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



 
  SAVING SENIORS AND OUR MOST VULNERABLE CITIZENS FROM AN ENTITLEMENT 
                                 CRISIS 

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 18, 2013

                               __________

                           Serial No. 113-18


      Printed for the use of the Committee on Energy and Commerce

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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania             GENE GREEN, Texas
MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee          LOIS CAPPS, California
  Vice Chairman                      MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia                JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             JIM MATHESON, Utah
ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin 
BILL CASSIDY, Louisiana                  Islands
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
CORY GARDNER, Colorado               BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas                  PETER WELCH, Vermont
ADAM KINZINGER, Illinois             BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
                         Subcommittee on Health

                     JOSEPH R. PITTS, Pennsylvania
                                 Chairman
MICHAEL C. BURGESS, Texas            FRANK PALLONE, Jr., New Jersey
  Vice Chairman                        Ranking Member
ED WHITFIELD, Kentucky               JOHN D. DINGELL, Michigan
JOHN SHIMKUS, Illinois               ELIOT L. ENGEL, New York
MIKE ROGERS, Michigan                LOIS CAPPS, California
TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          JIM MATHESON, Utah
PHIL GINGREY, Georgia                GENE GREEN, Texas
CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
LEONARD LANCE, New Jersey            JOHN BARROW, Georgia
BILL CASSIDY, Louisiana              DONNA M. CHRISTENSEN, Virgin 
BRETT GUTHRIE, Kentucky                  Islands
H. MORGAN GRIFFITH, Virginia         KATHY CASTOR, Florida
GUS M. BILIRAKIS, Florida            JOHN P. SARBANES, Maryland
RENEE L. ELLMERS, North Carolina     HENRY A. WAXMAN, California (ex 
JOE BARTON, Texas                        officio)
FRED UPTON, Michigan (ex officio)




                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     3
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     4
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     5
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     7

                               Witnesses

James C. Capretta, Senior Fellow, Ethics and Public Policy Center     9
    Prepared statement...........................................    11
Joshua Archambault, Director of Healthcare Policy, Program 
  Manager, Middle Cities Initiative, Pioneer Institute...........    20
    Prepared statement...........................................    22
Judy Feder, Ph.D., Professor of Public Policy, Georgetown Public 
  Policy Institute...............................................    34
    Prepared statement...........................................    36

                           Submitted Material

Statement of Paul N. Van de Water................................    69
Statement of Families USA, submitted by Ms. Schakowsky...........    72


  SAVING SENIORS AND OUR MOST VULNERABLE CITIZENS FROM AN ENTITLEMENT 
                                 CRISIS

                              ----------                              


                         MONDAY, MARCH 18, 2013

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 4:00 p.m., in 
room 2123, Rayburn House Office Building, Hon. Joseph R. Pitts 
(chairman of the subcommittee) presiding.
    Present: Representatives Pitts, Burgess, Hall, Shimkus, 
Blackburn, Lance, Cassidy, Guthrie, Ellmers, Pallone, 
Christensen, Sarbanes, and Waxman (ex officio).
    Staff Present: Clay Alspach, Chief Counsel, Health; Sean 
Bonyun, Communications Director; Matt Bravo, Professional Staff 
Member; Sydne Harwick, Staff Assistant; Robert Horne, 
Professional Staff Member, Health; Carly McWilliams, 
Legislative Clerk; Monica Popp, Professional Staff Member, 
Health; Andrew Powaleny, Deputy Press Secretary; Chris Sarley, 
Policy Coordinator, Environment and Economy; Heidi Stirrup, 
Health Policy Coordinator; Alli Corr, Minority Policy Analyst; 
Amy Hall, Minority Senior Professional Staff Member; Elizabeth 
Letter, Minority Assistant Press Secretary; Karen Nelson, 
Minority Deputy Committee Staff Director for Health; and Matt 
Siegler, Minority Counsel.

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

    Mr. Pitts. The subcommittee will come to order.
    The chair will recognize himself for an opening statement.
    Medicare and Medicaid are critically important programs 
that millions of Americans rely on. These programs are in 
trouble. Doing nothing is not an option. Doing nothing is 
unfair, particularly to those who can't afford any other 
options. Doing nothing is irresponsible.
    But in the last few years, those who have proposed 
solutions have been viciously attacked by special interests and 
their allies on Capitol Hill. When the House passed a budget 
that charted a path to saving Medicare, many on the other side 
accused us of trying to, quote, ``end Medicare as we know it,'' 
end quote. But they offered no solution of their own.
    Let me be clear: The status quo spells doom for every 
American who relies on Medicare or Medicaid for their health 
care. Both parties need to work together to modernize these 
programs so they can survive.
    Today's hearing is designed to get an accurate picture of 
the fiscal challenges facing Medicare and Medicaid so we can 
preserve these programs for the populations they were designed 
to serve. Without defining the problems these programs face, we 
cannot assess whether they are serving current beneficiaries in 
the most efficient and effective manner possible and we cannot 
strengthen and save them for future generations.
    The Medicare program served 49 million beneficiaries in 
2012 and, as was noted in a previous hearing, has been on the 
Government Accountability Office's high-risk list since the 
list began in 1990. According to the latest Medicare trustees 
report, Medicare will be insolvent no later than 2024 but as 
soon as 2017. More recent estimates have predicted insolvency 
as soon as 2016. That is 3 years from now.
    Doing nothing is not an option. Slogans such as ``Hands Off 
My Medicare'' and the past refusal of some on the other side of 
the aisle to even discuss changes to the program will lead to 
Medicare's collapse. We can begin modernizing these programs 
now or we can do nothing. If we do nothing, Medicare will not 
be there for our children and grandchildren. In fact, if we do 
nothing, Medicare as we know it will not be there for today's 
seniors in a few short years.
    Nearly 60 million Americans are currently enrolled in 
Medicaid. While Medicaid spending accounts for nearly one-
quarter of most State budgets, in my home State of Pennsylvania 
it is approximately one-third of the entire State budget. 
Should Pennsylvania choose to expand the program under the 
Affordable Care Act, approximately 60 percent of the 
Commonwealth's budget will go to welfare spending, including 
Medicaid, unfairly crowding out funding for roads, schools, and 
public safety.
    Medicaid costs to the States are expected to grow by nearly 
$400 million in the next fiscal year, and these costs do not 
include any costs associated with an expansion. Currently, one 
in six Pennsylvanians receives Medicaid benefits. If the 
Governor chooses to expand Medicaid in the Commonwealth, one in 
four Pennsylvanians will be on the Medicaid rolls.
    And this is not just a problem for Pennsylvania. The next 
10 years of Federal Medicaid spending will be twice the amount 
spent in the last 45 years. This is completely unsustainable.
    Medicaid was designed as a safety net for our Nation's 
poorest and sickest people. States are already struggling to 
serve this core population, and Washington certainly doesn't 
have extra money lying around either. For a system that is 
already under tremendous strain, how will adding millions of 
young, able-bodied adults to Medicaid affect our ability to 
care for our country's poorest and sickest citizens?
    With both Medicare and Medicaid, we face a fundamental 
issue of fairness. Is it fair that young people are paying into 
Medicare, when, as of now, the program will not be around for 
them when they retire? Increasingly, doctors simply can't 
afford to treat Medicaid patients. Is it fair that the 
President's healthcare law will force millions of disabled and 
sick Americans to compete with able-bodied 25-year-olds for 
appointments with those doctors who will still see them?
    I look forward to hearing from our witnesses today not just 
about the challenges we face in preserving these programs but 
also their solutions to modernize and save Medicare and 
Medicaid.
    Thank you. That concludes my time.
    The chair recognizes the ranking member of the Subcommittee 
on Health, Mr. Pallone, for 5 minutes for an opening statement.
    [The prepared statement of Mr. Pitts follows:]

               Prepared statement of Hon. Joseph R. Pitts

    Medicare and Medicaid are critically important programs 
that millions of Americans rely on. These programs are in 
trouble.
    Doing nothing is not an option. Doing nothing is unfair, 
particularly to those who can't afford any other options. Doing 
nothing is irresponsible.
    But in the last few years, those who have proposed 
solutions have been viciously attacked by special interests and 
their allies on Capitol Hill. When the House passed a budget 
that charted a path to saving Medicare, many on the other side 
accused us of trying to ``end Medicare as we know it.''
    But they offered no solution of their own.
    Let me be clear: the status quo spells doom for every 
American who relies on Medicare or Medicaid for their health 
care. Both parties need to work together to modernize these 
programs so they can survive.
    Today's hearing is designed to get an accurate picture of 
the fiscal challenges facing Medicare and Medicaid so we can 
preserve these programs for the populations they were designed 
to serve.
    Without defining the problems these programs face, we 
cannot assess whether they are serving current beneficiaries in 
the most efficient and effective manner possible, and we cannot 
strengthen and save them for future generations.
    The Medicare program served 49 million beneficiaries in 
2012, and, as was noted in a previous hearing, has been on the 
Government Accountability Office's ``high risk list'' since the 
list began in 1990.
    According to the latest Medicare Trustees report, Medicare 
will be insolvent no later than 2024, and as soon as 2017. More 
recent estimates have predicted insolvency as soon as 2016. 
That's three years fromnow.
    Doing nothing is not an option.
    Slogans such as ``Hands Off My Medicare'' and the past 
refusal of the other side of the aisle to even discuss changes 
to the program will lead to Medicare's collapse.
    We can begin modernizing these programs now, or we can do 
nothing. If we do nothing, Medicare will not be there for our 
children and grandchildren. In fact, if we do nothing, Medicare 
as we know it will not be there for today's seniors-in a few 
short years.
    Nearly 60 million Americans are currently enrolled in 
Medicaid. While Medicaid spending accounts for nearly one-
quarter of most state budgets, in my home state of 
Pennsylvania, it is approximately one-third of the entire state 
budget.
    Should Pennsylvania choose to expand the program under the 
Affordable Care Act, over 60 percent of the commonwealth's 
budget will go to Medicaid, unfairly crowding out funding for 
roads, schools, and public safety.
    Medicaid costs to the state are expected to grow by nearly 
$400 million in the next fiscal year, and these costs do not 
include any costs associated with an expansion.
    Currently one in six Pennsylvanians receives Medicaid 
benefits. If the governor chooses to expand Medicaid in the 
commonwealth, 1 in 4 Pennsylvanians will be on the Medicaid 
rolls.
    And this is not just a problem for Pennsylvania. The next 
ten years of federal Medicaid spending will be twice the amount 
spent in the last 45 years.
    This is completely unsustainable.
    Medicaid was designed as a safety net for our nation's 
poorest and sickest people. States are already struggling to 
serve this core population, and Washington certainly doesn't 
have extra money lying around either. For a system that is 
already under tremendous strain, how will adding millions of 
young, ablebodied adults to Medicaid affect our ability to care 
for our country's poorest and sickest citizens?
    With both Medicare and Medicaid, we face a fundamental 
issue of fairness. Is it fair that young people are paying into 
Medicare when, as of now, the program will not be around for 
them when retire?
    Increasingly, doctors simply can't afford to treat Medicaid 
patients. Is it fair that the president's health care law will 
force millions of disabled and sick Americans to compete with 
able-bodied 25-year-olds for appointments with those doctors 
who will still see them?
    I look forward to hearing from our witnesses today, not 
just about the challenges we face in preserving these programs 
but also their solutions to modernize and save Medicare and 
Medicaid.

                                #  #  #

OPENING STATEMENT OF HON. FRANK PALLONE JR, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Chairman Pitts.
    Today we will examine Medicare and Medicaid, the safety net 
programs that afford our seniors, disabled, and low-income 
Americans access to quality health care. Ensuring the long-term 
fiscal stability of these programs has been and continues to be 
a priority of my work in Congress.
    Budgets are about more than numbers and dollars. They are 
real-life expressions of priorities, of choices, and of values. 
And these choices have an impact on the lives of millions of 
Americans not just for the fiscal year each budget covers but 
for future years and future generations.
    Now, I know that growing deficits are not good for the 
future either, but we cannot reduce the deficit and give tax 
cuts to the wealthy on the backs of our most vulnerable 
Americans. What Republicans want to do when they talk about 
painful cuts in the name of fiscal responsibility is to cut the 
structural foundation of our safety net programs. They want to 
block-grant Medicaid under the guise of State flexibility. They 
want to decrease the Medicare rolls and turn seniors' health 
over to insurance companies. But these changes do nothing to 
tackle healthcare costs. They simply undermine the program's 
guarantee of access to care.
    So let's be clear and let's use facts. We have deficits 
because of two unpaid wars, years of unpaid tax cuts to the 
rich, and a deep recession. Meanwhile, revenues as a percent of 
GDP from 2009 to 2012 were at the lowest levels seen in 40 
years.
    But because Republicans made it clear that they will not 
consider any further changes in revenues, not even to get rid 
of egregious tax breaks for the wealthiest Americans, their 
only idea for addressing our budget challenges associated with 
health care is to shift costs and risk onto seniors and to the 
most vulnerable Americans who depend on Medicare and Medicaid 
for health security.
    Now, I agree there is more that can be done to make the 
healthcare system more efficient and economically sustainable. 
The reality exists that an aging population means more people 
will rely on Medicare and millions of the uninsured will now 
have access to healthcare through Medicaid because of the 
Affordable Care Act.
    But there are commonsense reforms that I believe Democrats 
and Republicans can agree on that would bring greater value 
into our health system that don't include cost-shifting. The 
Affordable Care Act includes a number of provisions designed to 
both reform healthcare delivery and improve the quality and 
efficiency of health care. This, I believe, was a huge 
downpayment on reforming the way Medicare and Medicaid deliver 
care. And we are already seeing it pay off. Over the last 3 
years, Medicare costs per person have grown 1.3 percent slower 
than growth in the overall economy. And that is a reversal of 
decades of rising costs.
    Healthcare reform was entitlement reform. The ACA decreases 
the deficit and promotes efficiency and quality. So let's build 
on that work. Let's have a productive and fair conversation 
about how to bring more value into these programs and not 
eviscerate them.
    Mr. Chairman, the issue is not whether we reduce the 
deficit, but how we do so. And that conversation must include a 
discussion about revenues.
    I would now yield whatever time I have to the gentlewoman 
from the Virgin Islands, Ms. Christensen.
    Mrs. Christensen. Thank you, Mr. Pallone.
    I want to say a word about Medicaid. And I hope that my 
good friends on the other side of the dais understand that 
leaving so many Americans without any insurance coverage has 
severely damaged their health as individuals and our economic 
health as a Nation. The ACA makes the investment we need to 
correct this. Cutting $810 billion and restructuring Medicaid 
as a block grant is the absolutely wrong way to go and will 
have catastrophic long-term economic and health consequences 
for the Nation.
    I can tell you firsthand what it is like, because we in the 
territories have always had to struggle under Medicaid caps. 
Benefits and services have to be limited. Eligibility for us is 
well below the FPL. We can't provide long-term care to all who 
need it, and we don't get DSH payments. Our governments end up 
taking up the slack, and our hospitals are already in crisis. I 
don't wish that on anyone, not even those who think they want 
Medicaid as a block grant. Your constituents deserve better, 
and your districts, States, and this country need us to do 
better.
    The best way to reduce Medicaid costs is by creating good 
jobs and by fully implementing and funding the Affordable Care 
Act, not going back to the Bush-era policies that increased 
poverty and the Medicaid rolls in the first place.
    I yield back the time to the ranking member.
    Mr. Pitts. The chair thanks the gentleman and, at this 
point, recognizes the vice chairman of the subcommittee, Dr. 
Burgess, for 5 minutes for an opening statement.

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

    Mr. Burgess. I thank the chairman for the recognition.
    We have all heard the figures. We hear them literally every 
week. Ten thousand baby boomers become eligible for Medicare 
every day. At the inception of Medicare, five workers supported 
every beneficiary. Today there are three; by 2030, there will 
be only two. The cost pressures are increasing, and we risk the 
ability to provide access to services for beneficiaries. 
Spending in Medicare alone is projected to double over the next 
10 years. The estimates are almost $40 trillion in unfunded 
liabilities, leading to insolvency by 2017.
    The Medicaid program, begun in 1965, was created to serve 
as a safety net for a very narrow population of 5 million very 
low-income Americans. The program has grown; now it covers over 
40 million Americans. Under the Affordable Care Act, it will 
grow even more: 25 million new individuals, 65 million total 
Americans. It is counterintuitive given the existing problems 
that already serve as a barrier to accessing care.
    Our country is $16\1/2\ trillion in debt. The President 
came to the House of Representatives last week and explained 
that he didn't think that was a pressing problem. I disagree. I 
think that it is.
    The issue is, no one knows when it becomes a crisis. No one 
knows when the Federal Government takes $110 billion down to 
the Bureau of Public Debt some Tuesday at noon to sell and no 
one shows up to buy. What happens next? Likely the interest 
rates rise. Do they go up a little bit, or do they go up a lot? 
If they go up more than a little bit, what happens to the debt 
service on the national debt, on that $16.5 trillion? You talk 
about mandatory spending, that is mandatory spending--spending 
that is not available for any other program. When we talk about 
crowding out other programs, that is what is at stake.
    And then we saw this weekend in Cyprus, where the 
Government of Cyprus decided to take very radical action 
because they felt the pressure from the debt crisis that they 
are facing. I am not saying that is what is in store for the 
United States, but you certainly understand that, given the 
world's situation, that we do need to pay attention. Our debt 
does matter, despite what the President disclosed to us last 
week.
    So $16\1/2\ trillion in debt, Medicaid costs are escalating 
$400 billion a year. States, even those States that have 
rejected expansion, like my home State of Texas, will be 
pressured to save money by reducing benefits or further cutting 
provider reimbursement.
    Now, think about that for a minute, what that means. We 
always talk about wanting to give patients access to high-
quality, accessible care. How is it going to be high-quality, 
how is it going to be accessible if you keep cutting provider 
reimbursements and reducing benefits or increasing waiting 
lines to get that care?
    Spending in Medicare and Medicaid is not proportional to 
the distribution of beneficiaries. Over $400 billion is spent 
annually on 50 million Medicare beneficiaries. More than half 
of that amount is for the 10 million individuals eligible for 
both Medicare and Medicaid. Nearly 1 in 10 of those so-called 
dual-eligibles have 5 or more chronic conditions, and well over 
half have mental or cognitive impairments. The most expensive 
dual-eligible patients, almost 1\1/2\ million, comprise 70 
percent of the total expenditures for that group.
    So we need to address costs, but the underlying system 
structure is something that needs to be looked at, as well. We 
must consider reforms that address the structure of this very 
critical entitlement program. Our heads have been stuck in the 
sand for too long. We know that the structural and fiscal 
problems exist. We know that they must be dealt with. The only 
question is, how long will America and Americans tolerate 
staring at these problems without fixing them for future 
generations?
    I thank the chairman for yielding, and I will yield back 
the balance of my time.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the ranking member of the full committee, Mr. 
Waxman, for 5 minutes for an opening statement.

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

    Mr. Waxman. Thank you, Mr. Chairman.
    Today we have a hearing on the entitlement programs and the 
economy. There is an implication here that we have to choose 
one or the other. Unfortunately, in the name of fiscal 
responsibility and balancing the budget, we are often presented 
with what I believe is a false choice between securing our 
Nation's fiscal health and ensuring the health of older, 
disabled, and low-income Americans.
    There are different paths we can take to ensuring the long-
term fiscal health of Medicare and Medicaid. The Ryan budget 
proposal that is going to be on the floor this week, what my 
Republican colleagues and their witnesses propose in our 
hearing today, are fundamental structural changes in the 
programs which, through premium support and privatization for 
Medicare and block grants for Medicaid, don't hold down the 
costs but simply shift them to beneficiaries, providers, and 
States. This path, as I said, doesn't lower costs; it shifts 
costs in a way that undermines the programs' guarantee of 
access to care.
    The alternative path that we began in 2010 with passage of 
the Affordable Care Act is to reform entitlement programs 
through delivery system reform that improves both efficiency 
and quality. The Affordable Care Act improves access to 
preventive care that saves dollars and lives. It includes 
incentives to reward physicians and other providers for better 
coordinating care and improving health. And it also included 
policies to cut waste and inefficient care.
    Health reform is entitlement reform. It is this kind of 
reform that builds a better healthcare system for all Americans 
at the same time that it lowers costs and helps support the 
long-term sustainability of our public healthcare programs.
    Medicare and Medicaid aren't ballooning out of control. 
These programs are amazingly efficient. Over the next 10 years, 
Medicare per capita costs are expected to grow at 5 percent per 
year, as opposed to 6.9 percent in private insurance. On the 
Medicaid side, the Congressional Budget Office estimates 
projected Medicaid spending dropping by $200 billion through 
2020, and the CMS actuary predicts spending will grow no faster 
per beneficiary than private insurance.
    The problem is the numbers and aging of our society. In the 
coming years, we will see a growth in the number of people who 
need Medicare and Medicaid. For Medicare, it is because of the 
retirement of the baby boomers, and many of these Medicare 
beneficiaries will also rely on Medicaid. Currently, dual-
eligibles are 15 percent of the Medicaid population but account 
for nearly 40 percent of expenditures.
    In Medicaid, millions of Americans who were previously shut 
out of having insurance, particularly the working poor, will 
now have access to coverage beginning in 2014. More people 
clearly means more costs. But the solution should not and 
cannot be simply to shift costs to States and beneficiaries, 
but to continue our efforts to improve the value we get from 
our programs in a thoughtful and sensible way.
    Did we know there was going to be a larger population 
coming on Medicare and Medicaid? Of course we have known this. 
We have known that we have had a baby boom population. But 
rather than put money aside to take care of that population, we 
spent it on two wars without any funding for them, we spent it 
on tax breaks for the upper-income without paying for them. We 
worked ourselves into a deep debt, and now the money is not 
there that we anticipated to use for these programs.
    The Republican budget slashes away at the programs that 
families need most. The Republican budget is built on a hoax. 
On the one hand, they say it balances in 10 years. On the 
other, they say, ``Repeal Obamacare.'' The fact is they repeal 
all of the benefits of Obamacare, including improvements to 
Medicare like filling in the Medicare Part D donut hole and 
adding no-cost preventive services, but then they turn around 
and keep the very Medicare cuts and taxes from the Affordable 
Care Act that Republicans campaigned against.
    Revenues need to be on the table. I don't think most 
Americans will say, Well, we know there are going to be 70 
million more seniors in Medicare; we hope you can make do with 
dollars that support only half that number. We need to 
eliminate the tax perks for the wealthiest. It is unjust, 
especially if, at the same time, we are talking about cutting 
holes in the safety net for the elderly and the poor.
    I yield back my time.
    Mr. Pitts. The chair thanks the gentleman.
    That concludes the opening statements.
    The title of our hearing today is ``Saving Seniors and Our 
Most Vulnerable Citizens from an Entitlement Crisis.'' The 
hearing was first scheduled on March 6th. It was cancelled due 
to the snowstorm. I want to thank the witnesses for rearranging 
your schedules to accommodate our hearing today.
    Our panel is comprised of three distinguished witnesses: 
first, Mr. James Capretta, senior fellow, Ethics and Public 
Policy Center; secondly, Mr. Joshua Archambault, director of 
health care policy and program manager for the Middle Cities 
Initiative, Pioneer Institute; and, thirdly, Dr. Judy Feder, 
professor of public policy, Georgetown Public Policy Institute.
    Your written statements will be made a part of the record. 
We ask that you summarize your testimony in a 5-minute opening 
statement.
    The chair recognizes Mr. Capretta for 5 minutes for your 
opening statement.

  STATEMENTS OF JAMES C. CAPRETTA, SENIOR FELLOW, ETHICS AND 
     PUBLIC POLICY CENTER; JOSHUA ARCHAMBAULT, DIRECTOR OF 
 HEALTHCARE POLICY, PROGRAM MANAGER, MIDDLE CITIES INITIATIVE, 
   PIONEER INSTITUTE; JUDY FEDER, PH.D., PROFESSOR OF PUBLIC 
           POLICY, GEORGETOWN PUBLIC POLICY INSTITUTE

                 STATEMENT OF JAMES C. CAPRETTA

    Mr. Capretta. Thank you, Mr. Chairman. It is a real 
pleasure to be here. Mr. Pallone, other members of the 
subcommittee. Thank you for the opportunity to testify before 
you today.
    The most serious threat to the Nation's long-term 
prosperity is the rapid and unfinanced growth of entitlement 
spending. Left unchecked, spending commitments for these 
programs will push Federal deficits and debt to levels that 
many economists fear will precipitate a crisis. Experience 
shows that the consequences of such a crisis would be 
especially disastrous for the most vulnerable segments of our 
society, including those who are dependent on the programs for 
their financial security and health needs.
    The three largest programs are Social Security, Medicare, 
and Medicaid. In 1973, spending on these programs was 4.8 
percent of GDP. Four decades later, that number had jumped to 
10 percent of GDP, a 5.2 percentage point jump, which is larger 
than today's spending on national defense.
    In its latest projections, CBO shows the combined spending 
on Medicare and Medicaid, the health entitlements, growing from 
about $0.8 trillion in 2012 to $1.8 trillion in 2023. That is a 
$1 trillion jump in spending and represents 55 percent of all 
the new resources available in 2023 compared to 2012.
    Looking out into the future, the problem is even more 
daunting. Both CBO and the actuaries who produced the Medicare 
numbers for the annual trustees report expect healthcare cost 
inflation, along with the surge in enrollment, to push Federal 
entitlement spending up very rapidly in the decades ahead. CBO 
estimates that the combined spending on Medicare, Medicaid, and 
the health law's new premium subsidy program will rise from 5.4 
percent of GDP today to 8.4 percent in 2030.
    And these projections assume very deep cuts in what 
Medicare pays for these services for seniors, an assumption 
that is highly questionable. Under an alternative scenario that 
CBO produces, the number could rise to as high as 12.4 percent 
of GDP, just on the health entitlements, by 2050.
    The consequences of various approaches to the problem vary 
quite a bit. Our budget situation would be far worse if not for 
large, offsetting budgetary cost reductions that have already 
occurred. In the 1980s, average defense spending was 5.8 
percent of GDP. In the last decade, it was 3.8 percent of GDP, 
even with the overseas engagements of that decade. All of that 
savings and more has gone to finance higher entitlement 
expenses.
    There is much concern today about the effects of the 
sequester. It is quite plain that the reason the blunt 
instrument of the sequester was enacted in 2011 is due in large 
part to the unaddressed problem of rising entitlement costs. 
The cuts are going to have to come from somewhere, and if there 
is no consensus on entitlements, then the cuts will inevitably 
fall on discretionary accounts, including education, job 
training, and public health funding.
    One approach to the problem would be to use the provisions 
of the 2010 healthcare law. There has been much talk about 
bending the cost curve through those provisions. But it is 
really important to note that CBO estimated essentially no 
savings from those provisions when they estimated the bill, and 
there has been no evidence since then that they will produce 
any savings. Instead, the 2010 law used the same formula that 
has been used in the past to hit budget targets, which is 
large, across-the-board, and indiscriminate cuts in the 
Medicare program.
    In particular, the law included an annual productivity 
factor adjustment that will reduce payments into institutions 
on an ongoing basis starting this year. According to the 2012 
trustees report, the cuts will push revenue down so much that 
about 15 percent of all hospitals will be operating in the red 
by the end of the decade. That number will jump to 25 percent 
in 2030 and 40 percent by 2050.
    The actuaries have made it very clear they don't expect 
this to happen, and so they produce an alternative set of 
assumptions for the Medicare program assuming that they will be 
reversed or partially reversed. When they do that, the 
projections for Medicare are essentially unchanged from prior 
to when the law was enacted.
    Another approach to solving the problem would be to raise 
taxes. The Congressional Budget Office did a study for Chairman 
Ryan last year on, if you solve this problem entirely on the 
tax side of the equation, what would it take, essentially. They 
estimated that to close the gap between the current policy and 
then what would happen with the alternative projections would 
take about a 33 percent tax increase across the board on income 
taxes and corporate tax rates--a very, very large tax increase.
    Let me conclude by saying that the most significant risk of 
all of this is for the social safety net, because in the midst 
of a Federal debt crisis, abrupt changes in policies would be 
required to continue borrowing at preferential rates in the 
global market. That has happened to other countries, and it is 
not out of the question that it could happen here.
    Thank you very much.
    [The prepared statement of Mr. Capretta follows:]

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    Mr. Pitts. The chair thanks the gentleman and now 
recognizes Mr. Archambault for 5 minutes for your opening 
statement.

                STATEMENT OF JOSHUA ARCHAMBAULT

    Mr. Archambault. Thank you, Chairman Pitts and Ranking 
Member Pallone, members of the committee. Thank you for this 
opportunity to bring a local perspective to this important 
issue of protecting our most vulnerable citizens from the 
entitlement crisis. My name is Josh Archambault, and I serve as 
the director of healthcare policy at a nonpartisan think tank, 
Pioneer Institute, in Massachusetts.
    This afternoon, I would like to focus on Medicaid, a 
program, especially in States with historically generous 
eligibility, such as Massachusetts, that may foreshadow some of 
the underlying issues that are sure to be exacerbated under the 
Affordable Care Act.
    Medicaid outcomes that deserve a closer look include the 
tremendous budget pressure in States and the crowding out of 
billions of dollars of spending on other public priorities; the 
reaction of State leaders to cut access to benefits and hike 
taxes to fund the program; and the increasing inability of 
patients to access providers, which may lead to worse health 
outcomes. In my opinion, as long as the program remains in 
place in its current form, these problems will persist, and we 
will fail to protect the most vulnerable.
    Lawmakers in all States, red or blue, have been prevented 
from investing in our kids and our communities due to the 
ballooning costs of Medicaid. For example, in 2012, 35 States 
funded elementary and high schools at a lower level than in 
2008. This translated into fewer teachers in the classroom and 
less police officers on the street. Sadly, these tradeoffs fall 
disproportionately hard on vulnerable communities.
    Even with the Federal Government offering to pay a 
significant portion of the ACA's Medicaid expansion costs, any 
additional spending does not come free. The Federal portion of 
the additional $638 billion will have to come either from 
higher taxes, from our sluggish economy, or from cuts in the 
budget.
    While supporters argue that the State portion of the 
additional spending will be minimal, roughly $33 billion, it 
cannot be denied that many States are struggling to pay for 
their current program. As a result, State leaders have cut 
access to benefits and hiked taxes to fund the program. In 
2010, 15 States cut benefits in Medicaid; in 2011, 18 States 
did.
    Putting aside the debate over the generosity of Medicaid 
programs in each State for just one moment, we know the pain of 
these cost-containment strategies are felt most strongly by the 
beneficiaries themselves. Instead of being able to vote with 
their feet and take their business elsewhere, they are stuck 
with these top-down decisions that dictate their insurance 
coverage, and the outcome has been poor access to providers and 
worse care outcomes for those on Medicaid.
    The Federal Government has placed restrictions on how 
States can manage costs in the program. As a result, the prime 
tool to save money is to decrease payment rates to providers. 
States that have already expanded Medicare eligibility tend to 
pay for it by cutting reimbursement rates to finance the 
expansion. Over time, this has resulted in underpayment of 
doctors and hospitals and more providers refusing to treat 
those on Medicaid. This trend prevents many recipients from 
gaining even basic access to specialists. As a result, when 
Medicaid patients are admitted into a hospital, they are often 
sicker. Lower rates also may account for more ER visits by a 
Medicaid patient. This form of care is both uncoordinated and 
expensive.
    In 2010, at least two-thirds of States cut provider 
reimbursement rates. In 2011, 39 States did. And in 2012, 
almost all 50 States cut rates. Recently the administration 
encouraged further cuts. As a result, access issues are likely 
to get worse, making it harder for even the most vulnerable on 
Medicaid to find a physician to see them.
    In 2011, a GAO study documented that children on Medicaid 
often have worse access to physicians than those with no 
insurance coverage at all. For many years, as Massachusetts has 
provided coverage to a much higher income level than in most 
other States, access remains a problem. Even the commonwealth 
with the highest per capita doctor ratio in the Nation still 
has a problem with access.
    A simple anecdote illustrates this problem well. A Boston-
area Medicaid recipient was provided a list of eligible 
providers by the Medicaid office and yet failed to find one 
accepting new patients after calling over 20 doctors.
    Policymakers should be concerned about the string of 
troubling outcomes that are appearing more often in the 
academic literature, and these studies raise legitimate 
questions about the quality of care being provided. If Medicaid 
outcomes were presented as part of a business, it is my opinion 
it would be shut down because it is not serving its consumers 
well and, in some cases, may be hurting their health. Reform 
requires a departure from the current mindset that having 
access to a Medicaid card is the same as having access to a 
doctor.
    Thank you so much for your time.
    [The prepared statement of Mr. Archambault follows:]

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    Mr. Pitts. The chair thanks the gentleman and now 
recognizes Dr. Feder for 5 minutes to summarize your opening 
statement.

                 STATEMENT OF JUDY FEDER, PH.D.

    Ms. Feder. Thank you, Chairman Pitts and Ranking Member 
Pallone and members of the committee.
    I am pleased to be with you today to speak on the future of 
Medicare and Medicaid. Continuing to slow growth in these 
invaluable programs is essential to meeting the needs of an 
aging population, but these programs are neither doomed nor in 
crisis. Briefly summarizing my written testimony, let me 
explain why.
    First, per-person costs in Medicare and Medicaid have 
consistently grown more slowly than private insurance premiums 
despite these programs' focus on older and disabled people with 
the greatest healthcare needs. In fact, in the past 3 years, 
Medicare's per-beneficiary costs have grown so slowly--
practically zero last year--that CBO has reduced its Medicare 
spending projections for the next decade by more than $500 
billion, on top of the $500 billion-plus in savings from 
measures taken in the Affordable Care Act. CBO has also reduced 
its Medicaid projections for that period, excluding ACA 
coverage expansions, by more than $200 billion.
    Second, what that means is that it is not growth in 
spending per beneficiary but growth in the number of 
beneficiaries that has become the primary driver of increased 
Medicare and Medicaid spending. It is this growth in the 
elderly population, as we baby boomers turn age 65, that 
requires us to actively promote the payment and delivery 
reforms initiated by the Affordable Care Act to make our 
healthcare system more efficient. There is no status quo in our 
healthcare system or in our public programs, Mr. Chairman. All 
our programs are in a state of active change, aiming to improve 
efficiency.
    Third, as these innovations develop--and they will take 
time to develop--there are additional measures we can take not 
in Medicaid. Given already constrained provider payment rates 
and existing opportunities for State flexibility, proposals 
that would secure more than modest savings, like block grants 
or per capita caps, would shift costs to States and reduce 
access to care. But on Medicare, as part of a balanced deficit-
reduction package, we can refine existing payment mechanisms at 
the same time we promote their reform.
    My testimony includes a few examples of refinements that 
reduce unnecessary overpayments and promote efficiency. These 
measures and others are not, as critics claim, arbitrary or 
unjustified cuts that endanger access or quality. On the 
contrary, as MedPAC emphasizes, they actually enhance provider 
efficiency. And if too great a gap emerges between public and 
private payments, the solution is not to have Medicare pay 
more; it is to revoke cost containment across the whole 
healthcare system through a collaboration among public and 
private payers in payment design and payment constraints.
    Fourth, only so much can be expected of reducing Medicare 
costs per beneficiary. A balanced deficit-reduction package 
must therefore include new revenues to serve an aging 
population. As the elderly population doubles over the coming 
decade, it is no less necessary for the Federal Government to 
invest in health care than it was for State and local 
governments to invest in education, as they did, when the very 
same people began entering public school 60 years ago.
    An alternative course of action, changing entitlement 
structures through vouchers or block grants or adopting an 
overly ambitious savings target that could produce the same 
result, would fail to serve the growing elderly population, 
undermining some of the most vulnerable members of our society, 
while shifting costs and actually increasing healthcare costs. 
Such measures might save Federal dollars, but keep in mind that 
half of Medicare beneficiaries have family incomes of less than 
$25,000 and they already spend 15 percent of their budgets on 
health care.
    Such action cannot be justified on grounds of fiscal 
responsibility. Stabilizing the debt in the coming decade at 73 
percent of the economy would require another $1\1/2\ trillion 
in deficit reduction and would give policymakers time to 
identify the further steps necessary to reduce costs throughout 
the healthcare system in coming years. And it will enable us to 
meet our responsibilities to an aging population, rather than 
abdicate those responsibilities by radically restructuring 
Medicare through premium support vouchers or by restructuring 
or severely cutting Medicaid or other programs that protect 
low-income Americans.
    Thank you.
    Mr. Pitts. The chair thanks the gentlelady.
    [The prepared statement of Ms. Feder follows:]

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    Mr. Pitts. That concludes the opening statements. I will 
begin questioning and recognize myself for 5 minutes for that 
purpose.
    Mr. Capretta, I read over your testimony, and I must say I 
am very concerned for our most vulnerable citizens if we don't 
fix these problems. Do you believe we have a healthcare access 
and coverage crisis on our hands if these valuable programs for 
our most vulnerable citizens are not strengthened?
    Mr. Capretta. I do think that the problems in Medicaid are 
becoming worse rather than better and that the coming 
enrollment tidal wave as part of the healthcare law in 2014 
will exacerbate the problems that are already existing in the 
program.
    It is quite apparent in many regions of the country that 
Medicaid participants are already struggling to get the same 
level of access--anywhere close to the same level of access as 
mainstream insurance. And we are about to enroll 15 million 
more people nationwide in the program on the sort of acute care 
side of Medicaid, from providing access to primary care, 
emergency care, specialist care. And every study that I have 
looked at shows that that will exacerbate the problem quite 
substantially because the supply of physicians willing to take 
care of those patients is fairly constrained. It is not likely 
to go up rapidly, even from the training of new physicians in 
the coming years.
    And so, yes, I have a real concern that you see in some 
parts of the country--California, for instance. Emergency rooms 
are crowded very heavily with people that are on the Medicaid 
program. That problem will become worse in 2014 and 2015.
    Mr. Pitts. You discuss in your testimony the unsustainable 
Medicare cuts in Obamacare. With more than 14 million Americans 
depending on the Medicare Advantage program today, what do you 
think the Obamacare cuts and the even more recent proposed 
Obama administration changes mean for the beneficiaries 
enrolled?
    Mr. Capretta. Well, the estimates are that the combined 
effect of the regulatory changes they are proposing, along with 
the statutory cuts, are that Medicare payments are going to go 
down by 7 to 8 percent in 2014 compared to 2013.
    So what we have had here is a temporary period where the 
administration really tried to artificially pump up Medicare 
Advantage, frankly, and put a new bonus program in that was 
really outside the normal process of demonstrations, pumped a 
lot of money into the program--sort of unfounded, in my 
opinion--and then now they have taken that away, and they are 
going to cut back on the payments quite a bit post some of the 
activity last year.
    And I think the effect is going to be very predictable. 
There are going to be plan withdrawals. There are going to be a 
lot of Medicare Advantage people pushed out of their program. 
The actuaries assume the number of enrollees will go down by a 
few million in the next few years.
    Mr. Pitts. Dr. Archambault, you note the added cost to 
States associated with the Medicaid expansion. Many States, 
including my home State of Pennsylvania, have not agreed to an 
overexpansion of the Medicaid program, which could cost the 
State approximately $5 billion over 10 years. Yet others are 
trying to sell the enhanced Federal match to States as free 
money and criticize Governors for rejecting the expansion.
    From your perspective, is the expansion not a risky 
investment for States, one that could cost them billions in the 
long run?
    Mr. Archambault. Yes, it certainly is, in my opinion. I 
think when you talk to State legislators, they will say 
something like, Well, we face an X-million-dollar shortfall in 
Medicaid this year, and it is unaffordable, and 10 percent of 
that is even more unaffordable.
    So I certainly think from both a State budget perspective, 
it is going to put some real strain on their budgets going 
forward if you enroll additional folks. And as I highlighted in 
my testimony, certainly Federal dollars are not free. The 
taxpayers that are constituents that pay both State and Federal 
taxes will feel that pinch in the future.
    Mr. Pitts. Now, from your experience and review of the 
Medicaid programs undergoing past expansions, you note in your 
testimony that the most vulnerable often suffer. Today the 
committee released a staff report outlining major reasons for 
Medicaid reform, which shows the program is already struggling 
to serve the most vulnerable.
    What will a dramatic expansion of the Medicaid program mean 
for the program's current citizens who already struggle to 
access services, like the disabled, who often have long waiting 
lists for home or community-based care initiatives, when 
resources will have to be diverted to cover the growing cost of 
an expansion rather than to serving them?
    Mr. Archambault. You know, I think you highlight a very 
important point going forward, that as you add millions of 
additional people into an already strained and broken system, 
it is the folks that have the most difficult health needs that 
maybe already struggle to find a primary care doctor or a 
specialist who are going to be even more disadvantaged in 
getting access to those people because there will be so many 
more people in front of them in line.
    We have multiple examples around the country. I know that 
the Committee on Oversight and Government Reform released a 
bipartisan report highlighting the billions of dollars in fraud 
and waste that we have seen in the New York Medicaid program 
for disabled folks. And I think it just highlights some of 
those issues that already exist in this program and need to be 
addressed with real, meaningful reform going forward.
    Mr. Pitts. My time has expired.
    The chair recognizes the ranking member of the 
subcommittee, Mr. Pallone, for 5 minutes for questions.
    Mr. Pallone. Thank you, Mr. Chairman.
    I wanted to ask my questions of Dr. Feder.
    A number of recent reports, including the National Health 
Expenditure Report, and projections from the Congressional 
Budget Office have highlighted the slowing in Medicare cost 
growth. And the Affordable Care Act has a number of provisions 
designed to both reform healthcare delivery and improve the 
quality and efficiency of health care. A GAO report a couple 
weeks ago raised concerns about the long-term sustainability of 
some of the reforms. Estimates based on the GAO report project 
that if the reforms are sustained, it could result in as much 
as $13 trillion in deficit reduction over the next 75 years.
    So I just wanted to ask if you could assess what impact the 
ACA is having on Medicare cost growth and the sustainability of 
the delivery system reforms designed to improve quality and 
efficiency. Can you help us get our hands around the 
sustainability issue?
    And then, last, we rely on a lot of economic models to 
project costs out into the future. How reasonable are these 75-
year projections that are made by GAO and others?
    Ms. Feder. Well, first of all, Mr. Pallone, the GAO report 
that you are referring to and the estimate of unsustainability 
was a gross misrepresentation of what can be called a 
projection. Those large numbers of unsustainability were based 
on assumptions that came from the requester, Senator Sessions, 
that ignored both the cost savings that are in the Affordable 
Care Act and the revenues associated with the Affordable Care 
Act. If you ignore both of those, it is not surprising that you 
come up with a problem.
    The GAO report, like CBO estimate after CBO estimate, shows 
that, as the law is written, that the expansions are indeed 
sustainable, and in coming decades--in this decade, they 
actually modestly reduce the deficit; in the subsequent decade, 
they significantly reduce the deficit.
    Now, the actions in the Affordable Care Act that control 
costs include measures that CBO does score, as shown in these 
estimates, which are elimination of overpayments to providers 
and to MA plans that have been recognized by experts for 
sometime as excess and overpayment. But, in addition, the 
Affordable Care Act has put in motion innovation in healthcare 
delivery to move not only the Medicare program and the Medicaid 
program but also the entire healthcare system away from a 
system that rewards more and more and more expensive services 
and instead rewards providers for efficiently delivering 
quality care through better coordination, better involvement of 
consumers in their own care, and avoidance and reduction of 
hospital use.
    Those innovations are just getting under way, but those 
mechanisms have considerable potential for improving the 
efficiency not just of the public programs but of the 
healthcare system overall.
    Mr. Pallone. Thank you.
    Let me ask you--I know you got into this a little in your 
testimony. You said the past 3 years have seen a dramatic 
slowing in the rate of increase of Medicare per-beneficiary 
costs. At the same time, changing demographics and aging of the 
population is projected to increase the number of Medicare 
beneficiaries from 50 million today to almost 90 million by 
2040. So even if per capita beneficiary costs remain stable 
relative to GDP, the increase in number of beneficiaries will 
drive cost growth.
    Just talk a little more about the relative contribution of 
excess cost growth or spending per beneficiary and increasing 
enrollment as drivers of Medicare cost growth. And is it 
reasonable to think that controlling costs alone without 
considering revenue, which I mentioned in my opening statement, 
is a realistic approach to funding Medicare?
    Ms. Feder. I think given the slowdown in Medicare cost 
growth, that the amount of what is called excess cost growth, 
which is above inflation, has diminished substantially in terms 
of projecting the future cost projections of per capita costs 
or of total costs.
    What is happening is that the costs are being driven by the 
aging of the baby boom generation. As several of you referred 
to in your testimony, this is not something that is a surprise. 
The baby boomers have been coming--I am at the front of them 
and proud to be one--for a long time. It is the numbers of 
people on Medicare who are now driving the overall cost growth.
    Mr. Pallone. Well, then what about the revenue aspect?
    Ms. Feder. I am glad you went right there. The revenue has 
become critical in that respect.
    And I mentioned in my testimony that the State and local 
governments increased their spending on schools when we baby 
boomers entered school by about the same percentage as we are 
now looking to increase costs in Medicare. And that investment 
is essential. We simply don't abandon the baby boom generation, 
who were working hard and contributing. We need to support the 
care that baby boomers will need through enhanced revenues, at 
the very same time that we are continually improving the 
efficiency of the program and getting value for the dollar.
    Mr. Pallone. Thank you.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the vice chairman of the committee, Dr. Burgess, for 
5 minutes for questions.
    Mr. Burgess. I thank the chairman for the recognition.
    Mr. Archambault, let me ask you a practical question. And I 
realize we are in a congressional hearing, so a practical 
question isn't really fair game, but I am going to ask it 
anyway.
    If you have, I mean, assuming a State that is going to do 
the Medicaid expansion under the Affordable Care Act, and you 
have a young person who is 20 years of age--well, let's say 27 
years of age, who is at 135 percent of the Federal poverty 
level, their care is going to be matched, the cost of their 
care is going to be paid for by the Federal Government, 100 
percent match. Is that correct?
    Mr. Archambault. Will we assume in that State that is doing 
the expansion they also have a State-based exchange that is 
open?
    Mr. Burgess. Well, they will be below the statutory rate--I 
mean, if there is a statutory--there is statutory language in 
the Affordable Care Act that says if you are below 138 percent 
of the Federal poverty level, you have to go into the Medicaid.
    Mr. Archambault. Yes----
    Mr. Burgess. Now, I don't know how the Supreme Court 
decision actually changed that.
    I guess what I am getting at is, if that same person who is 
28 years of age covered at 100 percent match actually gets 
pregnant during the course of that coverage year, then are they 
bumped back down to the 54 percent or 57 percent match? Do they 
drift in and out of that? Who keeps track of that?
    Mr. Archambault. I think you are right, Representative. I 
think you raise a very good question about some of the churn 
concerns that we have in and out of the Medicaid program; who 
has responsibility at the State level versus the Federal level 
on all these eligibility terminations.
    Mr. Burgess. Well, in fact, we learned during all of the 
difficulties with the Deepwater Horizon--and not this 
subcommittee but another subcommittee of the full committee had 
a field hearing down in Louisiana. And I was somewhat startled 
by the variance in earnings that people can have and that 
someone might earn their entire yearly income of $50,000, 
$60,000 in May and June if they happen to be a shrimper in the 
Gulf Coast off Louisiana.
    So who is going to be responsible for putting that person 
on Medicare when times are tough and in the exchange and then 
figuring out what sort of subsidy they get in the exchange when 
the shrimp are coming in?
    Mr. Archambault. Yes, I think there is a huge technology 
lift that is being required and expected of States and the 
Federal Government to be able to tell whether somebody is here 
legally, how much money they make, whether they qualify for 
subsidies or not. And we are very concerned about that ability 
going forward.
    Mr. Burgess. Well, and it is not just an esoteric or 
academic question, because there was someone from HHS who is in 
charge of the technology piece addressing AHIP this past week 
and seemed to, in the report in the CQ HealthBeat that I read, 
was significantly concerned about their ability to produce what 
they are supposed to be able to produce by October 1st. Because 
on October 1st people are supposed to go live and go online and 
sign up for this. Is that correct?
    Mr. Archambault. Yes, that is correct.
    Mr. Burgess. Well, let me just also say that, you know, I 
so welcome your testimony. I was privileged to be in the 
Supreme Court on the second day of the oral arguments last 
year. It didn't turn out the way I thought it was going to.
    But I was very concerned when I heard the Solicitor General 
say that people showing up in the emergency room without 
insurance are what are driving the costs up for the rest of us. 
And, actually, your testimony referencing the Milliman study 
about the cost-shifting due to low Medicaid reimbursement rates 
is really the cost driver that we ought to be concerned about.
    And, in fact, it is hard for me to understand how we are 
fixing that underlying problem of cost-shifting by expanding 
the program that is causing the problem in the first place. 
Maybe you could enlighten me as to how that is going to work.
    Mr. Archambault. Representative, I think you raise----
    Mr. Burgess. It is fair to say it ain't.
    Mr. Archambault. Yes, it ain't. And I think you have an 
even broader question, which is the cost-shift onto small 
business, in particular, when you under-reimburse for Medicaid.
    Mr. Burgess. Well, thank you. And I really appreciate 
everyone being here today.
    Mr. Capretta, let me just ask--you heard part of my opening 
statement. I am concerned about the fact that the dual-
eligible--we talk about a dual-eligible population as if it is 
a monolithic group, but they are not. And we all know that 
there are subgroups within that group that cost a great deal 
more than some of their other counterparts.
    How, really, as a health policy person, how do you go about 
trying to get your arms around the scope of that problem so 
that it makes sense? I mean, you have people that may cost an 
average of $59,000 a year for their care if they have five 
chronic conditions and people who may cost a fifth of that. How 
do you reconcile all of those differences within that group?
    Mr. Capretta. Well, the heart of the problem is that many 
of those beneficiaries are in unmanaged fee-for-service 
Medicare but the Federal Government put them in or they 
defaulted into an unmanaged system or were in it for a long 
time, their health deteriorates, they are in an unmanaged 
system, no one is really watching over the full spectrum of 
care, and then they end up in a situation where they need a lot 
of intensive intervention with Medicaid as well as Medicare, 
and the two programs are not coordinated.
    So I think, frankly, the heart of the problem is that 
Medicare has too many beneficiaries in an unmanaged system and 
they end up falling through the cracks.
    Mr. Burgess. Thank you, Mr. Chairman. I will yield back.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentlelady from the Virgin Islands, Dr. 
Christensen, for 5 minutes for questions.
    Mrs. Christensen. Thank you, Mr. Chairman.
    And I just needed to point out that the Affordable Care Act 
did increase the reimbursement rates of Medicaid as well as 
made other improvements to that and Medicare.
    Dr. Feder, while making up only 25 percent of the Medicaid 
population, the elderly and people with disabilities account 
for two-thirds of Medicaid spending. Many consumers and 
advocates are concerned about the loss of essential services, 
especially to these two vulnerable groups, in the name of 
reducing the debt and balancing the budget.
    I am especially concerned about how proposals that would 
cap Federal Medicaid funding would affect these populations. As 
you heard in my opening statement, we have firsthand experience 
in the territories with capped Federal funding for Medicaid. It 
hasn't made it more efficient; they haven't made people better 
off. It has just shifted the burden onto the territories, the 
localities, and the families. And I am sure the same would 
happen here.
    So can you tell me what the implications are for low-income 
families, senior citizens, and persons with disabilities if the 
Federal Government were to cap or otherwise limit Medicaid 
funding, particularly for the frail seniors and disabled 
individuals who are likely to need long-term-care services?
    Ms. Feder. Dr. Christensen, you rightly recognize from your 
experience that a large part of the Medicaid program does go 
toward long-term care as well as health care for people with 
disabilities. And any effort to cap that program so that it 
doesn't grow with the demand for care and with the cost of care 
will fall--the burden will fall on--or will place a burden on 
beneficiaries.
    We know that the people who are receiving long-term care 
from Medicaid pretty much throughout the Nation are receiving--
they are not receiving excessive care. They get pretty much 
less care than they need. In many States, they would like to 
move more aggressively to provide home and community-based 
care, but unfortunately that does not necessarily reduce costs. 
It may increase them.
    And the States will be, I believe, in the future sorely 
pressed to keep up with the growth in the elderly population 
and the demands it places. To simply put a lid on the program 
spending, on the Federal contributions, is to leave the States 
holding the bag for this growing elderly and disabled 
population, unable to serve them and forced to make significant 
choices as to who would get services and who would not.
    And it is not about flexibility. The States have 
flexibility. It is about who is going to get served. And 
somebody is going to be in serious trouble.
    Mrs. Christensen. Right. And you have already answered the 
question about shifting the costs. This is not going to control 
costs. It is just going to shift the beneficiaries in the 
States.
    Ms. Feder. That is completely correct.
    Mrs. Christensen. Yes.
    Can you talk about how better care coordination and other 
delivery reforms can improve care in Medicaid? You have already 
said--well, can you answer that for me?
    Ms. Feder. Sure. The whole idea is to move away, as Jim was 
referring to, from a system that does not enable people or 
providers to work together to coordinate and integrate people's 
care.
    And so we have in the Affordable Care Act a number of 
measures to achieve that goal, the coordination, whether it is 
the accountable care organizations or the medical homes or the 
health homes in Medicaid, a host that would start rewarding 
providers for working together to coordinate care.
    Mrs. Christensen. On another question, as a physician, I 
was really surprised by some of the assertions in Mr. 
Archambault's written testimony regarding Medicaid and the 
health outcomes of people who are covered by Medicaid.
    For example, he suggested Medicaid may be harmful rather 
than supportive of improved health. And I know you are familiar 
with the Oregon health study and others that show better self-
reported physical and mental health in Medicaid recipients 
compared to those who are uninsured. And he cited the GAO 
study, and his testimony says that it documented that children 
on Medicaid have worse access to physicians than those with no 
insurance at all. But the GAO study actually shows that 78 
percent of physicians nationally were participating in 
Medicaid.
    So we understand that there are challenges to Medicaid, as 
in all insurance, but I would like to ask you to comment on 
those studies and what the evidence shows about the impact of 
Medicaid on access and outcomes.
    Ms. Feder. Yes, I, too, was surprised, Dr. Christensen. And 
as you said, Medicaid is improving access by, in the Affordable 
Care Act, increasing the payments to primary care physicians.
    But the research literature quite consistently shows that 
Medicaid beneficiaries look very different from the uninsured 
and look quite like the privately insured population in terms 
of their having a medical home, a doctor whom they see in terms 
of their visits, and in terms of their health status.
    So Medicaid is of enormous value. We have seen this 
recently in what was a natural experiment in Oregon----
    Mrs. Christensen. Yes.
    Ms. Feder [continuing]. which was not contaminated by 
what--we sometimes can't tell the difference whether they are 
sicker or the populations look the same, which absolutely I 
think astounded its own authors, as to what a difference that 
Medicaid made to people's health outcomes and health services 
use.
    Mrs. Christensen. Thank you.
    I yield back to the chairman.
    Mr. Pitts. The chair thanks the gentlelady and now 
recognizes the gentleman from Texas, Mr. Hall, for 5 minutes 
for questions.
    Mr. Hall. Thank you, Mr. Chairman. And I do thank you for 
this hearing. It is certainly helpful because it is going to 
give opportunity for us Members to understand the financial 
challenges and everything facing our Nation and also hear from 
experts as to why doing nothing to improve it is not the answer 
we are listening for. And I would say this is one thrust that 
Members on both sides are very interested in, Republicans, 
Democrats, whatever. This is a major problem.
    And I think the chairman started out with this question to 
Mr. Capretta and to Mr. Archambault, and I think your answer 
was that you do believe that seniors and our most vulnerable 
citizens are facing an access-to-care crisis. That is a gimme, 
isn't it?
    Mr. Capretta. Are you directing that to me?
    Mr. Hall. Yes, sir.
    Mr. Capretta. Yes, I did answer in the affirmative. Yes, I 
do think there are some serious access problems, particularly 
in the Medicaid program.
    Mr. Hall. And do you feel that Washington is ignoring this 
crisis?
    Mr. Capretta. The Affordable Care Act, the healthcare law, 
tried to address it with a temporary Federal matching rate 
increase. But it is a 2-year program, and the nature of the 
problem is much, much larger than what they put on it. So I 
don't think it has been addressed adequately.
    Mr. Hall. Well, do you think it is--I guess I am asking--I 
was in the Texas Senate from 1962 to 1972, and a Congressman 
came down to Austin, Texas, to tell us they had two wonderful 
new programs and that one, if we weren't careful, one could 
cost around $500 million--I mean, could cost around $200 
million a year; and the other, Medicaid, if we weren't just 
quite careful and really watching it, it could cost maybe 
almost half that much.
    I regret to say that in 45 years Medicaid went from zero to 
$400 billion a year and Medicare is now $600 billion a year. 
Those are correct. That is in the ballpark, isn't it?
    Mr. Capretta. That is correct, yes.
    Mr. Hall. How fair do you think that really is to 
youngsters that are 20, 21, 25, or 30? I can't imagine anybody 
being that young. But how really fair is it to ask them to be 
paying into a program that we can't honestly guarantee it is 
going to be around the day, in any way like it is today, when 
they become eligible for the program? What do you say to those 
youngsters?
    Mr. Capretta. That is a very good point and an excellent 
question. I think you are probably in a difficult position with 
them because they are facing large--if the programs are left 
unreformed, they will end up paying probably three times: once 
for the current generation, once for their parents' generation, 
and once for their own generation. And that is really not what 
was intended.
    Especially in the Medicare context, the idea was it was a 
contributory program where across generations you roughly paid 
the same, and then you got an earned benefit in retirement for 
your health needs. The way it is shaping up is there is a big 
push to continually raise the tax rate financing the program so 
that future generations of retirees are going to pay way, way, 
way more than previous generations.
    Mr. Hall. The Medicare trustees, in their 2012 report, lay 
out two dates for insolvency. The first and most likely 
reported suggests the Medicare trust fund will be bankrupt in 
2024. And the second--and some suggest it is the more realistic 
of the two--puts the date of insolvency at 2017, just 4 short 
years away.
    What number should we believe?
    Mr. Capretta. I hate to dodge the question but probably 
both, because they really tell you two different things.
    The first is, the 2024 date tells you when there are simply 
no more reserves in the trust fund, so any claims that come 
into the Medicare program at that time will probably--the law 
is a little unclear--probably be paid at basically 75 cents on 
the dollar. So that is essentially what would happen after 2024 
if the trust fund is allowed to go totally to zero.
    2017 is when the trust fund is running a cash deficit. So, 
essentially, that means the Federal Government is going to have 
to borrow even more money out in the outside world to cover 
Medicare's expenses. That is kind of the time when you should 
start worrying about the overall finances of the Federal 
Government.
    Mr. Hall. I thank you.
    I yield back.
    Mr. Pitts. The chairs thanks the gentleman and now 
recognizes the gentlelady from Illinois, Ms. Schakowsky, for 5 
minutes for questions.
    Ms. Schakowsky. Everyone here agrees that we have a growing 
aging population. We know that. And I appreciate my colleague 
from Texas saying, let's talk about practicalities. But are we 
really, as a Congress, not just as Democrats or Republicans, 
talking about how to practically address these problems without 
causing more pain for the elderly in America? People over 65 
are making a median income of $22,000 a year, a Social Security 
benefit averaging $15,000 a year, out of which, let's remember, 
that is where the Medicare premiums come from. So you can't 
even talk about these programs separately.
    Are you kidding me, that we are going to, tomorrow, see the 
passage of a budget that not only repeals Obamacare, meaning a 
number of the improvements to the total healthcare system, some 
of the things that account for the reduction in spending on 
Medicare, and that turns it into a voucher program, that cuts 
Medicaid by turning it into a block grant by $810 billion over 
10 years? Can't we do better than that?
    I mean, this whole conversation just drives me crazy. Old 
people are going to--they are going to grow in numbers. Poor 
people are going to continue to grow in numbers if we do those 
things.
    So why don't we sit down and figure out those 
practicalities? My colleague raised some issues that I think do 
need to be dealt with. We can do this.
    I wanted to ask Dr. Feder a couple of questions about 
payment. In terms of Medicaid, the Republican budget would 
block-grant Medicaid, as I said. Can you explain how block-
granting Medicaid would severely restrict Medicaid's ability to 
protect those that fall on hard times, such as the economic 
downturn that we are still living through?
    Ms. Feder. Well, Ms. Schakowsky, it is exactly the opposite 
of the attention or the serious consideration you want to get 
to meeting the needs of the growing elderly population, would 
be to slam a lid on the funds that States have to deal with not 
only elderly and disabled people but other low-income people.
    There is not enough flexibility in life to enable States to 
deal more efficiently with this population, which is often 
claimed. States have flexibility to manage care in their 
programs. The only flexibility this would give them would be to 
essentially deny care to eligible people and would cut rates 
even further.
    Ms. Schakowsky. Let me give an example. In Cook County, we 
have already expanded the Medicaid program. And what we are 
seeing are things like a woman with Stage IV cervical cancer, a 
stage that community health centers rarely see at that stage, 
or a man with advanced testicular cancer, again, something 
rarely seen.
    So my question, if they had been insured, if they had been 
able to get Medicaid at an earlier point, I mean, are we really 
saving money if we cut these people off from the kind of 
preventative or appropriate intervention here?
    Ms. Feder. Well, you are, I think, right to point out that 
when people are insured, we have lots of evidence that shows 
that people get care earlier, they get better care, and they 
are less likely to die than people who don't have insurance. I 
can't tell you that that means that we won't save anything 
because, unfortunately, letting people die without care can 
mean spending less money. But that is not the way this society 
ought to operate and take care of its own.
    I hear a lot of concerns about what are purported problems 
in the Affordable Care Act from comments today, but, as I 
understand it, that many of these Members are planning to 
repeal the very coverage that would prevent the people from 
being seen only at that last minute.
    Ms. Schakowsky. Let me just end with this. What I see in 
the plans that have been suggested on the Republican side is 
cost-shifting. We say the Federal Government can't afford it, 
but, frankly, what the American people are concerned more about 
than the debt in this country is their own budgets, their own 
inability to get what they need. Why would we want to 
exacerbate those problems? Let's work together.
    I yield back.
    Mr. Pitts. The chair thanks the gentlelady and now 
recognizes the gentleman from Illinois, Mr. Shimkus, for 5 
minutes for questions.
    Mr. Shimkus. Thank you, Mr. Chairman.
    I appreciate you all being here. It is an important debate 
and discussion we are having.
    And I like my friend from Texas, Mr. Hall's comments on 
just the solvency of these programs, the 2017 date, the 2024 
debate. I also do that in discussions with Social Security, 
which is 2035 I think. And the way I try to explain it to my 
constituents: Absent reform--and this is a letter from the from 
Social Security Administration. When you retire, you get a 
letter. The fifth paragraph says, If we do nothing, you are 
going to get, in essence, 75 percent of your promised benefits.
    Because there is a trust fund, as I understand it, and the 
money is going--as we pay money in, it pays out to 
beneficiaries. But when you trip these dates, then only what 
gets paid out is what is in that fund. So that is why Social 
Security will be--someone who is expecting a $1,000 Social 
Security check will end up getting, on that date, left 
unchanged, a $750 check.
    I see, Mr. Capretta, you are shaking your head.
    Mr. Capretta. Yes.
    Mr. Shimkus. Is that how you understand that whole system?
    Mr. Capretta. That is right.
    Mr. Shimkus. And you are saying that that is true for the 
Medicare fund on 2017 or 2024, depending upon how we calculate 
that date.
    Mr. Capretta. It would be true in 2024, yes. They would 
only be able to pay out claims financing at the level of 
revenue coming in at that point. So if the revenue is only 
covering 75 percent of the total claims that are being filed by 
hospitals on behalf of patients, the law is ambiguous about how 
that will be handled. It doesn't say exactly how to handle it. 
The presumption is you just pay a percentage of the total 
claim.
    Mr. Shimkus. Because there is no provision for us right 
now, under current law, to borrow money to keep the new changed 
delta. I mean----
    Mr. Capretta. When the trust fund is depleted of reserves, 
there is no ability, under current law, for it just to run in 
the red.
    Mr. Shimkus. So Medicare pays, in essence, 70 percent of 
private care costs. I mean, I don't know if you know that or 
not. That is what I----
    Mr. Capretta. It is a little bit more than that, but that 
is in rough terms right.
    Mr. Shimkus. So if these insolvency date hits, then they 
are going to end up paying----
    Mr. Capretta. Seventy percent of that.
    Mr. Shimkus. A huge----
    Mr. Capretta. Yes.
    Mr. Shimkus. So it could be 30, 35 percent to the 
providers----
    Mr. Capretta. Right.
    Mr. Shimkus [continuing]. Who are providing care.
    Mr. Capretta. It recognizes the law has already cut the 
reimbursement rates quite a bit. The main provisions of saving 
money in the Medicare program that have been discussed today at 
the hearing are provisions that simply apply across-the-board 
reductions to every facility in the country that is providing 
services to Medicare patients. It didn't distinguish amongst 
any of them based on quality or anything else. It essentially 
applied an across-the-board cut to every provider.
    Mr. Shimkus. Now, let me ask a question, because then you 
talk about revenue, right? Maybe a solution would be more 
revenue. But under the Obamacare, the healthcare law, we 
increase Medicare taxes by leveling the 3.8 percent tax on 
unearned income, do we not?
    Mr. Capretta. That is correct. For anyone above $200,000 a 
year in annual income if you are an individual, $250,000 for 
couples.
    Mr. Shimkus. So this must help that fund, shouldn't it?
    Mr. Capretta. Well, it didn't go into the Medicare trust 
fund, though. This portion of that tax increase was dedicated 
to financing the rest of the bill.
    Mr. Shimkus. So a 3.8 tax on unearned income on the 
Obamacare healthcare law did not go to help prop up these 
insolvency issues on Medicare.
    Mr. Capretta. Correct.
    Mr. Shimkus. Well, that is unfortunate, if there is a 
funding problem.
    We also talked a lot during the debate, even in the 
Presidential campaign--and I had Secretary Sebelius right at 
the table you are at, who in essence agreed that they had 
double-counted the depletion of Medicare dollars into two 
directions. They double-counted, in essence, I said $500 
billion, but now we know it is like $716 billion.
    How did we double-count that, or how did--and we voted 
against the law--how did those who support the law, how did 
they double-count, how did the administration double-count 
hundreds of billions of dollars?
    Mr. Capretta. They cut the Medicare payment rate, as we 
discussed, by about $500 billion.
    Mr. Shimkus. Arguing that they are saving Medicare.
    Mr. Capretta. And they are taking basically $500 billion, 
reducing what Medicaid is paying to providers. That $500 
billion was used under what you call the PAYGO scorecard that 
is used in Congress to make sure legislation is at least 
deficit-neutral or a little better. They used that $500 billion 
to show a positive balance on the PAYGO scorecard. That is one 
scorecard. And then they deposited it into the second 
scorecard, the trust fund scorecard, to pay future Medicare 
claims. So they did spend the money twice.
    Mr. Shimkus. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the ranking member of the full committee, Mr. 
Waxman, for 5 minutes for questions.
    Mr. Waxman. Thank you, Mr. Chairman.
    Dr. Feder, the title of today's hearing is ``Saving Seniors 
and Our Most Vulnerable Citizens from an Entitlement Crisis.'' 
It seems that the term ``entitlement'' has come to mean 
different things to different people. Too often, people think 
of entitlements through the narrow lens of the programs that 
provide the social safety net for our seniors and the most 
vulnerable in our society without considering the fiscal impact 
of tax entitlements--tax deductions, exclusions, credits, and 
other tax preferences--which disproportionately benefit well-
to-do Americans. One could call those entitlements.
    Can you talk about entitlements, both those providing 
essential services to seniors and low-income Americans and 
those providing tax breaks to more affluent Americans, and the 
relative role of each in the context of protecting the most 
vulnerable in our society and addressing our long-term debt?
    Ms. Feder. Yes, Mr. Waxman.
    I think that we should start with the recognition that an 
entitlement is a commitment on the part of the Federal 
Government to provide benefits to as many people who qualify 
for that benefit appear in a given year without a constraint 
through the appropriations process. And when we apply that 
definition, the benefits that come through the Tax Code are the 
very same kinds of entitlements as benefits as those that come 
through direct spending. And that has, I think, been recognized 
by the Congressional Budget Office and others for many years. 
That is why we call them tax expenditures.
    There are some tax expenditures that do benefit low-income 
people, like the earned income tax credit and like the 
refundable tax credits in the Affordable Care Act. But the vast 
majority of tax expenditures for health care, for housing, for 
pensions, are disproportionately overwhelmingly benefitting the 
better-off. Because the higher your income, the more you 
benefit from not paying taxes on those dollars.
    It can be argued that that spending is crowding out some of 
the spending that we--improved spending that we need for 
middle-income and lower-income populations.
    Mr. Waxman. Exactly the argument we hear for spending on 
entitlements.
    Ms. Feder. I beg your pardon?
    Mr. Waxman. That is exactly the argument we hear for 
spending on Medicare and Medicaid.
    Ms. Feder. That that is crowding out, not----
    Mr. Waxman. Yes.
    Ms. Feder. You are quite right. And what I am saying, and I 
think that I am getting your point, is that by spending on the 
better-off in tax entitlements, it is that that is very much a 
part of the crowd-out.
    Now, I would also say that I don't know that I would 
eliminate all of those. I would not eliminate the tax benefit 
because we need the risk-pooling that it provides. But for 
high-income people, we do not need to be providing so many 
benefits.
    Mr. Waxman. Well, some have argued that cutting only 
spending entitlements while shielding tax entitlements would 
have a highly regressive impact. Is that what you are saying?
    Ms. Feder. It surely would.
    Mr. Waxman. OK.
    My Republicans colleagues have proposed keeping tax levels 
at about 18 percent of GDP. With what we know about the aging 
of our population and the increasing need for health coverage 
under Medicare and Medicaid, is it realistic to keep revenues 
at that level?
    Ms. Feder. No. It simply is not. And when you hear of 
concern for State budgets and when proposals are being made to 
actually shift more costs to States, whether it is health care 
or if we look at long-term care, which is borne primarily by 
the Medicaid program, and different rates of aging in different 
States, the notion that we would deal with these kinds of 
issues without generating, raising additional revenues is 
really unconscionable.
    Mr. Waxman. I was troubled by some of the accusations in 
the testimony of Mr. Archambault, and I believe they deserve to 
be fact-checked.
    First, Mr. Archambault asserts that Medicaid is not serving 
its customers well and, in some cases, may be hurting their 
health.
    Dr. Feder, isn't it true that the Medicaid program is 
completely optional for States? States are not required to 
provide Medicaid; isn't that correct?
    Ms. Feder. Yes, sir.
    Mr. Waxman. So if Governors really believed that Medicaid 
was harming their residents' health, do you believe they would 
continue to fund the program?
    Ms. Feder. Sounds pretty peculiar to me.
    Mr. Waxman. Many Governors, even Republican ones, have 
already opted to participate in the Medicaid expansion offered 
as a part of the Affordable Care Act because it is good for 
their States and good for their citizens. Moreover, there is 
empirical evidence showing that Medicaid improves health; isn't 
that accurate?
    Ms. Feder. Yes, sir.
    Mr. Waxman. In 2008, Oregon conducted a randomized, 
controlled experiment on how expanded access to Medicaid 
affects health. The results are very encouraging. The group who 
received coverage under Medicaid had substantively and 
statistically higher utilization of preventive and primary 
care, low out-of-pocket medical expenses and lower medical 
debt, and better physical and mental health than the control 
group.
    Can you comment on the assertions in Mr. Archambault's 
testimony?
    Ms. Feder. We had discussed that earlier, so I can do it 
briefly.
    I think that the evidence you have presented is what the--
the predominant evidence on the value of Medicaid in terms of 
improving people's health and enabling them to get care. There 
is no question about it.
    Mr. Waxman. Thank you.
    Thank you, Mr. Chairman.
    Mr. Shimkus [presiding]. The gentleman's time has expired.
    The chair now recognizes the gentleman from New Jersey, Mr. 
Lance, for 5 minutes.
    Mr. Lance. Thank you very much, Mr. Chairman.
    And good afternoon to the panel.
    To Dr. Feder, good afternoon. You gave us a figure, and I 
just didn't hear it. I gather Medicaid, at the moment, spends 
roughly $400 billion a year; is that right?
    Ms. Feder. I beg your pardon?
    Mr. Lance. Medicaid is roughly $400 billion a year? And I 
was interested in your testimony regarding long-term care. What 
percentage is in long-term care?
    Ms. Feder. Long-term care is about a third of total 
Medicaid spending. Spending on the elderly and disabled--and 
for the low-income disabled, Medicaid is providing not just 
long-term care but health care--the two populations together 
absorb about two-thirds of Medicaid spending.
    Mr. Lance. And by ``long-term care,'' do we mean nursing 
home care, by and large?
    Ms. Feder. Not necessarily. We mean help with basic tasks 
of daily living, which can happen in nursing homes but also 
happen at home and in community daycare centers and other 
places.
    Mr. Lance. And, obviously, with an aging population, the 
baby boomers, there are going to be more people who are going 
to need----
    Ms. Feder. That is correct.
    Mr. Lance [continuing]. Long-term care.
    Have you analyzed models that might be different from the 
model that we utilize today in America? I would hope it would 
be less expensive, but perhaps it would not be less expensive, 
care from one's residence as opposed to care in the nursing 
home?
    Ms. Feder. There has been a movement over several years, as 
it sounds as though you are quite familiar with, Mr. Lance, to 
treat people at home where they want to stay, or help people at 
home where they want to stay. And on a per-person basis, it is 
cheaper than putting them a nursing home.
    But we need to better serve that population. They are 
underserved throughout the Nation. And that requires additional 
investment.
    Mr. Lance. That would impress me as an area where we might 
work together in a bipartisan capacity, as undoubtedly there 
are going to be more people needing long-term care given the 
aging population and particularly regarding those who are baby 
boomers.
    Ms. Feder. I think that would be a wonderful thing, Mr. 
Lance. And I would appreciate--or would offer any assistance in 
that regard that I can.
    Mr. Lance. Thank you.
    Regarding tax expenditures--and I understand that this is a 
newer debate in America, but it is a debate currently occurring 
in our country. To you, Dr. Feder, or to other distinguished 
members of the panel, what is the largest tax expenditure at 
the moment in the country?
    Ms. Feder. I think the largest tax expenditure is the 
exclusion of employer-paid premiums from taxable income.
    Mr. Lance. Yes.
    Other members of the panel, is that the largest tax 
expenditure?
    Mr. Capretta. Yes, that is true.
    Mr. Lance. Yes. And I have stated in my campaigns for 
office that I do not favor taxation of that, and that has been 
welcomed by those who elect me to office.
    And I think it would be extremely difficult to tax those 
healthcare policies. Does the panel believe that it is at all 
realistic that Congress, whatever its configuration, would 
actually do that?
    Ms. Feder. Well, if I--and following up on Congressman 
Waxman's questions----
    Mr. Lance. Yes?
    Ms. Feder [continuing]. I think that what is important to 
recognize is that if the Congress is proposing to put a lid on 
spending for Medicare or Medicaid programs, that to ignore the 
expenditures that disproportionately go to higher-income 
people----
    Mr. Lance. I understand that point.
    Ms. Feder. And I think that is the context in which it is 
made.
    The other proposal----
    Mr. Lance. So do you favor taxation, Dr. Feder, of the 
portion----
    Ms. Feder. The proposals that I have seen that make sense 
to me--and we actually are doing something very much like that 
in the Affordable Care Act. I think that the proposals that I 
have seen that make some kind of sense are the proposals that 
would limit the tax breaks for higher-income people. But I 
would not favor taxing all those benefits.
    Mr. Lance. You would not favor taxing all of those 
benefits.
    Yes?
    Mr. Capretta. It is important to recognize that the 
healthcare law did, in a sense, impose a tax on those benefits 
on high-cost plans.
    Mr. Lance. Yes. Thank you.
    Mr. Capretta. And it was not based on income. It was across 
the board.
    Mr. Lance. It was across the board. Thank you.
    In your testimony, Dr. Feder, you do say, ``Stabilizing the 
debt in the coming decade would give policymakers time to 
identify the further steps that will be needed to slow the 
growth of healthcare costs throughout the U.S. healthcare 
system without impairing the quality of care.'' I believe I 
agree with that statement.
    At what level do you think it would be best, given the 
current situation, to stabilize the debt?
    Ms. Feder. Well, in my testimony I cited the work that has 
been done at the Center on Budget and Policy Priorities 
advocating that we stabilize that percentage at 73 percent of 
GDP.
    Mr. Lance. And what is it at the moment? It is a little 
higher, isn't it?
    Ms. Feder. I apologize. I don't want to misstate a figure, 
so I will just provide that for you later.
    Mr. Lance. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Shimkus. The gentleman's time has expired.
    The chair recognizes the gentleman from Georgia, Mr. 
Barrow, for 5 minutes.
    Mr. Barrow. I thank the chairman.
    Critics of the two warring tribes in Washington can find 
plenty to criticize on both sides. There will be folks who 
criticize Democrats for having a blind faith in the future and 
sort of ignoring the long-term trends and problems here, having 
some faith in our ability to solve this problem down the road. 
Folks can criticize folks on the other side of the aisle for 
basically saying this is so ominous, so bad, we just have to 
get out of the business, we have to cost-shift, we have to get 
out of the business of subsidizing the current model because it 
is just way too much for the taxpayers to bear.
    Both sides, it seems to me, that stereotype, seem to agree 
on something. They seem to accept the current level of spending 
and the current projections and the trends as being sort of--
the best of all possible worlds--some sort of a given. And I 
challenge that assumption.
    I happen to think that this whole approach that most folks 
tend to agree on is, what are we going to do about how to pay 
for this, sort of ignores the real challenge here. And that is, 
what are we spending our healthcare dollars on? And what are 
the things we can do that would have a big impact on what we 
are spending on but would also alleviate the underlying 
problems that people are facing.
    I look at the scourge of Alzheimer's and the scourge of 
diabetes as being a whole lot more than the public tab 
associated with both of those diseases, just to take two large, 
big-ticket items for example. If we could crack the Alzheimer's 
code, for example, I think we would have a big impact on 
Medicaid's viability and the burden that it is carrying all 
over the country. If we could crack the problem, the current 
trends of letting diabetes set up in the course of people's 
lives during their work life and most of the bills coming due 
only during Medicaid's time on the healthcare watch, we could 
have a big impact on Medicaid. But, more importantly, we could 
alleviate the suffering of millions that really is not 
accounted for in any of the discussion that we have been having 
on this committee.
    So my question to you all is, if you want to attack the 
problem in terms of putting the technology out in front of the 
mandates, instead of figuring out how we are going to pay for 
business as usual, but what can we invest in that will make for 
business as unusual, that can actually affect what we are 
having to spend money on in a big way?
    And I am not talking about nanny-state stuff that has no 
practical chance of success. I am talking about things we can 
hit if we make a good investment, a solid investment, a war on 
this or a war on that, that would have a big payoff not just in 
terms of the public's share of the healthcare expense in this 
country but also the suffering that people are experiencing in 
their lives.
    What are the two or three things that you all say we ought 
to wage a war on to get at that would have a big impact on 
Medicare's budget, Medicaid's budget, and also the bottom line 
of what we are funding?
    Because I regard this whole approach as sort of taking the 
current state of affairs as a given. And I look at this in 
terms of we are missing the challenge of trying to find those 
breakthroughs, those things that would take a serious, 
concerted, coordinated effort of research and development and 
deployment to actually make a big impact not only on people's 
lives but also in terms of our Nation's healthcare budget.
    What would you suggest we go after if that is the approach 
we want to take?
    I want to make the bad things we are paying for obsolete, 
not just be arguing about who is going to have to pay for them. 
I want to make the things that are driving our budget ox into 
the ditch and making people's lives miserable and make those 
things obsolete, rather than just figure out who is going to 
pay for them.
    Who is going to take a stab at helping us understand where 
we need to go in that direction?
    Mr. Capretta. Well, it is a big, big question. I am 
sympathetic to your point of view, actually. I think it is a 
big challenge, though, to have the certainty that some kind of 
public intervention is going to have enough of a payback and 
certainty that you don't need to make other adjustments.
    So, in other words, my first point to you----
    Mr. Barrow. I recognize that if we solved a lot of problems 
that are killing people off at a certain age, we would have a 
little bit more in terms of pension. Maybe there would be a 
shift on the reliance on the pension benefits of folks who are 
living longer and healthier lives.
    Mr. Capretta. No, no, what I am trying to say is that let's 
assume we made a big intervention in the areas you are talking 
about--and I am about to mention one that I agree with you on--
it is so uncertain that it will have the payoff we both would 
like to see, that you still have to make other adjustments in 
the entitlement programs, because you can't bank on that having 
the 20-year effect we are both looking for.
    But having said that, I do think that there are 
opportunities, especially in the area of diabetes, to make some 
progress. I think there are a lot of untreated and undertreated 
people with that condition that are heading into their Medicare 
years quite soon. And if we did a better job of coordinating 
care for that population, there is an opportunity--and I was 
part of a study that looked at this carefully--there is an 
opportunity to bring down some of that burden with some level 
of certainty associated with it.
    It won't solve our budget problems, though, I am afraid to 
say, unfortunately, because there are some expenditures 
involved in providing better care for them too
    Mr. Barrow. Dr. Feder, my time is running out. Have you got 
something you want to add?
    Ms. Feder. I was just going to add, I think that when Jim 
talks about investing in diabetes and in prevention and primary 
care, that is precisely what the changes, payment and delivery 
reforms in the Affordable Care Act are aimed to promote. It is 
to enhance our focus on primary care and coordinate care at 
early stages when there are early difficulties in order to 
prevent the use of costly services later on that actually could 
be prevented.
    Mr. Barrow. Just so you know, I am not interested in 
something that is high-maintenance, low-impact. I want low-
maintenance, high-impact. That is what I am looking at.
    Thank you.
    Mr. Shimkus. The gentleman's time has expired.
    Ms. Schakowsky. Mr. Chairman, I am wondering if I could 
offer something to put in the record.
    Mr. Shimkus. What are you----
    Ms. Schakowsky. This is a statement by Ron Pollack from 
Families USA.
    Mr. Shimkus. OK. Without objection, we will accept the 
submission.
    Ms. Schakowsky. Thank you.
    [The information appears at the conclusion of the hearing.]
    Mr. Shimkus. That chair now recognizes the vice chairman of 
the full committee, Mrs. Blackburn, for 5 minutes.
    Mrs. Blackburn. Thank you, Mr. Chairman.
    Just one comment I wanted to get in before I--I do have a 
couple of questions. Ms. Feder mentioned earlier that there was 
an increase in provider payments in Obamacare for Medicaid 
providers. And I just want to note that that is actually going 
to be a 2-year bump----
    Ms. Feder. That is correct.
    Mrs. Blackburn [continuing]. And not a full-time, long-term 
payment. So basically what we are doing there is setting up 
another one of these cliffs. It will be a new SGR cliff because 
the money goes away after 2 years.
    And what we find out and what we hear from our Governors 
and one of the reasons so many of our State legislatures are 
having such heartburn over the Obamacare issues is because you 
put money in, then you take money out, and then what happens 
with those Medicaid beneficiaries? And where are they going? 
How are you going to pay for this?
    And, quite frankly, I have to tell you that we all are 
compassionate and want to make certain that people have access 
to affordable care. But having the Federal Government put their 
hand further into that healthcare pot does not solve the 
problem; it makes it worse. It makes it worse.
    What we want to do and what I have heard from my colleagues 
across the aisle even--I am happy to hear them talk about 
solving this problem and this access-to-care problem, because 
the more Federal intervention you have, the worse the situation 
gets, the more limited is your access to care.
    And what we have found in Tennessee--and I will make Mr. 
Pallone's day. He knows I can't sit here and not say 
``TennCare.'' What we found through the--are you familiar with 
TennCare, Ms. Feder?
    Ms. Feder. I am.
    Mrs. Blackburn. And you know what a miserable failure it 
was and how we had a Democrat Governor that had to come remove 
180,000 people from the rolls and restructure it.
    And one of the lessons learned is that having access to the 
queue is not the same thing as having access to the physician. 
And that is something that you see--I continue to ask 
everybody, show me a public option plan, show me a Federal 
mandate plan that gives you greater access, greater outcomes, 
and a lower cost. The truth is, Ms. Feder, there is not one on 
the face of the earth, not one, that has successfully done 
that.
    Mr. Capretta, I have a couple of questions for you. I sit 
in these hearings and I hear a lot about, every time we look at 
something to save Medicare, to keep it solvent for a long 
period of time, trustees have told us it is going broke. Every 
time we do that, we are accused of trying to drive grandma and 
grandpa off the cliff. And I find it so incredibly unfortunate, 
but I think that the real crime is to sit by and do nothing and 
say we are just going to be content with the status quo and not 
look at how we solve this problem.
    Tell me where you are with looking at these trustee 
reports. What are your thoughts?
    Mr. Capretta. Well, the latest CBO estimates actually are 
pretty interesting. They did lower Medicare's future 
expenditure rates going forward.
    But the largest reduction, actually, was in the drug 
benefit, believe it or not. There is a lot of talk about 
Medicare and what it does and doesn't do and so on, but the 
drug benefit is essentially a competitive program driven 
entirely by private plans. It has been very competitive.
    Mrs. Blackburn. And it works?
    Mr. Capretta. And it works. The average annual growth 
rate----
    Mrs. Blackburn. And it is successful?
    Mr. Capretta. The average annual growth rate from 2007 to 
2012 is a little bit more than 2 percent a year, well below the 
average for the rest of the program.
    And the largest downward adjustment CBO made in their 
estimates going forward was in the drug benefit, despite the 
fact that the healthcare law expanded the program by closing 
the donut hole.
    So there is a model out there of competition and private 
choice and consumer choice that is working. It has actually 
driven a lot of costs out of the program.
    Mrs. Blackburn. All right. I appreciate that.
    I want to talk with you, also--obesity. Mr. Barrow 
mentioned Alzheimer's, which is a disease I am so familiar with 
because of my dad and my mother-in-law, both of whom have died 
with Alzheimer's. And I share his desire to crack that code. I 
think the other one is obesity.
    And you have had some interesting analysis on this. And 
what do you think, if we could reduce the obesity rates in 
seniors, what kind of impact would that have on the Medicare 
program?
    Mr. Capretta. It would have a very positive impact if we 
could do it. I think the challenge is the certainty of knowing 
which policy levers to pull that can deliver for sure on the 
outcome.
    I am all for trying to address this problem, in some way, 
to some degree. I think it will positively affect especially 
diabetes in the program, where there is a big chunk of dollars 
associated with that.
    So we don't have a silver bullet, but I think some 
additional public attention for people that are aging into 
Medicare with that problem is worth your attention.
    Mrs. Blackburn. Thank you.
    I yield back.
    Mr. Shimkus. The gentlelady's time has expired.
    The chair now recognizes the gentleman from Virginia, Mr. 
Griffith, for 5 minutes.
    Mr. Griffith. Thank you, Mr. Chairman.
    According to the CBO, Medicaid will cost the Federal 
Government $5 trillion over the next 10 years, with as much as 
$638 billion of that directly linked to the expansion of 
Medicaid from PPACA. Recently, Governor McDonnell laid out the 
need for vast reform to make Virginia's Medicaid program more 
cost-effective before the Commonwealth can consider an 
expansion of those benefits in that program.
    The Governor has laid out five tenets for Medicaid reform: 
one, service delivery through an efficient, market-based 
system, including more managed and coordinated care; two, 
reducing financial burdens to the State by getting an assurance 
from the Federal Government that the expansion will not 
increase the national debt; three, maximize the waivers that 
currently exist to achieve administrative efficiencies through 
streamlining of payment and service delivery; four, obtain buy-
in from healthcare stakeholders in the State for statewide 
reform; and, five, achieve greater flexibility by changes to 
Federal law, including more value-based purchasing, cost-
sharing, mandatory engagement in wellness and preventive care, 
the development of high-quality provider networks, and 
flexibility around essential health benefits.
    The Virginia Hospital and Health Care Association has said 
that they will cooperate. The reforms that Virginia is now 
discussing are on a par or similar to what we have discussed 
here in the Energy and Commerce Committee, at least on our side 
of the aisle. And that flexibility with Medicaid programs I 
think many States desire.
    So, Mr. Archambault, do you agree with Governor McDonnell 
that we need to have these Medicaid reforms and that not only 
Virginia but other States should be exploring these types of 
reforms and that we should be a partner with them? If you could 
explain.
    Mr. Archambault. Yes, Mr. Griffith, as I think the Governor 
has laid out and put his finger on a number of the issues that 
exist in the current program.
    And this is a bipartisan issue. You have Governors who have 
put in waiver requests that take over a year to get any 
response from the administration on whether they can move 
forward or not. So, certainly, I think both Republicans and 
Democrats at the State level see the value of greater 
flexibility. And I think anything that Congress can do to grant 
that flexibility would be a move in the right direction.
    Mr. Griffith. And you say that there are Democratic 
Governors as well as Republican Governors who desire this 
flexibility?
    Mr. Archambault. That is true. I mean, we have one in Rhode 
Island, in which they have been working on these issues for 
years, trying to get flexibility. And they got some additional 
flexibility to move forward.
    Mr. Griffith. And do you think that is because they sense, 
as the Founding Fathers did, that perhaps the individual States 
should experiment and find what works best, and then others can 
copy if they wish?
    Mr. Archambault. I think that is right. I mean, we even 
have an example in Connecticut with a Democratic Governor in 
which they expanded recently in Medicaid, and they found that 
it was more expensive than they initially anticipated; asked 
for flexibility from the administration, and it was denied.
    So I think there is certainly the need and a recognition on 
both sides of the aisle at the State level of this issue.
    Mr. Griffith. Mr. Capretta and Mr. Archambault, both, what 
do you think that we can do to better serve the States as they 
try to figure out ways to be more efficient?
    I will start with you, Mr. Capretta, since Mr. Archambault 
has had a couple minutes.
    Mr. Capretta. Sure. I think this year is a historic 
opportunity to move ahead with some more Medicaid flexibility 
year. Here you have an administration who would like the States 
to do a very large-scale expansion, which the Supreme Court 
said is entirely optional at this point. Many States are 
holding back, thinking about it.
    I think they have a great deal of leverage and you and the 
Congress have a great deal of leverage to say, Before we do 
anything more to put more people into the program, let's come 
to a consensus about what the basic rules are for who is 
running what.
    Mr. Griffith. For those who may not follow Virginia 
politics closely, that is exactly what the Virginia General 
Assembly did, was they said, We are going to set up a special 
group to consider expansion that the President and PPACA 
encourages, but we are not going to expand until we have seen 
reforms that make it so that we can afford to do that 
expansion.
    And so you are recommending that perhaps we take that 
Virginia model and see if we can't help encourage other States 
to do that by giving them the flexibility.
    Mr. Capretta. I think there is a real pernicious effect. I 
worked in the administration, did a lot of Medicaid waivers in 
my previous job in a previous administration. There is a little 
bit of an unusual and pernicious effect on one-off negotiations 
between an administration and a State. There ought to be rules 
that apply to every State that are fair to taxpayers across the 
country, and not special deals given to some States over 
others.
    Mr. Griffith. All right. I appreciate that.
    I only have 6 seconds left. Mr. Archambault?
    Mr. Archambault. I think a great example is welfare reform. 
You had a lot of States figure out how to do it at the local 
level first, and then there were--the same rules applied to all 
States.
    Mr. Griffith. And I have to go, but I would be remiss if I 
didn't mention that Virginia led on that one, as well.
    Thank you very much.
    I yield back, Mr. Chairman.
    Mr. Pitts [presiding]. The chair thanks the gentleman and 
now recognizes the gentleman from Kentucky, Mr. Guthrie, for 5 
minutes for questions.
    Mr. Guthrie. Thank you very much, Mr. Chairman. I 
appreciate being here.
    We talked about 2024 as the date that Medicaid goes 
insolvent. And that is if you believe a lot of the different 
accounting systems in the healthcare bill and the SGR goes 
away. Things like that happen even to get to 2024.
    But let's assume we get to 2024 before Medicare goes 
insolvent. So if somebody is 66 in 2024, we don't know how the 
law is going to treat them. That is what the testimony has been 
here today. Will it be 75 percent of 70 percent payments to 
hospitals and doctors? We just don't know that.
    I don't know if anybody would disagree with me on the 
panel, but we don't know what will happen if Medicaid goes 
insolvent in 2024, which is what the President's healthcare 
bill that was voted on by the majority does.
    So if it goes insolvent in 2024 and we don't know how 66-
year-olds are going to be treated--we do know that if we pass 
the Ryan budget, someone who is 66 years old in 2024 will have 
Medicare as we know it today.
    And just take me; I am a baby boomer. I was born in 1964, 
on the end of it. So if you are 65 today--today, if you are 65, 
as we speak today you are on Medicare, do you hope to live to 
be 76? With our healthcare system, I think most people do hope 
to live to 76.
    So what we are telling people today, we have no idea how 
you are going to have Medicare when you are 76 years old, 
unless we put a plan in place, which this side has put forth. A 
lot of people say, In Washington nobody ever tries to solve 
problems. We have known this is coming, both parties have known 
this is coming for a long time. Baby boomers are just a fact; 
it is a fact of the life. But we do have a plan. If you are 65 
years old today, when you are 76 you will have Medicare as you 
know it.
    And so what are we talking about doing the difference? 
Well, people will say, well, we need a balance of revenue. The 
President went around the country last year saying if we just 
asked the millionaires and billionaires, defined at $250,000 or 
more, to pay more, nobody is going to have to make any changes. 
Well, that is $80 billion. The President got $60 billion of the 
$80 billion in the fiscal cliff bill. I don't know if anybody 
in this room would say that is enough to solve the problem with 
Medicare.
    Even if you got the additional $20 billion he promised--
even though the 3.8 Medicare tax on unearned income didn't go 
into the Medicare side. So asking the rich to pay more, the 
fiscal cliff bill, the $60 billion didn't go to stave off 
Medicare. It was spent, essentially, in the fiscal cliff bill, 
most of it was spent on other projects. So when you say we just 
need to raise taxes to put it back into Medicare, I mean, we 
have seen what has happened twice just recently.
    So what are we offering? I think--is Medicare Part D a good 
program? And people think Medicare Part D--you said it is the 
cost of--people are saying Medicare costs per beneficiary have 
slowed, and a lot of it is due to Medicare Part D.
    So what we are saying is, oK, instead of--I think we had 
one panelist say, well, when baby boomers retire--they built 
schools when they had baby boomers; therefore, they are just 
going to have to pay more for us to be retired. So I am telling 
my children--my daughter is 19. In 30 years she will be 49. One 
hundred percent of all Federal revenues is supposed to go to 
Social Security, Medicare, and Medicaid at that point. So I am 
telling my daughter when she is my age she needs to wake up and 
go to work so my generation can be retired. That is what we are 
telling them. I mean, what else are they going to have? They 
are not going to have anything else.
    But what we are saying, if we adopt a program like Medicare 
Part D for the rest of Medicare, not only can somebody that is 
65 years old today have Medicare till they pass away as they 
know it and as it is, our children and grandchildren can have 
Medicare delivered to them in a way--did the majority change 
Medicare Part D in the bill? They did change some benefit 
within Medicare Part D, but they certainly didn't change the 
way it is delivered.
    And so I don't know why it is so radical. If it was so bad 
to do the other parts of Medicare like Medicare Part D, then 
why wasn't it changed during the healthcare bill? It wasn't.
    And so what we can say today, we can say, Children and 
grandchildren, my generation is retiring, you just owe it to 
us? Or we can say, Children and grandchildren, we are going to 
promise to people who are near retirement because politicians 
promised them things that we had no idea how to pay for but 
they organized their life around it so we are going to honor 
it? That is what this budget that is coming out tomorrow does. 
It honors the promise we made to people at or near retirement.
    But instead of asking our younger people to pay more, let's 
change the program in a way that we know works, because 
Medicare Part D works, and present it, give them an opportunity 
to have to not go to work every day to pay for my generation to 
be retired, go to work every day so hopefully someday when they 
have grandkids and they have grandkids, they can have the 
America that our parents have given to us.
    And I think that is what our generation owes them. They 
don't owe us. We owe them. That is what the American dream has 
been about.
    And I yield back my time.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from Louisiana, Dr. Cassidy, for 5 
minutes.
    Mr. Cassidy. Hey, Mr. Capretta.
    Mr. Capretta. Hello, Doctor.
    Mr. Cassidy. Que pasa?
    Mr. Capretta. Very well.
    Mr. Cassidy. So, as I gather--and I was looking up the CBO, 
Erskine Bowles--but if we do nothing, what, by 2035 or 
thereabouts Medicare, Medicaid, Social Security, and interest 
on the debt will consume 100 percent of Federal tax revenue?
    Mr. Capretta. I think that is about right, yes.
    Mr. Cassidy. It was something like that, and I somehow 
wondered off where I should be.
    And I also believe I know it is true that current law says 
that we cannot, under current law, transfer dollars from the 
general fund to the Medicare trust fund. Medicare trust fund, 
by law, is supposed to be self-sufficient, correct?
    Mr. Capretta. The Medicare hospital insurance trust fund is 
in that circumstance, yes, that is correct.
    Mr. Cassidy. So when A goes bankrupt, there is no more?
    Mr. Capretta. When it runs out of reserves, there is no--
you have to change the law to put more money into it.
    Mr. Cassidy. Dr. Feder, is reform worse than bankruptcy? 
Because if we know, according to current law, that after, what, 
2024 there is no money, that people will not have any dollars 
in Medicare Part A, is reform worse than--is reform----
    Ms. Feder. Mr. Cassidy, it is not----
    Dr. Cassidy [continuing]. Worse than bankruptcy?
    Ms. Feder [continuing]. Quite accurate to say people will 
not have any dollars in Medicare Part A. As has been said, they 
would not--that Medicare Part A dollars would fall short of 
full expenses----
    Mr. Cassidy. No, no, no, that is when it is bankrupt, 
right?
    Mr. Capretta. Well, bankrupt, and that is--there would 
still be revenue coming in that----
    Ms. Feder. There is still revenue----
    Mr. Cassidy. Well, it will be pay-as-you-go.
    Ms. Feder. The short story there is----
    Mr. Cassidy. Yes, but----
    Ms. Feder [continuing]. It is never bankrupt.
    Dr. Cassidy [continuing]. It is going to be 10 percent or 
it is going to be 20 percent.
    Ms. Feder. No. Well, no. Wait. We said it is 70 percent. 
And the other----
    Mr. Cassidy. No, it is 70 percent now.
    Ms. Feder. The other percent--no, I don't think so.
    But the other part of the story is that we are not doing 
nothing now. I have heard it said several times today that ``if 
we do nothing.'' We are not doing nothing.
    Mr. Cassidy. OK. Now, the accountable care organizations 
have never been shown to save money relative to----
    Ms. Feder. Well, of course they haven't been shown to save 
money, because they are brand-new and we are piloting them.
    Mr. Cassidy. No, no, no. They had demonstration projects 
which were deliberately selected to be places that had 
integrated health care that----
    Ms. Feder. I hear your concern about the previous pilots, 
and I think--but there are design features, for example, in the 
pioneer ACOs, who are sharing risk as well as sharing savings, 
that have greater potential, in addition to which they are not 
the only demonstrations that are being----
    Mr. Cassidy. Now, by the way, ACOs--I am sorry, I don't 
mean to interrupt, but I just have so little time. ACOs count 
upon having a capitated or a per-beneficiary payment, correct?
    Ms. Feder. No, they are shared--they are paid toward a--
there is a target on their spending.
    Mr. Cassidy. So their----
    Ms. Feder. And they share savings or bear--or some of them 
bear risk.
    Mr. Cassidy. So, ultimately, there is a sense of--and IPAB, 
for example, assumes a global budget for Medicare.
    Ms. Feder. Well, that is a different question. An ACO is 
not the same as an IPAB.
    Mr. Cassidy. So is a cap inherently wrong?
    Ms. Feder. Well, let me just--there is not a cap in the ACO 
savings. There is a shared risk--or an ACO program--there is 
shared savings.
    What I think is wrong is to cap dollars and assume that we 
know how to deliver the services. So you----
    Mr. Cassidy. So New York State is----
    Ms. Feder [continuing]. Assume a delivery mechanism. And I 
also would say that an arbitrary cap that is significantly 
slower than the rate of increase in healthcare spending puts 
beneficiaries at risk.
    Mr. Cassidy. So New York Mayor Cuomo, Governor Cuomo, I am 
told, is putting a global cap on Medicaid. Is that wrong?
    Ms. Feder. I do not think programs should be globally 
capped. I think they----
    Mr. Cassidy. So is there no limit to the exposure of the 
Federal taxpayer to how much they can spend?
    Ms. Feder. What I believe is that we need to adopt specific 
policy measures that do generate savings without----
    Mr. Cassidy. Well, we know historically----
    Ms. Feder [continuing]. Shifting risk to beneficiaries. It 
is shifting risk to beneficiaries----
    Mr. Cassidy. I am sorry. There is limited time. There is 
limited time.
    We know historically that New York, for example, has really 
gamed that system. So New York, which has half the population 
of California, has a program which is 25 percent more 
expensive. There are people in disabilities who are getting 
paid by New York Medicaid $5,000 a day.
    Ms. Feder. I think the way to address problems in spending 
is to adopt specific policy measures to make the system more 
efficient, which we know how----
    Mr. Cassidy. Now, we know that----
    Ms. Feder [continuing]. Some of which we know how to do.
    Mr. Cassidy. We know that Medicaid is very difficult to 
reform. Mr. Archambault just said that it takes a year, 
sometimes longer, to get a waiver. That doesn't really seem to 
be the flexibility or the agility----
    Ms. Feder. Oh, I would say that Medicaid has made a lot of 
changes in recent years, that we have for moms and kids an 
extensive reliance on managed care plans, some of which is good 
and some of which is not good. So there has been plenty of 
reform in Medicaid programs, whatever----
    Mr. Cassidy. But that wasn't the point. The point is that 
the flexibility that would give States the ability to sometimes 
shut this sort of thing down could take over a year.
    Ms. Feder. What I have heard ignored and in the previous 
comments is that what your budget is proposing is to take $800 
billion out of the Medicare program.
    Mr. Cassidy. You are kind of dodging the point, my point 
being that there is no ability--or put it this way. If it takes 
a year to 2 years or sometimes never to get the flexibility to 
address this, it shows that our ability to address it isn't 
quite agile.
    Ms. Feder. I simply disagree on----
    Mr. Cassidy. Mr. Archambault, is it true it takes over, 
sometimes, a year or 2 years to get those waivers?
    Mr. Archambault. I think there are multiple States. New 
Mexico is an example. Florida is an example in which it took at 
least a year, if not more. State of Oregon, Democratic 
Governor, took a while to get permission for their waiver, as 
well. Yes.
    Mr. Cassidy. So I am almost out of time, but thank you very 
much.
    Ms. Feder. You are welcome.
    Mr. Cassidy. I yield back.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the gentlelady from North Carolina, Mrs. Ellmers, for 5 minutes 
for questions.
    Mrs. Ellmers. Thank you, Mr. Chairman.
    And thank you to our panel.
    I would like to start off by saying, Dr. Feder, you had 
made some comments regarding the budget and that the budget 
basically repeals Obamacare and that that, in your opinion, is 
not a good thing. I would say that I completely disagree with 
that.
    And I am very concerned about access to care for patients, 
whether they be patients who are receiving Medicaid or Medicare 
patients. I think that is really what is in jeopardy here, and 
quality of care. Those are some of the things that we have to 
be addressing and looking at. We are all talking about pay-for, 
and that is very, very important, but it is really access to 
care and quality of care.
    So, having said that, the discussion about the States and 
the Governors who have decided to or been opposed to expanding 
Medicaid is an issue. In North Carolina, for instance, Pat 
McCrory, Governor Pat McCrory, has not elected to expand the 
Medicaid program. And his quote is, ``Our Medicaid system is 
broken, and I cannot expand a brokensystem.'' Now, I understand 
the Governors that have, but I also understand that is also 
information that they are receiving, and good intentions are, I 
think, what is happening here.
    And I would just like to cite--I know there were some other 
studies that were being discussed about how--and you had made 
comments that someone who was put on Medicaid essentially will 
receive the same health care and the same quality as someone 
who was on a private healthcare insurance plan. And I would 
dispute that.
    In fact, the study that I most recently became familiar 
with is the 2010 University of Virginia study, which released a 
landmark study showing that surgical patients--and this is 
surgical patients that they cite--on Medicaid have a 13 percent 
higher chance of dying than an individual with no insurance at 
all, keeping in mind, of course, that the death rate or the 
mortality of a surgical patient with healthcare insurance is 
about 1.3 percent, so that is statistically pretty small.
    But 13 percent higher than someone with no insurance at all 
and 97 percent higher if that person is on Medicaid. Now, that 
is in stark contrast with some of your theories and, basically, 
some of the studies that you have already cited.
    Having said that, obviously, this study shows, yes or no, 
that putting someone on Medicaid is not necessarily giving them 
better health care?
    Ms. Feder. No.
    Mrs. Ellmers. OK. Now, were you familiar with the study?
    Ms. Feder. No, I was saying my understanding of that, or of 
similar studies--I would have to check that particular----
    Mrs. Ellmers. Yes.
    Ms. Feder [continuing]. Is that it is of considerable 
importance, when you do a study, to compare costs under 
different insurance programs, that you recognize the health 
status or differences in the health status----
    Mrs. Ellmers. And I believe this study actually does that. 
So I would encourage you----
    Ms. Feder. My concern is that----
    Mrs. Ellmers. I would encourage you to familiarize yourself 
with this particular study----
    Ms. Feder. And I----
    Mrs. Ellmers [continuing]. Because it breaks it down.
    Ms. Feder. It runs counter to so much else----
    Mrs. Ellmers. Now, how can you justify or how can you say 
to an individual that would be put on Medicaid as a result of 
the expansion of Obamacare, essentially, how can you say to 
them that you really feel that they are going to be getting 
better health care?
    Ms. Feder. Because I have a host of evidence that shows 
that people who get Medicaid have better access to care than 
people without health insurance and that they live longer as a 
result. I am very comfortable in making that judgment.
    Mrs. Ellmers. So, in your opinion, putting more people on 
Medicaid is really the answer, not necessarily putting forward 
a budget or passing a budget that is actually a pro-growth 
economy----
    Ms. Feder. No, I actually think----
    Mrs. Ellmers [continuing]. To get people off of Medicaid?
    Ms. Feder. I actually think, Mrs. Ellmers, that that is a 
very broad statement. What we are talking about is the 
expansions in the Affordable Care Act, which I think will be of 
huge benefit to the population, whether through Medicaid or 
through exchanges. And I would hope that all States would see 
the value to their populations and go along with that 
expansion.
    Mrs. Ellmers. Mr. Archambault, are you familiar with the 
University of Virginia study?
    Mr. Archambault. I am, yes.
    Mrs. Ellmers. Why is it that when patients are put on 
Medicaid that there is this discrepancy? Because there would be 
this natural assumption that if you are put on a Medicaid plan, 
that all of a sudden you are going to get better health care 
and you are going to have a better outcome.
    Mr. Archambault. Without specifics to that program in 
Virginia and how it is treated, I think what that study 
illustrates is that the history of under-reimbursing doctors 
has led to some unexplainable results in the program and 
inconsistent-quality care being provided. And I am not sure we 
fully understand why yet. There are a lot of theories.
    Mrs. Ellmers. Yes.
    Mr. Archambault. But consistently in the academic 
literature we are seeing more and more examples in which the 
quality of care is less than those on private insurance.
    Mrs. Ellmers. OK. Thank you very much. And my time has run 
out. I appreciate this testimony. Thank you.
    Mr. Pitts. The chair thanks the gentlelady.
    That concludes the Members' questions at this point. If you 
have additional questions, you may submit them to the 
witnesses. I remind Members that they have 10 business days to 
submit questions for the record, and I ask the witnesses to 
respond to the questions promptly.
    This was an excellent hearing, excellent testimony. Thank 
you very much for coming today.
    And Members should submit their questions by the close of 
business on Monday, April 1st.
    With that, the subcommittee is adjourned.
    [Whereupon, at 5:57 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

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