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








                    MEDPAC'S JUNE REPORT TO CONGRESS

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

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

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 18, 2014

                               __________

                          Serial No. 113-HL13

                               __________

         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 June 20, 2014 announcing the hearing.................     2

                                WITNESS

Mark E. Miller, Ph.D., Executive Director, Medicare Payment 
  Advisory Commission............................................     7

                       SUBMISSION FOR THE RECORD

AHCA, statement..................................................    42
 
                    MEDPAC'S JUNE REPORT TO CONGRESS

                              ----------                              


                        WEDNESDAY, JUNE 18, 2014

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

    The Subcommittee met, pursuant to notice, at 10:03 a.m., in 
Room 1100, Longworth House Office Building, Hon. Kevin Brady 
[Chairman of the Subcommittee] presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                         SUBCOMMITTEE ON HEALTH

                                                CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
Wednesday, June 11, 2014
No. HL-13

                  Chairman Brady Announces Hearing on

                    MedPAC's June Report to Congress

    House Ways and Means Health Subcommittee Chairman Kevin Brady (R-
TX) today announced that the Subcommittee on Health will hold a hearing 
on the Medicare Payment Advisory Commission's (MedPAC) June report to 
the Congress. The report details the Commission's recommendations for 
reforming Medicare payment policies. The Subcommittee will hear from 
MedPAC's Executive Director, Mark E. Miller, Ph.D. The hearing will 
take place on Wednesday, June 18, 2014, in 1100 Longworth House Office 
Building, beginning at 10:00 a.m.
      
    In view of the limited time available, oral testimony at this 
hearing will be from the invited witness only. However, any individual 
or organization not scheduled for an oral appearance may submit a 
written statement for consideration by the Committee and for inclusion 
in the printed record of the hearing.
      

BACKGROUND:

      
    MedPAC advises Congress on Medicare payment policy. The Commission 
is required by law to submit two reports to Congress on an annual 
basis. The first report reviews Medicare payment policy and is due by 
March 15. The second report examines specific issues facing Medicare 
and is due by June 15.
      
    In its June 2014 report, MedPAC examines:

          The need to compare Medicare's policies across 
        traditional fee-for-service, Medicare Advantage, and 
        Accountable Care Organizations;
          Policy options for financial assistance for low-
        income beneficiaries in the context of its June 2012 
        recommendation to restructure the Medicare benefit design;
          Whether changes to Medicare's risk adjustment 
        methodology, which accounts for severity of patient illness, 
        can improve payment accuracy;
          Payment changes to bolster primary care and ensure 
        access to these services;
          How payments to Inpatient Rehabilitation Facilities 
        (IRFs) and Skilled Nursing Facilities (SNFs) differ for the 
        treatment of similar patients; and
          The impact of improved medication adherence on 
        overall Medicare spending.
      
    In announcing the hearing, Chairman Brady stated, ``It is our duty 
to make sure we have a strong Medicare program that works for seniors 
and taxpayers. MedPAC is a key advisor in this effort. I am pleased 
that the Commission continues to call attention to the need to improve 
Medicare's benefit design. This commonsense step would modernize the 
Medicare benefit so it looks more like other health plans. I commend 
the Commission for highlighting the need to compare fee-for-service to 
Medicare Advantage and other payment system options. We owe it to our 
seniors to provide an apples-to-apples comparison of quality and cost 
of these options in their geographic area. This hearing enables the 
Committee to hear MedPAC's valuable insights on these and other 
important issues.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on MedPAC's June 2014 Report to Congress.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Wednesday, July 2, 2014. Finally, please 
note that due to the change in House mail policy, the U.S. Capitol 
Police will refuse sealed-package deliveries to all House Office 
Buildings. For questions, or if you encounter technical problems, 
please call (202) 225-3943 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
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printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
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    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
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materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman BRADY. Good morning, everyone. I would like to 
welcome back the Medicare Payment Advisory Committee. Neither 
MedPAC nor its witness here today, Executive Director Mark 
Miller, is a stranger to this Committee. MedPAC is the key non-
partisan advisor with a lot of analytical firepower. There is 
bipartisan interest in this work.
    MedPAC issues two reports annually to the Congress. Its 
March report focuses on the adequacy of payments made to the 
various Medicare providers. The Committee pays close attention 
to those important findings, and has had MedPAC testify on them 
in past years. The June MedPAC report focuses on how to improve 
the Medicare program.
    Improving Medicare, that is the focus of our hearing today. 
We are at a critical juncture. The program faces serious 
financial challenges. The Part A Trust Fund, which was paid out 
to more than it takes in over the past several years is slated 
to go bankrupt in just over a decade. The funding needed for 
the Part B Trust Fund will be in--such an increasing drain on 
the treasury that it is sure to crowd out other priorities. 
According to independent researchers, this important program 
pays out, on average, three times the benefit it collects from 
workers over their lifetime.
    We are in a state of flux on how we pay our health care 
providers in Medicare. The popular Medicare Advantage program 
faces severe cuts after several years of the White House 
delaying the damaging Affordable Care Act cuts. Providers 
increasingly have their payments tied to performance, whether 
in traditional fee-for-service or some alternative payment 
model.
    The MedPAC June 2014 Report addresses a number of policy 
issues that are key to improving Medicare's viability and 
future direction. The report reiterates MedPAC's 2012 
recommendation to improve the design of the confusing and 
outdated Medicare traditional fee-for-service benefit for 
seniors. It also discusses policy options that could help to 
ensure that the new benefit design works for low-income 
seniors.
    MedPAC has outlined a design that brings clarity through a 
single deductible and uniform cost sharing and peace of mind by 
capping the amount that seniors have to pay out of pocket. The 
design would also reduce the need to buy a supplemental policy.
    Benefit redesign is not a new issue. The Bowles-Simpson 
Commission appointed by President Obama, and the bipartisan 
Policy Center have also recommended it. The Committee has 
called attention to it, even devoting a hearing exclusively to 
the topic last year.
    At that hearing, I asked witnesses to conduct what I view 
as the most informative analysis: beneficiary impact over 
multiple years. The fact that a senior may pay a little more in 
any given year is not nearly so important as avoiding the years 
in which a senior may face frighteningly high costs. Any 
beneficiary who has high costs, such as those that come with a 
stay in the hospital, will see a significant reduction in out-
of-pocket costs. Since we know the majority of seniors will 
have a hospital stay over the course of their lifetime--some, 
many trips to the hospital--this protects seniors from cost 
spikes in a year when they are particularly sick.
    With a mom who relies on the confusing Medicare system, I 
am sold. If it were up to me, this common-sense change would 
already be done. Hearing MedPAC's views on how an improved 
design can work for low-income seniors furthers the discussion. 
I am confident that this reform can be done in a way that has 
net benefit for beneficiaries, even as it reduces future 
expenditures. Listening to those who have concerns, we must 
continue to work to make this happen.
    The report also highlights the need to be able to compare 
traditional fee for service, Medicare Advantage, and the 
accountable care organizations. We owe it to our seniors to 
provide an apples-to-apples comparison of quality and cost of 
these options in their area. This effort can also provide vital 
information to set the stage for more sweeping reforms that 
further empower seniors and are more responsive to senior 
health care needs.
    The report also examines how payments to in-patient rehab 
facilities and skilled nursing facilities differ for the 
treatment of similar patients. This is a continuation of a 
robust site-neutral payment policy discussion that has happened 
over the last few years. The House passed a site-neutral policy 
back in 2011. In fact, a provision establishing parity between 
in-patient hospital and long-term care hospital payments was 
signed into law late last year. This is a topic of great 
interest to Members of this Committee, and has significant 
impact not only on health care providers, but seniors and 
taxpayers. MedPAC's work has been instrumental. We appreciate 
its continued focus.
    The report looks at whether the method of accounting for 
expected patient costs or risk adjustment can be improved. This 
is important, because we need to make sure payments to Medicare 
Advantage plans and providers are as accurate as possible.
    There is a lot of interest in the topic of medication 
adherence, which means taking medications exactly as prescribed 
by the doctor to result in better patient health and outcomes. 
The report examines the extent to which better adherence by 
seniors reduces overall Medicare spending.
    Finally, the report discusses possible payment policy 
changes to bolster access to primary care.
    Well, before we hear from Mr. Miller I want to say that 
this MedPAC report is not a book that will just sit on the 
shelf. For many of the issues, it represents an ongoing 
dialogue. This hearing is a valuable part of that conversation. 
I look forward to working with the Members of the Committee and 
MedPAC to enact policies that make the Medicare program work 
better for beneficiaries, for providers, and taxpayers.
    Before I recognize the Ranking Member, Dr. McDermott, for 
the purposes of an opening statement, I ask unanimous consent 
that all Members' written statements be included in the record.
    [No response.]
    Without objection, so ordered.
    I now recognize the Ranking Member, Dr. McDermott, for 5 
minutes for the purposes of his opening statement.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. Welcome, Dr. 
Miller, for coming today to discuss MedPAC's most recent 
report. It is an important hearing, and I hope that we can have 
a constructive conversation this morning that focuses on 
finding solutions to the challenges that Medicare faces in a 
way that protects beneficiaries.
    Through its expertise and non-partisan analysis, MedPAC in 
the past has helped Members of Congress come together to 
discuss options for reform that improve the payment system, cut 
down costs, and improve the quality of care that beneficiaries 
receive. Now, we may not always agree, but reports like the one 
we are discussing today often start as a good point for a 
starting point of a discussion.
    Unlike previous reports, the MedPAC has submitted to 
Congress a report that does not contain any recommendations. 
Instead, today's report represents a number of ideas we can use 
as a framework for today's discussion. We do not need to leap 
to any conclusions, there is no crisis. We should hear, listen, 
question, analyze what we hear, and, after a careful review of 
the issues, we can then determine what proposals to move on.
    Whatever changes we make, we need to focus on some key 
principles.
    First, we need to make sure that beneficiaries are 
protected from having to bear an increased financial burden. 
Current Medicare beneficiaries pay a greater share of their 
income for health care than the average American. And yet, 
often the Republicans say they need more skin in the game. They 
pay taxes during their working years to earn eligibility, and 
they continue to shoulder a share of the load through premiums, 
co-pays, or co-insurance and deductibles.
    Second, we must get health care costs under control. We did 
a lot of great things through the Affordable Care Act, 
particularly in the protecting of consumers and expanding 
access to affordable health care coverage for millions of 
Americans. The ACA improves Medicare's benefits by improving 
coverage of preventative care, and increasing prescription drug 
coverage. And the ACA helped constrain Medicare spending such 
that we have record low-per-capita spending growth, below 
inflation in the years following enactment of health care 
reform.
    We must continue this work by focusing on controlling costs 
and improving outcomes. Just this week a report from the 
Commonwealth Fund found yet again that the United States spends 
more per capita than any other country on health care, yet we 
don't get the best results. We have to fix that.
    Third, we must make sure that payments are accurate and 
fair. This involves a careful review of how Medicare pays 
doctors and hospitals, with an eye towards overpayments, which 
need to be eliminated, and fraud, waste, and abuse in the 
system. This will allow us to strengthen the program without 
harming the beneficiaries.
    Finally, we should focus on saving money through innovative 
payment models. The ACA introduced a number of promising 
reforms to Medicare, including accountable care organizations 
and the Medicare shared savings plan, which will cut costs 
without harming beneficiaries. We need to continue to remove 
barriers to setting up these innovative programs.
    I am concerned that my Republican colleagues will use 
today's hearing to suggest radical changes in Medicare. Whether 
it is a proposal to eliminate the program's defined benefit 
through a voucher program, or increasing cost sharing for 
seniors, I have heard a lot of bad ideas in the past. MedPAC 
has not suggested we make any of these changes in its report, 
and I hope our conversation doesn't use this hearing as a cover 
for those kind of bad ideas. I know that the chairman is 
interested in making changes to make Medicare stronger, and I 
hope to work with him. Thank you very much. And I yield back 
the balance of my time.
    Chairman BRADY. Thank you, Doctor. And we will now hear 
from Mr. Miller. And you are recognized 5 minutes for the 
purpose of your oral statement.

    STATEMENT OF MARK E. MILLER, PH.D., EXECUTIVE DIRECTOR, 
              MEDICARE PAYMENT ADVISORY COMMISSION

    Mr. MILLER. Chairman Brady, Ranking Member McDermott, 
distinguished Committee Members, thank you for asking the 
Commission to testify today.
    As you know, Congress created MedPAC to advise it on 
Medicare issues. And in the June report you will see themes 
that we have often repeated: moving the Medicare program away 
from a fragmented, volume-driven system to one that is 
coordinated across providers and settings, and focused on 
patient outcomes; rewarding providers and plans that take risk 
and improve quality with higher payments and reduced regulatory 
oversight; assuring that Medicare's payment systems don't favor 
one payment model over another; and assuring that traditional 
fee for service remains an option, but at the same time 
assuring that that payment system is accurate, accountable, and 
as fair as possible.
    Medicare now has 3 payment systems: 30 million 
beneficiaries are in traditional fee for service; 5 million are 
in accountable care organizations; and 15 million are in 
private plans. The Commission's June report discusses 
synchronizing Medicare's payment, quality measurement, risk 
adjustment, and regulatory oversight across the three payment 
systems. Our motivations are to protect the patient by setting 
common risk adjustment and quality standards, to assure 
fairness among plans and providers within a market by setting 
common financial and quality standards, and to protect the 
taxpayer by assuring that Medicare supports the lowest cost, 
highest quality payment system in any given market.
    Regarding this last point, we used data from 31 markets to 
compute current payments and to simulate a common benchmark for 
Medicare across ACOs, traditional fee-for-service, and private 
plans. There is a lot of technical details here, but here are 
two take-aways. A common benchmark could make ACOs and MA plans 
more competitive with fee-for-service. And, most importantly, 
the simulations show that driving volume to any one model may 
not be desirable because no one model is always the most 
efficient in a given market.
    Just as an aside, I would also note that on Monday we put 
out new guidance to the Congress and HHS on the next generation 
of ACOs that we believe is consistent with these longer-run 
goals.
    Moving on to quality measurement, the Commission has become 
concerned that Medicare's quality programs are overbuilt, 
burdensome, focused on process, rather than outcomes, and out 
of synch with the private sector. To address these issues, the 
Commission discussions have evolved towards an alternative view 
that would focus on a small set of population-based outcomes 
and patient experience measures, and then to compare and report 
quality across traditional fee-for-service, ACOs, and private 
plans. For the purposes of rewarding and penalizing, our 
conversations are incomplete. But the direction of the 
discussion is around using those population measures for ACOs 
and managed care plans, while continuing to use provider-based 
outcome measures for fee-for-service.
    Moving on to modernizing fee-for-service, in this report we 
explore three ideas. With respect to beneficiaries, we provide 
information on the Medicare support programs and reiterate the 
Commission's recommendation to increase eligibility for the 
program up to 150 percent of poverty. This recommendation 
should be viewed in the context of the Commission's broader 
recommendation on reforming the traditional fee-for-service 
benefit in order to rationalize that benefit design, to protect 
the beneficiary from high and unpredictable out-of-pocket 
costs, and to create price signals to discourage first dollar 
supplemental coverage. The MSP expansion will offer greater 
out-of-pocket assistance to low-income beneficiaries under the 
reform benefit design.
    With respect to provider payments, the report discusses 
primary care services, which the Commission believes are under-
valued in the physician fee schedule. The policy idea would 
maintain the primary care add-on in a budget-neutral manner, 
but would move to paying for these services on a patient basis, 
rather than on a service basis. We believe that this would give 
physicians, advance practice nurses, and other qualified 
professionals the resources and flexibility to provide non-
face-to-face services, and to provide coordination services.
    Finally, we continue the discussion of our site-neutral 
payment policy. As this Committee well knows, MedPAC has made 
recommendations to narrow payment differences in the ambulatory 
setting and between the in-patient hospital and the long-term 
care hospital setting. In this report we begin the discussion 
of narrowing payment differences for in-patient rehab and 
skilled nursing facilities--again, focusing on trying to 
identify comparable patients, where this makes sense.
    I would like to thank you for asking the Commission to 
testify today, and I look forward to your questions.
    [The prepared statement of Mr. Miller follows:]
   
   
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    Chairman BRADY. Thank you, Mr. Miller. I want to talk a 
little about--or ask you a little about--the recommendation to 
redesign the Medicare fee-for-service benefit. The current--for 
seniors, the current benefit design is very confusing. It 
really is, essentially, two different insurance products, one 
for the hospital nursing facility care, another one for 
physician services and other out-patients. Every one has its 
own deductible cost-sharing requirements, adding in a Part B 
medicine benefit and often a supplemental plan. You know, it is 
tremendously confusing.
    So, I am pleased the Commission wants to address these 
problems. Can you explain the benefits to seniors of a 
redesign? And my thinking is, you know, the current system 
works fine as long as you never go to the hospital, you know. 
But seniors are going to go to the hospital. And some--many 
times in their lifetime. And so, having a redesign that 
provides, you know, one clear deductible that creates a co-
payment, rather than co-insurance, so there is more, I think, 
limits to those, and then an out-of-pocket cost where, in those 
years where you are ill and in the hospital, you are not going 
to go lose your life savings as a result of it.
    Can you talk a little about sort of the context we ought to 
be viewing this? And we all want to make sure that we are 
protecting low-income seniors, as well.
    Mr. MILLER. Okay. So I think, if you want to talk about it 
from the beneficiaries' point of view--and I think that that 
was a motivation for a lot of the Commission's work here--the 
first thing is that the benefit, as it is designed, doesn't 
include a catastrophic cap. And the market has changed 
significantly on that point over time. The managed care plans 
all provide catastrophic caps, for example.
    And so, the first benefit to the beneficiary is to have a 
catastrophic cap, where their out-of-pocket would stop at some 
point. You know, we have modeled different options, but let's 
just say $5,000. So that is the first thing.
    The second thing is line of sight on their out-of-pocket 
costs. So right now you have a couple different deductibles, as 
you have said, and you also have percentage-based co-payments. 
I am going to pay 20 percent of something. And so, the 
Commission would rationalize those deductibles and move from 
co-insurance percentages to a co-payment amount for a service. 
And the hope here is that the beneficiary has a clear line of 
sight on what their out-of-pocket will be.
    And then that, coupled with catastrophic, brings me to the 
third point, and make the need for the supplemental insurance 
significantly less, because they have greater protections and 
greater certainty about what they are going to be paying out of 
pocket. And so, the need for supplemental insurance, if that 
becomes much less, you have just relieved the beneficiary of 
the premium for--that they pay for the supplemental insurance.
    And then a final point, which you have also referred to, is 
if you have protections up to, say, 150 percent of poverty for 
low-income, then you are helping beneficiaries with any of 
their premium costs.
    Chairman BRADY. Two things to that point. Should we be 
looking at the Medicare savings plan program in the context of 
this redesign?
    And, secondly, are there benefits to continuation of care 
by redesigning the Medicare benefit?
    Mr. MILLER. Yes, we are talking about 150 percent in the 
context of the broader re-benefit design. I am not sure if I 
followed the continuation of care----
    Chairman BRADY. And the re-design is--by this providing 
clarity and line of sight, in looking at your recommendations 
there seems to be a suggestion that this also helps seniors as 
they experience a continuation of care, from leading in the 
hospital and----
    Mr. MILLER. Right, I now follow your point. I am sorry I 
missed it.
    Yes, and we did--actually, we did some analysis for this 
Committee very directly on this question and gave it to you a 
while back. But for example, there are numbers like, you know, 
nine percent of beneficiaries have a hospitalization in a 
single year, but over multiple years--say 4 years--you can get 
up into 40 and 50 percent of beneficiaries having a 
hospitalization. And so, the benefit, the insurance value 
benefit, if you will, to a redesigned, you know, benefit, is 
that it also provides protection over a longer run.
    Chairman BRADY. Can I switch about MedPAC's discussion 
measuring quality by focusing on the entire patient population, 
as opposed to assessing each individual provider? Being able to 
compare quality in an area between fee-for-service, Medicare 
Advantage, and other options, I think, is a very important 
thing. I understand the Commission's reluctance to adjust 
provider fee-for-service payments, because it makes them 
accountable for things outside their control.
    My question is, in the context of how Medicare pays 
physicians, considering that the current sustainable growth 
formula adjusts payments based on the collective actions of 
physicians nationwide, wouldn't adjusting payments to 
physicians in a relatively small area signify an improvement?
    Mr. MILLER. I think this is something of a trade-off in the 
sense that at the national level it seems very clear that you 
have sort of a tragedy of the commons type of situation. So I 
might--if volume increases as a physician, I might be concerned 
about a fee reduction. But if that fee reduction is shared 
across the entire country, then I might benefit more in the 
short run by increasing volume, and then have the fee reduction 
shared by all physicians.
    It is arguable that doing that on a smaller basis would do 
two things: make the physician more aware of the pool of 
physicians that they are actually at risk with, and perhaps 
give them more of a jump-start to moving into more organized 
systems. Say, as long as I am being judged with other 
physicians, maybe I want to pick those physicians and go to an 
accountable care organization.
    However, it is really important for me to say this: the 
Commission was concerned that in that circumstance, in a fee-
for-service environment, there is no unified entity, so they 
were concerned about judging providers on that basis because of 
that. But that is kind of your trade-off.
    Chairman BRADY. No, I appreciate it. A final point, not a 
question, but I appreciate the Commission's work on trying to 
create an apples-to-apples comparison across all three of the 
payment models: spending benchmark, quality measurement, risk 
adjustment, regulatory oversight. I think for us to continue to 
improve the Medicare system, it is really critical we have an 
apples-to-apples comparison. So thanks for the work you are 
doing there.
    Mr. MILLER. Thank you.
    Chairman BRADY. Dr. McDermott.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    You made a passing comment about paying primary care 
physicians for per-patient amount, rather than per-service. I 
have always thought that we would have a much better system if 
everybody had a medical home, some general medical person who 
knew them and knew their situation. And it sounds to me like 
you are talking about a plan where you would give a fixed 
amount to a doctor to pay to do the general medical things that 
are necessary. They could then refer out for the rest of their 
care to the more general system.
    I would like you to talk a little bit about what you meant 
by that.
    Mr. MILLER. Yes. That is what we meant by that, that the 
notion would be that, instead of a primary care physician or 
advanced practice nurse, or whatever the professional is that 
is providing the primary care service, in order to get 
reimbursed they have to see the patient and they have to--you 
know, face to face, and provide a service.
    But I think the Commission's view is that, particularly and 
more coordinated systems, you want that professional to have 
the flexibility to do things like make phone calls, deal with 
the patient through email and phone calls, and also the 
flexibility to coordinate their care, which they aren't 
directly paid for now. So, the notion is moving to a payment 
for a population that you have responsibility for, rather than 
paying them service by service.
    To your medical home point, this concept is not 
inconsistent with that thought. We are not saying it has to be 
a medical home, but we are saying that the payment should move 
more to a patient-based payment, which then gives resources for 
the professional to be flexible.
    Mr. MCDERMOTT. Are you talking, then, to a large 
organization getting a certain payment to cover, let's say, 
30,000 people that get $100 a month for each one of--I am just 
picking numbers out of the----
    Mr. MILLER. Doesn't have to be a large organization. We 
would see this as, you know, this is how we would pay primary 
care providers and services in Medicare, whatever their 
situation is. So, no, it is not you have to be organized to do 
this.
    Mr. MCDERMOTT. I mean most seniors--8 out of 10--don't go 
to the hospital in a given year--moreover, a four or five-year 
period, as Mr. Brady has said. Aren't they protected by their 
supplemental insurance from the co-payment problems?
    Mr. MILLER. Yes. If I understand your question, yes. If you 
have a supplemental product, you can purchase products that 
cover your first dollar, your deductible in your hospital case, 
and you can purchase products that have a back end catastrophic 
coverage. That has produced a supplemental market.
    And without being, you know, too unpleasant about it, there 
is a lot of questions about the value of some of those 
products--the premiums people pay in exchange for the value 
that they get. And those products also impose additional costs 
on the taxpayer, because they generate services. There is 
fairly clear evidence on that.
    And so, the thinking is----
    Mr. MCDERMOTT. Tell me about the evidence that that----
    Mr. MILLER. Say again.
    Mr. MCDERMOTT [continuing]. Having this supplemental policy 
generates----
    Mr. MILLER. Yes, what we----
    Mr. MCDERMOTT [continuing]. Services, where is the data 
that says----
    Mr. MILLER. Okay, and we have published it, and we can make 
sure that we, you know, re-deliver it to you. There is a fair 
amount of evidence that when you--and not just a beneficiary, 
any person--of first-dollar coverage in their consumption of 
health care, utilization increases. And the issue with these 
products is the price I pay to get that product is about the 
actual wrap-around services, and the price doesn't contemplate 
the additional cost to the program that the product imposes.
    Mr. MCDERMOTT. Is it--am I correct in thinking that 90 
percent have supplemental coverage, about 90 percent?
    Mr. MILLER. Yes, and that is composed of three types. One 
is employer-sponsored insurance. One is the private Medigap--
individual Medigap market. And then another number is their 
Medicaid supplemental.
    And the kind of comments I am making, and what the 
Commission is talking about with this benefit redesign pertain 
to the employer-provided and the Medigap products. And our view 
there is the beneficiaries should have the choice of accessing 
those products. But the products' price should more fully 
respect--or reflect the full cost of purchasing that product, 
which is the wrap-around services and the additional costs that 
they impose on the program.
    Mr. MCDERMOTT. Thank you.
    Chairman BRADY. Thank you. Mr. Johnson is recognized.
    Mr. JOHNSON. Thank you, Mr. Chairman. Mr. Miller, the 
Commission report talks a lot about how Medicare under-values 
primary care services, including the fact that average 
compensation for specialists can be more than double what 
primary care practitioners earn.
    It is also my understanding that cognitive physicians, like 
neurologists and rheumatologists, are in a similar position to 
primary care in income, recruiting, and even--cognitive 
providers perform care coordination for beneficiaries with 
multiple chronic conditions, often for an aging population.
    My question is, does the Commission have any plans to also 
recognize cognitive providers, along with primary care 
providers, in its recommendations?
    Mr. MILLER. Okay. And this is a matter of degree, rather 
than philosophical difference.
    So, if you think about the Medicare physician fee schedule, 
I think what the Commission--you know, if all 17 were here--
would say to your answer--to your question is this. There is 
great concern that the procedural side of the fee schedule is 
over-valued. If you go to the cognitive side, there is concern 
that that is under-valued, because we are talking about time-
based services. You don't have as much ability to generate 
volume and compensate yourself.
    And so, cognitive becomes more of the concern. But if you 
have to pick priorities, and there is limited amounts of 
dollars, then the Commission's point is the first and primary--
or first concern is the primary care sets of services, and I 
will stop in just one second. And I think part of that 
reasoning is they see that as so critical to the care 
coordination that many people are looking for in the system.
    So it is not--you know, I completely--you know, the 
Commission disagrees, it is really a matter about--of 
priorities.
    Mr. JOHNSON. Okay. But you are looking at it.
    Mr. Miller, the June report repeats a previous finding that 
Medicare Advantage beneficiaries who dis-enroll and return to 
fee-for-service Medicare have a 16 percent higher fee-for-
service spending. Does that mean that Congress ought to build 
in extra incentives to keep beneficiaries in Medicare 
Advantage?
    Mr. MILLER. We haven't made a recommendation on--a direct 
recommendation on this point yet, but you are picking up on, 
decidedly, what--the issue that is being raised in the report. 
The actual number these days--we have re-estimated it using 
some later data--it is about 12 percent. But your point still 
stands. And I think there is some concern here that if you find 
a plan that has excessive dis-enrollment relative to what you 
see out there in the environment generally, you might want to 
contemplate some kinds of incentives or penalties to forestall 
that kind of action.
    And one of the things I would relate that to is we can 
always try and prove risk adjustment. It will probably be 
imperfect for a long time, and maybe forever. There are other 
administrative actions that you can take to try and get the 
behavioral response that you are looking for, and that is one 
of them.
    But, yes, you get about a 4 percent dis-enrollment 
occurring every year, and those people tend to be about 12 
percent more expensive than average. And I just don't want to 
vilify the plans here. Beneficiaries dis-enroll for their own 
reasons, as well. So this is both the beneficiary and the plan 
that are involved in the dis-enrollment.
    Mr. JOHNSON. Thank you. I appreciate your comments.
    Mr. MILLER. Can I say one thing really quickly? I forgot to 
say to Mr. McDermott the other supplemental coverage is managed 
care. I didn't mention that in answering your question. Sorry 
about that.
    Chairman BRADY. No, thank you.
    Mr. Thompson.
    Mr. THOMPSON. Thank you, Mr. Chairman.
    And, Mr. Miller, thank you for being here. I would like to 
touch on the under-value of primary care, as well. And 
specifically, in the ACA, we put in provisions to provide 
incentive payments for primary care docs. And in your report 
you state that access for beneficiaries seeking new primary 
care physicians raises more concerns than access for 
beneficiaries seeking new specialists. And I hear that in my 
district, as well. Folks tell me that they have long wait times 
for appointments, there is few docs, primary care docs, who 
will take new Medicare patients.
    And why is this problem persisting? And have the incentive 
payments helped to reduce this--the extent of the problem?
    Mr. MILLER. Okay. I don't--going to the last part of your 
question first, I don't want to overstate that the primary care 
add-on payment, which we recommended--and we, you know, accept 
responsibility for, and the Congress enacted, and so we think 
that that is the right direct--I don't want to overstate that 
this will correct the primary care, you know, wait times and 
difficulties that people are experiencing.
    But we think it is a really important signal to primary 
care providers about the value that they can potentially 
provide in care coordination in a reformed system. And we think 
that it is important that that signal persist.
    We do think that the fee schedule is out of balance for 
these types of services, and we are trying to say there is some 
attention to trying to rectify it.
    Last thing I will say and I will stop is we have also 
talked about other things to get greater value in that fee 
schedule, but I won't go into them in the interest of your 
time.
    Mr. THOMPSON. So we should continue----
    Mr. MILLER. Yes.
    Mr. THOMPSON [continuing]. After the 2015 date when the 
incentives expire, we should continue to do those?
    Mr. MILLER. The Commission has not made a hard 
recommendation on that, but the conversations that they are 
having, and that they are going to pick up with in the fall are 
all headed in that direction.
    Mr. THOMPSON. So thank you for being respectful of my 
time----
    Mr. MILLER. Trying to.
    Mr. THOMPSON [continuing]. But let's go into those other 
things that we should be doing----
    Mr. MILLER. Okay----
    Mr. THOMPSON [continuing]. In addition to the incentive 
payments.
    Mr. MILLER. No, no problem. I just didn't want to get you 
off your point, and you may have had another one.
    So, for example, in our SGR recommendations that we have 
made to the Congress--and you know, these are not popular, but 
none of our stuff is--so one of the things is we have made a 
set of recommendations on data collection and requirements for 
the secretary to identify over-price procedures in the fee 
schedule. We think that most of those over-price procedures 
reside on the procedural side of the fee schedule. Then you 
would have resources that you could re-balance to the cognitive 
or to the primary care side of the fee schedule, as you saw 
fit. That is one thought.
    A second thought is that--and again, this is somewhat 
unpopular--in solving the SGR issue, in order to keep the cost 
of the SGR fix down--and, remember, it used to be a lot more 
expensive than it was--you can differentiate the conversion 
factor for primary care or cognitive, or whatever the Congress 
decided, relative to the procedural services. And that is 
another way to get a re-balancing effect.
    Mr. THOMPSON. Is there anything else that Congress should 
do to try and get a handle on this problem?
    Mr. MILLER. I am sure I am forgetting something, but those 
are certainly the things off the top of my mind.
    Mr. THOMPSON. Okay. If you remember, why don't you drop me 
a line?
    Mr. MILLER. We will do that. And we talk to your people all 
the time.
    Mr. THOMPSON. Thank you. I yield back.
    Chairman BRADY. Thank you. Dr. Price.
    Mr. PRICE. Thank you, Mr. Chairman, and I want to thank you 
again for holding this hearing. I appreciate MedPAC's work in 
so many areas to try to make a health care system that works 
for patients. As I often times say, we tend to forget the 
patient in many of these discussions. We talk about money, we 
talk about other sorts of things, but often times forget the 
patient.
    I want to thank MedPAC for what appears to be a further 
maturation of and appreciation that patients in various medical 
specialties are actually different, that one-size-fits-all 
doesn't often times--doesn't work hardly at all, in terms of 
health care.
    To that end I want to talk a little bit about medical 
specialties and the difference that they have, and specifically 
pathologists, as it relates to meaningful use requirements and 
electronic health records. You are familiar with that program, 
are you not?
    Mr. MILLER. A bit. I am not real deep right at the moment, 
but I will do my best.
    Mr. PRICE. The kind of rewards, incentives that are being 
provided for physicians as it relates to electronic medical 
records and meaningful use are pretty much standard across the 
board. So we have got pathologists who, candidly, look at 
slides all day, or lab results all day, and are being asked to 
figure out whether or not that slide has an allergy or whether 
it smokes. And that doesn't make a whole lot of sense, does it?
    Mr. MILLER. To the extent that I understand what 
conversation I am in the middle of, no.
    Mr. PRICE. Well, all right.
    [Laughter.]
    Maybe I could ask MedPAC to take a look at that, because 
this is resources that are being utilized and caring for 
Medicare patients in a way that, frankly, doesn't make a whole 
lot of sense for either the patients or the physicians that----
    Mr. MILLER. And the question is whether there should be 
differential requirements across specialties on the EHR----
    Mr. PRICE. Exactly.
    Mr. MILLER [continuing]. Meaningful----
    Mr. PRICE. Exactly.
    Mr. MILLER. I can take that question back.
    Mr. PRICE. Let me come to something that you have been 
pushing on for a long time, and that site-neutral payments in 
the surgical setting. Obviously, ambulatory surgery centers, 
you mention that we ought to be looking for the lowest cost and 
the highest quality. And ASCs often times provide the highest 
quality at the lowest cost, and you have been a champion on 
that.
    I want to touch on the site-neutral payments that you have 
mentioned here in this report on SNFs and IRFs, skilled nursing 
facilities and in-patient rehab facilities. And I am curious as 
to whether or not CMS has given you any feedback on your 
recommendation.
    Mr. MILLER. And we have not made a recommendation yet. We 
are exploring this. We have just entered this particular area. 
They are aware that we are working on it. I don't think I have 
gotten feedback as in, ``Way to go,'' or, ``Stop what you are 
doing,'' nothing like that.
    Mr. PRICE. Can you imagine any reason why CMS ought not be 
supportive of site-neutral payments for various facilities 
providing similar care to patients, regardless of that site?
    Mr. MILLER. Oh, and I didn't mean to imply that they were 
broadly hostile to this at all. I was thinking very narrowly 
about the in-patient--or, sorry, the rehab and the skilled 
nursing facility. I haven't gotten a lot of feedback on that.
    I think there is a sense and an understanding at CMS that 
this is an issue. I think there are some differences about how 
they would go about it, but I don't think they are ignoring it. 
Let's put it that way.
    Mr. PRICE. I think it is a healthy discussion to have, and 
I think we are actually having some admission on the part of 
CMS that, again, that one-size-fits-all doesn't actually work.
    I want to also commend MedPAC for the work that you are 
recommending, or the discussion that you are having around 
quality measures. Those of us who have been physicians and 
practice clearly understand that one patient and another 
patient, even though they have exactly the same diagnosis, the 
quality treatment for each of those patients may be 
significantly different. Is that not true?
    Mr. MILLER. Agreed. And we are trying to not only get a 
more consistent set of quality measures, there is a very strong 
motivation on the part of the Commission to relieve the burden 
on the provider.
    Mr. PRICE. And to that end, wouldn't it be most--do you 
think it would be helpful to have the quality measures be 
determined primarily by those folks actually providing the car, 
the specialty societies, and not have them be a--the kind of 
duplicative and often times contradictory measures that we 
currently have in place?
    Mr. MILLER. Well, this was going too well to last, and so 
here we are.
    [Laughter.]
    I think the Commission has great concern that the quality 
measures, if they are determined entirely by the specialty 
societies--there is two concerns. Number one, that it creates 
and reinforces silo types of approaches to care: ``Here is my 
set of metrics for the thing I did,'' as opposed to what was 
the general outcome for the patient throughout the entire 
episode; and I think the second concern that the Commissions 
have--and this is with all respect, but the specialty societies 
all say it about each other--some of them have rigorous 
standards, some of them less so.
    Mr. PRICE. And my time has run out, but I look forward to 
having--maybe we can get another round, Mr. Chairman, as we 
move forward. Thank you.
    Mr. MILLER. And, if not, we are happy to get on the phone 
and talk to you about this, as always.
    Chairman BRADY. Thank you. Mr. Kind.
    Mr. KIND. Thank you, Mr. Chairman. Thanks for holding this 
hearing.
    Mr. Miller, thank you for your testimony today, and for the 
work MedPAC does. I wasn't going to ask you this in my question 
period, but since Dr. Price raised it, I have teamed up with 
him in regards to the whole meaningful use with certain 
specialties, especially as it relates to pathologists. So maybe 
we can follow up with you in regards to legislation that we 
specifically introduced to try to get MedPAC's response to it, 
as well as a letter that we are doing to CMS to try to 
highlight this issue. There have been some extensions, we are 
not sure if there is going to be another extension in the 
future. But, nevertheless, it would be nice to get MedPAC's 
incentive on it.
    You know, in past MedPAC reports to this hearing, I have 
been not so much critical, but impatient with MedPAC's 
recommendations in regards to payment reform. So I want to ask 
you yet here today--I mean there are a lot of tools out there, 
a lot of different payment models that are moving forward, a 
lot of experimentation taking place. But from MedPAC's 
perspective, where can we be accelerating this payment from 
fee-for-service to a quality or value-based reimbursement 
system?
    Where are there some very promising initial results coming 
back that is showing us that we can get much better quality of 
care, but also at a much better price?
    I think--I forgot who it was, Dr. McDermott or someone just 
cited the Commonwealth study that just came out this week, 
showing that we are still, by far, spending way too much per 
beneficiary in health care, as an entire system. And often 
times, getting worse results compared to most of the other 
developed countries around the world.
    And I think part of this is being driven by this archaic 
payment system that rewards volume over value. And I know 
MedPAC has had recommendations in the past. But right now, 
from, you know, where you see us today, where do you think we 
can be pushing more aggressively to get to a value or outcome-
based reimbursement system?
    Mr. MILLER. Okay. That is a pretty--you know, broad and 
complicated. But I would say a few things.
    I think, you know, we are going to be living with fee-for-
service for some period of time and, you know, perhaps forever. 
And I am not sure that that is a bad thing, because fee for 
service can be efficient and high quality in some parts of the 
country. But I think there are pursuits inside fee for service 
that can produce better quality results. Here is one.
    The re-admissions penalty, which is, again, not a popular 
idea, but it is--it looks like re-admissions are falling, and 
people are paying a lot more--hospitals are paying a lot more 
attention to it.
    On more of a systems-wide basis, you know, the ACO concept 
is still a concept, still entirely unproven, but we have been 
talking a lot to accountable care organizations on what is 
going on out there, and decidedly--at least for some of them--
it changes the underlying dynamic. You know, generating 
services is working against you. And as long as the quality 
standards are clear and present, they move more in that 
direction.
    And I think another area that we are talking about in this 
report is the notion of population-based quality measures. So 
get out--and I know there is some conflict over here--but get 
above the individual process-based, ``I did this particular 
thing,'' and say, ``Is this population avoiding admissions that 
are unnecessary? Are they staying out of the emergency room? 
Are they not being re-admitted?''
    A concept that we are only breaking ground on is the notion 
of can we count how many healthy days they have at home. That 
is what everybody wants. Can we start to construct measures 
that say, ``This is really where you want to be?''
    And then, finally, I think, you know, bringing both the 
beneficiary and the provider into the--we, MedPAC, I think the 
Congress in general, have spent a lot of time on trying to 
design payment systems and measurement systems to incent the 
provider, but also bring the beneficiary into that process too, 
so that you have both actors at the point of contact involved.
    Mr. KIND. And that is--I would love to be able to follow up 
with you and see what we can explore and move forward on.
    But one other thing before my time expires. Obviously, we 
had the CMS data dump on physician reimbursements recently. 
And, yes, it does provide a glimpse, but it was an incomplete 
picture, because it also didn't explain what results were 
happening, what the protocols of care--and I also discovered 
during that that you have multiple doctors using the same 
billing number. I mean, does that make sense? Don't we want to 
dis-aggregate that information if we want to really drill down 
to find out where the reimbursements are going, and if there is 
perhaps some over-utilization occurring?
    Mr. MILLER. Yes. I think the ability--I mean there are 10 
tax identification numbers, and then there are individual 
provider numbers. And I think it probably makes a lot more 
sense to be able to track through to the individual provider, 
because if there is a particular provider who is ordering a 
bunch of services that are really out of synch with general 
accepted practice, it is hard to get at that if you can't get 
to the individual.
    Mr. KIND. All right, thank you.
    Thank you, Mr. Chairman.
    Chairman BRADY. Thank you.
    Mr. Smith, you are recognized.
    Mr. SMITH. Thank you, Mr. Chairman.
    Dr. Miller, thank you for joining us here today. Medicare 
Part D, we are learning that there is cost savings, that costs 
are less than originally projected. Can you speak briefly to 
that, and how and why you have seen that take place?
    Mr. MILLER. I think probably the single most important 
reason that that is the case is that there was a fairly heavy 
move to the use of generic drugs that was driven inside the 
Part D program that may have resulted in the expenditures that 
were less than what was being projected when the program was 
implemented. But if there was one thing to point to, I think it 
is probably that.
    Mr. SMITH. And how about the penalty that is--rather than 
mandating seniors have Medicare Part D, there is a provision 
that is a penalty if they don't sign up during the open 
enrollment period.
    Mr. MILLER. Which is pretty true throughout Medicare. If 
you don't sign up for Part B, it is kind of the same----
    Mr. SMITH. Right, but there is no individual mandate, if 
you will. Correct?
    Mr. MILLER. There is no individual mandate. That is 
correct.
    Mr. SMITH. And can you speak to the effectiveness of that 
provision?
    Mr. MILLER. In lowering cost?
    Mr. SMITH. Well, not necessarily just in lowering costs, 
but in incenting individuals to sign up.
    Mr. MILLER. Well, I think the existence of a penalty 
probably focuses the attention of the beneficiary, if that is 
what you mean. And I think it was put into Part D and into Part 
B because of the concern about selection. If you don't move 
broad ranges of the population into these programs, what you 
get is the sickest, and then the premiums become unsustainable 
over time, and the program collapses--in the extreme. It is 
death spiral in the--you know, kind of the actuarial terms.
    So, those things are created to draw the beneficiary or 
whoever the person is, his attention to purchase the insurance, 
so that you get a relatively broad representation of risk.
    Mr. SMITH. Very well. I thank----
    Mr. MILLER. Is that what you are asking?
    Mr. SMITH. Yes. Thank you very much.
    Mr. MILLER. Okay.
    Mr. SMITH. I yield the balance of my time to Dr. Price.
    Mr. PRICE. Oh, thank you. Thank you very much. I was--I am 
sorry Mr. Kind left, because I was remiss in not thanking him 
for his assistance on this issue of some specialties, 
especially pathologists, and the meaningful use in electronic 
medical records.
    And you did make a comment to--in response from Mr. Kind, 
though. You said that re-admissions were falling. Have you 
looked at the change in observation status in hospitals?
    Mr. MILLER. Observation status has been increasing. We have 
looked at the relationship between those two. We don't think 
that that is driving the impact that we are seeing on 
admissions. But we are looking at observations. We do think 
that there are some real issues there. We are looking at the 
to-midnight rule, which I think has been a subject of some 
conversation.
    I am not in a position to give you, you know, data and 
analysis, although I may have some fact points. But the 
Commission--the staff right now--I haven't rolled it out in 
front of the Commission--is looking at an alternative approach 
that would change--I don't want to get too deep here--the in-
patient payment system to make it more clear when a person is 
in-patient, and to pay on a more rational basis, so that there 
is not as much need for this observation spike----
    Mr. PRICE. I think that would be extremely helpful, because 
all you have to do is go to an emergency room and you ask them 
where their observation beds, and they have increased--well, 
now that we have observation beds. The only reason for that is 
because of a payment system that we have put in place, as you 
know.
    I want----
    Mr. MILLER. This fall we will have some of this information 
out in our public meetings, and you and your staff can start 
paying attention.
    Mr. PRICE. Great. I would like to touch on the 
recommendation or the comment that you made in the report about 
paying--using a per-beneficiary payment. Some people have 
called that capitated payment system. How does what you 
envision to be appropriate differ from what some folks call 
concierge medicine, or personalized medicine? How does the 
paying a primary care physician or a medical home physician 
differ from what you are envisioning?
    Mr. MILLER. Well, I----
    Mr. PRICE. Or does it?
    Mr. MILLER. Well, I think I see the linkage that you are 
making.
    The--I think the first distinction--and maybe it is the 
only one I can think of off the top of my head--is that what a 
concierge payment usually gets you is exclusive access to a 
physician. And generally, physicians use it to lower their 
panel counts, and then focus more attention on an individual 
patient.
    This wouldn't have any exclusivity to it. The payment would 
be attached to the provider on the basis of a preponderance of 
contact with a patient. And we would say, ``Okay, you seem to 
be seeing this patient for their primary care. Here is a block 
of dollars for you to coordinate and, you know, have non-face-
to-face service with that beneficiary.'' That portion does 
sound like the concierge type of experience. The exclusivity, I 
think, would be a difference, though.
    Mr. PRICE. Maybe we can take a peek at that.
    Mr. MILLER. Yes, absolutely.
    Chairman BRADY. Thank you. Mr. Pascrell.
    Mr. PASCRELL. Mr. Chairman, thank you. This year's June 
MedPAC, Director Miller, reaffirmed--in my mind, anyway--that 
we don't have to scrap the current system in order to save 
Medicare. I think it is conclusive evidence to that effect.
    We are talking today about strengthening Medicare. The 
Affordable Care Act is already hard at work actually testing 
the new payment system and the delivery system. That will lead 
to innovation, not only for Medicare, but everybody in the 
entire health care system.
    The point I would like to make is that health care reform 
is already moving Medicare, I think, in a new direction. That 
is my estimation of what is going on. And we should always be 
open to new ideas. There is no two ways about that. But I think 
my colleagues need to take a look at the work happening today 
that is making and moving Medicare towards paying for the 
quality of services, not necessarily the quantity of services, 
for our seniors.
    Here is my first question to you. Health care, to me--
health care reform is entitlement reform. Not only did the 
Affordable Care Act reduce costs for Medicare, it also reduced 
costs for beneficiaries. Mr. Miller, can you discuss the ways 
in which the Affordable Care Act has helped the solvency of 
Medicare?
    Mr. MILLER. Well, I mean, I think a couple of things. The 
changes in the basic payment rates for the fee-for-service 
providers that were restrained as part of the ACA meant that 
there would be lower spending for that reason. So, you know, 
the reductions in the market basket, I think, you know, might 
be a way to talk about that vocabulary.
    I think a second reason is the reduction in the managed 
care payments, which the Commission did a lot of work 
demonstrating that we were basically subsidizing and paying 
more than we needed to to get that benefit. And I think that 
lowered expenditures.
    What I think the jury is still out on is, for example, take 
ACOs. You now have five million people in ACOs. So decidedly, 
there is change occurring. There results are mixed, which, 
actually, I think everybody expected them to be.
    Mr. PASCRELL. Right.
    Mr. MILLER. So the ACOs are actually saving money. There 
seems to be increases in quality, pretty broadly, but some are 
saving money, some are not.
    Mr. PASCRELL. Before we get into out-of-pocket expenses--I 
am very concerned about that--you don't disagree that the life 
of Medicare has been extended about eight years because of the 
ACA?
    Mr. MILLER. Well, I am not sure I have walked through that 
thinking for myself. I know the trust fund is extended. There 
is lower expenditures in Medicare rates right now. That is 
extending the life of the trust fund. There is big discussions 
about how much of that is secular and how much of that is ACA.
    But to your question, the things I pointed to did reduce 
Medicare's spend.
    Mr. PASCRELL. The average Medicare beneficiary has an 
average annual income of less than $23,000. I am concerned that 
if it doesn't provide adequate financial assistance for lower 
income beneficiaries, benefit redesign puts these beneficiaries 
in a very, very vulnerable financial situation. And they may--
it may discourage them from assessing--accessing the care they 
need because of the cost. I am very concerned about that.
    We discussed this when putting the bill together. While the 
intention of setting an out-of-pocket maximum is to protect 
beneficiaries from high out-of-pocket spending, it would only 
be effective for those who have the financial means to reach 
that threshold. When MedPAC proposed Medicare benefit redesign 
back in 2012, which was also referenced in the most current 
report in June, does MedPAC envision redesigning the benefit 
for the purposes of achieving cost savings of the program? Is 
that the reason why you have suggested that?
    Mr. MILLER. No, but I am going to parse my way through this 
answer carefully.
    The benefit redesign portion of our proposal is 
explicitly--and we say this very clearly--designed not to 
increase the aggregate liability for the beneficiaries. We all 
understand the distribution----
    Mr. PASCRELL. Right.
    Mr. MILLER [continuing]. Can change, but the aggregate 
liability.
    However, we have said that the first dollar coverage should 
have an additional charge to it. And our hope is that people 
see that they don't need it, and then they drop the first 
dollar coverage, and that frees up more resources for them. But 
if they choose to hold on to it, then they would pay more for 
that product.
    Mr. PASCRELL. Right, because, Mr. Chairman, we have talked 
about this several times about out of pocket. So we need some 
kind of a balance here so that, you know, we don't cut off our 
noses to spite our faces.
    Chairman BRADY. Let's see if we can find that common ground 
as we go forward.
    Mr. PASCRELL. Thank you.
    Chairman BRADY. Which is why the recommendations are, I 
think, helpful in this discussion. So thank you.
    Mrs. Black.
    Mrs. BLACK. Thank you, Mr. Chairman. And I appreciate your 
allowing me to be sitting in on this Committee.
    Thank you, Mr. Miller, for being here today. This is such 
an important subject matter, and we need to continue to make 
sure we are discussing it. In your June report you discuss the 
quality in fee for service and in the Medicare Advantage 
program, and I would like to discuss just a few concerns about 
how the quality is measured in Medicare Advantage, especially 
among that dual eligible population.
    I don't have to tell you, you know that dual eligibles only 
account for about 19 percent of Medicare beneficiaries, but 
they account for about 34 percent of all the Medicare spending. 
So this is an important population. And having been a nurse for 
over 40 years, and having worked with this population, I 
certainly recognize that they are the most vulnerable, they 
have the highest rates of chronic illness, of disability, 
mental illness, and frailty than the rest of the Medicare or 
the Medicaid populations. And this means that Medicare 
Advantage will play a critical part in getting those services 
that they so critically need, and the larger services in 
coordinated care and benefits to access those services that 
beneficiaries most in need of, and especially in care 
management, in managing their care, since they have so many 
issues.
    Would you agree that we need to take into account these 
fragile populations when we make comparisons across the fee-
for-service and the accountable care organizations with 
Medicare Advantage plans to make sure that we are really 
comparing apples to apples in both our costs and our quality.
    And then, if so, I would like for you to speak to how you 
think we might be able to do that.
    Mr. MILLER. Okay. So let me take this through a couple of 
steps here.
    So, the plans in managed care that take a lot of dual 
eligibles, the special needs plans, are--take a lot of these 
populations, although these populations are throughout the plan 
types.
    What we have done is we have looked at the risk adjustment 
system. And a way to think about it is, if this is your 
distribution of your population--expensive people, not 
expensive people--the risk adjustment system overpays a bit for 
not expensive, underpays for expensive people. And then, if 
you, as a managed care plan, kind of go after this end of the 
distribution, you could be potentially disadvantaged.
    We made three recommendations recently in which we said, 
``If you make these technical changes''--and I will take you 
through them, if you really want to glaze over--but, ``If you 
make these three changes, it will move a little bit more to 
this balance.'' So we think that that is a way to approach 
these kinds of payments and quality measurement in a way that 
is a bit more equitable.
    Now, as everything in health care, things get a little bit 
complicated. When you look at these plans' financial 
performance, they aren't really on a profit basis. That 
disadvantage--I mean, in some cases, have the highest profits 
relative to other plans. And so, you know, what we think should 
happen here is that there should be a common suite of 
measurements across any plan type, so that the beneficiary can 
look at it and say, ``This plan does well, this plan doesn't do 
well,'' whatever the--or fee-for-service, whatever the case may 
be.
    I have talked to these plans many, many times, and they 
say, ``You know, the way you do it in''--or, ``The way Medicare 
does it in managed care, it is not fair to us.'' And I say to 
them, ``What measures would you add to this suite that capture 
your line of business better than is happening now?'' And I 
have to say they have not come forward with those measures.
    And so, I see your point. I--we have made these 
recommendations for the risk adjustment. We think if there are 
measures that this portion of the industry can come forward and 
say, ``This is really what we are about,'' the Commission's 
view is let's evaluate them and make them part of the 
measurement process. But, to date, there hasn't been a lot 
forthcoming.
    Mrs. BLACK. Do you have any research that you are currently 
doing, or plan to do, in being able to put forward some 
measures that you think would be applicable?
    Mr. MILLER. See, we are a very small operation. There is 30 
of us at the--on staff anyway, and we don't really view 
ourselves as the people who create the measures. We try and 
draw them from the environment, evaluate them, point them out, 
and say, ``Here is a good set of work that is occurring.'' We 
can try and put effort into that.
    But to date, no, we have not come up with a set of measures 
that at least those special needs plans would say, ``Yes, that 
is the set-up measures.'' We have talked to them a bit about 
them, but we haven't gotten a lot of traction.
    Mrs. BLACK. I was just curious, because there are certainly 
areas such as the chronic illness, and the disability, and the 
mental illness that set a stage for saying, ``Here are the 
disease processes that are going to cost more,'' as to whether 
you have actually seen any measures out there that you think 
would be applicable for what is already there.
    Mr. MILLER. Now, to those types of things, at least, our 
risk adjustment recommendations should address some of that. 
So, if--one of the measures is basically a chronic condition 
count. And when you enter that into the model, it makes this 
risk adjustment system more balanced.
    So, to the extent that those are conditions that are 
present, we have made recommendations, and we have done 
research. I thought you were asking more about this is an 
activity that we are engaged in, and we should be measured on 
this activity. That is where we haven't brought new information 
to the conversation.
    Mrs. BLACK. I think it is both areas.
    Mr. MILLER. I agree with you. And one we have standing 
ideas. One we are trying to work with the industry to identify 
them.
    Mrs. BLACK. Thank you. Thank you, Mr. Chairman.
    Chairman BRADY. Thank you, Mrs. Black, for joining us. If 
anyone thinks this is a check-the-box hearing, they are wrong--
MedPAC does a report, we hold a hearing, that is it. Truth is, 
this Committee has spent, as you would imagine, a lot of time 
on the rollout of the Affordable Care Act, and spent a lot of 
good time, and I think a fairly historic agreement on how we 
fix permanently how we reimburse our doctors in Medicare.
    Now we are turning to how do we improve the Medicare 
program. There is a lot of challenges to it, there is a lot of 
opportunities. And it is my hope that we will build on some of 
the recommendations, adjust them, and, on a bipartisan basis, 
find a way to improve Medicare for our seniors.
    As a reminder, any Member wishing to submit a question for 
the record will have 14 days to do so. If any questions are 
submitted, Mr. Miller, I ask that the witness respond in a 
timely manner. And I thank you for your testimony on behalf of 
MedPAC here today, and the hearing is adjourned.
    [Whereupon, at 11:09 a.m., the Subcommittee was adjourned.]
    [Submissions for the Record follow:]
    
    
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