[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]







                   HEARING ON THE FUTURE OF MEDICARE
                         ADVANTAGE HEALTH PLANS

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

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

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 24, 2014

                               __________

                          Serial No. 113-HL15

                               __________

         Printed for the use of the Committee on Ways and Means



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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas                   CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington        XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana  LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
JIM GERLACH, Pennsylvania            JOHN B. LARSON, Connecticut
TOM PRICE, Georgia                   EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida               RON KIND, Wisconsin
ADRIAN SMITH, Nebraska               BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas                 ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota              DANNY DAVIS, Illinois
KENNY MARCHANT, Texas                LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio

        Jennifer M. Safavian, Staff Director and General Counsel

                  Janice Mays, Minority Chief Counsel

                                 ______

                         SUBCOMMITTEE ON HEALTH

                      KEVIN BRADY, Texas, Chairman

SAM JOHNSON, Texas                   JIM MCDERMOTT, Washington
PAUL RYAN, Wisconsin                 MIKE THOMPSON, California
DEVIN NUNES, California              RON KIND, Wisconsin
PETER J. ROSKAM, Illinois            EARL BLUMENAUER, Oregon
JIM GERLACH, Pennsylvania            BILL PASCRELL, JR., New Jersey
TOM PRICE, Georgia
VERN BUCHANAN, Florida
ADRIAN SMITH, Nebraska
















                            C O N T E N T S

                               __________

                                                                   Page

Advisory of July 24, 2014 announcing the hearing.................     2

                               WITNESSES

Joe Baker, President, Medicare Rights Center.....................    42
Robert A. Book, Ph.D, Senior Research Director, Health Systems 
  Innovation Network, LLC Outside Healthcare and Economics 
  Expert, American Action Forum..................................    35
Jeff Burnich, M.D., Senior Vice President & Executive Officer, 
  Sutter Medical Network, on behalf of CAPG......................    22
Chris Wing, Chief Executive Officer, SCAN Health Plans...........    11

                       SUBMISSIONS FOR THE RECORD

Alliance of Community Health Plans, ACHP.........................   108
American Federation of State, County and Municipal Employees, 
  AFSCME.........................................................   113
Priority Health..................................................   117
Senior Whole Health, SWH.........................................   122
 
                      FUTURE OF MEDICARE ADVANTAGE
                              HEALTH PLANS

                              ----------                              


                        THURSDAY, JULY 24, 2014

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                    Subcommittee on Health,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:00 a.m., in 
Room 1100, Longworth House Office Building, the Honorable Kevin 
Brady [Chairman of the Subcommittee] presiding.
    [The advisory announcing the hearing follows:]
    
    
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    Chairman BRADY. Good morning, everyone. The subcommittee 
will come to order.
    Today we will hear testimony regarding the Medicare 
Advantage Program. We will hear about these private plans that 
are chosen by an increasing number of seniors, and we will hear 
about how these private plans can combine high quality and low 
costs.
    We will look to the future of the popular program and ask: 
when scheduled cuts to Medicare Advantage Plans in the 
Affordable Care Act take place, can these popular plans 
continue to effectively serve seniors?
    Will the policies of the Obama Administration narrow choice 
and plan flexibility, further impacting our seniors?
    Since seniors were first given the option to select a 
private health plan to receive their Medicare benefits, they 
have shown a strong preference for these plans. Over the past 
decade, enrollment in Medicare Advantage has tripled. Of new 
enrollees, more than half choose a Medicare Advantage Plan over 
traditional fee-for-service. Today nearly 16 million seniors 
are receiving their benefits through these private plans.
    Medicare Advantage Plans are particularly popular with low 
income and minority seniors since these insurance plans are 
able to provide caps on out-of-pocket costs, coordination of 
care for seniors, and more predictable costs. The seniors that 
choose these plans are highly satisfied with the coverage and 
the benefits they receive.
    Unfortunately, many of our elderly could lose access to the 
plans they have and like because of cuts that are just 
beginning to hit that are part of the President's Affordable 
Care Act.
    Knowing just how unpopular these cuts were with the seniors 
that select these plans, the White House, acting through a new 
demonstration program and other regulatory actions, masked and 
delayed the impact of initial stages of the $300 billion in 
cuts through the November 2012 elections. Those political 
delays are over. The difficult reality is 2015 is now upon us, 
and millions of seniors who rely on the Medicare Advantage 
Program may be in jeopardy of losing their plan, their doctor, 
and the financial protection and benefits they have chosen.
    The future for Medicare Advantage may look grim. The 
questionable $8.3 billion quality bonus payment demonstration 
program used to mask ACA cuts is now coming to an end. In 
addition, the new payment methodology for Medicare Advantage 
Plans that assume Congress will fix the way Medicare pays 
physicians is only temporary. This leaves the looming threat to 
Medicare Advantage Plan rates could again include the broken 
physician reimbursement formula unless we finally and 
permanently fix the way Medicare pays our physicians.
    So instead of improving the situation, CMS' regulatory 
actions are threatening plans through potential termination and 
limiting their ability to innovate. For example, plans serving 
largely low income populations find themselves struggling to 
meet the demands of the Medicare Advantage Star Rating Program. 
That could place them in jeopardy of being terminated in this 
coming year, just weeks before open enrollment is to begin.
    Ironically, high performing Medicare Advantage Plans are 
also in the cross hairs. Plans that have consistently found 
ways to be rated highly in the star system now find themselves 
unsure of what supplemental benefits they must cut going 
forward due to backwards incentives under the benchmark cap 
created by the ACA.
    As many of us predicted following the passage of the 
controversial Affordable Care Act, seniors and Medicare 
Advantage health plans have not yet experienced the full impact 
of these cuts, and as the full impact of these cuts is felt in 
the coming years, could millions of seniors be forced out of 
plans they have and they like?
    A report released Monday by the American Action Network has 
mapped out likely benefit cuts per Medicare senior by 
congressional district, which I would like to enter for the 
record.
    And without objection, so ordered.
    [The information follows:]
    
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    Chairman BRADY. The report points to one glaring 
conclusion. Seniors in every district in America, Republican or 
Democrat, now face damaging cuts to their health care and 
pharmacy benefits they selected because it fits their needs. 
The Medicare Advantage Program is popular among our Nation's 
seniors because it provides seniors with choices to select a 
plan that best fits their needs.
    We need to ensure seniors continue to have this valuable 
option. It is no surprise then that many Members of Congress, 
even our colleagues in the Senate, have recognized the 
challenges facing seniors and have come out in bipartisan 
opposition to further cuts to Medicare Advantage.
    Today you will hear from witnesses who will tell us the 
current picture of Medicare Advantage, the good, the bad and, 
yes, maybe even the ugly, and I am confident that as we look 
forward and work together we can break down barriers and 
improve Medicare Advantage for America's seniors who depend 
upon these critical plans.
    The ACA brings a new level of uncertainty to those who 
depend on Medicare Advantage, and the time is now to consider 
the feature of these Medicare programs and the importance 
Medicare Advantage Plans play for a growing number of seniors.
    This Subcommittee will hold the Administration accountable 
to carefully examine the impact that any changes to Medicare 
health plans will have on seniors, the Medicare Program itself, 
and ultimately on taxpayers. We must work together to make sure 
that our Nation's seniors continue to have choices in their 
care and benefits.
    I recognize the Ranking Member, Dr. McDermott, for the 
purposes of an opening statement.
    And I ask unanimous consent that all members' written 
statements be included in the record.
    Without objection, so ordered.
    I now recognize the Ranking Member, Dr. McDermott, for five 
minutes for the purposes of his opening statement. Doctor.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. I want to thank you 
for holding this hearing.
    There is a good story to tell about the Medicare Advantage 
Program, and I am pleasantly surprised by my colleagues across 
the aisle having provided a stag for us to do that. I kind of 
wondered what it was about, but as I listened to the chairman, 
I realized it was more of the skewer tactics of the past.
    Before we get to the good news about the program, we have 
to hear a lot of specious claims about the ACA's effect on 
Medicare Advantage, but the truth is somewhat entirely 
different. Thanks to the changes made by the ACA, both Medicare 
Advantage and traditional Medicare are on a much stronger 
footing, and we will hear that from the report from the Trustee 
shortly.
    Since the passage of ACA, the MA Program has seen record 
high enrollment, with more than 15 million Medicare 
beneficiaries enrolling in the MA plan. Thirty percent of all 
Medicare beneficiaries are enrolled in Medicare Advantage at 
this point.
    Since the passage of the ACA, premiums have been reduced or 
held steady. In total, Medicare Advantage premiums have fallen 
14.3 percent. That means the average Medicare enrollee pays $31 
per month. Underlying Medicare Advantage benefits have been 
increased in both MA and in traditional Medicare, meaning that 
the plans have more money to spend on these benefits. Those are 
the facts.
    Now, one of the key improvements of the ACA made to MA was 
to cut down on overpayments that were threatening the solvency 
of the program. Thanks to misguided provisions put in by the 
Republicans' 2003 prescription drug legislation, the Federal 
Government was paying plans an average of 114 percent of the 
cost of traditional Medicare. That is 14 percent more than if 
people had stayed in Medicare. They were breaking the program.
    Independent analysis from the GAO, Medpac, and countless 
others point out that the wasteful spending was putting 
Medicare on an unsustainable course. To fix this, the ACA 
improved how we calculate payment rates. These reforms have 
brought payments to more in line with the costs of traditional 
Medicare, while emphasizing efficiency and quality.
    Even though we have reduced Medicare Advantage 
overpayments, insurance companies are doing just fine. Which 
insurance company has gone in the tank in the last five years? 
Their stock prices have surged, and their profits continue to 
grow.
    Reducing Medicare overpayments has also improved the 
Medicare Trust solvency and helped drive down Medicare 
spending. It is a fact that overall per capita growth in 
Medicare spending is at record lows, thanks to ACA. The 
savings, most of which were recommended from nonpartisan 
experts, including Medpac and others, come from changes to 
payments for plans and providers.
    Despite their rhetoric, my colleagues on the other side 
must have thought they were well justified, too. In fact, every 
Republican on this dais has voted multiple times in favor of 
these very same cuts as part of the Reagan--Ryan budget. 
Reagan, Ryan, it is all the same. They are Irish.
    At other times my Republican colleagues have been known to 
claim these savings have come at the expense of beneficiaries. 
That is false. We have increased benefits both in Medicare 
Advantage and traditional Medicare by expanding preventive 
care, eliminating cost sharing for preventive care, and 
improving coverage for prescription drugs.
    My colleagues across the aisle also talk about declining 
choice and access in Medicare Advantage Plans, but the reality 
is that beneficiaries have more access to Medicare Advantage 
Plans. More than 99 percent of eligible beneficiaries have 
access to an MA plan, and the average beneficiary has the 
option to choose between 18 plans. That is not a loss of 
choice.
    Given these facts, it does not sound to me that the program 
is having any real difficulty. So I am very interested to hear 
the witnesses.
    And thank you, Mr. Chairman.
    Chairman BRADY. Thank you.
    Today we are joined by four witnesses:
    Chris Wing, Chief Executive Officer at SCAN Health Plans;
    Dr. Jeff Burnich, the Senior Vice President and Executive 
Officer at Sutter Medical Network, testifying on behalf of the 
CAPG; Robert Book, Senior Research Director of the Health 
Systems Innovation Network, and Healthcare and Economics Expert 
at the American Action Forum;
    And Joe Baker, President of the Medicare Rights Center.
    Mr. Wing, you are now recognized for five minutes, and 
welcome.

       STATEMENT OF CHRIS WING, CEO OF SCAN HEALTH PLANS

    Mr. WING. Thank you, Mr. Chairman.
    My name is Chris Wing, and I am the CEO of SCAN Health 
Plans. SCAN was founded in 1977 in Long Beach, California, by 
senior citizen advocates. Their mission back there was very 
elegant: help seniors stay healthy and independent.
    I am happy to say that 37 years later we have the exact 
same mission statement. With our focus on our mission statement 
and the unique and disparate needs of seniors, since they are 
not a homogenous group, we have now emerged as one of the 
fastest growing MA plans in the Nation, and we are the fourth 
largest not-for-profit MAPD plan in the Nation.
    SCAN and our provider partners now care for 170,000 
seniors, up from 120,000 just three years ago. We care for the 
healthy, the poor, the chronically ill, the disabled, and those 
in their last days of life.
    We provide unique products, medical care, and services 
tailored to meet the very unique and disparate needs of today's 
seniors. In fact, 30,000 of our members have chosen to 
participate with us through special need plans. We have C-SNPs 
or chronic special need plans to care for members with 
diabetes, heart disease, and end stage renal disease.
    We have an institutional I-SNP specialty plan for members 
who are nursing home certifiable, and we also have D-SNPs that 
offer integration and care for members who are both eligible 
for Medicare and dually eligible. These are some of the most 
frail and underserved members in our Nation.
    We think the diversity of these plan offerings is a major 
reason why Medicare Advantage has become such a great public 
policy. So whether you are healthy and yearn for a discounted 
gym membership or you require an integrated care team to help 
you deal with a chronic, complex illness, Medicare Advantage 
has a plan for you.
    As Congressman McDermott mentioned, now 30 percent of 
seniors across the country are now enrolled in Medicare 
Advantage. In my home State, that is 38 percent, and actually 
based on an article from Health Affairs, now half of every 
Medicare beneficiary becoming eligible for the program is now 
selecting Medicare Advantage.
    Perhaps the growth of Medicare Advantage is due to 
affordability. For our members in 2014, 90 percent of them pay 
no monthly premium. Perhaps it is because of low cost use for 
going to primary care physicians. Eighty percent of our current 
members have absolutely no copay for seeing a primary care 
physician. This is extremely important for seniors who have 
frail health or are on a fixed income. We do not want to create 
any economic barriers to see their primary care physician.
    Perhaps the growth of MA is due to quality. Virtually all 
of the quality measurements now point to Medicare Advantage 
being better than traditional Medicare, better on diabetes 
testing, better on breast cancer screening, better on 
antidepressant medication management, and better on reducing 
hospital re-admit rates. No wonder people are voting with their 
feet and choosing MA.
    With that being said, there are significant clouds on the 
horizon. Over the past few years the MA Program has sustained a 
series of significant funding cuts. These include the $2.5 
billion cut as part of the American Tax Relief Act; and two 
percent sequestration cut that went into effect last year; and 
the $200 billion worth of cuts coming from the Affordable Care 
Act.
    Some seniors have already begun, and I am talking about 
SCAN seniors, to feel the impact of these cuts with higher out-
of-pocket costs, reduced benefits, and more limited provider 
choice. However, many more seniors in the future will be 
impacted as the vast majority of these cuts, almost 80 percent, 
occur in future years.
    Now plans of providers are adapting and evolving to these 
cuts. We have no choice, and it is good that we are doing it. 
Some of the larger plans are vertically integrating to create 
synergies in costs and care savings. SCAN is pursuing a more 
collaborative approach with the bigger systems in Arizona and 
California.
    We are a not-for-profit, mission driven company, and we 
have enjoyed the trust of our provider groups for 37 years. So 
we have started an initiative called Provider Integration where 
we collaborate with the 14 best and biggest groups on the West 
Coast, and the goal really is how can we work together to 
improve the model.
    The initial focus was on the CMS star program, and in just 
one year we took our star's rating in California from 3.5 to 
4.5. That is a big deal.
    But our seamless quality bonus can offset only so much of 
the cuts. So as Congress and CMS developed Medicare policy, we 
would ask you to be vigilant regarding the stability of 
Medicare Advantage. Reimbursement rates cannot continue their 
recent steep decline. As plans, we will work to minimize and 
mitigate as much of the impact as possible as we become more 
efficient, but we ask the Congress and CMS to do their best to 
keep payment rates as stable as possible.
    CMS should also keep the five-star bonus program stable. As 
I mentioned, the CMS quality bonus program is probably the 
biggest sea change event that has changed the focus on quality 
in my 30 years on managed care.
    Chairman BRADY. Mr. Wing, I apologize. The time has expired 
for the opening statement. So thank you very much.
    [The prepared statement of Mr. Wing follows:]
    
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    Chairman BRADY. Dr. Burnich.

   STATEMENT OF DR. JEFFREY BURNICH, SENIOR VICE PRESIDENT & 
  EXECUTIVE OFFICER, SUTTER MEDICAL NETWORK, ON BEHALF OF CAPG

    Dr. BURNICH. Chairman Brady, Ranking Member McDermott, and 
members of the Health Care Subcommittee, thank you for inviting 
me to testify today.
    I plan to talk about Medicare Advantage and the benefit 
from a physician's standpoint, how it benefits our seniors. I 
will describe a program we have developed at Sutter Health to 
manage some of the sickest, frail patients in this population.
    I am here as a representative of CAPG, the voice of 
accountable physician groups that represent 160 medical groups 
in 20 States and take care of 1.2 million Medicare Advantage 
lives. I am a physician, an internist, and I serve as a Senior 
Vice President and Executive Officer of the Sutter Medical 
Network.
    Sutter Health is a not-for-profit integrated delivery 
system taking care of three million lives in 19 counties in 
Northern California. We manage the risk of 49,000 Medicare 
Advantage lives and have taken care of capitated lives for over 
two decades.
    We do this with our 5,000 aligned physicians who are 
clinically integrating and managing care across our hospitals, 
clinical practices, home care, urgent care, and surgery 
centers.
    So why is MA important to CAPG, Sutter Health and their 
physicians? Well, for one, it is a predictable model for 
population management. The physicians, the PCPs, the primary 
care physicians, know who their patients are. They get lists. 
We make sure that those patients get in to see their physicians 
on an annual basis for an annual wellness exam, an annual 
wellness visit. It is a benefit of the MA Program.
    This helps us understand the risks of those patients, 
review their medications, their conditions and do better 
preventive planning.
    Secondly, it is a predictable budget for managing a 
population. You get a per member per month payment so that you 
can budget each year to take care of these patients and budget 
for programs and the expenses you incur for those.
    We have data to understand the utilization of the patterns 
of these patients so we can better manage the risk and the 
referrals.
    MA incentivizes caregivers to coordinate care, reduce cost, 
and reinvest those savings in the care model like Sutter 
Health's Advanced Illness Management Program, otherwise called 
AIM. Fee-for-service does not do this.
    So what is AIM and how does it align and support Medicare 
Advantage beneficiaries? Well, actually MA is the foundation of 
our AIM Program. In Sacramento, we have a large population of 
capitated lives, and it allowed us years ago to put care 
managers both in the hospital and in the practice to better 
coordinate the handoffs from discharge of patient and admission 
from office.
    So who are these patients? They are very sick and they are 
very frail. You may know some of them or have members in your 
family. They average 17 days a year in the hospital, 12 days in 
the intensive care unit. They take 18 to 30 prescriptions and 
54 trips to nine different physicians. These are really sick 
patients, hence the name AIM.
    We target the patients with a care management model that 
manages the patients with a multidisciplinary team. We use 
common training and real time data, and we enroll these 
patients in several settings, notably in the physicians' 
offices of our network, 40 percent, both in the hospital and 
home care.
    We go to the home, and we set goals with these patients. 
What is it that they want to accomplish? It can be as simple as 
a grandmother wanting to see her granddaughter graduate high 
school, and she is very ill and we need to manage her symptoms.
    Symptom management is a key ingredient because it keeps 
those people from picking up the phone, calling 911 and going 
to the hospital as the usual routine.
    And then we provide a wealth of services to evaluate 
emotional and nutritional needs.
    In 2009, we piloted the program in Sacramento, again, 
because we had a large MA population. We also applied for an 
Innovation Challenge Award from CMMI and received that in July 
of 2012. Through that grant we have spread the program across 
15 counties, taken care of 5,000 patients, with an average 
daily census of 1,800. We have met the patients' needs by 
maintaining them in their home environment where they want to 
choose to be treated. We have decreased unwanted, avoidable 
hospital emergency room/ICU stays and the costs associated with 
them.
    The savings are reinvested into the care model and the 
training and event technology. We are adding video visits next 
year so we can better monitor the patients in their homes more 
frequently.
    In conclusion, I believe Congress and the Administration 
should develop policies that encourage population payments to 
physician organizations in MA, as well as fee-for-service 
Medicare. Such payments should encourage the organized practice 
of medicine, strengthen and coordinate the care infrastructure, 
and build incentives for team-based care.
    Thank you for the opportunity to speak to you today as the 
committee considers important Medicare and fiscal policies in 
the future. I hope you will reconsider and consider all that 
the MA Program has to offer our senior citizens.
    Thank you.
    Chairman BRADY. Thank you, Doctor.
    [The prepared statement of Dr. Burnich follows:]
    
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    Chairman BRADY. Mr. Book, you are recognized for five 
minutes.

 STATEMENT OF ROBERT A. BOOK, PH.D., SENIOR RESEARCH DIRECTOR, 
HEALTH SYSTEMS INNOVATION NETWORK, LLC, OUTSIDE HEALTHCARE AND 
            ECONOMICS EXPERT, AMERICAN ACTION FORUM

    Dr. BOOK. Thank you, Chairman Brady and Ranking Member 
McDermott and Members of the Subcommittee.
    Chairman BRADY. Can you get your microphone and just see if 
that is on?
    Dr. BOOK. I am sorry.
    Yes, thank you, Chairman Brady, Mr. McDermott and Members 
of the Subcommittee. I thank you for the opportunity to share 
my research on the Affordable Care Act and its impact on 
seniors and disabled Americans enrolled in Medicare Advantage.
    Fee-for-service Medicare has very high deductibles, high 
copayments and no limit on out-of-pocket costs patients can 
face. Nearly all Medicare beneficiaries seek alternative 
coverage to reduce those out-of-pocket costs. Some retirees 
have supplemental coverage from a former employer, and some 
have income low enough to qualify for Medicaid. For the rest, 
MA is now the most popular option.
    The 30 percent of Medicare beneficiaries currently in MA 
that Mr. McDermott mentioned includes 44 percent of those who 
do not have access to retiree supplemental plans from a former 
employer. Most of the remainder have a Medigap or some other 
way of combatting those high out-of-pocket costs.
    Medicare is more popular among beneficiaries who have lower 
incomes but above the Medicare threshold, and it is more 
popular among African Americans and Hispanics. Hispanics, in 
particular, historically have been more than twice as likely as 
the average Medicare beneficiary to enroll in MA.
    CBO estimates that ACA cuts to Medicare Advantage will 
total $308 billion by 2023, and which is approximately 43 
percent of the ACA's total cuts to Medicare. MA payments are 
tied to benchmark monthly payments individually for each 
county, and the ACA makes changes to the way those benchmarks 
are calculated with the result that every county in the country 
will see a cut by 2017, and in fact, 97.9 percent of counties 
will see a cut in 2015, for which rates have already been 
published.
    The bonus system based on the star rating system that Mr. 
McDermott referenced, I think everyone agrees that paying more 
for good performance is a good thing. However the star rating 
system does not necessarily accomplish that because CMS chooses 
the rating criteria after the period of performance. So, for 
example, in the first cycle, they measured performance between 
January 2010 and June 2011 and then October 2011 announced the 
criteria on which plans would be rated.
    So since the rules are not determined until after the game 
is played, it is difficult for MA plans to tailor their 
performance to the criteria that CMS will reward. That system 
could, on the other hand, be used to reward favored plan 
sponsors by choosing criteria to give high ratings to those who 
are favored. Favored plans could then use the money to increase 
their profits and their increasing market share by offering 
benefits that other plans cannot afford to offer.
    So instead of allowing plans to compete on a level playing 
field, the rating system could be used to herd patients into 
favored plans by manipulating their ability to offer benefits. 
This is the reverse of the original goal of Medicare Advantage, 
which was to increase patient choice.
    Mr. McDermott mentioned that the dire predictions that many 
of us made for Medicare Advantage have not yet come to pass, 
and that is true because after the ACA was passed, CMS used its 
regulatory authority in a new way to mask the first few years 
of cuts. They created a new star rating bonus program different 
from the program in the Affordable Care Act which gave bonuses 
to almost all plans, with the result that most of those cuts 
have not actually hit patients or plans yet.
    So based on published rates for each county in 2015, now 
that the bonus program has ended, the total cut will be about 
$317 per month compared to the year before, but $1,530, or 13 
percent, below the pre-ACA baseline. So this demonstrates the 
extent to which the pilot program authority was used to offset 
cuts that were mandated by the Affordable Care Act.
    Now, the Affordable Care Act phases in and calls for the 
rates to be phased in through 2017. So there are more cuts to 
come. Assuming the Affordable Care Act cuts are implemented as 
passed by Congress, by 2017 the cumulative cut relative to the 
pre-Affordable Care Act baseline will be $3,700 per beneficiary 
per year, which is nearly a 27 percent overall cut.
    It is going to be extremely difficult, perhaps impossible 
for plans to maintain their prior level of benefits in the face 
of those drastic cuts.
    Every beneficiary will see some combination of either 
higher copayments, higher deductibles, a higher monthly premium 
in excess of the Part B premium they already pay, or reduced 
benefits or plan services or smaller provider networks.
    Now, this impact is going to be different for each plan as 
each plan deals with the cuts in its own way, but one way or 
another, it will affect everybody. This will affect not only 
seniors' financial stability, but also their access to health 
care.
    Chairman BRADY. Mr. Book, I am sorry. Your time has 
expired. So thank you very much.
    [The prepared statement of Mr. Book follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
   

    Chairman BRADY. Mr. Baker, you are recognized.

               STATEMENT OF JOE BAKER, PRESIDENT,
                     MEDICARE RIGHTS CENTER

    Mr. BAKER. Thank you. Thank you, Chairman Brady, Ranking 
Member McDermott, and distinguished Members of the Subcommittee 
on Health. Thank you for the opportunity to testify today on 
the future of Medicare Advantage.
    Each year Medicare Rights Center counsels thousands of 
people with Medicare about topics ranging from enrolling in a 
plan to appealing a denied claim. For people with Medicare, we 
find there is no one size fits all choice. Medicare Advantage 
Plans are a good option for some, but for many, original 
Medicare remains a better choice for them.
    My testimony today makes two key points about the MA 
program that I hope will inform your debate. First, the MA 
Program has been made more attractive to beneficiaries through 
benefits and protections contained in the Affordable Care Act.
    Second, the MA Program continues to be stable and strong. 
There is rising enrollment and widespread plan availability 
with decreases in average plan premiums and no significant 
changes in benefits and cost sharing.
    There are four significant ways in which the ACA has 
brought improvements to the MA Program. First, the ACA's 
decreasing reimbursement overpayments to MA plans. According to 
Medpac, on average MA Plans were paid 114 percent of cost, more 
than original Medicare, or about 1,000 more per enrollee. These 
overpayments drove up premiums for all Medicare beneficiaries, 
including those who remained in the original Medicare. The 
Affordable Care Act brings down these overpayments to level the 
playing field between original Medicare and Medicare Advantage.
    Second, the ACA enhanced coverage and reduced costs for 
certain types of preventive care which are now available to 
both people in Medicare Advantage and in original Medicare.
    Third, the ACA prohibited MA Plans from charging higher 
cost sharing for services used by sicker beneficiaries, 
including renal dialysis, chemotherapy, and skilled nursing 
care. Once again, these reforms leveled the playing field 
between the MA Program and original Medicare, but also among 
the MA plans themselves, lessening their ability to cherry-
pick, select healthier, not select not so healthy enrollees.
    Four, and finally, the Act mandated a medical loss ratio, 
requiring that Medicare Advantage Plans spend 85 percent of 
premiums on care, not on administrative costs or profits.
    With these changes under the ACA, the MA Program remains 
stable and shows improvement by five different indicators. 
First, Medicare itself is on a stronger financial footing. 
Improved efficiency in the MA Program translates into tangible 
savings for all people with Medicare. This year the Part B 
premium paid by both people with original Medicare as well as 
those with Medicare Advantage remains at 2013 levels, at 
$104.90 per month.
    Second, Medicare Advantage enrollment is at an all-time 
high, with nearly 16 million enrollees, and CBO projects future 
growth at a healthy clip.
    Third, plan choice remains strong. In 2014, the average 
beneficiary has a choice of among 18 Medicare Advantage Plans.
    Fourth, the premiums have gone down. The average Medicare 
Advantage premium was $44 a month in 2010 compared to $35 a 
month in 2014.
    Fifth, plan benefits and cost sharing remain unaffected. 
Covered benefits and cost sharing remain stable from year to 
year. There is no evidence of an overall trend towards less 
generous benefits.
    Even with this success, Congress can and should take steps 
to further improve Medicare Advantage, while also preserving 
and strengthening original Medicare, for example: By increasing 
support for the SHIP Programs. These are the State health 
insurance programs which provided free and unbiased counseling 
in each State to support seniors and people with disabilities 
in their decision making.
    Transparency of Medicare Advantage Plan performance can be 
enhanced through public release of plan reported data. This is 
especially important to see how Medicare Advantage Plans are 
managing claim denials or care denials and the appeals of those 
denials.
    And also by encouraging meaningful variation among plans, 
and I stress that, meaningful variation. Congress should 
explore further standardizing Medicare Advantage Plan benefits 
to help consumers make apples-to-apples comparisons among 
plans.
    Efforts are also needed to further consolidate plan choices 
for consumers so that they can make a meaningful choice to make 
sure that they are accessing the right plan for them or they 
are looking at Medicare Advantage in contrast to original 
Medicare in the correct way.
    Once again, thank you for this opportunity to testify 
today.
    Chairman BRADY. Thank you, Mr. Baker, and thank you for the 
testimony from all four witnesses.
    [The prepared statement of Mr. Baker follows:]
    
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    Chairman BRADY. The reason we are holding this hearing is 
that the Affordable Care Act cut, slashed more than $300 
billion out of Medicare Advantage that so many of our seniors 
rely upon. Now, the cuts were delayed through various actions. 
That is what Mr. Baker's testimony is all about. It did not 
happen. I agree. It did not happen because the cuts were 
delayed.
    Now they are becoming real, and there is no way it will not 
have some impact on seniors. The hearing today is to figure out 
what will that impact be.
    Mr. Book, as you describe in your testimony, the cuts to 
Medicare Advantage are becoming real for millions of seniors. 
There is no magic bean here. These cuts will land on them. Some 
suggest and your testimony said that you would be forced to 
spend $3,700 less per senior as a result of these cuts. Some 
suggest these simply eliminate inflated profits for Medicare 
Advantage Plans or have made them more efficient.
    But as we all know, CMS requires MA Plans to bid on 
Medicare's guaranteed benefits, A, B, D, as well as 
administrative costs. So this is all part of the bid.
    So the question to you is: what is the real impact on our 
seniors as results from the cuts that really begin next year 
for Medicare Advantage?
    Dr. BOOK. That $3,700 per senior per month or per enrolled 
member is going to have to be made up for by either reductions 
in benefits, increased copays, increased premiums. That is 
really all there is.
    They can restrict provider networks so that there are fewer 
physicians seniors can see. Those are about all of the options 
they have.
    You mentioned profit. The average health care company makes 
a profit of about three to five percent on all of their 
business, including their commercial and private sector 
business, and these cuts are 27 percent. So there is no way 
they can make up these cuts just by reducing their profit, even 
if they were willing to run profit down to zero. There is 
simply not enough room. They are going to have to make 
significant, very significant cuts in the benefits they provide 
to seniors or increase their prices that seniors pay above what 
they can afford.
    Chairman BRADY. They have to reduce the benefits.
    Dr. BOOK. Right.
    Chairman BRADY. Or you have to increase the costs to 
seniors.
    Dr. BOOK. Right. There is no other room. That is correct.
    Chairman BRADY. You do not have a magic bean that you will 
be using somehow----
    Dr. BOOK. Perhaps one of the physicians here could mention 
a magic bean, but I think if we had that we would have used 
that already.
    Chairman BRADY [continuing]. Yes, I would think so.
    Mr. Wing, Dr. Burnich, let us talk about what we know has 
already happened. I was around the last time Congress went 
after Medicare private plans in the 1997 Balanced Budget Act. 
According to the CBO estimates, at the time that law took $97 
billion out of the plan. This is three times greater than that.
    But I was there when almost two and a half million seniors 
lost their plan, some of them in our communities. I remember 
taking calls. I remember trying to figure out how we were going 
to get them in other plans. I remember how upset they were. 
They liked what they had, and there was an uproar.
    So much so Congress intervened in 2003 and created new 
incentives through Medicare Advantage Plans, resulting in the 
successful program we have today. Now with the $300 billion in 
cuts, it feels like, as Yogi Berra said, ``It's deja vu all 
over again.''
    Are we not likely to see similar levels of upset seniors 
once they start to feel the pain of these cuts, Mr. Wing, Dr. 
Burnich?
    Mr. WING. I think the answer is yes. I cannot speak for the 
industry, but we submitted our bid for 2015 in the first week 
of June, and there will be withdrawals from markets. There will 
be withdrawals of products from certain markets.
    Chairman BRADY. Withdrawals from markets means there will 
be fewer Medicare Advantage Plans offered to fewer seniors.
    Mr. WING. I cannot speak for the total industry, but I know 
that there is one geographic region where SCAN will be leaving 
in 2015 entirely. There are probably four or five counties 
where we are withdrawing some of our special need products, and 
in virtually all of our markets, we will be increasing what we 
ask seniors to pay, especially on the Part D, the Rx benefits.
    Chairman BRADY. Sure.
    Mr. WING. There will also be slight trimming of the 
networks, both in Arizona and California.
    Chairman BRADY. They will be able to see fewer doctors, 
fewer hospitals, less choice.
    Mr. WING. Yes.
    Chairman BRADY. And that impact would not be occurring 
without these Affordable Care Act cuts?
    Mr. WING. You know, we are a not-for-profit, but we need to 
have a margin, and right now in 2014 we have a negative margin. 
So we love caring for seniors.
    Chairman BRADY. Negative margin means your profits are so 
large you are actually losing money?
    Mr. WING. We are losing money.
    Chairman BRADY. Yes. Dr. Burnich.
    Dr. BURNICH. So about 1997, I lived through it. I practiced 
it in Ohio. It was not pleasant. It was painful for those that 
we cared for. It left a bad taste in the physician's mouth.
    I think you have to have choice. Narrow networks take away 
choice, but it also takes away quality physicians, and I am 
here as a physician. I am not here as a health planner, and I 
think it is important to offer choice and a broader network so 
that there is a broad palate of services.
    The programs like AIM would never get off the ground, and 
when you look at the expenditures in Medicare, 28 percent of 
all CMS dollars are spent in the last year of life, and half of 
that is in the last month.
    Chairman BRADY. So the plan that targets the most sick and 
chronically ill seniors would not have gotten off the ground?
    Dr. BURNICH. No, and it will not be sustainable either.
    And then the last piece I would say is physicians have to 
manage overhead, and at some point those cuts past down to them 
through the health plans is they will just disengage, and even 
the plans that do exist in counties, they will not be in them. 
They will go back to fee-for-volume, and if you recall after 
BBA 1997, if you looked at the rate of increase of 
expenditures, they plateaued a little bit after 1997, and then 
they went up much faster than they did in the previous ten 
years.
    I think the same thing could occur if you do that now.
    Chairman BRADY. You think the impact on seniors will be the 
same or greater than the cuts in the Balanced Budget Agreement?
    Dr. BURNICH. I do not know, but I know that physicians will 
figure out how to cover their overhead by doing more things.
    Chairman BRADY. Doing more things, seeking revenue from 
other sources?
    Dr. BURNICH. They will do more testing. They will do more 
invasive procedures. They will do what they did after 1997.
    Chairman BRADY. Can I finish with this?
    Dr. BURNICH. I hate to say that, but I think----
    Chairman BRADY. No, I know. Look. No magic bean here.
    Care coordination innovation within Medicare Advantage I 
think has been hugely helpful long term for our seniors. What 
is the impact of that when you are facing these cuts? Is that a 
risk?
    Mr. WING. Well, I think the care coordination is very, very 
valuable for the population we serve, the dual-eligibles, the 
seniors and our C-SNPs, our seniors and our I-SNPs. Every year 
we have to do an up-front assessment, an HRA, if you will. We 
have to develop a care management plan, a multidiscipline care 
management plan, and we love to do the special need plans.
    But they are underfunded. So they will be uniquely impacted 
with these cuts as opposed to vanilla MAPD program.
    Dr. BURNICH [continuing]. So in the 20th Century, a 
physician could practice and manage 25 to 30 drugs and a dozen 
tests, and now people are living longer. They are more complex. 
There are more complex drugs. You need a village of people to 
take care of people.
    So team-based care is a 21st Century concept, and it is 
evolving. Some people call it patient-centered medical home. I 
call it team-based care. Those teams are comprised of 
individuals such as care managers, nurse practitioners, 
sometimes a pharmacist, social worker, behavioral therapist 
because these people that are living longer are having much 
more complex problems, and physicians by themselves, internists 
like myself cannot do it alone, and if they do not have those 
teams around them, the patients will go back to falling through 
the cracks like they have in the past.
    And so I think the members of those teams, those budget 
cuts will take those people right out of the program.
    Chairman BRADY. Yes. A final point, thank you for the 
testimony, all of you. You know, around here if there is a $3 
billion cut to Medicare the place goes crazy. We are ending 
Medicare as you know it. A $300 billion cut to seniors today, 
some say, ``Oh, it is not problem. Nothing is going to 
happen.''
    There is going to be real impact. It is coming at us soon. 
I think seniors need to know what the impact is, and I think 
Congress needs to find a way to try to avoid these serious cuts 
on our seniors.
    Dr. McDermott, you are recognized.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    I asked to have a couple of graphs put up on the monitors 
because one of them shows the Medicare Advantage premiums, and 
you see that line that starts up high there and goes down and 
is flat. That blue line is the premiums of Medicare.
    Now, we have had these harbingers of disaster come in here 
and tell us that, ``Oh, my God, this is the end of Medicare. 
What we have done with these cuts is going to just end Medicare 
and it is going to price it out of people's ability.''
    But the fact is the premiums have stayed down. Now, the 
CBO, if you look at those three lines, the green line is what 
CBO projected would happen to MA in terms of enrollment before 
the enactment of the law. The red line is what they projected 
after it passed, and the blue line, the one that goes up to 
almost 15 million, is the fact of what has actually happened.
    CBO has not projected correctly on what was going to happen 
with MA. All the disaster folks who come out here like 
Cassandra telling us it is the end of the world are clearly not 
being able to project what is going on.
    We have made the cuts. They have already been started in 
2011. We have been gradually reducing the amount that Medicare 
Advantage Programs are getting. What that does is force doctors 
and programs to figure out how to do it more efficiently.
    Now, what I am hearing from the three of you is give us 
more money. Do you people understand that you came to the wrong 
place? These guys are not going to give you more money. They 
cannot raise taxes for highways, much less more money for 
Medicare. So you are asking for more money. They are not 
telling you you are going to get more money. They just want to 
scare the old people, and your job is going to be how do you 
deal with the money that you are going to get because they are 
voting for these cuts.
    The Ryan budget has had them in every single time.
    Chairman BRADY. Just for the record, I would say no 
Republican voted for the Medicare Advantage cuts in the 
Affordable Care Act. No Republican voted for it, and this chart 
does not recognize that the Administration delayed the cuts, 80 
percent of them.
    Mr. MCDERMOTT. Mr. Chairman, the Ryan budget uses the 
savings from the Affordable Care Act, and you can parse it any 
way you want, but you voted for it.
    Chairman BRADY. The Ryan budget is not the law today. These 
are people who are living under real cuts and real law.
    Mr. MCDERMOTT. Right. Mr. Baker, you have listened to this. 
Should seniors be worried as we go into this election about 
these cuts?
    Mr. BAKER. Given the experience that we have had thus far, 
I do not think so. In our discussions with plan executives both 
in New York State and in other areas of the country, we have 
heard that certainly plans are concerned, but they are also 
very concerned with keeping market share in their MA products 
which they think are profitable and which they think are, you 
know, very valuable to their product lines, particularly in an 
environment now under the Affordable Care Act where they could 
potentially cover someone, you know, cradle to grave, as it 
were.
    Mr. MCDERMOTT. Are they putting in bids?
    I mean, we hear that somebody is pulling out of a market. 
So I guess maybe some are, some are not?
    Mr. BAKER. Yes. I mean, I think that the experience, once 
again, every particular plan is making a decision about whether 
or not to increase market share in particular markets, pull in 
or pull out, and that is what we have seen consistently over 
the course of the history of the Medicare Plus Choice and the 
Medicare Advantage Program.
    These are private entities that make business decisions 
based upon reimbursement and a number of other factors about 
whether to enter a particular market or leave a particular 
market, and certainly BBA, other reimbursement changes can 
affect that behavior, but there is a whole host of other issues 
that can be specific to particular plans that have nothing to 
do with reimbursement overall.
    Mr. MCDERMOTT. Let me ask you one quick question. Are those 
plans open so that you can see what they are offering seniors 
in their Medicare Advantage?
    Mr. BAKER. Open how? I am sorry.
    Mr. MCDERMOTT. Open to look at them and see if they are 
cutting benefits.
    Mr. BAKER. Yes. I mean, we studied plans in New York, and 
we have looked at plans across the country, and we have not 
seen any significant change in benefits year to year and no 
trend in that regard.
    Mr. MCDERMOTT. They are making a bid based on the law as it 
presently is and the cuts that are being phased in over a 
period of time, slowed down by the Administration; they are 
making bids on that basis, and they say they can make it?
    Mr. BAKER. Many of the plans that I talk to say they can 
make it. Many, and I think in the testimony of some of the 
witnesses today there are a variety of strategies like looking 
for those four and five-star ratings that still bring 
significant bonuses to, you know, weather this and also other 
efficiencies to bring to bear.
    Mr. MCDERMOTT. Thank you.
    Chairman BRADY. Thank you.
    Just for the record, Mr. Baker, the trends have not changed 
because the cuts have not occurred. This hearing is about the 
future and the impact on our seniors.
    Mr. Johnson is recognized.
    Mr. JOHNSON. Thank you, Mr. Chairman.
    Mr. Wing, Dr. Burnich and Mr. Book, you know, my district 
back home includes Collin County, Texas. That is Dallas and 
Plano. My district is about 24 percent Medicare beneficiaries, 
and they have opted out of traditional fee-for-service Medicare 
and enrolled in Medicare Advantage because there are more 
advantages, obviously.
    Since Obamacare became law, Medicare Advantage enrollment 
has doubled in our county, yet benefits are expected to be cut 
over $2,600 per person, and the total number of plans has 
already begun to decline.
    I wonder if each of you can just explain what cuts mean for 
Medicare beneficiaries in my county and in the Nation, and if 
these beneficiaries lose access to their Medicare Advantage 
Plan, what challenge will they face when they have to re-enroll 
in a fee-for-service Medicare, and is that going to work?
    Mr. Wing.
    Mr. WING. If I may, I will just speak to the SCAN 
experience, and SCAN is operational in Arizona, Northern 
California, and Southern California.
    I do not think the experience in Texas is going to be much 
different than in California or Arizona for 2015, 2016, and 
2017. We are trying to shoot for a small margin, but no margin, 
no mission, and we are being forced to do things we do not want 
to do.
    We are a not-for-profit. Our whole mission is to improve 
the health and independence of our members, but with the cuts 
and the changes, we are going to have, as I mentioned, to 
withdraw from one geographic market, withdraw products, 
especially the special need products that are probably the most 
important products of the MA Program because they deal with the 
most frail seniors.
    But we cannot sustain. They are hard for us to sustain in 
good times. With these cuts, in some geographies we are going 
to have to withdraw them, and for our core programs, we are 
going to have to make some changes, more cost share 
participation on the part of the beneficiaries. I think you 
will see that in Texas. I think you will see that across the 
land.
    Mr. JOHNSON. Thank you.
    Chairman BRADY. Dr. Burnich.
    Dr. BURNICH. I think the biggest concern for me is access 
to care for patients, particularly if they get disenrolled from 
a Medicare Advantage Plan. Fee-for-service Medicare and primary 
care, it is hard to run a practice off of that. You have to 
really kind of manage a percentage, if you will, of the 
patients. Those patients, if they get disenrolled from an MA 
plan, might have trouble getting into a PCP, not to mention we 
have a shortage of PCPs.
    We have an aging population that is growing. So we are 
really putting pressure on access to care.
    Mr. JOHNSON. Yes, and do you not see some docs even getting 
out of the business?
    Dr. BURNICH. Absolutely.
    Mr. JOHNSON. That is what I am seeing.
    Dr. BURNICH. Yes. I do not think California and Texas are 
different there.
    Mr. JOHNSON. Yes. Mr. Book.
    Dr. BOOK. I think the type of impact is going to be the 
same throughout the country. The individual dollar amount of 
the impact is going to vary from county to county and State to 
State, and the reason for that is the benchmark rates are set 
at the county level.
    In the past they have been set by a somewhat arbitrary 
formula, and now we are just transitioning to a different, 
somewhat arbitrary formula. So the difference between the old 
rates and the new rates is going to vary from place to place.
    So the counties that are hit worst are in Louisiana. The 
counties that are hit least are in Montana, on average, but the 
types of impacts we are going to see are the same. Everybody is 
going to see a reduction in benchmarks. Everybody is going to 
see an increase in out-of-pocket spending and/or a reduction in 
benefits. It is going to happen everywhere.
    You put up that nice chart about what would have happened 
if the Affordable Care Act has been implemented, but it was not 
implemented. So, of course, the predictions did not come true. 
That is kind of like if you say if you jump off a building, you 
will hit the ground, but if you say, ``Well, I am not going to 
jump off the building yet so I am still fine,'' that does not 
really mean that it is okay to jump off a building.
    Mr. JOHNSON. I hope we do not go jump off a building.
    Mr. Chairman, I am ashamed that this Administration 
decimates Medicare, especially Medicare Advantage, to pay for 
Obamacare, and while they are playing political games and 
covering up these cuts until after the election, Medicare 
beneficiaries in my district and around the Nation are losing 
benefits and access to their preferred Medicare Advantage 
Plans.
    So I just want to thank you for holding this hearing, and I 
yield back the balance of my time.
    Chairman BRADY. Thank you.
    Mr. Gerlach, you are recognized.
    Mr. GERLACH. Thank you, Mr. Chairman.
    I want to start with the premise that Dr. Book made in his 
testimony that the average reduction in benefits for 2017 
relative to the pre-ACA baseline is going to be over $3,700 per 
beneficiary per year, about 27 percent. So if you would, make 
that an assumption for the purpose of my question for each of 
you.
    What do you think that kind of impact is going to have 
particularly on the area of the dual-eligibles?
    And of course, that varies. The affluence of counties, of 
course, varies. The number of dual-eligibles per county varies. 
The benchmarks therefore vary.
    But in terms of the scope and breadth of your current 
activity, recognizing that unique population of the Medicare 
patients, the dual-eligibles who tend to be more disadvantaged, 
who tend to have more severe health risks, what do you think 
the impact of Dr. Book's prognostication would be particularly 
with regard to that patient population?
    And I would start with you, Mr. Wing.
    Mr. WING. Well, thanks. It is a great question.
    We have been dealing with the dual-eligibles in California 
where they only integrate Medi-Cal and Medicare streams, 27 
percent over the next three years. Just take what I said about 
what we are doing for 2015 and magnify it by three or four. You 
know, these frails, they need a lot more. They are the frailest 
of the frail, and to reduce the network and especially when all 
of the pilots are counting on past enrollment, but if they lose 
the continuity of care with their trusted physician, they are 
going to bounce back into Medicare fee-for-service, and that is 
going to really cost the system because it is not just going to 
be the Medicare dollars that are at risk.
    Without a good care management program, they could very 
well end up in custodial and long-term care, and when members 
typically go into custodial care, typically they do not come 
out. And that is not as far as the dignity, the cost of the 
system.
    So much narrower network which has a corresponding impact 
as far as the passive enrollment will go way down. They will 
opt back into Medicare fee-for-service, and without the care 
management the doctor just talked about, they will probably end 
up in institutions and then long-term care.
    You talk about a shortsighted strategy. We need more care 
management for the more frail populations, whether they are 
dually eligible, ESRD, chronically ill. We need more care 
management to keep them out of the ERs, to keep them out of the 
acute settings, and most importantly for the duals, to keep 
them out of custodial care.
    Mr. GERLACH. Doctor.
    Dr. BURNICH. The primary care physician for most dual-
eligibles in this country is the emergency room, and then they 
clog up the emergency room for people who really need the care. 
It is not that they do not need the care, but they can be 
managed in a lower cost setting.
    In those 1,800 patients that are in AIM a day right now, 11 
percent of them are dual-eligible, and I can tell you that in a 
poor county like Sonoma and Santa Rosa, the residents came to 
me and said, ``This is the greatest program because now we do 
not have to manage these people in the hospital, and they are 
in the hospital for a long time and they take up a lot of 
resources and then they get lost to follow-up because they have 
no care coordination.''
    So that is the concern I have.
    Mr. GERLACH. Dr. Book.
    Dr. BOOK. I would agree with that, and I would also add 
that dual-eligibles get assistance from Medicaid in paying 
their fee-for-service copays and, if they are enrolled in 
Medicare Advantage, their Medicare Advantage premiums and 
copays.
    So in addition to getting access to coordinated care 
through Medicare Advantage, they also end up saving the States 
money because the amount Medicare has to pay to put someone 
into a Medicare Advantage program is a lot less than the copays 
they would pay if that same person were in fee-for-service.
    So if we reduce the Medicare Advantage benchmarks and plans 
end up exiting markets and there are fewer MA Plans and they 
take fewer patients, we are going to have dual-eligibles who 
are transitioning out of Medicare Advantage, losing their 
coordinated care, losing the doctors and hospitals that know 
them and that they know, and in addition, costing the Medicaid 
Program more money.
    So if we cut the program we do not actually save the money. 
We just put it somewhere else.
    Mr. GERLACH. Mr. Baker.
    Mr. BAKER. I think it is important to note that the 
Affordable Care Act has made significant investments in dual-
eligibles through demonstration projects, and those are getting 
underway now. I think certainly we all agree that there needs 
to be better care coordination for this population which is 
very vulnerable, and that needs to occur across the board, both 
in MA but also in the fee-for-service program through either 
these demonstration projects or through things like accountable 
care organizations or other efforts that the ACA has put 
forward so that really they are available to all people with 
Medicare, not just people on Medicare Advantage.
    Mr. GERLACH. Thank you all for your testimony.
    Chairman.
    Chairman BRADY. Thank you.
    Mr. Blumenauer is recognized.
    Mr. BLUMENAUER. Thank you very much, Mr. Chairman, and I 
appreciate being able to have a little deeper dive on some of 
the impacts of Medicare Advantage.
    I think my community has the highest penetration of 
Medicare Advantage in the country, or close to it, and so I 
have been following this closely.
    Part of the issue is that there is an opportunity to coax 
more value. There are some extraordinarily high cost areas 
around the country. We kind of think we are a little 
discriminated against in our community. We have pretty high 
value outputs, low costs, and we see these things scattered 
around the country. So I think there is nationally an 
opportunity to extract more value, and we ought to do it 
carefully, and I appreciate the admonition from some of our 
witnesses.
    One of the areas, however, in terms of coaxing more value 
out of managed care, I think, is an opportunity to deal with 
value-based insurance design, and rather than quack on, my 
friend and colleague, Congresswoman Black, I am looking forward 
to working with her co-sponsoring legislation, but since she is 
the lead co-sponsor, I would like to yield if I could to her 
because she is a little further down the line and may need more 
time, if you would care to comment or ask questions.
    Mrs. BLACK. Well, thank you, Mr. Blumenauer.
    I am so delighted that we are working together on this 
concept because this is one that I believe down the road is 
going to show us real benefit. Having been a nurse for 40 
years, I know specifically in nursing if we can get someone, 
particularly those who have chronic conditions like diabetes 
and cardiovascular disease, if we can get them to stay on their 
regimen, they are going to be a lot more healthy. They are 
going to save costs in the long run and quality of care for 
them is certainly going to be better.
    So this bill that we have together, and we have just filed 
it, is H.R. 5183, and it would incentivize the insurance 
companies. It would set up a demonstration project to 
incentivize the insurance companies to use those kinds of 
mechanisms that would give incentives to the patients for them 
to make sure that they are using what we know will make them 
healthy.
    For instance, if you are diabetic, there would either be 
low copays or no copays on things such as insulin. Maybe there 
would be no cost to go and see your primary care doctor for 
things like foot mapping and so on that we know already proven 
to keep people healthy.
    So I am delighted that we are able to have this bill 
together, and I hope that it will pass so we can get this 
demonstration project, show that it does work, and then roll it 
out all across this country.
    So, Mr. Blumenauer, I will yield back to you so that you 
can ask whatever questions of the witnesses.
    Mr. BLUMENAUER. I think it is important for us to be able 
to push. One of the things that I like about the Affordable 
Care Act is that there were a number of pilot projects. There 
are tests because we are going to be in the middle of health 
care reform for the next decade, but I think this is an 
opportunity to provide the right sort of incentives for 
patients, doing it on a couple of pilot projects, a couple of 
plans, to be able to see what works and what does not.
    I know there are some people who have some concerns. They 
want to make sure that it is done appropriately, and I think we 
can do that.
    So I am looking forward to the rollout of the bill. I hope 
that this might be on the list that I have talked to the 
chairman about, but I think there are a variety of areas that 
we ought to be able to agree that have nothing to do with 
Obamacare. These are things that we can move forward on.
    Mr. Gerlach has a proposal that I think has great merit. I 
have been working with Dr. Poe on the end of life care, with 
some 50 bipartisan co-sponsors.
    I would hope, Mr. Chairman, that there would be an 
opportunity for us to have hearings on things that we are not 
necessarily going to be hearing about on the Sunday talk shows, 
but could make a difference, and I think this is an example. I 
look forward to working with my colleague, and I hope we can 
bring it back before the committee for further discussion.
    Thank you, and I yield back.
    Chairman BRADY. Thank you, Mr. Blumenauer.
    Dr. Price is recognized.
    Mr. PRICE. Thank you, Mr. Chairman, and I want to thank you 
for holding this hearing, and thank the witnesses.
    I think it is incredibly important that we focus on what is 
going to happen. We know what has happened to date, and many of 
us differ on what the effect of that has been regarding the 
Obamacare/ACA.
    I do want to touch on something that Dr. McDermott said 
though because it is important for the witnesses to know. It is 
important for the folks in this room to know. It is important 
for the people across this country to know that no Republican 
voted for these cuts to MA, not one, not one in the House, not 
one in the Senate. And my friend from Washington State talks 
about them being included in the budget. The budget is required 
when we pass a budget; we are required to assume current law. 
That is where we start. And so what we do is take the money 
that has been stolen and raided from Medicare and put it back 
into Medicare. That is how we secure, save, and strengthen 
Medicare. So it is important that we set the record straight on 
that.
    Dr. Book, I want to touch on this star rating program and 
dive a little deeper on it. This is a program that as I 
understand was put in place by CMS to allow beneficiaries to be 
able to tell different things about plans and compare the 
plans. Yet it has now morphed into a program where Medicare, 
where CMS uses it to provide payments.
    Dr. BOOK. Right. That is correct.
    Mr. PRICE. Does that make any sense at all?
    Dr. BOOK. Well, not as the program is currently 
constituted, no. Originally the idea was that CMS would help 
Medicare beneficiaries to choose an MA plan by giving ratings 
based on their criteria, and if a beneficiary wanted to use 
those criteria to choose their plan, they could, and if they 
wanted to go and investigate on their own and call up a plan 
and see what doctors do you cover and what services do you 
cover, they could ignore the star ratings if they wanted to and 
make their own decision.
    That makes sense. I think that is fine.
    Mr. PRICE. That makes some sense.
    Dr. BOOK. But once you take that system and use it to make 
payments, you are adjusting the benefits that eh plans can 
offer, and you are saying to a senior whose criteria are 
different from that of the bureaucrats in CMS----
    Mr. PRICE. Right.
    Dr. BOOK [continuing]. ``If you like a different plan, you 
are going to have to pay more and accept lower benefits if your 
criteria are different from the bureaucrats' criteria.''
    I think that undermines the goal of patient choice, which 
was one of the goals of having Medicare Advantage in the first 
place.
    Mr. PRICE. Right. We would agree. This is another 
Washington knows best.
    Dr. BOOK. Yes, exactly.
    Mr. PRICE. We know what is best for you as a patient.
    Dr. BOOK. And from what I understand, CMS instituted the 
star rating program on its own just as a way of helping 
seniors, and then later it was incorporated by the Affordable 
Care Act, assuming it would continue to exist and saying, 
``Okay. Now, pay people that way.''
    Mr. PRICE. That is my understanding as well.
    Dr. BOOK. Yes.
    Mr. PRICE. Now, in your testimony you talk about some 
perverse incentives, some disincentives in the star rating 
program for having docs care for the sickest patients out 
there, the ones with the highest comorbidities, the ones with 
the greatest health challenges.
    Can you expand on that?
    Dr. BOOK. So some of the criteria give negative ratings to 
plan if certain things happen, and a plan could game the system 
by treating, you know, a healthier mix of patients, and we 
really do not want that. Really the people who need the 
treatment are the sickest patients.
    If you set up a criteria that says, you know, how many 
people achieved some certain benchmark without adjusting for 
how healthy or unhealthy they were when they came to see you, 
then, you know, we are not really being fair to the doctors. We 
are saying we are going to penalize you if you take care of the 
hardest cases, and I think that is the opposite of what we 
ought to be incentivizing.
    Mr. PRICE. One of the huge challenges that we have is to 
try to incentivize physicians to continue in practice. Mr. 
Johnson mentioned docs fleeing practice. As a former practicing 
physician I hear from my former colleagues all the time. Many 
of them are just looking for the exit doors because of these 
kinds of rules and regulatory oppression that they are working 
under right now.
    Dr. BOOK. This exists also in the fee-for-service system. 
There is this notion of pay for performance where you pay 
doctors for doing, you know, what they call evidence-based 
care. What it really is is they have a list of things that you 
are supposed to do for a patient with a particular diagnosis, 
and if you check all of these boxes, you get more money.
    So, for example, you are supposed to tell everyone who has 
had a heart attack to take aspirin. Well, that is great for 
most patients, but what if the guy is allergic to aspirin?
    Mr. PRICE. Yes.
    Dr. BOOK. If you get patients who are allergic to aspirin, 
are they going to pay you less?
    Mr. PRICE. Yes. It is again Washington knows best.
    I want to touch very quickly on this $3,700, Mr. Wing, 
because you mentioned your margin was two to three percent, as 
I recall.
    Mr. WING. I have no margin. I will lose money in 2014.
    Mr. PRICE. So if what Mr. Book says is correct and that is 
that payments are going to go down from the Federal Government 
per patient $3,700 a year, what happens to your model?
    Mr. WING. Well, we have levers, and first I have to become 
more efficient. We spent $40 million on a new IT system that 
should be implemented----
    Mr. PRICE. Can you absorb $3,700 per patient?
    Mr. WING [continuing]. No, not without extraneous changes.
    Mr. PRICE. Thank you.
    Mr. WING. Thank you.
    Chairman BRADY. Mr. Smith is recognized for five minutes.
    Mr. SMITH. Thank you, Mr. Chairman.
    And thank you to our witnesses as well.
    The chart that we saw earlier is very interesting, and 
certainly it is enlightening in terms of the trends they 
indicate. I am sure you saw the chart as well. Mr. Book, now 
the cuts would take place in 2015; is that correct?
    Dr. BOOK. We already have published rates for 2015 that 
incorporate those cuts, yes. The specific rates are published 
one year at a time. So we have seen the first year of cuts 
already.
    Mr. SMITH. So are we going to see some different trends 
from the lines in this graph?
    Dr. BOOK. I believe so, yea. In fact, as my colleague 
mentioned, they are already withdrawing from one geographic 
area, and that is one plan sponsor withdrawing from one area. I 
think we are going to see more withdrawals and more increases 
in premiums.
    Again, this year the change from last year is only three 
percent, but that is because the Affordable Care Act's cuts for 
last year were offset by regulatory action. So the transition 
from 2014 to 2015 is going to be less than it would have been 
before.
    Once you start moving forward, we are going to see 
substantial changes unless there is some other action that 
causes the Affordable Care Act not to be implemented.
    Mr. SMITH. Mr. Baker, do you believe that these trends can 
continue with the impending changes?
    Mr. BAKER. Well, certainly recent projections by the CBO 
continue to indicate that there will be rising enrollment in 
Medicare Advantage and that the initial projections and the CBO 
took into account these changes in reimbursement methodology, 
that there will continue to be different projections, better 
projections about ongoing enrollment in Medicare Advantage.
    So it does look like plans will be able to absorb these 
cuts. They will be able to innovate around and----
    Mr. SMITH. Well, how long do you think they can absorb and 
just kind of continue amidst many of these conditions?
    My concern is overall that health care professionals are 
frustrated. They do not like the view of the future. It 
concerns me greatly, especially as a representative of a part 
of rural America, that health care providers, when I hear from 
them, they are just discouraging young people, especially 
family members, from going into health care, and this is 
because of the Federal Government making such a bureaucracy of 
health care.
    And I am very concerned about such a reduction in 
providers. It is already difficult to find providers in rural 
America, and it stands to get much worse, and lack of providers 
means less competition in urban areas and less mere access in 
rural areas.
    We see that there will likely be disproportionate impact to 
Medicare Advantage choices in rural America. Mr. Book, can you 
elaborate on that perhaps?
    Is it correct that there would be a disproportionate 
reduction of choices in rural America?
    Dr. BOOK. I have not looked specifically at the rural-urban 
distinction, but if you want, I can get back to you on that 
later.
    In general, some of the rural counties had upward 
adjustments in their benchmarks prior to the ACA. That 
indicates they might be hit harder, but I would have to check 
the numbers to be sure.
    Mr. SMITH. Okay. I would appreciate any further information 
on that.
    Dr. BOOK. I can do that, yes.
    Mr. SMITH. I am very concerned about the frustration that 
this is causing across health care, and that this would 
actually lead to----
    Dr. BOOK. There is an extra bonus in the Affordable Care 
Act for certain types of urban areas. There is a set of 
demographic criteria for what counts as a qualifying county. It 
does not include every urban area, but it does include any 
rural area. Again, I would have to look at numbers to be sure, 
but I would not be surprised if it turns out that rural areas 
are harder hit.
    Mr. SMITH [continuing]. Okay. Thank you, Mr. Chairman. I 
yield back.
    Chairman BRADY. Thank you.
    Mr. Thompson, you are recognized.
    Mr. THOMPSON. Thank you, Mr. Chairman.
    Thank you to all of the witnesses for being here.
    Mr. Wing, I want to circle back on what the gentleman from 
Georgia questioned about, and that is the star program. You are 
a four and a half star program.
    Mr. WING. Yes, sir.
    Mr. THOMPSON. I am interested to know if the quality has 
improved because of the star program and to get your input on 
this, give you a chance to respond to the issue of star.
    Mr. WING. Thank you.
    For five years prior to my being at SCAN, I was the Chief 
Operating Officer for HealthCare Partners, which has big 
operations in California and Nevada and Florida. There was a 
sea change event with the stars. When you start having 
incentives for quality and there are benchmarks where we can 
compare plans versus plans, providers versus providers, you can 
start having really robust conversations about how do you 
improve best practices, and that is what we are doing with our 
provider integration.
    We bring these 14 groups together, and we do not hide the 
data. They have an economic incentive to group quality. They 
know who is best at each one of those 50 metrics, and then we 
have the physicians from those 14 groups share how do they get 
this best practice.
    I think we may debate this, but for my 30 years of being in 
health care, we now have a standard, and it has caused a sea 
change event amongst the providers that I deal with in Arizona 
and California to really focus on quality. And I would say 
there is some debate as far as are the metrics all the right 
metrics, but it does deal with patient satisfaction. It does 
deal with medication adherence, which does reduce cost long 
term.
    It is not perfect, but I applaud the stars program.
    Mr. THOMPSON. Dr. Burnich, do you support the ACA's effort 
to create payment parity between the MA plans and fee-for-
service?
    Dr. BURNICH. Based on the demographics of the current 
patients that are in MA, no, because they are a sicker 
population that choose MA at least at this point. It is not 
apples and apples. The sicker patients pick MA, and you need 
more resources, which means you need more revenue to manage 
them.
    Mr. THOMPSON. Mr. Baker, same question.
    Mr. BAKER [continuing]. I think, you know, the solution 
there is increasing and better risk adjustment for those folks 
rather than across the board subsidies or overpayments to 
Medicare Advantage Plans.
    Once again, we look to the dual eligible special 
demonstration projects and others where risk adjustment 
certainly is a challenge, but you know, we cannot make the 
perfect the enemy of the good and need to keep on that 
continuum.
    I think also the same holds true with the special needs 
plans. Rather than across the board and saying to plan, you 
know, ``Here is a pot of money. Allocate it as you will or 
cross-subsidize your product lines,'' but rather in those 
product lines making sure that Medicare is paying the right 
reimbursement for the right payments, given their risk of 
incurring cost, and of course, those that are more vulnerable 
and sicker are going to have a higher risk and so there should 
be higher reimbursement for those folks and less reimbursement, 
in turn, for those that are healthier or, as was said earlier, 
going to the gym through the gym membership.
    So that balance is always difficult to strike, and many 
plans are striking it on their own, and I think they have a 
partner now in CMS and trying to strike it, although, you know, 
there are going to be bumps along the way.
    Mr. THOMPSON. Mr. Baker, to continue, if you could list 
three or four top ways that we could improve the MA program, 
what would be on your list?
    Mr. BAKER. Well, I think, you know, better risk adjustment 
would be one of those, and continuing to enhance the star 
rating program and making sure that, you know, it is reflective 
of what consumers need to know. I think continuing to simplify 
and standardize plan products.
    You know there has been a lot of talk about choice here, 
but we find that consumers are paralyzed even by, say, ten or 
15 plan choices. So you know, with the average consumer now 
having 18 plans we just find that they are not able to kind of 
make an intelligent choice because they are not having apples 
to apples comparisons. So further work there on simplification.
    And then finally, some work on midyear provider changes. 
There have been some midyear provider changes that have really 
bumped people out of providers, and they are stuck in an MA 
plan where their provider no longer is contracting with. So 
that is another issue that we would like to work on.
    Mr. THOMPSON. Thank you.
    Chairman BRADY. Thank you.
    Mr. Roskam.
    Mr. ROSKAM. Thank you, Mr. Chairman.
    You know, one of the interesting things about sitting up 
here and watching you as you are watching us is watching your 
faces as each one is giving different testimony, and I think it 
would be a very interesting thing to do color commentary of 
congressional hearings because when Mr. Baker made the 
assertion that there is no evidence of trend toward less 
generous benefits and then sort of following that on with the 
inquiry from Dr. Price about the ability to absorb $3,700 and 
so forth, I just was looking at Mr. Wing. The expression that I 
saw, and these are my words and not your words, ``Absorb 
what?'' You know, like how much more capacity can you absorb?
    So, Mr. Wing, my question is not to weigh in on my color 
commentary of congressional testimony, but that is to give some 
more insight. What I have heard today described are various 
levers, various tools that are pretty uniform across the 
witnesses. That is here is how this works. You can do higher 
costs. You can reduce benefits. You can shrink choices. You 
said we can vertically integrate and drive savings and so 
forth, but you also said something that I found interesting, 
and I did not quite pick it up.
    Did you say that people with special needs are going to be 
uniquely impacted? Was it special needs or another word?
    Mr. WING. It is special needs, frail populations, seniors 
with multiple chronic conditions, the duals. You know, when I 
take a look at our data, 14 percent of our members with five or 
more chronic conditions consume more than half of our in-
patient confinements, and so accelerating the risk adjustment 
for the chronically ill as Medpac says, the risk adjustment for 
chronically ill members is not where it needs to be.
    So economic incentives, we love taking care of the frail 
and the chronically ill, but the rest of the industry may not, 
and they have an economic incentive not to, and that is where 
we need to focus our efforts. The Medicare chart book says 62 
percent of seniors with multiple chronic conditions were 92 
percent of the total Medicare spent.
    We have to be very careful about what we do, especially the 
impact to those seniors who have got four, five or six or more 
chronic conditions, and of those, if I may, 50 percent or more 
of them have got heart disease, which is probably not a 
surprise. Fifty percent or more have diabetes, which is not a 
surprise, but 50 percent of them or more are depressed, and 
they are probably depressed because they are so sick and they 
are not getting everything they need.
    Mr. ROSKAM. So this trend, to pick up on one of the 
examples that Dr. Burnich used, you talked about trying to deal 
with the grandmother who is probably like Mr. Wing is 
describing. The grandmother who wants to go to her 
granddaughter's graduation, that type of patient with this 
cumulative nature of a lot of difficulties or special needs is 
going to be uniquely impacted, uniquely negatively impacted or 
hurt by this. Is that fair enough?
    Dr. BURNICH. Yes.
    Mr. WING. Yes.
    Mr. ROSKAM. I yield back.
    Chairman BRADY. Thank you.
    Mr. Buchanan is recognized.
    Mr. BUCHANAN. Thank you, Mr. Chairman.
    I want to thank all of our witnesses for taking the time 
today.
    I am personally very concerned. In my district in Florida, 
my congressional district, we have over 54,000 on Medicare 
Advantage. In Florida alone, it is 1.4 million, over that, in 
Medicare Advantage. The State is growing back now at three, 
400,000 people a year. I talked to a lot of medical providers, 
a lot of our doctors. Everybody is disillusioned with where we 
are at, and when you think about 10,000 a day turning 65 for 
the next 30 years, 400,000, a lot of them are coming to 
Florida. So I am very, very concerned about these cuts and the 
impact it will have on our seniors, especially when you look 
out over quite a few years.
    Mr. Book, I wanted to ask you as it relates to the next 
year, what are the cuts and benefits anticipated that you 
mentioned earlier?
    Dr. BOOK. Each Medicare Advantage Plan has a number of 
levers they can pull. They can increase premiums to patients. 
They can reduce copays or they can reduce benefits or they can 
narrow their networks.
    Mr. BUCHANAN. Is there a percentage or a number?
    Dr. BOOK. I do not have that.
    Mr. BUCHANAN. Have you heard that number?
    Dr. BOOK. I do not have specific numbers on what plans are 
actually doing. We can look that up and get back to you on that 
I am sure.
    Mr. BUCHANAN. The bigger issue, looking down the road, 
because a lot of seniors might be 67, we have a lot of people 
staying active to 90.
    Dr. BOOK. Right.
    Mr. BUCHANAN. One of the things I am concerned at is 
looking over ten years, the Congressional Budget Office is 
saying over 300 billion in cuts. What is the impact to the 
providers and to our seniors, you know, all over the country, 
but especially in Florida with $300 billion in cuts?
    Dr. BOOK. So that is cumulative cuts over ten years. 
Starting in 2017, that is going to be about $3,700 per patient 
on average. It is going to vary from place to place. You know, 
we have specific numbers for each country that I can share with 
you. The money has to come from somewhere. The only place it 
can come from is cutting benefits or making seniors pay more. 
Those are the only two choices. If you cut benefits, you know, 
they are not allowed to cut, you know, the most basic health 
care benefits, but they can cut everything else that they add 
on top of that.
    So, for example, if you cut coordinated care or if you cut 
preventive care that is not affected by the preventive care 
mandate, you might end up increasing people's need for health 
care down the road. You might end up cutting one particular 
category but making you worse off.
    Mr. BUCHANAN. Let me just move on.
    Dr. Burnich, do you want to comment on that, the $300 
billion in cuts over the next ten years, the impact? Let us say 
the medical community, the providers, I can just tell you a lot 
of people in our area are very disillusioned. A lot of doctors 
with practices for 30 years are being consolidated by 
hospitals. I am very concerned with the need going forward, 
with the anticipated cuts, but I would like to get it from your 
perspective.
    Dr. BURNICH. It will diminish, as I said before, access. 
There will not be physicians to see unless they do concierge 
medicine where you pay an annual fee out of your own pocket. 
But this cohort of patients does not have that kind of money. 
So I do not see that it is sustainable.
    The only place other than cutting benefits or increasing 
premiums to accessing real dollars is in the last six months of 
life, and it is in the very last month of life is where we 
spend all the money.
    In our AIM Program, there is probably 30 percent that are 
Hospice eligible, but they choose not to go into Hospice for 
various reasons, emotional. They are not ready there yet, but 
when we get them to go into this program, and I cannot talk to 
you about the dollars yet because I am bound by CMMI not to do 
so, but they are significant, and I think they are significant 
enough at least in this populations, not all the MA lives, to 
provide some real savings to minimize those cuts.
    Mr. BUCHANAN. One other question. My time is running out. 
Mr. Book, can you comment? We are seeing terminations in 
Medicare Advantage in our region. Is that because of the ACA or 
do you know?
    Dr. BOOK. It is quite likely that it is. When payments are 
reduced, if a health plan does not think that they can attract 
patients and serve them well with the level of payment they are 
going to get, then they might just withdraw from the market 
instead of having a bunch of unsatisfied patients they cannot 
take proper care of.
    Mr. BUCHANAN. That is what I am hearing.
    Thank you, and I yield back.
    Chairman BRADY. Thank you.
    Mrs. Black, thank you for joining us today. You are 
recognized.
    Mrs. BLACK. Thank you, Mr. Chairman, and thank you again 
for allowing me to sit in as a non-member. I am so interested 
in these issues, and I really appreciate your allowing me to be 
here.
    I want to go back to the idea that Congressman Blumenauer 
talked about in the bill that we have to have a demonstration 
project, and I am just convinced that we need to look at this 
and make sure that it is what we have seen in our work, but to 
actually have the study to show that it does work.
    So probably, Dr. Burnich, I would like to have you talk a 
little bit about what your thoughts are on such programs since 
you have had an innovation grant, which I understand was 
initiated under MA. So if you could talk a little bit about 
whether you think this is something that is important.
    Dr. BURNICH. I think any time we can focus on value and 
setting value, i.e., decreasing cost and improving quality by 
whatever method is the right directional approach, and I think 
that is what I gleaned from wherever you were headed.
    Then it becomes so what costs are we talking about. That is 
where, you know, you get into the nitty-gritty, and that was 
the only piece I did not understand about what you were saying 
with your bill.
    Mrs. BLACK. Well, the idea of this is to show that if we 
are able to incentivize people to use the kinds of care that 
the physician recommends, that they are going to have a better 
outcome, therefore less admissions to the hospital especially 
for our diabetic patients and our cardiac, as you have already 
talked about. If we can keep them on a regime, we know that 
they are going to use less services and the quality of life is 
going to be better.
    Mr. Wing, would you like to weigh in on that as well since 
you are a care provider.
    Mr. WING. You know, I think anything we can do with the 
system, with the providers, with the members to be more 
compliant with proven prevention that is going to reduce system 
cost and reduce and improve quality, like medication adherence 
for hypertensives, for diabetes, I applaud.
    Mrs. BLACK. Mr. Book, do you have a thought on it as well?
    Dr. BOOK. I admit I have not seen the bill yet, but it 
sounds like a good idea. One thing I would add is we talk about 
value based medicine. The fees in the fee-for-service system 
are not set based on value to the patient. In fact, they are 
based on a rather crude estimate of cost, and they specifically 
exclude any consideration of value to the patient.
    So by definition they pay more for a high cost, low value 
service than a low cost, high value service, and I think that 
is one thing that drives up cost in the fee-for-service system 
and also drives patients and physicians away from low cost, 
high value services. It might be better for everybody if they 
did not have these perverse incentives caused by the fee-for-
service pricing system.
    Mrs. BLACK. I think you are making the point for my concept 
here.
    I want to go back to the risk adjustment model. I know we 
have talked a lot about that, but I would like to know, and 
especially from you, Mr. Wing, and probably you, Dr. Burnich, 
as well, what you seek. Obviously we do have to take a look at 
these frail patients and make sure that we are reimbursing for 
the true care and the nature of taking care of that patient, 
but can you give me an idea about long term, what you think we 
should do about proper payment to be sure that we are taking 
care of these patients adequately and also making sure that we 
are reimbursing the care providers for the services that are 
provided?
    Mr. Wing.
    Mr. WING. Sure. Well, I think that one of our first 
recommendations, and it is from Medpac. Mark Miller 
consistently talks about the slowness of the HCC model to 
correctly and accurately address members with chronic 
illnesses, and if we take a look at what is ailing America, it 
is seniors with multiple chronic conditions.
    So I did a survey about the large national plans to just 
take a look at why are they not investing or are they investing 
in C-SNPs like SCAN, and they are all fine companies, but if 
you take a look at United or the Humanas, the WellPoints, the 
Signas, there is only one that has close to five percent of 
their membership, and this is as of March of this year, that 
are in chronic special needs plans, and that is United who 
bought XLHealth a couple of years ago.
    I believe most of these plans are publicly traded. They are 
really smart people, but the economic incentives, because of 
the slowness of the agency model for chronically ill members is 
this is not good business.
    We need an agency model to encourage all of us to go after 
those seniors with two, three, four, five, six or more chronic 
illnesses. That is where the 92 percent of the spending is.
    Mrs. BLACK. Doctor?
    Dr. BURNICH. I would agree with those statements.
    The other thing, aside from risk is really understanding 
outcomes. You know, what is the output of the decisions and 
procedures and testing that are done by physicians with 
patients?
    And our industry as a whole is very poor at longitudinal 
outcomes. We track more process metrics than anything. So when 
somebody gets coronary artery bypass grafting, do we know that 
it really gave them a better quality of life for the next X 
number of years or did they really live longer?
    You know, one thing that I think has gotten abused, and 
there is literate to support it, was all of the stenting of 
patients. I actually got called down to the OR one day by my 
old chief resident who was the Chief of Surgery. He had the 
patient's chest open, and he said, ``Jeff, take a look.''
    And I thought, you know, he was asking me one of these 
trick questions. He said what do I see, and I could not 
distinguish the coronary anatomy because there were 27 metal 
stents in this patient. So you know, that kind of overuse and 
abuse, we are not tracking that, and we have really got to get 
transparent with the output of what physicians do.
    Mrs. BLACK. Absolutely. Transparency is a big part of this.
    Thank you again, Mr. Chairman.
    Chairman BRADY. Thank you.
    I want to thank all of our witnesses for expert testimony 
today and for the detailed discussion of the current status and 
future of private health plans and Medicare.
    Clearly significant cuts are on the horizon for the 
Medicare Advantage Program in 2015 and beyond, as Mr. Book 
analyzed, $3,700 per senior by 2017. Seniors have a right to be 
concerned about what will happen to the health care plan they 
depend upon?
    I just remind any member wishing to submit a question for 
the record will have 14 days to do so, and if any questions are 
submitted to the witnesses, I ask that you respond in a timely 
manner.
    With that, this Subcommittee--yes, sir.
    Mr. MCDERMOTT. May I ask unanimous consent to enter in the 
record a GAO study entitled ``Medicare Advantage Specialty 
Needs Plans Are More Profitable on Average Than Plans Available 
to All Beneficiaries,'' an article from the paper which says, 
``Despite cuts, Medicare Advantage enrollment ensures stocks 
still surging,'' and three articles that say ``Paul Ryan budget 
keeps Obama Medicare cuts Full Stop'' from the Washington Post.
    Thank you, Mr. Chairman.
    Chairman BRADY. Since none of them relate to the issue, 
they will be inserted as submitted.
    [The information follows:]
    
    
    
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      Chairman BRADY. With that, the hearing is adjourned.
    [Whereupon, at 11:35 a.m., the Subcommittee was adjourned.]
    [Submissions for the Record follow:]
    
    
    
    
    
    
    
    
    
    
    
    
    
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