[Senate Hearing 112-766]
[From the U.S. Government Publishing Office]
S. Hrg. 112-766
THE AFFORDABLE CARE ACT: THE IMPACT OF HEALTH INSURANCE REFORM ON
HEALTH CARE CONSUMERS
=======================================================================
HEARING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
ON
EXAMINING THE AFFORDABLE CARE ACT, FOCUSING ON THE IMPACT OF HEALTH
INSURANCE REFORM ON HEALTH CARE CONSUMERS
__________
JANUARY 27, 2011
__________
Printed for the use of the Committee on Health, Education, Labor, and
Pensions
Available via the World Wide Web: http://www.gpo.gov/fdsys/
----------
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
TOM HARKIN, Iowa, Chairman
BARBARA A. MIKULSKI, Maryland MICHAEL B. ENZI, Wyoming
JEFF BINGAMAN, New Mexico LAMAR ALEXANDER, Tennessee
PATTY MURRAY, Washington RICHARD BURR, North Carolina
JACK REED, Rhode Island JOHNNY ISAKSON, Georgia
BERNARD SANDERS (I), Vermont RAND PAUL, Kentucky
ROBERT P. CASEY, JR., Pennsylvania ORRIN G. HATCH, Utah
KAY R. HAGAN, North Carolina JOHN McCAIN, Arizona
JEFF MERKLEY, Oregon PAT ROBERTS, Kansas
AL FRANKEN, Minnesota LISA MURKOWSKI, Alaska
MICHAEL F. BENNET, Colorado MARK KIRK, Illinois
RICHARD BLUMENTHAL, Connecticut
Daniel Smith, Staff Director
Pamela Smith, Deputy Staff Director
Frank Macchiarola, Republican Staff Director and Chief Counsel
(ii)
C O N T E N T S
__________
STATEMENTS
THURSDAY, JANUARY 27, 2011
Page
Committee Members
Harkin, Hon. Tom, Chairman, Committee on Health, Education,
Labor, and Pensions, opening statement......................... 1
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming,
opening statement.............................................. 3
McCain, Hon. John, a U.S. Senator from the State of Arizona,
statement...................................................... 14
Franken, Hon. Al, a U.S. Senator from the State of Minnesota,
statement...................................................... 16
Bingaman, Hon. Jeff, a U.S. Senator from the State of New Mexico,
statement...................................................... 18
Bennet, Hon. Michael F., a U.S. Senator from the State of
Colorado, statement............................................ 19
Roberts, Hon. Pat, a U.S. Senator from the State of Kansas,
statement...................................................... 21
Reed, Hon. Jack, a U.S. Senator from the State of Rhode Island,
statement...................................................... 23
Burr, Hon. Richard, a U.S. Senator from the State of North
Carolina, statement............................................ 25
Sanders, Hon. Bernard, a U.S. Senator from the State of Vermont,
statement...................................................... 27
Hagan, Hon. Kay R., a U.S. Senator from the State of North
Carolina, statement............................................ 29
Murray, Hon. Patty, a U.S. Senator from the State of Washington,
statement...................................................... 31
Mikulski, Hon. Barbara, a U.S. Senator from the State of
Maryland, prepared statement................................... 62
Witness--Panel I
Sebelius, Hon. Kathleen, Secretary, U.S. Department of Health and
Human Services, Washington, DC................................. 6
Prepared statement........................................... 8
Witnesses--Panel II
Grasshoff, Lisa, Houston, TX..................................... 34
Prepared statement........................................... 36
Schlichting, Emily, Omaha, NE.................................... 38
Prepared statement........................................... 40
Koller, Christopher, Health Insurance Commissioner, State of
Rhode Island, Providence, RI................................... 41
Prepared statement........................................... 44
Olivo, Joe, President, Perfect Printing, Inc., Moorestown, NJ.... 48
Prepared statement........................................... 49
ADDITIONAL MATERIAL
Statements, articles, publications, letters, etc.:
Response by Secretary Sebelius to questions of:
Senator Enzi............................................. 63
Senator Alexander........................................ 75
Senator Roberts.......................................... 80
Senator Hatch............................................ 82
(iii)
THE AFFORDABLE CARE ACT: THE IMPACT OF HEALTH INSURANCE REFORM ON
HEALTH CARE CONSUMERS
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THURSDAY, JANUARY 27, 2011
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The committee met, pursuant to notice, at 10 a.m. in Room
SD-430, Dirksen Senate Office Building, Hon. Tom Harkin,
chairman of the committee, presiding.
Present: Senators Harkin, Bingaman, Murray, Reed, Sanders,
Hagan, Franken, Bennet, Enzi, Burr, Isakson, McCain, and
Roberts.
Opening Statement of Senator Harkin
The Chairman. The Senate Committee on Health, Education,
Labor, and Pensions will please come to order.
Today we meet for the first in a series of hearings that
this committee will hold on The Affordable Care Act; hearings
that will focus not on the politics of Health Care Reform nor
on the rhetoric that surrounds it, but rather on the tangible,
positive impact that reform is having on Americans' lives. I
think we can all agree that what this debate needs is more
light and less heat.
To that end, today's hearing will focus on the benefits of
health reform that Americans are experiencing right now;
specifically, the bundle of significant consumer protections
that went into effect last September, known as the Patient's
Bill of Rights. These protections are a historic, long-awaited
improvement in the quality and scope of health coverage for all
Americans. Every American who pays a health insurance premium
is now protected against some of the most egregious and abusive
practices of the health insurance industry.
Put another way, thanks to health reform Americans now have
protections that every Senator on this dais has had for many
years.
Before the Affordable Care Act, nearly 102 million
Americans were in health insurance policies with lifetime
limits; and it was estimated that as many as 20,000 people
annually could be denied coverage for care due to those limits.
And, surprisingly, people in danger of hitting a lifetime
limit are seriously ill, and their benefits run out just when
they need them the most.
The Affordable Care Act permanently eliminates all lifetime
limits and phases out annual limits by 2014, providing economic
and health security for those who need coverage the most at
critical times.
One of those folks, Lisa Grasshoff, is here today and will
talk a bit later about how the act's ban on lifetime limits has
helped her care for her son and strengthen her family's
financial future.
As I'm sure the Secretary will discuss in her testimony,
last week the Department of Health and Human Services released
an important report analyzing preexisting health conditions.
The report's findings are striking; up to 129 million
nonelderly Americans have a preexisting condition, and millions
more are likely to develop such a condition over the next 8
years. Before the Affordable Care Act these Americans faced
denial of coverage, restriction of health benefits, or higher
premiums as a result of their preexisting condition. Their
ability to take a new job, start their own business or make
other important life changes was limited. They were, in effect,
locked into their original insurance coverage.
Because of health reform, insurance companies are now
prohibited from restricting or denying coverage to children
under 19 because of a preexisting condition, and in 2014 this
protection will be extended to all Americans.
Between now and 2014, the law establishes an insurance plan
in every State tailored specifically to adults with preexisting
conditions who are currently uninsurable, offering coverage at
standard market rates; thousands of people have enrolled and
received coverage of life-saving services like chemotherapy.
Another element of the Patient's Bill of Rights is a
requirement for every insurance plan to cover evidence-based
preventive services that will head off many illnesses,
addressing them in the nurse's office rather than in the
emergency room.
The cost of preventable disease consumes 75 percent of
health care spending annually; dollars that could be used to
build roads, improve schools, create jobs.
The prevention investments in the law are down payments on
the long-term project of transforming our current sick care
system into a genuine health care system; and first dollar
coverage of preventive services like mammograms and
immunizations are a vital part of that.
Before the Affordable Care Act millions of young adults
went without health insurance because their jobs didn't offer
it or because they were ineligible for coverage on their
parent's policy.
These young people, starting a new job or a new business--
folks who don't have a lot of money--had to largely fend for
themselves in a chaotic, unregulated market for individual
coverage that charges high premiums for only modest benefits.
Now health reform allows these young people--more than 2
million of them--to stay on their parent's policy until age 26;
this reform relieves young people of the burden of high health
insurance costs.
We will learn more about this from one of our witnesses
today, Emily Schlichting, a University of Nebraska student.
Finally, the Affordable Care Act puts an end to one of the
most outrageous insurance company abuses, that's cancelling
insurance coverage right when someone gets sick, and sometimes
based on technical paperwork error; for example, a California
insurer, using computer programs, had a dedicated program to
cancel policies of pregnant women and the chronically ill only
because they submitted expensive claims.
Another insurance company started a fraud investigation
into anyone who submitted a claim reaching a certain cost
level, looking for reasons to cancel the policy; insurance
companies were also paying bonuses to employees based on how
many policies they canceled, and therefore, how much money they
saved the company.
Health reform puts an end to that sorry state of affairs.
So, today we'll hear from public officials at both the
State and Federal levels charged with implementing and
overseeing the Affordable Care Act, as well as private citizens
who will talk about how this has affected them.
Our first panel, of course, we welcome Secretary of Health
and Human Services, Kathleen Sebelius to her first hearing of
this New Congress.
In addition to expertly implementing the private insurance
market reforms for folks, today I want to applaud the Secretary
for her relentless and effective work in eliminating the waste,
fraud and abuse in Medicare and Medicaid.
This week the department reported that it had recovered
more than $4 billion from perpetrators of fraud last year; the
highest annual recovery ever.
Thank you very much, Madam Secretary.
The department released new rules authorized by the
Affordable Care Act, giving it even more effective tools to
detect and combat fraud.
Our second panel is comprised of Rhode Island Insurance
Commissioner, Chris Koller, and three nongovernment witnesses,
Lisa Grasshoff, Joe Olivo and Emily Schlichting.
As always, I am very pleased to be joined by our
committee's Ranking Member, Senator Mike Enzi.
And, before I turn for an opening statement from Senator
Enzi, one administrative matter: I request that the record
remain open for 10 days from today for statements to be
submitted to the record.
Senator Enzi.
Statement of Senator Enzi
Senator Enzi. Thank you, Mr. Chairman. I appreciate the
Secretary being here today. I was very pleased at the State of
the Union, that the President mentioned that there are flaws in
the Health Care bill that need fixing. He specifically
mentioned tort reform. Of course, a year and a half ago at the
American Medical Association Convention, he promised that the
Health Care bill would have tort reform and a permanent doc
fix; neither of those things wound up in there.
Now, today's hearing is designed as another marketing tool
for the health care plan. I don't think we can fault the
millions that have been spent on the marketing--it's been
voluminous, but it's the policy that's flawed, not the
marketing plan.
It's easy to pick a few paragraphs out of a 2,700-page law
to find a few provisions that are popular.
Apparently, the purpose of the hearing today is to identify
those few issues in the new law that enjoy support; and that's
often from both sides of the aisle.
Now, usually, a hearing is to seek solutions.
Unfortunately, the reality is that Americans won't have the
luxury of only abiding by their favorite paragraphs of the new
law; Americans will be forced to comply with the entire law.
That means, as a direct result of the new law, millions of
Americans will see their health insurance premiums increase.
Plans like Blue Shield of California have already announced
premium increases of 59 percent; a portion of which they
directly attribute to the mandates in the new law.
As a result of the new law, children in many States are not
able to get child-only health plans. I recently got a letter
from a disabled veteran in Wyoming. He wrote to me that because
of the new law he can't get health insurance for his kids. He
gets his health insurance care from the VA So, he doesn't need
a family policy, he needs a policy for his two kids; but
because of drafting errors in the new law, he's out of luck.
No health insurance plans in Wyoming are writing new child-
only policies. I've asked my staff to look into this, and they
found that to be the case in at least 19 other States. Because
of the new law, kids are not able to get health insurance.
Another problem with the new law is that millions of
seniors on Medicare will see their out-of-pocket costs go up
and benefits go down, because more than $500 billion was cut
from Medicare and used to pay for a new entitlement program.
Because of the new law employers across the country will be
forced to lay off workers and reduce wages as their health care
costs continue to increase as a result of all the new taxes in
the law that will increase their health care costs.
The new law also forces 16 million Americans into the
Medicaid Program; one of the worst health care programs in the
country, that provides some of the lowest-quality care; while
at the same time, forcing cash-strapped States to pay an
additional $20 billion over the next 10 years to expand the
program.
This is the reality that we face as a result of the new
health care law; nothing in the testimony we will hear today is
going to change it. That's why survey after survey shows that
the American people reject the policy set forth in this new
law. We recognize there are individuals who will benefit from a
few of the provisions in the law; and, in fact, many of those
provisions do enjoy bipartisan support.
There are many Senators, both Democrat and Republican, that
support policies, like prohibiting rescissions and making it
easier for parents to cover their children on their plans up to
age 26. We could have easily enacted a bill last year that
would have provided those protections; unfortunately, that's
not what was done with the new health care law.
Instead, the new law will force Americans to buy the type
of health insurance that Washington thinks they should have.
Employers will be required to offer health insurance or pay $52
billion in new taxes.
Americans will not have the luxury of picking which parts
of the new law apply to them, but instead will have to comply
with the 2,700 pages in new mandates, taxes, and limitations on
their freedoms. And that doesn't even count the pages of new
regulation.
There is a sign on the side of a building in Worland, WY
that says: As regulations grow, freedoms die.
Madam Secretary, you have the unfortunate task of writing
the hundreds of thousands of pages of regulations to implement
an unpopular health care law that the American people reject.
With each page you publish, you will be limiting the freedoms
of everyday Americans; for example, the freedom of individuals
to choose whether to spend their hard-earned dollars to pay
their mortgage or to pay their health insurance premiums has
vanished.
The Government now says: Americans have to pick health
insurance. If you don't have health insurance, you're breaking
the law, and you'll have to pay a fine.
Businesses that have more than 51 employees will not have
the freedom to decide whether to increase an employee's pay or
buy their employee health insurance. The new law says: If you
don't provide health insurance you have to pay $52 billion in
new taxes.
The freedoms of businesses to make decisions about how to
run their companies are disappearing. Americans who wish to pay
lower health insurance premiums by picking a plan that has a
higher deductible will no longer have this freedom. The new law
decrees that Washington knows best.
The Administration will soon be publishing regulations
capping the amount of out-of-pocket costs and limiting the
deductible amount small businesses can offer their employees.
Madam Secretary, I don't envy you your job, and I do
appreciate, though, that you're here today, and that you have
been working on those regulations, and meeting a lot of the
deadlines; and we will have the opportunity to ask some tough
questions about the new law.
I do believe this is your first time to appear before this
committee since your nomination hearing roughly 2 years ago;
and to perform proper oversight, this committee will need to
hear more from you; and I will ask you to reaffirm that
commitment today.
I'm glad this committee will finally have the opportunity
to ask you questions about the implementation of the new health
care law which impacts \1/6\ of our Nation's economy. And, of
course, I'm always interested in the donut-hole provision where
PhRMA, by paying 50 percent of the cost to get people through
the donut hole will then get 95 percent from taxpayers once
Seniors are through the donut hole because we no longer give
incentives for people to go to generics.
I have people from Wyoming talking to me about Medicare
Advantage because their rates have gone up so much, or have
completely been eliminated that they're losing a part of what
they consider to be health care and--invaluable health care--
and there's some animosity toward the AARP because they helped
to do that, and they are the ones supplying the Medigap policy,
which these people say they can't afford.
I believe that we can and should do better. I intend to
focus on ways to eliminate the provisions in this new law that
limit our basic freedoms. In their place I will work to enact
reforms that will focus on increasing consumer choices and
decreasing health care costs.
We must make health care more affordable for both consumers
and the Federal taxpayer.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Enzi.
Again, we have an exceptional group of witnesses today. I'd
like to thank all of you for taking the time and energy for
being here.
On our first panel, of course, is Secretary of Health and
Human Services, Kathleen Sebelius; and we welcome her here,
again, as Senator Enzi said, for her first appearance before
this committee.
Secretary Sebelius was a leading voice involved during the
passage of the Affordable Care Act. She is responsible for
implementing many of the key provisions; and of course, we all
know that prior to joining the Cabinet, Secretary Sebelius
served first as the Kansas Insurance Commissioner; so she has a
great deal of knowledge in that area; and then later, of
course, as the Honorable Governor of the State of Kansas, where
she worked to expand access to quality affordable health care,
and fought to protect consumers.
So, Madam Secretary, thank you for your hard work. Thank
you for sharing your knowledge with the committee today. I
commend you for your work on this important issue; your
statement will be made a part of the record in its entirety.
Please proceed as you so desire.
STATEMENT OF HON. KATHLEEN SEBELIUS, SECRETARY,
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC
Secretary Sebelius. Thank you very much, Mr. Chairman. It's
nice to have a chance to visit with the HELP Committee on this
important issue, and I want to thank Chairman Harkin, and
Senator Enzi, and members of the committee for the opportunity
to discuss the implementation of the Affordable Care Act, and
talk a little bit about the enormous difference it's already
making in the lives of Americans since it was passed.
As you know, in the framework of the bill, over the last 10
months, our department has worked closely with two other
departments; with Treasury and Secretary Tim Geithner and with
Labor and Secretary Hilda L. Solis. But, we've also been
working very closely with governors across the country; with my
former colleagues, State insurance commissioners, with health
care providers, doctors and nurses, with consumer advocates,
employers and other stake-holders, to deliver the key benefits
that have already become available to the people of America.
We've met deadlines, we've established strong, working
partnerships and begun laying the groundwork for the additional
reforms that take place in the years to come; and in that time,
I've had the chance to see the new law through the eyes of
people it helps every day.
Mr. Chairman, you've already referenced the new Patient's
Bill of Rights. And because of the enactment of those
provisions, millions of Americans don't have to worry about
losing their health insurance when they need it most; many of
the worst abuses of the insurance industry, like unfair and
arbitrary rescission practices and lifetime dollar limits on
benefits have now been brought to an end.
In addition, the new law begins to free as many as 129
million Americans with preexisting health conditions from the
fear of discrimination by insurance companies.
Starting this year, it did prevent insurers from denying
coverage to children because of a disability or illness; and in
2014 all Americans will be free from discrimination by
companies based on their health status.
The law is also beginning to slow down the rising health
insurance cost for families and small business owners; the new
resources for States to review questionable premium hikes; the
new regulations that limit the amount of premium dollars that
insurers can spend on marketing and CEO bonuses.
Beginning in 2014 individuals, families, and small
businesses will be able to pool their purchasing power and
negotiate lower rates in new health insurance exchanges, which
many States are already working on, to design and implement.
I've also seen how the new law is impacting America's
business owners. Over 5,000 businesses, State and local
governments, and unions are already using new funds to help
maintain coverage for a very vulnerable population--folks
between the age of 55 and 64 and their families, the so-called
early retirees. Around 4 million small business owners are now
eligible for tax credits to help them provide insurance for
their employees. Thanks to the new law, seniors and those
Americans with disabilities enjoy a stronger and more
sustainable Medicare.
We've sent over 3 million checks to those who fell into the
donut hole last year, and they've received a one-time $250
rebate check. This year, for those who reach the donut hole
coverage in 2011, they will begin to receive a 50 percent
discount on the covered name-brand prescription drugs; and over
time, that donut hole closes altogether.
Medicare beneficiaries are now receiving critical
preventive services and an annual wellness visit which has been
added to their guaranteed benefits.
So, in addition to giving Americans more control over their
health care, the new law is strengthening our economy; just
recently, the Congressional Budget Office reiterated their
numbers, that the new law will reduce the Federal deficit by
$230 billion over the next decade, and over a trillion dollars
in the following decade.
Now, on Tuesday night, President Obama laid out a vision
for how America can win the future by building a foundation for
long-term growth that allows families and business owners to
thrive.
Improving our health care system is vital to making that
vision a reality; and the Affordable Care Act is an essential
component to this goal.
By freeing families from the worst insurance company
abuses, freeing entrepreneurs to start new businesses without
worrying about losing their coverage, and freeing all of us
from the burden of skyrocketing health care costs that make it
hard for families to pay their bills, the law allows American
companies to compete and allows the Federal Government to bring
down the deficit.
Since March of last year our department has focused on
working with Congress and our partners across the country to
implement the law quickly and effectively.
In the coming months, I look forward to working with all of
you to continue those efforts and to make sure that Americans
can take full advantage of all that the law has to offer.
Again, I thank you for this opportunity, and look forward
to our discussion.
[The prepared statement of Secretary Sebelius follows:]
Prepared Statement of Kathleen Sebelius
summary
Over the last 10 months, the Department of Health and Human
Services has worked closely with the Departments of Treasury and Labor;
Governors and State insurance commissioners; doctors, nurses and other
health care providers; consumer advocates; employers; insurers; and
other stakeholders to deliver many of the law's key benefits to the
American people.
We've established a Patients' Bill of Rights to protect families
from many of the worst insurance abuses including rescissions and
lifetime dollar limits on care.
We've also begun to free as many as 129 million Americans from
discrimination based on preexisting conditions. Today, it's illegal to
deny coverage to children because of a preexisting health condition. In
2014, discrimination based on any individual's health history will be
outlawed.
The law is bringing down premiums for consumers by limiting the
amount of premiums insurers may spend on administrative costs and by
giving States resources to beef up their rate review processes. In
2014, State-based Exchanges will bring down premiums further by giving
individuals and small business owners the ability to pool their
purchasing power to negotiate lower premiums.
There are other benefits for America's businesses as well. Over
5,000 businesses, State and local governments and unions are using
funds from the Affordable Care Act to maintain coverage for pre-
Medicare retirees and their families. Around 4 million small businesses
may be eligible for a tax credit to help them provide health insurance
for their employees.
Thanks to the law, seniors are gaining a stronger and more
sustainable Medicare. Over 3 million seniors have already received one-
time $250 donut-hole rebate checks. This year, seniors in the donut
hole will receive 50 percent discounts on covered brand name
prescription drugs, and others will have access to many important
preventive care services for free.
The law is a key part of the Administration's effort to win the
future by out-innovating, out-educating and out-building the rest of
the world. It gives Americans more freedom in their health care
choices, from greater freedom to change jobs or start a business
without worry that they'll lose coverage to greater freedom from
skyrocketing premiums.
It also puts our budget on a more sustainable path by lowering the
deficit by $230 billion over the next decade and by over $1 trillion by
the end of the following decade.
Since March of last year, our Department has focused on working
with Congress and our partners across the country to implement this law
quickly and effectively. In the coming months, we look forward to
working with all of you to continue that work and make sure that
Americans can take full advantage of all that the law has to offer.
______
Chairman Harkin, Ranking Member Enzi, and members of the committee,
thank you for the opportunity to discuss our department's
implementation of the Affordable Care Act and the enormous difference
it has made in the lives of Americans since it was passed.
Over the last 10 months, our department has worked closely with the
Departments of Treasury and Labor, with Governors and State Insurance
Commissioners, with doctors, nurses, other health care providers,
consumer advocates, employers, insurers, and other stakeholders to
deliver many of the law's key benefits to the American people: from
establishing a new Patients' Bill of Rights that protects families from
the worst insurance company abuses, to sending more than 3 million $250
checks to seniors and other beneficiaries in the Medicare Part D
coverage gap, from making health insurance tax credits available to up
to 4 million small businesses, to new reforms that keep premiums down
by bringing transparency and accountability to our health insurance
markets.
We have met deadlines, established strong working partnerships, and
begun laying the groundwork for reforms that will take effect in the
years to come.
In the last year, I've also gotten the chance to see this new law
through the eyes of the people it helps every day. From the people I've
talked to around the country, and the letters I get every day, I've
learned firsthand how the law is giving Americans more freedom in their
health care choices and more security in their coverage.
It's making a difference for people like Ralph Byrd from Phoenix.
His twins have a condition called Spinal Muscular Atrophy that requires
expensive treatments and a constant need for care. Ralph had health
insurance but worried that the cost of care for his children would
quickly reach the lifetime dollar limit on his plan.
Thanks to the new law, Ralph's family and countless others no
longer have to worry about losing their health insurance when they need
it most. In September, the Patients' Bill of Rights began to put an end
to the worst abuses of the insurance industry, including the imposition
of lifetime limits. It also put an end to unfair and arbitrary
rescission practices and began to phase out annual dollar limits. It
puts an end under most plans to outrageous fees you could be charged
for going to the nearest emergency room. It allows parents to keep
their children on family plans in most cases up to age 26.
By holding insurers accountable, the new law frees Americans from
the worry that their benefits will be unfairly taken away or capped. It
has given millions of families peace of mind.
At the same time, the new law begins to free Americans from the
cruel practice of discrimination based on preexisting conditions.
In September, I met Gail O'Brien from Keene, NH. The previous
March, Gail, who was uninsured, was diagnosed with non-Hodgkins
Lymphoma. When she tried to get coverage she was declined because of
her condition or offered coverage at an unaffordable rate. She faced
the kind of decision that, unfortunately, millions of other Americans
have faced over the last few years. Should she pay for health care or
pay for her son's college education? Thanks to the new law, Gail was
able to get coverage through the Preexisting Condition Insurance Plan
created in each State by the new law. As a result, she has been able to
get her treatments and is responding very well.
Today, Gail is just one of thousands of Americans who had
previously been locked out of the health insurance market but now have
coverage thanks to the new law. Even more significant, insurers are no
longer allowed to deny coverage to children because of a preexisting
health condition. In 2014, any kind of discrimination based on your
health history will be outlawed. That's a day we will all celebrate.
Almost every family in America will benefit from this protection.
According to a report our department released last week, as many as 129
million Americans--or nearly one in two people under the age of 65--may
have a health condition that makes them vulnerable to insurance company
discrimination today. Things as big as being a cancer survivor or as
small as treating high blood pressure were enough to catch insurers'
attention. And we know that they did not hesitate to use this power.
The new law is freeing these 129 million Americans from the worry
that if they change jobs, retire, get divorced, or otherwise need
individual market insurance, they'll be shut out of health insurance or
denied the coverage they need.
We also need to make sure that coverage is affordable for
individuals, families, and businesses. Already, provisions of the
Affordable Care Act are helping to keep premium increases down by
demanding transparency and accountability from the insurance industry.
For too long, it has been a common occurrence for someone to open up
their mail and find a 25 percent premium increase from their insurer
with little explanation and no recourse.
That's changing under the new health care law. States are our
frontline defense to prevent unreasonable premium increases. As a
former State insurance commissioner, I am pleased by the State-focused
approach the law takes to premium review. We are providing States with
resources to help them beef up their rate review processes, including
the ability to hire actuaries to perform the necessary analysis of rate
proposals. In 2010, we provided the first round of what will eventually
be $250 million in funding to strengthen States' ability to review and
reject unreasonable rate hikes. Over the last year, States from
California to Connecticut have shown that vigorous oversight can be
very effective at stopping unjustified premium increases. We also have
proposed a system for transparency and consistent, reviews of any
premium increase over 10 percent in 2011 to identify any that are
unreasonable.
In addition, for the first time, insurers will be held accountable
for the way they spend consumer premiums. The new medical loss ratio
regulations released last year implement the statutory requirement that
insurers spend 80 to 85 percent of premium dollars on health care and
quality improvement efforts instead of marketing and CEO bonuses. Those
who don't meet the standard will have two choices: reduce premiums or
send rebates to their customers. We are already seeing indications that
these policies are causing insurance companies to think twice about
their premium increases and, in some cases, reducing the size of their
annual updates.
This is just the start of how the law will keep down premiums. In
2014, individuals, families, and many small businesses will be eligible
for tax credits to help them afford health coverage purchased through
the new Exchanges. They'll be able to pool their resources in new
State-based health Exchanges to negotiate lower rates. We estimate that
a family of four earning $55,000 a year will save nearly $6,000 each
year as a result of these tax credits. A single mother with an income
of $33,000 will save nearly $10,000, putting coverage within reach for
the first time for these vulnerable families. The nonpartisan
Congressional Budget Office estimates that small businesses will be
able to purchase coverage in the Exchanges at a significant savings
than what they are paying now, because of the larger risk pools and
streamlined administrative costs. Large employers are also benefiting.
Creation of State-based health insurance Exchanges is a central
component of the Affordable Care Act and a concept that has a long
history of bipartisan support. Under the act, States have until 2014 to
establish Exchanges for their citizens. As part of our partnership with
the States, we are again providing resources to help them get these
Exchanges up and running on time. We have provided Exchange Planning
Grants to 48 States plus the District of Columbia and just last week we
announced the availability of funds for States to begin the work to
establish Exchanges. We will continue to work closely with governors,
State regulators, and legislators to provide them with information and
resources to complete this critical work on time.
The law also invests in improving Americans' access to care through
$11 billion in funding for community health centers to increase
services, improve facilities and train and support more health care
professionals to work in the areas they are needed most.
I've also seen how the new law is helping America's businesses.
Under the new law, more than 5,000 businesses, local governments, and
unions have signed up for a new program that helps them maintain
coverage for retired workers who are not yet eligible for Medicare.
The California Public Employees Retiree System for example reports
that by factoring the new program into its 2011 health plans, it was
able to provide approximately $200 million in premium savings to
115,000 early retirees and their families.
We have also notified more than 4 million small businesses and non-
profits that they may be eligible for a tax credit this year to help
them provide health insurance for their employees. We have already seen
these credits working. After years of dropping coverage, we have seen
the trend start to reverse thanks to the law.
For example, Blue Cross Blue Shield of Kansas City recently
reported that after letting local businesses know about the new tax
credit, they enrolled more than 9,000 new members covered by 400 new
employers, more than a third of which had not previously offered
coverage. On behalf of the Business Round Table, Hewitt analyzed the
cost containment policies in the law and found that large employers
could save up to $3,000 per employee by 2019. Thanks to the new law,
America's businesses are getting more freedom from soaring costs that
made it hard for them to compete and keep their best employees.
The Affordable Care Act is also making Medicare stronger and more
sustainable. Last week, we sent out our three millionth $250 rebate
check to help seniors and other beneficiaries who reached the Medicare
Part D prescription drug benefit gap in 2010. Several of these seniors
have written to me to say how helpful these checks were, including one
couple from Minnesota who stapled their receipt to the card, showing
how they spent the money at their local WalMart.
This year, seniors are getting more benefits. Those who reach the
donut hole will receive a 50 percent discount on covered brand-name
drugs while in the donut hole, the first step toward closing the donut
hole by the end of the decade. Medicare beneficiaries will be eligible
to receive recommended preventive services such as mammograms and most
cancer screenings at no additional charge as well as free annual
wellness visits.
In addition to giving Americans more control over their health
care, the new law is strengthening our economy. More than 1 million new
private sector jobs have been created since the law passed and the
health sector is one of the fastest growing parts of our economy. The
Congressional Budget Office has said that the law will reduce our
Federal deficit by $230 billion over the next decade and by over $1
trillion by the end of the following decade.
I have personally seen the difference this law will make and in
just a few minutes, you'll hear more about how the law is making it
easier for Americans to get the health care they need. This law is not
just words on a page to be debated. There are names and faces that go
along with this law. We are moving forward with real rights and reforms
that are improving people's lives every day.
That's why last week's vote in the House to repeal this law was
unfortunate. At a time when there is so much more important work to be
done to rebuild our economy, we can't afford to take these benefits
away from families, bring back all the worst practices of the insurance
industry, raise premiums for families, increase health costs for
businesses, and add $1 trillion to the deficit by the end of the next
decade.
Since March of last year, our department has focused on working
with Congress and our partners across the country to implement this law
quickly and effectively. In the coming months, I look forward to
working with all of you to continue that work and make sure that
Americans can take full advantage of all that the law has to offer.
Thank you for your time.
The Chairman. Thank you, Madam Secretary.
We'll start our round of questions per agreement between
the Ranking Member and myself earlier on; the order will be,
The Chair, Ranking Member and then Senators in order of
appearance; and my staff has written this, so it will be
Senator McCain, Senator Franken, Senator Bingaman, Senator
Bennet, Senator Roberts, Senator Reed, Senator Burr, Senator
Isakson, Senator Sanders in that order.
Madam Secretary, getting to this child-only issue, could
you describe the new protections that the Health Reform bill
provides to children in the private market, and how that
differs from the status quo before the Affordable Care Act was
passed?
Secretary Sebelius. Mr. Chairman, before the Affordable
Care Act, what a number of companies did is offer child-only
policies, but eliminated any child with a preexisting health
condition. So, the parents who really desperately needed
coverage for their children with anything from asthma to
diabetes to a cancer survivor, were blocked from getting
coverage.
The Affordable Care Act says that if you are going to offer
child-only policies that it must be open to all children. No
longer can you only offer policies to children who don't have a
health condition that may require them to have health
insurance--what we have found companies doing is--some
companies may be changing the kind of policy offerings. What
most companies are doing are keeping in place their coverage
for children like those referred to by Senator Enzi, and are
selecting whether or not to offer policies going forward,
prospective policies.
A number of States have taken action--I think 19 or 20 so
far--to say companies who want to offer policies to children
must offer them across the board, feeling that the
discrimination against children with preexisting health
conditions is the worst of all worries for parents; and
particularly when you have a sick child, to not be able to find
affordable coverage is just untenable.
Children are also eligible for the new high-risk insurance
pools that are run in States across the country, in addition to
the private health market.
The Chairman. So, it's kind of the same situation that we
experience in other areas of insurance, that, if you're really
healthy you can get a health insurance plan.
Secretary Sebelius. If you promise not to get sick.
The Chairman. That's right. And if you have no preexisting
conditions.
One other thing that I wanted to just ask is: The first
dollar coverage for proven cost-effective, preventive services.
As you know, that's something that I worked very hard on with
others to get into this bill. Senator Burr was also very active
on that, to focus on preventive measures. So that has also
started.
I just wanted to again ask you how the act's mandated
coverage of these services are affecting Americans' health, and
basically, how the provision is being implemented on the
preventive end right now. How's that being implemented right
now?
Secretary Sebelius. Mister Chairman, I know that prevention
efforts are an area where you have spent a lot of time and
energy over the years, and one that I think has the potential
of yielding huge results in terms of not only lowering overall
health costs--as you say, 75 cents of every dollar is spent on
chronic diseases, most of which are preventable--but also on a
healthier population, a healthier workforce. So the new law has
a couple of provisions: Medicare beneficiaries now have
eligibility for mammograms and cancer screenings, a variety of
preventive coverage without co-pays; and that's a big step
forward in terms of taking down a cost barrier. In new plans
offered, beginning after January 1, 2011, the private insurers
will also offer preventive services that are covering a wide
range of care without co-pays, to encourage, again, people to
have regular checkups, get screenings, find problems much
before they get to be acute issues, and deal with them in a
much more cost-effective and, frankly, life-saving strategy
before people get acutely ill and spend that time in hospitals,
or in a condition where their lifespan is reduced and their
health costs skyrocket.
The Chairman. Just very simply, do you feel that the
department has the wherewithal to implement this right now; in
other words, to really implement these provisions?
Secretary Sebelius. We are finding that, yes, as we go
forward we are moving ahead and those policies are becoming
effective.
The Chairman. I appreciate that. Thank you, Madam
Secretary.
Secretary Sebelius. Yes.
The Chairman. Senator Enzi.
Senator Enzi. Thank you, Mr. Chairman.
I want to go back to the child-only plans question a little
bit, because we did take a look and found that there are at
least 20 States where you can't buy child-only insurance
anymore. If they already have it, they can keep it, but there's
not any new policies being issued, and consequently, they're
getting out of that market.
So, for parents like the disabled veteran in Wyoming that I
mentioned in my opening statement, who needs to buy a plan,
it's absolutely devastating. The outcome's unfortunately
predictable as a result of the drafting; which allows a person
to buy a policy on their way to the emergency room, and so
there's some incorrect drafting and incorrect implementation.
Do you have any specific steps that you're going to take to
fix the problem in those 20 States? Does Congress need to
change the law?
Secretary Sebelius. Senator, we have done a lot of outreach
with insurers across the country, and while there was an
initial flurry of announcements, many insurance companies are
reconsidering their initial plans to leave the marketplace.
I would suggest it was, in some cases, a pretty cynical
notion that you would only insure as a health insurer, children
without a preexisting health condition and keep those policies
in place.
Parent's coverage is often available to many of the
children who had child-only policies. We are finding that a lot
of children are being insured again, through their parent's
coverage, which has now been extended, as you know, to the age
of 26, which has been a huge boom to a lot of families.
A number of children are also eligible for CHIP coverage
and the new high-risk plan; so there are a variety of
strategies in place to make sure that children have coverage.
And we are continuing to work closely with insurance companies
to help rethink the strategies between now and 2014. In 2014
there won't any longer be any barriers for anyone with a
preexisting condition to have coverage. The child-only
provisions kicked in, initially, this year.
Senator Enzi. So, you're saying there's no need for
changes.
Secretary Sebelius. Senator, we will continue to look at
the situation, particularly in States like Wyoming, if all the
companies have moved out. I think it's untenable for parents
not to have coverage, but I would suggest--I would hope that we
could call on the companies who have made ample profits selling
child-only policies to children who were not ill or had any
preexisting condition to reconsider their efforts to leave the
market; and a whole series of companies have, indeed, done
that.
Senator Enzi. I would hope that we could make a fix in the
law as well, so that people don't just buy their insurance on
their way to the emergency room.
Yesterday, before the House Budget Committee, your
Department's Chief Medicare Actuary, Richard Foster, testified
that the new health care law will not hold down health care
costs, and will not allow everyone to keep their current
coverage.
Specifically when asked about the claim that the law
reduces costs, Mr. Foster described it as false more so than
true. Regarding the claim that people would be allowed to keep
their current coverage, Mr. Foster described that claim as not
true in all cases.
Is Mr. Foster wrong in his analysis? What information do
you have to counter the detailed analysis he's done of the new
law?
Secretary Sebelius. Senator, I have not had a chance to
thoroughly analyze Mr. Foster's testimony. I know in the past
when he has testified about the quarter of a trillion dollars
in deficit reduction, he has speculated that if, indeed, the
law is changed somewhere in the next 10 years, and if, indeed,
Congress does not implement the law as is, then the quarter of
a trillion dollars savings would not be realized.
We are standing by the Congressional Budget Office
analysis, your Budget Office analysis, which has had a series
of numbers about not only the impact on families, and says that
costs will go down, the impact on individual business owners'
premiums, which say that costs will go down, but also the
impact on the deficit.
And the Congressional Budget Office again says that costs
will go down.
Senator Enzi. You and I know that the Congressional Budget
Office is limited by what documents we give them to make their
analysis on. The doc fix alone creates a substantial loss, but
they weren't allowed to consider that in the analysis.
Now, in your testimony you noted the new laws strengthen
the economy.
Oh, my time has expired. I will be submitting some
questions if we don't go additional rounds.
The Chairman. OK, thank you. Thank you, Senator.
Senator McCain.
Statement of Senator McCain
Senator McCain. Thank you, Mr. Chairman.
Madam Secretary, the President said on Tuesday night, that
he is in favor of repealing the 1099 Small Business tax
increase from the Health Reform Law, and also believes that
medical malpractice should be an issue that we should be
addressing; do you agree with the President?
Secretary Sebelius. Yes, sir.
Senator McCain. Would you submit, perhaps for the record,
some idea of what the parameters of medical malpractice reform
might be--suggestions that the department might have?
Secretary Sebelius. Senator, as you know, the department
has had authority for----
Senator McCain. The question is, would you submit for the
record----
Secretary Sebelius. Would I submit them? Sure.
Senator McCain. Thank you, very much, since we tried
repeatedly over a year to get something addressing this issue
in the 2,700-page health reform document, some action on what
most experts agree contributes sometimes 20, 30 percent to the
additional costs of health care.
You have granted over 700 waivers. Now, for employers and
union plans from the, ``annual benefit limit restrictions and
health reform bill,'' why not make those permanent?
Secretary Sebelius. Senator, the goal of the law in the
area of the annual limit benefit granted our department the
discretion to look at situations which would cause, not only
market disruption, but a dramatic increase in premiums; and
what we have done, on a case-by-case basis, is receive
information particularly about the so-called mini-med plans
that are employer-based coverage throughout the country, and
grant waivers where the employer indicated that there would
be----
Senator McCain. I understand----
Secretary Sebelius [continuing]. An enormous rate increase.
Senator McCain [continuing]. How it works. I'm asking why
you wouldn't want to make them permanent.
Secretary Sebelius. That isn't----
Senator McCain. I appreciate if you would make your answers
short.
Secretary Sebelius. Why wouldn't we want to make them
permanent?
Senator McCain. Yes.
Secretary Sebelius. We're taking a look at the marketplace;
they have assured us that they can gradually phase into----
Senator McCain. They have assured you.
Secretary Sebelius [continuing]. The annual limit that----
Senator McCain. They've assured you of that.
Secretary Sebelius. That's my understanding yes, sir.
Senator McCain. Thank you. As you know, the States are
having great difficulty with their budgets, and there's some
conversations about some States even having to go into some
kind of bankruptcy, etc; and there are a number of States that
have great difficulty in complying with the act, as you know.
In my home State of Arizona, we are facing a serious budget
crisis. Our governor has written you a letter asking for a
waiver. She's asking for your assistance in providing Arizona
with a waiver from the maintenance of effort requirements of
the Patient Protection and Affordable Care Act.
She goes on to say:
``I'm respectfully requesting that Arizona be allowed
to reduce its Medicaid eligibility for certain
nondisabled adults in order to preserve its underlying
Medicaid Program.''
Would you give serious consideration to the governor, and
I'm sure other governors' request that States be able to
exercise the flexibility that they need to meet their
compelling budget requirements, and probably know best in the
view of many of us, how to provide the best health care at the
least possible cost for our constituents?
Secretary Sebelius. Senator, we're working very closely
with governors across the country. I just received, yesterday,
Governor Brewer's request, which we are taking a very careful
look at; and also taking a very careful look at the law.
I can tell you that we are actively working with States
around the country, with new governors, particularly, about the
flexibility that they have; many of them aren't aware of the
wide range of flexibility that they have to have cost savings
in their Medicaid Programs; and we are actively working to
provide teams of folks to go through the potential cost savings
that other States have already implemented.
Senator McCain. I'm told that you have given a full waiver
to three States; is that correct?
Secretary Sebelius. Not of the maintenance of effort, no,
sir.
Senator McCain. I see, but you----
Secretary Sebelius. That has not ever even been raised
before.
Senator McCain. I see. Thank you.
Again, Senator Enzi raised this, but something we all knew
about CBO, garbage in, garbage out; but the person who we give
the responsibilities, Medicare's independent economic expert,
said that both assertions, that the cost will be brought down
and let people keep their current health insurance, if they
like it, he strongly disagrees.
I, of course, disagree, since there's 300,000 citizens in
my State on Medicare Advantage, and there's no doubt that their
benefits under that program will be significantly changed, if
not eliminated.
I see my time has expired.
I look forward, Madam Secretary, on this issue of medical
malpractice reform. The President told the American people
Tuesday night that he recognizes that this is an issue that
needs to be addressed.
We're going to find out whether the trial lawyers run this
place or whether the American people, and affordable health
care is reachable for them, because without medical malpractice
reform it makes that issue, if not impossible, certainly
extremely difficult; and we look forward to hearing your
proposals as to how we can implement such as has been
implemented in the State of Texas.
I thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
All right, next we'll turn to Senator Franken.
Statement of Senator Franken
Senator Franken. Thank you, Mr. Chairman. Speaking of the
State of Texas, just to pick up from Senator McCain, my
understanding is that the State of Texas order has this pretty
dramatic tort reform. Health care there is much, much more
expensive than it is in my State of Minnesota; is that correct?
Secretary Sebelius. I think that is correct, Senator.
Senator Franken. I want to address the Ranking Member who
said that there's just like a few paragraphs that people like
in the bill, and that's what we keep talking about.
That is what I heard from the Ranking Member. I think if
you go back and look at your opening statement, you'll see
that, that that's what you said was in the marketing.
One of those paragraphs I would think that people do like,
is getting rid of preexisting conditions as a reason to
discriminate against a child or a patient; right? That's pretty
popular; isn't it?
Secretary Sebelius. I think it's very popular with the
American public, yes, sir.
Senator Franken. OK, and then the Ranking Member talked
about the ability to buy a policy on the way to the emergency
room. Now, I've heard that, and what that is about is, well, if
you have a preexisting condition you don't have to buy a policy
until you get sick; that's what that characterization is; isn't
it? I mean, is that your understanding of it?
Secretary Sebelius. I think that's what the Senator is
referring to; that you could opt in and out of the market and
only purchase coverage when you were sick.
Senator Franken. So, isn't that the reason for the mandate?
So, in other words, when I hear my friends who are opposed to
this reform say, ``Well, we really like the nondiscrimination
against people with preexisting conditions, but then you can
buy a health policy on the way to the emergency room''; well,
that's why you have the mandate, isn't it?
Secretary Sebelius. The idea is to have a stable insurance
pool, and to pool risk. As a former regulator, that's important
to have folks who have coverage; and some use it and some are
not using it simultaneously. It would be like buying car
insurance after you've had the wreck.
Senator Franken. Right. So, if you think of health care
reform as a three-legged stool--tell me if you agree with this
analysis: First leg is, you can't discriminate against people
with a preexisting condition; and I hear everyone say that they
want that; the second part is that since that means that you
could buy an insurance policy on the way to the emergency room,
you need a mandate, so that everyone has insurance, so you
can't buy an insurance policy on the way to the emergency room,
everyone would have it; right?
The third part is subsidizing; people can't afford it, and
that's why we have a sliding scale up to 400 percent of
poverty; isn't that correct? Isn't that a good analysis of what
comprehensive health care reform is?
Secretary Sebelius. I think if you look at the parts of the
market that don't function very well right now--for individuals
buying coverage and for a lot of the small business owners--
that having a much larger purchasing pool, having more people
involved, eliminating the preexisting condition limitation, and
then having everybody in, is certainly the way to stabilize the
private insurance market.
As you know, that was a discussion that the insurers had;
and since this plan is built around the private insurers'
market, it adopts that strategy. You can get rid of the
preexisting condition if everyone is in the pool.
Senator Franken. Exactly. OK, so I think this is really a
discussion about a comprehensive health care reform, and not
just cherry picking certain paragraphs.
I wanted to ask you about the medical loss ratio and the
implementation of that. As you know, I fought for that, which
basically says that insurance companies that have large group
policies have to use 85 percent of the premiums that they get
on actual health care; 15 percent can go to marketing and
administration and profits, and 80 percent if it's an
individual or a small group.
Can you tell me a little bit about the implementation of
this provision?
Secretary Sebelius. Senator, the provision has just been
outlined. As you know, the Congress in the Affordable Care Act,
directed the Nation's insurance commissioners, who are elected
and appointed across the country, and who regulate the private
market, to recommend a policy to us about the medical loss
ratio provision, which you've just outlined.
They had a unanimous recommendation about what were the
categories of health costs that should be included as medical
costs, what should be outside, and how it should be
implemented. We turned around and adopted their
recommendations, and that is, really, the policy that's in
place.
This year, for 2011, data will be collected by our
department about companies meeting that ratio. At the end of
the day, companies who fail to meet the ratio will owe their
policy holders a rebate; but the rebates do not start until
2012, until data has been collected.
Senator Franken. Thank you. My time is finished.
Thank you, Mr. Chair.
The Chairman. Thank you.
Senator Bingaman.
Statement of Senator Bingaman
Senator Bingaman. Thank you very much.
Madam Secretary, thank you for being here.
Let me ask about an issue that is a little bit off the
subject of your direct testimony here, but it is a very
important part of the bill that I would like to see us move
ahead with; it relates to implementation of the workforce
provisions that are contained in title V.
A central part of the reform, as I saw it, was creation of
a new independent and nonpartisan national workforce
commission; this is something which is not under your
department directly; it's an independent commission. It's
tasked with providing Congress and the Administration with
clear information and guidance on how to align our Federal
resources to meet the health care workforce needs of the
Nation.
It's based on recommendations that the Council on Medicine
Education made, and modeled after MEPAC, which, of course,
provides us with expert guidance on Medicare payment issues; it
had strong support, I believe, bipartisan support when we
included it in the bill.
It's my understanding that the commission members were
selected by GAO; Dr. Peter Buerhaus is the chair. The
commission may provide a report as early as October 1, but the
commission cannot begin its work until it gets funding to do
its work.
The appropriations bill that came out of the Labor HHS
Subcommittee and that we tried to pass on the Senate floor,
included $3 million for operation of the commission; it's
unclear, now, what the funding status is.
I wanted to just flag this issue for you. I know, this is
not your responsibility directly, but I think it is very
important.
A very important part of health care reform, is dealing
with the problem of how to channel Federal funds most
effectively to meet our health care workforce needs.
I don't know if you are familiar with the issue. If you
have any comments you'd like to make, I'd be glad to hear
those.
Secretary Sebelius. Senator, I think that the issue of the
health care workforce is an enormous issue.
Whether or not we had passed an Affordable Care Act, it's
an issue that's been looming on the horizon, and frankly,
ignored for decades. Where are the providers that we need for
the future? What's the pipeline? How do we get there in an
expedited fashion; and what's an accurate snapshot?
The Workforce Commission--I have seen the members' names
and bios, and it's a stellar group and one that we look forward
to working with.
The Health Care Act also expanded the National Health
Service Corps, which allows, in exchange for scholarship and
loan payment, providers to serve in underserved areas, which is
a significant step forward; it increases--thanks to the
Prevention and Wellness Fund, there was a $250 million
investment, and again, additional primary care providers, which
will train about 16,000 new providers over the course of the
next 5 years.
We have, as part of the act, some nurse-led community
health centers, increasing nurse practitioners and providers.
But I think that the challenge of making sure that all
Americans have access to health care providers, and
particularly, primary care, gerontology, mental health
providers; if we're shifting to a wellness system, we need the
providers on the ground who are able to deliver that care.
That's certainly part of the effort that you all have begun
with the Affordable Care Act, and accelerated what has been a
long-standing challenge, but one that we are paying very
careful attention to; and, the President has, as a high,
personal priority, to make sure we have the workforce needed by
the American public.
Senator Bingaman. Could I just ask that you maybe have
someone on your staff look into the issue of how we can get
the----
Secretary Sebelius. Yes, sir.
Senator Bingaman [continuing]. The funding for this
commission to do its work? As I say, I think they're ready--up
and ready to go. They obviously need some staff to assist them,
and they need to pay that staff; so it's not a substantial
amount of money, but I do think it's a very important task that
we've given them.
If you could look into that, I'd sure appreciate it.
Thank you.
Secretary Sebelius. I'd be glad to.
The Chairman. Thank you, Senator.
Senator Bennet.
Statement of Senator Bennet
Senator Bennet. Thank you, Mr. Chairman, and I'd like to
thank you and the Ranking Member for holding this hearing.
Madam Secretary, thanks for coming back.
If I had to sum up the last 2 years of my town hall
meetings in Colorado on this issue, what I would say is that
people are saying: We hated the system as it existed, the
health insurance system, and we also believe deeply in your
capacity--my capacity, not yours--to make it even worse than it
is now. I think the rancor on the debate on health care didn't
do much to create a level of confidence in all this.
One of the things that I talked about was that, when people
said, ``We don't believe government can do a good job here;
look at what government has done before,'' I said, ``You have a
point.''
At the heart of this reform, in many ways, is an attempt, a
rare attempt to actually change the incentive structures so
that we can deliver higher quality at a lower cost; something
that we historically, have not done, but something we have to
do, not just for the health of our citizens, but for the
quality of the care that we've got and so that we don't
bankrupt the United States of America.
One of the things I learned during the health care debate
was that, because of the way the incentive structure worked,
one out of every five Medicare beneficiaries that went to the
hospital were re-admitted within a month for conditions that
were completely preventable.
Medicare, as a result was spending $17 billion a year on
these hospital re-admissions that could have been prevented.
It's one of the reasons why I work so hard on something
called the Community Base Care Transitions Program. This
innovative model ensures that each Medicare beneficiary, at
risk of being re-admitted, is assigned a code to make sure that
they go in and out of the hospital, nursing home, and even
their own home, and that they do the follow-up care and take
their medications.
This practice known as transitional care, has shown a
reduction of up to 50 percent in places with high re-admission
rates; and I'm very proud that this was homegrown in the State
of Colorado based on work in Mesa County and Denver.
Madam Secretary, I just wanted to ask whether you're seeing
this across the country. Are people starting to think about how
we change the delivery model to create higher quality at a
lower price; and what can we do to accelerate that work?
Secretary Sebelius. Senator, I think that's a great
question. The earlier discussion really focused on some of the
insurance market changes, but I think the underlying health
costs and the amount that is spent on things that may not lend
themselves to the health of anyone, are areas that providers
and employers and others are eager to work on.
And, in the case of this coordinated care strategy, when
someone leaves the hospital, we know it works; it's in pockets
around the country, but never really taken to scale. It's
better for patients; it's better for their families; it's
better for their health, and certainly lowers costs of
unnecessary re-admission.
So, having an opportunity to employ those best practices
across the country, deploy those tactics, that bundled care,
the medical home model, which we know is again very
successful--the kind of early intervention.
A lot of those strategies are incorporated into the
Affordable Care Act, and give direction to our agencies to
implement those across the board; and I think that will be very
good for the American public's health and for our health care
costs.
Senator Bennet. I agree, and I will say I think it's been
lost in the debate, which is why I raise it here today; and,
the providers in my State that are working on these things, and
in many ways have some of the most forward-leaning approaches
to this, are really excited about the possibilities here.
And, that really brings me to my second point, which is
that we've heard discussion on both sides today and throughout
the debate about the CBO numbers; does this really save money;
is it going to save money over time?
I think the honest answer to that question is, it depends
on how well we execute. You know, it depends on how well you
execute it. It depends on how well the States execute it, and
it's one of the reasons why I worked with Senator Hagan and
Senator Warner on a fail-safe amendment that would have said:
``Look, if we don't save the money that we are
committed to save, that we have said we would save,
that we will look at it again as a Congress and make
sure we have those savings, because we want to keep
faith to the American people who reasonably are saying:
`We're not sure what to believe; we're not sure which
side, you know, is right'.''
And since it's a projection, we don't really know.
My own view is that if we put more of these transitional
care models in, we may save even more money than we've talked
about.
So, I wonder whether you'd be willing to work with me, and
Senator Hagan, and Senator Warner, and other members of the
committee, to see whether we might be able to write a piece of
legislation that could give the American people confidence,
that when we say we're going to save the money, we mean we're
going to save the money?
Secretary Sebelius. I'd be delighted to do that.
Senator Bennet. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Bennet.
Senator Roberts.
Statement of Senator Roberts
Senator Roberts. It seems to me that you might want to ask
Richard Foster to join that group, to save a lot of talking
back and forth.
Madam Secretary, thank you for coming.
I should inform my colleagues that the Secretary and I go
back quite a ways, from a family standpoint, and also from
serving at the same time with the Distinguished Secretary when
she was Governor of Kansas. I worked for her father-in-law when
he was in the Congress, and worked with her husband, Gary, who
is now a very prominent judge, when he was a rather rowdy
student----
Secretary Sebelius. Just say he was younger.
[Laughter.]
Senator Roberts [continuing]. When he was younger at Kansas
State University, home of the ever optimistic and fighting and
losing wildcats.
Secretary Sebelius. I wore my purple for you.
Senator Roberts. Thank you.
[Laughter.]
I appreciate that. Thank you.
We have a mutual friend who has a preexisting condition
that we all know about, and--Rudy Brodesco called and indicated
that he would like to talk with you. He talked with me for
about an hour, so I transferred him over to your office, so
then you can----
Secretary Sebelius. Thank you.
Senator Roberts [continuing]. You can visit with him.
I understand that Dr. Berwick is back, that he has not
parachuted in, that he is going to be recommended by the
President, or has been recommended by the President to again be
the Head of CMS; is that correct?
Secretary Sebelius. He's been re-nominated, yes, sir.
Senator Roberts. He's been re-nominated. Good, I hope that
in the Finance Committee we can take enough time to really get
at some of the challenges that we face.
Dr. Berwick has, unfortunately, been tagged with the title
of The Chief Rationer, with all of the regulations that are
pouring out of your department.
I understand a couple of weeks ago that some boxes were
moved and he is now in charge of oversight of the regulations.
Obviously, they would have to finally be approved by you, but
historically, it was in the Secretary's Office; now it's under
Dr. Berwick; is that correct?
Secretary Sebelius. The office of?
Senator Roberts. Of CMS.
Secretary Sebelius. Yes. Yes, sir.
Senator Roberts. So, that's a recent development. I don't
know if that gives me pause or what.
But at any rate----
Secretary Sebelius. Senator, we did that to maximize, I
think, efficiencies. It was going to be an independent office;
and once we looked at overhead costs of duplicating everything,
from front office help to legal staff, it was seen----
Senator Roberts. I got it.
Secretary Sebelius [continuing]. As an expedited way to
maximize and leverage our assets.
Senator Roberts. Maximizing Dr. Berwick does give me pause.
But at any rate, let's go on to another subject.
As former Governor of Kansas I know you are very well aware
that we have 83 Critical Access Hospitals out in our State, the
most of any State, fully two-thirds of our hospitals. You also
know that the Critical Access Hospitals are not part of the 5-
year exemption from the IPAB review--that's the what,
Independent----
Secretary Sebelius. Payment Advisory Board.
Senator Roberts [continuing]. Payment Advisory Board, yes,
very independent, to say the least.
I'm not happy with that. I think we abrogated our
responsibility as individual members to set the Medicare
reimbursement rates as best we know them, but that is a battle
that we lost in the health care reform, and so we have IPAB.
But the Critical Access Hospitals, of which there are many
in Wyoming, many in Iowa, many everywhere here, are not part of
that 5-year exemption from the IPAB review.
Should the IPAB recommend reductions that take funds away
from these rural community hospitals, I can assure you Congress
will act. It's a rather Byzantine-kind of way to do it, but you
got to get 60 votes. I'm sure the House would do it. Then if
you did it, the President would veto it. Then you got to come
back and override the veto with 67 votes. In the meantime, 83
Critical Access Hospitals--Abilene is a good example--
Ellsworth--you know these folks and they know you.
So, my question is: Would you support such a recommendation
to at least include the 83 Critical Access Hospitals?
I don't know why this happened, and Max Baucus doesn't
either. Pardon me for interrupting you. But even on
reconciliation I tried an amendment that would at least make
them consistent with other hospitals.
That was during the time that, you know--all those in
favor, say aye, aye; all those opposed, say no; and there was a
resounding no. And that's the way it went.
So, you know, what do you think?
Secretary Sebelius. I share your belief that Critical
Access Hospitals are incredibly important in States across the
country; and I would just say that I'm committed to working
with you to take a look at what the gap is, and what can be
done about it, short-term.
I think it's important that those hospitals not be
jeopardized, or the care they deliver be cut off from citizens
around the country, including in Kansas.
Senator Roberts. Most of us were very pleased to hear about
the President issuing an Executive order in applying the
principles: That each agency is directed to use the best
available techniques, to quantify anticipated present and
future benefits and costs as accurately as possible.
But, as we later found out, each agency, as they put up the
yardstick to figure out the cost-benefit ratio or situation
with any regulation, there's more language; and it says--and
this is the part that I have the most concern: Also to be
considered are values that are difficult or impossible to
quantify, including equity, human dignity, fairness and
distributive impacts.
Are you anticipating you will be able to determine which
regulations, including the ones recently released from the
health care regulations that HHS would fall under this
exemption? Are you exempt; are you not exempt; are the
regulations your Department oversees exempt--where are we,
here?
Secretary Sebelius. We certainly don't consider HHS exempt
from the--directed by the President; and we've already launched
a process to examine the whole host of regulations with the
parameters that he outlined. So, no, we are definitely not
exempt from that regulatory review.
The Chairman. Thank you, Senator.
Senator Roberts. I have a list that I'd like to share with
her--not now, but I will send you a list. And I look forward to
working with you.
Thank you.
Secretary Sebelius. Thank you, sir.
The Chairman. Thank you, Senator.
Senator Reed.
Statement of Senator Reed
Senator Reed. Thank you, Madam Secretary. Thank you, Mr.
Chairman.
Recalling some of the discussions in the health care
debate, one of the issues around the elimination of preexisting
conditions exclusions in health insurance policies was the need
to have, frankly, mandatory coverage; and that, I think, was an
issue that was pushed very aggressively by the insurance
industry.
Secretary Sebelius. That's correct.
Senator Reed. In fact, their view, basically, was that if
we provide this benefit, which could be, frankly, the most
popular aspect of the health care reform, that is, if you have
the resources, you can buy insurance, regardless of your health
care condition.
It was, again, just to sort of put it in context, it was as
much the insistence of the insurance industry than it is any
sort of policy-making here in Washington, that mandatory
coverage has to be part of it now.
Secretary Sebelius. I think, Senator, it was brought to the
table by the insurance industry, by the Association of Health
Insurance Plans, and others, to guard against an adversely-
selected marketplace if only the sick are in an insurance pool
that's immediately unaffordable.
Senator Reed. So, looking at--sort of turning it around and
at the logic of this is that, this provision, which people say,
``Oh, we really like that''--I don't know if you've seen the
polling data, but I would assume it's in the 1980s or 1990s
percent; you've got to keep this--would, frankly, require that
this universal approach to coverage through private markets has
to be maintained also; is that your view?
Secretary Sebelius. To have viable, private market, you----
Senator Reed. Right.
Secretary Sebelius [continuing]. You have to have a pool of
sharing the risk, yes, sir.
Senator Reed. There has been lots of discussion about
what's popular. We'll keep what's popular, we'll eliminate
what's unpopular. Popularity is in the eye of the beholder.
But in order to have a comprehensive system where everyone
can receive coverage, can buy it through the private markets
with assistance, if necessary, then you have to have,
essentially, the framework that you've set up, the interchanges
and the requirements to participate fully.
Secretary Sebelius. It's part of a market strategy that
keeps a market solvent.
Senator Reed. One of the issues that I thought Senator Enzi
brought up is very important, is the issue of these child-only
plans.
There are some States where there is either actual
departure of companies with these policies or threatened
departures; and I'm wondering if there's anything the States
can do.
I know we passed significant reform, but you are a former
insurance commissioner. Up until the passage of this act, most
of the action of insurance health care and otherwise was at the
State level.
The other aspect of this question would be: What about the
40 States where--some, I know, don't have these child-only
policies, but have done things to ensure that children are
protected?
Secretary Sebelius. Senator, you're absolutely right.
Again, the Affordable Care Act doesn't change the fact that
States have the leadership position in this framework; so
whether it's setting up the insurance exchanges or the high-
risk pool, or regulating their marketplace, it is a State-based
strategy, and we're working closely with those State
regulators.
Many States since the passage of the Affordable Care Act--
and many of them before, had taken action to say that it will--
if you want to sell insurance in our State, you must offer
policies across the board.
A number of States have actually passed that legislation
since the Affordable Care Act and the companies threatening to
leave the marketplace feeling that that is a very
discriminatory position for insurance companies to take. So
that is, indeed, being contemplated.
As I said earlier to Senator Enzi, there also are a number
of companies who immediately said that they would likely not
stay in the market, who have reconsidered that position, and,
indeed, are very much in the market.
Senator Reed. Madam Secretary, again, thank you. I think
you've been given one of the most challenging assignments in
Washington, and you have been working tirelessly to get it
done, and I appreciate very, very much what you and your
colleagues have been doing. And I anticipate that the
challenges will continue to appear along the road.
But, thank you, so much.
Secretary Sebelius. Thank you.
The Chairman. Thank you, Senator Reed.
Senator Burr.
Statement of Senator Burr
Senator Burr. Welcome, Secretary.
Secretary Sebelius. Thank you, Senator.
Senator Burr. Madam Secretary, if I heard you correctly,
when Senator Enzi asked you a question about CMS's projections,
and specifically, they were that this would bend the cost curve
of $251 billion, and that the national health spending would
increase $311 billion, and I heard you say, I think, that you
disagreed with the analysis that came out of CMS.
Secretary Sebelius. Again, Richard Foster----
Senator Burr. Richard Foster.
Secretary Sebelius. Yes, is an independent actuary.
Senator Burr. Let me ask you, what's the Administration's
position on fixing the SGR?
Secretary Sebelius. The President has said, since elected
he would like to see a permanent fix of the SGR.
Senator Burr. You used, to make your case to Senator Enzi,
CBO. Now, CBO says in their estimates they failed to take into
account $250 billion that would be necessary to fix SGR.
So, if the President's commitment is to fix SGR, then, in
fact, that eats up all the savings you've talked about; is that
correct? All the savings that come from health care reform will
be eaten up by the addition of a fixed SGR--just by your
numbers.
Secretary Sebelius. It would cost $200, yes; I don't know
what the cost is, but----
Senator Burr. OK. The Health Care Reform bill creates a new
tax on medical devices. Would you be supportive of repealing
that tax?
Secretary Sebelius. No, sir.
Senator Burr. Let me ask you: Does that not fly in the face
of what the President said Tuesday night to Congress, and to
the country, where he talked about winning the future, and out-
innovating the rest of the world; does that not make us
uncompetitive and force innovation out of the country by taxing
innovation?
Secretary Sebelius. I think that there are taxes on a lot
of innovative products that actually don't deter the innovation
from moving forward.
I don't necessarily think that you have to remove all tax
payments. As you know----
Senator Burr. No, I'm talking about----
Secretary Sebelius [continuing]. The medical device,
equipment, initially the Congress looked at a significantly
higher tax, and in the course of discussion and input, they
decided to significantly lower that tax and to not impede
progress.
Senator Burr. But this is a new tax on medical devices that
are being used by patients, which is one of the contributing
reasons that the Chief Actuary says, health care cost is going
to go up, because we've begun to increase the cost, not just of
the delivery, if we fix SGR, but the actual cost of the
products that are in the health care system.
So, let me ask you: NIH has just talked about a new program
where NIH is going to get involved, in some degree, in drug
development; is that something you're supportive of?
Secretary Sebelius. Senator, they have been involved in
accelerating drug development.
Senator Burr. They've been involved in research, of
promising compounds and----
Secretary Sebelius. That's true.
Senator Burr [continuing]. Directions. But, I sense a
distinct difference between that and drug development, which is
something that the private sector, or academia has been engaged
in almost 100 percent.
Secretary Sebelius. Senator, I know that you come from a
State, as does Senator Hagan, who has a lot of knowledge and
expertise in drug development. I think what Dr. Collins has
identified is that there are still way too many promising ideas
that die somewhere on the vine between the microscope and the
marketplace, and is trying to mobilize Sherpa teams,
activities, any incentives that can make sure that we can
actually get the patients those break-through drug
developments; and too many of them never make it to the market.
Senator Burr. Clearly, I think that will have a cost
involved in it, but it will also have a cost on the private
sector's inability to chase those promising things if we choose
to do it as a government.
Madam Secretary, I think we can all agree that there are
many things, that if we sat down today, we could tick off in
this bill that we could all support.
We could eliminate preexisting conditions. We could make
sure that every State had a risk pool. We could agree that
children should stay on their parent's health care plan until
age 26.
Now, I lived it. I'm a Federal employee. I'm a participant
in the largest employer in the country. My kids were kicked off
of my insurance at 22.
I guess I would ask you, for those members that were here
until this plan was passed, that are critical of the private
sector having their insurance that limited children's inclusion
to 22 or 23 or 24, but not 26, are they hypocritical in
questioning that, when they had the opportunity to change the
OPM guidelines and change the largest employer in the country
to age 26 before this massive health care reform plan was
passed?
Secretary Sebelius. Senator, I don't think it was
hypercritical. I think it's an unfortunate oversight, and we
found that the contracts precluded us from changing as rapidly
as some of the private market plans could change; but that
change will be made, and Federal employees across the country,
including Members of Congress, can look forward to keeping
their children on their plan.
Senator Burr. In conclusion, Mr. Chairman, we have over a
thousand employers who have applied for a waiver. Fifty-seven
hundred-plus have been approved; 50-plus have been denied. In
addition to that, CMS estimates that in the grandfather
regulation, it's estimated, your own estimates, 80 percent of
small business could lose their grandfather status.
I'm not sure what happened to, if you like it you get to
keep it. But you said, ``Americans will have more control over
their health care.''
My conclusion, after reading the plan numerous times, what
we've done is, the Federal Government has more control over
health care, not the American people.
I thank the Chair.
The Chairman. I thank the Senator.
Senator Isakson is gone.
Senator Sanders.
Statement of Senator Sanders
Senator Sanders. Thank you very much, Mr. Chairman.
Madam Secretary, thank you for being here; thank you for
the excellent work that you've been doing under very difficult
circumstances.
Just two lines of thought that I want to pursue: In the
Health Care Reform bill, some of us, including Senator Harkin
and many other people on this committee, worked very hard to
expand community health centers, because we believed that one
of the great crises in this country, and one of the reasons
that 45,000 Americans die every single year, is they don't have
access to health care; and, in fact, some of those people even
have health insurance.
So, we saw a crisis in primary health care. As a result of
this legislation, we doubled the number of community health
centers, opening up an opportunity for 20 million more
Americans to get good quality health care, dental care, mental
health counseling and low-cost prescription drugs.
Can you give us, maybe an update as to how progress is
coming along in terms of the community health center program?
Secretary Sebelius. Certainly, Senator, and again, I
applaud your leadership on this issue. It's an incredibly
important framework for health care improvements across the
country; and I try to visit health centers every trip I make,
and they are impressive neighborhood community organizations,
delivering high-quality, lower cost care to millions of
Americans.
We are working very quickly to implement the strategy
that's laid out over the next 5 years. The first step was to
put money in the pipeline for important improvements and
additional services, additional dental care and mental health
care.
We're putting out the new access point, grant proposals
that will be released this year and over the next several
years. Also an important feature of the community planning
proposals is going out the door in 2011; so those communities
which haven't quite gotten the wherewithal to actually make the
full-blown proposal will have an opportunity to bring together
providers and community groups.
But, certainly that footprint of community health centers
expanding across the country, and new sites; so it will be both
new access sites and mobile sites connected to existing health
centers, whether that be in schools or vans or other----
Senator Sanders. I should tell you, Madam Secretary, that
in Vermont we're making real, real success; and if you're
really nice to us in the next couple of years, and you grant a
few more requests, every part of the State of Vermont, every
county, every area in the State of Vermont will enable its
people to have access to community health centers, which we
think is a real step forward.
Would you be in agreement with a study, coming out of
George Washington University, which says that the investment
that we made, in fact, is going to save substantially more
money than we spend, because we're going to keep people out of
emergency rooms; we're going to let them get to a doctor when
they should; not get very sick and end up in a hospital at
great cost.
Secretary Sebelius. I haven't seen the study, but I
certainly have seen that practice in place. In fact, some of
the most creative and, I think, beneficial work going on around
the country is health care--community health centers working in
collaboration, with community hospitals----
Senator Sanders. Right.
Secretary Sebelius [continuing]. Appropriately, sort of
reassigning folks to care----
Senator Sanders. Other than utilizing----
Secretary Sebelius [continuing]. That is preventive care.
Senator Sanders [continuing]. An emergency room.
Secretary Sebelius. You bet, you bet.
Senator Sanders. All right, let me switch gear, and pick up
on a point that Senator McCain made a moment ago; and I'm sorry
he's not here. As you may know, the State of Vermont is giving
serious thought to moving forward toward a Medicare-for-all-
single-payer program. Our approach and our request for a waiver
may be a little bit different than Arizona's. We do not want to
throw people off of health insurance; we want to make sure that
every person in our State is covered.
We believe that that approach--and there was a study that
just came out by Dr. Hsiao, who you may know is an economist at
Harvard, who developed the health care program in Taiwan.
We believe that we can save many, many hundreds of millions
of dollars through a Medicare-for-all-single-payer program. I
know that we have to work on that waiver legislatively; that's
not something that you can give us on your own.
But, would you be prepared to work with us, as we walk down
that road, saying that in a federalist nation--we have 50
different States--that maybe the Nation can learn from what
Vermont or other States are doing with increased flexibility?
Secretary Sebelius. Senator, I was appreciative of the
meeting that you attended with your newly elected governor, and
applaud the work that Vermont has done.
States across the country often have been well ahead of the
Federal Government in terms of creative health strategies, to
expand coverage to citizens, and we very much encourage the
kind of flexibility, the State-based approaches which this bill
is built around; and I look forward to working with you.
Senator Sanders. All right. Our goal there is to maintain
the high standards of the national legislation, but to give
States flexibility to show how, in their particular areas, they
may be able to do it better at a more cost-effective way; so
we'd appreciate working with you.
Secretary Sebelius. Sure.
Senator Sanders. With that, Mr. Chairman, I thank you, very
much.
The Chairman. Thanks, Senator.
Senator Hagan.
Statement of Senator Hagan
Senator Hagan. Thank you, Mr. Chairman.
Madam Secretary, I, too, want to thank you for all the hard
work you've put in to date, and for being here today.
But I also am pleased with the partnership that the
Department of Health and Human Services is forming in North
Carolina, especially with our State insurance commissioner, as
they are moving forward to establishing the exchange.
I also wanted to talk for just a minute about having the
young adults on the parent's policies until they're age 26.
The State of North Carolina actually has done that for
years for State employees, if the students were still in
school. I know that when I switched and became a Federal
employee that my children had to find health insurance.
I have one son and one daughter; and it was incredibly more
expensive for the young woman to buy health insurance than it
was for the man.
So, I'm very pleased that when you think of two young
people going out into the workforce, getting the same pay, the
young woman was drastically affected, in a different way, month
to month, because of her higher increase in just purchasing
health insurance. So, I'm pleased that that has been changed.
In your testimony you mentioned that the new benefit
impacting hundreds of thousands of families from across the
country, allowing these young children to remain on their
parent's insurance until age 26; and we do have about 37,000 of
them that continue to be insured under their parent's health
plans.
I know that in the next panel we'll be hearing about the
impact of this new benefit; but, I understand that it is so
popular that Congress extended that benefit to military
families last year.
And, with that, I'm wondering if you could elaborate on the
impact of this benefit; and how many adult children do you know
that might be participating across the country; and could you
provide some thoughts on what would happen if this benefit
happened to be repealed?
Secretary Sebelius. Senator, I think the situation you
describe in North Carolina was in place in, again, a number of
States, but often was tied to school, full-time school.
So if kids aged out of their policy at 22 and were not in
school, they, again, lost their coverage. So this is impacting
lots of families at lots of different ages, in a very
beneficial way; and, again, I think, is a great illustration of
putting back together a larger pool of folks and bringing them
back into the marketplace, because the number of young
Americans was the second-highest category of uninsured
Americans.
The highest was those 55 to 64 who often were really priced
out of the market; but young Americans were the second-highest
category of uninsured in this country. So, this family
strategy, I think, goes a long way.
I can't give you exact numbers today. We'd be happy to try
and collect those for you--but, I think clearly, this is
impacting millions of young adults around the country in a very
positive way, and allows those young adults to think about
being an entrepreneur, or start their own business, or
strategies that, again, were impeding their ability to really
launch into a professional career if it did not come attached
with health insurance.
And, like you, Senator, I had two 20-somethings who lost
their coverage once they got out of school. We were lucky,
because both my boys were healthy, but they had friends who
were not so lucky and not so healthy, who had a terrible time
finding and purchasing health insurance.
Senator Hagan. On a whole, young adults are typically very
healthy individuals. So, really, that's helped from an
actuarial standpoint to have more of those on policies.
But also in your testimony, you mentioned the preexisting
condition insurance plans. The Inclusive Health is running the
North Carolina plan, and has currently right now, over about
800 participants to date, which I understand is one of the
highest in the country; however, I know that one of their
challenges has been raising the awareness and getting those who
are uninsured enrolled.
My question is: Could you talk about some of the challenges
that States are having in getting people enrolled, and some of
the other efforts that they are making to raise awareness among
the uninsured population; and does HHS offer guidance to States
on ways to increase this awareness?
Secretary Sebelius. Great question, Senator. I think one of
the challenges is, as you say, that a lot of people weren't
aware that these even existed; so we are certainly trying to
help amplify that message, that in every State in the country
there is now a new option for adults who still are locked out
of the market with a preexisting health condition and we'll
continue to do that.
We've also done a lot, in conjunction with States, of
outreach to disease groups, to faith-based communities, to
community leaders, to again, make them aware that these are
new.
In many States the benefits just became available late this
fall, so we're talking about the early couple of startup
months, but, we don't miss an opportunity to remind people that
this is one of the benefits of the new Affordable Care Act that
did not exist before, and actually, because the rates are
pegged to market rates, can be a much more affordable option
for those who have been uninsured for the last 6 months.
Senator Hagan. I will say, in North Carolina we had put
that in place earlier, although it is still like a pretty
expensive policy.
Secretary Sebelius. Right, right.
Senator Hagan. Thank you, Madam Secretary.
Secretary Sebelius. Yes.
The Chairman. Thank you, Senator.
Senator Murray.
Statement of Senator Murray
Senator Murray. Thank you, very much, Mr. Chairman for
having this hearing.
Madam Secretary, thank you for the tremendous job you and
all the folks at HHS are doing, implementing this law and
helping families get access, as we had envisioned.
I know you have another panel, so I'm just going to ask one
question and go back to your testimony.
You talked about the new resources that the Affordable Care
Act is now providing to States to help prevent unreasonable
premium increases, and you mentioned that grants have already
started going out to our States to help strengthen their
ability to review and reject unreasonable rate hikes.
Can you talk a little bit about how this will make the
process of premium increases more transparent for all health
care consumers?
Secretary Sebelius. Certainly, Senator. This is another
area where the bill that you all helped to put in place
contemplates that States are the leaders in the health
insurance market, and States are the regulators of their own
health insurance market, but also recognizes that often those
resources are not adequate to do a robust job of rate review;
particularly in tough budget times a lot of States have cut
back.
So, there are additional resources available and taken
advantage of, I think, by virtually every State in the country
to increase and enhance the oversight provided by those State
regulators.
What we are doing right now with healthcare.gov is
publicizing rates. For the first time, consumers can go on a
Web site and get an overview of what rates are being charged by
what plans in their particular jurisdiction; but two other
important pieces of information: How many people are denied at
that rate, what percentage are not offered a policy at that
rate, and how many times the rate deviates from that. So, that,
again, is available and updated on a regular basis.
Insurance commissioners are also committed to now, on Web
sites, and their plans making the rate-review process far more
transparent; asking for underlying actuarial information from
companies, holding hearings, having available to the public
what has often been a very opaque, very misunderstood system--
much more transparency, much more openness, much more
oversight.
And, the combination of consumers being able to pick and
choose, finally, line up plans side by side and choose what's
best for them, and a much more rigorous review, has already
yielded results where excessive rates have been turned down and
new rates have been submitted that are far less impactful on
the consumers with those policies.
Senator Murray. I applaud you on that, because we always
hear about how competition is what drives the cost down.
Without transparency, it's pretty hard to know how you can
impact healthcare costs. But, I think this open, transparent
way that people can now view insurance policies is what we
envisioned helping to bring those costs down.
So, I really appreciate your work on that.
Secretary Sebelius. One could argue that you could get more
information on the toaster you bought than the health insurance
plan for yourselves and your families; and we're trying to work
very closely with our partners at the State level and give a
very transparent, very open system.
Just lining the prices up side by side really does begin to
change strategies of companies. They don't want to be the top
price in the marketplace. So, that, in and of itself, has been
very helpful.
Senator Murray. Great. Thank you, very much.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
Madam Secretary, thank you very much for your appearance
here, and for your answering questions in great order.
As I said we'll leave the record open for 10 days; some
Senators may want to submit some questions in writing.
But, again, I want to personally also thank you for your
great leadership in all areas of health care and human
services, but especially in the area of implementation of the
Affordable Care Act.
Secretary Sebelius. Thank you, Mr. Chairman. I look forward
to working with you and the committee.
The Chairman. Thank you, Madam Secretary.
Next, we'll call our second panel.
I thank this panel for being here; I know that some of you
came a great distance, and I appreciate your patience in
sitting through the testimony; I hope that it was informative
for you as it was for us up here.
On our second panel, from left to right we have Ms. Lisa
Grasshoff; she works for the Paragon Hemophilia Solutions in
Houston, TX, a home-health company focusing on those with
bleeding disorders. Ms. Grasshoff 's experience with bleeding
disorders is personal, as her son, Joshua, suffers from two of
these diseases, Hemophilia-A and Type III von Willebrand
Disease. She's accompanied today by another member of the
bleeding disorder community, Ms. Tammy Davenport; is that
correct?
Thank you for being here and for sharing your stories.
Emily Schlichting, a junior at the University of Nebraska,
our neighbor to the west, majoring in political science and
communications. Ms. Schlichting suffers from a chronic
autoimmune disease called Behcet's Syndrome. She knows
firsthand the anxiety of obtaining health insurance while
suffering from a dangerous disease.
We thank you for being here, and we look forward to hearing
your story.
I will yield to Senator Reed for the purpose of introducing
Commissioner Koller.
Senator Reed. Thank you very much, Mr. Chairman. I'm just
delighted to be able to welcome Chris Koller to the panel. He
is officially, the first Health Insurance Commissioner for the
State of Rhode Island.
He was appointed by a Republican governor; reappointed by
an independent governor, and unusually supported by the
Democratic Delegation of Rhode Island. So, he's managed to
bring everybody to the table.
Before Chris became the first Health Care Insurance
Commissioner, he was instrumental in setting up the
Neighborhood Health Plan of Rhode Island, which is a safety net
insurance plan, which not only is effective in providing care,
but it's also recognized as providing excellent care; it's the
bulwark of our Medicaid Program in the State of Rhode Island.
So, he comes to this task with extraordinary skill.
He's a graduate of Dartmouth College, and holds a Master's
Degree in Management and Religion from Yale University, and in
a given day, he needs both theology and management to get
things done.
I just say personally, I've had the privilege of knowing
Chris, and being a friend. There's no one with more
intelligence, integrity and dedication--and selfless dedication
than Chris Koller. So I'm just honored that I could introduce
him, Mr. Chairman.
The Chairman. Thank you very much, Senator Reed. I'm also
aware of the travails that you went through to get here. I was
following your travels yesterday, and my staff kept advising
me, because of the weather, you were unable to take your
flight; and as I understand, it took you 10 hours on the train
to get here; so we really appreciate your diligence and effort
to be here.
Last, we have Mr. Olivo?
Mr. Olivo. Olivo.
The Chairman. Our final witness is Mr. Joe Olivo. Mr. Olivo
is the president and co-owner of a burgeoning printing
business, Perfect Printing.
Mr. Olivo co-owns the company along with his wife, mother
and two brothers in New Jersey. He has grown his business from
10 employees to 45 employees.
Boy, I wish we could do that all over the country.
Thank you very much for coming, Mr. Olivo.
So, again, as you know, we'll take all your testimonies as
they are written in order, and they will be submitted to the
record in their entirety.
I'd just like to ask, as we go through, if each of you will
just sum up in a few minutes--I don't have a distinct cutoff
time, but, 5 minutes or so, what it is that you want us to
know.
I know I always say this to, a lot of times to witnesses
who have come a long distance and all of a sudden, Senators
have disappeared. I assure you that their staffs are here. I
can assure you of that. And, I can say this, there's an old
saying around here that Senators are a constitutional
impediment to the smooth functioning of staff.
[Laughter.]
So, our staffs do a lot of the work, so I want to assure
you that your testimony and your being here is being well-noted
and supported.
We'll start with Ms. Grasshoff. Welcome, and, please
proceed.
STATEMENT OF LISA GRASSHOFF, HOUSTON, TX
Ms. Grasshoff. Thank you. Good afternoon, Mr. Chairman,
Senator Enzi and fellow Senate committee members.
Thank you for inviting me to share my story about the
positive impact the Affordable Care Act has had on my family.
It is both an honor and a privilege to have the opportunity to
address this committee and have my voice heard.
Again, my name is Lisa Grasshoff and I live in Houston, TX,
with my husband, Danny and our 20-year-old son. Danny and I
have been married for 36 years and after 17 years of marriage,
we were blessed with the birth of our only child, Joshua.
Surrounded by many family and friends, Joshua was born 5 weeks
pre-mature, and immediately I noticed that my baby was bruised
above his eye and had numerous bruises on his body, which
didn't make any sense because he was born by C-Section.
After extensive testing, Joshua was diagnosed with moderate
Hemophilia A, or Factor VIII deficiency, which is an inherited
genetic blood-clotting disorder.
Just to tell you a little bit about Joshua: He's an only
child and the only grandchild on both sides of our family; and
he's not spoiled, of course.
So, you know, obviously he became the focus of our world;
and, therefore Hemophilia bleeding disorders was often a topic
of conversation. We began trying to put the pieces together to
figure out how and why did this happen, because we had no
family history that we were aware of.
Thus, began my journey--my 20-year journey into the
bleeding disorders community, which is where it all began.
Hemophilia is a very rare and chronic bleeding disorder
that affects about 20,000 people in the United States, most of
which are male. People with bleeding disorders require life-
long treatment with high-cost clotting factor therapies, which
replace the missing or deficient blood protein that allows our
blood to clot.
Proper treatment, which must be administered intravenously,
can prevent debilitating injury and life-threatening internal
bleeding episodes. A lot of these episodes can occur
spontaneously without trauma.
Factor replacement therapy is very expensive, in excess of
$300,000 annually just to sustain the normal clotting process
that most people take for granted; and that is without any
hospitalization or any trauma-induced injury whatsoever. And
$300,000 a year is unbelievable.
Our community population is relatively small, and
therefore, there's a limited number of pharmaceutical companies
that produce factor. Our costs will never decrease for factor;
and we pay for it per unit. Our cost will only increase.
Currently, an infusion for my son, Joshua, runs about
$8,000 to the insurance company. That's a lot of money. There's
not even a remote possibility that a generic medication will
ever become available, like becomes available for so many other
meds.
In order for everyone to truly understand why I'm here
today, it's important that you really understand my family's
story for the last 20 years, and how important the Affordable
Care Act is for my family, as well as the bleeding disorders
community in general.
In March 1994, at the age of three, Joshua suffered a life-
threatening abdominal bleed. It came on again, spontaneously.
He had 17 bleeding ulcers in his stomach for no reason. The
doctors at the Houston Medical Center had never seen that
before.
He required a 7-week hospital stay, two surgeries, numerous
blood infusion, blood transfusions, massive doses of factor
replacement, to stop the bleeding. During that time he
literally coded three times; and by, coded, I mean he died and
they had to bring him back to life. That was one of the worst
times of my family and friends' life. It was very, very
frightening.
Aside from that, our hospital bill was in excess of
$800,000. And I had a $1 million policy. However, the
medication expense didn't stop when we left the hospital.
Because they could not explain why he had the abdominal bleed,
we had to continue treating him prophilactically to hopefully
prevent future bleeds. Therefore, he had to receive factor
replacement on a daily basis for the next 4 years, every day of
his life, and, every other day until he was 10 years old.
Currently, today Joshua treats prophlactically three times
a week. So, again, we still have the costs. And this, again,
was in 1994.
Unfortunately, Joshua continued to bleed spontaneously,
whether it was his mouth or whatever, and we couldn't seem to
get the bleeding under control, so we underwent further family
genetic testing in 1995, and that's when he received a second
diagnosis of Type III von Willebrand Disease, which, again, he
is missing the complete von Willebrand protein.
The von Willebrand protein works in conjunction with the
factor VIII protein to form a clot. Joshua has no von
Willebrand protein and 4 percent factor VIII protein, which is
considered moderate Hemophilia. And, they have to work
together; and without having one factor, the other one doesn't
work.
But, also at the same time, my husband and I received the
diagnosis of mild von Willebrand Disease. We had no idea that
we had von Willebrand Disease. It was quite a shock--quite a
shock, because we had never had any symptoms of having that
disease.
When Joshua was 16 he had a spontaneous head bleed the day
before Thanksgiving. It's another day in my life that I'll
never forget. It started with a really bad headache that we
thought were migraines, because he also suffered from migraine
headaches.
Long story short, I took him to the ER almost immediately,
and they did a CT Scan, and he was having a brain hemorrhage.
He was air lifted to the medical center, because I had taken
him to an outlying Houston hospital; and from that point
forward his life has changed.
Since that time he has had three more brain hemorrhages,
and the reason he continues to take factor three times a week
currently is to prevent the head bleeds, hopefully prevent the
head bleeds; and fortunately, we have done that.
Now, that affected his life in school, because he missed so
much school.
The treatment for von Willebrand Disease is different than
Hemophilia. It requires a different type of factor; and by the
time that Josh was 7 years old in 1998, we had maxed out three
insurance policies that had a million dollar cap, because the
medication is so very expensive.
But to sustain our son's life, what do you--you know,
that's a no-brainer. You do what you have to do.
And, during that period, when I maxed out my policy,
fortunately, at that time in 1991 you could afford to have two
health insurance policies because the premiums were so low; so
therefore, Joshua switched over to his father's policy. We
maxed that policy out.
My husband had to change jobs because of the insurance;
took a lower-paying job. We maxed out that policy. Again, he
had to take a lower-paying job, as I did as well.
And, you know, we work for health insurance, that's what we
work for. And because my husband has had to change jobs so
often, and we know how that looks on a resume, and the fact
that he's 57 years old, and he is currently unemployed--he was
laid off in June 2009. He is working a couple of part-time jobs
now, but he has not been able to find full-time employment;
and, you know, it's hard.
The preexisting condition, the elimination of the
preexisting condition is totally awesome for us. I mean, it
will make a world of difference.
The Affordable Care Act prohibits insurance companies from
limiting how much they will pay for Joshua's lifetime, and will
phase out annual caps over the next few years. And the fact
that he can stay on our plan until he is 26 is phenomenal. That
should give him enough time to become financially independent
and get his college education, and find his passion in life.
But, more importantly, my husband and I now have peace of
mind knowing that Joshua will continue to have coverage because
of his bleeding disorder. Having access to affordable health
care and quality medical care, will help him lead a full and
active life.
His future is much brighter today than before the enactment
of the Affordable Care Act; and for that I am very grateful. He
now has the opportunity to reach his economical potential
without health insurance rules dictating his choice of
profession. His hopes and dreams are now without restriction.
Thank you very much for inviting me and listening to my
story.
[The prepared statement of Ms. Grasshoff follows:]
Prepared Statement of Lisa Grasshoff
summary
My name is Lisa Grasshoff and my husband and I have a wonderful
son, Joshua, who has moderate Hemophilia A, or Factor VIII deficiency,
an inherited genetic blood clotting disorder.
After Joshua was diagnosed with Hemophilia A as a baby, I began
learning everything I could about blood disorders and how to treat
Joshua's particular condition. Joshua's disorder requires life-long
treatment with high-cost clotting factor therapies. Factor replacement
therapy is very expensive; in excess of $300,000 annually. Plus, there
are a limited number of pharmaceutical companies producing factor, so
we are not able to purchase a generic drug.
When Joshua was 3, he suffered a life-threatening abdominal bleed
that required a 7-week hospital stay, complete with numerous surgeries,
blood transfusions and factor therapies. Our hospital bill was in
excess of $800,000. But the expenses did not stop there, as Joshua
still needs treatments several times a week.
Not long after, Joshua was diagnosed with type III von Willebrand
disease, which means he is also deficient in the von Willebrand protein
needed to form a clot. This disease requires additional treatments.
Both of Joshua's conditions forced him to max out on three insurance
policies, each with a $1,000,000 lifetime cap, at age 7. My husband,
Danny, had no choice but to change jobs, reducing our income by 40
percent, just to obtain health insurance for our family. Since Danny
was laid off due to budget cuts, we now receive our insurance through
my employer.
Thanks to the Affordable Care Act, our insurance company is
prohibited from limiting how much care they will pay for during
Joshua's lifetime, and annual caps are phased out over the next few
years. The new law also allows Joshua to stay on our plan until he is
old enough to become financially independent. More importantly, though,
Danny and I now have peace of mind knowing that Joshua will not be
denied coverage because of his bleeding disorder. Having access to
affordable insurance coverage, and quality medical care will help him
lead a full and active life. The future for Joshua is much brighter
today thanks to the enactment of the Affordable Care Act, and for that
I am very grateful.
______
Good afternoon, Mr. Chairman and fellow Senate Committee members.
Thank you for inviting me to share my story about the positive
impact the Affordable Care Act has had on my family. It is both an
honor and a privilege to have the opportunity to address this committee
and have my voice heard.
My name is Lisa Grasshoff and I live in Houston, TX with my
husband, Danny, and our 20-year-old son. Danny and I have been married
for 36 years and after 17 years of marriage, we were blessed with the
birth of our only child, Joshua. Surrounded by family and friends,
Joshua was born 5 weeks pre-mature. Immediately, I noticed that my baby
was bruised above his eye and had several other bruises on his body,
which did not make sense because he was delivered by C-section. After
extensive testing, Joshua was diagnosed with moderate Hemophilia A, or
Factor VIII deficiency, which is an inherited genetic blood clotting
disorder.
Joshua is an only child and the only grandchild on both sides of
our family. So of course, he became the focus for all of us and
Hemophilia was often discussed. We began trying to put the pieces of
the puzzle together; we just wanted answers . . . why and how did this
happen? Many other questions came to mind and thus, began my 20-year
journey in the bleeding disorders community.
Hemophilia is a rare and chronic bleeding disorder affecting about
20,000 people in the United States, most of who are male. People with
bleeding disorders require life-long treatment with high-cost clotting
factor therapies, which replace the missing or deficient blood proteins
that allow blood to clot. Proper treatment, which must be administered
intravenously, can prevent debilitating injury and life-threatening
internal bleeding episodes.
Factor replacement therapy is very expensive; in excess of $300,000
annually just to sustain the normal clotting process that most people
take for granted. Our community population is small; therefore, there
are a limited number of pharmaceutical companies producing factor. Our
costs will never decrease, only increase. A generic medication is not
even a remote possibility for factor, as it is for many other drugs.
In March 1994, at the age of 3, Joshua suffered a life-threatening
abdominal bleed that required a 7-week hospital stay. He required two
surgeries, numerous blood transfusions, and massive doses of factor
replacement to stop the bleeding in his stomach. His hospital bill was
in excess of $800,000. However, the medication expense did not stop
there . . . he required factor replacement daily for the next 4 years
and every other day until he was 10 years old. Today Joshua treats
three times a week to prevent bleeds.
Upon further family genetic testing in 1995, Joshua received a
second diagnosis--type III von Willebrand disease which means he is not
only deficient in factor VIII, but he does not have the von Willebrand
protein needed to form a clot. Both blood proteins must work together
in order for the clotting process to be complete. Danny and I received
the diagnosis of mild von Willebrand disease at this time as well.
Treatment for von Willebrand disease requires a different type of
factor than hemophilia. Our choices are very limited, factor
replacement is more expensive, and this placed more pressure on our
need for the elimination of annual and lifetime caps. By 1998, Joshua
maxed out three insurance policies with each having a $1,000,000
lifetime cap. In order to obtain health insurance coverage for our
family, Danny had no choice, but to change jobs making less money;
therefore, reducing our income by 40 percent, yet our bills remained
the same. On that same note, due to budget cuts at his company, he was
laid off in June 2009, and to date is still not employed full-time.
However, I have health insurance through my employer and we do not have
to worry about maxing out another policy nor will we have to be
concerned about a preexisting clause when Danny does find full-time
employment.
The Affordable Care Act prohibits insurance companies from limiting
how much they will pay for during Joshua's lifetime, and will phase out
annual caps over the next few years. The new law also allows Joshua to
stay on our plan until he is 26 and old enough to become financially
independent. More importantly, though, Danny and I now have peace of
mind knowing that Joshua will not be denied coverage because of his
bleeding disorder. Having access to affordable insurance coverage, and
quality medical care, will help him lead a full and active life.
The future for Joshua is much brighter today than before the
enactment of the Affordable Care Act and for that I am very grateful.
He has the opportunity to reach his economic potential without health
insurance rules dictating his choice of profession. His hopes and
dreams are now without restriction.
Thank you for your time. I will be happy to answer any questions.
The Chairman. Thank you very much, Ms. Grasshoff, for
coming this great distance, and for sharing your story. I think
it's a very poignant one, and right to the point of what we're
talking about.
Ms. Grasshoff. Thank you.
The Chairman. Ms. Schlichting, my neighbor from the West,
welcome, and please tell us your story.
STATEMENT OF EMILY SCHLICHTING, OMAHA, NE
Ms. Schlichting. Good morning, everyone.
My name is Emily Schlichting. I'm 21 years old and I live
in Lincoln, NE, and I'm a junior at the University of Nebraska.
I'm here today because my life has drastically changed for the
better thanks to the Affordable Care Act. I'd like to share
with you just how that reform has affected my life.
I'll start, I guess, at the beginning, so that would be a
good place.
The summer before my senior year of high school, when I was
17, I began experiencing a lot of really odd symptoms, which my
doctors couldn't pinpoint.
My symptoms started as open ulcers that would get painfully
and dangerously infected. It intensified in the next coming
years to include high-grade fevers, swollen joints. I'd get
these large, calcified lumps on my legs called Erythema
nodosum, which hurt a lot; and just a lot of other symptoms
that never really fit together.
After about 2 years of visiting multiple specialists,
receiving MRIs and CT Scans, topped off by a week-long stay in
the hospital my freshman year of college, I was finally
diagnosed with Behcet's Syndrome, which is a rare autoimmune
condition. It's similar to vasculitis.
As you can imagine, that's kind of a lot to have dropped on
your head, having barely moved out of your parent's house at
the age of 18.
But, despite going through all of that, I consider myself
extremely lucky because my parents have amazing health
insurance. And my condition, because of that insurance, was
completely covered when I got sick.
I think something that really needs to be stressed here is
that being sick is hard enough in and of itself. You know, like
I was 18 years old, and all of a sudden I had swollen joints
like an 80-year-old man. I was taking medicine that made \2/3\
of my hair fall out, and I couldn't go out on the weekends,
because it hurt to get out of bed and walk to, like a party or
over to a friend's house.
So I didn't have to worry about where my care was coming
from while I was dealing with all that other stuff because of
my parent's insurance.
However, when I did start to get my body under control, it
became very clear to me that just because I had good health
care under my parent's plan, didn't mean that I wasn't going to
need to worry about where my care was coming from because I was
soon to be off that plan.
When you're chronically ill, young, and your health care is
tied directly to your employment, your job prospects become a
lot more limited than you might imagine. Suddenly, taking a few
years off to work at a nonprofit before I go to graduate or law
school was no longer an option because a lot of those jobs
don't offer great comprehensive insurance plans.
Beyond that, I could never drop off of an insurance plan
because if I did, given the condition that I've been diagnosed
with, it would have been almost impossible for me to get back
on a plan.
Paying for my own health care would pretty much bankrupt
me. I see, regularly, two rheumatologists, an ophthalmologist,
a dermatologist, an internist and a couple other specialists
for my condition because it's very rare and there's no one
doctor that specializes in it.
Add to that medicine and preventive tests that I have to
get all the time, whether it's a blood test for the kidney
transplant medicine that I take every morning or just general
checkups, it's really expensive.
And that's when things are going well.
So, the passage of the Affordable Care Act has made all of
those issues go away for me. The dependent coverage clause has
been a--it's a godsend. I mean, I can stay on my mother's
insurance until I'm 26, which, hopefully I won't have to, and
I'll be on my own feet and providing myself with insurance. But
having that security, I mean, I don't think there are words to
describe how important that is.
But, it gives me buffer time to figure out what career I
want to pursue, and to work for a couple years to gain
experience in that field before I go back to graduate or law
school. Having the time to gain that experience is invaluable
to me.
One of the things that struck me the most is how unfair it
felt that I was being pushed into grad school to stay on an
insurance plan, or, you know, forced to pay a really high COBRA
fee, or forced to go uncovered and then not ever have insurance
because of something that I couldn't control happening to me.
I believe that allowing young people to stay on their
parent's insurance gives us a new freedom to work toward our
goals without being uncovered. But, even more important than
that is the fact that the Patient's Bill of Rights makes it so
that I can't be denied coverage for a disease that I can't
control having.
I can't put into words for you how scary it is to think
about being 25 and bankrupt and sick. So, I'll just let you
take my word for it, that it's absolutely terrifying.
I can tell you over and over how much health reform has
positively affected my life, but I'm not the only young
American that has been affected by this law. I'm one of
millions and millions of young Americans who have been helped
by this bill, whether through the dependent coverage clause or
the Patient's Bill of Rights or a combination of both, like me.
I think a lot of the issue is that health care is something
that's really easy not to think about when you're young and
you're healthy. But eventually, we all get old, and most of us
get sick. And when that happens, health care matters more than
anything else; and I can testify to that because I've lived it.
Most people my age don't think about health on a daily
basis, and to be honest, I'm kind of jealous of them that they
don't have to. But, that also means that my generation doesn't
fully appreciate just how much this bill works for them.
We are one of the first generations that's given access to
free lifetime preventive treatments and care that will prevent
life-threatening illnesses before they start. I think that
Senator Hagan made a great point. You know, we need to make
sure that young Americans know these things are out there, and
that's why it is so important that you're holding hearings like
this, and that groups like Campus Progress and Young
Invincibles, who I've worked with, are getting the word out,
because in order for us to win the future, as President Obama
so artfully said on Tuesday, we need to have a generation of
Americans who are healthy enough to do so.
This legislation makes that a reality.
And for those reasons I'm personally, and as a member of
this country, extremely grateful that it was passed.
Thank you.
[The prepared statement of Ms. Schlichting follows:]
Prepared Statement of Emily Schlichting
summary
At 19, after 2 years of unexplained symptoms, she was diagnosed
with a chronic, autoimmune disease called Behcet's Syndrome. The
disease affects the veins and can cause rheumatoid arthritis, as well
as episodic flare-ups that cause open sores in the mouth, eyes, nose
and throughout the body. Although Emily was covered due to her parent's
insurance, it soon became apparent that health insurance would be a
dominant issue in her life. The last few years have found Emily
reconsidering what she can and will do with her life, a decision that's
been influenced by her need to maintain health insurance. The political
science and communications major at University of Nebraska has public
service and non-profit ambitions, but knows the challenges posed by
those jobs, which tend to not offer the best benefits. For Emily, being
uncovered is not an option, so her choice was to go stay in school as
long as she could to stay on her parent's insurance or try to find a
job to start immediately after graduation. Now, thanks for the
Affordable Care Act, Emily can stay on her parent's insurance until
she's 26 and can seek the non-profit work she thinks will best serve
her career aspirations.
______
Good morning, everyone. My name is Emily Schlichting. I'm 21 years
old and live in Lincoln, NE. I am here today because my life has
drastically changed for the better thanks to the Affordable Care Act. I
would like to share with you just how health care reform has impacted
my life.
The summer before my senior year of high school, when I was 17, I
began experiencing a lot of odd symptoms, and none of my doctors could
figure out what was causing them. My symptoms started as open ulcers
that would get painfully and dangerously infected, and over the next 2
years intensified to include high-grade fevers, mysterious raised lumps
on my legs, and swollen joints. After 2 years of visiting multiple
specialists, receiving MRI's and CAT scans, which was topped off by a
week-long stay in the hospital during my first semester of college, I
was finally diagnosed with Behcet's Disease, a rare auto-immune
condition. As you can imagine, this was a lot to deal with as a young
18-year-old barely out of my parents' house.
However, despite all that, I consider myself one of the lucky ones
because my parents have amazing health insurance. My condition, because
of that insurance, was completely covered. Being sick is hard enough in
and of itself. Luckily, I didn't have to worry about where my care was
coming from or who was paying for it while also trying to adapt to a
disease that has changed almost everything about my life. But when I
did start to get my body under control, I realized that just because I
had good health care under my parents didn't mean that being
chronically ill at a young age was not going to impact my life.
When your health care is tied directly to your employment, your
career opportunities become a lot more limited than you'd imagine.
Suddenly, taking a few years off to work at a non-profit before
graduate or law school was not an option because I would have dropped
off my parents' insurance plan. Beyond that, I had to be extremely
careful not to ever drop off an insurance plan because I have a
preexisting condition, which meant if I dropped off I would likely not
be able to get back on insurance. Paying for my own health care out-of-
pocket would bankrupt me. I regularly see two rheumatologists, an
opthamologist, a dermatologist, an internist and other specialists for
my condition. And that's when things are going well.
But, thankfully, with the passage of the Patient Protection and
Affordable Care Act last spring, none of that is an issue anymore. The
dependent coverage clause has been a godsend for me; it allows me to
stay on my parent's insurance until I'm 26; it gives me that buffer
time to figure out what career I want to pursue, and work for a couple
years to gain experience and valuable job skills. Then if I want to go
to law school or grad school I will be better qualified and better
prepared for a future career. Gaining that experience is something that
is invaluable to me. I believe that allowing young people to stay on
their parent's insurance gives us new freedom to work toward our goals
without going uncovered. But even more important than that is the fact
that the Patient's Bill of Rights makes it so that I can't be denied
insurance simply because I have a disease I can't control. And that . .
. it's changed my life in so many ways. I can't put into words how
scary the idea of being sick and bankrupt at 25 is, so you'll have to
trust me on this one. It's terrifying.
I can tell you over and over how much health reform has positively
impacted my life, but I'm not the only young American that has been
positively impacted by this legislation. I'm one example of millions
and millions of young Americans who have been helped by this bill,
whether through the Dependent Care clause or the Patient's Bill of
Rights or the combination of the two, like me. Health care is something
that is easy not to care about when you're young and you're healthy.
But someday, all of us are not going to be young, and in my case,
sooner, not so healthy. When that happens, health care becomes
something that matters almost more than anything else. Most people my
age don't think about their health on a daily basis (and I'm honestly a
bit jealous of that). However, that also means that my generation
cannot fully appreciate just how much this bill does for them. We are
one of the first generations that will be given free access to
preventive, life saving tests and treatments that can stop fatal
illnesses before they start. Young people are the future of this
country and we are the most affected by reform--we're the generation
that is the most uninsured. We need the Affordable Care Act because it
is literally an investment in the future of this country. This law is
important. It's really important.
Thank you.
The Chairman. Thank you very much for a very poignant and
passionate presentation.
Thank you for being here.
Mr. Koller, welcome. Please proceed.
STATEMENT OF CHRISTOPHER KOLLER, HEALTH INSURANCE COMMISSIONER
STATE OF RHODE ISLAND, PROVIDENCE, RI
Mr. Koller. Thank you. Chairman Harkin, Ranking Member Enzi
and members of the committee, thanks for the opportunity to
speak on this important topic.
I think my job here is to sort of give a view from the
States--to speak from an implementation standpoint. I find that
following this testimony that I've heard, it's just like my job
at work; you listen to passionate stories and you end up having
to work the machinery and enforce the rules behind the scenes.
So, it's hearing the testimony like this that gives us the
fuel to do our work in the States. I'm going to talk about two
things: A review of how the States have implemented the
Consumer Protection portions of the Affordable Care Act, and
then try to talk a little bit about what the effects have been,
at least in Rhode Island.
As Senator Reed so graciously said in his introduction, the
office was created in 2004. What I want to emphasize is that in
creating it, the Rhode Island Legislature gave it a broader
charge than other kinds of insurance. They asked the office to
look at, in addition to solvency in consumer protection, fair
treatment of providers, and looking at the system as a whole
and how to improve it.
I think that reflects what we've heard today, which is that
health insurance is fundamentally different from other kinds of
insurance. We don't ask our auto insurance to pay for our
preventive health; to pay for our routine maintenance; and if
you can't afford it, you simply walk.
We don't want to see that option for the kind of patients
that we've talked about today; and I think the legislature
recognized that in creating the Office of the Health Insurance
Commissioner.
So, I want to speak to two things: How we've implemented
the consumer protections, first.
Secretary Sebelius gave you an overview of the consumer
protections, and when I begin, I want to say that I speak as an
insurance commissioner. I am a member of the National
Association of Insurance Commissioners; what I say here
reflects my experience, of one insurance commissioner's
experience. I'm proud of the NAIC's work, but what I say is not
the official position of the NAIC.
As a rule, regulators have worked really hard to view this
as an implementation task. We have a job to do; and we've been
looking at what we have to do to implement these rules. It's
nonpartisan. It's just what we got to do, given the laws that
are out there.
When we've done this, what we've tried to do is look at the
process that we have in place, existing; notably, our process
of reviewing forms as they come in; the subscriber contracts.
How do we have to change the subscriber contracts to comply
with the new Federal rules?
That has really been pretty easy. That's been modifying our
check list.
Of a greater challenge has been refining the appeals
process, working on implementing PCIP within our local laws,
and doing rate review. I'm particularly doing this with tight
State budgets.
The resources that have been provided to the States,
particularly for myself, we have a small office, have been
greatly appreciated. They allow us to jump start important
work.
And where my--you asked for punch lines. So, my takeaway on
implementation is that the guidelines and standards for the
Affordable Care Act have to come from the Federal Government;
they should be marked by clarity, consistency, constancy and
sensitivity to local markets. Those processes haven't worked
flawlessly to date, but I think that the Office of Consumer
Information Insurance Oversight, the States, have been marked
by mutually respectful competent and well-intentioned efforts
that are meant to adhere to the statute, to implement it as
it's intended.
I think Secretary Sebelius and her staff have shown
admirable flexibility in working with these States to adjust to
their local conditions and deal with transition issues as they
go through.
But, implementation enforcement is up to the States. We are
closer to the consumers, the providers, and the health plans.
We can work more effectively through a series of relationships
that we have; and I think that was the wisdom in the act that
you passed, to leave that flexibility and that enforcement to
the States.
Second, in terms of the effects of consumer protection,
Senator Murray talked about rate review. This is something that
we have worked really hard with in Rhode Island. We have a
comprehensive rate-review process. The insurers have to come up
with their rate factors that they're going to use. They have to
be reviewed publically, posted on the Web site. I collect
testimony before I make a decision on what the rates can be,
going forward.
The effect of this is to increase the accountability in the
insurers, to have some stability, and to shift the focus of the
conversation from how can I shift costs, how can I get rid of
sick employees or sick enrolls, and how do we address the
underlying costs to the system.
That's why we've been able to do--in Rhode Island, we've
actually taken some of Senator Bennet's ideas from Colorado.
Yesterday I had a conversation with commercial insurers about,
how do we take the Colorado ideas around re-admission rates and
put those things forward in our delivery system?
We can only do that because I have the authority of rate
review. It means that when I speak they have to take into
consideration what I say. The second point is, State variation
and regulation. Rhode Island has to take relatively small steps
to do this.
We had a lot of these measures in place. That is not going
to be the same for our other States. We took a lot of grief
doing this going forward. It's taken time. We have to be
persistent.
We have to communicate consistently with our State offices,
to help them understand what's going on.
But, as a result businesses, like Mr. Olivo's, have a
stable market; they understand what's driving their costs; they
have a choice of products with consistent rules for pricing. I
can't emphasize how important that is, to change the rules for
pricing from, how do I get rid of my high risk, how do I find
someone who knows somebody who can get me a special deal, to
focus on the underlying costs.
We know what drives health insurance costs for folks. We
just have to decide if we want to be fair and allow people to
be part of the insurance pool or not. That's what these rules
put in place.
So, I'll just finish by urging you to keep, not only the
individuals in mind, but the idea that we are creating a
consistent set of rules, implemented at the State level, with
flexibility, so that we can get at improving our underlying
health system and allowing individuals to go forward with
confidence in the way that we've heard about today; not to
worry about, is health care going to bankrupt them going
forward.
I believe that we did not get this right at the first.
I think we're going to have to make corrections going
forward, but I think the trajectory is the right way to do it.
We continue to look forward to implementing the measures of
the act going forward.
Thank you.
[The prepared statement of Mr. Koller follows:]
Prepared Statement of Christopher F. Koller
summary
1. implementation of consumer protections
Guidance and standards for the ACA has to come from the
Federal Government. It should be marked by clarity, consistency,
constancy and sensitivity to local markets. While that process has not
worked flawlessly to date, it has been marked by professionalism on the
part of States and Federal agencies and fidelity to the statute.
ACA wisely left implementation and enforcement of these
reforms to the States. We are closer to consumers, providers and health
plans and can work more effectively than a Federal agency. States are
working hard with limited resources to put these protections into
place. In the wake of tight State budgets, the rate review and consumer
assistance grants provided to States as a part of ACA have been greatly
appreciated and the money wisely spent.
2. effectiveness of consumer protections
In Rhode Island we have in place a comprehensive health
insurance rate review process that requires health insurers file the
rate factors they anticipate they will use in all lines of business the
coming year. These are posted publicly, analyzed, compared and debated
before my Office renders a decision, which insurers have the option of
appealing.
Rhode Island has had to take relatively small steps to
implement these consumer protections--our legislature has concurred
with the Congress and previously had in place an appeals process,
dependent coverage to age 25, and the disallowance of rescission
language. Looking ahead we already have adjusted community rating in
the small group market, as required by ACA and very limited allowance
of pre-existing conditions.
These reforms have made our health insurance market more
stable, our pricing rules less susceptible to special deals that merely
shift costs and reward the connected, and our vulnerable citizens more
protected in the market. Small businesses in particular now know
exactly the short- and long-term steps that must be taken to reduce the
rate of increase in their premiums.
You are less likely to hear from people who have benefited
individually from these protections and from the more stable,
accountable system of private sector commercial health insurance that
is resulting. But I urge you to keep them in mind--because this is what
you have created with the Affordable Care Act. I have no doubt that in
statute and regulation we did not get everything right, and we will
have to make corrections as we proceed. However, I am also certain that
the trajectory of the ACA is the right one for citizens and we in Rhode
Island look forward to the benefits it will continue to bring.
______
Consumer Protections in the Affordable Care Act
Chairman Harkin, Ranking Member Enzi and members of the committee.
Thank you for the opportunity to testify on this important topic. My
name is Christopher F. Koller and I am the Health Insurance
Commissioner for the State of Rhode Island. My testimony will be
divided into two parts:
A review of the process for implementing the consumer
protection portions of the Affordable Care Act in States in general and
Rhode Island in particular.
An assessment of the effects to date of their
implementation, and future implications.
By way of background: The Office of the Health Insurance
Commissioner was created by statute in 2004. It is a cabinet level post
and encompasses all aspects of commercial health insurance oversight in
the State. We have a four-fold statutory charge which is broader than
that given for the oversight of other types of insurance:
i. Guarding the solvency of insurers;
ii. Protecting the interests of consumers;
iii. Ensuring fair treatment of health care providers; and
iv. Seeing the health care system as a whole and directing insurers
towards policies that promote system improvement.
This broad charge reflects the belief of the Rhode Island
legislature that health insurance is fundamentally different in nature
and social value from other types of insurance such as life or property
and casualty. To the best of my knowledge there are no other insurance
commissioners focused solely on health insurance in the country.
I am the first commissioner and assumed the post in 2005. Since
then, our Office has focused on enforcing existing statutes,
establishing a consistent, fair and transparent rate oversight system,
and setting standards for health plan actions to improve the underlying
performance of Rhode Island health care delivery system. I will speak
of these activities in more depth later.
1. implementation of consumer protections
Secretary Sebelius has given you an overview of consumer
protections in the ACA. I believe my role is to speak to the experience
of their implementation. As I begin, I want to note that my testimony
reflects the experience of an insurance commissioner. While I
participate actively in the National Association of Insurance
Commissioners and am proud of their service in the States, and to
Congress as it debated the ACA, nothing I say should be construed as an
official position of NAIC.
As a rule, regulators found it most appropriate to view this as an
implementation task, not a set of public policy questions--we have had
a job to do. Thus, a priority of State insurance regulators has been on
the measures--given existing State statute--a State must have in place
to meet the statutory deadlines imposed in the ACA, many of which
centered on commercial policies issued on or after October 1. The
following have been the broad areas of enhanced consumer protections we
have addressed:
1. First dollar coverage of preventive care benefits;
2. Elimination of lifetime and (in certain cases) annual limits;
3. Coverage of dependent children up to age 26;
4. Elimination of preexisting conditions exclusions for children;
5. Elimination of rescissions in individual coverage;
6. A process for consumers to appeal insurance company denials;
7. Disclosure by health plans of justification for rate hikes;
8. Development of minimum medical loss ratio standards; and
9. Develop preexisting condition insurance plans (varies by State).
In implementing these measures, regulators have relied wherever
possible primarily on existing activities to review and approve health
plan subscriber contracts (``forms'') and other consumer disclosures.
In effect, we are modifying our checklists of what contracts must
contain and permissible language. While this is not a nominal task, in
our experience it has not been overly taxing. We have been greatly
aided by the collaborative work of NAIC and good faith efforts by the
Division of Consumer Insurance and Information Oversight to communicate
continually to States what is needed and by when.
Efforts that involve changing processes other than forms review--
such as refining the appeals process, developing medical loss ratio
standards and implementing the PCIP statute--have been more varied by
State and somewhat more challenging. In the wake of tight State
budgets, the rate review and consumer assistance grants provided to
States as a part of ACA have been greatly appreciated and the money
wisely spent.
My message on implementation to date of consumer protections can be
summarized with the following points:
Guidance and standards for the ACA has to come from the
Federal Government. It should be marked by clarity, consistency,
constancy and sensitivity to local markets. While that process has not
worked flawlessly to date, it has been marked by professionalism on the
part of States and Federal agencies and fidelity to the statute.
ACA wisely left implementation and enforcement of these
reforms to the States. We are closer to consumers, providers and health
plans and can work more effectively than a Federal agency. States are
working hard with limited resources to put these protections into
place.
2. effectiveness of consumer protections
You have heard from individual consumers who can speak more
powerfully to the effects of the ACA than I could. I would like to
speak to two systemic effects of the act: the importance of rate
oversight and State level variation.
In Rhode Island we have in place a comprehensive health insurance
rate review process that requires health insurers to file the rate
factors they anticipate they will use in all lines of business the
coming year. These are posted publicly, analyzed, compared and debated
before my Office renders a decision, which insurers have the option of
appealing. The effect is to increase accountability, and to shift the
focus of the conversation from ``how can I cost shift to improve my
rate,'' to ``what is driving underlying health care inflation and how
can it be addressed.'' A sample of recent rate review analysis is
enclosed in my testimony.
As a result, businesses in Rhode Island now have a public agency
asking health insurers and providers the hard questions of what has to
be done to reduce system costs, not merely shift them. Rhode Island is
systematically investing in primary care, in health information
technology and in provider payment reform, and leveraging the
opportunities provided in those areas through the ACA and ARRA.
In the case of the increased consumer protections in ACA, having
this rate process in place meant that health plans in RI had to state
publicly how their costs would be effected by these changes in benefit
levels and subject them to public scrutiny and analysis. OHIC could
then make final, plan-specific decisions, and Rhode Islanders could be
assured they were implemented systematically.
My second point is on State level variation in regulation. Rhode
Island has had to take relatively small steps to implement these
consumer protections--our legislature has concurred with the Congress
and previously had in place an appeals process, dependent coverage to
age 25, and the disallowance of rescission language. Looking ahead we
already have adjusted community rating in the small group market, as
required by ACA and very limited allowance of preexisting conditions.
These reforms have been implemented steadily over the past decade.
They have not always been easy--particularly as the rules for pricing
have become more transparent and defined--and have required patience,
persistence and continual oversight. But they have made our health
insurance market more stable, our pricing rules less susceptible to
special deals that merely shift costs and reward the connected, and our
vulnerable citizens more protected in the market. Small businesses in
particular now know exactly the short- and long-term steps that must be
taken to reduce the rate of increase in their premiums.
I should caution that even as the efforts of OCIIO to work flexibly
with States continues, Members of Congress will hear from constituents
about the implementation of ACA. Indeed, any adverse event experienced
by anyone in the commercial insurance market will be attributed to the
act, regardless of its true origin. You are less likely to hear from
people who have benefited individually from these protections and from
the more stable, accountable system of private sector commercial health
insurance that is resulting. But I urge you to keep them in mind--
because this is what you have created with the Affordable Care Act. I
have no doubt that in statute and regulation we did not get everything
right, and we will have to make corrections as we proceed. However, I
am also certain that the trajectory of the ACA is the right one for
citizens and we in Rhode Island look forward to the benefits it will
continue to bring.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Analysis: Projected increases in hospital inpatient and outpatient
costs drive most of the rate factor increases requested by all three
health insurers. Projected administrative cost increases are relatively
large drivers for Tufts, while profit and reserve increases are
significant for United and BCBSRI.
The Chairman. Thank you very much, Mr. Koller, and again,
thank you for your tremendous efforts in getting here from
Rhode Island yesterday.
Mr. Olivo, welcome, and please proceed.
STATEMENT OF JOE OLIVO, PRESIDENT,
PERFECT PRINTING, INC., MOORESTOWN, NJ
Mr. Olivo. Good morning. Thank you, Chairman, and thank you
to the committee for not only the opportunity but the honor to
speak to you today.
I'd like to share with you my early experiences with the
health care law, how it's already begun affecting my company,
and some of the things I expect to see as the plan is fully
implemented.
I'm the president and co-owner of Perfect Printing. The
business was started in 1979. I co-own the company along with
my wife, my two brothers and my mother. I have been running the
company for the past 23 years. We've been very fortunate; we've
been able to grow the company to a high of 54 employees prior
to the economic downturn where we had to downsize; but we
currently have 45 employees.
One of the main concerns I have with the health care law is
how it's going to affect the coverage, the current coverage
that I offer to my employees. I'm able to pay 100 percent of
the premium cost for my employees, and 56 percent toward their
dependent costs.
The reason we've been able to do this is by the use of a
high deductible health savings accounts plans. Now, I know
during the lead up to the passage of this legislation, we heard
numerous times, and my employees heard numerous times that they
would be able to keep the health care that they had.
Within 30 days of the passage of the legislation I received
a letter from my insurance carrier that our plan would no
longer be offered. It's my understanding that because of the
preventive care portion of how it's treated with high
deductibles, it was no longer in compliance with the health
care law. So, as far as I'm concerned, that has proven to be
untrue.
Another area of concern for me is the tax credits that have
been promised to small business in order in which to pay for
this. Now 45 employees were certainly larger than a lot of
small businesses, but I don't think anyone would describe my
company as a large company. There are zero dollars in tax
credits available to our company.
I've had conversations with other fellow small-business
owners; I was speaking a couple of weeks ago to the owner of a
three-employee bridal shop that had spoken with her accountant.
She is not eligible for any dollars in tax credits. So, I don't
anticipate that being of assistance to my business or to my
employees.
A third area which is of great concern to me is compliance
with the 1099 law. This law, as you know, requires me to submit
a report for every vendor that I spend accumulated expenses of
$600 or more per year. Simply put, I do not have the systems in
place to monitor this. This will require myself as a business
owner, monitoring this and waste my time monitoring receipts
and keeping track of this. To put it in perspective of a small-
business owner, in a good year my profits are 3 cents on every
dollar earned.
Every time there's a new legislation, a regulation from
Washington like this, a good portion, if not all of that, comes
out of the profit of my business. It affects my ability to give
my employees raises and pay for future benefits.
Then there's the issue of whether I should even decide to
grow my business at the--we are 45 employees; if I go over the
50 employee threshold, where we were just 2 years ago, it's my
understanding that I'm mandated to provide insurance, or I
would have to face a penalty for not providing that insurance.
It's also my understanding that I could possibly be
penalized even if I do provide insurance. So, I find the ironic
part about this portion of the law is that what it's supposed
to encourage or mandate employers to provide insurance, I guess
when you look at the cost of the penalty that is currently in
the legislation versus what I pay for premiums, is actually an
incentive for me not to provide insurance for my employees.
These are the issues that I know that are currently
affecting my business.
It's the unknown that's even more of a concern. To put it
in perspective of myself and a lot of small-business owners,
when I decide to grow the business and invest funds and take a
loan out, I have to know cost certainty, because I put my house
on the line; I put my family's house on the line; I put all my
personal assets on the line. I cannot afford to be wrong with
my assumptions.
So, when you have a health care law like this with so much
unknown--and I challenge anyone to say, ``Well, here's what
your health costs will be 2 years from now,'' it causes me to
be much more hesitant to invest my money.
I think you're seeing the accumulative effect of this in
why small business is not participating in the growth of the
economy.
So, I'll leave you with this: My story is personal; it is
by no means unique; there are hundreds of thousands, if not
millions of small-business owners going through the same issues
that I am right now.
Thank you.
[The prepared statement of Mr. Olivo follows:]
Prepared Statement of Joe Olivo
summary
1. Welcome Remarks
a. Share experiences & additional consequences.
2. Background
a. Company description/size.
b. Health insurance background.
c. State of New Jersey.
3. Inability to Continue Existing Coverage
a. Currently offer plan that pays 100 percent premium.
b. Offer additional plans.
c. High deductible plans have controlled cost increases.
d. High deductible plans create better decisions.
e. Existing Coverage No Longer Offered.
i. Due to preventative care mandate.
f. Cannot keep our existing coverage.
4. Non-Eligibility for Tax Credits
a. Temporary, to narrowly limited and of marginal assistance
to most owners that I know.
5. Effects of 1099 Compliance
a. $600 or more.
b. Huge burden, no system currently in place.
c. Significant drain on already limited resources.
i. Cannot hire consultants or additional employees.
d. In the context of a small business owner.
i. Small profit.
ii. Lack of time.
6. Negative Consequences of Going Over 50 Employees
a. Threat of penalties if I exceed the 50 employee mark.
b. Actually an incentive not to provide insurance as the
penalty is less than the current premiums that I pay.
7. Consequences of Cost Uncertainty Due to the Law
a. Hesitancy to invest because personal assets are on the
line.
8. Concluding Remarks
a. Personal but not unique.
b. Economy cannot prosper for all by stifling a main engine of
growth.
______
Good morning. I'd like to thank the committee for the opportunity
and honor of allowing me to present my testimony today. My name is Joe
Olivo and I own a small business. I appreciate the willingness to have
an open discussion about some of the concerns that I, along with many
of my fellow small business owners, face because of the new healthcare
law. I would like to share with you my early experiences with the law,
how it is already affecting my business and what additional
consequences I expect to see as the regulations are fully put into
place.
I am the president and co-owner of Perfect Printing. I own the
company along with my wife, my mother and two brothers. My parents
started the company as a literal ``mom and pop'' copy center in 1979
and I have been actively running the company for the past 23 years. We
have been fortunate in that we were able to grow the company to a high
of 54 employees prior to having to downsize during the recent economic
downturn. We currently have 45 full-time and part-time employees.
One area I am certain will have a profound effect on my business is
the new, expanded 1099 reporting requirement in this law. As you may
know, the law now requires that I submit to the IRS a report of any
transaction adding up to over $600 in business in a year. This is a
huge requirement and I do not have any sort of system in place to
account for it. Just to give you a couple of examples, I have drivers
and sales people that fill up for gas. Based on a quick calculation, I
estimate they have probably gotten over $600 in gas at 8 to 10 filling
stations. I will now have to track down who the gas station owners are,
get the proper information and submit to them a form of how much we
spent with each business entity. Another example is the salesperson or
owner who frequently travels. Can you imagine trying to submit
paperwork to the various airlines, hotels, rental car agencies and
restaurants that you visit over the course of a year? I will most
certainly have to purchase some sort of software program and waste my
resources calculating and collating receipts for purchases of thousands
of items. I think it is very important to keep in mind the huge costs
that additional regulatory burdens place on small businesses like mine.
My business, like most small businesses operate with a very tight
profit margin and with little extra money to spare on purchases that do
not directly affect the profitability of the company. In a good year,
our profit is 3 cents on every dollar earned. Many years it is less
than that. When additional regulations, like those contained in the
healthcare law, are instituted the cost to comply with this usually
comes out of the profit portion. I do not have the luxury of simply
creating new revenue or cutting additional expenses in order to afford
the costs to comply. Besides the cost there is the issue of the
availability of time. As a small business owner, I have to make
decisions daily as to what issues can be attended to by the end of the
day and which ones will have to be pushed off to the next day simply
because I run out of time. My business can't afford the luxury of
hiring an HR or accounting consultant, or a new employee to fill out
all of the new government paperwork that is required by this law.
Simply put, if this part of the legislation is not rescinded this will
impair by ability to grow my business and the same would apply to the
millions of other small businesses in this country.
A key issue for any employer is how and when to grow their
business. Our company is on the cusp of the 50 employee threshold, at
which I would be legally bound to offer my employees insurance or pay a
penalty if I do not. Besides being ridiculously complex, it is my
understanding that, at the 50 employees or greater mark, I could
possibly be penalized even if I do offer insurance to my employees and
one or more of them decide to take a government-subsidized plan. I am
still in the process of trying to compute the exact ramifications of
this portion of the law. This being said, in the event I do hit that 50
employee threshold, based on my current premiums it may actually be
less expensive for me to not provide any health insurance and just pay
the penalties. Ironically, the part of the law that mandates that I
must now provide insurance is actually providing the perverse incentive
for me not to provide any insurance at all. This would not only be more
expensive to the Federal Government but it would mean that my employees
would lose the administrative support that I offer them with their
health insurance.
One of the main concerns I have with the law is how it will affect
the current healthcare coverage that I already offer to my employees.
We currently offer a plan where the company pays for 100 percent of our
employees' insurance premium and pays 56 percent toward family
coverage. We are also able to offer our employees additional plans that
offer lower deductibles at a higher premium cost. Compared to a lot of
our competitors we think this is quite substantial. We have only been
able to do this by offering a high deductible plan with a health
savings account. We began offering this plan 6 years ago and it has
been a tremendous tool toward slowing the rate of the escalating
healthcare premiums that we face, especially since we are located in
New Jersey. New Jersey is a guaranteed access, community-rated State
with heavily mandated policies. We have seen double-digit percentage
increases to our annual premiums going back to 1993. I estimate our
average premium increase for the past 17 years is around 20 percent
each year. The high deductible plans have allowed us to continue to pay
for our employees' premiums. With the savings to the company from
offering these plans, we have been able to contribute to the employees'
health savings accounts while encouraging the employees to do the same.
I have seen how these plans encourage healthier lifestyle choices and
make everyone more accountable and aware of how they spend their
healthcare dollars. While I would not say high-deductible accounts are
the sole answer to the crisis of rising healthcare costs, it has been a
very effective tool for my company.
During the debate leading up to the passage of the legislation, I
heard numerous times that my employees would be able to keep the same
plan they currently have. Unfortunately, within less than 30 days of
the law's passage, I received a letter from our insurance carrier
notifying us that our plan would no longer be available at the end of
the current term. The reason for this is that the preventative care
portion of the plan did not meet the requirements of the new law. The
promise that my employees would be able to keep their existing health
insurance has proven to not be true. After 20-plus years of voluntarily
providing coverage for my employees, much of it at my own cost, I am
now finding out this coverage is no longer acceptable according to the
government.
A final area of concern to me is the tax credits that were promised
to small business in order to help them pay for health insurance. This
point was made over and over during the debate and even persuaded some
of my fellow small business owners to mute their criticism of the plan
in the hopes that maybe the legislation would be a net benefit to their
companies. The problem with the tax credit is that it depends on the
government's definition of small. I checked the tax credits that I am
eligible for and I come up with a big fat zero. Now at 45 employees
there are certainly smaller businesses out there but I don't think
anyone would consider us a big business. I have learned from fellow
business owners with much smaller companies that the tax credit is so
narrow and so limited that it would provide marginal assistance to a
very low percentage of small businesses that are out there. For
example, an 18-person business who pays, on average, $38,000, doesn't
get anything either. Beyond this, the credit is temporary and, as I
referenced earlier, the year over year increases in healthcare costs
certainly aren't.
While those issues that I have mentioned are the known items that
will affect my ability to grow my business, it is the uncertainty that
causes concern as well. Questions such as:
What portions of the legislation are applicable to my company?
What are the exact ramifications if I go over 50 employees?
What taxes, fines and penalties will I be exposed to? How much will
they be?
Will I need to hire outside consultants or new employees in order
to see that I am in compliance with the new laws?
What is the definition of a part-time employee?
You should understand that when I make the decision to invest in my
business and try to grow it further, I cannot afford to be wrong in my
calculations. Like most small business owners, I put my home and a good
deal of my personal savings on the line when I make these investments.
When there is so much uncertainty regarding the costs that will be
required of me to comply with these new laws, it makes me much more
hesitant to invest and causes me to take much less risk in those
investments that I do wish to proceed with.
My story is very personal but it is not unique. There are hundreds
of thousands, possibly millions of small businesses owners that are
facing these same issues. How can we make the economy prosper for all
when we are stifling one of the main engines of growth? Thank you for
the opportunity to testify today. I look forward to answering your
questions.
The Chairman. Thank you, Mr. Olivo.
Thank you, very much. Again, we'll start with 5-minute
rounds.
First, Ms. Grasshoff, again, thank you very much for
telling the story about your son, Joshua.
You mentioned that your husband was forced to change jobs,
to take one that paid less money; and so were you. I'm just
curious about how that affected your family's financial
security; and obviously, you have to be looking forward to your
own retirement years and that type of thing.
I just wondered how that might have affected your own
personal financial security.
Ms. Grasshoff. It affected it tremendously. It reduced our
income by approximately 40 percent, but yet our bills didn't
decrease by 40 percent; and I'm just speaking of the
necessities: The groceries, the gasoline, you know, utility
bills.
It really took away from any outside activities that we
would do as a family, such as, going to the matinee movies. We
had to be very, very frugal.
You do what you have to do. The health insurance was the
most important thing.
The Chairman. Now, is Joshua aware of the health care law
and how it's going to affect him?
Ms. Grasshoff. Yes, sir. He absolutely is aware of it.
The Chairman. So, this is just giving him a little bit more
security that he can go ahead and do things in his own life?
Ms. Grasshoff. Yes, yes, it is. It has given him a lot more
security, because he sees that it's given his dad and I the
security and the peace of mind, knowing that he will be covered
on a health care plan until he is 26.
Unfortunately, he's not yet been able to start college, due
to some medical issues; and he's looking forward to starting
college. This gives him a little more time to decide.
He might go to school for a year and then want to be a rock
musician or what have you.
The Chairman. Horrors.
Ms. Grasshoff. But it gives him security, and, his dad and
I security, knowing that he will have coverage.
The Chairman. Or like Ms. Schlichting, maybe he might want
to go to work for a nonprofit or do something generously----
Ms. Grasshoff. He very well could. I would love for him to
follow in my footsteps.
The Chairman. Ms. Schlichting, I was reading the press
release that happened to be in the Omaha World Herald about
your appearance here.
You were quoted as saying, ``It's not just middle-aged
families who are affected by the reform,'' Schlichting said,
``It's about America's young people.''
Ms. Grasshoff. Absolutely.
The Chairman. The largest group of uninsured Americans. So,
Ms. Schlichting, I think you put a finger on it. Not too many
people think about the young people that are affected by this;
and I think you give evidence of what it means to young people.
Ms. Schlichting. I would definitely agree with that; and
that's something that I see a lot, just like at home, with my
friends and the girls I live with in my sorority. I remember
when this law was passed, standing in the kitchen at breakfast,
being like extremely excited; and no one else around me had any
idea what it meant, and how big of a deal it was; and I think
it is because, as has been touched upon earlier, young people
are, by and large, very, very healthy.
They're a healthy demographic, which is wonderful; but as
my existence proves, that's not the case for everyone.
There are young people who get sick. There are young people
who get really sick. Giving this security to them at that age
that gives them stability at a young age so they can go on and
do productive things with their lives, I think it's wonderful;
it's great.
The Chairman. I think you put your finger on it; when
you're young, if you haven't had an illness, like you have,
young people never think they're ever going to get sick, or
they might----
Ms. Schlichting. Oh, yes, not at all. I mean, yes, that's
definitely something amongst all my friends there. It's another
part of why it is hard to be ill as a young person, because
your peers really can't relate to you.
Like, I can't tell you how many times I've been called
like, oh, ``You're acting like an old woman,'' and because I'm
like swollen joints and don't want to go out that night, kind
of a thing, and when--you get used to it and you deal with it.
But, yes, it's definitely something that I would say most young
Americans don't have flying on their radar.
The Chairman. Right.
Mr. Olivo--I'm going to skip over Mr. Koller here just
briefly, but, Mr. Olivo, by 2014 every State will have an
insurance exchange; a one-stop shop for small businesses like
yours that can pool their purchasing power to get the same
leverage on insurance rates that large corporations have.
Now, as I've looked at that, and as I've discussed it with
small businesses, their first question to me was, why do we
have to wait until 2014? If we'd have had that now it would be
a lot better. It just had to do with the way that legislation
is done around here, I guess and compromises that are made.
I just wonder, have you looked down the road at how that
might affect you in 2014 and your employees; what that exchange
system might mean to you in 2014?
Mr. Olivo. I've looked into it because I have no way of
knowing what the costs are going to be. My concern with any
exchange is that it's set up as a true competitive exchange.
My understanding with the law is that the policies being
offered will still be very heavy in mandates, and preventive
care items that don't really open up to true, it's not a truly
competitive product I'll be buying. That was one of the things
we have with high deductible HSA plans for my employees that
fit our demographic of our company, and I was able to provide a
plan that was best for them.
With the exchanges, I'm not sure it's going to be when
it's--I'm from New Jersey where we have one of the most heavily
regulated insurance systems in the Nation, very heavily
mandated, and we have, I believe it's in the top three of
insurance premiums in the country.
I'm not very optimistic that a heavily-regulated mandated
insurance exchange will be of benefit to me.
The Chairman. Well, again, companies will have to come on
the exchange and compete for business.
Plus the fact, as you know, we also are mandating that, I
think the Secretary testified to that earlier, that as of
January 1 of this year, insurance companies have to put 80 to
85 percent of each premium dollar on health care quality
improvement. So, they have to start meeting that threshold
right away.
It seems to me in that regard, that, coupled with the
number of exchanges out there, even though there are mandates,
for example on the prevention side, the reason we mandate on
the prevention side, is because we know, from all the evidence,
that an ounce of prevention is worth a pound of cure. If we put
more in the front end, it's going to save more in the back end.
I mean, everybody understands that.
We're trying to move to a system whereby people get more up
front interventions early on so they don't get in the system
later on. That's why we have that entered on the wellness and
the prevention end of it.
We were hoping, and I don't know, we'll have to wait and
see, but I was hoping that, as we pass this, that we might have
some really true competition now out there, and these health
insurance policies that come on the exchange will be
transparent; people will know what they are.
Your business might be on the exchange with others that can
join together and actually get lower costs but higher quality;
because everyone's going to be competing for your dollar. Right
now, I don't know that that's really true, right now in the
present system that we have.
If you have any response on that, I don't know.
Mr. Olivo. Yes. I mean, I like the opportunity of buying
out of State. Once again, from my perspective as a business
owner in New Jersey, I've been running it since 1988.
In 1993 our State went to a guaranteed access community
rated insurance policy; and the politicians in my State have
been promising for the last 18 years that our premiums would go
down as a result; not 1 year has our premiums gone down.
The Chairman. Thank you, very much. I went way over my
time, and I apologize.
Senator Enzi. Thank you, Mr. Chairman. I thank the panel
for their testimony. I'm going to concentrate on trying to
figure out what we need to do to eliminate unintended
consequences of the new law.
I appreciate Mr. Koller's comments. Thank you, Mr. Koller.
I appreciate that you have a brother in Greybill, WY, so you
must have a little understanding of our rural area.
But, I will be asking, in writing, for you to list out
those fixes that you see as being needed; and I appreciate that
you mentioned that.
One of the comments that I get from people in Wyoming is
that there's this new high-risk pool; but they can't get in the
high-risk pool unless they go without insurance for 6 months;
and they can't afford to go without insurance for 6 months
because they have problems similar to what we've heard about
today.
I want to get a little bit of clarity on some of these
things.
Mr. Olivo, you said that the 1099s--and as the accountant
in the Senate, and I'm now joined by Senator Johnson, who's
also an accountant, so we'll have an accountants' caucus--I am
familiar with the 1099s.
I wondered if you had any evaluation on what the potential
cost is for you on those 1099s, with the equipment and things
that you might have to put in or hire a person. I know it's
early for you to do an evaluation on that, but do you have one?
Mr. Olivo. I don't have an exact dollar cost, but just to
give you an idea from my perspective, I can't afford to hire an
HR consultant or an accounting consultant; that's going to come
right out of my profits. So, I'm going to have to do it myself,
as a business owner, or assign someone internally that's going
to take away their productivity.
Just to give you an idea: My trip down here, I took a
train, I took a cab, I stayed in a hotel. I have to monitor,
did I go over $600 staying in Marriott Hotels this year? Is it
franchise-owned? Is it corporate-owned? Try to track down who
the owners are, send them the proper documentations. It's just
a logistical nightmare that I can't imagine even having to do.
Senator Enzi. I really appreciate that, and I know that the
purpose of it, supposedly, was to find $16.9 billion in fraud
that people are doing; and as an accountant, I can't figure out
exactly how that's going to do that; but my calculations of
cost, to find that $16.9 billion for the Federal Government,
it's going to cost individual businesses about $25 billion to
collect the information. That's not cost-effective.
I noticed in your testimony that you obviously have looked
at the 2,700 pages, and I appreciate--or whatever of them you
were able to go through. I know as a small businessman--and I
was in the shoe business for years and years--that it's
difficult to keep up with the Federal Government; but I
appreciate that, in your testimony, you had the five questions
in there that are pertinent for a small business, because we
don't look at these things from a small-business perspective
very often.
I wondered if you wanted to enlarge on those just a little
bit or mention them? I will be checking on all of those answers
for you, and appreciate that you were able to list them out so
concisely.
Now, in this job market that's been decimated and shed
millions of jobs, you spoke about the health reform law making
you think twice about hiring new employees.
We know that almost \2/3\ of jobs come from small
businesses, so if we're going to see our economy recover, it's
the small businesses that will lead the way.
But, as you point out, the health reform law created a very
large tax penalty for small companies that can't afford to
provide health insurance for their employees. So, can you
expand a bit on your concerns about hiring new employees as a
result of the health care reform law?
Mr. Olivo. Certainly. Just to give you an idea when there's
uncertainty--and some of the questions I had put in, is: Just
what portions of the legislation are applicable to my company;
exactly what happens if I go over 50 employees; if I have a
part-timer; if he's 30 hours or 20 hours? All these questions
add up to costs.
When I invest in my business, when I hire new employees, I
take a loan, and that payment is fixed. I have to pay that loan
every month. The bank doesn't want to hear, ``Well, I'm sorry,
I made a little mistake in my calculations; I can't afford it
this month.''
When you have all this uncertainty and all this unknown, it
just creates a much bigger cushion, of which I chose not to
invest. It affects, not just my business; it affects my
employees. I can't give the amount of raises I want to give. We
haven't had a raise in our company in 2 years. And, it makes it
that much more difficult to grow the business.
Senator Enzi. I can certainly understand that and
appreciate it.
You were asked the question a little bit earlier about the
exchange creating pooling that will bring down your costs.
The way I understand the exchange is, there will be a place
on the Internet that you can go to, and you can put in the
different criteria of your business, and you will be shown the
list of companies that will be able to sell you insurance,
because they will meet the Federal minimum standard.
I don't see how that's going to drive down the health care
costs for small businesses. But, I've had a bill that will
allow small businesses to actually pool their purchasing power
across State lines to buy less-expensive coverage, and the CBO
said that would slash premiums.
Do you think the costs of your health insurance will
decrease if you are able to get into this exchange?
Mr. Olivo. As the exchange is currently set up, I'm not
optimistic. I'm a little leery of it because it's not true
competition when it's a mandated product.
We've had the same thing in New Jersey for the past 19
years. It was supposed to be that there's a lot of heavy
mandates and preventive care costs, and I have not seen--my
average premium increase in the last 10 years has been 20
percent; and it ranges from 12 percent to 49 percent on any
given year.
So, I'm just leery. I've seen what mandates have done to
our State insurance costs, and I'm just a little leery when I
see the same type of thing on a Federal level.
Senator Enzi. I appreciate that, and I would mention that
in the HELP Committee bill, Senator Harkin and I had an
amendment that would have allowed for some flexibility for
incentives, which could have provided for some preventive care;
I did notice that that was accepted by the committee; I did
notice that after the August recess, when the bill was actually
printed, that part of it was no longer in there. So, pieces of
that amendment were deleted.
Thank you very much for your testimony. I will have more
questions for all of you in writing and hope that you'll answer
them.
Thank you.
The Chairman. Thank you, Senator Enzi.
Senator Reed and then Senator Franken.
Senator Reed. Thank you very much, Mr. Chairman.
I, too, want to thank Commissioner Koller for braving the
elements to come down here. You left out the dogsled.
[Laughter.]
Train, but the dogsled was the final thing.
Commissioner Koller, one of the issues we've been talking
about is ensuring that this system covers everyone in the
State; and from your perspective as Commissioner, how important
do you think that is, in terms of both delivering effective and
cost-effective health care service?
Commissioner Koller. Thank you, Senator Reed. In our State,
we have seen our rate of uninsured, the percentage of people
uninsured in the last 6 years, go from 6 percent to about 14
percent. That is completely an effect of the economic downturn,
which, as you know, and have worked hard with us, affected
Rhode Island particularly severely.
It is not a result of increasing health care costs; that
certainly has contributed to it. But, those people who are
uninsured, we still pay for.
When I look at a rate--and this is the benefit of a
comprehensive rate review--when I get a rate request, an annual
estimated inflation of 12 percent, and then about 4 to 5 points
of that is the hospital; and then when I go and I ask the
health insurers what's that about, they say, ``Well, we've got
to pay the hospitals 9 percent more in price increases''; 1
percent for utilization, but 9 percent in price increases.
I ask, ``What's that come from?'' They say, ``That's from
the number of uninsured.'' The hospitals have not gotten paid
for their uninsured, so they're looking for commercial insurers
to make up the bill; and, so, we pay for the costs of the
uninsured. I also think we pay, long-term with poor public
health.
You and Senator Sanders, have been strong advocates for
community health centers; for having comprehensive primary
care. That has to be the point of entry for this.
Uninsured people are not getting good primary care. It's
not clear that commercially insured people are getting good
primary care. That is what has to be our focus.
Senator Reed. In effect, one consequence of not covering
everyone is that the uninsured will get health care, but
expensively, through hospitals, and that has shifted, as you
point out as Commissioner, directly to private insurance
companies, who, in turn, recoup that from their customers.
These 20 percent, as Mr. Olivo pointed out, these 20
percent, 40 percent increases every year are in many respects
traceable exactly back to the fact that we've got a whole group
of people who have no coverage but still get care.
Commissioner Koller. Yes. And if you look at who the
uninsured are, by and large, they are working, single adults
who, if they could afford health insurance, would buy it; but
they are making an economic calculation based on their
circumstances, to go bare.
Why are they doing it? Because affordable health insurance
isn't available; and because they're given the option to opt
out, absent a mandate.
Those are exactly the working uninsured, who comprise the
majority of the uninsured, are exactly the folks we want in the
pool to make it work.
Senator Reed. One of the other things that we've got to do
is not simply sort of fund this system; it's to reform the
delivery of health care.
In your capacity at the Neighborhood Health Plan of Rhode
Island, and in your capacity as Commissioner you've got a
unique perspective: You've actually run an HMO health insurance
company and now you regulate them.
What are some of the delivery improvements that you've seen
already in Rhode Island; and will they be promoted by national
health care reform or accelerated? Are there other things that
are going to be possible?
Commissioner Koller. The most important thing that I feel
that we've done in Rhode Island in the commercial health
insurance market, is to say to health insurers, if you want to
work in this State, if you want to get the rate increases that
you're seeking, you have to put more money into primary care.
Primary care is the only part of our delivery system where the
more we have, the lower our costs are and the better our health
is.
Yet we systemically pay it less over time, led primarily by
the historical way that we've determined rates within Medicare.
We have told the commercial and health insurers that we
spent 6 percent of our insurance premiums on primary care--only
6 percent. If you look at other countries, it's 15, 20, 25.
There's no way that we're going to deliver you lower costs if
we don't--over the long-term--put more money in primary care.
I think the other thing is to change the way the hospitals
get paid. It is not in the hospital's financial interest to
reduce their re-admission rate. That is money in the bank. So
when you go to health in hospitals and you say, 20 percent of
your Medicare patients are being re-admitted, they say, ``Yes,
I know, and for me to work on that is financial suicide.'' So,
we have to change the way that we pay them.
There are absolutely things within the Affordable Care Act.
The investments in community health centers, in the National
Health Service Corps, in patient centers, Malcomb Home Demos
within Medicare, changing the way that hospitals get paid. We
need that kind of Federal leadership so that we can tell the
commercial health insurers, Do the same thing in the States.
That's how we get at the underlying costs.
Senator Reed. Again, I thank you. My time's expired.
I thank the Chairman and Ranking Member. This has been a
very informative hearing; and I particularly want to thank you,
Chris, for joining us; and to all the witnesses, for your
firsthand testimony.
And, go, go, Cuskers? Is that the right term?
Ms. Schlichting. Go, Big Red.
Senator Reed. Go, Big Red, OK. All right, take care.
The Chairman. Big Red. I just want to clear up one thing,
if you don't mind:
Mr. Koller, you said that 6 percent went to primary care;
is that 6 percent of the premium dollar?
Mr. Koller. Six percent of the premium dollar goes,
actually, it's even less than the premium dollar, because it's
6 percent of medical expenses. So, it's 6 percent of the 80 or
85 or 80 percent goes to primary care over time, and yet--it
has to be absolutely at the core of any kind of delivery system
reform.
I would say, Senator Enzi, to your point: My brother and I
have spirited conversations about the difference between Rhode
Island and Wyoming, and the fact that you can fit the entire
State of Rhode Island into one of the counties up there. But I
have this healthy respect for the importance of flexibility in
terms of how States implement this.
They recognize, in Wyoming, and any place, the importance
of primary care.
That doesn't change. That's not something that we can be
flexible about.
The Chairman. Senator Franken.
Senator Franken. Thank you, Mr. Chairman.
Thank you, all of you, for your testimony; Ms. Grasshoff
for your testimony about your son, Joshua; Ms. Schlichting, for
speaking about the importance of what we're doing in terms of
not discriminating against people with preexisting conditions;
Ms. Grasshoff about the importance of lifetime caps.
Commissioner Koller, Rhode Island can fit into most
States--counties, OK?
[Laughter.]
So, give it up about Wyoming.
Mr. Olivo, thank you for your testimony. My dad worked for
a great printing company for 30 years, in Minneapolis, Johnson
Printing, as a printing salesman. We got our health insurance
through Johnson Printing. We got great health insurance for our
family.
Your testimony about the 1099s, both here and in your
written testimony, this is why I've co-sponsored an amendment
or bill to actually get rid of that burden; and I think we
will.
So, thank you, and thank you for contributing to our
understanding of that.
Now, you wrote in your written testimony, that your health
care insurance premiums increased by an average of 20 percent a
year over the last 17 years; is that right?
Mr. Olivo. That's correct, and what I mean by that, is, for
renewing the same type of policy, it would typically come in,
on the average, around 20 percent over a 10-year period.
Senator Franken. OK. Over a 10-year period.
Mr. Olivo. Annually.
Senator Franken. Annually, OK, that's what I was looking
at.
That happened when there was no health care reform at that
point.
Now, what if I told you that monthly premiums for
Massachusetts's businesses, after they passed their health care
reform, which mandates the same stuff that this mandates, that
the average monthly premiums rose, on an average of 6.9 percent
from 2006 to 2007, and by 5 percent from 2007 to 2008? Would
that be better than the 20 percent that you're----
Mr. Olivo. From simple economics, that would be better,
certainly.
Senator Franken. OK. That's what happened.
What if I told you that in Massachusetts, after they
imposed the mandate that a percentage of Massachusetts
employers who offer health insurance to employees, has
increased to 76 percent from 70 percent, while during the same
period, nationally, it declined from 68 percent to 60 percent
during the same period; might that give you some hope?
Mr. Olivo. Once again, coming from New Jersey where I've
heard these tale of mandates and for 18, 19 years, saying,
we're going to mandate and legislate--we're going to legislate
our way toward lower premiums, I haven't seen it happen in my
experience where that's to be the case.
Senator Franken. But, the Massachusetts mandate is almost
exactly, precisely what the national mandate is.
And, do you understand for someone like Ms. Schlichting, if
there wasn't a mandate, that it would be impossible to provide
protection for people with preexisting conditions because then
only people with preexisting conditions would get health care?
There would be no reason to get health care until you got sick;
right?
Mr. Olivo. I certainly understand that. From my point of
view--and keeping in mind I'm a small business owner who pays
100 percent of my employees' premiums.
Senator Franken. Right.
Mr. Olivo. I'm worried about telling my employees, I can't
afford your position anymore because of the new health care
law. So, I'm well aware and I understand the problems. I'm just
concerned for my own employees right now.
Senator Franken. I'm sorry. I'm sorry. Why do you provide
health insurance, you're not mandated to do so, for your
employees?
Mr. Olivo. Like any other expense, I look at it as an
investment. I've chosen to invest in my employees this way; I
think it's a good investment. I wouldn't presume to tell
another business owner how they should invest. I would
definitely say, by choosing to do this, it has affected my
business' ability to grow, because I choose to forego other
investments that could grow my capital, because I've chosen to
do this for my employees.
Senator Franken. But, you feel it's better for your
business.
Mr. Olivo. For me, personally, it is.
Senator Franken. OK.
Mr. Olivo. I think it's good business for me.
Senator Franken. OK. So, now, suddenly, when there was a
penalty that you'd have to pay if you dropped them, why would
that incentivize you more to drop them than you've had before?
That doesn't quite add up to me.
Mr. Olivo. My competition begins doing it, and that's a
very real possibility; and they all of a sudden have a less-
expensive expense structure and are gaining profitability,
where I don't have it. It's natural capitalization at work--
it's something where I can't ignore because it will negatively
affect my company's ability to have my employees further
prosper.
Senator Franken. I understand. And, you're aware in
Massachusetts there is a penalty, and it very much parallels
this bill, and yet, contrary to the rest of the country, since
Massachusetts has adopted its mandate, more companies, more
employers are insuring their employees in complete opposition
to the rate in which it goes in the rest of the country, which
is less companies have--a lower percentage of which have been
insuring their employees in a way that would then mean that you
don't have to compete; you'd have to compete against fewer
companies that weren't insuring their employees.
So, it would help your competitive advantage, considering
that you're already someone who does the right thing; and I
applaud you for that.
Mr. Olivo. I've read things about Massachusetts that aren't
working out well. I live in New Jersey, I don't know enough
about Massachusetts to really comment on it; I could just say
as a small-business owner, with the way this legislation is set
up right now, I only see rising cost to my company. I don't see
where I'm going to gain lesser expense.
Whether that may happen and time bears it out, that could
be. I just don't see it.
Senator Franken. OK.
Thank you, really all of you, for coming today. My time has
expired.
The Chairman. Thank you very much, Senator.
I thank, again, all of our panelists who are here, for
their very personal and poignant testimonies, for their
professional testimonies, and also how this is affecting small
businesses, who are really the people that employ most
Americans.
I agree that we're going to do something about the 1099.
I've said many times before on this Health Reform bill, these
are not the Ten Commandments written in stone; it's the law;
it's the law that's in effect. Laws get changed. We modify
things as time and circumstances, and as information comes to
us.
I've often referred to the Health Care Reform bill as a
starter home. It's got a pretty good foundation; it's got a
pretty good roof, but maybe there are some other things that
need to be filled in and built into it.
That's why sessions like this are, I think, important for
us to hear from people about some of the good things, or maybe
some of the questions that people have that we should be paying
attention to, as we move ahead, as we probably modify, change
things as we move into the future.
Again, I thank you all very much for being here, and thanks
for your excellent testimony.
If there's no other business, the committee will stand
adjourned.
[Additional material follows.]
ADDITIONAL MATERIAL
Prepared Statement of Senator Mikulski
Chairman Harkin, I thank you for organizing today's hearing
that focuses on the consumer protections in the Affordable Care
Act. I support the health care reform law and I am proud of the
benefits that this law gives to Americans.
The Marylanders I hear from every day tell me this law
helps them and their families. Health care reform saves lives
and saves money. It puts more dollars in families' pockets and
not into insurance company's profits.
While this law is not perfect, it gets a lot of things
right. It ends gender discrimination so that a woman isn't
charged 30 to 40 percent more in health insurance premiums
simply for being a woman. It holds insurance companies
accountable for spending money on quality health care instead
of padding their bottom lines. Companies must now spend at
least 80 percent of premiums on health care services such as
mammograms and prescription drugs.
Insurance companies can no longer deny insurance coverage
because someone has a preexisting condition like asthma. In
eight States, being a victim of domestic violence was
considered a preexisting condition. This law puts a stop to
that. Insurance companies can no longer abuse women after they
have been abused by their husbands.
Moms and Dads can breathe a sigh of relief because their
child, who has leukemia, can no longer be denied health
insurance coverage based on a preexisting condition.
Additionally, insurers can no longer place a cap on lifetime
limits and say it costs too much to treat a child with cancer.
Today we are going to hear from Americans who are
benefiting from the health reform law. We will hear how Lisa
Grasshoff 's son, who has von Willebrand's disease, will no
longer have to worry about exceeding lifetime limits. Lisa's
insurer must now pay for her son's hemophilia care instead of
denying coverage when her family hits the lifetime limit, which
can happen pretty fast when you get really sick.
I have also heard from parents in my own State of Maryland,
like a woman who wrote to me named Maryanne. She has kids who
are 22 and 24 years old. The Affordable Care Act lets children
and young adults stay on their parents' health insurance until
they are 26. Without these protections, people like Maryanne's
kids would be without health insurance. Health care reform
reduces the fear families have about providing medical care to
their loved ones. Maryanne told me ``It's taken America too
long to finally do something about health care reform. Please
do not allow it to become undone.''
I am proud of what we accomplished in health reform. Health
care reform saves and strengthens Medicare. It ends the
punitive practices of insurance companies. It provides
universal access to health insurance. I am particularly proud
that this law will also improve the quality of our health care
and that we made significant investments in preventive care and
public health.
I thank the witnesses for being here today and look forward
to hearing from all of them.
Responses to Questions of Senator Enzi, Senator Alexander,
Senator Roberts and Senator Hatch by Secretary Sebelius
senator enzi
oversight
Question 1. Congress has an obligation to conduct oversight of
Federal agencies, to ensure there is transparency in our government and
that Federal dollars are used as Congress intended. In order to fulfill
this duty, my office and other congressional offices have written a
number of letters to you asking for information on issues regarding
health care reform implementation and other issues of importance at
your agency. The answers we have received, however, are often very late
and they rarely adequately address the issue in question.
For example, a letter from 30 Senators asking about your plans for
setting up high-risk pools was sent last year on June 22, yet we did
not receive a response until September 22d--a full 85 days beyond the
date a response was requested. In nearly every other case, HHS was late
in responding or in some instances may have ignored the request.
We need to have a better flow of information and better response
rate from the Department. During your confirmation hearing in 2009, I
believe you personally committed to being responsive to Senators from
both parties. What do you plan on doing to ensure that HHS is
responding to congressional requests in a more accurate, thorough and
timely manner?
Listed below are information requests that HHS either has not
answered, or provided an incomplete response. When can I expect a
response to the outstanding letters and who on your staff will be
responsible for meeting that commitment so that my staff can speak to
them?
----------------------------------------------------------------------------------------------------------------
Date Sent Letter Description Deadline Status
----------------------------------------------------------------------------------------------------------------
1/11/2010............................ The committee sent a 19-Jan-10.............. Incomplete response
letter to Secretary received 156 days past
Sebelius regarding date requested.
the failure to
disclose a $400,000
contract with HHS
consultant and MIT
Professor Dr. Gruber.
Dr. Gruber has been
one of the
Administration's
foremost sources of
economic analysis in
support of their
health care proposals.
3/26/2010............................ The committee sent a 8-Apr-10............... No response; currently
letter requesting 307 days past date
information relating requested (As of
to non-confirmed February 9, 2011).
appointees serving
under the HELP
Committee's
jurisdiction.
Information requested
includes a list of
consultants hired
since Jan. 20, 2009, a
list of all non -
career Senior
Executive Service
(SES) and Schedule C
appointees, and
quarterly updates.
4/22/2010............................ Senators Enzi, Burr and 14-May-10.............. Insufficient response
Coburn sent a letter received 53 days past
to Secretary Sebelius date requested.
requesting information
on what HHS is doing
to address the AIDS
Drug Assistance
Program (ADAP) waiting
lists, if statutory
authority is needed to
provide greater
flexibility, and
whether remaining
stimulus funds will be
used to help minimize
ADAP waiting lists.
4/26/2010............................ An oversight letter was 15-May-10.............. Insufficient response
sent to HRSA, which received 69 days past
administers the Ryan date requested.
White program, to
express concern over a
February 2010
regulation that
rescinded the 24 month
cap on emergency
housing assistance.
The letter requested
documentation on the
Administration's
reasoning for
rescinding the program
cap as well as
information detailing
the amount of funding
awarded for emergency
housing between 2000
and 2009.
5/27/2010............................ A letter was sent to 11-Jun-10.............. Response received 28
Secretary Sebelius days past date
relating to the mailer requested.
sent by the Centers
for Medicare and
Medicaid Services to
40 million seniors
touting the benefits
of health care reform.
The letter requests
more information on
who reviewed the new
mailer as well as its
cost to taxpayers.
6/22/2010............................ Senator Enzi and 30 30-Jun-10.............. Incomplete response
other GOP Senators received 85 days past
sent a letter to date requested.
Secretary Sebelius
asking about how the
funding for the high
risk pool program will
work, and what will
happen when it runs
out.
7/22/2010............................ Senators Enzi and 6-Aug-10............... Response received 49
Grassley sent a letter days past date
to Secretary Sebelius requested.
asking for an analysis
of the
Administration's claim
that certain health
insurance reforms
would lead to a
cumulative increase in
health insurance
premiums of likely
less than 1 percent.
The letter requests
actuarial studies
conducted by HHS and
poses several
questions about the
reasoning and
methodology they used
to arrive at their
estimate.
7/29/2010............................ Senator Enzi and other 16-Aug-10.............. Response received 85
HELP Republicans sent days past date
a letter requesting requested.
information about the
$25 million
reallocation of funds
for Ryan White ADAP
waiting lists.
7/29/2010............................ An oversight letter was 12-Aug-10.............. Response received 95
sent to Secretary days past date
Sebelius requesting requested.
information on HRSA's
ability to
effectively oversee
programs under its
jurisdiction and the
additional $250
million of funding
received under the new
health care reform
law. There are
allegations that 25
percent of all HRSA
program grantees are
on restrictive draw
down plans.
----------------------------------------------------------------------------------------------------------------
Answer 1. I take Congressional oversight very seriously and it is
key to informed policymaking by the legislative branch. I have directed
my staff to be forthcoming and as helpful as possible to Congress. I
have stressed that we need to be prompt and timely in our responses,
but we do want to make sure that we provide you with accurate
information. Sometimes that process can require additional time and
effort on the part of our staff. As far as I am aware, we have provided
you with accurate and complete information. However, I will take a look
at the requests you have identified and make sure that we have followed
up appropriately.
jobs
Question 2. In your testimony, you noted that the new law is
strengthening the economy. Please specifically identify what new jobs
you believe the new health care law has created?
Answer 2. The Affordable Care Act includes tax credits to help make
health care affordable for working families. Small businesses can begin
claiming tax credits to help provide insurance to their employees this
year. All told, the Affordable Care Act includes the largest middle-
class tax cut for health care in American history. The law lowers costs
for American businesses--especially small businesses--who are
struggling to remain profitable and competitive under the status quo.
The independent Congressional Budget Office confirmed that the law
would lower health insurance premiums by up to 2 percent for small
businesses and 3 percent for large businesses, and the Business
Roundtable estimated that provisions to help bend the health care cost
curve like those in the law could save $3,000 per person in health
costs by 2019. Additionally, independent experts predict that the new
law will create jobs--estimated at more than 250,000 per year.
Question 3. In recent testimony before the House Budget Committee,
CBO Director Elmendorf indicated that CBO estimates that the new health
care law will reduce the number of full-time workers by 800,000 by the
time the law is fully implemented. Do you disagree with the CBO
analysis, and if so, what data do you possess that supports this
belief?
Answer 3. The CBO report says,
``The Congressional Budget Office (CBO) estimates that the
legislation, on net, will reduce the amount of labor used in
the economy by a small amount--roughly half a percent--
primarily by reducing the amount of labor that workers choose
to supply. That net effect reflects changes in incentives in
the labor market that operate in both directions: Some
provisions of the legislation will discourage people from
working more hours or entering the workforce, and other
provisions will encourage them to work more. Moreover, many
people will be unaffected by those provisions and will face the
same incentives regarding work as they do under current law.''
Question 4. Has the Department or the Office of Management and
Budget calculated how many agents and brokers will likely lose their
jobs as a result of the new insurance regulations proposed by your
department?
Answer 4. None of the Affordable Care Act regulations take away
Americans' ability to continue to buy coverage through an agent or
broker. The medical loss ratio (MLR) rule, however, does ensure
consumers are receiving value for their premiums by requiring insurance
companies offering coverage in the individual market to spend at least
80 cents of every dollar on medical claims and quality improvement
activities, not on administrative expenses like overhead and salaries.
Insurers also have to report how much of their premium dollars are
spent on agent and broker commissions. Separating broker fees and
insurance premiums enables consumers to see exactly what percentage of
their premiums is going toward their health care, and protects them
from being charged higher premiums to cover an excessive share of non-
health care expenses.
Question 5. According to the Congressional Budget Office,
``Requiring employers to offer health insurance--or pay a fee if they
do not--is likely to reduce employment.'' Do you dispute the validity
of this analysis? How do you believe employers will respond to the $52
billion in new taxes on employers imposed by the new health care law?
Answer 5. The Affordable Care Act makes American businesses more
competitive by reforming our broken health care system, taking steps to
control health care costs, and helping to eliminate the ``hidden tax''
that drives up the price of employer-based health insurance to cover
the cost of care for the uninsured. The law also ensures that Americans
who work for employers that do not offer coverage still have access to
affordable, high-quality health insurance. In fact the Congressional
Budget Office emphasizes that the Affordable Care Act will ``encourage
other workers to take jobs that better match their skills, because they
would not have to stay in less desirable jobs solely to maintain their
health insurance.'' Further, independent experts predict that the new
law will create jobs--estimated at more than 250,000 per year.
costs
Question 6. In your testimony, you estimate that a family of four
earning $55,000 a year will save nearly $6,000 each year as a result of
the tax credits. What percentage of Americans will actually be eligible
for these tax credits?
Answer 6. The Congressional Budget Office estimates that in 2019,
19 million Americans will receive tax credits to purchase coverage in
the Exchanges.
Question 7. Your testimony suggested the medical loss ratio
regulation will increase value for consumers. But most consumers are
more concerned about health care costs. Do you have any independent
empirical analysis that demonstrates that the medical loss ratio
regulation will lower costs?
Answer 7. The MLR regulation is designed to ensure that consumers
are getting value for their health care dollar. The regulation was
issued late last year, but we are already seeing indications that this
provision, in conjunction with the Affordable Care Act's rate review
provision, is causing insurance companies to think twice about their
premium increases and, in some cases, reducing the size of their annual
premium increases. For example, for the second time in a year we have
seen insurers in California reduce or delay planned rate increases.
Question 8. Please identify any independent empirical analysis that
you are aware of that demonstrates that the rate review regulation will
lower health care costs?
Answer 8. Disclosing proposed rate increases, along with the
insurer's justification, will shed light on industry pricing practices
that some experts believe have led to unnecessarily high prices. This
unprecedented new transparency in the health insurance market will
promote competition, encourage insurers to do more to control health
care costs and discourage insurers from charging rates which are
unjustified. Importantly, we know rate review works. For example,
Connecticut regulators recently rejected a proposed 20 percent rate
increase after their review found that such an increase would be
excessive.
consequences of the new law
Question 9. In the preexisting condition exclusion interim final
rule, the Administration notes:
``There are two main categories of children who are most
likely to be directly affected by these interim final
regulations: First, children who have a preexisting condition
and who are uninsured; second, children who are covered by
individual insurance with a rider excluding coverage for a
preexisting condition or a preexisting condition exclusion
period. For the latter category, obtaining coverage for the
preexisting condition may require terminating the child's
existing policy and beginning a new one.''
The regulation also estimates there are 90,000 children in the latter
category.
Of these 90,000 children the Department estimates will benefit from
the new law, how many live in 1 of the 20 States in which there are no
carriers selling new child only health plans? How can parents of these
children consider terminating the child's existing policy if they live
in 1 of the 20 States in which there are no new child-only policies
available?
Answer 9. In March 2010, the insurance industry said they wanted to
make discriminating against children with preexisting conditions a
thing of the past. Several months later, they reneged on their
commitment and unfortunately, some insurance companies made the
unfortunate decision to stop selling child-only insurance policies. We
stand ready to work with States and private insurers to facilitate
their ability to offer child-only health care policies. Already we have
offered to work with States and private plans to have special open
seasons and have advised them of other options available to limit
adverse selection, such as adjusting rates for health status or
permitting child-only rates to be different from rates for dependent
children, consistent with State law. We hope that insurers in the
affected States will examine all of the flexibility available to them
to continue to offer child-only policies and reconsider their decision
not to offer child-only policies.
Additionally, CCIIO will continue its work to ensure that
Preexisting Condition Insurance Plans (PCIPs) in all States offer
viable coverage for children. The PCIP program includes coverage of
pediatric benefits, prescription drugs, and inpatient, outpatient, and
mental health services. In States where the Federal Government runs the
PCIP program, one way uninsured children with preexisting conditions
can qualify for PCIP is if they are offered a commercial insurance
policy at a premium at least twice as expensive as what they would pay
in PCIP in lieu of a denial of coverage by an insurer.
Question 10. In your testimony, you mention 5,000 unions, local
governments, and businesses have signed up for the early retiree
reinsurance program. Please provide a detailed accounting of who these
entities are, which have filed claims, how many claims have been paid
and how much of the original $5 billion allocated for the program has
already been spent?
Answer 10. HHS has administered the Early Retiree Reinsurance
Program (ERRP) with a great deal of transparency, and all of this
information is publicly available on our Web site. On March 31, we
published a report announcing that the program has provided more than
1,300 employers across all 50 States with nearly $1.8 billion in
reimbursements. The report details reimbursements received by each
participating plan sponsor, and is available here: http://
cciio.cms.gov/resources/files/errp_progress_report_3_31_11.pdf.
A March 2, 2010 report providing additional information can be
found here: http://www.healthcare.gov/center/reports/
retirement03022011a.pdf.
In addition, the ERRP page of healthcare.gov contains a searchable
list of approved plan sponsors by State. The page is directly linked
here: http://www.healthcare.gov/law/provisions/retirement.
Question 11. Please provide the most recently collected enrollment
data by State for the new high-risk pool program authorized in PPACA,
including the 23 States in which the Federal Government has contracted
with the Government Employees Health Association (GEHA) to run the
program.
Answer 11. Based on data reported as of February 1, 2011, PCIP had
12,437 members. Of these, 8,762 were enrolled in State-run PCIPs and
3,675 were enrolled in the federally run PCIP.\1\
---------------------------------------------------------------------------
\1\ [Note: We should have updated numbers soon.]
Question 12. Please provide a detailed accounting of how the
Department has spent the $5 billion allocated for the new high-risk
pool program, separately identifying the amounts provided to each State
and the funds spent on advertising.
Answer 12. This is still being determined.
Question 13. How many entities have applied for waivers from the
annual benefit limit requirement? How many of the applications were
accepted by HHS? How many of the applications were denied by HHS?
Please also provide a list of all of the names of the entities that
have applied for waivers and the current status of their applications.
Answer 13. As of April 1, 2011 a total of 1,168 annual limit waiver
applications had been granted. As of February 19, 2011, 79 applicants
were initially denied. Applicants that were denied a waiver were
informed of their ability to seek a reconsideration of CCIIO's
determination. Some applicants that have asked for reconsideration have
been subsequently approved. An updated list of approved applications by
plan type can be found on CCIIO's Web site here: http://cciio.cms.gov/
resources/files/approved_applications_for_waiver.html.
Question 14. Please describe the process that the Department has
used to determine whether to grant a waiver from the annual benefit
limit requirement. As part of this answer, please identify the criteria
that are used to assess the merits of the request, as well as the
policies and procedures that are used by your staff to make waiver
determinations. Please identify which individuals within the Department
are responsible for making these determinations, the role the HHS
General Counsel in reviewing these decisions, and any processes that
are being used to ensure that the waivers are issued in a manner that
is consistent with the policies and procedures described above.
Answer 14. Information on the waiver process is available in our
guidance, here: http://cciio.cms.gov/resources/files/ociio_2010-
1_20100903_508.pdf.
Question 15. Have any entities or health plans been issued waivers
exempting them from any requirements included in PPACA (other than the
waivers that have been issued exempting plans from meeting the annual
benefit limits)? Does HHS intend to issue waivers exempting any
entities from any other requirements included in PPACA?
Answer 15. As you note, as of April 1, 2011, 1,168 group health
plans or health insurance issuers had received 1-year waivers from the
restricted annual limits provision, consistent with the Secretary's
responsibilities under the statute.
The Affordable Care Act permits an adjustment to the Medical Loss
Ratio (MLR) standard for a State's individual health insurance market
for up to 3 years if it is determined that applying the 80 percent MLR
standard ``may destabilize the individual market in such State.'' In
order to qualify for this adjustment, a State must demonstrate that
requiring insurers in its individual market to meet the 80 percent MLR
has a reasonable likelihood of destabilizing the State's individual
insurance market and could result in fewer choices for consumers. Under
this standard, HHS accepted the Maine Bureau of Insurance request for
an adjustment to 65 percent for 2011 and 2012. HHS will allow the
adjustment to continue through 2013, as Maine requested, if the State
provides additional data at the end of 2012 to support a third year of
the adjustment to 65 percent.
prevention fund
Question 16. The new health care law established a Prevention and
Public Health Fund (PPHF), which will provide $15 billion over the next
10 years for prevention, wellness and public health activities. Recent
HHS press releases indicated that $500 million was allocated from this
fund last year for these activities and $750 million will be spent this
year.
Please provide a detailed accounting of how these funds have been
spent. As part of your answer, please provide the names of all entities
that have received funds, the amounts they received, the stated purpose
for which the funds are to be used and the agencies within HHS that
actually dispersed the funds.
Answer 16. Attached please find spreadsheets that display a
detailed accounting of how HHS obligated the $500 million from the FY
2010 Prevention and Public Health Fund (PPHF). The financial
information displayed represents the most current available as of March
2011. The attached spreadsheets are organized based upon the agencies
that awarded the funds \2\:
---------------------------------------------------------------------------
\2\ [Note: These charts may be found in the attached pdf
documents].
HRSA: 1 summary spreadsheet, 5 program-specific
spreadsheets showing obligations of PPHF funds.
CDC: 1 spreadsheet showing obligations for PPHF-funded
programs by grant mechanism (data pulled between 12-1-2010 and 2-9-
2011), 1 spreadsheet that describes the program funded by each grant
mechanism.
OS: 2 spreadsheets--1 displays ASPA and ASPE programs, 1
displays OASH programs funded with the PPHF.
SAMHSA: 1 spreadsheet showing all awards under the Primary
and Behavioral Health Integration program.
AHRQ: 1 spreadsheet showing PPHF funds obligated for the
U.S. Preventive Services Task Force and Healthy Weight Practice-Based
Research Networks.
As of March 23, 2011, HHS has not obligated any of the proposed
$750 million from the FY 2011 Prevention and Public Health Fund.
Question 17. Please describe the process that the Department has
used to determine the eligibility of an entity to receive funds from
the PPHF. As part of this answer, please identify the criteria that are
used to assess applications, the policies and procedures used to
determine eligibility and the amount of funding to be provided to an
entity, and whether the process used to make determinations was a
competitive one. Please also identify. Please identify which
individuals within the Department are responsible for making these
determinations, how input from stakeholders is collected and used in
this process, the role the HHS General Counsel in reviewing these
determinations, and any processes that are being used to ensure that
all determinations are made in a manner that is consistent with the
policies and procedures described above.
Answer 17. The Affordable Care Act states that the purpose of the
Prevention and Public Health Fund is for an ``expanded and sustained
national investment in prevention and public health programs that will
improve health and help restrain the rate of growth in private and
public sector health care costs.'' The resources from the Fund serve as
a funding source for many existing HHS programs and new programs that
meet this purpose, and the Fund does not have its own eligibility
criteria. Generally, across the range of HHS programs funded with
Prevention and Public Health Fund resources, grants supported by the
Fund are available to universities, States and local governments,
professional health organizations, tribal organizations, community and
faith-based organizations.
Each agency's program has its own eligibility requirements, and the
funding opportunity announcements (FOAs) for each program, which are
posted on the respective operating division's Web site and on
grants.gov, describe in full detail the purpose of the award,
eligibility requirements, estimated award amount(s), application
deadline, and method of selection. As with other HHS grant programs,
applications that meet the eligibility requirements and are responsive
to the FOA are reviewed and scored by an objective review panel based
on the criteria published in the FOA. The review panels are comprised
of experts knowledgeable in the relevant field. Applications for awards
that support research are reviewed for both scientific merit and
programmatic conformance. Awards are made according to rank score,
additional published criteria, if any, and the availability of funds.
After all selections have been made, organizations whose applications
were reviewed but not funded will be notified of their status. An
application will remain active for 1 year from the date of
notification.
HHS General Counsel reviews all funding opportunity announcements
related to programs supported by the Prevention and Public Health Fund
and ensures that all awardee determinations comply with standard HHS
policies and procedures as well as the laws governing grant authority.
Question 18. As you prepare to spend the $750 million allocated for
distribution this year, please identify the criteria that will be used
to determine the most effective prevention and public health activities
to fund, how funding will be distributed among prevention and public
health activities, and whether geographic and demographic
characteristics were used to determine program funding.
Answer 18. The Prevention and Public Health Fund offers HHS the
opportunity to fund the best evidence-based interventions. The
Affordable Care Act authorizes the award of funds to programs that
provide for an expanded and sustained national investment in prevention
and public health improvement. We have engaged in a constructive
dialogue within the Administration and Congress on specific, high-
impact investments that can make a difference in the health of
Americans. By investing in State and local public health infrastructure
and community efforts to implement proven prevention programs, we can
make a significant impact on the leading causes of death.
Because of the Prevention and Public Health Fund, businesses,
schools and other educational institutions, State and local
governments, and non-profits have received the much-needed financial
investment for programs such as tobacco cessation, obesity prevention,
and increasing the primary care and public health workforce. In several
cases, geographic and/or demographic characteristics were used to
determine program funding based on population size, burden of disease,
and ability to reduce health disparities and/or achieve positive health
outcomes.
For fiscal year 2011, building on the initial investment of fiscal
year 2010, new funds are dedicated to expanding on four critical
priorities:
1. Community Prevention ($298 million): The initiative supports
community prevention activities that we know will work to reduce health
care costs and promote health and wellness.
Community and State Prevention ($222 million).
Implement the Community Transformation Grant program and
strengthen other programs to support State and community
initiatives to use evidence-based interventions to prevent
heart attacks, strokes, cancer and other conditions by reducing
tobacco use, preventing obesity, and reducing health
disparities. Launch a consolidated chronic disease prevention
grant program.
Tobacco Prevention ($60 million). Implement anti-
tobacco media campaigns which are proven to work to reduce
tobacco use, telephone-based tobacco cessation services, and
outreach programs targeting vulnerable populations, consistent
with HHS' Tobacco Control Strategic Action Plan.
Obesity Prevention and Fitness ($16 million). Advance
activities to improve nutrition and increase physical activity
to promote healthy lifestyles and reduce obesity-related
conditions and costs. These activities will support the First
Lady's ``Let's Move!'' initiative and help implement
recommendations of the President's Childhood Obesity Task
Force.
2. Clinical Prevention ($182 million): The initiative supports
clinical preventive services that we know will work to reduce health
care costs and promote health and wellness.
Access to Critical Wellness and Preventive Health
Services ($112 million). Increase awareness of new preventive
benefits made available by the Affordable Care Act. Expand
immunization services and activities. Strengthen employer
participation in wellness programs.
Behavioral Health Screening and Integration with
Primary Health ($70 million). Assist communities with the
coordination and integration of primary care services into
publicly funded community mental health and other community-
based behavioral health settings. Expand suicide prevention
activities and screenings for substance use disorders.
3. Public Health Infrastructure and Training ($137 million): The
allocation strengthens State and local capacity to prepare health
departments to meet 21st century challenges.
Public Health Infrastructure ($40 million). Support
State, local, and tribal public health infrastructure to
advance health promotion and disease prevention through
improved information technology, workforce training, and policy
development.
Public Health Workforce ($45 million). Support
training of public health providers to advance preventive
medicine, health promotion and disease prevention,
epidemiology, and improve the access to and quality of health
services in medically underserved communities.
Public Health Capacity ($52 million). Build State and
local capacity to prevent, detect, and respond to infectious
disease outbreaks through improved epidemiology and laboratory
capacity. Increase investments in programs that prevent
healthcare associated infections.
4. Research and Tracking ($133 million): The initiative supports
the Affordable Care Act's expansion of coverage for community and
clinical preventive services by increasing resources for research and
evaluation of preventive services.
Health Care Surveillance and Planning ($84 million).
Fund data collection and analysis to monitor the impact of the
Affordable Care Act on the health of Americans. Boost the
collection and analysis of environmental hazards data to
protect the health of communities.
Prevention Research ($49 million). Strengthen the
CDC-facilitated Community Guide by supporting the Task Force on
Community Preventive Services' efforts to identify and
disseminate evidence-based recommendations on important public
health challenges to inform practitioners, educators, and other
decisionmakers. Expand the development of recommendations for
clinical preventive services, with enhanced transparency and
public involvement in the processes of the U.S. Preventive
Services Task Force. Fund cross cutting public health research
studies.
Question 19. Please describe how, on an ongoing basis, the
Department will inform the public and Congress about how the PPHF funds
are used.
Answer 19. Information will be publicly available on an ongoing
basis which will detail how the PPHF funds are used. As is our usual
practice, as grants are awarded, HHS will relay that information via
press releases and fact sheets on the various agencies' Web sites,
www.hhs.gov and/or www.healthcare.gov. Information regarding the State-
by-State breakdown of the fiscal year 2010 PPHF funds is already
available on the Web site as is information regarding the categories of
fiscal year 2011 PPHF dollars. For more information, visit http://
www.healthcare.gov/news/factsheets/prevention02092011a.html and http://
www.healthcare.gov/news/factsheets/prevention02092011b.html.
Interested parties may also contact Grants Management Specialists
in the various Operating Divisions to formally request this
information. In addition, there are useful Web sites that provide
additional information. For example, the Computer Retrieval of
Information on Scientific Projects (CRISP) (http://crisp.cit.nih.gov)
is a public Web site that shows funded grants from CDC's IMPAC II
grants management system.
Question 20. Please describe how the Department will measure the
efficacy of the programs funded under Section 4002, specifically with
regard to improving the health outcomes of specific individuals and
reducing health care expenditures.
Answer 20. Recipients of grants funded with Prevention and Public
Health Fund resources are expected to achieve the stated outcomes of
the grant. Awardees will develop evaluation plans to ensure performance
monitoring and tracking of overall progress on outcome objectives as
well as specific progress on activities designed to address the core
objectives of the respective program. In addition, PPHF resources are
available for healthcare surveillance and statistics activities, which
will track the impact of the ACA, such as changes in the health care
system and local, State, and national trends over time. HHS plans to
use measures such as: percentage of adults who smoke cigarettes,
percentage of adults with a healthy weight, percentage of children with
a healthy weight, percentage of infants born at a low-birth weight,
percentage of people receiving seasonal influenza vaccine in the last
12 months, and percentage of people who have a specific source of
ongoing medical care, among others.
community living assistance services and supports act (class act)
Question 21. The CLASS Act was passed as part of the Patient
Protection and Affordable Care Act of 2010. On January 5, you sent a
letter to Congress stating that the CLASS Act programs would be moved
to the Administration on Aging (AOA). The following questions concern
that move and the overall implementation of the CLASS Act.
Is the Administration on Aging (AOA) receiving funds to administer
the program? Are Federal funds being transferred from other previously
appropriated programs, such as Own Your Future and the National Long-
Term Care Clearinghouse, to finance the administrative costs of the
CLASS Act? Please list any programs whose funding has been shifted to
implement the CLASS Act, and for each fiscal year. Please specify
whether these are mandatory or discretionary funds. Please also list
the statutory authority for the use of these funds for the
implementation of the CLASS Act.
Answer 21. The President's fiscal year 2012 Budget requests $120
million in administrative funding for the CLASS program, including
significant investments for the development of a national IT system and
education and outreach to potential participants and employers. The
requested funds will be used to bridge the period between fiscal year
2011 when funding is covered under the Health Reform Implementation
Fund authorized by Section 1005 of P.L. 111-152 and the point at which
administrative funding can be drawn statutorily from premiums received.
For fiscal year 2010 and fiscal year 2011, no AOA funding is being
used to administer CLASS. The program's expenses are being funded
entirely by the Health Reform Implementation Fund. No funding has been
transferred from other programs.
Question 22. Is there expected to be an advertising and/or outreach
campaign for the CLASS Act programs? If so, what is the 10-year budget
for the advertising/outreach campaigns? How will the monies be spent?
Where will the Department of Health and Human Services (HHS) find the
money for the campaign? Please specify whether these are mandatory or
discretionary funds. Please also list the statutory authority for the
use of these funds for the implementation of the CLASS Act.
Answer 22. The CLASS Act is designed to help Americans prepare for
their financial future by offering insurance that will help pay for an
individual's future long-term care needs. The CLASS program is required
by law to maintain solvency over 20 and 75 years. The Department of
Health and Human Services (HHS) will ensure CLASS meets these statutory
requirements, and no taxpayer funds will be used for payment of
benefits. Outreach and education will be crucial components of
achieving the goals of the CLASS program for two reasons. First,
surveys show widespread misunderstanding about the nature of long-term
care costs and the extent to which Medicare pays for these services and
supports. Outreach and education will provide Americans with
information they need to plan responsibly for their own future. Second,
an informed public is more likely to recognize the benefits that CLASS
provides and choose to participate in the program, boosting
participation and improving the fiscal solvency of the program.
The President's fiscal year 2012 Budget requests $120 million in
discretionary appropriations to fund outreach, education and
administration. This funding will be spent pursuant to Title 32 of the
Public Health Service Act.
Question 23. Recently, I was informed that HHS intends to contract
with outside groups, Knowledge Networks and Thompson Reuters, to
conduct a study and surveys on who is purchasing long-term care
insurance and related products. Were these contracts put out for
competitive bid? Will you please supply copies of the contracts?
Answer 23. The Department of Health and Human Services (HHS) will
develop CLASS to meet the program's statutory requirements for solvency
over 20 and 75 years, and no taxpayer funds will be used for the
payment of benefits. HHS is conducting research to increase our
understanding of Americans' attitudes, opinions and knowledge of the
risks of needing long-term care and their likely need for services. The
information will be used to support development of the CLASS benefit.
The contracts to Thompson Reuters and Knowledge Networks were awarded
pursuant to Federal Acquisition Regulations. The Thompson Reuters
contract was awarded through the Department's competitive indefinite
delivery/indefinite quantity (ID/IQ) task order contract mechanism. The
contract to Knowledge Networks was awarded through the GSA Mission
Oriented Business Integrated Services (MOBIS) Schedule (Survey Services
874-3). Copies of these contracts are attached.
Question 24. If surveys were used by these outside groups on behalf
of a study undertaken for HHS, Federal law requires that the surveys of
more than 10 individuals must be approved by the Office of Management
and Budget. Please supply copies of the OMB approval of these surveys
and copies of all surveys used.
Answer 24. All surveys that will be conducted to support CLASS
program development will undergo review by OMB, as required under the
Paperwork Reduction Act (PRA). All information collection requests
(ICRs) submitted by agencies for OMB approval under the PRA can be
found at http://www.reginfo.gov/public/do/PRASearch. OMB has reviewed
and approved one survey that contained questions related to the CLASS
Act. These questions added to HHS/CDC's National Health Interview
Survey (approved by OMB on December 13, 2010) can be found at: http://
www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201009-0920-002.
Question 25. In adhering to the President's commitment to
transparency and abiding by government contract regulations, please
list all studies that have been submitted to OMB for approval in the
last 180 days. Include the estimated cost of the study, the source of
the funding, as well as the organization in charge of its
administration.
Answer 25. No studies have been submitted to OMB for approval.
Question 26. The SCAN Foundation has actively advocated for passage
of the CLASS Act and has awarded grants to help implement the program.
In fulfilling Congress' obligation to conduct routine oversight please
describe the Department's and AOA's relationship and communication with
the Foundation. Does AOA receive any funding or resources from the SCAN
Foundation? If so, please provide a breakdown for each fiscal year. Is
SCAN or any of its employees or representatives currently under
contract or serve as a consultant to HHS?
Answer 26. The SCAN Foundation operates independently and does not
fund any HHS activities. HHS officials and staff meet with
representatives from a range of outside organizations on numerous aging
and long-term care issues; SCAN is among those organizations. No
employees of the SCAN Foundation are under contract with or serve as a
consultant to HHS related to the CLASS Act.
Question 27. Has the Department or AOA hired any staff for the
purposes of running the CLASS Act programs? Please list any employees
or contractors hired for purposes of the CLASS Act and their roles in
implementing the CLASS Act. How many full-time employees does HHS or
AOA anticipate hiring for the implementation of the CLASS Act programs?
Will employees of other Federal agencies be used for the implementation
of the CLASS Act programs?
Answer 27. Yes, currently the CLASS program has a team of 12 full-
time staff. The staff includes program specialists and IT
professionals. The fiscal year 2012 budget request discusses the
Administration on Aging's plans to have approximately 22 full-time
equivalents or FTEs working on the CLASS program in fiscal year 2011.
The fiscal year 2012 budget requests an appropriation to support 40
FTEs in fiscal year 2012.
Question 28. Has the Department of AOA hired an actuary for the
CLASS Act? Pursuant to Section 3203 of the CLASS Act, you shall develop
at least three actuarially sound benefit plans as alternatives for the
CLASS Independence Benefit Plan. Have you consulted with the three
actuaries, and if so, who are the actuaries? Is the actuary for the
Centers of Medicare and Medicaid Services (CMS) one of the three
actuaries? When will the three alternatives be shared with
Congressional Oversight Committees? When will the final decision be
made with respect to which actuarial plan alternative will be the basis
for the CLASS Act implementation? Will you require that each of the
actuarial analyses contain a 75-year analysis?
Answer 28. Yes. AOA/CLASS has hired an actuary, Robert Yee, who has
over 30 years of actuarial and executive experience, including at the
largest provider of private long-term care insurance in the country.
Robust actuarial estimates will be crucial components of achieving the
goals of the CLASS program. The statute requires the development of
three benefit plans. The methods and assumptions that underlie these
plans must be certified by the CMS Actuary.
Question 29. What discussions have taken place between HHS/AOA and
the Department of Treasury regarding the establishment of enrollment
mechanisms for collecting CLASS Act program premiums?
Answer 29. We have had conversations with the Department of
Treasury for advice on how to establish IT systems for accurate and
streamlined collection of premiums. The CLASS program is working on
mechanisms for employers and individuals to pay premiums into the
program, including through third-party payroll processors.
Question 30. What discussions have taken place with States and
related entities and the private sector in the establishment of the
eligibility assessments pursuant to Section 3205 of the CLASS Act?
Answer 30. We have not discussed CLASS eligibility assessment
issues with States. However, we are conducting research on eligibility
assessments currently used in the private long-term care insurance
market, and examining closely the assessment procedures used by State
insurance and Medicaid programs.
Question 31. When will the first premiums be collected pursuant to
the CLASS Act programs? Will the collection of premiums begin prior to
the establishment of the CLASS Independence Benefit Plan? Will the
collection of premiums begin prior to the establishment of enrollment
mechanisms for all entities and individuals? What regulations need to
be finalized before premiums collection commences?
Answer 31. The Department will announce the CLASS plan by October
2012, after considering the recommendation of the CLASS Independence
Advisory Council. Enrollment and premium collection will not begin
until a benefit plan, enrollment mechanisms, and information systems
are established.
Question 32. Recently, you gave a speech to the Kaiser Family
Foundation concerning the CLASS Act. You claimed that the CLASS Act has
loopholes and that it only offers two options for setting premiums and
``[n]either of these options is appealing.'' What loopholes need to be
fixed? Will these require legislative changes? What other options are
you considering for premiums? Will these premium issues require
legislative changes?
Answer 32. We are not seeking legislative changes. As I said in my
speech at the Kaiser Family Foundation, we are taking advantage of the
flexibility allowed us in the statute to structure premiums in order to
keep CLASS solvent.
For example, I will use the flexibility the law allows to ensure
that there are not loopholes in the law that allow people to enroll in
the program and then strategically skip payments yet remain enrolled.
Question 33. In recent years, the Federal Government's own long-
term care insurance programs experienced a serious spike in cost of
premiums to those enrolling in the program. How can you ensure that no
premium spikes will occur with those enrolling in CLASS Act programs?
Will enrollees in CLASS Act programs be given the opportunity to
receive a refund if premium spikes are too high?
Answer 33. We are looking at options for indexing premiums so that
they will rise along with benefits. The indexing system would have to
be completely transparent. That way people can plan ahead without being
surprised by sudden large rate increases.
general
Question 34. States are having a difficult time balancing their
budgets due to restrictive Medicaid maintenance of effort (MOE)
requirements. You recently recommended different strategies for States,
such as purchasing drugs more efficiently, but many of these strategies
have already been employed by States over the past few years to rein in
spending.
How are States supposed to implement new and innovative approaches
in the short term AND long term when they are heavily restricted by the
current MOE requirements?
Answer 34. As a former Governor, I know the difficult budget
pressures facing States. The Administration has a strong track record
on our partnership with States during difficult economic times. Working
with Congress, we increased Federal support for Medicaid, supporting
increased enrollment at the same time when State Medicaid resources
were down. Working again with Congress, we extended the Children's
Health Insurance Program (CHIP) to secure funding into the future. As a
result, in 2009, even though Medicaid enrollment rose because of the
recession, State spending in Medicaid declined by 10 percent.
There are a number of steps States can take to reduce costs and
squeeze waste, fraud and abuse from their programs. On February 3,
2011, I sent a letter to all Governors laying out a broad array of
options already available to them to reduce their spending and balance
their budgets, as well as new ideas that can be accomplished through
existing options or waivers. States have many choices they can make
including limits on some benefits, changes in cost sharing, and greater
use of managed care. A copy of the letter can be found at: http://
www.hhs.gov/news/press/2011pres/01/20110203c.html.
Medicaid cost issues largely reflect the cost issues facing our
health care system as a whole. Like other payers, States can save
considerable dollars by focusing on improving the safety and quality of
care. Efforts to reduce and eliminate unnecessary hospital readmissions
are a great example. Preventing one readmission of a disabled adult
with Medicaid can save enough money to cover three adults without
disabilities for an entire year.
On February 25, 2011, CMS also sent a letter to State Medicaid
directors clarifying situations in which the maintenance of effort
provision does not apply. (Please visit the CMS Web site for a copy of
the letter to States: http://www.cms.gov/smdl/downloads/SMD11001.pdf.)
CMS intends to continue to work with Governors on further exploring
existing flexibility and options to improve Medicaid's performance. CMS
recently created the Medicaid State Technical Advisory Teams (M-STAT)
that are responsible for working directly with States to address steps
they can take to improve efficiency in their programs and develop
effective cost containment strategies.
We are also exploring options such as those that will be proposed
by the National Governor's Association. We continue to work closely
with States on innovative approaches to improve the quality and
efficiency of care provided to high-cost beneficiaries, such as those
eligible for both Medicare and Medicaid (dual eligibles).
Question 35. Medicare Actuary Richard Foster recently wrote that an
additional 5 million or more early retirees may be added to the
Medicaid rolls in 2014 if current adjusted gross income definitions are
maintained. This represents an increase of 25 percent over initial
projections.
How are States expected to respond to these future increases in
costs when the Federal Government is already facing a $14 trillion
national debt and major flexibility is not allowed for the States by
the Federal Government?
Answer 35. I recognize the challenge that the current fiscal
environment has posed for State budgets including the increased
enrollment in Medicaid, which is designed to serve more people during
downturns, as people lose jobs and their job-based coverage. By
providing new Medicaid coverage through the Affordable Care Act, we are
reducing the costs and inefficiencies resulting from the lack of
insurance that plague our health system, and raise costs for all
Americans and businesses in all States.
The Federal Government will pay 100 percent of the Medicaid cost
for the first 3 years for newly eligible adults. After that, the
Federal Government will pay at least 90 percent of the cost of the
expansion. By greatly increasing the number of people with health
insurance, the Affordable Care Act will also help States save money on
other safety net programs and uncompensated care. Many services that
States currently provide for the uninsured and pay for on their own--
like mental health care and hospital treatment--will be matched by
Federal Medicaid funds.
As Secretary, I am committed to working closely with States to
minimize potential financial and administrative burdens of implementing
the Affordable Care Act. For example, some States have calculated that
overall they will not bear any new costs under the law. CMS recently
issued a final rule to provide States with a 90 percent enhanced match
on investments in their IT systems for the design and implementation of
changes to their Medicaid eligibility systems and we are committed to
drive down the overall costs of these investments through shared
technology.
Question 36. While implementing $500 billion in Medicare payment
cuts, please identify how the new health care bill will specifically
decrease costs for patients as competition decreases and the Federal
Government takes a larger role in managing health care in the United
States?
Answer 36. The Affordable Care Act contains numerous new provisions
that are specifically directed at reducing the cost of care.
For example, the Affordable Care Act supports ambitious new efforts
to reduce fraud and waste in the health care system. New authorities in
the Affordable Care Act offer additional front-end protections to keep
those who commit fraud out of Federal health care programs, as well as
new tools for deterring wasteful and fiscally abusive practices,
promptly identifying and addressing fraudulent payment issues, and
ensuring the integrity of our programs.
Another example is the Center for Medicare and Medicaid Innovation.
This new cross-cutting resource for improving care access and
coordination for Medicare, Medicaid, and CHIP beneficiaries will test
and study the most promising innovative payment and service delivery
models. In doing so, the Innovation Center will work collaboratively
with relevant Federal agencies and clinical and analytical experts, as
well as local, national and regional providers, States and beneficiary
organizations to identify and promote systems changes that could
improve quality and outcomes for patients while containing or reducing
costs.
The Affordable Care Act also established a Federal Coordinated
Health Care Office to improve coordination of the care provided to
beneficiaries eligible for both Medicare and Medicaid, also known as
dual eligibles. This population consists of the most vulnerable and
chronically ill beneficiaries, who represent 15 percent of enrollees
and 39 percent of Medicaid expenditures and 16 percent of enrollees and
27 percent of Medicare expenditures. These individuals experience many
challenges obtaining care under the current system. Dual eligibles need
to navigate two separate systems: Medicare for primary coverage of
basic health care services (e.g., preventive, primary, acute, and post-
acute care) and prescription drugs, and Medicaid for wraparound
coverage, including coverage of long-term care supports and services,
and help with Medicare premiums and cost-sharing. The Federal
Coordinated Health Care Office will work to better streamline care for
dual eligibles and partner with States to introduce new integrated care
delivery models that ensure they receive full access to the items and
services that will result in better health care outcomes and lower
overall costs, while reducing duplicative or wasteful care.
Other cost-saving innovations in Medicare and Medicaid include
programs to reduce unnecessary hospital readmissions, reduce and
eliminate healthcare-acquired conditions, and initiate shifts in our
payment systems that, in the long run, will reward quality of care over
quantity of care.
Finally, the Affordable Care Act will reduce premiums by an
estimated 14-20 percent for Americans who buy health insurance on their
own in the new competitive insurance Exchanges. Beginning in 2014, the
law will allow individuals, families, and small business owners to pool
their purchasing power through new State-based Exchanges. Millions will
qualify for tax credits to help them buy coverage through the
Exchanges. Under the new law, it is estimated that a family of four
making about $33,000 could save nearly $10,000 in premiums, beginning
in 2014, if they purchase coverage in the Exchange. A family of four
making $56,000 could save up to $6,000 each year, by purchasing
Exchange coverage. The Affordable Care Act has brought real change to
the health insurance marketplace that has immediately benefited
thousands of Americans, and will improve coverage and provide real
savings for millions more.
Question 37. In December 2010, it was announced that Ohio State
University would receive a $100 million grant for its Radiation
Oncology Center, pursuant to a provision in the new health care law.
Please identify all of the hospital systems that applied for this grant
and the process that was used to determine the winner. Please also
identify which individuals within the Department who were responsible
for making this determination and describe the role of the HHS General
Counsel in reviewing this decision.
Answer 37. Section 10502 of Affordable Care Act provided for a
single grant for up to $100 million for debt services on, or direct
construction or renovation of, a health care facility that provides
research, inpatient tertiary care, or outpatient clinical services.
Eligibility for this award was limited to institutions of higher
education with an academic health center at a public research
university in the United States that contained the State's sole
academic medical and dental school. The funding opportunity was
announced August 18, under Announcement Number: HRSA-11-126.
Potential applicants were invited to ask the Agency questions about
the program guidance and application requirements. HRSA staff, after
consultation with the Office of the General Counsel, responded to
questions via email, telephone, and conference calls, with the
questions and answers then posted on the HRSA Web site as Frequently
Asked Questions for all potential applicants to see.
Eleven applications were received for funding under the
Infrastructure to Expand Access to Care funding opportunity
announcement, four of which were determined by the Agency as not having
met the programmatic eligibility requirements. The remaining seven
applications were deemed eligible.
An external Objective Review Committee was established to evaluate
the eligible applications. The review committee was staffed with non-
Federal persons free of conflicts of interest with expertise in the
areas of: health care administration within an institution of higher
education; health facility construction and design; and capital
finance. After the committee discussed and evaluated each application
on its own merit and based on what was in the application alone, each
member of the Review Committee independently scored that application. A
Federal grants office determined a rank order based on the committee
scores. Consistent with HRSA's grant practices, the applicant with the
highest score, the Ohio State University, was awarded the grant.
senator alexander
Question 1. As a former Governor, I am deeply concerned with the
Medicaid expansion in the new health law. Tennessee's previous Governor
Bredesen, a Democrat, has called it ``the mother of all unfunded
mandates'' and estimated that it will cost Tennessee an additional $1.1
billion for 2014-19, and that is even with the Federal Government
paying 100 percent of the expansion population from 2014-16.
The new law also mandates that Medicaid primary care physicians be
reimbursed at 100 percent of Medicare rates in 2013-14, for which the
Federal Government will pay for those 2 years. But this creates a
funding cliff for 2015. To keep doctors in their programs, States will
either be forced to continue to pay Medicaid primary care physicians
100 percent of Medicare rates, or these physicians will effectively see
a 40-50 percent cut in 2015. According to the TennCare director, the
requirement to increase provider reimbursement to 100 percent of
Medicare would cost Tennessee roughly an additional $324 million per
year.
How are States going to shoulder these additional burdens in the
current budget crises most of them are experiencing? Is the
Administration considering any kind of flexibility options to offer to
States in order to avoid being crushed by all the mandates and
maintenance of effort requirements?
Answer 1. As a former Governor, I know the difficult budget
pressures facing States. The Administration has a strong track record
on our partnership with States during difficult economic times. Working
with Congress, we increased Federal support for Medicaid, supporting
increased enrollment at the same time when State Medicaid resources
were down. Working again with Congress, we extended the Children's
Health Insurance Program (CHIP) to secure funding into the future.
TennCare relies on private managed care companies to provide care
to a Medicaid population--a group that often has special needs and
higher costs. Just 5 percent of Medicaid beneficiaries account for more
than half (55 percent) of all spending. By contrast, 50 percent of
beneficiaries--those with the lowest costs--account for only 5 percent
of spending. To truly get a handle on growing Medicaid costs and to
improve health status overall, we need to help States find ways to
better care for these high cost enrollees, people who often have
multiple chronic conditions or other special health care needs.
The Affordable Care Act includes a number of provisions to help
improve care while lowering costs, such as a Medicaid health home State
plan option and new authorities through the Innovation Center that will
enable States to design and test new care management and care
coordination strategies in both managed care and fee-for-service
contexts.
There are a number of steps States can take to reduce costs and
squeeze waste, fraud and abuse from their programs. I recently sent a
letter to all Governors laying out a broad array of options already
available to them to reduce their spending and balance their budgets,
as well as new ideas that can be accomplished through existing options
or waivers. States have many choices they can make including limits on
some benefits, changes in cost sharing, and greater use of managed
care. States can also save considerable dollars by focusing on
improving the safety and quality of care. I intend to work with
Governors on exploring existing flexibility and options.
Question 2. One of the problems with the Medicaid expansion is that
there is an access problem for patients in the program being unable to
see a doctor willing to treat them. There are varying reports on
providers not willing to see Medicaid patients, like the 2006 report
from the Center for Studying Health System Change Only stating that
about half of U.S. physicians accept new Medicaid patients.
Even the CMS chief actuary stated in an analysis done in April, ``.
. . it is reasonable to expect that a significant portion of the
increased demand for Medicaid would be difficult to meet, particularly
over the first few years.''
By adding 16-18 million more people into the program, what is your
Administration doing to address access issues for all these new
beneficiaries?
Answer 2. As Secretary, I am committed to ensuring access for
Medicaid beneficiaries. A good first step is a provision in the
Affordable Care Act that provides a federally funded boost in payment
rates to primary care physicians for 2 years, which will ensure that
such providers have a strong incentive to serve program beneficiaries.
The Affordable Care Act also takes important and significant steps to
boost the number of primary care providers, including new bonus
payments for primary care in Medicare and new residency slot
allowances.
In addition, the newly formed Medicaid and CHIP Payment and Access
Commission (MACPAC) will also play an important role by providing
research and analysis on provider payment rates and access in the
Medicaid program. We anticipate working closely with them as we do with
MEDPAC.
Question 3. Has HHS done an analysis of how many providers are not
seeing new or any Medicaid patients? If not, can your department look
into this and get back to me?
Answer 3. Ensuring access to care is a key goal of this
Administration, especially as we look ahead to coverage expansions in
2014. In fact, we are currently undertaking rulemaking to help CMS
better ensure that Medicaid beneficiaries can access high quality care
in a timely manner. We expect to have proposed regulations available
for public comment in the spring and would welcome input in this area.
CMS does not currently track rates of provider participation in the
Medicaid program. However, in their March 2011 Report to Congress
(http://www.macpac.gov/reports), the Medicaid and CHIP Payment and
Access Commission (MACPAC) provided selected surveys examining provider
participation in Medicaid and CHIP that may be informative in
understanding current provider participation rates.
Question 4. In your testimony, you mention tax credits as a way
that the law will keep down premiums. I realize that people who receive
the tax credits or subsidies will pay less out of their own pocket for
premiums, but are you saying that these tax credits/subsidies will
bring down the underlying premiums and or the underlying cost of health
care?
Answer 4. The Congressional Budget Office (CBO) produced estimates
of the impact of the Affordable Care Act on premiums, even without the
impact of the tax credits. For people purchasing non-group coverage
through the Exchanges, it estimated savings of 7 to 10 percent
resulting from the increase in the size of the insurance pool as well
as the nature of the new enrollees, many of whom, in light of the
premium tax credits and the individual responsibility provisions, are
likely to be relatively younger, healthier at any given age, and/or
have lower expected utilization of health services. An additional 7 to
10 percent savings would result from providing the same set of services
to the same group of enrollees--primarily because of the new rules in
the market such as eliminating insurance underwriting. CBO also credits
some of the savings to increased choices and competition. Together,
these savings range from 14 to 20 percent.
Question 5. According to estimates from Senate Finance minority tax
staff last year, only 7 percent of Americans would qualify for
subsidies and would see these cost savings. What about everyone else?
Even CBO has said premiums for families buying coverage on the
individual market would see premiums increase by $2,100 a year. Blue
Shield of CA had increases as high as 59 percent--some of that is
directly attributable to the new health care law.
Answer 5. The vast majority of Americans who have health insurance
get coverage through their employer, and that will not change when the
Affordable Care Act is fully implemented. The Congressional Budget
Office (CBO) estimates that premiums for small businesses will be up to
2 percent lower and premiums for large business will be up to 3 percent
lower because of key reforms in the Affordable Care Act. And longer
term reforms in the law will reduce the ``hidden tax'' that drives up
the price of employer-based health insurance to cover the cost of care
for the uninsured.
For Americans that purchase insurance in the individual market,
Exchanges will bring transparency and fairness to a broken system, and
significant tax credits will be available to offset the costs of
coverage. Even without factoring in the impact of the tax credits, CBO
estimates that the cost of comparable coverage in the Exchange will be
14 to 20 percent lower than they would be without the Affordable Care
Act. This translates to savings of an estimated $2,300 per year for
families. CBO also assumed that individuals and families would have, on
average, coverage that is more comprehensive than what they have now,
meaning that the savings would be offset by higher premiums due to
better coverage. It is important to note that this benefit enhancement
is largely a choice, not a requirement.
Question 6. You state in your testimony that the new law ``is
bringing down premiums for consumers by limiting the amount of premiums
insurers may spend on administrative costs and by giving States
resources to beef up their review process.''
How do you square this statement with recent news articles that
some insurers are raising premiums as a result of the new law?
Answer 6. The Affordable Care Act holds insurers accountable and
will help bring down premiums. It ensures every significant health
insurance rate increase will undergo a thorough review and provides
$250 million in grants to States to bolster their rate review process.
For the first time, insurers will be held accountable for the way they
spend consumer premiums. The new medical loss ratio regulations
released last year implement the statutory requirement that insurers
spend at least 80 or 85 percent, depending on the market, of premium
dollars on health care and quality improvement efforts instead of
marketing and CEO bonuses. Those insurers who don't meet the standard
will have two choices: reduce premiums or send rebates to their
customers. There is growing evidence that these provisions are
resulting in reductions in premium increases or withdrawal of rate
increases.
Question 7. PPACA requires insurers to establish a medical loss
ratio (MLR) for 80 percent for individuals and 85 percent for group
coverage plans. Has HHS done premium impact analysis based on this
change? If so, what were your results?
Answer 7. HHS anticipates that the transparency and standardization
of MLR reporting in the interim final regulation will help consumers to
ensure that they receive good value for their premium dollars.
Additionally, the inclusion of activities that improve quality in
calculating the MLR could help to increase the level of investment in
and implementation of effective quality improvement activities, which
could result in improved quality outcomes and lead to a healthier
population. The department estimates that issuers' total one-time
administrative costs related to the MLR reporting, record retention,
and rebate payment and notification requirements represent less than
0.02 percent of their total premiums for accident and health coverage,
and their total annual ongoing administrative costs related to these
requirements represent less than 0.01 percent of their total premiums
for accident and health coverage. Executive Order 12866 also requires
consideration of the ``distributive impacts'' and ``equity'' of a
regulation. As described in the regulatory impact analysis (RIA) for
the MLR regulation this regulatory action will help ensure that issuers
spend at least a specified portion of premium income on reimbursement
for clinical services and quality improving activities and will result
in a decrease in the proportion of health insurance premiums spent on
administration and profit. It will require issuers to pay rebates to
consumers if this standard is not met. Although we are unable to
quantify benefits, the transfers (rebates from issuers to consumers)
could be substantial--estimated monetized rebates of $0.6 billion to
$1.4 billion annually.
Question 8. On June 18, 2010, I sent a letter to the then Centers
for Medicare & Medicaid Services (CMS) Acting Administrator Marilyn
Tavenner in reference to a request made by the American College of
Radiology, the American Society of Radiologic Technologists and the
American Registry of Radiologic Technologists in regard to the
adjustment in supervision levels for Radiologist Practitioner
Assistants and Registered Radiologist Assistants. What action has been
taken in reference to my inquiry?
Answer 8. We appreciate your interest in CMS's policies regarding
supervision levels for services performed by radiology practitioner
assistants (RPAs) and registered radiologist assistants (RRAs).
Currently, RPAs and RRAs may not bill Medicare separately for services
that they provide. However, these services can be covered and paid
under the diagnostic testing benefit category, as long as the
appropriate level of supervision is provided by a qualified physician.
CMS carefully assigns physician supervision levels for diagnostic
testing services, based in large part upon the judgment of our
physician clinical advisors. At this time, CMS does not intend to make
a change in the physician supervision requirements for services
provided by RPAs and RRAs. However, our medical staff reviews these
requirements on an ongoing basis. We are happy to continue to work with
you and your staff on this issue.
Question 9a. I have had several constituents complain about the
2011 Physician Fee Schedule final rule policy requiring physician or
qualified non-physician (NPP) signatures on requisitions for laboratory
tests reimbursed under the clinical laboratory fee schedule. This rule
recently adopted by the Centers for Medicare & Medicaid Services (CMS)
could adversely affect patient care.
Why is CMS now requiring that doctors sign both the medical chart
with the doctor's order and the requisition form for the lab test? What
led CMS to conclude that one signature from the physician was not
enough?
Answer 9a. The action taken in the CY 2011 Physician Fee Schedule
final rule to require a physician's or qualified non-physician
practitioner's (NPP) signature on laboratory requisitions followed
earlier efforts in CY 2009 and CY 2010 to address the confusion that
existed about when a signature was required and for what services. The
requirement was also intended to respond to numerous stakeholder
comments urging a consistent policy across Medicare benefits, since
physician signatures are required for other types of diagnostic
services. At the same time, CMS believed that it would not increase the
burden on physicians because it was the agency's understanding that, in
most instances, physicians are annotating the patient's medical record
with either a signature or an initial (the ``order''), as well as
providing a signature on the paperwork that is provided to the clinical
diagnostic laboratory that identifies the test or tests to be performed
for a patient (the ``requisition'') as a matter of course. Further, CMS
recognized that some practitioners use the patient's medical record as
the order for laboratory services and the policy would not require such
practitioners to also submit requisitions.
Because of concerns that some physicians, NPPs, and clinical
diagnostic laboratories are not aware of, or do not understand, this
policy, CMS focused its efforts in the first quarter of 2011 on
developing educational and outreach materials to educate those affected
by this policy. However, after further input from the laboratory
community, CMS has decided to focus its resources for the remainder of
2011 on changing the regulation that requires signatures on laboratory
requisitions because of concerns that physicians, NPPs, and clinical
diagnostic laboratories are having difficulty complying with this
policy.
Question 9b. Is CMS concerned that this could further increase the
cost of care by having to have the doctor present twice? (Once to
examine the patient and again when the test is administered; even
though the test could be conducted hours or even a day later).
Answer 9b. The policy does not require the physician to be present
when the test is performed. In fact, CMS believed that the policy would
not increase the burden on physicians because it was the agency's
understanding that, in most instances, physicians are annotating the
patient's medical record with either a signature or an initial (the
``order''), as well as providing a signature on the paperwork that is
provided to the clinical diagnostic laboratory that identifies the test
or tests to be performed for a patient (the ``requisition'') as a
matter of course. Further, CMS recognized that some practitioners use
the patient's medical record as the order for laboratory services and
the policy would not require such practitioners to also submit
requisitions.
Question 9c. Did CMS consult with any providers to engage them on
the discussion for this rule? If so, what was their response? If not,
why didn't they?
Answer 9c. Yes. As mentioned above, CMS engaged in notice and
comment rulemaking to address the confusion that existed about when a
signature was required and for what services in CY 2009 and CY 2010
before finalizing a policy in the CY 2011 Physician Fee Schedule final
rule. The requirement was intended to respond to numerous stakeholder
comments urging a consistent policy across Medicare benefits, since
physician signatures are required for other types of diagnostic
services. However, after further input from the laboratory community,
CMS has decided to focus its resources for the remainder of 2011 on
changing the regulation that requires signatures on laboratory
requisitions because of concerns that physicians, NPPs, and clinical
diagnostic laboratories are having difficulty complying with this
policy.
Question 10. Why was meaningful tort reform left out of the 2010
Patient Protection and Affordable Care Act? Medical costs in our
country are rising steadily and this is threatening access to services.
Using Texas as a case study, it is fair to extrapolate that tort reform
leads to cost saving and increases access. Additionally, a CQ Today
article that ran on January 24, 2011, cites a Congressional Budget
Office Estimate that medical malpractice reform could save $54 billion
over 10 years.
Why did PPACA choose to ignore this?
Answer 10. As the President noted in his State of the Union
Address, the Administration strongly supports efforts to reduce health
care costs, including considering ideas to rein in frivolous medical
malpractice lawsuits. I agree that our medical liability system needs
to be examined, to ensure that it improves the quality of care and
patient safety, compensates patients in a fair and timely manner if
they are harmed through medical negligence, reduces medical liability
premiums and the costs associated with defensive medicine, and weeds
out frivolous lawsuits.
As you know, prior to the enactment of the Affordable Care Act, the
Administration established a $25 million initiative to support efforts
by States and health systems to develop, implement, and evaluate
patient safety and medical liability reforms. This is the most
ambitious effort to date by HHS to support and evaluate our medical
liability system and patient safety reforms. It is also the largest
government investment connecting medical liability to improving quality
and avoiding harm rather than just negligence and punishment.
Building on that effort, the President's fiscal year 2012 Budget
includes $250 million in grants to States to reform their medical
liability laws. The Department of Justice, in consultation with the
HHS, will administer this program. The goal of these reforms would be
to fairly compensate patients who are harmed by negligence, reduce
providers' insurance premiums, weed out frivolous lawsuits, improve the
quality of health care and patient safety, and reduce medical costs
associated with ``defensive medicine.'' States could propose reforms to
their medical malpractice system through various approaches, such as
health courts, safe harbors, early disclosure and offer, or other legal
reforms.
Question 11. My office often meets with Nurses, Physicians
Assistants and Tech Assistants. What is HHS/CMS doing to help work
these professionals into the delivery system? Specifically, What is
being done to evaluate on a national level how many responsibilities
these professionals are capable of handling, in relation to their
training levels?
What is being done on a national level to make sure these
professionals are being used to their full capacity?
Tennessee has many rural and underserved populations. By maximizing
the professionals mentioned above, we could increase access to care and
lower costs. It is important for me to learn what initiatives the
Secretary is taking to working these individuals into the delivery
system, and to make sure there are qualified and certified
professionals to deliver services in their care area.
Answer 11. The Administration believes that strengthening and
growing the health care workforce is critical to reforming the Nation's
health care system. Workforce initiatives funded by the Affordable Care
Act include a strong focus on nurse practitioners and physician
assistants. For instance, with $30 million in Affordable Care Act
funding, 600 new physician assistants will be fully trained by 2015.
With $31 million in Affordable Care Act funding, 600 new nurse
practitioners and nurse mid-wives will be fully trained by 2015. In
addition, the President's fiscal year 2012 budget proposes to begin a
5-year effort to fund the training of an additional 4,000 new primary
care providers, including primary care physicians, nurse practitioners
and physician assistants. The Administration recognizes that these
providers are an essential component in the health care delivery
system. We also support the development of inter-professional training
and of team-based care models, like medical homes, which involve health
professionals practicing to the full extent of their training. To
inform Federal, State and private sector workforce planning in the
future, the President's budget also would enhance the efforts of the
Health Resources and Services Administration's National Center for
Health Workforce Analysis to collect and analyze data on the health
care workforce supply, demand and capacity.
In addition to creating new training opportunities for nurse
practitioners and physician assistants, the Affordable Care Act also
invests in encouraging the placement of these providers in underserved
areas. About half of National Health Service Corps clinicians,
including physicians, advanced practice nurses, and physician
assistants, work in Health Resources and Services Administration-
supported health centers, which have a long record of success providing
affordable, cost-effective, high quality preventive and primary care
services to some of our Nation's most vulnerable individuals. The
Affordable Care Act provided $11 billion to bolster and expand
Community Health Centers and $1.5 billion for the National Health
Service Corps over the next 5 years. In addition, the Affordable Care
Act provided $15 million to fund nurse-managed clinics, which provide
primary care and wellness services to underserved and vulnerable
populations, and are managed by advanced practice nurses, including
nurse practitioners.
Question 12. Tennessee has many Veterans. My office has been
hearing that for many of them, their local VA clinics or other
government treatment centers is out of network for their carrier. Is
this something into which your department is looking in coordination
with the Department of Veterans Affairs to make sure our Veterans have
access to care?
Answer 12. 38 U.S.C. 1729 provides VA the statutory authority to
collect its billed charges or an amount a third party payer
demonstrates it pays to non-governmental providers in the same
geographic area for the same care and services. Federal law does not
require third party payers to enter into agreements with VA. However,
VA has found there are many benefits to entering into agreements with
third party payers. Formal agreements have been established with
several third party payers conducting business in Tennessee.
Collectively, the third party payers with whom VA has entered into
agreements, according to the 2010 Atlantic Information Systems
Directory of Health Plans, covers over 80 percent of people enrolled in
health insurance plans in the State. The third party payers doing
business in Tennessee, with whom VA has formal agreements include:
BlueCross BlueShield of Tennessee, Aetna, CIGNA, Great-West Healthcare,
and United Healthcare. Moreover, VA has a legislative proposal in the
fiscal year 2012 budget that would amend 38 U.S.C. 1729 to make VA a
statutory participating provider with all health plans whether or not
an agreement is in place with a health insurer or third party payer,
thus preventing the effect of excluding coverage or limiting payment of
charges for care.
The VA cannot bill Medicare or Medicaid.
senator roberts
Question 1. I was pleased to learn of President Obama's commitment
through Executive order to require that Federal agencies ensure that
regulations protect our safety, health and environment while promoting
economic growth.
Based on that commitment I have 2 questions: first, are you at the
stage where you can tell us what regulations HHS is planning to scrub
or repeal because of this Executive order and what is the timeline for
complying?
Answer 1. The President's Executive order requires each agency,
including HHS, to conduct a retrospective review of existing
significant regulations to identify those that can be modified,
streamlined, harmonized with others, or eliminated in order to increase
flexibility and reduce burdens and costs on the regulated community.
Under that Order, the President directed agencies to develop a plan and
submit that plan to OMB by May 18, 2011. The plan will include a
preliminary list of regulations HHS will review pursuant to the
Executive order over the next 2 years.
OIRA has notified the agencies that it will be working closely with
them as they develop their respective plans to meet the May 18, 2011,
deadline. HHS is actively engaged in that process and will have a draft
plan to OIRA by the end of April. We expect to submit the final HHS
plan by the May 18 deadline.
Question 2. We have heard many suggestions from health providers in
Kansas--people from Kansas you have worked with and know--and we would
be happy to work with you to address their concerns. I think the
example of the impact of regulations on the child-only market is a good
one.
So my second question is, realistically, what are the chances based
on the President's commitment that PPACA regulations will be changed or
repealed?
Answer 2. HHS is committed to meeting both the spirit and intent of
the President's Executive order. As the President sets forth, the
retrospective review process will be an ongoing one--undertaken as part
of a culture of regulatory review and revision.
Question 3. The Executive order says:
``In applying these principles, each agency is directed to
use the best available techniques to quantify anticipated
present and future benefits and costs as accurately as
possible. Where appropriate and permitted by law, each agency
may consider (and discuss qualitatively)''
and this is the part where I have the most concern, ``values that are
difficult or impossible to quantify, including equity, human dignity,
fairness, and distributive impacts.''
Are you anticipating you will be able to determine which
regulations, including recently released health reform regulations, HHS
believes would fall under this exemption?
Answer 3. Along with every regulation, HHS submits a regulatory
impact analysis that includes a discussion of costs and benefits of the
regulation. However, determining the costs and benefits of a regulation
over time can be tricky and difficult when it comes to assessing the
impact of a regulation on the health and well-being of individuals over
the long term. We do not read the President's Executive order to permit
an exemption to the quantitative cost/benefit requirement. Rather, we
believe the President permits agencies to discuss qualitative factors
that are difficult or impossible to measure in quantitative terms, but
which are nevertheless important in assessing the value of the
regulation in improving the health and well-being of the American
people.
Question 4. Beyond the 180 days with which your Agency would now
have to provide a preliminary plan for the Executive order, what is the
HHS timeline for complying with the intent of this Executive order and
creating ``a more cost-effective, transparent and smart regulatory
system.'' In short, how long is this expected to take, and when can
Americans expect to see results?
Answer 4. Consistent with the President's directive, we expect that
the process will not simply be a one-time exercise, but rather an
ongoing process of review and change. The effort is to create a culture
of review and revision, where existing regulations are routinely
modified, streamlined, or eliminated where appropriate to achieve a
better regulatory framework. We expect that the American people will
see certain initial results within the next year. But we also expect to
produce results year after year as these reviews become
institutionalized as part of the review and revision process.
Question 5. Madam Secretary, as the former Governor of Kansas you
are well aware that Kansas has 83 Critical Access Hospitals (CAHs)--the
most of any State and fully \2/3\ of our hospitals. And you also know
that CAHs are not part of the 5-year exemption from IPAB review that
other hospitals were given in health reform. Should IPAB recommend
reductions that take funds away from these rural community hospitals I
can assure you Congress will act, but would you support such a
recommendation?
Answer 5. The Independent Payment Advisory Board is one of the key
features of the Affordable Care Act that will set our system on a path
to sustainability in the long run. The statute establishing the IPAB
specifies that the Board recommend proposals that would ``protect and
improve Medicare beneficiaries' access to necessary and evidence-based
items and services, including in rural and frontier areas.'' In my
experience, many of America's rural areas continue to be on the cutting
edge, leading change and improvement in health care. I'm happy to talk
to you or your staff about ways to ensure that critical access
hospitals can continue to provide essential services in many rural
areas of the country.
Question 6. It has recently been brought to my attention that there
is a regulation related to the dialysis transition adjuster that I have
been told, based on CMS inaccurate estimates, has resulted in
underpayments for dialysis treatments. Is this one of the regulations
CMS and HHS are considering revising?
Answer 6. When adopting a new payment system under Medicare, CMS is
often statutorily required to ensure that aggregate payments (with the
exception of any applicable inflation update) are the same as those
under the previous payment system. In this case, we were required to
ensure that payments under the new ESRD prospective payment system
(PPS) were, in aggregate, 98 percent of the total payments that would
have been made under the previous basic case-adjusted composite payment
system. In order to meet this requirement, we applied a transition
budget neutrality adjustment factor of 3.1 percent to ESRD payments in
the calendar year (CY 2011) ESRD PPS final rule.
As described in the final rule, CMS' calculation of this factor was
based on the best available data to estimate payments during the
transition period. At the same time, we acknowledged that the
adjustment may not reflect actual choices made by the ESRD facilities
regarding opting out of the ESRD PPS transition. However, we noted that
the adjustment would be updated each year of the transition (CY 2012
and CY 2013) to reflect actual data on providers electing to opt-out of
the transition.
We recently issued an interim final rule (76 Fed. Reg. 18930, April
6, 2011), in which we revised the ESRD transition budget-neutrality
adjustment finalized in the CY 2011 ESRD Prospective Payments System
final rule for renal dialysis services furnished April 1, 2011 through
December 31, 2011, to reflect the actual election decisions of ESRD
facilities for participating in the ESRD PPS transition.
Question 7. If CMS and the Department are unwilling or unable to
exhibit the flexibility necessary to fix something as straight-forward
as the dialysis transition adjuster then how can this committee and the
American people be confident that the Department has the wherewithal to
implement something as daunting and complex as the Affordable Care Act?
Answer 7. As we noted in our response to the previous question, we
have already updated the dialysis transition adjuster in response to
reasonable concerns from the dialysis provider industry. Additionally,
CMS and the Department share your concerns and implementing the
Affordable Care Act in a timely and transparent way is a high priority
for the Administration. We have aggressively moved forward on a number
of provisions that are already providing seniors with meaningful
benefits.
The Administration and HHS remain committed to a transparent
implementation process that includes feedback from stakeholders. For
example, CMS has specifically requested comments on portions of the
regulation implementing the Affordable Care Act provisions to counter
fraud in the Medicare and Medicaid programs. Feedback, both from the
notice and comment process and other outreach efforts, will continue to
be a critical part of the Administration's implementation efforts.
Question 8. Madam Secretary, Dr. Berwick was renominated to be the
CMS Administrator by the President. As a representative of your
Department are you and your Administration committed to allowing or
encouraging Dr. Berwick to testify before the relevant committees and
answering all of the questions and concerns of the Members of the
Senate during this nomination process? I think this is of particular
importance considering the reorganization of OCIIO under CMS.
Answer 8. Across the Department, we are all focused on implementing
the Affordable Care Act and bringing real benefits to all Americans. We
are committed to our mission of ensuring access to and providing
efficient, high-quality health care to our beneficiaries, and will
continue to work with Congress in a bipartisan fashion to achieve this
core goal.
Dr. Berwick has already testified before Congress and is fully
committed to meeting with individual Senators to address all of their
questions and any areas of concern.
senator hatch
Question 1. Currently the Institute of Medicine (IOM) is reviewing
and will soon issue a list of specific mandatory benefits to meet the
Patient Protection and Affordable Care Act's (PPACA) essential health
benefits requirement. In general, when these mandates are implemented
in 2014, will individuals living in States, like Utah, with fewer
benefit mandates see an increase in premiums as a result of adding
benefits that were previously not required to be covered?
Answer 1. The IOM will not be making recommendations on specific
benefits or services. As they state on their Web site:
``The IOM will not define specific service elements of the
benefit package. Instead, the IOM will review how insurers
determine covered benefits and medical necessity and will
provide guidance on the policy principles and criteria for the
Secretary to take into account when examining QHPs for
appropriate balance among categories of care; the health care
needs of diverse segments of the population; and
nondiscrimination based on age, disability, or expected length
of life. Additionally, the IOM may offer advice on criteria and
a process for periodically reviewing and updating the benefits
package.''
Question 2. Actuarial analysis by the Council for Affordable Health
Insurance has found that individual benefit mandates, on average,
increase premiums by between 1 and 3 percent. If the new benefit
mandates coming out of the IOM exceed the number of benefits mandated
in Utah, PPACA will force Utah constituents to pay higher premiums for
benefits they may not need or want. To that end, can you confirm that
States with few benefit mandates will see increases in premiums as a
result of the essential health benefits requirement under PPACA?
Answer 2. As noted above, the IOM is not making recommendations on
specific services. The Affordable Care Act defines essential health
benefits to,
``include at least the following general categories and the
items and services covered within the categories: ambulatory
patient services; emergency services; hospitalization;
maternity and newborn care; mental health and substance use
disorder services, including behavioral health treatment;
prescription drugs; rehabilitative and habilitative services
and devices; laboratory services; preventive and wellness
services and chronic disease management; and pediatric
services, including oral and vision care.''
Question 3. Can you also confirm that as U.S. Preventive Services
Task Force (USPSTF) continues to approve new A and B recommendations
for preventive health benefits premiums will also continue to increase
if the preventive benefit recommended is not already mandated or
covered by a plan?
Answer 3. Too many Americans don't get the preventive health care
they need to stay healthy, avoid or delay the onset of disease, lead
productive lives, and reduce health care costs. Cost-sharing (including
copays, co-insurance and deductibles) reduces the likelihood that
preventive services will be used. The Affordable Care Act is already
helping to make wellness and prevention services affordable and
accessible to individuals by requiring most health plans to cover
preventive services and by eliminating cost-sharing. High-quality
preventive care helps Americans stay healthy, avoid or delay the onset
of disease, lead productive lives, and reduce costs. And yet, despite
the proven benefits of preventive health services, too many Americans
go without needed preventive care because of financial barriers. Even
families with insurance may be deterred by copayments and deductibles
from getting cancer screenings, immunizations for their children and
themselves, and well-baby check-ups that they need to keep their
families healthy.
Question 4. I was surprised by the announcement made by HHS on
January 26, 2011, that a total of 948 waivers have been granted from
the annual benefit limits established under PPACA. This waiver process
obviously stands in stark contrast to the Administration's claims about
the value of PPACA in reducing costs and making health care more
affordable. What is concerning about the announcement is the lack of
transparency about the waiver process. If the new requirements under
PPACA were meant to reduce costs and make health care more affordable
and accessible, then why do these organizations need waivers to
continue to keep costs down and provide access to insurance?
Answer 4. The Affordable Care Act is designed to provide Americans
with affordable, high-quality coverage options--while ensuring that
those who like their current coverage can keep it. Unfortunately,
today, limited benefit plans, or ``mini-med'' plans are often the only
type of insurance offered to some workers. In 2014, the Affordable Care
Act will end most mini-med plans when Americans will have better access
to affordable, comprehensive health insurance plans that cannot use
high deductibles or annual limits to limit benefits. In the meantime,
the law requires insurers to phase out the use of annual dollar limits
on benefits. In 2011, most plans can impose an annual limit of no less
than $750,000.
Mini-med plans have lower limits than allowed under the Affordable
Care Act. While mini-med plans do not provide security in the event of
serious illness or accident, they are unfortunately the only option
that some employers offer. In order to protect coverage for these
workers, regulations allow these plans to apply for temporary waivers
from rules restricting the size of annual limits to some group health
plans and health insurance issuers.
Waivers only last for 1 year and are only available if the plan
certifies that a waiver is necessary to prevent either a large increase
in premiums or a significant decrease in access to coverage. In
addition, enrollees must be informed that their plan does not meet the
requirements of the Affordable Care Act. No other provision of the
Affordable Care Act is affected by these waivers: they only apply to
the annual limit policy.
Question 5. As States are facing a $175 billion collective budget
shortfall, we must provide them with the flexibility to find
responsible ways to continue serving beneficiaries and to fulfill their
constitutional requirements to balance their budgets. I appreciate your
acknowledgement of the difficult budget circumstances States are
facing, but I have heard from many States that your February 3, 2011,
letter fails to provide the level of assistance that States desperately
need. As you know, dozens of governors have asked for relief from the
maintenance of effort (MOE) requirements in the Patient Protection and
Affordable Care Act (PPACA) in order to responsibly manage their
programs and even to make common-sense modernizations to their
eligibility determination procedures. As you know, your waiver
authority under Section 1115 of the Social Security Act allows you to
waive certain provisions in Section 1902 of the Social Security Act.
The MOE requirements included in the PPACA are in section 1902. I
understand that you plan to look at each State's individual
circumstances and specific budgetary pressures, however knowing that
there is a $175 billion collective State budget shortfall, do you
anticipate granting any Section 1115 waivers from MOE restrictions for
States to allow them greater flexibility in balancing their budgets?
Answer 5. HHS understands the challenges States are facing and
we're ready to offer new approaches, listen to new ideas and conduct
business with States in ways that are responsive to the severity and
immediacy of these challenges. CMS recently sent a detailed letter to
State Medicaid directors on February 25, 2011, clarifying situations in
which the Affordable Care Act maintenance of effort provision does not
apply. (Please visit the CMS Web site for a copy of the letter to
States: http://www.cms.gov/smdl/downloads/SMD11001.pdf.) Specifically,
in States that have or project budget deficits, the Affordable Care Act
MOE requirements do not apply to certain adult populations, but the
ARRA MOE does continue to apply through June 2011. The letter also
provides additional information about the treatment of premiums and
clarifies that the MOE provision in the Affordable Care Act also does
not require a State to request that the Secretary continue a
demonstration under section 1115 upon its expiration.
The new MOE guidance helps States in three ways. First, it serves
as a reminder to States that are experiencing budget deficits of the
ACA provision allowing them to seek an exemption from the ACA MOE
requirement for certain adult populations (above 133 percent FPL).
Second, it clarifies that States with 1115 waiver demonstration
programs may allow those waivers to expire at the end of their waiver
approval period without violating MOE. Third, it notes that some States
may be able to increase premiums paid by Medicaid or CHIP
beneficiaries.
We're also taking a number of steps to help States implement
changes that will bring efficiencies to their Medicaid programs and
improve the quality of care provided. CMS recently created the Medicaid
State Technical Advisory Teams (M-STAT) that are responsible for
offering States technical support and fast-track ways for them to
implement new initiatives--particularly those targeted at ending the
fragmented care provided to people dually eligible for Medicaid and
Medicare that comprise a significant amount of Medicaid costs, lowering
pharmacy costs and improving program integrity. These steps will
strengthen the program over the long run, improve the quality and
outcomes of care, and help States run more efficient Medicaid programs.
We look forward to continuing to work with States.
Attachments
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
SECTION A: STATEMENT OF WORK
1.0 TITLE
Survey on Long-Term Care Awareness and Planning
1.1 PURPOSE
The purpose is to collect questionnaire responses from a sample of
the American public about their attitudes, experiences, opinions and
actions related to long-term care services. This will be accomplished
by using Knowledge Networks' nationwide online panel (KnowledgePanel)
as a platform for fielding interactive chats, online town hall
meetings, and an online questionnaire. This is one of three inter-
related task orders intended to assist in the implementation of
provisions of the Affordable Care Act (ACA) related to long-term care
financing and awareness. Development of the questionnaire, and the OMB
clearance package, and analysis of the data will be completed by two
other contractors through related task orders.
1.2 BACKGROUND
Successful implementation of the new ACA provisions will require a
well-developed understanding of how the American public assesses their
possible future need for long-term care. The ACA includes the
development of a new voluntary insurance program for long-term care as
well as a national awareness campaign. In order to obtain sufficient
enrollment in the new insurance program, consumer preferences will need
to be understood and to some extent accommodated. Results from these
task orders will be used to develop educational and marketing materials
as well as to inform the design of the insurance program.
Knowledge Networks has been selected for the project based on their
national, probability-based survey panel. The panel was constructed
using dual-frame sample recruitment that includes both random digit
dialing and address-based sampling. Knowledge Networks panel provides a
statistically valid representation of the American public and includes
many difficult to reach populations.
Using Knowledge Networks is a less costly method for obtaining
consumer input than other survey methods. This method has several
advantages for this particular data collection effort as follows:
all responses are gathered on-line, reducing both
administrative costs and the amount of time necessary to collect the
data;
respondents that do not have computers or internet access
are provided these as a part of their participation agreement;
using a proprietary panel (that uses address and phone-
based sampling) avoids the problem of reaching the increasing share of
the population without a telephone land line; and,
extensive demographic and socio-economic data have
already been collected on the entire sample allowing questionnaires to
focus solely on areas of interest.
In addition, Knowledge Network offers the opportunity to gather
consumer input in a variety of forms including small interactive chats
that resemble focus groups, online town hall meetings and questionnaire
responses from a national sample of adults. The use of a variety of
methods to collect consumer input through one contract vehicle allows
for a more effective and flexible collection of data that can change as
conditions or requirements change.
The contractor for this project must be willing to coordinate with
the contractors selected for the task orders entitled ``Development of
a Survey on Long-Term Care Awareness and Planning'' and ``Development
and Testing of Long-Term Care Awareness Materials.'' It is anticipated
that each of the three contractors will designate a liaison that will
be responsible for coordinating with the other contractors.
1.3 SPECIFIC TASKS
Task 1.0 Post-Award Logistics
Subtask 1.1: Post-Award Meeting
Within two (2) weeks of award, staff from Knowledge NetWorks and
other relevant staff (including the liaisons for the other task orders)
shall meet with the ASPE task order officers to discuss the objectives
of the contract and any related project issues. The Government
anticipates a joint post-award meeting for all three task orders.
Specific topics to be discussed include, but are not limited to: the
objectives of the project, major deliverables, work schedule,
questionnaire testing, and contract coordination.
Subtask 1.2: Work Plan
Knowledge Networks shall develop a work plan that will guide the
activities of the project. The work plan, which will reflect the
results of the post-award meeting (Sub-task 1.1), will serve as a
blueprint for their approach to carrying out project activities and
specific timelines for the project tasks. The draft work plan will
include a process for communicating with the other task order liaisons.
The draft work plan shall be submitted to the task order officers for
review two (2) weeks after the post-award meeting. The work plan shall
be considered final upon approval of the task order officers.
Task 2.0 Interactive Chats
Knowledge Networks shall convene three sets of interactive chats
featuring moderated on-line discussions and manage all logistics and
chat technologies. Each chat will feature informal, moderated, online
discussions during which consumers will be offered the opportunity to
respond to prototype educational/marketing materials. The number of
chats will be determined as a result of work on a preliminary market
segmentation framework completed under a separate task order. For
budget purposes, the contractor should assume three (3) sets of chats.
Each set will consist of chats with three (3) distinct groups, each
with no more than nine (9) participants for a grand total of nine (9)
chats with 81 total participants. Respondents will be selected based on
the preliminary market segmentation framework. The task order officers
will approve the final selection of the chat participants within each
market segment as described in the framework.
Knowledge Networks shall provide prototype awareness materials
(also developed in a separate contract) to each participant. The
materials will be the subject of a facilitated discussion that allows
each chat participant to offer their own written and/or verbal comments
and see the written and/or verbal responses of other participants.
Participants will be asked to comment on any aspect of the materials.
Knowledge Networks will provide a technical moderator for the chat. A
content moderator representing another ASPE contractor shall moderate
the sessions and stimulate conversation as necessary. Knowledge
Networks shall keep a record of the comments offered during the
sessions. Knowledge Networks shall also provide technical assistance to
the task order officers to help facilitate the interactive chats in an
on-line fashion. The timing of the chats is as follows:
Sub-Task 2.1: First Set
Knowledge Networks, in conjunction with the ASPE task order
officers, will determine the timing of the first set of interactive
chats. The government anticipates it will take place no more than
thirty-six (36) weeks from contract award. A record of the online
session shall be provided to the task order officers no later than 2
weeks after completion of the chat.
Sub-Task 2.2: Second Set
Knowledge Networks, in conjunction with the ASPE task order
officers, will determine the timing of the second set of interactive
chats. The government anticipates it will take place no more than
forty-two (42) weeks from contract award. A record of the online
session shall be provided to the task order officers no later than 2
weeks after completion of the chat.
Sub-Task 2.3: Third Set
Knowledge Networks, in conjunction with the ASPE task order
officers, will determine the timing of the third set of interactive
chats. The government anticipates it will take place no more than
forty-eight (48) weeks from contract award. A record of the online
session shall be provided to the task order officers no later than 2
weeks after completion of the chat.
Task 3.0 Online Town Hall Meetings
Knowledge Networks shall convene six online town hall meetings. The
town hall meetings will feature a presentation by a moderator (provided
through a separate contract) followed by informal discussions and
instant polling of participants.
Participants will be offered the opportunity to respond to
prototype educational/marketing materials, to raise questions and to
offer responses to instant polls. Each town hall meeting will consist
of no more than 100 participants. Respondents will be selected based on
the preliminary market segmentation framework. The task order officers
will work with Knowledge Networks to align the selection of the
participants with each market segment. Knowledge Networks shall provide
a technical moderator to manage all technical aspects of the meetings.
Knowledge Networks shall provide prototype awareness materials
(provided by the task order officers) to each meeting participant.
The government anticipates that the online town hall meetings shall
be convened between 50-70 weeks after award of the contract. The task
order officers shall work with Knowledge Networks on the scheduling of
the meetings. A record of the town hall meetings shall be provided to
the task order officers no later than 2 weeks after completion of each
meeting.
Task 4.0 Attitudes and Opinions Questionnaire
Sub-Task 4.1: Pretest
Knowledge Networks shall arrange for a questionnaire pretest with
no more than 25 cases. This pretest will allow for examining
questionnaire length, possible coding or respondent answering problems
and for testing response data delivery. Data from the pretest shall be
provided to the government. The pretest shall be completed no later
than sixty (60) weeks after contract award.
Sub-Task 4.2: Data Collection
Knowledge Networks shall invite panel participants between the ages
of 40 and 70 to respond to the questionnaire. The sample shall be large
enough to obtain 18,000 responses. The government anticipates that the
questionnaire will take 40 minutes to complete. Knowledge Networks will
inform the task order officers of any problems that arise during data
collection. Collection of data shall occur within eighty (80) weeks
after contract award.
Sub-Task 4.3: Data Delivery
Questionnaire response data shall be provided to the task order
officers and the ASPE contractor no later than eighty-four (84) weeks
after contract award. These files should at least be delivered as flat
ASCII files and preferably as SAS data files.
Task 5.0 Evaluation Processes Memo
Knowledge Networks shall provide a short memo that discusses the
administration of the interactive discussions and questionnaire in the
above tasks (Tasks 2-4). The purpose of the memo is to describe issues
or problems that should be taken into consideration when analyzing the
data. Of particular concern are issues that arose in the testing of
consumer materials. Knowledge Networks shall note any logistical
problems or other limitations in the data to be used for this purpose.
The memo shall be delivered to the ASPE task order officers within
eighty-four (84) weeks of contract award.
2.0 PERIOD OF PERFORMANCE/DELIVERABLES
2.1 PERIOD OF PERFORMANCE
The period of performance shall be 86 weeks from the date of award.
2.2 PLACE OF PERFORMANCE
All work performed under this task order shall be accomplished at
the Contractor's facility.
2.3 DELIVERABLE SCHEDULE
The Contractor shall deliver the following items in accordance with
the schedule set forth below:
----------------------------------------------------------------------------------------------------------------
Task Deliverable Date Due # of Copies to TOO
----------------------------------------------------------------------------------------------------------------
Task 1............................... Post-Award Logistics .......................
1: Post-Award Meeting Week 2................. 1 electronically
1.2: Work Plan....... Week 4................. 1 electronically
Task 2............................... Interactive Chats .......................
2.1: First Set....... Week 36................ 1 electronically
2.2: Second Set...... Week 42................ 1 electronically
2.3: Third Set....... Week 48................ 1 electronically
Task 3............................... Town Hall Meetings..... Weeks 50-70............ 1 electronically
Task 4............................... Survey of Attitudes and
Opinions Week 60................ 1 electronically
4.1: Pretest......... Week 80................ 1 electronically
4.2: Data Collection. Week 84................ 1 electronically
4.3: Data Delivery...
Task 5............................... Evaluation Processes Weeks 86............... 1 electronically
Memo.
----------------------------------------------------------------------------------------------------------------
2.4 PERFORMANCE REQUIREMENTS
The Performance Requirements Summary (PRS) below lists requirements
that the Government will evaluate. The absence of any task order
requirement from the PRS shall not detract from its enforceability nor
limit the rights or remedies of the Government under any other
provision of the task order, including the clauses entitled
``Inspection of Services'' and ``Default.''
----------------------------------------------------------------------------------------------------------------
Method of
Performance Surveillance Standard to be Met/
Required Services/Tasks Standards (Quality of Allowable Deduction
Assurance) Deviation
----------------------------------------------------------------------------------------------------------------
Customer satisfaction........... Contractor adheres Task order officer Contractor Up to 2 percent of
to guidance will work closely provides consumer fixed fee.
provided by task with contractor. response data to
order, officer. task order
officers in a
timely fashion.
Task 3--Center-Active Chats..... Contractor Task order Each chat must Up to 1 percent of
successfully officers will have at least fixed fee.
recruits participate in nine
sufficient number all chats. participants.
of participants Operation of
for inter-active technology must
chats and ensures not present an
smooth operation obstacle to
of communication obtaining
technology. consumer input.
Task 4--Town Hall Meetings...... Contractor will Task order officer Each town hall Up to 2 percent of
recruit will participate meeting should fixed fee.
sufficient number in each town hall have at least 80
of participants meeting. participants.
for each town Operation of
hall meeting and communications
ensure smooth technology must
operation of not present an
communication obstacle to
technology. obtaining
consumer input.
Task 5--Questionnaire........... Contractor will Task order Questionnaire Up to 2 percent of
recruit a officers will response data fixed fee.
sufficient sample work closely with should be
of panel members contractor. provided to the
to obtain desired task order
number of officers not
questionnaire later than 3
responses and weeks after
data is submitted questionnaire
in a timely responses have
fashion. been submitted.
----------------------------------------------------------------------------------------------------------------
3.0 GOVERNMENT FURNISHED PROPERTY/INFORMATION
3.1 GOVERNMENT FURNISHED PROPERTY/INFORMATION
The government will provide:
prototype educational/marketing materials to be tested;
and,
an OMB approved questionnaire
4.0 TASK ORDER ADMINISTRATION DATA
4.1 AUTHORIZATION OF GOVERNMENT PERSONNEL
Notwithstanding the Contractor's responsibility for total
management during the performance of this task order, the
administration of the Task order will require maximum coordination
between the Government and the Contractor. The following individuals
will be the Government's points of contact during the performance of
this task order:
1. Contract Specialist
All order administration shall be performed by:
Kevin McGowan
Contract Specialist
Division of Acquisition Management
Parklawn Building, Room 5-101
5600 Fishers Lane
Rockville, MD 20857
(301) 443-0708
[email protected]
2. Contracting Officer
The PSC Contracting Officer is the only individual authorized to
modify this order. The Contracting Officer responsible for
administrative and contractual issues concerning this task order is:
(To be determined upon award.)
3. Contracting Officers' Technical Representative Appointment
and Authority
The name and address of the COTR assigned to this project is:
(To be determined upon award.)
(a) Performance of work under this task order must be subject to
the technical direction of the Contracting Officers' Technical
Representative identified above, or a representative designated in
writing. The term ``technical direction'' includes, without limitation,
direction to the contractor that directs or redirects the labor effort,
shifts the work between work areas or locations, fills in details and
otherwise serves to ensure that tasks outlined in the work statement
are accomplished satisfactorily.
(b) Technical direction must be within the scope of the
specification(s)/work statement.
The Contracting Officers' Technical Representative does not have
authority to issue technical direction that:
(1) Constitutes a change of assignment or additional work outside
the specification(s)/statement of work;
(2) Constitutes a change as defined in the clause entitled
``Changes'';
(3) In any manner causes an increase or decrease in the task order
price, or the time required for task order performance;
(4) Changes any of the terms, conditions, or specification(s)/work
statement of the task order;
(5) Interferes with the Contractor's right to perform under the
terms and conditions of the task order; or
(6) Directs, supervises or otherwise controls the actions of the
contractor's employees.
(c) Technical direction may be oral or in writing. The Contracting
Officers' Technical Representative shall confirm oral direction in
writing within 5 work days, with a copy to the Contracting Officer.
(d) The contractor shall proceed promptly with performance
resulting from the technical direction issued by the Contracting
Officers' Technical Representative. If, in the opinion of the
contractor, any direction of the Contracting Officers' Technical
Representative, or his/her designee, falls within the limitations in
(c), above, the contractor shall immediately notify the Contracting
Officer no later than the beginning of the next Government work day.
(e) Failure of the contractor and the Contracting Officer to agree
that technical direction is within the scope of the task order shall be
subject to the terms of the clause entitled ``Disputes.''
4.2 HHSAR 352.242-70 KEY PERSONNEL (JAN 2006)
The key personnel specified in this task order are considered to be
essential to work performance. At least 30 days prior to diverting any
of the specified individuals to other programs or contracts (or as soon
as possible, if an individual must be replaced, for example, as a
result of leaving the employ of the Contractor), the Contractor shall
notify the Contracting Officer and shall submit comprehensive
justification for the diversion or replacement request (including
proposed substitutions for key personnel) to permit evaluation by the
Government of the impact on performance under this task order. The
Contractor shall not divert or otherwise replace any key personnel
without the written consent of the Contracting Officer. The Government
may modify the task order to add or delete key personnel at the request
of the Contractor or Government.
(End of clause)
The individuals cited below are key personnel:
Name_______Title
(To be entered upon award.)
4.3 INVOICE SUBMISSION
1. The Contractor shall submit one original monthly invoice
complete with all required back-up documentation to the Contract
Specialist, Kevin McGowan, at [email protected] or sent by U.S.
mail and addressed as follows:
DHHS/Program Support Center
Division of Acquisition Management
Attn: Matthew Gormley
Parklawn Building, Room 5-101
Rockville, MD 20857
One complete copy of each invoice with backup documentation shall
be emailed to the COTR.
Three hard copies of all invoices with all required back-up
documentation shall be sent directly to the Finance Office for payment
or an electronic copy of all invoices with all back-up documentation
may be e-mailed to [email protected]. It is the responsibility
of the Contractor to verity that the Finance Office has received their
invoice. Calls concerning contract payment shall be directed to the
general help-line number on (301) 443-6766. The address for the Finance
Office responsible for payment is:
DHHS/Program Support Center
Financial Management Services/DFO
Commercial Payments Section
Parklawn Building, Room 16A-12
5600 Fishers Lane
Rockville, MD 20857
Telephone Number: 301-443-6766
2. The Contractor agrees to include the following information on
its invoice:
a. Contractor's name, invoice number and date;
b. Contract Number and Task Order Number;
c. Employee name and title (labor category); the loaded hourly
rate; number of hours used during the month; number of hours remaining
for the task order period; dollar amount billed for the month;
cumulative dollar amount billed to date for the task order period; the
balance remaining for the task order period;
d. Payment terms;
e. Tax identification number;
f. Signature of an authorized official certifying the voucher to be
correct and proper for payment;
g. Contractor's complete remittance or check mailing address; and
h. COTR's name and telephone number.
5.0 OBSERVANCE OF FEDERAL HOLIDAYS
No services or deliveries shall be performed on Federal property on
Saturdays, Sundays or Federal legal holidays as shown below:
Government holidays are:
1 New Year's Day--January 1st
2. Martin Luther King's Birthday--Third Monday in January
3. President's Day--Third Monday in February
4. Memorial Day--Last Monday in May
5. Independence Day--July 4th
6. Labor Day--First Monday in September
7. Columbus Day--Second Monday in October
8. Veteran's Day--November 11th
9. Thanksgiving Day--Fourth Thursday in November
10. Christmas Day--December 25th
6.0 TASK ORDER TYPE
The Government anticipates award of a Firm Fixed Price Task Order.
Note: Cancellation costs will not be incorporated into this Non-
Severable Task Order.
7.0 SPECIAL TASK ORDER REQUIREMENTS
7.1 HHS Section 508 Accessibility Standards Notice (September 2009)
Section 508 of the Rehabilitation Act of 1973 (29 U.S.C. 794d)
requires Federal agencies to purchase electronic and information
technologies (EIT) that meet specific accessibility standards. This law
helps to ensure that Federal employees with disabilities have access
to, and use of, the information and data they need to do their jobs.
Furthermore, this law ensures that members of the public with
disabilities have the ability to access government information and
services.
There are three regulations addressing the requirements detailed in
Section 508. The Section 508 technical and functional standards are
codified at 36 CFR Part 1194 and may be accessed through the Access
Board's Web site at http://www.access-board.gov. The second regulation
issued to implement Section 508 is the Federal Acquisition Regulation
(FAR). FAR Part 39.2 requires that agency acquisitions of Electronic
and Information Technology (EIT) comply with the Access Board's
standards. The entire FAR is found at Chapter 1 of the Code of Federal
Register (CFR) Title 48, located at http://www.acquisition.gov. The FAR
rule implementing Section 508 can be found at http://
www.section508.gov. The third applicable regulation is the HHS
Acquisition Regulation (HHSAR).
Regardless of format, all Web content or communications materials
produced for publication on or delivery via HHS Web sites--including
text, audio or video--must conform to applicable Section 508 standards
to allow Federal employees and members of the public with disabilities
to access information that is comparable to information provided to
persons without disabilities. All contractors (including
subcontractors) or consultants responsible for preparing or posting
content intended for use on an HHS-funded or HHS-managed Web site must
comply with applicable Section 508 accessibility standards, and where
applicable, those set forth in the referenced policy or standards
documents below. Remediation of any materials that do not comply with
the applicable provisions of 36 CFR Part 1194 as set forth in the SOW
or PWS, shall be the responsibility of the contractor or consultant
retained to produce the Web-suitable content or communications
material.
The following Section 508 provisions apply to the content or
communications material identified in this SOW--PWS: Access Board Final
Rule 36 CFR Part 1194.22(a)-(p).
7.2 Requirements Regarding Permission to Disclose or Publish Findings
Prior to Delivery Order End Date
The contractor and any consultants or subcontractors agree not to
release or disclose, verbally or in writing, information pertaining to
the results or findings of work (including data collection, analyses,
draft or final papers and reports) for the period of this delivery
order without obtaining prior written approval of the Task Order
Officer. The contractor must request approval in advance (minimum 21
days prior to release) and in writing, specifying: who or what is
generating the request for advance information; when and how project
results/information will be released; and what information would be
released. Failure to receive response from the Task Order Officer does
not constitute approval for releasing information.
7.3 Food And Beverage--Unallowable Costs
Food and beverage costs, unless part of per diem expenses paid in
accordance with the Federal Travel Regulations, are unallowable costs
to this task order.
7.4 Contractor Performance Evaluation
During the life of this order, the Contractor's performance will be
evaluated on an interim and final basis pursuant to FAR Subpart 42.15.
The evaluation will be conducted utilizing the National Institutes of
Health Contractor Performance System (CPS). The Contractor shall
register in the CPS. The CPS may be accessed by the Contractor at
https://cpsContractor.nih.gov.
7.5 Travel
The Contractor will be reimbursed for travel to provide support at
a Government site or other site as may be specified and approved by the
COTR under this effort. All travel shall be approved, by the COTR,
prior to commencement of travel. The contractor shall be reimbursed for
actual allowable, allocable, and reasonable travel costs incurred
during performance of this effort in accordance with the Federal Travel
Regulations in effect on date of travel.
The Contractor shall provide supporting documentation and a
detailed breakdown of incurred travel costs with each invoice.
8.0 CONTRACT CLAUSES/PROVISIONS
In addition to applicable terms and conditions of the Offeror's GSA
MOBIS contract, the following Federal Acquisition Regulation and Health
& Human Services Acquisition Regulation Provisions/Clauses apply to
this acquisition:
HHSAR 352.239-73 Electronic Information Technology Accessibility
(Oct 2009)
(a) Section 508 of the Rehabilitation Act of 1973 (29 U.S.C. 794d),
as amended by the Workforce Investment Act of 1998, and the
Architectural and Transportation Barriers Compliance Board Electronic
and Information (EIT) Accessibility Standards (36 CFR Part 1194),
require that, unless an exception applies, all EIT products and
services developed, acquired, maintained, or used by any Federal
department or agency permit--
(1) Federal employees with disabilities to have access to and use
information and data that is comparable to the access and use of
information and data by Federal employees who are not individuals with
disabilities; and
(2) Members of the public with disabilities seeking information or
services from a Federal agency to have access to and use of information
and data that is comparable to the access and use of information and
data by members of the public who are not individuals with
disabilities.
(b) Accordingly, any vendor submitting a proposal/quotation/bid in
response to this solicitation must demonstrate compliance with the
established EIT accessibility standards. Information about Section 508
is available at www.section508.gov. The complete text of Section 508
Final Provisions can be accessed at www.access-board.gov/sec508/
provisions.
(c) The Section 508 accessibility standards applicable to this
solicitation are identified in the Statement of Work/Specification/
Performance Work Statement. In order to facilitate the Government's
evaluation to determine whether EIT products and services proposed meet
applicable Section 508 accessibility standards, offerors must prepare
an HHS Section 508 Product Assessment Template, in accordance with its
completion instructions, and provide a binding statement of
conformance. The purpose of the template is to assist HHS acquisition
and program officials in determining that EIT products and services
proposed support applicable Section 508 accessibility standards. The
template allows vendors or developers to self-evaluate their products
or services and document in detail how they do or do not conform to a
specific Section 508 accessibility standard. Instructions for preparing
the HHS Section 508 Evaluation Template may be found under Section 508
policy on the HHS Office on Disability Web site www.hhs.gov/od.
(d) Respondents to this solicitation must also provide any
additional detailed information necessary for determining applicable
Section 508 accessibility standards conformance, as well as for
documenting EIT products or services that are incidental to the
project, which would constitute an exception to Section 508
requirements. If a vendor claims its products or services, including
EIT deliverables such as electronic documents and reports, meet
applicable Section 508 accessibility standards in its completed HHS
Section 508 Product Assessment Template, and it is later determined by
the Government--i.e., after award of a contract/order; that products or
services delivered do not conform to the described accessibility
standards in the Product Assessment Template, remediation of the
products or services to the level of conformance specified in the
vendor's Product Assessment Template will be the responsibility of the
Contractor and at its expense. (end of provision)
FAR 52.252-2 Clauses Incorporated by Reference (FEB 1998)
This task order incorporates one or more clauses by reference, with
the same force and effect as if they were given in full text. Upon
request, the Contracting Officer will make their full text available.
Also, a full text of a clause may be accessed electronically at these
addresses: FAR--http://www.acqnet.gov/far and HHSAR--http://
www.hhs.gov/oamp/policies/hssar.doc.
a. FEDERAL ACQUISITION REGULATION (FAR) (48 CFR CHAPTER 1) CONTRACT
CLAUSES
------------------------------------------------------------------------
FAR Clause No. Title and Date
------------------------------------------------------------------------
1. 52.204-7............................... Central Contractor
Registration (Apr 2008)
2. 52.212-4............................... Contract Terms And
Conditions--Commercial
Items (Mar 2009), Alternate
I (Oct 2008)
3. 52.227-14.............................. Rights In Data--General (Dec
2007)
------------------------------------------------------------------------
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Contract Number: HHSP23320100022WI
Task Order Number: HHSP23337001T
SECTION C. STATEMENT OF WORK
Title
Development and Testing of Long-term Care Awareness Materials
I. Purpose
This task order is one of three inter-related task orders intended
to assist in the implementation of provisions of the Affordable Care
Act (ACA) related to long-term care financing and awareness. The two
related task orders are: (1) Development of a Survey on Long-Term Care
Awareness and Planning and (2) Survey of Long-Term Care Awareness and
Planning.
The purpose of this task order is to develop a set of consumer-
oriented long-term care awareness materials. The Department's current
set of materials, designed as part of the National Clearinghouse for
Long-Term Care Information (Clearinghouse), targets a broad 20-year
(50-70) age bracket. The new materials will focus on different segments
of the population in an effort to increase the salience of the
materials. Also, the current materials were developed and tested nearly
10 years ago. A number of changes are necessary to bring them up to
date with current planning options as well as changes in the relative
level of long-term care awareness. The new materials are intended for
use in a variety of Clearinghouse initiatives including educating
consumers about a new Federal long-term care insurance program. This
task order is limited to: (a) identifying this relevant target market
(i.e., segments of the population), (b) analysis of consumer responses,
and, (c) revision and design of the educational materials. The
logistics for the interactive discussions will be coordinated by
Knowledge Networks in a separate contract.
II. Background
Approximately 70 percent of Americans 65 years of age can expect to
experience some level of long-term care need before they die.\1\ Long-
term care refers to a wide variety of services and supports used by
persons who are unable to perform activities of daily living, such as
bathing or dressing, because of a disability. Such services can be
provided informally, by family members or neighbors, or through a
network of formal long-term care service providers. However, the vast
majority of such care is provided by informal (unpaid) caregivers. Over
78 percent of persons receiving long-term care rely solely on some form
of informal care while 8 percent rely solely on formal, or paid,
care.\2\ For those without informal caregivers, or for those whose
needs cannot be met by informal caregivers alone, there are a variety
of formal long-term care service providers.
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\1\ Kemper, Komisar, Alecxih. Long-Term Care Over an Uncertain
Future: What Can Current Retirees Expect? Inquiry--Excellus Health
Plans; Winter 2005/2006; 42, 4
\2\ Lee, Thompson. Long-term Care: Support for Family Caregivers.
Long-Term Care Financing Project Issue Brief March 2004; Georgetown
University.
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The type of formal long-term care with which consumers are most
familiar is nursing home care. Approximately 35 percent of those using
long-term care services will use some nursing home care, and 5 percent
of long-term care users spend more than 5 years in such a facility.\3\
Increasingly, consumers are voicing a preference for remaining in their
home for as long as possible. For some time, public policy at both the
State and Federal levels has been moving towards expanding community-
based options for persons needing long-term care.\4\
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\3\ Kemper, et al. 343.
\4\ Shirk, Cynthia. Trading Places: Real Choice Systems Change
Grants and the Movement to Community-Based Long-Term Supports Issue
Brief National Health Policy Forum No. 822, May 2007.
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Long-term care services are expensive. A semi-private room in a
nursing home costs an average of $191 a day and home care services cost
an average of $20 an hour in 2008.\5\ The onset of chronic illness and
the associated need for long-term care services can threaten the
security of retirement finances. Johnson, et al. found that the onset
of disability presented ``a special financing challenge'' for older
adults. They estimate that spells of nursing home use can reduce
household wealth by 60 percent for unmarried women.\6\
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\5\ MetLife Mature Market Institute. MetLife Market Survey of
Nursing Home and Assisted Living Costs. October 2008.
\6\ Johnson, Mermin, Uccello. When the Nest Egg Cracks: Financial
Consequences of Health Problems, Martial Status Changes, and Job
Layoffs at Older Ages.
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In spite of the number of people who will need such care and the
significant threat to retirement finances that the high costs of care
represent, most Americans are unaware of how much long-term care costs
or who routinely pays for such services. In numerous surveys conducted
over the last 10 years, a majority of respondents were unable to
correctly identify who pays for long-term care or to correctly estimate
the cost of such services. One of the most misunderstood aspects of
long-term care financing is the role of Medicare. Several surveys
report that more than half of pre-retiree respondents think that
Medicare pays for custodial long-term care.\7\ \8\ Other studies assume
that private health insurance or other public programs will pay.\9\
\10\
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\7\ Lake Research Partnership and American Viewpoint. Survey of
California Voters 40 and Older on Long-Term Care. April 2010.
\8\ Mathematica Policy Research, Inc. Shoring Up the Infrastructure
for Long-Term Care: What Do Vulnerable Adults Know About Their Options.
Issue Brief July 2004.
\9\ MetLife Mature Market Institute. MetLife Long-Term Care IQ
Removing Myths, Reinforcing Realities. September 2009.
\10\ Minnesota Department of Human Services. Aging Initiative:
Project 2030 Baby Boomer Market Research Report June 1997.
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In addition, while many believe that private long-term care
insurance plays a major role in financing long-term care, this has not
been the case. Long-term care insurance has not achieved any
significant penetration among retirees and pre-retirees due in part to
this lack of awareness. The Long-Term Care Financing Strategy Group
estimated in 2005 that about 8 million long-term care insurance
policies were in force or about one in six people over age 65 with an
income over $20,000.\11\ Policy sales in recent years have remained
virtually flat. Consumers that are uninsured for long-term care and
unprepared for its associated cost often end up on Medicaid. Medicaid
is the largest payer of long-term care services in the country.\12\ The
sheer size of the baby boom generation poses a major challenge to State
and the Federal Governments to sustaining current access to publicly
funded long-term care.
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\11\ Long-Term Care Financing Strategy Group. Index of the Long-
Term Care Uninsured. Washington, DC: Long-Term Care Financing Strategy
Group; 2005.
\12\ Georgetown University Long-Term Care Financing Project.
National Spending for Long-Term Care Fact Sheet. February, 2007.
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In 2005, Congress acted to increase consumer awareness of long-term
care by establishing The National Clearinghouse for Long-Term Care
Information (Clearinghouse) in the Deficit Reduction Act of 2005 (DRA).
Section 6021(d) of the DRA appropriated $15 million in funding for the
Clearinghouse. The goal was to make consumers more aware of the need to
plan ahead and to offer information and tools to assist them in
planning. The premise behind the Clearinghouse is that preparing
consumers for long-term care may reduce dependence on Medicaid and
other public sources of financing. Over the last 4 years, ASPE has had
a major role in administering this effort in coordination with CMS, the
Administration on Aging, the National Governors Association, and
individual State governors. The two major components of the
Clearinghouse are as follows:
(1) National Clearinghouse Web site.--The Administration on Aging
(AoA) hosts a Web site (www.longtermcare.gov) that provides consumers
with information about how to plan for long-term care. The Web site
contains information on public coverage such as Medicare and Medicaid
as well as private financing alternatives such as reverse mortgages and
long-term care insurance. Consumers can obtain general information
about long-term care as well as links to State-specific resources such
as local area agencies on aging or State divisions of insurance.
(2) State-Based Long-Term Care Awareness Campaigns.--State-based
awareness campaigns combine State and Federal resources to reach out
directly to consumers. Over the last 4 years, 16 States have launched
campaigns, reaching over 20 million households. Each State campaign
featured a letter from the Governor, a State-specific informational
brochure and included a number of State-specific activities designed to
take advantage of local messaging opportunities. Consumers are asked to
respond to the mailings by requesting more information by mail, phone
or through the internet. The response to these campaigns has exceeded
expectations; while direct mail campaigns define success as response
rates over 1 percent, these State campaigns have had rates from a low
of about 4 percent to a high of over 21 percent.
Much of the consumer material on the Web site and in the State
campaigns was designed and tested several years ago. In an effort to
improve the quality of the campaign materials, a Technical Expert Panel
(TEP) was convened last year to obtain input from a variety of experts
with perspectives in social marketing, private insurance marketing, and
non-profit communications. The TEP provided a review of the materials
and made three major recommendations. They are:
A. Segment the target market.--The TEP felt that the age span in
our target market was too broad to reach with a single set of
materials. They noted, for example, that younger persons did not like
the suggestion that they do crossword puzzles to keep their minds
active or receiving information about programs and options for which
they are decades away from using, such as reverse mortgages. They
recommended targeting narrower age groups with greater homogeneity to
ensure our messaging remains salient.
B. Reduce the number of calls to action.--The TEP felt that the
materials contained too many calls to action (9 to 12), even for the
segments for which the messaging was relevant. Based on the findings of
research by Barry Schwartz,\13\ and Richard Thaler and Cass
Sunstein,\14\ the TEP noted that people are often overwhelmed if there
are too many options or suggestions, even if they are sympathetic to
the overall message.
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\13\ Schwartz, Barry, The Paradox of Choice: Why More is Less.
Harpers Collins. New York, NY, 2004.
\14\ Thaler, Richard and Cass Sunstein, Nudge: Improving Decisions
About Health, Wealth and Happiness. Penguin Books: New York, NY, 2008.
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C. Simplify the message.--The TEP also concluded that we were
asking too much of the target market with materials that were too long
and too complex. They suggested that we do not try to provide a
complete education on the topic but just make an appeal for a limited
set of relevant action steps.
The impetus for this new work stems from an extension of
Clearinghouse funding via the recently passed Patient Protection and
Affordable Care Act. The Clearinghouse was extended and funded for an
additional 5 years during which new materials will be needed to
continue to increase consumer awareness about long-term care. This
project will mainly serve to revise the awareness materials in
accordance with the recommendations of the TEP. The contractor will
review the Department's current materials, develop a marketing strategy
focused on narrower age groups and other segments of the population,
design separate materials for each segment, and analyze survey and
focus group information in order to make revisions. The collection of
information through the survey, the focus groups and other means will
be done via a separate ASPE contract with Knowledge Networks.
III. Project Summary
Key Goal: The key goals for this task order are to: (1) develop a
market segmentation framework for better communicating with the
American public about long-term care by focusing on narrower age groups
and other segments, (2) develop materials focused on narrower market
segments, and (3) test and refine the new materials to reflect the
preferences of each market segment.
Study Design: After a market segmentation framework is developed,
consumer awareness materials will be developed for each segment. These
materials will be tested in small interactive chats and larger town
hall meetings. The data will be collected by Knowledge Networks through
a separate task order, will be analyzed in this task order and will be
used to revise the materials after each phase to better reflect market
segment preferences.
Major Deliverable: This task order has two major deliverables: (1)
a market segmentation framework that is focused on specific age groups
and other segments and (2) a series of associated consumer awareness
materials related to long-term care. The materials will include
educational information on long-term care as well as calls to action
for individual planning.
Contractor Coordination: The contractor for this project must be
willing to coordinate with Knowledge Networks as well as the contractor
selected for the task order entitled ``Development of a Survey on Long-
Term Care Awareness and Planning.'' It is anticipated that each of the
three contractors will designate a liaison that will be responsible for
coordinating with the other contractors.
IV. Sample Research Questions
What are the different segments of our target market
population? What information sources are trusted for issues related to
retirement and long-term care?
What kind of information do consumers need to better
understand the risks and costs associated with needing long-term care
services?
Are there differences in how segments of the American
public use and receive information related to planning for the future
in general and long-term care specifically? Are some forms of
information and/or media better suited to specific segments?
V. Specification of Tasks
Task 1.0 Post-Award Meeting
Within two (2) weeks of award, the contractor and other relevant
staff (including the liaisons for the other task orders) shall meet
with the ASPE task order officers to discuss the objectives of the task
order and any related issues. The Government anticipates a joint post-
award meeting for all three task orders. Specific topics to be
discussed include, but are not limited to, purpose and goals of the
task order, scope of work, timetable, format of deliverables, and
dissemination of findings. The contractor shall prepare a brief
memorandum summarizing issues discussed at the post-award meeting. The
memorandum is due one (1) week following the meeting (see Appendix A
for the Schedule of Deliverables).
Task 2.0 Work Plan
The contractor shall develop a work plan that will guide their
activities. The work plan, which will reflect the results of the Post-
Award Meeting (Task 1), will serve as a blueprint for the contractor's
approach to carrying out task order activities and shall include:
A strategy for segmenting the target market by extent of
readiness for long-term care awareness and planning;
A process for communicating with the other task order
liaisons;
Potential members of the Technical Expert Panel and date
of meeting;
A timeline for the development of new segment-specific
consumer materials;
A strategy and timeline for testing new materials with
consumers; and,
A delivery schedule.
For each task, the work plan shall describe the approach the
contractor shall take, personnel assignments, and target date for
completion of specific tasks. The work plan shall be modified as needed
as the task order progresses at the discretion of the task order
officers. The draft work plan shall be submitted to the task order
officers for review within five (5) weeks of contract award. A revised
work plan, addressing comments from the task order officers, shall be
submitted two (2) weeks later and be considered final upon approval of
the task order officers.
Task 3.0 Establish Technical Expert Panel
The contractor shall provide the task order officers with a
prioritized list of fifteen (15) candidates with expertise in market
segmentation, advertising and designing materials for baby boomers and/
or general long-term care and retirement research to serve on a
Technical Expert Panel (TEP). The TEP will provide substantive advice
regarding technical decisions, review major reports and documents, and
be consulted individually and/or collectively throughout the course of
the task order (see Task 7, Task 8, Subtask 10.1, and Subtask 12.2).
The contractor shall form a TEP of eight (8) experts from the original
list of 15 based on consultations and feedback from the task order
officers. Non-government members of the TEP will receive an honorarium
of $1,000 and the contractor shall reimburse experts for travel
expenses related to their participation. For purposes of bidding, the
contractor shall assume that there will be at least six non-local
experts who will need to travel to Washington, DC for the TEP meeting.
The list of potential members of the TEP shall be submitted to the task
order officers eight (8) weeks following contract award. The contractor
shall secure agreements for participation from TEP members twelve (12)
weeks following contract award.
Task 4.0 Literature Review
The contractor shall conduct a review of the literature and
materials in the following three areas:
Survey research related to the attitudes, opinions and
interests of the target population around long-term care in general,
and long-term care financing/planning in particular. Of particular
interest are surveys of ``buyers and non-buyers'' of long-term care
insurance and surveys related to consumer assessment of long-term care
risk.
Evaluations of major public awareness or social marketing
campaigns that have focused on a similar target market and been
conducted in the last 7 years. The review shall identify lessons
learned or findings that might be useful to the current project. Of
particular interest are evaluations of campaigns related to long-term
care or to other financial planning-type activities such as advanced
care planning or estate planning. The goal of the review is to take
advantage of the lessons from previous public campaigns that have been
evaluated.
Current messages and media related to long-term care in
general and long-term care financing specifically. The contractor shall
identify messages from news organizations, public entities and private
industry to members of the target market. It should identify, to the
extent possible, existing competing and complementary messages from the
major long term-care insurers, advocacy organizations and government
agencies. The contractor should use the scan to identify opportunities
for new messages such as information gaps or other ongoing activities
that can be utilized. Of particular interest is the range of
motivational appeals, assumptions about target market financial and
issue knowledge, and use of various forms of media.
The draft literature review shall be completed no later than
fourteen (14) weeks from award of the contract. The contractor shall
submit a final literature review within 2 weeks of receiving comments
from the Government.
Task 5.0 Preliminary Market Segmentation Framework
Using the review of literature (Task 4), the contractor shall
propose a preliminary conceptual framework for segmenting population
aged 40-70 into smaller sub-groups. The purpose of the segmentation is
to allow for the development of messages and calls to action that are
more relevant to members of each sub-group. The Government anticipates
that the initial segmentation factor will be age because long-term care
planning changes over the life span. In addition to age, the contractor
shall consider a wide range of demographic and other variables
including attitudes, opinions, and interests before recommending a
segmentation strategy. The contractor shall present more than one
approach to segment the market and should outline the advantages and
disadvantages of each approach. The proposed segmentation should be
large enough to represent a significant portion of the total target
market while small enough to allow for the design of awareness messages
and calls to action with a high degree of salience to each segment. The
applicability of existing segmentation systems such as Nielsen/PRIZM
(consumer lifestyle segmentation) and work by Jeremy Pincus of Forbes
Consulting should be considered as part of the development process.
The preliminary market segmentation framework shall be completed no
later than eighteen (18) weeks from award of the contract. The
Government anticipates that the preliminary framework will be adjusted
as data become available from the complementary long-term care
awareness projects and will be finalized in Subtask 12.1.
Task 6.0 Marketing Materials Memo
After development of the market segmentation framework (Task 5),
the contractor shall draft a memo outlining preliminary content for
long-term care planning for each segment. The Government anticipates
that content for each segment will combine the following four elements:
Information/knowledge: information and/or data that
encourage each segment to consider a call to action. For example, does
the target market need to know how to compute compound interest in
order to buy long-term care insurance? Information for each segment
should be included based on how it engages the target market in a call
for action. This element should include information on risk, types of
providers and cost of care.
Call to action: suggested planning actions for each
segment, restricted to the three most significant steps that members of
the segment can take now. This element is largely dependent on age. For
example, the oldest segment may be asked to learn about reverse
mortgages whereas the youngest one will not.
Motivational appeal: the rationale the target market could
consider adopting for answering a call to action. For example
individuals used to exerting control over their lives may respond
positively to the suggestion that they need to consider long-term care
planning to ensure continued control as they require services.
Delivery: the medium or method used for delivering
content. Segments may have different preferred media for information
about long-term care. For example, the Department's logo on a direct
mail piece may provide issue validation for some segments. Other
segments may prefer to receive information through social networking or
from peer issue leaders. Content delivery may vary for each market
segment but should be held together by similar themes and/or designs.
The contractor shall submit the memo no later than twenty-two (22)
weeks from award of contract. The memo shall be considered final upon
approval of the task order officers.
Task 7.0 Technical Expert Panel (TEP)
The contractor shall be responsible for making arrangements to
convene one in-person meeting of the TEP in Washington, DC. The main
purpose of the TEP is to provide feedback on the marketing materials
memo (Task 6). However, during the meeting the TEP will also review the
literature review (Task 4) and the preliminary market segmentation
framework (Task 5).
Arrangements for the meeting will include preparing the agenda,
compiling necessary materials, making logistical arrangements, taking
minutes, and summarizing proceedings. Agendas and meeting materials
shall be submitted to the task order officers twenty-three (23) weeks
after contract award for distribution to TEP members. The TEP meeting
shall take place no later than twenty-five (25) weeks after contract
award. The contractor shall submit a summary that outlines the TEP
comments and makes recommendations regarding the need to revise the
marketing materials memo no later than twenty-seven (27) weeks after
contract award.
Task 8.0 Development of Draft Marketing Materials
Building on the recommendations and comments from the TEP (Task 7),
the contractor shall develop new marketing materials. The contractor
must have the capability to create and reproduce prototype marketing
materials for the various marketing segments as identified in Task 5.
The materials shall be developed so that they can be reproduced both in
electronic and hard versions. The draft marketing materials shall be
developed within thirty-three (33) weeks after contract award. The task
order officers may seek feedback and comments from selected members of
the TEP.
Task 9.0 Interactive Chats
The contractor shall moderate three (3) sets of three (3)
interactive chats with members of the market segments identified in
Task 5. The interactive chats will be convened by Knowledge Networks
using members of their KnowledgePanel. The purpose of these chats is
to solicit reactions, opinions and ideas related to the draft marketing
materials as developed in Task 8. Following each set of chats, the
materials will be revised for testing in the next set of chats.
Participants will provide feedback on the content of the materials
and suggest ways for improvement. For budget estimation purposes, the
contractor should assume nine (9) interactive chats with no more than
nine (9) participants in each chat.
Subtask 9.1: First Set
The contractor shall work with Knowledge Networks and the task
order officers to schedule the first of three (3) sets of three (3)
interactive chats with members of the market segments identified in
Task 5. Participants will review the draft materials and provide
reactions/comments. The contractor shall moderate the discussions and
provide discussion topics when necessary. The contractor shall submit a
discussion outline for ensuring that all chats cover the same topics.
The discussion outline shall be considered final upon approval of the
task order officers and shall be submitted two (2) weeks prior to the
chat.
The initial interactive chat shall be conducted no later than
thirty-six (36) weeks after contract award. The contractor shall submit
a short memo summarizing the discussion and recommending changes to the
draft materials. The memo shall be submitted no later than thirty-eight
(38) weeks after contract award and shall be considered final upon
approval of the task order officers. The contractor shall then revise
the materials based on the feedback from the initial chats. The
materials should be revised no later than forty (40) weeks from
contract award.
Subtask 9.2: Second Set
Using the newly revised materials from Subtask 9.1, the contractor
shall again work with Knowledge Networks and the ASPE task order
officers to convene a second set of three (3) interactive chats with
members of each market segment as identified in Task 5. Participants in
each chat will review the revised draft materials and provide
reactions/comments. The contractor shall moderate the discussions and
provide discussion topics when necessary. The contractor shall submit a
discussion outline for ensuring that all chats cover the same topics.
The discussion outline shall be considered final upon approval of the
task order officers and shall be submitted two (2) weeks prior to the
chat.
The second set of interactive chats shall be conducted no later
than forty-two (42) weeks after contract award. The contractor shall
submit a short memo summarizing the discussion and recommendations for
changes to the draft materials. The memo shall be submitted no later
than forty-four (44) weeks after contract award and shall be considered
final upon approval of the task order officers. The contractor shall
then revise the materials based on the feedback from the second set of
interactive chats. The materials should be revised no later than forty-
six (46) weeks from contract award.
Subtask 9.3: Third Set
Using the newly revised materials from Subtask 9.2, the contractor
shall again work with Knowledge Networks and the ASPE task order
officers to convene a third set of interactive chats with members of
each market segment as identified in Task 5. Participants in each chat
will review the revised draft materials and provide reactions/comments.
The contractor shall moderate the discussions and provide discussion
topics when necessary. The contractor shall submit a discussion outline
for ensuring that all chats cover the same topics. The discussion
outline shall be considered final upon approval of the task order
officers and shall be submitted two (2) weeks prior to the chat.
The third set of interactive chats shall be conducted no later than
forty-eight (48) weeks after contract award. The contractor shall then
revise the materials based on the feedback from the participants. The
materials should be revised no later than fifty (50) weeks from
contract award. These revised draft marketing materials shall be
considered final upon approval of the task order officers.
Task 10.0 Interactive Town Hall Meetings
The contractor shall moderate on-line interactive town hall
meetings on the materials developed in Subtask 9.3. The interactive
town halls will be convened by Knowledge Networks using members of
their KnowledgePanel. The number of town hall meetings will be
determined as a result of the preliminary market segmentation framework
completed under Task 5. For budget purposes, the contractor should
assume six (6) town hall meetings. The Government anticipates that the
online town hall meetings shall be convened between 50-70 weeks after
award of the contract.
Subtask 10.1: Town Hall Content
The town hall meetings will feature a presentation by a moderator
followed by informal discussion and instant polling. The presentation
shall consist of a description and display of the marketing materials
that were developed in Subtask 9.3. The presentation should provide
several opportunities for open discussion and instant polling related
to the materials. Participants will (a) respond to prototype
educational/marketing materials, (b) raise questions and (c) offer
responses to instant polls. The contractor shall develop a presentation
for each segment that displays the educational materials and polls
participants. The presentations shall be developed three (3) weeks
before the scheduled town hall meetings. The contractor shall revise
the presentations reflecting input and edits from the task order
officers and other reviewers designated by the task order officers.
Subtask 10.2: Town Hall Meetings
Each town hall meeting will consist of no more than one hundred
(100) participants. Respondents will be selected based on the
preliminary market segmentation framework. The contractor shall work
with the task order officers and Knowledge Networks to align the
selection of the participants with each market segment. The timing of
the town hall meetings shall be coordinated between the task order
officers, the contractor and Knowledge Networks.
Task 11.0 Analysis of Town Hall Meetings
Using a recording provided by Knowledge Networks, the contractor
shall analyze consumer reactions from the town hall meetings. The
contractor shall prepare a report that synthesizes how members of each
market segment reacted to the revised materials. The report shall
include recommendations for changing the consumer materials in
accordance with the findings. Analysis of the town hall meetings shall
be submitted no later than eight (8) weeks after the last town hall
meeting and shall be considered final upon approval of the task order
officers.
Task 12.0 Final Deliverables
Subtask 12.1: Final Market Segmentation Framework
The contractor shall finalize the preliminary market segmentation
framework developed in Task 5. The final framework shall incorporate
any new information that has become available via this project, or
other complementary long-term care awareness projects, since the
conclusion of Task 5. Of particular interest will be the comments and
recommendations of the preliminary framework by the TEP (Task 7).
The final market segmentation framework shall be submitted to the
task order officers no later than seventy (70) weeks from contract
award. The contractor shall make any recommended changes to the
framework (as determined by the task order officers) within two (2)
weeks.
Subtask 12.2: Final Revised Materials
The contractor shall revise the final draft materials (from Subtask
9.3) for each segment (Task 5) based on the analysis of the town hall
meetings (Task 11) and any feedback from the task order officers and
any members of the TEP (Task 3) (as solicited by the task order
officers). These materials are not intended to be the final ``publicly
distributed'' materials; rather, they are intended to be the final
materials (both in terms of content and camera-ready ``look and feel'')
for this task order. It is expected that the materials will be revised,
as necessary, when they are to be distributed to the public during
future awareness efforts.
The final revised materials shall be submitted to the task order
officers no later than seventy-four (74) weeks from the contract award.
The contractor shall make any recommended changes to the materials (as
determined by the task order officers) within four (4) weeks.
Subtask 12.3: Draft Task Order Summary
The contractor shall submit a draft task order summary that
includes an overview of all activities with timelines. The draft
summary should be no more than twenty (20) pages and, in addition to
the overview, should contain detailed summaries of the following:
the literature review;
the materials redesign process; and
the interactive discussions (chats and town hall).
The draft task order summary shall be submitted to the task order
officers no later than seventy-eight (78) weeks from the contract
award.
Subtask 12.4: Final Task Order Summary
The contractor shall submit a revised task order summary that
incorporates comments and edits from the task order officers no later
than eighty-two (82) weeks after contract award. The final market
segmentation framework (Subtask 12.1) and the final revised materials
(Xeroxed copies of Subtask 12.2) shall be added to the end of the final
task order summary as appendices for purposes of governmental
archiving. The entire task order summary will be considered final upon
approval of the task order officers.
Task 13.0 Monthly Progress Reports and Interim Meetings
Subtask 13.1: Monthly Progress Reports
The contractor shall submit monthly administrative progress reports
outlining all work accomplished during the previous month. At a
minimum, such reports shall cover the following items:
discussion of the progress in accomplishing the tasks in
this task order;
activities anticipated during the upcoming reporting
period; and
statement of actual costs incurred by task relative to
budgeted costs per task.
Monthly reports are due the first week of every month following the
approval of the work plan and shall be sent by the contractor directly
to the task order officers via e-mail.
Subtask 13.2: Interim Meetings
The contractor and task order officers shall also have interim
meetings (in-person or via teleconference) as deemed necessary, but no
fewer than two, by the task order officers to discuss issues that need
input or approval. It is expected that the two mandatory interim
meetings shall be scheduled to update HHS and other Federal Government
officials on the (1) development of materials before the interactive
chats and (2) the preliminary analysis from the town hall meetings. The
timing of these meetings shall be determined by the task order
officers.
SECTION D. CONTRACT CLAUSES
Section 508 Compliance
The final report deliverable must comply with the Department of
Health and Human Services Section 508 Compliance Requirements.
This language is applicable to Statements of Work (SOW) generated
by the Department of Health and Human Services (HHS) that require a
contractor or consultant to (1) produce content in any format that
could be placed on a Department-owned or Department-funded Web site; or
(2) write, create or produce any communications materials intended for
public or internal use; to include reports, documents, charts, posters,
presentations (such as Microsoft PowerPoint) or video material that
could be placed on a Department-owned or Department-funded Web site.
Section 508 of the Rehabilitation Act of 1973 (29 U.S.C. 794d)
requires Federal agencies to purchase electronic and information
technologies (EIT) that meet specific accessibility standards. This law
helps to ensure that Federal employees with disabilities have access
to, and use of, the information and data they need to do their jobs.
Furthermore, this law ensures that members of the public with
disabilities have the ability to access Government information and
services.
There are three regulations addressing the requirements detailed in
Section 508. The Section 508 technical and functional standards are
codified at 36 CFR Part 1194 and may be accessed through the Access
Board's Web site at http://www.access-board.gov. The second regulation
issued to implement Section 508 is the Federal Acquisition Regulation
(FAR). FAR Part 39.2 requires that agency acquisitions of Electronic
and Information Technology (EIT) comply with the Access Board's
standards. The entire FAR is found at Chapter 1 of the Code of Federal
Register (CFR) Title 48, located at http://www.acquisition.gov. The FAR
rule implementing Section 508 can be found at http://
www.section508.gov. The third applicable regulation is the HHS
Acquisition Regulation (HHSAR).
Regardless of format, all Web content or communications materials
produced for publication on or delivery via HHS Web sites--including
text, audio or video--must conform to applicable Section 508 standards
to allow Federal employees and members of the public with disabilities
to access information that is comparable to information provided to
persons without disabilities. All contractors (including
subcontractors) or consultants responsible for preparing or posting
content intended for use on an HHS-funded or HHS-managed Web site must
comply with applicable Section 508 accessibility standards, and where
applicable, those set forth in the referenced policy or standards
documents below. Remediation of any materials that do not comply with
the applicable provisions of 36 CFR Part 1194 as set forth in the SOW
or PWS, shall be the responsibility of the contractor or consultant
retained to produce the Web-suitable content or communications
material.
The following Section 508 provisions apply to the content or
communications material identified in this SOW or PWS: Access Board
Final Rule ``36 CFR 1194.22(a)-(p).''
SECTION E. CONTRACT DOCUMENTS
E.1. Schedule of Deliverables
------------------------------------------------------------------------
Task Deliverable Date Due in Weeks
------------------------------------------------------------------------
Task 1.......................... Post Award Meeting Week 2
Post Award Summary Week 3
Task 2.......................... Work Plan......... Week 5
Revised Work Plan. Week 7
Task 3.......................... Establish Week 8
Technical Expert
Panel.
Task 4.......................... Literature Review. Week 14
Task 5.......................... Preliminary Market Week 18
Segmentation
Framework.
Task 6.......................... Marketing Week 22
Materials Memo.
Task 7.......................... Technical Expert Week 25
Panel. Week 27
Summary of TEP
Meeting.
Task 8.......................... Development of Week 33
Marketing
Materials.
Task 9.......................... Interactive Chats
Subtask 9.1:
Discussion Week 34
Outline. Week 36
Initial Week 38
Interactive Chats. Week 40
Initial
Interactive Chat Week 40
Memo. Week 42
Revised Week 44
Materials. Week 46
Subtask 9.2:
Discussion Week 46
Outline. Week 48
Second Week 50
Interactive Chats.
Second
Interactive Chat
Memo.
Revised
Materials.
Subtask 9.3:
Discussion
Outline.
Third
Interactive Chats.
Revised
Materials.
Task 10......................... Interactive Town
Hall Meetings 3 Weeks before
Subtask 10.1: Subtask 10.2
Town Hall Content. Weeks 50-70
Subtask 10.2:
Town Hall
Meetings.
Task 11......................... Analysis of Town 8 Weeks after
Hall Meetings. Subtask 10.2
Task 12......................... Final Deliverables
Subtask 12.1: Week 70
Final Market Week 74
Segmentation Week 78
Framework. Week 82
Subtask 12.2:
Final Redesigned
Marketing
Materials.
Subtask 12.3:
Draft Task Order
Summary.
Subtask 12.4:
Final Task Order
Summary.
Task 13......................... Monthly Progress
Reports and Monthly
Interim Meetings As Needed
Subtask 13.1:
Monthly Progress
Reports.
Subtask 13.2:
Interim Meetings.
------------------------------------------------------------------------
E.2. Quality Assurance Surveillance Plan
----------------------------------------------------------------------------------------------------------------
Method of Surveillance Standard to be Met/
Required Services/tasks Performance Standards (Quality Assurance) Allowable Deviation
----------------------------------------------------------------------------------------------------------------
Task 5 Market Segmentation Framework. Contractor develops a Task order officers Market Segmentation
clear market will work closely with framework is completed
segmentation framework contractor. in a timely fashion so
that links development as to guide subsequent
and analysis of tasks.
response data to
research questions.
Task 6 Development of Marketing Contractor develops Task order officers Draft marketing
Materials. draft marketing will work with materials are ready
materials from contractor (and any for dissemination to
information gathered subcontractors) on the the Technical Expert
in earlier tasks. development. Panel on deadline
outlined in contract.
Task 9 Interactive Chats............. Contractor moderates Task order officers Revisions to the draft
the different sets of will work closely with marketing materials
interactive chats and contractor and review are made after each
analyzes the transcripts of all set of interactive
information that comes chats. chats.
from them.
Task 11 Analysis of Town Hall Contractor analyzes the Task order officers A set of revised draft
Meetings. information that comes will work closely with marketing materials
from the different contractor. for each identified
sets of interactive market segment are
town hall meetings. produced.
Task 12 Final Deliverables........... Contractor develops a Task order officers Contractor delivers the
final market will review drafts of three distinct final
segmentation framework all Final Deliverables. deliverables to the
and a final set of task order officer on
marketing materials schedule and of
for all the identified acceptable quality.
segments and produces
a final report.
Task 12 Monthly Progress Reports..... Contractor keeps task Task order officers Contractor informs task
order officers will attend all order officers of
informed as to monthly and interim issues that impact
unforeseen problems meetings and review schedule of
and/or necessary all progress reports. deliverables or costs
changes to work plan. associated with the
contract.
----------------------------------------------------------------------------------------------------------------
E.3. Travel Costs
Travel costs, shall be included in the Firm Fixed Price and will be
evaluated in accordance with Federal per diem rates and Federal Travel
Regulation (FTR). All travel shall be approved, by the COTR, prior to
commencement of travel.
E.4. Rights in Data--Advance Approval for Dissemination of Project
Information Prior to Contract Completion
The Contractor (including any subcontractors or consultants) agrees
not to disclose, verbally or in writing, information pertaining to the
results or findings of work (including data base files, analyses, draft
or final papers and reports) for the period of an individual delivery
order under this contract without obtaining prior written approval of
the task order officers. The Contractor must request approval in
advance (minimum 21 days prior to release) and in writing, specifying:
who or what is generating the request for advance information; when and
how project results/information would be released; and what information
would be released. Failure to receive response to the task order
officers does not constitute approval for releasing information.
E.5. Specifications for the Delivery of Digital Copies of Reports
In addition to the printed copies required under the contract,
digital copies of the reports shall be delivered on media readable by
Windows 9x programs. The text, tables, and any charts or other graphics
shall be organized and formatted as described in the following
paragraphs.
Text may be formatted in any of the commonly available word
processing programs marketed by the IBM, Corel, or Microsoft
corporations. Lengthy documents (greater than 500 Kb) should be divided
into several parts and a separate file should be provided for each
part. Lengthy files (greater than 200 Kb) should be avoided if
possible.
The title page, table of contents, and other front matter shall be
in a separate file. File names should contain consecutive numbers that
correspond to the numerical labels used in the printed version. For
example, Chapter 4, Figure 2 can be rendered as C4F2.gif. Suffixes
shall be those used by the software manufacturer or follow the usual
industry conventions, e.g., doc, wpd, xls, gif, jpg, etc. Where
compatibility with earlier versions of the software is in doubt, files
shall be delivered in the penultimate version of the software.
Tables and tabular material shall not be converted into graphical
images, but be included with the word processing files or delivered as
spreadsheet files.
Graphic figures such as bar and line charts, diagrams, and other
drawings shall be delivered in the GIF (Graphics Interchange Format) or
the JPEG (Joint Photographic Experts Group) format. Even though the
graphical elements may have been merged with the text to form a single
file for printing purposes, each graphical image (figure) shall be
delivered as a separate file and must not be embedded in a word
processing, spreadsheet, slide show or other composite file.
Questions regarding the interpretation of these specifications may
be directed to Brian Sinclair-James, ASPE Coordinator of Information
Dissemination, at (202) 401-6127.
SECTION F. CONTRACT ADMINISTRATION
F.1. Invoicing and Payment
One original voucher complete with all required back-up
documentation shall be submitted to the Contract Specialist and
addressed to:
Division of Acquisition Management, SAS/PSC
Parklawn Building, Room 5C-18
5600 Fishers Lane
Rockville, MD 20857
Contract Number: HHSP23320100022WI
Task Order Number: HHSP23337001T
One copy of the voucher with copies of all required back-up
documentation shall be emailed to [email protected] or
they may be submitted to:
PSC/FMS/DFO Commercial Payments Section
Parklawn Building, Room 16A-12
5600 Fishers Lane
Rockville, MD 20857
The contractor shall list the COTR name and phone number on the
face page of the voucher.
One copy of the voucher with copies of all required back-up
documentation shall be emailed to the COTR (the cover page of all
invoices must show the Contract Number, and the Government COTR's name
and telephone number) or they may be submitted to:
Office of the Assistant Secretary for Planning and Evaluation
U.S. Dept. of Health and Human Services
Attn: Hunter McKay and Sam Shipley
Hubert H. Humphrey Bld., Room 424E
200 Independence Ave. SW
Washington, DC 20201
(202) 690-6443
All calls concerning contract payments shall be directed to the
general help line for contract payments on (301) 443-6766.
F.2. Contracting Officer's Technical Representative (COTR) Appointment
and Authority
(a) Performance of work under this contract must be subject to the
technical direction of the COTR identified above, or a representative
designated in writing. The term ``technical direction'' includes,
without limitation, direction to the Contractor that directs or
redirects the labor effort, shifts the work between work areas or
locations, fills in details and otherwise serves to ensure that tasks
outlined in the work statement are accomplished satisfactorily.
(b) Technical direction must be within the scope of the
specification(s)/work statement.
(c) The COTR does not have authority to issue technical direction
that:
(1) Constitutes a change of assignment or additional work
outside the specification(s)/Statement of Work;
(2) Constitutes a change as defined in the clause entitled
``Changes'';
(3) In any manner causes an increase or decrease in the
Contract Price, or the time required for Contract Performance;
(4) Changes any of the terms, conditions, or
specification(s)/Work Statement of the Contract;
(5) Interferes with the Contractor's right to perform under
the terms and conditions of the Contract; or
(6) Directs, supervises, or otherwise controls the actions of
the Contractor's employees.
(d) Technical direction may be oral or in writing. The COTR shall
confirm oral direction in writing within 5 work days, with a copy to
the Contracting Officer.
(e) The Contractor shall proceed promptly with performance
resulting from the technical direction issued by the COTR. If, in the
opinion of the Contractor, any direction of the COTR, or his/her
designee, falls within the limitations in (c), above, the Contractor
shall immediately notify the Contracting Officer no later than the
beginning of the next Government work day.
(f) Failure of the Contractor and the Contracting Officer to agree
that technical direction is within the scope of the Contract shall be
subject to the terms of the clause entitled ``Disputes.''
F.3. Contracting Officer's Technical Representative (COTR)
The COTR is responsible for the technical requirements covered by
this Contract, as contemplated by Section F.2., hereof, will be
designated by separate correspondence.
F.4. Contracting Officer
Contracting Officer (CO): The CO has the overall responsibility for
the administration of this Contract. The CO is the only person
authorized to take actions on behalf of the Government to: amend,
modify, or deviate from the Contract terms, conditions, requirements,
specifications, details and/or delivery schedules; make final decisions
on disputed deductions from Contract payments for non-performance or
unsatisfactory performance; terminate the Contract for convenience or
default; issue final decisions regarding Contract questions or matters
under dispute. Delegation of other responsibilities may be made to
authorized representatives.
[Whereupon, at 12 p.m., the hearing was adjourned.]