[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                HEALTH CARE LAW'S IMPACT ON THE MEDICARE

                     PROGRAM AND ITS BENEFICIARIES

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



                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 10, 2011

                               __________

                           Serial No. 112-05

                               __________

         Printed for the use of the Committee on Ways and Means




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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

WALLY HERGER, California             SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas                   CHARLES B. RANGEL, New York
KEVIN BRADY, Texas                   FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin                 JIM McDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
GEOFF DAVIS, Kentucky                XAVIER BECERRA, California
DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
CHARLES W. BOUSTANY, Jr., Louisiana  JOHN B. LARSON, Connecticut
DEAN HELLER, Nevada                  MIKE THOMPSON, California
PETER J. ROSKAM, Illinois            EARL BLUMENAUER, Oregon
JIM GERLACH, Pennsylvania            RON KIND, Wisconsin
TOM PRICE, Georgia                   BILL PASCRELL, Jr., New Jersey
VERN BUCHANAN, Florida               SHELLEY BERKLEY, Nevada
ADRIAN SMITH, Nebraska               JOSEPH CROWLEY, New York
AARON SCHOCK, Illinois
CHRISTOPHER LEE, New York
LYNN JENKINS, Kansas
ERIK PAULSEN, Minnesota
RICK BERG, North Dakota
DIANE BLACK, Tennessee

                       Jon Traub, Staff Director

                  Janice Mays, Minority Staff Director


                            C O N T E N T S

                               __________

                                                                   Page
Advisory of February 3, 2011 announcing the hearing..............     2

                               WITNESSES

Donald M. Berwick M.D., Administrator, Centers for Medicare and 
  Medicaid Services..............................................     6
Richard S. Foster, Chief Actuary, Centers for Medicare and 
  Medicaid Services..............................................    70

                       SUBMISSIONS FOR THE RECORD

Mr. Rangel.......................................................   115
Families USA.....................................................   116
American College of Physicians...................................   120
America's Health Insurance Plans.................................   126
Alliance for Retired Americans...................................   132
Campaign for Better Care.........................................   133
Center for Medicare Advocacy.....................................   135
Health Industry Distributors Association.........................   139
LeadingAge.......................................................   141
Medicare Rights Center...........................................   142
National Partnership for Women Families..........................   144
National Senior Citizens Law Center..............................   147
Roundtable on Critical Care Policy...............................   148

                   MATERIAL SUBMITTED FOR THE RECORD

Questions for the Record:
      Mr. Berwick................................................   150
      Mr. Berwick--Tiberi DME Data Request.......................   166


                    HEALTH CARE LAW'S IMPACT ON THE


                 MEDICARE PROGRAM AND ITS BENEFICIARIES

                              ----------                              


                      THURSDAY, FEBRUARY 10, 2011

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                                    Washington, DC.
    The committee met, pursuant to call, at 10:00 a.m., in Room 
1100, Longworth House Office Building, the Honorable Dave Camp [chairman of the committee] presiding.
    [The advisory of the hearing follows:]

HEARING ADVISORY

Chairman Camp Announces Hearing on the Health Care Law's Impact on the 
                 Medicare Program and its Beneficiaries

Thursday, February 3, 2011

    House Ways and Means Committee Chairman Dave Camp (R-MI) today 
announced that the Committee on Ways and Means will hold a hearing to 
examine what impact the health care overhaul will have on Medicare and 
Medicare beneficiaries. The hearing will take place on Thursday, 
February 10, 2011, in 1100 Longworth House Office Building, beginning 
at 10:00 A.M.
      
    In view of the limited time available to hear the witness, oral 
testimony at this hearing will be from the invited witness only. 
However, any individual or organization not scheduled for an oral 
appearance may submit a written statement for consideration by the 
Committee and for inclusion in the printed record of the hearing. A 
list of invited witnesses will follow.
      

BACKGROUND

      
    The health care overhaul enacted last year included one-half 
trillion dollars in Medicare program savings from 2009-2019. As a 
result of these policies, the actuaries at the Centers for Medicare and 
Medicaid Services (CMS) have warned that beneficiaries' access to care 
could be jeopardized, nearly 9 in 10 seniors could lose their retiree 
prescription drug coverage, and millions of seniors are expected to 
lose their Medicare health plans.
      
    In announcing this hearing, Chairman Camp said, ``It is the 
Committee's responsibility to oversee the Medicare program and to fully 
understand the impact the recently enacted health law will have on the 
seniors and disabled Americans who rely on it. This hearing will allow 
the Committee to better understand the challenges created by the 
Democrats' health care overhaul so that we can assess what actions may 
be necessary to ensure that Medicare beneficiaries have continued 
access to needed health care services.''
      

FOCUS OF THE HEARING:

      
    The hearing will examine the impact of the enactment and 
implementation of the ``Patient Protection and Affordable Care Act'' 
(P.L. 111-148) and the ``Health Care and Education Reconciliation Act 
of 2010'' (P.L. 111-152) will have on the Medicare program and its 
beneficiaries.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
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FORMATTING REQUIREMENTS:

      
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    1. All submissions and supplementary materials must be provided in 
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    2. Copies of whole documents submitted as exhibit material will not 
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    3. All submissions must include a list of all clients, persons and/
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    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
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    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman CAMP. The committee will come to order.
    Good morning. I want to welcome everyone here and also 
extend a special welcome to our guests, Donald Berwick, the 
Administrator at the Centers for Medicare & Medicaid Services, 
and Richard Foster, Chief Actuary for the Centers for Medicare 
& Medicaid Services.
    Dr. Berwick, despite three separate requests from the 
Republicans on the committee to our Democrat counterparts in 
the last Congress, this is the first time you have actually 
been invited and appeared before this committee--or any House 
committee, for that matter--so we have been especially looking 
forward to having you here for what I hope will be an 
informative and spirited discussion about the impact the 
Democrats' new health care law will have on Medicare, our 
seniors, and other beneficiaries who depend on the program to 
meet their health care needs.
    I would note that the spending that runs through your 
agency is greater than what is spent by the Department of 
Defense. So not only do we have a constitutional responsibility 
to conduct this oversight, we have a clear fiscal 
responsibility to the American people, given the amount of tax 
dollars that you control.
    And if I were going to pick a subtitle for this hearing, I 
might well borrow a line from Charles Dickens, ``It was the 
best of times, it was the worst of times,'' because, to be 
honest, as I read through the testimony of our two witnesses 
and looked back through the information we have seen from CMS, 
I see two very contrasting perspectives appearing from the same 
agency.
    On the one hand, we have Dr. Berwick, who has repeatedly 
touted the benefits of the health care law. In testimony before 
the Senate Finance Committee last November, Dr. Berwick stated 
that ``Medicare's long-term sustainability is stronger than 
ever as a result of the new efficiencies, new tools, and 
resources to reduce waste and fraud and slow growth in Medicare 
costs.''
    On the other side, you have Mr. Foster and his team in the 
CMS Office of the Actuary, who has a 180 degree perspective on 
the new health care law. In report after report, the Office of 
the Actuary has provided a bleak outlook about the future of 
Medicare resulting from the new health care law. This is due in 
large part to the fact that there are more than one half 
million dollars in cuts to Medicare that have been made in an 
effort to finance the law. Those changes include massive cuts 
to hospitals, cuts to home health agencies, cuts to skilled 
nursing facilities, and cuts to hospice providers.
    The concern of many on the committee is the impact of this 
law and the potential to either lose access to health care 
services or be forced to pay more for the services they need. 
Sadly, that is already happening, from those who depend on 
local hospitals, to folks who depend on Medicare Advantage 
plans, to retirees receiving retiree drug coverage, to seniors 
who will pay higher prices.
    For example, the Medicare actuaries predict that because of 
the cuts in the Democrats' health care laws, 725 hospitals, 
2,352 nursing homes, and 1,587 home health agencies will become 
unprofitable. It is no wonder they warn that seniors' access to 
care could be jeopardized. Three Pennsylvania hospitals have 
been put up for sale, and drastic changes in the new health 
care law were cited as a factor in that decision.
    CBO has predicted that beneficiaries who remain in the 
Medicare Advantage plan will see their annual out-of-pocket 
costs increase by an average of $816 by 2019. The Medicare 
Trustees predict that 5.8 million seniors will lose their 
current retiree drug plan provided by their former employer 
because of the Democrats' health care law, and another 1.7 
million seniors who would have otherwise received an offer of 
retiree prescription drug coverage in the future will no longer 
have this option.
    And, finally, despite the claims that Medicare donut hole 
changes will solve the costs facing seniors, the reality is 
that CBO has predicted that Part D premiums will increase by 4 
percent this year and 9 percent for all seniors by 2019 as a 
result of the Democrats' health care law.
    These are just a few concerns, and I am sure there are more 
concerns that will be identified today, including the very 
fuzzy Washington math that has led some to characterize the 
financing of the law as a Ponzi scheme.
    Given the impact the new health care law will have on 
Medicare and the Nation's seniors, it is my hope that in 
today's hearing we can have an honest and open airing about how 
CMS plans to institute these cuts while still meeting the long-
term needs of our Nation's seniors and Medicare beneficiaries.
    I now yield to Ranking Member Levin to make an opening 
statement.
    Mr. LEVIN. Thank you, Mr. Chairman; and we welcome our two 
witnesses. I think this will be an opportunity to shatter many 
of the myths that have been spread about health care reform.
    For more than 45 years, Medicare has offered important 
health benefits for senior citizens and people with 
disabilities and has safeguarded financial stability for them 
and their families. The Affordable Care Act builds on the 
program's strengths and I emphasize that by investing in 
Medicare's future, improving benefits, reducing costs for 
beneficiaries, and getting a better deal for taxpayers.
    During the health reform debate and in the time since its 
enactment, health reform opponents have relied on myths and 
scare tactics to create fear and uncertainty among Medicare 
beneficiaries. What is really most scary is the plan from 
Republicans to privatize Medicare through a voucher system. So 
let's set the record straight, and we will have more of that 
today on health care reform and its impact on Medicare.
    The Act strengthens Medicare's future, improves benefits 
for senior citizens and people with disabilities, and saves 
money for taxpayers.
    Fact one: The Act lowers cost to Medicare beneficiaries in 
improved benefits. Thanks to Medicare payment reforms and 
efforts to eliminate waste and fraud, beneficiaries will save 
on average almost $200 on their Part B premiums by 2019, and 
cost sharing also will go down by more than $200.
    Fixing the donut hole created by the Republican plan was a 
key improvement of the Act. We offered immediate assistance 
with drug costs by providing $250 to over 3 million people. 
This year, seniors who hit the donut hole will save an average 
of $500. By 2020, the donut hole will close completely. 
Finally, seniors will reap benefits due to this elimination of 
cost sharing for most preventive services and the creation of a 
new annual physical benefit.
    Fact two: The Act significantly strengthens Medicare's 
financial footing. The Act extends solvency of the trust fund 
by 12 years.
    Fact three: The Act modernizes the Medicare program. It 
contains an array of delivery reform systems to ensure that the 
program rewards value over volume. In fact, health care 
experts, including more than 270 leading economists, agree that 
the Act creates a more disciplined and effective health care 
system.
    Fact four: The Act includes tough new fraud-fighting tools 
that are projected to save taxpayers approximately $5 billion. 
The law empowers CMS to stop fraud before it happens.
    But there is one more point that needs to be stressed, and 
it is the Republican agenda to repeal reform. The repeal agenda 
would reverse the progress we have made. It would raise 
beneficiary costs and substantially shorten Medicare solvency. 
It would end delivery innovations and stop important new fraud-
fighting powers in their tracks.
    My Republican colleagues focus on repealing health care 
reform and privatizing it by turning it into a voucher system. 
The repeal agenda shifts medical expenses back onto seniors and 
their families. When we passed Medicare, it was to fix these 
very problems to ensure that seniors would no longer have to 
spend their retirement in poverty or in fear of the next 
illness. Repeal would do more than turn back the clock, it 
would rip off its hands. That is a fact we cannot ignore and a 
possibility we will not accept.
    Chairman CAMP. Well, thank you.
    Dr. Donald Berwick is the Administrator for the Centers for 
Medicare & Medicaid Services. As Administrator, Dr. Berwick 
oversees the Medicare, Medicaid, and the Children's Health 
Insurance Program. Together, these programs provide care to 
nearly one in three Americans.
    Before assuming the leadership of CMS, Dr. Berwick was 
President and Chief Executive Officer of the Institute for 
Health Improvement, Clinical Professor of Pediatrics and Health 
Care Policy at the Harvard Medical School, and Professor of 
Health Policy and Management at the Harvard School of Public 
Health. He is also a pediatrician, adjunct staff in the 
Department of Medicine at Boston's Children's Hospital, and a 
consultant in pediatrics at Massachusetts General Hospital.
    Dr. Berwick, your full written statement will be made part 
of the record. You have 5 minutes to address the committee, 
whereupon the members will question you for 5 minutes each.
    So, Dr. Berwick, welcome to the committee, and you have 5 
minutes.

 STATEMENT OF DONALD M. BERWICK, M.D., M.P.P., ADMINISTRATOR, 
            CENTERS FOR MEDICARE & MEDICAID SERVICES

    Dr. BERWICK. Thank you, Mr. Chairman. I appreciate the 
chance to appear here. It is a privilege and an honor to serve 
as the Administrator and also to get a chance to be in dialogue 
with you now and in the future.
    I am a physician, I am a pediatrician, I am the son of a 
physician, and I am the father of a newly minted physician. 
Almost three-quarters of a century span the time between when 
my father first hung out his shingle in a small town in 
Connecticut where I grew up and when my daughter Jessica showed 
up last year for her first day as a primary care resident.
    My own career is sort of a bridge also between them, from 
the typewriters that my father used to the computers that 
Jessica uses, from ignorance about how genes worked to the 
decoding of the human genome, from helplessness in the face of 
almost all cancers to cures for many cancers, from the time 
before Medicare when seniors lived in fear of medical 
bankruptcy to now when they do not.
    The Affordable Care Act is a bridge, too. It is our 
Nation's answer to many of the problems that modern health care 
brings, along with its successes. It is our answers to the 
questions about health care coverage.
    Will we make sure that our neighbors don't need to be 
afraid that they are going to lose health insurance when they 
get sick or not be able to get it in the first place? The 
answer is yes. People with preexisting conditions will be able 
to get insurance and insurance companies will not be allowed to 
withdraw coverage from those who become ill. Yes, children 
under 26 can be covered under their parents' insurance 
policies.
    Will Medicare beneficiaries get the drugs that they need at 
the prices they can afford? The answer is yes now. We have sent 
over 3 million tax-free rebate checks to seniors to get them 
through the donut hole. We have discounts now of 50 percent for 
covered prescription drugs for people in the donut hole. By 
2020, we will close the donut hole completely.
    Will we invest in prevention for seniors, not just treat 
them for the heart attacks and strokes and cancers they could 
have avoided? The answer is yes. We will add annual wellness 
checks and cost-free screening tests like mammography and 
colonoscopy to Medicare benefits.
    In some ways, though, the biggest question of all I know is 
one that concerns you, which is, can we afford to do that? Is 
getting the care that we want and that we need--care for 
everybody--sustainable? The answer to that also is yes.
    Not only does the Affordable Care Act make Medicare 
fiscally stronger, it also provides us with the tools to make 
health care better. And as in the rest of what we do, doing 
things right is less costly than doing things wrong.
    Can we afford to meet the needs of patients and families? 
Yes. We cannot afford not to. When a patient gets an avoidable 
surgical infection or when two different doctors who don't have 
a way to coordinate their care mistakenly prescribe two drugs 
for Mr. Green that ought not to be taken together, the patient, 
the family, and society all bear the higher costs of the 
complications. When Mrs. Miller stops taking her medicines 
because she can't afford them, she will suffer the stroke that 
will become her greater burden and ours. The diabetes that we 
fail to prevent or to detect early will become the heart attack 
or the amputation or the kidney failure that will cost far more 
in suffering and in dollars to treat later.
    It is a terrible mistake, in my opinion, to think that the 
route to affordable health care is to deny people insurance, 
care, and treatment. That is a very bad plan. Instead, the 
proactive, patient-centered investments that the Affordable 
Care Act and Medicare and Medicaid themselves represent are our 
Nation's best hope for the sustainable excellent health care to 
which we aspire. Better care, better health, and lower costs 
through improvement of care, they come together. They are a 
package deal.
    Let me focus on one particular case, the Medicare Advantage 
program, which I know you have concerns about. You are 
concerned about the strength of the program. We actually have 
some quite exciting new data just now on enrollments and 
premiums.
    Despite earlier projections of enrollment declines and 
premium increases, the actual data we now have in 2011 shows 
that enrollment in Medicare Advantage increased 6 percent, to 
more than 12 million beneficiaries. On average, beneficiaries 
have seen a 6 percent reduction in their premiums, and there is 
a 5 percent increase in the number of beneficiaries who are now 
in four- and five-star Medicare Advantage contracts this year 
versus last year. That translates into more beneficiaries being 
in lower-cost and higher-quality plans.
    Higher-quality care is what I want for all patients. When I 
practiced pediatrics, I did everything I possibly could to make 
sure that my patients had the best medical care possible. I 
fought for a bone marrow transplant for a young boy for whom 
that was the last possible chance for success. He got the 
transplant, and he lived. I made sure that kids with asthma got 
the most modern treatment we had and that their mothers and 
their fathers and their schoolteachers understood how to help 
them. I made sure that immunizations were up to date, that 
obese kids knew that they had options, because you can never 
underestimate the value of prevention.
    And now, at CMS, I get to do the same for Medicare and 
Medicaid and CHIP beneficiaries and for the millions more who 
will benefit from a healthier private insurance market. It is 
the same plan. Quality pays. If you want to thrive, don't run 
away from a problem. Do things right. Better care, better 
health, and lower costs through improvement. That was my 
father's plan, that is my daughter's plan, and every day at CMS 
it is our plan.
    Thank you.
    [The prepared statement of Donald M. Berwick, M.D., 
follows:]

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    Chairman CAMP. Thank you, Dr. Berwick. Your time has 
expired, but your full statement will be made part of the 
record.
    Dr. Berwick, is the British health care system, the 
National Health Service, a good model for us to follow here in 
the United States?
    Dr. BERWICK. Mr. Chairman, I have seen and worked in many 
countries. Every country finds its own solution to its own 
problems. America needs an American solution to the American 
health care problem, and the Affordable Care Act is certainly 
that--or the beginning of that. It is a system that balances 
public and private payment. It depends heavily on the private 
health care sector. It is a good partnership between the 
Federal Government and States. It is the American way to an 
American health care system that is sustainable.
    Chairman CAMP. Well, regarding the British National Health 
Service, you made a statement--and that is a service that is 
notoriously known for rationing care--you said, ``I fell in 
love with the NHS. To an American observer, the NHS is such a 
seductress.''
    Are you still in love with the NHS? Is this still a view 
you subscribe to?
    Dr. BERWICK. There are strengths and weaknesses for every 
health care system around the world. We have a lot to learn 
from each other. But I say again, the American health care 
system needs an American solution. That is what excites me 
about the Affordable Care Act. It puts a stake in the ground 
about the kind of system we can have based on the heritage of 
our system, the assets we have, our investment in our own 
public trust, and this extraordinary partnership between public 
and private care. We are on the route to a solution that fits 
our country, and that is what really counts.
    Chairman CAMP. Would that be a yes or a no?
    Dr. BERWICK. I am saying that every country finds its own 
solution. There are strengths in the British health care 
system. There are strengths in every health care system I have 
seen and enormous weaknesses in all of them. We are all 
struggling with the same issues.
    Chairman CAMP. You also wrote, ``I admit to my own devotion 
to a single-payer mechanism as the only sensible approach to 
health care finance I can think of.'' Do you still feel that a 
government-run, single-payer health care system is the only 
sensible approach?
    Dr. BERWICK. I am really excited by the promise the 
Affordable Care Act offers, Mr. Chairman, to American health 
care. I think we have found our way to a really open door here 
now to a solution to the American health care problem. It is an 
investment in better care, better health, and lower costs 
through the improvement of care. And as I understand that law 
more and more, I see more and more tools that our country now 
has to make care exactly what it should be for every single 
person.
    Chairman CAMP. Is that a yes or a no to my question? I am 
having trouble understanding whether you still believe that the 
single-payer system is the only sensible approach.
    Dr. BERWICK. I think the Affordable Care Act is a sensible 
approach for America, and we are seeing progress already. I 
think we will see immense progress if we stick with this law. I 
can see the potential for helping our country actually use 
innovation, an improvement of quality of care, transparency, 
putting control in the hands of patients. We are going to find 
our way to a better health care system, and this is an exciting 
opportunity.
    Chairman CAMP. If I could have a simple yes or no answer. 
You said one time that ``competition, in short, will hurt you, 
not help you.'' Now that you will be in charge of setting up 
exchanges, determining what health benefit plans will look 
like, analyzing premiums, do you still feel that competition in 
health care is a bad thing? And I think we need some clarity 
from you. Is this a yes or a no?
    Dr. BERWICK. Competition certainly has a place in our 
health care system. It is the American way to excellence in 
many forums. There are other areas in which providing public 
support to people through a publicly financed system helps, 
too. There is not a simple yes or no answer to your question, 
Mr. Chairman; and I think the Affordable Care Act strikes a 
superb balance between public and private sector investment and 
better care.
    Chairman CAMP. You have also said that any health care 
funding plan that is just, equitable, civilized, and humane 
must redistrict wealth from the richer among us to the poor and 
less fortunate. Is this a view you still subscribe to?
    Dr. BERWICK. Statement of fact, Mr. Chairman, sick people 
tend to be poorer and poor people tend to be sicker; and if we 
are investing in the health of our neighbors and our Nation, we 
are going to have to take care of the sicker and poorer in our 
country. And we have done that. That is why Medicare and 
Medicaid are there in the first place.
    Chairman CAMP. And you think wealth redistribution is the 
way to go about achieving that goal?
    Dr. BERWICK. Poor people tend to be sicker, and sicker 
people tend to be poor. And if we really want to help each 
other we are going to have to understand that and address it, 
and we have in our public policy. That is where Medicaid came 
from in the first place, Mr. Chairman.
    Chairman CAMP. We have heard that this legislation will 
mean that most preventative care will now be free because of 
this new health care law. And you once wrote that one over-
demanded service is prevention--annual physicals, screening 
tests, and other measures that supposedly help catch diseases 
early. Do you still feel that preventative care isn't too high 
of a demand?
    Dr. BERWICK. Mr. Chairman, I am a pediatrician. I have 
spent my life in preventive services. The whole idea in taking 
care of children is to give them effective prevention so they 
don't get the diseases that we will later pay the price for. 
There is effective prevention and ineffective prevention. The 
Affordable Care Act is a tremendous investment in getting 
people effective preventive services. That is why they cover 
mammography and colonoscopy now at no copayment for the 
patient. That is why we introduced the annual wellness 
physical. Effective prevention is the best investment we can 
make in higher quality, better life, and lower cost.
    Chairman CAMP. Well, I would take it that is a ``no'' then. 
I would take it that you do not feel that preventative care is 
in too high of a demand.
    Dr. BERWICK. I am sorry, Mr. Chairman, I don't understand.
    Chairman CAMP. The question I asked you was, after reading 
your quote, do you still feel that preventative care is in too 
high demand? And I guess from our answer you do not feel that 
preventative care is in too high demand.
    Dr. BERWICK. I must say, Mr. Chairman, I don't recognize 
your quote. I am telling you what I think, which is that 
effective prevention----
    Chairman CAMP. You wrote it once. It was in your writings. 
I am quoting your writings. I am reading it from ``We can cut 
costs and improve care at the same time,'' by Donald Berwick, 
Medical Economics Office, August 12, 1996, page 186.
    Dr. BERWICK. I believe we can cut costs and improve care at 
the same time by investing in effective care, and that 
certainly includes investing in effective preventative 
services, which is what the Affordable Care Act at last allows 
us to do for seniors who now can be protected from strokes and 
heart attacks and complications of diabetes as never before.
    Chairman CAMP. So the answer is, no, you don't feel that 
preventative care is in too high demand.
    Dr. BERWICK. Is in too high demand?
    Chairman CAMP. That is what I am asking.
    Dr. BERWICK. I believe that offering effective preventive 
services is a terrific investment for our Nation, and that is 
what the Affordable Care Act does.
    Chairman CAMP. All right. Mr. Levin may inquire.
    Mr. LEVIN. I was going to say, that I think it is important 
that everybody hear your answers.
    Dr. BERWICK. Thank you.
    Mr. LEVIN. And so the mic will be clear. And I am glad that 
the chairman asked you these questions so that the air can be 
cleared when it is often, I think, misrepresented and so we can 
move on and you can provide the services that you have been 
trained to provide. I am glad those questions were asked. I 
don't think you were surprised.
    Let me just ask you, in terms of separating fact from myth, 
Mr. Camp, in his opening statement, talked about more than one 
half trillion dollars in cuts to Medicare. Would you comment on 
that?
    Dr. BERWICK. We have an unsustainable health care system 
now. That is the problem we are struggling with no matter which 
side of the aisle you are on. We have a system that our country 
is having trouble affording, and it is failing to meet the 
needs of many of its citizens, and we are trying to navigate 
our way to a solution.
    I think the Affordable Care Act offers an opportunity to 
offer every American better care, not just those in Medicare 
and Medicaid, but everyone a better system, safer, more 
effective, more patient-centered. There are investments in 
innovation. There are investments in continuity of care so that 
patients with chronic illness who need to be handed off well 
from hospital to home or from doctor to doctor can get that 
kind of support. These all improve the quality of care, And 
through that we are going to see costs fall over time.
    The Affordable Care Act has many potential elements in it 
that will, I think, in the long run result in savings for our 
country and for beneficiaries themselves.
    Mr. LEVIN. So when there is a reference to a half trillion 
dollar cuts in Medicare, these so-called ``cuts'' relate in 
most cases to the rate of increase in reimbursements and 
payments to providers; isn't that true?
    Dr. BERWICK. We are on an unsustainable trajectory, and we 
need to find a way to lower costs. The Affordable Care Act is 
linking reimbursement to providers more and more to the quality 
of what they do. Instead of paying for care in fragments or 
pieces or high volume care alone, we are orienting more and 
more payment in this country, on the public and private side 
both, to paying providers for excellence, for producing the 
care that we want and need.
    An example would be infections in hospitals. There are 
hospitals all over this country that now have reduced many 
forms of infection to zero. I have visited those hospitals. I 
have seen them. The question now is, if it can be done there, 
can it be done everywhere? The answer is, yes, if we invest in 
it. The Affordable Care Act invests in innovations that would 
allow things like infection control to be spread all over the 
country now. Every single hospital offering excellence at the 
level that the best currently do, that lowers costs and 
improves quality at the same time. And that is a plan that will 
get us to a more sustainable health care system and in the end 
a more sustainable Medicare Trust Fund, Medicaid system, and 
health care as a whole.
    Mr. LEVIN. Do you want to comment on this claim that 5.8 
million seniors will lose their current retiree drug plan 
provided by their former employer, also in the statement of our 
chairman?
    Dr. BERWICK. We are in a transitional mode in American 
health care. The Affordable Care Act helps the retiree drug 
programs with a retiree drug subsidy. Businesses will make 
their decisions about continuing or not continuing their 
retiree drug plans, and the beneficiaries will choose among the 
things available to them. And I am sure there will be some 
shifts.
    You know, the Part D program, the alternative to the 
retiree drug program, in many cases has been strengthened 
immensely over the past year or two now. We have strong 
evidence of a much better supply in the Part D program. And we 
have the 50 percent drug discount for brand name drugs so that 
some retiree drug beneficiaries will choose to move over to 
Part D because it is a better plan for them.
    Mr. LEVIN. Thank you.
    Chairman CAMP. Thank you.
    The Chairman of the Health Subcommittee, Mr. Herger, may 
inquire.
    Mr. HERGER. Thank you, Mr. Chairman; and, Dr. Berwick, I 
want to thank you for being here this morning. I appreciate 
your dedication to creating a high-quality health care system, 
but I think we have some very fundamental disagreements about 
how to achieve that goal.
    Chairman Camp highlighted your past support for a single-
payer system and your comment that ``competition, in short, 
will hurt you, not help you.'' Dr. Berwick, do you believe 
competition and market forces are good or bad for health care 
in light of your quote?
    Dr. BERWICK. On the whole, good, Congressman Herger. We can 
see that in the durable medical equipment bidding system, for 
example, in which we are using market forces to enhance the 
benefits to beneficiaries, reduce their costs of durable 
medical equipment, at the same time assuring a supply of 
excellent DME. That program alone has reduced the spend for the 
nine areas that the DME program was tried in by 32 percent. 
Extrapolating to the country as a whole, that would be a saving 
over the next 10 years of $27 or $28 billion, of which $17 
billion gets returned to the Medicare Trust Fund and $11 
billion to the beneficiaries. That is constructive use of 
competition in a very important arena, increasing excellence, 
increasing transparency, decreasing costs, and increasing the 
well-being of the people who use those products and services.
    Mr. HERGER. So, in other words, you don't agree with your 
statement where you said ``competition, in short, will hurt 
you, not help you?''
    Dr. BERWICK. There are instances where competition is very 
helpful, and I have just cited one. There are instances where 
it is probably less useful. But in a rural setting where there 
is only a single hospital, critical access hospital, and that 
is the only supply in town, we can't use competition as the 
major lever for improvement in that. We have to reach out and 
help that setting and make sure that it can supply the goods 
and services and excellence that that community needs. 
Sometimes it helps; sometimes it doesn't.
    But the answer to your question before, do I think 
competition can help? The answer is, yes, in many cases 
absolutely.
    Mr. HERGER. Which is directly opposite of what your quote 
was. But the reason that I and many others find your past 
statements troubling is because America was built on the free 
enterprise system. Going back to our Founding Fathers, 
Americans have always believed that free people working in free 
markets make better decisions than any king or dictator or 
government bureaucrat could ever make for them, and that is 
what this health care debate is fundamentally about. Are we 
going to stick with the free enterprise system that has brought 
about the greatest prosperity in the history of the world or 
are we going to hand over the keys to the government? Will we 
trust patients' own doctors to determine the best course of 
medical treatment or will we leave that decision up to a 
district bureaucrat who has never met the patient?
    You are now overseeing an agency that provides health care 
benefits to more than 11 million beneficiaries in Medicare 
Advantage and 19 million in Medicare prescription drug plans. 
Congress designed Medicare Advantage and Medicare Part D to 
give senior citizens a choice of plans so they can pick the 
plan that works best for them instead of being forced into a 
one-size-fits-all government plan.
    Given your repeated statements expressing skepticism about 
the private health care market and competition, how will you 
reconcile your personal beliefs with your responsibility to 
administer these programs that are built on the principles of 
competition and consumer choice?
    Dr. BERWICK. Congressman, I can't think of a better example 
of American-style competition benefiting everyone than, say, 
with the evolution right now of the Medicare Part C program, 
the Medicare Advantage program. Look at what is happening: more 
transparency, more negotiation, more visible understanding by 
beneficiaries of the quality of the plans they can choose from, 
an open market in the Medicare and You handbook and on the Web 
where they can search for the plan they want and then they buy 
it. And what happens? Quality goes up and costs go down. That 
is the free market at work with the support of Medicare to make 
this a transparent environment in which the beneficiary can 
make choices. We are interested in more choice, not less, and 
it is working.
    Mr. HERGER. And I couldn't agree with you more. But I hope 
you recognize that what you have just said in your statements 
and answers to Chairman Camp are very different, very different 
than these quotes that you have made in the past, but thank you 
very much.
    Chairman CAMP. Thank you. The gentleman's time has expired.
    Mr. Johnson is recognized.
    Mr. JOHNSON. Thank you, Mr. Chairman, and Doctor.
    You know, the administration and Democrats here in Congress 
made promises to seniors about their health care and 
unfortunately didn't live up to them. In many cases, the law's 
provisions are going to harm, not help, Americans primarily by 
raising premiums and reducing access. I mean, the Medicare 
actuaries warn that the one-half trillion dollars in Medicare 
cuts in the Democrat health care law are so drastic that 
providers might end their participation in the program, 
probably jeopardizing access to care for beneficiaries.
    You know as well as I do there are docs that are getting 
out of Medicare now because they can't deal with it. And I 
don't know if you have a private office or not, but most of the 
docs I know have to hire two or three extra people just to 
track the administrative work that goes along with that 
Medicare junk.
    The Congressional Budget Office also expressed concern that 
it is unclear if the law's Medicare cuts can be sustained and 
whether this slower rate of growth will be accomplished through 
greater efficiency or instead reduce access to care or diminish 
the quality of care for Medicare beneficiaries.
    In Texas, more than 300 doctors have dropped the Medicare 
program in the last 2 years--you are aware of that, I am sure--
including 50 in the first 3 months of 2010. Some docs feel the 
only way they can have control over their practice is to stop 
taking Medicare patients. Of course, not all docs drop out of 
the program. Some doctors are choosing to increase fees, reduce 
staff wages and benefits and reduce charity care. Those 
alternatives don't sound good to me.
    As a CMS administrator, how do you plan to prevent seniors 
from being denied access to care as a result of the massive 
Medicare cuts in the program?
    Dr. BERWICK. It is tough times for all. Everyone is 
tightening their belt in this economy. I know that. But let me 
say that I have never been more optimistic about the future of 
the health care system in our country with the Affordable Care 
Act in our hands. I am told now that the participation in the 
Medicare system is the highest this year than it has ever been 
in history among physicians. The Affordable Care Act was 
supported by the American Medical Association, the American 
Hospital Association, professional societies, and trade 
associations. I don't think they would be supporting an Act 
that they think spells doom for them.
    Mr. JOHNSON. Well, how do you account for 300 doctors 
dropping it in Texas?
    Dr. BERWICK. Not everyone agrees with the Affordable Care 
Act, of course, but the associations, whose job is to make sure 
that the wellbeing of their part of the industry proceeds well, 
are supporting this act. They know that the future lies in 
better care, better health, and lower cost; and I think they 
are interested in engaging with us--with us on the public and 
private side both--in making health care better. That is what 
they say to me when they meet with me.
    I have been going all over the country meeting with 
hospital leaders and professional leaders, and I think 
everybody that I am speaking with knows we have got to navigate 
our way to a better health care system together in public and 
private partnership, and I think we are headed in that 
direction.
    Mr. JOHNSON. I don't know how you plan to prevent seniors 
from being denied access. What kind of steps are you going to 
put in place so you can identify a problem before it becomes a 
crisis?
    Dr. BERWICK. More transparency, more knowledge about what 
is going on, more linkage of quality to payment.
    Mr. JOHNSON. And how do you do that if the docs refuse to 
be part of Medicare anymore?
    Dr. BERWICK. Ninety-six percent of the docs are 
participating in Medicare, and they are more than willing to 
work with us, the ones that I have met with. They know that in 
the long run better care is the answer for them, for their 
patients, and for the sustainability of the country. And we are 
going to work hard with the providers of care all over this 
country to make that care better. They know in the long run 
that that is how they will do the best for their patients, and 
that is what counts.
    The hospitals want to be safer, they want to be higher 
quality, and we will work with them to get them in that 
direction. In the end, extra readmission that shouldn't have 
happened because we dropped the ball helps no one. Hospitals 
know that, doctors know that, and we are going to work for 
better care. That will be why people came into health care in 
the first place and why they will want to stay there.
    Mr. JOHNSON. Well, I don't know how you are going to get to 
the docs that quit the system because they can't stand it.
    Thank you, Mr. Chairman.
    Chairman CAMP. Thank you.
    Mr. Rangel is recognized.
    Mr. RANGEL. Thank you so much, Mr. Chairman; and, Doctor, 
thank you so much for sharing with us the knowledge that you 
have so that our government can do a better job which you and 
your family have dedicated your life to.
    I just want to correct the record, because the chairman had 
indicated in his opening statement that three Catholic 
Universities in Pennsylvania were closed because of the 
Affordable Care Act. They rushed to make certain that some of 
us knew that the Affordable Care Act had nothing to do at all 
with the sale and that they had indicated that they wanted to 
do this long before the Act. The president is a Roman Catholic 
nun, and she is the one that wanted to clarify the record and 
her support for the Act.
    Having said that, it just amazes me as to the opposition to 
this revolutionary concept of broad national coverage. What is 
your guesstimate of the number of Americans that have health 
insurance coverage?
    Dr. BERWICK. The number that have health insurance 
coverage?
    Mr. RANGEL. That have health coverage of some kind.
    Dr. BERWICK. I don't know the exact number. I know that we 
have closed the gap a lot with the Affordable Care Act that now 
have access to----
    Mr. RANGEL. I heard it is about 30 percent that don't have 
coverage.
    Dr. BERWICK. As the Affordable Care Act gets into play, we 
are going to be closing that by over 30 million Americans that 
will have coverage.
    Mr. RANGEL. But these people somehow manage to get health 
care even though they are not covered by insurance; is that 
true?
    Dr. BERWICK. That is true.
    Mr. RANGEL. And normally--not normally, but many of them go 
to emergency clinics in order to get this health care, and it 
is my understanding that this is a very expensive way to get 
health care treatment.
    Dr. BERWICK. You are absolutely right, Congressman. It is 
you pay me now or you pay me later. When the patient comes in 
and you detect their diabetes early, they don't get kidney 
failure later. If they don't have access to care, complications 
will occur and they will show up later in the emergency room or 
the safety system and they will be expensive in a different 
way, right out of our public treasury, often.
    Mr. RANGEL. When I was a kid, things were that you never 
went to see a doctor unless you were sick, but now I think it 
is abundantly clear that you can prevent so many serious 
illnesses, as you said in your testimony, by being able to go 
without having enormous cost to prevent these things from 
happening.
    Dr. BERWICK. Absolutely right. We know the Director of the 
Centers for Disease Control, Dr. Frieden, has pointed out that 
with three or four simple, preventive steps we could reduce 
hundreds of thousands of heart attacks and strokes and other 
cardiovascular diseases in our country.
    Mr. RANGEL. Now if you already have coverage and you are 
paying your premiums, are not included in the premiums the 
costs for the people who don't have coverage?
    Dr. BERWICK. Eventually, it comes around. Somebody has to 
pay.
    Mr. RANGEL. So if those who have premiums can find some way 
to reduce the costs of those who are not insured, does that not 
mean that your premium should be expected to be lowered?
    Dr. BERWICK. Your premiums can be lowered. And in the long 
run the savings will be there because somewhere in the tax 
system and wages and in premiums that money will be saved and 
will come back into the American economy instead of being 
wasted in ill health that we could have avoided.
    Mr. RANGEL. And so if we could develop a plan where most 
all people one way or the other would be able to get preventive 
care, would be able to get some type of care to prevent them 
from being hospitalized or prevent their illnesses from 
becoming chronic, then everybody not only gets the better 
quality of care but the cost per capita is dramatically lower.
    Dr. BERWICK. Exactly, Congressman.
    Mr. RANGEL. Now if that is true--I guess coming from Lenox 
Avenue in Harlem, New York--that those who have coverage 
probably take the attitude, I got mine, Jack, it is up to you 
to get yours. Because I think we have done a terrible job. And 
I want to thank the Republican majority for giving us a second 
chance of really showing the benefits of the program. Because 
the law is complicated.
    But if you have a child with a precondition, you can better 
appreciate it today. If you have a kid that is under 26 and you 
couldn't get coverage, if you have high costs for prescription 
drugs, all of these things, the public is beginning to 
understand what is in the bill.
    So I would like to take this opportunity to thank the 
Republican majority for giving us an opportunity not only to 
defend the bill that this committee majority was so proud of 
playing a major part in and giving us an opportunity not just 
to defend but to point out that, in the short and long run, 
this is best for our Nation; and I appreciate your patience 
with us.
    And, Mr. Chairman, these hospitals that you referred to 
have sent out a release that I would like unanimous consent to 
be included in the record in saying sale it was, but it had 
nothing to do with the law that is before the committee.
    Chairman CAMP. Without objection.
    Chairman CAMP. The gentleman's gratitude to the majority is 
duly noted. His time has expired, and Mr. Brady is recognized.
    Mr. BRADY. I, too, am grateful. Republicans oppose this 
health care plan because it won't lower prices for Americans, 
it will drive people out of plans they prefer, we can never 
hope to afford it, and a lot of companies that provide health 
care today are going to drop them, none of which we think is 
the right solution for health care reform in America.
    So let's get specific. How many seniors have lost their 
Medicare Advantage plan since President Obama's plan was put in 
place?
    Dr. BERWICK. Congressman, there is always turnover in 
Medicare Advantage. I don't know the exact the number that have 
changed----
    Mr. BRADY. No, these aren't turnovers. How many have been 
forced out of their preferred Medicare Advantage plan? Your 
agency says 700,000. Are they right?
    Dr. BERWICK. That is a turnover number. They can choose to 
be in Medicare Advantage or not. It is a system in which people 
can choose----
    Mr. BRADY. No. Your actuaries said 700,000 seniors have 
already been forced out of their preferred Medicare Advantage 
plan. Is your agency correct?
    Dr. BERWICK. Medicare Advantage plans are a market system 
in which beneficiaries can choose, and they----
    Mr. BRADY. Is your actuary, their report accurate?
    Dr. BERWICK. What I know right now, sir, is enrollment in 
Medicare advantage plans is up 6 percent this year. People are 
exercising their choices, and they have choices.
    Mr. BRADY. Is that a little misleading since the cuts on 
Medicare Advantage haven't taken place yet?
    Dr. BERWICK. Well, we are seeing heavy marketing by 
Medicare Advantage, by Medicare Advantage plans. There is 
growth in those plans. There are reductions in premiums----
    Mr. BRADY. If you could send back to us how many seniors 
have lost their Medicare Advantage plan, been forced out of 
their preferred plan, by State, I would appreciate it.
    How many seniors will lose their preferred Medicare 
Advantage plan under the President's new national health care 
plan?
    Dr. BERWICK. Medicare Advantage options are robust for 
Medicare Advantage beneficiaries, and they choose the plan that 
meets their needs----
    Mr. BRADY. Your actuaries say 7.4 million. Are your people 
correct?
    Dr. BERWICK. We are seeing an increase, sir, in the 
enrollment in Medicare Advantage----
    Mr. BRADY. Because the cuts haven't taken place.
    Dr. BERWICK. We are seeing investments in Medicare 
Advantage plans----
    Mr. BRADY. If you could get me that answer. I am not trying 
to interrupt, but since you already have these numbers, it 
would be great to refer to them.
    Dr. BERWICK. We will be happy to----
    Mr. BRADY. How many of those--in the Part D prescription 
plan for seniors, how many of those have lost their preferred 
plan since the President's plan took place?
    Dr. BERWICK. Sir, the number of sound options, meaningful 
choices for Medicare beneficiaries in both C and D are 
increasing; and beneficiaries are taking advantage of those 
higher rates.
    Mr. BRADY. Your agency says 3 million this past year have 
already been forced out of their plan. Are your actuaries 
right?
    Dr. BERWICK. We are seeing turnover in Medicare Part D and 
C, as we always do. Some plans, when you are leaving the 
market----
    Mr. BRADY. How many seniors in Part D have been 
automatically enrolled in a Medicare Part D plan that costs 
them more?
    Dr. BERWICK. I don't know the answer to that, sir.
    Mr. BRADY. Your folks say 1.5 million. Can you provide both 
for Part D and those forced into a higher cost plan, can you 
provide that to us by State?
    Dr. BERWICK. Happily.
    Mr. BRADY. The donut hole, the way that was closed is 
highly flawed, creates cost shifting within it. For the 90 
percent of seniors who do not reach the donut hole, can you 
guarantee that they will not see higher premiums as a result of 
closing the donut hole for those who are not in it and not 
touched by it?
    Dr. BERWICK. As a result of closing the donut hole?
    Mr. BRADY. Yes.
    Dr. BERWICK. Part D premiums rose slightly this year from I 
think $29 or $30, on average. I am not quite sure I understand 
what you mean that their premiums will rise as a consequence of 
closing the donut hole.
    Mr. BRADY. Yes. Because you are cost shifting within the 
donut hole. You are taking the 90 percent who do not reach it 
and taking the cost of closing it and applying it to them. Your 
actuaries say their premiums will go up.
    Dr. BERWICK. Congressman, what I know is that a patient 
that gets to the donut hole and needs their medications to 
preserve their life and their health and their function, if 
they can't afford them, they get sicker, and we end up paying 
and their families----
    Mr. BRADY. So can you guarantee for seniors who are not in 
the donut hole that their premiums won't go up?
    Dr. BERWICK. It is so important to provide people 
medications when they reach that donut hole, and I think that 
we are seeing much more confidence on the part of seniors that 
they can get the medications they can't afford.
    Mr. BRADY. Does the Deceptive Trade Practices Act apply to 
ObamaCare?
    Dr. BERWICK. Does the Deceptive Trade Practices Act apply 
to ObamaCare? Is that your question?
    Mr. BRADY. I am being only halfway factitious. It seems to 
me none of the promises made to our seniors under the 
President's national health care plan will come true. Many are 
forced out of their plans, will see higher premiums. That is 
why Republicans are serious about coming back with better 
solutions for seniors.
    Dr. BERWICK. Congressman----
    Chairman CAMP. The gentleman's time has expired. If you 
would like to submit a response in writing, you are certainly 
welcome to do that.
    Dr. BERWICK. Thank you.
    Chairman CAMP. Mr. Tiberi is recognized for 5 minutes.
    Mr. TIBERI. Thank you, Mr. Chairman, for having this 
hearing today. And kind of dovetailing on Chairman Brady's 
comments about Republicans wanting to have better solutions for 
seniors kind of goes along with my line of questioning.
    It was disappointing to hear the ranking member express 
concern in the rhetorical fashion that he did with respect to 
this hearing and what Republicans believe. Why Republicans 
voted to repeal this bill is because we do care about the 
impact of this bill to real people, and having $500 billion 
taken out of the system is a good reason to have this hearing 
today and get information from Dr. Berwick and Mr. Foster and 
continuing the discussion. Because, Dr. Berwick, thank you for 
doing what you are doing and being here today, but we represent 
a lot of people in a lot of different parts in this country.
    In my district in central Ohio--and Mr. Levin has been to 
my district, not on my behalf, but he has been to my district--
there are doctors, there are seniors, there are hospital 
administrators, there is the largest--Dr. Berwick, the largest 
Medicare Advantage provider in my district is a nonprofit 
Catholic hospital. And they are all very, very concerned about 
the impact that this bill, this law has with seniors. Not 
insurance companies, not wealthy seniors, I am talking about 
real people.
    My dad has a sixth-grade education. My mom has an eighth-
grade education. They are on Medicare. My physician--Dr. Randy 
I will call him--a primary care physician, his father-in-law 
lost his primary care physician because he no longer was going 
to take Medicare patients. So my physician, Dr. Randy, said, 
Dad, I will find you a doc. I know a lot of doctors out there. 
Columbus, Ohio, is the 15th largest city in America. This 
doctor friend of mine could not find a doctor for his father-
in-law because nobody would take new Medicare patients based 
upon the new law. So he is now taking his father-in-law as a 
new patient, which he said he would never do.
    A lady in my district, Joan, came to me teary eyed because 
her mother, a Medicare patient, first lost her Medicare 
Advantage program, so she had to go into Medicare fee-for-
service--and I just give you this as examples--and then lost 
her doctor, who said I am done with Medicare.
    We have a large city. We have four healthy hospitals, three 
of which are very concerned about the new law. We have a 
doctor's association--unlike the American Medical Association--
the Ohio State Medical Association, who oppose the bill, who 
support repeal. They want reform. Don't get me wrong. They want 
reform, but they are very concerned about what this legislation 
does.
    Mr. TIBERI. And so I understand what the minority has said. 
I appreciate your testimony. But the reality on the ground that 
I see, as a son of seniors, as someone who wants to improve our 
health care system, who wants better access, who wants lower 
cost, who really wants people to keep what they have, which is 
one of the President's goals, a wonderful goal by the way, Dr. 
Berwick, I thought the President was spot-on on that, but the 
reality on the ground, at least in central Ohio, is people are 
not being able to keep what they have. Seniors are frightened 
that they are losing coverage in reality that they had and they 
liked, that they chose. Seniors are frightened that they are 
losing doctors.
    My mom lost her doctor. And when you are 70 years old and 
you have had a doctor for a long time and you build a really 
good relationship with that doctor, you are frightened to face 
a situation where now you have to go on to another doctor that 
you don't know who that is going to be, but you are talking 
with other seniors. My mom and dad walk every morning at a 
local mall, a senior's club, and we know what they are talking 
about. Are there going to be any doctors left that take senior 
citizens? And this is a year after this bill went into effect.
    And Dr. Berwick, you are a physician. These physicians talk 
to their patients and they express concern about the new health 
care bill, many of whom supported it when it first was talked 
about, but opposed it in the end.
    So my question to you is let's not talk about the 
statistics, let's talk about what I say, what you say, what the 
chairman says, to constituents who on the ground, are seeing a 
reality that is much different than the rhetoric of when this 
bill passed and what the goals were. People are losing the 
coverage they had, and they are losing their doctors, and their 
doctors are blaming the bill.
    Dr. BERWICK. And your question, Congressman.
    Chairman CAMP. If you want to respond briefly, the 
gentleman's time just expired; I will give you a few seconds to 
answer and then you can supplement it in writing.
    Dr. BERWICK. I am meeting all the time, Congressman, with 
doctors and I have the same objective you do. We need a robust 
medical profession, a strong support to that profession. And we 
are committed to that, you and I both are. I am hearing a 
different story. The physicians I meet with want to participate 
in the change of health care that the Affordable Care Act 
offers. They are actively engaging in issues related to 
changing the form of care to make it sustainable, better for 
them and their patients. And I think we can get there and 
apparently, unlike you, I think the Affordable Care Act 
provides a very strong foundation for that progress, for the 
professions as well as for the beneficiaries.
    Mr. TIBERI. Thank you.
    Chairman CAMP. Thank you. Mr. Stark is recognized.
    Mr. STARK. Thank you, Mr. Chairman. Thank you for holding 
this hearing and thank you, Dr. Berwick, for being here to 
enlighten us.
    The Affordable Care Act has a variety of initiatives to 
modernize the Medicare program and make sure that we are, I 
hope, recognizing value more than volume.
    What has your value as you move among the provider 
community across the country, and what is the reaction you are 
hearing?
    Dr. BERWICK. To the modernization of health care, it is 
excitement, it is excitement everywhere. We are seeing it first 
in some of the information technology work that is going on 
now. We are finally at the threshold of really modernizing 
information technology for the providers of care and the 
beneficiaries of this care in this country. It is going to make 
a tremendous difference.
    Beyond that, physicians today can be very frustrated by the 
fragmentation in the health care system. People move from place 
to place and get dropped. The Affordable Care Act has in it the 
opportunity now to reward and support continuous seamless care. 
So the patient with diabetes that is seeing three or four 
different doctors knows that her journey is being crafted. We 
will be able to build accountable care organizations, move 
payment toward bundled payment, link payment to quality of care 
for both health plans and hospitals, so that continuity gets 
established.
    Doctors all over this country and providers of care are 
quite excited about this progress into a better care system. 
And Congress in its wisdom has given us these gifts of the 
Innovation Center in the Affordable Care Act and the Federal 
Coordinated Health Care Office for dual eligibles. I can't tell 
you how important these are. The Innovation Center is going to 
liberate all of the imagination around the country, place by 
place, community by community, to find better ways to deliver 
care.
    And when a hospital in Nebraska or Maine develops a better 
way to make patients safer or to take better care of someone 
with multiple sclerosis, we can learn about that and spread 
that news all over the country. We are on the threshold of a 
tremendous boost in innovation, creativity and spread of better 
care around this country. And the doctors know that. That is 
what they are talking to me about.
    Mr. STARK. Would it be your understanding that--I guess 
this isn't a yes or no, but that there is a positive role for 
government to play in the delivery of medical care in this 
country, and that that could be led by the Members of Congress 
if they decided to work together and do it?
    Dr. BERWICK. We are already doing it. I mean it is a 
catalytic role. You have set the stage for the health care 
system to do what it wants to do for doctors to thrive and 
commit themselves to patients. You do that as you provide the 
resources to help them make care more continuous, safer, to 
invest in prevention like the Affordable Care Act does.
    But let's make no mistake about it. Government has no role 
at all in the encounter between the doctor and patient. 
Honoring the sanctity of that consulting room is really, really 
key. I am totally committed to that. But we set the stage for 
those two people to meet each other and work together when 
things are done right. So it is a combination of government 
support, encouragement, reward, and the confidence and the 
commitment that professionals have when they encounter 
patients, and the patients have when they are confident in the 
professional. It is a balance.
    Mr. STARK. Thank you very much for what you are doing. And 
I look forward to, as I know members of our committee do, to 
working with you over the next couple of years to see that we 
can improve the system and with your cooperation. Appreciate it 
very much. Thank you.
    Dr. BERWICK. Thank you, Mr. Stark. Thank you for your 
leadership.
    Chairman CAMP. Thank you. Mr. Davis is recognized.
    Mr. DAVIS. Thank you, Mr. Chairman. Your comment on health 
care being liberated, the private sector has been innovating 
for decades and sharing common information among the 
professions. I just find it hard to believe, to talk about 
innovation in the context that we have, in a variety of issues 
from programmatic perspectives to the issue just recently 
discussed.
    I didn't go to Harvard, I went to West Point. And the one 
thing I would have to say at the beginning of this, listening 
to this hearing, having watched my mother navigate through the 
system that was managed by your agency, and we talk about 
affordability and innovation, in the world where I grew up, 
both academically and professionally, these answers would be 
called equivocation. There are straight yes-and-no answers 
about cuts on issues. And I think it is very important to share 
the truth of this and avoid the posturing for the lives to save 
that we want to save.
    Successful physicians that I know are known for their 
candor as well as their bedside manner in sharing factually 
what is before people. I have not heard one doctor, save one 
who is in a very different place politically than the rest of 
the entire Kentucky Medical Association, whose head I met with 
yesterday, who has not said this is going to limit their 
capacity, increase their overhead, increase their cost and is 
going to cause a very serious problem for senior citizens.
    When you talked about competitive bidding being a good 
thing, it is not pay me now or pay me later. It is pay me now 
and pay me later. Directly, I have a long term DME provider 
that is well established in my community, lost their ability to 
bid. A California company won. And coming on the back side of 
this, because they had no local capacity to deliver, guess who 
they turned around to subcontract with? The company that had 
been doing the business at a lower cost before.
    The, let's say, counter-intuitive answers are not here. And 
admittedly I am not a doctor. One of my opponents once played 
one on television, but I will have to say that I am most 
disappointed in the lack of candid answers on these issues, 
because we want to help you improve this system. It has been 
made more complicated by the bill. And in my other life it 
would be ``read the problem.'' If you read the bill, it does 
not connect the dots by creating 162 new agencies, commissions, 
and boards. Cutting direct benefit and increasing taxes is not 
a recipe for improved capacity. I want increased access.
    In coming to that, many of my constituents are on Medicare 
Advantage. Do you know how many people are actually in the 
program, Dr. Berwick?
    Dr. BERWICK. About 12 million, I believe.
    Mr. DAVIS. That is correct. It is about 12 million people. 
Do you know how many people were in the program in 2005?
    Dr. BERWICK. I don't, sir.
    Mr. DAVIS. It is about 5.3 million, less than half of what 
it is today. So the market working competitively, seniors were 
moving to this as a preferred program of choice. And I think 
the numbers say something about the popularity, don't you?
    Dr. BERWICK. Yes. I think Medicare Advantage has tremendous 
opportunities embedded in it as well as significant problems.
    Mr. DAVIS. Well, I would say that the customers tend to 
vote with their feet, no different than the doctors who are 
pulling out of Medicare in droves. I am seeing the same thing 
happening in the Ohio Valley. I am in the same vicinity as Mr. 
Tiberi here. We are seeing that happen in the medical 
profession.
    It is getting to a point because of this bill--I have a 
daughter who wants to go to medical school, has been told by 
seven different physicians not to go because of the truncation 
and the complication in the health care system that is going to 
be placed upon future physicians.
    But coming back to Medicare Advantage, your own actuaries 
said last year, as Mr. Brady pointed out, that 7.4 million 
seniors would lose their coverage in Medicare Advantage. Is 
your actuary correct?
    Dr. BERWICK. The actuary is making predictions of the 
future, sir. What I have is the evidence before us today. We 
have----
    Mr. DAVIS. I didn't ask you that question. I asked you, is 
your actuary correct in his calculations?
    Dr. BERWICK. The actuary is making a prediction. I can't 
judge whether he is correct or not. What I can tell you are the 
facts now, sir----
    Mr. DAVIS. I will go back to our academic education. The 
commander is responsible for what the unit does or fails to do. 
I am not interested in an academic salon answer.
    Is your actuary correct in the assumptions that your 
department submitted to this committee?
    Dr. BERWICK. Sir, I am not a commander.
    Mr. DAVIS. You are the leader of--you lead a budget larger 
than the Defense Department, sir. Please answer the question.
    Dr. BERWICK. I lead an agency in which the growth rate of 
Medicare Advantage this year is 6 percent and the actuary 
predicted a decrease. So the actuary's prediction was 
incorrect. Our Medicare Advantage is healthier now than it ever 
was before.
    Mr. DAVIS. So if the Medicare Advantage is a good program, 
then why would he say that the people are going to be cut out 
of the program by the very legislation that you are advocating?
    Dr. BERWICK. What I am saying is that I have the facts on 
the ground before me now, and the facts are that Medicare 
Advantage is looking stronger and stronger. We are seeing plans 
invest in expansion of Medicare Advantage. We are seeing robust 
choices for beneficiaries, 26 choices per county on average in 
this country, average premiums going down 6 percent, enrollment 
going up 6 percent. That looks like a very robust program. And 
these are smart businessmen out there. People who run the 
Medicare Advantage plans are investing in a future that looks 
pretty bright to them, or I don't think they would be investing 
in the way we are seeing them invest right now. Medicare 
Advantage looks healthy.
    Mr. CAMP. Thank you. The gentleman's time has expired.
    Mr. Reichert is recognized.
    Mr. REICHERT. Thank you, Mr. Chairman.
    Doctor, thank you for being here today. I am not a doctor 
either, but I have been a patient many times. So I am looking 
at the system as most Americans would, from that side of the 
issue. I am disappointed too, as Mr. Davis has stated, in the 
way that you are answering or not answering some of the 
questions. So I hope that you understand our frustration here 
with some of your responses.
    Most Americans are just trying to figure this thing out. 
They need your help to do that. A lot of people are listening 
today. This is streamed live C-SPAN, so there will be a lot of 
Americans listening to your words.
    You obviously support the Affordable Care Act. We had a 
witness in a couple of weeks ago whose name is Austan Goolsbee. 
Do you know him?
    Dr. BERWICK. Yes.
    Mr. REICHERT. Chairman of the Council of Economic Advisory. 
He said that the health care bill would increase access, 
decrease costs, increase benefits, reduce the deficit, and 
people would be allowed to keep their health care if they 
wanted to. Do you agree with those statements? Does the bill 
accomplish those things?
    Dr. BERWICK. It appears to be, yes.
    Mr. REICHERT. It that a yes?
    Dr. BERWICK. Yes.
    Mr. REICHERT. Is there anything at all in the bill that you 
would change?
    Dr. BERWICK. We are going to learn over time. That is a 
complex question.
    Mr. REICHERT. But you have had some time to read the bill 
and look at the bill. Is there anything that stands out in your 
mind that you would change?
    What don't you like about the bill? Or is it all good.
    Dr. BERWICK. It is a very complicated bill, sir.
    Mr. REICHERT. Is there anything about the bill you don't 
like?
    Dr. BERWICK. Right now I am implementing the bill----
    Mr. REICHERT. Yes or no, I guess, because I am not going to 
get a straight answer. Is there anything about the bill that 
you would change? Yes? No?
    Dr. BERWICK. Over time, we are going to learn about this 
bill, sir, and I can tell you----
    Mr. REICHERT. From what you know today. From what you know 
today, sir, is there anything that you would change?
    Dr. BERWICK. In the whole----
    Mr. REICHERT. Can you tell me when the $206 billion cuts to 
Medicare Advantage begin?
    Dr. BERWICK. Well, right now the payments are stabilized.
    Mr. REICHERT. When do the $206 billion cuts begin? What is 
the target date, the set date? What year?
    Dr. BERWICK. The cuts are phased in over time. It depends 
on the plan.
    Mr. REICHERT. When do they begin?
    Dr. BERWICK. It depends on the plan----
    Mr. REICHERT. What year do the cuts begin? Can you give me 
a year?
    Dr. BERWICK. It is variable depending on the plan and the 
area, sir.
    Mr. REICHERT. In 2017, $206 billion in cuts will begin to 
take place. Your actuaries say, as Mr. Davis has asked you, 
that there would be 7.4 million seniors then leaving that 
system, losing their health care. So the statement that you 
agreed with earlier that Mr. Goolsbee also agreed with--you can 
keep your health care if you want to--isn't a true statement. 
Even the President of the United States has said in a public 
forum, which I was present at, he said there may have been 
some--in regard to this statement that you can keep your health 
care plan if you like it, he said there may have been some 
language snuck into the bill that runs contrary to that 
premise.
    Now, if there is language in the bill that runs contrary to 
this premise, and according to the President it does, would you 
change that language?
    Dr. BERWICK. Sir, Medicare Advantage----
    Mr. REICHERT. Would you change the language if there is 
language in the bill, as the President says there is, that got 
snuck into the bill, would you change the language that 
prohibits people from keeping the health care they like? Would 
you change the language, sir?
    Dr. BERWICK. People on Medicare Advantage----
    Mr. REICHERT. Would you change the language, sir, if there 
is language in the bill? That is a yes-or-no question. If there 
is language in the bill, yes or no?
    Dr. BERWICK. I would love to be able to answer your 
question yes or no. I cannot, sir.
    Mr. REICHERT. Why can't you answer the question? It is a 
simple question. If there is language in the bill that says, as 
the President has said, that runs contrary to the promise that 
you can keep your health care if you like it, why would you not 
say ``yes'' to that question, that I will change that language 
because we believe and we have said over and over again, if you 
like your health care plan, you can keep it. Why would you not 
change that language?
    Dr. BERWICK. Congressman, to me----
    Mr. REICHERT. Why would you not change that language, sir? 
Answer the question.
    Dr. BERWICK. Sir, you are asking a hypothetical question, 
sir. What I can tell you is our job----
    Mr. REICHERT. No, sir, I am not. The President of the 
United States has made this statement. There is language in the 
bill----
    Mr. LEVIN. Mr. Chairman, I need to object.
    Mr. REICHERT. Well, it is my time, Mr. Camp.
    Chairman CAMP. If the gentleman from Washington State would 
suspend. Mr. Levin.
    Mr. LEVIN. I will find a way to object. I think we have to 
let witnesses answer questions, sir. This is not the Star 
Chamber.
    Chairman CAMP. Back to regular order. The gentleman from 
Washington's time is about to expire, so you have about 2 or 3 
seconds left, and then we will leave a few seconds for Mr. 
Berwick to answer the question.
    The gentleman is entitled to an answer to his question.
    Mr. REICHERT. Mr. Chairman, I would just ask for a straight 
answer from the witness. Thank you, and I yield back.
    Chairman CAMP. Mr. Berwick, you have a few seconds, as I 
have done to the minority, to respond to the question.
    Dr. BERWICK. Mr. Chairman, I am not aware of any such 
language in the bill, and the question to me sounds 
hypothetical.
    Chairman CAMP. Thank you.
    Mr. McDermott is recognized.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    Dr. Berwick, you have given a bravura performance in 
political theater. You have been brought to a stage today and 
put into a play that you really don't want to be in; you want 
to be doing your job. This is a stage being set to get rid of 
Medicare. The Republicans have never liked Medicare. When Harry 
Truman proposed it in 1946, the Republicans started talking of 
socialized medicine, playing on the fears of what was going on 
in the Soviet Union. They have used these fear and 
misinformation tactics then, and they are using them again here 
today.
    Now, when Medicare passed in 1965, most Republicans voted 
no. And what we are really doing here today is trying to poke 
holes in the bill. But we have been here 100 days, and the 
committee has laid no proposal on the table to make it better. 
Everybody is talking about what is wrong with it. Bill Frist 
said, don't repeal, make it better.
    So all we have in front of us is one plan that is on the 
table, Paul Ryan's road map. He wants to give a voucher to 
every senior citizen in this country. Now, let's be serious. 
The point of that is that the Republicans believe that seniors 
need to put more skin in the game. And I want to be crystal 
clear here. Seniors already spend one third of their income on 
health care. They can't afford any more skin in the game.
    So whatever I hear here is really about the Paul Ryan plan. 
And I would like you to take the time to tell us what you think 
will happen when they repeal or begin to undercut and destroy 
this and work toward putting a voucher plan, because that is 
the only thing they have put on the table, and I believe that 
all the Republicans are for it, because none of them have stood 
up and said, we don't want a voucher system, we want to make 
this system better, we hate ObamaCare. We want to get rid of it 
and put in the voucher system. So tell us what a voucher system 
would do to seniors in this country.
    Dr. BERWICK. It would put them at risk. People, they 
already have skin in the game. Their bodies are in the game. 
The whole idea here is to give seniors security so they don't 
have to wake up in the morning wondering whether they can get 
to the care that they need and that will help them preserve 
long and fruitful lives.
    Mr. MCDERMOTT. Do you think seniors could take a 6- or 
$7,000 dollar voucher out at age 75 and get a health care plan?
    Dr. BERWICK. Not a senior whose actuarial risks are 11- or 
$12,000--or worse if they get something--a worse disease than 
that. We are putting them at risk. We are partners with the 
seniors in Medicare. We have got their backs. I wake up every 
day thinking about how to help these beneficiaries make sure 
they can get the care they want and they need. I think that is 
an important role to fill. And my colleagues in CMS have the 
same commitment.
    Sending them out on their own to go navigate this very 
difficult system, which isn't always friendly to their needs, 
is not the right answer. And taking the law down strikes me as 
a terrible answer. It means taking away the wellness visits we 
have just added, removing access, first-dollar access to 
preventive coverage. It means putting the people in the 
doughnut hole back at risk now, so the lady I met in Atlanta, 
who can't afford her medications right now, is going to have 
her blood pressure rise and get a stroke as a result of that.
    It means, by the way, that we decrease our focus on quality 
because this law has in it unparalleled tools for transparency 
and improvement of care through measurement, support to 
quality, and rewarding quality. In this bill, we now can reward 
hospitals for making their care safer. We couldn't do that 
before. Because of this bill, we can reward Medicare Advantage 
plans that reach 3- or 4- or 5-star levels with more and more 
reward. That is going to focus the whole industry on doing 
better for the beneficiary. When the bill goes away, that goes 
away.
    This bill gives us tools to fight fraud and abuse at a 
level never possible before. Do we want to let the criminals 
get away now? Just let them out scot-free, by taking the law 
away; it makes no sense to me. The bill is going to invest in a 
transparency of beneficiaries and the public at large and 
providers can find out much more because of this bill about 
their own performance.
    Mr. MCDERMOTT. Do you think that if seniors understood what 
a voucher plan really meant, they would be in favor of it, as 
opposed to the Medicare plan that we have and we are trying to 
amend and make better?
    Dr. BERWICK. I don't think; I know. I have been out talking 
to seniors. And when I go to senior centers and I explain this 
bill and I tell them where we are, they applaud. They want 
this. They understand how this bill works in their interests 
and how when I go to work every morning I have their interest 
in mind. A voucher system says go out on your own, God bless 
you, I hope you do okay.
    Mr. MCDERMOTT. Can I clarify one other thing?
    Chairman CAMP. The gentleman's time has expired.
    I do think it is important to note for the record that the 
Republican plan on health care that was introduced in the 
Congress was the only plan that was scored by the Congressional 
Budget Office that reduced premiums across the board, did not 
cut Medicare, and did not increase taxes.
    And with that, I would recognize the gentleman from 
Louisiana.
    Mr. BECERRA. Mr. Chairman, I hope that if we are going to 
be allowed to comment in between, outside of regular order----
    Chairman CAMP. When you are the chair, you will be allowed 
to comment.
    Mr. BECERRA. We will ask for regular order as often as we 
can.
    Chairman CAMP. Dr. Boustany has the time.
    Mr. BOUSTANY. Dr. Berwick, I too come from a family line of 
physicians. I am a cardiac surgeon and know of the importance 
of the doctor-patient relationship as you do.
    How do you reconcile your views on provider oversupply? You 
have made multiple statements with regard to oversupply in 
markets and so forth, your actuary's concerns about shortages, 
which are real, and the prospect of those shortages getting 
worse with the current reimbursement rates that inevitably will 
be cut. We are seeing reimbursement pressures on physician 
practices. We already have shortages. Would you agree that we 
have a shortage in primary care physicians in this country?
    Dr. BERWICK. We have a shortage of primary care in this 
country, yes.
    Mr. BOUSTANY. Physicians?
    Dr. BERWICK. Physicians and nurses. Yes.
    Mr. BOUSTANY. Do you agree that we have a shortage of 
general surgeons in this country?
    Dr. BERWICK. In some areas we do, sir.
    Mr. BOUSTANY. What about rural areas?
    Dr. BERWICK. Some rural areas are having trouble with 
access to general surgery, I know that.
    Mr. BOUSTANY. I think it is more widespread than you seem 
to be suggesting, sir. How do you reconcile your view with 
this? Because your statements seem contrary to what your 
actuaries are saying.
    Dr. BERWICK. Sir, please explain to me what contradiction 
you see. I will be happy to address it.
    Mr. BOUSTANY. Well, the contradiction is we are going to 
see shortages----
    Dr. BERWICK. Yes.
    Mr. BOUSTANY. And worsening shortages, which will hurt 
access to care for seniors and particularly folks who live in 
rural communities.
    Dr. BERWICK. Yeah. Well, again, the actuary is making a 
prediction here. What I see in the Affordable Care Act is an 
investment in expansion of primary care and primary care 
services. I think over time it will have that effect, 
investments in health centers, teaching----
    Mr. BOUSTANY. Reclaiming my time, sir. Without fixing the 
reimbursement system, we are going to see more and more 
physicians either opting out for early retirement, we are 
seeing fewer people going into medicine. How do you reconcile 
this?
    Dr. BERWICK. I agree with that. The President has committed 
to fixing the SGR problem, which we are absolutely committed to 
working with you and your colleagues on, in trying to get past 
that. That is a serious looming problem in the health care 
system for sure. And as----
    Mr. BOUSTANY. That leads me to my next question, because 
you have talked often about rewarding quality versus quantity, 
and yet in your testimony I see nothing but platitudes and 
nothing specific to suggest the path you are going to take on 
this. And I suggest that there is going to be a lot of work 
that this committee is going to have to do, to dig down working 
with you on this issue.
    Dr. BERWICK. I will be happy to work with you, sir. Within 
the work outlined for us in the Affordable Care Act and other 
legislation, there are very specific ways in which quality will 
be linked to payment, hospital-based, value-based purchasing, 
physician modifiers----
    Mr. BOUSTANY. But we have seen those specifics. Those are 
platitudes. I understand what needs to be done in terms of 
quality. I have done that in hospitals. I took a community 
hospital from being sort of average to the top 100 hospital in 
cardiac surgery. I understand those things. But we have to get 
beyond the platitudes on changing this reimbursement system, 
because it is at the heart of access problems for seniors and 
particularly for rural families, because we are going to see 
access problems. This reimbursement issue is causing physician 
shortages.
    Dr. BERWICK. Sure. Congressman, I assure you the specifics 
are there, they are out there, and I would be happy to work 
with you at any point afterward to explain what those specifics 
are. And I welcome your comments and improvements in those 
specifics.
    Mr. BOUSTANY. Thank you. Now, with regard to technology, 
you have made a number of statements that seem to be of concern 
to me, obviously, about downplaying the importance of new 
technology innovation in health care. We have an innovation tax 
in this bill that is going to hurt innovation, I believe, in 
the long run. But you have made statements--I will quote one. 
``One of the drivers of low value in health care today is the 
continuous entrance of new technologies, devices, and drugs 
that add no value to care.''
    Can you explain that.
    Dr. BERWICK. Of course, yes. Some new devices, drugs, are 
miracles. They save lives and they add tremendous value to 
care. Others do not.
    Mr. BOUSTANY. So who should decide?
    Dr. BERWICK. Professions, the scientific community----
    Mr. BOUSTANY. So when you suggest there should be a 
national policy, who is going to make those decisions?
    Dr. BERWICK. A national policy.
    Mr. BOUSTANY. National policy, that is what I am referring 
to. You referred to a national policy. In fact your quote is, 
``If we had a national policy, it would allow us to know the 
difference.''
    Dr. BERWICK. Investments in supports to the scientific 
community to allow us to understand more and more about what 
works and what works better than other things is very 
important----
    Mr. BOUSTANY. So let me ask you this. Back in the 1950s 
when a surgeon saw a patient die from a pulmonary embolus, he 
put his mind to work on this and he actually came up with an 
idea. And working in his garage, he put together the first 
heart-lung machine. Would that have fit into national policy? 
What impediments would there have there been?
    Chairman CAMP. The gentleman's time is expired. If you want 
to respond quickly to that.
    Dr. BERWICK. I am very excited by the Innovation Center and 
what it can offer for people exactly like that all over the 
country. We have a good idea. We now have the ability to help 
him invest further in that idea and grow as a country as a 
whole.
    Chairman CAMP. The gentleman's time has expired. Mr. Heller 
is recognized.
    Mr. HELLER. Thank you, Mr. Chairman.
    Dr. Berwick, I appreciate you being here today. I am going 
through some of your quotes and I know we have heard some of 
them already today, but frankly I think they are worth 
repeating, quotes like ``The NHS is not a national treasure, it 
is a global treasure.'' ``The decision is not whether or not we 
will ration care, the decision is whether we will ration care 
with our eyes open.'' Quotes like ``Competition in short will 
hurt you, not help you.'' Another one, ``I admit to my devotion 
to a single payer mechanism as the only sensible approach to 
the health care finance I can think of.'' And finally, ``Any 
health care funding plan must redistribute wealth from the 
richer among us to the poor.''
    Sometimes reading your quotes, Dr. Berwick, I wonder what 
country we live in.
    Having said that, I have a significantly large district 
and, as you know, this health care bill significantly reduces 
the funding for the Medicare Advantage program. Nearly one-
third of all Medicare beneficiaries in my district are enrolled 
in the Medicare Advantage, and that is more than 100,000 
seniors in my largely rural district.
    You just made a comment that you go to these senior centers 
and you talk to them and they applaud you on what this new 
program, this new care provided for them. I go to senior 
centers in my district and try to explain the new health care 
system to them, and I assure you, I don't get a round of 
applause.
    You just said that it is a good model. I guess my question 
is how you, in your mind, say that this is a good deal for 
seniors if the net Medicare savings is $575 billion in this 
piece of legislation, and yet the amount reinvested in the 
Medicare benefits is $24 billion? If you are going to take $575 
billion out of the Medicare system, what benefits do seniors 
have with only $24 billion put back in?
    Dr. BERWICK. The projections, as you heard earlier, say 
that co-payments in Parts A and B are going to go down by $200 
a year by 2019; fee-for-service premiums will be down by $200; 
the doughnut hole will have closed and seniors will no longer 
be afraid of losing their drug benefits; and out-of-pocket 
costs in American health care are projected to go down $237 
billion. This is a very good deal for seniors and a very good 
deal for America.
    Mr. HELLER. So do you believe protecting the patient-doctor 
relationship is a goal of this health care bill?
    Dr. BERWICK. Definitely.
    Mr. HELLER. Do you believe that patients, their families, 
their doctors, should be the ultimate authority for the 
individual health decisions?
    Dr. BERWICK. I believe--yes, I do.
    Mr. HELLER. Do you believe one of the goals of the health 
care bill is streamlining the system so patients can navigate 
it more easily?
    Dr. BERWICK. Yes, I do.
    Mr. HELLER. If that is the goal of the health care bill, 
wouldn't a reasonable person think that 100 new boards, 
agencies, and programs would violate all three of those 
questions?
    Dr. BERWICK. I think the health care bill will accomplish 
all of the goals you just articulated: a smoother, more 
seamless care. I can name the parts of the bill that will help 
us do that as a Nation in partnership between the public and 
the private sector. We can see how quality will be improved as 
a result of this bill and costs will fall as a result of the 
improvement of quality. People will be better off because of 
this bill, I am sure of it.
    Mr. HELLER. Maybe in another country. Thank you. Thank you, 
Mr. Chairman.
    Chairman CAMP. All right, thank you. Mr. Lewis is 
recognized.
    Mr. LEWIS. Thank you very much, Doctor, for being here. 
Thank you for your service. As one member, I must tell you that 
I love your testimony, not just like it but I loved it. And I 
love your response, your answers to the questions. This is my 
beginning of my 25th year here, and you have been one of the 
better witnesses. And I just want to thank you. Thank you and 
your family for your great service.
    Dr. BERWICK. I can't help saying, Congressman, what an 
honor it is to be in the same room as you.
    Mr. LEWIS. Thank you, sir.
    Doctor, what would happen to cost sharing for Medicare 
beneficiaries if reform was repealed?
    Dr. BERWICK. Costs would go up for beneficiaries if reform 
is repealed, beginning just with the drug coverage issue. 
Seniors are very, very dependent on access to medications. It 
preserves their health and their life and their vitality, and 
they know it. If this bill were repealed, more and more seniors 
will lack access to the drugs that they really need. If this 
bill is repealed, they won't be able to get as easily the 
preventive services they need that will keep them healthy over 
time. A little bit less directly, because this bill so much 
invests in delivery system reform, making care better, 
smoother. Ask a senior who is seeing four or five different 
doctors, taking three or four medications, what her life is 
like in a fragmented health care system. It is a nightmare. She 
can't be sure that two doctors are prescribing drugs that are 
not incompatible with each other. She can't be sure that her 
lab test report will go to the right place.
    Delivery system reform, improvement of care is what is 
behind this bill. That is where we will end up, a better care 
system to be a doctor in, to be a nurse in, to be a patient in. 
We can make care safer. If this bill goes away, we don't have a 
plan anymore then for crafting the kind of journeys our 
patients and our families and our communities really want. 
Costs will go up. Health care quality will go down. The bill is 
an open door to the new American health care system that we 
really want and all need and can afford.
    Mr. LEWIS. Doctor, if the Affordable Care Act was repealed, 
would those 3 million seniors who receive $250 from the 
government have to pay that money back?
    Dr. BERWICK. We are looking at that now. I hope we don't 
ever have to face that question for real.
    Mr. LEWIS. Doctor, like Mr. Rangel and others, when I was 
growing up in rural Alabama as a young child, I never saw a 
doctor, never went to a doctor. Tell me what is in this bill 
that would help children growing up, poor people in rural 
America, black, white, Latinos, Asian American, Native 
American, or growing up and just happen to be poor, family 
can't afford a doctor. Do you think this is a major step toward 
providing health care for all of our people and especially 
young people?
    Dr. BERWICK. Yes. High-quality health care, which is what 
we all want, begins with health care. You have to be able to 
get to it. And this bill assures the old and the young and 
millions of people that they can get access to the care that 
then can be made great for them. If they can't get in, they 
can't get help.
    If this bill goes away, people will wake up in the morning, 
tens of millions of Americans will wake up wondering whether 
they are going to lose their health care coverage and not be 
able to get it. Children and adults. We are talking about a 
bill that has in it now a guaranteed issue of insurance to 
children despite preexisting conditions. That is a major step 
forward. That means a kid who has asthma, who happens to be in 
transition, their parents between jobs, cannot be denied access 
to health care insurance as a result of this bill. Take that 
away, you hurt that child.
    Mr. LEWIS. Thank you very much, Doctor.
    Mr. CAMP. Thank you. Mr. Gerlach is recognized.
    Mr. GERLACH. Thank you, Mr. Chairman.
    Doctor, thank you for testifying today. To switch gears 
just a bit, one of the gaping holes, in my opinion, in the 
health care enactment last year was the lack of medical 
liability reform legislation. And it was interesting to hear 
the President in the State of the Union indicate his support 
for medical liability reform.
    Do you support medical liability reform legislation?
    Dr. BERWICK. Yes, I do, Mr. Gerlach.
    Mr. GERLACH. Do you support a cap on noneconomic losses?
    Dr. BERWICK. I support an exploration now in the country as 
to what forms of improvement in the medical liability system 
would actually work to the benefit of patients and the quality 
of the system. I don't know exactly what those will be, but I 
think we have got to start on that process.
    Mr. GERLACH. Are you aware of the State statutes in 
California and Texas that do have cap on noneconomic losses?
    Dr. BERWICK. It is not my area of specialty and it is not 
CMS' direct area; but, yes, I am aware of them.
    Mr. GERLACH. So you are open to Federal legislation that 
would include languages that supports caps on noneconomic loss?
    Dr. BERWICK. Sir, I am not in a position to commit myself 
right now to what I think about any particular set of 
solutions, but I think we need to begin the national 
exploration for solutions. Indeed we are, the Agency of Health 
Care Research and Quality has demonstration projects underway 
now, but we need more. And I was happy to see that in the 
President's language.
    Mr. GERLACH. In your testimony, you have the sentence, 
``CMS has new tools to fight fraud that will return money to 
the trust funds and the Treasury.''
    What new tools does the agency have to really ferret out 
the waste, fraud, and abuse that is contained in the system?
    Dr. BERWICK. Two big kinds of tools, I would call them 
detection tools, which will allow us to identity patterns of 
abuses; abuse of the public trust and actually criminal 
behaviors. And working very closely with the Department of 
Justice and the FBI and others, we are engaging in more and 
more enforcement with quite a bit of return. I think the return 
on investment calculation shows something like 6.8 to 1 for the 
dollars we are putting into that. That is the pay-and-chase 
part of enforcement.
    The other part, very exciting for me, is prevention. Why do 
these people get into the system in the first place? So we now 
have rules out there that will eventually allow us to 
prequalify Medicare providers at different tiers of risk by 
screening them in advance, in some cases in the riskiest 
levels, with actual criminal background checks that will keep 
the criminals out of the system in the first place.
    Mr. GERLACH. Last fall I had a constituent that came to me. 
He sought medical care for a knee problem. The doctor 
prescribed a knee brace for him. A knee brace was then 
provided, and under the reimbursement schedule of Medicare, the 
provider was provided $686 for a knee brace. My constituent 
then went online and found online that same knee brace for the 
cost of $194.
    So how is it that Medicare, if you are searching for 
opportunities to find where the waste is, why is it reimbursing 
a $194 knee brace for $686?
    Dr. BERWICK. Congressman, I would love to look into that 
particular case with you afterwards if you are willing to do 
that with me.
    Mr. GERLACH. I will submit all the documentation with you, 
and I have been corresponding back and forth with your branch 
on this, but keep getting a bureaucratic answer as to why the 
schedule is the way it is. And I would like to have a more 
specific answer to why we are paying $686 for a $194 knee 
brace.
    Dr. BERWICK. I am delighted to pursue that with you. I will 
note that the DME competitive bidding system will more and more 
allow us to get much better deals for our beneficiaries and for 
the Congress as my board. I think it is really important for us 
to be acting in a market system on behalf of beneficiaries to 
find the best deals for them.
    Mr. GERLACH. Thank you, Doctor. Thank you, Chairman.
    Chairman CAMP. Dr. Price is recognized.
    Mr. PRICE. Thank you, Mr. Chairman.
    Welcome, Dr. Berwick. I too am a third generation 
physician. My father and my grandfather were docs, as you are a 
family of three generations of physicians. But I really think 
you missed your calling. I think you would have made a great 
lawyer for all of the reasons that we can imagine.
    The issue here isn't between Democrats and Republicans, 
isn't whether or not Americans have access to the highest 
quality of care. The issue is whether or not patients and 
families are going to be in charge of that care, or government 
is going to be in charge of that care. And by and large, our 
friends on the other side of the aisle believe that government 
can make better decisions about this than people.
    You in your answers have confirmed that you basically 
believe the same thing as well, that government needs to be in 
place to be able to make these decisions for people because 
clearly they wouldn't be able to make them themselves. So it 
gets down to who decides. Who is going to decide these 
fundamental questions about health care?
    In the sale of this bill, as has been cited, the President 
said, and many of our friends on the other side said, Don't 
worry; if you like the kind of health care coverage that you 
have you can keep it. Is that true?
    Dr. BERWICK. That the President said that.
    Mr. PRICE. No. Is it true that if you like what you have, 
you can keep it?
    Dr. BERWICK. I don't understand your question, Congressman.
    Mr. PRICE. Are there any Americans that have lost coverage 
that they liked?
    Dr. BERWICK. There is always turnover in the supply----
    Mr. PRICE. That is not the question. The question is, 
because of this bill, there are Americans that have lost the 
coverage that they want and in fact can't have the coverage 
that they like.
    Dr. BERWICK. Dr. Price, my answer is that there is turnover 
always in what is available to beneficiaries----
    Mr. PRICE. Dr. Berwick, that is not responsive to the 
question, which is why you see the frustration up here.
    Dr. BERWICK. Yes, I know it.
    Mr. PRICE. The fact of the matter is, there are millions of 
Americans who have health care coverage, have had health care 
coverage, and that coverage is going away because of this law. 
And that is what they are concerned about. Many of them were 
out on the lawn of the Capitol over the past 2 years, 
expressing this frustration. Were they wrong?
    Dr. BERWICK. What I am hearing from the beneficiaries is 
that they have more choices, more options, they are able to 
find the care----
    Mr. PRICE. Dr. Berwick, with all due respect, you are 
hearing from beneficiaries who are selected by individuals to 
come and give you a story that is not reflective of the real 
world. The real word is reflected by the individuals right here 
who are going home and hearing from their constituents, 
patients that you and I used to care for, that they are no 
longer able to get the coverage and the treatment that they 
desire.
    I want to move to quality. Quality is the pivotal issue in 
this.
    Dr. BERWICK. Yes.
    Mr. PRICE. And the question is, who is going to decide what 
quality health care is? Because as you know, treating thousands 
of patients, what is the right treatment for one patient, even 
with the same diagnosis, isn't necessarily what is right for 
another patient, because patients are unique and it takes those 
patients and families and doctors together making those 
decisions.
    Do you believe that that is the case?
    Dr. BERWICK. Yes, I do sir. The importance of addressing 
the needs of every single individual patient is at the heart of 
my----
    Mr. PRICE. Who ought to make that final decision about what 
treatment that patients receives?
    Dr. BERWICK. The doctor and the patient.
    Mr. PRICE. The doctor and the patient. If I were to tell 
you that this law violates that principle and that your agency 
has the power to negate a decision made by a patient and the 
doctor, would you agree with me?
    Dr. BERWICK. No, I would not.
    Mr. PRICE. So if we can demonstrate that in fact that is 
the case, then you will be supportive of us changing this law 
to make it so that doctors and families and patients are in 
fact given the right to make that clinical decision; is that 
correct?
    Dr. BERWICK. Dr. Price, I honor the encounter between the 
doctor and the patient. I also think this law gives us as a 
country tremendous tools for turning the lights on to 
understanding the quality of the care that is going on----
    Mr. PRICE. Dr. Berwick, I will show you line and verse of 
this law that I believe removes that, through the Independent 
Payment Advisory Board, through the Comparative Effectiveness 
Research Council. There are many who believe that you support 
rationing and have said that. Do you support rationing of care?
    Dr. BERWICK. I abhor rationing. My entire life has been 
spent fighting rationing. There is no substance whatsoever to 
the concept that I support rationing.
    Mr. PRICE. I appreciate that, because we are going to be 
able to demonstrate for you how this bill--this bill--provides 
for rationing of care in this Nation. And I welcome your 
participation in making certain that it is overturned.
    In my brief time left, I want to make certain I get to the 
physicians who are trying their hardest to take care of 
patients in this country. Many are concerned about the 
likelihood that they see coming down the pike that their 
licensure will be tied to participation in this plan.
    Can you state unequivocally that you believe that 
physicians' licensure in a State to practice medicine ought not 
be tied to participation in any health care plan?
    Dr. BERWICK. Dr. Price, I am not aware of the issue that 
your question refers to. If you are willing to talk with me 
afterwards about it, I would be happy to----
    Mr. PRICE. Do you believe that physician licensure ought to 
be tied to physician participation in any plan?
    Dr. BERWICK. I don't understand your question, sir, and I 
apologize for that. I would be happy to talk with you about it 
afterwards and you can explain it to me.
    Mr. PRICE. I look forward to that. Thank you.
    Dr. BERWICK. Thank you, Dr. Price.
    Chairman CAMP. The gentleman's time has expired. And I will 
say that, Doctor, you are able to answer in writing at a later 
time if you so choose to do that.
    Chairman CAMP. Mr. Neal is recognized for 5 minutes.
    Mr. NEAL. Thank you, very much Mr. Chairman.
    Dr. Berwick, first of all, a word of thanks. Your medical 
DNA is in Massachusetts.
    Dr. BERWICK. It is.
    Mr. NEAL. What arguably is the Mecca of health care 
delivery in the country. I think that any State would be 
envious of the first-class hospitals that we have, including 
the teaching hospitals which are evenly distributed across the 
entire Commonwealth. The law that is under assault here this 
morning has high customer satisfaction across the State. North 
of 77 or 78 percent of the people are satisfied with the 
delivery that they have witnessed.
    Now the term ``actuary'' has been thrown around here 
frequently. Could you succinctly tell us what an actuary does 
Doctor?
    Dr. BERWICK. I regard our actuary as a kind of consultant. 
He looks at the financial situation of the agency and of the 
trust funds, and he advises us on what he thinks about them and 
their future.
    Mr. NEAL. Thank you. And let me bring you to the next 
point. At rotary clubs and chamber of commerce get-togethers 
and neighborhood events, our friends on the other side are 
going to be routinely asked, Do you favor a ban on preexisting 
condition? And I can tell you, the chorus from them is going to 
be yes. Do you favor a cap on out-of-pocket expenses? Yes. Do 
you favor keeping children on their parents' health care until 
they are 26? The answer is going to be yes. Do you offer and 
support more preventive care? Yes. How about more women's 
health care? Yes.
    Do you favor, based upon the actuarial references they have 
made today, getting there through the mandate which the 
insurance industry would say it is the only way that it can be 
done? How might you respond to that?
    Dr. BERWICK. Well, I agree with all of the above. The not 
having preexisting conditions keep you from getting insurance 
seems to be only logical. Why would we have a system in which 
if you need the care, you cannot get the care? That makes no 
sense at all.
    So we want a system in which people can be guaranteed they 
can get care, even if they don't need it, which is the idea 
behind this law. You have to have an individual mandate of some 
form; otherwise the whole thing unravels, because then people 
who don't need insurance won't buy it until they do need it, 
and the whole actuarial calculation falls apart. It is simply 
logic. It is mathematically true. I didn't invent that.
    Mr. NEAL. Something that an actuary might assert?
    Dr. BERWICK. Absolutely.
    Mr. NEAL. Dr. Berwick, would you talk a little bit just in 
the closing minutes that I have to give you kind of a forum 
here, would you tell me what you intend to with waste, fraud, 
and abuse and the cost-saving mechanisms you are putting in 
place with Medicare in particular?
    Dr. BERWICK. Yes. There are actually two parts to that. I 
have learned a lot since I have arrived. There is more fraud 
and abuse than I thought. I now can see the data. I also know 
that we can root it out and find it, and with the tools given 
us in the Affordable Care Act now and the support of Congress, 
we will stop the criminals and we will stop the abuse and we 
will stop the waste. We are diligent about that. My deputy, 
Peter Budetti, is doing a great job and the Administration is 
fully committed to it. And I now understand how important and 
possible that is.
    There is the other area of error which is not the same as 
waste, fraud, and abuse. There are honest errors. There are 
errors that get in because of billing and coding systems. We 
have to work on those also. The President has set a goal of by 
2012 reducing the Medicare error rate by half. We are on track. 
We will do that. And that also will help us have a much more--
better stewardship of the public trust in support of a better 
health care system.
    Mr. NEAL. So that number that we have seen of $50 billion 
annually could be attributed to fraud; is that an accurate 
number in your estimate?
    Dr. BERWICK. It is sometimes misinterpreted to be the 
number that applies to Medicare. That is not true. That number 
is a rough estimate of fraud and abuse costs for the American 
health care system as a whole, which of course affects the 
private payers and providers as well as the public side of 
payment. But that is a large number and it seems to be there.
    Mr. NEAL. Thank you very much, Doctor.
    Chairman CAMP. Thank you. Mr. Buchanan is recognized.
    Mr. BUCHANAN. Thank you, Mr. Chairman, for the opportunity 
for this hearing today. It is very important.
    Dr. Berwick, I represent a part of Florida. We have 
probably more seniors than any other district in the country. 
We have 155,000 that are on Medicare. I do a lot of town halls. 
I have got one this Saturday. What comes up with a lot of them 
is the whole thing on Medicare Advantage. We have 30,000 that 
have been on Medicare Advantage. I don't know what that number 
is today. But the general perception in all these places is 
that they are going to lose their Medicare Advantage.
    And you are saying, yet that it is ticking up. I don't see 
it. I don't hear it. And it is something you have to deal with. 
You have a heck of a PR problem if you are saying that it is 
moving the other way.
    Dr. BERWICK. Congressman, I agree with you. We have a 
communication problem. I can tell it from the questions I am 
getting. People have a lot of misconceptions about Medicare 
Advantage. It is stronger now than it was before. There are 
quality measurements now that apply to it. There are bonuses 
that will be awarded to stronger and more effective Medicare 
Advantage plans. Enrollment is going up. And I think that the 
Medicare Advantage plans are seeing the business opportunities 
and the growth----
    Mr. BUCHANAN. I have a couple of other questions.
    So you would disagree with Richard Foster, his assessment 
that millions of Medicare Advantage recipients will lose their 
coverage? That was something that he said.
    Dr. BERWICK. He is making a prediction, sir, and it is his 
job. What I can see is the facts on the ground. Now, he 
predicted a decrease in Medicare Advantage this year. It is not 
going down; it is going up. We are seeing decreases in 
premiums, a healthier system. So he is doing his best at 
prediction. But I can see the facts, and the facts are that the 
system looks stronger every day, and the plans are behaving as 
if this is a good area to be in because----
    Mr. BUCHANAN. Well, give me the facts of how many people 
have dropped off, how many are adding? Because I would like to 
see that so I can communicate that back to our district.
    He also mentioned two-thirds of hospitals are already 
losing money under terms of Medicare patients, and the 
ObamaCare is going to make it much worse, and they are talking 
about hospitals having to shut down. What is your response to 
that?
    Dr. BERWICK. My response is I meet with the hospital 
industry all the time now. I regard them as key partners, and 
we have been working together. They know and I know that the 
solution for them and for Medicare and for the country is 
better care, to move the forms of care delivery toward higher 
and higher quality. That reduces costs. It improves care and it 
makes them more robust.
    I got an e-mail yesterday from Denver Health where they now 
have documented, through improvement of processes in that 
hospital, $100 million of savings while making----
    Mr. BUCHANAN. Let me get to this last key point. You call 
the law the Affordable Care Act. But let me just mention to you 
that I met with a large company in our area, one of the largest 
employers. His health care cost went up this year, same 
employees, went up $1.5 million.
    Another pharmacist--we went there to talk about issues for 
small pharmacists and then he hands me on the way--he said 
Congressman, I just got my bill, it went up 22 percent. I was 
chairman of the Florida chamber and chairman of our local 
chambers, I can tell you with small businesses throughout 
Florida, throughout our region, it is going up 20 percent a 
year. They are saying, what is this health care bill going to 
do?
    Are you out talking to any people that are in business or 
create 15, 20 jobs? Everybody is very, very concerned. They 
don't see the savings. It is, across the board, substantial 
increases. How do you respond to that?
    Dr. BERWICK. All the time I see it, Mr. Buchanan, and that 
is sort of the point I want to make. It is not the law that is 
doing that, it is the state of American health care. It is 
fragmented, it is not paid for correctly. It is a heritage of a 
system with high levels of lack of coordination, safety 
problems, infections, injuries to patients----
    Mr. BUCHANAN. People see this as just another big 
entitlement program. They are not seeing where, for a family of 
four, and a small businesses is going to pay half or 25, they 
are not seeing any reductions. They don't see anything coming 
down the road. Is this just another big entitlement program? Is 
that what we are talking about here?
    Dr. BERWICK. I would be happy to meet with them and with 
you, sir, because the answer lies in the Affordable Care Act--
--
    Mr. BUCHANAN. By the way, I would love to have you come 
down. It is real nice in February in Sarasota. Come down, meet 
with our business people and talk to them.
    Dr. BERWICK. What I would explain to them is that their 
interests and the interests of our patients in our Nation lie 
in making better care, making care get better, and then I can 
show them, and be happy to talk with you, about the elements of 
the bill that will allow us to move the country toward better 
and better care, safer, more reliable, more streamlined----
    Mr. BUCHANAN. One other point. Our cardiologists wrote you 
a letter. They would love to meet with you. Many of them are 
concerned about being able to stay in business because of the 
substantial cuts on Medicare. I am sure you have got a lot of 
this feedback. What are you doing about it?
    Dr. BERWICK. I am meeting regularly with specialty 
societies and talking with physicians. They, like I, know that 
if they can work together with us and with the private sector 
to make health care better, smoother, more streamlined, safer, 
costs will go down. That makes the system more sustainable and 
in the end will be the foundation for their incomes to remain 
where they want them to be.
    Chairman CAMP. The gentleman's time has expired. Mr. Smith 
is recognized.
    Mr. SMITH. Thank you, Mr. Chairman. Thank you, Dr. Berwick 
for being here today.
    I do want to touch on an issue. My concerns are that the 
complexity of health care is compounded with this new 
legislation, and therefore making it--especially in rural 
areas, the job of medical professionals even more difficult. 
The last two annual OPPS rules have included provisions 
requiring a physician be onsite and available whenever an 
outpatient procedure is being performed, regardless of its 
simplicity. I understand CMS takes the position this change is 
a clarification of existing policy and not a new rule. I also 
appreciate CMS taking action to suspend its enforcement for the 
critical access hospitals most impacted by it.
    However, the fact is the rule wasn't impacting hospitals 
until it was restated in 2010, and many of the small towns and 
hospitals affected don't have enough practitioners to meet the 
letter of this rule. And actually the people who will suffer, 
the patients in small community hospitals, but certainly the 
distance between facilities is very great but this would 
further compound it.
    I will ask in writing, for the record, questions relating 
to that so we can get some specific responses.
    But when you look at this new legislation that is now law, 
I am concerned that the addition of over 100 new agencies adds 
to the complexity. Do you see any mechanism in the law that 
does not actually centralize discretionary authority in these 
agencies rather than out among the health care professionals 
across our country?
    Dr. BERWICK. Let me go back to your point about the rural 
hospitals, because they are related. I think it is very 
important for us to remain mindful of what it is like to give 
care in every setting around the country and to make that more 
feasible. That is one of the reasons why we delayed 
implementation of the physician direct supervision rule while 
we reconsider those requirements for rural and critical access 
hospitals. We also included rural hospitals under 100 beds, as 
you know, as well as critical access hospitals. So I am very 
sensitive to the issue you are raising.
    The more general issue of complexity is of serious concern, 
and we need to make sure that every step we take in 
implementing this law is value added, that it makes things 
easier for patients and beneficiaries----
    Mr. SMITH. I mean, of the over 100 new agencies, do they 
not have some discretionary authority that did not previously 
exist?
    Dr. BERWICK. I am committed to simplification, sir. What I 
want to have is, no matter how many agencies are involved, I 
want to make sure that the beneficiaries' needs are addressed 
and that the doctors and hospitals that you are concerned about 
are feeling that when Medicare takes an action, it is something 
that they understand and it is value added and not just 
bureaucracy. I am thoroughly committed to that. You saw the 
President's executive order just 2 weeks ago talking about 
simplifications of regulations and procedures. Medicare is 
going to be very much a part of that direction of work.
    Mr. SMITH. I just want to bring the message that many 
health care professionals, almost all of them that I talk to, 
are very nervous about this, about the power of the government 
increasing and telling them what to do, when to do it, how to 
do it, not to do it, whatever the case might be.
    And I just had a very positive experience at my local 
hospital relating to a family member in the last few months, 
where I stood amazed at how great our current system is, and 
certainly I do not want to jeopardize that.
    And I yield back.
    Dr. BERWICK. We share that in common, Congressman. Thank 
you.
    Chairman CAMP. Mr. Becerra is recognized.
    Mr. BECERRA. Thank you, Mr. Chairman. Dr. Berwick, thank 
you very much for being here and for all your testimony.
    I wouldn't be surprised if anyone is watching, this is 
somewhat confused. A lot of consumers aren't quite sure they 
are beginning to reap the benefits of--as my colleague Mr. Neal 
pointed out, that no longer can an insurance company 
discriminate against them because of a preexisting condition. 
All of a sudden they are finding that their recent graduate 
child from some college, who can't yet find a job, is still 
able to stay on the health insurance coverage of that parent. 
So they are beginning to see the benefits, but I don't doubt 
that some of them are confused, because they hear all of these 
anecdotal stories or they hear about these projections or they 
hear about these scare tactics, death panels and all the rest.
    But I think you started off your testimony by saying, where 
we are being told that seniors should be very scared when it 
comes to HMO Medicare that they are going to lose their 
insurance coverage, that it is just the opposite.
    Can you repeat what the actual numbers show, not the 
projections or the speculation is?
    Dr. BERWICK. The projections were of a decrease in 
enrollment to Medicare Advantage. This year we are seeing a 6 
percent increase in enrollment. There are now, on average, 26 
Medicare Advantage plans available in every county in this 
country on the average. We have made those choices more 
meaningful. A lot of them need two plans. The nonsense that was 
there, that there really wasn't any difference, they are gone 
now. And when a beneficiary looks at their options, they are 
meaningful options. They can scan down a list of Medicare 
Advantage plans and pick out and say that is the one I want, 
that is the one that meets my needs. Equal choices being 
exercised, and lower cost.
    Mr. BECERRA. I was about to go there. The other scare 
tactic is seniors in America, be afraid because your costs are 
going to rise. And those are the scare tactics and the 
projections. What is the actual result on paper?
    Dr. BERWICK. On average, the Medicare Advantage premiums 
are down 6 percent this year. Now, that is not for every single 
person. Some people will choose a Medicare Advantage plan where 
the premium goes up because it has a different benefit 
structure that they prefer. But the average premium went down 
this year not up.
    Mr. BECERRA. Let me make sure I understand this. Some 3 
million beneficiaries under Medicare, close to 3 million 
seniors, got a $250 tax-free check to help them pay for their 
prescription drugs if they fell into this doughnut hole.
    Dr. BERWICK. Over 3 million if they fell in the doughnut 
hole in 2010. This year, if they are in the doughnut hole, they 
will see a 50 percent reduction in the prices, in the cost they 
are paying for many brand-name drugs.
    Mr. BECERRA. Hopefully we will be able to continue to have 
you come and others testify about what actually is in the bill, 
not what might be or is projected to be in the bill.
    The other thing I wanted to get into--let me make sure I 
understand this--you are within the Federal Government, as I 
am, as every one of my colleagues is, so you qualify for the 
Federal Employee Health Benefit program for your health care.
    Dr. BERWICK. I do.
    Mr. BECERRA. And everything that I understand from the 
bill, and having helped push that through and get it enacted 
and knowing how we are going to try to reduce the costs, one of 
the things we try to do is give people choices. And as we, you 
and I, and every one of my colleagues has a choice of plans 
through the Federal Health Employee Benefit plan, this new law, 
historic new law, will give a lot of Americans a choice in what 
plan they decide to select; is that correct?
    Dr. BERWICK. Many choices, more meaningful choices.
    Mr. BECERRA. And just as Members of Congress and you and 
other members of the Federal Government receive government 
support, public support to help pay for the cost of your health 
care plan, of each of our health care plan, so under this new 
historic law will Americans get some support, public support--
some would say government support--for the cost or the paying 
of those health care plans.
    Dr. BERWICK. That is correct.
    Mr. BECERRA. Now, some would say that is a government 
takeover. And I think I did a quick survey. I think that plan, 
which is now law as a result of the historic passage of health 
care reform last year, which now gives Americans those same 
choices through these options, this marketplace and exchange of 
options that will be available, and with some Federal 
subsidies, taxpayer-subsidized assistance, is very similar to 
what we get, each and every one of the members of this 
committee get for health care as well. In fact my recollection 
is the subsidy that Members of Congress, Republican and 
Democrat, get for their health care under the Federal Employee 
Health Care Benefit plan is actually greater than the taxpayer 
support that will be provided in subsidies for the new law; is 
that correct?
    Dr. BERWICK. I believe so.
    Mr. BECERRA. So every time we hear folks talk about 
government takeover of health care, it is interesting, it is 
not good enough for the American consumer, but it is okay for 
Members of Congress to continue to get government-sponsored 
health care, and it is okay to have the choices there; but to 
give that to the American people seems like we are not quite 
hearing the full story. So I hope we will have a chance to hear 
you more often and talk to us more about the implementation of 
the legislation. And I thank you for your testimony.
    Dr. BERWICK. Thank you, Congressman.
    Chairman CAMP. Thank you. Mr. Schock is recognized.
    Mr. SCHOCK. Thank you, Mr. Chairman.
    Thank you, Dr. Berwick, for being here. I had a real-life 
story myself this week. I was back on my district work period 
and I had some time with my father, which is sometimes rare. He 
is a family physician. And he is a young man. He is 62 and he 
informed me that he is calling it quits, much to my surprise. 
Six kids in his family, five of them are doctors, and not a 
single one of them is convinced this is going to be good for 
their profession.
    And so I guess I challenge you when you suggest that this 
association or that association or this group or that group 
supports it. When I go home every weekend, I go home during 
these district work periods and I run into doctor after doctor 
after doctor who tells me this is going to be bad for their 
profession.
    Mr. SCHOCK. So I just put that out there as not some 
statistical fact but a reality check, for me at least, in my 
district and specifically in my family.
    Would you agree that most Americans get their health 
insurance from their employer--private health insurance, but 
those who have private health insurance get it from their 
employer at this point?
    Dr. BERWICK. I think it is about 160 million people, yes.
    Mr. SCHOCK. Is that most Americans who have private health 
insurance?
    Dr. BERWICK. It is the majority, I think.
    Mr. SCHOCK. Okay. Are you aware last year, when this bill 
first passed, that publicly held companies--specifically, 
again, coming back home to my home area, Caterpillar Tractor 
Company, which is in Peoria, other companies like Verizon, John 
Deere, had to submit to the SEC what one provision would do to 
their bottom line, specifically the change to the Medicare Part 
D reimbursements; and for Caterpillar it was a $100 million hit 
to their bottom line. Are you aware of that?
    Dr. BERWICK. I was not, but please go ahead.
    Mr. SCHOCK. You were not aware of that.
    Dr. BERWICK. No.
    Mr. SCHOCK. Well, let me back up. Your assumption is that 
the bill as it stands, as it has been passed, will lower health 
care costs for employers in the long term.
    Dr. BERWICK. I believe that by improving care in America, 
which this bill takes a long step toward, care will become more 
affordable for everybody, not just Medicare, and better.
    Mr. SCHOCK. But specifically my question is, since most 
Americans get their health care coverage from their employer, 
my constituents are specifically interested, do you believe 
that the employers' health care that they are paying for will 
become less expensive?
    Dr. BERWICK. The route to that goal, which is my goal, is 
the improvement of care. And so the improvement of care affects 
all. We are not going to make a better American health care 
system--doctors, nurses, hospitals, all of us together--only 
for Medicare and Medicaid beneficiaries. That would be 
impossible. So the agenda of making care better, safer, more 
reliable, smoother, more seamless, that is a benefit to all. 
And yes, indeed, if successfully executed--and I think that is 
what our country is headed for now--- altogether, public and 
private, it will benefit the private side as well as the public 
side of payment.
    Mr. SCHOCK. Well, I find that interesting, because I have 
heard that a lot when I am in Washington, D.C. But are you 
aware of any publicly traded company who has to put out for the 
public their books and for their investors their projections on 
cost, any publicly traded company who is predicting their 
health care costs going down over the next 5 years?
    Dr. BERWICK. I wouldn't know that, Congressman. What I know 
is that it is possible to get there, and we are going to be 
changing that way of thinking over time by making care better. 
I want to work with the private sector, employers, hospitals, 
professional societies, those who give care, and health plans 
altogether, to make care better.
    Have you ever seen a patient with a post-operative 
infection that they didn't need to get? Do you understand what 
that costs in time and morbidity? Well, that could be a 
private-paid patient or a public-paid patient. It is still 
costing money.
    So I want to change the game in American health care with 
my colleagues in the private sector to make that care safer and 
better. And when we do that, the care will get more affordable. 
And I am not an accountant or a stockbroker, but I bet you will 
see companies around this country understand that their health 
lies in a healthier health care system, which is what we are 
headed for.
    Mr. SCHOCK. Again, at the end of the day I think we are 
interested in the realities, with all due respect. And the 
realities are most major companies--and, again, I am not aware 
of any, you don't seem to be aware of any major employers who 
are providing health care coverage health insurance premiums 
going down, nor are there predictions that their health care 
coverage will be going down.
    I have one final question since my time is about to expire. 
And it is with regard to, you are aware of the two Federal 
courts that have now ruled that individual mandate portion of 
the health law unconstitutional.
    Dr. BERWICK. Two have held one way, two the other.
    Mr. SCHOCK. Okay. I am curious, if the administration is 
required by the justice system to stop implementing this law, 
how you plan to comply with that.
    Dr. BERWICK. You will have to speak with my colleagues in 
the Department of Justice and others more qualified than I to 
answer that question. Right now, my job is to forge ahead and 
try to make American health care improve, protect the 
beneficiaries, and implement the provisions of the law unless 
and until I am told otherwise.
    Mr. SCHOCK. Have there been any discussions in the 
Department relative to that?
    Chairman CAMP. The gentleman's time has expired.
    Mr. Doggett is recognized. Time is very short, and we are 
trying to get everybody in.
    Mr. DOGGETT. Thank you, Mr. Chairman.
    Dr. Berwick, thank you for your distinguished service and 
your candor this morning.
    We know that an earlier generation of Republicans fought 
Lyndon Johnson in getting Medicare created in the first place 
with the same fervor that our Republican colleagues are 
fighting health insurance reform today. We know that Newt 
Gingrich was determined to let Medicare wither on the vine and 
had the support of some of the Republicans who continue to 
serve on this committee. And now they have laid out a roadmap--
you have discussed it with Dr. McDermott--where their ultimate 
goal is to move seniors to the uncertainty of vouchers, away 
from the guarantees that Lyndon Johnson signed into law in 
Medicare, and to shift responsibility to seniors to meet their 
health care needs, to fend for themselves with private 
insurance companies to provide for their needs.
    That is the longer-term goal. But in the short-term goal, 
it has become increasingly apparent when you cut through all of 
their repeal rhetoric that what they are really presenting to 
seniors and individuals with disabilities is a plan to increase 
the cost of their health care.
    I would like to go through and itemize how this Republican 
plan will increase the cost of health care for seniors and 
individuals with disabilities who rely on Medicare.
    Under existing law that you administer today, if a senior 
needs a mammogram, colorectal cancer screening, bone mass 
measurement, will they have to make any copay?
    Dr. BERWICK. Not as we implement the law.
    Mr. DOGGETT. And so if we repeal that guarantee of no 
copayment, seniors will have to pay more for those services. 
Their health care costs under the Republican plan will 
increase, will they not?
    Dr. BERWICK. For those services, yes.
    Mr. DOGGETT. Let's discuss the effect of seniors and the 
increased costs that Republicans want to impose on them right 
now with the bill that they have already passed with reference 
to prescription drugs. The best estimate I have seen through 
the Assistant Secretary for Planning and Valuation--and I would 
ask you about this--is that the average individual who would 
reach this donut hole gap in coverage--a gap in coverage 
created by the Republicans with their prescription drug plan a 
few years back--when they reach that gap today in 2011, each of 
those people on average will get a little over $500 in benefits 
under existing law, total benefits to Medicare beneficiaries of 
about $2 billion in savings this year under the law. Does that 
sound about right?
    Dr. BERWICK. That is correct. And when we get to 2019 or 
2020----
    Mr. DOGGETT. And so what the Republicans are proposing in 
repealing that law is to hike the cost for prescription drugs 
to seniors in America this year by over $2 billion, over $500 
apiece for those who enter the prescription drug gap.
    You have discussed this with Mr. Lewis, but do you have a 
mechanism under their increased health care bill to demand of 
seniors that they give back the $250 that we gave them through 
this bill last year for prescription drugs--about 3 million 
people you said.
    Dr. BERWICK. Yes, over 3 million. I hope we don't have to--
--
    Mr. DOGGETT. Is there any mechanism there? Because I assume 
under their repeal bill we are going to be asking seniors not 
only to pay more this year but to give back the $250 that they 
received if they reached that gap last year.
    Now what about on the issue of the Part B premium that we 
asked seniors and individuals with disabilities to pay? Under 
existing law, according to all the estimates you have seen, 
won't those premiums be lower than if we adopt the Republican 
higher senior cost bill? Won't those seniors have to pay more 
for the Part B premium if Republicans are successful in their 
attack on Medicare?
    Dr. BERWICK. Yes, I believe they would.
    Mr. DOGGETT. And with reference to Mr. Camp's assertion 
that some Part D premiums could go up for seniors, that is true 
only to the extent that they get more coverage under this bill; 
isn't that true?
    Dr. BERWICK. Yes, they have a selection.
    Mr. DOGGETT. And any increase is really fairly modest.
    And finally, with reference to the ``Medi-scare'' argument, 
that seniors are going to lose the ability to select their own 
doctor, there are actually incentives under the law that they 
want to repeal to pay your primary care doctors more under 
Medicare than they have received at any time in the history of 
Medicare, isn't that right?
    Dr. BERWICK. That is correct.
    Mr. DOGGETT. And that ought to give seniors not only lower 
health care costs but more choice than they have ever enjoyed 
in the history of Medicare, don't you agree?
    Dr. BERWICK. I agree.
    Mr. DOGGETT. Thank you very much for your service and for 
your candid answers. I hope that we can work together to ensure 
that this Republican plan to eventually privatize Medicare 
through a voucher system, but in the meantime, this year, the 
hike cost to every senior and individual with disabilities who 
relies on the Medicare system, that that plan--they can call it 
repeal, they can call it an attack on President Obama, whatever 
they want to, but we have to stop this Republican plan to 
increase seniors' cost.
    Thank you.
    Chairman CAMP. Thank you.
    Ms. Jenkins is recognized.
    Ms. JENKINS. Thank you, Mr. Chairman; and thank you, Dr. 
Berwick, for being here.
    As you all know, the Independent Payment Advisory Board, 
the IPAB, created under the new health care law is charged to 
determine whether Medicare is spending more than is budgeted 
and, if so, to offer fixes to cut back on Medicare spending 
that are then fast tracked with very little opportunity for 
congressional input. While I have numerous concerns with this 
board--including the 15 unelected bureaucrats who will serve on 
it and the lack of congressional oversight and approval of 
their recommendations--I am also concerned as to whether rural 
issues will be addressed and protected by it.
    Currently, most hospitals were granted a 10-year exemption 
from any changes proposed by this board, but critical-access 
hospitals were not included in that exemption. Kansas has one 
of the largest number of critical-access hospitals in the 
country, and any further cuts or payments could determine 
whether they keep their doors open.
    Can you please just speak to us on this issue and further 
challenges that rural Medicare patients have accessing care and 
whether or not they will be protected by this board?
    Dr. BERWICK. Well, the board, as you know, does not lie 
within CMS. It is independent. The President supports the 
Independent Payment Advisory Board, and I support the 
Administration.
    With respect to rural health care, my commitment could not 
be stronger, Congresswoman. I care deeply about that sector. It 
is crucial to Americans. It is crucial to the health of our 
system as a whole. Indeed, some of the best care I have ever 
seen in the country emerges in the rural sectors, and I think 
that gives us an opportunity to learn from them and spread 
ideas elsewhere.
    That is one of the reasons why I did suspend enforcement of 
the physician supervision rule in the critical access and rural 
hospitals that I was asked about before. I want to make sure 
that we don't do anything that impedes not just good care but 
fabulous care in the rural settings. I am committed to that.
    The Affordable Care Act gives us a chance to understand 
more about the input costs in rural hospitals. We will be 
looking carefully at that. But it is a sector I care a lot 
about, and I look forward to working with you to make it a 
healthier and healthier part of our health care system.
    Ms. JENKINS. Are you willing to work with the 
administration to give the critical-access hospitals the same 
exemption?
    Dr. BERWICK. I am happy to talk with you further about 
that, Congresswoman. It is not an issue that I know in any 
detail.
    Ms. JENKINS. Okay. And I just wanted to follow up on my 
colleague from Illinois and his discussion about what the 
Supreme Court could be asked to do.
    I visited with many small businesses and large businesses 
in my district in Kansas, and many of them are investing a 
tremendous amount of money in implementing a law which one of 
the cornerstones is the individual mandate. And I am just 
curious, do you think it really is in the best interest of the 
American people for us to continue to implement this law, 
spending a whole lot of taxpayer dollars before we have a final 
judgment?
    Dr. BERWICK. Congresswoman, I am not a lawyer. I can't deal 
with the legal aspects of that. I will take counsel from the 
members of the administration that are there to help me 
understand what to do.
    I think the Affordable Care Act is good for America, and my 
job right now is to make sure that that goes as well as it 
possibly can. That is what I am committed to do every single 
day, make care better for our beneficiaries, and I will 
continue to do that.
    Ms. JENKINS. Do you have any idea what the price tag is 
that business is having to spend that will be lost should the 
individual mandate be overturned?
    Dr. BERWICK. Business is a key stakeholder in the American 
health care system, and those costs are not sustainable now. 
Businessmen can tell you that as well as our beneficiaries can. 
We have to solve that problem. The Affordable Care Act gives us 
a chance to build an American health care system that will 
thrive, that is sustainable, that is higher quality and lower 
cost. That is where the interests of our public investment in 
health care law is, and that is where the interests of 
businesses lie. That is what I am keeping my eye on right now, 
better care for everyone and lower cost through improvement.
    Ms. JENKINS. So you have no idea how much will be lost in 
the economy because of businesses----
    Dr. BERWICK. I have a better idea of what will be lost in 
our economy if we don't get American health care on track. It 
ought to be going toward better care through care redesign and 
better services to patients, safer care, better care.
    Ms. JENKINS. Do you have any idea what the cost to CMS will 
be? How much will be spent that will be lost should the 
individual mandate be found unconstitutional?
    Dr. BERWICK. I don't have a particular number there, no, 
Congresswoman.
    Ms. JENKINS. No. Okay.
    How do you suggest that we might recoup any of the loss 
that you do incur should that happen?
    Dr. BERWICK. Why don't we address that downstream? I hope 
this law survives. It is a great law, and I look forward to 
being able to continue to implement it.
    Ms. JENKINS. So you don't have any plan to recoup the 
costs?
    Dr. BERWICK. I go to work to try to make care better for 
beneficiaries, Congresswoman. That is my job, and that is what 
I am doing right now.
    Chairman CAMP. Time has expired.
    Mr. Thompson is recognized.
    Mr. THOMPSON. Thank you, Mr. Chairman.
    Dr. Berwick, thank you very much for being here and for 
your excellent testimony.
    I agree with one of the previous speakers who said anyone 
watching this is probably wondering what in the world could 
possibly be going on; and some probably even think it is 
Democrats versus Republicans, a partisan deal here. So I would 
like to just add in a couple of comments that I have that have 
been made by advocacy groups for seniors.
    This committee hearing is on Medicare and the effect on 
seniors, and the same groups that work hard to make sure 
seniors have access to good quality health care have spoken out 
on this.
    Families USA said Medicare's benefits are improved under 
the Affordable Care Act.
    The Center for Medicare Advocacy said Medicare reforms 
included in the Affordable Care Act do not reduce Medicare's 
guaranteed benefits, they improve Medicare and help safeguard 
the Medicare Trust Fund.
    The Alliance for Retired Americans says that this measure 
strengthens the Medicare program, provides protections to 
millions of Americans against insurance company abuses, makes 
prescription drugs more affordable, and provides prevention and 
wellness screenings as well, which will enhance the quality of 
life for our Nation's seniors.
    The Leadership Council of Aging Organizations said that 
millions of Americans have already benefited because of this 
bill and that the economic and physical health of seniors and 
their families will continue to benefit as the law is 
implemented further.
    Do you agree with that, Dr. Berwick?
    Dr. BERWICK. I agree with all of those, yes.
    Mr. THOMPSON. Let me ask you, in my little district in 
northern California, what would happen to the 10,300 seniors in 
my district who hit Part D donut hole if my Republican friends 
are successful in repealing this health care legislation?
    Dr. BERWICK. I assume many of them would have to choose 
between medicines and other things that they want in their 
lives. I have seen seniors that have to choose between medicine 
and food. I have met seniors who can't afford their medicine, 
stop taking it, and face the consequences of doing that, 
stopping their anticoagulants, stopping their blood pressure 
medicine, having their diabetes get worse because they can't 
afford to control it; and they are scared.
    Mr. THOMPSON. And you may have answered this question 
before. I apologize. I had competing hearings this morning. But 
those same seniors, what would happen with the $250 check that 
they received to help pay for their medicines during the time 
they are in the donut hole? Would they have to send that $250 
back?
    Dr. BERWICK. I believe we are looking at that issue right 
now just to make sure we understand what would have to happen, 
and I do not have an answer yet. I fear that might be the case. 
I don't even want to think about it if I don't have to.
    Mr. THOMPSON. Mr. Doggett mentioned that primary care 
doctors get an incentive to be able to provide the health care 
that we all know has been lacking and helped lead to the 
situation where health care in our country was unsustainable. I 
think it is also important to note that rural doctors also get 
an increase in their reimbursement rates. In my area, and in 
any rural area in the country, this is a huge, huge issue as to 
how we attract doctors to provide health care for the many, 
many seniors that live in rural areas.
    And I just can't emphasize enough how important preventive 
health care is. Not only is it good for individuals who receive 
it, but it saves so much money, so many health care dollars 
when you can detect a problem early on and fix it. What would 
happen to the 110,000 Medicare beneficiaries in my district who 
right now, today, under the law that we passed, receive free 
preventive services and free annual wellness exams? Would they 
lose this under the Republicans bill?
    Dr. BERWICK. They would have higher copayments if they want 
it, and some of them would avoid it. We now know, due to good 
science and research, that a colonoscopy allows detection of 
colon cancer at early stages. It saves lives. It keeps you from 
dying of colon cancer because we find the colon cancer earlier. 
So there are beneficiaries in your district who wouldn't have a 
colonoscopy because they couldn't afford it if this law is 
withdrawn, their cancers will advance, they will die of colon 
cancer, and their lives would otherwise have been saved.
    Mr. THOMPSON. Thank you.
    And one final question, Doctor. If our Republican friends 
are successful in repealing this legislation and passing their 
bill, what would happen to the solvency of the Medicare 
program?
    Dr. BERWICK. According to the Medicare Trustees Report from 
the Actuary, the Medicare Trust Fund life is extended from 2017 
to 2029, 12 years of extension of Medicare.
    Mr. THOMPSON. So Medicare would be shortened.
    Chairman CAMP. Thank you. The gentleman's time has expired.
    I appreciate Dr. Berwick for extending in time here. We 
will have one more person, questions, and then what we will do 
is recess for 5 minutes, and then we will reconvene for a 
second panel.
    So Mr. Paulson is recognized for 5 minutes.
    Mr. PAULSEN. Thank you, Mr. Chairman and Dr. Berwick.
    The issue of geographic disparities in Medicare payment is 
a long-standing problem that has resulted in unfair low 
payments to health care providers in Minnesota and other high-
quality, low-cost States. In fact, well-documented studies show 
that a variation of Medicare payments are not tied to quality 
and efficiency. But, for example, the Dartmouth Atlas of Health 
Care puts Minnesota in the bottom quintile of per-enrollee 
Medicare payments, yet on measures that indicate high quality 
of care, like avoiding hospitalizations for conditions that can 
be treated and handled in a different setting that is more 
appropriate for care for patients with chronic conditions, et 
cetera, Minnesota ranks really highly.
    How will this new health care law ensure that the Medicare 
beneficiaries in my district or in Minnesota, these high-
quality, low-cost States, are going to have the same access to 
services as those in other parts of the country?
    Dr. BERWICK. Congressman, I know this issue very well, and 
it is a very important one to make sure that payment is fair 
and adequate and that geographic variation and costs are well 
respected in the payment system.
    Under the Affordable Care Act, there are actually three 
different processes under way right now. An Institute of 
Medicine study on input costs for geographic areas that will be 
due back to us in May or June--and probably in enough time to 
map that into payment rules for 2012. The Secretary has been 
required by the law to have a study of geographic variation and 
costs for hospitals that will be due at the end of the year, 
also available for use in 2012. And there is a really important 
longer term Institute of Medicine study underway now on 
geographic variation in Medicare as a whole, cost and quality 
variation. Based on this information, I think we will be able 
to craft much more rational regulation and policy to help make 
sure that payment is fair and equitable and respects the 
variation in costs and outcomes in different areas.
    Mr. PAULSEN. And, Dr. Berwick, I think this is essential to 
actually get to the crux of the problem. This has been an 
ongoing issue, and my physician community has certainly talked 
about it for a long period of time.
    Let me ask this, too. One of the fundamental shortcomings I 
believe of the health care law as well is the failure to 
recognize that in some States like Minnesota we have a pretty 
low uninsured rate and a well-functioning marketplace, that 
costs could rise in the presence of unnecessary and unwarranted 
regulation from now the Federal Government. For example, the 
new State exchanges are likely to require new levels of 
certification of health plans, essential benefit offerings, and 
even network adequacy standards. These activities are now 
currently overseen by our Department of Commerce. Why do we 
need Washington or the Federal Government to ensure that 
Minnesota's Department of Commerce is acting appropriately 
right now?
    Dr. BERWICK. I would be happy to talk with you afterwards, 
Congressman, about the various kinds of administrative costs 
you are talking about. We do, under the law, have the 
opportunity now to help States set up enrollment systems which 
are new and crafted for the enrollment processes that appear 
under the law through exchanges, integrating exchange and 
Medicaid enrollment, for example. You know, there is a 90-10 
Federal match for that, 90 cents out of every dollar that 
States have put into that kind of administrative process will 
come from the Federal Government. So I would be happy to talk 
with you further if you would like about the concerns you have 
about those administrative procedures.
    Mr. PAULSEN. And I actually would be interested in that 
because I want to make sure that the new law does not provide 
any additional layers of regulation that would stifle, I guess, 
innovation and raise costs.
    And I will give you another example, too. I have heard that 
there is something like 250,000 pages of additional regulations 
that are going to come out of this law. That is certainly going 
to be a challenge if it is a heavily bureaucratic load that is 
put from a top-down perspective down on our providers in an 
already very tangled and unwieldy behemoth of health care 
regulation that is out there right now, and I hear that from my 
providers on a regular basis.
    Dr. BERWICK. Yes, sir. I would be concerned as you are.
    Let me make it clear. My attitude, from my view as 
administrator, is a partnership with providers and States; and 
making things harder for them isn't a good idea. I am 
interested in my job of making sure the Federal Treasury Funds 
are protected and beneficiaries are protected, but I think we 
can do that in partnership. And if you are concerned about 
regulatory burden, I am, too; and we should talk about it.
    Mr. PAULSEN. Thank you, Dr. Berwick.
    I just want to follow up one more time on this Medicare 
Advantage issue because it has been forecasted that about $200 
billion out of the Medicare Advantage program is going to be 
cut or overhauled; and that is going to be, according to our 
next witness, Mr. Foster, who is coming forward, about a 50 
percent reduction in enrollment.
    When I travel around my district and around Minnesota, it 
is very clear that seniors enrolled in Medicare Advantage are 
worried about losing benefits or the Medicare Advantage options 
altogether. For the past year, the administration has been 
trying to reassure seniors that nothing is going to change, but 
I don't believe that is the case. You talked about the 6 
percent rise in Medicare Advantage for 2011. Obviously, a lot 
of provisions of the law have not been phased in, but let me 
just ask you this: I am worried we are going to go back to the 
days when seniors in Minnesota, for instance, don't have the 
same options as seniors in Miami or in New York City. Do you 
agree that Minnesota seniors should have the same Medicare 
options as seniors in Miami or in New York City or around the 
country?
    Dr. BERWICK. I think they should have robust options, as 
beneficiaries all over the country should; and I think they are 
getting them with the improvements that we are seeing in the 
Medicare Advantage system right now. I don't want your seniors 
to be worried. The Medicare Advantage program is stronger for 
them, it is more available to them, and the choices are more 
meaningful now, and they need to know that. And, yes, I am 
committed to their options.
    Mr. PAULSEN. Thank you.
    Chairman CAMP. Thank you. The gentleman's time has expired.
    Thank you, Dr. Berwick, for being here today and for your 
testimony. Thank you for extending the time before the 
committee and accommodating as many members as possible. You 
can see by the member participation that the issues before your 
department are of great importance to the people we represent 
and to America's seniors. So thank you for your testimony about 
the effects of implementation of this health care law.
    If members would like to, they can submit in writing to you 
any questions and you can be happy to respond.
    Yes, the gentlewoman from Nevada.
    Ms. BERKLEY. Thank you for recognizing me.
    Do you think in the future we might be able to make this a 
little more equitable? Perhaps if those sitting in the more 
expensive seats had 4 minutes to question, those of us in the 
cheap seats might have had an opportunity to question the 
witness. I was very patient and very anxious to do that.
    Chairman CAMP. What we will do is, on the second panel, we 
will start with where we left off. Dr. Berwick had limited 
time. Many times our witnesses come without time limit. Dr. 
Berwick had a time limit, as does happen on occasion.
    Ms. BERKLEY. This has happened a few times; and, frankly, 
it was Mr. Berwick that I wanted to question.
    Chairman CAMP. All right. Thank you.
    Yes, Doctor.
    Dr. BERWICK. Mr. Chairman, first, I want to thank you for 
having me here. I enjoyed it, and I really welcome a chance to 
join you any time. And with respect to any members who would 
like to meet with me personally, that is an open door. I will 
be happy to do that at any point.
    Chairman CAMP. Maybe that is something that can be 
arranged. Thank you.
    The committee will stand in recess until 12:30.
    [Recess.]
    Chairman CAMP. The committee will reconvene for our second 
panel; and I want to welcome Richard S. Foster, the Chief 
Actuary for the Centers for Medicare & Medicaid Services.
    Since 1995, Mr. Foster has been Chief Actuary for the 
Centers for Medicare & Medicaid Services. He is responsible for 
all the actuarial and other financial analyses for the Medicare 
and Medicaid programs.
    Previously, he served as Deputy Chief Actuary for the 
Social Security Administration for 13 years. He is a fellow of 
the Society of Actuaries and a member of the American Academy 
of Actuaries, American Statistical Association, American 
Economic Association, National Academy of Social Insurance, and 
Senior Executives Association. Welcome to the committee.
    Mr. Foster, you will have 5 minutes to give us your 
testimony. Your full written statement will be made part of the 
record. Welcome to the Ways and Means Committee. You have 5 
minutes.

  STATEMENT OF RICHARD S. FOSTER, CHIEF ACTUARY, CENTERS FOR 
                  MEDICARE & MEDICAID SERVICES

    Mr. FOSTER. Thank you, Chairman Camp, Representative Levin, 
and distinguished Members of the Committee. Thank you for 
inviting me to testify today about the impact of the Affordable 
Care Act on the Medicare program and its beneficiaries.
    The Office of the Actuary and CMS provides actuarial, 
economic, and other technical assistance to policymakers in 
both the administration and in Congress; and we do so on an 
independent, objective, and nonpartisan basis. We have 
performed this role throughout the last 45 years, since 
enactment of Medicare and Medicaid.
    I am accompanied today by Suzanne Codespote, ASA, who is 
the Deputy Director of our Medicare and Medicaid Cost Estimates 
Group, and also by my special assistant, Cathy Curtis, Ph.D. My 
statements are my own and do not necessarily represent an 
official position of the Department of Health and Human 
Services.
    Considerably more information about the financial status of 
Medicare and the impact of the Affordable Care Act on the 
program is available in my written testimony, in my April 22 
memorandum on the Affordable Care Act, and of course in the 
2010 Medicare Trustees Report.
    The Affordable Care Act has numerous provisions affecting 
Medicare and its financial operations. We estimate in the first 
10 years, 2010 through 2019, that the Act would result in 
Medicare savings that total $575 billion over this period. Most 
of that is in the form of lower expenditures, about $486 
billion. Those lower expenditures, as of 2019, represent a 
reduction of 11 percent in expenditures for Medicare compared 
to what would have happened under the old law.
    Now the magnitude of the reduction continues to increase 
over time. We estimate by 2030 that the reduction in 
expenditures will be 20 percent; in 2050, 32 percent; and in 
2080, 43 percent. The Act is estimated to reduce the long-range 
Hospital Insurance Actuarial Deficit by four-fifths. It is also 
estimated, as we have heard, to postpone the exhaustion of the 
HI trust fund by 12 years, using the 2010 Trustee's report 
baseline.
    I note that the HI savings under the Affordable Care Act 
cannot directly be used to both offset the cost of the coverage 
expansions in the health reform act and at the same time to pay 
for future HI benefits. There are budget and trust fund 
accounting conventions that result in both these conclusions, 
and we can discuss this issue further if it would be helpful.
    As most of you know, I have had some concerns about one 
particular provision of the Affordable Care Act which has to do 
with reducing the payment updates, the annual payment updates 
for most categories of Medicare providers, other than 
physicians, by the increase in economy-wide productivity. Now 
these lower payment updates will provide a strong incentive for 
hospitals and other providers to be as efficient as possible, 
but it is doubtful that many providers, other than physicians, 
can improve productivity to match economy-wide levels. Possible 
consequences are that the payment rates for the affected 
providers will grow at about 1.1 percent slower than the 
increase in those providers' input prices, in other words, the 
input prices they have to pay for wages, office space, energy 
supplies, things like that. So unless providers can improve 
their productivity or make efficiency gains otherwise, over 
time the payment rates will become inadequate to cover input 
costs. If that happens, and absent legislation to do anything 
about it, then providers might have to end participation in 
Medicare, and that leads to possible issues with access to care 
for Medicare beneficiaries.
    Now, more likely, Congress would act to override the 
productivity adjustments if this occurs, as you had to do many 
times with the physician payment system under current law; and, 
if so, then that implies that the actual future costs for 
Medicare would be quite a bit higher than we have projected 
under current law.
    To help illustrate the possible understatement of the 
current law cost projections, the trustees use an illustrative 
alternative to current law and show a projection based on that.
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    Chairman CAMP. Mr. Foster, your time has expired, but we 
will make your full statement a part of the record.
    Mr. BLUMENAUER. is recognized for 5 minutes.
    Mr. BLUMENAUER. Thank you very much, Mr. Chairman.
    Mr. Foster, good to see you again.
    I am interested in exploring three points with you. You 
were here, I thought I saw, for much if not all of the previous 
discussion. You heard one of my colleagues describe with 
dismay, I believe it was my friend from Pennsylvania, who 
talked about somebody with a knee brace that under the existing 
schedule was $686 versus $194 that could be obtained just going 
on the Internet.
    Have you examined the current system's trend lines in terms 
of its sustainability? You are talking about problems under the 
Affordable Care Act. Absent the Affordable Care Act, have you 
done a projection of what America's health care looks like in 
terms of deterioration of quality, of people being shed by 
plans, other plans being shut down? Do you have a report on 
that? Have you examined it?
    Mr. FOSTER. We don't have a formal report. We try to keep 
up with these various kinds of issues, yes.
    Mr. BLUMENAUER. Would you say that it is safe to assume 
that if we don't do something that the trend lines are actually 
worse in terms of people losing care, costs exploding, 
inefficiencies in the system?
    Mr. FOSTER. Without question, something needs to be done. 
Because historically, for a variety of reasons, health care 
costs have grown faster than people's wages or the economy at 
large, and that can't be sustainable indefinitely over time.
    Mr. BLUMENAUER. I take that to say that you acknowledge 
that it is actually worse if we don't do something, that people 
are going to lose care, that quality is going to go down, that 
the budget is going to be broken if we don't something.
    Mr. FOSTER. I don't know about worse or better. That is 
something I would have to think about.
    Mr. BLUMENAUER. I would appreciate it if you would, because 
you have thought about it here. You have made the decision that 
actuarially, and your assumptions, your hunches, being around 
here for a long time, that you think some of this isn't going 
to happen. I would appreciate if you would add your intellect 
to what the consequences are for the current system absent 
doing something, whether it is going to be better or worse.
    My second point, I wonder if you had a chance to look at 
the Republican roadmap that my good friend and colleague Paul 
Ryan has advanced that actually posits greater reductions in 
Medicare spending over time. And I would ask if you think that 
is greater or less likely that Congress would stand by and 
allow greater reductions. If you think there are problems under 
the existing Act, would there be greater or lesser reductions 
under my friend Paul Ryan's approach?
    Mr. FOSTER. My office looked at Mr. Ryan's plan several 
years ago when he first developed it. We discussed with him at 
the time--and it continues to be the case--that if you have a 
voucher program for Medicare and Medicaid and the voucher 
payments increase at a slower rate than health care costs are 
increasing, then over time people cannot buy as comprehensive 
an insurance coverage as they started out, and at some point 
that can become quite an issue. So there are risks to either 
approach. They are different in nature, but they both exist.
    Mr. BLUMENAUER. I don't want to catch you unawares, but I 
would respectfully request that you think about that, maybe 
look at them and if you have an opinion about which is the 
greater risk of Congress caving, those draconian cuts or the 
things that are imposed under the Affordable Care Act, at some 
point.
    I would like to turn to Medicare Advantage, because this is 
one of the areas that you think there is instability. You were 
here when Dr. Berwick testified that current Medicare Advantage 
enrollment increased 6 percent to more than 12 million 
beneficiaries. You heard that, on average, beneficiaries have 
seen a 6 percent reduction in their premiums. And you heard, 
most important, there is a 5 percent increase in the people who 
are investing in the better, higher-quality programs. I mean, 
there are some that give health club memberships that aren't 
very good programs, and we don't want to subsidize ones that 
aren't doing a very good job. I note in my community you get 
about $586 on average, and we have the highest percentage of 
Medicare Advantage in the country. In Louisiana, there is one 
that is over $1,300 a month.
    Chairman CAMP. The gentleman's time has expired.
    Mrs. BLACK. is recognized for 5 minutes.
    Mrs. BLACK. Thank you, Mr. Chairman; and thank you, Mr. 
Foster, for being here.
    As part of the Democrats' health care law, employers who 
provide retiree drug coverage can no longer deduct that 
subsidy, the so called ``RDS,'' and we have seen companies take 
huge write-offs as a result of this tax increase. And an 
example of that has already been talked about in the last 
session with AT&T with $1 billion and Deere and Company with 
$150 million. These are big numbers, and it means that less 
money will be available for investment and creating jobs.
    But my question relates to the impact on seniors. The 
President reiterated on Sunday, ``If you have health care that 
you like, you keep it.'' In your opinion, does the Democrats' 
health care law provide further incentive for these companies 
to drop the retiree drug coverage plan, resulting in seniors 
losing their coverage?
    Mr. FOSTER. Yes to the first part, probably not to the 
second part. In other words, without the tax deductibility, 
that changes the financial balance, so we expect that many 
employers will drop their retiree drug coverage because of 
these changes. We also expect that most of them--not all--most 
of them will help get their retirees into regular Part D 
prescription drug plans.
    Mrs. BLACK. As a follow-up to that, how is this going to 
affect the regular Part D moving forward?
    Mr. FOSTER. It won't make a lot of difference. Instead of 
Medicare paying a Federal subsidy for these same people within 
the retiree plans, will pay a Federal subsidy for them within 
the Part D plan.
    Mrs. BLACK. I see.
    Mr. FOSTER. It will slightly decrease the premiums. Because 
these tend to be lower-cost people. They have had full 
employment histories, so it will help bring down the overall 
cost within the Part D plan world but not by very much.
    Mrs. BLACK. I want to go in another direction that really 
hasn't been mentioned much here. There was some talk in the 
last section about how these senior groups have promoted the 
recent reform, and AARP was certainly a part of that. However, 
as a part of the new law, insurance companies are required to 
spend 80 to 85 percent of the premium on government-approved 
spending services and this is called that medical loss ratio. 
However, Medigap policies that seniors purchase to supplement 
traditional Medicare are only required to meet a medical loss 
ratio of 65 percent. And AARP and United are a part of this. 
And while I am not in support of government mandating how 
private industry operates, do you think that the MLR policy 
should be applied equitably across the line?
    Mr. FOSTER. Well, I confess that is not an issue that I 
have thought much about, and I don't get into policy issues, 
but you could probably make a good case that if it makes sense 
in general then it would make sense for the broader spectrum, 
including Medigap policies.
    Mrs. BLACK. Well, I would think that most people would 
agree that if we are going to do something we should do it 
equally and that if we have one particular company that is 
advocating for a policy and then gets the break to be less, 
that does not seem to be very fair.
    Mr. FOSTER. There is one other difference that I would 
mention, which is, when you think of a normal health insurance 
policy like a private insurance policy that covers the whole 
gamut of health care services, there is sort of a lot of money 
to work with. If you think about a Medigap policy, which wraps 
around Medicare, it is a much lower dollar value policy. So to 
the extent that you have given administrative costs, they are 
going to tend to represent a greater share for a small dollar 
policy. So you might not be able to do 80 or 85 percent, but, 
on the other hand, you could certainly specify a loss ratio 
standard that is perhaps somewhat higher than the existing one.
    Mrs. BLACK. Thank you.
    I yield back my time, Mr. Chairman.
    Chairman CAMP. Thank you.
    Mr. PASCRELL. is recognized.
    Mr. PASCRELL. Thank you, Mr. Chairman.
    Mr. Foster, it is good to see you again.
    At many town hall meetings that I have attended, Mr. 
Foster, it has been my goal to dispel some of the myths that we 
have heard discussed today and other days. Seniors have been 
grateful as they have begun benefiting from health care reform, 
for example, in getting a $250 check--which doesn't seem much 
to you or me but means a lot to a lot of seniors--to help them 
pay for prescription drugs under Medicare. I don't have any 
trick questions about that, but I just wanted to lay the facts 
out.
    Mr. FOSTER. I appreciate that.
    Mr. PASCRELL. Well, I am not finished yet, though.
    I also learned something this morning. It seems like both 
sides are convinced that we finally laid it out, chapter and 
verse--and would you confirm this--that there are no cuts in 
guaranteed benefits under the Medicare program? Could you 
verify that? Except we are not talking about the private plans, 
we are not talking about doing away with gym privileges, we are 
talking about substance, and you know what I am talking about.
    Mr. FOSTER. Yes, sir. There are no cuts in what is referred 
to as guaranteed benefits, in other words, the standard 
Medicare benefit package. In fact, that has been expanded.
    Mr. PASCRELL. Thank you very much for your conciseness. I 
hope people will choose to go back and read the bill, which we 
were accused of not doing, but that is a fact of life.
    Now I want to ask you something which I would ask you to be 
as precise as you can be. I want to talk a little bit about how 
health care reform creates what I would consider to be positive 
incentives for providers to focus on the quality of their care, 
thereby benefiting seniors.
    I understand that your office did not score innovative 
ideas such as hospital value-based purchasing or the 
Independence at Home Demonstration program as part of your 
analysis. In fact, I look at the sheet from the estimated 
Medicare costs, and Section 3003, the expansion of the 
Physician Feedback Program, sections 3006, 3007, value-based 
purchasing, which I know you believe in, but you did not score. 
I am not criticizing. I am going to ask you a question.
    CMS Innovation Centers, the Medicare Shared Savings 
program, National Program on Payment Bundling--I have seen a 
lot written about that in the last 3 or 4 years--Hospital 
Readmissions Reduction Program. Let me ask you this question: 
Don't any of these specific areas--I could name five more--have 
any potential for savings? And why specifically were they not 
scored? Because you did score some other things.
    Mr. FOSTER. Sure. In a number of cases, we actually did 
estimate savings. For example, for the lower payments for 
readmissions, unnecessary readmissions, the hospital-acquired 
conditions, what it really depends on, sir, is when you have 
enough information about how the proposal will actually work. 
On some of these, for example, at the time of enactment the 
Medicare Shared Savings program was not adequately specified 
for us to be able to estimate what the impact would be.
    Mr. PASCRELL. So it wasn't a question that you thought that 
they would not work, it was a question--and correct me--it was 
a question of gathering enough information to say that they 
definitely would work. Am I putting words in your mouth?
    Mr. FOSTER. Only slightly. It is a question of having 
enough information to determine that they work well, they don't 
work so well, as the case may be.
    Mr. PASCRELL. So you are not questioning whether these 
things would work.
    Mr. FOSTER. I am saying we don't always have an opportunity 
or enough information to try and figure that out.
    Mr. PASCRELL. Well, let's take the five things that I 
mentioned. You would think, from what I have read and what I 
have looked into--to my amateur abilities--that we could 
possibly save a heck of a lot of money if these things work as 
well as they are expected to work.
    Mr. FOSTER. There is the potential in almost all of these. 
But if I may give you one example.
    Mr. PASCRELL. Sure.
    Mr. FOSTER. The Medicaid Shared Savings program, as you 
know, the regulation is due out within another couple of weeks. 
We have been working closely with the folks on that. The 
original design of the regulation we estimated would actually 
increase costs. The design was modified somewhat to lower the 
cost, and the current version now achieves some degree of 
savings overall.
    Chairman CAMP. Thank you.
    Mr. PASCRELL. This is quite a bit of money we are talking 
about here now.
    Chairman CAMP. The gentleman's time has expired.
    Mr. PASCRELL. Thank you.
    Chairman CAMP. Mr. Crowley is recognized.
    Mr. CROWLEY. It is unusual, two for the road here.
    Chairman CAMP. We are playing catch-up.
    Mr. CROWLEY. Thank you, Mr. Chairman.
    I want to just follow up on the line of questioning of Mrs. 
Black as it pertains to the corporate tax advantage that she 
mentions will be phased out in 2013, what is, in effect, a case 
of, in my opinion--and I think many--double dipping. Now I 
would hope that my Republican colleagues aren't defending 
double dipping, but that is what it sounded like to me.
    The loophole that will expire in 2013 pertains to a law 
that allows businesses to deduct the value of that subsidy 
twice. They can exclude the 28 percent from their income and at 
the same time deduct 28 percent from their income for tax 
purposes. If that is not double dipping, I don't know what is. 
The health care reform legislation closes that loophole by 
allowing businesses to deduct this money once rather than 
getting a double deduction on taxpayer dollars. These 
businesses will still get a generous subsidy to help them cover 
retiree prescription drug costs, and they still get to exclude 
that benefit from their income. They just don't get to do it 
twice and double the deduction on the backs of taxpayer 
dollars.
    But, Mr. Foster, what I want to do is follow up on the 
questioning of my colleague from New Jersey just a bit more. 
One of the Affordable Care Act's greatest tangible benefits was 
the assistance it provided to our seniors with high 
prescription drug costs, particularly those who got caught in 
what is known as the Medicare Part D donut hole or coverage 
gap. The law gave every senior who was hit in that coverage gap 
in 2010 a check for $250; is that correct?
    Mr. FOSTER. Yes, the ones who made it to the coverage gap.
    Mr. CROWLEY. That is the equivalent of 7,300 seniors in my 
district alone and over 3 million seniors nationwide. These are 
checks that seniors have already received that they are already 
using to help them to pay for the high cost of prescription 
drugs. Is it true that the Republicans' efforts to repeal the 
Affordable Care Act, which each of my colleagues on the other 
side of the aisle voted for, as if it had not been enacted 
would force seniors to return that $250 check that they 
received to help them with the cost of prescription drugs? 
Would that be the case?
    Mr. FOSTER. If the legislation were repealed entirely and 
retroactively, including provisions that have already taken 
effect, then, yes, in theory you would have to pay back those 
rebate checks.
    Mr. CROWLEY. Let me ask you this question: If that were the 
case, if they had to pay back those checks--and that would 
amount to over $650 million that has been paid out--is it 
possible that when seniors are forced to return those $250 
checks that they got that they would have to pay interest on 
those $250 checks as well? It is $650 million. I assume that 
had that stayed in the Treasury that it would have accumulated 
some interest. Would they have to pay the interest back on 
those checks as well?
    Mr. FOSTER. I am not aware of any situation, if there is a 
benefit or an overpayment and a recovery, that interest is 
involved.
    Mr. CROWLEY. But it is quite possible they may have to pay 
interest on it.
    Mr. FOSTER. I have not seen it before.
    Mr. CROWLEY. So then it would be a loss to the Treasury, 
the interest that would have otherwise been gone had it 
remained where it was.
    Mr. FOSTER. In effect----
    Mr. CROWLEY. It is quite possible.
    Mr. FOSTER. Right.
    Mr. CROWLEY. Thank you.
    My Republican colleagues have said that they want to 
completely take away all funding for the Affordable Care Act, 
and they have made it clear that they will use the continuing 
resolution to cut off any funds for the implementation of this 
law. Will this mean that the remaining seniors who hit the 
prescription drug coverage gap towards the end of 2010, just 
like their neighbors, and are waiting desperately for the help 
will now be denied the check that is rightfully theirs if 
funding for this were to be cut off?
    Mr. FOSTER. Again, if it is repealed in its entirely and 
retroactively.
    Mr. CROWLEY. Thank you.
    Mr. Foster, the Department of Health and Human Services 
estimated that under the Affordable Care Act Medicare 
beneficiaries--seniors--who have hit the prescription drug 
coverage gap will each save $526 this year alone as a result of 
further closing the coverage gap. By 2020, when the gap is 
fully closed, each beneficiary will save $1,540. This means a 
total savings of $8.8 billion in savings to a projected 5.7 
million beneficiaries.
    If the Affordable Care Act were repealed, Medicaid 
beneficiaries would effectively see an $8.8 billion cut just 
from this particular provision being repealed; is that true?
    Mr. FOSTER. I would have to look up the figures, but those 
are in the right ballpark.
    Mr. CROWLEY. Thank you. I thank you for your honesty and 
your candor, and I thank the chairman.
    Chairman CAMP. Mr. Foster, would you agree that health care 
spending and rising health care costs are the most significant 
drag on our Nation's fiscal health?
    Mr. FOSTER. Oh, I don't know about that. They certainly 
represent----
    Chairman CAMP. Or a significant drag on our Nation's fiscal 
health?
    Mr. FOSTER. Well, certainly, yes.
    Chairman CAMP. And one of the claims that is often made is 
that this health care law will ``bend the curve'' of health 
care spending. In your expert analysis, would you say that 
their law increases or decreases national health expenditures?
    Mr. FOSTER. We have estimated that overall national health 
expenditures would increase under the health reform act.
    Chairman CAMP. So a significant drag on our economy is 
actually made worse under this law.
    My second question is, the nonpartisan Congressional Budget 
Office has made clear that the Medicare ``savings'' as a result 
of the health care law can't be counted twice, first to shore 
up the solvency of the Medicare program and then also pay for a 
new health care entitlement. Your office's April 22, 2010, 
report on the effects of the law on the Medicare Trust Fund 
pointed out, ``In practice, the improved Part A financing 
cannot be simultaneously used to finance other Federal outlays, 
such as the coverage expansions under the PPACA, and to extend 
the trust fund, despite the appearance of this result from the 
respective accounting conventions.''
    Can you sort of settle for this committee with a yes or no 
answer if the funds that are designated to finance a new 
entitlement under the health care reform law, can they be 
simultaneously used to make the Medicare trust fund more 
solvent?
    Mr. FOSTER. Not directly, no.
    Chairman CAMP. So what is the implication of that truth 
about the solvency of the Medicare program and on the alleged 
deficit reduction in the Democrats' health care law?
    Mr. FOSTER. Well, what I would like to do would be to 
explain it as follows: Clearly, there are very large Medicare 
savings under the health reform act. Those savings, the actual 
cash that shows up in higher payments, higher taxes, whatever, 
that is loaned to the rest of government. The Medicare trust 
funds get Treasury bonds, IOUs.
    Mr. FOSTER. The money is immediately spent. Whether for the 
purpose of offsetting the cost of the coverage expansions or 
building roads or whatever, it is spent. In a few years when we 
need the money, we can cash in those Treasury bonds and it has 
to be repaid with interest. But the original money we are 
talking about, if it was $100 in higher taxes, the $100 is 
spent. It is gone. We now need the $100. We will get it back, 
but Treasury will have to come up with a new $100 to pay it 
back for us. So to spend $100 for the ACA and $100 for Medicare 
takes $200, and the original $100 can only be used once.
    Chairman CAMP. So the costs of the bill are understated.
    Mr. FOSTER. I think that is a different issue.
    Chairman CAMP. I wanted to just touch on something else. 
Health and Human Services, HHS, spent about $20 million to 
convince seniors that the health care law was good for 
Medicare. And one of the first attempts to do that was the 
caller mailing that was glossy, that went out to seniors to 
inform them of a number of new government programs, even though 
they were ineligible for many of those programs.
    Was your office asked to review the Medicare mailer that 
went to seniors or to review the scripts that appeared in the 
media that were aimed at seniors? Did your office review those?
    Mr. FOSTER. No, we were not asked and we did not look at 
them.
    Chairman CAMP. I would like you to comment on two 
statements included in the Medicare mailer and to just give 
your comments on whether those were accurate, inaccurate, or 
misleading. One was it keeps Medicare strong and solvent. Is 
that inaccurate or misleading, given that the Medicare cuts are 
unsustainable and that the, quote, savings are double-counted 
as you mentioned earlier in your testimony, double-counted as 
both trying to extend the Medicare solvency and also pay for a 
new entitlement?
    Mr. FOSTER. Technically and in an important way, the 
savings for Medicare under the Affordable Care Act do extend 
solvency. Now we lend the money out, we get it back, we can 
continue paying benefits longer than before. Now, there is the 
appearance and good bit of reality of the double-counting so 
that is an issue. But technically it does help in that regard.
    Chairman CAMP. The quote that Medicare benefits won't 
change whether you get them through original Medicare or 
Medicare Advantage plan, is that an accurate statement?
    Mr. FOSTER. I will be quite honest. I have been troubled 
with that statement. We had the question earlier about the 
guaranteed benefits. It is true enough that the, quote, 
guaranteed benefits which are the original fee-for-service 
package, nobody is reducing that. That actually expands a 
little bit. It is also true that for Medicare Advantage 
enrollees, their extra benefits, their lower cost-sharing, 
their lower premiums will be reduced under the Affordable Care 
Act.
    Chairman CAMP. And when you reviewed whether this 
legislation, quote, bent the cost curve or not, did it include 
any analysis of the physician payment formula or any extension 
of that or a, quote, doctor fix, as it is often called here?
    Mr. FOSTER. No, not directly. Other than the original Ways 
and Means Committee bill, the legislation did not have a doctor 
fix it in it.
    Chairman CAMP. So that is a fairly significant cost to 
Medicare that has not been accounted for or included in this 
legislation?
    Mr. FOSTER. Yes. It has been treated as a separate issue.
    Chairman CAMP. So in response to my question about 
increasing or decreasing health care spending, even your 
analysis would be pretty significantly understated if this were 
included.
    Mr. FOSTER. The cost of a permanent fix for the SGR system 
over 10 years is about $300 billion. That provision was not in 
the Affordable Care Act. It is a continuing issue, as you know, 
but that is roughly the cost.
    Chairman CAMP. So that would mean health care expenditures 
would increase by that additional amount over that period?
    Mr. FOSTER. That is correct.
    Chairman CAMP. Thank you. Mr. Levin may inquire.
    Mr. LEVIN. Mr. Foster, welcome. And I think this may give 
us an opportunity for further reference to the facts.
    You answered the question of the chairman about benefits. 
The guaranteed benefits are different than the extra benefits 
under the Advantage programs; isn't that true.
    Mr. FOSTER. Yes, sir, that is correct.
    Mr. LEVIN. See, there tends to be always confusion or an 
attempt to confuse. For example, there were references done 
earlier today, cuts in the payments. So let me just quickly 
review your testimony because I think it is important to get to 
the facts. On page 3, you say that it is estimated that the 
number of uninsured persons in the U.S. would reduce it by 34 
million. You don't challenge that, do you?
    Mr. FOSTER. No, sir, that is our best estimate.
    Mr. LEVIN. Good. You then, going to page 5, say that 
expenditures are expected to increase by about 200 billion due 
to the substantial expansions of coverage under the Affordable 
Care Act. So if 34 more million are insured, it is likely the 
costs will go up overall, no?
    Mr. FOSTER. Yes, that is correct.
    Mr. LEVIN. So let me just go on to page 5, and you talk 
about the Medicare savings. There have been references here to 
cuts in Medicare payments. Isn't it more accurate to say that 
these cuts will come from a reduction in the increase in 
Medicare payments?
    Mr. FOSTER. There are a lot of each. Certainly for the 
productivity adjustments that I mentioned, that is a slower 
growth in payment updates. If you think of the disproportionate 
share of hospital payments, that is a flat-out reduction in the 
level. So there are examples of each.
    Mr. LEVIN. So to simply talk about cuts, as has been done 
in many of the statements, including advertisements, whatever, 
about over $500 billion, half trillion in cuts in Medicare 
payments, much of that is in the reduction of the increase in 
Medicare payments; isn't that correct?
    Mr. FOSTER. Yes. A significant part of it is in that form.
    Mr. LEVIN. Also, bending the curve; when we talk about 
bending the curve, we are talking about bending the curve in 
terms of the rate of increase in bending the curve in the rate 
of payments to providers, are we not?
    Mr. FOSTER. Bending the curve generally refers to slowing 
the overall rate of health care costs growth, not necessarily 
how it might be done.
    Mr. LEVIN. But it also, when we talk about bending the 
curve, there is an effort, it indicates an effort to try to 
bring down the cost of the payments to those who provide care, 
no?
    Mr. FOSTER. Well, clearly that is one way that the 
Affordable Care Act works to try to slow the growth of health 
care costs.
    Mr. LEVIN. And it really does try to do that, does it not?
    Mr. FOSTER. Yes, sir, primarily through the Medicare 
productivity adjustments.
    Mr. LEVIN. Now, I just want to finish by referring to that, 
because there is a statement to take. There is an indication, 
an effort often, to take somewhat qualified statements of yours 
and to indicate that essentially it is sure to happen. And I 
think that we need to look at your testimony, because you say 
on page 8, Although this policy could be monitored over time to 
avoid such outcome, changes would likely result in smaller 
actionable savings than described for these provisions.
    Essentially what you are doing is projecting. For example, 
you did as to the Advantage programs, and so far this year it 
has turned out your projections are wrong. Right?
    Mr. FOSTER. I would stop short of calling them wrong 
without appearing to be defensive. The real issue is 2011 is 
not much affected by the Affordable Care Act. 2012 through 
2017, there will be big effects. There are factors unrelated to 
our estimate of the Affordable Care Act that have resulted in 
2011 Medicare Advantage enrollment increasing by more than we 
thought it would.
    Chairman CAMP. All right, thank you. Mr. Herger is 
recognized.
    Mr. HERGER. Thank you, Mr. Chairman.
    Mr. Foster, the President and his administration have 
repeatedly said that we must pass their health care overhaul 
because controlling health care costs would help the economy.
    On June 2, 2009, the Council of Economic Advisers said, 
quote, we estimate that slowing the annual growth rate of 
health care costs by 1.5 percentage points would increase real 
growth domestic product relative to the no-reform baseline by 
over 2 percent in 2020, closed quote.
    The President's economic advisers also stated that slowing 
cost growth would lower the unemployment rate. The President's 
economists also argue that slowing the growth rate of health 
care costs raises standards of living by freeing up resources 
that can be used to produce other desired goods and services, 
closed quote.
    Based on your analysis, will the Democrats' health care law 
slow the rate of health care costs so we can get these outcomes 
like more growth and more jobs?
    Mr. FOSTER. Overall, the Affordable Care Act increases 
total health spending and it increases Federal spending on 
health care. There are some factors in there that would help 
slow the growth rate further out in the projection period. One 
of the largest of those factors is the one that I question the 
long-range viability of.
    Mr. HERGER. And Mr. Foster, in an auxiliary report to the 
Medicare Trustees 2010 Report, CMS actuaries predicted that 
under the new health care law by 2019, Medicare payment rates 
will be lower than current Medicaid rates. In your recent 
testimony before the House Budget Committee, you confirmed that 
the best-case scenario under current law is that Medicare rates 
will be equal to Medicaid rates in 10 years.
    What impact would these rates have on beneficiaries' access 
to care?
    Mr. FOSTER. If Medicare payment rates become lower than the 
current level for Medicaid, which in fact would happen over 
time under the Affordable Care Act, then it raises questions 
about the ability of beneficiaries to have access to care. 
Within the Medicaid program, as I am sure you know, there are a 
number of studies that suggest access has been something of a 
problem and getting worse. So you basically have to provide a 
reasonable payment rate for physicians and hospitals and 
anybody else in order to enable them to provide health care 
services to Medicare beneficiaries or anybody else.
    Mr. HERGER. That would be a major problem, wouldn't it? I 
mean, we are already seeing a problem of doctors not taking new 
patients. And to think that that would be more dramatically 
affected, does that concern you?
    Mr. FOSTER. It concerns me primarily because I think this 
would tend to happen over time, and whether it is 10 years or 
20 years or somewhat longer is a little bit hard to say, but I 
believe it will happen. I believe you folks, Congress at large, 
would have to respond to it because it makes no sense to have a 
Medicare program where Medicare beneficiaries cannot get access 
to care.
    So I believe you would have to override the provisions and 
that would result in a higher cost than we now project under 
current law. That is my primary concern.
    Mr. HERGER. Thank you Mr. Foster.
    Chairman CAMP. All right. Mr. Rangel is recognized.
    Mr. RANGEL. Thank you, Mr. Chairman. And welcome back, Mr. 
Foster.
    I would want you to clarify your status as an independent 
analysis. I gather it is not your job to evaluate whether or 
not you think this program is good, bad, whether it is going to 
work or whether it is not going to work. But one thing you did 
say is that it would increase medical costs. And I wonder 
whether your job title and responsibility would say that while 
it would initially increase the amount of money the Federal 
Government is paying, that in terms of prevention and the fact 
that everyone will have access to health care, does it come 
within your protocol to determine whether or not in the long 
run medical costs would be reduced as a national expenditure?
    Mr. FOSTER. The which part of medical costs, sir.
    Mr. RANGEL. Overall medical costs. In other words, many of 
us lay people believe that if indeed people who now have no 
coverage, that we are paying for their very high emergency 
costs and we are paying for it through the Federal Government, 
we are paying for it with increased premiums, actually the 
Federal Government initially would be paying more money for 
health care. But would you evaluate what is preventing from 
happening that would also cost money? Is that a part of your 
responsibility?
    Mr. FOSTER. Yes, sir. You correctly stated that we don't 
evaluate whether a proposed policy is a good idea or a bad 
idea. Our role is to help policymakers understand the technical 
aspects. Will something work the way they intend? Will 
something have a savings or a cost? And we try very hard to do 
that. Evaluating the policy implications, of course, that is 
your job and we don't step on your toes in that regard.
    Now, in terms of your specific question, we do try to 
estimate the impact of the Affordable Care Act on total 
national health expenditures, taking all the factors you 
mentioned into account, either directly or implicitly.
    Mr. RANGEL. How long have you been doing this?
    Mr. FOSTER. Today it seems like quite a while, sir.
    Mr. RANGEL. I know the feeling.
    Mr. FOSTER. I don't mean to be a wise guy. I have been 
working as an actuary for 38 years now, 16 years as chief 
actuary of CMS.
    Mr. RANGEL. And how many of those years have you advised 
the Federal Government?
    Mr. FOSTER. All of them.
    Mr. RANGEL. And I assume if indeed you deviated in terms of 
being political, you would never have survived all of these 
different administrations for 38 years?
    Mr. FOSTER. If anybody thought I was taking a political 
role or allowing political beliefs or preferences to affect my 
work and my office's work, my own staff would be the first ones 
to throw me out of the office.
    Mr. RANGEL. And I think my recollection is correct that you 
have taken on quite a few administrations in terms of what they 
wanted and what your reports indicated.
    Mr. FOSTER. I would like to think that we have offered 
sound, objective, technical advice to many administrations, 
some of the time for which it was appreciated.
    Mr. RANGEL. Very wisely put.
    Could you evaluate what would happen in terms of health 
costs if indeed we were using a voucher system instead of the 
one that is outlined in this bill, and the health costs for the 
potential patient would be higher than the voucher? What would 
happen fiscally as relates to overall health costs?
    Mr. FOSTER. There is certainly a possibility that if the 
voucher payments don't increase fast enough, people might have 
very limited insurance options, very low-value insurance, or 
perhaps no options at all.
    The hope, I believe, and I am sure Representative Ryan 
could explain this better, is that it would change the 
underlying nature of health care cost increases. That is a 
worthy goal for everybody. But it involves risks that if you 
try to do it through a voucher program or you try to do it 
through lower and lower relative payments under Medicare for 
providers, that either the vouchers are inadequate or the 
payments are inadequate, and you can't buy what you would like 
to buy. That is the risk.
    Mr. RANGEL. So the risk would not be just the Treasury in 
terms of costs, but it would be the potential patient. I mean, 
I think also I would like to ask if they raise the age of 
Medicare in order to be eligible, what impact would that have 
fiscally? Well, you could--I would like to follow through on 
the chairman's suggestion that we send you questions, and I 
appreciate your services to this committee and to our country.
    Chairman CAMP. Thank you. Mr. Johnson is recognized.
    Mr. JOHNSON. Thank you, Mr. Chairman. Thank you for being 
here, Mr. Foster. The health care law cuts Medicare payments to 
hospitals by more than $150 billion according to our estimates, 
and that estimate includes the impact of several provisions, 
the market basket reduction and the permanent loss of their 
annual productivity adjustment.
    MedPAC's latest data estimates the inpatient hospitals will 
have Medicare margins of a negative 5 percent in 2009. And is 
it possible that some hospitals might be forced to cut back 
their staffs to survive the cuts and may be reducing the 
quality of care provided to seniors and other patients?
    Mr. FOSTER. That is a conceivable outcome. I would like to 
think that MedPAC and my office and others would continue to 
monitor the situation and advise you all, and if something like 
that happened, you would step in and say that we want to change 
the law to avoid that outcome.
    Mr. JOHNSON. Well, how would we change the law? We are 
cutting the amount that we are paying them, so what would you 
have to do, increase the pay?
    Mr. FOSTER. Basically yes, sir. If you passed a law that 
said I personally get paid, say, half of what I am getting paid 
now, I would probably quit. And if you came back and said, 
okay, we will pay you what you used to get, I would probably 
come back.
    Mr. JOHNSON. That is what is happening in our hospitals, at 
least in the Texas arena. You know nurses, docs, and 
practitioners are laying off. They have to pay salaries and 
rent, and those are still going up, as you know. They will be 
paid less than cost of goods. And do you think that is 
sustainable in the long term?
    Mr. FOSTER. It is possible if they can improve their 
productivity at much better rates than they ever have 
historically, which is perhaps not likely, or if they can get 
rid of the admittedly significant level of inefficiency that 
exists, if they can take other steps through innovations and 
joining in provider organizations, ACOs and so forth, then all 
of that is possible. Now, what I am afraid of is it may not be 
probable.
    Mr. JOHNSON. I agree with you totally, and thank you for 
your testimony. Mr. Chairman, I yield back.
    Chairman CAMP. Thank you. Mr. Brady is recognized.
    Mr. BRADY. Thank you, Chairman, and thank you, Mr. Foster, 
for joining us. I am concerned about the damage that will be 
done for our seniors as a result of this new health care law.
    Dr. Berwick wasn't able to answer a number of my questions 
on the impact, so I went to your report to get the answers and 
I want to confirm them. I am concerned that many seniors that 
get prescription drug benefits under Medicare will have higher 
Part D costs because of the flawed way in which the doughnut 
hole is supposedly closed.
    On page 13 of your report, you say, ``Providing additional 
coverage for prescription drugs dispensed in the coverage gap, 
the doughnut hole, will cause an increase in costs for the 
prescription drug plans and therefore an increase in the 
average Part D premium rate.''
    In plain English, are you saying that prescription Part D 
premiums will increase for seniors who are not in the doughnut 
hole?
    Mr. FOSTER. They would increase for all Part D enrollees 
who pay premiums. In other words----
    Mr. BRADY. Including those who are not in the doughnut 
hole?
    Mr. FOSTER. Their premiums would increase, on average, not 
by very much. The amount is shown in the table on page 12. Now, 
for people who make it to the coverage gap, where the coverage 
gap----
    Mr. BRADY. That I understand. I have some more questions.
    The second point you make on Medicare Advantage, the new 
provisions will reduce Medicare Advantage rebates to plans and 
thereby result in less generous benefit packages, an estimated 
$1,500 a year over time. In plain English, is that saying that 
seniors within Medicare Advantage will have less benefits under 
the new health care bill?
    Mr. FOSTER. Yes, sir.
    Mr. BRADY. On the same page, ``The reduction in Medicare 
Advantage rebates will cause a large increase in the out-of-
pocket costs incurred by Medicare Advantage enrollees, 
estimated $873 more a year over time.'' In plain English, does 
that mean seniors in Medicare Advantage will have to pay more 
as a result of this new health care law?
    Mr. FOSTER. If the Medicare Advantage plan benefit package, 
in other words the supplemental benefit package, stays the 
same----
    Mr. BRADY. They will have to make up the difference out of 
their pocket.
    Mr. FOSTER. Enrollees will have to make up the difference.
    Mr. BRADY. That is my fear.
    Final point. There is concern that the way this new health 
care plan was structured, it punishes seniors who are getting 
their retirement plan through their business that they retire 
from, versus those perhaps of State, Federal Government 
workers. Removing the tax deductibility of their assistance for 
their medicines is going to have an impact.
    You say here, that you have, quote, the anticipated 
movement of many of the Medicare beneficiaries currently 
enrolled through the retiree drug subsidy program of Part D 
plans.
    Does that mean that you anticipate seniors who are 
currently getting medicine help through their retirement plan 
from their business will be either forced or will move to the 
Medicare plan, as a result of the cut in their health--under 
this health care plan.
    Mr. FOSTER. Yes, sir. As a result of the change in the tax 
status of the subsidy payments to employers.
    Mr. BRADY. They left in place that subsidy help in its 
entirety for those government workers on retirement plans. Do 
you anticipate government workers being forced off or leaving 
their plan for Medicare?
    Mr. FOSTER. I don't have any idea. I think it is a somewhat 
different issue.
    Mr. BRADY. Well, it is the impact of removing the subsidy. 
When it was put in place they were equal. Workers in a 
government retirement plan and workers in a business plan were 
treated equally. That parity is now gone with removal of the 
tax deductibility that was done to make them whole. So at this 
point at least, you didn't at least estimate that, unlike 
private sector workers, government workers will not be leaving 
their plan?
    Mr. FOSTER. No. Again, it is a little bit different, sir. 
For the retiree drug subsidy within Medicare, you had an 
employer who was paying the drug cost for drug insurance for 
his or her retired workers. The employer could deduct that full 
amount.
    Mr. BRADY. I know how it works.
    Mr. FOSTER. And the Medicare payment through the retiree 
drug subsidy to the employer was not counted as income and did 
not reduce the amount that the employer could deduct.
    Mr. BRADY. At some point we need to continue this 
discussion, because I think there is a direct correlation 
there. So thank you, Mr. Chairman.
    Ranking Member Levin. Thank you. The gentleman's time has 
expired.
    Mr. STARK. is recognized.
    Mr. STARK. Thank you, Mr. Chairman. Thank you for having 
this hearing and welcome back, Mr. Foster.
    In Medicare Advantage, under the ACA, would Medicare 
benefits be reduced?
    Mr. FOSTER. The traditional Medicare benefit package would 
not be affected. The extra benefits that most plans offer would 
definitely be reduced over time.
    Mr. STARK. The ACA extends solvency by about 12 years, 
correct?
    Mr. FOSTER. Yes, sir, based on the 2010 trustee's report 
baseline.
    Mr. STARK. And ACA lowers cost-sharing under Part B saving 
beneficiaries at the doctors' offices; is that correct?
    Mr. FOSTER. Yes, sir, for fee-for-service beneficiaries.
    Mr. STARK. And it reduces out-of-pocket spending for 
prescription drugs, does it not?
    Mr. FOSTER. Yes, sir, by closing the coverage gap.
    Mr. STARK. And the ACA leaves Part B premiums which are 
presently made up of Social Security deductions the same; is 
that correct?
    Mr. FOSTER. It would actually for fee-for-service 
beneficiaries, actually all beneficiaries, it would lower the 
Part B premiums.
    Mr. STARK. And would repeal raise costs for beneficiaries 
and reduce solvency?
    Mr. FOSTER. It would essentially do the opposite of 
everything that the ACA did; in other words, putting it back 
where it had been.
    Mr. STARK. Can I go back just very quickly to the Medicare 
Advantage benefits? It has always been a concern of mine that 
the benefits offered in Medicare Advantage are far different 
from those that are actually used. In other words, a Medicare 
Advantage plan may offer trips to China and all kinds of things 
that the members of the Medicare Advantage plan would have no 
possible chance to use. Do you have any figures that relate to 
the benefits ``offered,'' and as opposed to those that are 
actually used?
    Mr. FOSTER. Directly, no. Indirectly, yes. In other words, 
when a plan submits a bid for Medicare Advantage, and they have 
to specify the per-member-per-month cost of the various 
supplemental coverages that they offer, they have to justify 
that cost based on the past experience of the cost for those 
provisions.
    Mr. STARK. How much they actually paid out?
    Mr. FOSTER. Yes. So you can't have too much of a difference 
there without our challenging it and asking for a justification 
for the difference.
    Mr. STARK. So it would be difficult for those plans to 
offer spurious benefits that are just there in name only but 
aren't really very attractive to the members; is that fair?
    Mr. FOSTER. I am sure it happens to some degree in some 
cases, the gym club memberships perhaps, that kind of thing.
    Mr. STARK. For me, they don't do me much good. Thank you 
very much.
    Thank you, Mr. Chairman.
    Chairman CAMP. Thank you. Mr. Tiberi is recognized.
    Mr. TIBERI. Thank you, Mr. Chairman. Thank you for being 
here, sir. Medicare Advantage is voluntary; right, sir?
    Mr. FOSTER. Yes, sir.
    Mr. TIBERI. So you can sign up or you can drop off.
    Mr. FOSTER. That is right.
    Mr. TIBERI. Every senior I have talked to who is on 
Medicare Advantage said that they liked the Medicare Advantage 
plan they are on because it offers them a comprehensive health 
care package whereas Medicare fee-for-service does not.
    Do you know off the top of your head how many, what 
percentage of seniors who are on Medicare, traditional Medicare 
fee-for-service, are in another additional plan, whether it be 
Medicaid, Medigap, retiree coverage?
    Mr. FOSTER. It is a fairly high percentage.
    Mr. TIBERI. Like maybe 90?
    Mr. FOSTER. Probably not quite that high, but 75 perhaps. I 
could look those up for you.
    Mr. TIBERI. I would love that number. Thank you sir.
    [The information follows: Did not receive]
    Mr. TIBERI. So is it fair to say that under the current 
system, Medicare fee-for-service is not meeting the needs of 
most seniors because they are choosing other forms of coverage?
    Mr. FOSTER. I would put it it slightly differently. I would 
agree generally, but I would put it slightly differently. The 
Medicare benefit package, the fee-for-service package is not 
exceptionally generous. It has significant cost-sharing 
requirements and it doesn't have catastrophic coverage 
protection. So most Medicare beneficiaries who are able to seek 
additional coverage, either through Medigap or they have it 
through their employer plans, or if you are low income you have 
it through Medicaid just in order to avoid the risk of 
financial catastrophe.
    Mr. TIBERI. And most Medicare Advantage beneficiaries do 
not seek that additional coverage, correct?
    Mr. FOSTER. Generally not. Many plans have catastrophic 
coverage but not all.
    Mr. TIBERI. So if you reduced the number of enrollees on 
Medicare Advantage and they go in Medicare fee-for-service, 
then they will have an additional out-of-pocket expense, 
potentially a new Medigap, that they would have to pay for.
    Mr. FOSTER. Typically.
    Mr. TIBERI. Do you know who the largest Medigap provider is 
in America?
    Mr. FOSTER. United Health Care.
    Mr. TIBERI. Is it affiliated with any other organization?
    Mr. FOSTER. Like AARP.
    Mr. TIBERI. Are they the largest?
    Mr. FOSTER. I don't know.
    Mr. TIBERI. Could you get that information? Could CMS 
provide that?
    Mr. FOSTER. I could try to find out.
    [The information follows: Did not receive]
    Mr. TIBERI. So is it safe, then, to say that if you are in 
a position to gain market share, you would be opposed to the 
Medicare Advantage program to continue to exist if you were a 
provider of an additional product?
    Mr. FOSTER. I am sorry, I didn't quite understand.
    Mr. TIBERI. If you were in the business of providing 
coverage for seniors and you are providing that holistic 
coverage as an addition to Medicare fee-for-service, the more 
Medicare fee-for-service beneficiaries there are, the better it 
is potentially for you to supplement your business by offering 
more coverage to supplement Medicaid fee-for-service. Meaning 
if there are fewer Medicare Advantage beneficiaries, they have 
to go back in the Medicare fee-for-service, so you would be 
potentially benefited.
    Mr. FOSTER. Yes, you would have a broader market 
opportunity.
    Mr. TIBERI. Because the odds are that if you are no longer 
on Medicare Advantage, you would need something other than just 
Medicare fee-for-service based upon what we already know, 
right?
    Mr. FOSTER. Yes, sir.
    Mr. TIBERI. So is it fair to say that what Mr. Ryan is 
trying to do, what he has been criticized for trying to do, 
doesn't acknowledge the fact that most Medicare--most, the 
majority, you said 75 percent, look forward to the number--but 
most Medicare fee-for-service individuals today don't believe 
that they have enough coverage, therefore are either 
supplementing their coverage. So it is not fair because we are 
not, to be critical, we are not comparing apples to apples. Is 
that fair?
    Mr. FOSTER. Well, fee-for-service Medicare by itself is a 
basic package without catastrophic protection or some other 
features.
    Mr. TIBERI. And what Mr. Ryan is also providing is a basic 
package that is for the senior.
    Mr. FOSTER. That is correct.
    Mr. TIBERI. Thank you. I appreciate that. I yield back.
    Chairman CAMP. Thank you. Mr. Davis is recognized.
    Mr. DAVIS. Thank you, Mr. Chairman.
    Mr. Foster, I appreciate the work that you have done to try 
to make sense of the health care law and the impact it will 
have on seniors' coverage under Medicare. You do an important 
job. I thank you for your service. Surviving 38 years in the 
mosh pit of politics is a credit to a Job-like stability of 
mind to be able to keep focus.
    Mr. FOSTER. Or limited mental faculties.
    Mr. DAVIS. I think that is over in the United States 
Senate, probably, where we would find that.
    But earlier this morning, many of us would asked Dr. 
Berwick his thoughts about the numbers that your office has put 
out. I come from an operations and planning background where 
the metrics are everything and the assumptions behind the 
metrics are really how you can formulate effective policy 
decisions, make business decisions, and have some adequate 
degree of predictability about the way trends are going.
    I understand that there is no actuarial formula that is is 
perfect, unless you had the ability to see into the future. And 
I am sure you would not be working here if that were the case. 
You would have clients in other places. But the projections are 
hypothetical, but they are very critical to understand how 
these assumptions would play out for policy.
    And I think that I felt rather uncomfortable this morning 
asking specific questions that are based on data and not 
getting an answer.
    But I was wondering, technically speaking, if you can take 
a moment to explain for us the role of your office and how you 
do what you do. If you could give us kind of a sound-bite 
version of that, outside of it being perceived by many non-
numerically-oriented folks as kind of a black art to come up 
with things that can get batted around. I would like to hear 
your perspective on how you come to your conclusions.
    Mr. FOSTER. Sure. There are many techniques for estimation, 
cost projection, that actuaries use both in government and in 
the private sector. The better the data, the better job we can 
do. It is hard, of course, when you have something new, not 
tried before, where it is hard to predict people's behavioral 
response, people, employers, whatever.
    We have a staff of about 90 percent people in the Office of 
the Actuary at CMS. They are all sharp, above average, handsome 
and beautiful respectively, and they work very hard to try to 
estimate the financial and other impacts of any proposal that 
is asked of us.
    Mr. DAVIS. Well, following on that, the nonpartisan 
Congressional Budget Office has made clear that Medicare 
savings as a result of the health care law can't be counted 
twice; first, to shore up solvency of the Medicare program 
while also paying for a new health care entitlement program. 
Further, your office's April 22, 2010, report on the effects of 
the Democrats' health care law, and the Medicare Trust Fund 
pointed out--and I am quoting--In practice, the improved party 
financing cannot be simultaneously used to finance other 
Federal outlays, such as the coverage expansions under the 
PPACA, and to extend the trust fund, despite the appearance of 
this resolve from respective accounting conventions.
    I was wondering if you could tell us about this double-
counting issue, maybe elaborate for us a little bit.
    Mr. FOSTER. I would be glad to. It is nothing new, but it 
is relevant and important. I will go back to the example that I 
used a bit ago, where suppose under the Affordable Care Act a 
given worker has to pay $100 higher hospital insurance payroll 
tax. So that hundred dollars, the true cash, the hundred 
dollars is sent to the Treasury. The Treasury credits the 
Hospital Insurance Trust Fund with $100 Treasury security, and 
then the money goes into the general fund, and from there it is 
spent pretty much immediately, whether it is to offset the cost 
of the coverage expansions under the Affordable Care Act or for 
SSI benefits or anything else. But the money is spent.
    Now, later on, a couple years down the road, we need our 
hundred dollars so we cash in our Treasury security, we get the 
$100 back with some interest. Obviously, it is not the same 
$100. That money is already spent. We need to spend $100, so 
Treasury has to come up with $100, say, by borrowing that much 
to then give to us. So the original $100 can't both spend $100 
over here for coverage expansions and $100 over here for HI. On 
the other hand, because of the way the trust funds are set up, 
we do get the help when we need it in the future. I don't know 
if that helps or not.
    Mr. DAVIS. That helps very much. I think a few of my 
colleagues' assumptions on the other side of the aisle remind 
me of a production manager once who quipped they were losing 
money on every product, but they would make it up on volume. 
And we certainly want to avoid that. Thank you very much for 
your service. I yield back.
    Chairman CAMP. Thank you.
    Mr. MCDERMOTT. is recognized.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    It is good to see you, Mr. Foster. We haven't seen you for 
a while. You have been around as long as I have been here, so I 
have got to see you on a number of occasions and I liked what 
you said earlier: You like to know how it actually works.
    And as I look at Medicare, Medicare's administrative cost 
is 3 percent. That is the generally accepted figure. Do you 
accept that figure?
    Mr. FOSTER. The way it is normally calculated it is 
actually quite a bit lower. If you look at all the Federal and 
related administrative costs for Medicare, it represents about 
1.3 percent of total expenditures.
    Mr. MCDERMOTT. 1.3 percent.
    Mr. FOSTER. Yes, sir.
    Mr. MCDERMOTT. Now, insurance companies' administrative 
costs are estimated on average about 14 percent, sometimes as 
high as 40 in the individual market; is that correct?
    Mr. FOSTER. Yes, sir. That is in the ballpark, depending on 
the nature of the insurance.
    Mr. MCDERMOTT. So if Mr. Ryan and the Republicans succeed 
in moving to a voucher system--that is, we hand 5,700 or 6,300 
or whatever amount to seniors every month--how will that 
administrative cost on the insurance companies, will that be an 
added cost on top of what they are getting already? I don't 
understand where that administrative cost goes.
    Mr. FOSTER. Well, any insurance premium that you see, just 
about any will normally include amounts to cover the medical 
expenses and also the administrative costs and whatever profit 
margin is built in. So under Mr. Ryan's plan, a voucher 
pavement would help a beneficiary purchase some level of 
coverage that would include the cost of administering the 
program.
    Mr. MCDERMOTT. And when you look at it from the two 
standpoints of the government and the senior citizen, the 
government cost would go down if we had a voucher system; is 
that correct?
    Mr. FOSTER. Yes, sir.
    Mr. MCDERMOTT. And what would happen to the costs to the 
senior citizen, above the voucher? Would that pay for their 
cost, do you think?
    Mr. FOSTER. It would depend on how the voucher amount is 
escalated each year. If it grows at a slower rate than health 
care costs----
    Mr. MCDERMOTT. That is what Mr. Ryan is talking about, less 
than the medical inflation rate.
    Mr. FOSTER. In his original proposal, that is correct. I 
believe it is--the modified version with Dr. Alice Rivlin, it 
would grow at a faster rate. But if you assume that the voucher 
payment increases more slowly than health care costs, then over 
time people would initially have to buy less comprehensive 
coverage. Now, that might help them purchase health care more 
prudently because they have more of a direct financial stake in 
it.
    Mr. MCDERMOTT. You mean as they are getting older, they 
would be buying less health care coverage. Is that what you are 
saying?
    Mr. FOSTER. Yes. Whether it is an individual who is getting 
older or a new person who comes along and qualifies for 
Medicare, they might buy a catastrophic coverage instead of 
more comprehensive one. What I am saying is that can feed back 
into how much they spend.
    Mr. MCDERMOTT. Does that make sense, that as you get older 
you need less health care coverage?
    Mr. FOSTER. No. Of course, obviously, as people age, they 
typically run into higher health care costs. The issue here 
would be, how is the voucher handled? Is it adjusted for age? 
Is it one amount for all, and the insurance companies have to 
provide guaranteed issue regardless of age. Those are details 
to be worked out.
    Mr. MCDERMOTT. So it would be--you would have to have some 
kind of regulatory system to make sure that insurance companies 
would sell a policy to an 85-year-old who had had several 
cancers.
    Mr. FOSTER. Yes, I think that would be required.
    Mr. MCDERMOTT. You couldn't get away without regulation; 
you would need the Federal Government involved in it?
    Mr. FOSTER. I would tend to think so. In fact, I think Mr. 
Ryan's plan has that sort of thing involved. But as I said 
before, it has been a couple of years since I looked at it.
    Mr. MCDERMOTT. Would his be called a government takeover of 
health care?
    Mr. FOSTER. You would probably have to ask him that 
question, sir.
    Mr. MCDERMOTT. Do you see any way that you can make the 
system that we put in last year in law better?
    Mr. FOSTER. Sure.
    Mr. MCDERMOTT. Give me a couple of suggestions.
    Mr. FOSTER. Okay. If you think about Medicaid for a minute, 
the expansion of Medicaid eligibility applies to people under 
65. So picture somebody who is 63 or 64 and qualifies for the 
Medicaid coverage. They turn 65, and of course they qualify for 
Medicare, and they then would no longer qualify for Medicaid. 
So that is, I hate to use the word ``notch'' for reasons you 
all remember, but I think that would represent a notch in 
benefit coverage. So that is a limitation that I think will 
need to be addressed.
    Let me give you one other example, if I may----
    Chairman CAMP. Your time has expired. If you want to 
complete that in writing that would certainly be welcome.
    Mr. MCDERMOTT. Thank you.
    [The information follows: Did not receive]
    Chairman LEVIN. Mr. Reichert is recognized.
    Mr. REICHERT. Thank you, Mr. Chairman. Welcome, and I am 
pleased to hear your answers to the questions that my 
colleague, Mr. McDermott, asked. I asked a similar question of 
the previous witness and didn't get an answer as to what he 
might change or improve in the health care law, so thank you 
for those answers.
    I want to sort of stick to the theme that I was with 
earlier this morning, and that is if you like your health care 
plan you can keep it, and specifically for seniors. So as I 
understand the health care current law, there are substantial 
cuts to Medicare in the area of $200 billion. And according to 
your figures, by 2017 you are predicting that maybe 50 percent 
of the seniors who would otherwise enroll in Medicare will 
probably not enroll in Medicare. Is that an accurate statement?
    Mr. FOSTER. Yes, sir. We have estimated that about 50 
percent of the people who would have been enrolled in Medicare 
Advantage plans would no longer be enrolled under the 
Affordable Care Act. A slightly better updated estimate is 
closer to 40 percent.
    Mr. REICHERT. So if that happens, would it be fair to 
assume that there could be a large reduction in enrollment; in 
this large reduction in enrollment, there could be fewer 
choices in plans offered?
    Mr. FOSTER. Yes. We have not modeled the number of plans 
that could be offered, but the private plans like to offer a 
certain kind of benefit package consistent with HMO's or PPO 
practice. If they can no longer offer that package because of 
the reduced Medicare rebates that are payable, then they might 
choose to exit the market.
    Mr. REICHERT. So those seniors that are in those plans, 
because of the reduction of the choices that might be made 
available, would no longer be able to keep the health care plan 
that they like?
    Mr. FOSTER. I anticipate that is what will happen.
    I might add that that is not going to happen in 2011. It is 
going to happen gradually, between 2012 and 2017.
    Mr. REICHERT. So while your report doesn't speak to the 
contraction of plans, can you give me your opinion on which 
plans would most likely survive in that sort of scenario?
    Mr. FOSTER. We anticipate that it would vary 
geographically. The payment rates will be directly tied to 
Medicare fee-for-service costs in the area in question. In some 
parts of the country, fee-for-service expenditures are very, 
very high. South Florida comes to mind, obviously. In areas 
like that, the Medicare Advantage plans can comfortably have a 
cost under the fee-for-service level and they should be able to 
continue and do pretty well.
    Mr. REICHERT. So would it be fair to say, too, that plans 
with a larger market share might be those that survive?
    Mr. FOSTER. I would have to think about that. They get an 
economy of scale, so that would probably help. But that is not 
the biggest factor, I don't think.
    Mr. REICHERT. So what about the Medigap insurance? Would 
that be one of those you think that would still be around as 
plans are reduced through Medicare Advantage cuts?
    Mr. FOSTER. Yes. There is a distinction. The Medicare 
Advantage plans have different payment rules and they are 
governed by Medicare. The Medigap plans are overseen by the 
States, but that is a voluntary program that individuals decide 
to do on their own or not. It is unrelated to Medicare 
Advantage.
    Mr. REICHERT. But as Medicare Advantage plans go away, 
seniors are going to have to make a choice to go someplace, as 
Mr. Nunes said, or Mr. Tiberi said, they are going to have to 
go somewhere, and Medigap would be one of those.
    I just find it interesting that, I don't know if you are 
aware or not, but Mr. Herger and I have been investigating 
AARP's strong financial public support of this health care bill 
and their interest in the Medigap insurance plans. And as 
Medicare Advantage disappears, Medigap insurance, United, for 
example, stand to gain a lot in my opinion. Would you agree 
with that statement?
    Mr. FOSTER. Well, I think that if our projection ends up 
being correct, as I have every reason to expect, and something 
like 6 to 7 million people, beneficiaries, leave Medicare 
Advantage plans, many of them, perhaps most of them, will want 
auxiliary coverage and Medigap will be the most straightforward 
way to get it.
    Mr. REICHERT. I yield back, Mr. Chairman. Thank you.
    Chairman CAMP. Thank you. Dr. Boustany is recognized.
    Mr. BOUSTANY. Thank you, Mr. Chairman. And, Mr. Foster, 
thank you for appearing before the committee today.
    Mr. Foster, it is my understanding that the insurance 
experts, many insurance experts outside of government, all 
conclude that the long-term care program in this law, the so-
called CLASS act, is likely to suffer from severe adverse 
selection, and the program will primarily appeal to less 
healthy enrollees and this will drive up premiums.
    This month, a report by the Center for Retirement Research 
concluded that without adjustments, adverse selection will 
create a death spiral of rising premiums and declining 
participation. It noted that even with regulatory changes by 
the administration, premiums may never reach an affordable 
level for middle-class households.
    So, considering your prior warnings, written warnings to 
Congress in April of 2010, do you agree with the conclusion 
that CLASS, as structured by the new health law, is likely to 
suffer from severe adverse selection in a death spiral of 
unaffordable premiums?
    Mr. FOSTER. I certainly agree that, as written, the CLASS 
program would be subject to various severe adverse selection 
which could cause the so-called death spiral or assessment 
spiral. It may be possible administratively to adjust the 
program enough to make it viable, and I know people are working 
to that end.
    Mr. BOUSTANY. But if indeed these premiums were to go up, 
clearly folks that are on Medicare, who have looked for some 
way to provide for their long-term care needs, will suffer. Is 
that true?
    Mr. FOSTER. Well, the CLASS program I think was designed to 
try and meet two different sets of needs. One is as a form of 
Federal long-term care insurance for younger people, who over a 
long period would participate and then qualify for benefits----
    Mr. BOUSTANY. Right. But the Medicare program today doesn't 
cover long-term care so it is really targeted for that 
population. Prior planning, obviously.
    Mr. FOSTER. Well, the other thing it tried to accomplish 
was for people who were in not so good health or who are older, 
to give them an opportunity to acquire long-term care 
insurance.
    Mr. BOUSTANY. So you have real concerns about the solvency 
of this program as it is constructed today.
    Mr. FOSTER. Yes, sir, I do.
    Mr. BOUSTANY. Thank you.
    I want to change tracks now and just pursue a line of 
questioning I had with the previous witness with regard to 
physician shortages reimbursement linkage that is there. And in 
your testimony you describe unless providers could reduce their 
cost per service correspondingly through productivity 
improvements or other steps, they would eventually become 
unwilling or unable to treat Medicare beneficiaries, and that 
is because of declining reimbursements that are built into the 
system. Is that correct?
    Mr. FOSTER. Yes, sir, for affected providers like hospitals 
and skilled nursing facilities, et cetera.
    Mr. BOUSTANY. Right. So if that is the case, that is 
clearly going to hurt access for Medicare patients and most 
likely be very acute in rural areas where there is obviously 
less opportunities for these institutions in rural communities 
to make appropriate adjustments.
    Mr. FOSTER. Yes, sir. If over some period of time, the 
reimbursement rates become inadequate and you don't do anything 
about it, then I think access would be a significant issue.
    Mr. BOUSTANY. And we heard some platitudes about 
innovations in reimbursement, but no specific detail. And 
further down in your testimony, you talk about some of these 
payment system reforms and delivery system reforms facilitated 
through the research programs that are described in the bill. 
But you say that these outcomes are far from certain, and many 
experts doubt the feasibility of such sustained improvements, 
and anticipate that over time Medicare price constraints would 
become unworkable and that Congress would likely override them, 
much as they have done to prevent reductions in physician 
payment rates, otherwise required by the sustainable
    Mr. BOUSTANY. So I take that to mean that Congress will 
make adjustments to prevent these kinds of draconian cuts which 
were built into the original assumptions on cost savings for 
the bill, and so we won't achieve some of those cost savings 
and in fact we are perpetuating the same problem. Is that a 
fair statement?
    Mr. FOSTER. Yes. That is a reasonable summary of my 
concern.
    Mr. BOUSTANY. Thank you. And I sense that you don't have a 
lot of confidence in these prospective delivery system and 
reimbursement reforms that are being talked about. I mean, we 
have created a bureaucratic entity, but we don't really know 
what is going to materialize there.
    Mr. FOSTER. I have a lot of optimism, but it remains to be 
seen whether it can be fulfilled.
    Mr. BOUSTANY. Thank you.
    Thank you, Mr. Chairman.
    Mr. JOHNSON. Thank you.
    Mr. Lewis is recognized.
    Mr. LEWIS. Thank you very much, Mr. Johnson.
    I thank you, Dr. Foster--Mr. Foster.
    Mr. FOSTER. Mr. Foster. Dr. Foster is my father.
    Mr. LEWIS. Okay. Well, thank you, Mr. Foster, for being 
here. Thank you for your service for many, many years.
    Let me just ask you, Mr. Foster, is it true that for the 
first two decades all of the plan paid by 95 percent?
    Mr. FOSTER. Are you asking whether the Medicare Advantage 
plan started off being paid 95 percent of the traditional level 
of cost?
    Mr. LEWIS. Yes.
    Mr. FOSTER. Yes, sir, that is correct.
    Mr. LEWIS. Prior to health reform, did Medicare overpay 
Medicare Advantage plan?
    Mr. FOSTER. Subsequent to the Medicare Modernization Act, 
the benchmarks for payments to private plans and the payment 
levels were clearly such that for a given beneficiary Medicare 
tended to pay roughly 12 to 15 percent more than if that person 
had been in fee-for-service.
    Mr. LEWIS. What percentage of beneficiaries are enrolled in 
private plans?
    Mr. FOSTER. Currently, it is about 27 percent.
    Mr. LEWIS. Let me ask you another question: Do fee-for-
service beneficiaries pay higher Part B premiums to cover these 
overpayments?
    Mr. FOSTER. Yes, sir. The fact that the Medicare Advantage 
enrollees to date have a higher per-person cost for Medicare, 
that higher cost feeds through to Part B and affects the Part B 
premium, which is paid by all Part B enrollees. Now that 
difference will shrink over time under the Affordable Care Act.
    Mr. LEWIS. Many of my colleagues keep asserting that 
benefits will be reduced, but I want to clarify that there will 
not be a reduction of Medicare benefits even for those in 
private plans. Is that right? Am I right?
    Mr. FOSTER. Not in this case, sir. For the people who are 
in the private plans, they will actually see an outright 
reduction in their total----
    Mr. LEWIS. But will those in Medicare benefits?
    Mr. FOSTER. If you are referring to the traditional 
Medicare.
    Mr. LEWIS. No, the guaranteed benefits.
    Mr. FOSTER. Yes, there is no change in those, other than to 
expand them a little bit.
    Mr. LEWIS. Thank you very much.
    Mr. JOHNSON. Thank you.
    Mr. Paulsen, do you wish to question?
    Mr. PAULSEN. Thank you, Mr. Chairman. I would like to ask 
maybe one or two questions. Thank you, Mr. Foster.
    I was just going to ask your perspective. The health care 
law includes now multiple potential Medicare payment reductions 
for all health care providers, and in addition there will be 
significant pressure and requirements to improve quality 
outcomes at the same or reduced costs. So layering on top of 
that now we have this new medical device tax in the new law 
that will make the tools these providers need to achieve their 
quality outcomes much more expensive because that tax is likely 
to begin to be passed on to health care providers and consumers 
as well. Do you see how the medical device tax is in conflict 
or direct conflict with the goals to improve patient care and 
reduce costs within our health care system?
    Mr. FOSTER. The tax on the medical devices, I agree with 
your assessment that that tax is likely to be passed on through 
a higher price for the devices, which would, other things being 
equal, raise health care expenditures.
    Mr. PAULSEN. Thank you, Mr. Chairman.
    I will have one other question.
    I think one of the elements of the accountable care 
organization oversight model that is included as a part of this 
shared savings, this means if an ACO, as its known, succeeds in 
reducing costs by a certain amount and also meets selected 
quality measures, the hospitals and the physicians that are in 
the ACO will each receive a share of the savings that were 
generated. So this type of arrangement in which providers 
essentially have a financial interest to reduce care has been 
part of the several gain-sharing demonstration programs that 
are currently under way.
    Independent monitoring of each ACO or shared savings 
program site must be an essential part of the ACO program to 
ensure that these financial incentives are appropriate and do 
not induce providers to limit a patient's treatment options and 
negatively affect quality of care. Can you comment regarding 
independent monitoring of ACOs, just independent monitoring of 
these accountable care organizations?
    Mr. FOSTER. Well, I think what I would say is, obviously, 
you do have to monitor the quality that is part of the program, 
that you don't want providers to stint on care or avoid 
services that are really necessary. If they can avoid 
unnecessary services, that is great for everybody, but you do 
have to make sure, because of the financial incentive, that it 
doesn't go too far.
    Mr. PAULSEN. Thank you, Mr. Foster.
    Mr. Chairman, I yield back.
    Mr. JOHNSON. Thank you.
    Mr. Berg, do you care to question?
    Mr. BERG. Mr. Foster, your office authorized an appendix to 
the Medicare Trustees 2010 report in which you question the 
Trustees' projections that Medicare party solvency would be 
extended. And you stated that their estimates do not represent 
the best estimate of actual future Medicare expenditures. I 
understand your office does not typically issue an ancillary 
report to the annual Medicare Trustee's Report giving an 
alternative projection. What were the key concerns that you had 
with the Trustees' report that compelled you to issue this 
ancillary report?
    Mr. FOSTER. Well, there are two factors there, sir. One is, 
by law, I am required to certify that the assumptions and 
methods used in the Trustees' report are reasonable. In my 
comment in that certification I said that the current law 
projection is probably not a reasonable projection, given that 
the current law itself may not be viable, some of the 
provisions may not be viable.
    Now, in addition to that, we issued an auxiliary memorandum 
with the illustrative alternative projection that showed, under 
a different version of the law, if the parts that we worried 
about the viability--the physician payments and the 
productivity adjustments--if those are assumed to go away, to 
be overridden, then what would the cost look like?
    Now we had done that in the past just for the physician SGR 
issue, and the Trustees have asked us to do this. So I wouldn't 
say I am at major odds with the Trustees in any respect. We all 
recognize the concerns and want to make sure the public 
understands and you understand the concerns.
    Mr. BERG. One additional question. As you know, the health 
care law cuts Medicare Advantage by $206 billion, according to 
the CBO. Can you elaborate on how these cuts will impact 
enrollee benefits and premiums and plan availability?
    Mr. FOSTER. Under the current law, if a plan's cost is 
lower than the so-called ``benchmark'' level, then the 
difference, a portion of the difference--and to date it has 
been 75 percent--it is paid to the plans in the form of a 
rebate. They have to use the rebate amounts to either reduce 
cautionary requirements or add extra benefits, like dental or 
vision coverage, or reduce Part B or Part D premiums.
    Now under the Affordable Care Act, the benchmarks will be 
reduced significantly and the percentage, what used to be 75 of 
this difference, benchmark versus bid, that will be reduced to 
50 percent, although it can be increased for quality bonuses. 
But the bottom line is the rebate amounts are going to be 
reduced substantially. And in the written testimony, we 
estimate about $1,500 on average by 2019. So that will cut back 
to the tune of $1,500 the extra benefits that can be offered.
    Now the MA beneficiaries will also benefit from the fee-
for-service effects. They will have to pay a lower Part B 
premium and other changes. So they gain from that but not as 
much as they lose from the lower benchmarks.
    Mr. BERG. Thank you. I will yield back my time.
    Mr. JOHNSON. Thank you.
    Mr. Levin, Do you have one more comment?
    Mr. LEVIN. Well, just as a follow up to that last question 
about Medicare Advantage programs.
    Mr. Foster, I think if your testimony is taken as a whole 
and not taken apart just for some advantage, talking about 
Medicare Advantage, it is clear that essentially a lot of 
Medicare beneficiaries were subsidizing extra benefits for 
others and that subsidization essentially led to an advantage 
for Medicare Advantage plans. Now that advantage is being 
reduced and, as a result, a large number, the larger percentage 
of people covered by Medicare won't be subsidizing advantages 
for others.
    As that advantage is reduced, I think you would agree that 
there are other ways for carriers to make up the difference. 
They can become more efficient, no? The insurance carrier can 
become more efficient?
    Mr. FOSTER. Yes, sir, there is potential for that.
    Mr. LEVIN. Indeed, I think there is a recent report from 
one of them that have reduced premiums because of the more 
efficient way that care is being delivered. And one can very 
readily argue that the reduction in that subsidy will lead to 
more carefully and effectively delivered health care.
    Mr. FOSTER. At the margin, I think you are probably 
correct. In the big picture, I don't think that is enough to 
counteract the changes of the benchmarks.
    Now I might add, because I don't want anybody to 
misunderstand me, I have no position on the policy issue of 
whether it makes sense or does not make sense for one group of 
Medicare beneficiaries to get an advantage and another group 
not to get it. That is a policy issue. That has been the case 
for the Medicare Advantage enrollees, benefit from the nature 
or the design of the formula for payment. That has been very 
valuable and has been very popular. To the extent that the 
Affordable Care Act removes most of that advantage, is that 
good policy? That is for you all to decide.
    Mr. LEVIN. I think you described it accurately. A lot paid 
for an advantage for a minority, and we are now reducing that 
advantage. Hopefully, reducing a subsidy paid for by the 
majority can lead to more effective delivery of care.
    Thank you very much.
    Mr. JOHNSON. Thank you, Mr. Levin.
    And I want to thank you, Mr. Foster. I appreciate your 
lengthy stay with us this morning, and I would ask that if any 
members want to submit questions that you be allowed to provide 
written responses for the record, if you would.
    With that, this hearing is adjourned.
    [Whereupon, at 2:15 p.m., the committee was adjourned.]

    [Submissions for the Record follow:]

                    Prepared Statement of Mr. RANGEL
     Bad Rap? Health Care Law Blamed for Sale of Catholic Hospitals
                            October 18, 2010
                           by Lori Robertson
    Republicans are claiming the new health care law is a ``main 
reason'' for the sale of three Catholic hospitals in Pennsylvania. And 
a conservative Catholic group is running a radio ad saying it is 
``the'' reason. But the hospitals' CEO says his words are being twisted 
and the new law isn't the ``precipitating factor'' behind the sale.
    The hospital group says in a news release that ``[t]he rationale 
for our initiative has been mischaracterized by certain politicized 
media outlets and severely distorted by some special interest groups.'' 
Here's what that refers to:

          A press release from the Republican staff of the 
        House Ways and Means Committee claims: ``Three Catholic 
        hospitals in Pennsylvania have been put up for sale, with 
        ObamaCare cited as a main reason for the decision.''
          And a radio ad from a group called CatholicVote.org 
        says the hospitals ``are calling it quits. . . . The reason? 
        Obamacare.'' The ad calls for the defeat of Democratic Reps. 
        Paul Kanjorski and Chris Carney--both of whom are Catholic and 
        voted for the health care law.

    The origin of these claims is an interview given to a local 
television station by Kevin Cook, CEO of Mercy Health Partners in 
Scranton, Pa., regarding the decision to sell three hospitals. Cook 
told WNEP-TV in an October 6 segment that the three hospitals in the 
Scranton area were ``doing well'' and were ``ahead of budget for the 
year.'' But, he said, ``it's more a decision when we look out over the 
landscape of health care over the next five years . . . we understand 
that a different level of investment may be required than what we can 
facilitate on our own.'' The reporter then says that ``much of that 
required investment'' was a result of the new health care law. Cook is 
shown saying: ``Health care reform is absolutely playing a role. But 
was it the precipitating factor in this decision? No. But was it a 
factor in our planning over the next five years? Absolutely.''
    Those sound bites quickly evolved as the story was picked up by 
blogs and the conservative press, and by the GOP, which issued its 
release two days later, on Oct. 8. That same day, however, the Catholic 
Health Association issued a statement calling the reports ``alarmist'' 
and ``false.''
    CHA President Carol Keehan, Oct. 8: Reports that health reform is 
the primary motive behind the sale are completely false, misleading and 
politically motivated. Deliberations to sell the facilities began well 
before the Affordable Care Act became law and did not hinge on 
enactment of the legislation.
    Here it should be noted that Sister Keehan is a Roman Catholic nun 
with long experience running Catholic hospitals and with Medicare 
regulations, but she also advocated strongly for passage of the new 
health care law. President Obama awarded her one of the 21 pens he used 
at the signing ceremony. So she's not a neutral source.
    On the same day, however, Cook himself posted a similar disclaimer 
on the hospitals' website:
    Mercy Health Partners' CEO Cook, Oct. 8: The rationale for our 
initiative has been mischaracterized by certain politicized media 
outlets and severely distorted by some special interest groups.
    Discussions about mergers, acquisitions and strategic partnerships 
have been conducted in our health care community for years-long before 
the passage of the Affordable Care Act. Our decision announced last 
week was due to many factors.
    None of this stopped CatholicVote.org from airing its radio ad, 
which it first posted to its YouTube site on Oct. 11. The ad targets 
Democratic Reps. Kanjorski and Carney, both of whom are in toss-up 
races, according to the Cook Political Report. The group, a 501(c)(4) 
advocacy organization, is running the ad primarily on talk radio. It 
says: ``Mercy Hospital CEO Kevin Cook said that President Obama's 
health care law is absolutely playing a role in their decision to close 
their doors. Paul Kanjorski and Chris Carney are both Catholic and each 
claim to represent us in Washington.'' The ad says both voted for the 
health care law and urges voters to ``say goodbye to Paul Kanjorski and 
Chris Carney.''
    The following day, Mercy's CEO went back on the air, saying in 
another TV interview that his words were being twisted. In the follow-
up story, a WNEP reporter says that Cook ``claims opponents of health 
care reform are twisting his words out of context'' and that ``Cook 
says health care reform is a small factor, but a factor, because its 
cost and impact is unclear.'' Cook himself stresses that the hospitals 
are ``not closing,'' as the radio ad claims. And Cook says it's 
``disappointing that a decision that we made that was in the best 
interest of this community has been politicized in the way it has.''
    In fact, the hospitals' original Oct. 6 press release announcing 
the sale cited long-term issues, and didn't mention the new law: ``For 
more than two decades area hospitals have endured lower than average 
reimbursements for care and a static population base. This has, at 
times, resulted in empty hospital beds and the duplication of 
services.'' An editorial in the Scranton Times Tribune echoed that 
assessment, saying: ``Just about everyone in the regional health care 
industry has known for some time that Scranton no longer can sustain 
three independent full-service community hospitals. Mercy and Moses 
Taylor hospitals and Community Medical Center all have considered sales 
or mergers while vigorously shedding services and staff.''
    Even in Cook's initial TV interview, he said the law wasn't ``the 
precipitating factor.'' So how does CatholicVote.org justify its claim 
that ``the'' reason to ``close'' the hospitals is ``Obamacare''? We 
asked the group's president, Brian Burch. He said that how big a role 
the law played could be debated, but ``the fact of the matter is, it 
was a factor.'' He says the ad uses Cook's exact words, saying the law 
is ``absolutely playing a role.'' As for the CEO's subsequent 
statements, Burch said: ``I think he's trying to backtrack on his 
statement.''
    Gladys Bernet, a spokeswoman for Mercy Health Partners, told us 
that Cook didn't bring up the health care law as a factor in the 
original TV interview, but he was responding to the reporter's 
question. She says the ``mistake'' was that his ``response was too 
nuanced.'' If you listen to his comments carefully, she says, Cook says 
that the health care law was a factor in long-term planning. But, ``was 
it the precipitating factor in this particular decision? No.'' Says 
Bernet: ``That's a very nuanced answer.''
    Nuance, however, rarely makes it into political messages.
    Correction, Oct. 18: We originally wrote that Sister Keehan was 
present at the White House signing ceremony for the health care law. 
That's incorrect. She was traveling and could not attend the ceremony, 
according to the Catholic Health Association.

                                 
                        Families USA, Statement
    Families USA is a national nonprofit, nonpartisan organization for 
health care consumers. Our mission is to ensure that all Americans have 
access to high-quality, affordable health care. Families USA has a 
strong interest in the protection of Medicare beneficiaries. We submit 
these comments to the House Committee on Ways and Means with regard to 
the Hearing on the Health Care Law's Impact on the Medicare Program and 
Its Beneficiaries.
    For more than a year, opponents of the Patient Protection and 
Affordable Care Act (Affordable Care Act) have erroneously charged that 
health reform was enacted at the expense of Medicare and its 
beneficiaries. This is simply not true. Medicare's benefits are 
improved under the Affordable Care Act. And although Medicare's future 
spending is lower under the health law than it was projected to be 
prior to enactment, this reduction is not the result of across-the-
board reductions in payments or from reductions in benefits. The 
savings come from making Medicare work better by improving the way 
health care providers deliver care; modernizing how Medicare pays for 
services; and eliminating waste, fraud, and abuse.

Improving Medicare Benefits

Closing the Doughnut Hole

    When the Medicare Part D prescription drug program was created in 
2003, it included a gap in coverage known as the doughnut hole. When in 
the coverage gap, a beneficiary had to pay 100 percent of the cost of 
the prescription drugs purchased. In 2010, the coverage gap began once 
the beneficiary paid $2,830 for prescription drugs and ended once 
prescription drug costs reached $6,440. This meant that a beneficiary 
with significant prescription drug needs was responsible for $3,610 in 
out-of-pocket costs before catastrophic coverage started.
    The Affordable Care Act closes that gap, saving beneficiaries money 
and improving access to needed medications. In 2010, any beneficiary 
who fell into the coverage gap received $250 to help defray the cost of 
medications. In 2011, once a beneficiary spends $2,840, he or she 
reaches the doughnut hole. However, beneficiaries will no longer pay 
100 percent of the cost of drugs. Now, beneficiaries will pay 50 
percent of the cost of brand-name prescription drugs and 93 percent of 
the cost for generic drugs. Each year until 2020, the discount provided 
will increase, until the coverage gap is closed.

Improving Access to Preventive Services

    Prior to the Affordable Care Act, Medicare beneficiaries were 
liable for deductibles and co-insurance for some preventive services, 
even if those services were covered by Medicare. If Medicare did not 
cover the service, such as an annual physical exam, the beneficiary had 
to pay the full cost of the service. Since these costs could be 
unaffordable for Medicare beneficiaries, they may have foregone these 
services.
    The Affordable Care Act recognizes the importance of preventive 
health care, both in terms of how it can improve people's health and in 
terms of the savings it can create for the health care system. That's 
why, for the first time in the history of the Medicare Program, as of 
January 1, 2011, beneficiaries will no longer have to pay out of their 
own pockets for preventive services like cancer screenings or 
mammograms. Medicare will also be able to add coverage in the future 
for new preventive services that are found to be effective.
    The Act also gives beneficiaries the option to spend more time with 
their doctor at their annual physical (or wellness visit) to develop a 
personalized prevention plan together. These plans include information 
about the beneficiary's current health status and a schedule for 
preventive services that the beneficiary should get over the next five 
to 10 years. These changes mark an important shift in Medicare's 
approach toward helping beneficiaries stay well, rather than only 
treating them when they are sick.

Moderating Premiums

    Most Medicare beneficiaries will see slower growth in their 
Medicare Part B premiums than they would have seen if the Affordable 
Care Act had not passed. By 2018, Medicare Part B premiums for most 
beneficiaries are estimated to be $200 less per year than they 
otherwise would have been.

Improving Medicare's Financial Outlook

    Technological advances in health care services have caused care to 
become more expensive, and as a result, Medicare spending continues to 
increase. To ensure the sustainability of the program, it is necessary 
to make changes that improve and modernize the way services are paid 
for. In 2009, the Medicare trustees estimated that the Medicare trust 
fund would be insolvent by 2017, meaning that, after that date, the 
trust fund wouldn't have sufficient money to cover all of Medicare's 
estimated costs. In order to extend the life of the trust fund and to 
improve benefits for people with Medicare, the Affordable Care Act 
makes carefully targeted changes to the program to achieve $418 billion 
in savings between now and 2019.\1\ These changes extend the life of 
the Medicare trust fund by 12 years to 2029.
---------------------------------------------------------------------------
    \1\ Centers for Medicare and Medicaid Services, Affordable Care Act 
Update: Implementing Medicare Cost Savings, (Washington: August 2010), 
available online at http://www.cms.gov/apps/docs/ACA-Update-
Implementing-Medicare-Costs-Savings.pdf.
---------------------------------------------------------------------------
    While $418 billion over 10 years is a considerable spending 
reduction, it is important to understand that the savings are only a 
small amount compared to the total spending that will occur in the 
program over the same period of time. Over the next 10 years, Medicare 
will still spend about $6.7 trillion (down from a projected $7.1 
trillion before the law was passed).\2\ While the annual growth in 
spending will decrease from 6.8 percent to 5.5 percent, the program's 
spending will still grow by more than 5 percent per year over the next 
10 years. In other words, the Medicare Program will spend more in 10 
years than it does now (the rate of growth will just be slower), 
meaning that it will continue to be able to meet the needs of 
beneficiaries today and in the future.
---------------------------------------------------------------------------
    \2\ Kaiser Family Foundation, Medicare Spending and Financing Fact 
Sheet (Washington: August 2010), available online at http://
www.kff.org/Medicare/upload/7305-05.pdf.
---------------------------------------------------------------------------
    Historically, spending reductions are not unusual, and compared to 
other legislation, the reductions in the Affordable Care Act are 
modest.\3\ For example, in 1997, faced with a forecast that the 
Medicare trust fund would become insolvent by 2001, Congress enacted 
substantial changes to the Medicare Program, which were estimated to 
reduce future Medicare spending by 12 percent over 10 years.\4\ By 
contrast, the Affordable Care Act is projected to reduce Medicare 
spending by about 5 to 7 percent over 10 years.
---------------------------------------------------------------------------
    \3\ Jennifer O'Sullivan, Medicare: History of Part A Trust Fund 
Insolvency Projections (Washington: Congressional Research Service, 
March 28, 2008), available online at http://aging.senate.gov/crs/
Medicare14.pdf.
    \4\ Kaiser Family Foundation, Medicare Savings in Perspective: A 
Comparison of 2009 Health Reform Legislation and Other Laws in the Last 
15 Years (Washington: December 2009), available online at http://
www.kff.org/healthreform/upload/7983-02.pdf.

---------------------------------------------------------------------------
Achieving Cost Savings

    So how are these cost savings in Medicare achieved? The savings are 
achieved by giving health care providers incentives to work together to 
provide high-quality, efficient care and by eliminating waste, fraud, 
and abuse. These measures not only save money, but they also improve 
care for beneficiaries.

Encouraging Coordination among Health Care Providers 

    Under Medicare's current fee-for-service payment system, health 
care providers are paid for each individual service they provide to a 
patient. This means that the more services they provide, the more money 
they are paid. This incentive to provide more care is a major 
contributor to increasing health care costs. The Affordable Care Act 
begins the process of moving away from the fee-for-service payment 
system and toward a value-based system, where health care providers are 
paid based on the value of the care they provide.
    All providers can lower costs and improve the quality of care, 
thereby improving the value of that care, by working together to 
coordinate patient care. One of the new payment mechanisms created by 
the Affordable Care Act allows doctors, hospitals, and other health 
care providers to join together to form accountable care organizations 
(ACOs). Providers in an accountable care organization will take 
responsibility for the cost and quality of the health care delivered. 
If the accountable care organization delivers high-quality care at 
lower costs, the providers in the accountable care organization can 
share in the savings they generate. For example, by working together, 
health care providers can avoid duplicating tests and can monitor a 
patient's prescription drugs to make sure the patient is not taking 
medications that interact poorly, among other things. This new payment 
approach will create an estimated $5 billion in savings for the 
Medicare Program. Just as importantly, it will improve the quality of 
the care that beneficiaries receive and lay the groundwork for more 
substantial savings and improvements in the future.

Eliminating Waste, Fraud, and Abuse

    The Affordable Care Act takes significant steps to protect Medicare 
by cracking down on waste, fraud, and abuse. The law provides relevant 
agencies with an additional $350 million over the next decade to hire 
more investigative personnel to aggressively monitor and prevent waste, 
fraud, and abuse in the system.
    The health reform law will require Medicare providers to go through 
stricter screenings, such as background checks and site visits, to 
ensure that fraudsters, such as a doctor who bills for services he or 
she never provided, never enter the program to begin with. In addition, 
the Affordable Care Act imposes harsher fines and penalties on Medicare 
participants who submit false information on applications and claims. 
With stronger penalties, ``bad actors'' should be deterred from 
committing fraud and abusing the system.
    The nonpartisan Congressional Budget Office (CBO) estimates that 
every $1 that is invested to fight fraud results in $1.75 in savings. 
The provisions in the law to fight waste, fraud, and abuse are expected 
to save the Medicare program about $5 billion over the next 10 years.

Paying for High-Quality Care

    Among the ways that the health reform law begins to rein in 
unnecessary spending while also improving the care beneficiaries 
receive is by encouraging hospitals to prevent avoidable readmissions 
and hospital-acquired conditions. Once these changes are fully 
implemented, they will save the Medicare Program more than $11 billion.
    Sometimes it is necessary for a patient to be readmitted to the 
hospital shortly after being discharged--for example, if the patient 
must have multiple surgeries to treat his or her condition. But 
sometimes, a patient must be readmitted for a reason that could have 
been avoided, such as complications from not taking medication properly 
because no one explained how the medication would need to be taken.\5\ 
Hospitals can decrease the number of avoidable readmissions by 
providing better care when the patient is in the hospital and by 
improving communication with patients (and their care givers) and other 
health care providers who care for the patient. That way, patients know 
how to care for themselves when they leave the hospital and their 
doctors know, for example, what tests were performed while the patient 
was in the hospital and the medications the patient is taking.
---------------------------------------------------------------------------
    \5\ The Medicare Payment Advisory Commission (MedPAC), in its 2007 
report to Congress, estimated that about 18 percent of patients were 
readmitted to the hospital within 30 days of being discharged, and of 
that, about 13 percent were potentially avoidable. MedPAC estimated the 
cost to Medicare for potentially avoidable readmissions within 30 days 
of discharge was $12 billion. Available online at http://
www.medpac.gov/chapters/Jun07_Ch05.pdf.
---------------------------------------------------------------------------
    Beginning in 2013, hospitals that have high rates of readmissions 
for certain health conditions will see their Medicare payment rates 
reduced. To avoid a reduction in their payments, hospitals will need to 
implement programs to improve the quality of care that patients receive 
while in the hospital and ensure that patients, care givers, and health 
care providers receive proper information when patients are discharged 
from the hospital.
    The Affordable Care Act also builds on existing efforts to improve 
care and save money when patients are still in the hospital. Since 
October 2008, Medicare has imposed a financial penalty on hospitals 
each time a patient experiences certain hospital-acquired conditions, 
such as an injury from falling, bedsores, or an object being left in a 
patient during surgery. The Affordable Care Act takes this a step 
further. Starting in 2014, each hospital's record for hospital-acquired 
conditions will be posted online publicly at 
www.hospitalcompare.hhs.gov. In addition, if a hospital has a high rate 
of certain hospital-acquired conditions, its total Medicare payment 
will be reduced by 1 percent.

Modernizing Medicare's Payment System

    The majority of Medicare savings under the Affordable Care Act come 
from altering the way hospitals, nursing homes, and other health care 
facilities are paid. Traditionally, Medicare increases payments to 
hospitals and other health care facilities each year using a 
complicated formula. Each hospital gets this increase regardless of 
whether it is providing good-quality, efficient care. The health reform 
law changes this.
    The Affordable Care Act reduces these annual adjustments over the 
next 10 years. The purpose of this change is to encourage hospitals and 
other health care facilities to improve their productivity through 
increased efficiency. Each year, other industries increase their 
productivity by improving their efficiency so that they provide more 
for less, which lowers costs for consumers. The health reform law 
applies this same principle to the health care industry, which will 
save the Medicare Program $205 billion over 10 years.
    Some people have questioned whether hospitals will be able to 
continue to operate after these payment reductions take effect. But the 
hospital industry agreed to these payment reductions, acknowledging 
that they will gain from the millions of newly insured people and that 
savings can be achieved through improved efficiencies, such as 
preventing duplications of tests by using electronic health records to 
monitor the care that a patient has already received.\6\ Also, 
hospitals will be able to avoid some of the payment reductions by 
providing high-quality care. Beginning in 2012, hospitals that meet 
certain performance levels will receive higher Medicare payments.
---------------------------------------------------------------------------
    \6\ Ceci Connolly and Michael Shear, Hospitals Reach Deal with 
Administration, The Washington Post, July 7, 2009, available online at 
http://www.washingtonpost.com/wp-dyn/content/article/2009/07/06/
AR2009070604053.html.

Leveling the Playing Field between Original Medicare and Medicare 
---------------------------------------------------------------------------
        Advantage 

    In recent years, overpayments to Medicare Advantage plans have been 
identified as a substantial source of waste within the Medicare system. 
These plans were established in the eighties with the expectation that 
they would lower Medicare costs by providing coverage more efficiently. 
Instead, Medicare Advantage plans have been paid an average of 14 
percent more than it would have cost to treat the same beneficiaries in 
original Medicare. In 2009, that was equal to about $1,138 per 
beneficiary, for a total of $11.4 billion in overpayments. As a result 
of this increased cost, Medicare Part B premiums are about $3.00 more 
per month than they otherwise would be for all Medicare beneficiaries, 
not just those in these private plans. While these overpayments 
generated considerable profits for the private insurance companies, 
they did not benefit the Medicare trust fund. Instead, they moved up 
the insolvency of the trust fund by 18 months.
    In 2011, under the Affordable Care Act, payment rates for Medicare 
Advantage plans are frozen at 2010 levels. Despite this freeze in 
payments, analysis of the Medicare Advantage market for 2011 shows that 
Medicare beneficiaries were able to choose among, on average, 24 
Medicare Advantage plans by county. Premiums remained essentially 
stable from 2010 to 2011, which is a significant difference from 2009 
to 2010, when premiums increased by 22 percent.\7\ In addition, 
estimates show that Medicare Advantage will experience a 5 percent 
increase in enrollment in 2011.\8\ Beginning in 2012, rates will be 
reduced over a 3- to 7-year period so that costs are closer to those of 
original Medicare. High-quality plans will receive bonus payments of 5 
to 10 percent. These changes will save the Medicare Program $145 
billion.
---------------------------------------------------------------------------
    \7\ Marsha Gold, Gretchen Jacobson, Anthony Damico, and Tricia 
Neuman, Medicare Advantage 2011 Data Spotlight: Plan Availability and 
Premiums (Washington: Kaiser Family Foundation, October 2010), 
available at http://www.kff.org/Medicare/upload/8117.pdf.
    \8\ Centers for Medicare and Medicaid Services, Medicare Advantage 
Premiums Fall, Enrollment Rises, Benefits Similar Compared to 2010 
(Washington: September!, 10), Aavailable 
online at http://www.cms.gov/apps/media/press/
release.asp?Counter=3839&intNumPerPage=
10&checkDate=&checkKey=&srchType=1&numDays=3500&srchOpt=
0&srchData=&keywordType=All&chkNewsType=1%2C+2%2C+3%2C+4%2C+5&intPage=&s
howAll=&pYear=&year
=&desc=&cboOrder=date.
---------------------------------------------------------------------------
    Opponents of health reform claimed that these changes would result 
in beneficiaries who are enrolled in Medicare Advantage plans losing 
their coverage. In fact, Medicare beneficiaries will not lose coverage 
for Medicare's guaranteed benefits, which include hospital inpatient 
coverage and doctor visits, among other things. Each private plan will 
have to make a business decision about how it wants to operate under 
the new payment system. Plans that are not able to provide health 
coverage efficiently may reduce coverage or withdraw from Medicare. But 
high-quality, efficient plans will continue to offer coverage, and the 
new quality bonuses may make these plans more attractive.\9\ 
Furthermore, everyone with Medicare will always have the option of 
getting coverage through original Medicare if they no longer like their 
Medicare Advantage plan.
---------------------------------------------------------------------------
    \9\ Humana Inc. President and chief executive officer Michael B. 
McCallister ``told industry analysts during a conference call to 
discuss quarterly earnings that Medicare Advantage remains a tremendous 
opportunity and acknowledged that he's been surprised that more 
competitors haven't ventured into the market.'' ``On the Call: Humana 
CEO Michael McCallister,'' Associated Press/BloombergBusinessWeek, 
August 2, 2010, available online at http://www.businessweek.com/ap/
financialnews/D9HBFU5G0.htm.

---------------------------------------------------------------------------
Conclusion

    As the health care system advances and new, more expensive 
treatments become available, the Medicare Program must also adjust to 
meet the changing needs of beneficiaries. It must ensure that it can 
continue to offer the coverage that millions of seniors and people with 
disabilities have come to rely on. The Affordable Care Act takes 
important steps to ensure that Medicare is there for Americans in the 
future, while improving benefits for tens of millions of beneficiaries, 
improving their access to care while lowering their out of pocket 
costs.

                                 
               American College of Physicians, Statement
    The American College of Physicians (ACP) is pleased to submit the 
following statement for the record of the above referenced hearing. ACP 
is the largest medical specialty organization and the second-largest 
physician group in the United States. ACP members include 130,000 
internal medicine specialists (internists), related subspecialists, and 
medical students. Internists specialize in the prevention, detection, 
and treatment of illness in adults. Our membership includes physicians 
who provide comprehensive primary and subspecialty care to tens of 
millions of patients, including taking care of more Medicare patients 
than any other physician specialty.
    ACP appreciates the Committee's interest in the effect of the 
Affordable Care Act (ACA) on the Medicare Program and its 
beneficiaries. The College believes that this legislation contains 
important and essential provisions to begin to address America's severe 
shortage of primary care physicians for adult patients, improve 
benefits for preventive services, empower patients and physicians to 
make patient care decisions based on the best evidence of clinical 
effectiveness, and extend the solvency of the Medicare Part A Trust 
Fund. We also recognize that the legislation can and should be 
improved, and we urge the Committee to seek bipartisan common ground on 
a plan to permanently repeal the Sustainable Growth Rate (SGR) formula, 
to further support the value of primary care in Medicare payments, and 
to initiate reforms to make the costs and financing of the program 
sustainable over both the short- and long-term while reducing the 
federal budget deficit.
    Our statement will particularly focus on the continued need for 
payment and delivery system reforms to support the value of care 
provided by primary care physicians. The ACA supports this goal by 
beginning to reform payment and delivery systems. Other provisions of 
the law, not under the jurisdiction of this committee, will fund 
training programs that have a proven record of producing more primary 
care physicians who practice in areas of the country with the greatest 
need. Given the major role played by the Medicare program in financing 
care for America's senior and disabled citizens and the fact that so 
many other payers follow Medicare's lead, the Medicare payment reforms 
initiated by the ACA are of particular significance to the program and 
its beneficiaries.

Why Is It So Important to Address the Shortage in the Delivery of 
        Primary Care?

    Investment in primary care is essential to achieving a high 
performing, efficient and effective health care system. An ACP analysis 
of over 100 annotated research studies shows that the availability of 
primary care physicians in a community is positively associated with 
better outcomes and lower costs of care.
    Yet the United States is facing a growing shortage of physicians in 
key specialties, most notably in general internal medicine and family 
medicine--the specialties that provide primary care to most adult and 
adolescent patients. A recent peer-reviewed study projects that there 
will be a shortage of up to 44,000 primary care physicians for adults, 
even before the increased demand for health care services that will 
result from near universal coverage is taken into account. A case in 
point is the Commonwealth of Massachusetts. While the state has been 
able to achieve coverage for nearly all of its residents, shortages of 
primary care physicians have led to long waits for appointments.
    The looming primary care physician shortage stems from the fact 
that the demand for primary care in the United States is expected to 
grow at a rapid rate while the nation's supply of primary care 
physicians for adults is dwindling and interest by U.S. medical school 
graduates in pursuing careers in primary care specialties is steadily 
declining. Primary care physicians provide 52% of all ambulatory care 
visits, 80% of patient visits for hypertension, and 69% of visits for 
both chronic obstructive pulmonary disease and diabetes, yet they 
comprise only one-third of the U.S. physician workforce, and if current 
trends continue, fewer than one out of five physicians will be in an 
adult primary care specialty.
    With the aging of the U.S. population, a greater proportion of our 
citizens are enrolled in the Medicare program. Older Americans--with 
increasing incidences of chronic diseases--are especially disadvantaged 
by the shortage of primary care physicians to care for them.
    Even with the ACA's policies that are beginning to address the 
crisis in primary care, the United States will likely continue to face 
a shortage of primary care physicians for adults, as well as shortages 
in other critical physician specialties, but this shortage will be much 
more severe if the ACA's policies to reform payment and delivery 
systems and to ensure adequate workforce capacity are under-funded or 
repealed.
    The following ACA provisions help address this crisis in primary 
care and further contribute to the delivery of higher quality, more 
effective and efficient care to our Medicare and, in some cases, 
Medicaid beneficiaries and enrollees in private insurance plans. The 
College strongly supports the continued implementation and funding of 
these provisions.

I. Payment and Delivery System Reforms

Primary Care Incentive Program

    This program begins to address inequities in payments for primary 
care by providing a 10 percent bonus payment, in addition to the usual 
Medicare fee schedule amount, for designated primary care services 
provided by internists, family physicians, geriatricians and 
pediatricians. In order to qualify for the bonus, at least 60 percent 
of Medicare allowed charges of these physicians must consist of the 
designated primary care services: office, nursing facility, 
domiciliary, and home services. The bonus program took effect on 
January 1, 2011 and will continue through 2015.
    This important ACA provision begins to address disparities in 
payments that are major barriers to physicians entering and remaining 
in primary care specialties. A new report by the Council on Graduate 
Medical Education recommends that compensation to primary care 
physicians be increased to 70 percent of the average payment for other 
physician specialties in order to train and retain a sufficient supply 
of primary care physicians. While the Primary Care Incentive Program 
falls considerably short of COGME's recommendation, it will result in 
the largest sustained increase in payments to primary care physicians 
in decades. Congress should sustain this critically important program, 
while enacting further reforms to support the value of primary care.

Center for Medicare and Medicaid Innovation

    There is substantial agreement that the current Medicare resource-
based fee-for-service (FFS) payment system for physicians directly 
contributes to unnecessary expenditures and undervalues the value of 
care provided by internal medicine specialists and other primary care 
physician specialties. It provides an incentive for physicians and 
other healthcare professionals to deliver services of marginal or 
uncertain value. The ACA accelerates the adoption and dissemination of 
alternatives to conventional fee-for-service by establishing a new 
Center for Medicare & Medicaid Innovation (CMMI). The CMMI will allow 
the Centers for Medicare and Medicaid Services (CMS) to test models 
that promote broad payment and practice reform within Medicare (as well 
as Medicaid and the Children's Health Insurance Program) with a 
particular focus on reforming primary care payments while preserving or 
enhancing the quality of care.
    Importantly, the ACA provision authorizing the CMMI requires that 
it consider models to promote broad payment and practice reform in 
primary care, including patient-centered medical home (PCMH) models for 
high-need individuals, and models that transition primary care 
practices away from fee-for-service based reimbursement. The PCMH is a 
care model that has received substantial support from a variety of 
physician organizations, businesses, health plans, and patient advocacy 
groups. It is typically delivered by a team of healthcare professionals 
within a physician-led primary care practice and it requires delivery 
of care that centers on the needs and preferences of the patient. It 
expands care access, it promotes improved care coordination/
integration, it promotes care management and education toward care 
self-management where appropriate, and it is based on the development 
of processes to ensure continuous quality improvement. The model also 
recognizes the importance of integrating into patient care members of 
the medical neighborhood, including specialty and subspecialty 
practices, hospitals and other related care providers, including 
compensating non-primary care specialists for their essential 
contributions to coordinating care with a patient in a PCMH. A recent 
review of early results of PCMH demonstration projects reflects its 
potential to improve care quality, patient access and lower costs.
    The concept of encouraging adoption by Medicare of the PCMH model 
has a long legacy of bipartisan support. When Republicans were in 
control of the 109th Congress, legislation was enacted to require that 
Medicare initiate a demonstration project to enroll Medicare patients 
in Patient-Centered Medical Homes, and Republicans and Democrats alike 
have continued to recognize the importance of encouraging broad 
adoption of PCMHs in Medicare and other programs.
    Also of significance is the provision allowing for the rapid 
testing and implementation into the federal healthcare system of those 
payment changes found to be effective. The Secretary has authority to 
broadly implement into the Medicare program aspects of projects that 
have been found to be successful without the necessity of further 
legislative approval. Through the CMMI, the ACA will encourage 
innovation and adoption of delivery system and payment reforms to allow 
Medicare patients to receive services of high quality and 
effectiveness, while helping to ensure the efficient use of limited 
federal resources.

Medicare Shared Savings Through Accountable Care Organizations

    The ACA instructs the Secretary to implement, no later than January 
1, 2012, a voluntary shared savings program that promotes 
accountability for services delivered to a defined Medicare fee-for-
service (FFS) patient population with the goals of increasing the 
quality and efficiency of services delivered. The College supports the 
implementation and evaluation of this program. It directly provides an 
incentive for physicians and other healthcare professionals to improve 
care integration and efficiency while, at the same time, helping to 
ensure improved quality of delivered care. It also correctly recognizes 
the importance of primary care as a foundation of these Accountable 
Care Organization efforts. Finally, it is structured, at least 
legislatively, to allow entrance into the program of a variety of 
different types collaborating practices. This flexibility serves to 
promote innovation that will help better serve our Medicare 
beneficiaries. The College will monitor the rule making process very 
closely to ensure that this flexibility is maintained upon 
implementation--particularly the ability of small practices that 
provide the majority of care under Medicare to participate effectively 
within this program. This integrated model of payment appears quite 
promising. CMS should have the resources to implement and evaluate it 
effectively as an alternative payment model under Medicare.

Identifying and Correcting Mis-Valued Services Paid Under the Medicare 
        Physician Fee Schedule

    The ACA contains a provision, which took effect in March, 2010, 
which promotes identification and correction of mis-valued physician 
fee schedule services. The physician fee schedule drives approximately 
$80 billion in annual Medicare payments for physician services and 
substantially affects payments made by other payers. Congress included 
the provision on the belief that too little attention is devoted to 
monitoring whether services have become overvalued or mis-valued. Mis-
valued services distort incentives and can contribute to the overuse or 
underuse of specific services on the basis of financial, as opposed to 
clinical, reasons. In addition, inappropriate valuation of services 
affects physicians' decisions to enter or remain in specialty fields 
that perform undervalued services. Payments to primary care physicians, 
and other physician specialties that primarily provide undervalued 
evaluation and management services, have been significantly adversely 
affected by these mis-valued service codes.
    The provision contains two main parts: providing direction to the 
Secretary of the Department of Health and Human Services (HHS) largely 
for identifying and correcting mis-valued services; and requiring the 
Secretary of HHS to establish a process to validate relative value 
units for physician fee schedule services. The College continues to 
support and participate in the current process in which the American 
Medical Association's Relative Value Update Committee (RUC) provides 
recommendations to CMS regarding changes in the value of physician 
services. At the same time, we believe that the Secretary needs to have 
the capability and responsibility to better confirm and validate these 
recommendations, and expand on the recommendations provided by the 
RUC--particularly regarding over-valued services.
    Until new payment models that more effectively promote high quality 
and efficient care are designed and implemented on a widespread basis, 
ensuring adequate resources within CMS to refine the current Medicare 
physician fee schedule remains crucial. This helps to ensure that 
services are delivered for appropriate clinical, not financial, reasons 
and it helps increase the entrance of qualified physicians and other 
healthcare professionals into primary care and other fields that are 
adversely affected by the undervaluation of their services.

II. Improved Benefits in the Traditional Medicare Program

Coverage of Preventive Services

    The ACA provides incentives for Medicare beneficiaries to obtain 
preventive services which will lead to the prevention and treatment of 
health problems. (Incentives are also provided for Medicaid recipients 
and the privately insured.) Beginning in 2011, the Act eliminates 
coinsurance, deductibles and copayments for approved preventive 
services and tests. These include blood-pressure and cancer screenings, 
mammograms, Pap tests, and immunizations. Also beginning in 2011, 
Medicare beneficiaries became eligible for a new benefit, an annual 
wellness exam that includes a wellness check-up and personalized 
prevention plan at no cost to the patient.
    Depending on the results of the wellness exam, patients will be 
provided with a 5-10 year plan for screenings and other preventive 
services as well as advice and referrals for educational services 
covering weight loss, physical activity, smoking cessation and 
nutrition.
    The prevention of disease is an important aspect of care delivered 
by internal medicine specialists. As a result of the ACA, 50 million 
Medicare patients are now able to take advantage of these positive 
incentives for improved health status through preventive services.

Phase Out of the ``Doughnut Hole''

    The ACA provides subsidies to reduce and eventually eliminate the 
``doughnut hole,'' the gap in coverage in which the enrollee is 
responsible for the full cost of prescription drugs once an initial 
period of coverage is exceeded. Prior to enactment of the ACA, once in 
the doughnut hole, beneficiaries were required to bear all of the cost 
of prescription medication until a catastrophic threshold was reached.
    Beginning in 2011, the ACA requires that drug manufacturers provide 
a 50 percent discount on brand name prescriptions while the beneficiary 
is in the doughnut hole. In addition, Medicare total cost calculations 
will include the non-discount price of the drugs. Thus beneficiaries 
will be able to reach the catastrophic threshold more quickly while 
benefiting from decreased out-of-pocket spending.
    Beginning in 2011, a federal subsidy is phased in for generic drugs 
so that the coinsurance is reduced from 100 percent to 25 percent by 
2020 for beneficiaries within the doughnut hole.
    As it is estimated that about 25 percent of beneficiaries fall into 
the doughnut hole in a given year, these ACA provisions provide a 
valuable benefit to millions of America's seniors.

III. Empowering Patients and Physicians to Make Informed Decisions

Funding for Comparative Effectiveness Research to Inform Clinical 
        Decision-making

    From the perspective of practicing physicians and their Medicare 
(and other) patients, the insufficient availability of data about what 
works best for whom creates critically important limitations for the 
clinical decision-making process. Each day, in the privacy of the 
examination room, patients are treated for conditions for which there 
are numerous treatment options. This includes treatment for common 
conditions, such as intermittent heartburn, more serious chronic 
conditions, such as high blood pressure or diabetes, and immediate 
life-and-death issues, such as choosing the best approach for the 
treatment of acute coronary syndrome or an aortic dissection. The 
limited availability of valid data to supplement the physician's 
clinical experience and professional knowledge--data that compare the 
clinical effectiveness of different treatments for the same condition--
makes it difficult to ensure that an effective treatment choice is 
made, one that meets the unique needs and preferences of the patient.
    The ACA helps to address this issue by establishing an independent, 
non-profit, tax exempt corporation, known as the ``Patient-Centered 
Outcomes Research Institute'' (PCORI) to provide comparative 
effectiveness information to clinicians and patients. The law also 
funds the development of shared decision making tools to translate the 
results of the research into information that is understandable by 
patients and that can be the basis of shared decision-making with their 
personal physicians. In this way, Medicare patients and their 
physicians will be empowered to make informed, and therefore improved, 
health decisions based on the best and most recent evidence of clinical 
effectiveness.

IV. Additional Needed Legislation

    ACP believes that Congress should enact additional legislation to 
facilitate further payment and delivery system reforms that recognize 
and support the value of care provided by internists and other primary 
care physicians.

Repeal of the SGR Formula

    It is essential that the Medicare Sustainable Growth Rate (SGR) 
formula be repealed and replaced with a new framework that provides 
predictable, positive and stable updates for all physician services and 
protects primary care from experiencing cuts in payments due to 
increases in utilization in other physician services. This could be 
accomplished by one or more of the following options, potentially in 
combination with each other: (1) setting a floor, e.g., at no less than 
the percentage annual increases in the cost of delivering services, on 
payment updates for primary care services, (2) providing higher 
spending targets for primary care than for other categories of 
services, should Congress decide to replace the SGR with separate 
spending targets for distinct categories of services, (3) exempting 
practices that are organized as a PCMH, and that are recognized as such 
by a process established by HHS, from payment reductions in any given 
calendar year and (4) exempting primary care services from budget 
neutrality adjustments resulting from changes in relative values and 
behavioral offset assumptions.

More Effective Medical Liability Reforms

    ACP is one of more than 100 physician membership organizations that 
have endorsed H.R. 5, the ``Help Efficient, Accessible, Low-cost, 
Timely Healthcare (HEALTH) Act of 2011.'' Introduced by Representative 
Phil Gingrey, MD, this bill would enact proven reforms to reduce the 
costs of defensive medicine, including caps on non-economic damages. We 
also are encouraged that President Obama said in his State of the Union 
address that he is willing to ``look at other ideas to bring down 
costs, including one that Republicans suggested last year--medical 
malpractice reform to rein in frivolous lawsuits.'' Realizing that this 
issue is outside the jurisdiction of the Ways and Means Committee, ACP 
agrees that there is an opportunity now for Congress to work with the 
president on a bipartisan basis to address the enormous costs of 
defensive medicine, which contribute to higher spending by the Medicare 
program.
    The ACA authorizes grants for state programs to improve patient 
safety and test alternatives to the traditional medical liability tort 
system. Although such grants may help identify effective ways to 
improve patient safety and reduce the costs of defensive medicine, the 
ACA did not do enough to address the costs of defensive medicine and to 
ensure that patients who are truly injured by medical negligence get 
the compensation they need for their injuries.
    Although estimates of the cost of defensive medicine vary, one 
recent study estimates the cost at $55.6 billion annually--more than 
half of the estimated annual federal spending under the ACA. Other 
experts believe that the cost of defensive medicine is much higher. The 
cost of defensive medicine leads to higher Medicare spending because 
the program ends up paying for unnecessary services, services that are 
billed to the program because physicians fear being sued if they don't 
order every extra marginal test and treatment available. Such excess 
Medicare spending leads to higher out-of-pocket costs to Medicare 
enrollees, contributes to the growing federal deficit, and undermines 
the long-term financing of the program. The tens of billions of dollars 
wasted each year on defensive medicine could free up funding to provide 
coverage to many millions of Americans, to fund other needed programs, 
and/or to reduce the federal budget deficit.
    Tort reform and changes in legal standards concerning professional 
liability are needed to remove a major impediment that inhibits 
physicians from responsibly ordering tests and procedures based 
primarily on clinical and cost-effectiveness in accord with practice 
guidelines.
    In addition to the proven reforms in H.R. 5, ACP believes that 
health courts offer a promising approach that should be broadly tested 
nationwide. Under today's judicial system, judges and juries with 
little or no medical training decide medical malpractice cases. The 
majority of medical malpractice cases involve very complicated issues 
of fact, and these untrained individuals must subjectively decide 
whether a particular provider deviated from the appropriate standard of 
care. Therefore, it is not at all surprising that juries often decide 
similar cases resulting in very different outcomes.
    The concept of health courts (also called ``medical courts'') is a 
specialized administrative process where judges, without juries, 
experienced in medicine would be guided by independent experts to 
determine contested cases of medical negligence. The health court model 
is predicated on a ``no-fault'' system, which is a term used to 
describe compensation programs that do not rely on negligence 
determinations. The central premise behind a no-fault system is that 
patients need not prove negligence to access compensation. Instead, 
they must only prove that they have suffered an injury, that it was 
caused by medical care, and that it meets whatever severity criteria 
applies; it is not necessary to show that the third party acted in a 
negligent fashion.

Conclusion

    While ACP acknowledges the strong disagreements between Republicans 
and Democrats on many aspects of the ACA, the legislation contains 
provisions that have enjoyed the support of both parties. To be clear, 
ACP does not believe that the ACA should be repealed, but we do believe 
that Congress should seek common ground on building and improving upon 
the law, particularly as it relates to payment and delivery system 
reforms.
    Both parties have long supported the need to improve and reform 
payment policies to support the value of primary care, to fund primary 
care training programs, and to improve the quality of services 
delivered. These are not Democratic or Republican issues, but the right 
thing to do for Medicare and other patients and constituents. The 
College is hopeful that such programs will continue to find bipartisan 
support in the 112th Congress. ACP stands ready to assist in bringing 
the two parties together on these important issues. Together we can 
achieve the very best health care system possible for America's seniors 
and all of its citizens.

                                 
              America's Health Insurance Plans, Statement
I. Introduction

    America's Health Insurance Plans (AHIP) is the national association 
representing approximately 1,300 health insurance plans that provide 
coverage to more than 200 million Americans. Our membership includes 
sponsors of Medicare Advantage health plans and Medicare Part D 
prescription drug plans who have a long history of providing high 
quality coverage to Medicare beneficiaries and a strong commitment to 
the long-term success of the Medicare program. Our members also 
participate in other public programs and offer a broad range of health 
insurance products in the commercial marketplace.
    We appreciate the committee's interest in examining the impact of 
the Affordable Care Act (ACA) on the Medicare program and the 48 
million Americans it serves. The provisions of the new law--most 
notably, the deep funding cuts--have far-reaching implications for the 
quality of care, benefits, and choices available to Medicare 
beneficiaries. The law's impact will be particularly severe for the 11 
million seniors who have chosen to enroll in Medicare Advantage plans 
because they value the improved quality of care, additional benefits, 
and innovative services these plans provide.
    Our statement focuses on two areas:

          We review data and research findings demonstrating 
        the impact the ACA will have on beneficiaries who rely on the 
        Medicare Advantage program to meet their health care needs.
          We review the success Medicare Advantage plans have 
        achieved in improving health care quality and patient care for 
        beneficiaries, and the importance of preserving private health 
        plan choices to achieve greater value and efficiency throughout 
        the entire Medicare program.

II. The Impact of the ACA on Medicare Advantage Enrollees

    According to the Congressional Budget Office (CBO),\1\ the ACA will 
directly reduce funding for the Medicare Advantage program by an 
estimated $136 billion over ten years (2010-2019). CBO further 
estimates that, because of the linkage between Medicare Advantage 
payment benchmarks and Medicare fee-for-service (FFS) spending, the 
ACA's Medicare FFS reimbursement changes will indirectly reduce funding 
for Medicare Advantage by an additional $70 billion over ten years. 
These deep funding cuts--combined with the new premium tax that begins 
in 2014--pose a serious threat to the health benefits and choices of 
the nation's 11 million Medicare Advantage enrollees.
---------------------------------------------------------------------------
    \1\ CBO, Selected CBO Publications Related to Health Care 
Legislation (2009-2010), December 2010, pages 29-34.
---------------------------------------------------------------------------
    Under the ACA, Medicare Advantage payment benchmarks for 2011 are 
frozen at 2010 levels--meaning that plans did not receive rate 
increases this year to account for recent health care cost growth. 
Despite this rate freeze, Medicare Advantage plans are continuing to 
offer affordable plans to Medicare beneficiaries, with most plans 
making little change in premiums from 2010 while continuing to offer 
robust benefits. These offerings demonstrate that Medicare Advantage 
plans are working hard to continue to provide value to Medicare 
beneficiaries in light of the ACA funding cuts.
    In future years, however, beneficiaries likely will begin to see 
the impact of the ACA funding cuts, since the cuts become increasingly 
larger with each passing year. CBO's estimates show that the Medicare 
Advantage cuts for 2012 ($6 billion), 2013 ($9.4 billion), and 2014 
($13.1 billion) are many times larger than the cuts for 2011 ($1.8 
billion). As the cuts become deeper in 2012 and beyond, plan sponsors 
will be challenged in their efforts to cushion the blow for 
beneficiaries.
    The magnitude of this challenge is highlighted by projections that 
have been released by CBO, the Office of the Actuary of the Centers for 
Medicare & Medicaid Services (CMS), and the Heritage Foundation. These 
projections clearly demonstrate that the ACA will adversely impact 
enrollment in the Medicare Advantage program, reduce benefits, and 
increase out-of-pocket costs for enrollees.

Lower Enrollment

    Both CBO and the CMS Chief Actuary have projected major declines in 
Medicare Advantage enrollment as a direct result of the funding cuts in 
the ACA.
    According to CBO,\2\ the ACA will cause enrollment in Medicare 
Advantage plans in 2019 to be 4.8 million lower--dropping from 13.9 
million to 9.1 million--than was projected prior to the law's 
enactment. This represents a 35 percent decline in enrollment by 2019.
---------------------------------------------------------------------------
    \2\ CBO, Selected CBO Publications Related to Health Care 
Legislation (2009-2010), December 2010, pages 29-34.
---------------------------------------------------------------------------
    The CMS Chief Actuary \3\ projects an even larger decline, stating: 
``We estimate that in 2017, when the MA provisions will be fully phased 
in, enrollment in MA plans will be lower by about 50 percent (from its 
projected level of 14.8 million under the prior law to 7.4 million 
under the new law).''
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    \3\ CMS Chief Actuary, Estimated Financial Effects of the ``Patient 
Protection and Affordable Care Act,'' as Amended, April 22, 2010.
---------------------------------------------------------------------------
    The departure of millions of Medicare beneficiaries from the 
Medicare Advantage program, as anticipated by both CBO and the CMS 
Chief Actuary, will translate into lower health care quality and 
reduced value for the affected beneficiaries and an overreliance on the 
fragmented Medicare FFS program. We discuss these issues in greater 
detail beginning on page 6 below.

Additional Benefits Reduced and Out-of-Pocket Costs Increased

    For Medicare Advantage enrollees who are able to stay in the 
program, the ACA's funding cuts will have a significant impact on the 
benefits they receive and the out-of-pocket costs they pay. 
Historically, Medicare Advantage plans have provided enrollees 
additional benefits beyond those offered in the Medicare FFS program, 
including vision, hearing, dental, and health and wellness programs. 
The ability of plans to continue to offer these extra benefits will be 
severely compromised as deeper funding cuts are implemented in the 
coming years.
    CBO projects that the average value of additional benefits provided 
by Medicare Advantage plans in 2019 will be $67 per month under the 
ACA; this represents a 50 percent cut from the $135 per month amount 
that was projected prior to enactment of the new law.
    Similarly, the CMS Chief Actuary states that the ACA will ``result 
in less generous benefit packages'' for Medicare Advantage enrollees. 
Noting that plan sponsors use rebates to provide extra benefits and 
reduce cost-sharing for enrollees, the CMS Chief Actuary indicates \4\ 
that the average rebate per enrollee dropped sharply from $1,093 in 
2010 to $684 in 2011, and will decline further to $43 by 2019. (Under 
the Medicare Advantage payment formula, rebates are based on how a 
plan's bid compares to the benchmark.) The CMS Chief Actuary also has 
estimated that, taking into account both the Medicare Advantage and 
Medicare FFS provisions of the new law, beneficiaries will face higher 
out-of-pocket costs of $473 per enrollee in 2012, $812 per enrollee in 
2015, and $923 per enrollee in 2017.
---------------------------------------------------------------------------
    \4\ CMS Chief Actuary, Letter to Senator Charles Grassley, October 
8, 2010.
---------------------------------------------------------------------------
    These findings are reinforced by research the Heritage Foundation 
\5\ has conducted on the ACA's impact on benefits for Medicare 
Advantage enrollees. This study reached the following conclusions:
---------------------------------------------------------------------------
    \5\ Heritage Foundation, Reductions in Medicare Advantage Payments: 
The Impact on Seniors by Region, September 14, 2010.

          By 2017, individuals who would have been enrolled in 
        Medicare Advantage plans under prior law will lose an average 
        of $1,841 in benefits due to the Medicare Advantage funding 
        cuts alone. Such beneficiaries will lose a total of $3,714 when 
        the effects of the entire bill, including Medicare FFS cuts, 
        are considered. This latter figure represents a 27 percent 
        reduction in benefits relative to what would have been provided 
        under prior law. The aggregate loss for all beneficiaries 
        nationwide is estimated to be $55 billion annually by 2017.
          The loss of benefits will vary widely across the 
        nation, with beneficiaries in the hardest-hit counties facing 
        cuts almost five times as large as cuts for those in the least-
        hit counties. Even in counties where the impact is least 
        severe, the average beneficiary will lose at least 15 percent 
        of his or her benefits by 2017.
          Beneficiaries in the following states will face the 
        largest benefit losses in 2017 as a result of the ACA's 
        Medicare Advantage funding cuts: Louisiana ($5,092 per 
        beneficiary), Texas ($4,732), Hawaii ($4,693), New York 
        ($4,512), and New Mexico ($4,177).

Impact on Low-Income and Minority Beneficiaries

    In evaluating the impact of the ACA's funding cuts, it is important 
to recognize the crucial role the Medicare Advantage program plays as a 
health care safety net for many low-income and minority Medicare 
beneficiaries.
    In December 2010, AHIP published a study \6\ showing that Medicare 
Advantage plans are a valuable choice for low-income and minority 
beneficiaries, particularly those who are not eligible for Medicaid and 
do not have employer-sponsored retiree benefits. For many of these 
individuals, Medicare Advantage may be their only option for 
comprehensive, affordable coverage.
---------------------------------------------------------------------------
    \6\ AHIP Center for Policy and Research, Low-Income & Minority 
Beneficiaries in Medicare Advantage Plans, December 2010.
---------------------------------------------------------------------------
    Key findings of this AHIP study include the following:

          Among Medicare beneficiaries who were not enrolled in 
        Medicaid or employer-based supplemental coverage and who had 
        annual incomes between $10,000 and $20,000 in 2008, 37 percent 
        chose Medicare Advantage plans, 30 percent purchased Medigap 
        supplemental policies, and 33 percent were covered by the 
        Medicare FFS program alone.
          Nationwide, 25 percent of African-American Medicare 
        beneficiaries and 29 percent of Hispanic beneficiaries were 
        enrolled in Medicare Advantage plans. By comparison, 21 percent 
        of all Medicare beneficiaries were enrolled in Medicare 
        Advantage plans.
          Sixty-nine percent of all minority beneficiaries 
        enrolled in Medicare Advantage in 2008 had incomes below 
        $20,000. By comparison, 37 percent of White Medicare Advantage 
        enrollees had incomes below $20,000.

    These findings demonstrate that Medicare Advantage plans are 
important to many minority beneficiaries and many low-income 
beneficiaries who cannot afford the high out-of-pocket costs they would 
incur under the Medicare FFS program. These vulnerable beneficiaries 
will pay a heavy price if the ACA's Medicare Advantage funding cuts are 
fully implemented.
    The previously-cited study by the Heritage Foundation also 
addresses this concern, estimating that 70 percent of the ACA's cuts to 
the Medicare Advantage program will be imposed on beneficiaries with 
annual incomes below $32,400 in today's dollars. This study also 
estimates that these cuts will cause Hispanics to lose $2.3 billion in 
benefits and African-Americans to lose more than $6.4 billion in 
benefits, while also causing nearly 300,000 Hispanics and more than 
800,000 African-Americans to lose access to Medicare Advantage plans. 
The study describes the Medicare Advantage cuts as ``a regressive tax 
that disproportionately punishes low-income and minority seniors.''

Lessons From Balanced Budget Act of 1997

    We urge the committee to consider the lessons learned following the 
deep funding cuts that the Balanced Budget Act of 1997 (BBA) imposed on 
the Medicare health plan program, known at that time as 
``Medicare+Choice.'' Following the enactment of this law, Medicare 
health plan enrollment initially remained stable, but eventually 
Medicare beneficiaries saw their health plan choices diminish as many 
health plans were forced to withdraw from the program or limit their 
service areas due to inadequate funding and excessive regulatory 
burdens. Over the next several years, from 1999-2003, nearly 2.4 
million Medicare beneficiaries were forced to change plans or return to 
the Medicare FFS program due to the unintended consequences of the BBA. 
If the ACA's Medicare Advantage funding cuts are fully implemented, 
another generation of Medicare beneficiaries will likely experience 
similar disruptions in their health coverage.

III. The Value Provided by Medicare Advantage Plans

    Medicare Advantage plans have a strong track record of pioneering 
new innovations and strategies for improving health care quality, 
promoting the efficient delivery of health care services, and advancing 
an evidence-based health care system. As a result, the Medicare 
Advantage program offers a solid foundation for modernizing the broader 
Medicare program to meet the health care needs of current and future 
generations of beneficiaries.

Evidence of Quality Improvement

    Over the past 18 months, AHIP's Center for Policy and Research has 
conducted a series of increasingly expansive studies comparing certain 
utilization measures, including hospital readmission rates, for 
enrollees in the Medicare Advantage program and the Medicare FFS 
program. Recognizing that reducing preventable hospital admissions has 
become an important national priority, and a goal of the ACA, for 
achieving both quality improvement and cost control, health plans have 
developed a variety of innovative programs that are revitalizing 
primary care, improving care transitions, and helping patients achieve 
better health outcomes.
    Our research findings demonstrate that these strategies are 
succeeding in helping to keep patients out of the hospital and avoid 
potentially harmful complications. The most recent AHIP studies on 
hospital readmissions include the following findings:

          Based on a risk-adjusted comparison of patterns of 
        care among patients enrolled in two large, multi-state Medicare 
        Advantage HMO plans and in the Medicare FFS program, we found 
        that the Medicare Advantage plans improved health care for 
        their enrollees by reducing emergency room visits by 24 
        percent, reducing hospital readmissions by 39 percent, reducing 
        certain potentially avoidable hospital admissions by 10 
        percent, and reducing inpatient hospital days by 20 percent.\7\
---------------------------------------------------------------------------
    \7\ AHIP Center for Policy and Research, Working Paper: Comparisons 
of Utilization in Two Large Multi-State Medicare Advantage HMOs and 
Medicare Fee-for-Service in the Same Service Areas, December 2009.
---------------------------------------------------------------------------
          Based on an analysis of hospital discharge datasets 
        in nine states, we found that risk-adjusted hospital 
        readmission rates were about 27-29 percent lower in Medicare 
        Advantage than in Medicare FFS for each enrollee, 16-18 percent 
        lower for each person with an admission, and 14-17 percent 
        lower for each hospitalization.\8\
---------------------------------------------------------------------------
    \8\ AHIP Center for Policy and Research, Working Paper: Using State 
Hospital Discharge Data to Compare Readmission Rates in Medicare 
Advantage and Medicare's Traditional Fee-for-Service Program, May 2010.
---------------------------------------------------------------------------
          Based on an analysis of data on gaps in time between 
        hospital admissions and discharges in five states, we found 
        that risk-adjusted 30-day readmission rates per hospitalization 
        were about 12-18 percent lower in Medicare Advantage than in 
        Medicare FFS, that risk-adjusted 30-day readmissions per 
        patient with an admission were 12-27 percent lower in Medicare 
        Advantage among patients with at least one admission, and that 
        30-day readmissions per enrollee (including enrollees not 
        hospitalized in a year) were 22-43 percent lower in Medicare 
        Advantage.\9\
---------------------------------------------------------------------------
    \9\ AHIP Center for Policy and Research, Using AHRQ's `Revisit' 
Data to Estimate 30-Day Readmission Rates in Medicare Advantage and the 
Traditional Fee-for-Service Program, October 2010.

    All of these studies consistently show that Medicare Advantage 
plans are reducing the need for preventable hospitalizations. As a 
result of this success, health insurance plans not only are improving 
the health and well-being of their enrollees, but also achieving 
greater efficiencies and cost savings for the Medicare program and for 
---------------------------------------------------------------------------
taxpayers.

Innovative Programs and Tools

    A recent AHIP publication \10\ provides plan-specific examples of 
the types of programs and services that health plans have implemented 
to reduce preventable hospital readmissions and emergency room visits. 
Examples of these programs include the following:
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    \10\ AHIP Center for Policy and Research, Innovations in Reducing 
Preventable Hospital Admissions, Readmissions, and Emergency Room Use, 
June 2010.

          Expanding patient access to urgent care centers, 
        after-hours care, and nurse help lines to give patients safe 
        alternatives to emergency rooms for non-emergency care;
          Arranging for phone calls and, in some cases, in-home 
        visits by nurses and other professionals to ensure that follow-
        up appointments are kept, medications are being taken safely, 
        care plans are being followed, medical equipment is delivered, 
        and home health care is being received;
          Offering intensive case management to help patients 
        at high risk of hospitalization access the medical, behavioral 
        health, and social services they need;
          Arranging for home visits by multidisciplinary teams 
        of clinicians who provide comprehensive care, teach patients 
        and their caregivers how to take medications correctly, and 
        link families with needed community resources; and
          Revamping physician payment incentives to promote 
        care coordination and improved health outcomes.

    Health plans have developed a wide range of tools and strategies to 
improve quality and efficiency, and build an evidence-based health care 
system. The value of these health plan initiatives was recognized by a 
July 2010 study \11\ published by the American Enterprise Institute for 
Public Policy Research. This study focused on geographic variations in 
both Medicare spending and utilization of services, noting that 
variation in the public sector exceeds variation in the private sector 
by about 2.8 times for outpatient visits and 3.9 times for hospital 
days.
---------------------------------------------------------------------------
    \11\ American Enterprise Institute for Public Policy Research, 
Addressing Geographic Variation and Health Care Efficiency: Lessons for 
Medicare from Private Health Insurers, July 2010.
---------------------------------------------------------------------------
    In explaining this finding, the study notes that private payers 
have multiple tools for directing health care resources, including 
directing patients ``toward preferred providers who deliver more 
efficient care using benefits management or through preferred 
networks.'' The authors conclude, ``To reduce spending and more 
appropriately limit geographic variation in utilization among Medicare 
beneficiaries, the program should consider the utilization-management 
techniques employed in the private sector as a model.''
    The ACA attempts to introduce a number of these initiatives to the 
Medicare FFS program. However, we are skeptical that these efforts will 
be as effective as ongoing health plan programs. Health plans routinely 
offer health risk assessments to help identify high risk populations in 
need of specific services. These assessments, combined with the use of 
a patient's information on frequency and usage of health care services, 
enables the health plan to provide care management models, disease 
management programs, prescription drug support, home care, and tailored 
outreach to Medicare Advantage enrollees to meet their specific needs. 
While health plans have been highly successful in using this 
information to improve patient care, the Medicare FFS program lacks the 
infrastructure and coordination that are needed across providers to 
address the specific needs of each individual patient.
Fraud Prevention Initiatives
    Preventing health care fraud is another essential ingredient of any 
strategy for achieving quality improvement. Health plans devote 
substantial resources to fraud prevention programs that identify 
individuals who provide care under false credentials, deliver medically 
unnecessary services, or make treatment decisions based on illegal 
referral relationships. These investments play a key role in improving 
patient care.
    AHIP recently released a report \12\ highlighting efforts by health 
plans to prevent and detect health care fraud. This report outlines 
survey findings on the cost savings achieved from these initiatives, 
the types of programs health plans have implemented, and the future of 
fraud detection and prevention programs.
---------------------------------------------------------------------------
    \12\ AHIP Center for Policy and Research, Insurers' Efforts to 
Prevent Health Care Fraud, January 2011.
---------------------------------------------------------------------------
    Survey respondents included a cross-section of health plans ranging 
from small, regional companies to large, multi-state commercial 
carriers. Among the large companies in the survey, estimated net 
savings from anti-fraud operations (savings less costs) exceeded $3 per 
enrollee, resulting in an estimated total net savings of nearly $300 
million in 2008. For the medium-sized companies reporting, estimated 
net savings were about $1 per enrollee and 2008 total net savings were 
about $10 million. For smaller companies, estimated net savings were 
about $2.70 per enrollee, and total net savings reported were 
approximately $5 million in 2008.
    Survey respondents were asked to estimate only the costs and 
savings directly attributable to their anti-fraud efforts. These 
estimates do not include the impact of deterrence, which is likely the 
largest associated savings from insurers' anti-fraud programs. The 
knowledge that health plans have robust anti-fraud measures and 
controls likely prevents inappropriate billings or claims from 
occurring in the first place.

Patient Safety Initiatives

    On another front, health plans regard patient safety as a top 
priority under their quality improvement initiatives. Plans have 
developed and implemented several approaches to improve patient safety 
and increase awareness of safety-related issues, including efforts to 
reduce healthcare-acquired infections and prevent ``never events'' 
(i.e., serious reportable events that should never occur in a health 
care setting and are associated with patient death or serious 
disability).
    Specific patient safety strategies used by health plans include 
using evidence-based care and national benchmarks to prevent infections 
and improve surgical safety. This includes, for example, providing 
physicians with tool kits based on a standardized set of procedures and 
instructions to create a consistent approach to infection prevention. 
Other examples include training providers and hospitals on error 
reduction techniques, and pre- and post-surgical team briefings in 
order to maintain consistency of safe practices across providers.
    Health plans also have developed innovative payment models to 
incentivize hospitals to reduce hospital-acquired conditions and 
infections. Such models reward providers that meet performance targets 
and include additional per-patient per-month quality payments. The 
structure of these programs include root-cause analysis of never 
events, communication with patients/families when never events or 
serious reportable events occur, and forums to discuss best practices 
and lessons learned.
    Other priorities include tracking and reporting infection rates at 
the hospital and physician level and reporting them internally and 
publicly (where state requirements exist). Some health plans have 
enhanced their quality improvement and monitoring programs by requiring 
providers or hospitals to identify gaps in care and recommend changes 
to improve patient care safety systems. Others require reporting of 
adverse events to designated patient safety organizations.
    Health plans use nationally-recognized measures of patient safety 
for never events, serious reportable events, surgical safety 
indicators, and preventable medical errors, specifically from CMS, the 
National Quality Forum, Leapfrog, the Joint Commission, and others. 
Health plans have informed us that by working in collaboration with 
network hospitals, they have helped achieve the following measureable 
improvements in patient safety:

          Health plan network hospitals participating in such 
        improvement programs have reduced the rate of central line 
        bloodstream infections well below the national average. For 
        example, one health plan measured its 2010 rate for central-
        line infections at 0.96, compared to the national rate of 1.96, 
        as reported by the Centers for Disease Control and Prevention 
        (CDC).
          Health plan network hospitals also reduced cases of 
        ventilator-associated pneumonia by 70 percent, to less than 1.5 
        per 1,000 ventilator days in over two years (2008-2010).
          Over an eight year period (2002-present), one health 
        system succeeded in reducing the number of ventilator-
        associated pneumonia cases by 97 percent and the number of 
        central bloodstream infections by 91 percent.

Preserving Medicare Health Plan Choices

    Looking forward, it is important to maintain a stable Medicare 
Advantage program and preserve private health plan choices to achieve 
greater value and efficiency throughout the entire Medicare program.
    If the ACA funding cuts are fully implemented, millions of Medicare 
beneficiaries will be forced into the inefficient Medicare FFS program. 
This, in turn, will undermine the broader health reform goals of 
enhancing quality and patient safety, improving efficiency and value, 
and containing costs. Expanding enrollment in the outdated Medicare FFS 
program will result in more beneficiaries receiving fragmented care 
that is poorly coordinated under a system that prioritizes volume over 
quality. Meanwhile, reducing enrollment in Medicare Advantage will 
result in fewer beneficiaries receiving coordinated care and benefiting 
from the innovations that private sector health plans have pioneered.
    We urge Congress and the Administration to reconsider the ACA 
funding cuts to ensure that Medicare Advantage remains viable and can 
serve as a foundation for building a modernized Medicare program that 
provides access to high quality health care.

IV. Conclusion

    Thank you for considering our perspectives on the ACA and its 
impact on the Medicare program. We stand ready to work with the 
committee to strengthen health care choices and benefits for our 
nation's Medicare beneficiaries.

                                 
               Alliance for Retired Americans, Statement
    The Alliance for Retired Americans would like to thank the 
Committee on Ways and Means for holding this hearing on the impact of 
the Patient Protection and Affordable Care Act on the Medicare program 
and Medicare beneficiaries. The Alliance appreciates the opportunity to 
reiterate its support for the health care law and provide examples from 
our members who are benefiting from its provisions.
    Founded in 2001, the Alliance is a grassroots organization 
representing more than 4 million retirees and seniors nationwide. 
Headquartered in Washington, D.C., the Alliance and its 30 state 
chapters work to advance public policy that strengthens the health and 
economic security of older Americans by teaching seniors how to make a 
difference through activism.
    The health law is particularly important for seniors, who spend a 
larger share of their retirement income on medical care. The law makes 
improvements to the Medicare program by providing added benefits, 
enhancing health care quality and extending the solvency of the program 
by 12 years. Seniors have already begun to reap the benefits of the 
law. In 2010, 3.4 million seniors who fell in the Part D doughnut hole 
coverage gap received a $250 payment to help with the costs of their 
medications. Beginning this year, seniors are eligible to receive free 
annual check ups. In addition, they will no longer have to pay any 
cost-sharing for life-saving preventive screenings for diseases such as 
diabetes and cancer. Seniors who fall in the doughnut hole will get a 
50% discount for brand name drugs and a government subsidy toward the 
costs of their generic medications. These are the first steps towards 
closing the entire doughnut hole, which will occur in 2020.
    The Affordable Care Act restructures government payments to 
Medicare Advantage (MA) plans to keep them more in line with that of 
traditional Medicare. The law reduces the overpayments to MA plans and 
prohibits the MA plans from charging higher co-payments than 
traditional Medicare. By 2014, MA plans must spend 85% of enrollee 
premiums on health care, rather than on administrative costs, executive 
pay or insurance company profits. MA plans that provide good quality 
care will receive bonuses. These changes emphasize quality and 
efficiency and will reduce costs for the government as well as Medicare 
beneficiaries.
    In the future, seniors can expect improved medical care, because 
the Medicare program begins to reform the health care delivery system 
by implementing pilot programs such as bundling, patient-centered 
medical home, value-based purchasing and Accountable Care 
Organizations. These programs encourage providers to promote efficiency 
and coordinate care, which will ultimately lead to better quality care 
for seniors.
    Already, we have heard from Alliance members how the added benefits 
have improved their lives. One such individual is Bob Meeks from Tampa, 
Florida who has astronomical medical costs due to several medical 
conditions. He pays $265 a month for Advair and $175 for Nexium. His 
out-of-pocket costs are $4,000 a year, and that does not include his 
wife's out-of-pocket costs. While he has tried to substitute with 
generic or comparable drugs, oftentimes the medications are not 
available in a generic or the comparable drugs are not as effective. In 
2010, he received the $250 check providing him needed assistance toward 
his medications. Another individual is Mary Ellen Wlaysewski from 
Glenndale, New York who fell in the doughnut hole in September of last 
year. Ms. Wlaysewski was diagnosed with breast cancer and has to take 
Arimidex, which costs $1,066.84 for a 3 month supply through a mail 
order pharmacy. She is expecting her check soon.
    Then there is James Cassidy of Easton, Pennsylvania who has such 
high medical bills that he fell in the doughnut hole in March of last 
year and stayed in the doughnut hole for the rest of the year. James 
has diabetes and his insulin alone costs $300 a month. He also suffers 
from heart disease and his heart medications costs about $250 a month. 
He said that the $250 check helped him because it allowed him to buy a 
month's supply of his heart medication. James says that sometimes he 
has cut his pills in half and other times he has gone without, because 
the drugs were unaffordable. This year, James will receive a 50% 
discount on brand name medications and a 7% discount on generic drugs 
when he falls in the doughnut hole. The provisions of the Affordable 
Care Act will help him better afford his medications.
    Then there is Demmi Murphy of Jacksonville, Florida who is in her 
forties and is disabled. She receives Social Security Disability and is 
covered under Medicare. She hit the doughnut hole in June 2010. One of 
her medications costs $1,283 a month and the others are anywhere 
between $300 and $400 a month. The doughnut hole check did help her, 
and she looks forward to the drug discounts this year.
    Finally, there is Olivia Babis, a 35 year old woman from Polk 
County, Florida, who suffers from an autoimmune disease. While her 
husband does have health insurance through his job, there is a one-year 
exclusion for pre-existing conditions. There is also an annual cap, 
which she would exceed within 6 months. Olivia is currently on 
Medicaid. Although both she and her husband have college degrees, he 
had to get a job that pays $9 an hour, so that she could qualify for 
Medicaid. She is grateful that the new health law has a provision 
prohibiting insurers from excluding individuals with pre-existing 
conditions and establishing annual limits. While these provisions do 
not go into full effect until 2014, she is hopeful it will cover her in 
the near future. If the law is repealed, she will have to continue to 
rely on Medicaid.
    Millions of seniors are counting on the drug discounts in the 
Affordable Care Act to help them afford their medications this year and 
in the future. They are glad the days of having to choose between food 
or medicine or having to cut their pills in half are mostly behind 
them. An additional 32 million Americans have either begun getting 
coverage through the dependant care provision, the early retiree 
coverage, or the high risk pools or are anxiously awaiting 2014 to 
purchase insurance through the exchanges. If the health care law is 
repealed, these individuals will be thrown back to the mercy of 
insurance or pharmaceutical companies.
    In addition to improvements under Medicare, the new law enacts 
several new initiatives to address the long-term care needs of older 
and disabled Americans, including the Community First Choice Option, 
which creates a new state plan option under Medicaid to provide 
community based attendant supports and services to individuals with 
disabilities who are Medicaid eligible and who require institutional 
level of care. The law also creates the Community Living Assistance 
Services Support Act (CLASS), which creates a national long-term care 
insurance program financed through voluntary payroll deductions that 
will provide benefits to enrollees unable to perform two or three 
activities of daily living. These are extremely important provisions 
for current and future retirees.
    The Alliance for Retired Americans strongly supports the Affordable 
Care Act, because of the numerous provisions that are helping retirees 
afford health care both now and in the future. Repealing it would 
negatively affect millions of older and retired Americans. The law 
strengthens the Medicare program, provides protections to millions of 
Americans against insurance company abuses, makes prescription drugs 
more affordable, and provides prevention and wellness screenings, all 
of which enhance the quality of life for our nation's seniors. We thank 
the Committee for the opportunity to submit this testimony.

                                 
                  Campaign for Better Care, Statement
    The Campaign for Better Care appreciates the opportunity to submit 
a statement for the record on the Impact of the Affordable Care Act on 
Medicare beneficiaries.
    The Campaign for Better Care (www.campaignforbettercare.org) is a 
broad-based coalition of consumer organizations with a direct stake in 
improving the health and quality of life for older adults with multiple 
health conditions and their family caregivers. We are committed to 
ensuring that new models of care delivery and payment, including 
Accountable Care Organizations (ACOs) and Patient Centered Medical 
Homes (PCMH), provide the comprehensive, coordinated, patient- and 
family-centered care that individuals want and need.
    Changing the way health services are delivered and paid for is key 
to fulfilling the promise of high quality, patient- and family-centered 
care for millions of Americans. Our fragmented delivery system has 
failed those who rely on it the most. Hardest hit are vulnerable 
populations, including older adults with multiple chronic conditions, 
and their family caregivers, who struggle to navigate an impossibly 
complex health care system without the help they need. This population 
uses the most health care services, at the highest cost. Because no one 
is helping them coordinate their care, they suffer the poorest health 
outcomes.
    The ACA can help address these problems. In addition to improving 
health care coverage and affordability, the law makes significant 
advances in improving the way health care services are delivered and 
paid for, moving us toward a health system that rewards value over 
volume, promotes better coordinated care, and is oriented around the 
needs of patients and families.

Changing How Care is Delivered

    Nine out of ten older Americans (age 65 and older) have at least 
one chronic health condition and 77 percent have multiple chronic 
conditions.\i\ These are the people who could most benefit from better 
coordination of care. Yet, to date, our health care system--including 
Medicare--has not risen to the challenge.
---------------------------------------------------------------------------
    \i\ Machlin, S., Cohen, J., & Beauregard, K. (2008). Agency for 
Healthcare Research and Quality. Health Care Expenses for Adults with 
Chronic Conditions, 2005. (Statistical Brief #203). Retrieved July 22, 
2009, from http://www.meps.ahrq.gov/mepsweb/data_files/publications/
st203/stat203.pdf.
---------------------------------------------------------------------------
    The ACA promotes innovative new ways to deliver health care that 
will promote higher quality, better coordinated, more efficient care. 
These new approaches should foster better communication and 
coordination among health care providers, patients and family 
caregivers, and help prevent problems like harmful drug interactions, 
unnecessary hospitalizations, conflicting diagnoses, and failure to 
connect people with community based services that can help them manage 
their health.
Improving Medicare

    Medicare is a lifeline that offers older Americans secure health 
coverage. But there are notable gaps in Medicare's coverage that cost 
beneficiaries millions of dollars out of pocket and often prevent older 
persons--particularly those with numerous chronic conditions--from 
getting the care they need.
    The ACA fills in some of these gaps--making Medicare more 
affordable for millions of older Americans. Because of the ACA, 
Medicare beneficiaries can now get an annual physical and access to a 
number of preventive services, such as mammograms and colorectal 
screenings, without expensive out of pocket costs. And the ACA's 
changes to the donut hole will save these beneficiaries thousands of 
dollars. Last year, beneficiaries who fell in the ``donut hole'' 
received a $250 rebate. This year, they will benefit from 50 percent 
off brand name drugs in the donut hole. By 2020, the donut hole will be 
closed.
    The newly established Federal Coordinated Health Care Office will 
work to improve coordination between Medicare and Medicaid for dually 
eligible beneficiaries and help to ensure that care for this population 
is more efficient.

Changing How We Pay for Care

    The current health care system pays for care based on volume not 
value. The ACA begins to link payment to provider performance and 
quality of care, providing much-needed incentives for quality 
improvement. Increasing Medicare and Medicaid payment for primary care 
providers will help to ensure that patients have ready access to good 
primary care, which is particularly important for older adults 
struggling with multiple chronic conditions, who need a higher level of 
care coordination and care management.

Improving the Quality of Care

    The new law includes policies that will help us move away from a 
system that values quantity over quality--and toward a system that 
prioritizes effective delivery of the right care, at the right time, 
for the right patients. New policies will link payment to quality and 
provider performance, creating much needed incentives for quality 
improvement by hospitals, physicians, nursing homes, home health 
providers and others.

Changing the Health Care Workforce

    The ACA also makes strengthening and expanding the health care 
workforce a priority. It supports programs aimed at increasing the 
supply of qualified primary care providers, and training our health 
care workforce so it better meets the complex health needs of older 
patients.

Conclusion

    The ACA offers us an opportunity to make our health care system 
more efficient and more patient- and family-centered, which is 
critically important for older patients with multiple health problems 
and their family caregivers. As a nation, we simply cannot afford to 
delay implementing the new law. The health and well-being of millions 
of Americans--including older and chronically ill persons--depends on 
it.

                                 
                Center for Medicare Advocacy, Statement
    The Center for Medicare Advocacy, Inc. is a national, non-profit 
organization that works on behalf of older people and people with 
disabilities to ensure fair access to affordable and comprehensive 
health care. We submit this statement for the record of the Hearing on 
the Health Care Law's Impact on the Medicare Program and its 
Beneficiaries, held before the House Ways & Means Committee on February 
10, 2012.
    Last year Congress passed two statutes, collectively referred to as 
the Affordable Care Act,\1\ to extend health insurance to millions of 
Americans who are uninsured, to improve quality of care for all 
Americans, to reduce spiraling increases in health care costs, and to 
reduce the deficit. Some misstated reports about changes made by health 
care reform to Medicare have resulted in public fear of cuts to 
Medicare benefits.
---------------------------------------------------------------------------
    \1\ Pub. L.111-148, the Patient Protection and Affordability Care 
Act of 2010 (PPACA or ACA), on March 23, 2010, and Pub. L. 111-152, the 
Health Care and Education Reconciliation Act of 2010 (HCERA), on March 
30, 2010.
---------------------------------------------------------------------------
    The Center for Medicare Advocacy wants to be very clear for the 
record: Medicare reforms included in the Affordable Care Act do not 
reduce Medicare's guaranteed benefits; they improve Medicare and help 
safeguard the Medicare Trust Fund.

THE AFFORDABLE CARE ACT STRENGTHENS THE MEDICARE PROGRAM AND RETAINS 
        ITS GUARANTEED BENEFITS

    The health care reform law expands Medicare coverage, by 
eliminating cost-sharing for preventive services, adding a yearly 
wellness visit, limiting some cost-sharing in private Medicare plans, 
closing the Part D ``Donut Hole,'' and creating opportunities for 
exciting new delivery systems to promote coordination of care.
    Further, perhaps of most significance, the changes made to Medicare 
by the Affordable Care Act extend the solvency of the Medicare Part A 
(hospital insurance) trust fund. The Medicare Trustees now project that 
the Trust Fund will remain solvent through 2029, rather than through 
2017, or an extension of 12 years.\2\ According to the Center on Budget 
and Policy Priorities, the most recent projection by the Trustees is 
among the most favorable projections made by the Medicare Trustees in 
the last 21years.\3\ 
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    \2\ 2010 Annual Report of the Boards of Trustees of the Federal 
Hospital Insurance and Federal Supplementary Medical Insurance Trust 
Funds, August 5, 2010, http://www.cms.hhs.gov/ReportsTrustFunds/
downloads/tr2010.pdf.
    \3\ Paul N. Van der Water, 2010 Medicare Trustee Report Shows 
Benefits of Health Reform and Need for Its Successful Implementation 
(Center On Budget and Policy Priorities, August 16, 2010) http://
www.cbpp.org/cms/index.cfm?fa=view&id=3265.
---------------------------------------------------------------------------
    The AffordableCareActC:/Users/nuehlecke/AppData/Local/Microsoft/
Windows/users/WeeklyAlerts/Website/www.medicareadvocacy.org/
InfoByTopic/Reform/10_10.28.ReformDoesntCutBenefits.htm_edn1#_edn1 
achieves savings in the Medicare program through a series of payment 
reforms, service delivery innovations, and increased efforts to reduce 
fraud, waste, and abuse. The actual projected reduction in Medicare 
spending is $428 billion over 10 years, after $105 billion in new 
Medicare spending is taken into consideration.\4\ It is important to 
stress again that none of the payment reforms affect Medicare's 
guaranteed benefit packages. In fact, the law specifically states that 
the guaranteed benefits in Medicare Part A and Part B will not be 
reduced or eliminated as a result of changes to the Medicare 
program.\5\
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    \4\ CBO March 20, 2010; Joint Committee on Taxation Revenue 
Estimates, JCX-17-10 (March 20, 2010).
    \5\ PPACA (Pub. L. 111-148), Sec. 3602.

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MOST MEDICARE CUTS ARE TO PRIVATE INSURANCE PLANS

    The greatest amount of savings in Medicare, about $130 billion over 
10 years, will be achieved by reducing overpayments to private Medicare 
Advantage (MA) plans \6\ that serve only 24% of all Medicare 
beneficiaries.\7\ These are the insurance plans that contract with the 
Centers for Medicare & Medicaid Services (CMS) under Medicare Part C to 
provide benefits to those who voluntarily enroll. MA plans must provide 
all of the guaranteed benefits under Part A and Part B; they may 
provide additional benefits with moneys they receive in excess of the 
cost of providing the guaranteed benefits.
---------------------------------------------------------------------------
    \6\ CBO March 20, 2010; Joint Committee on Taxation Revenue 
Estimates, JCX-17-10 (March 20, 2010) http://www.jct.gov/
publications.html?func=startdown&id=3673.
    \7\ Medicare Advantage Fact Sheet (Kaiser Family Foundation Sept. 
2010), http://www.kff.org/medicare/upload/2052-14.pdf.
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    Under the funding mechanism in effect before enactment of the 
Affordable Care Act, MA plans were paid, on average, 9%--13% more than 
the traditional Medicare program to provide the same coverage. These 
extra payments resulted in Medicare Part B premiums being $3.35 higher 
per month for all beneficiaries in 2009, and resulted in the Federal 
Government (and taxpayers) spending $14 billion more than it would have 
paid had Medicare Advantage plan enrollees remained in the traditional 
Medicare program. The Medicare Payment Advisory Commission (MedPAC) had 
recommended to Congress for years that the benchmarks used to evaluate 
MA plan bids should be set at 100% of traditional Medicare costs, to 
achieve financial neutrality between payment rates for traditional 
Medicare and private plans.\8\ Instead, billions of dollars were wasted 
- jeopardizing the solvency of the Medicare Trust Fund, and increasing 
costs for all Medicare beneficiaries and for taxpayers.
---------------------------------------------------------------------------
    \8\ Report to Congress, Medicare Payment Policy (March 2010); 
www.medpac.gov/documents/Mar_10Ch04.pdf.
---------------------------------------------------------------------------
    The Affordable Care Act phases in changes to the MA overpayments in 
order to curtail this waste, starting with a freeze in Medicare 
payments to MA plans for 2011. These changes are not as extensive as 
those recommended by MedPAC, however, and the new payment mechanism 
will not achieve the financial neutrality recommended by MedPAC. As a 
result of the new payment formula, plans in some lower-paid counties, 
generally rural and suburban areas, will continue to receive payments 
that exceed the traditional Medicare amount.\9\ The new payment 
structure also provides for an increase in payments by up to 5% for 
plans that receive four or more stars on the CMS star rating 
system.\10\ In other words, the Affordable Care Act protects 
beneficiaries and strengthens the Medicare Advantage program by 
rewarding MA plans that provide higher quality care and reducing 
wasteful payments to those that do not provide additional value.
---------------------------------------------------------------------------
    \9\ B.Biles, G. Arnold, Medicare Advantage Payment Provisions 
(G.W.U. March 2010), available at http://www.gwumc.edu/sphhs/
departments/healthpolicy/dhp_publications/pub_uploads/
dhpPublication_8C515659-5056-9D20-3D3985C6A1BBC2A5.pdf.
    \10\ HCERA Sec. 1102.

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MEDICARE ADVANTAGE OPTIONS REMAIN ROBUST FOR 2011

    Many people in the health care industry predicted that the change 
in MA payments would result in fewer MA plans contracting with CMS, 
higher premiums, and reduced benefit packages. CMS announced at the end 
of September 2010, however, that these predictions were not accurate. 
According to CMS, MA plan premiums for 2011 are, on average, $1 less 
than in 2010, and most beneficiaries continue to have numerous choices 
of Medicare Advantage plans.\11\
---------------------------------------------------------------------------
    \11\ ``Medicare Advantage Premiums Fall, Enrollment Rises, Benefits 
Similar Compared To 2010 Wide Range Of Medicare Health And Drug Plan 
Options Continues In 2011'' (CMS Sept. 21, 2010); http://www.cms.gov/
apps/media/press/
release.asp?Counter=3839&intNumPerPage=10&checkDate=&checkKey=&srchType=
1&numDays=3500&srchOpt=0&srchData=&keywordType=All&chkNewsType=1%2C+2%2C
+3%2
C+4%2C+5&intPage=&showAll=&pYear=&year=&desc=&cboOrder=date.
---------------------------------------------------------------------------
    Many MA plans that chose to leave the Medicare market in 2011 did 
so as a result of changes made by the Medicare Improvement for Patients 
and Providers Act of 2008 (MIPPA),\12\ not the Affordable Care Act.
---------------------------------------------------------------------------
    \12\ Section 162 of the Medicare Improvements for Patients and 
Providers Act of 2008, Pub. L. 110-225 required private fee for service 
Medicare Advantage plans to have provider networks in most areas of the 
country, effective January 1, 2011.
---------------------------------------------------------------------------
    Those who point to the cuts in the overpayments to MA plans as 
proof that Medicare benefits were reduced by health care reform 
legislation fail to acknowledge that the Affordable Care Act improves 
benefits offered by MA plans. For example, the new law sets limits on 
the amount of cost-sharing plans can charge for chemotherapy 
administration services, renal dialysis services, and skilled nursing 
care services.\13\ Further, starting in 2014, 85% of MA plan revenues 
must go towards benefits, not profits, or plans may be subject to 
sanctions.\14\
---------------------------------------------------------------------------
    \13\ PPACA Sec. 33203.
    \14\ HCERA Sec. 1103. A plan's contract must be terminated if the 
plan fails to have a Medical Loss Ratio of 85% for 5 consecutive years.

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HEALTH CARE REFORM LINKS PAYMENT TO QUALITY OUTCOMES

    The Affordable Care Act moves towards linking payment to quality 
outcomes for entities that provide services to Medicare beneficiaries. 
Health care reform emphasizes efforts to measure quality and to provide 
payment for only those services and procedures that meet certain 
quality of care standards. As stated above, Medicare Advantage plans 
may be entitled to bonus payments if they score highly on quality 
measures. In addition, hospitals will be given incentives to reduce 
hospital acquired conditions with respect to hospital discharges 
starting in 2015.\15\
---------------------------------------------------------------------------
    \15\ PPACA Sec. 3008.
---------------------------------------------------------------------------
    Medicare payments also may be reduced for certain providers in the 
future if they do not provide high quality health care. For example, 
beginning in 2012, hospital payments may be reduced if a hospital is 
determined to have excessive readmissions for identified conditions or 
procedures that are high volume or high cost and for which the 
readmission rate is high. A readmission is defined as a return to the 
same or a different hospital for the same condition within a time frame 
to be specified by the Secretary of Health and Human Services 
(HHS).\16\
---------------------------------------------------------------------------
    \16\ PPACA Sec. 3025.

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INDEPENDENT PAYMENT ADVISORY BOARD (IPAB) PROTECTS MEDICARE BENEFITS

    It is anticipated that another $15.5 billion in savings to the 
Medicare program will be achieved from 2014-2019 through the workings 
of the Independent Payment Advisory Board (IPAB), a new quasi-
governmental body which will take over from Congress the function of 
establishing Medicare payment policies, will be able to achieve.\17\ 
The Affordable Care Act includes strict parameters for IPAB activity. 
It must submit proposals to Congress to reduce Medicare spending if 
statutorily-defined parameters are met. These proposals will go into 
effect if Congress does not act. Most importantly, the Affordable Care 
Act prohibits the IPAB from changing eligibility or benefits, reducing 
the Part D low-income subsidy, or rationing care.\18\
---------------------------------------------------------------------------
    \17\ CBO March 20, 2010; Joint Committee on Taxation Revenue 
Estimates, JCX-17-10 (March 20, 2010).
    \18\ PPACA Sec. 3403(c), adding Section 1899 of the Social Security 
Act.
---------------------------------------------------------------------------
    The beneficiary protections built in to the IPAB by the Affordable 
Care Act are in stark contrast to other recommendations currently under 
discussion to control increased Medicare and other health care costs 
and to reduce the deficit. For example, the National Commission on 
Fiscal Policy and Reform (Fiscal Commission) recommended changing 
current Medicare cost-sharing by creating a single annual deductible of 
$550 for Part A and Part B services.\19\ Further, Congressman Paul 
Ryan, Chair of the Committee on the Budget, would change the benefit 
and cost-sharing structure of the current Medicare program. His Roadmap 
for America's Future would eliminate the guaranteed benefits available 
to all beneficiaries under Medicare and that are protected by the 
Affordable Care Act. Instead, he would offer older people and people 
with disabilities $11,000 to purchase a private insurance plan,\20\ 
essentially changing Medicare into a capped dollar voucher program.
---------------------------------------------------------------------------
    \19\ In 2011, the Part B deductible is $162, and the Part A 
deductible is $1,132 per spell of illness.
    \20\ http://www.roadmap.republicans.budget.house.gov/Issues/Issue/
?IssueID=8520.
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    In addition to changing Medicare from a uniform, defined benefit 
health insurance program to a defined contribution plan, Congresman 
Ryan's proposal does not take into account that Medicare was enacted in 
1965 because private insurance companies did not want to offer 
insurance to older people and people with disabilities. There is no 
guarantee that these same insurance companies would want to offer 
insurance to this population again, particularly if the Affordable Care 
Act's prohibition of discrimination against people with pre-existing 
conditions is eliminated.

MILLIONS OF PEOPLE ARE ALREADY BENEFITING FROM THE AFFORDABLE CARE ACT

    The Center for Medicare Advocacy provides direct assistance to 
thousands of Medicare beneficiaries in Connecticut each year, and 
assists beneficiaries, their families and their advocates who live in 
the other 49 states and the District of Columbia through phone calls, 
electronic inquiries, and educational efforts. The following examples 
explain how the beneficiaries we assist have already been helped by the 
Affordable Care Act, or will be helped by health reform in the future:

          Ms. M in Arizona and Mr. B in New York are Medicare 
        beneficiaries with different health care statuses. Like 
        millions of other Medicare beneficiaries, both are eligible for 
        health care reform's a new Annual Wellness Visit wellness visit 
        that will include a health risk assessment to establish or 
        update their medical and family history, create a list of 
        current providers and suppliers involved in providing medical 
        care--including a list of prescriptions, take measurements of 
        height, weight, body mass index, blood pressure and other 
        routine measurements, and detect cognitive impairments. They 
        will pay no cost-sharing for the visit or for the preventive 
        services that are recommended to each of them during the visit.
          Mr. G. in Florida and Ms. K. in Connecticut are two 
        of the millions of Medicare beneficiaries with high 
        prescription drug costs. When they enter the Part D ``doughnut 
        hole'' in 2011, as they did in 2010, they will no longer have 
        to pay the full cost of their medicine, but will pay only 50% 
        of the cost of brand name drugs and 93% of the cost of generic 
        drugs.
          Mr. W., a Virginia beneficiary with multiple chronic 
        conditions, including diabetes, joined a Medicare Advantage 
        plan when he first became eligible for Medicare. Changes to the 
        Medicare Advantage program limit the likelihood that he will 
        pay more than people in traditional Medicare for high cost 
        services and add an out-of-pocket limit to his health care 
        costs. The Medicare Advantage plan in which he is enrolled 
        rates highly on the quality rating scale, meaning that his 
        health plan will be eligible for quality bonus payments. Mr. W. 
        also enters the Part D doughnut hole each year and anticipates 
        spending substantially less for his prescriptions starting in 
        2011.
          Ms. C in Texas has Alzheimer's disease and resides in 
        a long-term care facility. In 2010, she spent approximately 
        three (3) months in a Long-Term Care Hospital (LTCH) as a 
        result of poor quality care in a number of settings. Ms. C was 
        originally sent to an acute care hospital from the long-term 
        care facility to have a wound (bed sore) on her toe treated. 
        She went to the LTCH for an acquired illness (MSRA), either 
        from the acute hospital or at the long-term care facility. 
        While in the hospital, she experienced multiple hospital 
        acquired infections before she finally returned to the long-
        term care facility. The Affordable Care Act creates quality and 
        payment incentives to ensure that Ms. C and other beneficiaries 
        like her receive the highest quality of care and are not 
        hospitalized as a result of avoidable health care incidents.
          Ms. J. in Massachusetts has multiple chronic 
        conditions that need monitoring and coordination. She will 
        benefit from new delivery systems such as Accountable Care 
        Organizations and Medicaid Homes designed to improve 
        coordination and quality of care for people like her.
          Ms. S. in California is eligible for the Part D Low-
        Income Subsidy that pays her drug plan premium, eliminated the 
        Donut Hole, and reduces her cost-sharing for drugs. Changes to 
        how CMS determines which Medicare Prescription Drug Plans 
        qualify as Low-Income Subsidy plans provide her more stability 
        and continuity in drug plan coverage, and mean that she is less 
        likely to have to change drug plans in order to receive the 
        full subsidy.
          Ms. G. in Pennsylvania was a plaintiff in a law suit 
        challenging how people who are dually eligible for Medicare and 
        Medicaid receive assistance with their Medicare premiums and 
        cost-sharing. The new Federal Coordinated Health Care Office, 
        created by the Affordable Care Act, will help ensure that the 
        most vulnerable Medicare beneficiaries, those who are eligible 
        for both Medicare and Medicaid, will not encounter barriers 
        that prevent them from receiving the full array of benefits and 
        services for which they are eligible.

CONCLUSION

    The Affordable Care Act slows the growth in future Medicare 
spending by reducing wasteful overpayments to private Medicare 
Advantage plans, by restructuring up-dates in payments to many 
providers, and by tying payments to improved quality of care. In 
addition, the Affordable Care Act helps beneficiaries by reducing out-
of-pocket costs, adding new benefits and promoting quality care. Health 
care reform does not reduce Medicare benefits, it adds to them. It does 
not endanger Medicare's financial future, it saves billions of dollars 
for the Trust Fund, extends the projected solvency of the program by 
over a decade, and cuts billions of dollars in wasteful spending. The 
Affordable Care Act creates a stronger Medicare program for the 47 
million older people and people with disabilities who rely on Medicare 
for their health care coverage today, and for the millions who will 
follow tomorrow.
            Respectfully submitted,




Judith A. Stein, Esq.                                    Vicki Gottlich
Executive Director                               Senior Policy Attorney



                                 
          Health Industry Distributors Association, Statement
    The Health Industry Distributors Association (HIDA) is the 
professional trade association that represents the interests of over 
600 medical-surgical products distributor companies operating 
throughout the United States. Our members deliver life-saving 
healthcare products to more than 220,000 points of care including over 
195,000 physician offices, 5,700 hospitals and 16,000 nursing home and 
extended care facilities in the nation and are committed to promoting 
safety and savings throughout the healthcare supply chain.
    Medical products distributors offer the nation's providers on-
demand access to over 200,000 medical products essential for patient 
care. Providers value this ``one-stop shopping'' resource, as it helps 
them manage supply costs and focus time and resources on patient care. 
All products sold by a medical products distributor are sold to a 
healthcare provider. As such, virtually every patient procedure is 
supported in some way by products supplied by a distributor.
    The majority of distributors are small businesses. Over a quarter 
of the industry earns annual revenues under $1 million dollars. The 
healthcare distribution sector employs 65,000 people nationwide. 
Distributors' average 1.3% annual profit margin is among the lowest in 
healthcare, requiring distributors to operate at extremely high levels 
of efficiency.
    On behalf of HIDA, we applaud your efforts to ensure that Medicare 
beneficiaries continue to have uninterrupted access to life-saving 
medical products. As such, we appreciate the opportunity to provide 
comments on provisions within the Patient Protection and Affordable 
Care Act (P.L. 111-148) and the Health Care and Education 
Reconciliation Act of 2010 (P.L. 111-152) that are poised to negatively 
impact the delivery of healthcare. Further implementation of the 
following provisions could hinder our members' ability to continue 
delivering these critical services in a streamlined manner. 
Specifically, HIDA would like to provide comments on the following 
provisions:

          Section 6410 of P.L. 111-148, Adjustments to the 
        Metropolitan Statistical Areas (MSAs) for Medicare Durable 
        Medical Equipment, Prosthetics, Orthotics, and Supplies 
        (DMEPOS) Competitive Acquisition Program; and
          Section 9006 of P.L. 111-148, Expansion of 
        Information Reporting Requirements.

Comments on Adjustments to the Metropolitan Statistical Areas for 
        Medicare Durable Medical Equipment, Prosthetics, Orthotics, and 
        Supplies Competitive Acquisition Program, Section 6410, Patient 
        Protection and Affordable Care Act (P.L. 111-148)

    HIDA supports competition in healthcare. As currently devised, 
Medicare's ``competitive bidding'' system is anything but competitive. 
It empowers the Federal Government to choose ``winners and losers,'' 
reduces competition, limits patient and provider access to critical 
healthcare products, and adds layers of bureaucracy and cost to the 
system. Section 6410 further expands Round Two of Medicare's 
competitive bidding program for DMEPOS to 91 MSAs from the current 
nine, a nine-fold increase. Expanding Round Two of the program by 91 
MSAs prior to evaluating the impact of Round One on beneficiaries, 
providers and suppliers seems imprudent. As such, HIDA has several 
suggestions for improving the program, these include:

          Expanding the parameters of the current Government 
        Accountability Office (GAO) program report mandate to include 
        the impact of the competitive bidding program on Skilled 
        Nursing Facilities, Nursing Facilities and Intermediate Care 
        Facilities (Medical Place of Service Codes 31, 32, and 54) in 
        each Round One MSA, and delaying further expansion of the 
        DMEPOS competitive bidding program until the effects of Round 
        One can be fully assessed; and
          Exempting the enteral product category (e.g., 
        intravenous nutrients) from competitive bidding or including an 
        ``any willing provider'' provision to ensure that all licensed, 
        accredited and bonded suppliers are able to participate.

    The competitive bidding program, in its current form, is positioned 
to reduce competition and patient choice, and eliminate jobs at a time 
when the Federal Government is trying to preserve and create them. 
Competitive bidding changes Medicare's basic premise from beneficiaries 
having access to ``any willing provider,'' to a selection process that 
over time will significantly reduce the number of entities to which 
Medicare beneficiaries will have access. During the rebid of Round One, 
approximately 1,011 licensed, accredited and bonded suppliers submitted 
bids in hopes of participating in the new program. Of those 1,011 
suppliers only 356 companies were offered contracts by the Centers for 
Medicare and Medicaid Services (CMS). Those not offered a bid are 
barred from participating in the program for three years (i.e., 
contracts are required to be rebid once every three years). Many of 
these smaller, regional supplier companies do not have the overhead to 
sustain their businesses without revenue from Medicare Part B. If a 
significant number of suppliers are eliminated, market competition will 
diminish, prices will increase, quality will erode, and patient choice 
will be limited.
    Furthermore, Medicaid and many private insurance companies tend to 
replicate Medicare reimbursement policies, further intensifying the 
negative impact on small businesses. Similar proposals are already 
under consideration by state Medicaid programs (e.g., KS, CA, OH, TX) 
as a way to rein in costs.
    In addition to the program's negative impact on small businesses, 
competitive bidding is poised to jeopardize quality of care for 
millions of Medicare beneficiaries in skilled nursing facilities 
(SNFs). The competitive bidding program is designed for patients who 
live within their homes and the program does not account for the highly 
specialized, exacting care required of SNF patients. Patients in a SNF 
are among the population's most ill and frail. They require 24/7 direct 
clinical coordination and care by their nurses, doctors, and other 
healthcare professionals. The acuity level of the SNF patient 
population is such that they require institutional care. In contrast, a 
typical homecare patient does not require this level of care.
    Life-sustaining enteral nutrients, equipment and supplies--one of 
the nine product categories included in Round One are not well suited 
for the competitive bidding program. CMS indicated in its 2004 report 
to Congress on the demonstration programs in Polk County, Florida and 
San Antonio, Texas that most enteral nutrients are supplied to SNF 
residents. The report further states that enterals were not compatible 
with the demonstration program specifically due to complex issues 
involving SNFs. HIDA understands first-hand the various complexities 
involved in the distribution of products into SNFs (e.g., the level of 
clinical management and services required in institutionalized settings 
compared to that for non-institutionalized beneficiaries), as our 
members are uniquely impacted by the competitive program as suppliers 
of enteral nutrients, equipment and supplies.
    Moving to a national competitive bidding program for DMEPOS raises 
many serious questions related to cost, access, beneficiary 
protections, and market-based competition. Taking these factors into 
consideration, HIDA feels that CMS should not move forward with further 
implementation of Round Two of program until the impact of Round One on 
Medicare beneficiaries within SNFs, suppliers and providers is fully 
evaluated and understood.

Comments on the Expansion of Information Reporting Requirements, 
        Section 9006, Patient Protection and Affordable Care Act (P.L. 
        111-148)

    The new IRS 1099 reporting requirements on businesses that purchase 
goods and services in the amount of $600 or more from corporations or 
individuals are quite onerous and will result in a considerable amount 
of additional paperwork for smaller, regional medical products 
distributors. HIDA supports the recent bipartisan calls for repeal of 
the new reporting requirements which will allow distributors to focus 
on growing their businesses, creating jobs and delivering life-saving 
medical products to healthcare providers.
    Thank you for reviewing our concerns and considering our comments. 
We appreciate the opportunity to suggest important modifications to the 
healthcare reform legislation that should be implemented to ensure that 
patients and providers continue to have uninterrupted access to life-
sustaining medical products.
    Please contact HIDA's Vice President of Government Affairs, Linda 
Rouse O'Neill at [email protected], or (703) 838-6125 with any questions.

                                 
                         LeadingAge, Statement
    LeadingAge commends the Ways and Means Committee for holding this 
hearing on the impact of the Affordable Care Act on seniors. We believe 
the new law has had a number of positive and significant effects on the 
delivery of health care and long-term services and supports to seniors, 
and we continue to support its implementation.
    LeadingAge is an association of 5,500 not-for-profit organizations 
dedicated to expanding the world of possibilities for aging. We advance 
policies, promote practices and conduct research that supports, enables 
and empowers people to live fully as they age.
    One of the most important aspects of the Affordable Care Act for 
seniors was the reduction in the growth of Medicare spending, which 
will help to preserve the life of the Medicare trust fund. In 2009, 
before the enactment of healthcare reform, the Medicare trustees 
predicted that the trust fund would be exhausted by 2017. The trustees 
pointed to both the increase in the number of individuals eligible for 
Medicare and to accelerating health care costs as the factors 
endangering the financial stability of the Medicare trust fund.
    In developing the Affordable Care Act, Congress made some hard 
choices, imposing spending restrictions on the program that the 
Congressional Budget Office projects will total $500 billion over ten 
years. As a result, the Medicare trustees subsequently estimated that 
the trust fund can continue to finance the Medicare program for many 
more years. In view of widespread concern over the size of the federal 
budget deficit and the growth of entitlement spending, we hope the 
committee will take into account the Medicare savings already achieved 
under the Affordable Care Act.
    The healthcare reform law increases consumer long-term services and 
supports options while also improving transitions between levels of 
care. Medicare and other insurance programs currently finance services 
provided primarily in hospitals, skilled nursing facilities and 
physician offices; services at home and in the community get relatively 
little coverage. As a result, individuals released from a hospital 
frequently have to be re-hospitalized, at significant expense to 
Medicare and other insurance plans, because they have not received the 
services they needed to get well.
    The expansion of home- and community-based options under the 
Affordable Care Act, including Money Follows the Person, Independence 
at Home and Community First Choice, will help consumers obtain long-
term services and supports in the least restrictive and most cost-
effective setting. Several demonstration programs for which the ACA 
provides--transitional care, prevention of hospital readmissions, 
patient-centered medical homes, and accountable care organizations are 
just a few examples--show great promise for better integrating health 
and long-term services and supports. Ultimately these demonstrations 
could point the way toward real reform of our health care delivery 
system, improving care and services as well as reducing health care 
costs.
    Healthcare workforce needs also are addressed under the Affordable 
Care Act. We already face a severe shortage of nurses and direct care 
workers who provide the bulk of paid long-term services and supports. 
This problem will only worsen as increasing numbers of elders come to 
need long-term services and supports at the same time that nurses and 
direct care workers in the baby boomer generation reach retirement age. 
In addition, the vast majority of those providing long-term services 
and supports are family caregivers. They serve on an unpaid basis, 
frequently with little or no training or other help with care that can 
become quite complex.
    The Affordable Care Act contains several provisions to meet these 
needs. The new law increases loan amounts in the existing federal 
nursing student loan program. It authorizes new training opportunities 
for direct care workers, a crucial provision that will help to improve 
the quality of long-term services and supports. The law would fund 
geriatric care centers to provide training in geriatrics, chronic care 
management and long-term care for faculty in health professions schools 
and for family caregivers. The law also would expand geriatric care 
awards to advanced practice nurses, clinical social workers, 
pharmacists and psychologists, increasing the number of health care 
professionals knowledgeable about the special needs of older people, 
the age group that makes the most use of the nation's health care 
system.
    The Affordable Care Act addresses a long-neglected issue by 
establishing the Community Living Assistance Services and Supports 
(CLASS) program. CLASS creates a consumer-financed, premium-based, 
voluntary insurance plan to help people needing long term services and 
supports remain in their homes and communities. The enactment of CLASS 
followed decades of discussion over how the nation might better address 
appropriate financing for these critical services and more than five 
years of legislative development, debate, and hearings. The program 
gained the support of over 250 consumer, provider, and faith-based 
organizations from AARP and the Alzheimer's Association to Easter Seals 
and the Paralyzed Veterans of America.
    Ten million Americans today need long term services and supports--
including 4 million under age 65. As the baby boomers age into 
retirement, these numbers will more than double. Without CLASS, 
Medicaid would remain the nation's default insurance plan for long-term 
services and supports. Medicaid is an open-ended, taxpayer-funded 
entitlement program that already is straining federal and state 
budgets. This system fails to provide realistic opportunities for 
personal planning, requires people to spend-down into poverty before 
receiving the help they need, fails to support family caregivers 
adequately, leads to higher acute care costs and is fiscally 
unsustainable, given the baby boomers' coming explosive needs.
    While private long-term care insurance policies and tax incentives 
for their purchase have been available for approximately thirty years, 
fewer than ten percent of seniors have this coverage. Even fewer people 
under age 65 have long-term care insurance policies. This kind of 
coverage will continue to be an important source of financing for long-
term services and supports. However, even if the rate of long-term care 
insurance policy purchases accelerates beyond current projections, 
private insurance will not provide enough of an alternative to Medicaid 
funding of long-term services and supports in the coming decades.
    The CLASS plan promotes personal responsibility, puts choice in the 
hands of consumers, saves Medicaid money, and doesn't rely on taxpayer 
funds. CLASS is totally voluntary. Its cash benefit approach allows 
consumers to choose the type of help they want. It saves Medicaid 
money, according to the Congressional Budget Office. It is not a 
government entitlement program and stands on its own financial feet. 
The ACA prohibits the use of taxpayer funds to pay for benefits under 
CLASS. The program was strengthened by the Gregg amendment, which 
requires premiums to be set at levels that will keep the program 
solvent over a 75-year period based on actuarial analysis.
    Because of the numerous ways in which the Affordable Care Act 
benefits seniors, LeadingAge continues to support the new law. We look 
forward to continuing to work with Congress on its effective 
implementation.
            William L. Minnix, Jr.
President and CEO
LeadingAge (formerly American Association of Homes and Services for the 
    Aging)

                                 
                   Medicare Rights Center, Statement
    The Medicare Rights Center is a national, independent nonprofit 
consumer service organization that works to ensure access to affordable 
health care for older adults and people with disabilities through 
individual counseling and advocacy, educational programs and public 
policy initiatives. We provide services through six different hotlines 
to individuals, caregivers and professionals who need answers to 
Medicare questions or help securing coverage and getting the health 
care they need. Our work directly representing people with Medicare 
gives us a unique perspective on the Affordable Care Act (ACA).
    The ACA includes several important improvements to Medicare that 
will give older adults and people with disabilities access to more 
affordable and higher quality health care. Such improvements include:

          Increased prescription drug coverage by closing the 
        Medicare Part D coverage gap, known as the ``doughnut hole''
          Expanded access to affordable preventive care 
        services
          Investment in delivery system reforms that will 
        better coordinate the care people with Medicare receive
          Better coverage for people with pre-existing 
        conditions and disabilities

    First, the ACA closes the coverage gap, or doughnut hole, in the 
Medicare prescription drug benefit. Over 3 million individuals fall 
into the doughnut hole each year, and many of these individuals have 
multiple chronic conditions, some of them life threatening. Since the 
advent of the Part D drug benefit in 2006, the Medicare Rights Center 
has handled hundreds of calls from clients who have entered the 
doughnut hole, and their stories spotlight the issue. Stories include 
individuals who must skip doses, split their pills or forgo medications 
altogether because of the high out-of-pocket costs of prescription 
drugs when they are in the doughnut hole.
    Ms. G, a client from Arizona, called Medicare Rights Center because 
she is in the doughnut hole and cannot afford her medications. She has 
diabetes, a heart condition and high blood pressure, and is currently 
on 16 medications. She also has very high hospital bills. Ms. C's 
income is $2,400 per month, so she does not qualify for a program that 
would help her pay for the cost of her medical bills or drugs. The 
closure of the coverage gap will help Ms. C afford her medically 
necessary prescriptions that help prevent her serious health conditions 
from getting worse.
    Ms. C, a client from New York, takes several medications, including 
a very expensive anti-cancer medication to keep her cancer at bay. She 
called the Medicare Rights Center when she learned from her pharmacist 
that she was approaching the doughnut hole. She said that she would be 
able to avoid the doughnut hole if she did not take her anti-cancer 
medication, but wanted to know if there was any assistance she could 
receive that would allow her to afford and take this medication. Due to 
her income, Ms. C had limited options. Medicare Rights advised her that 
a far too common option was to ask doctors for free samples of 
medications in order to sustain treatment if no other assistance was 
available. Without closure of the doughnut hole, Ms. C will face 
unaffordable drug costs. If she is unable to access her medication, the 
chances of her cancer recurring are increased.
    The ACA will improve the experience of Ms. G, Ms. C and others who 
in the past have faced similar financial hurdles to accessing their 
medications. In 2010, individuals in the doughnut hole were eligible to 
receive a $250 rebate on drug costs. This year, pursuant to the ACA, 
they will receive a 50 percent discount on brand-name drugs, and by 
2020 the doughnut hole phase-out will be complete, which means 
individuals will pay the standard 25 percent cost-sharing for their 
medications.
    Also, the ACA aims to transform the way that all Americans, 
including people with Medicare, think about their care and engage the 
health system. The law emphasizes prevention and allows for the 
provision of new or expanded preventive services under Medicare. In 
addition to providing annual wellness exams and prevention plans to 
people with Medicare, the ACA eliminates consumer cost-sharing for many 
Medicare-covered services recommended by the United States Preventive 
Services Task Force, such as mammographies and screenings for heart 
disease and osteoporosis. This increased access to affordable 
preventive services will improve Americans' health and could reduce 
long-term costs to the health care system. By eliminating barriers to 
preventive services, the law encourages healthy behaviors and allows 
consumers to personally invest in their care.
    Ms. C, a client from Oklahoma, called Medicare Rights Center 
because she wanted to quit smoking. Her doctor prescribed a medication 
to assist her in her efforts, but her drug plan would only cover the 
drug if she agreed to attend smoking cessation counseling sessions, 
which Medicare covered, but with cost-sharing. Now, as a result of 
health reform, Ms. C, and those in similar situations, will be able to 
go to smoking cessation counseling sessions free of charge.
    Ms. C, like many others, wanted to take steps to become healthier 
and improve her quality of life. The ACA helps people with Medicare be 
able to take these initial steps.
    But the ACA's effort to empower patients to be more involved in 
their own care goes beyond the elimination of cost-sharing for 
preventive benefits. The law invests in delivery system reforms that 
aspire to emphasize patient-centered models of care and to better 
coordinate the care patients receive. These reforms will hopefully 
create greater efficiency in the program that will bolster Medicare's 
financial outlook without sacrificing consumers' quality of and access 
to care. For example, the ACA increases reimbursements to doctors who 
provide primary care, thereby offering them incentives to enter this 
practice area. The bill also provides incentives to doctors or groups 
of doctors to create ``medical homes'' and ``Accountable Care 
Organizations,'' wherein they coordinate the care that patients receive 
from a variety of providers. According to a 2006 MedPAC report, the 
average person with Medicare sees five doctors. However, there is no 
incentive in the current Medicare system for doctors or other care 
providers to talk with each other. In fact, the Medicare Rights Center 
often must facilitate these conversations and the exchange of 
information across care settings through our casework, or our clients 
must do so for themselves, which can be difficult, especially in times 
of acute illness.
    While we all have many questions about how these new models and 
reforms will work and are currently engaged with other stakeholders to 
ensure that consumer protections remain central to reforms, all parties 
must ensure that we are getting the highest value for our healthcare 
dollars. The ACA aims to address this issue in a responsible way that 
does not just pass higher costs on to Medicare consumers.
    In addition to these improvements, health reform improves coverage 
for people with pre-existing conditions and those with disabilities who 
do not yet qualify for Medicare. Americans under 65 with Social 
Security Disability Insurance have to wait two years before they are 
eligible for Medicare coverage. In many cases, these individuals and 
other individuals who are uninsured and have a pre-existing condition 
can now join states' high-risk pools, which were created by the ACA, 
and receive insurance coverage while they wait for Medicare. Most 
important, in 2014, they will have access to even more insurance 
options in the form of plans offered on state-based health exchanges 
and expanded Medicaid. This means that people in the two-year waiting 
period, one of the populations most in need of affordable, high-quality 
care, will now be better able to access affordable coverage. Allowing 
people better access to care before they enroll in Medicare should also 
mean that they require less care once they become Medicare eligible. No 
longer will people have to play the waiting game as their condition 
worsens and require more acute and potentially more expensive care 
before Medicare becomes available to them.
    The ACA takes positive steps this year, as noted above, to provide 
significant benefits to people with Medicare and planned delivery 
system reforms will help to ensure that people with Medicare have 
continued access to high-quality, affordable care.
    Submitted by Joseph Baker,
    President, Medicare Rights Center

                                 
          National Partnership for Women & Families, Statement
    The National Partnership for Women & Families submits this written 
statement on the impact of the Affordable Care Act (ACA) on older 
women. The National Partnership is a non-profit, non-partisan consumer 
organization with 40 years of experience working to make life better 
for women and families by promoting access to quality health care, 
fairness in the workplace, and policies that help women and men meet 
the dual demands of work and family.
    Access to affordable, quality health care is central to the well-
being of women and families. It is a key determinant of their quality 
of life, their economic security, and their ability to thrive, prosper 
and participate fully in our society. This is especially true for older 
women.
    Women 65 and older make up more than half the nation's Medicare 
beneficiaries and comprise 70 percent of the oldest beneficiaries (ages 
85 and older). They are the primary consumers of health care--using 
more health care services as they age. And because women tend to live 
longer than men, older women are more likely to have chronic 
conditions, many of which can be costly to treat and can affect all 
aspects of their lives.\1\
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    \1\ Anderson, G. (2007). Chartbook, Chronic Conditions: Making the 
Case for Ongoing Care. Johns Hopkins University. Retrieved October 1, 
2009, from http://www.fightchronicdisease.com/news/pfcd/documents/
ChronicCareChartbook_FINAL.pdf.
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    As caregivers and patients, women bear the brunt of poor care 
coordination in our current health care system--often having to 
navigate the system alone. Worse too, older women are more vulnerable 
than men to increasing health care costs--having earned less during 
their working years \2\ and often having scaled back their careers and 
compromised their economic security to meet family caregiving 
responsibilities.\3\
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    \2\ U.S. Census Bureau, Current Population Survey, 2009 Annual 
Social and Economic Supplement, Table PINC-05: Work Experience in 
2008--People 15 Years Old and Over by Total Money Earnings in 2008, 
Age, Race, Hispanic Origin, and Sex, online at http://www.census.gov/
hhes/www/cpstables/032009/perinc/toc.htm.
    \3\ National Alliance for Caregiving and AARP. (2009). Caregiving 
in the U.S. 2009, 14; 59.
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    But the Affordable Care Act lays the groundwork for improving 
quality and care coordination so that older women and caregivers are 
better protected. Our written statement highlights some of the ways the 
ACA helps older women.

Lower Costs, Immediately

    Medicare is a critical program that offers older women secure, 
essential health coverage. It protects millions of older women who 
otherwise could not purchase coverage in the private market, which 
historically has been plagued by gender rating and other forms of 
discrimination. However, prior to enactment of the Affordable Care Act, 
there were some notable gaps in traditional Medicare coverage. In 
particular, annual wellness visits were not covered, leaving 
beneficiaries to pay out of pocket for critical preventive services. 
Beneficiaries also had to cover the full cost of prescription drugs 
once they reached the ``donut hole''--leaving them on the hook for 
nearly $3500 out of pocket.
    As of January 1st, older women on Medicare are able to get a free 
annual physical. This will include time for their health care providers 
to conduct a comprehensive health risk assessment and create a 
personalized prevention plan. And older women--whether they are 
Medicare beneficiaries or continue to purchase private health 
insurance--will be able to access a number of preventive services, such 
as mammograms and colorectal screenings, without expensive copays.
    Older women are also benefitting from more affordable drug 
coverage--saving thousands of dollars over the next ten years--as the 
ACA closes the ``donut hole.'' Last year, beneficiaries who fell in the 
``donut hole'' received a $250 rebate. This year, they will benefit 
from 50 percent off brand name drugs in the ``donut hole.'' By 2020, 
the ``donut hole'' will be closed.
    Retired women over age 55 who are not eligible for Medicare will 
also benefit from the new temporary reinsurance program provided for in 
the ACA. It lowers retiree health costs and encourages employers to 
continue to offer coverage.\4\
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    \4\ The reinsurance program will reimburse employers for 80 percent 
of the costs of retiree health benefit claims between $15,000 and 
$90,000.

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Safer Care

    A goal of our reformed health care system is to get and keep 
patients healthy. This would seem self-evident but, in the past, too 
often interaction with the health care system has actually harmed 
patients. For instance, nearly one in every five Medicare patients 
discharged from the hospital is readmitted within 30 days,\5\ and each 
year, about 1.7 million health care associated infections occur in 
hospitals, resulting in about 100,000 deaths.\6\
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    \5\ Jencks SF, Williams MV, Coleman EA, Rehospitalizations among 
patients in the Medicare fee-for-service program, New Engl J Med, 
2009;360(14):1418-1428.
    \6\ National Healthcare Quality Report, 2009. P. 108.
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    The Affordable Care Act prioritizes and invests in efforts to 
improve patient safety. More attention and resources will go toward 
making sure older women are safe when they transition from a hospital 
to home or another facility--the most dangerous point in the continuum 
of care for vulnerable patients.\7\ In addition, starting in 2015, 
Medicare will begin to reduce payments to hospitals that have the 
highest rates of hospital-acquired conditions, like falls, pressure 
ulcers and infections.
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    \7\ Parry, C., E. A. Coleman, J. D. Smith, J. Frank, and A. M. 
Kramer. 2003. The care transitions intervention: A patient-centered 
approach to ensuring effective transfers between sites of geriatric 
care. Home Health Care Services Quarterly 22(3):1-17.
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    Women with multiple chronic illnesses, who in some cases take more 
than 50 separate prescriptions each year,\8\ will benefit from new 
medication management services. Pharmacists will perform comprehensive 
medication reviews to identify, resolve, and prevent medication-related 
problems, and/or educate and train patients and caregivers about their 
medications to help reduce dangerous medication interactions and 
medical errors.
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    \8\ Berenson, R. & Horvath, J. (2002). The Clinical Characteristics 
of Medicare Beneficiaries and Implications for Medicare Reform. 
Prepared for: The Center for Medicare Advocacy Conference on Medicare 
Coordinated Care, Washington, DC. Available at: 
www.partnershipforsolutions.org.

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Better Care

    Millions of Americans have suffered needlessly because our health 
care system is not providing comprehensive, coordinated, quality care 
to those who need it most. Nine in 10 older Americans (age 65 and 
older) have at least one chronic health condition and 77 percent have 
multiple chronic conditions.\9\ Yet our system is not equipped to 
provide the help these patients need. Large numbers of older adults 
with multiple chronic health conditions are left on their own to 
navigate often-conflicting diagnoses and instructions from multiple 
specialists. They report duplicate tests and procedures, conflicting 
diagnoses for the same set of symptoms, and contradictory medical 
information.\10\ This lack of coordination and communications puts 
their health at grave risk.
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    \9\ Machlin, S., Cohen, J., & Beauregard, K., op. cit., pg. 5, 
Figure 1.
    \10\ Anderson, G. (2007). Chartbook, Chronic Conditions: Making the 
Case for Ongoing Care. Johns Hopkins University. Retrieved October 1, 
2009, from http://www.fightchronicdisease.org/news/pfcd/documents/
ChronicCareChartbook_FINAL.pdf.
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    The Affordable Care Act is a significant--indeed, unprecedented--
advance in changing the way we pay for and deliver health care so that 
patients can receive high quality care. The ACA created the Center for 
Medicare and Medicaid Innovation to test, evaluate and rapidly expand 
new care delivery models that improve quality and care coordination. 
And, if evidence shows that these new care delivery models foster 
patient-centered care, improve the quality of care patients receive, 
and reduce costs, the Innovation Center will be able to expand the 
model broadly across the Medicare and Medicaid programs.
    One of the models that the Innovation Center has begun to test is 
the patient-centered medical home. This new model pays primary care 
practices to better coordinate and manage the care of patients, 
ensuring that they have someone in the health care system who looks out 
for their interests and is available when they need help. Eight states 
have been selected to take part in the Multi-Payer Advanced Primary 
Care Practice Demonstration, where Medicare will join ongoing multi-
payer demonstrations to provide one million beneficiaries with medical 
homes. In addition, up to 500 Federal Qualified Health Centers will 
have the opportunity to participate in an Advanced Primary Care 
Practice Demonstration and provide patient-centered, coordinated care 
to nearly 200,000 low-income Medicare beneficiaries.
    To ensure older women understand their health care options and 
receive the care they want, the ACA also calls for the development and 
use of shared decision making tools which help patients and their 
caregivers understand the risks and benefits of treatment options and 
make informed decisions about their care.

Long Term Savings

    There is little dispute that our skyrocketing health care costs are 
unsustainable and disastrous, for the country, for individuals and for 
families. In particular, costs related to treating chronic conditions 
could soon overwhelm patients, families and caregivers and are already 
straining the system badly.
    As the new law begins to bend the cost curve, older women are 
likely to see decreasing health care costs. The traditional payment 
system undermines quality through perverse incentives for quantity of 
service regardless of quality, value or appropriateness. For example, 
doctors are paid for the number of tests they run--not for the time it 
takes to talk patients about their preferences and values, nor whether 
what they prescribe actually makes their patients healthier.
    The Affordable Care Act takes critical steps to begin to change the 
way we pay for care. The new law opens the door for important payment 
reforms that will move us away from a system that pays for volume of 
services to one that pays for value by supporting primary care and 
rewarding better quality, coordination and communication among 
providers, patients and family caregivers. This will lead to more 
affordable care for older women and help ensure the Medicare program is 
around for the long haul.

Stronger Health Care Workforce

    Low reimbursement rates and a lack of training and support have led 
to a shortage of health care practitioners trained in primary care and 
geriatrics. To ensure that we have a health care workforce capable of 
delivering the care older women need, the reform law will increase 
payments for primary care services under Medicare and Medicaid and 
provide enhanced training and support for nurses and other primary care 
providers.
    Family caregivers--who are mostly wives and adult daughters--will 
benefit from new supports that help them care for their loved ones 
while also taking care of themselves. For example, the Affordable Care 
Act establishes Geriatric Education Centers (GECs) to support training 
in geriatrics, chronic care management, and long term care issues for 
family caregivers, as well as health professionals and direct care 
workers. The GECs are required to train family caregivers at minimal or 
no charge and to incorporate mental health and dementia best care 
practices into their curricula.

Conclusion

    The Affordable Care Act is helping millions of older women. Repeal 
of the law would be a painful and unnecessary step backward for women 
and the loved ones they care for. We need to move forward to implement 
the Affordable Care Act to ensure older women can benefit from the high 
quality, patient- and family-centered health care system they urgently 
need.
            Submitted by, Debra L. Ness, President

                                 
             National Senior Citizens Law Center, Statement
                       HEALTH REFORM LAW BENEFITS
                        LOW INCOME OLDER ADULTS
    The National Senior Citizens Law Center continues to support full 
enactment of the Affordable Care Act based on what the law does to make 
health care for low income older adults more accessible, affordable and 
of higher quality.
    We remain focused on ensuring effective implementation, especially 
in areas where low-income older adults are affected.
    In addition, NSCLC has long opposed judicial activism and remains 
committed to fighting legal challenges to the health reform law in the 
courts.

            How Health Reform Helps Low Income Older Adults

    The ACA contains key elements that will benefit all seniors and 
several that are targeted to helping low income older adults in 
particular. Here are some examples:

          Medicaid funding begins this year for providing more 
        long term care at home versus in a nursing home. A recent NSCLC 
        report on the impact of the Supreme Court's 1999 Olmstead 
        Ruling, NSCLC called on states to take full advantage of 
        expanded home and community based options that are built into 
        the new law. In poll after poll, seniors and their families 
        consistently have favored care at home to institutionalization.
          Better quality of care for close to nine million 
        seniors and persons with disabilities who are eligible for both 
        Medicare and Medicaid (dual eligibles). The law creates an 
        ``Office of Dual Eligibles'' that is already working to improve 
        the delivery of care to dual eligible seniors currently 
        struggling to navigate systems that are far too complex and 
        confusing.

    The country's low income older adults will also benefit from 
closing of the donut hole in Medicare prescription drug coverage, the 
addition of an annual wellness visit to Medicare, and of course the 
ending of insurance industry practices such as denying coverage because 
of age, gender or pre-existing conditions. Poor elders are often the 
target of abusers and the law contains funding for far greater efforts 
to prevent elder abuse.

                      Why Court Challenges Matter

    The cases brought by several states focus on doing away with the 
individual mandate, but NSCLC argues that doing so would jeopardize the 
balance the law achieves between requiring people to have health 
insurance and forcing insurance companies to cover those who are 
already sick, too old or happen to be women.
    For older adults without health insurance and a pre-existing 
condition, a court decision that finds the individual's responsibility 
to have health insurance unconstitutional could be particularly 
problematic. The result would be the denial of health coverage to 
nearly half of all older adults between age 55 and 64. Recent studies 
show the percentage could be even higher.
    The states in question, led by Republican governors and attorneys 
general, have launched an attack on Congressional power to enact social 
legislation. NSCLC is confident that the Supreme Court, when and if 
asked to rule on one of these cases, will ultimately find the 
requirement by Congress that individuals have minimum health coverage 
constitutional.
    The National Senior Citizens Law Center is a non-profit 
organization whose principal mission is to protect the rights of low-
income older adults. Through advocacy, litigation, and the education 
and counseling of local advocates, we seek to ensure the health and 
economic security of those with limited income and resources, and 
access to the courts for all. For more information, visit our Web site 
at www.NSCLC.org.

For more information contact:
Kevin Prindiville
Deputy Director

                                 
             Roundtable on Critical Care Policy, Statement
    Chairman Camp and Ranking Member Levin and other Members of the 
Committee, we thank you for holding this important hearing to examine 
the Patient Protection and Affordable Care Act's (PPACA) impact on the 
Medicare program and its beneficiaries. The Roundtable on Critical Care 
Policy supports the Committee's commitment to ensuring that the reforms 
authorized by PPACA will be implemented in a way that improves the 
efficiency and effectiveness of our health care system by transforming 
the way health care is delivered in this country.
    Established in 2009, the Roundtable on Critical Care Policy is a 
nonprofit organization that provides a forum for leaders in critical 
care and public health to advance a common federal policy agenda 
designed to improve the quality, delivery and efficiency of critical 
care in the United States. The Roundtable brings together a broad 
cross-section of stakeholders, including the nation's leading medical 
professionals with specialized training in critical care, patient 
groups, academia, public health advocacy and industry.
    The Roundtable is supportive of Acting Administrator for the 
Centers for Medicare and Medicaid Don Berwick's simultaneous pursuit of 
the ``Triple Aim'': improving the experience of care, improving the 
health of populations, and reducing per capita costs of health care. 
However, as the Committee moves forward with overseeing the 
implementation of these goals and develops additional policies to 
strengthen and modernize Medicare, the Roundtable encourages the 
Committee to consider proposals focused on improving the care for those 
beneficiaries who are critically ill and injured.
    Each year, over five million Americans are admitted into 
traditional, surgical, pediatric, or neo-natal intensive care units 
(ICUs).\1\ The ICU is one of the most costly areas in the hospital, 
representing 13% of all hospital costs, with the total costs of 
critical care services in the U.S. exceeding $80 billion annually.\2\ 
Providers of critical care require specialized training, the care 
delivered in the ICU is technology-intensive, treatment is unusually 
complex due to what may be a patient's system--or multiple system--
challenges or failures, and outcomes have life or death consequences. 
Approximately 540,000 individuals die each year after admission to the 
ICU, and almost 20% of all deaths in the U.S. occur during a 
hospitalization that involves care in the ICU.\3\
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    \1\ Society of Critical Care Medicine. Critical care statistics in 
the United States. http://www.sccm.org/AboutSCCM/Public%20Relations/
Pages/Statistics.aspx.
    \2\ Halpern Na, Pastores SM. ``Critical Care Medicine in the United 
States 2000-2005: An analysis of bed number, occupancy rates, payer mix 
and costs,'' Critical Care Medicine 37 no. 1 (2010).
    \3\ Angus DC, Barnato AE, Linde-Zwirble WT, et al. ``Use of 
Intensive care at the end of life in the United States: an 
epidemiologic study'' Critical Care Medicine 32 (2004).
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    Despite the significant role critical care medicine plays in 
providing high-quality health care, the PPACA did little to address the 
challenges that plague the critical care delivery system. A failure to 
address these challenges could jeopardize patient safety and do little 
to bend the curve on rising health care costs.
    Multiple studies have documented that the demands on the critical 
care workforce--including doctors, nurses, and respiratory therapists--
are outpacing the supply of qualified critical care practitioners. A 
2006 study by the Health Resources & Services Administration found that 
the current demand for intensivists--physicians with special training 
in critical care--will continue to exceed the available supply due 
largely to the growing elderly population, as individuals over the age 
of 65 consume a large percentage of critical care services.\4\ Studies 
by patient safety organizations, such as the Leapfrog Group, have found 
that intensivist-led ICU teams have been ``shown to reduce the risk of 
patients dying in the ICU by 40%'' \5\ The current and projected 
critical care workforce shortages pose significant patient safety 
concerns.
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    \4\ Health Resources and Services Administration Report to 
Congress: The Critical Care Workforce: A Study of the Supply and Demand 
for Critical Care Physicians. Requested by: Senate Report 108-81. 
Available at: http://bhpr.hrsa.gov/healthworkforce/reports/
criticalcare/default.htm. Accessed November 2010.
    \5\ The Leapfrog Group. Fact Sheet. http://www.leapfroggroup.org/
about_us/leapfrog-factsheet.
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    While PPACA included several initiatives to expand the health care 
workforce, they were largely focused on expanding primary care. 
However, a solution cannot be reached solely by adding to the 
workforce; we must also find ways to improve the efficiency of the 
existing workforce. That is why the Roundtable enthusiastically 
supports a provision included in PPACA that prioritizes within the 
newly established Centers for Medicare and Medicaid Innovation (CMMI) 
the testing of models that make use of electronic monitoring--
specifically by intensivists and critical care specialists--to improve 
inpatient care.
    The Roundtable strongly urges the Committee to ensure that, as the 
Administration moves forward with new payment and delivery reforms, 
initiatives aimed at improving the quality of care delivered to the 
critically ill and injured are made a priority. Earlier this year, 
researchers at the Johns Hopkins Bloomberg School of Public Health 
found that hospitals in Michigan that implemented the Keystone Project, 
an ICU quality improvement initiative funded by the Agency for 
Healthcare Research and Quality, decreased an elderly person's 
likelihood of dying while hospitalized by 24 percent.'' \6\ The 
Administration and Congress needs to support similar initiatives to 
ensure we continue to make progress in improving health outcomes for 
our critically ill and injured beneficiaries.
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    \6\ Agency for Health Care Research and Quality, ``Landmark 
Initiative to Reduce Healthcare-Associated Infections Cuts Death Among 
Medicare Patients in Michigan Intensive Care Units,'' January 31, 2011 
http://www.ahrq.gov/news/press/pr2011/haimiicupr.htm.
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    The Roundtable also believes that policy changes are necessary to 
meet the needs of our most vulnerable patients during advanced illness. 
A recent study by the Dartmouth Institute for Health Policy and 
Clinical Practice found that ``one in three Medicare cancer patients 
spend their last days in hospitals and intensive care units,'' and that 
``clinical teams aggressively treat patients with curative attempts 
they may not want, at the expense of improving the quality of their 
life in the last weeks and months.'' \7\ The Roundtable encourages the 
Committee and the Administration to find ways to work together on this 
issue.
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    \7\ The Dartmouth Institute For Health Policy & Clinical Practice, 
``Nearly One Third of Medicare Patients with Advanced Cancer Die in 
Hospitals and ICUs; About Half Get Hospice Care'' Press Release 
November 16, 2010.
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    And lastly, another challenge facing critical care medicine is the 
notable absence of research on the availability, appropriateness, and 
effectiveness of a wide array of medical treatments and modalities for 
the critically ill or injured. At present, many of the current, high-
cost treatments delivered in the ICU lack comparative effectiveness 
data. Yet in 2009 when the Institute of Medicine released its mandated 
report recommending 100 topics to be given priority for comparative 
effectiveness research funding, few of these topics related to critical 
care. Moreover, current federal research efforts are partitioned and 
scattered across the government and throughout the National Institutes 
of Health's (NIH) 27 institutes, making it difficult to coordinate 
existing research and identify gaps.
    As Members look to address these issues in the future, we hope that 
you will consider some of the reforms included in the ``Critical Care 
Assessment and Improvement Act'' that was introduced late last year by 
Congresswoman Tammy Baldwin and will be re-introduced this year. The 
legislation would authorize a much needed assessment of the current 
state of the critical care delivery system, including its capacity, 
capabilities, and economic impact. In addition, the bill would 
establish a Critical Care Coordinating Council within the NIH to 
coordinate the collection and analysis of information on current 
critical care research, identify gaps in such research, and strengthen 
partnerships. Lastly, the bill authorizes a number of initiatives to 
bolster federal disaster preparedness efforts to care for the 
critically ill or injured.
    The Roundtable on Critical Care Policy appreciates the opportunity 
to submit a statement for the record and looks forward to working with 
the Committee to strengthen our health care delivery system.
    Submitted by: Executive Director Stephanie Silverman

                                 
                   MATERIAL SUBMITTED FOR THE RECORD
                       Questions for the Record: 
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                 Mr. Berwick--Tiberi DME Data Request 
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