicians and what criteria will they use in making those decisions?
Answer: As stated above, the independent physicians, other health
professionals, and other experts that serve on IPAB will have
discretion in recommending proposals that improve the quality of care
for Medicare beneficiaries while slowing the rate of growth of program
expenditures. There is no requirement that IPAB review, assess, or make
recommendations regarding any one area of program spending, including
medical services provided by physicians. Congress was clear in its
direction to IPAB, and I expect they will use those criteria to guide
their priorities and recommendations.
[An additional submission of Mr. Van Hollen follows:]
[Whereupon, at 1:01 p.m., the committee was adjourned.]