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




                THE PRESIDENT'S FISCAL YEAR 2012 BUDGET
                    PROPOSAL WITH U.S. DEPARTMENT OF
                       HEALTH AND HUMAN SERVICES
                      SECRETARY KATHLEEN SEBELIUS

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

                                HEARING

                               before the

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

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 16, 2011

                               __________

                           Serial No. 112-07

                               __________

         Printed for the use of the Committee on Ways and Means














                  U.S. GOVERNMENT PRINTING OFFICE
70-873                    WASHINGTON : 2011
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001








                      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  MIKE THOMPSON, California
DEAN HELLER, Nevada                  JOHN B. LARSON, Connecticut
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

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.





                            C O N T E N T S

                               __________

                                                                   Page

Advisory of February 9, 2011, announcing the hearing.............     2

                                WITNESS

Kathleen Sebelius, Secretary, U.S. Department of Health and Human 
  Services.......................................................     5

 
                THE PRESIDENT'S FISCAL YEAR 2012 BUDGET
                    PROPOSAL WITH U.S. DEPARTMENT OF
                       HEALTH AND HUMAN SERVICES
                      SECRETARY KATHLEEN SEBELIUS

                              ----------                              


                      WEDNESDAY, FEBRUARY 16, 2011

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

    The Committee met, pursuant to call, at 10:05 a.m., in Room 
1100, Longworth House Office Building, Hon. Dave Camp [Chairman 
of the Committee] presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
February 9, 2011

                Chairman Camp Announces a Hearing on the

           President's Fiscal Year 2012 Budget Proposal with

              U.S. Department of Health and Human Services

                      Secretary Kathleen Sebelius

    House Ways and Means Committee Chairman Dave Camp (R-MI) today 
announced that the Committee on Ways and Means will hold a hearing on 
President Obama's budget proposals for fiscal year 2012. The hearing 
will take place on Wednesday, February 16, 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. The 
sole witness will be the Honorable Kathleen Sebelius, Secretary, U.S. 
Department of Health and Human Services (HHS). However, any individual 
or organization not scheduled for an oral appearance may submit a 
written statement for consideration by the Committee and for inclusion 
in the printed record of the hearing.
      

BACKGROUND:

      
    On February 14, 2011, the President is expected to submit his 
fiscal year 2012 budget proposal to Congress. The proposed budget will 
detail his tax, spending and policy proposals for the coming year, 
including his proposed budget for the Department of Health and Human 
Services and the programs it operates and oversees. Many of the 
Department's programs such as Medicare, efforts to assist those who 
lack health insurance, and Temporary Assistance for Needy Families are 
within the Committee's jurisdiction.
      
    In announcing this hearing, Chairman Camp said, ``This hearing will 
give us an opportunity to examine the Democrats' new health care law, 
its implementation, and the resulting cost increases and market 
disruptions already being felt across the country. Equally important, 
we will be able to address the looming expiration of the historic 1996 
welfare reform law and what plans the Administration has to build on 
its successes in breaking the cycle of dependency and moving more 
Americans off of welfare and into private sector employment.''
      

FOCUS OF THE HEARING:

      
    U.S. Department of Health and Human Services Secretary Sebelius 
will discuss the details of the President's HHS budget proposals that 
are within the Committee's jurisdiction.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Wednesday, March 2, 2011. Finally, please 
note that due to the change in House mail policy, the U.S. Capitol 
Police will refuse sealed-package deliveries to all House Office 
Buildings. For questions, or if you encounter technical problems, 
please call (202) 225-1721 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    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 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    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. I want to 
thank everyone for being here this morning, especially our 
honored guest, the Secretary of the Department of Health and 
Human Services, Kathleen Sebelius. Madam Secretary, I trust you 
and the Members of this Committee have everything you will need 
to proceed smoothly with this hearing. But that in large part 
is due to the hard work of our staffs, and of one gentleman in 
particular, Reginald B. Green, or as he has been known to all 
of us who wander the halls of the first floor of Longworth 
Building, particularly those who enter this room, as Reggie. 
Yesterday Reggie marked his 29th year with this Committee. And 
in those years, Reggie has helped many Members, including 
myself, as he has new Committee staff, with the ways of the 
Ways and Means Committee. And with a simple look or a discrete 
shake of the head or subtle gesture, Reggie has kept this 
Committee, its witnesses, and the audience on course. So 
Reggie, thank you, and we look forward to your continued 
service to this Committee, the House, and the Nation.
    Madam Secretary, thank you for joining us today. We are 
pleased to be the first committee to welcome you to the House 
of Representatives for a discussion of the 2012 budget. And as 
I looked through your testimony in preparation for today, I 
noticed that you referenced comments made by President Obama in 
last month's State of the Union Address. Speaking about the 
health care law, he said, and I quote, ``Let me be the first to 
say that anything can be improved. If you have ideas about how 
to improve this law by making care better or more affordable, I 
am eager to work with you.'' And the refrain from that night is 
becoming a familiar one for this Administration: If you don't 
like it, we can fix it.
    Some in the Administration have said the 1099 reporting 
provision is too burdensome on small business, and it is. Some 
in the Administration have acknowledged that the health care 
law prevents millions from being able to keep the care they 
have and like, and it does. And still others, most notably you, 
have gone so far as to say that certain new entitlement 
programs, like the CLASS program, are financially 
unsustainable. And I would say you are right. And while I 
appreciate your willingness to fix some flaws here and there, 
the reality is the law is a mess, and so is the budget that is 
meant to finance its implementation.
    As I look through this budget, I see gimmick after gimmick, 
temporary patches paid for with permanent tax increases, a 
Medicare doc fix that is absent of any policy details, and 
hundreds of billions of dollars in exchange subsidies that 
can't be accounted for. And as I noted to Secretary Geithner 
yesterday, I am also disappointed that this budget also lacks 
any mention of entitlement reform. Presumably from this budget, 
Medicare is doing just fine. And I think the facts suggest 
otherwise.
    So Madam Secretary, I hope that during your time with us 
today we can account for some of the missing items in this 
budget, and that you will be able to help us all fill in the 
blanks. And I look forward to your testimony.
    I will recognize the Ranking Member, Mr. Levin, for the 
purposes of an opening statement.
    Mr. LEVIN. Thank you very much, Mr. Chairman. For our 
opening statement, I now yield to the Ranking Member on the 
Health Subcommittee, Mr. Stark.
    Mr. STARK. Thank you, Mr. Levin. Thank you, Chairman Camp, 
for holding this hearing to review the President's budget in 
regard to Health and Human Services, and I look forward to 
hearing from Secretary Sebelius and thank her for joining us 
today.
    The President outlined a tough budget on a number of 
fronts. I wouldn't have made all the same choices, but I 
commend the President for trying to walk the fine line of 
reducing the deficit and continuing to meet people's needs. In 
contrast, the House Republicans are debating a job-killing 
continuing resolution that independent analysts confirm would 
destroy 800,000 private and public sector jobs, cause the 
firing of thousands of police officers, firefighters, other 
public servants around the country, and kick more than 200,000 
children out of Head Start. Of particular concern for today's 
audience is that we would endanger the ability of Medicare to 
pay doctors, hospitals, and other health care providers who 
treat Medicare patients, threatening seniors' access to health 
care.
    I am pleased that, in his budget, the President proposed 
improvements to several vital programs within our jurisdiction, 
including foster care, child support enforcement, and child 
care. We look forward to working with the Administration to 
ensure these programs are protecting children, lifting families 
out of poverty.
    In crafting his budget, the President acknowledges that the 
health reform law includes significant entitlement reforms to 
Medicare, improvements that will extend the lifetime of 
Medicare by 12 years, according to CBO, and the Affordable Care 
Act, which reduces the deficit by $230 billion between now and 
2019 and more than $1.2 trillion in the following decade.
    My friends on the other side of the aisle have been talking 
out of both sides of their mouths. In a hearing last week they 
are talking about how health care reform did too much to cut 
Medicare, and this week they are saying we need to cut even 
more out of Medicare and supporting a Republican roadmap that 
would turn Medicare into a voucher system.
    Taken together, Medicare changes in the health reform law 
add up to a significant, meaningful entitlement reform, but 
reform that protects taxpayers, the program, and the 
beneficiaries. The health reform law makes Medicare stronger, 
improves benefits for all beneficiaries. Senior citizens, 
people with disabilities who receive care through Medicare will 
have lower premiums for medical care and pay less when they go 
to the doctor or pick up prescriptions.
    Given the historic health reform effort and its deficit 
reduction achievements, it comes as no surprise that the 
President took a light touch to the health programs in his 
budget. As we might say, we already gave at the office. I look 
forward to hearing from the Secretary about why the President 
made the choices he did in this budget, and I am sure we will 
have a lively discussion after that, Mr. Chairman. Thank you 
very much.
    Chairman CAMP. Thank you. Again, Secretary Sebelius, 
welcome to the Ways and Means Committee. Your written statement 
will be made part of the record. And you have 5 minutes to 
summarize your statement. And you may begin. Thank you.

          STATEMENT OF KATHLEEN SEBELIUS, SECRETARY, 
          U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

    Secretary SEBELIUS. Well, thank you, Chairman Camp, and 
Ranking Member Levin, and Members of the Committee. It is my 
pleasure to be here today to discuss the President's fiscal 
year 2012 budget for the Department of Health and Human 
Services.
    I want to start with a personal aside. I am a constituent 
of two Members of this Committee. Our family has a house in 
Chairman Camp's district, and Congresswoman Jenkins is my 
Congresswoman from the great State of Kansas. So I want to 
recognize them. I also want to add my congratulations to one of 
your Members, Congressman Lewis, who yesterday was given the 
Presidential Medal of Freedom. And congratulations for that 
enormous honor.
    In the President's State of the Union Address, he did 
outline his vision for how the United States can win the future 
by out-educating, out-building, and out-innovating the world so 
we can give every family and business the chance to thrive. Our 
2012 budget is a blueprint for putting that vision into action, 
and making the investments that will grow our economy and 
create jobs.
    The budget also recognizes that we can't build lasting 
prosperity on a mountain of debt. Years of deficits have put us 
in a position where we need to make some tough choices. We 
can't invest in the future unless we also live within our 
means. So developing our budget, we looked at every program, we 
cut waste, we redesigned programs to put a focus on results, 
and in some cases cut programs that we wouldn't have cut in 
better fiscal times.
    Now, I look forward to answering your questions, but I want 
to share some of the highlights. Over the last 10\1/2\ months, 
we have worked around the clock with our partners in Congress 
and States to deliver on the promise of the Affordable Care Act 
to the American people. Now, thanks to the law, children can no 
longer be denied coverage because of their preexisting health 
conditions. Families have the protections of the new Patients' 
Bill of Rights. Businesses are getting some immediate relief 
from health costs, and seniors have lower cost access to 
prescription drugs and preventive care.
    Later today, our Department will announce the award of 
seven new grants, creating a $241 million partisanship with 
States that will design and implement the information 
technology infrastructure needed to operate the new health 
insurance marketplaces, the State-based exchanges, allowing 
individuals and small businessowners to pool their purchasing 
power and negotiate lower rates. The budget builds on efforts 
like this one by supporting innovative new models of care that 
improve patient safety and quality, while reducing the burden 
of rising health costs on families, businesses, cities, and 
States.
    As Secretary Geithner said yesterday, the Affordable Care 
Act makes a significant step toward slowing down rising health 
care costs, and includes major delivery systems reform. For the 
first time ever, we are tackling some of the significant long-
term problems. We make new investments in our health care work 
force, in community health centers, to make quality, affordable 
care available to millions more Americans, and create hundreds 
of thousands of new jobs around the country.
    At the same time, the budget includes additional proposals 
that will strengthen program integrity in Medicare, promote 
lower pharmaceutical costs, improve Medicare program 
operations, and reform the quality improvement organizations 
which help providers improve care.
    The budget also includes savings proposals to strengthen 
Medicaid and funding for the Medical Assistance program and 
Medicare part D premium assistance for low income 
beneficiaries.
    To make sure that America continues to lead the world in 
innovation, our budget increases the funding for the National 
Institutes of Health. New frontiers of research like cell-based 
therapies and genomics have the promise to unlock revolutionary 
treatments and cures for diseases, ranging from Alzheimer's to 
cancer to autism. The budget allows the world's leading 
scientists to pursue their discoveries, while keeping America 
at the forefront of biomedical research.
    Now, nothing is more important to our future than healthy 
development of our children, and our budget includes a 
significant increase in funding for child care and Head Start, 
following the science that shows that success in school is 
significantly enhanced by early learning opportunities, which 
makes these investments some of the wisest we can make. But our 
budget does more than provide resources. It aims to raise the 
bar on quality child care programs, supporting key reforms to 
transform the Nation's child care system into one that fosters 
both healthy development and gets children ready for school. We 
have a new Early Learning Challenge Fund, a Department of 
Education partnership that promotes State innovation in early 
education.
    The budget also supports a child support and fatherhood 
initiative that promotes strong family relationships by 
encouraging fathers to take responsibility for their children, 
changing policies so that more of that child support reaches 
the children, and maintains a commitment to vigorous 
enforcement, promoting healthy relationships between fathers 
and their children. There are funds for new performance-driven 
incentives for States to improve outcomes for children in 
foster care, such as reducing long term foster care stays and 
rates of child maltreatment reoccurrence. These children 
deserve to be part of our better future.
    Our budget also recognizes that at a time when so many 
Americans are making every dollar count, we need to do the 
same, and that is why we provide new support for President 
Obama's unprecedented push to stamp out waste, fraud, and abuse 
in our health care system, an effort that more than pays for 
itself, returning a record of $4 billion to taxpayers in 2010 
alone.
    We have a robust package of administrative improvements 
that conservatively deliver over $32 billion over the next 10 
years in Medicare and Medicaid savings. They enhance prepayment 
scrutiny, expand auditing, increase penalties for improper 
actions, strengthen CMS ability to implement corrective 
actions, and address State schemes that increase Federal 
spending.
    We have made eliminating waste, fraud, and abuse a priority 
across our entire Department, but we know that is not enough. 
So we have programs in here that we have reformed and 
discontinued. Just an example is the CDC funding to help States 
reduce chronic diseases. Previously, those funds were split 
into disease categories, a grant for each disease area. It 
didn't make sense, since a lot of the conditions have the same 
risk factors, like smoking and obesity. We want to give States 
one comprehensive grant that will allow them more flexibility 
to address chronic disease more effectively.
    So the 2012 budget we are releasing today, Mr. Chairman, 
makes tough choices smart, targeted investments so we can have 
a stronger, healthy, and more competitive America tomorrow. 
That is what it will take to win the future, and that is what 
we will determine to do.
    With that, Mr. Chairman, I would be pleased to answer your 
questions.
    [The prepared statement of Secretary Sebelius follows:]



    Chairman CAMP. All right. Thank you. Thank you very much.
    Madam Secretary, this is the first budget, this 20 pounds 
of documents is the first budget that we have received since 
the health care law was passed. And I was just wondering what 
is the cost of the exchange subsidies? I can't find it anywhere 
in the budget. I wonder if you could tell us what that cost is.
    Secretary SEBELIUS. Well, Mr. Chairman, the exchange 
subsidies really haven't started yet because the exchanges 
don't start until 2012. And it is a mandatory part of the 
funding in the ACA budget. We have had some planning grants 
that have gone to States in terms of--I think we have 48 States 
that have received about a million dollars to begin the 
planning for exchange grants. We are announcing $240 million 
today for early innovation in terms of IT pieces of it. But 
there are not subsidies that start until the exchanges are up 
and running.
    Chairman CAMP. It is a 10-year budget. And certainly you 
expect the exchanges will be running within that time period. 
And what is the estimate of the cost of the exchange subsidies 
over that time?
    Secretary SEBELIUS. Mr. Chairman, I really cannot give you 
an accurate cost until States figure out what they want to do. 
As you know, the law also includes the possibility that States, 
as many of you have suggested, will be working across State 
lines to put together exchanges. We really don't even know at 
this point how many States will have an exchange, if there will 
be regional exchanges, what they will look like. So we do not 
have a cost estimate at this point.
    Chairman CAMP. So there is no estimate of what might be 
projected based on an analysis of what States might do?
    Secretary SEBELIUS. At this point I think it is preliminary 
because States are just beginning their planning process, and 
we do not have their plans.
    Chairman CAMP. All right. So given that there is no really 
accounting or number in the budget to account for these 
exchange subsidies, then would the deficit be understated if 
these exchange subsidies certainly will cost something?
    Secretary SEBELIUS. Well, I think, Mr. Chairman, the plan 
is that there is startup money in the Affordable Care Act, 
anticipating that the planning apparatus and setting up the 
infrastructure will be part of the funding of the Affordable 
Care Act. From that point on, the premiums provided by 
beneficiaries and participants in the exchanges will pay the 
ongoing costs.
    Chairman CAMP. By my count, the President is proposing 
about $55 billion in new Medicare spending and about $12 
billion in Medicare spending reductions, so about a $40 billion 
increase on net. Given that Medicare is one of the largest 
contributors to our long-term deficit, do you think that it is 
a good idea that the President's proposal is actually 
increasing overall Medicare spending?
    Secretary SEBELIUS. Well, Mr. Chairman, as you probably 
know, the first of the baby boomers are eligible for Medicare 
this year. The beneficiaries are expected to rise every year 
for the next number of years. And also the Affordable Care Act 
for the first time includes, I would say, a different approach 
to Medicare. It doesn't assume that Medicare costs have to go 
up year in and year out, but has over a 10-year window a 
decrease in the cost increase of Medicare, which is unheard of 
in the history of the program. So that we are looking at not 
harming any of the guaranteed benefits, but at the same time 
having a much more efficient and effective and quality-driven 
Medicare Program for the millions of additional beneficiaries 
who will come of age over the next several years.
    Chairman CAMP. There is a proposal to freeze Medicare 
physician payments for 2 years, and that is at about a $54 
billion cost. Then the budget proposes over the 7 years after 
that, from 2014 to 2021, spending an additional $315 billion to 
provide SGR, or physician payment formula relief from 2014 
onward. And obviously, many of us are interested in a long-term 
solution to the physician payment issue, and to do that in a 
fiscally responsible way. But my question is there is no 
mention of how this is paid for in the budget. And I wondered 
if you could mention how is this long-term fix going to be paid 
for? I don't see any details or solutions in the budget. And 
what ideas might you have in that area?
    Secretary SEBELIUS. Well, Mr. Chairman, as you said, the 
budget includes more than 2 years of suggested pay-fors, about 
$62.5 billion of what would cover--I think the estimated costs 
of a 2-year fix is about $54 billion. So the President has put 
on the table suggestions for getting us started toward a long-
term solution. He looks forward to working with Congress on the 
solution into the future.
    As you know, the SGR issue dates back to 2002. It has never 
been addressed in a permanent fix. We think that is very 
important to do, and we look forward to working with you and 
your Committee to come up with solutions as we move forward. 
But there is more than 2 years of pay-fors included in the 
President's budget.
    Chairman CAMP. Yes, for that initial $54 billion. But I am 
sure you can understand our concern. $315 billion is a lot of 
spending to have absolutely no detail on how it is going to be 
reached. It is a big promise, but I don't see how, from this 
budget document, how we will address that. So I look forward to 
trying to find those answers in the future.
    Secretary SEBELIUS. Well, again, I think the payment covers 
2011, 2012, and then into 2013. And we would hope that we could 
work very diligently to fulfill the promise to America's 
doctors that they will actually be paid for the Medicare 
services they deliver. And I think that is a promise that has 
been not able to be fulfilled long term for a long time. And we 
need to fix that strategy going forward.
    Chairman CAMP. Do you anticipate other reductions in 
Medicare to meet that $315 billion obligation under the SGR? 
Other cuts to Medicare?
    Secretary SEBELIUS. Again, Mr. Chairman, I think it is 
important that we be accurate about what is happening with the 
Medicare Program. What the Affordable Care Act did, for the 
first time in a very long time, is make suggestions about ways 
to slow down the growth rate of Medicare. It is still 
anticipated that Medicare costs will increase at about the rate 
of 6 percent as opposed to 8 percent increase year in, year 
out, which is where they were estimated to do. That is where 
the $500 billion comes from. Not a single guaranteed benefit is 
touched in that $500 billion. And in fact, as you know, this 
year we are making a major step toward closing the gap in part 
D coverage, the donut hole that 8 million seniors find 
themselves in every year. So they will have a 50 percent 
reduction in brand name drugs this year. They also this year 
for the first time will have a new wellness benefit as part of 
their yearly Medicare benefits. And there is no copay for 
seniors any longer for preventive care. So in fact, we are 
making proposals that slow down the growth rate, which is I 
think what entitlement reform is about, slow down the growth 
rate of Medicare spending, and keep all of the guaranteed 
benefits very much in place.
    Chairman CAMP. Yeah, but I am sure you can understand our 
perspective with the almost half a trillion dollar cuts assumed 
in the health care law, then an unpaid for over $300 billion in 
payments for a new physician payment formula, if that is going 
to come out of other reductions in Medicare, we are over $800 
billion without any real detailed plan of how to get there.
    So it is a major issue, and I know we will have to engage 
further on it. I appreciate your comments today, though. At 
this point I will yield to Mr. Levin for 5 minutes for the 
purpose of inquiring.
    Mr. LEVIN. Thank you, Mr. Chairman. I want to pick up those 
two threads. You know, the SGR is a problem created in part by 
someone who chaired this Committee. He led the efforts. He was 
then in the majority. And it has to be resolved. But I think we 
should remember that this hole was dug by one of our 
predecessors, at least he was partially responsible for it.
    Mr. Chairman, you said the law is a mess. I just want to 
say that the notion that the law is a mess is a myth. Among the 
myths that are being spread, one is that health care reform 
interferes with the patient-doctor relationship. Another myth 
is that it is essentially creating dictates from Washington. 
Another myth, and I hope we will touch on this, relates to 
Medicare Advantage and the notion that its role will be 
dramatically diminished.
    Another myth that was spread some months ago and continues 
to be spread, is that health care reform cuts Medicare 
payments. Another myth is that this law doesn't involve 
entitlement reform.
    And so I would like to ask you, Madam Secretary, and 
welcome, to discuss how this new law attempts in a serious way 
to address the rate of increase in Medicare costs and payments. 
Clearly, there will be some increase in Medicare payments 
because many, many more people are going to be covered, as you 
mentioned.
    On page 4 of your testimony, you discuss, under improving 
health care quality and reducing health care costs, steps that 
are in this law. Could you review why really for the first time 
there are major efforts to try to bend the curve in terms of 
costs?
    Secretary SEBELIUS. Certainly, Congressman. I think that 
this Committee has had the opportunity to hear from Dr. 
Berwick, who is the new Administrator of the Centers for 
Medicare and Medicaid Services, and probably one of the leading 
experts in the country on quality care for patients combined 
with efficiency of payment. And the health care law for the 
first time gives Medicare some additional tools that we really 
didn't have to look at not only innovative models of care, 
which help improve the patient-centered care and provider 
choices, but also lower costs. The Accountable Care 
Organization, which allows providers to come together, or 
providers and hospitals, or health centers and hospitals to 
deliver better care in a coordinated fashion we know will lower 
costs because it is doing that in parts of the country, and 
this gives us an opportunity to drive that care. We know that 
having an initiative on hospital-based infections has a 
significant impact not only in improving patient outcomes, but 
significantly lowering costs. And those tools are all part of 
the efforts moving forward to stop Medicare being a volume 
purchaser, where doing more pays more, but really looking at 
patient outcomes as one of the key features, and making sure 
that high quality care is delivered to patients according to 
their doctors' wishes day in and day out, which is why I think 
we have so many providers who are very enthusiastic about the 
new opportunity practicing medicine the way they think it 
should be practiced, and the opportunities to really be 
compensated for what is high quality patient care day in and 
day out.
    Mr. LEVIN. And innovation centers?
    Secretary SEBELIUS. The innovation center has opened its 
doors. We look forward to everything from modeling programs of 
the dual eligibles, the so-called dual eligibles who are 
eligible for Medicaid and Medicare simultaneously and now 
navigate two very cumbersome programs in order to get care, and 
their providers are often handicapped, as well as a huge effort 
on waste, fraud, and abuse that has never been tackled in this 
way, with partnerships at Justice that, as I say, has already 
yielded last year over $4 billion. But we think that is just 
the tip of the iceberg, that we have a real opportunity to 
return dollars to the Medicare Trust Fund and to States' 
Medicaid budgets.
    Mr. LEVIN. Thank you.
    Chairman CAMP. Thank you. Mr. Herger is recognized.
    Mr. HERGER. Thank you, Secretary Sebelius, for your 
testimony. In an auxiliary report to the Medicare trustees 2010 
report, the CMS actuaries predicted that in large part because 
of the Democrats' health care overhaul, Medicare payment rates 
will be lower than current Medicaid rates by 2019. If this were 
allowed to occur, the actuary said that, quote, ``Medicare 
beneficiaries would almost certainly face increasingly severe 
problems with access to care.'' And in CMS Chief Actuary 
Foster's recent testimony before the House Budget Committee, he 
confirmed that the best case scenario under the current law is 
that Medicare rates will be equal to Medicaid rates in just 10 
years.
    In my State of California, Medicaid's reimbursement rates 
are so low that it is virtually impossible for many enrollees 
to find physicians who are willing to see them. Hospitals in my 
district lose far more money on Medicaid patients than they do 
treating the uninsured. People on Medicaid in California may 
technically have coverage, but they often do not have access to 
quality care. Under the new health law, Medicare beneficiaries 
will be in the same position in just a few years.
    Madam Secretary, how will you expect to preserve access to 
care for Medicare beneficiaries in the years ahead?
    Secretary SEBELIUS. Well, Congressman, I think there is no 
question that the pact made with the seniors in this country 
and the most disabled population 45 years ago, when Medicare 
was passed, is an important contract to keep. What is also very 
clear is that if nothing changes in Medicare the trust fund 
will be out of money in a very near future. And in fact, 
passage of the Affordable Care Act added an additional dozen 
years to the trust fund, which we think is an important step 
forward.
    More importantly, I think, is the change in the overall 
program. I share your concerns that Medicaid rates in many 
States across the country are significantly low, and often 
jeopardize access to care, and part of that approach has been 
just to slash rates and not to reform the care delivery system. 
What the Affordable Care Act contains is for the first time 
some significant steps to look at the delivery of health care 
by Medicare, and hopefully by Medicaid also, making sure that 
we focus on what can be the best possible care to patients at a 
much reduced cost.
    We know that can happen because it is happening across the 
country. And Kaiser in your State, Kaiser Permanente, is one of 
the leaders in strategies to deliver high quality care at a 
significantly lower rate than many other parts of the country. 
So I would suggest that the kinds of delivery system reforms, 
combined with the efforts on waste, fraud, and abuse, can 
actually not only save the Medicare Program and make sure that 
we are fulfilling that commitment to seniors long term, not 
only this year and next year but 10 years and 20 years from 
now, but also end up with a much higher quality care for all of 
the beneficiaries than we have right now.
    Mr. HERGER. Well, thank you. And that is certainly our goal 
to move in that direction. The concern is maybe we want to make 
sure we are not going in the wrong direction.
    The health care law provided $1 billion to implement the 
health care overhaul. However, CBO estimated that 
implementation of a law of this magnitude would require up to 
$20 billion. My staff was informed by yours that almost all of 
the $1 billion in implementation funding will be exhausted by 
the end of this year. In fact, I am told the Center for 
Consumer Information and Insurance Oversight intends to spend 
$760 million this year alone to implement the new health care 
law.
    I fail to understand how HHS can go through this kind of 
money when many of the provisions it is supposed to implement 
do not take effect until 2014. And I would like you to provide 
the Committee in writing, and by hopefully early March, a 
detailed accounting of how HHS spent $161 million in 2010 and 
plans to spend $760 million this year to implement the new 
health care law.
    Chairman CAMP. The gentleman's time has expired. The 
Secretary may respond in writing to that, but we do have to 
keep the hearing moving because there are other Members who are 
interested. If you want to respond just very briefly.
    Secretary SEBELIUS. Well, Mr. Chairman, I would just 
correct one thing, and we would be happy to provide it in 
writing. The $161 million is across all agencies, Congressman. 
We have spent about 125 at HHS. Treasury has some and OPM has 
some. The 760 projected expenditure is also across all 
agencies, it is not HHS. But we would be happy to provide those 
details in writing.
    [The information follows: Did not receive.]
    Mr. HERGER. Thank you. I appreciate that.
    Chairman CAMP. Thank you. Mr. Johnson is recognized.
    Mr. JOHNSON. Thank you, Mr. Chairman. Well, it seems to me 
you are doing a lot of increases in personnel. And you know, 
the President's budget proposes the Department of Health and 
Human Services add 4,700 new positions. And every HHS division 
will see an increase in the number of Federal bureaucrats 
employed. CMS is going to add more than a thousand full-time 
positions, an increase of 21 percent compared to 2010. We are 
cutting payments to doctors and other health care services, yet 
increasing administration costs here in D.C.
    I am all for creating jobs, but how many Federal 
bureaucrats do we need to get the job done? I think we can all 
agree it is critical to pursue policies that create jobs, not 
eliminate them, but the health care reform law places 
significant restrictions on physician ownership of hospitals. 
Many projects in planning had to stop, and expansions were 
curtailed. And every one of those decisions had a negative 
impact on jobs in States like Texas. Industry experts tell me 
at least 30,000 jobs would have been created if this provision 
had not been enacted.
    Can you explain how the Administration can support a 
provision that negatively impacts well-paying health care jobs 
in many communities while advocating for a ton more Federal 
employees?
    Secretary SEBELIUS. Well, Congressman, the President's 
budget does include employee additions at the Department of 
Health and Human Services that, as you say, will be in 
virtually every agency because we have had significant new 
duties assigned to our Department. Certainly implementation of 
the Affordable Care Act is one, but not nearly the scope of our 
new duties. The Food and Drug Administration has a new Food 
Safety Act that was passed by this Congress to implement new 
tobacco regulations, new translational science. The National 
Institutes of Health has new duties in terms of researching 
cutting-edge cures and strategies to keep Americans healthier. 
We are administering new programs in early childhood.
    Mr. JOHNSON. If you would make your answers short, I would 
appreciate it, because we have a limited amount of time. Why do 
you need that many more employees in your agency? You are 
trying to tell me, but you are telling me it is other agencies.
    Secretary SEBELIUS. No, these are all within the Department 
of Health and Human Services. These are our agencies. We have 
11 agencies that have a wide scope of programs.
    Mr. JOHNSON. So you are expanding government. Is that true?
    Secretary SEBELIUS. Pardon me?
    Mr. JOHNSON. So you are expanding government based on this 
health care bill.
    Secretary SEBELIUS. This has little to do with the health 
care bill, Congressman. What I am trying to explain to you is 
that over the scope of just the 2 years that you are comparing, 
the fiscal year 2010 baseline and now, we have a host of new--
--
    Mr. JOHNSON. I understand that. But here we are trying to 
reduce the size of government, and you are expanding it. Can 
you answer why you have to do that? Because you ought to be 
able to operate with the people you have.
    Secretary SEBELIUS. Well, I tried to explain that we have a 
host of new duties that have nothing do with the Affordable 
Care Act. That is certainly one of our new responsibilities. 
But food safety, delivery of health care to American Indians, 
child care, Head Start.
    Mr. JOHNSON. Thank you. Austan Goolsbee, Chairman of the 
Council of Economic Advisers, said the Administration would be 
willing to work with us on a provision for physician-owned 
hospitals provided quality care and reduced costs. Physician-
owned hospitals have a well-established reputation for quality 
care measured by CMS, Health Grades and Consumer Reports. 
MedPAC has found that specialty hospitals may be an important 
competitive force that promotes innovation.
    Shouldn't we work to bring patients more options for 
quality care in their community and allow that kind of 
competition and innovation instead of dictating from the 
Federal Government?
    Secretary SEBELIUS. Well, Congressman, my understanding is 
that the provision that you are referring to continues a sort 
of moratorium that had been in place. But I know from my home 
State of Kansas there are numbers of doctor-owned facilities. I 
know in your State of Texas there are numbers of doctor-owned 
facilities. And I would look forward to having this continued 
discussion with you about what can be done to make sure 
patients have adequate choices.
    Mr. JOHNSON. Thank you. I wish you would do that.
    CBO scored the provision as saving $500 million over 10 
years, with no savings in the first 5. Yet CMS actuaries did 
not find any savings from the provision that cuts doctor-owned 
hospitals. And you might look at the difference in the scoring 
while you look at that.
    You have acknowledged there are parts of the recently 
enacted health care law that needs to be fixed. Do you think 
prohibition on physician-owned hospitals is one of those parts 
that we can look at? Yes or no.
    Chairman CAMP. If you could answer briefly.
    Secretary SEBELIUS. I said, Congressman, I would be happy 
to have this discussion with you.
    Chairman CAMP. All right. Thank you. Mr. Rangel is 
recognized.
    Mr. RANGEL. Thank you, Mr. Chairman. And welcome, Madam 
Secretary. As I often said, as rough as this has been on you 
personally, I think it is good for the Nation to better 
understand the program that the President has offered us. I 
don't think that any person that is ill, that the doctor would 
ask whether they are Republican or Democrat. And everybody here 
on the Committee certainly knows that it will be a stronger, 
more productive America if we make certain that it is a 
healthier America. And so it would seem to me that now is the 
time, the campaign is over, to try to improve and correct and 
get a broad-based consensus as to how we can better serve 
America in terms of health care.
    Having said that, I just want to share with you the 
importance of the wellness provisions and the community health 
centers. I don't know how many people have come from 
communities that are medically underserved. But when I was a 
kid, if my mom was taking the three kids to see a doctor and 
the neighbors would say, well, what's wrong with your children, 
and she said there is nothing wrong with them, it is time for 
their checkup, they would think she has lost her mind. It 
almost is a part of the culture that you don't go to the 
hospital, you don't see a doctor until you are sick. And of 
course the painful listening to the doctor says why didn't you 
come earlier? If only you had let us know, this could have been 
prevented. And the number of people that ended up in intensive 
care only because they didn't have a place in their community 
to go just for an examination.
    I don't know how you interpret this in dollars and cents. 
And it just amazes me how this issue became polarized with 
parties. Because doctors don't make partisanship a part of 
their career. So I want to thank you for persevering. And 
perhaps if you can share with us in talking with the opponents 
of this bill, not those that just oppose because of political 
reasons, what can we do to take down the firewall and to say we 
all want the same thing, a better, stronger, healthier America? 
Has there been anything that you have found from opponents that 
they are willing to say can we talk?
    Secretary SEBELIUS. Well, Congressman, I think that your 
mention of community health centers has certainly been 
traditionally a very bipartisan effort that has been supported 
by the previous Administration and this Administration as a 
critical part of the health infrastructure of the country. 
Right now about 20 million people, often in very underserved 
rural and urban areas, have high quality preventive primary 
care at a community health center. And through the investments 
both in the Recovery Act and the Affordable Care Act, that 
number will double to closer to 40 million Americans. These are 
community health centers which often are not only providing 
health advice and checkups to the family, but often have child 
care, and labor advice, and really are in the heart of 
communities.
    We are also, as you know, through the Affordable Care Act 
doubling the number of primary care physicians who will be 
available at those community health centers, and nurse 
practitioners, and mental health professionals to make sure 
that that high quality care is delivered. And then you reduce 
the number of people who inappropriately come through the doors 
of an emergency room to try and access health care at the least 
effective, most expensive juncture, and have a healthier 
America, healthier kids who can study in school and a healthier 
work force.
    Mr. RANGEL. These centers are not Democratic centers or 
Republican centers, they are based on need, aren't they?
    Secretary SEBELIUS. Community health centers are located in 
the least served communities, whether they are rural or urban.
    Mr. RANGEL. You said earlier that before there used to be 
bipartisan support. There is an implication here that if you 
look at the votes of Democrats and Republicans, the Republicans 
would normally be protecting the insurers. And then you find 
Democrats fighting, as we do, in trying to protect the patient. 
As much as we would want to get back to bipartisanship, can you 
say now that we enjoy the same bipartisanship after the 
election as we did before?
    Secretary SEBELIUS. Well, I think that the----
    Chairman CAMP. If the answer could be brief, because the 
red light is on.
    Secretary SEBELIUS. We look forward to working with both 
parties to improve the health of America.
    Chairman CAMP. All right. Thank you. Mr. Brady is 
recognized.
    Mr. BRADY. Thank you, Mr. Chairman. Madam Secretary, thanks 
for joining us. I think the incentives in ObamaCare are flawed 
and will drive the budget numbers higher. For example, the 
requirement, obviously, that almost all businesses offer 
government-approved health care or pay a tax is flawed. Under 
the law, if you offer health care today but it doesn't end up 
government-approved, you face a fine or a tax of $3,000 a 
worker. But if you just don't offer it at all to your workers, 
you pay a tax of $2,000 per worker. It is an incentive for 
businesses to drop their health care and move their workers 
into the exchanges, which will drive up the costs of this plan.
    The incentives for individuals to buy health care I think 
are flawed as well, too low as a matter of fact. And I fear 
what we will see is the Massachusetts effect, where coverage of 
individuals went up, but new plans were purchased for an 
average of 5 months. So individuals were buying the plans when 
they were sick, dropping them when they were ill, driving up 
the costs. And I noted in the last numbers we got from 
Massachusetts, ER visits are actually up 9 percent in that 
State.
    So this health care plan I think will drive workers out of 
the plans they have into the more expensive exchanges, not 
solve the problem, in fact drive up costs for those who are 
insured long term, and drive numbers in ERs at the local 
hospitals as well.
    Final point. We had our local small businesses' health care 
insurers in our office yesterday. One of them was from Aetna, 
which has by their indication laid off up to 3,500 U.S. workers 
due in part to the medical loss ratio mandate. We had by 
estimates anecdotally losses within the industry of between 
100,000 and 200,000 workers, again because of the inflexibility 
of the medical loss ratio. Then we just had one small business 
that has 15 employees, laid off one because he was swept 
through this medical loss ratio issue. In effect, government 
told him he had too many workers. He has lost one, did away 
with one. Their point is if this health care plan is so great 
for the economy, why are they having to lay off their own 
workers? And doesn't that add to the budget deficit?
    Secretary SEBELIUS. Well, Congressman, I am not quite sure 
what the connection between the medical loss ratio and the job 
loss is. As you know, the medical loss ratio is a formula which 
determines that 80 cents of every health premium dollar should 
go to pay for health costs, not insurance company overhead and 
not salaries. It was not anybody in the Federal Government who 
determined what that formula should look like and what those 
factors were. It was actually----
    Mr. BRADY. There is no formula within the law?
    Secretary SEBELIUS. It was actually the National 
Association of Insurance Commissioners, elected and appointed 
insurance commissioners from across the country who by 
unanimous vote gave us a recommendation of what that medical 
loss ratio should look like, the formula for insurers to 
determine what in fact could be part of that.
    Mr. BRADY. So State commissioners enforced this mandate or 
did the Federal Government enforce it? Because if I recall----
    Secretary SEBELIUS. No one is enforcing anything right now. 
We are collecting data. The MLR just went into effect in 
January. Insurers are beginning to give data to both their 
State commissioners and to HHS. At the end of the day, if they 
don't meet the ratio they will owe their policyholders a 
refund.
    Mr. BRADY. The good news is you are saying there haven't 
been any jobs lost to the medical loss ratio mandate?
    Secretary SEBELIUS. Well, again, the medical loss ratio is 
a formula about insurance premiums.
    Mr. BRADY. Sure. But to your knowledge, I mean I just want 
to sort of stay on the point, to your knowledge you are saying 
we have not lost U.S. jobs because of the medical loss ratio 
mandate?
    Secretary SEBELIUS. That is my understanding. It has not 
come to my attention. I don't really know how data collection 
could cause job loss. And that is what insurers are doing right 
now.
    Mr. BRADY. Okay. Thank you, Mr. Chairman.
    Chairman CAMP. Thank you. Mr. Stark is recognized.
    Mr. STARK. Thank you, Mr. Chairman. Again welcome, Madam 
Secretary.
    There has been a lot of misinformation coming from people 
who would oppose the ACA, and the misinformation has been 
largely on the Medicare Advantage program. Yet last week we 
heard Administrator Berwick of CMS, that what is really 
happening is that Medicare Advantage is alive and well.
    Can you give us your take on Medicare Advantage, where it 
is going, and what its status is, please?
    Secretary SEBELIUS. I would be happy to. I know that there 
was a lot of concern and certainly speculation by some that the 
passage of the Affordable Care Act would mean the end of the 
Medicare Advantage program. And our first year of experience 
indicates that nothing could be further from the truth. Not 
only have we seen an increase in enrollment, about 6 percent 
more Medicare beneficiaries are in Medicare Advantage plans 
this year over last year, but they have some very good news. 
Their premiums have dropped from 2010 to 2011, largely as a 
result of the negotiating power that we acquired in the 
Affordable Care Act to make sure that excessive copays and out-
of-pocket costs were not shifted to beneficiaries. Ninety-nine 
percent of beneficiaries have a Medicare Advantage program to 
choose from. And in fact, in most places there are about 26 
Medicare Advantage plans per county to have as choices. 
Comprehensive benefits, according to our actuarial estimates, 
have actually been more substantial. And I think that the news 
is good. What will happen over time is that the overpayment to 
insurance companies that started to lure companies into this 
market decades ago is going to gradually be decreased. But we 
think that this year's news--again, the Medicare actuary had 
predicted a dramatic decrease in population for Medicare 
Advantage plans and a dramatic increase in premiums, neither of 
which has occurred this year. And we think that is the start of 
a very good story about choice for Medicare beneficiaries. Our 
goal is to have beneficiaries have choices that deliver high 
quality care at a lower cost.
    Mr. STARK. Thank you.
    Chairman CAMP. Thank you. Mr. Nunes is recognized.
    Mr. NUNES. Thank you, Mr. Chairman. As it relates to the 
Medicare Advantage, the increase in enrollees this year, when 
did the cuts start to Medicare Advantage in the ObamaCare bill?
    Secretary SEBELIUS. The rates were frozen for this year.
    Mr. NUNES. Oh, so there haven't been any cuts yet?
    Secretary SEBELIUS. The rates were frozen. And with 
inflation, I think you would have a number of Medicare 
Advantage plans tell you that was a cut. But they were frozen 
this year.
    Mr. NUNES. Okay. As it relates to the exchange subsidies 
that the chairman pointed out are not in the budget, and you 
suggested that you are waiting on the States to do their 
analysis, when the States come in with their analysis on the 
costs of these exchange subsidies do you think it will be 
greater than zero or less than zero? The costs on the exchange 
subsidies?
    Secretary SEBELIUS. Are you talking about--I may have 
misunderstood the earlier question. The subsidies that will be 
available to people below 400 percent of poverty?
    Mr. NUNES. The chairman pointed out in the budget that was 
presented----
    Secretary SEBELIUS. Is that what we are talking about? 
Because I was talking about the startup costs for exchanges.
    Mr. NUNES. I think what the chairman was pointing out is 
there are no costs in the budget. You stated that that is 
because you are waiting on the analysis of the States. So in 
the 10-year budget window there is no costs. And so it is a 
simple question, do you think when those costs come in will 
they be greater than zero or less than zero?
    Secretary SEBELIUS. Our budget actually will have no 
subsidies. The Treasury budget ultimately will have the 
subsidies in their budget. So the HHS budget will not have a 
bottom line for a projection of subsidies if we are talking 
about those that go directly to taxpayers.
    Mr. NUNES. The exchange subsidies are nowhere in the 
budget, Madam Secretary.
    Secretary SEBELIUS. I am not familiar with the Treasury 
budget.
    Mr. NUNES. Okay. Let me move on. In ObamaCare do you think 
we reduced----
    Secretary SEBELIUS. I am sorry, Congressman, they are in 
the Treasury budget. I was just given that information. So 
yesterday----
    Mr. NUNES. Well, my assumption is they will be greater than 
zero when the costs come in.
    Secretary SEBELIUS. I think that is accurate. But they are 
in the Treasury budget, not in the HHS budget.
    Mr. NUNES. Okay. With passage of ObamaCare, did we increase 
the unfunded liabilities of Medicaid?
    Secretary SEBELIUS. The bill anticipates an increase in 
enrollment in Medicaid, yes, sir.
    Mr. NUNES. How many people?
    Secretary SEBELIUS. It is projected, I think, that there 
will be about 16 million additional Medicaid beneficiaries 
around the country.
    Mr. NUNES. And do you think that Medicaid payments are an 
appropriate amount now, average, should be better? What do you 
think in terms of the Medicaid----
    Secretary SEBELIUS. Payments to providers?
    Mr. NUNES. Medicaid reimbursement rates, yes.
    Secretary SEBELIUS. As you know, Medicaid is a partnership 
with the States. And a State at a time decides what their 
reimbursement rates are. That is part of their State 
flexibility.
    Mr. NUNES. So at a time when the States are basically 
having budgets that are in the tens of billions in some cases 
like California in the red, is this going to increase the costs 
to States when you add on 16 million enrollees onto Medicaid?
    Secretary SEBELIUS. What the Affordable Care Act does, 
Congressman, is the Federal Government picks up a hundred 
percent of those additional enrollees for the first several 
years and then----
    Mr. NUNES. Several years like in 2 years.
    Secretary SEBELIUS. Three years.
    Mr. NUNES. Oh, 3 years. Sorry.
    Secretary SEBELIUS [continuing]. And then 95 percent of the 
cost going forward.
    And I can tell you as a former Governor, the amount of 
uncompensated care we would carry as a State versus a 95-5 
split Federal Government-State for those same uninsured people 
in my State would have been a wonderful bargain.
    Mr. NUNES. Right now, as you are aware, Mr. Herger pointed 
out that Medicaid in California, in some parts of California, I 
think most parts of California, you have very few doctors who 
will want to see Medicaid patients. So I am not exactly sure 
how, just because you give a government card that allows people 
to get Medicaid to 16 million new Americans, if that is really 
better health care or is that just saying you are covering 
people.
    Secretary SEBELIUS. Well, the other thing that the 
Affordable Care Act does is for at least the first several 
years increase provider, doctor rates, from Medicaid rates to 
Medicare rates, which is certainly something that the providers 
are very enthusiastic about.
    Mr. NUNES. That is for 2 years only, I think.
    Secretary SEBELIUS. For the first 2 years. And we would 
hope that Congress would take a look at that and would help us 
extend that.
    Mr. NUNES. But that is not in this budget. Those increased 
costs are not in the budget.
    Secretary SEBELIUS. Not past 2016.
    Chairman CAMP. Time has expired.
    Mr. NUNES. One more question.
    Chairman CAMP. We are past the 5 minutes. We really need to 
go to Mr. Tiberi now.
    Mr. Tiberi.
    Mr. TIBERI. Thank you, Mr. Chairman.
    Thank you, Madam Secretary, for being here today.
    I want to assure my colleagues on the other side that we do 
care about patients. In fact, as you know, Dr. Berwick was here 
last week; and I mentioned specifically my concern about 
patients being left off of Medicare. And, ironically, 2 days 
later, my godmother got a note from her OB-GYN. She is on 
Medicare fee-for-service, and she was informed in writing that 
she would no longer--the doctor, a woman, would no longer be 
taking Medicare patients, including my godmother. And that is a 
trend that we continue to see, at least in Ohio. I can't speak 
for any other part of the country.
    And as you know, Madam Secretary, the Medicare Advantage 
program is one that has, at least in central Ohio, high marks 
by seniors, incredibly high marks by seniors.
    The cut that we are speaking about has not occurred. You 
are absolutely right. But my understanding is in 2012 we will 
see the actual first cut over a 6-year period. In fact, the 
cut, my understanding is--and correct me if I am wrong--is $200 
billion. That will encourage--the largest Medicare provider in 
my district is not an insurance company. It is a Catholic 
hospital. And they are reassessing whether or not they are 
going to continue in the Medicare Advantage program. That means 
all those Medicare Advantage beneficiaries, those seniors who 
chose to go into that Catholic hospital not-for-profit Medicare 
Advantage program will be back in the Medicare fee-for-service.
    As you know, Madam Secretary, a majority--a huge majority 
of seniors who are on Medicare fee-for-service have some sort 
of other coverage, whether it be retiree coverage, whether it 
be a MediGap plan, or Medicaid; and the largest MediGap 
provider in the country is AARP which supported the bill. So my 
constituents who are on this large Medicare Advantage program 
that may not exist after 2012 or 2013 face the choice of buying 
a MediGap coverage probably from AARP, which obviously benefits 
AARP.
    And so the fact of the matter is--and I would love to have 
your comment on this--if we actually cut Medicare Advantage, 
Medicare Advantage providers are telling me that aren't 
insurance companies, that they will be forced to choose to no 
longer be in the program. If that happens, what happens to the 
beneficiary?
    Secretary SEBELIUS. Well, again, Congressman, I think that 
there is not a lot of evidence that that will happen. And I 
share your concern that Medicare beneficiaries have a choice.
    But, right now, we have about 75 percent of the 
beneficiaries who are subsidizing about a thousand dollars a 
year more for those who are choosing Medicare Advantage, with 
no real health benefits to the Medicare Advantage customers. So 
that we are trying to address, as has been raised here and I 
think is certainly a concern that the Administration shares 
with all of Congress, that we address the rising health care 
costs which are well in excess of all inflationary costs. We 
spend two and a half times of what any nation on Earth spends, 
and we don't have good health results.
    Mr. TIBERI. But during the debate on the health care bill, 
we were told that we were going to have greater access, that 
patients would have greater access.
    Secretary SEBELIUS. And as the data this year shows, we 
won't. Six percent more in Medicare Advantage.
    Mr. TIBERI. I can give you a real-life example. My 
godmother on Friday who got a letter from her long-time OB-GYN 
that they are not taking Medicare patients anymore because of 
reimbursement issues.
    Now it is great that we are going to increase Medicaid 
reimbursements, but doctors in Columbus, Ohio--and I know you 
are visiting soon--are telling me that this is a huge problem; 
and we haven't even began the debate in Ohio where the Governor 
and legislature are facing a $1.6 billion hole on Medicaid. And 
they have--I know you say they have flexibility, but the 
flexibility they have is based upon a basic benefit. They can 
go above that basic benefit, but they can't have any 
flexibility below that basic benefit on Medicaid.
    So we have providers telling me and patients telling me 
that Medicaid and Medicare are broken, and part of the fixes in 
the bill are expediting physicians from backing off both 
programs.
    Secretary SEBELIUS. Well, Congressman, again, I think we 
talked earlier about the sustainable growth rate. And at least 
what I have heard from doctors as I travel around the country 
is that their primary concern about Medicare deals with the 
uncertainty that has been created really since 2002 with any 
kind of addressing the payment rate.
    And I think that the President shares that concern. He has 
made it a 2-year pay-for, 2\1/2\-year pay-for going forward. 
That would be the longest fix in the SGR in a very long time. 
We think it should be a permanent fix. We would look forward 
to--I think this is an area that should have a lot of 
bipartisan support.
    I would agree with you the uncertainty about payment for 
Medicare doctors has caused a huge concern throughout the 
country, and that is why the President is recommending that we 
fix it.
    Mr. TIBERI. My time has expired. Thank you.
    I will just tell you that patients and doctors are telling 
me it is not just the uncertainty, it is the bill that was 
passed.
    Chairman CAMP. Thank you.
    Mr. McDermott is recognized.
    Mr. MCDERMOTT. Thank you, Mr. Chairman; and welcome, 
Secretary Sebelius. Thank you for being here.
    This past Friday, the Republicans put out their plan to cut 
a hundred billion dollars from the Federal budget. The proposal 
clearly highlights Republican priorities related to the health 
and wellness of Americans as well as jobs and the economy. 
Three quick examples:
    The Republicans want to cut $1.3 billion from community 
health centers. If this cut is made, according to analysis from 
the Senate, more than 2.8 million people will lose access to 
their current primary care provider and over 5,000 health 
center staff will lose their jobs.
    Number two, Republicans propose cutting $850 million from 
the CDC. This is central to protecting America against flu 
outbreaks and other epidemics. If an infection were to break 
out, a decreased CDC funding would stand in a way of an 
effective response. This would devastate our economy and jobs.
    And, finally, the example of Republican priorities, they 
propose cutting $1 billion from the National Institutes of 
Health. Now this cut is just plain stupid. For every dollar 
spent by NIH, $2 are returned; thousands of jobs are created; 
and NIH research is keeping our country at the forefront of 
innovation.
    A hundred billion dollar pledge was simply political 
theater with no merit whatsoever behind it. The cuts will 
actually hurt our economy and destroy jobs. What really 
accounts for Federal spending is mandatory Federal programs 
like Medicare and Social Security.
    Given that our witness today is the Secretary, I am going 
to focus on Medicare and what Republicans hope to do with these 
important programs.
    Republicans have always hated Medicare. A majority of them 
voted against it with the original passage in 1965. Speaker 
Gingrich said he hoped it would wither on the vine. And in the 
months to come, the Republicans are going to try to dismantle 
and eventually try to do away with Medicare. You don't have to 
take my word for this. Republicans outlined their plan in a 
document called the Roadmap to America's Future. The Republican 
plan would end Medicare as we know it, making it a voucher 
system. The plan would force seniors to go out and shop around 
for private health insurance coverage with a government 
voucher.
    Republicans want to force seniors to put more skin in the 
game when it comes to their health care, but seniors are 
already putting a third of their income into their health care. 
They can't afford any more skin.
    Now, when it comes to priorities, I happen to believe that 
Medicare should be preserved. We extended its solvency by 12 
years as I looked at the bill we passed. I believe we should 
focus improving on it.
    But I would like you, Secretary, to explain--you are 
formerly an insurance commissioner and you have been a 
Governor. Now tell me what you anticipate, if the Republican 
roadmap for the future passes and every senior is handed a 
$8,000, $9,000 voucher, whatever, and sent out into the 
insurance world, what will be the effect of that?
    Secretary SEBELIUS. Well, Congressman, I share your belief 
that the passage of Medicare was an important compact with the 
American people. In fact, I have a bit of a personal connection 
with that. My father was a Member of the Energy and Commerce 
Committee and helped to write the Medicare bill, and he will 
turn 90 in 3 weeks and is now a beneficiary of that bill. So I 
start this conversation as a daughter.
    I think that we are responsible to do a couple of things. 
One is to help make sure that Medicare is here for generations 
to come, and 12 years of additional solvency is a step in that 
direction. I think that some of the delivery system reforms 
that are anticipated are another big step in that direction to 
make sure that we deliver high-quality care.
    I also have the experience, as you say, as an insurance 
commissioner and understand that people who are shopping on 
their own often do not have any market leverage, which is why 
people in the individual market are often penalized. They pay 
18 to 20 percent more than those who are in large employer 
pools. One of the reasons for the health exchange is to help 
group people into pools so that they would have some purchasing 
power.
    So insurance experience, as you balance risk and if you are 
shopping on your own, there is no risk to balance but your own.
    Mr. MCDERMOTT. Can you imagine your father at age 90 going 
out looking for a health insurance plan with a voucher?
    Secretary SEBELIUS. No, I cannot.
    Mr. MCDERMOTT. What would happen to him?
    Secretary SEBELIUS. Well, I think that the benefits of the 
Medicare program are having access to high-quality care that is 
there year in and year out, and that is something that we have 
committed ourselves to for 45 years. And the opportunity that 
the Affordable Care Act gives us and that the President is very 
committed to is making the kinds of not only payment reforms 
but delivery system reforms that can be instrumental in 
delivering that high-quality care for generations to come.
    Mr. HERGER [Presiding]. The gentleman's time has expired.
    The gentleman from Kentucky, Mr. Davis, will inquire for 5 
minutes.
    Mr. DAVIS. Just before moving forward I would like to 
correct a pleasant fiction being shared by my colleague from 
Washington State. The roadmap is one person's idea. It is not 
representative of the party and Members such as myself, 
Chairman Camp, almost everybody I know in this Committee who 
has worked for years to bring Medicare into the 21st century 
and to leverage technologies.
    And I wish that you had taken me up on the invitation that 
you accepted when you were before the Committee 2 years ago to 
come and visit across the river from Cincinnati in Covington. 
Some tremendously innovative process ideas that were going on.
    Before my colleagues were removed from the majority and 
they jammed through the PPACA, the so-called health care 
reform, it eliminated this expansion or this ability to expand 
and lower costs to health care dramatically because of the 
provisions in the bill. And had you seen that firsthand I think 
that we might have had--actually had a bipartisan dialog on 
health care.
    Moving to an equally important subject under your 
jurisdiction and one that is personally important to me because 
of my own background growing up, as you know, the 1996 Welfare 
Reform Law replaced the former welfare system with a new 
Temporary Assistance for Needy Families, or TANF, block grant 
program. And the program has worked to promote and increase 
earnings, reduce poverty, independence. Still, we all 
acknowledge there continue to be issues such as a large number 
of adults continuing to collect TANF benefits without engaging 
in work and other productive activities. States have also 
learned how to game the system to avoid work requirements for 
such adults, among other concerns.
    As chairman of the Human Resources Subcommittee, this issue 
is of great personal interest to me; and I know that you state 
in your written testimony an interest in working with the 
Congress on TANF reauthorization. However, this budget is the 
second in a row in which the Administration has punted in terms 
of issuing specific recommendations for a comprehensive multi-
year reauthorization of the TANF program. Why does the 
President's budget not include a comprehensive multi-year TANF 
reauthorization proposal for the second year in a row?
    Secretary SEBELIUS. I think, Congressman, we are engaged in 
a broad outreach to stakeholders; and particularly in the 
recent recession we saw opportunities to have TANF be a more 
effective and productive program. Work subsidies for instance 
were used in many, many States around the country including--I 
was going to say Ohio. I am not sure that they were implemented 
in Kentucky. But we want to make sure that, as TANF is 
reauthorized, we really take into account the very recent 
experience and work with Congress on a long-term strategy that 
reformats this program and makes it effective into the future. 
We learned some lessons in the last 2 years that I think have 
to be part of the principles going forward, and we are still in 
the process of collecting that information.
    Mr. DAVIS. On that same note, would you say in terms of 
welfare work rates, work and education requirements, the time 
limits over this 2-year hiatus, that the Administration feels 
the current law is fine?
    Secretary SEBELIUS. No, sir. I think we feel that it 
absolutely is an essential program but actually needs 
reformatting. But the recent downturn made it even more obvious 
that there were areas that needed to be addressed; and, again, 
we would look forward to working with you and your Subcommittee 
in terms of having that long-term discussion.
    Mr. DAVIS. We would like to have that discussion very much 
to rationalize assistance rates and make sure people get the 
help that they need, certainly, but also be able to have--would 
you agree that it would be helpful to have a comprehensive 
score not unlike on how we roll up costs in the private sector 
in all forms of assistance that an individual receives in a 
database that would be supportive of that so that we can get a 
good read from a fiscal perspective? To me, this is not 
partisan. It is simply process like we would do as good 
financial stewards.
    Secretary SEBELIUS. Well, I think to be informed by all of 
the information is important as we move----
    Mr. DAVIS. So you would support that?
    Secretary SEBELIUS. I am not quire sure exactly what you 
are asking me.
    Mr. DAVIS. Well, basically, some of these benefit 
allocations are done without reference to other benefits that 
folks get or sometimes folks can fall off the cliff in one area 
and be forced into paying exorbitant taxes when in fact they 
are not really rational for where their level is. And the one 
way to do this is to get these programs connected and that 
would begin by having common metrics so we could see every 
program that a person is in receipt of. It would go a little 
bit outside your jurisdiction, but I think it would be helpful.
    Final question. Based on this desire to move forward and 
address some of these issues, do you believe--do you support--
does the Administration support the current work requirements 
for welfare recipients that are included in the Deficit 
Reduction Act of 2005?
    Secretary SEBELIUS. I am not sure I can answer that 
question comprehensively.
    Mr. DAVIS. I tell you what we will do. We will get you that 
information, and you can comment, and we look forward to 
working with you on those reforms.
    Secretary SEBELIUS. I would be happy to do that. Yes.
    [The information follows: Did not receive]
    Chairman CAMP. Thank you.
    Mr. Lewis is recognized.
    Mr. LEWIS. Thank you very much, Mr. Chairman.
    Madam Secretary, welcome. Thank you for your service, for 
your vision, for your leadership, and your commitment to health 
care for all Americans.
    Madam Secretary, it is my understanding that over 3 million 
seniors and individuals living with disability received 
assistance with their prescription drug costs last year as a 
result of the Affordable Care Act. If the Affordable Care Act 
were repealed, would those seniors have to pay the government 
back?
    Secretary SEBELIUS. I think that question is uncertain, 
Congressman. There is some belief that they may have to pay it 
back.
    Mr. LEWIS. Thank you.
    Something has been sort of bothering me for a while. I keep 
hearing some of my colleagues, especially on the other side, 
referring to the Affordable Care Act as ObamaCare. Now, if I am 
President of the United States, if I am Mr. Obama, I would 
embrace it. I would be very proud that people are referring to 
ObamaCare, the Affordable Care Act as Obama Care. Do you have 
any reaction to it?
    Secretary SEBELIUS. Well, Congressman, I think that there 
has been an effort to portray the Affordable Care Act as 
government takeover of health care; and I would just suggest 
that nothing could be further from the truth. This is a very 
State-based system, as you know. The expansion of health 
insurance to approximately 30 million people will be private 
plans, State-based exchanges, run and chosen by the States. The 
regulation of insurance will stay a State-based mechanism. The 
oversight will be provided by States. The consumer outreach is 
provided by States.
    So I think the attempt of renaming the bill is to 
mischaracterize the efforts under way of somehow the Federal 
Government dictating health care. I would suggest this is a 
very provider- and patient-centered health reform.
    Mr. LEWIS. Thank you very much, Madam Secretary.
    Thank you, Mr. Chairman. I yield back.
    Chairman CAMP. Thank you very much.
    Mr. Reichert is recognized.
    Mr. REICHERT. Thank you, Mr. Chairman.
    Welcome, Madam Secretary.
    I have, in the last few hearings we have had, had an 
opportunity to question Mr. Goolsbee and Dr. Berwick on some 
issues--and we will just talk through the buzzer. I kind of 
want to follow the same line of questioning. Did you get a 
chance to see their interviews at all in their appearance here?
    Secretary SEBELIUS. I did not.
    Mr. REICHERT. I am concerned. There are a lot of promises 
in the health care bill. And you have listed off a number of 
them today. There is a promise to lower the cost for 
businesses, lower the cost for seniors; and I am not sure the 
American people really are buying all of the promises, promises 
to pay doctors. And I think part of the problem is we are 
getting mixed messages.
    I just thought--I want to just share a little quote with 
you that you gave in a press conference in June of 2010. You 
said, together what these rules mean is exactly what President 
Obama told the American people from the start. Under the 
Affordable Care Act, if you like your doctor and your plan, you 
can keep it.
    I have asked Mr. Goolsbee and I have asked Dr. Berwick 
those same questions, and I can't get a straight answer.
    Do you still believe that statement in this bill, you are 
able to keep your health care bill and your doctor if you like 
it? Is that an accurate statement? Just say yes or no.
    Secretary SEBELIUS. Congressman, it is accurate to the 
point that we are not tampering with the existing system. 
Employers make choices of plan changes and doctor changes that, 
right now, employees don't control.
    Mr. REICHERT. Madam Secretary, please. My time is limited.
    Here is the problem. The people in America just want to 
know--I go to church on Sunday, and I hear from my senior 
citizens. They just want to know, can I keep my doctor? And I 
say, well, the plan says, yes, you can. The President, though, 
you may recall, said a year ago--and I was present, most of the 
Republican Members were present when he addressed our 
conference--and he said there may have been some language that 
snuck into the bill that runs contrary to that premise. Now how 
does that----
    Secretary SEBELIUS. I don't think there is any language in 
the bill that interferes with the current system.
    Mr. REICHERT. The President was inaccurate then when he 
made that statement?
    Secretary SEBELIUS. Congressman, I did not hear the 
President's statement. What I can tell you, employers choose 
care for 180 million Americans. That doesn't change.
    Mr. REICHERT. Madam Secretary, please.
    If the President said that there is language in the bill 
that runs contrary to that promise and your quote in June, 
2010, will you work to change the language in the bill to 
ensure that the American people can keep their doctor and keep 
their health plan?
    Secretary SEBELIUS. Congressman, I would be happy to work 
with you on that. But, as you know, we don't order doctors to 
take care Medicare patients. You just heard of a doctor who did 
not--or take Medicaid patients. We don't order employers to 
keep the same plan with the same network. That has never been 
part of the promise.
    Mr. REICHERT. Madam Secretary, you just made my point.
    The language in the bill over years will result in the 
American people having to leave their doctors that they like 
and leave their health care plans. We know that is going to be 
a fact.
    Secretary SEBELIUS. I would strongly disagree that that is 
the language in the bill. That is the current system.
    Mr. REICHERT. You believe that the current bill allows 
people to keep their health care plan and their doctor. That is 
what you said in June, 2010.
    However, there is another interesting quote that comes from 
your own agency's regulation on grandfathered health plans, and 
it states that seven out of ten employers will not be able to 
maintain their grandfathered status. How is that consistent 
with your statement in 2010 that you can keep your health care 
plans if you like them? That is very inconsistent.
    You see why the American people are so skeptical of this 
health care plan? Not only is it over 2,400 pages long, but 
they are being promised promises, and they don't see the 
promises coming through true. They are already falling apart. 
You need to help us understand.
    Secretary SEBELIUS. I would be happy to work with you to 
help you understand.
    Mr. REICHERT. Thank you. I yield back.
    Chairman CAMP. Thank you.
    Dr. Boustany is recognized.
    Mr. BOUSTANY. Thank you, Mr. Chairman.
    Thank you, Madam Secretary, for being here today.
    As you know, many Americans are really opposed to the idea 
of being required to purchase or to have insurance or 
Washington-mandated insurance.
    The new health law also requires participating employers to 
auto enroll all workers in the new CLASS entitlement program. 
Unless a worker pays very close attention, it takes time to opt 
out of this program. You call the program voluntary even though 
some enrollees might not want to join this. So if CLASS is 
truly voluntary, why did Washington Democrats allow American 
workers--why didn't they allow all American workers to 
exclusively opt in instead of being automatically enrolled in 
this program?
    Secretary SEBELIUS. Well, sir, I need to correct something.
    First of all, there is no program that is together yet. 
There is no automatic auto enrollment. That is one of the 
considerations being discussed. But there is no framework yet 
for the CLASS program. One of the issues is how to get a take-
up rate that is a sustainable program. There is no mandate for 
auto enrollment.
    Mr. BOUSTANY. Let me ask you this. If you do assume that 
fewer Americans would enroll in CLASS, if you gave them to 
freedom to opt in instead of forcing them to jump through the 
hoops to opt out, I mean, what do you think they are going to 
do? Are they going to opt in or op out?
    Secretary SEBELIUS. Well, again, I think CLASS has the 
potential of offering Americans a product that they currently 
don't have available, which is to set aside their own money and 
pay for residential services, allowing them to age in place. It 
isn't available in the private market. It isn't available in 
the public market. We have heard from consumers across the 
country how incredibly valuable this would be to not be faced 
with a choice of forced nursing home or leaving their home.
    Mr. BOUSTANY. I understand the benefits of the program.
    Let me ask you this. I understand many employers plan to 
avoid CLASS participation due to what they foresee as 
administrative hassles and certainly the projected insolvency 
of this program. The U.S. Chamber, the President's own deficit 
commission both have called for repeal of the program before 
implementation.
    You recently announced a massive $93.5 million PR program 
targeting employers. But what is the contingency plan if you 
cannot pressure enough employers to auto enroll workers in a 
program that Democratic Senator Kent Conrad calls a Ponzi 
scheme? I mean, are you going to have warnings in this from CBO 
and the Medicare Actuary who have expressed major concerns 
about future deficits and this program being clearly 
unsustainable?
    Secretary SEBELIUS. Congressman, we very much share the 
concerns that have been expressed that, as written into the 
law, the framework of the program was not sustainable into the 
future. The deficit commission actually said it should be 
repealed or corrected.
    Mr. BOUSTANY. So should it be repealed?
    Secretary SEBELIUS. No, sir. We are actually in the process 
of correcting the framework so it can be solvent into the 
future and so we not only keep the commitment to the American 
people but also make sure that taxpayer----
    Mr. BOUSTANY. Madam Secretary, would you share the 
information that you--the discussions you have had with 
Treasury on this on the mechanisms for enrollment and how the 
premiums are going to be collected?
    Secretary SEBELIUS. We would be happy to share.
    Mr. BOUSTANY. Thank you. And do you know when the first 
CLASS premiums will be collected?
    Secretary SEBELIUS. They are not scheduled to be started 
until 2012.
    Mr. BOUSTANY. And will it begin prior to the establishment 
of the CLASS independence benefits plan?
    Secretary SEBELIUS. No, sir, because we can't enroll 
anybody unless they know what it is that they would be setting 
money aside from.
    Mr. BOUSTANY. Okay. Thank you.
    Mr. Chairman, also, we heard a lot of discussions about 
delivery system reforms; and we heard vague platitudes by Dr. 
Berwick the other day to our questioning across the dais here. 
I have deep concerns as somebody who has really worked in 
delivery system reforms and quality issues in that area; and I 
haven't heard anything specific from you today, either. I 
deliberately avoided the question. But I am going to send a 
letter to you in writing requesting a meeting with your experts 
at HHS to start extensive discussions on this. Because, 
clearly, this is at the heart of how we really manage costs in 
this; and I have not heard anything in public or in testimony 
to the effect that you guys understand what you need to do in 
that area.
    Secretary SEBELIUS. Well, we would be delighted to have 
those discussions.
    And let me just assure you, Congressman, that delivery 
system reforms initially are entirely voluntary, are coming to 
us from providers. This is not something that is being directed 
by CMS. It is a provider-driven, innovative approach, 
strategies that are in place and work. But we would be happy to 
have those extensive discussions.
    Mr. BOUSTANY. I will send you a formal letter requesting 
those meetings.
    Chairman CAMP. Mr. Neal is recognized.
    Mr. NEAL. Thank you very much, Mr. Chairman; and thank you, 
Madam Secretary.
    I want to thank you, first of all, for the productive 
meeting that you and the staff had with Caritas Christi. You 
went a long way toward reassuring them of many of the issues 
that were raised earlier by my friend, Mr. Tiberi.
    I want to thank my friend, Mr. Brady, for looking out for 
those hospitals in Massachusetts, very important. I assure him 
right now, if he is ever ill, we will make sure that he has a 
space in that Mecca of medical care. I know that was on your 
mind.
    I will point out something else that I think is really 
important, Madam Secretary, and that is the customer 
satisfaction rate in Massachusetts with the health care plan 
that became the national model is above 77 percent. It is not 
limited to Democrats or Republicans. It is the population of 
the State that is very happy with access.
    And emergency room care everywhere is a drag on medical 
costs because of the issue of preventative care which they 
might have received at an earlier stage which in this 
legislation that you are explaining once again this morning 
addresses.
    Let me talk to you about the issue of children's hospitals 
and graduate medical education that has had broad bipartisan 
support. Could you offer some clarity on how you see the future 
on that initiative?
    Secretary SEBELIUS. Well, I would say, Congressman, that 
was a very difficult budget decision, as you know. The 2012 
budget does eliminate the GME for the 60-plus children's 
hospitals and instead I would say focuses resources on programs 
that specifically train primary care doctors, recognizing that 
that is a huge need that has been long under attended in the 
past.
    In a better budget time, that would not have been the 
recommendation going forward, but that was the direction that 
the President wanted to take.
    Mr. NEAL. So it is front and center in your office still, 
the issue of how to address the program?
    Secretary SEBELIUS. Yes.
    Mr. NEAL. And I want to thank you on behalf of that 9-year-
old who visited my office recently who has hemophilia. And 
maybe you could address, in light of that, the issue of 
lifetime caps.
    Secretary SEBELIUS. Well, I hear from parents and others 
all over the country who were terrified that their disease was 
going to cause them to run out of care or treatment at a very 
critical time. I actually participated on a health panel with a 
mother of a hemophiliac in Connecticut who told some 
incredible, compelling stories. As a parent, I can't imagine 
what she and her husband are trying to go through.
    It is a very limited, as you know, percentage of the 
population. But for that percentage it is a life-or-death 
situation where they were confronted with a cap on life-or-
death care or treatment going forward.
    So the removal of that cap, both gradually removing the 
yearly cap but the removal of the lifetime cap won't affect a 
lot of people, but the people it affects have--we have 
literally provided them some lifesaving hope for the future.
    Mr. NEAL. And virtually every spring I have a group of 
visitors from my constituency, parents who have children with 
diabetes, and I want to assure you that they are very happy 
with the idea that those children now can access not only care 
but, just as importantly, insurance. That is a huge victory.
    Secretary SEBELIUS. Well, I had the experience as a parent 
when my sons got out of school neither of them was headed for a 
job with insurance coverage. So I experienced personally 
keeping the young adult on a family plan would have been a huge 
help to my husband and me.
    But, also, one of our son's great friends had some 
childhood illnesses; and what his father told me is that 
graduating from college for him was a very dangerous situation 
because his son was confronted with the insurance market and 
enormous blockades to getting any kind of insurance due to his 
health conditions when he was 9 and 10. Heath's parents and 
others won't have to worry about that anymore, and that is a 
big step forward.
    Mr. NEAL. Thank you, Mr. Chairman.
    Chairman CAMP. Mr. Roskam is recognized.
    Mr. ROSKAM. Thank you, Madam Secretary. Thank you, Mr. 
Chairman.
    Madam Secretary, one of the issues that has come up in my 
congressional district is this notion of waivers and the 
process by which waiver decisions are made, who is the 
beneficiary of a waiver. I know that there are all kinds of 
accounts out there.
    I am informed, from information from your office, that 
there is 948 waivers that are presently in place. And you know 
this story. You know the criticism of it. It seems like there 
is almost a line-of-scrimmage, audible feeling to this. In 
other words, well, you know, come in and make your pitch and 
maybe you get a waiver and maybe you don't. The other criticism 
is that the waivers are for a short time duration.
    So I represent a district west to northwest suburbs of 
Chicago. McDonalds Corporation gets a waiver, and I am not a 
critic of that waiver. But what do you say to the tool and dye 
manufacturer in the suburbs of Chicago who has a hundred 
employees that doesn't have the political stick, isn't a big 
story, doesn't have the ability to come in and make a pitch for 
a waiver? Where are those employers being served in the waiver 
process?
    Secretary SEBELIUS. Congressman, there are really two 
categories of employer-based plans and other plans where the 
waiver situation has come up.
    One is, as you said, the McDonald's area, where there are a 
number of employers, large and small, who offered very limited 
health benefit plans, the so-called mini-med plans. And early 
on there was notice given and information on the Web site, 
information available in the preliminary rule to recognize the 
fact that those plans will cease to exist in 2014 when there 
are affordable, viable competitive options in State-based 
exchanges.
    But, in the interim, the law gave our office the 
flexibility of collecting the first year of data. Because there 
really isn't any data about how many are out there and what 
they look like and if indeed it meant losing coverage for 
employees who had some coverage even though they didn't have 
comprehensive coverage to grant a waiver, and those waivers 
have been put in place.
    The other, the 900 that you referred to, is really a 
different category. It deals with one feature of the plan and 
that is the $750,000 overall benefit, back to Congressman 
Neal's question, about the lifetime cap. A number of plans were 
not able to reach that in a year's period of time. And again 
the law says that our office is given the flexibility to look 
at serious market disruption and rate increases.
    The rule was published. The Web site is published. I would 
say I think, on average, 95 percent of the waiver requests that 
we received actually were given waivers. It was a fairly rapid 
turnover. Most plans have a January 1--or a bulk of plans have 
a January 1 turnaround time, which is why we saw a big increase 
in that final quarter. And that again is a 1-year waiver to get 
a graduated movement toward that benefit ceiling that currently 
wasn't in the plan.
    Mr. ROSKAM. So in that second group--am I interpreting this 
correctly--if you are the tool and dye manufacturer and your 
problem doesn't line up with the problem that, let's say, SEIU 
has, then, because your problem is different, the department is 
not willing to contemplate a waiver?
    Secretary SEBELIUS. It isn't that the problem is different. 
That waiver authority was very specifically outlined in the 
bill for that one provision, and we are following the law.
    Mr. ROSKAM. So does the waiver provision limit your 
authority then to only those two areas and you have got to find 
within those two areas, either the mini-med or the short time 
duration, and beyond that you don't have the authority to make 
a waiver?
    Secretary SEBELIUS. We don't have the authority to waive 
the law--I mean, we have rulemaking authority, which we are 
using. We are doing extensive outreach with everybody from tool 
and dye makers----
    Mr. ROSKAM. I understand. I am short on time.
    I just want to direct your attention. So is the two 
categories of waivers, Madam Secretary, are those categories of 
waivers?
    Secretary SEBELIUS. No, there is waivers of authority in 
the medical loss ratio that can be granted to an entire State; 
and there likely is other waiver authority. But those are the 
two that you mentioned in your opening comments.
    Mr. ROSKAM. Right. So it is an overstatement to say that 
your authority to make waivers is limited to the two things 
that we have discussed; isn't that right?
    Secretary SEBELIUS. That would be correct.
    Mr. ROSKAM. So you are making decisions then based on how 
you are interpreting the statute; isn't that correct?
    Secretary SEBELIUS. I am trying to follow the law, as is 
our staff, yes.
    Mr. ROSKAM. I yield back.
    Chairman CAMP. Time has expired.
    Mr. Becerra is recognized.
    Mr. BECERRA. Thank you, Madam Secretary; and 
congratulations to you for all of the work that you have 
engaged in over the last 2 years. It has probably been an 
interesting ride for you as Secretary. Obviously, your 
preparation, from being a Governor to having been an insurance 
commissioner, certainly put you in a good position to be able 
to be where you are today; and we thank you for all of the work 
that you have done.
    We continue to hear the myths about the Affordable Care Act 
and what it meant to have this historic reform of health care 
to make our system far more productive, given that it is the 
most expensive in the world. And we are beginning to now have 
it seen through to the American people that the talk of these 
death panels was simply myth, that the talk of a government 
takeover of a system that relies on private health insurance 
companies to offer health care is difficult to swallow as 
truth, and, again, that one is myth. In fact, you and I and 
every Member on this Committee as Members of Congress receives, 
essentially, government-sponsored, taxpayer-sponsored health 
care through the Federal Employee Health Benefit Program.
    In fact, the support, the subsidy that you and I and every 
single Member, who I believe every single Member here has 
accepted that government-sponsored health care, the support we 
get through subsidy is greater than the support and subsidy 
that we provide in the Affordable Care Act to the 30 some odd 
million Americans who would qualify. So if there has been a 
takeover, the first people who should defy that are probably 
the Members of Congress who are receiving that same government-
sponsored health care.
    But having heard about all of the myths, we are now 
beginning to see the reality, the facts coming through. I think 
you mentioned one of those, the myth that we were going to see 
seniors lose their health care if they got their health care 
through Medicare HMO, which is the Medicare Advantage Program. 
The myth was they were going to lose it. The fact I believe you 
mentioned was that we have actually seen an increase in the 
number of people who are receiving coverage and a reduction--am 
I correct--a reduction of the costs, 6 percent increase and a 6 
percent in the number of people participating, and was it a 6 
percent drop in the actual premiums that seniors under Medicare 
HMO receive have to pay?
    I believe as well, and Mr. Neal, my colleague, also pointed 
out, that the myths were that we were going to be denying 
people health care. The facts now are becoming evident that a 
lot of our children who are adults who are having a hard time 
finding insurance are able to qualify for insurance through 
our--in other words, through their parents health insurance 
policy. That is now a right that we as parents have.
    The Affordable Care Act, I believe--and you may have the 
number--how many seniors is it that qualify for the $250 
support check they received because they fell into this donut 
hole, what we call the donut hole of prescription drug coverage 
where all of a sudden, having received support from the Federal 
Government to help pay for their prescription drugs, they all 
of a sudden fell into this black hole where they no longer 
received support. So, last year, they received $250 to support 
them from the Federal Government under the Act.
    Do you know how many people, seniors got that?
    Secretary SEBELIUS. As of the year's end, about 3 million 
seniors had received that one-time check.
    Mr. BECERRA. So, without that Affordable Care Act, 3 
million seniors would have had to put out of pocket another 
$250 to pay for their prescription drugs. And we know for many 
of these seniors on fixed income that could have been the 
difference between making the payment for the rent or perhaps 
buying the food for the month as well.
    We know, for example, that small businesses are beginning 
to take advantage of the tax credit that they are offered under 
the Affordable Care Act. Do you remember how much the credit is 
for small businesses?
    Secretary SEBELIUS. It starts at 30 percent, but it 
graduates up, thirty percent of the cost of employees' health 
coverage. And, yes, indeed, that is causing an up-tick for the 
first time in a very long time in small businessowners 
purchasing insurance coverage.
    Mr. BECERRA. So we hear the myth. The cry is that small 
businesses are going to find this impossible to deal with and 
that we will find small businesses losing the opportunity to 
offer coverage to their employees. The facts are beginning to 
show that, with this credit, $3 out of $10 in providing the 
cost of health care to your employees will be covered through 
the Affordable Care Act, that a lot of small businesses are 
beginning to take advantage of that opportunity, many for the 
first time being able to tell their employees that they will be 
able to offer health care insurance to them.
    But I think one of the greatest achievements of the 
Affordable Care Act--and I thank you for having pushed for 
this--is that the whole process of discriminating against 
individuals because of their health condition that we saw by 
insurance companies is now going to be something of the past. 
So discrimination based on preexisting conditions will now be 
prohibited. So we thank you for all that help.
    And I thank you, Mr. Chairman, for the time.
    Chairman CAMP. Thank you.
    Dr. Price is recognized.
    Mr. PRICE. Thank you, Mr. Chairman; and welcome, Madam 
Secretary, to the Committee.
    We hear a lot of talk on the other side about myths that 
don't exist. In fact, there is a lot of truths to what they 
call myths out there. As a physician, when I talk about health 
care, I like to talk about principles; and one of the 
principles is accessibility to health care. Everybody wants 
citizens across this great land to have accessibility to health 
care; and, in fact, accessibility is decreasing for a variety 
of reasons. One of them is we think the bill that was passed.
    But when physicians aren't able to care for people because 
of reimbursement or because of all sorts of regulatory 
apparatus or the lawsuit abuse issues that exist out there that 
aren't being addressed, then patients can't find a doctor. And, 
as you know, in your former State, in your previous State where 
you were Governor, there are doctors who aren't taking new 
Medicare patients for a variety of reasons, but they are not. 
So new Medicare patients are having difficulty finding a 
physician.
    In terms of affordability, premiums are increasing for 
people because of this law specifically. I know that you don't 
want them to say that, but that is the truth. I would suggest 
to you that the quality of care is harmed and threatened by 
this law because it removes the ability of patients and 
families and doctors to make medical decisions, and I look 
forward to working with you on that, because I know that is not 
your goal. I know that is not your goal.
    You mentioned about Medicare Advantage that, because it was 
frozen, that that was a cut in the fees that were being 
utilized for Medicare Advantage. Do you remember saying that 
just about an hour ago?
    Secretary SEBELIUS. I said that it has been portrayed by a 
number of companies who deliver Medicare Advantage that we did 
not keep up with the cost of inflation and they would 
characterize it as a reduction.
    Mr. PRICE. Would the same hold true for SGR, for physician 
reimbursement rates which for the past 9, 10 years have not 
increased relative to inflation at all?
    Secretary SEBELIUS. I definitely know that there are 
physicians who consider that a cut, yes, sir.
    Mr. PRICE. There are a lot of physicians that I--one of my 
former colleagues that I talk to, and they say they are not 
going to be able to continue in the Medicare Program anymore 
because of reimbursement rates and a variety of things. There 
are some who believe that as access to physicians decrease it 
is because of the rules and because of the reimbursement, that 
patients won't be able to find physicians in a large number and 
that the response of the Federal Government will be to make 
certain to require that physicians have to participate in the 
Medicare program or the exchanges and base that upon licensure.
    Does the Administration support requiring physicians to 
participate in the program as a component of being able to get 
licensed in the State?
    Secretary SEBELIUS. As you know, licensure is a State 
issue. We have never had that discussion. I don't have any 
idea, again, where that conversation is coming from, but that 
certainly----
    Mr. PRICE. Would you support the Federal Government 
requiring physicians?
    Secretary SEBELIUS. No, sir.
    Mr. PRICE. And the Administration would not, you don't 
believe?
    Secretary SEBELIUS. I can speak for myself. No, sir.
    Mr. PRICE. Well, I am curious.
    Secretary SEBELIUS. I can't speak for anyone else.
    Mr. PRICE. You represent the Administration.
    Secretary SEBELIUS. I have never heard that conversation 
raised by anyone. So I find it difficult to be asked what 
people think about it, because I don't know. But licensure is a 
State issue, as you know, and that is not a conversation.
    Mr. PRICE. There are some people who support Federal 
licensure of physicians, correct?
    Secretary SEBELIUS. I assume so.
    Mr. PRICE. And there are some individuals who believe that 
the Federal Government ought to require physicians to 
participate in these programs as a----
    Secretary SEBELIUS. Congressman, as you know, though, that 
was never a part of anybody's conversation to establish somehow 
mandatory participation and anything would be tied to this 
program. That is just not part of the reality of the bill.
    Mr. PRICE. You wouldn't support that?
    Secretary SEBELIUS. I have said no.
    Mr. PRICE. Okay. Medicare, in essence, price fixes the 
reimbursement that physicians are able to receive for services 
provided to patients. Do you believe that that is an 
appropriate thing, as, of necessity, prices will have to be 
decreased?
    Secretary SEBELIUS. Well, I think what is very appropriate 
is, for the first time, decoupling what physicians are paid 
from what they do in terms of volume of procedure. And that 
delivery system reform is something that I think has been long 
overdue. It will more appropriately provide physician payment 
for care delivery.
    Mr. PRICE. You think physicians ought to be able to charge 
outside of the reimbursement that they are provided by the 
Federal Government?
    Secretary SEBELIUS. To the patients?
    Mr. PRICE. Yes.
    Secretary SEBELIUS. They can in some instances, and in a 
lot of instances they cannot. And I think that is part of the 
Medicare pact, is that patients will not have additional 
expenses beyond their co-pays and payments.
    Mr. PRICE. Thank you, Mr. Chairman.
    Chairman CAMP. Thank you.
    Mr. Buchanan is recognized.
    Mr. BUCHANAN. Thank you, Mr. Chairman, for this important 
hearing; and, Madam Secretary, appreciate you being here today.
    I represent southwest Florida--Sarasota, Bradenton area.
    I want to talk a little bit about tort reform. I have 
noticed the last couple of days the President mentioning that, 
and he understands the importance of it. Could you just expound 
for a minute on that, and then I have got a couple of questions 
I want to follow up with.
    Secretary SEBELIUS. Certainly.
    Congressman, last year, the President directed our agency 
to use the authority we had to implement a series of grant 
programs which are now in place in 20 different areas, some 
with health systems, some with States, to look at a variety of 
measures that could increase patient safety, reduce frivolous 
lawsuits, reduce liability premiums, and ensure fair 
compensation. So we have planning grants and demonstration 
grants around the country and are monitoring those closely.
    This year's budget includes a recommendation that under the 
Department of Justice there be an additional $250 million in 
grants to States to do health courts, safe harbors, early 
disclosure, and offer programs.
    Mr. BUCHANAN. All of our time is limited.
    Let me mention a couple of things.
    One, you are aware of the figures CBO came up with, a 
savings of $55 billion that we would save if we got 
incorporated in terms of the health care bill.
    But let me just say, as it relates, I work with our medical 
society because it is big. I have probably more seniors than 
any other district in the country, around 280,000 55 and older. 
But in dealing with a lot of doctors I know in terms of one 
neurosurgeon he is paying $200,000 a year in medical liability 
insurance.
    One of the lawyers--we don't--this is back a couple of 
years ago--was telling me that he has a practice in bankruptcy. 
And I was asking him who his clients were, because we don't 
have a lot of large companies there. He said, primarily 
doctors. They are looking for asset protection. So I talked a 
little bit more, and he said many of the doctors come to him 
simply because they have practiced as surgeons for 20 years, 
they have created some net worth, and they are afraid that is 
exposed every day that they do any kind of surgery.
    And then also testing in terms of defensive medicine, 
people are very concerned. I have got to believe you talked to 
doctors and others. Everybody gets a test. Everybody gets a CAT 
scan, almost. And the cost that is there because of defensive 
medicine is really affecting the cost of doing business. And I 
am sure in Medicare, we are spending a lot more money than we 
need to.
    So I know it is something that you are looking at. I would 
just say we need to look at that much more aggressively. I 
don't know of any doctors that don't think it is a big problem.
    The other thing I just want to say in terms of the 
Affordability Act is, I don't know--you know, I brought this 
up, and I continue to bring it up--what businesses that you are 
talking to, but I would love to have you come down to Sarasota, 
Bradenton and talk to our businesses.
    I don't know--and I have been in business for 30 years. I 
chaired the Florida Chamber. I don't know of any businesses 
that have any confidence that their premiums, number one, none 
of them are going down. Most of them are going up. One guy, a 
gentleman I talked to the other day, went up a million and a 
half. Another--but it is typically 20 percent, 25 percent. Then 
they look for ways to cut their expenses.
    If we are really looking to try to grow jobs as we need 
to--that is my number one priority--we have got to deal with 
bending the curve on health care for companies. I know the 
health care program we got out there, many feel that is a large 
entitlement, but it does little or nothing for small business. 
And I am just telling you the businesses are just being 
strangled; and many times they have got to pass it on to 
families, the working families in our area.
    So when you talk about the Affordability Act, tell me what 
businesses, based on what research you have done, are really 
seeing any savings.
    Secretary SEBELIUS. Well, Congressman, I think there is no 
question that particularly the small businessowners have been 
at the vortex of the cost increase in health care, which is, as 
you know, exceeding all other inflationary costs. And what we 
find--you know, I saw this in Kansas, I saw it across the 
country, small businessowners often pay 18 to 25 percent more 
for exactly the same coverage that the large employers have 
because they don't have the market strength. They won't see a 
big relief in that market strength until they have the option 
of the new exchanges, which have a much larger purchasing pool 
and much more ability to actually leverage those costs for 
providers.
    Mr. BUCHANAN. When do you see those exchanges----
    Secretary SEBELIUS. Right now they are experiencing the 
assistance with employee coverage of the tax credits. And we 
are seeing in the Kansas City area, Blue Cross Blue Shield has 
said their small business market has actually increased for the 
first time in years because people are linking the tax credit 
and coming back into the marketplace.
    Mr. BUCHANAN. Let me just say I have Blue Cross, we work a 
lot with Blue Cross, my companies have Blue Cross, 25 percent a 
year for the last 5 or 7 years. Nobody believes, other than you 
and maybe a few others in the Administration, that health care 
costs are coming down. They don't see it. I walk into 
businesses and they will show me their bill just went up 22 
percent. But I just want to bring that to your attention.
    Chairman CAMP. Time has expired. Mr. Doggett is recognized.
    Mr. DOGGETT. Thank you, Mr. Chairman. And thank you, Madam 
Secretary. I know a number of our Republican colleagues think 
they can defeat health insurance reform through anecdote. But 
fortunately, the facts really support the testimony that you 
have and the reform that we have underway.
    While I think that Dr. Berwick did an outstanding job last 
week in explaining the increased costs that seniors will face 
if what they call repeal and what I would call the Republican 
Senior Insecurity Act were to be approved. It means seniors pay 
more out of their pockets for prescription drugs. It means 
seniors pay more out of their pocket for a cancer screening. It 
means seniors pay more out of their pocket for health insurance 
premium increases. It means that seniors pay more out of their 
pocket for copays. And all we get out of that, other than 
seniors having to pay more, is that the solvency of the 
Medicare Trust Fund declines by over a decade if they are 
successful with their Senior Insecurity Act.
    I want to touch on some of the anecdotes, though, as well 
that they mentioned about Medicare. As far as the availability 
of physicians to seniors, something that we provide incentives 
for, in fact availability for all of Americans through our 
primary health care incentives in the new act, isn't it correct 
that last year 96 percent of American physicians had Medicare 
participation agreements?
    Secretary SEBELIUS. I think that is a correct number.
    Mr. DOGGETT. So there may be some anecdotes out there, but 
it is according to CMS, almost all physicians in America have 
signed up to participate in Medicare. And I would offer for the 
record at this point a report prepared by our Ways and Means 
Democratic staff concerning Medicare beneficiaries reporting 
reliable access to physician services, Mr. Chairman.
    Chairman CAMP. Without objection.
    [The information follows: Mr. Doggett]



    
    Mr. DOGGETT. And it shows that actually while this is an 
issue we need to keep working on, that seniors tend to have 
more access than some people do within the private health 
insurance system. While the focus on seniors is very important, 
I want to also be sure we have touched on the effect of this 
important health insurance reform that you are helping to 
implement on the rest of the population. If the Republicans 
were successful in satisfying the desire of the big insurance 
monopolies to undermine health insurance law reform, about how 
many young people age below 26 would lose health insurance 
coverage that they gained through the reform? Aren't we talking 
about a couple million or so?
    Secretary SEBELIUS. Yes. Yes, sir. I think 2 to 3 million 
are the up to 26-year-olds who now can stay on their family's 
policy.
    Mr. DOGGETT. That didn't have it before.
    Secretary SEBELIUS. That is correct.
    Mr. DOGGETT. So they can call it repeal, but to a young 
person who is counting on that insurance, it means terminate 
their insurance coverage. What about the study that your 
Department did concerning preexisting conditions? Do you have 
an estimate of about how many Americans will now, if they are 
successful with repeal, will now see their coverage either 
terminated or limited as a result of a preexisting condition if 
we don't have the guarantees that this new health insurance law 
provides?
    Secretary SEBELIUS. It is close to half of our population 
has a preexisting condition that by insurance companies' 
terminology either changes their rate or actually could lock 
them out of the system.
    Mr. DOGGETT. So there are millions of Americans that really 
have a stake in not going back to the old system----
    Secretary SEBELIUS. Hundreds of millions.
    Mr. DOGGETT [continuing]. Of letting the insurance company 
decide that you are not going to get insurance, or your 
insurance will be largely meaningless because of some 
preexisting condition that they have defined.
    And then as it relates to our small businesses, if they are 
successful in undermining health insurance reform, about how 
much in tax subsidies will our--tax incentives for providing 
health insurance coverage, about how much will small businesses 
across America lose?
    Secretary SEBELIUS. Well, we have right now about 4 million 
small businessowners who qualify for the graduated tax 
incentives that provide some help for them to provide employee 
coverage. So we will know at this year's tax time how many 
actually took advantage of that. But there are 4 million 
potential businessowners. And again anecdotally, we know that a 
lot are beginning to connect with those benefits and come back 
into the marketplace.
    Mr. DOGGETT. Thank you very much for the important work you 
are doing in implementing this act. I believe we will see the 
original objectives of this act fulfilled with the work that 
you are doing.
    Chairman CAMP. All right. Thank you. Mr. Smith is 
recognized.
    Mr. SMITH. Thank you, Mr. Chairman. Thank you, Madam 
Secretary, for sharing your expertise and insights here today.
    I have heard concerns from constituents, one in particular 
who has a diabetic child. And this is not an anecdotal 
scenario, but the concern from this parent is that the 
employer-provided plan under which her family is covered may be 
subject to the so-called tax on Cadillac plans. Is that a 
conceivable scenario?
    Secretary SEBELIUS. I assume there are plans that will be 
subject, the very high benefit plans could be subject to a tax.
    Mr. SMITH. Can you paint a picture of what that might be?
    Secretary SEBELIUS. According to the economic experts, the 
goal really is to again slow down the growth of health care 
costs and targeted plans that are significantly in excess of an 
average plan, to say that over a course of the next 4 or 5 
years before that tax is implemented----
    Mr. SMITH. What will the threshold be, basically?
    Secretary SEBELIUS. I don't want--$30,000 I think, but I 
really don't want to give you incorrect information. I would 
rather do that in writing. I am sorry.
    [The information follows: Did not receive]
    Mr. SMITH. Okay. But all plans above that level?
    Secretary SEBELIUS. Up until that threshold, wherever it 
ultimately was set in the bill, would again be available for 
the tax deduction that every other plan gets. The goal is to 
either apply taxes or discourage plans from offering the so-
called Cadillac benefits.
    Mr. SMITH. So then above that threshold they would be 
subject to the tax?
    Secretary SEBELIUS. That is correct.
    Mr. SMITH. All plans would be subject to that tax?
    Secretary SEBELIUS. That is correct.
    Mr. SMITH. Okay. Now, it was characterized earlier that 
shopping for a plan may be considered a penalty. And I 
understand the complexity and the elderly perhaps having to 
review some of the complex conditions of various plans. I 
certainly understand that. But I would hate for the American 
people to be prohibited from shopping around. And our Tax Code 
basically does prohibit shopping around by requiring taxes 
being paid on something that is a health care benefit, health 
insurance benefit that is taken outside of an employer.
    Do you see any accommodation eventually of how we might be 
able to accommodate an individual being able to shop around as 
he or she might wish?
    Secretary SEBELIUS. Actually, the Affordable Care Act makes 
that not only feasible, but I would say encourages that with 
the State-based exchanges that will be up and running in 2014. 
For the first time ever, an individual, entrepreneur, small 
businessowner will have available, as one of a myriad of 
choices, two or three competitive programs with benefits 
offered that are in a large pool marketplace which he or she 
doesn't have to join.
    Mr. SMITH. Would they be tax-deductible? That health 
insurance benefit policy premium, would that be tax-deductible?
    Secretary SEBELIUS. To the employer, yes, sir.
    Mr. SMITH. No, for someone wishing to purchase it.
    Secretary SEBELIUS. An individual?
    Mr. SMITH. Yes.
    Secretary SEBELIUS. That did not change in the Tax Code. 
There is an individual--again, I don't want to speak out of 
school, and I apologize, I don't know the individual tax rate. 
There is a certain portion of health care that is deductible, 
but I don't know where it stops.
    Mr. SMITH. Okay. The concern is that the personal 
prerogative in many ways, and the courts are weighing in on 
part of this, but the personal prerogative relating to health 
insurance may be eroding given the mandates, the individual 
mandate, and other things. And I don't want to spend our time 
today on the legal intricacies of the individual mandate. But I 
am concerned that in the aggregate maybe some of the priorities 
aren't in the proper order. For example, the SGR, we are 
talking about bipartisan concern, took a lower priority than 
the Affordable Care Act. And that is very discouraging when we 
know that there are issues out there that need to be addressed. 
Yet that was outside of the Affordable Care Act. And we can 
speculate on the reasons why, but it is very, I think, 
concerning.
    Now, adding 16 million people to the Medicaid rolls I think 
has not only short-term concerns but long-term concerns as 
well. So I offer that up, if you might respond outside of 
today's meeting. I know my time has expired. But if you might 
be able to offer how we could encourage fewer Medicaid 
beneficiaries down the road rather than more.
    Thank you.
    Chairman CAMP. Thank you. Mr. Thompson is recognized.
    Mr. THOMPSON. Thank you, Mr. Chairman. Madam Secretary, 
thank you for being here. You know, an important part of the 
health care delivery system in my district, and a very 
important job creator, are the community health centers. And 
not only do they create jobs and provide great health care, I 
think they are reflective of the change in the delivery of 
health care. They deliver incredibly important primary health 
care, preventive care, they do it in a cost-effective way. And 
it is very, very high quality. It is, I think, great that we 
are here today talking about these things. At the same time, 
our Republican colleagues are on the floor debating a 
continuing resolution that would cut over $1 billion from 
community health centers across the country.
    As I understand this, if this were to become law, that 
nearly 130 community health centers across the country would 
have to close their doors. It would mean thousands of lost 
jobs, and I believe it would lead to a very steep increase in 
health care costs. Because these folks wouldn't have these 
facilities to go to; they would be seeking their care in 
emergency rooms and other inefficient delivery systems for this 
type of health care. And again, it would mean a huge loss of 
jobs.
    Do you read this the same way that I do? And would the 
President, if this thing were, this misguided effort were to 
pass Congress, would the President allow that to become law?
    Secretary SEBELIUS. Well, Congressman, I know that the 
President and I share your not only support of the community 
health centers as being an absolutely critical part of the 
public health infrastructure in this country, but data will 
show without doubt that the care delivered is at a much lower 
cost than care delivery certainly through the doors of an 
emergency room. Along with a community health center of course 
is the National Health Service Corps, which is training 
additional primary care docs, nurse practitioners, mental 
health technicians, dentists to be in the community health 
centers. So the complication of access, which was mentioned by 
one of your colleagues earlier, would be severely hampered and 
compounded by any closure of community health centers. And 
certainly the physician pipeline and the health care pipeline 
that is so important, regardless of whether we had a new 
Affordable Care Act or not, we have a looming shortage of 
health care providers. And I think anything done to either 
hamper that training pipeline or eliminate these critical 
centers of care delivery is a huge step backward.
    Mr. THOMPSON. Thank you. I am glad you brought up the 
National Health Service Corps, because that was my second 
question. And as I understand this, the continuing resolution 
cuts over $140 billion from that program. And not only does 
that truncate the pipeline, and everybody knows that we need 
more providers, and when you represent a district such as mine 
or any rural district in the country, it is very difficult to 
attract providers. And this is one of the many great things 
that the health care reform measure put in place to help us in 
underserved areas. And even urban underserved areas suffer from 
this.
    So these cuts on the heels of all of the gains that we have 
made are a bit hard to take. And I also want to raise the issue 
of the increase in reimbursement rates. Because access has been 
raised today. The amount that we pay Medicare providers has 
been raised today. And the health care reform bill increased 
reimbursement rates to primary care physicians, which is 
extremely important if we are ever going to get our arms around 
the soaring costs of health care. And there was also an 
increase for rural providers, which is very, very important.
    And what can we expect if these increases in these two 
critical areas are not realized?
    Secretary SEBELIUS. Well, I think, Congressman, you have 
identified, again, areas that we know are missing. If we truly 
are going to shift focus into a wellness and prevention and 
health system as opposed to a sickness care system, we are 
lacking the pipeline of primary care providers. We are also 
lacking the primary care providers who can be essential in the 
health home concept, which is built into the Affordable Care 
Act, which we know delivers better care to chronically ill 
patients, can dramatically decrease the number of hospital 
visits by wrapping care around patients. And that will be hard 
to fulfill.
    So I think that the shift in focus to addressing care 
before it gets chronic, addressing appropriate care in rural 
and urban areas is severely jeopardized by not only the lack of 
funding for a new provider pipeline and community health 
centers, but certainly the incentive pay for rural health 
providers and others who serve in critically underserved areas.
    Chairman CAMP. Thank you. Ms. Jenkins is recognized.
    Ms. JENKINS. Thank you, Mr. Chairman. And I just want to 
thank my fellow Kansan for joining us today. While we have 
disagreed about the repeal of the entire health care law, the 
Administration has recently decided it agreed with Republican 
Members in Congress that the 1099 requirement should be 
repealed. However, as I understood the budget language, it 
would only repeal the requirement for goods, but keep it for 
services. And this seems to contradict the President's strong 
support for repeal.
    So I was just hoping you could clarify the position of the 
Administration and provide any other caveats related to 1099s 
that we will need to know as we continue with our efforts this 
week on 1099s.
    Secretary SEBELIUS. Well, I think that the President has 
made it clear not just recently, but for months, that he very 
much supported elimination of the 1099, which on balance has 
far more burdens than benefits for small businessowners and 
supports, as you know, the 1099 repeal passed on the Senate 
side. We supported that effort. I know there is consideration 
on this side. So we look forward to working with you to 
eliminate that burdensome requirement.
    Ms. JENKINS. But did I understand the language right, that 
he has just taken it out for goods and not services in the 
budget?
    Secretary SEBELIUS. I am not sure.
    Ms. JENKINS. Okay.
    Secretary SEBELIUS. You, Congresswoman, are an accountant, 
I am not. So I hesitate to--my understanding was we favored the 
entire repeal. I didn't realize there was a delineation.
    Ms. JENKINS. Okay. Great.
    President Obama stated to the American Medical Association 
back in 2009 that he doesn't support caps on medical liability 
claims. However, in his State of the Union Address just a few 
weeks ago he was willing to take a look at other ideas to bring 
down the costs, including medical malpractice reform to rein in 
these frivolous lawsuits.
    I am hoping just to get a sense from you today that despite 
your prior experience in working as the Director of the Kansas 
Trial Lawyers Association, you, like the President, have come 
around to the idea that liability reform is needed and cannot 
only decrease the deficit, but can also ensure continued access 
to care for Medicare patients, particularly in our rural areas.
    As you know, Kansas currently has a $250,000 cap on 
noneconomic damages. That was enacted back in the late '80s. 
Prior to passage of the cap, Kansas liability premiums paid by 
physicians had increased to among the highest in the country. 
So given your experience as our insurance commissioner and 
Governor, do you believe that this cap served the State of 
Kansas well over the last 20 years? Do you think it might be a 
good model for the country to use? And would you support a 
specific cap such as our $250,000 cap? Or what other reforms do 
you think might work well?
    Secretary SEBELIUS. Well, I, like the President, do not 
support caps, which I think unfairly penalize injured patients. 
I do support, and have aggressively followed his directive in 
terms of exploring lots of other possibilities for liability 
reform.
    As you may know, across the country there is no direct 
connection between those States which have instituted various 
mechanisms and their liability payments. In fact, the data is 
hardly conclusive. One of the areas that is being funded right 
now by our office and is enhanced by the President's 2012 
budget is the so-called safe harbor approach, creating a set of 
protocol whereby a physician would be essentially immunized 
from liability suits going forward if the practice fell within 
that. It shows a lot of promise. There are various health 
systems that have adopted that. And those are the kinds of 
reforms that I think the President supported when he was a 
Member of the U.S. Senate and is encouraged about supporting 
going forward.
    Ms. JENKINS. Okay. And then maybe just finally, as a 
follow-up to Congressman Buchanan's line of questioning as it 
relates to the Justice Department grants to provide incentives 
for State medical malpractice reform, I was just curious if you 
will be supporting Kansas being chosen as one of the 
demonstration grants.
    Secretary SEBELIUS. Well, since, as you say, Kansas has had 
full tort reform since the '80s, it is difficult to know what 
it is that they will be proposing. But I assume the Justice 
Department would certainly look at whatever it is and see if 
that is meritorious.
    Chairman CAMP. All right. Thank you. Mr. Blumenauer is 
recognized.
    Mr. BLUMENAUER. Thank you, Mr. Chairman. Thank you, Madam 
Secretary. I appreciate you and Dr. Berwick helping focus on 
what has actually happened in an area of deep concern, Medicare 
Advantage. It was comforting in the Budget Committee to hear 
him talk about how enrollment actually is increasing, that 
premiums are decreasing. And it appears that benefits are 
stable or even increasing.
    But I would like to just have you walk us through one other 
area of controversy, because some of my friends talk about 
hundreds of thousands of people, Medicare beneficiaries 
enrolled in Medicare Advantage who must change their plans due 
to health care reform. Now, my understanding is that this 
shakeout was a result of bipartisan legislation that we passed 
in 2008, and actually passed by a large overwhelming bipartisan 
majority over the veto of President Bush that has prompted a 
reassessment in dealing with some of the Medicare Advantage 
private fee-for-service plans that were of poor quality and had 
significant overpayments.
    Am I correct that the shakeout is due to prior legislation 
and is dealing to try and contend with some of the problems of 
delivery and overcharge?
    Secretary SEBELIUS. That is correct, Congressman. The 
Medicare fee-for-service, as you say, were not only some of the 
highest cost plans with the highest cost share for 
beneficiaries, but had the lowest outcomes value in terms of 
the whole spectrum of Medicare services. And as you know, one 
of the things that was done with the passage of the Affordable 
Care Act that you and your colleagues insisted on was not only 
to make sure that Medicare beneficiaries had access to choices 
like Medicare Advantage, but also that we ensured quality. So 
part of the new program is instituting the five-star rating for 
Medicare Advantage based on health quality. And in fact we are 
seeing already consumers appreciating that notice, because we 
have had a 5 percent increase in the number of beneficiaries 
who are enrolling in four- and five-star plans, giving 
consumers for the first time some real ability to choose plans 
based on health outcomes.
    Mr. BLUMENAUER. Well, I must say I deeply appreciate what 
the Department has done in the administration of the new health 
care reform. I come from an area that is high value, low cost, 
and I appreciate the work that is being done to try and zero in 
on how we deal with some of these regional disparities, but 
that is based on rewarding value, not being penalizing at all. 
But it does seem to me that this is an area that all of us on 
the Committee ought to embrace. It is the reform of Medicare. 
And you were tireless in working with us to make sure that this 
legislation had virtually the entire smorgasbord of proposed 
reforms. They weren't as strong perhaps as some of us would 
have liked in some areas, but isn't that an argument for our 
working together to strengthen and accelerate the reforms 
rather than to put sand in the gears?
    Secretary SEBELIUS. Well, certainly you and your colleague 
Mr. Kind and others were, I would say, ferociously insistent 
during the course of this discussion that we not just add money 
to the system, that we actually look at ways that higher 
quality care could be delivered at a more effective rate, and 
capture some of the best practices around the country. So that 
is definitely a part of this reform effort, and we have an 
opportunity for the first time to accelerate those best 
practices, to highlight them, and to actually implement them 
across the system if they are shown to work.
    Mr. BLUMENAUER. Well, I am happy to convey again the 
commitment from our newly elected Governor, Dr. John Kitzhaber, 
to work with you so that our State can be a laboratory to 
accelerate, squeeze extra value, improve performance, and 
perhaps help with a national model that would make people more 
comfortable with the direction we are on. The fact is if we 
don't change the direction we are on, all the budget cutting 
isn't going to make any difference.
    Thank you so much.
    Chairman CAMP. Thank you. Just one moment. I think we are 
trying to get an answer here. We are going to reduce time to 3 
minutes. And I want to thank the Secretary for her willingness 
to stay for just a few extra minutes. We just have 5 Members 
left who may inquire. So we will reduce the time to 3 minutes.
    Mr. Paulsen may inquire.
    Mr. PAULSEN. Thank you, Mr. Chairman. And Madam Secretary, 
thank you for being here today as well.
    I remember a couple weeks ago when the President had his 
State of the Union speech he talked about winning the future. 
And the budget that he also laid out claims one of his highest 
budget priorities is encouraging innovation. And I couldn't 
agree more, coming from a State like Minnesota, where we have a 
high industry in medical device technology, for instance, which 
is very, very critical for jobs, critical for health care, and 
innovation that is there. Knowing that that is the message the 
President delivered not only in the State of the Union but also 
in the budget, why would we place a new $20 billion tax on 
medical technology products and device manufacturers? I am very 
concerned about that. You know, I was hoping there might be a 
repeal mechanism as a part of the budget, for instance, to kind 
of match some of the words that we heard recently. Why would we 
do that new tax?
    Secretary SEBELIUS. Well, I think the President believes 
certainly in accelerating innovation, and there is no doubt 
that medical innovation is a major component of that. I think 
the balance is that as we move forward, the medical device 
companies will also have access to a large pool of new 
customers who they don't currently serve and that the 
additional costs will be balanced amply by the additional 
customers in the pool of insured Americans.
    Mr. PAULSEN. Well, and I have heard that argument before. I 
know that the vast majority of device procedures are not 
elective, they are performed on older patients, for instance, 
the majority of whom have insurance with Medicare. And in 
Massachusetts, which has been mentioned this morning, it is the 
model upon which much of the new health care law was built. 
There was no increase in device utilization like you suggest. I 
just know that this tax is really going to affect, I think, the 
competitiveness of our companies. I tour these companies every 
week. We all know the larger companies that exist, and they may 
be able to withstand it. But there are smaller companies that 
are not yet profitable that are really working on these life-
saving technologies that are going to be, I think, stifled to 
create new innovation. I think that is going to be a problem. 
And they have told me directly that they are worried about 
having to ship their research and development overseas. And I 
think this spills right into the mantra we have heard from the 
Administration about shipping jobs overseas.
    So I don't know if you have any other feedback in there, 
but I know it is absolutely going to be a concern going 
forward. And I think if we eliminate this pipeline of venture 
capital and innovation, it is going to be very difficult, if 
not impossible, to get back.
    Secretary SEBELIUS. Well, again, Congressman, we share your 
view that accelerating innovation is important. It is one of 
the reasons that assets to the Food and Drug Administration and 
some of their translational science is so critical, that they 
have developed a new pipeline to accelerate devices coming to 
market as well as ensuring the safety of those devices. So we 
certainly share the balance, and think again that the 
additional consumers will again compensate for the modest tax 
increase.
    Chairman CAMP. Thank you. Mr. Kind is recognized.
    Mr. KIND. Thank you, Mr. Chairman. Madam Secretary, thank 
you for being here, and for your patience. And thank you for 
your leadership in the implementation of the Affordable Care 
Act. Outside of the President, you probably have one of the 
most difficult, yet most important jobs in this town today. And 
that is moving forward on health care reform. We are having a 
discussion all week long about decisions we have to make in 
order to get these budget deficits under control. But unless or 
until we figure out a way to bend the cost curve in the largest 
and fastest growing area of spending at the Federal, State, and 
local level, rising health care costs, everything else would be 
for naught.
    Now, I want to take you back to the conversation you were 
just having with Mr. Blumenauer about changing the way we pay 
for health care so it is value, not volume-based. And this is 
crucial, it is important, because studies show that we are 
spending close to one out of every three health care dollars in 
this country on tests and procedures that aren't working. They 
are not improving patient care. And oftentimes because of the 
overutilization or the overuse, too many patients are being 
left worse off rather than better off, which is all of our 
goal.
    Now, there are tools in place in health care reform to help 
us make this conversion, but it is going to take time. You 
don't change the way you pay for one-fifth of the entire U.S. 
economy and the largest area of spending in the Federal budget 
overnight. And one of those tools was something I worked with 
Representative Braley and Senators Cantwell and Klobuchar, and 
that is the value-based modifier for physician reimbursement. 
That will take effect in 2015. But on January 1 of next year, I 
think you are supposed to start publishing information on 
moving forward on this new value index for physician 
reimbursement.
    I am wondering if you could just give us an update on where 
that is right now, and if work has begun in that endeavor.
    Secretary SEBELIUS. Sure. I am happy to do that. As you 
know, there is an Institute of Medicine analysis underway 
directed to look at the value-based index, which I think is a 
critical component of moving toward a value-based payment 
system. We should have results back this spring, later this 
spring. We will be then sharing those results and having an 
extensive dialog as we move toward a system.
    But I would suggest, Congressman, in addition to that one 
mechanism, which is important, I think that the work underway 
with providers across this country who are enthusiastic about 
the accountable care organization model, where they can 
actually have a different model of delivery, about the bundled 
payment opportunities for released patients to have better care 
and fewer readmissions----
    Mr. KIND. And the medical homes and the other tools that 
are in the bill.
    Secretary SEBELIUS. All of those I think are added together 
to have really the biggest transformation of the delivery 
system that we have ever seen.
    Mr. KIND. And that is what we need is this vast 
experimentation to start happening and sooner rather than 
later. And I want to thank you for coming to La Crosse, 
Wisconsin, last year, visiting with Gunderson Lutheran, 
learning more about their highly integrated and coordinated 
patient-focused care system that they have set up. And these 
are the type of models of care that we should be trying to 
duplicate nationwide to get a grip on the rising costs in the 
health care system. Again, thank you for your leadership.
    Secretary SEBELIUS. Sure.
    Chairman CAMP. Mr. Berg is recognized.
    Mr. BERG. Thank you, Mr. Chairman. Secretary----
    Secretary SEBELIUS. If I can find you.
    Mr. BERG. I am here. And obviously, being from the Midwest, 
it is nice to have you here. I guess my question really 
revolves around some of the simplicity maybe in the Midwest. In 
North Dakota, obviously our legislature is kind of at a 
standstill, waiting for a Supreme Court decision on the health 
care bill. And so I guess I just quickly, you know, where is 
that at, and what are you doing or can be done to expedite 
that? We need a decision. It is just wasting a lot of time.
    Secretary SEBELIUS. Well, as you know, the attorney general 
from Virginia has asked the Supreme Court for an expedited 
decision. They will make a decision I assume fairly quickly 
whether or not to grant cert on that or not. And you will then 
have some clarity.
    Mr. BERG. The other point that I guess I would like to make 
is on the insurance exchange, we need flexibility in that. What 
are you doing to provide the States flexibility in the 
insurance exchange?
    Secretary SEBELIUS. Actually, there is enormous flexibility 
built into the original exchange model and ongoing. I am 
working very closely with Governors, have met with all the new 
Governors, have met, as I say, there are planning grants out to 
States, but we think all kinds of models will work, and it 
should be a State-based model that works in their marketplace.
    Mr. BERG. Thank you. The final thing really is obviously we 
have got a lot of manpower tied up with the health care bill. 
And at the State level they are starting to see other work not 
as timely as it was in the past. And, you know, obviously if 
you are shifting work--again, I understand the workload that 
you have. You know, what are you doing to ensure that the 
normal work is getting done? And what assurances can you give 
back to the State that we are going to stay on the timelines 
that we were on before?
    Secretary SEBELIUS. Well, Congressman, we are working 
overtime to try and fulfill the mission that we have, which is 
critical health care services and essential human services, and 
I think that our staff has been not only timely, but enormously 
user-friendly. As a former Governor, I have really come to the 
office as a recipient of HHS dialog in the past. And I think 
that particularly our CMS folks, who are the ones who are 
closest in touch with often States, have been sending teams out 
to States, sitting down with new Governors, analyzing budgets, 
trying to do an enormous amount of technical assistance and 
support in a very timely fashion. Because we know people are 
trying to get their arms around their new budgets and their 
services.
    Mr. BERG. Thank you.
    Chairman CAMP. Thank you. Mr. Pascrell is recognized.
    Mr. PASCRELL. Two points, Mr. Chairman. Madam Secretary, 
thank you for the day. First is if we end Medicare, because 
that is the only alternative on the table right now, and that 
is to provide a voucher system, whereby seniors would be given 
a voucher and they would take care of their health care.
    Have you analyzed the depth or the consequences of us 
moving to the Republican plan of vouchers?
    Secretary SEBELIUS. I have not to a great extent. But I 
have certainly seen a model where individuals in the 
marketplace attempt to purchase their own coverage, and that is 
typically the least effective, most expensive kind of insurance 
arrangement.
    Mr. PASCRELL. Yeah. So those seniors are not only going to 
pay more money, but they are also not going to get the health 
care that is provided in the Health Care Reform Act.
    Second issue is the work force. What is the alternative 
plan to doing what we have done with regard to providing the 
providers with more doctors, more nurses, et cetera? That is 
very specific. The work force proposals in health care reform 
are very specific to the issue about the shortage. Could you 
tell me what the alternative is that we have been asked to look 
at? Because if you are simply going to say the Health Care 
Reform Act doesn't do what we wanted it to do, then what is the 
other side telling us about--how are we going to address the 
shortage in health care providers?
    Secretary SEBELIUS. Congressman, I don't know that I can 
answer that question. What I can tell you is that the resources 
provided for work force first in the Recovery Act, amplified in 
the Affordable Care Act over time, and then followed up on in 
the President's budget are essential to serving the health 
needs of Americans. This is an issue that has been long 
overlooked. We need a pipeline of health care providers, and 
this act plays an essential role in providing that pipeline.
    Mr. PASCRELL. So we all agree there is a shortage, but 
there is only one proposal on the table now that is going to 
address that proposal. So therefore, much of the criticism is 
not only a myth, but a fraud.
    Thank you, Madam Secretary.
    Chairman CAMP. Thank you. We have two Members left, and 
then this hearing will be over. Mrs. Black is recognized for 3 
minutes.
    Mrs. BLACK. Thank you, Mr. Chairman. Madam Secretary, I 
know that there have been statements, and actually I guess in 
the health care bill that there will be an opportunity for a 
wide variety of plans through the exchanges, including those 
featured in the health care savings accounts. And having been 
in the health care field for over 40 years now, I think that 
one of the mistakes that we made in the health care field was 
taking the consumer out of the driver's seat so that they 
really don't understand what the cost of care truly is. So I 
believe that health care savings accounts certainly will help 
us, for those that it is reasonable, to put them back in the 
driver's seat so they do understand what the cost of their care 
is, and they will have more freedom and choice there.
    While the health care law really does not include a blanket 
prohibition on exchanges offering HSA programs, it does contain 
some new restrictions on deductibles and cost sharing that 
would prevent many of the current HSA plans from being offered. 
More importantly, the law does not specify that cash 
contributions made to the HSA plans will be counted toward a 
new minimum Federal requirement under the new actuarial value 
metric. That is in section 1302(D) of the statute that states 
very clearly that these parameters will be defined, and I 
quote, ``under regulations issued by the Secretary.''
    In other words, it does not state it will determine whether 
they will be able to offer HSA coverage. It is the Secretary 
yourself that will be making those rules and regulations. And I 
would like for you to speak to what the intent of that is and 
if you think that the HSA plans are a good option as we move 
forward.
    Secretary SEBELIUS. Well, Congresswoman, I know that there 
is every opportunity to include in the State-based plans, plans 
that are coupled with HSAs. And the preliminary analysis is 
that the vast majority of those plans which are in the market 
right now would certainly meet any kind of qualifications. 
Again, the States will be the ones to make the preliminary 
choice. So we are not at the point of that yet. But I 
understand the interest in HSAs being a component of the 
exchanges going forward and there is certainly no prohibition 
in that.
    Mrs. BLACK. Well, it does say that they will be defined, 
the parameters will be defined under the regulations issued by 
the Secretary. So do I understand you saying you would support 
regulations that would promote HSA plans?
    Secretary SEBELIUS. Well, we will certainly have 
regulations that allow for that to be an option if the State 
chooses that as an option. There won't be any mandatory 
requirement for States.
    Chairman CAMP. All right. Thank you. Our final questioner, 
Mr. Heller, is recognized for 3 minutes.
    Mr. HELLER. Thank you, Mr. Chairman. Last but not least. 
Thanks for your patience.
    I guess it is fair to say that you are familiar with the 
access to affordable care demonstration that is part of the 
health care bill?
    Secretary SEBELIUS. Yes.
    Mr. HELLER. For those who don't know, it is a demo program 
that will allow up to 10 States to develop State-based 
nonprofit public-private partnerships that provide access to 
comprehensive health care services to the uninsured at a 
reduced fee. And this demonstration model, which is an 
extremely successful program that started in my State in 
Nevada, it is called Access to Healthcare Network, or AHN. Mrs. 
Rice has been in my office numerous times, done a great job. 
Worked in northern Nevada, moved it down to southern Nevada. 
And I know she has met with your staff also, trying to help 
everybody understand how this demonstration program works. It 
is my understanding, though, that this demo is not funded. And 
there is no sign that the HHS will act on it any time soon. Is 
that reasonable or is that--can you respond to that?
    Secretary SEBELIUS. Well, Congressman, there are numerous 
provisions of the Affordable Care Act which were authorized but 
not funded. And we look forward to working with Congress about 
those critical programs.
    Mr. HELLER. AHN, the Access to Healthcare Network, is a 
medical discount plan. And it has provided quality, affordable 
medical care to 10,000 uninsured Nevadans. It is a shared 
responsibility model. The entire community, hospitals, 
providers, clinics, the insurance industry, employers, and even 
the banking industry have put aside what differences they may 
have to help the uninsured through this process. So I am just 
concerned as here is a program that works. We are insuring 
10,000 Nevadans that are very, very difficult to insure. But 
one individual with her efforts, and obviously her clinic and 
the people that she has hired, has put together this program to 
get 10,000 of these people that would otherwise not be insured 
and put them in a program. So I guess I am concerned. I am 
concerned that--actually, what I want you to do is become more 
familiar with the model, because I think it does work. And I 
think that to be able to provide affordable, quality medical 
care to a population that otherwise would be very, very 
difficult to insure--in fact, I think after this post-health 
care reform there is still going to exist out there without 
health care--is something we ought to take a good look at and 
try to determine and figure out how we can fund a program that 
works as smoothly and as well as this does.
    Secretary SEBELIUS. Well, it sounds like a model we 
definitely should take a look at. In fact, I think I have met 
with--as you describe it, I have met with the Nevada folks. It 
just didn't, the title didn't capture. But I think there 
certainly are opportunities going forward, and I look forward 
to working with you to figure out how we could do that.
    Mr. HELLER. If I could provide your office additional 
information.
    Secretary SEBELIUS. Great.
    Chairman CAMP. Thank you very much, Madam Secretary. Thank 
you for your testimony. Thank you very much for extending the 
time so that all Members could have an opportunity to ask a 
question. And if any Members have further questions, if they 
submit them by letter, if you would be kind enough to respond 
in writing, we would sure appreciate it.
    Secretary SEBELIUS. I would be happy to.
    Chairman CAMP. I do just want to make a quick announcement 
that the afternoon hearing with Budget Director Jack Lew has 
been moved to 2:30 because of votes that will start on the 
House floor about 1 o'clock. A notice has been sent to all the 
offices.
    Again thank you very much, Secretary Sebelius.
    Secretary SEBELIUS. Thank you, Mr. Chairman.
    Chairman CAMP. This meeting is adjourned.
    [Whereupon, at 12:45 p.m., the Committee was adjourned.]
    [Questions for the Record follow:]



    
                                 
