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



 
     IPAB: THE CONTROVERSIAL CONSEQUENCES FOR MEDICARE AND SENIORS

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



                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               ----------                              

                             JULY 13, 2011

                               ----------                              

                           Serial No. 112-73


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov

     IPAB: THE CONTROVERSIAL CONSEQUENCES FOR MEDICARE AND SENIORS




      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov





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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    HENRY A. WAXMAN, California
  Chairman Emeritus                    Ranking Member
CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina   GENE GREEN, Texas
  Vice Chairman                      DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma              LOIS CAPPS, California
TIM MURPHY, Pennsylvania             MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California         JAY INSLEE, Washington
CHARLES F. BASS, New Hampshire       TAMMY BALDWIN, Wisconsin
PHIL GINGREY, Georgia                MIKE ROSS, Arkansas
STEVE SCALISE, Louisiana             JIM MATHESON, Utah
ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin 
BILL CASSIDY, Louisiana              Islands
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

                                 _____

                         Subcommittee on Health

                     JOSEPH R. PITTS, Pennsylvania
                                 Chairman
MICHAEL C. BURGESS, Texas            FRANK PALLONE, Jr., New Jersey
  Vice Chairman                        Ranking Member
ED WHITFIELD, Kentucky               JOHN D. DINGELL, Michigan
JOHN SHIMKUS, Illinois               EDOLPHUS TOWNS, New York
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina   LOIS CAPPS, California
TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
PHIL GINGREY, Georgia                TAMMY BALDWIN, Wisconsin
ROBERT E. LATTA, Ohio                MIKE ROSS, Arkansas
CATHY McMORRIS RODGERS, Washington   JIM MATHESON, Utah
LEONARD LANCE, New Jersey            HENRY A. WAXMAN, California (ex 
BILL CASSIDY, Louisiana                  officio)
BRETT GUTHRIE, Kentucky
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)

                                  (ii)


                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     4
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     6
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     7
Hon. Phil Gingrey, a Representative in Congress from the State of 
  Georgia, opening statement.....................................     8
Hon. Bill Cassidy, a Representative in Congress from the State of 
  Louisiana, opening statement...................................     8
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     9
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................   305
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, prepared statement......................................   307
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, prepared statement.........................   308
Hon. Leonard Lance, a Representative in Congress from the State 
  of New Jersey, prepared statement..............................   309
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, prepared statement................................   311

                               Witnesses

Hon. George Miller, a Representative in Congress from the State 
  of California..................................................    11
    Prepared statement...........................................    14
Hon. John Cornyn, a United States Senator from the State of Texas    17
    Prepared statement...........................................    20
Hon. David P. Roe, a Representative in Congress from the State of 
  Tennessee......................................................    24
    Prepared statement...........................................    27
Hon. Allyson Y. Schwartz, a Representative in Congress from the 
  Commonwealth of Pennsylvania...................................    30
    Prepared statement...........................................    32
Kathleen Sebelius, Secretary, Department of Health and Human 
  Services.......................................................    35
    Prepared statement...........................................    38
    Answers to submitted questions...............................   312
Christopher M. Davis, Analyst on Congress and the Legislative 
  Process, Congressional Research Service, Library of Congress...   106
    Prepared statement...........................................   109
David Newman, Specialist in Health Care Financing, Congressional 
  Research Service, Library of Congress \1\......................
Diane Cohen, Senior Attorney, Scharf-Norton Center for 
  Constitutional Litigation, Goldwater Institute.................   132
    Prepared statement...........................................   133
Judith Feder, Senior Fellow, Center for American Progress........   151
    Prepared statement...........................................   153
Avik S. Roy, Healthcare Analyst, Monness, Cespi, Hardt & Co......   158
    Prepared statement...........................................   160
Stuart Guterman, Senior Program Director, Program on Medicare's 
  Future, The Commonwealth Fund..................................   199
    Prepared statement...........................................   202
Scott Gottlieb, Resident Fellow, American Enterprise Institute...   225
    Prepared statement...........................................   227
Alex B. Valadka, The Alliance of Speciality Medicine.............   255
    Prepared statement...........................................   258
Mary R. Grealy, President, Healthcare Leadership Council.........   267
    Prepared statement...........................................   269
Jack Lewin, Chief Executive Officer, American College of 
  Cardiology.....................................................   274
    Prepared statement...........................................   276
Teresa Morrow, Cofounder and President, Women Against Prostate 
  Cancer.........................................................   284
    Prepared statement...........................................   286

                           Submitted Material

Written statement of June 14, 2011, from Burke Balch, Director, 
  Robert Powell Center for Medical Ethics at the National Right 
  to Life Committee, submitted by Mr. Pitts......................    80
Letter, dated July 8, 2011, from Sandra Schneider, President, 
  American College of Emergency Physicians, to subcommittee 
  leadership.....................................................    85
Letter, undated, from Thair Phillips, President, RetireSafe, to 
  Mr. Pitts......................................................    87
Letter, dated June 24, 2011, from healthcare organizations 
  opposing the Independent Payment Advisory Board to Members of 
  Congress, submitted by Mr. Pitts...............................    88
Written statement of July 13, 2011, from Karen Zinka, Men's 
  Health Network, submitted by Mr. Pitts.........................    98
Letter, dated March 11, 2011, from Richard N. Waldman, President, 
  American Congress of Obstetricians and Gynecologists, to Mr. 
  Roe, submitted by Mr. Pitts....................................   101
Letter, dated July 12, 2011, from Tim Laing, Chair, Government 
  Affairs Committee, American College of Rheumatology, to 
  committee leadership, submitted by Mr. Pitts...................   102
Written statement of July 13, 2011, from the American College of 
  Radiology, submitted by Mr. Pitts..............................   103
Letter, dated July 6, 2011, from Cecil B. Wilson, Immediate Past 
  President, American Medical Association, to Mr. Roe, submitted 
  by Mr. Pitts...................................................   104
Written statement of July 13, 2011, from Robert B. Blancato, 
  Executive Director, National Association of Nutrition and Aging 
  Services Programs, submitted by Mr. Pitts......................   105
Letter, dated May 23, 2011, from Scott & White Healthcare to Mr. 
  Cornyn, submitted by Mr. Burgess...............................   254

----------
\1\ Mr. Newman did not present an opening statement.


     IPAB: THE CONTROVERSIAL CONSEQUENCES FOR MEDICARE AND SENIORS

                              ----------                              


                        WEDNESDAY, JULY 13, 2011

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:03 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Joseph 
Pitts (chairman of the subcommittee) presiding.
    Members present: Representatives Pitts, Burgess, Whitfield, 
Shimkus, Myrick, Murphy, Blackburn, Gingrey, Latta, McMorris 
Rodgers, Lance, Cassidy, Guthrie, Pallone, Dingell, Capps, 
Christensen, Schakowsky, Gonzalez, Matheson, and Waxman (ex 
officio).
    Staff present: Gary Andres, Staff Director; Jim Barnette, 
General Counsel; Mike Bloomquist, Deputy General Counsel; Anita 
Bradley, Senior Policy Advisor to Chairman Emeritus; Howard 
Cohen, Chief Health Counsel; Paul Edattel, Professional Staff 
Member, Health; Debbee Keller, Press Secretary; Ryan Long, 
Chief Counsel, Health; John O'Shea, Professional Staff Member, 
Health; Andrew Powaleny, Press Assistant; Chris Sarley, Policy 
Coordinator, Environment and Economy; Heidi Stirrup, Health 
Policy Coordinator; Lyn Walker, Coordinator, Admin/Human 
Resources; Tom Wilbur, Staff Assistant; Jean Woodrow, Director, 
Information Technology; Alex Yergin, Legislative Clerk; Alli 
Corr, Democratic Policy Analyst; Tim Gronninger, Democratic 
Senior Professional Staff Member; Karen Lightfoot, Democratic 
Communications Director and Senior Policy Advisor; and Karen 
Nelson, Democratic Deputy Committee Staff Director for Health.
    Mr. Pitts. Everyone, please take their seats. The 
subcommittee will come to order. The chair recognizes himself 
for 5 minutes for an opening statement.

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Today's hearing on the Independent Payment Advisory Board 
comes at a crucial time. It is a crucial time for health reform 
in general. It has been almost 16 months since the passage of 
President Obama's massive overhaul of the healthcare system. 
And as the multitudes of provisions in the law go into effect, 
we are beginning to get an idea of how our healthcare system 
would look under PPACA. The fundamental concept underlying the 
administration's approach to health reform is that the 
government, or a group of government-appointed experts, knows 
better than patients and their doctors which healthcare 
services are valuable.
    It is also a critical time for the Medicare program in 
particular. A quick look at a few numbers will remind us of the 
importance and timeliness of today's hearing. Ten thousand 
seniors become eligible for Medicare every day, and according 
to the program's own actuaries, the program faces costs not 
covered by the Medicare tax of more than $30 trillion over the 
next 75 years. This staggering amount of money is more than 
double the current national debt.
    One of the most worrisome provisions in PPACA and a 
provision that highlights the administration's fundamental 
approach to health reform is the creation of the Independent 
Payment Advisory Board or IPAB. The IPAB embodies what is 
objectionable in the President's healthcare system overhaul and 
how the administration's approach to health reform is 
fundamentally different from the Republican reform proposal. 
President Obama's health reform legislation was pushed through 
Congress without meaningful bipartisan debate. In like fashion, 
the recommendations of IPAB will be pushed through Congress 
with very little time for discussion or for the development of 
realistic alternatives to these recommendations that will then 
become law.
    The IPAB is likely to profoundly influence the future of 
Medicare and even the healthcare system in general. In fact, 
the panel of 15 experts that will make up the board will 
arguably have more influence over healthcare than any person, 
group of people, organization, or government agency has ever 
had--more than patients, physicians, professional 
organizations, MedPAC, CMS, or even Congress.
    However, we need be clear about one thing: this isn't about 
``death panels.'' The intent of creating IPAB was not to kill 
seniors. But Democrats do believe that the best way to cut 
Medicare costs is to give an unaccountable board the power to 
limit treatment options. We disagree. We believe the solution 
to fighting costs is to give patients more power, more control, 
and more choices. Why should anyone--especially a government-
appointed expert--second-guess patients and doctors?
    It is encouraging that there is widespread opposition to 
the IPAB. Physician groups, hospitals, consumer groups, patient 
advocacy groups, and others have all voiced their concern over 
the board. There is even bipartisan opposition in Congress. 
This is not surprising, since the decisions of the board will 
become law by a fast-track process that will bypass the usual 
legislative procedures, in effect superseding the customary 
jurisdiction of committees like this one. As Representative 
Pete Stark was recently quoted as saying when asked about IPAB, 
``Why have legislators?''
    The time for substantial Medicare reform is now and the 
decisions about how to achieve the necessary reform are crucial 
and fundamental to the future of the program. The Democrats 
would leave these decisions to 15 unelected, unaccountable 
government appointees. We believe that current and future 
Medicare beneficiaries know better.
    I want to thank the witnesses for agreeing to participate 
in this important hearing. I look forward to hearing their 
testimony. And at this point, the chair recognizes the ranking 
member of the subcommittee, Mr. Pallone, for 5 minutes for his 
opening statement.
    [The prepared statement of Mr. Pitts follows:]
    [GRAPHIC] [TIFF OMITTED] 72772.001
    
    [GRAPHIC] [TIFF OMITTED] 72772.002
    
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman. And thank you for 
holding this very important hearing.
    I am very strongly opposed to the Independent Payment 
Advisory Board, or IPAB, created under the Affordable Care Act. 
I have never supported it, and I would certainly be in favor of 
abolishing it. However, I do not see IPAB as a significant 
factor in the Affordable Care Act. As you know, I am one of the 
strongest advocates for the Affordable Care Act for many 
reasons. The Affordable Care Act has finally set our healthcare 
system on a path to reform. It was the most significant 
improvement to Medicare passed in years and will reduce costs 
to Medicare through a number of broad efforts--most notably, by 
reforming the way in which doctors deliver care, incentivizing 
a focus on efficiency and value rather than just the number of 
services performed.
    Furthermore, it is important to note that the Affordable 
Care Act reduced projected Medicare spending growth to 
historically low levels. Over the past decade, Medicare cost 
growth per beneficiary was 7.8 percent. The most recent 
trustees' report projects that over the next 10 years, that 
growth rate will be just less than 3 percent.
    Now, it is becoming increasingly clear that the Republicans 
will use IPAB as just another way to oppose and deface the 
Affordable Care Act. But this issue, from my perspective, 
should be the furthest thing from partisan. It is an issue that 
I believe all legislators from all political backgrounds should 
take concern. It is about the legislative and executive 
branches. This is about congressional prerogatives being 
limited. We should absolutely not, under any circumstances, 
seed legislative power to the executive branch. This is simply 
not what our founding fathers wanted or intended.
    IPAB, like other independent commissions, encroaches upon 
our legislative authority. Indeed, I am opposed to independent 
commissions or outside groups playing a legislative role other 
than on a recommendatory basis. It is not the job of an 
independent commission to get involved in congressional 
matters--in this instance, healthcare policy for Medicare 
beneficiaries. We have had the counsel of MedPAC for a long 
time. But MedPAC is just that; it is counsel. Nothing MedPAC 
recommends is automatic. When Congress agrees, it enacts those 
recommendations. When Congress disagrees, we ignore those 
recommendations. This is how the process should work. This is 
how the process should continue.
    Unfortunately, the debate of IPAB reminds me of the Base 
Realignment and Closure or BRAC process. IPAB is just another 
BRAC, only the healthcare version. In fact, during discussion 
over the Affordable Care Act, it was mentioned by the 
administration and others that they were using BRAC as an 
example. I strongly believe that BRAC is a monumental failure. 
I voted against every BRAC in my 23 years in Congress. I have 
seen them run up costs and waste money. And the worst part is 
as an elected official who was sent to Congress by my 
constituents to represent their best interests, then I become 
powerless to stop things like BRAC. I certainly tried. I fought 
the closure of Fort Monmouth, New Jersey, with everything that 
I had in more ways than I can count, but it wasn't enough. 
Because like IPAB, the BRAC took away all legislative authority 
and prerogative, and to this day I fight to minimize its 
effects on my constituents.
    Mr. Chairman, as I said again, this is not about IPAB or 
its relation to Medicare. It is about a growing imperialistic 
presidency. I have been here for 23 years. Whether it was the 
first George Bush or it was President Clinton or was the second 
George Bush or now President Obama, the presidency continues to 
try to take over the prerogatives of Congress. We have to stop 
it. We have to reverse it. We can't be a part of an effort to 
let that continue. Just because decisions are tough doesn't 
mean Congress shouldn't make them. I believe this committee and 
this Congress has the knowhow to make the tough choices that 
are still needed to improve our healthcare system.
    And frankly, I have told the President and everybody in the 
executive branch I actually like dealing with MedPAC and its 
recommendations. I like having hearings in this subcommittee 
where we review the MedPAC recommendations. And most of the 
time we adopt them. So the idea that somehow we don't want to 
make the tough choices, we are not capable of making the tough 
choices, that is simply not true. That is why we are elected. 
That is why people continue to elect me in my opinion.
    So instead, let us build on the Affordable Care Act's 
reforms and expand efforts to contain the growth and future 
healthcare costs. We can do it. We don't need IPAB.
    I yield back, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman. I now recognize 
the vice chair of the subcommittee, Dr. Burgess, for 5 minutes 
for opening statement.

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

    Mr. Burgess. I thank the chairman for the recognition. I 
want to welcome our Senator from Texas, Senator Cornyn, and my 
fellow OB/GYN doctor, Dr. Roe, welcome them to committee and 
being here today.
    This healthcare law that was signed 15 months ago contains 
countless policies that will essentially disrupt the practice 
of medicine. Along with the many excesses and constrictions in 
the law, the Independent Payment Advisory Board represents the 
worst of both.
    I am a doctor, a Member of Congress, I am also someone in 
my 60s who is soon to be Medicare-age and I am distressed by 
what I see happening with the Independent Payment Advisory 
Board. It is not accountable to any constituency. It only 
exists to cut provider payments to fit a mathematically-created 
target. Given that private insurers use Medicare as a benchmark 
for their own payment changes, the IPAB could have a far-
reaching implication beyond Medicare for our Nation's 
providers.
    The board exponentially and inappropriately expands the 
power of the executive branch, giving an unaccountable panel of 
15 individuals the authority to make changes to the Medicare 
program. It takes the authority away from Congress. Congress 
has no say in the board's reports, yet their recommendations 
essentially hold the power of legislation.
    And yes, this board is appointed with the consent of the 
Senate but not necessarily because nine of these board members 
could be recess appointments. Nine of these board members would 
constitute a majority, therefore completely bypassing the 
legislative branch.
    Now, for patients, these bureaucrats may be able to cut 
payments too low that it will block care to seniors. It does 
change the fundamental nature of the relationship with the 
Federal Government, and those people who are cared for by 
insurance provided by the Federal Government now will be able 
to tell you who gets care, where the care is given, when it is 
given, but the fundamental change is now we will be able to 
tell you when you have had enough.
    The board is not a solution in search of a problem. 
Medicare's unfunded liabilities are enormous. That is why 
Republicans want to be able to keep Medicare for future 
generations by lowering the cost to the Federal Government by 
providing better choices.
    Let me at this point yield to another doctor on the 
committee, Dr. Phil Gingrey.

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

    Mr. Gingrey. Mr. Chairman, thank you. And I thank the 
gentleman for yielding.
    I have got three posters I would like to share with my 
committee members and with the witnesses. This first poster, 
President Obama's chief medical officer, ``Most people who have 
serious pain do not need advanced methods. They just need the 
morphine and the counseling that have been available for 
centuries.'' Again, President Obama's chief medical officer, 
``The decision is not whether or not we will ration care. The 
decision is whether we will ration with our eyes open.'' And 
the last slide, again, from President Obama's chief Medicare 
officer, ``I cannot believe that the individual healthcare 
consumer can enforce through choice the proper configurations 
of a system as massive and complex as healthcare. That is for 
leaders to do.''
    If anyone has any questions as to why Members of Congress 
are opposed to what has been deemed a denial-of-care board, as 
you just heard, I would simply suggest you read carefully the 
words of the head of CMS, Dr. Donald Berwick. And it is no 
surprise that he will remain interim head. You might even want 
to refer to him as Don Corleone.
    And I thank you for the time and I would now like to yield 
to my physician colleague from Louisiana, Dr. Bill Cassidy.

  OPENING STATEMENT OF HON. BILL CASSIDY, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF LOUISIANA

    Mr. Cassidy. Thank you for yielding.
    I am a doctor who, for the last 20 years, has worked in a 
hospital for the uninsured. And one of the reasons I ran for 
office is that well-meaning politicians would have well-
sounding laws which would make the lines grow longer at my 
hospital for the uninsured. I have to say, with Obamacare, it 
is like deja vu all over again. Medicare is going bankrupt. 
Anticipating this, Obamacare has a provision of 15 appointed 
bureaucrats who have the ability to almost in an unfettered 
fashion decrease payment. Now, we say--Republicans, some 
Democrats--that this can decrease access. Defenders say oh, no, 
decreasing payment is not rationing. I ask those defenders to 
join me at my hospital for the uninsured and I will show you 
the reality.
    So although I look forward to Secretary Sebelius' 
testimony, I feel like I have heard it before. A benign 
bureaucracy paternalistically looking after the interest of the 
individual while controlling global healthcare cost. It would 
be amusing if it were not so frightening. There is a better 
way, and the better way is to give the power to the patient and 
not to the bureaucrat. This is not where Obamacare is, but it 
is where I hope we arrive.
    Thank you. I yield back.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the ranking member of the full committee, Mr. 
Waxman, for 5 minutes for opening statement.

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

    Mr. Waxman. Thank you very much, Mr. Chairman.
    There was an attack on Dr. Berwick. He was invited once to 
appear before our committee and was cancelled out by the 
committee itself. Perhaps we ought to give him the opportunity 
to respond to some of these statements that have been made 
about his past writings.
    I regret to observe that this hearing today is very 
partisan and very hypocritical. It is partisan because this is 
another battle in war waged since January by the Republicans to 
tear down the Affordable Care Act. When the Republicans passed 
their repeal bill through the House in January, we were 
promised that a Republican replacement would be right behind 
it. But we are now in July and we have seen absolutely no sign 
of any Republican idea for addressing our Nation's problems in 
healthcare--skyrocketing costs, 50 million Americans without 
insurance, and the uneven quality of care.
    This is an exercise in hypocrisy because of the utter 
fallacy of the pious arguments made on the issue of Medicare 
and costs. I have been around long enough to remember when 
doctors said we didn't need any government program. We take 
care of poor people because that is our obligation. And now we 
are told we can't find a doctor because they are not paid 
enough. They don't feel it is their obligation to take care of 
the poor unless they are paid adequately. I understand that, 
but let us skip the piety about it.
    The main Republican attack on the Affordable Care Act is 
that we cannot afford it. Too much coverage, not enough cost 
reduction, they say. They ignore the CBO's estimates. They 
ignore the testimony from hundreds of economists and doctors 
and experts of all stripes. Republicans just assert it doesn't 
control costs. And then they attack the new law for the 
comprehensive approach it takes to controlling costs. And they 
do it the old-fashioned way, through fear.
    Dr. Burgess has called IPAB ``Armageddon.'' Dr. Gingrey 
compared the Republican plan for Medicare unfavorably to 
``throwing grandma off a cliff,'' and said that IPAB is worse 
than that ``because grandma could possibly survive the fall 
from a cliff but cannot survive IPAB.'' Well, I have some 
concerns about some aspects of IPAB, but I don't agree with the 
premise that we need IPAB to make Congress to do its job. No 
one should think that a hyperbole of IPAB's Republican 
critics--rationing, death panels, faceless bureaucrats, pulling 
the plug on grandma--represents reality.
    It is a fact that IPAB is prohibited from rationing. It is 
also a fact that the savings CBO expects from IPAB over the 
next 10 years amounts to just $2 billion, less than 10 percent 
of what Republicans proposed to cut from Medicare even before 
they would end the program in 2022 and replace it with their 
voucher plan.
    But the heart of the matter is Medicare and its future. 
What is the Republican plan for controlling costs in Medicare? 
Simple. End Medicare as we know it. The Republican plan shifts 
all of the burden for healthcare costs onto seniors, people 
with disabilities, onto the States. It would double costs for 
new enrollees in 2022 by $6,000 per person according to CBO. 
For people with disabilities, including people in nursing 
homes, Medicare cuts come almost immediately in 2013, meaning 
that people won't be able to pay for nursing home care or the 
home-based care that will keep them out of a nursing home in 
the first place.
    Republicans are seeking to end Medicare's guaranteed 
benefits, leaving seniors and people with disabilities on their 
own in the insurance market. They want to cut the program by 
$20 trillion over the next few decades. Fears about IPAB are 
hypothetical at this point and always leave alternatives to the 
Congress. The harm to Medicare from the Republican plan, if 
enacted, would be a certainty.
    With respect to IPAB, Mr. Chairman, Congress has the final 
say over Medicare policy. And if Congress has the final say 
over all IPAB recommendations, which will pass through this 
committee, I hope one day to return to the chairmanship of this 
committee, and if I do, I will certainly exercise this 
committee's oversight duties over IPAB thoroughly. I am sure 
that Mr. Upton will do the same.
    So I think it is time we set aside efforts to repeal the 
Affordable Care Act, focus on real problems for American 
families in what they are facing today and stop this constant 
attack on anything that tries to do something about the 
problems that American families face, especially those who 
cannot buy insurance, who cannot afford insurance, who cannot 
pay their doctors adequately so they can be seen, and we just 
forget about them. We already have over 50 million uninsured. 
Let us don't add to the burden by taking away Medicare and 
Medicaid from those for whom they rely on those programs.
    I yield back.
    Mr. Pitts. The chair thanks the gentleman. That concludes 
the opening statements for the members.
    I want to thank the witnesses for agreeing to appear before 
the committee today. We have four panels today, and your 
written testimony will be entered into the official record. We 
ask that you summarize your opening statements in 5 minutes.
    The first panel--and in order of presentation I will 
introduce them--first, the Honorable George Miller, who 
represents the 7th Congressional District of California; 
second, the Honorable John Cornyn, Senator from the State of 
Texas; the Honorable David Roe, who represents the 1st 
Congressional District of Tennessee; and I believe we have the 
Honorable Allyson Schwartz representing the 13th Congressional 
District of Pennsylvania coming.
    Congressman Miller, you may begin.

STATEMENTS OF HON. GEORGE MILLER, A REPRESENTATIVE IN CONGRESS 
FROM THE STATE OF CALIFORNIA; HON. JOHN CORNYN, A UNITED STATES 
     SENATOR FROM THE STATE OF TEXAS; HON. DAVID P. ROE, A 
  REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE; AND 
HON. ALLYSON Y. SCHWARTZ, A REPRESENTATIVE IN CONGRESS FROM THE 
                  COMMONWEALTH OF PENNSYLVANIA

                STATEMENT OF HON. GEORGE MILLER

    Mr. Miller. Thank you very much, Mr. Chairman and Ranking 
Member Pallone, for the opportunity to testify before the 
committee today.
    I came to Congress in 1975, and since that time, I have 
been involved in the debate over national health reform 
proposals. Throughout these debates, lawmakers struggled with 
how to control costs without harming care. Unfortunately, 
Congress chose to kick the can down the road for a very long 
time. Without action, healthcare costs have continued their 
endless rise, well in excess of inflation. As everyone here 
well knows, these costs have grown to unsustainable levels for 
families, for businesses, and for taxpayers.
    In the past decade, healthcare spending has increased an 
average of 6.8 percent a year and is expected to rise from 18 
percent of GDP to 34 percent of GDP in 2040. At the same time, 
employer-provided insurance has fallen and out-of-pocket and 
premiums have skyrocketed for employees. The opportunity for 
reform finally changed with the Affordable Care Act. For the 
first time, Congress put in place specific, identifiable 
measures to make Medicare and our healthcare system more 
efficient. We need to give these innovations an opportunity to 
work.
    These innovations include stronger tools to combat fraud 
and abuse in Medicaid and Medicare--tools that have already 
started to save billions of dollars; to better coordinate the 
care through accountable care organizations; incentives to 
reduce hospital readmissions, and reward the delivery of high 
quality and efficient care; and improved patient safety through 
the Partnership for Patients initiative. These reforms were 
included based on what was worked on in the past and what was 
likely to work in the future. These cost-savings ideas are 
beginning to work.
    We did not make these decisions lightly. The debate was 
robust. But in the end, the majority agreed to give these ideas 
a chance. Our goal was to make Medicare stronger for seniors 
and sustainable for future generations so we wouldn't have to 
go down the road of rationing or turning Medicare into a 
voucher program. If Congress begins to roll back these reforms, 
then we will not see the efficiencies, we will not see the 
innovations that experts agree will stabilize our healthcare 
system.
    One of these ideas is the Independent Payment Advisory 
Board. This board serves as a backstop to ensure that our 
federal health programs operate efficiently and effectively for 
both seniors and for the taxpayers. Before the Affordable Care 
Act, Congress and other stakeholders had an unremarkable track 
record of controlling costs. 535 Members of Congress cannot be 
doctors, although it looks like an awful lot of them are. I 
wondered where that doctor shortage was coming from. Five 
hundred thirty-five Members are not capable of knowing the best 
science and the best practices for every medical treatment and 
535 Members of Congress are subject to unrelenting lobbying by 
special interests that have a financial stake, and in many 
cases, a financial conflict of interest in many of the 
decisions that they make--but not necessarily the best health 
of our seniors in mind.
    With these reasons, many experts have recommended the 
creation of an independent board of health experts to make the 
system improvement recommendations. And, as you know, Congress 
has often used independent boards to help with complex issues, 
such as MedPAC or the BRAC, which BRAC--Frank, I love you--but 
the fact is those bases would have never been closed and we 
would have been lugging the cost around for generations.
    The Independent Payment Advisory Board will not usurp the 
Congress. It will not be unaccountable. It will not be 
unfettered. It simply acts as a backstop in case government 
spending exceeds the benchmarks. Both CBO and Medicare trustees 
tell us that because of the Affordable Care Act reforms, they 
don't expect the mandatory actions of the panel to be triggered 
in the immediate future. The President will nominate the 
doctors, health experts, and consumers to the board to examine 
all of the data and evidence on best practices and 
inefficiencies in healthcare spending. The Senate will consider 
and approve each nominee. The IPAB will make all of the 
recommendations to the Congress. The Congress can approve, 
disapprove, or modify each recommendation. It sounds like a 
heavy role for Congress.
    In other words, Congress retains the role in healthcare but 
in an improved and more efficient fashion. Ideally, IPAB 
recommendations could also be a driver for innovation, not only 
the public sector but for the private sector.
    Under the law, the Independent Payment Advisory Board 
guarantees the doctor-patient relationship. Doctors will retain 
full authority to recommend the treatments that they think are 
best for their patients. The law prohibits the recommendations 
that would ration care, change premiums, or reduce Medicare 
benefits.
    In conclusion, I testify here today as someone who deeply 
cares about the delivery of healthcare to the citizens of the 
United States. Everyone agrees that our Nation's healthcare 
costs must come under control. With 76 million baby boomers 
just beginning to rely on Medicare, the time is now to push for 
innovative reforms that can help us contain the cost of the 
Medicare program.
    The Independent Payment Advisory Board is about 
strengthening the Medicare program. Without the innovation and 
evidence-based decision-making, Medicare will be put in 
jeopardy. And the forces calling to end Medicare will gain the 
upper hand because of uncontrollable cost. The American people 
have firmly rejected the Republican budget plan to end 
Medicare, to voucherize Medicare. What they do support is 
accessible and affordable healthcare, and the only way we can 
guarantee that for future generations is by using the best 
science, the best medicine, the best evidence, and the best 
practices available for all of our citizens. We really have no 
alternative.
    Without these innovations, our current system is 
unsustainable for the Nation's families, the Nation's 
businesses, and the Nation's taxpayers, and I strongly support 
IPAB and would oppose any effort by Congress to undermine it.
    And thank you so very much for allowing me to testify.
    [The prepared statement of Mr. Miller follows:]
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    Mr. Pitts. The chair thanks the gentleman.
    Senator Cornyn, you may begin your testimony.

                 STATEMENT OF HON. JOHN CORNYN

    Mr. Cornyn. Chairman Pitts, Ranking Member Pallone, and 
members of the committee, thanks for giving me the opportunity 
to testify here today regarding the Independent Payment 
Advisory Board created by the Patient Protection Affordable 
Care Act. And unfortunately, this is a product that came from 
the Senate and not from the House. I am sorry about that.
    But, of course, the goal of IPAB is one we all share, as 
Congressman Miller just articulated. We have to find some way 
to control the cost in Medicare. Medicare trustees warned 
Congress that the program will be insolvent in 2024, which is 5 
years earlier than previously predicted. I noted that 
Medicare's unfunded liabilities, the gap between Medicare's 
future cost benefits and future taxes and premiums it expects 
to collect, are more than $24 trillion and growing.
    The Medicare trustees have now issued a Medicare warning 
every year since 2006 in which they have alerted Congress that 
more than 45 percent of Medicare's funding will come from 
general revenues. The nonpartisan Congressional Budget Office 
issued a warning of its own in June in its 2011 long-term 
budget outlook. CBO projects that if current law remains in 
place, spending on the major mandatory healthcare programs 
alone will account for approximately 6 percent of our gross 
domestic product today to 9 percent in 2035 and would continue 
to increase thereafter.
    So, as we all know, something has to be done about the 
unsustainable growth and the cost of the Medicare program. We 
all agree on that much. Like many Americans and many members of 
this committee, though, I do not believe that IPAB is the right 
answer. Everyone here knows how IPAB is supposed to function, 
but here are my specific concerns:
    First, I am concerned that the only tool in the IPAB 
toolbox will be cutting payments to providers. And we are 
already seeing how government price controls are restricting 
access to care--on one hand saying you are covered by a 
government program; on the other hand saying because of 
restrictive payments to providers, good luck finding a doctor 
who will see you at that price.
    The American Medical Association estimates that one of 
three primary care doctors limit the number of Medicare 
patients they see. As Dr. Burgess will confirm, in our State of 
Texas, 42 percent of physicians are considering opting out of 
Medicare completely due to low reimbursement rates. Although 
there is some concern recently about the rhetoric surrounding 
IPAB, continuously cutting reimbursement to Medicare providers 
will prevent access to care for Medicare beneficiaries.
    Secondly, I am concerned that IPAB's enormous power will 
grow at the expense of Congress and the people's elected 
representatives. In fact--as you probably know and no doubt do 
know--there is litigation challenging this delegation of 
legislative authority to this unelected body currently pending. 
Why Congress would voluntarily undermine its own authority in 
this area is really beyond me. We are the ones who are elected, 
we are the ones who are accountable to the votes, and we are 
the ones who should be making those decisions.
    Congress created the Medicare program in 1965, and it 
should be Congress that is held accountable to the seniors who 
use Medicare as their healthcare system. But, as you know, IPAB 
has a different approach. Seniors subjected to IPAB 
recommendations cannot challenge the recommendations in court 
or remove members of the board. There is no accountability. The 
only way a member of the board can be removed is by the 
President for neglect of duty or malfeasance in office.
    My concerns should be familiar to many of you because these 
are the same concerns I am hearing from you and from my 
constituents, which I suspect you are hearing from your 
constituents as well. Scott & White Healthcare in Temple, 
Texas, recently wrote me in support of the bill on the Senate 
side that I am sponsoring for repealing IPAB. They write, 
``Scott & White Healthcare is supportive of initiatives to 
identify fraud and waste in the healthcare system and 
incentivized high-value healthcare in this country. But we have 
concerns and questions about the process that will be used by 
IPAB to implement cost savings in Medicare.''
    On June the 24th, 2011, over 270 different organizations 
from the Pennsylvania Medical Society to the New Jersey Academy 
of Ophthalmology wrote Members of Congress regarding their 
concerns saying that ``not only will IPAB severely limit 
Medicare beneficiaries' access to care, but also increase 
healthcare costs that are shifted onto the private sector.'' 
And we are all very familiar with the cost-shifting that goes 
on when government reimburses at a lower rate and those with 
private insurance or private pay have to pick up the slack. 
They also cited concerns about IPAB's lack of accountability 
and inability to improve the quality of care in the Medicare 
program.
    I want to thank the chairman and the ranking member and 
this committee for being skeptical of the IPAB from the 
beginning and for supporting repeal now. Of course, this is not 
a partisan issue. This is not part of an effort to repeal the 
healthcare bill. This is a narrowly targeted piece of 
legislation designed to deal with this particular provision, 
which I think deserves and does have bipartisan support.
    In January 2010, 72 House Democrats joined Republicans 
asking then-Speaker Pelosi to take IPAB out of the healthcare 
bill. On Monday, Congressman Pallone was quoted as he was here 
today saying he didn't support IPAB and certainly would be in 
favor of abolishing it. Congressman Roe's bill enjoys 
bipartisan support for the legislation in this House, and I 
hope some of my Democratic colleagues in the Senate will join 
me in our effort to repeal this particular provision in the 
healthcare bill.
    As we repeal the IPAB, we have got to look at a better way 
to achieve our bipartisan goal of controlling healthcare costs 
in the Medicare program. One model I believe that has worked 
pretty darn well is the Medicare Prescription Drug program, 
which has come in under budget by about 40 percent by providing 
transparency, competition, more quality and service, which has 
used market forces to discipline costs. The Prescription Drug 
Program has achieved these results, as I say, by injecting 
competition and choice into the system. Many other programs at 
the state level and the private sector have also cut costs 
without sacrificing quality or access to care, goals that we 
all share. And Congress should continue to take a look at those 
as well.
    In conclusion, Mr. Chairman, let me just say that Medicare 
beneficiaries have paid their hard-earned money into Medicare 
for years and it should be these same beneficiaries, their 
families and providers who determine the healthcare that is 
right for them.
    Thanks for allowing me to testify here today, and I am 
happy to respond to any questions you might have.
    [The prepared statement of Mr. Cornyn follows:]
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    Mr. Pitts. The chair thanks the gentleman and now----
    Mr. Burgess. Mr. Chairman, can I ask unanimous consent that 
the letters that Senator Cornyn referenced from Scott & White 
Clinic and New Jersey Medical Association be made part of the 
record here today?
    Mr. Pitts. OK. Could we see those and then we will act on 
that if you have copies.
    Mr. Cornyn. Absolutely.
    Mr. Pitts. Thank you.
    Congressman Roe, you are recognized for 5 minutes.

                 STATEMENT OF HON. DAVID P. ROE

    Mr. Roe. I thank Chairman Pitts and Ranking Member Pallone 
and members of the subcommittee. Thank you for inviting me here 
to testify today. And I applaud this subcommittee's effort to 
shine a light on the danger posed to seniors by the Independent 
Payment Advisory Board, better known as IPAB.
    I have practiced medicine for the past 31 years, not been 
in Congress. This is only my second term, and I am an OB/GYN 
doctor, and I found out delivering your own voters worked out 
pretty well for me. But I firmly in my core believe that 
healthcare decisions should be made between physicians, the 
patients, and their families, not by a board appointed by the 
President or anybody else, Republican or Democrat.
    Created as part of the Affordable Care Act that went into 
effect last year, the IPAB is charged with developing proposals 
to reduce the per-capita rate of growth in Medicare spending. 
Certainly, something has got to be done to ensure that this 
important program remains available not only for current 
retirees but for the next generation as well. The Medicare 
trustees recently projected that the Medicare Trust Fund will 
go bankrupt in 2024, and it has been stated that the 
Congressional Budget Office says that the fund will exhaust 
even sooner, in 2020. We already know what President Obama's 
plan to save Medicare is, is the $500 billion in cuts to the 
program and the IPAB. The cuts speak for themselves, but the 
American people deserve to hear the truth about the IPAB as 
little more than a roadmap to potentially rationing care.
    Now, some say that the Affordable Care Act expressly 
prohibits rationing, raising revenues or beneficiary premiums, 
increasing cost-sharing or other restrictions on benefits. This 
is highly misleading because nothing in law prohibits cutting 
payments to physicians. Already Medicare pays physicians 
between 85 and 90 cents on the actual cost of the care, which 
has made it more difficult for beneficiaries to access the 
needed care. If reimbursements continue to fall even further, 
it could very well become economically impossible for 
physicians to see Medicare patients. With millions of baby 
boomers becoming eligible for Medicare, IPAB cuts couldn't come 
at a worse time.
    The IPAB could adversely impact the quality of patient 
care. For example, look no further than Britain's National 
Institute for Health and Clinical Excellence, or NICE. 
Decisions are based on cost, not quality or outcomes for an 
individual patient. Decisions regarding patient care shouldn't 
be made by a panel of 15 unelected bureaucrats who haven't 
examined the specifics of an individual's unique case. Medicine 
is not a one-size-fits-all discipline. What is effective for 
treating one patient may be harmful for another. By 
centralizing medical care decision-making, the IPAB would put a 
Washington bureaucrat squarely between patients and the care 
recommended by their doctor.
    In addition to degrading access to and quality of care, 
IPAB has two significant structural problems: It is both 
unaccountable and unworkable. The board is empowered to make 
recommendations regarding Medicare without any input from 
Congress. Don't just take my word for it. The former OMB 
Director, Peter Orszag, called the IPAB the single biggest 
yielding of power to an independent entity since the creation 
of the Federal Reserve.
    Even after the IPAB makes its recommendations, the hands of 
the Congress are still somewhat tied. The proposal would be 
considered under fast-track procedures and without 3/5 vote of 
the Senate, Congress can only modify the types of cuts, not the 
size. And if Congress fails to act on the board's 
recommendations, they automatically go into effect. This isn't 
government by the people. It is instead government by the 
bureaucrats.
    Questions have also been raised regarding IPAB's ability to 
function as it is designed. In reference to IPAB, the CMS Chief 
Actuary, Richard Foster, wrote in the April 2010 memo that 
``limiting the cost growth for a beneficiary to a level below 
medical price inflation alone would represent an exceedingly 
difficult challenge.'' The CBO, on the other hand, projects no 
savings resulting from IPAB over the next 10 years. In both 
cases, these expert analyses suggest that IPAB will not yield 
the results promised by its proponents.
    Further, the legislators who created the IPAB made it clear 
that they want this board to impact more than just Medicare. 
The Affordable Care Act requires the IPAB to make 
recommendations about how to restrain private-sector healthcare 
costs growth as well. While these recommendations do not 
automatically go into effect, they will no doubt serve to 
encourage private insurance companies to cut provider payments. 
Ultimately, cuts to provider insurance payments will result in 
even less access for Medicare beneficiaries because most 
providers shift cost onto private insurance to make up for 
Medicare losses. So everyone loses under this scenario.
    While it seems that there is little that our two parties 
can agree on in the current environment, both sides have 
acknowledged that the IPAB is a terrible idea. That is why my 
bill to repeal IPAB--the Medical Care Decisions Accountability 
Act--has more than 160-plus bipartisan cosponsors, and all but 
one physician in U.S. Congress has signed on. The American 
Medical Association has endorsed my legislation, as did a broad 
coalition of more than 270 healthcare organizations. Even 
former Democratic leader Dick Gephardt called for the IPAB's 
repeal.
    Mr. Chairman, it is time that we begin the fact-based 
conversation about reforming Medicare without the demagoguery 
that has marked recent months. I can't think of a better place 
to start than a bipartisan effort to repeal IPAB.
    Let me finish with a couple of things. Ask yourself two 
things or two problems. Does this bill increase access and 
quality of care for seniors? And number two, how much oversight 
and power has Congress given up? And let me just give you a 
brief example. If you are a family practitioner and you are 
seeing Medicare patients and you want to continue to do that 
and let us say your practice grosses $300,000 this year, which 
is probably what a family practice would do. About $150,000 of 
that--50 percent if you run a very efficient practice--is 
overhead. If you cut the current--SGR growth cuts are 
recommended to be about 30 percent the end of this year, that 
family practitioner is making a very comfortable living at 
$150,000. His or her costs stay at $150,000, but their income 
will be cut to 50. And how does that increase access? If IPAB 
basically can do that, how does that help our seniors?
    I very much appreciate the bipartisan support for this, and 
I thank you for having me here today.
    [The prepared statement of Mr. Roe follows:]
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    Mr. Pitts. The chair thanks the gentleman and now 
recognizes Congresswoman Schwartz for 5 minutes for her opening 
statement.

             STATEMENT OF HON. ALLYSON Y. SCHWARTZ

    Ms. Schwartz. Thank you, Chairman Pitts and Ranking Member 
Pallone, Mr. Waxman, and members of the committee, for the 
opportunity to testify this morning.
    First of all, let me say I have and continue to be a very 
strong supporter of the Affordable Care Act because it will 
extend access to affordable, meaningful health coverage to all 
Americans, strengthen Medicare, and contain costs for American 
families, businesses, and government. The potential for savings 
is significant. The Centers for Medicare and Medicaid Services 
(CMS) Office of the Actuary estimates that over the course of 
the first 10 years the Affordable Care Act will save Medicare 
more than $400 billion by attacking fraud and abuse, reducing 
overpayments to insurance companies, reducing medical errors 
and unnecessary duplication of services, increasing access to 
cost-effective primary care services, and improving care 
coordination across healthcare settings and transitioning to 
payment systems that reward value.
    CBO estimates that the law will reduce the deficit by more 
than $1 trillion over the next 20 years. And that is just the 
beginning. Healthcare reform has the potential to fundamentally 
transform the healthcare delivery and payment systems by 
creating a variety of models for improved delivery of care by 
incentivizing high quality, greater efficiency, and better 
outcomes. Successful implementation will ensure that seniors 
get the right care at the right time at a lower cost to 
taxpayers.
    My decision to support repeal of the Independent Payment 
Advisory Board reflects my confidence in the many cost-
containment measures in the law. Despite Republican claims, 
IPAB is not a ``death panel'' nor is it a ``rationing board.'' 
That is merely scare tactics. IPAB is simply the wrong approach 
to achieving the right goal.
    We all agree that the rate of growth in Medicare spending 
must be contained and that current Medicare payment systems are 
flawed and need to be reformed. But we cannot conceal 
fundamental flaws in our healthcare system by simply cutting 
reimbursements to hospitals and physicians or, even worse, 
ending Medicare as we know it, as the Republicans have 
proposed. The Republican plan to convert Medicare into a 
voucher program means that seniors will no longer have access 
to a guaranteed set of health benefits and, according to the 
CBO, the resulting premiums and co-insurance will increase out-
of-pocket costs more than $6,000 per senior per year and 
increase as healthcare costs rise. This is neither better 
quality care nor genuine cost savings. It is merely shifting 
the burden of increased cost to seniors.
    Congress must accept its responsibility for legislating 
sound health policy for Medicare beneficiaries, including 
reforms to the payment systems. Turning over this 
responsibility, whether to insurance companies as proposed by 
the Republicans, or to an unaccountable board, undermines our 
ability to represent the needs of seniors and the disabled and 
to ensure access to care.
    Repealing IPAB--while preserving the essential health 
reforms in the Affordable Care Act--enables providers to focus 
on innovations that will achieve cost savings by incentivizing 
efficient, high-quality healthcare. If we do not, IPAB is 
structured in such a way that the board may be forced to impose 
cuts on a narrow sector of the healthcare system, ignoring the 
need for broader changes. Arbitrary cuts on spending, absent 
fundamental reforms to underlying cost drivers, simply shift 
the cost burden. Thus, IPAB has the potential to stifle 
implementation of the promising innovations that would address 
these cost drivers just as they are beginning to take shape.
    The Obama Administration is already implementing healthcare 
reforms to reduce the rate of growth in healthcare spending by 
holding providers accountable for reducing costs through more 
coordinated care, the adoption of health information 
technology, improved quality, and better outcomes. Accountable 
Care Organizations, which create incentives for healthcare 
providers to work together to lower costs while meeting quality 
standards and putting patients first, could save up to $750 
billion over the next 10 years.
    The Center for Medicare and Medicaid Innovation, 
established under the healthcare reform law, is advancing 
innovations such as the Patient-Centered Medical Home, 
Healthcare Innovation Zones and other innovative delivery 
models with the potential to achieve even more significant 
additional savings. The Center's recently launched Partnership 
for Patients initiative will save costs by bringing together 
hospitals, physicians, and patients to dramatically reduce 
hospital-acquired conditions and hospitals readmissions. This 
program alone is expected to generate savings of up to $35 
billion.
    These are reforms that we should build on to achieve 
greater cost efficiencies without risking access or quality. It 
is our job to identify the cost-efficient, cost-saving 
innovations and ensure that they are implemented broadly and 
successfully across the country.
    There are tough choices ahead as we work to contain the 
rate of growth in costs in healthcare. We should eliminate 
IPAB, reject the Republicans' efforts to dismantle Medicare, 
and focus on reshaping payment and delivery systems to reward 
coordination, efficiency, and value to achieve these cost 
savings. And in so doing, we will meet our obligation both to 
seniors and to taxpayers.
    And I thank you for the opportunity.
    [The prepared statement of Ms. Schwartz follows:]
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    Mr. Pitts. The chair thanks the gentlelady. The chair 
thanks the witnesses of our first panel--very informative. I 
appreciate the bipartisan nature of it. And we will dismiss the 
first panel at this time and call the----
    Mr. Burgess. Mr. Chairman, did we rule on my unanimous 
consent request?
    Mr. Pitts. If the Senator can give us the documents, then 
we will rule on it. Can you make sure we get that? Not yet? We 
will act on it later.
    The second panel consists of a single witness. The 
Honorable Kathleen Sebelius is the United States Secretary of 
Health and Human Services. We welcome the Secretary to the 
hearing.
    Madam Secretary, your written testimony will be made part 
of the official record. Welcome. And we ask that you summarize 
your statement in 5 minutes and then be available after 5 
minutes for questions. Could you hear me? I am sorry. We have 
had some problems with our mikes. Your written testimony will 
be made part of the official record. We ask that you summarize 
your opening statement in 5 minutes. So welcome, Madam 
Secretary. You may begin your testimony.

STATEMENT OF KATHLEEN SEBELIUS, SECRETARY, DEPARTMENT OF HEALTH 
                       AND HUMAN SERVICES

    Ms. Sebelius. Well, thank you, Chairman Pitts and Ranking 
Member Pallone and members of the committee. I appreciate the 
opportunity to come today to discuss how the Affordable Care 
Act is strengthening Medicare for seniors today and tomorrow.
    My written testimony does provide more detail, but I want 
to highlight some of the steps we are taking as part of the 
healthcare law to fill the gaps in Medicare coverage, to 
improve care, and make the program more sustainable for the 
future while preserving the guarantees for seniors and those 
with disabilities.
    When Medicare became law in 1965, it served as a national 
promise that seniors wouldn't go broke because of a hospital 
bill. In 2006, Medicare added coverage for prescription drugs, 
which make up a growing share of beneficiaries' healthcare 
costs. But we know that too many seniors still struggle to 
afford their medications, and that is why the Affordable Care 
Act moved to assist the seniors falling into the donut hole 
with a one-time $250 check in 2010 and this year starts a 50 
percent discount for the approximately 4 million beneficiaries 
who now will get some assistance with the purchase of brand-
name drugs. By 2020, that gap will be closed completely.
    We also know that too many seniors were going without the 
preventive care that can help prevent an illness before they 
occur, in some cases, because of expensive co-pays. And that 
shouldn't happen. So beginning this year, the law allows 
Medicare beneficiaries to receive recommended preventive 
services like screenings for colon or breast cancer, as well as 
an annual wellness visit without paying a co-pay or deductible. 
It is the right thing to do and it is the smart thing to do 
because it helps physicians catch small health problems before 
they turn into big ones.
    The law is also helping to improve the quality and safety 
of care for people with Medicare. We know that there are model 
hospitals across the country that have adopted best practices 
to dramatically increase the quality of care. In fact, for 
almost every major common medical error, we have examples of 
health systems that have significantly reduced or even 
eliminated them altogether. There is no reason why all Medicare 
beneficiaries shouldn't enjoy that same high quality of care 
wherever they receive it. And that is why the Affordable Care 
Act provides unprecedented support to help those best practices 
spread.
    In March, we launched the Partnership for Patients, an 
historic partnership with employers, unions, hospital leaders, 
physicians, nurses, pharmacists, and patient advocates to 
reduce harm and error in our Nation's hospitals. Last week, we 
announced that more than 2,000 hospitals have already signed up 
and are taking critical steps to improve care. They are aimed 
at two goals: reducing preventable readmissions and reducing 
hospital-acquired conditions.
    Under the law, we have also established the first of its 
kind, Medicare/Medicaid Coordination Office, working with 
States to improve care for those beneficiaries who are enrolled 
both in Medicare and Medicaid and often receive fragmented or 
duplicative care as a result.
    Through the new Medicare and Medicaid Innovation Center 
created by the law, we are testing a wide range of additional 
models for increasing the quality of care from strategies of 
helping seniors manage their chronic conditions to new models 
in which hospitals and doctors who keep their patients healthy 
and out of the hospital can share in the cost savings they 
create.
    Together, these reforms are beginning to dramatically 
strengthen Medicare today for seniors and Americans with 
disabilities. We also have the responsibility to preserve the 
promise of Medicare for future generations, and we can't do 
that if costs continue to rise unchecked. Because doing care 
the right way often costs less than doing it the wrong way, 
many of the laws reforms to improve care also reduce Medicare 
costs. For example, the Partnership for Patients alone is 
estimated to save Medicare as much as $50 billion over the next 
10 years by reducing errors and unnecessary care.
    But the law doesn't stop there. It contains important new 
tools to stamp out waste, fraud, and abuse. And in fiscal year 
2010, as we are beginning to build this new system, our anti-
fraud efforts returned a record $4 billion to taxpayers. And 
the new tools will help us build on that progress. The Medicare 
trustees estimate that these reforms in the Affordable Care Act 
have already extended the solvency of the trust fund until 
2024. Without the reforms, the trust fund would have been 
insolvent 5 years from now.
    But when it comes to Medicare's future, we can't take any 
chances, and that is why the law also creates the Independent 
Payment Advisory Board, or IPAB, a backstop, a failsafe to 
ensure Medicare remains solvent for years to come. IPAB is 
comprised of 15 health experts, including doctors, other 
healthcare professionals, employers, economists, and consumer 
representatives. The Affordable Care Act provides for 
consultation between the President and congressional leadership 
on appointing members of the board, and appointments are 
subject to the advice and consent of the Senate.
    Each year, the board recommends improvements to Medicare. 
The recommendations must improve care and help controls costs. 
For example, the board can recommend additional ways for 
Medicare to reduce medical errors and crack down on waste and 
fraud. And contrary to what some have said, IPAB by law is not 
allowed to ration care or shift costs to beneficiaries. In 
fact, it is specifically forbidden from making any 
recommendations that would ration care, reduce benefits, raise 
premiums or cost-sharing, or alter eligibility for Medicare. It 
leaves all final decisions in the hands of Congress.
    If Medicare spending begins to threaten the program's 
future, IPAB is charged with making recommendations to Congress 
to create necessary savings without shifting the cost of care 
to seniors and those with disabilities. But then it is up to 
Congress to decide whether to accept those recommendations or 
come up with recommendations of its own to put Medicare on a 
stable, sustainable path. In other words, IPAB's 
recommendations are only implemented when excessive spending 
growth is not addressed and no actions are being taken to put 
spending in line.
    The nonpartisan Congressional Budget Office and the 
independent Medicare Actuary both predict that IPAB is 
unnecessary anytime soon--indeed in the next decade--thanks to 
the work that we are already doing to slow rising costs. But we 
don't know about the future, which why experts across the 
country, including independent economists and the CBO believe 
that IPAB is needed as a safeguard. And we agree. We believe 
the best way to strengthen Medicare for today and tomorrow is 
to fill the gaps in coverage, crack down on waste and fraud, 
and bring down costs by improving care, changing the underlying 
delivery system. And that is what we are working to do under 
the healthcare law.
    Over the last 16 months, our department has focused on 
working with Congress and our partners across the country to 
implement the law quickly and effectively, and in the coming 
months, I look forward to working with all of you to continue 
those efforts.
    Thank you again, Mr. Chairman, and I would be pleased to 
take your questions.
    [The prepared statement of Ms. Sebelius follows:]
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    Mr. Pitts. The chair thanks the Secretary for your opening 
statements. I will now begin the questioning and recognize 
myself for 5 minutes for that purpose.
    And I have a couple of questions. I would like to ask you 
to respond yes or no. I am very concerned about IPAB. And 
assuming the cap is reached, suppose we reach a situation where 
IPAB then kicks in, I would like to walk through a couple of 
potential scenarios.
    Is it possible for IPAB to cut provider payments for 
dialysis, yes or no, if we reach that situation?
    Ms. Sebelius. Mr. Chairman, I have had this directed by law 
to take into account any cut in provider services before they 
make recommendations.
    Mr. Pitts. But the answer is yes, they may cut provider 
payments for dialysis?
    Ms. Sebelius. They don't make any cuts whatsoever. They 
make recommendations to Congress.
    Mr. Pitts. For cuts in dialysis. So if they make a 
recommendation for cuts for payments for dialysis, if those 
occurred, would at least some providers no longer be able to 
provide dialysis services? Yes or no?
    Ms. Sebelius. Mr. Chairman, I have no idea what the 
scenario is, what the recommendations are, and what Congress 
would do with those recommendations, but I assume that we would 
have that information if we had a real example.
    Mr. Pitts. If the recommendations took place, would some--
--
    Ms. Sebelius. What are the recommendations, sir, and what 
is the payment cut and what is the rate at which providers 
would be repaid and what scenario and over what kind of period 
of time? I have no idea.
    Mr. Pitts. Is it possible that some providers could be cut?
    Ms. Sebelius. By?
    Mr. Pitts. If those recommendations took place.
    Ms. Sebelius. If Congress accepted the recommendations and 
made a decision that cuts in dialysis were appropriate, I 
assume that there could be some providers who would decide that 
that would not be a service they would any longer delivery, the 
same way they do with insurance coverage each and every day 
that providers make determinations whether it be part of the 
network.
    Mr. Pitts. If that occurred, would fewer providers, as you 
have suggested could occur, mean that some seniors would have 
to wait longer for dialysis? Yes or no?
    Ms. Sebelius. Mr. Chairman, as you know, any cut in 
services, certainly cost-shifting to beneficiaries could mean 
huge reductions in care that seniors would have the opportunity 
to receive. What we have right now is guaranteed benefits. What 
I think the House Republican plan would do is shift that to a 
guaranteed contribution, which would dramatically change the 
ability of seniors to access care.
    Mr. Pitts. In this case we are talking about the law, not a 
proposal in the Republican budget. IPAB is commanded to save 
money by cutting reimbursements. They will have to make the 
decisions about which services are more or less critical, what 
patients can wait longer. Is that not rationing?
    Ms. Sebelius. Mr. Chairman, IPAB is not directed to make 
recommendations based on cuts in reimbursements. It is directed 
to make recommendations based on ways to reduce costs overall 
if, indeed, the Medicare spending targets per capital exceed 
what the actuary hits as a target goal. I think that there are 
a variety of areas, and one is the work we are currently doing 
in the Partnership for Patients where you actually go after 
costs that are unnecessary and being paid right now in the 
system, $50 billion worth of costs for care that should have 
never been realized in the first place. Those are the kinds of 
recommendations I think that are significant and could make a 
huge impact.
    Mr. Pitts. Let me ask you about, again, the statute. Where 
in the statute is there prohibition on IPAB making 
recommendations that could reduce access to breast cancer 
treatment, say, mammograms?
    Ms. Sebelius. Well, IPAB is forbidden by law to make 
recommendations that would ration care and I would say any kind 
of prohibition on accessing treatment would be rationing care.
    Mr. Pitts. Are there any provisions in the law that 
explicitly state IPAB cannot reduce access to the treatments 
like that?
    Ms. Sebelius. They may not by law ration care. And I think 
anyone would suggest that a reduction or an elimination of a 
treatment is rationing care. That is forbidden by law.
    Mr. Pitts. Suppose someone believes that IPAB has, in fact, 
rationed care. What redress does that person have to challenge 
the board's decisions?
    Ms. Sebelius. A court challenge.
    Mr. Pitts. Are the board's recommendations exempt from 
judicial or administrative review?
    Ms. Sebelius. The judicial oversight that is limited is 
really, I think, regarding my or any future Secretary of HHS 
implementation of recommendations when they have followed the 
law. I don't think anyone--certainly our general counsel feels 
very strongly that nothing in that language is consistent with 
language that is currently in the Medicare statutes as they 
move forward. Nothing would certainly give either the IPAB 
board or a future Secretary of HHS or the current Secretary of 
HHS any ability to violate the law, and that would always be 
subject to judicial review.
    Mr. Pitts. The chair thanks the gentlelady and recognizes 
the ranking member, Mr. Pallone, for 5 minutes for questions.
    Mr. Pallone. Thank you, Mr. Chairman.
    Madam Secretary, while today's hearing is on IPAB and its 
consequences to seniors, we have yet to hold a hearing in this 
subcommittee on the Republican plan for Medicare, even though I 
have asked for that many times. And as you recall, the 
Republican budget ends the Medicare program. IPAB's effects do 
not compare to the consequences for seniors of the Republican 
budget. Over the next 10 years, the Republican budget proposes 
to cut Medicare by $32 billion. CBO believes that IPAB will 
save about $2 billion over that same time period. So the 
Republican budget would cut 13 times as much in the next 
decade, and that is even before they begin their plan to end 
Medicare starting in 2022.
    I hear the Republicans accuse the Affordable Care Act of 
rationing care. First, it was the death panels, then the 
government takeover, and now it is IPAB. But the Republican 
plan for Medicare is so destructive it would actually end 
Medicare's guaranteed hospital benefit. It would actually end 
Medicare's coverage for surgical care and for chemotherapy, and 
coverage for all those services would be entirely dependent on 
whether you could first convince the plan to cover you and then 
on whether the plan includes hospital services or chemotherapy 
in its benefit package. And as you know, these kinds of 
problems are endemic in the individual insurance market, and 
that is why we have so many uninsured today and that is why we 
passed the Affordable Care Act to guarantee a good benefit 
package and eliminate a lot of the discrimination.
    I just wanted to ask you what do you think the Republican 
budget plan would mean for beneficiaries who would no longer 
have their Medicare benefits?
    Ms. Sebelius. Well, Congressman, I don't know and I don't 
know that anyone knows all the details of what the Republican 
plan is. What we do know is what is there in terms of numbers, 
that the current plan of giving a senior or someone with a 
disability an $8,000 voucher beginning in 2022 and having that 
voucher purchase whatever coverage is available in the private 
market would shift costs to beneficiaries. So beneficiaries 
would be paying for about 61 percent of their cost of care. 
Currently, they pay under 30 percent. Within 8 years they would 
pay closer to 70 percent of the cost of care. In fact, an 
average senior who is relying on Social Security would be 
paying about 60 percent of that Social Security check in 2022 
for healthcare. Right now, it is about a quarter of the Social 
Security check. So there would be a huge cost shift.
    It is unclear what the benefits actually would be available 
and who makes that determination. I gather that the Office of 
Personnel Management would negotiate some kind of package, but 
what kind of a benefit package would be mandated or not 
mandated is a little unclear at this point. What we know is 
that without controlling the underlying costs and continuing 
down this path, what the Republican plan does is shift costs 
onto seniors, and frankly, insurance companies are pretty adept 
at making decisions about what care is granted and what care 
isn't granted, eliminating benefit packages. And that is done 
in a day-in and day-out basis, as well as determining what 
providers get paid, for what services, over what kind of period 
of time.
    Mr. Pallone. Well, you know, the point I am trying to make 
is the Republican cuts to Medicare in the future far outstrip 
anything proposed in the Affordable Care Act, including IPAB, 
and we have to remember that Republicans objected to all of the 
savings in the Affordable Care Act, not just the IPAB. And 
despite that, their budget, amazingly enough, proposed to 
incorporate 96 percent of the Affordable Care Act savings, all 
of them essentially except for the IPAB.
    I just wanted to ask you, as I mentioned before, you know, 
we are talking a Republican budget that proposes to cut 
Medicare by 32 billion. CBO says that IPAB will save about 2 
billion over that same time period. So the Republican budget 
cut is 13 times as much. I just wanted you to comment on that 
or confirm that if you will.
    Ms. Sebelius. Well, again, Mr. Chairman, I think there is 
no question that the Republican budget does contemplate an end 
to Medicare as know it, an end to the commitment that seniors 
will have benefits guaranteed once they turn 65, be able to 
choose their own doctor, be able to choose the health system 
that they find best treats their situation, and reliably 
understand that they won't go bankrupt because of care 
delivery. So that period would come to an end and it would be a 
voucher system and a private insurance market, which is a very 
different kind of care delivery and a very different kind of 
commitment.
    Mr. Pallone. Thank you. Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the vice chairman of the subcommittee, Dr. Burgess, for 5 
minutes for questions.
    Mr. Burgess. Thank you, Mr. Chairman.
    Let me just continue on that for just a moment. You said 
that the Ryan plan would define the end of Medicare as we know 
it. Why does the IPAB not provide a similar definition?
    Ms. Sebelius. Well, I think, Congressman, the Independent 
Payment Advisory Board makes recommendations to Congress. It is 
forbidden by law to do exactly what the Republican budget plans 
do.
    Mr. Burgess. Let me ask you a question.
    Ms. Sebelius. They may not shift cost to seniors. They may 
not change benefits----
    Mr. Burgess. Yes, as we----
    Ms. Sebelius [continuing]. They may not----
    Mr. Burgess [continuing]. Know from reading the law, it is 
very, very difficult for people to appeal those decisions, and 
in fact we won't even know because no one currently has 
standing until there is actually implementation of the board, 
which has not happened yet and care is denied and they take it 
through the courts. But I think we are going to find it is 
very, very difficult to overturn a decision of this board.
    Can you tell us the difference between a voucher and 
premium support?
    Ms. Sebelius. The difference between a voucher and premium 
support?
    Mr. Burgess. Mr. Ryan's articulated aspirational document 
in the Republican budget talked about premium support, a 
concept actually introduced during the Clinton Administration 
with the Commission to Save Medicare, the Bill Frist 
Commission. On the other side, the talking point is that he is 
going to give a voucher.
    Ms. Sebelius. A voucher is basically in, I think, insurance 
terms a guaranteed contribution as opposed to a guaranteed 
benefit.
    Mr. Burgess. OK.
    Ms. Sebelius. Those are very different concepts. On one 
hand, in the current Medicare program, seniors and those with 
disabilities have guaranteed benefits. That would switch if it 
becomes a voucher in the----
    Mr. Burgess. And then what would premium support look like 
in that world?
    Ms. Sebelius. Pardon me?
    Mr. Burgess. What would premium support look like in that 
world?
    Ms. Sebelius. I am not as familiar with that term. I know 
what guaranteed contribution is. I know what a voucher is. I 
don't----
    Mr. Burgess. So it is incorrect to use the terms 
interchangeably as so often happens in this committee? Premium 
support is a different phenomenon than a voucher? Premium 
support would be a request for proposals going out to insurance 
companies to provide the coverage, must as in Medicare Part D, 
so you should have some familiarity with it.
    Ms. Sebelius. Well, if you are assuming, Congressman, let 
me just ask if you are assuming that $8,000 provides the total 
benefit----
    Mr. Burgess. No, I am asking the questions, Madam 
Secretary. This is my brief time to be able to ask you 
questions, so I have got to insist upon that.
    Now, the budget for the Independent Payment Advisory Board 
begins October 1, correct, $15 million?
    Ms. Sebelius. It is available, yes, sir.
    Mr. Burgess. Now, who has been nominated to that board and 
is awaiting confirmation?
    Ms. Sebelius. No one.
    Mr. Burgess. And why is that?
    Ms. Sebelius. Well, I think, Congressman, the board is not 
activated until 2014 and I know that the President is in 
discussion with a number of potential nominees and I know he 
has consulted with various Members of Congress, but it will be 
appointed and up and running at the time----
    Mr. Burgess. So should we keep that $15 million that is due 
October 1 because you apparently don't need it to set up the 
board because----
    Ms. Sebelius. We have no intention of using money before 
there is a board up and running.
    Mr. Burgess. Well, who does the check go to?
    Ms. Sebelius. I don't think there is a check. I think there 
is money available that we draw down.
    Mr. Burgess. Who cashes the check? Can we have that money 
back? We are in a debt crisis. You may have heard.
    Ms. Sebelius. I understand. I can assure you there will be 
no drawdown on the treasury of $15 million until there is a 
board and a functioning operation.
    Mr. Burgess. Now, on this board, are they available to be a 
recess appointment by the President so that they would not be 
subject to Senate confirmation like your head of CMS is?
    Ms. Sebelius. I am not a lawyer. I can't answer that 
question.
    Mr. Burgess. Well, the CRS report that is available on this 
indicates that there would be the availability of a recess 
appointment. I count nine that wouldn't require input from 
either the Speaker of the House or the minority leader on the 
Senate's side. So nine would be a majority but in fact you 
don't even need a numbers majority. You just need a majority of 
those who have been appointed, is that correct?
    Ms. Sebelius. That is correct.
    Mr. Burgess. Let me ask you this. It looks like in statute 
that you could not have a majority of the board made up as 
physicians. Is that correct?
    Ms. Sebelius. My understanding is that the prohibition is 
yes, that a majority could not be practicing physicians.
    Mr. Burgess. Well, who can make up the majority? I mean the 
definition of who can be the members is actually a little bit 
vague. It is with people with national recognition for their 
expertise in health finance. That is an odd pool, but they can 
actually make up the majority?
    Ms. Sebelius. Well, I think, Congressman, the 
characteristics----
    Mr. Burgess. So think tanks can be the majority of this 
board.
    Ms. Sebelius. The characteristics of the board members are 
modeled after the characteristics that were defined for the 
MedPAC board members, which have very similar kinds of 
backgrounds and abilities but very significant differences that 
there is a very strong conflict of interest barrier for the 
IPAB where they could not be receiving payment from the system 
and making recommendations at the same time.
    Mr. Burgess. The man who would have been your predecessor 
but he actually didn't get confirmed, Tom Daschle, wrote a book 
called Critical. I don't recommend anyone buy it, but he talks 
about this board. This board was something that he extolled in 
this book to a great degree, but it was actually patterned more 
after the Federal Employee Health Benefits program, which is, 
in fact, employer-sponsored insurance. Is it your vision that 
one day this board can be spread to further than just the 
Medicare world but could actually control the private health 
insurance world, much as the Center for Consumer Information 
Insurance Oversight now envisions controlling the private 
insurance market as well?
    Ms. Sebelius. Again, Congressman, the board doesn't control 
anything. They make recommendations to Congress in the event 
that Congress has not acted to keep Medicare solvent. That is a 
recommendation board. They don't control the Medicare program. 
Congress is in the driver seat. They make recommendations and I 
think that could be very helpful as look for ways to preserve 
beneficiaries' right to health insurance and look for a program 
to be solvent on into the future.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the ranking member of the full committee, Mr. Waxman, for 5 
minutes.
    Mr. Waxman. Thank you, Mr. Chairman. Madam Secretary, I am 
pleased to see you even if you don't see me. Now you do.
    You have been pressed on whether this is a premium support 
or a voucher. It is hard to distinguish it, but as I 
understand, premium support would keep increasing the amount of 
money that would be available for people to buy insurance, like 
Part D Medicare so that the amount of money would keep up with 
the costs. A voucher, as I understand being proposed by the 
Republicans--although we haven't seen detail--is a defined 
contribution with no increase no matter what the cost increases 
may be in medical care.
    But I want to explore with you a different issue. We are 
hearing a lot today about all the things that IPAB is allegedly 
going to do to the Medicare program. I have also heard you 
describe all the things IPAB can't do like denying benefits and 
increasing costs for beneficiaries. I would like to know how 
the Republican plan for Medicare stacks up against all of the 
things that IPAB can and cannot do. For example, the Republican 
plan would end Medicare's guaranteed benefits, the things like 
hospital stays and doctor visits. They would replace it with a 
cash voucher. Can IPAB do that?
    Ms. Sebelius. No, they cannot.
    Mr. Waxman. The Republican plan would increase cost-sharing 
for Medicare beneficiaries, more than doubling their out-of-
pocket costs for new enrollees. Can IPAB do that?
    Ms. Sebelius. Well, no, the IPAB board cannot make 
recommendations that would do that kind of cost-shifting.
    Mr. Waxman. The Republican plan proposes to increase 
premiums and force people to negotiate their care with private 
plans on their own. Can IPAB do that?
    Ms. Sebelius. There is no ability in the law, I think, to 
make those kinds of recommendations that would change the 
beneficiaries' benefits. No.
    Mr. Waxman. In fact, IPAB is prohibited from making all of 
these changes that would be harmful to beneficiaries, but the 
Republican plan enacts them all. Are you aware of any proposals 
in the Republican plan that would save money by reducing costs 
and not by shifting them to the beneficiaries?
    Ms. Sebelius. I have no seen any details of delivery system 
changes or cost reductions, no, sir.
    Mr. Waxman. Well, I think the right way to reform Medicare 
is to make care more efficient the way we have started to do 
under the Affordable Care Act. The wrong way is to wash our 
hands of the problem putting all of the costs onto the Medicare 
beneficiaries.
    Secretary Sebelius, at yesterday's hearing before the House 
Budget Committee, there was a major topic of conversation about 
the ability of Medicare patients to see their doctors when they 
need to, and that is an important issue for all of us to 
monitor. But the premise of many Republican questions seems to 
be that Medicare patients are unable to see their doctors 
today. This is similar to their bizarre claim that it is better 
to be uninsured than to have Medicaid. Are you aware of any 
information on whether Medicare patients are more or less able 
than private patients to see doctors of their choice?
    Ms. Sebelius. No, sir. In fact, about 98 percent of the 
physicians in this country are enrolled in Medicare. I know 
that there are pockets in communities where doctors are just 
overbooked, but that would apply to private pay and Medicare 
patients.
    Mr. Waxman. Surveys from the Medicare Payment Advisory 
Commission and numerous other independent surveys all confirm 
Medicare patients have access to care, at least as good as the 
access private insurance patients enjoy, if not better. That is 
for primary care and for specialists. Now, certainly, we need 
to address the SGR if we are really going to guarantee access 
in Medicare for the future, but that problem exists whether we 
repeal IPAB or not.
    There is another problem with the Republican claims about 
access problems under the Affordable Care Act Medicare Savings. 
Republicans adopted all of those savings provisions in their 
own plan. Until they end the program in 2022, the Affordable 
Care Act is the Republican plan for Medicare excluding IPAB. Do 
you know, Madam Secretary, how much of the act's Medicare 
savings was from the IPAB? Well, I will tell you because you 
may not know. It was 4 percent.
    Ms. Sebelius. Yes.
    Mr. Waxman. Four percent. So the Republicans embraced 96 
percent of the act's cost savings in Medicare. They pile on 
trillions in cuts over the next several decades when they end 
the Medicare program, and they suggested Affordable Care Act 
will cause access problems but that their voucher plan won't. 
It doesn't add up and it doesn't make sense.
    I want to ask you one last thing about--well, tell you 
what, I would go over my time and I would like to give other 
members their opportunity to ask questions. Thank you for being 
here. Thanks for responding to the questions.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the gentleman from Georgia, Dr. Gingrey, for 5 minutes for 
questions.
    Mr. Gingrey. Mr. Chairman, thank you. Madam Secretary, 
thank you for appearing.
    You know, we are here to talk about IPAB, Independent 
Payment Advisory Board, not today at least to express our 
outrage over Obamacare in general, but it seems like the 
discussion has expanded a bit, maybe on both sides of the 
aisle. I must say I am a little bit surprised of the 
questioning in regard to the difference in a voucher and 
premium support. You seemed to struggle just a tad over that. A 
voucher, as I understand it, is sending someone a check on a 
monthly basis to spend on healthcare at their own volition. 
They could basically, I guess, sign up for holistic medicine. 
They could have an acifidity bag around their neck.
    They could essentially do anything they wanted to with that 
voucher whereas premium support in the plan for prosperity, the 
Republican plan to reform and save Medicare for our current 
seniors and our future generations is talking about premium 
support where the Center for Medicare and Medicaid Services 
basically where the senior designates, they want to purchase 
their health insurance, a plan that best fits their needs, that 
premium is advanced to an insurance company as payment for 
those services. It doesn't go directly to the patient. So that 
is a big difference in a voucher versus premium support. And I 
think we should describe it accurately.
    IPAB, in its report to Congress, is charged under Obamacare 
with including ``recommendations that target reductions in 
Medicare program spending to sources of excess cost growth.'' 
Madam Secretary, can you tell us where in Obamacare the term 
``excess cost growth'' is defined?
    Ms. Sebelius. Sir, I don't know if there is a statutory 
definition. I do want to respond briefly to your premium 
support issue because----
    Mr. Gingrey. We are beyond that and my time is limited and 
I am just going to help you on this second question. It is not 
defined. ``Excessive cost growth'' in Obamacare is not defined. 
Peter Orszag, in fact, President Obama's former OMB director 
has defined the ``excessive cost growth'' in Medicare as 
principally the result of new medical technologies and services 
and their widespread use by the U.S. heath system. That is what 
Peter Orszag thinks in regard to excessive cost.
    Let me ask you this question. The head of CMS, Dr. Donald 
Berwick, interim head of CMS and it is likely that he will 
remain interim, has been quoted as saying ``most people who 
have serious pain do not need advanced methods. They just need 
the morphine and counseling that have been available for 
centuries.'' Madam Secretary, do you believe that limiting 
advanced methods to sick seniors in favor of morphine and 
counseling is an appropriate way to reduce Medicare costs? Yes 
or no?
    Ms. Sebelius. Congressman, I believe that seniors have a 
right to make choices with their doctors, which is what they do 
now under the Guaranteed Benefit program under the Medicare 
system. Under an insurance plan, that would no longer exist and 
I would also suggest that premium support typically means that 
there is an enhanced benefit and as a result----
    Mr. Gingrey. Well, Madam Secretary, I agree with the first 
part of your response. It should be between the doctor and the 
patient and you don't get that with IPAB.
    Madam Secretary, I am aware that the statute states that 
IPAB cannot propose plans that ration care. Can you tell me 
where the word rationing is defined in the Obamacare statute?
    Ms. Sebelius. It is not defined, sir.
    Mr. Gingrey. Well, you are absolutely correct on that. It 
is not defined.
    During questioning before the House Budget Committee 
yesterday, you referred to IPAB as merely a safeguard and a 
stopgap noting that it will only come into play if Congress 
failed to reduce Medicare spending, in fact, wouldn't be 
recommending any cuts until the 10 years. Yet on Wednesday, 
April 13, President Obama in laying out his plan to reduce 
healthcare spending to the American people stated that IPAB was 
a major plank in his plan to make additional savings in 
Medicare. Madam Secretary, if President Obama had stated 
publicly that IPAB is a major plank of his plan to save 
Medicare and you are saying that IPAB, it is just a backstop to 
Congress coming up with a plan, should the American people 
infer from that that Obamacare is the President's grand plan to 
save Medicare? Give me a yes or no or if you want to expand a 
little bit and the chairman will allow, I would like to hear 
your opinion on that.
    Ms. Sebelius. I don't think there is any disagreement 
between the President and my statement. The way that the 
Independent Payment Advisory Board is structured is that 
recommendations are made on a yearly basis and recommendations 
are only impactful if, indeed, Congress has not taken the 
advice of the independent actuary that per capita spending has 
exceeded a targeted goal. If, indeed, the IPAB recommendations 
are not ones that Congress chooses to accept, they change the 
recommendations or move in a different direction and the 
recommendations never have any impact if, indeed, cost trends 
are below the independent actuary's targeted goal.
    It is a backstop. It is a backstop for Congress taking the 
responsibility to keep Medicare solvent into the future. If, 
indeed, they don't act, there is a mechanism where these 
recommendations become law absent Congress rejecting the 
recommendation.
    Mr. Gingrey. Well, I have gone way over my time and I will 
just close out by saying I agree with Mr. Pallone and Ms. 
Schwartz that we ought to repeal IPAB. It is wrongheaded. It is 
boneheaded. And I yield back.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the gentlelady from California, Mrs. Capps, for 5 minutes.
    Mrs. Capps. Thank you, Mr. Chairman. And thank you, Madam 
Secretary, for being here today.
    You know, I have been listening to this discussion. I have 
met with advocates in the past few months on both sides of the 
IPAB issue. The one thing they share is a concern for the 
unknown. One common concern is that due to protections for 
hospitals and other groups from IPAB changes before 2020, the 
only thing left would be to cut provider rates. Others note 
that this is not true. We have heard the same kind of 
discussion today. Can you please address this issue? What could 
IPAB recommend other than provider payment cuts?
    Ms. Sebelius. Well, I can give you a few quick examples of 
things that are on the table as we speak. For years there was a 
recommendation out of MedPAC, who can only, you know, make 
recommendations that we look at the overpayment to Medicare 
Advantage plans. That was never accepted by the United States 
Congress and yet when the Affordable Care Act was put together, 
Congress decided that that was an appropriate area to look at.
    Medicare Advantage, the private market strategy for 
Medicare which was supposed to introduce competition and choice 
and drive down costs, now runs at about 113 percent of the fee-
for-service plan with no health benefits. So Congress 
implemented the changes recommended by MedPAC for years, and 
over the course of the next 10 years, the Congressional Budget 
Office says about $140 billion will be saved. That is an 
example of the kind of strategy that has been on the table. If 
it had been implemented years ago, $140 billion less would have 
been paid out over the last decade.
    But an overpayment, no health benefits, seniors will still 
have choices. We have a very robust program. We have begun to 
decrease the overpayment to Medicare Advantage plans. But I 
think that is a strategy that is in the Affordable Care Act. It 
is exactly the kind of strategy that I think is anticipated by 
this independent board.
    Mrs. Capps. Thank you. Conversely, the Republican majority 
has voted unanimously to essentially end the current Medicare 
program. The not hypothetical but known result would be a 
doubling in out-of-pocket costs for beneficiaries who would get 
a limited-amount voucher to cover a fraction of the cost of 
private insurance. It would leave our seniors and persons with 
disabilities on their own to haggle with insurance companies 
without any guarantee that there would be any policies 
available to them, let alone that they would be affordable.
    Madam Secretary, some talk about the Republican plan as a 
way to cut cost, but all I see is a huge cost shift placing the 
financial burden on seniors with limited incomes without any 
meaningful reforms in the plan to actually address the overall 
costs of healthcare. As you have analyzed the Ryan budget plan, 
are there any cost-containment strategies in it to privatize 
Medicare? Does that privatizing include any cost containment 
that you notice?
    Ms. Sebelius. Congresswoman, we have not been able to 
identify cost-containment strategies. And as I say, the case in 
point, Medicare Advantage, which has been in existence for 
years which was specifically put on the table to introduce cost 
and competition, was anticipated to drive down costs has done 
just the opposite. It is running at about 113 percent and every 
Medicare beneficiary, all 49 million beneficiaries pay an extra 
$3.66 per member per month to pay for the additional supports 
for Medicare Advantage program that will, again, be gradually 
over time decreased. And I think thanks to the Affordable Care 
Act, that excess payment will cease to exist.
    Mrs. Capps. I think all of us in Congress understand the 
need to reign in healthcare spending. In fact, that is what so 
many innovations in the Affordable Care Act are set up to do, 
just that. I just have a few seconds. You have a few seconds. 
If you could talk about some of those aspects of the law. You 
mentioned Medicare Advantage. What are some of the other parts 
of the Affordable Care Act, particularly as it relates to 
Medicare, that are opportunities for cost containment?
    Ms. Sebelius. Well, I think, Congresswoman, certainly 
through the Innovation Center, we are already seeing some very 
exciting delivery system reform, which is really the underlying 
healthcare delivery system. So the Partnership for Patients 
goals, which I think are very on point, and not only impact 
Medicare but impact everyone that goes in and out of the 
hospital, reducing hospital-acquired infections, which kill 
100,000 people in America every year, cause hundreds of 
thousands of people to stay in the hospital longer and put them 
in worse physical condition, but cost billions of dollars, and 
reduce unnecessary readmissions where one out of five Medicare 
patients cycles back to the hospital within 30 days. Many of 
them have never seen a healthcare provider.
    Those two initiatives, which already 2,000 hospitals and 
countless other partners have signed up to participate in will 
reduce Medicare spending by $50 billion. Better healthcare, 
lower cost.
    Mrs. Capps. Thank you very much. I yield back.
    Mr. Pitts. The chair thanks the gentlelady, recognizes the 
gentleman from Ohio, Mr. Latta, for 5 minutes for questions.
    Mr. Latta. Well, thank you very much, Mr. Chairman. And 
Secretary, thank you very much for being with us today. If I 
can just go back on the line of questioning that Dr. Burgess 
had. Is there anything in the law that says how many members 
have to be appointed before the board starts functioning?
    Ms. Sebelius. Not to my knowledge, sir, but I can----
    Mr. Latta. Well, the reason I ask that with 15 members 
could 3 members actually be appointed and start functioning as 
a board? Because just looking at what the law says here----
    Ms. Sebelius. I am sorry. I am really having a very hard 
time hearing you.
    Mr. Latta. I can probably talk louder than this microphone 
is picking this up.
    Ms. Sebelius. I can put my ear to the microphone but that 
really doesn't help.
    Mr. Latta. That might help. This is the Energy and--you 
know, this is the technology here, too.
    Ms. Sebelius. Sorry.
    Mr. Latta. But it says under the act, it says, ``Quorum: a 
majority of the appointed members of the board shall constitute 
a quorum for the transaction of business, but a lesser number 
of members may hold hearings.'' But again, I guess the question 
is if you have got only three members appointed, can they start 
functioning as the board? And then actually you could have 
fewer members of that three actually start holding hearings. Is 
that possible?
    Ms. Sebelius. Well, I certainly think fewer than a quorum 
could start holding hearings and I would think that that 
outreach function is critically important for any board who is 
going to make recommendations. I would be happy to get you the 
answer in writing.
    Mr. Latta. I appreciate that.
    Ms. Sebelius. I don't want to speak outside of the----
    Mr. Latta. Yes, I would appreciate that if you could.
    And if I can just go to your testimony on page 12, you said 
that the ``IPAB cannot make recommendations that ration care, 
raise beneficiary premiums or cost-sharing, reduce benefits, or 
change eligibility for Medicare. The IPAB cannot eliminate 
benefits or decide what care Medicare beneficiaries can 
receive. Given a long list of additional considerations the 
statute imposes on the board, we expect the board will focus on 
ways to find efficiencies in the payment systems and align 
provider incentives to drive down those costs without affecting 
our seniors' access to care and treatment.'' OK. So what we are 
saying is, then, they are going to have pretty much the power 
of the purse. Would you say that would be the recommendations 
that they would have in this case and that they would have that 
power of the purse to say if they are not making the 
recommendations as to what care that a person would be 
receiving but they are going to be able to say how much money 
is going to be expended? Would that be a correct statement?
    Ms. Sebelius. I think, Congressman, again, they are 
recommendations that come to Congress. They are triggered at a 
point where the independent actuary sets a per capita spending 
target. Actions have not reached that spending target so they 
will make recommendations about appropriate ways to reach that 
within the bounds of the law.
    Mr. Latta. OK. So going along those same lines, though, 
again, if someone has the recommendations of the power of the 
purse and they are saying well, we are going to have to reduce 
that--you already mentioned a little earlier in some other 
questions--how are we going to make up for those doctors and 
hospitals if their payments are going down? Wouldn't they, 
then, have to cut back on the patients they see and the care 
that they provide?
    Ms. Sebelius. Well, again, I think, Congressman, I tried to 
give with Congresswoman Capps an example of the kind of 
strategy that can yield enormous cost savings without 
jeopardizing care or jeopardizing the kind of relationship 
between doctors and their patients. And that is really what is 
envisioned. I think a fundamental tenet of the current Medicare 
commitment to seniors and those with disabilities is the 
ability to choose one's own doctor, the ability to choose one's 
own care system, and the knowledge that you have benefits that 
are available to you. That ceases to exist under the plan 
supported by the House Republicans, and I think that IPAB 
serves as an ongoing yearly group of experts who are not being 
paid by the system to make recommendations to Congress who can 
act on those recommendations or not.
    Mr. Latta. Because, again, I represent a rather large area 
in the State of Ohio, a lot of rural areas that have a lot of 
community hospitals. You know, they are all very, very 
concerned about reimbursement. I have got a lot of my doctors 
that are very concerned about reimbursement and so, you know, 
as we are looking at this, they are reading this, too, and, you 
know, as they read the testimony about, you know, driving down 
costs and trying to, you know, for payment systems align 
provider incentives, they are nervous about their other 
payment.
    And Mr. Chairman, I see that my time has expired and I 
yield back. Thank you.
    Mr. Pitts. The chair thanks the gentleman and yields 5 
minutes to the ranking member emeritus, the gentleman from 
Michigan, Mr. Dingell.
    Mr. Dingell. Mr. Chairman, I thank you for your courtesy. 
Welcome back to the committee, Madam Secretary.
    Ms. Sebelius. Thank you, sir.
    Mr. Dingell. Your father served here with distinction. It 
is particular pleasure to see you here this morning.
    Madam Secretary, do you believe that the emphasis on annual 
recommendations will limit the board's focus to short-term 
fixes rather than lowering our Nation's healthcare spending in 
long term? Yes or no?
    Ms. Sebelius. No.
    Mr. Dingell. Madam Secretary, under the Republican plan, 
nothing will prevent private insurance companies from rationing 
care. Is that right?
    Ms. Sebelius. I am sorry. Nothing----
    Mr. Dingell. Under the Republican plan, nothing would 
prevent private insurance companies from rationing care, yes or 
no?
    Ms. Sebelius. That is correct. There is no prohibition.
    Mr. Dingell. All right. Now, IPAB is legally prohibited in 
the legislation from making recommendations that would ration 
healthcare, is that right?
    Ms. Sebelius. Yes, sir. There is a prohibition for 
rationing care, shifting costs to beneficiaries, eliminating 
benefits.
    Mr. Dingell. Now, Madam Secretary, who is in charge? Under 
the Republican plan, the insurance companies, is that right?
    Ms. Sebelius. If I understand it correctly, yes, the 
voucher would be paid to an insurance company.
    Mr. Dingell. All right. The Republican plan also ends 
Medicare as we know it and repeals the Affordable Care Act 
giving free reign to the insurance companies to decide what 
care you could get and when with no clear limits to protect 
consumers or prevent insurance companies from taking in 
exorbitant profits, is that right?
    Ms. Sebelius. Well, the various features, including the 
medical loss ratio and consumer protections and rate review 
would all be eliminated with the Affordable Care Act and 
companies would then be in charge of seniors----
    Mr. Dingell. And under the Affordable Care Act the 
individual and that individual's doctor would be in control of 
matters and the President's plan maintains Medicare as we know 
it. Is that right?
    Ms. Sebelius. Well, it is a--yes, a plan that maintains the 
Medicare benefit package understanding we need to look serious 
at outgoing costs.
    Mr. Dingell. And the plan remains a defined benefit plan. 
Is that right?
    Ms. Sebelius. That is correct.
    Mr. Dingell. Which, under the Republican plan, it is not? 
It is a defined payment plan, is that right?
    Ms. Sebelius. Yes, sir.
    Mr. Dingell. All right. Now, the Republican plan would 
eliminate Medicare's guaranteed benefits and limits on cost-
sharings and premiums, is that right, yes or no?
    Ms. Sebelius. Yes.
    Mr. Dingell. Instead, insurance companies could determine 
which benefits seniors on Medicare would receive and how much 
they would pay, is that right?
    Ms. Sebelius. I assume so, sir. I don't think there is any 
written language about what the benefits would look like.
    Mr. Dingell. OK. IPAB is, under the President's plan, the 
President--or rather IPAB is legally prohibited from cutting 
premiums or increasing premiums and copayments. Is that right?
    Ms. Sebelius. Yes. There cannot be cost-shifting onto 
beneficiaries.
    Mr. Dingell. Now, under the Republican plan, healthcare 
costs would rise which turns Medicare over to private insurance 
that have higher administrative costs and profits, is that 
right?
    Ms. Sebelius. Yes, sir. Currently, the Medicare program 
runs at under 2 percent administrative costs and I think the 
most efficient private insurers are at about 12 to 15 percent.
    Mr. Dingell. Now, IPAB will make decisions based on what is 
best for seniors and Medicare and not who spends the most money 
in Washington, is that right?
    Ms. Sebelius. By law they are directed to protect the 
beneficiaries as they make recommendations.
    Mr. Dingell. All right. Now, Madam Secretary, how will you 
and the board insure that consumers' and patients' views will 
be taken into consideration as the board drafts its 
recommendations?
    Ms. Sebelius. Well, Congressman, I think that there is no 
question that the President will look for members of this board 
who are eager to not only participate in the long-term solvency 
of Medicare but also pay close attention to the protection of 
the beneficiary, which is part of the fundamental direction----
    Mr. Dingell. We also hold public hearings on these matters, 
right?
    Ms. Sebelius. Public hearings, I think the appointment of 
people who don't have a conflict----
    Mr. Dingell. Well, Madam Secretary, is it your belief that 
the board would benefit from soliciting public comment prior to 
issuing its recommendations----
    Ms. Sebelius. Absolutely.
    Mr. Dingell [continuing]. In a manner similar to that 
specified in the Administrative Procedures Act?
    Ms. Sebelius. Yes, sir.
    Mr. Dingell. I guess we could say that is a commitment on 
the part of the department, is that right?
    Ms. Sebelius. Yes, very much so.
    Mr. Dingell. Madam Secretary, it is always a privilege to 
see you.
    Thank you, Mr. Chairman, for your courtesy.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the gentleman from Louisiana, Dr. Cassidy, for 5 minutes.
    Mr. Cassidy. Thank you for being here, Secretary Sebelius. 
And if every now and then I cut you off, I am not being rude, 
but it is so valuable to have you here I am just trying to stay 
focused and I apologize at the outset.
    I will also say to my Democratic colleagues, Republicans do 
retain the savings, yes, 96 percent of them but we put them 
back into Medicare as opposed to spending them on another 
entitlement, and I think that is the difference between the two 
of us.
    Secretary, I am a doctor who works in a hospital for the 
uninsured but 20 to 50 percent of my patients have Medicaid. So 
I think it is fair to stipulate that when public insurance 
programs pay physicians below cost, then they really don't have 
access. It may be access on paper but it is not access in 
power. Now, that said, Richard Foster currently estimates that 
under current law in 9 years, Medicare will pay physicians 
below what they receive on average from Medicaid. Now, is it 
fair to accept with the given stipulation that that will hurt 
access of Medicare patients to their physician?
    Ms. Sebelius. Well, I don't think there is any question, 
Congressman, that underpayment of any kind of provider 
certainly jeopardizes an adequate network, whether it is a 
private insurer or a public payer.
    Mr. Cassidy. Now, if MedPAC already knowing that under 
current law--under current law physician reimbursement is cut 
by 21 percent in the near future, I am sure you will agree that 
that would have disastrous effects upon a patient's access.
    Ms. Sebelius. You mean failing to fix the SGR.
    Mr. Cassidy. And of course part of the savings of SGR is 
into the trillion dollars of savings that the other side of the 
aisle claims for Obamacare. So I will tell you as a patient 
that sees Medicaid patients at a hospital for the uninsured, 
when I read that this board has the limited ability to cut but 
where they can cut is reimbursement to providers, I actually 
see that what we are really doing is effectively denying 
access. Now, I will also say that I have learned that rarely do 
government institutions admit that they are rationing. Rather, 
the queue gets longer. Would you disagree with that or do you 
think I am wrong?
    Ms. Sebelius. Well, Congressman, I think that there is no 
question that, again, I think the Republican budget plan on 
Medicaid----
    Mr. Cassidy. Well, I am speaking about current law. I am 
really----
    Ms. Sebelius [continuing]. Since you raised Medicaid in 
hospitals----
    Mr. Cassidy [continuing]. I see that you are pivoting 
here----
    Ms. Sebelius [continuing]. Cutting $770 billion----
    Mr. Cassidy [continuing]. Again, when we speak of a board 
which has limited ability to save money except by cutting 
payments to providers----
    Ms. Sebelius. Well, that is not accurate, sir.
    Mr. Cassidy. OK. So it can also do Medicare Part A and it 
can also do pharmacy coverage for dual eligibles. But clearly, 
a significant portion of it is cutting payments to providers. 
Now, again, under current law Medicare will be paying providers 
less than Medicaid per Richard Foster as well documented 
Medicaid patients have trouble gaining access. So where do we 
part in our analysis?
    Ms. Sebelius. Well, again, I think that there are lots of 
opportunities in the delivery system where we are paying or 
overpaying for care that probably should never have been----
    Mr. Cassidy. So if I may summarize, you are saying that 
there will be savings that will keep this mechanism from 
being--I gather--keep this mechanism, this IPAB, this denial-
of-care board from having to act. I will say parenthetically 
that the New England Journal of Medicine article which I am 
sure you are aware of shows that Accountable Care Organizations 
have not saved money under the more favorable rules in which 
the pilot studies have been done.
    But going back to my point----
    Ms. Sebelius. Some of them did, some didn't.
    Mr. Cassidy. Three out of ten did, seven didn't. So coming 
back to the current law----
    Ms. Sebelius. So we learn from them and go on.
    Mr. Cassidy. Coming back to current law because we really 
can't say oh, don't worry. If this works out, this would never 
happen. Let us just assume that it does happen. Again, if we 
decrease payment to providers and we know from experience that 
that will decrease access, does that not trouble you?
    Ms. Sebelius. It does, which is why I think Congress 
carefully wrote also into the parameters for the Independent 
Payment Advisory Board that at every step along the way, 
provider access had to be part of their overall 
recommendations.
    Mr. Cassidy. It has to be part of the overall----
    Ms. Sebelius. They make recommendations to Congress.
    Mr. Cassidy. Clearly, Medicaid by law has to provide access 
for pregnant women and pediatrics. By law they are supposed to 
pay adequately to give that access. And yet there is a recent 
New England Journal of Medicine study that shows that those 
with Medicaid or CHIP actually are more likely to be denied 
access to an appointment. In fact, 2/3 of the time they are 
denied such access. Doesn't that give us pause that despite 
that law that they are guaranteed access, for the privately 
insured it is only 11 percent that you can't get an 
appointment? For the publicly insured it is 2/3. I mean do you 
not see a danger that this would be the case with this IPAB 
board?
    Ms. Sebelius. Well, again, IPAB has no authority to cut 
anything. They make recommendations and----
    Mr. Cassidy. And 4/5 of Congress will return.
    Ms. Sebelius [continuing]. Secondly, as you know, sir, that 
governors of various States set provider rates in their 
Medicaid programs. They are vastly different in Louisiana than 
they are in----
    Mr. Cassidy. This is on average and I think New York Times 
has well documented that in States as desperate as Louisiana 
and Michigan that is the case. It is disingenuous to think 
otherwise.
    But that is OK. I am out of time and I yield back.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the gentlelady from Illinois, Ms. Schakowsky, for 5 minutes for 
questions.
    Ms. Schakowsky. I think this discussion is just really 
ironic, this attack on IPAB given the fact that the Republican 
plan would instead turn over the Medicare program to private 
insurance who would have no constraints whatsoever in raising 
their rates and doubling of out-of-pocket costs for 
beneficiaries. And this semantic debate whether it is vouchers 
or premium supports, the only difference is where the check is 
sent to, where the inadequate check is sent to. And if we want 
to have a semantic debate, we ought to change the--because what 
they are proposing is not Medicare. We could call it Sortacare 
or Maybecare or Idon'tcare. But it is not Medicare anymore 
according to what my understanding of Medicare, which, as you 
pointed out, Madam Secretary, is a guaranteed benefit plan. 
That is the essence of Medicare.
    The other thing is I don't know for sure if you know the 
answer to this, but my understanding is that the Republican 
budget includes all of the Medicare savings provisions that you 
so wisely helped to navigate and talked about from the 
Affordable Care Act with the exception of IPAB. Isn't that 
true?
    Ms. Sebelius. That is my understanding.
    Ms. Schakowsky. And those include those kinds of changes 
that have been made that they accuse the Democrats of, you 
know, cutting Medicare and, you know, these are reasonable 
savings. Is it also true that there was a May 26, 2011, letter 
to Representative Waxman from the CBO projecting the Medicare 
will not exceed the specified targets during the 2012 to 2021 
period, and therefore, that IPAB will not be triggered during 
that period? I know you said that. I would like for you to 
restate that expectation.
    Ms. Sebelius. Well, I think thanks to the impact already of 
some of the strategies in the Affordable Care Act and some 
really unprecedented new tools not only in fraud and abuse but 
in delivery system ability to align payments with high-quality, 
lower-cost care, we are already seeing a cost trend that is 
diminishing. And the actuary has projected that at no time--
there is a slight possibility that in 2018 there would be a 
brief recommendation period, but he basically says that for 
that 10-year period, it is very unlikely that IPAB ever have--
they will be meeting and making recommendations but in terms of 
having to meet a spending target will not occur.
    Ms. Schakowsky. Once again, I frankly was really a bit 
surprised and happy to see that there is this new study that 
says that 93 percent of physicians are taking new Medicare 
patients but only 88 percent of physicians are taking new 
private patient plans, new private plans. The issue of access I 
think, you know, is on everyone's mind, and clearly we do not 
want to see doctors refusing to take Medicare patients. So let 
me ask you to--again, I think it is once again, but address 
this issue of access to care with IPAB.
    Ms. Sebelius. Well, again, I think that the goal is to make 
sure that Medicare is solvent not only for the next number of 
years--and as you know, the Affordable Care Act has already 
extended the solvency projections--but on into the future. And 
so the strategies really are aimed at trying to make sure that 
we not only have patients' ability to choose his or her own 
doctor, a fundamental tenet of the current Medicare plan, very 
different than if you are in a private insurance plan where 
that physician, that hospital system, that pharmacy, that set 
of benefits is pre-chosen for you. So access to your own 
doctor, having, you know, patient-driven strategies and making 
sure that as recommendations are made about any kind of cost 
reduction on into the future that we pay close attention to 
patient access to providers. That is part of the framework of 
the Independent Payment Advisory Board, and it is one that I 
think the board would follow very seriously. Certainly, we 
would at the Department of Health and Human Services pay very 
careful attention to anything that jeopardized care delivery 
and certainly having access to a physician jeopardizes care 
delivery.
    Ms. Schakowsky. Thank you. And let me just say that I want 
to thank you so much for your leadership in making sure that we 
can finally reach a time when all Americans have access to 
quality healthcare. Thank you.
    Mr. Pitts. The chair thanks the gentlelady and recognizes 
the gentleman from New Jersey, Mr. Lance for 5 minutes.
    Mr. Lance. Thank you very much, Mr. Chairman. And good 
morning to you, Madam Secretary.
    Ms. Sebelius. Good morning.
    Mr. Lance. I am interested in the process regarding the 
IPAB because in my judgment oftentimes process relates 
fundamentally to policy. And you have indicated, Madam 
Secretary, that the President has not yet chosen to appoint any 
members of IPAB. Might you give the committee a time frame when 
in your opinion the President might begin to appoint members to 
the board?
    Ms. Sebelius. Sir, I don't know about a specific timetable. 
I know it is absolutely the President's intention that by the 
time the IPAB provision would begin to operate there will be 
members of the board. As you know, the independent actuary 
doesn't make a target recommendation until 2013----
    Mr. Lance. 2013.
    Ms. Sebelius [continuing]. Comes to Congress in 2014.
    Mr. Lance. But it is your best judgment that President 
Obama intends to make appointments in his term of office, the 
term of office ending in the end of 2012.
    Ms. Sebelius. I think President Obama intends to make 
appointments so that the IPAB can be operational at the time 
that it is operational.
    Mr. Lance. Thank you. The law suggests that he makes 
several of the appointments in consultation with the leaders, 
Speaker Boehner, Leader Pelosi, Leader Reid, and Leader 
McConnell. Is that accurate?
    Ms. Sebelius. Yes, sir.
    Mr. Lance. And is he required to appoint those whom the 
leaders have suggested or is it merely consultative?
    Ms. Sebelius. It is consultative.
    Mr. Lance. So, for example, he would not be required to 
follow through on the suggestions of any of the four leaders?
    Ms. Sebelius. That is correct, although the Senate has a 
confirmation ability and I would feel that their consultation 
might be fundamental in getting folks confirmed.
    Mr. Lance. Perhaps that is so. That is obviously for the 
other House of Congress. Now, regarding how we in the 
legislative branch can discontinue the automatic implementation 
process for recommendations of IPAB--and this is down the road, 
for example, in 2017--as I understand it, a joint resolution 
discontinuing the process must meet several conditions, 
including the fact that it would require approval by a super 
majority of 3/5 of the Members of the Senate. Is that accurate?
    Ms. Sebelius. No, sir. The recommendations to be changed by 
Congress operate in the normal rules of the congressional 
structure. Now, the Senate seems to do everything by a vote of 
60, but there is certainly no requirement that IPAB be rejected 
and substitute recommendations be made by a super majority. I 
think it is only to repeal IPAB itself, to get rid of the 
board. It is my understanding that that is a super majority 
written into the law, but not to accept or reject the 
recommendations.
    Mr. Lance. So to follow through on your expertise and you 
are obviously expert on this. To get rid of IPAB, the 
underlying PPACA law requires a super majority in the Senate?
    Ms. Sebelius. Well, in the repeal of the Affordable Care 
Act----
    Mr. Lance. Yes.
    Ms. Sebelius [continuing]. The House has taken action to 
repeal the Independent Payment Advisory Board----
    Mr. Lance. Yes.
    Ms. Sebelius [continuing]. And again, I apologize. I don't 
want to misspeak. It is my understanding that if that were done 
independently, that that would require some kind of super 
majority. Just in 2017. I am sorry.
    Mr. Lance. Yes, in 2017.
    Ms. Sebelius. Just that 1 year----
    Mr. Lance. Yes.
    Ms. Sebelius [continuing]. It would require super majority.
    Mr. Lance. Well, in my judgment that is unconstitutional 
and I am wondering whether the lawyers at your department 
opined on whether that provision is constitution or 
unconstitutional, recognizing that we all rely on the advice of 
those who serve us in legal capacities?
    Ms. Sebelius. I have been advised, Congressman, that our 
lawyers feel that the structure and the operation as described 
by law of IPAB is constitutional. I would be happy to go back 
and get a very specific answer for that question.
    Mr. Lance. Thank you. My time is up. It is my judgment that 
that provision at the very least is unconstitutional and not in 
accordance with the current provisions of the American 
Constitution.
    Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the gentleman from Texas, Mr. Gonzalez, for 5 minutes for 
questions.
    Mr. Gonzalez. Thank you very much, Mr. Chairman. Welcome, 
Madam Secretary.
    This is a quote and since this is a discussion now about 
the benefits and such of competing plans, the Affordable Care 
Act has already been repealed in the House of Representatives. 
This is the quote. ``First, I fear that as health inflation 
rises, the cost of private plans will outgrow the government 
premium support. The elderly will be forced to pay even higher 
deductibles and co-pays. Protecting those who have been 
counting on the current system their entire lives should be the 
key principle of reform.'' Would you agree with that statement?
    Ms. Sebelius. From what I could hear of it, I do agree.
    Mr. Gonzalez. Well, you just agreed with a Republican 
Senator Scott Brown. I just thought I would throw out a 
Republican out there that agrees with the position that we have 
been taking as to the competing plans. And so to give some 
things some context as I lead to my second question would be 
that 1/2 of Medicare beneficiaries have incomes of less than 
$21,000, 1/2 have less than $2,095 in retirement assets, 1/2 
have less than 30,000 in financial assets, 1 in every 4 
Medicare Part D beneficiaries reaches the donut hole. So we 
have had the Affordable Care Act, and something that I believe 
has gone unnoticed--and you may have covered it in your 
statement and I apologize, I got here late--what went into 
effect this year that will result and has already resulted I 
believe in about $260 million in savings to Part D 
beneficiaries when it comes to name-brand pharmaceuticals and 
generics?
    Ms. Sebelius. A 50 percent discount did begin in 2010 for 
those 4 million approximately beneficiaries who will see a 50 
percent decrease in the brand-name drugs that they purchase 
once they hit the donut hole gap.
    Mr. Gonzalez. That is already in place?
    Ms. Sebelius. It is.
    Mr. Gonzalez. Can you contrast what we presently have in 
the way of Medicare Part D and within the Affordable Care Act 
but what we have had in place as opposed to what is being 
proposed by the Republicans and of course what we refer to as 
the Ryan budget, the Ryan plan, RyanCare, whatever you want to 
call it? Is there a significant difference in the very nature 
of the benefit that is being provided?
    Ms. Sebelius. Well, I certainly think that the repeal of 
the Affordable Care Act would eliminate the donut hole closing, 
the gap coverage that now anticipates being closed. But beyond 
that, it is my understanding, Congressman, that there would be 
a significant change in the poorest seniors who now qualify for 
both Medicare and Medicaid benefits. With the Republican budget 
as it deals with Medicaid, as you know right now, there is help 
and support for another approximately 4 million seniors who 
actually are income-eligible. They don't ever hit the so-called 
donut hole and pay out-of-pocket costs because their costs are 
supported by the Federal Government.
    And there would be a major shift in the kinds of support 
for the poorest seniors. It would shift from, again, price 
supports for everything from nursing home care to prescription 
drug care and shift to a fixed income, a fixed amount of money 
in a medical savings account that those seniors could try to 
use to navigate what are often very substantial healthcare 
costs. So I think in terms of the drug plan, there are about 4 
million seniors right now who are actually supported with 
wraparound care. And that would cease to exist also.
    Mr. Gonzalez. The way it has been explained to me--and I am 
surely not the expert in the area--and I am just going to go 
ahead and read basically. ``Part D is a defined benefit, so 
services are specified in law and covered by plans. The 
Republican plan would leave benefits up to the beneficiaries' 
negotiation with the insurers. Part D's federal contribution 
keeps pace with drug costs, so beneficiaries and the government 
split the growth in health cost, and the Republican budget 
beneficiaries would bear all of the burden.'' Is that an 
accurate description of the situation and the contrast between 
what we have, what the Democrats have been proposing and 
supporting, and then the latest proposal from the Republicans?
    Ms. Sebelius. I think so, sir.
    Mr. Gonzalez. Thank you very much. I yield back.
    Mr. Pitts. The chair thanks the gentleman. Before I yield 
to Mr. Guthrie, you mentioned there would be a judicial review 
for the implementation of IPAB recommendations. Before I yield 
to Mr. Guthrie, I would like the record to show on page 420 of 
the act, Section 3403(e)(5) states there should be ``no 
administrative or judicial review under Sections 1869, Section 
1978, or otherwise of the implementation by the Secretary.'' 
That means there is no judicial review of IPAB's 
recommendations.
    Ms. Sebelius. Mr. Chairman, the question that was posited 
to me was a question that assumed that IPAB operated outside 
the scope of their authority, outside the scope of the law. In 
that case, our general counsel feels very strongly that there 
absolutely is a judicial review right. So in the implementation 
that falls within the scope of the law, that is the case that 
you----
    Mr. Pitts. The chair thanks the gentlelady and recognizes 
Mr. Guthrie for 5 minutes.
    Mr. Guthrie. Thanks, Madam Secretary, for coming. I 
appreciate you being here. The question first you seem well 
versed in the Republican budget. How many people that are 65 
years old today and older are affected by that budget? How many 
people will be affected that are elderly on Medicare today?
    Ms. Sebelius. Well, I think the Republican budget would 
dramatically affect the poorest seniors in its impact on----
    Mr. Guthrie. What will Medicare----
    Ms. Sebelius [continuing]. The dual eligible seniors who 
are over 65 today will immediately see a cut in their benefits 
and in their payments going forward.
    Mr. Guthrie. People would see the Medicare they wouldn't be 
affected----
    Ms. Sebelius. Well, those seniors are on Medicare today. 
The poorest seniors in this country would be immediately 
affected by the Republican budget.
    Mr. Guthrie. But on that the President today is talking 
about raising taxes on people making 200,000, $250,000 or more 
and supports that. The administration supports that. If 
somebody is 54 years old today, when they are 65 if their 
income is $250,000 or more, why should they not pay more for 
their healthcare? We want them to pay more taxes or the 
administration does; why shouldn't they be more responsible for 
their healthcare? Why should they be treated the same as the 
dual eligibles? Why should they have the same payment as that?
    Ms. Sebelius. Well, I think the President's concept of 
shared sacrifice is that people contribute a fair share.
    Mr. Guthrie. But not in healthcare? Not in terms of their 
Medicare?
    Ms. Sebelius. In terms of Medicaid, no one qualifies for 
Medicaid who is making $250,000 a year.
    Mr. Guthrie. But if somebody is 65 years old they qualify 
for Medicare regardless of income. If somebody is 65 years 
old----
    Ms. Sebelius. Everyone who reaches the age of 65 in America 
qualifies for Medicare, correct.
    Mr. Guthrie. So my question is why shouldn't somebody that 
is 54 today, 11 years from now when our budget would go into 
effect not be required to pay more for their healthcare if you 
talk about shared sacrifice?
    Ms. Sebelius. Well, the current Medicare structure has 
income-related premiums in a variety of the programs. That is 
part of the program right now.
    Mr. Guthrie. But right now currently there is a study out 
of the Urban Institute. I think you have seen it. It is about 1 
to 3 what people pay into Medicare, what they take out. The 
average of the Urban Institute said I think it is $109,000 the 
average couple pays into Medicare and takes out or will expend 
$343,000 in healthcare costs over the course of their lifetime. 
And I don't think it should be 1 for 1, $1 you get in, $1 you 
get out. But given that the baby boomers are retiring, 1946 
they turn 65 this year. I am 1964, the end of it. Just 
demographically, these kinds of costs just can't be withstood 
in this system. And the system as it is, if you are saying we 
are going to leave the system as it is and try to make it up in 
efficiencies or provider reimbursements, I don't see when we 
get to 2024, which is the point where it--how it becomes 
sustainable without reforming and changing the program, not 
just trying to make it on pure efficiencies. I don't see where 
you can make that kind of difference.
    Ms. Sebelius. Well, I would agree that I think we certainly 
understand that Medicare as it is right now as a fee-for-
service, pay-for-volume program is unsustainable and certainly 
unsustainable at the point as you suggest that we have a 
looming influx of baby boomers.
    Mr. Guthrie. Um-hum.
    Ms. Sebelius. I think there is a very dramatic difference 
of approaches between the Republican plan, which shifts those 
costs onto seniors. It doesn't really lower costs. It just says 
you will pay 61 percent of your own healthcare up to 70 
percent. A direct opposition----
    Mr. Guthrie. Well, I would argue that implementing the 
system would lower costs and kind of--the proof in the pudding 
that was Medicare Part D. It is one of the programs I think it 
is 40 percent under estimates performing because of competition 
within health plans for people's business. So I would argue it 
does lower cost. But go ahead.
    Ms. Sebelius. Well, I just wanted to say that is one vision 
of the system that you shift those costs to private insurers 
and somehow achieve something along the way.
    Mr. Guthrie. The differences are so great. Matter of fact, 
in 30 years, the entire federal budget is going to be Medicare, 
Medicaid, and Social Security.
    Ms. Sebelius. If nothing changes.
    Mr. Guthrie. So the differences are so great and so just 
saying we are going to cut back our reimbursements or create 
efficiencies, I don't see where you make that difference. That 
is my question.
    Ms. Sebelius. Well, I think that again----
    Mr. Guthrie. Without completely reforming the system.
    Ms. Sebelius. I think we do need a complete reform of the 
system, and I think the Republican budget chooses to do that 
with beneficiaries and just shift costs of who pays what----
    Mr. Guthrie. Instead of shifting it to my 17-year-old----
    Ms. Sebelius [continuing]. And the Affordable Care Act 
says----
    Mr. Guthrie [continuing]. To pay it for the rest of their 
life.
    Ms. Sebelius [continuing]. We need to look at the 
underlying healthcare costs not just for Medicare but if 
affects every private employer, it affects everybody who goes 
to the hospital, it affects every doctor, and the kinds of 
underlying healthcare shifts--and let me give you another 
example, Congressman, if I may. We have finally started down 
the road of competitive bidding, a market strategy, for durable 
medical equipment. It was started in 2003, pulled back in 2008, 
restarted this year in the test market where it is implemented. 
There is a 34 percent decrease in durable medical equipment 
without any jeopardizing of benefits.
    Mr. Guthrie. I lost my time but with that level of savings 
required to make it work unsustainable can just come from 
efficiencies alone.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the gentlelady from Tennessee, Ms. Blackburn, for 5 minutes.
    Mrs. Blackburn. Thank you, Madam Secretary, for your 
patience. And three of us are going to try to share the balance 
of your time and get our questions in.
    I would remind my colleagues, one of my colleagues from 
Illinois was making comments about what Medicare would be 
called going forward. I would remind my colleagues it was 
Obamacare or PPACA, whatever we want to call it, that cut $575 
billion out of Medicare. It was a conscious decision to make 
those cuts. I would also remind my colleagues that Medicare is 
a trust fund, and the Federal Government has had first right of 
refusal on the paychecks of the workers of this country. And so 
therefore, making that kind of cut I think is a breach of what 
has been promised to those enrollees.
    Madam Secretary, I looked at some of your comments from the 
budget committee yesterday and I feel like we are kind of doing 
a session of kick the can. And you know as well as I do that as 
we have been with you time and again on these hearings, we have 
looked at access to affordable care and have tried to get some 
definitions from you, and IPAB is one of those that we are very 
concerned about how it is going to restrict or affect access to 
healthcare and what IPAB is going to end up doing. We know that 
supposedly some of the 15 experts coming to IPAB are supposed 
to be pharmaca, economics, health economists, insurers, and 
actuaries. We know that the President, he has an initiative to 
achieve savings. So if they are not there to achieve savings, 
what are they there for?
    Ms. Sebelius. They are there, Congresswoman, to recommend 
to Congress ways that Medicare can be solvent on into the 
future.
    Mrs. Blackburn. So you see it strictly as a solvency issue?
    Ms. Sebelius. That is their direction, yes.
    Mrs. Blackburn. That is their direction. OK.
    Ms. Sebelius. They are only triggered when the independent 
actuary----
    Mrs. Blackburn. Let me ask you another question, then, 
because we know the GAO is supposed to do a study by January 1, 
2015, on access, affordability, and quality. This is of IPAB. 
And then Kaiser Foundation recently noted that, ``IPAB would be 
required to continue to make annual recommendations to further 
constrain payments if the CMS actuary determine that Medicare 
spending exceeded targets, even if evidence of access or 
quality concerns surface.'' And I am quoting Kaiser Foundation. 
So how do you reconcile the statements made by the 
administration that IPAB will not impact access, affordability, 
and quality with the statements made by the Kaiser Family 
Foundation that IPAB is required to continue cutting even if 
evidence of quality-of-access problems arise?
    Ms. Sebelius. Congresswoman, I am not familiar with that 
Kaiser quote, but as you know----
    Mrs. Blackburn. Well, in the interest of time, then, if you 
are not familiar with it, would you----
    Ms. Sebelius. I am not familiar with what Kaiser said. I am 
familiar with the law and I am familiar with the way it works 
and I am familiar with the fact that what they are directed to 
do is when the independent actuary, on a yearly basis--which he 
does year in and year out--recommends a target goal for 
spending, assuming that Congress ignores that, doesn't act, 
they are directed to recommend ways to meet that spending 
target to Congress. Again, if Congress does not act, chooses to 
ignore, chooses not to change it, then those cuts go into----
    Mrs. Blackburn. OK. Well, let me reclaim my time so that I 
can yield to Mr. Shimkus, but I would also like to highlight 
that I am still waiting for a response from you on addressing 
waste, fraud, and abuse from the last hearing. And with that, I 
yield to Mr. Shimkus.
    Mr. Shimkus. Thank you. Thank you, Madam Secretary. 
Welcome. And we are going to try to get you out of here. This 
is our last couple of questions. We are not going to match our 
greatest hits of the last time so I am not intent to do that.
    But our 2024 time frame for the expansion of the solvency 
of Medicare, is that based upon the----
    Ms. Sebelius. 2024----
    Mr. Shimkus. The 2024 expansion of the Medicare Trust Fund 
is based upon the----
    Ms. Sebelius. Expansion or----
    Mr. Shimkus. The solvency.
    Ms. Sebelius. The solvency, yes.
    Mr. Shimkus. The solvency is based upon the $575 billion 
cut in Medicare, is that correct, for the most part?
    Ms. Sebelius. It is based on projecting what the trends are 
right now on into----
    Mr. Shimkus. And based upon the double counting that we 
talked about last time. And I would just ask your individual 
health insurance policy, do you have under the Federal 
Employees' Health Benefit plan?
    Ms. Sebelius. I do.
    Mr. Shimkus. And in the D.C. area there is probably around 
42 difference choices for health insurance policies? I mean in 
St. Louis area is 21. I think D.C. is almost double that 
amount. It is operated by OPM. They negotiate it. We have a 
premium support plan that you are participant of and that I am 
a participant of.
    Ms. Sebelius. And the Federal Government pays about 70 
percent of the cost----
    Mr. Shimkus. All that premium support is a----
    Ms. Sebelius. And it rises----
    Mr. Shimkus [continuing]. Negotiated contractual 
relationship with private insurance to provide insurance just 
like you receive and just like we receive. So it is the same 
plan so any----
    Ms. Sebelius. Well, it is----
    Mr. Shimkus. The voucher debate is not correct.
    Ms. Sebelius. Well----
    Mr. Shimkus. It is the same plan that you have. And I yield 
my time to Dr. Murphy.
    Mr. Murphy. Thank you. I am just trying to find out some 
answers here. And if you don't have the information, could you 
please get back to me.
    What is an estimate of how much you think working on fraud 
issues will save Medicare overall, again, 1 or 5 or 10 years?
    Two, is you are working on a number of issues about quality 
improvement. You did mention the issue about infections. There 
has been bills we have moved through this committee, a bill 
that I wrote to ask for transparency on infection reporting. I 
understand from speaking with the head of Center for Disease 
Management that it has been about 27,000 lives have been saved 
by having the transparency. And I appreciate everybody who 
worked on that. If you could get us some accurate numbers of 
how much money that will save, too, over time, I would 
appreciate that, too.
    So yes, fraud, improvement of quality, and there is a 
number of issues there. Another option, too, to reduce Medicare 
costs is the ongoing issue we have of reducing payments, which 
is the SGR, et cetera, and also means testing has been kicked 
around, too. But I do want to ask this and tie in with some 
other issues. Medicare Part D, the actual part that is a donut 
hole--and, again, I don't expect you to know these numbers--but 
there is a percentage of seniors that never got to that level 
because they never needed that much prescriptions. Do you have 
information on what percentage of seniors that was or how many 
that was who, you know, spending for prescription drugs never 
got there?
    Ms. Sebelius. I know that about 8 million hit it. I don't 
know how many enrollees we have.
    Mr. Murphy. Um-hum.
    Ms. Sebelius. I don't know how many are enrolled but I can 
get you that number.
    Mr. Murphy. Let me lay out because I don't want to play 
games and I am sure you don't like them either. I am just 
trying to find this out. In terms of the number of seniors who 
actually had a donut hole problem, some never purchased a plan 
but never hit that level. Some did purchase a donut hole 
coverage plan and helped them through that next level. And some 
did not have coverage and those are the ones we all share a 
concern about. So what I am trying to find out as we are 
looking at honest numbers on this is what was the difference in 
impact upon cost and quality of care? You are probably familiar 
with the study that came out that said about 50 to 75 percent 
of people who were prescribed medication do not take it 
correctly. Either they never fill the prescription, they don't 
take it, they mix it with other drugs, and that leads to 
returns to physicians' offices, re-hospitalizations, extended 
hospital visits, and emergency room visits.
    In the context of this, as we really try and look at honest 
quality--and I get real tired of this Republican-Democrat 
battle. I just want to talk about patients here. The issue is 
if we get down to the concrete levels of this, what does it 
really save if we focus on how we can do such things as disease 
management and care management, because you know right now that 
is not paid for. And that is a big frustration for me that 
someone who may have a chronic illness such as diabetes or 
cancer or heart disease, if they are not helped through this 
and physicians aren't paid for this, so we don't pay a nurse to 
make the call and monitor this, it is a serious cost problem. 
And I hope that is something as we get through this you can 
help us with some real numbers. I don't know if the IPAB board 
is authorized to work on these things. I tend to not think so 
but correct me if I am wrong. I would deeply appreciate further 
discussions with you on this outside of this artificial setting 
here and to work further on this.
    Ms. Sebelius. Well, I would very much appreciate that. We 
can get you some numbers. I am not sure--since Medigap plans 
are sold at the state level and some cover additional 
prescription drugs but a lot don't--how accurate I can--but we 
will get you the donut hole numbers as much as we can. And we 
would love to work with you on coordinated care strategies, 
particularly for the chronically ill. I think that is an 
enormous opportunity for better care delivery at significantly 
lower costs.
    Mr. Murphy. Thank you. And I might add my closing part here 
is that I know that a lot of private plans end up paying these 
out of pocket now where they will cover heart disease and 
diabetes, and I want to make sure we don't leave this hearing 
saying that everything the government does is bad and 
everything private insurance does is bad. I think there is a 
lot mistakes on both, but I would hope we would not get into 
that finger-pointing and blame game but instead say let us look 
at how we can use disease management. And I want to hear how 
this is going to be done better. Thank you. I yield back.
    Ms. Sebelius. Thank you.
    Mr. Pitts. The chair thanks the gentleman. Madam Secretary, 
we will submit questions for the record and ask that you please 
respond promptly to those. You have been very generous with 
your time. Thank you for your testimony. We will take a 5-
minute break as we set up the third panel.
    [Recess.]
    Mr. Pitts. The subcommittee will come to order. I will ask 
our guests to please take their seats. The chairman has a 
unanimous consent request that the following documents be 
entered into the record: statement of Burke Balch, Director of 
the Robert Powell Center for Medical Ethics of the National 
Right to Life Committee; second, a letter from Sandra 
Schneider, President of American College of Emergency 
Physicians to Chairman Pitts and Ranking Member Pallone; 
thirdly, statement of Thair Phillips, President of RetireSafe; 
fourth, a letter from 283 healthcare organizations opposing the 
Independent Payment Advisory Board; fifth, statement of Karen 
Zinka, Health Educator for Men's Health Network; sixth, a 
statement of Richard Waldman, President of American College of 
Obstetricians and Gynecologists; seventh, a letter from Tim 
Laing, Chair of the Government Affairs Committee, American 
College of Rheumatology; eighth, statement of the American 
College of Radiology; ninth, a letter from Cecil Wilson, past 
president of the American Medical Association; tenth, testimony 
from Bob Blancato, National Association of Nutrition and Aging 
Services Programs. I think you have all copies of these. 
Without objection, so ordered.
    [The information follows:]
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    Mr. Pitts. I will introduce our third panel at this time. 
Testifying in our third panel are Christopher Davis, who is an 
analyst on Congress and the legislative process for the 
Congressional Research Service; David Newman is a specialist in 
healthcare financing at the Congressional Research Service; 
Avik Roy is a healthcare analyst with the firm Monness, Crespi, 
Hardt, and Company in New York City; Stuart Guterman is vice 
president for Payment and System Reform, executive director for 
the Commission on High Performance Health System at the 
Commonwealth Fund; Judy Feder is professor public policy at 
Georgetown University; and Dr. Scott Gottlieb is a practicing 
physician and is currently a resident fellow in health policy 
at the American Enterprise Institute.
    Mr. Davis, you may begin your testimony.

STATEMENTS OF CHRISTOPHER M. DAVIS, ANALYST ON CONGRESS AND THE 
     LEGISLATIVE PROCESS, CONGRESSIONAL RESEARCH SERVICE, 
    ACCOMPANIED BY DAVID NEWMAN, SPECIALIST IN HEALTH CARE 
FINANCING, CONGRESSIONAL RESEARCH SERVICE; DIANE COHEN, SENIOR 
 ATTORNEY, SCHARF-NORTON CENTER FOR CONSTITUTIONAL LITIGATION, 
 GOLDWATER INSTITUTE; JUDITH FEDER, PROFESSOR AND FORMER DEAN, 
  GEORGETOWN PUBLIC POLICY INSTITUTE; AVIK S. ROY, HEALTHCARE 
   ANALYST, MONNESS, CRESPI, HARDT AND CO.; STUART GUTERMAN, 
  SENIOR PROGRAM DIRECTOR, PROGRAM ON MEDICARE'S FUTURE, THE 
    COMMONWEALTH FUND; AND SCOTT GOTTLIEB, RESIDENT FELLOW, 
                 AMERICAN ENTERPRISE INSTITUTE

               STATEMENT OF CHRISTOPHER M. DAVIS

    Mr. Davis. Thank you, Mr. Chairman. Chairman Pitts, Ranking 
Member Pallone, and members of the subcommittee, on behalf of 
the Congressional Research Service I appreciate the opportunity 
to testify about the ``fast-track'' parliamentary procedures 
relating to the Independent Payment Advisory Board.
    I am accompanied today by my CRS colleague, David Newman, 
who is a specialist in healthcare financing. While I will limit 
my testimony to the parliamentary aspects of the IPAB, at the 
request of the subcommittee, David is available to answer 
questions if desired on the healthcare policy aspects of the 
board.
    Expedited or ``fast-track'' procedures are special 
parliamentary procedures Congress sometimes adopts to promote 
timely action on legislation. As the name implies, fast-track 
procedures differ from the usual procedures of the House and 
Senate because they generally allow the legislation in question 
to be considered more quickly and to avoid some of the 
parliamentary hurdles which face most bills.
    The Patient Protection and Affordable Care Act established 
two fast-track procedures related to the IPAB. The first 
governs consideration of a bill implementing the 
recommendations of the IPAB related to future rates of Medicare 
spending. The second procedure governs consideration of a joint 
resolution discontinuing the automatic implementation of the 
IPAB's recommendations. I will briefly describe both 
procedures.
    As others have testified, under PPACA the IPAB will, under 
certain circumstances, propose an implementing bill containing 
recommendations designed to reduce the rate of Medicare 
spending growth. The Secretary is to automatically implement 
these recommendations on August 15 unless legislation is 
enacted before then which supersedes the IPAB proposals.
    The procedures established by PPACA permit Congress to 
amend the IPAB-implementing legislation but only in a manner 
that achieves at least the same level of targeted reductions in 
spending growth as the IPAB plan. The act bars Congress from 
changing the IPAB fiscal targets in any other legislation it 
considers as well and creates a super majority vote in the 
Senate to wave this requirement.
    PPACA establishes special fast-track procedures governing 
House and Senate committee consideration and Senate Floor 
consideration of an IPAB-implementing bill. Under these 
procedures, the bill is automatically introduced and referred 
to the House Committees on Energy and Commerce and Ways and 
Means and to the Senate Committee on Finance. Not later than 
April 1, each committee may report the bill with committee 
amendments related to the Medicare program. If a committee has 
not reported by April 1, it is discharged.
    PPACA does not establish special procedures for Floor 
consideration of an IPAB-implementing bill in the House. It 
does for the Senate. PPACA creates an environment for Senate 
Floor consideration of an IPAB-implementing bill which is 
similar to that which exists after the Senate has invoked 
cloture. There is a maximum of 30 hours of consideration and 
all amendments must be germane. A final vote on the bill is 
assured.
    PPACA establishes a second fast-track procedure governing 
consideration of a joint resolution discontinuing the automatic 
implementation process of the IPAB recommendations. Such a 
joint resolution is in order only in the year 2017 and its 
consideration is also expedited in committee and on the Senate 
Floor. Passage of a joint resolution discontinuing the 
automatic IPAB process requires a 3/5 vote of Members of both 
the House and the Senate. Both the IPAB-implementing bill and 
the joint resolution I have described must be signed by the 
President to become law. should either measure be vetoed, 
overriding the veto would require a 2/3 vote in both chambers. 
The arguable effect of these provisions is to favor the 
continuation of the IPAB and its recommendations possibly even 
in the face of congressional majority supporting a different 
policy approach.
    While the fast-track parliamentary procedures governing 
consideration of an IPAB-implementing bill are expedited, they 
do not in themselves guarantee that Congress will agree on a 
bill and present it to the President. Because it is not 
possible to force the House and Senate to agree on the same 
bill text, whether Congress can pass an implementing bill which 
will supersede the recommendations of the IPAB is subject to 
the deliberative process.
    Finally, as I detail in my written testimony, questions 
about certain mechanics of these two fast-track procedures, 
such as how certain points of order under the act will be 
enforced will likely require clarification by the House and 
Senate in close consultation with each chamber's 
parliamentarian.
    The Congressional Research Service appreciates the 
opportunity to assist the subcommittee as it examines these 
matters. My colleague and I are happy to answer any questions 
you may have.
    [The prepared statement of Mr. Davis follows:]
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    Mr. Pitts. The chair thanks the gentleman.
    Mr. Newman, you are recognized for 5 minutes for an opening 
statement.
    Mr. Newman. I have no independent testimony.
    Mr. Pitts. Ms. Cohen, I apologize to you. I failed to 
introduce you in the introduction. Diane Cohen, Senior Attorney 
for Goldwater Institute. You are recognized for 5 minutes.

                    STATEMENT OF DIANE COHEN

    Ms. Cohen. Thank you, Chairman, and thank you, Ranking 
Member Pallone. I really appreciate the opportunity to come 
here all the way from Arizona and to discuss with you the 
unprecedented constitutional issues raised by Congress' 
establishment of the Independent Payment Advisory Board and the 
real-world consequences that this unprecedented independent 
agency will have on the lives of citizens and especially 
seniors.
    The Goldwater Institute's legal challenge to the Patient 
Protection and Affordable Care Act is unique among the lawsuits 
challenging the act because ours is the only one that 
challenges the constitutionality of IPAB. We believe the 
creation of IPAB represents the most sweeping delegation of 
Congressional authority in history, a delegation that is 
anathema to our constitutional system of separation of powers 
and to responsible, accountable, and democratic lawmaking. IPAB 
is insulated from congressional, presidential, and judicial 
accountability to a degree never before seen. It is the 
totality of these factors that insulate IPAB from our Nation's 
system of checks and balances that renders it constitutionally 
objectionable.
    Specifically, IPAB is an unelected board of bureaucrats 
whose proposals can become law without the approval of 
Congress, without the approval of the President, and they are 
insulated from rulemaking, administrative and judicial review, 
and any meaningful congressional oversight. Far from 
representing Medicare reform, IPAB is an abdication of what has 
been historically a congressional responsibility. Indeed, it is 
an unconstitutional delegation of Congress' legislative duties 
and is unaccountable to the electorate and immune from checks 
and balances.
    And I just want to follow up on what the Secretary 
testified about earlier this morning. Let us be clear, Section 
(e)(5), the act specifically prohibits judicial review. And 
what that means is that the act prohibits judicial review. If 
the Secretary acts outside the law, there is no judicial 
review. There is no accountability for her actions. Secondly, 
these are not mere proposals or recommendations. These are 
legislative proposals that can become law.
    We also heard talk about while one provision says there is 
no judicial review but we are not supposed to believe that, 
another provision says a joint resolution is required to 
dissolve the board, but we are not supposed to believe that, 
and then another provision prohibits rationing, but we are 
supposed to believe that.
    IPAB is independent in the worst sense of the word. It is 
independent of Congress, independent of the President, 
independent of the judiciary, and independent of the will of 
the American people. Thank you, Mr. Chairman.
    [The prepared statement of Ms. Cohen follows:]
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    Mr. Pitts. The chair thanks the gentlelady and recognizes 
Dr. Feder for 5 minutes.

                   STATEMENT OF JUDITH FEDER

    Ms. Feder. Thank you, Chairman Pitts, Ranking Member 
Pallone, members of the committee.
    Mr. Pitts. Pull your mike--or push it on. Yes.
    Ms. Feder. OK?
    Mr. Pitts. That is better.
    Ms. Feder. I will start again. Chairman Pitts, Ranking 
Member Pallone, members of the committee, I am glad to be with 
you this morning as you consider the role of the Independent 
Payment Advisory Board established by the Affordable Care Act.
    I would like to start in thinking about how to approach 
that by calling your attention to the fact that Medicare is an 
enormously successful program, more successful than private 
health insurance in pooling risk and controlling costs. 
Medicare has historically achieved slower spending growth than 
private insurance, and the ACA extends its relative advantage. 
Action taken in the Affordable Care Act achieves an average 
annual growth rate of 2.8 percent per Medicare beneficiary for 
2010 to 2021, 3 percentage points slower than per capital 
national health spending. National health spending is projected 
to grow faster than GDP growth per capital by close to 2 
percentage points, but Medicare's projected per beneficiary 
spending growth will be a full percentage point below growth in 
per capital GDP.
    Growing slower than the private sector is good but not good 
enough since both public and private insurers pay too much for 
too many services and fail to assure sufficiently delivered 
quality care. That is why the Affordable Care Act goes beyond 
tightening fee-for-service payments to pursue a strategy of 
payment and delivery reform and creates the IPAB to assure 
effective results. The strategy includes payment reductions for 
overpriced or undesirable behavior and bonuses or rewards for 
good behavior, most especially for payment arrangements that 
reward providers for coordinated integrated care efficiently 
delivered.
    These reforms have the potential to transform both Medicare 
and, by partnership and example, the Nation's healthcare 
delivery system to provide better quality care at lower cost. 
But their achievement in implementation cannot be assumed. That 
is why the IPAB exists, to recommend ways to achieve specified 
reductions in Medicare spending by changing payments to 
healthcare providers. In essence, IPAB serves to inform and 
assure congressional action to keep Medicare spending under 
control.
    Some legislators have proposed to repeal the IPAB, but 
along with about 100 health policy experts who recently wrote 
congressional leaders in support of IPAB, I see that effort as 
sorely misguided. As we wrote, the IPAB enables Congress to 
mobilize the expertise of professionals to assemble evidence 
and assure that the Medicare program acts on the lessons of the 
payments and delivery innovations the Affordable Care Act seeks 
to promote.
    I contrast the ACA strategy to strengthen Medicare with the 
inclusion of IPAB with the alternative strategy not only to 
repeal IPAB but also to eliminate Medicare for future 
beneficiaries, replacing it with vouchers for the purchase of 
private insurers, vouchers that take advantage of all Medicare 
payment reductions included in the Affordable Care Act. The 
Congressional Budget Office analysis shows that such action 
would not slow healthcare cost growth. Rather, it would 
increase insurance costs and shift responsibility for paying 
most of them onto seniors, doubling out-of-pocket costs for the 
typical 65-year-old from about 6 to $12,000 in 2022 with out-
of-pocket spending for beneficiaries growing even further in 
the future as the gap between Medicare--slower cost growth--and 
private insurance--more faster cost growth--would increase.
    Given Medicare's track record relative to private insurance 
in delivering benefits and controlling costs, morphing Medicare 
into a private insurance market simply makes no sense. Medicare 
is clearly doing its part to control spending and to bring the 
rate of spending growth under control. But healthcare spending 
growth is not fundamentally a Medicare problem. It is a health 
system problem. Medicare can only go so far on its own to 
promote efficiencies without partnership with the private 
sector. Effective payment and delivery reform requires an all-
payer partnership to assure that providers actually change 
their behavior rather than looking to favor some patients over 
others or to pit one pair against another.
    Rather than moving to abandon IPAB which supports 
Medicare's continued and improved efficiency, Congress should 
therefore modify IPAB's current spending target to apply not 
just to Medicare but to private insurance, indeed, to all 
healthcare spending and extend its authorities to trigger 
recommendations for all payer payment reform if the target is 
breached. Only payment efficiencies that apply to all payers 
can assure Medicare and all Americans the affordable quality 
care we deserve.
    Thank you, Mr. Chairman.
    [The prepared statement of Ms. Feder follows:]
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    Mr. Pitts. The chair thanks the gentlelady and recognizes 
the gentleman, Mr. Roy, for 5 minutes.

                    STATEMENT OF AVIK S. ROY

    Mr. Roy. Chairman Pitts, Ranking Member Pallone, and 
members of the Health Subcommittee----
    Mr. Pitts. Is your mike on?
    Mr. Roy. Chairman Pitts--there we go--Ranking Member 
Pallone, members of the Health Subcommittee, thanks for 
inviting me to speak with you today about IPAB.
    My name is Avik Roy and I am a healthcare analyst at 
Monness, Crespi, Hardt, and Company, a securities firm in New 
York. In that capacity, I recommend healthcare investments to 
our clients who represent the largest investment firms in the 
world. In addition, I am a senior fellow in healthcare at the 
Heartland Institute in which capacity I conduct research on 
health policy with an emphasis on entitlement reform.
    In my remarks today I will focus on four questions: first, 
why is Medicare so expensive? Second, what is the best way to 
adjust the growth of Medicare spending while preserving high-
quality care for seniors? Third, is IPAB likely to aid these 
goals? Fourth, is IPAB perfect as it is? Is it possible to 
reform or improve IPAB or should Congress scratch the whole 
thing and try something else?
    Why has Medicare spending gone through the roof? Many trees 
have been killed in search of answers to the questions. Well, 
while there are many plausible drivers of Medicare spending 
growth, the single-biggest problem is this: it is easy to waste 
other people's money. It is like the difference between a cash 
bar and an open bar. At a cash bar, I might order a beer or a 
house wine, but at the open bar, I would probably ask for a 
fine Kentucky bourbon, especially if Congressman Guthrie and 
Whitfield come back. Price becomes no object in such a system. 
And Medicare is more like that open bar. As a result, seniors 
tend to be entirely unaware of how expensive their treatments 
are and have no incentive to avoid unnecessary or overpriced 
care. Studies show that spending has increased most rapidly in 
those areas of healthcare where individuals bear the least 
responsibility for their own expenses.
    So what should Congress do? There are three ways to deal 
with the Medicare cost problem. The first, which is what we do 
now, is to avoid hard choices by promising that we will cover 
nearly every treatment but underpay doctors and hospitals in 
compensation. The second approach, which we call rationing, is 
for Medicare to determine either by congressional order or an 
expert panel that certain treatments aren't cost-effective and 
deny them to seniors who seek them out. The third option would 
be to let seniors decide by granting them more control over 
their own health dollars either by increased cost-sharing and/
or by allowing them to choose between different insurance plans 
with different benefit packages.
    Our current approach, underpaying doctors and hospitals, is 
leading more and more doctors to drop out of Medicare. We 
already see this problem in Medicaid where internists are 
almost nine times as likely to reject all Medicaid patients for 
new appointments than those with private insurance. According 
to Medicare Actuary Richard Foster, Medicare reimbursement 
rates will become worse than those of Medicaid within the next 
9 years. And studies show that health outcomes for many 
Medicaid patients are worse than those who have no insurance at 
all.
    As you know, after objections at rationing care through 
IPAB would resemble a death panel, Congress severely 
constrained IPAB's authority preventing the board from 
including any recommendation to ration care, raise premiums, 
increase cost-sharing, restrict benefits, or alter eligibility 
requirements. I know that you are all very familiar with the 
endless tussle over the Medicare sustainable growth rate, or 
SGR, which has caused significant fiscal headaches because 
Congress routinely overrides the SGR's requirements for reduced 
payments to doctors and hospitals. But IPAB, as it is currently 
designed, is similar to SGR in that its primary approach to 
cost control involves reducing payments to physicians. These 
global reimbursement cuts haven't worked in the past and they 
won't work in the future. Hence, we should be seriously 
concerned that IPAB as it is currently designed will reduce 
seniors' access to doctors and healthcare services, thereby 
worsening the quality and outcome of their care.
    So the question we must then ponder is can IPAB be fixed or 
should Congress wholly repeal it? It is conceivable that a 
differently designed IPAB could help Medicare spending more 
efficient. For example, an IPAB that was empowered to make 
changes to Medicare premiums, cost-sharing provisions, and 
eligibility requirements could assist Congress in enacted much-
needed reforms to the program.
    I know that both IPAB's proponents and its opponents see 
the board as a foot in the door for government rationing. But 
let us remember that for 45 years we have misled the public 
into thinking that we could provide seniors with unlimited 
taxpayer-funded healthcare with no constraints. IPAB, to its 
credit, is an attempt at intellectual honesty because 
government rationing is a logical and necessary consequence of 
single-payer systems like Medicare.
    Between IPAB and the 2012 House budget, Congress can now 
have an honest debate. Should we move to a more British-style 
system of rationing under single-payer healthcare or should we 
move to a more Swiss-style system of individual choice and 
diverse options? In the diversity-and-choice approach, if you 
don't like how your health plan restraints costs, you can 
switch to another plan or spend your own money on a more 
generous plan. In the government-driven approach, you have to 
accept what the government tells you to accept or pay onerous 
economic penalties.
    It is certainly my view that diversity and choice is more 
appealing and also more likely to work.
    Thanks again for having me. As an addendum to my written 
testimony, I am including an article from the latest issue of 
National Affairs in which I further expand on these issues. I 
look forward to your questions.
    [The prepared statement of Mr. Roy follows:]
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    Mr. Pitts. The chair thanks the gentleman and recognizes 
Dr. Guterman for 5 minutes.

                  STATEMENT OF STUART GUTERMAN

    Mr. Guterman. Thank you, Chairman Pitts, Vice Chairman 
Burgess, Ranking Member Pallone, and members of the 
subcommittee, for this invitation to testify on the Independent 
Payment Advisory Board.
    I am Stuart Guterman, Vice President for Payment and System 
Reform with the Commonwealth Fund, which is a private 
foundation that aims to promote a high-performance health 
system that achieves better access, improved quality, and 
greater efficiency, particularly for society's most vulnerable 
members, including those with low incomes, the uninsured, young 
children, and elderly adults. I am particularly glad to be able 
to speak to you on this topic because I have been working on 
Medicare issues, particularly payment policy, for a long time 
at CMS, MedPAC and CBO.
    I have seen the problems faced by the program persist over 
time despite continuous efforts to address and remediate them. 
I believe we have an unprecedented opportunity and an historic 
imperative now to address these problems in a comprehensive 
way, which is the only way they can be solved. The Congress 
faces a challenging dilemma in addressing the growth of 
Medicare spending. Achieving an appropriate balance between 
controlling costs and continuing to achieve the objectives of 
the program is a difficult task but one that is of the utmost 
importance.
    An important factor to considering policies to control 
Medicare and other federal health spending is the fact that it 
is largely driven by factors that apply across the healthcare 
system, putting pressure not only on the public sector, 
including both the Federal Government and state and local 
governments but the private sector as well, including both 
large and small businesses, workers and their families, and 
others who need or may need healthcare. Treating healthcare 
cost growth only as a Medicare issue can lead to inappropriate 
policies that fail to address the underlying cause of the 
problem and lead to increasing pressure not only on Medicare 
and its beneficiaries but on the rest of the health system and 
the people it serves. In other words, I guess I would say that 
the open bar extends not only to Medicare beneficiaries but to 
all patients who make choices about how much healthcare to 
use--and their providers.
    The IPAB, if used appropriately, can serve as a helpful 
tool in attempting to address these issues. It should be viewed 
as an opportunity to focus the attention of policymakers both 
in the executive branch and the legislative branch and in fact 
if stakeholders and state and local governments in the private 
sector as well, an action that in the end needs to be taken to 
avoid an alternative that everybody should agree will be 
unpalatable.
    I have described some of these actions in my written 
testimony, which I won't go into detail here, but suffice it to 
say, this will require a broader view of the role of IPAB and 
all other available mechanisms as well. It is not a question of 
whether Congress or the IPAB should be trusted to solve this 
problem but the issue that it will take, collaboration among 
Congress, the administration, and all parties involved in the 
healthcare system to solve it.
    While the board is currently charged with identifying areas 
of overpayment in Medicare, its scope of authority also 
includes issuing recommendations for Medicaid and private 
insurer payment policies. And the combined leverage of multiple 
payers could in fact yield prices closer to competitive market 
prices, as well as greatly reduce administrative burdens on 
physician practices and hospitals, all while stimulating 
delivery system improvement and innovation. To be sure, how 
much we pay for healthcare is very important, but how we pay 
and what we pay for is even more important. The IPAB should be 
looked at as a tool to be used to improve health system 
performance in this way.
    An array of payment approaches can be designed to encourage 
providers to become more accountable for the quality and cost 
of care beneficiaries receive and reward them rather than 
punishing them as the current system often does for providing 
that type of care. In this regard, the IPAB can and should work 
closely with the new CMS Innovation Center. These innovations 
should be developed both from the top down with the Federal 
Government leading the way, as well as from the bottom up with 
Federal Government joining in initiatives developed and 
implemented by local stakeholders.
    The Affordable Care Act provides for testing innovative 
payment strategies, including broad authority for the 
Innovation Center to pilot test a broad array of payment and 
delivery system reforms. The IPAB should have the flexibility 
to work with the Innovation Center to quickly adopt and spread 
successful innovations throughout the Medicare and Medicaid 
programs and work to encourage their spread and align 
improvement efforts throughout the healthcare system.
    Finally, and perhaps most importantly, the scope of the 
IPAB should include working with private sector payers on ways 
to foster collaboration between the public and private 
initiatives to improve organization and delivery of healthcare 
and slow cost growth. Given the CBO's finding of 55 percent of 
projected increase in federal health spending over the next 25 
years can be attributed to excess growth in healthcare costs 
throughout the healthcare sector. This problem plagues 
businesses, households, federal, state, and local government 
alike. And it seems clear the only way to reduce growth in 
federal health spending is to address the growth of total 
health spending.
    Summing up, the emphasis of IPAB as part of a broader 
process should be on total healthcare costs rather than only 
federal spending, enhancing access and quality, being sensitive 
to distributional impact, including protecting the most 
vulnerable, emphasizing the need the improve performance, 
encouraging coherence and alignment of incentives across the 
entire healthcare system. Again, the IPAB can be useful as a 
vehicle for focusing attention on these most critical issues if 
all the public and private sector stakeholders can work 
together to make it so.
    Thanks for inviting me to participate in this hearing, and 
I am honored to be here before the subcommittee and with these 
distinguished panels and look forward to the rest of the 
discussion.
    [The prepared statement of Mr. Guterman follows:]
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    Mr. Pitts. The chair thanks the gentleman and recognizes 
Dr. Gottlieb for 5 minutes.

                  STATEMENT OF SCOTT GOTTLIEB

    Mr. Gottlieb. Mr. Chairman, Ranking Member, thank you for 
the opportunity to testify before the committee.
    IPAB was created based on a premise that decisions about 
the pricing of Medicare's benefits are simply too contentious 
to be handled by a political process. But changes to the way 
Medicare pays for medical services affect too many people in 
significant ways to be made behind closed doors. How Medicare 
prices medical products and services has sweeping implications 
across the entire private market. They are some of the most 
important policy choices that we make in healthcare. To these 
ends, there are some considerable shortcomings with the way 
that IPAB is structured and how it will operate.
    Among these problems, IPAB has no obligation to engage in 
public notice and comment that is customary to regulatory 
agencies whose decisions have similarly broad implications. 
IPAB's decisions are restricted from judicial review. In 
creating IPAB, Congress provided affected patients, providers, 
and product developers with no mechanism for appealing the 
board's decisions. IPAB's recommendations will be fast-tracked 
through Congress in way that provides for only a veneer of 
congressional review and consent. The cumulative effect of the 
rules for appointing members to IPAB will almost guarantee that 
most of its outside members hail from the insular ranks of 
academia. But most significantly, IPAB is unlikely to take 
steps that actually improve the quality of medical care and the 
delivery of services under Medicare. That is because IPAB does 
not have any practical alternative to simply squeezing prices 
in the Medicare program.
    The problem we have in Medicare is a problem with the 
existing price controls that erode healthcare productivity and 
Medicare's outdated fee-for-service payment system. This leads 
to inefficient medical care. There is too little support for 
better, more innovative ways of delivering healthcare.
    So what is IPAB likely to do besides simply squeeze prices? 
They will also try to confer CMS with new authorities to enable 
the agency to make more granular decisions about what products 
and services CMS chooses to cover. IPAB could well confer CMS 
with constructs such as Least Costly Alternative authority or 
the authority to consolidate drugs, devices, equipment, or 
services under the same payment code. The combined effect of 
these new powers would effectively give CMS the ability to 
engage in tacit forms of reference pricing.
    The problem is that CMS has no tradition of making these 
kinds of decisions. As a consequence, it has little capacity to 
make the required clinical judgments. I believe many in 
Congress realize this and I know many stakeholders recognize 
it. This isn't just a question of expertise. It is also a 
question of whether these kinds of personal medical choices 
should be made in the first place by a remote agency that is 
far removed from the circumstances that influence clinical 
decision-making. This will have implications for patients and 
providers. It will also have implications for those developing 
new medical technologies making that process more uncertain, 
more costly, and less attractive to new investment.
    Medicare must continue to implement reforms to align its 
coverage and payment policies with the value delivered to 
beneficiaries. Congress needs to focus on real ways to get 
longer-term savings like premium support, modernizing benefits 
in tradition Medicare, and paying for better outcomes. IPAB 
makes it even harder to do all these things.
    In closing, if Congress believes that the political process 
is incapable of making enduring decisions about the payment of 
medical benefits, then all of this is an argument for getting 
the government out of making these kinds of judgments in the 
first place. It is not an argument for creating an insular 
panel that is removed from the usual scrutiny to take decisions 
that other federal entities have failed to adequately discharge 
precisely because those decisions could not survive public 
examination.
    Thank you.
    [The prepared statement of Mr. Gottlieb follows:]
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    Mr. Pitts. The chair thanks the gentleman. I will now begin 
the questioning and recognize myself for 5 minutes for that 
purpose.
    Mr. Roy, changes that reduce cost by improving the 
healthcare delivery system and health outcomes often require 
several years before savings may occur and the board may have 
to find immediate savings. Therefore, isn't there a real 
concern that board proposals may skew towards changes in 
payments, which are likely to result in de facto rationing of 
care and ignore the more important aspects of long-term reform?
    Mr. Roy. In fact, it appears that that is almost certain to 
be the likely consequence of IPAB's decisions.
    Mr. Pitts. Thank you.
    Ms. Cohen, can you expand on how difficult it would be for 
Congress to stop or override the decisions made by the 15 
experts on this board once the process is put into motion?
    Ms. Cohen. Certainly. Well, first of all, it is not a 
matter of Congress being able to come up with an alternative. 
The alternative would actually have to be exactly what IPAB 
would have already done. They have to make the same cuts or an 
alternative couldn't even be viable pursuant to the statute. 
There can be no amendments to IPAB's proposal, again, unless it 
meets the very strict requirements of IPAB's statute. So 
basically, Congress can do nothing but do more than what IPAB 
has done. It certainly couldn't do less.
    But more than that, we have talked about the spending 
targets, but IPAB's power is much broader than that. IPAB also 
has powers that could affect the private market, and it is very 
unclear about if a proposal came by that came from IPAB that 
included recommendations for the private market--or legislative 
proposals, as they are called in the act--whether Congress 
could actually override that. And then, of course, there is the 
super majority voting requirement in the Senate. And that, of 
course, is a very difficult hurdle.
    Mr. Pitts. Thank you. Anyone can respond to this question. 
Savings attributable to the IPAB have varied considerably. The 
CBO's scoring for the IPAB has changed several times. 
Initially, the CBO estimated that savings attributable to the 
board would be $15.5 billion over the 5-year period from 2015 
to 2019. In March 2011, realizing that under current law the 
IPAB mechanism will not affect Medicare spending during the 
2011-2021 period, CBO scored repeal of the IPAB at zero. In 
April, using an obscure statistical methodology called the one-
sided bet, the CBO revised this estimate again and now says 
that full repeal of the IPAB would cost $2.4 billion. Can 
anyone explain why this has been so difficult to score? Mr. 
Davis, do you want to try?
    Mr. Davis. Mr. Chairman, I would like to, if I can, defer 
to my colleague, Mr. Newman.
    Mr. Pitts. All right. Mr. Newman?
    Mr. Newman. I think basically we have got a varying set of 
assumptions going forward in that these estimates are likely to 
change in future years, too. If Congress fixes the SGR, the 
baseline estimate with respect to what program expenditures are 
going to be will change, and once that changes, the targets 
will change and the potential savings resulting from board 
recommendations will change, too. I think what you are doing is 
looking at snapshots at these estimates over time.
    Mr. Pitts. All right. Thank you.
    Dr. Guterman, regarding the IPAB, the CBO stated that the 
board is likely to focus its recommendations on changes to 
payment rates or methodologies for services in the fee-for-
service sector by nonexempt providers. And the Kaiser Family 
Foundation recently stated in an issue brief that the 1-year 
scorable savings mandate may discourage the type of longer-term 
policy change that could be most important for Medicare, and 
the underlying growth in healthcare cost, including delivery 
system reforms that MedPAC and others have recommended, which 
are included in the ACA and which generally require several 
years to achieve savings. Would you agree with this assessment 
from both the CBO and the Kaiser Foundation?
    Mr. Guterman. I would suggest that the IPAB, since it 
doesn't exist yet, what it focuses on will depend a lot on the 
environment in which it operates. And I would envision IPAB as 
working closely with the Innovation Center to incorporate some 
of the best policies that were enacted in the Affordable Care 
Act and other policy ideas as well. So I would hope that IPAB 
wouldn't be an either-or proposition, that you would either 
take IPAB or the Congress or some other party but that it would 
be people working together to try to find the best policies 
available to accomplish the goals that IPAB was established 
for, which is to slow Medicare spending and more broadly to 
slow healthcare spending.
    Mr. Pitts. The chair thanks the gentleman. My time has 
expired. The chair recognizes Ms. Schakowsky for 5 minutes for 
questions.
    Ms. Schakowsky. I thank you, Mr. Chairman and Mr. Pallone, 
for letting me go out of order.
    Mr. Roy, I have to say that I am deeply offended by your 
open-bar analogy. It is like saying oh, honey, now that we are 
65, I can get breast cancer and you can have that heart attack. 
And we are now able to get--I can now get a PET scan and an MRI 
and a CAT scan as if older Americans are making those kinds of 
decisions or--as I think Dr. Guterman pointed out--as if they 
are making those decisions differently from people who have 
insurance who also, you know, go about their business knowing 
that they are insured and get the healthcare. I mean, really. 
And also that Medicare has exploded. It has not, in fact, 
exploded more than healthcare costs in the private sector. Is 
that true, Dr. Feder?
    Ms. Feder. That is true, Congresswoman, that Medicare 
spending per capita grows more slowly than in the private 
sector.
    Ms. Schakowsky. More slowly. The other thing is you must 
not have seen the recent Medicaid study, a scientific study 
done out of Oregon that absolutely showed--the first actual 
scientific study that was able to take 10,000 people who got 
Medicaid, 10,000 who did not and had profound improvements in 
the healthcare of people--you ought to check it out. It is a 
very important study.
    So I think it is insulting to older Americans to say that 
now they are just spending their days just having a great time 
at the doctor. You know, mostly I think people are trying to 
figure out, you know, perhaps have a little vacation or 
something or pay for their medications is more likely.
    So Dr. Feder, what you are saying in your testimony is that 
because the problem is system-wide that this will--and you 
mentioned how consumers should have choices and mentioned 
Switzerland, you know, Switzerland says in the basic package, 
insurance companies can't make any profit. Did you know that?
    Mr. Roy. Yes, they are nonprofit companies.
    Ms. Schakowsky. They are nonprofit companies. That makes a 
rather big difference between the U.S. system that anyone has 
proposed and the Swiss system, which I think was sort of 
glossed over in your saying that, you know, we should have 
more--I think it is--I would like that. That would be just 
fine.
    But Dr. Feder, I want to get back to you and say so how 
exactly would that work if we were to bring everyone under this 
system?
    Ms. Feder. Ms. Schakowsky, as you know, the Independent 
Payment Advisory Board is now authorized to make 
recommendations for the private sector but they are not 
binding. There is not an overall target. There is a target on 
Medicare alone. And since, as you say and I agree, the problem 
is system-wide. We could modify that is a target that 
authorization to apply to all of healthcare spending because 
Medicare and private spending are driven by the same factors 
and can be most effective if their payment mechanisms are 
aligned. And a way to do that is as the IPAB examines the 
evidence, as Dr. Guterman said, works with the Innovation 
Center and looks for ways to improve payments in both the 
public and private sector, adoption of those improved payment 
mechanisms could be applied, recommended to the Congress for 
application not only to Medicare but as conditions we could say 
for favorable tax preferences under current law. So we have the 
capacity to apply these mechanisms across the board.
    Ms. Schakowsky. And there could be some carrots you put 
out, as well as sticks.
    Ms. Feder. I beg your pardon? There could be?
    Ms. Schakowsky. The carrots as well as sticks.
    Ms. Feder. Absolutely. I think the goal is to actually 
change the way in which we pay consistent with--I believe it 
was Mr. Murphy was asking the Secretary about coordinating 
care. The goal is to move away from rewarding providers for 
delivering ever more and expensive service and more expensive 
services toward delivering good care, efficient higher-quality 
care, coordinated and efficiently delivered and rewarding 
providers accordingly.
    Ms. Schakowsky. OK. Would anybody want to comment on the 
issue of access to care? Is it really a concern that we--and I 
will leave that to--that if Medicare reimbursements are too low 
as a result of a decision by IPAB that doctors simply won't 
take Medicare patients.
    Mr. Roy. That is already happening. So if you look at 
consistent surveys, the rate of the difficulty for Medicare 
beneficiaries gaining access to care is higher than it is for 
people in private insurance.
    Ms. Schakowsky. Actually, I saw an opposite study. Maybe 
you haven't seen a more recent study that has 93 percent of 
Medicare patients were able to access care as opposed to 88 
percent of people who had private insurance.
    Mr. Roy. The consistent consensus of all the data is access 
to care for Medicare beneficiaries is worse, and I recommend 
that you talk to the physicians in your district and I think 
they will agree.
    Ms. Feder. Actually, I have to take issue with that. It is 
not consistent. The MedPAC finds through the surveys that they 
do that the access that Medicare beneficiaries have access in 
the vast majority of communities around the country. There are 
variations and that in many respects if not most or if not all 
it is that the access is superior to those for private 
insurers.
    Ms. Schakowsky. Thank you. My time has actually run out. I 
don't know, Mr. Chairman, if Dr. Guterman----
    Mr. Guterman. If I can add one more comment. Any issues 
there are with current or future access problems for Medicare 
beneficiaries is probably attributable to the sustainable 
growth rate mechanism, which is kind of a separate issue from 
the IPAB. And I would also point out that CBO's estimate of the 
impact of the whole Affordable Care Act on Medicare spending 
was that the projected increase pre the ACA of 94 percent over 
the next 10 years would be reduced to an increase of 71 percent 
over the next 10 years in Medicare spending. I think that could 
hardly be described as rationing care or starving providers.
    Mr. Pitts. OK.
    Ms. Schakowsky. Thank you.
    Mr. Pitts. The chair thanks the gentlelady and recognizes 
Dr. Burgess for 5 minutes for questions.
    Mr. Burgess. Thank you, Mr. Chairman.
    Let me just say on the issue of access to care, Mr. Roy, I 
have talked to the doctors in Ms. Schakowsky's district and 
they tell me to a man and a woman that they are in deep trouble 
because they cannot afford the cost of delivering their care. 
Now, true enough MedPAC came to this panel, I think it was the 
last Congress, testified to us that there were not access 
issues that they had identified and then Glenn Hackbarth has 
visited with me since then saying he is becoming concerned 
about people, particularly seniors who move, and when does that 
happen? I want to be closer to the grandkids, so they move to a 
new city or location and there they find the door is closed. 
And if this Congress continues to bury its head in the sand 
about that, we are going to find that the world becomes very, 
very hostile.
    Now, Mr. Roy, let me just tell you I was not offended by 
your open-bar analogy.
    Mr. Roy. Thank you.
    Mr. Burgess. I do not drink myself but I thought it was 
apropos. And, you know, the President of the United States, 
when he had the Republicans down 3 or 4 or 5 weeks ago to the 
White House, big reception in the East Room, and he wanted to 
drive a point home with us. And I think the point he wanted to 
make was that drugs cost too much.
    But the point he made was that during the--and it is not a 
HIPAA violation because he told us in an open forum--in the 
election he developed a rash on his back and he was concerned 
about it. So he went to a doctor who prescribed some goop to 
put on it. And he put the goop--he didn't use the word goop; I 
made that up--but he put this cream on it for the prescribed 
time and it might have helped a little bit but not so much so 
he had it refilled. He had a little prescription card and it 
cost him 5 bucks to get it refilled. So he went down and had it 
refilled.
    And then he was on the campaign trail and he ran out. So 
what to do? He went to a pharmacist, explained to the 
pharmacist his dilemma, got the prescription transferred via 
the miracle of electronic records and the pharmacist bagged it 
up for him and said that will be $400. And the President looked 
at the pharmacist and said, you know, this rash is not that 
bad. And at that point, the President became an informed 
consumer and was spending his healthcare dollars wisely. Now, 
people do argue that well, wait a minute. You go into that sort 
of system and people will not get healthcare when they need it.
    He also pointed out to us, and I did not know this, but 
apparently one of his daughters was gravely ill when she was 
very young and he went to the emergency room with her and the 
doctor explained the diagnoses and what would have to be done 
and what he proposed and the President--then not the 
President--he said do whatever it takes. And of course he did. 
He behaved in a rational fashion that you would expect a father 
to do when their child is gravely ill. He did not question 
cost.
    So I guess the point I am trying to make is the President 
actually articulated a strategy for consumer-directed 
healthcare that I thought was phenomenal for him to admit. Now, 
we had some hearings leading up to the Affordable Care Act. We 
didn't have hearings that I thought really would have gotten to 
the issue of the cost of delivering care. If we were serious 
about that, we should have invited Mitch Daniels in here and 
said how did you do it with your Healthy Indiana plan? Now, Dr. 
Feder is saying that the cost of Medicare grows more slowly 
than other areas. I don't think that is accurate and I would 
like to hear Dr. Gottlieb, perhaps Ms. Cohen weigh in on that, 
and you, too, Mr. Roy, but we never heard from someone who is 
actually making it happen on the ground. Healthy Indiana 
program costs went down by 11 percent over 2 years. So even if 
we accept the figures that I believe are wrong that Dr. Feder 
is talking about, why wouldn't we do something that is even 
better than that, which was look into consumer-directed 
healthcare? Because as the President so correctly articulated, 
something magic happens when people spend their own money.
    Now, we are left with this Independent Payment Advisory 
Board that is going to tell us how to magically spend less 
money, and it just takes me back to a speech that Ronald Reagan 
gave in 1964, and he talked then about some of the issues that 
were ahead and whether or not this country still believes in 
this capacity for self-government or whether we abandon the 
American Revolution and confess that it is a little 
intellectual elite in a far-distant Capitol that can plan our 
lives for us better than we can plan them ourselves. Ronald 
Reagan was describing the Independent Payment Advisory Board.
    I have gone on too long, but Dr. Gottlieb, do you have an 
impression as to whether or not the cost of delivering care is 
rising more slowly in Medicare than in other areas?
    Mr. Gottlieb. I would defer to Mr. Roy on an analysis of 
numbers. I haven't seen any apples-to-apples comparisons on 
senior care because everyone is in Medicare.
    Mr. Roy. That is correct so you can't really analyze the 
numbers directly because seniors, of course, are almost all on 
Medicare. Not all of them but--and they are also over 65 so 
they have higher medical expenditures.
    Mr. Burgess. Well, let me ask you a question. Regardless of 
whether you are for-profit or not-for-profit insurance company, 
you need to have access to capital, so the cost of that capital 
is the cost of what the cost of the capital is on the open 
market, but does Medicare have a cost of capital that they have 
to put on their balance sheet?
    Mr. Roy. No, in fact there are a number----
    Mr. Burgess. Do they have a cost for advertising they need 
to put on their balance sheet?
    Mr. Roy. There are a number of different aspects of 
Medicare administrative costs that are off the HHS or 
Medicare----
    Mr. Burgess. And on that general administrative side to the 
balance sheet, what about all the administration that goes on 
in the Department of Health and Human Services that is 
appropriated through a discretionary appropriation, which is 
the largest appropriation that occurs every year that the 
Congress deigns to do appropriations bills?
    Mr. Gottlieb. I would just add, you know, the most 
significant cost to Medicare is the cost of compliance with the 
Medicare program, which is a cost that isn't estimated. If you 
look at what goes on in medical practice, a good percentage of 
the expenditures in any medical practice or in the hospital is 
on trying to comply with the Medicare program because of the 
threat of, you know, a Justice Department audit or a Medicare 
audit. Hospitals, medical practices overspend on that. That 
doesn't get calculated in the cost of the overall program, if 
you will. Private healthcare plans have to actually hire staff 
to do that kind of work. Medicare can just foist rules on the 
private sector and back it up with the threat of litigation or 
criminal penalty, and those costs don't get estimated in the 
cost of the program.
    Mr. Burgess. Very well. Thank you.
    Mr. Roy. Roughly speaking, the administrative costs are 
double when you count all the off-budget expenditures of 
Medicare, and that doesn't also include the cost of fraud, 
which is very significant in the Medicare program relative to 
that for private insurers. If you add all that up, the 
administrative cost per beneficiary for Medicare between fraud 
and the actual administrative costs is arguably double to three 
times that of private insurers. If you leave fraud out, it is 
about 20 percent higher.
    Mr. Burgess. Thank you. Thank you all for being on the 
panel today.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the gentleman, Mr. Pallone, for 5 minutes for questions.
    Mr. Pallone. Thank you, Mr. Chairman. I am going to try to 
divide my time between asking Dr. Guterman about the Affordable 
Care Act and asking Mr. Davis about IPAB. So just bear that in 
mind if I cut you off.
    You heard me in the beginning that I am against IPAB. I 
think it is a usurpation of, you know, congressional authority 
and, you know, I have never been in favor. I spent a lot of 
time trying to make sure it wasn't in the House bill, which it 
wasn't. But a lot of my concern is that it is very much like 
the BRAC, which I think is a disaster. And the concern about 
the BRAC is that it is totally stacked against Congress. I mean 
I don't like the idea to begin with because it takes away 
congressional authority and gives it to the executive or 
independent commission, but I also think it is stacked. There 
is no way we are ever going to overturn a BRAC decision. We 
have had three BRACs since I have been here. Every time we try 
to overturn it we fail, and that is it. There is no 
congressional input.
    What I wanted to ask Mr. Davis quickly is to what extent is 
IPAB the same? In other words, we have been operating with 
MedPAC, they make recommendations, we usually adopt them. I 
think we have been very effective. I don't see any need to 
change MedPAC. With BRAC, you know, it is one deal. You either 
vote it up or down. You need a super majority, which we never 
get. Is the process similar and stacked in a way that it is 
going to be virtually impossible as it is with the BRAC to 
overturn?
    Mr. Davis. Thank you, Mr. Pallone.
    Mr. Pallone. And I am asking him as opposed to the D or R 
witnesses because I am trying to be--not that you are biased 
but I am trying to get an unbiased opinion. Go ahead.
    Mr. Davis. Yes, Mr. Pallone. As you said in your opening 
comments, there are very many similarities between the IPAB 
model and the base-closure commission. Principally is, as you 
indicated, that this is a commission that makes recommendations 
that go into force unless Congress stops them. That is also, of 
course, the case with IPAB. And whether under this procedure 
there are certain super majorities that are required to 
overturn IPAB and some of them, frankly, are de facto super 
majorities as they are with BRAC, the idea that if Congress 
were to put forward something different it would be vetoed and 
require a 2/3 override in both chambers. So in that way it is 
similar to the base closure process.
    There are two differences I would highlight, though. The 
first is is that Congress, unlike under BRAC, can change the 
procedures--or rather change the recommendations of IPAB as 
long as they fit within the same fiscal targets. That, as you 
know, is not the case with BRAC where it is simply an up-or-
down vote. Others have pointed out another difference, frankly, 
with BRAC in simply that it is related only to facilities 
while, of course, very important, can be thought of as very 
different to a sweeping policy area such as Medicare or 
healthcare reform. So I think in sum there is similarities and 
differences.
    Mr. Pallone. All right. Thank you. I appreciate that.
    Now, let me ask Dr. Guterman, I don't know if I was going 
to ask Judy Feder to jump in, too, but I don't know if we have 
time. I believe very strongly--I am opposed to IPAB, but one of 
the reasons I also was opposed to it was because I thought that 
in the Affordable Care Act that we did a very good job about 
keeping costs down and that we put together under Medicare, 
under the Affordable Care Act a sustainable trajectory if you 
will for the next generation with all the things that we did 
and we don't need IPAB, not necessary.
    So what I wanted to ask you is if you could outline how the 
Affordable Care Act's approach to reducing health costs is 
affective. You know, don't get into IPAB. I mean to what extent 
did we set up a sustainable Medicare program here and get 
towards the cost without IPAB, with the other things. In 1 
minute or so.
    Mr. Davis. The Affordable Care Act laid out a number of 
tools that one could use to build a better healthcare system, 
and that is really the answer. It is not a matter of how much 
we pay so much as how we pay and what we pay for in healthcare 
and how healthcare is organized and delivered that needs to be 
addressed. And the Affordable Care Act, through the Innovation 
Center, through the Medicare/Medicaid Coordination Office. 
Those are two big steps because the Innovation Center is 
supposed to develop in collaboration with outside parties 
innovations that help improve the delivery of care and save 
money in Medicare and Medicaid and across the healthcare 
sector.
    And they have already begun to initiate projects that 
involve States in broader initiatives. They are working with 
private payers. The ACO model that they are working on is one 
that has been picked up by the private sector, and in fact 
there are a number of private sector initiatives that are 
ongoing to try to achieve the Accountable Care Organization 
model that has been put forward in the ACA.
    And also having Medicare and Medicaid work together for a 
change, there are 9 million beneficiaries who are eligible for 
both programs, and right now the two programs just aren't well 
aligned to serve those beneficiaries' needs or to make sure 
that the money that is spent is well spent for those 
beneficiaries.
    Mr. Pallone. Thank you. Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the gentleman from Georgia, Dr. Gingrey, for 5 minutes for 
questions.
    Mr. Gingrey. Mr. Chairman, thank you very much and I thank 
the panel. I am sorry I had to step out to give a little quick 
speech and I missed all of your testimony but I certainly 
intend to read it all because what I heard was extremely 
interesting, a little bit diverse, which is to be expected.
    Before I go into questions, I want to raise one very 
important point today. In the press, Secretary Sebelius has 
often chided opponents of IPAB for suggesting that it has the 
power to restrict access to physicians' services or life-saving 
drugs and treatments, otherwise known as rationing. And yet 
under oath here today she has admitted that IPAB is charged 
with reducing excessive growth areas of Medicare spending when 
President Obama's own OMB director states that excessive growth 
in Medicare spending is due to the availability and adoption of 
new, high-cost drugs and treatments.
    Finally, nowhere in Obamacare are the words rationing or 
excessive growth areas defined in statute, which means it is up 
to the Secretary and the IPAB board to ultimately decide what 
is rationing and what cutting excessive growth areas means. It 
is up to them. And if the American public disagrees with how 
the Secretary or IPAB define rationing, they are, as I got from 
her testimony, prohibited from suing in court to stop it.
    So my concern here is simple. What one person considers 
rationing, another might refer to as reducing excessive growth 
areas of Medicare, known here as new treatments or drugs. And I 
believe the Secretary of Health and Human Services owes this 
committee and owes the American people a lot more clarity on 
this issue.
    Now, let me in the remaining time get to my questions and I 
will go to Dr. Gottlieb, yes, and Mr. Roy. I am interested in 
your thoughts on the lack of clarity in the law with regards 
to, one, rationing and reductions in excessive growth areas, 
along with the lack of judicial review, as I mentioned, for 
patients who feel the board is in fact denying them the 
benefits that they need to survive.
    Mr. Gottlieb. Well, I think the issue of rationing versus 
squeezing payments is a distinction without a difference 
because we have seen it already that when you squeeze payments, 
it effectively closes off access to care, and there is some 
debate about what is happening in the Medicare program, and I 
would submit there has been some recent studies, one out of 
Massachusetts that shows that Medicare beneficiaries are having 
a hard time getting access to providers up there. There is 
certainly no debate around Medicaid and whether or not patients 
under the Medicaid program have a difficult time getting access 
to medical care because of how low rates have been squeezed in 
that program. So, so long as IPAB is going to squeeze down 
payments, it is going to ration care, and I think, you know, 
the distinction is just semantics.
    What was the second question, Congressman? I am sorry.
    Mr. Gingrey. Well, let me do this, Dr. Gottlieb. Thank you. 
And I would like to get Mr. Roy's opinion on that same thing if 
he can.
    Mr. Roy. I think that I would echo Dr. Gottlieb's comments. 
I think that the importance of access to a physician cannot be 
understated. It is the most important thing. If you have a 
problem and you can't see a doctor for that problem and that 
problem festers, you could have a much more serious medical 
condition. Children die of toothaches on Medicaid because they 
can't see a dentist and have their abscesses removed. There are 
serious, serious medical problems of healthcare that if you 
can't have access to a physician, you can't do anything. So the 
fact that the IPAB is explicitly restricted from changing the 
mix of benefits really doesn't matter if somebody can't 
actually see a doctor in the first place.
    Mr. Gingrey. Right. Right. Well, I thank you both for that 
answer to that question. And I have got one more, Mr. Chairman.
    Secretary Sebelius in her statements today said that the 
administration has begun outreach efforts to fill these 15 
seats on the Independent Payment Advisory Board. I would just 
be curious to know among this distinguished panel whether or 
not any of you have been contacted, and I very specifically ask 
Ms. Cohen. Has anyone from the administration contacted you 
about serving on our IPAB?
    Ms. Cohen. No, probably because I am suing them.
    Mr. Gingrey. Ms. Feder, Judy Feder, has anyone from the 
administration asked you--contacted you about this?
    Ms. Feder. I have actually had lots of discussions about 
various aspects of the Affordable Care Act with the 
administration and indicated that I would be proud to serve on 
the Independent Payment Advisory Board.
    Mr. Gingrey. So the answer is yes? That sounds like a yes 
to me.
    Ms. Feder. Asked would be grossly overstating.
    Mr. Gingrey. Yes. I take that as a yes. Mr. Roy, how about 
yourself? Have you been asked?
    Mr. Roy. I am afraid not. I like my current job, so I am 
OK.
    Mr. Gingrey. Dr. Gottlieb?
    Mr. Gottlieb. I have been asked by some Senate staff and I 
indicated that I would be interested in being nominated but I 
wouldn't want to serve. My only reason for being nominated is I 
want to write an op ed. outlining why the President shouldn't 
pick me to serve on the board.
    Mr. Gingrey. So the response, Mr. Chairman, is that two of 
our panelists have been at least approached and one is 
enthusiastic about the possibility of serving and the other one 
is not. I thank you all very much for your response and I yield 
back my time.
    Ms. Feder. If I might just clarify, the approach was mine I 
just want to say.
    Mr. Gingrey. Mr. Chairman, would you yield me another 15 
seconds?
    Mr. Pitts. Go ahead.
    Mr. Gingrey. Did I not ask Dr. Guterman?
    Mr. Guterman. No, you didn't.
    Mr. Gingrey. I apologize, Dr. Guterman. Have you been 
approached?
    Mr. Guterman. You don't need 15 seconds. No, I have not.
    Mr. Gingrey. You have not. OK. Thank you. And I yield back.
    Mr. Pitts. All right. The chair thanks the gentleman and 
recognizes the gentlelady from California, Mrs. Capps, for 5 
minutes for questioning.
    Mrs. Capps. Thank you, Mr. Chairman.
    Well, welcome to all of you and thank you. This is a big 
panel and thank you to each of you for your testimony. I am in 
and out today but my computer and my television set are all 
locked in so I could watch and listen.
    Dr. Feder, the Republican plan for Medicare is to end it in 
2022 and replace it with a limited voucher, whatever it needs 
to be called, with which to purchase coverage on their own. 
Each senior, then, would have this opportunity or 
responsibility. It would solve the Federal Government's 
healthcare cost problems by asking seniors and those with 
disabilities to make sure that all the costs were covered and 
using their voucher or subsidy or premium support to help them 
do this. The Congressional Budget Office estimates that the 
Republican budget would double annual costs. Despite this cost-
saving or cost-shifting in the Ryan budget plan, the Republican 
budget would actually double the annual cost for Medicare by 
2022 and nearly triple them by 2030. But this isn't just a 
problem for the future. Costs that large cannot be covered by 
our future seniors overnight.
    The Center for Economic and Policy Research looked into 
what these changes would mean for the retirement planning of 
people who are 54 or under today, which will be the first 
cohort of people who will live under--should the Ryan plan 
become actualized. They found that this plan would require that 
each senior would have to save about $182,000 for retirement 
over whatever they would be currently planning to save. Does 
this lead you to question the claim that the Republican budget 
doesn't hurt people today, only in the future?
    Ms. Feder. It does, indeed, Ms. Capps, and I appreciate 
your drawing attention to the fact that it is not just about 
the future. It is about the current period. And I would add to 
it the concern that you have raised about people becoming 
uncertain as to what they would have to pay for insurance. And 
at the time when they are struggling to put aside pensions for 
the future, as well as take care of their kids, get them 
started and educated, that they would have to be putting money 
away to deal with future insurance costs seems to me an 
outrage.
    In addition to that, those who were talking about the 
repeal of the IPAB are also talking about the repeal of the 
Affordable Care Act. And so the protections that have been 
added for prescription drug costs, for preventive benefits, and 
other advantages that are available to current seniors, current 
beneficiaries would also disappear.
    In addition, there would be an enormous--as this proposal 
has set up--there would be a huge cliff that occurs at that 
year when that goes into effect. And that seems an enormous 
burden to put on people into the future.
    Mrs. Capps. I would like to shift to a topic of Medicaid in 
just a minute, but I want you to respond briefly to many 
concerns that current seniors--today's Medicare recipients are 
the ones who are voicing their concerns about this change in 
plan, even though they have been reassured that nothing will 
happen to them. There is a concern, and I haven't been able to 
address it--I wondered if you could--about what is to stop, you 
know, the majority from pushing forward this time. I mean if it 
is going to be that kind of cost shift to start, you know, for 
those who are 54 now, what is there sacred about this contract 
that the current seniors now have with their government?
    Ms. Feder. The people that would be affected in 2022 are 
paying into Medicare for Medicare benefits as we speak and they 
are expecting them. If the Congress changes that contract, 
there is nothing to say that they couldn't change the contract 
for those currently on Medicare.
    Mrs. Capps. Now, similarly, the Republican plan for 
Medicaid would also slash payments to States starting in just 2 
years. It would be sort of a block-grant approach to Medicaid--
the match that is now guaranteed, the federal portion of it 
would no longer be in the same way. I am from California, and 
boy, there is tremendous concern about this because our State 
has terrific economic challenges. We have lots of people 
receiving Medicaid benefits, and to have this double whammy to 
the State of having to pick up more of the piece, which is 
apparently what is intended. Maybe you will explain what the 
cuts to Medicaid would have any effect on Medicare 
beneficiaries, some of them being dually eligible.
    Ms. Feder. The Republican budget calls for a cut in federal 
funding to the States for Medicaid of about 3/4 of a trillion 
dollars. It is a huge cut in the resources going to States to 
support a population which, as we all know and are discussing 
with respect to Medicare is aging and then becoming 
increasingly in need of care. About a third of Medicaid 
spending is for long-term care services, long-term services and 
support, some in nursing homes, some outside nursing homes. The 
elderly along with younger people with disabilities but the 
elderly are primary beneficiaries. They are also beneficiaries 
of Medicare.
    We have improved services in recent years to try to get 
people who need long-term care services at home and in the 
community where they want to stay and not go into nursing 
homes, those as well as a host of other services who are dual 
eligibles. Medicare beneficiaries who are also dependent on 
Medicaid would be tremendously at risk as we know from what 
States are already considering as cuts in benefits.
    Mrs. Capps. Thank you, Dr. Feder.
    Mr. Pitts. The chair thanks the gentlelady and recognizes 
the gentleman from Kentucky, Mr. Guthrie, for 5 minutes.
    Mr. Guthrie. Thank you, Mr. Chairman. Thank you for coming.
    I talked with the Secretary earlier today and here is my 
concern. And people have paid into Medicare and it is not a 
dollar in, you get a dollar out. I understand that. But we have 
a study from the Urban Institute says people average about 
100,000 or a little more into Medicare and take out about 
300,000. And people might say that is not a correct study or 
not. I know. And I have seen other studies about three to one 
what you pay and what you receive. And I am 1964 into the baby 
boomer. Beginning of the baby boomer is 1946. We are all 
retiring starts now. It starts now. We know in 2024 I think the 
President even said Medicare is unsustainable. Now, they say 
during the Obama healthcare plan, President Obama's healthcare 
plan they preserve Medicare, but he even said yesterday that it 
is unsustainable the path that it is on. And what we are trying 
to do is offer a solution, a reform that preserves it for those 
who have it and to have it for people that are--I am 47. I am 
affected by it--to move forward. And to say that we paid into 
Medicare and it is not going to be there. That is just 
incorrect. That is absolutely incorrect because it is a 
government-sponsored program that we are offering that uses 
Medicare dollars to move forward.
    So my question is--and Dr. Feder, with the vast of baby 
boomers moving--taking out $3 for every $1 we put in, how do 
you keep the system as it is for people in the future? You 
can't just--you know, they talked about DME medical equipment. 
If you stopped people from buying the scooters--the free 
advertising, I will get you a scooter on television--you can't 
save enough money to make up for the demographic move, the wave 
that is coming of baby boomers. And it starts today. It has 
started today.
    Ms. Feder. Mr. Guthrie, I am an earlier baby boomer. I will 
be 65 next year, so I am at the point of the pressure here. And 
there is no question that it is growth in population that is 
what is driving Medicare spending, total spending much more 
than any other period in the history of the program as the 
enrollment grows because the per capital spending growth, 
remember, for Medicare is much slower than private sector 
growth, but what is now come to drive along with that spending 
growth, cost per beneficiary, is the number of beneficiaries.
    Mr. Guthrie. Right.
    Ms. Feder. And it is true for all of us that we don't want 
1965 healthcare or in 1985 or in 2020. We want the healthcare 
that is available today.
    Mr. Guthrie. Right. So how do you have the fee-for-services 
as it exists today with the vast baby boomers retiring and 
not--talk about cost-shifting. I have a 17-year-old daughter 
who in 30 years will be 47 years old, which is my age. And in 
40 years, according to the CBO, 100 percent--if you have 18 
percent of revenue GDP--coming to the Federal Government will 
be for Medicare, Medicaid, and Social Security. So the greatest 
generation who provided the interstate highways, fought World 
War II, did everything to give my generation the opportunities, 
my generation, if we don't address it--I know everybody is here 
criticizing everything we are doing--but if we do not address 
it, my child will go to work when she is my age for me to be 
retired, solely for me to be retired.
    Ms. Feder. Well, I understand your concern and I share it. 
I have 4-year-old twin granddaughters, and I am doing my best 
to guarantee affordable healthcare for them well into the 
future when they are my age and older. And what we are all 
concerned about here is how to do that. And the way to do that 
is to change the overall healthcare system. The Affordable Care 
Act gave Medicare the lead in changing the way we pay for 
healthcare and making the whole system more efficient. And that 
is what we need to do because an alternative is simply to deny 
care to those who don't have the resources to pay a cost that 
is going up.
    Mr. Guthrie. The Republican plan doesn't deny care. And 
just like Medicare Part D, it is 40 percent under estimate 
because health plans have to compete. Anybody can answer what I 
just--I am just not asking the one question----
    Ms. Feder. Well, if I may stay with you, I don't think 
Medicare Part D offers you the answer there, sir, and the cost 
of prescription drugs are rising as well. We need to make the 
system more efficient----
    Mr. Guthrie. Well, let me ask--Mr. Roy, I am about out of 
time. I am sorry to cut you off but I only have 40 seconds 
left.
    Mr. Roy. No, I think that one of the things that we see 
with the CBO projections is the CBO consistently underestimates 
the importance of cost-shifting in medical expenditures, so 
Medicare Part D has a significant cost-sharing component, which 
is the so-called donut hole, which is now going away. But that 
donut hole is a big part of the reason, along with the choice 
and plans, that Medicare Part D is coming 40 percent under 
budget, whereas with the conventional, traditional parts of the 
program, expenditures have skyrocketed out of control because 
there has been minimal cost-sharing.
    Mr. Guthrie. And the administration wants people making 
$250,000 or more to pay more taxes but they don't want them to 
pay more for their healthcare. And what our plan does is if you 
are at the lower end, you still get covered, and at the higher 
end you would pay more. And so instead of a $250,000-a-year 
person at 65 years old paying more for their healthcare, they 
are going to send the bill to my 17-year-old daughter and my 
16-year-old son and my 13-year-old daughter.
    Mr. Roy. I would make a point about that which is that 
because medical expenditures grow at faster than the rate of 
GDP, you can never raise taxes fast enough to compensate for 
the rise in healthcare spending. So it is always much more 
efficient if you want a means test to means test on a spending 
side rather than on the taxation side.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the gentleman from Texas, Mr. Gonzalez, for 5 minutes.
    Mr. Gonzalez. Well, thank you very much, Mr. Chairman. And 
I really appreciate the testimony of all the witnesses. I may 
not agree with a few of you but I do think that IPAB is 
actually one of the best approaches as trying to get a handle 
on what are exploding healthcare costs. And I think we all 
acknowledge that healthcare costs consume too much of our GDP, 
that employers are no longer providing it to the degree that 
they used to provide it to their employees, that individuals in 
this country very likely cannot afford healthcare. It is that 
simple. That 50 cents out of every dollar spent on healthcare 
comes from some entity of government.
    And I do--I share some of the real concerns of my 
colleagues on the other side of the aisle about where we are 
going to be and such. A generation that may have provided great 
opportunity for us, the interstate highway system, but I remind 
everybody that what Eisenhower and others did in the '50s to 
give us that interstate highway system was to, in essence, 
raise the gasoline tax what would be the equivalent of 96 cents 
a gallon today. There is not one of my colleagues--and I hate 
to say it--I don't think I would vote on that myself today. So 
there is a difference that is going on out there as to what 
people are willing to pay for in this country and still expect 
to receive the benefit.
    I am concerned about something you said, Mr. Roy, and 
because in the United States either the government is 
subsidizing the payment for healthcare or the private sector 
is. But the individual consumer--and there is no other product 
or service that has that kind of status in this country that I 
am aware of. But I am somewhat disturbed by the fact that it 
must be all of the patient's fault.
    And I am concerned about some aspects of IPAB. I share the 
concerns of my physicians in my district that are saying where 
will our input--how are we guaranteed that we have something to 
say as far as the information that is going to be considered by 
the members of this board? I am really worried about that. But 
where does the responsibility lie? I will tell you right now, 
if I go into my doctors--and I have been going to them for a 
number of years--and if they tell me I need a certain procedure 
or certain test, I really don't question it.
    Now, let us just say I didn't have Blue Cross/Blue Shield 
because it is employer-sponsored. I am a Member of Congress. 
But I was going to pay that out of my own pocket. I am still 
not real sure--your premise is that I am going to shop around 
and I am going to go around and say well, I am not sure that I 
really need that test. I think I will go and see another doctor 
and get another opinion, which is going to cost me money and 
such. So where does the responsibility lie? Do you believe that 
maybe the physicians have a responsibility only to provide that 
service which is absolutely necessary? I am not going to get 
into the argument of unnecessary testing and everything else 
because I have got the gold standard in the State of Texas, and 
it has not brought down the cost of healthcare in the State of 
Texas. It has brought down the cost of insurance policies for 
certain specialties. So where is this shared responsibility? 
How do we get a handle on this? And isn't IPAB maybe a method 
of achieving that goal?
    Mr. Roy. If one looks at a number of studies around the 
behavior of patients and physicians with high deductible health 
plans and health savings accounts where there is more 
consumerism, where there is more ability to shop for procedures 
and tests and office visits, you see a lot more intelligent 
consumption.
    I think in Washington we have an excessively pessimistic 
view of the ability of individuals to make intelligent 
decisions about their own care. Especially in the days of the 
internet, people do a lot of research; people have a lot of 
knowledge. If we had a system where consistently across the 
system for everyone there were more and more people who could 
shop for care, who bought insurance for themselves instead of 
having it provided by someone else, you have more of the 
ability to start thinking in the way that people need to think 
about well, do I really need that test? And if a doctor says, 
yes, I really do think you need that test even though it costs 
$2,000, the patient might say yes. But maybe the doctor will 
say you know what? That test is $2,000. I think it might 
benefit you a little bit but maybe it is not worth paying for 
for you right now because it is $2,000 and you are very 
unlikely to benefit from it.
    Mr. Gonzalez. Don't you think the determining factor, 
though, really in most tests--and I know this is going to be 
controversial--is whether it is covered or not?
    Mr. Roy. Could you repeat the question?
    Mr. Gonzalez. What I am saying is whether you have access 
to a number of tests or not is whether that test is going to be 
paid for through some subsidy, either through private insurance 
or government. Isn't that the truth?
    Mr. Roy. Not necessarily because, again, if you have co-
pays, deductibles, health savings accounts, and other 
mechanisms by where the patient shares in the expenditure, the 
patient has more of an incentive to monitor those expenditures 
and make sure they are being executed intelligently.
    Mr. Gonzalez. And Mr. Chairman, I am going to ask your 
indulgence just to give Dr. Guterman a couple of minutes to 
respond to some of the comments.
    Mr. Pitts. Dr. Guterman?
    Mr. Guterman. I promise this will be brief. I wanted to 
point out that in my written testimony, I point out that 58 
percent of total Medicare spending is accounting for by 10 
percent of Medicare beneficiaries, who account for an average 
of $48,000 in Medicare costs. These are people who are very 
sick. It is not that they are incurring those costs because 
they are bad shoppers. The other thing I would point out is 
that there was a large-scale experiment on the impact of out-
of-pocket costs on the utilization of healthcare and what it 
found was that, indeed, higher out-of-pocket costs reduced the 
utilization of healthcare both desirable and undesirable 
healthcare. So putting the onus on the back of Medicare 
beneficiaries, especially ones who are sick who are the ones 
who are spending the money is kind of a difficult way to make 
sure that the system runs efficiently.
    Mr. Pitts. The chair thanks the gentleman. That completes 
this round of questioning. We will have one follow-up for each 
side. Dr. Burgess?
    Mr. Burgess. Thank you, Mr. Chairman.
    Dr. Guterman, I recognize one size fits all doesn't work 
and that is one of the reasons I have got some concerns about 
what we have done, what Congress has done with the Affordable 
Care Act. But I am a big believer and letting people spend 
their own money for healthcare, but I also recognize that there 
are populations out there where this would not be the wisest 
course of action.
    Now, when I practice medicine, I kind of considered myself 
to be--well, what I have learned now--we call it a medical 
home--but I mean I was always the one that arranged things for 
my patient. I always went the extra mile to do things that were 
not necessarily reimbursed but were required as part of giving 
good care. And I don't remember if you were there at the 
Commonwealth meeting in January but it came up during the 
course of that meeting that one of the Members of Congress who 
was there said that healthcare is so complicated I have to use 
a concierge doctor to sort of sort things out for me. And this 
was not a Republican Member who said it. So it was kind of a 
shock to hear this come from a Member of Congress. And I asked 
Don Berwick. Dr. Berwick was there and he was on that panel, 
and I said, so Don, you just complained about 20 percent of 
your patients consuming 80 percent of your resources. Why don't 
you buy these folks a concierge doctor? Or why don't you 
directly contract with a physician to be responsible for a pool 
or panel of patients in the dual eligible world. And we all 
know who those patients are. They are readily identifiable. 
They don't move around a lot. They stay in one place. So 
wouldn't that be a population that would be amenable to a 
different type of practice model? You talk about wanting to 
change the payment structure for everyone and maybe that is not 
necessary.
    Maybe we could look at this defined population and say we 
want to do a better job for these patients. And we know that 
they are not served by having to go from doctor to doctor to 
doctor to doctor. Why don't we put one person in charge? We 
used to have a saying when I was in practice too many doctors 
means no doctor and that is exactly true. So if you had one 
person who was directly accountable to that arguably very 
complicated and very ill and multiple-medical-conditions 
patient, if you have one doctor, don't you think you would get 
a better return on investment for that money that you spend?
    Mr. Guterman. Dr. Burgess, I agree with everything you 
said, and I think that is the underlying philosophy of the 
medical home model. I think it is the underlying philosophy of 
the Accountable Care Organization. And I think, you know, what 
this represents is that I think we all agree that the 
healthcare system needs to work better to provide care, 
especially for those with multiple chronic illnesses and the 
people who are sickest. And I think whatever approach you take, 
whether it is a----
    Mr. Burgess. But, sir, that is not new information. You 
said you have been working on this for 30 years. Where is the 
beef?
    Mr. Guterman. The medical home model has been one that has 
been talked about and tried in limited, you know, scale, but--
--
    Mr. Burgess. And yet, I am the kind of doctor who was 
providing that type of care and you basically ran me out of 
business----
    Mr. Guterman. Right.
    Mr. Burgess [continuing]. By not paying the freight, by not 
paying for these activities.
    Mr. Guterman. The problem is that in our current fee-for-
service system, people get punished for doing the kind of care 
that you would like to provide. And, you know, we hear people 
from various systems around the country, you know, that can 
enumerate the way they get punished for doing good things for 
their patients, but under the current payment system, those 
good things are rewarded with lower payment, so in a sense they 
are punished for doing what they would like to do for their 
patients. So I think we can agree--and maybe this is a platform 
for kind of collaboration, you know, across the aisle that we 
agree, I think, on the kind of care we would like to see and we 
agree that getting to that kind of care is what we really need 
to solve the problems that we are all concerned with.
    Mr. Burgess. And I would just submit the obstacle so far 
has been CMS. They haven't been a facilitator; they have been 
an obstacle. But I welcome the opportunity to work with you on 
this. Obviously, I have got some discussions going on with 
other people and I would welcome the Commonwealth Fund being 
part of that discussion as well.
    Thank you, Mr. Chairman. I will yield back.
    Mr. Pitts. The chair thanks the gentleman. Mr. Pallone for 
a follow-up?
    Mr. Pallone. Thank you, Mr. Chairman. I am going to ask Dr. 
Guterman. You know, before I was asking you questions about how 
the Affordable Care Act would save money even without IPAB, and 
I believe very strongly that it saves money, particularly for 
not only the government but also for beneficiaries as opposed 
to the Republican budget, which I think is going to cost, you 
know, Medicare beneficiaries a lot more. So I just want to ask 
you to compare and contrast the Affordable Care Act's approach 
to saving money and that of the Republican budget, particularly 
as beneficiaries are affected if you would.
    Mr. Guterman. Let me start by adding something I omitted in 
my answer to your previous question and that is the Patient-
Centered Outcomes Research Institute, which is a public-private 
organization that is charged with producing evidence to help 
make better clinical decisions in the healthcare sector, which 
I think can only help. It is not like those decisions aren't 
being made every day millions of times. It is just they are 
being made with too little information. But I guess rather than 
contrast the two approaches, I would say that under both 
approaches the problem is not solved unless we change the way 
healthcare is delivered and paid for because in the end you 
need to control the cost of healthcare and you need to control 
the way healthcare is delivered and the way it is targeted at 
the people who need it most and providing the services that 
benefit people most.
    And if you provide people with premium support, if the cost 
of healthcare isn't controlled, they are going to find 
themselves more and more left out of the market for health 
insurance. If you just rely on cutting payments alone, you are 
going to make access more difficult for Medicare beneficiaries. 
If you address broader issues either through the IPAB or other 
mechanisms that are already in place with the Affordable Care 
Act, then I think you achieve what you want to achieve and 
then, you know, even perhaps make the Independent Payment 
Advisory Board unnecessary because you have controlled costs 
already and met their targets.
    Mr. Pallone. Thank you.
    Mr. Pitts. Dr. Cassidy, you came in and missed the first 
round. Do you have questions?
    Mr. Cassidy. Yes.
    Mr. Pitts. You are recognized for 5 minutes.
    Mr. Cassidy. I apologize for having to leave.
    Dr. Guterman, I kind of had a schizophrenic approach to 
your testimony. Part of it I liked and part of it I am thinking 
what is the guy thinking? So the part that I liked is where you 
mention that we have to take a global view. History clearly 
shows that Medicare and Medicaid will do a downward pressure 
upon their cost and shift that to the private sector. I mean 
there is no mystery about that. I could almost stipulate that. 
There is a good article by one of the--maybe McKinsey, maybe 
somebody else about the hydraulic effect. The more Medicare, 
the more Medicaid you have in your book of business, the 
greater the upward impact upon costs for small businesses and 
the private health insurance market.
    So what gives you kind of encouragement that IPAB--which is 
really just looking after the Medicare book of business--will 
not succumb to that same temptation that Medicare always has 
and Medicaid specifically really has to shift cost to the 
private sector?
    Mr. Guterman. Let me first--the term cost-shifting is often 
misunderstood partly because it assumes that the cost of 
healthcare is somehow immutable and can't be reduced by better 
examination of what is appropriate to----
    Mr. Cassidy. I will give you that we can do a better job 
with what we have, but if Medicaid pays 60 percent of cost, 
then clearly there has to be a makeup someplace.
    Mr. Guterman. Well, but that depends on whether you think 
costs are right. But beyond that, what I think is important to 
think of IPAB in the context of is the broader set of tools 
that are available to us, that I think there is more really 
unprecedented push to use to address the problems that we are 
facing now. And I think, you know, looking at IPAB alone--IPAB 
alone is not going to solve the problem. But IPAB is in the 
context of a broad array of policies that are on the table that 
may in fact be able to solve the problem. And it is also part 
of a process that I think the Congress has to be involved in. 
You know, sometimes----
    Mr. Cassidy. Let me pause you there because I have limited 
time.
    Mr. Roy, what would you--I think we know where Dr. Guterman 
is going. What would be your thoughts?
    Mr. Roy. Yes, so I think you actually, Dr. Cassidy, bring 
up the most important point around this faulty idea that 
somehow Medicare expenditures are growing more slowly than 
private sector because what happened is Medicare shifts costs 
to private insurers, so if I have two Chevys that I paid 
$10,000 each for and the government comes to me and says I am 
buying that one Chevy from you for $5,000 and I lose 5,000 on 
that, maybe I charge the other guy 15,000 to make it up. And 
that is effectively what cost sharing is. It is more 
complicated than that in reality, but that is basically what 
Medicare does. Medicare cheats by underpaying for care and 
restricting access. And these are the problems that, 
unfortunately, have a significant--what IPAB is all about.
    Mr. Cassidy. Dr. Gottlieb, your thoughts, please?
    Mr. Gottlieb. I think IPAB has no alternative but to try to 
squeeze payments in the short term because anything it could do 
to try to fundamentally reform payment systems or the way care 
is delivered isn't going to score well at CBO. They are going 
to have to achieve immediate savings.
    I think one of the larger problems here is that a lot of 
the reforms in the Accountable Care Act and a lot of things we 
are talking about here today are predicated on changing the 
delivery model, getting better coordination of care. Those 
require investments in innovation and how care is delivered, 
and the only that providers, hospitals, doctors are going to 
invest money to better coordinate care is if they can earn an 
above-market rate of return for a sustainable period of time on 
their invested capital. And the problem is that the 
administration's legislation, the regulations don't allow for 
that. And that is why is you are seeing the adverse reaction to 
the regulations on the Accountable Care Organizations.
    I could tell you I have seen a lot of business plans 
floated with venture capitalists on creating new Accountable 
Care Organizations or services that would provide services to 
the Accountable Care Organizations. I haven't seen a single one 
yet funded for that precise reason that the presumption out 
there is that you are not going to be able to earn a return on 
capital. If you do earn an above-market rate of return on 
capital for any length of time, it is going to be regulated. If 
you continue to earn an above-market rate of return, it is 
going to be taxed. And if you continue to earn it after it is 
taxed, you are going to be criminalized.
    Mr. Cassidy. But on the other hand, if you don't, you will 
be subsidized.
    Mr. Gottlieb. And when it is gone, you subsidize it.
    Mr. Cassidy. And that is without saying that, again, as I 
mentioned earlier, the New England Journal of Medicine article 
that reflected upon the 10 Accountable Care Organization pilot 
studies, places specifically chosen so that they would be more 
likely to succeed did not.
    Now, Dr. Guterman, you must have some thoughts about that.
    Mr. Guterman. In fact, as I was saying when we started up 
those demonstrations, and in fact I would describe that 
demonstration as a rousing success for several reasons. One is 
that half of those 10 sites were able to achieve measurable 
savings according to the rules of the demonstration and 
received bonus payments for saving Medicare millions of dollars 
compared to the targets that they were working under.
    Mr. Cassidy. Now, in fairness, it was a 3-year 
demonstration project and I think 3 did and it was not every 
year and several did not.
    Mr. Guterman. But in the last 3 years there were 5 of them. 
And all of the sites achieved noticeable increases in the 
quality of care, which perhaps was even more important, 
certainly without spending more money. And there were some--as 
there will be--and I think something that the IPAB or any other 
mechanism is going to have to deal with is compared to what? 
And how you deal with getting either CBO scoring or the Office 
of the Actuary in CMS to agree that a particular project is 
going to save money. But that is going to have to be dealt 
with. That is a methodological issue that I think needs to be 
dealt with.
    Mr. Cassidy. I am out of time. I yield back. Thank you all.
    Mr. Pitts. The chair thanks the gentleman. Did you----
    Mr. Burgess. But Mr. Chairman?
    Mr. Pitts. Go ahead.
    Mr. Burgess. Did you rule on my unanimous consent request 
for Senator Cornyn's letters from Scott & White?
    Mr. Pitts. Without objection, so ordered.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 72772.172
    
    Mr. Burgess. Thank you.
    Mr. Pitts. Thank you and thank you to the panel. Very 
informative. I appreciate your patience.
    We will now change panels to a fourth panel, and I will 
introduce the fourth panel as they come to the table.
    Joining us on our fourth panel is Dr. Alex Valadka, a 
neurosurgeon. He is the chief executive officer at the Seton 
Brain and Spine Institute, Austin, Texas. He represents the 
Alliance for Specialty Medicine. Secondly, we have Mary Grealy, 
who is the president of the Healthcare Leadership Council in 
Washington, D.C. Then we have Dr. Jack Lewin, Chief Executive 
Officer of the American College of Cardiology. And fourthly, we 
have Teresa Morrow, who is the cofounder and president of Women 
Against Prostate Cancer.
    Your written testimony will be entered into the record. We 
ask that you summarize your opening statements in 5 minutes 
each.
    Dr. Valadka, you may begin your opening statement.

  STATEMENTS OF ALEX B. VALADKA, REPRESENTING THE ALLIANCE OF 
   SPECIALTY MEDICINE; MARY R. GREALY, PRESIDENT, HEALTHCARE 
   LEADERSHIP COUNCIL; JACK LEWIN, CHIEF EXECUTIVE OFFICER, 
 AMERICAN COLLEGE OF CARDIOLOGY; AND TERESA MORROW, COFOUNDER 
          AND PRESIDENT, WOMEN AGAINST PROSTATE CANCER

                  STATEMENT OF ALEX B. VALADKA

    Mr. Valadka. Thank you, Chairman Pitts, Ranking Member 
Pallone, members of the subcommittee, for allowing me to 
testify about the Independent Payment Advisory Board. My name 
is Alex Valadka. I am a practicing neurosurgeon from Austin, 
Texas, and as far as I can tell, I am the only practicing 
physician who has the privilege of testifying before you here 
today.
    I am pleased to be here today on behalf of the Alliance of 
Specialty Medicine which was founded in 2001 with the mission 
to develop sound federal healthcare policy that fosters patient 
access to the highest quality specialty care and improves 
timely access to high-quality medical care for all Americans. 
As advocates for patients and physicians, the alliance and its 
members welcome the opportunity to contribute to the ongoing 
debate regarding IPAB, or as we think about it, the Impacts 
Patients Adversely Board.
    We are deeply concerned about the unintended consequences 
that will result from the establishment of IPAB. We oppose its 
creation and we are now urging Congress to immediately act to 
repeal IPAB. Now, I realize that by this time in our IPAB-athon 
here today, you have had an earful and I don't to be overly 
repetitive, but I do want to make you aware that America's 
specialty physicians have numerous concerns at both the concept 
of IPAB and its structure.
    First and foremost, the alliance believes that under the 
IPAB, access to specialty care will be severely limited due in 
part to the additional payment cuts that it will impose on 
physicians. Medicare physician payments are already well below 
market rates, as you heard earlier today, and they continue to 
be subject to deep cuts as a result of the flawed SGR formula. 
Cuts to physician reimbursement under IPAB will only exacerbate 
those already imposed on physicians as a result of SGR cuts and 
other cuts that are going to occur each year as part of the 
Medicare physician fee schedule for things like problems with 
the electronic health record, value of base quality modifiers, 
meaningful use requirements, and things of that type.
    Our physician survey data demonstrates that these cuts, 
including those imposed by IPAB, may ultimately force 
specialists out of the Medicare program severely threatening 
Medicare access to its beneficiaries to innovative therapies 
and quality of care. And to echo something that was said 
earlier today, participation in Medicare is not on or off. Many 
physicians still continue to participate but they have to limit 
the number of Medicare patients they can see in their offices 
or otherwise provide access to.
    Our second concern is that IPAB lacks accountability and 
sets a dangerous precedent for overriding the normal 
legislative process. As drafted, the IPAB has little if any 
accountability to the Medicare beneficiaries whose healthcare 
will be affected by its decisions. And yet its recommendations 
will have the force of law if Congress fails or chooses not to 
act. The alliance maintains that Congress should be the entity 
to legislate healthcare policy, not an independent board.
    An additional concern is that the limited transparency of 
IPAB proceedings severely limits congressional oversight of the 
Medicare program and replaces the transparency of hearings like 
this one with the less transparent process overseen by the 
executive branch, not the legislative branch.
    The IPAB statute also provides fast-track procedures for 
IPAB proposals, which will automatically become law unless 
Congress can act very quickly to amend the proposal. Congress 
already faces significant challenges in moving legislation 
through the regular legislative process and we seriously doubt 
its ability to jump through all the procedural hoops within the 
required 7 months to override IPAB recommendations.
    Although its proponents argue that the IPAB is critical to 
holding down the growth in healthcare spending, providers 
representing nearly 40 percent of Medicare expenditures, 
including hospitals and nursing homes, are exempt from the 
reach of IPAB for several years. We agree with the CBO that 
this would place greater pressures to achieve saving on 
physicians which, as I previously noted, will ultimately 
curtail seniors' timely access to specialty care.
    Finally--and again as discussed earlier today--the process 
for making appointments to the IPAB isn't balanced because 
appointments are made solely by the President. This structure 
also ensures that the board will have inadequate expertise 
since it fails to include practicing clinicians like me who can 
draw from firsthand experience when considering how proposed 
recommendations could impact the delivery of healthcare for 
both the patient and provider perspective.
    Although the alliance recognizes the need to hold down the 
growth of Medicare costs, the IPAB is simply the wrong way to 
go. But the more than 100,000 physicians represented by the 
alliance reiterate our pledge to work with Congress to identify 
more appropriate ways to achieve this goal. I ask that you make 
the same commitment and work with the medical community to meet 
the challenges facing our healthcare system and not leave these 
very important decisions to a group of 15 unelected and largely 
unaccountable individuals.
    Mr. Chairman, thank you again for allowing the alliance to 
testify, and I would be happy to answer any questions.
    [The prepared statement of Mr. Valadka follows:]
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    Mr. Pitts. The chair thanks the gentleman and recognizes 
Ms. Grealy for 5 minutes for an opening statement.

                  STATEMENT OF MARY R. GREALY

    Ms. Grealy. Chairman Pitts, Ranking Member Pallone, members 
of the subcommittee, on behalf of the members of the Healthcare 
Leadership Council, I want to thank you for the opportunity to 
testify on the ramifications of the Independent Payment 
Advisory Board, or IPAB, for patients and the U.S. healthcare 
system.
    Now, already today you have heard a number of perspectives 
on IPAB. While I request to submit my full testimony for the 
record, I would like to briefly share the point of view of HLC 
members who are chief executives of the Nation's leading 
healthcare companies and organizations. The views I express 
today reflect the conclusions of hospitals, academic health 
centers, insurers, pharmaceutical and medical device 
innovators, distributors, pharmacies, and other sectors within 
our healthcare system.
    Mr. Chairman, we fully agree that it is imperative to make 
Medicare a more cost-efficient program, that its current 
spending growth rates are unsustainable. The question is how to 
address this challenge in a way that strengthens and does not 
undermine the accessibility, the affordability, and quality of 
healthcare for Medicare beneficiaries and for all Americans.
    Now, there are different approaches available to Congress 
in pursuing this objective. On one hand, you have the direction 
embodied in IPAB to simply slash expenditures whenever spending 
exceeds a certain arbitrary level. Now, we can talk all we want 
about the expertise of those who conceivably would be serving 
on IPAB, but those credentials are largely irrelevant. IPAB 
isn't designed to develop meaningful long-term reforms to 
strengthen the value of the Medicare program. Rather, its 
mandate is to achieve immediate scorable savings.
    Now, according to analysis from the Congressional Budget 
Office and the Kaiser Family Foundation, this imperative to 
make immediate reductions means that IPAB's course of action 
will likely focus on reducing payments to providers. The impact 
of this action is easy to predict. Today, as we have heard, an 
increasing number of physicians are restricting the number of 
Medicare patients that they see in their practice because of 
low payment rates. According to a survey of the American 
Medical Association's members, that number includes one of 
every three primary care physicians.
    Now, if IPAB is expected to cut the payment rates to even 
lower levels, then we will almost certainly see more physicians 
unable to treat Medicare beneficiaries and access will become a 
more critical issue. With those 80 million baby boomers 
entering the Medicare program at an average of 9,000 per day 
and the projected physician shortages already on the horizon, 
we could find ourselves on the verge of a healthcare access 
perfect storm that will hit seniors the hardest.
    These payment cuts also will likely result in greater cost-
shifting to private payers and their beneficiaries. It should 
also be noted that IPAB will function much as that deadly robot 
in the ``Terminator'' movies. It will have a single-minded, 
relentless focus on achieving its cost-cutting function. There 
is no statutory latitude to take into consideration unforeseen 
public health concerns that may, in the short term, necessitate 
more, not less, healthcare spending. It does not take into 
consideration the potential of new medicines and devices that 
may have high upfront cost but that will reduce Medicare 
spending in the long run.
    Now, there is no question that Congress has more 
flexibility than the IPAB in being responsive to healthcare's 
circumstances, capabilities, and needs and will certainly be 
more responsive to public concerns than an unelected board ever 
will be. There are far more preferable approaches to making 
Medicare more cost-efficient. There are multiple provisions, 
for example, as we have heard today, within the Patient 
Protection and Affordable Care Act that are focused on moving 
away from the fee-for-service model and aligning incentives to 
reward providers for high-quality cost-effective care. We 
should give these reforms an opportunity to work before we 
think of turning to an approach as extreme as the IPAB.
    Also, throughout the country, private-sector healthcare 
providers are demonstrating innovative ways to generate better 
health outcomes with less cost. We have documented many of 
these successes in our HLC value compendium, which we provided 
to CMS and I would like to submit for the record.
    Mr. Chairman, thank you again for this opportunity to 
present our views.
    In summary, the members of the Healthcare Leadership 
Council believe that the IPAB mandate and inherent 
inflexibility will inevitably result in reduced healthcare 
access for seniors. We need, instead, to turn to payment and 
delivery reforms that will actually improve care while reducing 
costs.
    Thank you, and I will be happy to answer any questions.
    [The prepared statement of Ms. Grealy follows:]
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    Mr. Pitts. The chair thanks the gentlelady and recognizes 
Dr. Lewin for 5 minutes.

                    STATEMENT OF JACK LEWIN

    Mr. Lewin. Thank you very much, Chairman Pitts, Ranking 
Member Pallone, and Vice Chair Dr. Burgess. It is a pleasure to 
be here today representing the American College of Cardiology, 
all of America's cardiologists, and the many cardiovascular 
nurses and researchers.
    Cardiovascular medicine represents 43 percent of Medicare 
costs today, still, unfortunately the number one killer in 
America, yet we have made some real progress. In the last 
decade, morbidity and mortality for cardiovascular disease has 
gone down by 30 percent in the United States, and that is 
because of new imaging techniques, new procedures, new 
therapeutics, new approaches to prevention, but also because 
for the last decade we have been able to take electronic tools, 
guidelines, performance measures, appropriate-use criteria and 
apply them closer and closer to the point of care to measure 
best evidence and get the best results reducing unnecessary 
spending and activities.
    The Door-to-Balloon Campaign is one approach where we have 
been able to speed the treatment of heart attacks in hospitals 
through system improvement using the data we collect in the 
registries we have in 2,500 U.S. hospitals. We have reduced the 
variation for heart attack treatment by a factor of 3, the 
length of stay from 5 to 3 days, the costs by 30 percent across 
the United States just in the last 3 to 4 years. Unbelievable.
    But here is the thing. We got no reward for that, no 
incentives for that. It happened because we believe in it. The 
IPAB, as proposed, is going to fail. Its price controls won't 
work. It is a mechanism that represents the past, not the 
future. And we are very concerned about that. In fact, you 
know, we probably ought to get rid of the existing flawed 
price-control mechanism, the SGR that you have on the books 
right now. It hasn't worked very well, has it? We get rid of 
that one before we launch the next one, please.
    We need an immediate and different approach or a very 
different IPAB to bend the cost curve. In the last 40 years, 
amazingly enough, the healthcare costs have gone up, you know, 
multiples of the GDP 40 years in a row. This is really amazing. 
If we got the GDP--if healthcare costs were GDP plus 1 percent, 
the U.S. national deficit would go away in 20 years. So, you 
know, it is a patriotic kind of thing calling for me at least 
for the profession of medicine, physicians, hospitals, and 
others to get on this. We really have to bend the cost curve. 
And can we do it? Yes, we can. If we get the unnecessary 
spending out of the system, we can get this done.
    Now, I think to do that we have got to go back to using 
those tools at the point of care, the guidelines, the 
appropriate-use criteria. These measure not only quality but 
for appropriate use, effectiveness in terms of efficiency and 
spending, getting the right test the first time, getting the 
right procedure the first time, et cetera. We can now measure 
comparative outcomes. We couldn't do that 10 years ago. We 
didn't have the electronic means to do that. We couldn't tell 
doctors and hospitals how they are doing as to whether they are 
spending the money efficiently, providing patients with the 
best care. Now, we can.
    So let us provide the incentives for consistent best 
evidence at the point of care, let us systematically reduce 
variation, get rid of the unnecessary tests and procedures, 
unnecessary admissions and costs. Let us use that kind of a 
price-control approach. That is not the IPAB, folks. If we want 
to IPAB to work, it is going to have to be so radically 
modified to do the following: it has got to develop incentives 
for doctors and hospitals to reward quality and not volume. 
Setting price controls on volume is not going to solve our 
problem. We already know that. It needs to apply to healthcare 
sectors, not just the doctors, and wait a few years and add the 
hospitals later. It needs to be flexible to attract people who 
really understand the healthcare system and are in it and see 
it from various perspectives. And it is currently designed so 
that it can't do that in terms of the 15 members it is going to 
attract to be full-time parties as it is designed now.
    So, you know, we are committed to the cause of the IPAB. We 
think its purpose is absolutely right on. We believe in that 
purpose. We see it as, in fact, a national kind of patriotism. 
Let us compete in a global economy and get healthcare costs 
down without destroying innovation in healthcare and without 
destroying patient care itself.
    So let us rethink the IPAB or amend it so that it can 
achieve the kinds of targets that will provide viable 
Medicare--well, the targets for Medicare spending that will 
keep the healthcare system viable but that won't stifle 
innovation and won't harm patient care.
    Thank you very much.
    [The prepared statement of Mr. Lewin follows:]
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    Mr. Pitts. The chair thanks the gentleman and recognizes 
Ms. Morrow for 5 minutes.

                   STATEMENT OF TERESA MORROW

    Ms. Morrow. Thank you. I would like to thank Chairman Pitts 
and Ranking Member Pallone and the committee for holding this 
important hearing today and I appreciate the opportunity to 
submit my testimony on a topic that will definitely have 
significant implications on the lives of thousands of men, 
women, and families.
    My name is Teresa Morrow, and I am cofounder and president 
of Women Against Prostate Cancer. Our mission is to unite the 
voices and provide support for the millions of women affected 
by prostate cancer. As healthcare leaders of the household, the 
role that women play in all phases of prostate cancer from 
preventative screenings to treatment and follow-up care is 
critical.
    As you know, prostate cancer, as with any cancer, impacts 
the entire family. Our own cofounder, Betty Gallo, experienced 
the impact of this firsthand when her husband and your former 
colleague, Representative Dean Gallo, was diagnosed with 
prostate cancer in 1992 and subsequently died from the disease 
in 1994. Since his passing, many advancements in treatment and 
access to screenings and quality healthcare have saved the 
lives of thousands of men diagnosed with prostate cancer and 
fewer families have to suffer the loss of their loved ones as 
the Gallo family did.
    We are here today because we are concerned about the effect 
that implementation of the Independent Payment Advisory Board 
will have on Medicare patients and families, including the 
large number of seniors that are diagnosed with prostate cancer 
each year. We share your concerns for more sustainable 
healthcare costs but do not believe that IPAB is the best way 
to achieve this goal.
    We believe that IPAB will have a negative impact on patient 
access to quality care. IPAB's power to dramatically cut 
payments to healthcare providers and physicians who provide 
services to beneficiaries will likely result in fewer providers 
being willing to accept new Medicare patients and limiting 
senior's access to quality providers. We are concerned that 
IPAB could ultimately limit access to certain treatments or 
medications. While IPAB may be specifically prohibited from 
rationing care, reduced payments for certain medical services 
and providers could lead to the unintended consequence that 
beneficiaries should have access to certain treatments and 
therapies but not to others.
    As a prostate cancer organization, we are particularly 
concerned that patients may not have access to new and 
innovative therapies to treat cancer that can ultimately 
improve and save lives. Treatment decisions should be made 
between a healthcare provider and a patient and his or her 
family and not be limited by an unelected board.
    I recently spoke with a prostate cancer patient named Doug 
Magill from Northeast Ohio, and when he was diagnosed with 
prostate cancer, he began his quest to determine which 
treatment to pursue. He did all the things an informed patient 
would do--got a second opinion, spoke with other patients, 
family and friends, and he did a lot of research. Ultimately, 
he chose to travel across the country to Loma Linda University 
Medical Center to receive proton radiation therapy. He chose 
proton therapy because of his fear of the side effects such as 
impotence and incontinence that other treatments may cause.
    Doug expressed his concern to me that an entity like IPAB 
may have restricted his right to choose his treatment. By 
limiting his access to certain providers, he may have been 
forced to choose surgery instead of proton therapy and possibly 
left incontinent and impotent for the rest of his life.
    Like Doug, each prostate cancer patient is unique and that 
should come into play when determining a treatment path. 
Patients and providers should have the right to choose what is 
best for them.
    Another negative impact to seniors will be IPAB's 
requirement to achieve savings in 1-year periods. This means 
that the focus will largely be on cutting payments and other 
short-term savings rather than on long-term savings and reforms 
that could save money or help patients avoid unnecessary care 
in the future.
    More emphasis should be placed on prevention. Catching 
health problems in their early stages while they are still 
treatable and preventable is the best way to ensure that 
seniors stay healthy and incur less expense to Medicare in the 
long run. More emphasis should be placed on participation in 
benefits like the Welcome to Medicare physical. Currently, less 
than 10 percent of those eligible to participate in this 
screening do so even though it can serve to provide guidance 
for seniors' health maintenance as they age.
    Finally, we are concerned about the lack of oversight of 
IPAB. The board has the power to change laws previously enacted 
by Congress without actually needing congressional approval. 
Furthermore, the Secretary's implementation of IPAB's 
recommendations is exempt from judicial and administrative 
review.
    We are also troubled that there is no patient 
representation on the board and that IPAB is not required to 
hold public meetings where the voices of patients, caregivers, 
and families can be heard. Important healthcare decisions that 
can dramatically impact patients will be made by an unelected 
board without accountability to the public.
    In conclusion, I would like to thank the committee and just 
reiterate that while we agree that healthcare costs do need to 
be reigned in, we do not believe that IPAB is the right way to 
do so. Thank you.
    [The prepared statement of Ms. Morrow follows:]
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    Mr. Pitts. The chair thanks the gentlelady and thanks the 
panel for your testimony. We will now begin questioning and I 
will recognize myself for 5 minutes for that purpose.
    Dr. Valadka, you state that the IPAB as it has been 
described in statute will simply ratchet down costs in the 
absence of adequate clinical expertise or the research capacity 
to examine the national and regional effects of proposed 
recommendations to ensure patients are not unduly impacted. Are 
you concerned that the IPAB's mandate to cut spending in the 
short-term will undermine longer-term improvements to Medicare 
and the healthcare system in general? Would you elaborate?
    Mr. Valadka. Yes, thank you for the question.
    One aspect of this which has not been addressed much this 
morning is the fact that Medicare not only funds a lot of 
practitioners in the private sector but also is a huge 
contributor to medical schools and other places that do 
research. And that margin is getting thinner and thinner. As 
someone who spent over 12 years as a medical school faculty 
member, I can attest to that firsthand.
    So if Medicare reimbursements to all the physicians 
participating in medical schools are going down, that leaves 
very little excess room for research to develop new treatments, 
as well as for education of medical students and residents who 
are going to be the next generation of practitioners. And those 
are the most fertile source for new innovations, ideas coming 
forward for the several decades following their training.
    And moving to people who are already in practice, there is 
a lot of very clever people practicing out there who come up 
with better ways to do a procedure or treat a patient or to 
treat a disease. But again, if there is less excess capital 
flowing into their practices, they are not going to have the 
luxury of that time to develop new and better treatments.
    Mr. Pitts. Thank you.
    Ms. Grealy, many if not most healthcare analysts think that 
meaningful health reform will occur over a number of years. Are 
the short-term scorable proposals that the board is likely to 
have to make consistent with meaningful health reform in your 
opinion?
    Ms. Grealy. Well, actually, I think it could be a barrier 
to that long-term meaningful reform. I think as you have heard 
among this panel that things that could save Medicare money in 
the long run may require a capital investment up front. We look 
at the current development of Accountable Care Organizations. 
It requires investment. As Dr. Lewin has pointed out, we need 
to have health information technology as an important tool. 
Again, these are things that in the short-term could increase 
spending, and this idea of having a year-by-year, 1-year budget 
reduction requirement I think really could impede some of those 
longer-term savings that would improve quality as well as 
reduce the cost of care.
    Mr. Pitts. Thank you.
    Dr. Lewin, in your testimony you state that ``until the SGR 
is replaced, you cannot support implementation of the IPAB.'' 
Does that mean that if the SGR is replaced, you would then 
support the IPAB?
    Mr. Lewin. Thank you for the question, Mr. Chairman.
    No, I think the SGR needs to be replaced and that is going 
to be exceedingly difficult as you well know because of the 
accumulated debt that it has accrued.
    I think that we need something different from the IPAB and 
the SGR, something that is not a price-control approach. In 
fact, let us move away from the past and really innovate in 
health system reform to a new future where we start rewarding 
for better quality, more efficient care rather than the volume 
of care. And so, you know, we need to get on this now. We may 
not get the SGR fixed for years as far as I know. So we need to 
develop a new mechanism.
    And sir, the IPAB, while the goal is right, the method is 
wrong. And so we will work with you to develop something that 
really will bend the cost curve, really will achieve those 
spending targets but to do so in a fashion that could actually 
work.
    Mr. Pitts. Thank you.
    Ms. Morrow, how could the IPAB affect the development of 
newer treatment modalities for prostate cancer as they are 
developed in the future? Does the IPAB have the potential to 
limit care for future patients as well as current patients in 
your opinion?
    Ms. Morrow. Yes, we do believe that, you know, IPAB is 
charged to reduce excessive growth rates and Medicare spending 
and, you know, that could be defined as reducing payments for 
new, high-priced drugs and yes, we are very concerned about 
that taking prostate cancer.
    Mr. Pitts. Thank you. The chair yields to Mr. Pallone for 5 
minutes for questions.
    Mr. Pallone. Thank you, Mr. Chairman.
    I wanted to ask Dr. Lewin one of the many ideas put into 
place by the Affordable Care Act was the Center for Medicare 
and Medicaid Innovation. It is a new effort by CMS to research 
and develop ideas to save money and improve quality in Medicare 
and Medicaid more quickly than before. Last week, the 
Innovations Center announced projects to improve the 
coordination of care for dual eligibles--for instance, in 
cooperation with the States. Do you believe that the 
Innovations Center is a good idea? Would you just comment on it 
and why you might think that it is a good idea?
    Mr. Lewin. We heartily applaud the Innovation Center idea. 
We think that this is exactly what we need, a part of the CMS 
agency that really starts rewarding and funding innovation and 
new idea. I mean, we want to continue to have the best 
healthcare for all people in this country, including those who 
don't have access right now, and we want to continue 
innovating. But we are going to have to cut spending. 
Fortunately, you know, we can do this because there is so much 
waste in the current healthcare system.
    The Innovation Center moving toward the triple aim--things 
that improve health, improve healthcare, and lower costs at the 
same time are possible. The Door-to-Balloon, the speeding up of 
heart attack treatment is an example. And I could give you 
numerous more that we are working on in cardiology. So if we 
could start funding models and show people out there what best 
practices are and then diffuse those across the healthcare 
system with a new kind of payment incentive process, I think we 
can solve this problem, have the best healthcare system in the 
world, and do it at GDP plus 1 percent.
    Mr. Pallone. Thank you.
    Did you want to comment, Ms. Grealy, on the Innovation 
Center as well?
    Ms. Grealy. Yes, I think this is a real opportunity for a 
public-private partnership. I think Jack has given some great 
models of what is being done in the private sector now against 
the financial incentives in the current Medicare program. They 
are doing the right thing despite not really getting rewarded 
for it. The value compendium that we have submitted will show 
you other examples of that. So I think it is an opportunity for 
the Medicare and Medicaid programs to learn from the private 
sector and to test pilot these things as opposed to this board 
of 15 people coming up with a number, making some 
recommendations that perhaps haven't even been test piloted. 
And I think that is the real advantage of having the Center for 
Innovation.
    Mr. Pallone. Thank you. I was going to ask you also, Ms. 
Grealy, this is a quote from the CBO analysis of the Republican 
plan for Medicare and Medicaid in their budget. It says, 
``Under the Republican budget proposal, the gradually 
increasing number of Medicare beneficiaries participating in 
the new premium-support program would bear a much larger share 
of their healthcare costs than they would under the traditional 
program, and that greater burden would require them to reduce 
their use of healthcare services, spend less on other goods and 
services, or save more in advance of retirement than they would 
under current law.''
    Now, in your testimony, you said that ``IPAB has the 
potential to cause serious harm to Medicare beneficiaries'' 
but, you know, I would like to know what your views would be of 
the Republican budget plan and its effect on beneficiaries. Do 
you agree with the CBO's characterization of the Republican 
plan?
    Ms. Grealy. The Healthcare Leadership Council for over a 
decade has supported the concept of moving to a premium-support 
model for the Medicare program to give seniors more choice, to 
have those private plans competing, much as they do in the 
Medicare Part D program. I think what we need to do is to look 
at the premium-support model. There are many components to it. 
We probably would recommend using a different inflation factor. 
Much like Alice Rivlin, we would probably recommend maintaining 
for a period of time the traditional Medicare program. So I 
think there is a lot of merit to the concept. I think there are 
some modifications that we would make to the proposal that was 
put forward.
    Mr. Pallone. Thank you.
    Let me ask--I guess I have another 50 seconds here. I 
wanted to ask Ms. Morrow, you know, again you made your 
concerns about IPAB clear but as you know, this was developed 
as a backstop mechanism to address to growing costs of 
healthcare. In the Republican approach in the budget is very 
different. They would simply slash existing programs. They 
would end Medicare as we know it, and they would slash medical 
research. And I am concerned about the impact on medical 
research of the Republican budget. The NIH budget was actually 
cut under the continuing resolution for this year, and for 2012 
it doesn't look any better. If you would just comment on it. I 
mean I am just concerned where are we going with research with 
what happened with the CR and what is in the Republican budget 
for the future?
    Ms. Morrow. Yes, continuing research in cancer is extremely 
important to us and we do advocate for increased funding for 
research. And I am not familiar with everything that is in the 
Republican plan but, I mean, we will continue to support more 
increased funding for research.
    Mr. Pallone. OK. Thank you very much. Thank you, Mr. 
Chairman.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the vice chairman of the subcommittee, Dr. Burgess, for 5 
minutes.
    Mr. Burgess. Well, thank you, Mr. Chairman. And I thank you 
all for being here. This has been an interesting--although, Dr. 
Valadka, you are correct that this was--what did you call it? 
The IPAB-alooza of--IPAB-ulous?
    Mr. Valadka. IPAB-athon, but IPAB-alooza applies as well.
    Mr. Burgess. I do so welcome the comments of all of you. I 
think they have been very helpful.
    Ms. Grealy, I hope that you will take some time and take 
the Secretary of Health and Human Services perhaps to lunch and 
explain to her what premium support actually is. You might even 
want to include Ranking Member Waxman in that discussion 
because he seems to have some difficulty and even the President 
of the United States required a little remedial education of 
the difference between a voucher and a premium-support system.
    Dr. Valadka, let me just ask you, we hear a lot about the 
IPAB. We have heard a lot about it today, but I get the general 
impression that doctors and patients and patient-advocacy 
groups do not support the IPAB. Is that a fair assessment, and 
if that is fair, why do you suppose that is?
    Mr. Valadka. To borrow a line from a high-ranking member of 
this body, when the healthcare debate was going on a couple of 
years ago, you have to pass the bill to find out what is in it.
    Mr. Burgess. Now, we know.
    Mr. Valadka. I have had that same conversation with many of 
my colleagues in the operating room and the ICU in the hallways 
where they don't really quite know what IPAB is. And the more 
you talk to them and educate them, I don't think anyone thinks 
it is a good idea. And I think it has been gratifying to see 
this started as a very obscure issue that only policy wonks 
knew about, and now I understand they get discussed in the New 
York Times, Wall Street Journal, CNN, mainstream media outlets 
like that. So I do think that the more people learn about it, 
the less they are going to support it.
    Mr. Burgess. And I think that is in general true.
    Now, Dr. Lewin, you talked about repeal the SGR before you 
do the IPAB. I got to believe that really you are the 
membership of the American College of Cardiology would not 
support either of those control mechanisms. Is that correct? 
Now, the AMA did--you know, unlike Mr. Pallone, who voted for 
that bill, I voted against it. I thought the AMA was wrong to 
support it. What does your membership say?
    Mr. Lewin. Well, we certainly don't have any affinity for 
the SGR. It clearly doesn't work and it is too bad we didn't 
deal with it 10 years ago, right? We all wish we had. But that 
said, I think the IPAB as it is currently designed we don't 
believe will be effective in any way, shape, or form. It is 
going to be another price-control mechanism. So we would like 
to get on with the challenge that we have as a Nation of, you 
know, creating the healthcare system of the future that 
provides access to everybody, that continues to reward 
innovation and improve quality. And we think we need a 
different approach than the IPAB.
    Mr. Burgess. Well, let me tell you the problem, though, 
because you reference the SGR and your pessimism of the SGR 
that anything meaningful will happen, and I actually--this here 
I am more optimistic that something can happen to the SGR than 
any time previous in my 9 years here.
    But here is the deal. You are exactly right. What if in 
1998 someone had had the courage to say oh, this SGR thing is 
going to be a disaster in 10 years' time and I want to fix it. 
We have that opportunity with the IPAB now. Once the IPAB 
begins that cumulative effect of, you know, this specious thing 
of a dollar saved, then there is going to be a CBO-directed 
cost associated with its repeal. And it won't be too terribly 
long before that cost becomes a mountain too tall to climb just 
as the SGR is today.
    So yes, we got to kill one that is mature, which is the 
SGR, but the other one, we do need to get a handle on it before 
it ever gets out of the box. And I would say the time is now to 
repeal the Independent Payment Advisory Board, and I would 
encourage Mr. Pallone to join with us on that because once this 
thing gets away from you, it is Katy bar the door. It would be 
impossible to undo it.
     And I think honestly that is what the administration is 
banking on. They want to get this thing up and running and it 
is another method--but let us be honest, this thing was not 
about healthcare, never was. It is a tax bill, but bottom line, 
it is about control. They want to control you. They want to 
control Dr. Valadka. They want to control what you do. They 
want you to do only what they tell you you can do and they want 
to be able to tell you when to stop, don't do anymore. That 
patient has had enough. That is where this thing is going.
    Ms. Morrow, let me just thank you for being here. I don't 
have a question for you as relates to the IPAB on prostate 
cancer, but I do remember in the discussion of healthcare 
reform as it was going through, I read somewhere where some 
healthcare thinker said we will be able to tell if Congress was 
serious about reforming healthcare as to what they do with 
prostate cancer because the implication was we over-treat 
prostate cancer in the United States of America. However, 
recent studies comparing survival rates for prostate cancer in 
the United States versus Europe, it is like 99 versus 77 
percent. I would rather be here with all our faults than 
anywhere else in the world. Do you have any comments on that?
    Ms. Morrow. I have seen those same statistics and, you 
know, as far overtreatment, we strongly disagree with that 
term. You know, it is up to the patient. The doctor and the 
patient can have an informed discussion about the person's 
prostate cancer and whether it is going to grow and affect them 
in their lifetime, but the decision should be between the 
patient and the provider.
    Mr. Burgess. And not the IPAB and the provider.
    Ms. Morrow. Exactly.
    Mr. Burgess. Thank you.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
Dr. Cassidy for 5 minutes.
    Mr. Cassidy. Dr. Valadka, a friend emailed me and said how 
come you don't have a practicing physician on the panels, one 
passionate about our practices? And so I will have to email her 
back and say although I didn't pick it, we have one.
    My question for you is that when you look at the CBO score 
that Mr. Pallone referenced, it says the reason that 
traditional Medicare scores less than a private insurance plan 
is that traditional Medicare pays physicians less. Indeed, the 
way CBO scored it is although they don't assume the SGR cuts go 
through, they also have no inflation adjustment. Now, that has 
been the case since 2002, and effectively, Medicare is paying 
physicians significantly less now than they were in 2002, so 
much so that Richard Foster says that within 9 years Medicare 
will pay less on average than Medicaid. You are a practicing 
physician. Secretary Sebelius avoided answering this question 
every which way. But if Medicare is now paying less than Texas 
Medicaid, what will that do for access to services for those 
who have Medicare?
    Mr. Valadka. In one word, cost-shifting. As we discussed 
here earlier today----
    Mr. Cassidy. Now, let me say this. You are saying that as a 
specialist who sees people coming through the ER and almost 
have no choice but to see the patient. So speak first as a 
specialist and then imagine what it would do for access to 
primary care.
    Mr. Valadka. Well, as you well know, when patients come 
through the emergency room, we take care of them first and 
oftentimes we don't even know their name. You know, they are in 
the computer as unknown, number something, we operate and take 
care of them and then later figure out who they are, who the 
family is, you know, if they have any resources. That is a 
hospital administration issue. But that is time that takes away 
from your practice. And as you know, time is a very precious 
thing. So you are going to have to make up the gap in other 
ways because you are going to have pay your secretary, your 
nurses, your----
    Mr. Cassidy. You have a fixed overhead?
    Mr. Valadka. Absolutely.
    Mr. Cassidy. Now, I know you are not primary care, but if 
you are primary care and you are spending 50 percent of your 
receipts on fixed overhead and you got a choice of which 
patients that you can afford to take--New York Times documented 
this very well with an oncologist in Michigan getting paid 
below cost by Michigan Medicaid at some point could no longer 
afford to take more Michigan Medicaid patients, would you 
accept that it is going to hurt access to primary care?
    Mr. Valadka. Well, I think you used the word choice as to 
what patients are going to have to take, and I would quibble 
with you a little bit. You don't have a choice. You have to 
take more patients with commercial insurance just to subsidize 
all of the activity you are spending taking care of the 
patients with no insurance or Medicaid.
    Mr. Cassidy. Or limit what you--now, in this case, if 
Medicare is paying less than Medicaid, you would now put the 
Medicare patient in the same boat if you will as that Michigan 
Medicaid cancer patient who could not find a provider?
    Mr. Valadka. That is exactly right.
    Mr. Cassidy. Yes. And again, in 9 years under the provision 
that CBO describes is saving money for traditional fee-for-
service Medicare, we and Medicare as we know it because seniors 
will not be able to access care, that is a little--and you 
raised something, just kind of--I thought about it but the way 
you phrase it kind of ticked my mind a little bit. So IPAB can 
only cut among providers, physicians.
    Mr. Valadka. Yes.
    Mr. Cassidy. So really we could have a hole in the bucket 
for hospitals. There could be a hole in the bucket for 
hospitals with just an inordinate amount of cost going there, 
but physicians would have to make up the difference, correct?
    Mr. Valadka. As it is now, yes, because hospitals have I 
think until 2018 or 2019. Yes. They are out of the loop. They 
kind of negotiated themselves out. I just can't stress it 
enough--it is like a broken record--we have to do something 
different than this. We need to deal with the rising costs of 
Medicare. We can but we need help from Congress to do that with 
a different approach than this design. This isn't going to work 
and if this is health reform, then let us start off and do 
something the right way and reward incentives for quality and 
efficiency and improved care. That we can do. We now have the 
tools to do that. We couldn't have done that in the '90s when 
health reform was proposed. We can do that now. And physicians 
want to do this. We still want--clinical judgments are still 
going to be important and we want to protect the patient-
physician relationship in this process.
    Mr. Cassidy. I like the way you emphasize the practicing 
physician's role in controlling healthcare costs. I note in 
IPAB I don't think you are allowed to continue to practice and 
still serve on the board, which gives me kind of pause. Wait a 
second. If the person who is in the mix, if she is the one who 
knows best how to do it but she is the one who, by statute, is 
not allowed to serve, it seems kind of odd.
    Mr. Valadka. Certainly. And especially a full-time 
occupation to be on the board. We are going to attract people 
that are going to be retired people. So this is not the design 
for a system that is really going to innovatively improve 
Medicare.
    Mr. Cassidy. There is a system designed by staffers, not by 
people involved in healthcare.
    I am out of time. I yield back. I thank you all.
    Mr. Valadka. Thank you.
    Mr. Pitts. The chair thanks the gentleman. That completes 
the first round. We will have one follow-up on each side. Dr. 
Burgess?
    Mr. Burgess. Dr. Lewin, you referenced that setting price 
controls on volume doesn't work, and I think we have seen that 
with the SGR rather eloquently. You reduce the amount you pay 
and you drive up volume because, as Dr. Cassidy pointed out, 
overhead costs are fixed so you have got to do more if you are 
going to keep those overhead costs met and continue to earn a 
salary if you are at an individual or a small-group practice, 
which I was.
    Now, fee-for-service medicine gets a bad rap in all of this 
and we are told by all the great thinkers in healthcare that 
the fee-for-service system is the culprit. But really the 
culprit is the administrative pricing brought to us by the 
Center for Medicare and Medicaid Services and your specialty in 
particular. I mean, I have had deans of medical schools who are 
cardiologists come to me and say the big problem is the 
overutilization of our specialty, you know, Door-to-Balloon 
time studies that you have done, that is great and a great 
metric, but if these guys are accurate and more balloons are 
being done than are necessary, then it doesn't matter that you 
do them quickly. It is still going to be a cost driver. And yet 
because of administrative pricing, we have favored that type of 
activity in the Medicare system.
    You know, you would ask yourself the big problem that 
everyone talks about is childhood obesity. You have got the 
First Lady working on that is her main cause. You would think 
that with childhood obesity under the raft of childhood 
diabetes that will follow that we will be churning up pediatric 
endocrinologists right, left, and center. And yet we turn them 
out a handful a year. And cardiologists know we turn out a lot. 
So as the leader of your professional organization, how are you 
proposing to deal with this? Forget SGR and IPAB for a moment. 
You guys have a responsibility here.
    Mr. Lewin. Yes, you know, just as a quick aside with the 
tsunami of obesity and diabetes, you know, we won't have enough 
cardiologists to deal with what is coming up in the future. 
But, you know, we really have the tools now to make sure that 
people who have chronic stable angina who are approaching the 
system for care don't get a stent when it really wasn't needed 
or don't get bypass surgery where a stent would have been 
better or get to optimal medical therapy when the data shows 
the results will be better and they will have no risk of 
complications in the meantime. We have these tools, we have the 
science, but there are no incentives to apply them in hospitals 
across the country.
    We have incentives to reduce the use of implantable 
defibrillators for people for whom the science says shouldn't 
have gotten them. We published it. We published our data. We 
have 100 percent--thanks to--Medicare requires the use of our 
registry. We have 100 percent of the implantable defibrillator 
data in the United States. We pointed out 23 percent of them 
apparently were placed without the best guideline evidence 
being present. And we want to go around and educate everybody, 
but the incentives are not there to say to the hospitals and 
the doctors we are going to reward those who start to reduce 
that variation, not pay for the volume.
    Mr. Burgess. Well, how will IPAB reduce that variation?
    Mr. Lewin. It won't. It will not. IPAB just has no way to 
do that. We need a different mechanism and that is payment 
incentives for improved quality and outcomes and efficiency. 
And you have to measure to manage. So you have got to have 
systems out there to give doctors and hospitals feedback, 
dashboards of feedback on how they are doing as compared to all 
their peers. When they have that information, they will change.
    Mr. Burgess. And Dr. Valadka, let me just ask you to, you 
know, you are the only practicing physician we have heard from 
all day. What about how does medical liability reform factor 
into what Dr. Lewin was just talking about?
    Mr. Valadka. I think liability reform is a huge way to try 
to bring down costs in the healthcare system. Now, that is not 
part of IPAB. Of course, we would beginning far afield. But you 
are a Texan. You have heard about the Texas miracle following 
tort reform there in 2003. It did everything that its 
proponents said it would. It lowered the cost of professional 
liability insurance. It brought more PLI carriers into the 
State, and most importantly, it brought a lot more physicians 
into the State. And those guys are going to the rural and 
underserved areas just as much as going to the major 
metropolitan centers. The only downside has been the flood of 
applications to the Texas Medical Board because----
    Mr. Burgess. Yes, the Texas Medical Board is in trouble. 
But Dr. Lewin referenced, you know, the fact that sometimes a 
stent might do instead of a bypass or maybe maximum medical 
therapy. But it could be tough if you are the doctor on the 
frontline who is worried about the appearance of did I do 
everything possible if this patient walks out of the office and 
crashes and burns in my parking lot, did I do everything 
possible to prevent that from happening? And that is a burden 
with which we live as practicing physicians every day, is it 
not?
    Mr. Valadka. Well, that is absolutely true. And again, to 
put that in perspective, that is going to happen a certain 
percentage of the time even if you do everything right. So now 
you are thinking, OK, did I do everything right? Someone is 
going to be looking over my shoulder in 6 months or 12 months 
if there is a bad outcome. And again, you know, Abraham Lincoln 
said even if you did everything right and events prove you 
wrong, a thousand angels swearing you were right won't make a 
difference. So that is a huge concern for all practicing 
physicians.
    Mr. Burgess. Thank you for being here today, all of you. 
Thank you.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the gentleman from Michigan, the ranking member emeritus, Mr. 
Dingell, for 5 minutes of questions.
    Mr. Dingell. Mr. Chairman, you are most courteous. Thank 
you.
    Dr. Lewin, welcome to today's hearing. I would like to 
begin to discuss your recommended improvements to IPAB. You 
mentioned in your testimony that flexibility should be provided 
to help recruit high-quality board candidates. Do you believe, 
then, that under the current statute the board will be unable 
or will be able to recruit high candidates?
    Mr. Lewin. Congressman Dingell, thank you for the question. 
I don't believe the way it is currently constructed the IPAB 
will recruit the kind of people that we want. First of all, the 
IPAB membership is a full-time, if you will, occupation. It 
means that we can't bring in the best and the brightest from 
throughout the health sector with various perspectives to help 
guide this process. We are almost destined with that approach 
to bring in retired people.
    Mr. Dingell. My next question, you have gotten a bit ahead, 
but one, what will be the barriers to recruiting candidates; 
and two, what should we do to eliminate those barriers to 
enable us to recruit the strongest candidates?
    Mr. Lewin. My guess is that the importance of this process 
is that some excellent candidates may come to serve just with 
their expenses covered, but I think this shouldn't have to be a 
full-time commitment on the part of those individuals. We need 
people who are the best and the brightest in the healthcare 
sector who understand the economics as well as the clinical 
realities of this and the patient perspective part of this to 
be sitting around this table. So I think that the way that it 
is designed in terms of the pay and the requirement that it be 
a full-time occupation will make it very untenable.
    Mr. Dingell. OK. Now, Doctor, IPAB establishes a Consumer 
Advisory Council to advise the board on how payment policies 
impact consumers. However, this is an advisory capacity only 
and does not include patient representation. Now, as a 
physician, how would you recommend addressing this problem and 
encouraging patients' participation to help in decision-making 
necessary for the board to issue the best recommendations?
    Mr. Lewin. Well, I think the IPAB ought to have patient 
representation sitting right there on the board itself if it 
was to exist. Patient representation should have been part of 
the process of the IPAB. But I would say, Congressman Dingell, 
that I think we have to reconstruct what we consider this IPAB 
model if we want it to actually achieve cost containment over 
time by systematic improving quality of care. I think the way 
it is designed isn't going to work so I am not so concerned 
about how we get the members on it right now. I would like to 
see a design of a system that might actually reduce costs and 
improve quality.
    Mr. Dingell. I notice you, Dr. Valadka, were nodding yes?
    Mr. Valadka. Yes, I agree completely. It seems like we have 
gotten a little bit ahead of the conversation when we are 
talking about how to structure IPAB and how it should be set up 
in advisory committees, but I think a more fundamental question 
is really will it achieve the aims it sets out to do without 
creating too many adverse events like limiting access to care 
for our seniors.
    Mr. Dingell. Thank you.
    Now, again, coming back to our first witness here. Your 
testimony suggests the use of data registries as one way to 
ensure high-quality care while identifying areas to reduce 
spending. In particular, Doctor, you mentioned the ACC's 
Pinnacle outpatient registry. I happen to believe that the 
technology advances like electronic health records and 
registries can create savings but also know that there could be 
a resistance to implementing such technologies. How many 
providers participate in this registry currently, Dr. Lewin?
    Mr. Lewin. Thank you for that question, Congressman 
Dingell. Nearly all the major hospitals in the United States 
participate in the registries and they pay us for the data, and 
that allows us to actually keep this very expensive operation 
going. In the physician outpatient setting, it is really hard 
to ask the doctors to pay us for collection of data at this 
time, but a thousand practices have signed up. We have two 
million patient records already with this relatively new 
system. And we can see measured improvement in quality across 
the entire Pinnacle network. I might add that 100 percent of 
the Pinnacle participants received the full PQRS reward and the 
e-prescribing reward, and we were able to file for them. So 
there is some small reward. But if we were to use payment 
reform to provide real incentives for improved outcomes and 
quality, this would go rapidly across the entire environment. 
It needs to reach to internal medicine and family practice and 
others who share in the care of cardiology patients with us in 
the outpatient setting.
    Mr. Dingell. My time is up, Doctor, but with the patience 
of the chair, I am going to ask you can you give me an example 
of how a member of ACC has used the registry to bring down the 
costs of their practice?
    Mr. Lewin. Absolutely. The one thing I can give you is that 
they got an average of 8 to $10,000 back from the rather 
pitifully small reward program called PQRS that Medicare uses 
today by just by participating in the registry. They got the 
rewards from Bridges to Excellence and from other employer-
based private insurance approaches. And some of them are now 
going to receive a bypass of having to go through, you know, 
call a nurse to get permission for a procedure because they can 
demonstrate to the insurance company that they are making the 
right decisions using the clinical decision support tools 
embedded in the registry. So it is a hassle factor improvement 
for the doctor, and time is worth money. So even though the 
payment incentives aren't really aligned yet to improve 
quality, even now, this Pinnacle registry is offering some 
benefits to people in the current environment.
    Mr. Dingell. Thank you, Doctor.
    Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman. We are voting on 
the floor. We have 11 minutes to go. We have time for follow-up 
from Mr. Pallone.
    Mr. Pallone. I will be quick. I know that both Dr. Burgess 
and you, Dr. Lewin, brought up the SGR and I do think that 
certainly when I hear from the doctors, you know, they see the 
SGR and, again, the cliff we faced in January as the biggest 
threat to Medicare, more so than IPAB. And you know, I am 
opposed to IPAB but I just wanted you to comment on that. I 
mean, isn't this SGR a major threat, more so than IPAB and what 
are the doctors telling you about it?
    Mr. Lewin. We would have to think that it is a major 
threat. It is certainly a threat to access. If more doctors 
can't afford to accept Medicare patients, clearly it is going 
to pose a nightmare for our healthcare system, for emergency 
rooms and for the entire system. So we are very, very worried 
about it and particularly because it is a big, big price tag to 
try to fix it.
    Mr. Pallone. The cut.
    Mr. Lewin. And I honestly don't know how it is going to 
happen given the conversation on, you know, the debt ceiling 
and the deficit. So, you know, I assume we might end up kicking 
that can down the road again, and I am very, very worried about 
that, much more worried than I am about the IPAB.
    Mr. Pallone. Well, I just wanted to say I know that Dr. 
Burgess mentioned that, you know, he hopes that we can get to 
it and do a long-term fix this year. And I am very much 
supportive of that. I always kid him because he was I think the 
only Republican who voted for the Democrat long-term fix that 
we passed a couple years ago. So I have to commend him for that 
although maybe he doesn't like to be commended for that.
    But I would just ask, Mr. Chairman, that I know that we 
have already had a hearing on it, but I would urge that we do 
try to address it and not wait until the last minute and kick 
the can down the road.
    Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman and for the 
information of the panel. We are going to deal with the SGR 
this year. We intend to do a long-term fix. We are in the 
process. We have collected information from all the doctor 
groups. We have had meetings, many meetings, and we are in the 
process of developing a vehicle, but it will probably be after 
the break in the fall before we get to it. But we intend to 
deal with it on a permanent basis before the end of the year.
    This has been an excellent panel. Thank you for the 
information you have shared.
    That concludes today's hearing. I remind members that they 
have 10 business days to submit questions for the record, and I 
ask the witnesses to please agree to respond promptly to these 
questions. With that, this subcommittee is adjourned.
    [Whereupon, at 2:06 p.m., the subcommittee was adjourned.]
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