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




 
                            MEDPAC'S ANNUAL
                        MARCH REPORT TO CONGRESS

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

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

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 15, 2011

                               __________

                           Serial No. 112-HL1

                               __________

         Printed for the use of the Committee on Ways and Means




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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

WALLY HERGER, California             SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas                   CHARLES B. RANGEL, New York
KEVIN BRADY, Texas                   FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
GEOFF DAVIS, Kentucky                XAVIER BECERRA, California
DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
CHARLES W. BOUSTANY, JR., Louisiana  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

                                 ______

                         Subcommittee on Health

                   WALLY HERGER, California, Chairman

SAM JOHNSON, Texas                   FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin                 MIKE THOMPSON, California
DEVIN NUNES, California              RON KIND, Wisconsin
DAVID G. REICHERT, Washington        EARL BLUMENAUER, Oregon
DEAN HELLER, Nevada                  BILL PASCRELL, JR., New Jersey
PETER J. ROSKAM, Illinois
JIM GERLACH, Pennsylvania
TOM PRICE, Georgia

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 
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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 March 8, 2011, announcing the hearing................     2

                                WITNESS

Glen M. Hackbarth, Chairman, Medicare Payment Advisory Commission     5

                       SUBMISSIONS FOR THE RECORD

American College of Radiology, statement.........................    64
The American Health Care Association, statement..................    67


                            MEDPAC'S ANNUAL
                        MARCH REPORT TO CONGRESS

                              ----------                              


                        TUESDAY, MARCH 15, 2011

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

    The Subcommittee met, pursuant to call, at 1:07 p.m., in 
Room 1100, Longworth House Office Building, Hon. Wally Herger 
[Chairman of the Subcommittee] presiding.
    [The advisory announcing the hearing follows:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                         SUBCOMMITTEE ON HEALTH

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
March 8, 2011
HL-1

                 Chairman Herger Announces a Hearing on

                MedPAC's Annual March Report to Congress

    House Ways and Means Health Subcommittee Chairman Wally Herger (R-
CA) today announced that the Subcommittee on Health will hold a hearing 
on the Medicare Payment Advisory Commission's (MedPAC) annual March 
Report to the Congress which details the Commission's recommendations 
for updating Medicare payment policies. The Subcommittee will hear from 
MedPAC's Chairman, Glenn Hackbarth. The hearing will take place on 
Tuesday, March 15, 2011, in 1100 Longworth House Office Building, 
beginning at 1:00 p.m.
      
    In view of the limited time available to hear the witness, oral 
testimony at this hearing will be from the invited witness only. 
However, any individual or organization not scheduled for an oral 
appearance may submit a written statement for consideration by the 
Committee and for inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    MedPAC advises Congress on Medicare payment policy. The Commission 
is required by law to submit its annual advice and recommendations on 
Medicare payment policy by March 15. In its March report to the 
Congress, MedPAC is required to review and make recommendations on 
payment policies for specific provider groups, including hospitals, 
skilled nursing facilities, physicians, Medicare Advantage plans, and 
other providers.
      
    In announcing the hearing, Chairman Herger stated, ``MedPAC 
provides valuable technical advice and counsel to Congress on the 
Medicare program, ranging from recommendations on payment adequacy to 
ways in which we can improve the delivery and quality of care for 
seniors and people with disabilities. This hearing will offer the 
Subcommittee an opportunity for an indepth exploration of MedPAC's 
recent recommendations and their impact on the Medicare program and its 
beneficiaries. As we confront the issues surrounding implementation of 
the health care overhaul law passed last year and the continued need to 
reform entitlement programs, the information we receive from MedPAC 
will be more important than ever.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on MedPAC's March 2011 Report to the 
Congress on Medicare payment policies.
      

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 
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by the close of business on Tuesday, March 29, 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:

      
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    1. All submissions and supplementary materials must be provided in 
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with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
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    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman HERGER. The Subcommittee will come to order. I 
want to welcome everyone to the first hearing in the 
Subcommittee on Health for the 112th Congress. Today we will be 
hearing from the Medicare Payment Advisory Commission, MedPAC, 
on the recommendations from their March 2011 report on Medicare 
payment policies.
    During this Congress, we must come together to address a 
fiscal crisis of monumental proportions. Every program, no 
matter how important, must be scrutinized to ensure that scarce 
taxpayer dollars are being used appropriately and efficiently.
    Therefore, I find it fitting that in our inaugural meeting 
we would hear from MedPAC. The insight and guidance we receive 
from MedPAC will be very important as we seek ways to reform 
the Medicare program and improve the accuracy of provider 
payments while also ensuring that Medicare beneficiaries have 
access to high-quality care.
    Congress relies on MedPAC's Medicare provider payment 
recommendations because they are based on sound policy and 
strong data analysis. Traditionally Medicare spending has 
outpaced growth in the economy at large and is a major driver 
of our long-term debt. The Congressional Budget Office projects 
that Medicare spending will nearly double as a share of the 
U.S. economy over the next 25 years.
    By 2050 the Big Three Federal entitlement programs--
Medicare, Medicaid and Social Security--are expected to exceed 
total tax revenue, with Medicare being the largest of the 
three. We cannot bring about a fiscally sustainable future if 
these trends continue.
    MedPAC's analysis is invaluable in helping us better 
understand when growth in Medicare spending is appropriate and 
when Medicare payments need to be adjusted.
    Last year Congress passed a massive health care overhaul 
law that permanently reduces Medicare payments to a number of 
providers. Less than 3 percent of the more than one-half 
trillion dollars in cuts from Medicare came from actual 
delivery reforms.
    We must do better than that, which is why we also rely on 
MedPAC's June report to Congress to guide us toward proposals 
that offer real reform instead of just turning payment dials up 
or down. This will help ensure that Medicare savings yield 
better outcomes for Medicare's beneficiaries.
    I think I speak for all of us up here, Republicans and 
Democrats alike, that we are still looking for the silver 
bullet that will permanently reform the physician payment 
system in a fiscally responsible manner, and look forward to 
working with MedPAC to find such a solution.
    I want to offer a warm welcome to our invited witness, 
MedPAC's Chairman Glenn Hackbarth. Thank you for joining us 
today and I look forward to hearing your testimony.
    I would also like to extend a special word of thanks to 
MedPAC's executive director, Mark Miller, and the entire MedPAC 
staff for their hard work on this report.
    Before I recognize Ranking Member Stark for the purpose of 
an opening statement, I ask unanimous consent that all Members' 
written statements be included in the record.
    Without objection, so ordered.
    I now recognize Ranking Member Stark for his opening 
statement.
    Mr. STARK. Thank you, Mr. Chairman. I would like to join 
you in welcoming Glenn and MedPAC. It is the efforts of MedPAC 
and their staff that have helped us in the past. Many of the 
recommendations in the current law's provisions are MedPAC's 
work, and they have formed a number of the reforms that are in 
the law that modernize the delivery of health care that Federal 
rewards value over volume and encourages better coordination.
    They have helped us with ideas to lower their rate of 
preventable readmissions, the testing of bundled payments, 
medical homes, and hospital value-based purchasing.
    We have made difficult decisions in order to rein in rising 
health care costs, and it would not have been possible without 
the advice of MedPAC.
    The end result: A program with improved benefits that lower 
costs for beneficiaries, create taxpayer savings, and 
innovations that we hope will improve patient care and 
strengthen finances for the Medicare solvency for an additional 
number of years. This, we think, is better than the program 
that favors vouchers or shifting of costs to the very 
beneficiaries who Medicare was created to serve.
    While my Republican colleagues and I have many areas where 
we disagree, there are several areas where we work together, 
including Medicare's broken physician payment system. The House 
Democrats passed comprehensive reform for the physician payment 
system in the last Congress, and I hope getting a long-term 
solution is at the top of our to-do list.
    As this year progresses, I look forward to getting 
continued input and advice from Mr. Hackbarth and the MedPAC 
staff, and will continue to rely on your expertise and advice 
as we undertake our Medicare and oversight responsibilities.
    Thank you, Mr. Chairman.
    Chairman HERGER. Mr. Hackbarth, I would like you to go 
ahead and proceed with your testimony. We do have two votes 
going on now, so I would like to have you give your testimony, 
and then we will recess until following those two votes, and 
then we will come back. If you would proceed with your 
testimony, please.

               STATEMENT OF GLENN M. HACKBARTH, 
         CHAIRMAN, MEDICARE PAYMENT ADVISORY COMMISSION

    Mr. HACKBARTH. Thank you, Mr. Chairman and Mr. Stark. I 
especially appreciate the warm welcome and the acknowledgment 
of the work of the MedPAC staff. We have a terrific staff and 
without them we couldn't do our work.
    As you know, MedPAC is a nonpartisan congressional advisory 
body, so our goal, our mission, our sole mission is to help you 
with the difficult decisions that you must make each year. Each 
year we produce two reports, a March report which usually 
focuses primarily on payment updates, and then a June report 
that ranges more broadly across Medicare issues.
    We have 17 commissioners, as you know. Six of them have 
clinical training as either physicians or RNs. Six of our 
commissioners have high-level executive experience with health 
care delivery organizations; four high-level government 
experience; and then six academics who publish frequently in 
peer-reviewed journals. And some of us have more than one of 
these credentials.
    I mention the credentials to emphasize that we are people 
who have experience in different facets of the Medicare 
program, and our goal is to bring that experience to bear for 
the benefit of the program, the beneficiaries it serves, and 
the taxpayers who finance it.
    Because we have a lot of experience, it doesn't necessarily 
mean that we are always right. We can be right or wrong, like 
everybody else, but you can be assured that our agenda as a 
Commission is the same as yours: High-quality care for Medicare 
beneficiaries at the lowest possible cost for taxpayers.
    Despite the diversity of the MedPAC commissioners, we 
typically have a high degree of consensus on our 
recommendations. This March report is no exception. There are 
12 recommendations in our March report that represents a total 
of 187 ``yes'' votes, versus only two ``no'' votes, and three 
abstentions.
    The March report, as I say, here is the summary of the 
major recommendations in the March report. There are 
recommendations on payment updates for each of the payment 
systems that Medicare uses. For physicians, hospital inpatient 
and outpatient dialysis services and hospice services, we are 
recommending a 1-percent increase in the Medicare rates. For 
ambulatory surgery centers, one-half of 1-percent increase in 
the rates, and then zero update for skilled nursing facilities, 
home health agencies, inpatient rehab facilities, and long-term 
care hospitals.
    In the case of home health services, we are recommending a 
rebasing of the rates as we have in the previous year, as well 
as some changes in the case mix system and a per-episode copay 
for Medicare beneficiaries.
    And then, as we do each year in our March report, we also 
do a status report on the Part C Medicare Advantage Program and 
Part D, the prescription drug program.
    I want to pick up, Chairman Herger, on one of the points 
that you made in your introduction. This report is principally 
about how much the unit prices should change for Medicare 
services. But we can't get to where we want to go in terms of 
an efficient Medicare program, providing high-quality care to 
Medicare beneficiaries at a reasonable cost for taxpayers, if 
we focus only on the unit prices.
    In addition to that, we must look at the relative values 
that we pay for different types of services. We must also look 
at the payment methods that we use and try new, innovative 
payment methods that create better incentives for high-value 
care. And then, finally, we must also look at the incentives 
for Medicare beneficiaries.
    So, Mr. Chairman, those are my summary of comments and I 
look forward to the opportunity to talk further about our 
report.
    Chairman HERGER. Thank you very much.
    [The statement of Mr. Hackbarth follows:]

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    Chairman HERGER. Again, as I mentioned earlier, to allow 
our Members to vote, we have two votes going on, we are going 
to recess and we will reconvene immediately after the second 
vote. With that, we stand in recess.
    [Recess.]
    Chairman HERGER. The Health Subcommittee of the Ways and 
Means Committee will reconvene.
    Mr. Hackbarth, I want to thank you for your testimony. In 
MedPAC's report, you recommend that Congress should freeze 
Medicare rates for inpatient rehabilitation facilities, long-
term care hospitals, and skilled nursing facilities.
    Can you explain what led the Commission to recommend 
freezing payment rates for these providers?
    Mr. HACKBARTH. Mr. Chairman, the analysis that we go 
through for each of the provider sectors takes into account a 
variety of different factors, one of which is their financial 
margin on Medicare business where that data is available, but 
we also look at access to capital, the quality of services to 
Medicare beneficiaries, whether facilities are opening or 
closing.
    So it is sort of a multifactorial analysis that we go 
through, so the specifics for each of those sectors varies a 
little bit. But in general, what they have in common is that 
the projected margins are pretty healthy for each of those, and 
we think that there is ample room for efficient providers of 
those services to operate within the existing rates, so no 
increase in the rates is necessary.
    Chairman HERGER. Thank you. Currently there is no copayment 
for home health care. In the March report, MedPAC recommends 
that most Medicare beneficiaries be required to pay a copayment 
for each episode of home health care they receive. The 
commissioners recommended that exceptions be made for low-
income beneficiaries and those being discharged from the 
hospital.
    Could you explain why the Commission arrived at this 
recommendation and the impact it would have on overutilization 
and fraud?
    Mr. HACKBARTH. Yes. Well, this is a challenging issue for 
MedPAC. This is an issue where we actually did have a 
dissenting vote and an abstention, which, as I indicated 
earlier, is fairly unusual for us.
    We concluded, the majority of us concluded, the vast 
majority of us concluded that a $150 per episode copay was an 
appropriate and necessary step to help curb unnecessary 
utilization of home health services. As you know, home health 
is an area where utilization has increased rapidly and, in 
particular, in some parts of the country. And by its nature, it 
is a service where there aren't clear, clinical guidelines as 
to appropriate use of the service. And under those 
circumstances, we think it is an appropriate thing to do to ask 
the beneficiaries to pay a modest copay.
    To put the $150 per episode copay in context, for a 
beneficiary with a typical number of visits, home health visits 
in an episode, it would work out to about $8 per visit, so a 
smaller amount than that same beneficiary would pay for a 
physician office visit or an outpatient therapy visit. So it is 
modest, but we think it is appropriate.
    And I would emphasize the point that you picked up on, 
which is it is targeted to apply only to beneficiaries who are 
admitted to home health from the community. It doesn't apply to 
Medicare beneficiaries following a hospital stay or a stay in a 
skilled nursing facility, and there is also an exemption from 
the copay for beneficiaries who use four or fewer home health 
visits.
    Chairman HERGER. Thank you for that.
    Some have expressed concerns that the addition of a home 
health copayment would drive seniors to other sites of care 
such as outpatient facilities. Are seniors currently required 
to pay a copayment for the care they receive in these 
outpatient settings?
    Mr. HACKBARTH. Yes, that is true. They are required to pay 
copays. Home health is one of the few services where Medicare 
beneficiaries are not required to pay a copay.
    And as I indicated in what we thought was an appropriate 
home health copay, we took into account how much beneficiaries 
paid for some of these alternative services.
    Chairman HERGER. So in your opinion, home health copayments 
would not shift a beneficiary to other sites of service?
    Mr. HACKBARTH. That is our expectation, yes. It would not 
shift them, yes.
    Chairman HERGER. I thank you again for your testimony.
    Now, the gentleman from California, Mr. Thompson, is 
recognized for 5 minutes.
    Mr. THOMPSON. Thank you, Mr. Chairman. Thank you, Mr. 
Hackbarth, for being here.
    In your March 10, 2010 report, you state that Medicare is 
the single largest payer in regard to Medicare, in regard to 
health care. And you also go on to say that for the next decade 
that that cost is going to slow vis-a-vis the previous decade. 
I think it was are you looking at 6-percent growth between now 
and 2019? It was about almost 10 percent in the past decade. 
And I am assuming that part of that reason is because of the 
health care reform legislation that was passed, and the idea 
was to pass legislation that bends that cost that we have heard 
so much about that, and at the same time creating better care, 
better health, and lower costs.
    There was a very interesting article in the National 
Journal, I think it was last Friday, that is entitled, Adapt or 
Else. And they state that whether it wants to or not, the 
health care system is being forced to reinvent itself. The 
health care law is a clearinghouse of sorts for policies that 
have circulated among health care analysts for years but 
struggled to gain traction.
    Isn't the truth of the matter that much of what was put 
into the health care reform bill either came from MedPAC advice 
or proposals that MedPAC itself put forward?
    Mr. HACKBARTH. Well, certainly there were many provisions 
that were linked to past recommendations of MedPAC.
    Mr. THOMPSON. So bundling around hospital administrations?
    Mr. HACKBARTH. Yes.
    Mr. THOMPSON. That was one of your recommendations that was 
in there.
    Mr. HACKBARTH. Yes, that is correct.
    Mr. THOMPSON. Reducing hospital readmissions, that was a 
MedPAC recommendation?
    Mr. HACKBARTH. Yes.
    Mr. THOMPSON. Value-based purchasing aimed at rewarding 
quality?
    Mr. HACKBARTH. Yes.
    Mr. THOMPSON. Primary care investments and expanded primary 
care reimbursement?
    Mr. HACKBARTH. Yes.
    Mr. THOMPSON. Payment accuracy including reducing Medicare 
Advantage overpayments?
    Mr. HACKBARTH. Yes.
    Mr. THOMPSON. Adoption of comparative effectiveness 
research?
    Mr. HACKBARTH. Yes.
    Mr. THOMPSON. And expanded fraud fighting authorities?
    Mr. HACKBARTH. Yes.
    Mr. THOMPSON. Thank you.
    The other question I have is, as you know I think 
firsthand, I am very concerned about representation for rural 
areas. And as cochair of the bipartisan Rural Health Care 
Coalition, we have been very, very active in trying to bring 
attention to that issue.
    And rural health care delivery has a lot of unique 
challenges, shortages of health care providers, and probably 
spills over into other underserved areas as well, but 
geographic remoteness, low-patient volume with 
disproportionately high Medicare populations, limited access to 
integrated health care systems, and a lack of electronic 
networks to efficiently manage health care.
    I understand that it is probably a challenge for you too, 
and I know you don't do it personally, but it is a challenge to 
get that appropriateness, or proportionateness on the 
Commission. But in your report, there is not even a mention of 
the word ``rural.'' And I think it is a concern for those of us 
who live in rural areas and represent rural areas.
    Is there anything that you can tell us that we can look 
forward to? Are we going to address this issue? Are we going to 
get proportional representation on that board?
    Mr. HACKBARTH. Well, thank you, Mr. Thompson, for raising 
this. We have talked about this issue before.
    We share your concern about ensuring access to quality care 
for beneficiaries in rural areas and assuring appropriate 
payment for providers in rural areas. In fact, the very first 
report that I did, on becoming chairman of MedPAC, is 
``Medicare in Rural America,'' a typically thick MedPAC report. 
And in every report since, in every March report since, there 
are in fact lots of analyses directed specifically at the issue 
of fair payment for rural providers.
    Let me cite a couple of examples.
    Mr. THOMPSON. I said ``report,'' I meant your testimony. I 
apologize for that.
    Mr. HACKBARTH. Okay. Well, in this March report, let me 
just highlight a couple of examples that are important. We have 
recommended changes in the payment systems for lots of 
different Medicare providers, but in this particular report we 
talk about fairness and payment for skilled nursing facilities 
and home health agencies, and we have made recommendations in 
changing the case mix system used to allocate those payments.
    Among the benefits from those changes would be increased 
payments for rural providers of home health services and 
skilled nursing facility services. So throughout all of our 
reports, there are issues like that where we are trying to 
assure accuracy and fairness in payment, which we think is very 
important.
    On the specific issue of representation, we have four 
commissioners that have significant rural experience out of our 
17. We have two physicians and then two people----
    Chairman HERGER. The gentleman's time has expired. Thank 
you.
    The gentleman from Texas, Mr. Johnson, is recognized for 5 
minutes.
    Mr. JOHNSON. Thank you, Mr. Chairman.
    Thank you for being here today. I appreciate you saying you 
are out to get good value for what we spend in Medicare. I am 
committed to making sure that Medicare has provided high-
quality care while at the same time being wise with taxpayer 
dollars.
    Your report mentions the variations between Medicare 
payments for the same services in different settings. Medicare 
generally pays more for a service in a hospital than in an 
ambulatory surgical center.
    Does this create an incentive for care to be provided in 
one setting over another, based on higher reimbursement?
    Mr. HACKBARTH. Yes, that is our concern, Mr. Johnson, and 
it is a growing concern. And we see some shift toward hospital-
based services that may be driven, at least in part, by higher 
payment levels.
    Mr. JOHNSON. Are you looking to do something about it?
    Mr. HACKBARTH. We are, in fact. It is a tricky issue to 
deal with for a variety of reasons, but in particular, because 
the patients are often different. So it can be the exact same 
service--for example, some type of ambulatory surgery--but the 
patients that go to the hospital are sicker on average. They 
have more underlying conditions. They are at higher risk of a 
bad event. So they are done at the hospital outpatient 
department so that they are closer to backup in case something 
goes wrong.
    And so if you go to equal payment, you have to make sure 
that it is properly risk-adjusted for the different types of 
patients seen in the different settings.
    Mr. JOHNSON. Yes, I understand that, but you ought to be 
able to work that problem I think.
    Mr. HACKBARTH. And we are working on that, and I hope we 
will be making some recommendations.
    Mr. JOHNSON. Thank you. So you have got a plan for studying 
these payment variations?
    Mr. HACKBARTH. Yes, sir.
    Mr. JOHNSON. I appreciate that. Our health care delivery 
system needs to focus on the right procedures to the right 
patient at the right time and place. Does the current payment 
system make that hard to achieve?
    Mr. HACKBARTH. It does. It creates incentives often for 
more costly services than are absolutely necessary for patients 
and, as we just discussed a minute ago, sometimes not in the 
lowest cost, most efficient setting.
    Mr. JOHNSON. Okay. We know you are interested in combating 
waste, fraud and abuse in the Medicare system, and we have 
heard about the problems across all areas of the country, 
including reports of alleged fraud in home health services 
occurring near my district in Dallas. Secretary Sebelius has 
said that her Agency is setting up new checks to screen 
providers before they are ever accepted into the system.
    Can you comment on what progress has been made in becoming 
more proactive rather than reactive in preventing fraud?
    Mr. HACKBARTH. Well, we are not specifically engaged in the 
operational side of enforcement, but we have recommended that 
the Secretary monitor home health use for unusual patterns, 
very high levels of use, and that the Congress give the 
Secretary the authority to do things like limit new providers, 
limit payment when abberant patterns of home health use are 
found.
    And so our contribution to this has been to mostly identify 
some of these very unusual patterns. So in some areas of the 
country, you will see home health use that is like seven times 
the national average, and we think that sort of analysis is a 
useful screening tool for the Secretary and the Justice 
Department to use.
    Mr. JOHNSON. Do you think she has taken your statistics and 
done anything with them?
    Mr. HACKBARTH. Our understanding is that they are 
intensifying their focus on Medicare fraud in general, but in 
particular in the home health area.
    Mr. JOHNSON. That is an interesting word you chose, 
``intensify.''
    Thank you, Mr. Chairman, I appreciate the time.
    Chairman HERGER. Thank you. The gentleman yields back.
    The gentleman from New Jersey, Mr. Pascrell, is recognized 
for 5 minutes.
    Mr. PASCRELL. Thank you, Mr. Chairman. Mr. Chairman, I 
think that Glenn Hackbarth brings some unique qualities to our 
Committee in that the recommendations from MedPAC, many of them 
were incorporated into the affordable health care bill, which 
is now the law of the land.
    And so when people talk about they made cuts but they 
didn't get into the entitlements where the real money is, we 
all know Social Security did not add to the debt; and now they 
miss the point about the health care legislation, because one-
third of it dealt with Medicare and Medicaid, addressing the 
entitlement but specifically adopting many of your 
recommendations. That is a fact of life.
    We can point out chapter and verse where the 
recommendations the Commission made are in there. This is 
entitlement reform.
    And what was the purpose of your recommendations? Well, if 
you read your report, and not just read what somebody else said 
about it, but if you read your report, you are saying that this 
is--you didn't use the word ``reform,'' this is changing how we 
look at Medicare and Medicaid.
    So one of the fundamental problems we face in health care 
deliverance--I mean, no use putting a system together if we 
don't have the people to deliver it. So we spend quite a bit of 
time on work force. I know when we are putting the legislation 
together, quite a bit of time, doctors and nurses, how to get 
more doctors and nurses.
    We know about the shortages. But you are going to cripple 
the system, regardless of what the system is and how we want to 
deliver it to the patient, if you don't have the personnel that 
is properly trained, updated, et cetera.
    You offer two solutions, both of which were involved or 
implemented, put into the health care reform, which we hope 
will be implemented: the idea of a payment reform, like paying 
for quality outcomes and delivery system reforms, such as 
medical homes and the accountable care organizations. You were 
very, very specific.
    Do you think that these reforms, these two reforms, will 
help improve the delivery of health care for Medicare 
beneficiaries and, more importantly, do you think that these 
are essential changes to Medicare itself?
    Mr. HACKBARTH. Well, it is certainly our hope and 
expectation that those two reforms would both improve quality 
of care for Medicare beneficiaries and, we hope, also reduced 
the cost. In each case, medical homes and ACOs, there are a lot 
of important issues to be worked out. And each idea, I am sure, 
will evolve over time, but we think that they are promising 
steps.
    Mr. PASCRELL. Mr. Chairman, I want to bring to your 
attention something. Most of these reforms and changes were 
never scored, never scored', which means we do not have a true 
picture of the amount of savings when we move from pay-per-
service to proper care and help for the patient.
    We don't know really what the results will be. That was 
never scored by CBO. And I would contend to you, if you look at 
your recommendations, and you look at very specifically the 
Health Care Reform Act, that you can find areas where it 
doesn't take too much to conclude that there must be a savings 
from moving away from fee-for-service and into those specific 
things which you just mentioned.
    Would you agree with me?
    Mr. HACKBARTH. Well, certainly that is why we recommended 
them is that we think by moving away from straight fee-for-
service payment, changing the incentives for providers, helping 
them focus on value, changing the organization of care 
delivery, can result in better care at lower cost.
    Mr. PASCRELL. So those editorials and those politicians and 
Congressmen on both sides of the aisle, I am going to ask you 
the question; let me make the statement, and it is like when 
did you stop beating your wife this time?
    Chairman HERGER. The gentleman's time has expired.
    Mr. PASCRELL. Can I finish the question?
    Chairman HERGER. Very quickly, please.
    Mr. PASCRELL. Then I will try to answer it. The question 
is, the editorials and those Congressmen on both sides of the 
aisle who said, very specifically, that we need to get to 
entitlement in order for us to have true cuts in the budget----
    Chairman HERGER. The gentleman's time has expired.
    You can ask if we get a second round, or you can submit in 
writing.
    Chairman HERGER. Again, the gentleman's time has expired.
    I might also mention several of these issues that you 
brought up were scored, but they scored so small they weren't 
listed.
    Mr. PASCRELL. Many of them were not, Mr. Chairman. I will 
go over them one by one with you if you wish.
    Chairman HERGER. The gentleman's time has expired.
    Mr. PASCRELL. Thank you, Mr. Chairman.
    Chairman HERGER. With that, the gentleman from Georgia, Dr. 
Price, is recognized for 5 minutes.
    Mr. PRICE. Thank you, Mr. Chairman.
    In your assessment of the handout that we got, you have the 
volume growth increasing significantly. Can you cite for us the 
main drivers of that volume briefly?
    Mr. HACKBARTH. So, Dr. Price, you are referring to this 
one?
    Mr. PRICE. I think this one.
    Mr. HACKBARTH. Right. So the principal drivers are the top 
line, the red line, is spending per Medicare beneficiary. So a 
small piece of it is due to the annual updates and payment 
rates. That is the lowest line, sort of gold update line.
    The difference between the red line and the yellow line is 
due to changes in the volume and intensity of service. So more 
visits, more procedures, more imaging tests, things of nature.
    Mr. PRICE. What would you say would be the--are there 
incentivizations in the program itself that drive that volume?
    Mr. HACKBARTH. Well, the amount that we pay for a service 
can influence volume, and one of the issues that we----
    Mr. PRICE. Anything else?
    Mr. HACKBARTH. Differences in, you know, burden of illness 
from year to year can affect volume. Changes in technology as 
new technology develops; concerns about malpractice can be a 
factor in volume growth.
    Mr. PRICE. Would you say that there are folks out there in 
the community, in the medical arena, that are working to 
decrease those costs as well on their own?
    Mr. HACKBARTH. Sure. Absolutely.
    Mr. PRICE. And when we as a government or as a society 
identify those, shouldn't we use some of those as best 
practices?
    Mr. HACKBARTH. Absolutely. As somebody who ran a large 
physician practice, that was one of the things that we tried to 
do most often was learn from colleagues and practices.
    Mr. PRICE. Exactly. That is kind of the hallmark of health 
care, isn't it, to find what works best and use it.
    Mr. HACKBARTH. It is best.
    Mr. PRICE. Then I would like you to address, please, the 
issue of physician-owned facilities, hospitals, ambulatory 
surgery centers. All of the reports that I have seen and read 
and all of my personal experience leads me to believe that they 
are one--oftentimes drive the highest quality of care at the 
greatest efficiency and the lowest possible cost per patient. 
Yet we as a society disincent and, in fact, punish them for 
doing what they are doing.
    How would you address that?
    Mr. HACKBARTH. Well, it is a tricky issue, Dr. Price. On 
the one hand, I ran a large multispecialty practice where we 
brought all kinds of services in-house; and so we were self-
referring through our colleagues, and we thought that was good 
for patients.
    On the other hand, there are instances where that sort of 
self-referral can cause problems.
    Mr. PRICE. Then shouldn't we be addressing, then, the self-
referral, as opposed to saying you can't have any of those 
things anymore?
    Mr. HACKBARTH. Yes.
    Mr. PRICE. Do you disagree with the fact that physician-
owned entities out there oftentimes have the highest quality at 
the lowest cost per patient?
    Mr. HACKBARTH. No, I don't disagree with that. I think that 
can often be the case.
    Mr. PRICE. Do you agree or disagree with the statement that 
we as a Congress and as a government have put in place policies 
that will actually diminish the ability of those kinds of 
services to be in existence?
    Mr. HACKBARTH. Yes, there are some policies. But here is 
the tricky part about it. The problem isn't physician ownership 
per se or self-referral per se; it is the combination of self-
referral with fee-for-service payment that rewards more volume 
and intensity, and often missed pricing of services that 
creates real substantial profit opportunities.
    Mr. PRICE. So I hear you say, then, that if we had a level 
playing field and allowed physician-owned entities to compete 
with other entities, level playing field, same pricing 
mechanism and the like, the same reimbursement mechanism, that 
you would be supportive of that opportunity; is that right?
    Mr. HACKBARTH. The first step is to try to get the prices 
right so there aren't undue profit opportunities.
    The second step is to try to move to new payment systems 
that don't reward volume intensity, but reward better care.
    Mr. PRICE. Mr. Chairman, let me just say if I may, because 
my time is very, very brief, I think we are missing a huge 
opportunity by not rewarding those individuals that actually 
provide the highest quality of care at the lowest possible 
cost; and, in fact, we are punishing those individuals for 
doing what they are doing. And I look forward to my second 
round.
    Chairman HERGER. I thank the gentleman. The gentleman's 
time has expired.
    The gentleman from Washington, Mr. Reichert, is recognized 
for 5 minutes.
    Mr. REICHERT. Thank you, Mr. Chairman. Welcome, thanks for 
being here today.
    There is a movement among employers toward what people have 
called a value-based benefit design where preventive primary 
and chronic disease care is cheaper for employees and things 
like high-end imaging and unnecessary emergency room visits, 
which we sort of touched on a little bit already, or high-cost 
drugs, those things that have been identified as not having I 
guess any, proven value, are more expensive.
    These coverage programs are combined with wellness programs 
and incentives for things like improved physical activity and 
nutrition. There are some great examples from Washington State, 
including Group Health, Costco, Boeing, which all use different 
approaches to providing very structured, purposeful health care 
to their employees.
    Medicare, by comparison, seems to be behind the curve a 
little bit. Some have said maybe even in the dark ages. But 
Medicare Advantage offers promise, though, for coordinated 
care. Would you agree with that?
    Mr. HACKBARTH. Yes, I would.
    Mr. REICHERT. And MedPAC has encouraged Congress and CMS to 
add pay-for-quality components to the fee-for-service payment 
system in Medicare, but this is just one step. Could Medicare 
actually change its benefit structure to be more innovative and 
value-based?
    Mr. HACKBARTH. Yes.
    Mr. REICHERT. It even sort of goes to the doctor's question 
of best practices.
    Mr. HACKBARTH. Yes. In fact, it is an issue that is 
currently on the MedPAC agenda, and we will have a chapter on 
the subject in our June report this coming June, and we are 
looking hopefully to moving toward some recommendations on 
redesign of the Medicare benefit package.
    Mr. REICHERT. Would it be possible for you to share some of 
those ideas that you are looking at today?
    Mr. HACKBARTH. Well, we are not to the point of concrete 
recommendations. We are drawn to the idea of value-based 
insurance design. In fact, one of the MedPAC commissioners, 
Mike Chernew, is one of the leading academic thinkers behind 
the value-based insurance design movement.
    Mr. REICHERT. So your discussion and your recommendations, 
how long has that discussion been ongoing?
    Mr. HACKBARTH. Well, on this particular issue, I think we 
had one session last year, and then we had a session in 
February, and then our upcoming meeting in a couple of weeks.
    Mr. REICHERT. So your awareness of this issue and 
discussion was started last year. You have had another meeting 
since, so we are sort of behind the curve here on this issue. 
So we have gone a year; what is the expectation on your 
recommendations being presented, published?
    Mr. HACKBARTH. Well, you know, I don't want to get in front 
of my colleagues and presume a final conclusion.
    As I say, I think we will have a chapter in our June 
report. It could--it won't include recommendations, bold-faced 
recommendations, but it could have some clear directional 
signals. And then if we have agreement in June, we would come 
back next year and potentially consider----
    Mr. REICHERT. It could be a while before we see a value-
based system, then, in Medicare?
    Mr. HACKBARTH. It will. And, of course, it would require 
legislation to change.
    Mr. REICHERT. All right. What could Congress do to help you 
speed the process up or probably, more likely, slow it down?
    Mr. HACKBARTH. Well, we are well aware of the interest in 
Congress in the issue, and there is a lot of interest among 
MedPAC commissioners. So it isn't for a lack of interest or 
effort, but it is a complex issue to change the Medicare 
benefit package.
    Mr. REICHERT. So are we looking at 2 years, 3 years, 4 
years?
    Mr. HACKBARTH. Well, I would hope, if we are going to make 
recommendations, that it would be in our next cycle. We operate 
upon a September-to-June cycle so we would take them up in the 
fall.
    Mr. REICHERT. When is your next meeting?
    Mr. HACKBARTH. In 2 weeks.
    Mr. REICHERT. Is it a public meeting?
    Mr. HACKBARTH. All of our meetings are public.
    Mr. REICHERT. Could you provide me with the date and time 
of the meeting, please?
    Mr. HACKBARTH. Oh, absolutely.
    Mr. REICHERT. Thank you. I yield back, Mr. Chairman.
    Chairman HERGER. The gentleman yields back. The gentleman 
from California, the Ranking Member, Mr. Stark, is recognized 
for 5 minutes.
    Mr. STARK. Thank you, Mr. Chairman. Glenn, thank you again 
for all the good work that MedPAC does.
    I know Mr. Herger has been concerned about copayment for 
certain beneficiaries that use home health services. It is my 
understanding that home health users are older, poorer, more 
frail, more likely to be female, than the overall Medicare 
population, and I am concerned about putting further cost-
sharing on this population. I gather some MedPAC commissioners 
were as well, given that the Commission, as I understand it, 
was not unanimous on this proposal.
    What were the concerns of those who didn't support the 
idea?
    Mr. HACKBARTH. Mr. Stark, they are much like what you just 
described; that the copay would fall disproportionately on a 
vulnerable portion of the Medicare population, which was an 
issue that all of us, including those of us who voted ``yes'' 
on the recommendation, took very seriously. And so what we 
tried to do was tailor our recommendation in ways that would 
minimize although not eliminate that impact.
    And it is also important to keep in mind, as you well know, 
that using copays is not new in Medicare; it is the norm in 
Medicare. And they inevitably fall on users of services who 
tend to be sicker and the like.
    So it is always a challenging balancing act. We think by 
having a modest copay, $150 targeted on admissions from the 
community, that we have tailored in a way that minimizes the 
adverse impact.
    Mr. STARK. Okay. And I know that you have a long history, 
MedPAC does, of recommending parity in payments between 
Medicare Advantage and the fee-for-service side. And your 
recent report summarizes your earlier recommendations about 
Medicare Advantage and the estimates that Medicare Advantage 
plans are paid, on average, 113 percent of the traditional fee-
for-service.
    Didn't private managed care plans originally come into 
Medicare saying they could do more for less; in other words, 
for 20 years they were paid 95 percent of our fee-for-service 
rate, I believe, or thereabouts, and over time we have actually 
moved from demanding they do better and trying to demand that 
they break even.
    You have long recommended that there be a financial 
neutrality between Medicare Advantage and fee-for-service. I 
think that is correct.
    Mr. HACKBARTH. That is correct.
    Mr. STARK. And the Affordable Care Act takes steps to begin 
to bring financial neutrality between those two programs. Can 
you tell us what MedPAC is seeing in the 2011 landscape in 
terms of Medicare Advantage availability, enrollment, and 
premiums?
    Mr. HACKBARTH. Yeah. Well, enrollment is up. The number of 
plans is down somewhat, and the reduction is primarily due to 
the reduction in private fee-for-service plans.
    Mr. STARK. Okay.
    Mr. HACKBARTH. Because of the requirement enacted, not in 
PPACA, but several years ago in MIPPA, that fee-for-service 
plans could not operate if there were coordinated care, 
coordinated network plans available. So some of the private 
fee-for-service plans have left the program, and that is the 
single biggest factor in reduction in the number of available 
plans.
    Membership is, as I say, up in the most recent numbers.
    Mr. STARK. Again, thank you very much for your advice to 
this Committee. We appreciate it, appreciate the work you do. 
Thank you, Mr. Chairman.
    Chairman HERGER. I thank the gentleman who yields back.
    I now recognize for 5 minutes the gentleman from 
Pennsylvania, Mr. Gerlach, to inquire.
    Mr. GERLACH. Thank you, Mr. Chairman. I have a question 
with regard to your recommendations relative to radiologic and 
other imaging services. Can you briefly give me a summary of 
what your recommendations there are?
    Mr. HACKBARTH. Well, on the specific issue of the imaging 
in this report, I don't think we made any specific 
recommendations in this report. In the past, in previous 
reports, we have made a number of recommendations related to 
how the price for imaging services is set. In some instances we 
think those prices have been too high, and we have recommended 
specific changes to reduce price.
    Mr. GERLACH. I understand that there is a professional 
component and a technical component to the reimbursement 
structure.
    Mr. HACKBARTH. That is correct.
    Mr. GERLACH. That there has already been an adjustment 
downward for the technical component. Is there also a 
recommendation that you want to implement to also reduce the 
professional component of that reimbursement for radiological 
services?
    Mr. HACKBARTH. We have looked at recommendations for 
reducing the professional component as well.
    Mr. GERLACH. What is that based on?
    Mr. HACKBARTH. For duplication of work would be an example. 
When two tests are done on the same patient at the same time, 
the amount of work is reduced because you don't have to do some 
things twice. It is the same patient at the same time, and that 
may justify reduction in the professional component.
    Mr. GERLACH. Okay. So you are obviously concerned about 
utilization overall, and therefore by reducing the professional 
component aspect of that, you can reduce utilization?
    Mr. HACKBARTH. Well, certainly there are indications that 
when the price is too high, you get more utilization. People go 
to areas that are more profitable, they invest in equipment if 
there is significant profit in that area. So it is very 
important to keep the prices right, as close to the cost of 
delivery as possible.
    Mr. GERLACH. Is there an understanding in your review 
process of how the services come about to begin with? For 
example, if a radiologist--I am thinking of one in one of my 
hospitals who does a service based upon a referral from another 
physician--if there is a reduction in the professional 
component of that radiologist's service but the radiologist 
didn't initiate the service, the radiologist just took a 
referral, how would a referral-based system, cutting the 
professional component for service based on a referral from 
somebody from the outside, how would that affect utilization?
    Mr. HACKBARTH. So what you are suggesting, I just want to 
make sure I understand the situation. So this is a radiologist 
who has received a referral for imaging service. And you are 
saying if their professional component is reduced?
    Mr. GERLACH. Yeah. As I understand, what you are talking 
about is reducing the professional component for that service.
    Mr. HACKBARTH. Again what we have talked about are making 
adjustments in very specific instances; for example, when you 
are doing multiple images on the same visit.
    Mr. GERLACH. Okay.
    Mr. HACKBARTH. Then we think there are some economies in 
doing it that way, and it is appropriate to reduce the 
professional component in instances like that.
    We have not just said across the board, oh, let's reduce 
imaging services because we think we want to try to suppress 
utilization. We take a much more targeted approach than that.
    Mr. GERLACH. Is it only in cases of multiple services or 
imaging work being done with one patient at one time that you 
are suggesting that change?
    Mr. HACKBARTH. Specifically on the work component, I think 
it is multiple services. There have been, in the physician fee 
schedule also, changes in the practice expense for physician 
services that have changed the payment levels for different 
types of service.
    Mr. GERLACH. Okay. And in coming up with this 
recommendation, who did you talk to within the profession to 
get a sense of how patients come to undertake those imaging--
have those imaging services undertaken, both referral and, in 
some instances, the physician is able to do imaging on his own 
or her own, based upon how they are set up as a practice. Who 
did you talk to in essence to come up with the conclusion that 
there ought to be a change in the professional component of 
those services of being reimbursed?
    Mr. HACKBARTH. Well, one of the things that I am most proud 
of in that MedPAC is that we do reach out to all of the 
relevant professional associations. As you well know, in this 
particular area there are also some coalitions of people in the 
imaging field, professional physicians and imaging equipment 
manufacturers. And we hear, believe me, often from those people 
and exchange ideas. All of our recommendations, when we make 
them we have open public discussion. Draft recommendation is 
discussed in a public meeting. We solicit input from affected 
parties on those recommendations before we finally act. We have 
a very open process.
    Chairman HERGER. The gentleman's time has expired.
    Mr. GERLACH. Thank you. I yield back.
    Chairman HERGER. The gentleman from California, Mr. Nunes 
is recognized for 5 minutes.
    Mr. NUNES. Thank you, Mr. Chairman. I would like to yield 5 
minutes to the gentleman from Georgia, Mr. Price.
    Mr. PRICE. I thank my friend from California for yielding, 
and I appreciate the continued response that you give me.
    I want to follow up on the comments that Mr. Gerlach was 
just making, or the line of questioning on the multiple tests. 
For example, if a patient is coming for a certain MRI 
procedure, one procedure, the costs of that procedure that are 
borne by the facility and by the physician involved in 
interpreting that are pretty much fixed, correct?
    Mr. HACKBARTH. On the interpretation side or the technical 
component related to the equipment?
    Mr. PRICE. Both.
    Mr. HACKBARTH. Well, the cost of operating the equipment is 
influenced by the volume of service provided. So you make a 
capital expenditure. The more you use that equipment, the lower 
your unit cost for the capital expense, you spread it over more 
units.
    Mr. PRICE. The machine doesn't know whether it is one 
patient or two patients who are getting the two different 
procedures, right? The volume is the number of procedures 
itself; it is not how many patients there are.
    Mr. HACKBARTH. That is right. It doesn't matter whether 
they are distinct patients or not.
    Mr. PRICE. All right. You have a patient coming in for an 
MRI of a cervical spine and a patient coming in for an MRI of a 
lumbar spine. Those two procedures are separate, distinct, and 
require the use of the machine itself, the technical side; and 
the interpretive side physician is using his or her best 
knowledge and information and expertise to interpret that. You 
wouldn't say that that had a volume component, would you?
    Mr. HACKBARTH. In terms of interpreting----
    Mr. PRICE. Yeah.
    Mr. HACKBARTH. No.
    Mr. PRICE. Okay. So the physician side ought to be fixed 
you just said, right?
    Mr. HACKBARTH. Professional.
    Mr. PRICE. We ought not decrease physician reimbursement 
based on whether or not it is one patient or two patients.
    Mr. HACKBARTH. Well, based on whether it is one versus two, 
no. But as new technology, imaging being one example, becomes 
more widely used, more frequently used, I do think it is 
reasonable for the cost per unit of service, as the experience 
level goes up, to go down.
    Mr. PRICE. That----
    Mr. HACKBARTH. That happens in almost every market for 
every service in the economy.
    Mr. PRICE. I might be able, if it was two C-spine MRIs on 
the same patient, at the same time; but we are talking about 
two different procedures on the same patient, requiring the 
same use of the machine, and the different brain power of the 
physician involved to interpret it. And so it is astounding to 
us--unless your goal is to simply decrease the cost, not worry 
about the quality and the access--if your goal is simply to 
decrease the cost, then that might make sense. But if you are 
interested in maintaining access to care and maintaining 
quality to care, then many of us believe that you are cutting 
right at the core of it.
    Mr. HACKBARTH. A couple points are key here, Dr. Price. 
First of all, the method for setting the relative values. As 
you know, MedPAC does not do that, CMS does not do that. An 
AMA-sponsored RUC does that. So it is people from the 
professional societies sit down together and determine the 
relative values for the work element.
    Mr. PRICE. If a specialty society says no, that is not the 
appropriate reimbursement for this procedure, do they have any 
ultimate authority in that?
    Mr. HACKBARTH. There is a very elaborate process.
    Mr. PRICE. Who makes the final decision?
    Mr. HACKBARTH. The ultimate decision on the fee schedule is 
in CMS.
    Mr. PRICE. There you go.
    Mr. HACKBARTH. But in the vast majority of cases, they 
adopt the recommendations from the AMA-sponsored RUC.
    Mr. PRICE. Can you name a single procedure? Because the 
cost that the government reimburses physicians, pays physicians 
for the care, allows for the access to care, right?
    Mr. HACKBARTH. That is true.
    Mr. PRICE. Okay. So can you name a single procedure for 
which physicians are being reimbursed in real dollars more 
today than when they were 15 years ago?
    Mr. HACKBARTH. Not off the top of my head.
    Mr. PRICE. Yeah. And I would love to have you get back, 
because I don't think there is one. I say that in all sincerity 
and honesty. What we are doing is drastically limiting the 
access, availability, of patients--your mom, your folks, 
seniors across this country--to access to care because of how 
we are dealing with reimbursement issues. That is where we 
ought to be looking for----
    Mr. HACKBARTH. What I would like do is, if we could put 
this slide up. Medicare payments to physicians have been going 
up quite rapidly in fact.
    Mr. PRICE. If I may, Mr. Chairman, the payment per--for a 
procedure for physicians, for visitation, the cost of a patient 
to come to an office for a visit is drastically reduced from 
where it was 15 years ago.
    Mr. HACKBARTH. Yeah.
    Mr. PRICE. Right?
    Mr. HACKBARTH. I am not trying to be argumentative.
    Mr. PRICE. Nor am I.
    Mr. HACKBARTH. But there is an important point here, Mr. 
Chairman. The unit prices you and I would agree--the increase 
in unit prices, the price per office visit, the price per 
procedure, has gone up relatively slowly. That is that bottom 
line on this graph. But the amount of income that physicians 
get from Medicare has gone up rapidly, the red line.
    Mr. PRICE. In real dollars, the inflation-adjusted dollars, 
that line goes below the access, as you well now.
    Mr. HACKBARTH. The red line represents a 5\1/2\-percent 
increase, average increase per year per beneficiary, since the 
year 2000.
    Chairman HERGER. The gentleman's time has expired.
    Mr. PRICE. Thank you.
    Chairman HERGER. If time permits, we may try to go for a 
second round of questioning.
    Now the gentleman from Oregon, Mr. Blumenauer, is 
recognized for 5 minutes.
    Mr. BLUMENAUER. Thank you, Mr. Chairman. Welcome, Doctor, a 
Northwesterner here.
    Before I get to my questions, though, I want to just allow 
you to finish your thought that you had with my good friend 
from Georgia, because we watch a certain amount of different 
impulses. There are some who suggest that the solution to 
exploding Medicare costs is to basically voucher this and index 
it at a level that is dramatically below the cost of inflation, 
medical inflation, something that would be the curve going 
down, down. And if there are problems associated--and you folks 
try and split the difference. I mean, you are cognizant of the 
problems, you deal with practice patterns, you recommend year 
after year, after year, after year, to Congress and the 
Administration things that could help bend that cost curve. 
There is quite a bit of bipartisan pushback over the years. I 
mean, that is not political, that is just--because people get 
pinched and they don't want to reduce that cost.
    My impression is that, as we constructed the Affordable 
Care Act, that we actually included most of the recommendations 
over the--they don't maybe have the teeth that some would like, 
they don't implement them instantly. There are too many, maybe 
pilot projects and test this, but they are there.
    I am curious if you want to just finish answering the 
question, because if the spending per beneficiary is going up 
compounded over 5 percent per year, it suggests that there are 
a whole lot of procedures and a whole lot of more expensive 
somethings that are going on there. And I just want to make 
sure you are able to complete your thought.
    Mr. HACKBARTH. All right. So I guess I would summarize our 
view on this with a few points.
    One is, overall, it is our sense that there is enough money 
in the physician fee schedule; Medicare pays enough for 
physician services overall to assure adequate access for 
Medicare beneficiaries. However, we are concerned about how the 
money is distributed.
    We think we pay too much for some types of services and too 
little for other types of services. Primary care would be an 
example where we are worried that the payments are too low. So 
we think some redistribution of the payments is appropriate.
    And then finally we think it ought to be a high-priority 
goal for Medicare to move to new payment systems that don't 
just reward more volume and intensity, but reward higher value 
care for both Medicare beneficiaries and the program.
    I would agree that just holding down the unit price 
increase, the way the yellow line has, is not the best way to 
get good care for Medicare beneficiaries.
    Mr. BLUMENAUER. And that, of course, is why we attempted to 
have a comprehensive approach that incorporated these elements 
in, and hopefully they can be implemented sooner rather than 
later, after they are tested, to be able to make a system that 
does reward health care value over volume.
    Mr. HACKBARTH. Right.
    Mr. BLUMENAUER. I find it a little bit ironic that some of 
my Republican friends talk about massive cuts in, for example, 
Medicare Advantage, when in fact it is a move to try and deal 
with the quality of the system. And they propose to replace it 
with something that would be far more draconian than any modest 
adjustment in Medicare Advantage.
    Mr. HACKBARTH. Mr. Blumenauer, if I may, could I just pick 
up on----
    Mr. BLUMENAUER. Well, I only have 30 seconds left, and I 
gave 3 minutes to you.
    Mr. HACKBARTH. You were generous, I am sorry, go ahead.
    Mr. BLUMENAUER. But there is just one area that I wanted to 
leave for your review, because we are watching palliative care 
and hospice kind of merge, and there is an opportunity for us 
to be able to give higher quality care for our people. We used 
to talk about in the last 6 months of life, but we are finding 
because of palliative care, because of changes in treatment 
patterns, sometimes people in ``hospice'' live longer than 
people who are given intensive treatments, ICUs and chemo, 
expensive and really painful chemotherapies.
    I am wondering if there is a way going forward that we can 
work with you to think a little bit about the recalibration of 
what hospice care means, ways that better meet the needs of 
patients and families, actually might end up being less 
expensive but certainly better care.
    Chairman HERGER. The gentleman's time has expired.
    Mr. BLUMENAUER. Thank you.
    Chairman HERGER. The gentlelady from Tennessee, Ms. Black, 
is recognized for 5 minutes.
    Mrs. BLACK. Thank you, Mr. Chairman.
    Mr. Hackbarth, I want to go to the issue of outpatient 
settings. And your report verifies something that I have heard 
within the district, in that there is a significant variation 
in the amount of Medicare payments for similar services that 
are provided in outpatient settings, with Medicare generally 
paying more for services that are furnished in a hospital 
outpatient department than in an ambulatory surgical center or 
in a physician's office. And this variation of course results 
in an undesirable financial incentive, such as those ambulatory 
surgical centers being organized as more a hospital outpatient 
department, at least in part, to receive the higher payments.
    Does the Commission have a plan for studying this? And if 
so, do you have a sense for where those policy options will be 
that may result from this review?
    Mr. HACKBARTH. Yes. It is an issue that we are actively 
looking at. We are concerned that the disparities in payment 
for the same service, based on the location where it is 
provided, can cause problems. And there is some evidence that, 
in fact, it is causing problems. As you indicate, people are 
converting to hospital status simply to get the benefit of the 
higher payment, and clearly that is a problem.
    As I indicated earlier in response to Mr. Johnson's 
question, it is a little bit tricky in the sense that, although 
the service might be the same--for example, a given ambulatory 
surgical procedure--the patients receiving it could be 
different between the ASC and the hospital outpatient 
department. I know this from experience, having run a large 
group. We did surgery in both ASCs and hospital outpatient 
departments. And we would send, quite consciously, the more 
difficult patients to the hospital outpatient department; same 
surgery, but the riskier patients, because of comorbidities and 
the like. And we wanted them to be at the hospital in case 
something went wrong and we needed backup.
    Because they were sicker patients, we paid the hospital 
more for the same surgical procedure that we paid the ASC. It 
was an adjustment in effect for the higher risk of the patient.
    So what we need to do is move toward equal rates for the 
same service on a risk-adjusted basis. And that last part is 
the tricky part in this that we are looking at.
    Mrs. BLACK. Thank you. And that certainly makes sense. But 
at the current time where you look at apples to apples, it 
doesn't appear to be that way. So I think that certainly is a 
wise thing to take a look at.
    Additional question. In your latest report the Commission 
notes that beneficiaries who receive the Part D low-income 
subsidy, they account for nearly 22 percent of all enrollees, 
and yet more than half--of them reach the doughnut hole. 
Further, these low-income subsidy enrollees account for about 2 
million of the 2.4 million enrollees who reached that Part D 
catastrophic spending cap in 2008.
    Your report also notes that average per-capita spending for 
the low-income subsidy enrollees were double that of the non 
low-income subsidy enrollees. And I know that these low-income 
enrollees are probably for the most part sicker, and they 
require more medication, but this disparity really is very 
alarming.
    Do you have any recommendations on how we might be able to 
better control the cost for this population?
    Mr. HACKBARTH. We have not looked specifically at that. We 
have done some research that suggests that there may be 
differences in risk that aren't fully captured by the existing 
risk-adjustment systems, and that may be a reason for the 
higher utilization. Because you are talking about a low-income 
population, the tool of using copays to try to limit access 
utilization is not one that is really available to serve people 
that don't have much income and appropriately need to be 
protected from excessive copays. If we don't do that, then 
there is the risk that they won't get needed drugs, and we will 
have higher costs.
    Mrs. BLACK. I don't discount that, but I think what I have 
seen in my experience as an emergency room nurse is that when 
people have an opportunity to have a smorgasbord, or more 
services available for them, they tend to overutilize those 
services just because they are available. And I am not casting 
any stones there. Because if we all go into a buffet, we eat a 
whole lot more food at the buffet than we would if we ordered 
an individual plate.
    And so trying to get at how do you do a better job while 
making sure that the services that are being required are 
actually services that are really needed and not just being 
utilized because they are there.
    Chairman HERGER. The gentlelady's time has expired. The 
gentleman from Wisconsin, Mr. Kind, is recognized for 5 
minutes.
    The Ranking Member is recognized.
    Mr. STARK. Mr. Chairman, I ask unanimous consent to put in 
this National Journal article from Mr. Thompson.
    Chairman HERGER. Without objection.
    [The information follows:]

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    Chairman HERGER. The gentleman from Wisconsin for 5 
minutes.
    Mr. KIND. Thank you. Thank you, Mr. Chairman, and thank 
you, Mr. Hackbarth and your staff, for the update that you are 
giving us today. And I think this is a very important hearing, 
just hearing the recommendations that you are making. We 
appreciate all the work that you put into this and the effort 
to provide us guidance and where we are going to go with the 
Medicare program.
    Now, I notice in your January 2011 report, you reported on 
various geographic variations in the health care system, 
utilization variation. And you found in that report that one 
area that was high, one are of utilization tended to be high in 
all areas of utilization. In fact, you specifically noted that 
the area with the greatest service use, Miami, is nearly twice 
the level of utilization than the least use area, which is my 
hometown of La Crosse, Wisconsin. And yet in the report then 
and today, you are not making any recommendations on how to 
deal with this geographic payment variation or utilization 
variation around the country.
    I am wondering why you are not being a little more explicit 
in the recommendations, and will you in the future provide 
greater guidance in this area?
    Mr. HACKBARTH. We think, Mr. Kind, that the best way to 
reward high-value health care delivery, whether it is in La 
Crosse or perhaps a provider in Miami, is through changing the 
payment system, moving away from fee-for-service payment to new 
payment methods.
    Mr. KIND. I agree. But are you going to come up with 
specific proposals on how do that?
    Mr. HACKBARTH. We have made many proposals, medical home, 
ACOs, bundling around hospital admissions, many of them picked 
up in PPACA. And so we think payment reform is the best way to 
move to value.
    Mr. KIND. Most of that is already in the Affordable Care 
Act.
    Mr. HACKBARTH. That is correct.
    Mr. KIND. Again, relying on your recommendations in the 
past. But what about systematic reform----
    Mr. HACKBARTH. There is a lot of discussion in recent years 
about geographic variation. And one of the points that I think 
has been missed in that we can talk about regions of the 
country, and Florida is more expensive than Wisconsin, but 
there is variation within Wisconsin, there is variation within 
Florida. And so if you apply a geographic approach and say we 
want to reward Wisconsin and penalize Florida, there is going 
to be a lot of collateral damage.
    Mr. KIND. I agree, and that is the point. And that is the 
point that many of us have been trying to make for the last 2 
or 3 years is this geographic variation is occurring within 
congressional districts, within communities themselves. So it 
is less Wisconsin versus Florida as it is from individual 
providers, no matter where you find them.
    And that is the point on payment reform. And you even 
recognize on page 4 of your March report--you are right--we 
recognize that managing updates and relative payment rates 
alone will not solve a fundamental problem with the current 
Medicare fee-for-service payment system; that providers are 
generally paid more when they deliver more services, without 
regard to the quality or value of those additional services.
    I think that is going to be the key and the ultimate 
verdict on health care reform. If we can move to a different 
reimbursement or payment system, outcome and value, and that I 
think will solve a lot of the problems.
    As far as the cost curve that we were just talking about, 
but also the quality of care that we are striving for out 
there, and I was hoping MedPAC throughout the years would have 
been a little more affirmative in the recommendations in how we 
can get there other than through pilots and ACOs and medical 
homes and bundling, which is all necessary and good, but 
something more dramatic in proposal.
    Mr. HACKBARTH. Well, the challenge that we have--you know, 
everybody says that fee-for-service is bad because there are 
rewards of volume and intensity of service. And for sure, that 
is true. But from my perspective the worst legacy of fee-for-
service is that we have a fragmented delivery system.
    Mr. KIND. Right.
    Mr. HACKBARTH. Where people don't work together to improve 
care for patients. In too many instances they operate 
separately, they don't communicate well, they don't coordinate 
well. And the difficult thing about payment reform is that you 
can change payment methods, but there has to be somebody at the 
other end to receive it.
    Mr. KIND. Right.
    Mr. HACKBARTH. There has to be a reorganization.
    Mr. KIND. I agree. And you are probably aware that, again, 
under the Affordable Care Act, two things are going to happen, 
both through the Institute of Medicine. They are going to have 
an update for the first time in the Medicare reimbursement 
formula, using real data, realtime instead of the proxy data, 
which I think is long overdue.
    But second and most importantly, they have embarked on a 2-
year study now to come up with an actionable plan to change 
fee-for-service to a fee-for-value reimbursement system. That 
then can go to the Administration, and the IPAT Commission for 
implementation, which again I think is going to be key. That is 
already moving forward under health care reform, which again I 
think is going to be the key to sustaining the system that we 
have in a much more affordable basis but getting better 
outcomes, too.
    The thing with the accountable care organizations, medical 
homes bundling, that is fine for pilots, but it is basically 
saying you need to structure yourself in this fashion to be 
rewarded, instead of saying you will be rewarded for value and 
outcome of care; you figure it out as far as what is the best 
approach to achieve it. Because, obviously, smaller groups are 
going to have a little more difficulty than the larger 
providers to form in ACOs or some type of medical home model, 
wouldn't you agree?
    Mr. HACKBARTH. Yeah. In fact one of the challenges with 
small providers, for example, physicians in solo practice, is 
it is difficult to assess their performance because of small--
--
    Chairman HERGER. The gentleman's time has expired.
    Mr. KIND. That is right. Thank you.
    Chairman HERGER. We have--everyone has asked a question, 
maybe there are a couple of Members who would like to ask a 
second question, so we will begin to move to that. The 
gentleman from Georgia, Dr. Price, for 5 minutes.
    Mr. PRICE. Thank you, Mr. Chairman. I look forward--there 
are so many questions. I look forward to being able to provide 
some for you and respond in writing.
    The part A, primarily hospital services, part B, primarily 
physician services, is described. What percent of part B is 
physician reimbursement?
    Mr. HACKBARTH. Actually to M.D.s as opposed to other health 
professionals?
    Mr. PRICE. Yes.
    Mr. HACKBARTH. It is about 12 or 13 percent of total 
spending for physicians. Is that the number you are looking 
for?
    Mr. PRICE. Yes.
    Mr. HACKBARTH. Or what share of part B is physicians?
    Mr. PRICE. Well, both. But 12 or 13 percent is fine, 
because I think there is this sense by many that if you just 
whack away, and whack away, and whack away at the docs, that 
you will be able to control the cost. And in fact if we 
continue as a society to whack away at what the physicians are 
able to gain for their services, for their caring, 
compassionate, and knowledgeable services, we will truly harm 
the access to quality care in this country, because physicians 
are saying, ``I can't do that anymore, I can't do that 
anymore.''
    And that is what I hear from my colleagues, former medical 
colleagues at home and across the country, who say--what I was 
trying to get to with the previous line of questioning, on not 
having any--any significant increase in reimbursement. And all 
insurance pegs itself to Medicare now, basically, in terms of 
reimbursement. So the Federal Government controls the payments 
to physicians for virtually every single procedure in this 
country.
    I want to talk about a couple other items in the short time 
that I have available. You mentioned about the RUC, having the 
availability to have significant input into the cost--payment 
for physician services; also agreed that it was CMS that had 
the final say.
    Mr. HACKBARTH. Right.
    Mr. PRICE. The RUC itself, as I understand it, has 
significant responsibility from the 90 percent of the costs--
the payment for the services that are provided. That number may 
or may not be right. About half of Medicare visits are through 
primary care, yet the number of primary care physicians on the 
RUC is in the teens, and maybe even lower, maybe even single 
digits in terms of a percent. How do you reconcile that?
    Mr. HACKBARTH. Well, certainly that has been a sore point 
among primary care physicians, that they felt they have been 
underrepresented and that the process is skewed against them in 
various ways.
    Mr. PRICE. Isn't that part of the problem, though, of 
setting up the kind of apparatus that we currently have, is 
that you rarely if ever can get to the right answer, because 
you rarely have the right people in the room.
    Mr. HACKBARTH. Yeah. Medicare has very complicated payment 
systems, as you know. Better than most people, I am aware of 
not only the complexity but also some of the weaknesses. The 
problem, however, is that it is not like we can say, Oh, it is 
these Medicare-administered prices or prices set by the 
competitive market. As you just indicated, private insurers 
tend to say, Oh, Medicare's way is better than what we were 
using, so we are going to adopt Medicare's fee schedule.
    Mr. PRICE. So what we have is essentially price-fixing from 
the Federal Government.
    Mr. HACKBARTH. It is a difficult system, but there aren't 
clear, better alternatives. One point on the----
    Mr. PRICE. If there are clear, better alternatives, then I 
look forward to that discussion.
    Mr. HACKBARTH. Well, I would look forward to that as well. 
But let me just make one point how private insurers use the 
Medicare system. Typically what they use is the relative 
values, but they set their own conversion factor.
    Mr. PRICE. Let me talk about----
    Mr. HACKBARTH. But the price is not the same.
    Mr. PRICE. That is true. It is 90 percent or 110 percent or 
130.
    Let me talk about one of those relative values and that is 
the E&M codes, evaluation and management; the doc visit codes, 
if you will. My understanding--what evidence or what science 
went into the setting of those codes? Are you aware of the 
initiation of the----
    Mr. HACKBARTH. Well, the original system back in the early 
nineties was based on an extensive research project done by 
Bill Showell at Harvard to set initial relative values. And 
then the RUC process was established for purposes of 
maintaining the system.
    Mr. PRICE. And ``maintaining'' is the right word. Because 
there hasn't been, as I understand it, a critical evaluation of 
the E&M codes and what we are incenting in terms of office 
visits and----
    Mr. HACKBARTH. Well, actually by law there is a 5-year 
review. Each 5 years they do a comprehensive review of the work 
values. That doesn't mean every single code, but it is a far-
reaching review of the work.
    Mr. PRICE. And it compares to what has been--I would 
suggest it compares to what has been the occurrence as opposed 
to looking at whether or not we are getting the desired----
    Mr. HACKBARTH. In fact, a critical question in the whole 
system is do we want to base the prices for different services 
on estimates of the cost of producing them, or do we want to 
take into account the value of the service to patients?
    Mr. PRICE. Which brings me to a value question. All of the 
values comments seem to imply that every single patient can 
have an ideal outcome regardless of the diagnosis and 
regardless of the clinical status. How do you pay for value in 
a patient who has a terminal disease, is at the end of life, 
and needs caring, compassionate care for that? It will have a 
lousy outcome.
    Mr. HACKBARTH. Well, when I talk about pay for value, I am 
talking about, number one, looking at populations served and 
not individual cases, as I think you are pointing out. 
Individual cases, sometimes there are unavoidable bad results. 
That is not a sign of poor care. So you look across broader 
populations, you risk-adjust for the underlying conditions, and 
you use measures that take into account things like patient 
satisfaction; it is not just outcomes. You know, a terminal 
patient could receive good care, and acknowledge it is high-
quality, humane care, even though it is a bad outcome.
    Mr. PRICE. Thank you.
    Chairman HERGER. The gentleman's time has expired.
    The gentleman from Washington, Mr. McDermott, is recognized 
for 5 minutes.
    Mr. MCDERMOTT. Thank you very much, Mr. Chairman. I was 
sitting down in my office watching this on the television, and 
I decided I better come up here and ask a question.
    Mr. HACKBARTH. Okay.
    Mr. MCDERMOTT. Because I think the least known Committee in 
the medical industrial complex in the United States is the RUC 
and the impact that they have.
    And I would like to submit for the record a graph from the 
Medical Group Management Association, Annual Physician 
Compensation Productive Survey. It is 1992 to 2008.
    [The information follows:]

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    Mr. MCDERMOTT. And you can see when the RUC started, and 
the top line is the specialist's income and the bottom line is 
primary care.
    And so I started looking at the RUC and figuring out who is 
on the RUC and how do they do this, and they clearly submit 
their recommendations to CMS. And nine times out of ten, or 
more than that, maybe 95 times out of 100, the CMS accepts 
their recommendation; is that correct?
    Mr. HACKBARTH. That is correct, yes.
    Mr. MCDERMOTT. So it is not being set by CMS, but is being 
set by a private committee controlled by the American Medical 
Association; is that correct?
    Mr. HACKBARTH. That is correct. I would point out that what 
we have recommended--and this was 2 or 3 years ago now--is that 
CMS take a more assertive role and not just be a passive 
receiver of recommendations, but be more directive in what they 
need to look at, and change the dynamic that otherwise exists 
within the RUC. And they have taken some steps in that 
direction. That was the answer.
    Mr. MCDERMOTT. I would like to submit another article for 
the record, which is from the New England Journal of Medicine, 
dated 22 March 2007, which says that in 2006 the RUC 
recommendations--well, MedPAC went up on 227 services and down 
on 26.
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    Mr. MCDERMOTT. So there has never been any bending of the 
curve on the basis of the RUC; is that correct?
    Mr. HACKBARTH. And that is precisely our concern. The 
dynamics of the RUC are that there are lots of incentives to 
identify a service for higher payment. There is very little 
incentive to collect data to document Oh, my service ought to 
go down.
    And so what we have said is that CMS needs to redress that 
imbalance in incentives within the RUC by directing them to 
look at particular services that are likely to be overvalued.
    Mr. MCDERMOTT. Do you think it might be better just to 
collect your own data and never mind the RUC? I mean, why 
should the medical association be setting their own fees? How 
are you ever going to get control of costs if you let the fox 
decide what the keys to the hen house are going to be used for?
    Mr. HACKBARTH. Well, what we have recommended is a hybrid 
approach where CMS does not turn over the keys to the fox, is 
much more assertive in the process, but then takes advantage of 
the expertise of the relevant specialties to provide input to 
that process. So it is a rebalancing of the system, we think 
mirroring professional expertise with data analysis done by 
CMS.
    Mr. MCDERMOTT. How about a rebalancing of the components 
inside the RUC? My looking at the list, depending how you look 
at people and what you can figure out is that mostly it is 
special--or it is a balance heavily weighted toward 
specialists, not toward primary care physicians.
    Mr. HACKBARTH. And that, too, is a concern of ours and 
certainly it is a concern of many of the primary care 
physicians in the relevant professional societies.
    Mr. MCDERMOTT. It seems to me that the biggest problem that 
those of us who are supporting of the President's plan still 
have about what is going on, is that controlling costs is still 
not very well done. We have done well at access, in including 
more people through the exchanges and that sort of thing, but 
the question is ultimately going to be how come we are spending 
16 percent of GDP, or 17 percent of GDP, and the Swiss are 
spending 11 percent, and the French are spending 12 and 
whatever?
    Where is that 5 percent coming from is what I have been 
looking at trying to figure out. And I keep coming back to the 
fact that Medicare allowed usual and customary fees in the 
original legislation, and we are continuing it with RUC is 
simply an extension of that as I see it. Am I misreading the 
facts?
    Mr. HACKBARTH. No. We believe how Medicare pays for 
services is an important contributor to the level of 
expenditure and the rate of growth. If we ever want to reduce 
the rate of growth, let alone reduce the level of expenditure, 
if we ever want to improve the value we get for our Medicare 
expenditures, we need to change the payment methods.
    Chairman HERGER. The gentleman's time has expired.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    Chairman HERGER. The gentleman from New Jersey, Mr. 
Pascrell, is recognized.
    Mr. PASCRELL. Thank you, Mr. Chairman.
    Mr. Chairman, I looked over the report from the Centers for 
Medicare and Medicaid Services, the CMS report of April 22nd of 
2010, that also is an interesting document. And I just wanted 
to clarify something we started to get into before on the 
previous question.
    Clearly the CBO and the CMS scored all the legislative 
language. I misspoke, but I am trying to get to the point, I 
didn't finish my point. It did score all of the words in the 
970 pages or so of that health care reform bill in that bill, 
in the Act. They did not give as much credit, though, the point 
I am trying to make, to delivery system reforms that we 
believe, those of us who support the legislation, support the 
Act, will lead to better care at lower costs.
    Mr. HACKBARTH. Right.
    Mr. PASCRELL. We had the--Mr. Chairman, we had the CMS 
actuary here, if you remember, in this room last month.
    Mr. HACKBARTH. Right.
    Mr. PASCRELL. I asked him why these provisions weren't 
worth--weren't credited with more savings. If you look at the 
chart, they go--each one of the provisions, and you see a lot 
of zeros, of course, and you see a lot of low numbers and some 
other things, but things we were talking about before the pilot 
testing for pay for performance.
    The technical corrections to hospital value-based 
purchasing, support the patient-centered medical homes, which 
is only a small part of this. There is the whole list in the 
report which we were provided. It is very, very clear.
    The question, what we are saying, those of us who support 
the legislation in the Act, why we think these things will lead 
to better care and lower costs? Plus, why the hell did we put 
the bill together in the first place? We had the actuary here 
and I asked why those provisions weren't credited with more 
savings than the charts would indicate. So you can score it and 
not give credit for the savings. I don't think that is a score 
that--you know, we probably wait for the results because we 
didn't get any results. They said, We don't have enough 
information.
    Mr. HACKBARTH. Right.
    Mr. PASCRELL. Is that correct?
    Mr. HACKBARTH. That is my understanding of what they did.
    Mr. PASCRELL. Now, he answered this; he answered that he 
believed in their potential to save Medicare money, he stated 
for the record, but that he didn't have enough data to estimate 
the amount of savings they would be given. How am I doing so 
far?
    Mr. HACKBARTH. I think you have accurately described the 
situation. The concepts can be sound. The concepts have to be 
turned into operational payment systems and then you have to 
get providers to convert to those new payment systems. There 
are certain connections there----
    Mr. PASCRELL. Not unlike the changes we made to Medicare 
since its beginning in the sixties. We made dramatic changes to 
the Medicare program. Made dramatic changes when we 
prognosticate, when we went out from the point that we were at. 
So this is not unusual, this is not something that we say, 
Well, is it going to be in 2022? I mean the charts here go up 
to 2019. I think they are very optimistic, but I hope that all 
of us recognize these provisions.
    These provisions, the breadth and the width of Medicare and 
Medicaid entitlement changes, we are changing business in the 
Health Care Act, aren't we, Mr. Hackbarth?
    Mr. HACKBARTH. That is certainly the goal. That is why we 
recommended various provisions that we did that were included 
in the law. We think they have the potential to change.
    Mr. PASCRELL. Okay. So if these ideas in health care reform 
which would move us toward paying for the quality of care 
rather than the quantity of care, something my friend from 
Wisconsin keeps talking about, I would assume everybody 
understands, I know there will be pushbacks from the medical 
profession.
    Chairman HERGER. The gentleman's time has expired.
    Mr. PASCRELL. And you have heard them. Cannot be identified 
as entitlement reform, then what the heck can be? Thank you, 
Mr. Chairman.
    Chairman HERGER. The gentleman's time has expired.
    Mr. Hackbarth, the Commission intends to consider different 
approaches to updating physician payments in an attempt to 
provide options aimed at fixing the SGR problem. Can you 
preview the timing and the substance of the Commission's work 
on this pressing issue?
    Mr. HACKBARTH. Yeah. Our hope is that we will have 
recommendations in the fall, draft recommendations in 
September, final recommendations for vote within the Commission 
in October. That is a hope.
    We have got to obviously do a lot of work between now and 
then and forge a consensus on what to do. The work we think is 
urgent. It is motivated by a growing concern among MedPAC 
commissioners that the SGR is a growing threat to access to 
services for Medicare beneficiaries.
    I want to be clear; we don't see wide-scale evidence of 
that right now, but our concern is that the repeated difficult 
process of trying to avert large-scale cuts in physician 
payments, doing that over and over, sometimes multiple times in 
the same year, the cumulative effect of that exercise is 
undermining both physician and beneficiary confidence in the 
Medicare program.
    So for a long time I have been able to sit before the 
Subcommittee and say, yeah, SGR is a problem that we don't see 
an imminent threat to access. We think we are getting closer to 
that tipping point. And so we are looking at options for 
potentially addressing that.
    Just if I may, Mr. Chairman, just one last point. I don't 
want to create the false expectation that we may come up with a 
new payment system that is not going to have a budget score 
attached to it; that the big SGR budget problem is going to go 
away. I don't think that there is a rational policy option that 
will make that number go away.
    I think the question for the Congress is not whether we are 
going to spend more than the SGR baseline says. I think 
everybody in this room, the CMS actuary, the Medicare trustees, 
everybody, knows we are going to spend more than the SGR says 
we will. The only question now is whether we are going spend 
more by making last-minute adjustments, plowing more money into 
the existing payment system, or whether we are going to spend 
more strategically to achieve important goals for the Medicare 
program.
    We think that the latter course is the wise course, and so 
my hope is that we can develop a package that will have a cost, 
a budget cost to it, but will achieve some important goals for 
Medicare reform going forward. That is our goal.
    Now whether I can, you know, get the consensus within 
MedPAC, I won't know until we are further into the process, but 
that is the mindset that I have.
    Chairman HERGER. All right. I thank you for your comments. 
And I am sure you know this is a bipartisan major concern that, 
as Members of the Committee each of us deal with as we talk 
with our physicians. It is one that we need to place; and it is 
important for to you know, as I am sure you do, that this is a 
high priority of us, of this Committee, and certainly of this 
Subcommittee.
    And, again, I want to thank our witness for your testimony 
today.
    As a reminder, any Member wishing to submit a question for 
the record will have 14 days to do so. Mr. Hackbarth, if any 
questions are submitted, I ask that you respond in a timely 
manner. With that, the Subcommittee is adjourned.
    [Whereupon, at 2:57 p.m., the Subcommittee was adjourned.]
    [Submissions for the Record follow:]

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