[Senate Hearing 112-579]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 112-579
 
    EXAMINING MEDICARE AND MEDICAID COORDINATION FOR DUAL-ELIGIBLES 

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

                                HEARING

                               BEFORE THE

                       SPECIAL COMMITTEE ON AGING

                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS


                             SECOND SESSION

                               __________

                             WASHINGTON, DC

                               __________

                             JULY 18, 2012

                               __________

                           Serial No. 112-20

         Printed for the use of the Special Committee on Aging


         Available via the World Wide Web: http://www.fdsys.gov

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                       SPECIAL COMMITTEE ON AGING

                     HERB KOHL, Wisconsin, Chairman

RON WYDEN, Oregon                    BOB CORKER, Tennessee
BILL NELSON, Florida                 SUSAN COLLINS, Maine
BOB CASEY, Pennsylvania              ORRIN HATCH, Utah
CLAIRE McCASKILL, Missouri           MARK KIRK III, Illinois
SHELDON WHITEHOUSE, Rhode Island     DEAN HELLER, Nevada
MARK UDALL, Colorado                 JERRY MORAN, Kansas
MICHAEL BENNET, Colorado             RONALD H. JOHNSON, Wisconsin
KIRSTEN GILLIBRAND, New York         RICHARD SHELBY, Alabama
JOE MANCHIN III, West Virginia       LINDSEY GRAHAM, South Carolina
RICHARD BLUMENTHAL, Connecticut      SAXBY CHAMBLISS, Georgia
                              ----------                              
                 Chad Metzler, Majority Staff Director
             Michael Bassett, Ranking Member Staff Director



                                CONTENTS

                              ----------                              

                                                                   Page

Opening Statement of Senator Herb Kohl...........................     1
Statement of Senator Bob Corker..................................     2

                           PANEL OF WITNESSES

Melanie Bella, Director, Medicare-Medicaid Coordination Office, 
  Center for Medicare and Medicaid Services, U.S. Department of 
  Health and Human Services, Baltimore, MD.......................     3
Jason Helgerson, Medicaid Director and Deputy Commissioner, 
  Office of Health Insurance Programs, New York State Department 
  of Health, Albany, NY..........................................    16
Robert Berenson, M.D., Institute Fellow, Urban Institute, 
  Washington, DC.................................................    18
Shawn Morris, President, Healthspring, Nashville, TN.............    19
Tom Betlach, Director, Arizona Health Care Cost Containment 
  System, Phoenix, AZ............................................    21
Dory Funk, M.D., Medical Director, Senior Community Care, Eckert, 
  CO.............................................................    24

                                APPENDIX
                   Witness Statements for the Record

Melanie Bella, Director of the Medicare-Medicaid Coordination 
  Office, Center for Medicare and Medicaid Services, Baltimore, 
  MD.............................................................    38
Jason Helgerson, Medicaid Director and Deputy Commissioner of the 
  Office of Health Insurance Programs, New York State Department 
  of Health, Albany, NY..........................................    55
Robert Berenson, Institute Fellow, Urban Institute, Washington, 
  DC.............................................................    57
Shawn Morris, President, HealthSpring, Nashville, TN.............    68
Tom Betlach, Director, Arizona Health Care Cost Containment 
  System, Phoenix, AZ............................................    72
Dory Funk, Medical Director, Senior Community Care, Eckert, CO...    79

       Responses to Additional Questions Submitted for the Record

Melanie Bella, Director of the Medicare-Medicaid Coordination 
  Office, Center for Medicare and Medicaid Services, Baltimore, 
  MD.............................................................    90
Shawn Morris, President, HealthSpring, Nashville, TN.............    92

             Additional Statements Submitted for the Record

Aetna, Hartford, CT..............................................    95
Federation of American Hospitals, Washington, DC.................    99
Medicaid Health Plans of America, Washington, DC.................   104
Medicare Rights Center, Washington, DC...........................   110
National Association of Nutrition and Aging Services Programs, 
  Washington, DC.................................................   114
National Committee to Preserve Social Security and Medicare and 
  National Senior Citizens Law Center, Washington, DC............   116


    EXAMINING MEDICARE AND MEDICAID COORDINATION FOR DUAL-ELIGIBLES

                              ----------                              


                        WEDNESDAY, JULY 18, 2012

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:05 p.m. in Room 
SH-216, Hart Senate Office Building, Hon. Herb Kohl, chairman 
of the committee, presiding.
    Present: Senators Kohl [presiding], Wyden, Whitehouse, 
Bennet, Blumenthal, Corker, and Johnson.

        OPENING STATEMENT OF SENATOR HERB KOHL, CHAIRMAN

    The Chairman. Good afternoon. We welcome our witnesses and 
all of you who are here today.
    I commend Senator Corker for putting together and chairing 
this hearing on meeting the challenges of integrating care for 
beneficiaries who qualify for both Medicare and Medicaid. These 
so-called dual eligibles tend to have chronic conditions that 
must be carefully managed, such as diabetes and heart disease. 
They need high-quality, consistent Medicare services, and many 
depend on Medicaid for long-term services and supports.
    Historically, the coordination of care for dual-eligible 
beneficiaries has been fragmented and resulted in higher costs 
and poorer health outcomes. This is not acceptable. Not only 
have these people earned benefits that should protect them when 
they need it, but the high cost is not sustainable in the 
current environment.
    In our health care system today, dual eligibles are the 
most vulnerable of the vulnerable. The challenge for all of us 
is to figure out how to deliver care to them in a way that 
meets their needs but does not cost our health care system a 
fortune.
    Today, at a cost of about $300 billion, these 9 million 
dual eligibles account for a disproportionate amount of 
spending. They represent 16 percent of Medicare beneficiaries 
but consume 27 percent of the program's spending. In the 
Medicaid program, dual eligibles make up 15 percent of 
beneficiaries but account for 39 percent of total costs.
    Fortunately, efforts are now underway to try to eliminate 
costly duplication of services. The new Federal Coordinated 
Health Care Office, or the Duals Office, at the Centers for 
Medicare and Medicaid Services, is working with states to 
implement sound strategies for testing expanded models of 
coordinated care that we hope will lower costs.
    While the national demonstration for dual eligibles is just 
beginning, we hope that this hearing will shed light on what 
gains we can expect to see as this national demonstration of 
unprecedented size and scope prepares to launch.
    Some states, such as Arizona and New York, show great 
potential, and we look forward to hearing about the successes 
of those models. We'll also hear from Medicare-based plans, a 
national expert who understands the intricacies of the Medicare 
program, and also from the PACE program, which has a long 
history of participating in both Medicare and Medicaid.
    As we go forward, it's important to consider whether there 
is sufficient oversight in place for the national duals 
demonstration which will include 26 states, including my own 
State of Wisconsin. Concerns have been raised as to whether 
beneficiaries will be able to choose the best form of care and 
how, if they wish to make a change, they can switch from one 
plan to another or return to traditional Medicare.
    The issue of passive enrollment or enrolling Medicare 
beneficiaries in a program without their consent is a 
fundamental question of beneficiary choice which we cannot 
simply sweep under the rug.
    There are also important questions about what kind of data 
we need and expect to see on an ongoing basis that will clearly 
show what quality of services are being delivered and the 
amount of actual cost savings that accrue from each and every 
participating provider and state.
    We look forward to hearing from Ms. Bella and all of our 
witnesses.
    I'd like to turn now to Senator Corker, who will chair this 
hearing.
    Senator Corker.

                STATEMENT OF SENATOR BOB CORKER

    Senator Corker [presiding]. Thank you, Mr. Chairman. I 
certainly appreciate all of the testaments. I thank you for 
allowing us to have this hearing, and I want to thank all who 
are participating in this hearing to get an update on care for 
seniors known as dual eligibles who receive both Medicare and 
Medicaid benefits.
    Seniors in this vulnerable population usually suffer from 
poor health status and lack of financial resources to 
supplement their treatment. As a result, their care can be very 
complicated and costly, particularly because of Medicare and 
Medicaid's competing rules which create inefficiencies for the 
patients, providers, and payers.
    There are about 9 million dual eligibles, and some recent 
estimates place their annual cost of care to be about $300 
billion by Federal and state governments. According to the 
Centers for Medicare and Medicaid Services, dual eligibles 
represent 20 percent of Medicare enrollment but 32 percent of 
total Medicare spending. In Medicaid, they make up just 15 
percent of enrollment but 35 percent of the program cost.
    With the Medicare Trust Fund on track to be insolvent by 
2024, and state and Federal budgets in dire financial 
predicaments, we must make sure that Medicare and Medicaid are 
working together to serve dual eligibles efficiently and cost 
effectively.
    There have been some innovative solutions to fully 
integrate financial incentives and coordinate patient care. 
Existing models like Programs for All-Inclusive Care for the 
Elderly, known as PACE, and some Medicare Advantage special-
needs plans are successfully navigating complicated rules to 
implement patient-centered care, but very few individuals are 
enrolled in these programs. There is much more that we can do 
so that dual eligibles get quality care at lower cost.
    CMS is in the process of implementing state demonstration 
projects with the goal of achieving financial alignment between 
Medicare and Medicaid for the treatment of dual eligibles. 
Twenty-six states, including Tennessee, have applied under this 
demonstration program which allows states to have the 
flexibility to be laboratories of innovation and could expand 
integrated, coordinated care for dual eligibles from about 
120,000 to as many as 3 million.
    With any program of this size affecting the care of so many 
patients, there must be appropriate congressional oversight. 
Given a recent Congressional Budget Office report demonstrating 
how previous coordinated care demonstrations have not achieved 
sufficient savings, there is a lot riding on whether or not 
coordination and financial alignment can work to truly improve 
the quality and contain the cost of care for dual eligibles.
    I look forward to hearing from our witnesses today on how 
we can currently serve dual eligibles and what more we can do. 
These issues are critical to protecting the retirement security 
of current and future seniors. And again, thank you for 
participating. Thank you for letting us have this hearing 
today.
    We have two panels today. In the first of our panels, we 
look forward to hearing from Melanie Bella. Melanie is the 
Director of the Medicare-Medicaid Coordination Office at the 
Centers for MMS. According to CMS, Ms. Bella is the Senior Vice 
President for Policy and Operations at the Center for Health 
Care Strategies, focusing on integrating care for complex 
populations.
    So, Ms. Bella, we thank you very much for being here and 
look forward to your testimony.

    STATEMENT OF MELANIE BELLA, DIRECTOR, MEDICARE-MEDICAID 
COORDINATION OFFICE, CENTER FOR MEDICARE AND MEDICAID SERVICES, 
  U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, BALTIMORE, MD

    Ms. Bella. Good afternoon, Chairman Kohl, Senator Corker. 
Thank you for the opportunity to be here today. My name is 
Melanie Bella. I'm the Director of the Medicare-Medicaid 
Coordination Office at the Centers for Medicare & Medicaid 
Services. We appreciate the opportunity to share our current 
efforts to provide high-quality, well-coordinated care for 
Medicare and Medicaid enrollees.
    Today, there are over 9 million Medicare-Medicaid 
enrollees, and these low-income persons, seniors and persons 
with disabilities, receive care in a fragmented system that is 
neither easy to navigate nor designed to provide the best care 
possible.
    For decades, there has been much discussion about providing 
better care to this population, and thankfully, through the 
Affordable Care Act, Congress has now given us tools to take 
action, and that's what we want to talk to you about today.
    Simply put, the status quo is not working. Medicare and 
Medicaid enrollees are forced to navigate a myriad of rules and 
requirements and manage multiple identification cards, benefits 
and providers. These are real people stuck in broken systems.
    Consider Jamie. Jamie is a 29-year-old with quadriplegia. 
He is a new Medicare and Medicaid enrollee. Among his many 
needs, he requires both a wheelchair and a shower chair. When 
Jamie became eligible for the second program, there was 
confusion about how to continue access to the medical benefits 
that he needed. As a result, Jamie did not get the services 
that he needed.
    When things like this happen, and they happen every day, 
beneficiaries suffer, and we end up with institutional 
placements or admissions that could and should be prevented.
    Now consider Ms. R. Ms. R. is an 80-year-old widow who 
lives with her daughter. Her daughter has recently taken a 
second job so that she can help provide care for her mother. 
Among her many health conditions, Ms. R. has heart failure, 
diabetes, dementia. She has advanced hip and knee 
osteoarthritis. She sees multiple specialists and rarely sees 
the same primary care provider twice. Her daughter, who is 
feeling overwhelmed, is considering nursing home placement.
    Instead, the family was made aware of an integrated care 
program that was available for Ms. R. After six months in the 
program she has had no hospitalizations, her medication costs 
were cut in half, and she's had no ER visits. In addition, her 
daughter has had fewer work absences.
    Care like Ms. R. receives should be the rule and not the 
exception. With that as our driving principle, the Medicare-
Medicaid Coordination Office is focused on three areas. The 
first is program alignment, the second is data and analytics, 
and the third is models and demonstrations. Collectively, these 
areas form a platform for developing and advancing more 
integrated, person-centered systems of care for people like 
Jamie and the millions of beneficiaries across the country who 
are eligible for both Medicare and Medicaid but find themselves 
stuck in a broken system today.
    Better coordination begins with program alignment. To 
address program barriers and inefficiencies, we launched what's 
called a program alignment initiative, which has served as our 
guide for streamlining Medicare and Medicaid rules, 
requirements and policies. The alignment initiative has 
provided an important forum for the public to comment on our 
work, and it's a guide to help us identify opportunities for 
program alignment that we can either address directly or we can 
address through current or future demonstrations.
    Next is data. A critical aspect to everything we do is 
having a thorough and comprehensive understanding of this 
population. Last year, we initiated a new process to support 
States in their efforts to provide safer, better, and more 
cost-effective care through sharing data, Medicare Parts A, B 
and D data with States for care coordination.
    Earlier this year, we released State-specific profiles that 
provide a snapshot of basic demographic information, 
utilization profiles, cost patterns for the population that 
we're talking about, by State. We hope these tools will help 
serve ourselves and other policymakers better to address the 
needs of this population.
    Complementing these efforts are models and demonstrations 
which further our work to better coordinate care. Through the 
financial alignment initiative, we have fostered a Federal and 
State partnership through demonstrations, one a managed fee-
for-service model and one a capitated model, intended to test 
the alignment of service delivery and financing of the two 
programs. The demonstrations are designed to leverage the 
strengths of the State and Federal governments and to take the 
best aspects of both programs and put them forward in a way 
that meets the needs of beneficiaries, their caregivers and 
providers.
    In addition to the financial alignment initiative, we are 
excited about a new initiative aimed at reducing avoidable 
hospitalizations among nursing facility residents. We are 
committed to openness and transparency and have made it an 
integral part of this process. We take public feedback very 
seriously and are continually working to address comments and 
recommendations.
    This testimony reflects just some of the ways we are 
working to improve the overall beneficiary experience of care, 
strengthen the partnership between the States and the Federal 
Government, protect the integrity of the Medicare Trust Fund 
and taxpayer dollars, and promote more integrated and 
accountable systems of care.
    While there may be differences in views on how we get 
there, there can be no question that we can provide better care 
for this population. Our job is not simply about numbers and 
charts and dollars and savings. It's about people, and we will 
continue to do our part and look forward to working with you 
and your support to do better for this population. Thank you 
very much.
    Senator Corker. Mr. Chairman, why don't you go first with 
questions?
    The Chairman. Thank you. I will not be over long.
    While state by state evaluations are required under the 
national demonstration, what kind of nationwide evaluation of 
the 26 states will CMS undertake? For example, have you 
identified ways to measure quality of care for dual eligibles 
that all states will be required to collect? And if so, will 
the results from each state be part of a national evaluation?
    Ms. Bella. I'm glad you asked that question. Evaluation is 
critical to these demonstrations. We brought an external 
evaluator, RTI, on board several months ago to begin working 
with us, knowing that we were going to want to have a very 
comprehensive evaluation. We will have, as you state, State-
specific evaluation designs, and also a national evaluation. We 
will have core measures across all of the demonstrations, and 
then we will have variations within each demonstration to 
reflect, for example, the different models of care, the 
different target populations.
    But the answer to your question, the answer to all your 
questions is yes. We will have a core set of measures, we will 
have State-specific designs, and we will have a national design 
that will look in aggregate across the demonstrations for both 
the managed fee-for-service and the capitated model.
    The Chairman. Good. The Medicare Payment Advisory 
Commission, MedPAC, and others have expressed concerns that the 
demonstration is too expansive. At the same time, not all 
states are participating in a demonstration, and among the 26 
that are, some are choosing to focus on a limited population. 
Still, it's clear that some states involved have an interest in 
quickly expanding their model.
    What is CMS doing to balance the pressure to expand with 
the need to make sure the new models actually work? And how 
will the agency respond if some states do not do a good job and 
beneficiaries fail to get high-quality care?
    Ms. Bella. Well, a couple of points in response. The first 
is I think it's important to make sure that everyone realizes 
we have not approved any demonstrations yet, and we have not 
made any claims that we will approve demonstrations unless they 
meet the standards and conditions and the high bars that we've 
set for the demonstrations.
    So there certainly is a lot of interest in the proposals 
that have all been publicly posted. The numbers are higher than 
we intend to approve through these demonstrations, and we have 
many checks and balances along the way where we can ensure that 
the beneficiary protections are in place, the financial 
safeguards are in place before we allow the demonstrations to 
unfold.
    So, we have a group of States that's interested in 
implementing in 2013 and a group that's interested in 2014, and 
within each of those groups, they all want to phase 
differently. In order for us to continue with anything that we 
approve, again, we will have milestones to make sure those are 
met before we automatically allow enrollment of beneficiaries 
into these programs.
    But, I think the first and foremost thing to emphasize is 
that nothing has been approved yet, and some things in State 
proposals--this will not shock anyone--are outside the 
boundaries of what CMS has indicated it would be willing to 
accept. So, there's going to be a lot of give and take between 
now and the time that we assess all the proposals.
    The Chairman. Finally, the concept of passive enrollment 
for dually eligible beneficiaries is one that has not been 
tried in Medicare before, as you know. Is CMS concerned about 
setting a precedent that could be difficult to un-do?
    Ms. Bella. We look at these demonstrations as an 
opportunity to test new enrollment methodologies and to test 
new ways of communicating with beneficiaries to make sure they 
understand their choices and their options. So, we will be 
using enrollment brokers, choice counselors, leveraging ADRCs 
and SHPs out in the community, and that's something we haven't 
done in the past, quite honestly.
    We had a limited run with passive enrollment when Part D 
started, and I think we've learned from that experience, and 
we're really trying to wrap around the beneficiary and make 
sure there is a strong network of information in accessible 
formats to help beneficiaries understand these choices, and we 
see that this demonstration is an excellent opportunity to test 
the passive enrollment model.
    The Chairman. Thank you.
    Senator Corker.
    Senator Corker. Thank you, Mr. Chairman.
    As you can tell by the large number of people here, there's 
been a lot of input as it relates to this demonstration 
program, and I want to applaud you for trying to figure out a 
better way of dealing with dual eligibles, I really do. I know 
a lot of people here are interested in making sure that it 
works in an appropriate way.
    There's been a lot of discussion about the size of this 
program. It's a pretty large demonstration program when you 
have potentially 9 million folks overall and 3 million have 
been projected to be a part of this program. I know that you 
may have a sense of what you think the real uptake is going to 
be in this program. I wonder if you might share with us how 
many people you think really will be a part of this 
demonstration project.
    Ms. Bella. Sure. Certainly, size has generated a lot of 
interest, as you know.
    Senator Corker. A lot of enrollees, a lot of dollars.
    Ms. Bella. We said last year when we announced the 
demonstrations that we had a target of up to 2 million 
beneficiaries. I think we feel that that is a reasonable target 
both to balance not putting too many people in, but also to 
allow us to test variation across the Nation in different 
delivery systems, different States, with different beneficiary 
populations.
    So, we believe that is a size that's necessary for us to be 
able to provide information to Congress and others about how to 
better promote integrated care for these populations. We 
believe we're doing it with strong evaluation and oversight 
that will ensure that we're protecting the beneficiary interest 
because we have milestones along the way to do this, and again 
our target is 2 million. That doesn't mean that we will approve 
up to 2 million, but----
    Senator Corker. But your sense is there might be 2 million 
in participation.
    Ms. Bella. Certainly, there's been widespread interest from 
the States, and I would say we have had a small test of this in 
the past. We've seen other integrated programs, but they've 
been very small. So this is, in part, a way for us to test 
scale for a population that, I think in our view, is long 
overdue.
    Senator Corker. And how does the size of this compare to 
other demonstration programs that we might have carried out in 
Medicare in the past?
    Ms. Bella. Certainly by Medicare's definition, it's very 
large. But then there also have been, I think, observations 
about Medicare demonstrations in the past that they haven't 
been large enough for us to get an understanding of how we 
would scale those demonstrations and/or that they haven't moved 
quickly enough.
    So again, we're trying to strike that balance. Certainly, 
when we test things in the Medicaid world, they're on a larger 
scale. So when we're trying to bring those two worlds together, 
we're trying to strike that balance, and we feel that up to 2 
million is a reasonable balance.
    Senator Corker. So you think that's appropriate and feel 
comfortable with that? Again, I'm sure you're going to have a 
lot of input regarding that as it moves ahead.
    I know that Senate Finance Republicans and MedPAC and 
others have been a little bit concerned about the effect that 
this is going to have on Medicare Part D and the competitive 
program that exists there, and I wonder if you might give any 
comments that you might have regarding keeping that competitive 
process in place and any negative impacts that you think this 
program could have on that.
    Ms. Bella. Well, as you can imagine, we worked closely with 
our Office of the Actuary as we structured this demonstration 
to ensure that we were putting the pieces together in a way 
that would not have a negative impact on Part D. We feel the 
way we've structured Part D as part of this demonstration will 
not have an impact on the Part D bids, and we will be closely 
monitoring and evaluating that over the course of the 
demonstration to ensure that, indeed, we're not having any 
unintended result.
    Senator Corker. And do you plan to allow states to 
substitute their Medicaid formulary for Part D?
    Ms. Bella. So we've been pretty strong in our policy that 
Part D stays intact. We're pleased with Part D. We believe that 
the beneficiary protections it affords and the protected 
classes are things that need to remain the same in the 
demonstration, and that's the policy that we've issued.
    Senator Corker. So based on that statement, do you think 
there will be much impact on the savings that we're seeing from 
Medicare Part D now?
    Ms. Bella. Again, based on our consultation with our Office 
of the Actuary, we don't believe that it's going to have any 
negative impact on the Part D program.
    Senator Corker. And as you can imagine, advocates, 
especially for people who have really complex situations, HIV, 
mental health, those kinds of things, are concerned, end-stage 
renal disease, all kinds of chronic issues. You feel certain 
that you're going to be able to put in place robust networks to 
care appropriately for individuals who have conditions like 
this?
    Ms. Bella. We certainly expect that the demonstration 
proposals that the States have put forward, and we approve are 
sensitive and reflective of the subpopulations through the 
requirements that they have on the health plans, for the care 
plans and the interdisciplinary teams and all of those things. 
Through our network adequacy and readiness reviews, that will 
be a strong component, we'll be looking to be sure that by 
subpopulation, the plan has an adequate network in place to 
provide care. We will be monitoring the care plans, the models 
of care, all of those things, not in a one-size-fits-all 
approach but sensitive to the different needs of the various 
subpopulations that you mentioned.
    Senator Corker. And you've talked a lot about the 
complexity, and you gave two great examples on the front end, 
and aligning incentives and all of that. You're projecting 26 
states, I guess, participating in this. Tell me where you think 
the savings is actually going to come from and how will the 
savings be attributed between Medicaid and Medicare as you go 
forward.
    Ms. Bella. Sure.
    Senator Corker. And will that differ, by the way, per each 
state?
    Ms. Bella. So the first question is where do we think the 
savings will come from. Generally in three areas: one, improved 
coordination of care because we actually have now a coordinated 
system with an accountable entity. The second is reduction of 
duplicative or unnecessary care, which we know is happening 
today. And third is administrative efficiencies, by having 
entities that don't have to navigate both programs and do two 
sets of reporting requirements and two of everything 
essentially. So we believe that that will provide savings.
    We anticipate that--we have not released a national savings 
target for the very reason that the savings opportunities will 
be different in each State. It will depend on what the 
intervention is, what the target population is, what the 
State's current mix of institutional and community-based 
placement is. All of those things, among others, will influence 
what the savings opportunity is in each State. So we do expect 
that it will vary, yes.
    Senator Corker. And how will you attribute those savings 
again? I'm not sure----
    Ms. Bella. Oh, I'm sorry, that was the third part of your 
question. The way this is designed, and it's designed to bring 
the two payers together in a way that aligns incentives, we 
would expect that the savings would be applied proportional to 
the contribution of each payer to the rate that gets paid for 
an individual. So Medicaid will not be grabbing all the 
Medicare money, and vice-versa. It will be a reflection of the 
way the payers contribute today to the care.
    Senator Corker. Some of the states have found some unmet 
needs for home and community-based services when they looked at 
newly enrolled beneficiaries. I'm just wondering how this is 
being factored into your projections.
    Ms. Bella. Particularly, it's something that we expect to 
see in some States, particularly those that are less 
rebalanced, if you will. The way the model is designed to work, 
and this is in the capitated model I assume we're talking 
about, we expect to see shorter-term savings in the Medicare 
arena, in the hospitalizations and readmissions and better 
pharmacy management. Those shorter-term savings can help offset 
some cost increases in the community-based services side.
    When the shorter-term savings run out, that's when we 
expect to see some of the savings from Medicaid start to 
materialize. So the beauty of this model is when you put them 
together, one comes in sooner, the other comes in later, but by 
blending the two, they both share across the life of the 
demonstration. And so we believe some of the unmet need will be 
able to be funded through some of the opportunities that come 
through reduced hospitalizations and better pharmacy 
management.
    Senator Corker. I think, again, when you look at the 
interest that we've had in this hearing, the people that are 
here, you find this anytime there are changes in the Federal 
Government, people that have been serving a population in a 
certain way become concerned. So there have been a lot of 
process questions. Can you describe for the audience here today 
and those who care about this, obviously us here, what kind of 
process are you going to work through to refine these proposals 
with state governments, and what kind of transparency and input 
are you going to be receiving all along the way?
    Ms. Bella. The transparency and stakeholder engagement has 
been a core part of this process from day one. All of the 
States in the development of their proposals, one of our major 
requirements was that they have a very robust and meaningful 
stakeholder engagement process all along the way while they 
were developing their proposal. Before they submitted their 
proposal to us, we required that they posted it publicly for 
comment for a 30-day period. Then we required that they 
incorporated those comments or that they showed us what they 
did and did not incorporate into their proposal.
    Upon that part of the process, they were able to submit a 
proposal to CMS. We then posted that proposal for public 
comment for 30 days and gathered public comment directly to 
CMS. We are actively going through all of those comments. Some 
States have more than others, as you can imagine. But then that 
also guides our interaction with the States to go back and 
understand why they are or are not changing certain things that 
may have come in during the public comment period.
    What that's all leading up to is the development of a 
memorandum of understanding. The memorandum of understanding is 
what memorializes the demonstration between CMS and a 
particular State. But there is no guarantee that the point of 
proposal will result in a memorandum of understanding because 
there's much that has to be worked out along the way.
    CMS issued guidance in both January and March that laid out 
standards for these demonstrations, a heavier focus on the 
Medicare side, but clearly said these are the parameters and 
these are our standards for things like grievances and appeals 
and marketing and provider credentialing and licensure 
insolvency, all those types of things. So that's been out in 
the public domain. It's been very public.
    In addition, I mentioned the memorandum of understanding. 
The template for the MOU was made public last year when we 
announced these demonstration opportunities, so we've tried to 
get information out in the public to make people aware of the 
types of things that would be part of these demonstrations. 
We've made a commitment that all those memoranda of 
understanding will be made public. So we really do want to 
encourage--not encourage, but live up to transparency along the 
way in the process. We meet with stakeholder groups frequently 
and oftentimes without the State, just upon request. So we are 
trying to make this, again, a very open process.
    Senator Corker. Thank you. I know we have two other 
senators that have just come in. I'll ask one more question, 
then have a few more for the record, if that's okay.
    What do you see as a future of special needs plans, managed 
long-term care, PACE programs, outside of this demonstration? 
And are you thinking that there needs to be more than one 
model, if you will, as you go forward? I'm just wondering what 
you think the impact on these other programs will be as you 
move ahead.
    Ms. Bella. The ultimate goal for us is to have seamless 
coordinated systems of care for beneficiaries. So there is not 
a one-size-fits-all approach. There's a very important place 
for the PACE program, and we are trying to work with our 
demonstration States to ensure that there continues to be a 
viable option for PACE. Special needs plans are important in 
that they focus on this population. We'd like to see those be 
more integrated.
    But in answer to your question, there is not a one-size-
fits-all approach, and we have variations of the two models 
that we have out there today, and we expect that we will learn 
from those things and we'll make adaptations. Again, the goal 
is not to have one prescribed model, but the goal is to have 
people in seamless, accountable systems of care.
    Senator Corker. Well, thank you very much. And with that--
--
    The Chairman. I have one question.
    Senator Corker. Okay. Go ahead.
    The Chairman. Ms. Bella, many of the state proposals for 
national demonstrations project that, over time, savings will 
come as a result of reduced hospitalization rates, emergency 
room visits, and long-stay nursing home admissions. From CMS' 
vantage point, what kinds of changes will be needed to produce 
significant savings in these areas, and realistically how 
quickly can they be realized?
    Ms. Bella. Well, unfortunately, there's no silver bullet, 
and nothing happens quickly. I mean, these things take time to 
show results. So I think we all have to have that expectation 
in mind.
    Having said that; there are certainly opportunities in the 
areas that you mentioned. But one of the fundamental things 
that we have to overcome is this financial misalignment between 
the two programs, because right now the incentives are not 
aligned for many of the outcomes that you speak of. So part of 
what we're trying to do, where we have a lever at CMS is in 
these demonstrations and trying to change payment policy, and 
trying to change the benefit structure in a way to put 
accountability in the system that rewards improved quality and 
outcomes and aligns incentives to allow us to see the types of 
improved health outcomes that you speak of.
    The Chairman. Thank you.
    Senator Corker. Thank you, Mr. Chairman.
    Senator Johnson.
    Senator Johnson. Thank you, Senator Corker. Sorry I was 
late. So if I ask some questions that have been covered, I 
apologize.
    Just in reading the briefing materials here, one of the 
problems it seems like in the demonstration projects is states 
are moving way more individuals into these projects than was 
anticipated. Isn't there a relatively easy fix to that? Does 
that require some legislation, or am I overstating the problem?
    Ms. Bella. Certainly there's been a lot of attention on the 
numbers, and the numbers that are floating around in the public 
are higher. They're inflated based on what CMS intends to move 
forward with, and we believe that the number that we--we 
control whether we approve these or not. So I think you're 
right, it's not a complicated issue. There are differences in 
opinion on how large the size should be. We feel comfortable 
moving forward with the target that we set, and we do have 
mechanisms in place to ensure that we will only move forward 
with State proposals that are appropriate and have the 
necessary beneficiary protections.
    Senator Johnson. In terms of trying to limit the increase 
in costs, and I think that's about all you can really do in 
health care, unfortunately. It's very difficult to actually 
reduce cost. But in terms of limiting the increase of cost, 
certainly from my standpoint, introducing free market 
principles into health care would be one of those things. Is 
there anything in this demonstration project that would start 
moving us in the direction of bringing some free market 
disciplines? In other words, putting patients more in charge of 
some of the payments?
    Ms. Bella. At this stage, we're not injecting any type of 
beneficiary payments for this population. We certainly are 
trying to encourage beneficiaries to be in more efficient 
systems of care, those that can give them additional benefits 
than they are receiving today in the sort of fragmented fee-
for-service world. So I think that's the first step toward 
getting folks more engaged in their care.
    Senator Johnson. So would you say the cost savings you 
expect really come more from that coordination of care versus 
just a capitated type of payment system? Is there any 
capitation involved in this at all?
    Ms. Bella. Yes. There are two demonstration models. One is 
a capitated model and one is a managed fee-for-service model, 
more like an accountable care organization model. But we think 
there are cost savings from improved care coordination, from 
reduction of duplicative and unnecessary spending, which 
happens quite a bit in this population, and from administrative 
efficiencies, by not having to deal with two sets of program 
rules and requirements that are completely different.
    Senator Johnson. Are you running those two experiments side 
by side to determine which is best?
    Ms. Bella. We're not--each State has indicated which model 
it's interested in testing. We have two States actually that 
are interested in testing both models, but they will be in 
different areas of the State. So we will have common measures 
across both models that will help inform the strengths, I 
guess, and the impact on quality of cost of one model over the 
other.
    Senator Johnson. If you were to guess, which model do you 
think would be superior?
    Ms. Bella. We have more stability and predictability in the 
capitated model, and more accountability, because one entity is 
receiving both funding sources to arrange for the care. I 
think, though, that's a more tested model, and the managed fee-
for-service model offers us a great opportunity to learn 
through aligning incentives in a different delivery system 
setup. So I think that both have tremendous promise, and 
honestly a lot of it just depends on the State and what the 
state's current delivery system environment is. So I think that 
they both hold great promise.
    Senator Johnson. In an earlier response to a question, you 
were talking about the financial incentives just weren't 
aligned properly between the two systems. Can you just dwell on 
that a little bit more, try to get me to understand exactly 
what you're talking about there?
    Ms. Bella. Sure. A couple of examples: One is Medicaid 
programs typically have care management programs for high-risk, 
high-cost folks, and those care management programs are 
intended to reduce hospitalizations or readmissions or improve 
medication management and those things.
    For a dual eligible, if Medicaid pays a care management 
fee--say it's me, and they pay a care management fee for me but 
I'm a dual eligible, so if I have reduced hospitalizations or 
better drug costs, Medicare gets that money. So Medicaid 
doesn't want to make an investment if it has no ability to 
share in any returns on that investment. So that's one example.
    Is that helpful? Today the Medicaid programs are excluding 
the dual eligibles for these programs, by and large, because of 
this financial disincentive. So neither program benefits, nor 
does the beneficiary.
    Another example is between hospitals and nursing homes. So 
Medicare pays for hospitals, Medicaid pays for custodial 
nursing home stays. You see this incredible churn between the 
two payers largely driven by the misaligned financial 
incentives, and what happens is the beneficiary gets in the 
middle and we have all these unnecessary placements between the 
two settings, again in large part because each is paid for by a 
different payer.
    Senator Johnson. How much does the different reimbursement 
rates enter into that equation in terms of misalignment of the 
financial incentives? I mean, are providers pushing more 
Medicare versus Medicaid because of reimbursement 
differentials?
    Ms. Bella. It happens for some services. Most of the 
services, it's pretty clear who is the primary payer, and so 
there's not as much of that. But certainly Medicare is a better 
payer than Medicaid, and particularly when it comes to skilled 
nursing care, nursing facility care. I think there is a greater 
interest in having Medicare be the payer than Medicaid in those 
settings.
    Senator Johnson. Okay. Well, thank you. I'm out of time.
    Senator Corker. Senator Wyden.
    Senator Wyden. Thank you very much, Mr. Chairman. I want to 
commend you and Senator Kohl because I think this is an 
extremely important topic. I wish I had a nickel for every time 
I heard about how health care was going to be better 
coordinated, because I think we would all be in very solid 
financial shape if that was the case.
    Ms. Bella, I want to touch on some of the issues that you 
and I have talked about in the past, and start with the 
proposition that coordination of dollars is not the same thing 
as coordination of care. My sense is that this room is probably 
filled today because most folks are interested in the former. 
They want to know where the dollars are going to go, and that's 
understandable, and I just want to make sure that the dollars 
actually go for the programs that do coordinated care for these 
very vulnerable people and deliver the highest possible 
quality.
    Now, my view is--and we've talked about this in the past, 
and I'd just like to get this on the record--that the 
Independence at Home model is just about the best way to make 
sure that you coordinate care for these very vulnerable people. 
Would you largely share that view?
    Ms. Bella. I think Independence at Home is a great program 
for a segment of this population, yes.
    Senator Wyden. Well, I appreciate that because, as you 
know, I pushed very hard to get that into the Affordable Care 
Act. We were able to get that in. We've been able to make a 
modest start. We have this demonstration program underway. We 
saw in Portland that House Call Providers was chosen as one of 
the 16 groups to participate. I very much appreciate that. It's 
our desire to build on the extraordinary accomplishments of the 
VA program that has taken a population that's even sicker, with 
more of what you professionals would call co-morbidities, and 
produced astounding results. At the VA, the costs have been 
reduced by 24 percent, hospital days have been reduced by 62 
percent, nursing home days by 88 percent. So the VA is 
coordinating care and saving money.
    The question I had for you is we've been reviewing all the 
materials that you all have been getting out to the states, and 
you've told me again today that you think Independence at Home 
is a very good model. But as far as I can tell in terms of the 
information going out to the states, Independence at Home 
doesn't seem to get much attention at all, if any, as a 
delivery model for the states.
    So can you tell me what is going on with respect to your 
efforts to make sure that states are aware of this? Perhaps we 
just haven't seen all the material that you all have sent out. 
But if you could tell me what the situation is in terms of your 
relationship with the states, that would be very helpful.
    Ms. Bella. Certainly, and the Independence at Home program, 
as you know, is led through our Center for Innovation. So I can 
go back and consult with our colleagues there to find out more 
about what outreach is going on to the States.
    For our particular interaction with States on Independence 
at Home, we're particularly keying to States where there is an 
Independence at Home demonstration and who want to do one of 
our demonstrations to make sure that we are coordinating 
appropriately and make sure that there is the best situation 
for the beneficiaries. So most of our interaction around that 
program is specific to states where there might be potential 
overlap.
    Senator Wyden. Why don't you get back to me, if you would, 
on that point? Because I think it's been a concern in our 
office and among a number of the States. CMS has said that 
Independence at Home is a good model, it makes sense for the 
dual eligibles, but it has not gotten much mention, if any, in 
terms of what you all are doing to communicate with the States.
    The second question touches on what's going on with the 
dual eligibles, but particularly in states like mine that have 
high Medicare Advantage penetration. As you know, Oregon has 
the highest percentage of seniors participating in Medicare 
Advantage in the country. It's about 42 percent. In fact, in 
the metropolitan Portland area, it's well over half of the 
seniors in Multnomah, Washington and Clackamas Counties are 
participating in Medicare Advantage programs. As you know, you 
see this all the way through the Pacific Northwest where Group 
Health is extraordinarily popular up in the Seattle area.
    Now, Oregon would like to move forward with this kind of 
coordination for dual eligibles, but we're concerned about 
being disadvantaged because of how CMS proposes setting care 
reimbursement rates for this population. We're already getting 
hammered under today's reimbursement rates. We're very 
appreciative of the work that you all have been doing with our 
governor's office, by the way, on this point. But it just seems 
to me that if we don't get this resolved, we could actually be 
moving backwards, particularly in states like mine that have 
high Medicare Advantage participation.
    So on behalf of the governor and our state folks, we would 
like to have a commitment that you all will work to ensure that 
Medicare Advantage plans are not disadvantaged by integrating 
care for the dual eligibles. Is that something that you can 
offer up here today that I can take back to our State folks?
    Ms. Bella. We work very closely with your State folks and 
appreciate all of their dedication to this project. The goal of 
these demonstrations is not to hurt anyone. I think there is 
obviously a legitimate concern on the rate setting for States 
like Oregon, and other States as well, and our commitment is to 
work with the States to ensure that we can create a rate that 
is appropriate to allow plans to provide the services that 
beneficiaries need.
    Senator Wyden. Well, that's appreciated, and Oregonians do 
find ourselves working with you all a lot, and we appreciate 
that. We're trailblazers in many respects, and certainly on 
health care kinds of issues. As I've told you before, and I 
think Chairman Kohl and I have talked a little bit about this, 
I want to make sure that 10 years from now, 15 years from now, 
we have dramatically increased the number of folks, 
particularly the dual eligibles, that are treated at home.
    Very often I come to hearings now on this committee and on 
the Finance Committee and I walk out saying the discussion 
isn't very different than the kind of discussion I participated 
in when I was co-director of the Oregon Gray Panthers years 
ago, and I point out to my staff I had a full head of hair and 
rugged good looks. We were talking then about demonstration 
projects, then, and here we are 30 years later still, day in 
and day out, seeing vulnerable seniors, dual eligibles, those 
who have chronic diseases, heart, stroke, cancer, diabetes, 
going off to hospital emergency rooms in the middle of the 
night, going to institutional services, when I know we can get 
more of those seniors care where they want to be, which is at 
home, at less cost to taxpayers.
    We've talked about this before. I know this conversation 
will be continued. We appreciate what you're trying to do with 
Oregon, where we have the special concern because we're already 
discriminated against with respect to reimbursement rates, and 
then if you could follow up on the first point to make sure 
that the states fully understand the value of the Independence 
at Home model for treating dual eligibles, that would be most 
appreciated, and I look forward to talking to you in the future 
about these topics and working with you.
    Chairman Corker, Chairman Kohl, thank you very much.
    Senator Corker. So, thank you very much. I want to say that 
I know a lot of folks are here and a lot of folks are 
interested for a lot of reasons, and certainly there's a lot of 
finance at stake with all of this. But I am very pleasantly 
surprised that the Administration is taking this on in the way 
that it is. You seem to be very knowledgeable and on top of 
this. I know you're going to be getting a lot of input from 
this panel coming after this, and I hope you will at least 
understand when it's over what they have said and pay attention 
to that.
    But I want to thank you for taking on a really tough issue 
that our country has been wrestling with for many, many years. 
I think with input from stakeholders who care deeply about the 
lives of these dual eligibles, and with oversight from 
Congress, I think we can have a very good outcome, and I thank 
you for taking those steps towards that end. So thank you for 
being here.
    We'll have the next panel up, if that's okay.
    So I'll go ahead and be introducing the panel as you're 
getting seated. Panel 2 consists of Jason Helgerson, Medicaid 
Director and Deputy Commissioner of the Office of Health 
Insurance Programs from New York State Department of Health in 
Albany; Dr. Bob Berenson, Institute Fellow, Urban Institute, 
Washington, DC; Shawn Morris, President of HealthSpring, a 
Nashville-based entity, Nashville, Tennessee, I might say; Tom 
Betlach, Director of the Arizona Health Care Cost Containment 
System, from Phoenix; and Dr. Dory Funk, Medical Director, 
Senior Community Care, Eckert, Colorado.
    We thank all of you for being here and look forward to your 
input. I know there's a lot of interest in this, and we 
certainly, I know, will learn a lot from your testimony. If you 
can go ahead and give your opening comments in 5 minutes or so, 
we'd appreciate it, and we'll have some questions.

  STATEMENT OF JASON HELGERSON, MEDICAID DIRECTOR AND DEPUTY 
  COMMISSIONER, OFFICE OF HEALTH INSURANCE PROGRAMS, NEW YORK 
             STATE DEPARTMENT OF HEALTH, ALBANY, NY

    Mr. Helgerson. Thank you, Senator, and thank you very much 
for the opportunity to be here today to testify before this 
committee on this very important topic. On behalf of Governor 
Andrew Cuomo, it's a tremendous honor to be here testifying and 
talking about New York's efforts to redesign its Medicaid 
program, and in particular the state's efforts to transform the 
health care delivery system for New Yorkers who are enrolled in 
both Medicaid and Medicare.
    Currently, New York State spends more than twice the 
national average on Medicaid on a per capita basis, and yet at 
the same time New York ranks 31st in overall health system 
quality, and it ranks last for avoidable hospital utilization.
    Upon taking office, Governor Cuomo issued an executive 
order which established the Medicaid Redesign Team. The MRT 
brought together stakeholders in a unique way from across the 
state to work together to reform the system, reduce costs and 
improve quality.
    This team worked in two phases. The first phase was asked 
to identify $4 billion in immediate Medicaid savings. To do 
this, the MRT held hearings, established an interactive 
website, harnessed the social media, and collected feedback 
from citizens and stakeholders alike. In less than two months, 
these efforts generated over 4,000 ideas.
    On February 24th, 2011, the MRT submitted its first report 
with 79 recommendations to the governor. This package achieved 
the governor's Medicaid savings target, and subsequently the 
governor accepted those recommendations and forwarded them to 
the legislature. In somewhat unheard of standards in New York 
State government, the legislature actually adopted virtually 
all of these recommendations.
    The MRT Phase 1 package introduced structural reforms that 
have significantly bent the Medicaid cost curve and improved 
outcomes for Medicaid members. Importantly, the savings were 
achieved without any cuts in eligibility, nor did the plan 
eliminate any optional benefits. New York State implemented all 
Phase 1 initiatives on time and within savings targets. These 
efforts generated not only substantial savings for New York 
taxpayers but for the Nation as a whole. Over the next five 
years, the MRT initiatives will reduce Federal Medicaid 
spending by $17.1 billion.
    In Phase 2, the MRT broke up into 10 workgroups and focused 
on developing a multi-year action plan to really fundamentally 
reform the state's Medicaid program. The MRT completed its work 
earlier this year and the state now has a 5-year plan for 
transforming Medicaid. The major elements of that reform plan 
include the enactment of the first of its kind in the Nation 
Medicaid global spending cap that brings much needed fiscal 
discipline and transparency to the program. Also, care 
management for all, a proposal to over several years phase out 
the fee-for-service Medicaid program and replace it with a 
system of high-quality care management that rewards quality 
over volume.
    1.8 million New Yorkers now have access to patient-centered 
medical homes that are nationally certified. And also, funding 
was provided to create Health Homes all across the state, an 
innovative new model which promises to provide high-quality 
care management and care coordination for Medicaid's highest 
needs patients.
    And lastly, the plan included a major new partnership 
between the state and the Federal Government to integrate care 
between Medicare and Medicaid for the dually eligible 
individuals. New York is well positioned to partner with the 
Federal Government around duals integration. Duals are among 
the most fragile people living in New York, and the fact that 
Medicare and Medicaid have not worked together well has meant 
poor outcomes and high cost.
    New York's approach to dual integration is multifaceted. 
First, the state will utilize Health Homes to provide care 
management for duals who do not require long-term care 
services. This initiative will be deployed in January of 2013 
and will benefit 126,000 Medicaid members.
    Next, the state will expand on its highly successful 
managed long-term care program, which manages the long-term 
care needs of roughly 50,000 duals today. This program, which 
has been around for over a decade, is now moving into mandatory 
status and will grow to more than 120,000 people by January of 
2014. In that same year, the state will add Medicare services 
in coordination with the Federal Government to the existing 
plan benefit package so as to convert in place these duals into 
a fully integrated managed care product.
    New York will also be working to expand its successful 
model to 10,000 duals with developmental disabilities.
    Duals will have the option, of course, to opt out of 
Medicare managed care. However, we are confident that they will 
actually stay in the fully integrated option since they are 
already enrolled in and familiar with their plan. It's 
important to note that PACE will also be an option, and New 
York operates some of the largest PACE programs in the country.
    Thanks to Governor Cuomo's leadership and the hard work of 
the MRT, New York is now in a position and is excited that we 
have a plan to fundamentally redesign the Medicaid program. 
Thanks to this effort and the efforts of our friends at the 
Duals Office, we now are on the path for a new partnership 
between the state and the Federal Government when it comes to 
integrating care for some of our most fragile New Yorkers.
    Thank you very much for the opportunity to testify.
    Senator Corker. Thank you very much.
    Dr. Berenson.

   STATEMENT OF ROBERT BERENSON, MD, INSTITUTE FELLOW, URBAN 
                   INSTITUTE, WASHINGTON, DC

    Dr. Berenson. Thank you, Senator Corker, Senator Johnson. I 
appreciate the opportunity to testify on the CMS initiative for 
dual eligible beneficiaries. My orientation is to Medicare 
based on my experience as a practicing internist for 20 years, 
a senior official in the Clinton Administration responsible for 
Medicare payment policy and managed care contracting, and as 
vice chair of MedPAC until this past May. There is broad 
agreement on the need to do a better job on care for the duals. 
I long have supported a move from fee-for-service, which is 
proving increasingly dysfunctional, to capitation, so I endorse 
testing the general approach in the dominant integrated payment 
model in the CMS financial alignment initiative.
    Because of the challenges of scaling and generalizing from 
impressive local initiatives, reports of successful Medicaid 
managed care programs and innovative Medicare Advantage special 
needs plans should lead to real demonstrations, accompanied by 
strong evaluations to produce the needed evidence on which to 
base policy. There are many examples of initiatives that 
proponents knew ``worked'' that proved not to work when scaled 
and subjected to evaluation.
    CMS has indicated it wants to include 2 million or more in 
these state-initiated programs. Instead, my view is that CMS 
should scale down this demonstration to one that might involve 
as many as 500,000 dual eligibles in perhaps 8 to 10 states. 
Such a demonstration program would still constitute one of the 
largest demonstrations Medicare has ever mounted.
    Reasons for this shift include, one, experience with mostly 
healthy adults and children does not qualify a managed care 
organization to serve duals who may have severe mental illness, 
developmental and other physical disabilities, HIV/AIDS, end-
stage renal disease, dementia, multiple chronic conditions. 
Medicaid managed care plans currently serve only about 120,000 
duals nationally.
    SNPs do target duals care and serve about 10 times that 
many. Yet even with SNPs, there is little evidence that permits 
policymakers to presume, for example, that passive enrollment 
is in the beneficiary's best interest, a central premise in 
this initiative.
    Two, Medicaid managed care plans lack capacity to 
accommodate the kinds of numbers that have been proposed by the 
states.
    Three, the financial alignment initiative should require 
proof of concept before broad application. In fact, prior 
demonstrations and experience with SNPs do not demonstrate that 
these integrated programs actually produce savings. Further, a 
central purpose of demonstrations is to work out a myriad of 
operational issues before broad adoption.
    Four, proper evaluation is essential to fulfilling the ACA 
requirement that the CMS chief actuary certify that a 
demonstration has reduced spending with no reduction in 
quality, improved quality with no greater spending, or both. 
The current size and scope of the demonstrations would make 
such evaluations problematic.
    Most states have proposed including all duals or entire 
subpopulations in their programs. Given all the effort that 
would go into producing an acceptable program, it is unlikely 
that if the evaluation proved negative, a future CMS 
administrator would be able to tell a state to shut down the 
demo and return to the status quo ante. In the current 
parlance, they are too big to fail.
    CMS has proposed a financing model that assumes up-front 
savings for Medicare, unlike the approach used in other 
important initiatives such as shared savings program for ACOs. 
The immediate response of financially pressured managed care 
plans could be to limit rather than expand long-term services 
and supports, and to cut provider payment levels from Medicare 
levels, threatening access to care. The initiative has been 
silent on the extent to which health plans can achieve savings 
through reduced payment rates to providers.
    Of the $320 billion Medicare and Medicaid dollars estimated 
as spent on duals in 2011, 80 percent represent Federal 
dollars, more than two-thirds of which flowed through Medicare. 
Potential savings in this demonstration would come primarily 
from better management of Medicare-financed, acute care 
services. In recent years, there has been a marked ramp-up of 
Medicare programs and demonstrations for beneficiaries with 
serious, chronic health conditions, many of whom are duals. 
They include ACOs, the Independence at Home demonstration that 
Senator Wyden talked about, bundled payment, hospital 
readmission penalties, and increased Medicare Advantage 
enrollment.
    As Senator Rockefeller suggested in his recent letter to 
the Secretary, instead of relying solely on a model that relies 
on multiple state efforts, CMS should also test models that 
bring care for duals under the Federal umbrella.
    Thank you very much.
    Senator Corker. Thank you.
    Mr. Morris, welcome.

STATEMENT OF SHAWN MORRIS, PRESIDENT, HEALTHSPRING, NASHVILLE, 
                               TN

    Mr. Morris. Thank you. Senator Corker, I want to thank you 
and Chairman Kohl for the opportunity to appear today before 
the U.S. Senate Special Committee on Aging to discuss improving 
care for dual eligibles.
    My name is Shawn Morris, and I'm the President of 
Development and Innovation at HealthSpring, a Cigna Company. 
HealthSpring is one of the largest Medicare Advantage 
coordinated care plans in the United States, with over 400,000 
Medicare Advantage and 1.2 million Prescription Drug Plan 
members. More than 122,000 of these Medicare Advantage members 
are dual-eligible beneficiaries.
    Cigna and HealthSpring have been serving Medicare 
beneficiaries for 20 years, and our concentration on the big 
picture of improving beneficiaries' overall health and quality 
of life has allowed us to develop a unique approach to health 
care coverage. This approach is particularly beneficial to the 
vulnerable dual-eligible beneficiaries with complex health care 
needs.
    At HealthSpring, we developed a partnership that provides 
what our members want, more access to higher quality preventive 
care, while giving physicians the tools and incentives they 
need to deliver that care. Specifically, HealthSpring develops: 
focused, data-driven networks; pays physicians for quality over 
quantity, and provides our physicians the resources they need 
so they can devote more time and attention to their patients. 
The result of this approach is engaged physicians and healthier 
members with lower medical costs. It's a common-sense model, 
but an uncommon practice.
    Through long-term initiatives like our Living Well Health 
Centers and Partnership for Quality program, we are able to 
focus on our members' overall health by improving their 
experience of care and quality of life. HealthSpring's Living 
Well Health Centers provide an additional clinical support by 
adding health plan coordinators, nurse practitioners, 
pharmacists and behavioral health specialists at the point of 
care. This interdisciplinary care team increases patient 
satisfaction and improves adherence to evidence-based treatment 
plans.
    Our Partnership for Quality program is also a clear win-
win-win. Beneficiaries receive better care and stay healthier; 
empowered, engaged physicians earn more through quality 
bonuses; and HealthSpring spends less overall on delivering 
care. For example, members enrolled over a four-year period 
with Partnership for Quality physicians saw an 8 percent 
reduction in hospital admissions, and significant increases in 
preventive health services, such as a 73 percent increase in 
breast cancer screenings and 83 percent increase in colorectal 
screenings. Partnership for Quality turns the inefficient, 
volume-driven model of health care on its head, and everyone 
benefits.
    The HealthSpring members that often benefit the most from 
our dedication to comprehensive care coordination and higher 
quality are our 122,000 dual-eligible members. That is why we 
strongly support CMS' recent efforts to improve care for this 
vulnerable population. The new Capitated Financial Alignment 
Model demonstration program offers a real opportunity to 
improve the quality of care for these long underserved 
beneficiaries and as a fortunate by-product, generates 
considerable budgetary savings.
    We believe that in order for these demonstrations to 
succeed in identifying the best, long-term solutions for these 
patients, great care needs to be taken when selecting the 
participating plans. As MedPAC noted in its June 2012 report, 
``plan participation standards should be transparent and should 
at least consider quality rankings, provider network adequacy, 
plan capacity, and experience with Medicare and Medicaid 
services for dual-eligible enrollees.''
    We completely agree. We believe all plans that meet CMS 
designated quality and access standards, including Medicaid 
managed care plans as well as Medicare Advantage plans, ought 
to be eligible to participate in these demos. Frail, dual-
eligible beneficiaries deserve nothing less.
    That said, it's also important to recognize that when 
Congress created Medicare and Medicaid nearly a half-century 
ago, it established Medicare as the primary source of financing 
of medical care for seniors regardless of their eligibility for 
Medicaid. Indigent seniors should have the same Medicare 
coverage and the same broad access to physicians as more 
affluent ones.
    In carrying out the Capitated Financial Alignment Model, we 
should not overturn this structure by preventing Medicare 
Advantage plans from participating or by requiring 
beneficiaries to relinquish the current coverage that they have 
actively chosen. Requiring dual eligibles to abandon their 
chosen plan and trusted physicians, that have experience in 
coordinating their care and forcing these beneficiaries into a 
plan with a less specialized care coordination model could 
undermine the intent of the demonstrations.
    Lastly, by maintaining Medicare as the primary source of 
care for vulnerable dual eligibles, we'll ensure that they're 
able to benefit from the variety of new delivery system reforms 
that the dual-eligible population so desperately needs. Dual-
eligible beneficiaries have the greatest need and the best 
opportunity for improving quality and lowering cost.
    We strongly support these goals and look forward to working 
with this committee and other Federal policymakers to achieve 
these results. Thank you again for this opportunity to testify, 
and I welcome any questions you may have.
    Senator Corker. Thank you.
    Mr. Betlach.

 STATEMENT OF TOM BETLACH, DIRECTOR, ARIZONA HEALTH CARE COST 
                CONTAINMENT SYSTEM, PHOENIX, AZ

    Mr. Betlach. Thank you for the invitation to discuss 
Arizona's use of managed care to improve the lives of 
individuals enrolled in both the Medicare and Medicaid 
programs. Arizona has maintained a system of managed care for 
its entire membership, including dual-eligible members, since 
the state joined Medicaid in 1982. Arizona built its Medicaid 
program on the principles of member protection, competition, 
choice, and accountability. Arizona also offers the unique 
perspective of a state that has one-third of our dual-eligible 
members in the same health plan for both Medicare and Medicaid.
    The vision underlying Arizona's program is to place 
accountability for management, oversight, and care delivery 
with one entity, the health plan. Arizona's model works through 
private health plans that engage in a competitive bidding 
process and are financially at risk to coordinate care for 
their members. Members have their choice of health plan and 
doctor. Health plans establish their own provider networks, 
which we monitor to ensure access to care.
    Thirty years of experience have shown it is precisely our 
frailest members who are most in need of the care coordination 
managed care offers. Recently we have seen a great deal of 
confusion and misinformation surrounding the use of Medicaid 
managed care for dual eligibles. My message to the committee 
today is simple: Medicaid managed care for dual-eligible 
members is not an experiment but instead, has proven to be a 
success in Arizona.
    In Arizona, 82 percent of our elderly and physically 
disabled population that is at risk of institutionalization is 
dually eligible. The model of care for this population in many 
states is nursing home placement. Over the past decade AHCCS, 
through the work of our health plans has progressed from 40 
percent of its elderly and physically disabled members in home 
and community to 72 percent, saving $300 million this past 
year. For members at risk of institutionalization with a 
developmental disability, 98 percent live at home or in the 
community, contributing to Arizona's number 1 ranking by United 
Cerebral Palsy.
    More importantly, keeping people out of institutions 
increases member satisfaction and offers higher quality of 
life. Providing the right kinds of care coordination to keep 
people at home is a Medicaid skill set.
    These care management successes also extend to prescription 
drugs. Arizona's drug costs for dual eligibles were $166 per 
member per month, compared to a national average of $266 when 
Part D was created. A study conducted by the Lewin Group showed 
AHCCCS health plans were not withholding care but rather 
effectively using generic and lower cost drugs. Without this 
effort, Arizona would have spent $90 million more per year on 
dual-eligible drug coverage.
    Avalere Health recently completed an analysis of the health 
outcomes for dual-eligible members enrolled in Mercy Care Plan, 
an access contractor that is also a Medicare Advantage special 
needs plan, or D-SNP. Avalere compared 16,000 integrated dual 
members enrolled in Mercy Care Plan to national Medicare fee-
for-service dual-eligible data. To ensure a fair comparison, 
Avalere created a risk-adjusted model. The results showed Mercy 
Care Plan performed considerably better than fee-for-service. 
Mercy Care Plan members exhibited a 31 percent lower rate of 
hospitalization, 43 percent lower rate of days spent in a 
hospital, nine percent lower emergency department use, and 21 
percent lower readmission rates.
    Arizona also has proven that passive enrollment works. When 
Medicare Part D was created, Arizona actively encouraged 
existing Medicaid plans to become D-SNPs. On January 1st, 2006, 
approximately 39,000 members were passively enrolled with their 
Medicaid plan for Medicare in order to provide better 
continuity of care for Part D implementation. Arizona's strong 
transition planning and protocols ensured member protections 
and minimal disruption during this enrollment process.
    Overall, Arizona's Medicaid members are satisfied with 
their health plans. In fact, only three percent of more than 
1.2 million total AHCCCS members change their health plan each 
year. I've been fortunate to be associated with the AHCCCS 
system for 20 years. For the past 10 years, I have served as 
the Deputy Director and now Director. Prior to that, I served 
in the governor's office for 10 years. I know the AHCCCS 
program is not an experiment. It is a proven model with 
documented success. So, for me, it is frustrating to hear 
others dismiss Medicaid managed care as an option for duals and 
suggest that states are either ill-intentioned or incapable of 
achieving success for this population.
    This is not about achieving a budget target. States like 
Arizona want to move the system forward, improve care for our 
citizens, and be responsible with the taxpayers' dollars. To 
think, as I have seen some suggest, that Medicare can be the 
sole answer for dual members is simply wrong. Medicare has very 
limited knowledge and experience in home and community-based 
services, community supports, or behavioral health. States have 
managed these issues for duals, and it is the states that 
understand their local communities the best.
    Equally disconcerting is this notion that states are moving 
too fast and the demonstrations are too big. We've had 45 years 
of fragmentation. We have decades of comparison data that show 
the shortcomings of the existing system. We don't need control 
groups in these dual demonstrations. We know what is not 
working for the people we serve and the taxpayers who are 
footing the bill. The current system is indefensible and 
unsustainable. We should not wait any longer to build upon a 
proven model.
    We hope Arizona's example will dispel the myths around 
managed care and assuage the anxiety some feel about using this 
model for dual eligibles.
    Thank you again for the opportunity to briefly share our 
experiences in Arizona with the committee.
    Senator Corker. Dr. Funk, your summary.
    Senator Bennet has arrived.
    Senator Bennet. I thank the Ranking Member for your 
leadership, and for you and the Chairman for holding this 
hearing, and I am looking forward to reading everybody's 
testimony. I apologize because I have another engagement, but I 
wanted to come and welcome Dr. Funk here.
    Thank you very much for what you do in Colorado, and thanks 
for coming all this way to share your views.
    In the end, we've got some hard decisions to make here, but 
I think if we approach this in the spirit of goodwill that 
Senator Corker, among others, have shown, we're going to be 
able to get this done with a view toward how it's actually 
going to affect the people that live in our states rather than 
the battle that's going on back here. So, thank you.
    Senator Corker. And thank you for your great service.
    Senator Bennet. Thank you.

    STATEMENT OF DORY FUNK, M.D., MEDICAL DIRECTOR, SENIOR 
                   COMMUNITY CARE, ECKERT, CO

    Dr. Funk. Thank you, Senators, for inviting me out for my 
first trip to Washington. My name is Dr. Dory Funk.
    Senator Corker. We have found that it has a negative effect 
on folks.
    Dr. Funk. Is that right?
    [Laughter.]
    Senator Corker. I would not stay long.
    [Laughter.]
    Go ahead. Sorry to disconcert you.
    Dr. Funk. That's fine. I'm a medical director for a PACE 
program in rural Western Colorado run by Volunteers of America. 
It's a successful PACE program, and I'm here to tell you about 
three particular operational flexibilities that we've been 
granted by the State of Colorado by waiver that I think 
directly attributes to some of our success. The National PACE 
Association, or NPA, wants to see those applied more broadly to 
PACE organizations across the country.
    PACE stands for Program for All-Inclusive Care of the 
Elderly. It's designed around an interdisciplinary team to meet 
the needs of frail, elderly, low-income people with chronic 
care and long-term needs in order to keep them in their homes 
and out of nursing homes. Participants in the PACE program must 
meet state-determined criteria for level of nursing home care. 
There are 86 programs in 29 states that currently cover 25,000 
participants, 90 percent of which are dual-eligible Medicare 
and Medicaid beneficiaries.
    Ours is a little bit different. In a traditional PACE 
program, one or two physicians are hired to care for all the 
participants. Therefore, upon enrollment, a participant has to 
leave their own physician, who they may have had for a decade 
or two. Under the traditional model, nurse practitioners have a 
role limited to acute care only, and the majority of the care 
provided to participants in the traditional model is delivered 
in a full-service PACE day center.
    The contrasts in our program are as follows. At Senior 
Community we have a waiver to contract with community-based 
physicians so the participants get to keep their own physician. 
We then train the physician and incentivize him to provide care 
and medical practice within our PACE philosophies of care.
    In Colorado, nurse practitioners have unrestricted license 
to provide primary care given the rural nature of our state. 
The waiver we obtained allows a broadening of the scope of care 
of our nurse practitioners. They can now provide basically 
attending care they do, require periodic assessments, 
participate more fully in care planning, and play a larger role 
in supporting the community physicians.
    Finally, we also have a waiver to develop an alternative 
delivery site in a tiny community 30 miles from the nearest 
PACE delivery site where we have 25 participants. As you can 
imagine, if you're frail, elderly, multiple medical issues, 30 
miles in a van can be a long ride, especially in the winter.
    Owing in part to these operational flexibilities and the 
innovative leadership provided by Volunteers of America, we've 
achieved success in several quality measures.
    First of all, we have a remarkable market penetration. 
Twenty-three percent of the PACE-eligible population in our 
area is enrolled in Senior CommUnity care. Typically, PACE 
programs achieve a market penetration of approximately 6 to 8 
percent.
    Secondly, our clinical costs are in line or meet NPA 
benchmarks. We spend $711 per member per month on doctors, lab 
tests, diagnostic studies and hospitals, while the NPA 
benchmark is $940 per member per month.
    Thirdly, our total hospital days and our 30-day hospital 
readmission rates are outstanding. In fact, we have the lowest 
30-day hospital readmission rate of all 86 PACE programs. It's 
6.8 percent. Nationally, for the dual-eligible population, it's 
21.7 percent. Our hospital days per 1,000 members is 2,900. For 
duals enrolled in nursing facilities, it's 5,000. For duals 
receiving home and community-based services in the community, 
it's 6,400 days per thousand.
    So we also talked about in our hearing so far outlined 
incentives. As with any good idea where multiple parties are 
involved, our program has incentives aligned among community 
physicians, community hospitals, community ERs, and the PACE 
participant, all within a blended Medicare and Medicaid 
capitated payment system. Our physicians see their patients do 
well, they get to practice with guidelines of care that make 
clinical sense, and they get rewarded financially. Hospitals 
are seeing lower lengths of stays and lower readmission rates. 
Our emergency rooms get disposition help with our difficult 
patients that wind up in the ER. Finally, the patients get to 
stay in their homes, and the families get the support to do so.
    PACE has been a proven leader in providing care to the 
particularly frail and elderly part of the dual-eligible 
population for 25 years. NPA would like to extend these 
operational flexibilities to other PACE programs across the 
country, as well as expanding PACE eligibility to include 
individuals under the age of 55 who meet their state's criteria 
for nursing home level of care, and to high-need, high-cost 
beneficiaries who may not yet meet nursing home criteria for 
care but currently are not well served.
    NPA will be hoping for your support in their pursuit of 
legislative and regulatory solutions in order to achieve those 
goals.
    Senator Corker. Thank you for your pleasant testimony.
    Just so no one is caught off guard, I'll call on Senator 
Johnson, and then Senator Blumenthal, and then Senator 
Whitehouse, and then I'll go last. I just want to make sure you 
all will be ready. I'll give you time to settle in here for 
just one moment. We welcome you.
    Senator Johnson.
    Senator Johnson. Thank you, Mr. Chairman.
    Mr. Morris, can you just tell me, why did HealthSpring 
pursue this initiative, which I guess I would kind of consider 
is capitated coordinated care. Would that be an accurate 
description?
    Mr. Morris. That would be correct. The initiative from the 
demonstration project? Just to clarify.
    Yes. HealthSpring is a Medicare Advantage plan. We accept 
payments from Medicare A and B, and D. So we approach all of 
what we do in coordinating for any member, Medicare or dual 
eligible, in a capitated way.
    So in that approach, the first thing we're going to do is 
align incentives for the providers downstream. We want to be 
innovative. We want to create programs such as the Partnership 
for Quality I spoke of in my testimony as well as the Living 
Well Health Centers, and so forth.
    We are very interested in these demonstration projects, and 
we feel it aligns the incentives from a payer perspective, be 
that Medicare or Medicaid. But at the same time, we think that 
the people and the payers that can qualify, such as the 
different payers that have been represented here today, 
Medicaid, PACE and Medicare Advantage, not be, put at a non-
competitive advantage to demonstrate what they can do in an 
innovative way.
    Senator Johnson. This was something done on your own 
company's initiative, or is this something that was part of 
this particular government program?
    Mr. Morris. This decision to participate in the 
demonstration project is on our own company's initiative.
    Senator Johnson. Okay. The private sector did it. Okay.
    Dr. Berenson, are you familiar with your Urban Institute 
study that compares the long-term contribution of retiring 
couples into Medicare versus what the expected benefit is? I 
don't want to be springing that on you if you're not familiar 
with it.
    Dr. Berenson. Well, that was done by a different branch. 
Gene Steuerle's work?
    Senator Johnson. Right.
    Dr. Berenson. Yes, I'm aware of it. I don't know a lot of 
the details, but I am aware of it.
    Senator Johnson. Roughly, I think he found, for a couple 
retiring today, basically a two average earner couple, that 
they would have paid in roughly about $116,000 into Medicare, 
with an expected benefit--and all these things are time-value-
adjusted--of about $350,000, which kind of shows the mismatch 
of the funding mechanism.
    The reason I raise that issue is when I take a look at the 
health care law, it was supposedly funded for 10 years by about 
half a trillion dollars in taxes, fees and penalties, and about 
a half a trillion dollars, $500 billion, in reductions to 
Medicare and Medicaid, Medicare Advantage. Is that roughly 
correct?
    Dr. Berenson. Medicare, Medicare Advantage, and provider 
payments, not Medicaid as far as I know. Largely Medicare cuts, 
yes.
    Senator Johnson. To my knowledge, we really haven't even 
enacted the SGR doc fix, which is about $280 billion. I'm not 
quite sure. Are you aware that we're actually initiating those 
savings from Medicare over this 10-year period?
    Dr. Berenson. I believe the actuary has two estimates, one 
which is current law which assumes the SGR occurs, and then 
sort of a real-world picture in which it assumes that Congress 
does what it's done for the last 10 years and does not allow 
those cuts to go into place.
    Senator Johnson. Here's my question and my concern. And 
again, I appreciate the fact that we're looking for 
efficiencies within the system, but I'm afraid the system is 
going to be horribly broken because if we roll the budgetary 
window forward to when the health care law actually gets fully 
kicked in, about 2016 with full spending, the total cost of the 
health care law will be about $2.5 trillion over 10 years. The 
taxes, fees and penalties, currently about $500 billion, maybe 
those will grow, maybe they won't. That leaves about a $2 
trillion deficit gap or money that's going to have to come from 
I guess Medicare or Medicaid, or something else.
    Does that concern any of you in terms of what you're trying 
to do, working with either Medicare or Medicaid? And are you 
aware of that type of funding gap with the health care law?
    I'll go to Dr. Berenson.
    Dr. Berenson. We could go in any number of directions on 
this. I also would, I guess, cite data that suggests that both 
CBO and the actuaries have projected that per-capita spending 
in Medicare for the next 10 years is projected to increase at 
about 1 percent above inflation or at about GDP. It's the best 
it's been since the founding of the program. Whether that's 
sustainable or not is up for debate. But it's clear that, at 
least in the 25-year projections, that the real pressure on 
Medicare funding, and it's significant, is from a near doubling 
of the beneficiary population who will be in Medicare. So we 
clearly have a serious problem. The question is whether per-
capita spending reductions of the kind I think that these 
programs would lead to by itself can solve the problem.
    Senator Johnson. So I guess my point being is we have a 
huge problem with Medicare. As it is, the health care law 
starting in 2016 adds about a $2 trillion problem to that 
figure.
    So, thank you, Mr. Chairman.
    Senator Corker. Thank you.
    Senator Blumenthal.
    Senator Blumenthal. Thank you, Mr. Chairman. Thank you for 
holding this hearing on this critically important topic.
    The additional costs to the Medicare program that you were 
describing result from the increase in the number of 
beneficiaries, does it not?
    Dr. Berenson. The data that I'm aware of suggest that about 
half of the increase over 25 years is from the increase in the 
population, and about half is from per-capita spending 
increases. But at this point in time, it's largely just 
inflation. It's the cost of doing business, plus a slight bit 
more.
    Senator Blumenthal. And let me ask you and Mr. Morris, if I 
may, because, Mr. Morris, you mentioned the preventive care 
element and the opportunities there for not only improving 
quality but reducing costs, and you say that Medicare should 
remain the primary source of care for the dual eligibles. What 
specific opportunities do you think there are in emphasizing 
preventive care for this population that will account for such 
a huge increase in costs?
    Mr. Morris. We began the program I spoke of, Partnership 
for Quality, in 2006 with a local physician group in Gallatin, 
Tennessee; it was designed with the physicians. And at that 
time, when we looked at their adherence to the standards that 
that group came up with; along with us, and these are typical 
quality standards such as women over the age of 40 getting 
mammographies, and individuals over 50 years of age getting 
colonoscopies, just general things, their adherence to the 
agreed up quality standards was around 37, 38 percent.
    Since then, that particular group today is up over 90 
percent adherence to the standards. We have grown the 
Partnership for Quality program over a six-year period to 
include physicians that take care of 120,000 members or so, and 
the average of that is in the high 70s. This particular group, 
not being an outlier, is representative of what most physicians 
are when we audit adherence to those same standards.
    I think the answer to your question ``Can you do this'', I 
think we can. I think you have to have consistent quality 
standards that you need to compare these demos to, I also think 
there needs to be benchmarks and there needs to be 
participation from the groups that you are going to be holding 
accountable; we've had a lot of success doing that.
    Senator Blumenthal. And I read about the Partnership for 
Patients program, and I've been very impressed by its potential 
and its accomplishments so far. But when you say in your 
testimony that physicians are empowered to devote themselves to 
their patients and our members receive better care and stay 
healthier, for the non-health care professional, what does that 
mean in practice?
    Mr. Morris. In this program, I'll compare it to fee-for-
service Medicare. For a physician in fee-for-service Medicare 
to invest the capital from a primary care physician's 
standpoint, to provide this level of service, they would not be 
reimbursed for such within the fee-for-service system. We all 
know the primary care physicians are busy. They're seeing 40 to 
50 people a day, on average. So you can do that math. That's 
just a few minutes a day per patient.
    To the average physician in the community, we embed in 
their practice an employee of HealthSpring, a clinical person 
to run a Web-based tool to extract data on their entire 
population of who are not meeting these established quality 
guidelines. It's not the people who come into the office where 
you see the majority of gaps. Most physicians do a pretty good 
job with these patients. It's the population of patients that 
do not come into the office and having processes in place to 
get those patients in, is where you can make more significant 
improvement.
    Senator Blumenthal. And I think that's a critical point. 
How do you get that population into the office, and how do you 
not just get them into the office physically but get them there 
a second and third time for the follow-up that's necessary to 
provide preventive care?
    Mr. Morris. Well, by having a HealthSpring employee in that 
physician's or that group's office that is embedded there. So 
the patient feels that that employee is a part of that 
practice, and it's a different model than an insurance company 
calling from an insurance office to get that patient in. They 
react because they've met that employee, they've seen them at 
their doctor's office.
    Is it easy? It's not easy. It takes a lot of work, 
especially in the population we're speaking to, in dual 
eligibles. These people tend to move around, they have multiple 
caregivers, and it takes creative, innovative processes of 
getting multiple cell phone numbers and multiple siblings' home 
numbers to reach them and get them in.
    Senator Blumenthal. Thank you.
    Mr. Chairman, my time has expired. I want to thank you 
again, and I will be submitting for the record a statement, an 
opening statement, but I won't take the committee's time with 
it.
    Senator Corker. Well, thanks for being here. I will say, 
I've visited the operation that Mr. Morris has. It's phenomenal 
to see what happens there, and it really is a model of how 
health care can and should work in our country. So I do hope 
you'll spend a little more time with it because it's an 
incredible thing to witness and to see patients coming in, and 
to see the way they're treated, and to see the familiarity they 
have with the caregivers.
    So thank you for your question.
    Senator Blumenthal. Thank you. I'd be interested in 
learning more about that.
    Mr. Morris. Oh, we'd welcome any of you there. Love to have 
you.
    Senator Blumenthal. Thank you.
    Senator Corker. Thank you.
    Senator.
    Senator Whitehouse. Thank you, Chairman.
    I thank all the witnesses for being here.
    I'd like to sort of give what appears to be a general 
perspective and see if you all agree with it, and then ask a 
very specific question.
    The general perspective is that we have an enormously 
expensive health care system for the results that it produces. 
We burn 18 percent of our gross domestic product every year on 
health care, and I think the most inefficient other 
industrialized country in the world is at 12 percent. So we're 
50 percent more inefficient than the least efficient of our 
industrialized competitors, which isn't a great place to be, 
and you can draw some conclusions about what savings are 
possible by simply becoming more efficient, by delivering 
health care better.
    Some pretty responsible people have actually done that. The 
President's Council on Economic Advisors I think has pegged the 
number at about $700 billion every single year. The Health Care 
Institute I think puts it at about $850 billion every single 
year. The Institutes of Medicine just came out with a report 
that put it at $760 billion every single year. The Lewin Group 
and President Bush's Treasury Secretary O'Neill, who knows a 
lot about this from the Pittsburgh Regional Health Initiative, 
those two have pegged it at $1 trillion a year.
    So I start from the proposition that there are enormous 
efficiency gains to be achieved in the health care system 
without compromising the quality of care, and that when you're 
in a discussion of let's leave the system in place and just cut 
people's benefits, you're in a horrible discussion and a wrong 
discussion. If you're in a ``let's try to protect those 
benefits at all costs but let's see how we can deliver that 
benefit of health care more efficiently,'' you're in the right 
place.
    I see a lot of heads nodding. So the second piece of that 
is that we're actually beginning to kind of sort out what the 
mechanism is for achieving that goal, and it's a combination of 
quality improvements so you don't have hospital-acquired 
infections and errors all over the place. It's payment reforms 
so that people are getting paid to deliver better health care 
and better health outcomes rather than just more procedures. 
It's an emphasis on prevention and on primary care in places 
where those things can be demonstrated to actually save money 
by addressing problems early or preventing them in the first 
place.
    The whole thing has to be supported by a health information 
infrastructure that is more robust and helpful, and we can do 
something about the kind of grotesque administrative costs that 
are associated with a lot of health care.
    So I view this as a real time of opportunity, and from what 
I understand, I mean, there are folks like the Vanderbilt 
Medical Center in Tennessee just won an innovation grant. 
They're going down this path. Gundersen Lutheran, Senator 
Johnson, I've talked about before. They're one of the five or 
six real national leaders in improving this delivery.
    Have I kind of correctly described the sweet spot that you 
all are aiming for with the Medicaid and Medicare delivery 
system reforms? I'll start with Mr. Helgerson, who is nodding 
most vigorously.
    Mr. Helgerson. Yes.
    Senator Whitehouse. He and Mr. Morris are tied for nodding 
among the five nodding heads.
    Mr. Helgerson. Yes, Senator, I agree 100 percent. I think 
it's a tremendous opportunity. In New York two years ago there 
was a study done by the Lewin Group that specifically looked at 
dual eligibles in New York State. There are 700,000 of those 
individuals, roughly about 48 percent of total Medicaid 
expenditures on that population, about 41 percent of total 
Medicare expenditures. They found in their analysis that if we 
moved to fully integrated managed care and that managed care 
was effective, as we would all hope, we could save up to $1 
billion a year in Medicare and Medicaid savings. So there are 
absolutely substantial opportunities. There are a lot of 
inefficiencies in the system.
    And in addition to that, I think also what we're excited 
about is that not only are there inefficiencies, but there are 
also just really poor patient outcomes, and the lack of the 
ability of the programs to work together and really have 
patient-centered care, as it's been described, that really 
leads to individuals who are clearly worse off.
    We believe that one of the reasons why New York ranks 50th 
in the Nation in inappropriate hospitalizations is because for 
duals, the system has simply not worked, and these new duals 
initiatives really are an opportunity to get the system working 
for those individuals.
    Senator Whitehouse. How many of your duals tend to be in 
nursing homes?
    Mr. Helgerson. We have roughly--and it's an interesting 
comparison between Arizona and New York--roughly about 50 
percent of our spent in long-term care is in nursing homes 
institutional level of care. Traditionally, that's been a spent 
that's been fee-for-service. It's now being moved into 
capitation. In Arizona, I think it's like 80/20, meaning 
roughly 80 percent is in the community. So I think that shows 
you, in a state that was entirely managed care from its 
beginning, that I think not only can it mean better outcomes, 
but I think we'll get closer to the Olmstead decision, which is 
trying to keep people in the community as long as possible, and 
I think if we align the incentives more effectively, we can do 
that.
    Senator Whitehouse. Let me make one last point. I know my 
time has run out here. I'd love to work with any and all of you 
on trying to expand the definition of ``meaningful use'' for 
health information technology purposes, at least on a pilot 
basis to include nursing homes, at least for the dual-eligible 
population, because it really makes very little sense when you 
have patients who are cycling back and forth between a nursing 
home and a hospital very often, and creating an enormous amount 
of cost as they cycle, to have our system support the 
development of health information technology in the hospital 
but not in the nursing home. I think if you kicked it all the 
way open, it's too big of a bite and there's too much. But on a 
pilot basis, and particularly for these dual eligibles, we 
really ought to be able to try to find a way to push that 
aperture a little wider.
    There's a similar problem with respect to behavioral 
health, somebody who has a behavioral health issue. Their 
behavioral health provider is likely to be their medical home 
because that's the one place where their doctor really 
understands not only their health problem but their limitations 
in grappling with the rest of the health care system, and yet 
we carve out behavioral health providers.
    So if you're interested in that, hunt me down and come to 
my office, call my office. I think this is a simple correction 
that I hope the Administration could actually make on its own 
within the existing definitions of ``meaningful use,'' and I'm 
putting pressure on them in every way I can to try to do that, 
again, at least on a pilot basis.
    I'll close out. I was introduced by George Halvorson, who 
is the CEO of Kaiser Permanente. He's a pretty serious guy in 
health care in this country. In the course of introducing me he 
said, ``There are people right now who want to cut benefits and 
ration care and have that be the avenue to cost reduction in 
this country, and that's wrong,'' he said. ``It's so wrong, 
it's almost criminal,'' he said. ``It's an inept way of 
thinking about health care.''
    So I applaud all of you for thinking in a non-inept way 
about health care and really trying to get after the 
improvements we can do in the delivery system. I know, Mr. 
Morris, you in particular have a great private-sector example. 
But in Arizona, New York and elsewhere, thank you very much for 
this. There's a road we must travel, and it's a road with 
immense rewards.
    I thank the chairman for holding this hearing.
    Senator Corker. Thank you. Thanks for being here.
    So, first of all, Dr. Berenson, when I said that being in 
Washington sometimes can have a negative effect, I wasn't 
referring to your testimony. I realize you're from Washington.
    [Laughter.]
    As I listened to sort of the summation of the first four 
witnesses' testimony, Mr. Helgerson, you all are in New York 
State, and you all are just robustly pursuing managed care, 
which is also sort of a pleasant surprise from that state, and 
it sounds like you're pretty robust, pretty excited about the 
changes that that will have for the people that you serve.
    Dr. Berenson, if I summarize your testimony, it's that you 
think the demonstration project is too large and you worry 
about people being reimbursed at rates that are lower than 
Medicare. Those are two of the concerns that you seem to 
express most during your testimony.
    Mr. Morris, it seemed to me your concern was that if people 
have the ability to be a part of the Medicare program now, you 
don't want to see that change so that they end up being 
administered through Medicaid.
    Mr. Betlach, you have exactly the opposite view and think 
we ought to robustly pursue the states' ability through 
Medicaid to manage these dual eligibles.
    But do you think there's any way, as we move ahead with 
this demonstration program, do you think there's a way to--
especially, I guess, Dr. Berenson, Mr. Morris and Mr. Betlach--
to reconcile the concerns that the three of you all have, which 
are very different in nature?
    Mr. Morris. I think there should be flexibility. I think it 
goes back to consistency of the plan's ranking and which plans 
are going to participate in the demos, then making sure those 
health plans will engage quality standards and network adequate 
standards. We're a Medicare Advantage plan. We're used to 
working with Medicare, and we have years of experience in what 
an adequate network should be. They're stringent. There's give 
and take in what that looks like at the end of the day when 
you're expanding a network.
    So Medicare Advantage is used to such a process. I don't 
know that it's a state versus Federal issue. It's really, for 
us, why would you preclude in a demonstration, innovative 
companies that have proven their ability to take care of dual 
eligibles for such a long period of time, and do that in a way 
that the beneficiaries have chosen you in an open market? So 
why would CMS and the State on the front end preclude 
innovative companies, no matter if they're Medicaid or 
Medicare? So have that open and allow plans that meet the 
standards over a three-year period. Make sure we have 
consistency in order to demonstrate that the demonstration 
projects are successful.
    Senator Corker. And at present, you think you will be 
precluded as it's taking off?
    Mr. Morris. Some states have an open RFP process, and some 
states are moving members to Medicaid. There's a variety of 
things out there. As Ms. Bella said, they've made no decisions, 
but we think just in general, if it's a demonstration by 
nature, you want organizations that can qualify, be they for-
profit, not-for-profit, whatever, in order to improve the 
ability for the demonstration at the end of the period to be 
successful.
    Senator Corker. Do you think your dialogue with CMS and 
others throughout the process will reconcile that in a way that 
will be acceptable based on things as they're moving ahead 
right now?
    Mr. Morris. We are hopeful of that.
    Senator Corker. Okay, good.
    Dr. Berenson.
    Dr. Berenson. Yes, I'd make a couple of comments, one on 
that point. One of my concerns is that, as I understand it, the 
sort of priority for beneficiaries will be their passive 
enrollment into a managed care plan. There are some very 
important programs now that have started in Medicare. The most 
important in my view is accountable care organizations. CMS 
recently announced 2.4 million beneficiaries will be in the 
combination of the shared savings ACOs and the pioneer ACOs. 
And yet, as I understand it, people will be placed in a 
separate organization under the state proposal and then have to 
opt out.
    I've talked to clinicians at Ann Arbor, at the University 
of Michigan, which has one of these that says, ``yes, we're all 
worried about this because we're now going to have to work with 
all of our enrollees to get them to opt out.'' Well, in ACOs 
they are not enrollees. They're assigned. But actually, they 
are in a program which is dedicated to trying to improve 
efficiency in what hopefully will be a capitated way in the 
future. So I think the demo causes some dislocation there.
    CMS is trying to work on a lack of overlap and duplication 
of demos. I think this is one area where they should do that.
    I did want to make one or two comments about Mr. Betlach's 
presentation. I don't think Arizona is typical of many of the 
states. Really, they have a lot of experience in this area. 
Some of the other states don't, and the numbers that I've never 
seen contested is that nationally there are about 100,000 or 
slightly more dual beneficiaries who are in integrated managed 
care programs. So some of the other states are doing this sort 
of ``on the come''. Arizona has the experience. If we actually 
had an attitude that, ``we're proving the concept--that this 
works'', then I would assume CMS would select Arizona as one of 
the models that they would want to have in the program.
    I would still have a problem with the idea that all of the 
duals or all of the disabled duals would be in it. I do think 
we want to have a control group, not a randomized group but a 
control group, and then prove the concept, not just to Avalere 
but to CMS' evaluators, and that establishes a much better 
basis for going forward.
    Senator Corker. And it sounds like the concern that you 
have fundamentally really probably won't get addressed. Is that 
correct? I mean the size of the program as announced is the 
size of the program, and so the concept you just put out there 
at the end is probably not going to happen.
    Dr. Berenson. Well, I guess. I don't know what CMS will do. 
My concern is less, frankly, with 2 million than it is with the 
idea that states would enroll all of their duals or all of 
their disabled under 65, as Massachusetts is proposing. That, 
in my view, means you can't go back. I mean, I don't think you 
enroll--in California we're talking about 800,000 to 1 million 
dual eligibles. That's in their proposal. I don't think, as I 
said, in three years the administrator calls the governor and 
says, ``You failed, undo all of that.'' I think you want to be 
able to do a demonstration that is not a fait accompli, that 
you've basically done a Medicaid waiver. I think we want to 
keep these as demonstrations.
    Senator Corker. Thank you.
    Mr. Betlach.
    Mr. Betlach. Thank you.
    Senator Corker. He's highly complimentary of you.
    Mr. Betlach. Thank you. In Arizona, we welcome all plans in 
terms of the competition. I mentioned that in terms of one of 
our principles. If a Medicare Advantage plan is interested in 
participating in the program, it can come and compete with 
other plans. That's been one of our guiding principles all 
along.
    Arizona has had a lot of experience with this population, 
particularly since 2006, in terms of the passive enrollment 
that was done to support integration. We've shared a lot of our 
experiences with other states, with CMS, with others in terms 
of the type of oversight that we've done on plans, trying to 
build the strength within the entire system and not just 
relying on what Arizona has learned by going through this over 
a number of years.
    Again, to summarize our testimony, it's simply to show the 
types of impact this integration can have and that the model 
can work. Therefore, we should be looking at moving that 
forward because we've had this fragmentation for so long, and 
we've talked a lot about the challenges and the outcomes. I 
think that when you look at the types of accomplishments we've 
been able to achieve, you will want to move forward in this 
endeavor.
    Senator Corker. Would everybody here, just on that note, 
would all the witnesses agree that we do, whether it's a 2 
million or a 3 million person program or some other program, we 
do need to work towards alleviating the fragmentation that 
exists in dual eligibles? Is that a fair statement that 
everybody would agree with?
    Mr. Helgerson. Yes.
    Dr. Berenson. Yes.
    Mr. Morris. Yes.
    Mr. Betlach. Yes.
    Senator Corker. And before we close out the hearing--and we 
thank you all for your testimony--are there any things you want 
to say in closing that might be, you think, a misimpression 
that might have been left here with any of the questions or 
something that one of the other witnesses might have said that 
you'd like to clarify?
    [No response.]
    Senator Johnson.
    Senator Johnson. I'll just try to wrap up what I was trying 
to achieve with my questioning, first starting out with the 
question about the private sector, where you've actually come 
in the private sector and worked toward these solutions. This 
may be an unfortunate metaphor, but I think we're really 
whistling past the graveyard here, and that's the other point I 
was trying to make.
    Again, I commend all of you in terms of your efforts in 
trying to, as Senator Whitehouse was talking about, trying to 
achieve those types of savings. But, Dr. Berenson, you alluded 
to this, under-reimbursing providers. My concern with what 
we've just passed here, what the Supreme Court just basically 
ratified, is we have a whole new entitlement now, and to 
encapsulate what it's going to do, it's going to increase the 
demand for health care while it decreases the supply, and it 
supposedly is going to be paid for by reductions in 
reimbursements to providers, reductions to programs that are 
also simply unsustainable.
    I mean, this is great trying to figure out some way, shape 
or form through government to try to reform these programs, but 
I haven't seen government do it. I think we need to look to the 
private sector, and we need to be very concerned about what's 
going to happen from the standpoint of debt, deficit, and those 
types of pressures on our medical system. I just don't think 
government is the solution to it. That was really what I was 
trying to get through with my questioning.
    Senator Corker. Thank you.
    To each of you, I think we're at an interesting time, and 
Medicare reform is certainly--not necessarily the dual-eligible 
component but probably that, too--is going to be a topic that I 
think we may actually take up over the next six months to a 
year-and-a-half as part of fiscal reforms, and I think people 
like you that have had such a deep experience and broad 
experience in it, people like you are very helpful.
    I will just tell you that I would welcome input in our 
office regarding this program as it develops and other concepts 
that you see that might improve the delivery of care there.
    We thank you all for being here. We thank you for the roles 
you play in your respective states and here in Washington, and 
I hope if there's any additional input after this, you'll give 
it.
    I do have a number of questions that I don't want to keep 
everybody here asking that we will ask in written form, if 
that's okay, and other members may have the same. If you could 
try to respond in the next week or so with those, I'd greatly 
appreciate it.
    But thanks for your participation. Thank you.
    [Whereupon, at 3:53 p.m., the hearing was adjourned.]



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